Edgar Filing: ALTEON INC /DE

Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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ALTEON INC.

(Name of Registrant as Specified in Its Charter)

__________________________________________________________

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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ALTEON INC.

221 West Grand Avenue, Suite 200

Montvale, NJ 07645

(201) 934-5000

FINANCING PROPOSED — YOUR VOTE IS VERY IMPORTANT

The enclosed proxy statement relates to the 2007 annual meeting of the stockholders of Alteon Inc. At the meeting, we will ask you to approve matters relating to a significant financing transaction which may result in a change of control of the Company and which we cannot complete without obtaining stockholder approval. That financing transaction and related matters are described in detail in the enclosed proxy statement. In this proxy statement, we refer to Alteon Inc. as the “Company,” “Alteon,” “we” or “us.”

We are asking stockholders of Alteon:

to approve an amendment to the Alteon 2005 Stock Plan to reserve up to an additional 53,000,000 shares (prior to the implementation of the reverse stock split, as discussed elsewhere in this proxy statement) of common stock for issuance under the Plan;

to approve the issuance of shares of Alteon Series B Preferred Stock, warrants to purchase Series B Preferred Stock, shares of Series B Preferred Stock issuable upon exercise of such warrants and Alteon common stock issuable upon conversion of Series B Preferred Stock, each pursuant to the Series B Preferred Stock and Warrant Purchase Agreement, dated as of April 5, 2007, as amended;

to approve Alteon’s Amended and Restated Certificate of Incorporation, which will be amended to (a) increase the number of shares of preferred stock authorized for issuance; (b) authorize and designate the Series B Preferred Stock to be issued and common stock issuable in connection with the financing, (c) change the name of the Company to Synvista Therapeutics, Inc., (d) amend the provisions relating to the indemnification of directors and (e) eliminate references to any retired or cancelled series of preferred stock;

to approve a reverse stock split of Alteon common stock at a ratio within the range of 1:50 to 1:100, with the specific ratio to be determined by the Board of Directors of Alteon; and

to ratify the appointment of J.H. Cohn LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007.

We cannot complete the financing transaction unless you approve the amendment to the Alteon 2005 Stock Plan, the issuance of shares and warrants as part of the purchase agreement, the reverse stock split, and certain provisions included in Alteon’s Amended and Restated Certificate of Incorporation, as more fully described in the enclosed proxy statement.

The date, time and place of the Alteon annual meeting is:

July 20, 2007
10:00 a.m., Eastern Time
the Marriott Park Ridge
300 Brae Boulevard	/s/ Noah Berkowitz
Park Ridge, NJ 07656	Noah Berkowitz, M.D., Ph.D.
	President and Chief Executive Officer
June 22, 2007	Alteon Inc.

This proxy statement is dated June 22, 2007 and is first being mailed to stockholders on or around June 28, 2007.

Alteon will provide you with copies of important information about Alteon from documents filed with the SEC that are not included in or delivered with this proxy statement, free of charge, upon request to: Alteon Inc., 221 West Grand Avenue, Suite 200, Montvale, NJ 07645, Attention: Investor Relations, Telephone: (201) 934-5000

In order to receive timely delivery of the documents before the Alteon annual meeting, you should make your request no later than July 5, 2007. Please also see “Where You Can Find More Information” on page 43.

ALTEON INC.

221 West Grand Avenue, Suite 200

Montvale, NJ 07645

(201) 934-5000

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF ALTEON INC.

To Be Held on July 20, 2007

To the Stockholders of Alteon Inc.:

You are cordially invited to attend the annual meeting of stockholders of Alteon Inc., which will be held on July 20, 2007, at 10:00 a.m., Eastern Time, at the Marriott Park Ridge, 300 Brae Boulevard, Park Ridge, NJ 07656 for the following purposes:

1. To approve an amendment to the Alteon 2005 Stock Plan to reserve up to an additional 53,000,000 shares (prior to the implementation of the reverse stock split, as discussed elsewhere in this proxy statement) of common stock for issuance under the Plan;

2. To approve, in accordance with Rule 713 of the American Stock Exchange Company Guide, the issuance of shares of Alteon Series B Preferred Stock, warrants to purchase Series B Preferred Stock, shares of Series B Preferred Stock issuable upon exercise of such warrants and Alteon common stock issuable upon conversion of Series B Preferred Stock, pursuant to the Series B Preferred Stock and Warrant Purchase Agreement, dated as of April 5, 2007, as amended, as described in the attached proxy statement, which would result in the issuance of greater than 20% of Alteon’s presently issued and outstanding capital stock;

3. To approve an amendment contained in the proposed Amended and Restated Certificate of Incorporation of Alteon to increase the number of shares of preferred stock authorized for issuance;

4. To approve an amendment contained in the proposed Amended and Restated Certificate of Incorporation of Alteon to designate the Series B Preferred Stock to be issued in the financing;

5. To approve an amendment contained in the proposed Amended and Restated Certificate of Incorporation of Alteon to change the name of the Company to Synvista Therapeutics, Inc.;

6. To approve an amendment contained in the proposed Amended and Restated Certificate of Incorporation of Alteon to amend the provisions relating to the indemnification of directors;

7. To approve an amendment contained in the proposed Amended and Restated Certificate of Incorporation of Alteon to eliminate references to any retired or cancelled series of preferred stock;

8. To approve a reverse stock split of the issued and outstanding shares of Alteon common stock (such split to combine a number of outstanding shares between fifty (50) and one hundred (100) (such final number to be determined by the Company’s Board of Directors) outstanding shares of Alteon common stock, into one (1) share of Alteon common stock);

9. To consider and vote upon an adjournment of the annual meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of Proposals 1 through 8;

10. To ratify the appointment of J.H. Cohn LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007; and

11. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Only stockholders of record at the close of business on May 24, 2007 are entitled to vote at the meeting or any adjournment or postponement thereof. Only stockholders or their proxy holders and Alteon guests may attend the meeting. A complete list of those stockholders entitled to vote will be kept at the principal executive offices of Alteon, 221 West Grand Avenue, Suite 200, Montvale, NJ 07645 for a period of ten days prior to the meeting.

Your vote is important. The affirmative vote of the holders of a majority of the votes cast in person or by proxy at the Alteon annual meeting is required for approval of Proposals 1, 2, 9 and 10. The affirmative vote of the holders of a majority of the shares of Alteon common stock outstanding on the record date for the annual meeting is required for approval of Proposals 3, 4, 5, 6, 7 and 8. Proposal 2 can not be passed without the passage of proposals 1, 3, 4 and 8; proposal 4 can not be passed without the passage of proposals 2 and 3 and proposal 8 can not be passed without the passage of proposals 2, 3 and 4.

You are urged to attend the annual meeting in person, but if you are unable to do so, the Board of Directors would appreciate the prompt return of the enclosed proxy card, dated and signed, or, if your proxy card or voting instruction form so indicates, your prompt vote electronically via the Internet or telephone. We strongly encourage you to vote electronically if you have that option.

	Noah Berkowitz, M.D., Ph.D.
	Secretary
	June 22, 2007

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE FINANCING AND THE ANNUAL MEETING		iii
GENERAL INFORMATION		1
Solicitation		1
Record Date, Voting Rights and Outstanding Shares		1
Broker Non-Votes		1
Revocability of Proxy and Voting of Shares		1
Dissenters’ Right of Appraisal		1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		2
MANAGEMENT		3
The Board of Directors		3
Committees of the Board of Directors and Meetings		4
Director Nomination Process		5
Stockholder Communications to the Board		5
Director Attendance at Annual Meetings		5
Executive Officers		5
COMPENSATION DISCUSSION AND ANALYSIS		6
EXECUTIVE COMPENSATION		12
COMPENSATION COMMITTEE REPORT		19
AUDIT COMMITTEE REPORT		20
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE		21
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		21
PROPOSAL 1 INCREASE IN THE AGGREGATE NUMBER OF SHARES AVAILABLE UNDER THE ALTEON 2005 STOCK PLAN		22
Federal Income Tax Considerations		24
New Plan Benefits		25
PROPOSAL 2 THE ISSUANCE OF SECURITIES IN THE FINANCING		26
Necessity of Stockholder Approval		26
Series B Preferred Stock		26
Effect of Financing on Current Stockholders		28
Structure of the Financing and Terms of Outstanding Debt Securities		29
Factors Considered by the Board of Directors in Recommending the Financing		29
Timing of Closing		29
Conditions to the Completion of the Financing		29
Certain Covenants		30
Representations and Warranties		31
Expenses		31
Amendments and Waivers		32
Registration Rights Agreement Related to the Financing		32
Ownership of Alteon’s Executive Officers and Directors		32
Board Membership and New Directors Following the Financing		32
Listing of Alteon Common Stock		32
Use of Proceeds		33

PROPOSAL 3 APPROVAL OF AMENDMENT TO ALTEON’S CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF PREFERRED STOCK		34

PROPOSAL 4 APPROVAL OF THE DESIGNATION OF THE SERIES B PREFERRED STOCK		36

PROPOSAL 5 APPROVAL OF A CHANGE OF THE NAME OF THE CORPORATION		38

PROPOSAL 6 APPROVAL OF AMENDMENT TO ALTEON’S CERTIFICATE OF INCORPORATION TO CHANGE THE PROVISIONS REGARDING THE INDEMNIFICATION OF DIRECTORS		39

PROPOSAL 7 APPROVAL OF AMENDMENT TO ALTEON’S CERTIFICATE OF INCORPORATION TO REMOVE REFERENCES TO RETIRED CLASSES OF PREFERRED STOCK		40

PROPOSALS 8 AND 9 REVERSE STOCK SPLIT AND THE ADJOURNMENT OF THE ANNUAL MEETING		41
General		41
Purpose		41
Requirements for Listing on the AMEX		41
Potential Increased Investor Interest		42
Principal Effects of the Reverse Stock Split		43
Procedure for Effecting Reverse Stock Split and Exchange of Stock Certificates		43
Fractional Shares		44
Accounting Matters		44
Potential Anti-Takeover Effect		44
No Dissenter’s Rights		44
Federal Income Tax Consequences of the Reverse Stock Split		45
PROPOSAL 10 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		46
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors		47
FORWARD LOOKING STATEMENTS AND CAUTIONARY STATEMENTS		48
INCORPORATION BY REFERENCE		48
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		48
CODE OF BUSINESS CONDUCT AND ETHICS		48
STOCKHOLDER PROPOSALS		48
OTHER MATTERS		48
GENERAL		49
WHERE YOU CAN FIND MORE INFORMATION		49
ANNEX INDEX		50
ANNEX A - SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT AND AMENDMENT NO. 1 THERETO		A-1
ANNEX B - FORM OF WARRANT		B-1
ANNEX C - FORM OF REGISTRATION RIGHTS AGREEMENT		C-1
ANNEX D - FORM OF ALTEON’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION		D-1
ANNEX E - PROXY CARD		E-1

Alteon Inc.

221 West Grand Avenue, Suite 200

Montvale, NJ 07645

(201) 934-5000

PROXY STATEMENT FOR THE ALTEON INC.

2007 ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON JULY 20, 2007

QUESTIONS AND ANSWERS ABOUT THE FINANCING AND THE ANNUAL MEETING

Q:	*Why did you send me this proxy statement?*

We sent you this proxy statement and the enclosed proxy card because Alteon’s Board of Directors is soliciting your proxy to vote at the 2007 annual meeting of stockholders, and any adjournments of the meeting, to be held on July 20, 2007, at 10:00 a.m., Eastern Time, at the Marriott Park Ridge, 300 Brae Boulevard, Park Ridge, NJ 07656. This proxy statement along with the accompanying Notice of Annual Meeting of Stockholders summarizes the purposes of the meeting and the information you need to know to vote at the annual meeting.

On June 28, 2007 we began sending this proxy statement, the attached notice of annual meeting and the enclosed proxy card to all stockholders entitled to vote at the meeting. We are also enclosing with this proxy statement our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007. The following sections of the Form 10-K are also incorporated by reference into this proxy statement: the financial statements, including the notes thereto, and the unaudited quarterly financial data for the two-year period ended December 31, 2006 (Part II, Items 8(a) and 8(b)); Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part II, Item 7); and Qualitative and Quantitative Disclosures About Market Risk (Part II, Item 7A). The following sections of the Form 10-Q are also incorporated by reference into this proxy statement: the unaudited condensed consolidated financial statements, including the notes thereto (Part I, Item 1); Management's Discussion and Analysis of Financial Condition and Results of Operations (Part I, Item 2); and Qualitative and Quantitative Disclosure About Market Risk (Part I, Item 3). You can also find a copy of our 2006 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2007 on the Internet through the SEC’s electronic data system called EDGAR at www.sec.gov or through the Investor Relations section of our website at www.alteon.com.

Q:	*When and where is the stockholder meeting?*

A:	The Alteon annual meeting will take place on July 20, 2007 at 10:00 a.m., Eastern Time at the Marriott Park Ridge, 300 Brae Boulevard, Park Ridge, NJ 07656.

Q:	*Why are we seeking approval for the issuance of Series B Preferred Stock?*

As a result of being listed for trading on the American Stock Exchange (“AMEX”), issuances of our common stock are subject to the AMEX Company Guide, including Rule 713 of the Company Guide. Under Rule 713, stockholder approval must be obtained in connection with the sale, issuance, or potential issuance by a listed company of shares of common stock, or of securities convertible into common stock, in an amount equal to 20% or more of the presently outstanding stock, for less than the greater of book or market value of the stock. As of May 24, 2007, we had 129,318,588 shares of common stock outstanding.

On April 5, 2007, we entered into a Series B Preferred Stock and Warrant Purchase Agreement, as amended, which we refer to as the purchase agreement, under which we will, subject to certain conditions, issue up to 500,000,000 (prior to the implementation of a reverse stock split as discussed elsewhere in this proxy statement) shares of our Series B Preferred Stock, $0.01 par value per share (the “Series B Preferred Stock”), and warrants to purchase up to 125,000,000 (prior to the implementation of a reverse stock split, as discussed elsewhere in this proxy statement) shares of Series B Preferred Stock (the “Financing”) to the purchasers who are participating in the Financing. The issuance of the Series B Preferred Stock and warrants to the purchasers requires stockholder approval under Rule 713. In addition, a total of up to 625,000,000 shares of our common stock (prior to the implementation of the reverse stock split discussed elsewhere in the proxy statement) may be issued, assuming full conversion of all of the Series B Preferred Stock and the exercise of the warrants to purchase shares of Series B Preferred Stock issued in connection with the Financing, and additional shares of Series B Preferred Stock may be issued upon the operation of certain anti-dilution adjustments provided in the terms of the Series B Preferred Stock and the warrants. Pursuant to the terms of the Financing, shares of the Series B Preferred Stock will be sold at a price equal to $0.05 per share (calculated prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement).

iii

The purchasers of the Series B Preferred Stock will include the following funds affiliated with Baker Brothers Investments (“BBI”), which is a group of affiliated funds dedicated to investing in public and private healthcare companies: Baker/Tisch Investments, L.P., Baker Biotech Fund I, L.P., Baker Brothers Life Sciences, L.P., 14159, L.P. and Baker Bros. Investments II, L.P. The natural persons who will control the voting and disposition of the shares held by the entities affiliated with BBI are Felix J. Baker, Ph.D. and Julian Baker.

The purchasers of the Series B Preferred Stock will also include Atticus Global Advisors, Ltd. ("AGA") and Green Way Managed Account Series, Ltd., in respect to its segregated account, Green Way Portfolio D ("Green Way"). AGA and Green Way are an investment partnership and a managed account for which Atticus Capital LP (“Atticus Capital”) is the sole investment manager and has sole investment authority. Atticus Management LLC (“Atticus Management”) is the sole general partner of Atticus Capital and Mr. Timothy R. Barakett is the Chairman, Chief Executive Officer and sole Managing Member of Atticus Management. Accordingly, Mr. Barakett may be deemed to have control over the voting and disposition of the shares purchased by AGA and Green Way.

Q:	*What are the terms of the Series B Preferred Stock and Warrant Purchase Agreement?*

The Company anticipates that it will raise up to $25,000,000 in the Financing, including the conversion of $6,000,000 of the Company’s Senior Convertible Secured Promissory Notes, as further discussed below, plus accrued interest thereon. Under the terms of the Financing, the Series B Preferred Stock will be sold at $0.05 per share (calculated prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement). Prior to the implementation of the reverse stock split, Alteon may be required to issue up to 500,000,000 shares of Series B Preferred Stock, and warrants to purchase up to 125,000,000 shares of its Series B Preferred Stock, exercisable at $0.05 per share for a five-year period from the date of issuance. Each holder of Series B Preferred Stock will be entitled to cast, at any stockholder meeting, the number of votes equal to one-half of the number of whole shares of common stock into which the shares of Series B Preferred Stock held by such holder are convertible. The Series B Preferred Stock will be convertible into common stock at any time at the option of the holder at an initial conversion rate of 1:1, subject to adjustment. On April 4, 2007, the day prior to the execution of the Financing agreement, the closing price of a share of our common stock was $0.10, as reported by AMEX, and on May 24, 2007 the closing price of a share of our common stock was $0.05, as reported by AMEX.

Upon the closing of the Financing, the Senior Convertible Secured Promissory Notes, in an aggregate principal amount of $6,000,000, issued by Alteon pursuant to a Note and Warrant Purchase Agreement, dated January 11, 2007, as amended, by and among Alteon and the lenders named therein, plus all accrued but unpaid interest thereon (approximately $92,055 through May 31, 2007), will be automatically converted pursuant to their terms into that number of shares of Series B Preferred Stock equal to the principal plus all accrued but unpaid interest on the notes divided by the price per share at which the Series B Preferred Stock is sold, and thereafter the notes will be cancelled.

The holders of the Senior Convertible Secured Promissory Notes include the following funds affiliated with BBI: Baker/Tisch Investments, L.P., Baker Biotech Fund I, L.P., Baker Brothers Life Sciences, L.P., 14159, L.P. and Baker Bros. Investments II, L.P. The natural persons who control the disposition of the senior convertible secured promissory notes held by the entities affiliated with Baker Brothers Investments are Felix J. Baker, Ph.D. and Julian Baker.

In connection with the Financing, we have entered into a Registration Rights Agreement with the investors. Under the terms of the Registration Rights Agreement, we have agreed to file a registration statement with the Securities and Exchange Commission for the resale of the shares of common stock issuable upon conversion of Series B Preferred Stock issued in the Financing, as well as upon conversion of Series B Preferred Stock underlying the warrants sold in the Financing. Failure to file the registration statement in a timely manner will result in payment by us to each investor of liquidated damages, subject to limitations set forth in the Registration Rights Agreement. These liquidated damages will also be payable in the event that the resale registration statement has not been declared effective within certain time periods or if sales cannot be made pursuant to the registration statement following its effectiveness, each as described in the Registration Rights Agreement.

Holders of the Series B Preferred Stock will be entitled to additional rights and preferences described elsewhere in this proxy statement. As a result of the pricing terms of the securities to be issued in the Financing, the Financing will result in substantial and immediate dilution of the interests of our existing stockholders.

Due to the rights that are afforded to the holders of the Series B Preferred Stock, including the price per share at which the shares of Series B Preferred Stock will be sold, the anti-dilution protection as discussed elsewhere in this proxy statement, the 1:1 conversion ratio into common stock and the registration rights associated with the common stock underlying the shares of Series B Preferred Stock, there is a possibility that the per share price of our common stock may decrease as a result of the issuance of the Series B Preferred Stock.

Q:	*What effect will the Financing have on the capital structure and control of Alteon?*

If completed, we may be required to issue up to 500,000,000 shares of Series B Preferred Stock and warrants to purchase up to 125,000,000 shares of Series B Preferred Stock (both prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement) in the Financing, which, assuming the full conversion of such shares of Series B Preferred Stock into our common stock, would represent approximately 79% of our issued and outstanding capital stock as of May 24, 2007. Accordingly, in the event that all of the shares of Series B Preferred Stock were to be converted into our common stock, a change in control of Alteon would occur. As noted above, each holder of Series B Preferred Stock will be entitled to cast the number of votes equal to one-half of the number of whole shares of common stock into which the shares of Series B Preferred Stock held by such holder are convertible. Therefore, on the date of issuance of the Series B Preferred Stock, the holders of Series B Preferred Stock will have approximately 41% of the voting power of Alteon. The Series B Preferred Stock will be convertible into common stock at any time at the option of the holder at an initial conversion rate of 1:1, subject to adjustment. Thus, if the holders of the Series B Preferred Stock convert all of their shares of Series B Preferred Stock into shares of common stock, and exercise all of their warrants to acquire shares of Series B Preferred Stock which are then converted into shares of common stock, they will have approximately 83% of the voting power of Alteon. In addition, purchasers of the Series B Preferred Stock will be entitled to a number of rights and preferences which holders of shares of our outstanding common stock do not and will not have. Among these rights and preferences is a preference on liquidation of Alteon, which means that holders of the Series B Preferred Stock will be entitled to receive the proceeds out of any sale or liquidation of Alteon before any such proceeds are paid to holders of our common stock. In general, if the proceeds received upon any sale or liquidation do not exceed the total liquidation proceeds payable to the holders of the Series B Preferred Stock, holders of common stock would received no value for their shares upon such a sale or liquidation.

Alteon will have the right to automatically convert the Series B Preferred Stock into common stock in certain circumstances. An equivalent of $7,500,000 (measured as of the original issue date) of Series B Preferred Stock will automatically be converted into common stock when (i) the thirty-day prior trailing average closing price of Alteon common stock, as reported by the American Stock Exchange, for the entire six months preceding such time is equal to at least the price at which shares of Series B Preferred Stock were sold in the Financing and (ii) the registration statement for resale of securities issued in the Financing has been declared effective by the SEC and is continuously effective for a one and one-half year period. Thereafter, the remainder of the outstanding Series B Preferred Stock will automatically be converted into common stock when (i) the thirty-day prior trailing average closing price of Alteon common stock, as reported by the American Stock Exchange for the entire six months preceding such time, is equal to at least two times the price at which shares of Series B Preferred Stock were sold in the Financing and (ii) the registration statement for the resale of securities issued in the Financing has been declared effective by the SEC and is continuously effective for a one and one-half year period.

Q:	*When do you expect the Financing to be completed?*

A:	We are working towards completing the Financing as quickly as possible. We hope to complete the Financing by July 31, 2007. However, the exact timing of completion of the Financing cannot be determined yet because completion of the Financing is subject to a number of conditions.

Q:	How many authorized but unissued shares of Alteon common stock and preferred stock will exist after the closing of the Financing, and taking into account the reverse stock split?

The following table reflects the capital structure of the Company before and after the annual meeting, assuming, for purposes of illustration only, the implementation of a reverse stock split in a ratio of 1:75, and taking into account the approval of all of the proposals being presented to the stockholders by this proxy statement:

	Prior to the 2007 Annual Meeting	After the 2007 Annual Meeting

Common Stock Authorized	300,000,000	300,000,000
Common Stock Issued and Outstanding	129,318,858	1,724,251
Common Stock Reserved for Issuance	66,758,107	11,492,752
Common Stock Unreserved and Unissued	103,923,035	281,782,997

Preferred Stock Authorized	1,999,329	15,000,000
Series A Preferred Stock Authorized (Shareholder Rights Plan)	400,000	400,000
Series A Preferred Stock Issued (Shareholder Rights Plan)	0	0
Series B Preferred Stock Authorized	0	8,333,333
Series B Preferred Stock Issued	0	6,666,667
Series B Preferred Stock Reserved for Issuance	0	1,666,667
Preferred Stock Unreserved and Unissued	1,599,329	6,266,667

Q:	*Does the Board of Directors of Alteon recommend voting in favor of the issuance of securities in the Financing?*

Yes, after careful consideration, including the solicitation and review of alternative sources of funding, licensing and other strategic opportunities, Alteon’s Board of Directors has unanimously determined the Financing to be in the best interests of the Alteon stockholders and has declared the Financing advisable.

As of May 24, 2007, all executive officers and directors of Alteon, together with their affiliates, own as a group approximately 15% of the shares of Alteon common stock entitled to vote at the Alteon annual meeting. A vote of a majority of the total votes represented by the shares of Alteon common stock present in person or by proxy at the annual meeting is required to approve the Financing. However, we are required to effect a reverse stock split, described below, in connection with the Financing, which will require the affirmative vote of a majority of our outstanding shares.

Q:	*Why are we seeking approval for the reverse stock split?*

On October 9, 2006, we received a letter from AMEX indicating that we were not in compliance with the following listing standards in the AMEX Company Guide: (i) Section 1003(a)(i), as a result of our shareholder’s equity of less than $2,000,000 and losses from continuing operations and/or net losses in two out of our three most recent fiscal years; (ii) Section 1003(a)(ii), as a result of our shareholder’s equity of less than $4,000,000 and losses from continuing operations and/or net losses in three out of our four most recent fiscal years; and (iii) Section 1003(a)(iii), as a result of our shareholder’s equity of less than $6,000,000 and losses from continuing operations and/or net losses in our five most recent fiscal years. We were required to submit a proposal setting forth our Plan of Compliance pursuant to which we outlined our plan to regain compliance with the relevant provisions of the AMEX Company Guide. We submitted this plan on November 6, 2006. On January 24, 2007, we received a notice from the staff (the “Staff”) of AMEX that AMEX has accepted our plan to regain compliance with AMEX continued listing standards, and that our listing will be continued pursuant to an extension until April 9, 2008. The Staff requested that Alteon effect a reverse stock split of its common stock in order to increase the selling price of Alteon common stock. Further, we have agreed with the purchasers of the Series B Preferred Stock to effect a reverse stock split as part of the Financing. On May 24, 2007, the closing price of our common stock as reported on AMEX was $0.05 per share.

The Board of Directors has unanimously approved the reverse stock split partly as a means of increasing the share price of Alteon common stock. Our Board of Directors believes that maintaining our listing on AMEX may provide a broader market for Alteon common stock and facilitate the use of Alteon common stock in financing and other transactions. In addition, continuing listing on AMEX is a condition to the closing of the Financing, and we expect the reverse stock split to facilitate the continuation of such listing. We cannot assure you, however, that the reverse stock split will result in an increase in the per share price of our common stock, or if it does, how long the increase would be sustained, if at all. Although the stock split is designed to raise the stock price, there is no guarantee that the share price will rise proportionately to the reverse stock split, so the end result could be a loss of value. In addition, while we expect the reverse stock split to assist with our plan to regain compliance with AMEX listing standards, the reverse stock split itself will not address the fact that our shareholder’s equity is less than $2,000,000. We do, however, expect that our receipt of the net proceeds of the Financing will address the deficiency in our shareholder’s equity and allow us to regain compliance with the aspects of the AMEX listing standards relating to shareholder’s equity.

Q:	*Does the Board of Directors of Alteon recommend voting in favor of the reverse stock split?*

Yes, after careful consideration, Alteon’s Board of Directors has unanimously determined the reverse stock split to be in the best interests of the Alteon shareholders and has declared the reverse stock split advisable. Alteon’s Board of Directors approved the reverse stock split and recommends that Alteon stockholders approve it as well.

Q:	*How does the Board of Directors recommend that I vote on the other proposals?*

A:	The Board of Directors recommends that you vote as follows:

“FOR” the approval of the amendment to the Alteon 2005 Stock Plan;

“FOR” the approval of all of the proposals related to Alteon’s Amended and Restated Certificate of Incorporation;

“FOR” the adjournment of the annual meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of the amendment to the Alteon 2005 Stock Plan, the issuance of our securities as part of the Financing, the amendment and restatement of the Company’s Restated Certificate of Incorporation or the reverse stock split; and

“FOR” the ratification of the selection of independent auditors for our fiscal year ending December 31, 2007.

If any other matter is presented, the proxy card provides that your shares will be voted by the proxy holder listed on the proxy card in accordance with his or her best judgment. At the time this proxy statement was printed, we knew of no matters that needed to be acted on at the annual meeting, other than those discussed in this proxy statement.

Q:	Will any changes be made to the Alteon Board of Directors as a result of the Financing?

Yes. Following the closing of the Financing, our Board of Directors will be fixed at seven (7) persons, consisting of (a) three (3) incumbent directors, (b) one (1) vacancy that may be filled at any time after the closing of the Financing with a new director designated by the investors affiliated with BBI who held convertible promissory notes that were converted into Series B Preferred Stock at the closing of the Financing, which new director shall be reasonably acceptable to the Company, and (c) three (3) additional vacancies. As long as the investors affiliated with BBI who held convertible promissory notes that were converted into Series B Preferred Stock at the closing of the Financing hold at least 50% of the shares of Series B Preferred Stock issued to them in the Financing, such investors will have the right, at their option, to designate two (2) people to fill two (2) of the three (3) additional vacancies. If two (2) vacancies are not available at the time such purchasers choose to designate two (2) members of the Board of Directors, the Board shall use its commercially reasonable efforts to cause two (2) of its then-current members to resign their positions in order to create vacant seats for the purchaser designees. These seats will then be filled by appointment of such persons by the other members of the Board who are then in office, and not by election by our stockholders. No persons have yet been identified to serve in these vacant positions.

vii

Q:	*Who can vote?*

Only stockholders who own Alteon common stock at the close of business on May 24, 2007 are entitled to vote at the Alteon annual meeting. On this record date, there were 129,318,858 shares of Alteon common stock outstanding and entitled to vote. Each share of common stock is entitled to one vote on any matter presented at the meeting. Alteon common stock is currently our only class of voting stock.

Q:	*How many votes do I have?*

A:	Each share of Alteon common stock that you own entitles you to one vote.

Q:	*How do I vote?*

A:	You may vote by mail by completing, signing and dating your proxy card and returning it in the enclosed, postage-paid and addressed envelope. If you mark your voting instructions on the proxy card, your shares will be voted:

as you instruct, and

according to the best judgment of the proxy holder if a proposal comes up for a vote at the annual meeting that is not on the proxy card.

If you return a signed card, but do not provide voting instructions, your shares will be voted:

FOR the approval of the amendment to the Alteon 2005 Stock Plan, FOR the issuance of securities in the Financing pursuant to the Purchase Agreement, FOR the approval of all of the proposals of Alteon’s Amended and Restated Certificate of Incorporation, FOR the approval of the reverse stock split, FOR any proposal by the Alteon Board of Directors to adjourn the meeting; and FOR the ratification of J.H. Cohn LLP as Alteon’s independent registered public accounting firm for the fiscal year ending December 31, 2007;

according to the best judgment of the proxy holder if a proposal comes up for a vote at the annual meeting that is not on the proxy card or for the adjournment or postponement of the annual meeting.

If you are a stockholder of record of Alteon, you may also vote by telephone at the toll-free number 1-800-PROXIES or on the Internet at www.voteproxy.com. If you are a beneficial owner of Alteon common stock, you may be able to vote electronically as well, if your proxy card or voting instruction form so indicates. See the instructions on your proxy card or voting instruction form. You are strongly encouraged to vote electronically if you are given that option.

Q:	*What do I do if I want to change my vote?*

Just send in a later-dated, signed proxy card to Alteon’s Secretary before the meeting. Or, you can attend the meeting in person and vote. You may also revoke your proxy by sending a notice of revocation to Alteon’s Secretary at Alteon’s principal executive offices, 221 West Grand Avenue, Suite 200, Montvale, New Jersey 07645. If you voted via the Internet or telephone, you can submit a later vote using those same methods.

Q:	*What if I receive more than one proxy card?*

You may receive more than one proxy card or voting instruction form if you hold shares of our common stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described under “How Do I Vote?” for each account to ensure that all of your shares are voted.

Q:	*If my shares are held in “street name” by my broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?*

If you do not provide your broker, bank or nominee with instructions on how to vote your “street name” shares, your broker, bank or nominee will not be permitted to vote them on the matters that are to be considered by the Alteon stockholders at the annual meeting, except for the ratification of our independent registered public accounting firm. You should therefore be sure to provide your broker with instructions on how to vote your shares.

viii

If you wish to vote your shares in person, you must bring to the meeting a letter from the broker, bank or nominee confirming your beneficial ownership in the shares to be voted.

Q:	*What happens if I do not return a proxy card or otherwise provide proxy instructions?*

A:	The failure to return your proxy card or otherwise provide proxy instructions could be a factor in establishing a quorum for the annual meeting of Alteon stockholders, which is required to transact business at the meeting.

Q:	*What constitutes a quorum at the meeting?*

The presence, in person or by proxy, of the holders of a majority of the outstanding shares of Alteon common stock is necessary to constitute a quorum at the meeting. Votes of stockholders of record who are present at the meeting in person or by proxy, abstentions, and broker non-votes are counted for purposes of determining whether a quorum exists.

Q:	*What vote is required to approve each proposal and how are votes counted?*

Proposal 1: Approve Amendment to the Alteon 2005 Stock Plan to Increase the Shares Available for Issuance under the Plan

The affirmative vote of a majority of the votes present or represented by proxy and entitled to vote at the annual meeting is required to approve the amendment to the Alteon 2005 Stock Plan. Abstentions will be treated as votes against this proposal. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote.

	Proposal 2: Approve Issuance of Securities in the Financing		The affirmative vote of a majority of the votes present or represented by proxy and entitled to vote at the annual meeting is required to approve the issuance of securities in the Financing pursuant to the Purchase Agreement. Abstentions will be treated as votes against this proposal. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote.

	Proposal 3: Approve an Increase in the Number of Shares of Alteon Preferred Stock Authorized for Issuance		The affirmative vote of the majority of the Company’s outstanding common stock is required to approve an increase in the number of shares of Alteon preferred stock authorized for issuance as set forth in Alteon’s Amended and Restated Certificate of Incorporation. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Abstentions and broker non-votes will be treated as votes against this proposal.

	Proposal 4: Approve the Designation of the Series B Preferred Stock		The affirmative vote of the majority of the Company’s outstanding common stock is required to approve the designation of the Series B Preferred Stock as set forth in Alteon’s Amended and Restated Certificate of Incorporation. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Abstentions and broker non-votes will be treated as votes against this proposal.

	Proposal 5: Approve a Change of the Company’s Name		The affirmative vote of the majority of the Company’s outstanding common stock is required to approve a change to the name of the Company as set forth in Alteon’s Amended and Restated Certificate of Incorporation. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Abstentions and broker non-votes will be treated as votes against this proposal.

	Proposal 6: Approve a Change to the Provisions of Alteon’s Restated Certificate of Incorporation that Relate to the Indemnification of Directors		The affirmative vote of the majority of the Company’s outstanding common stock is required to approve a change to the provisions that relate to the indemnification of members of the Board of Directors as set forth in Alteon’s Amended and Restated Certificate of Incorporation. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Abstentions and broker non-votes will be treated as votes against this proposal.

	Proposal 7: Approve the Elimination of Retired and Cancelled Alteon Preferred Stock		The affirmative vote of the majority of the Company’s outstanding common stock is required to approve the elimination of any reference to retired or cancelled preferred stock as set forth in Alteon’s Amended and Restated Certificate of Incorporation. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Abstentions and broker non-votes will be treated as votes against this proposal.

	Proposal 8: Approve a Reverse Stock Split		The affirmative vote of the majority of the Company’s outstanding common stock is required to approve the reverse stock split. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Abstentions and broker non-votes will be treated as votes against this proposal.

	Proposal 9: Approve Adjournment of the Annual Meeting, if Necessary, if a Quorum is Present, to Solicit Additional Proxies if There are not Sufficient Votes in Favor of Proposals 1, 2, 3, 4, 5, 6, 7 and 8		The affirmative vote of a majority of the votes present or represented by proxy and entitled to vote at the annual meeting is required to approve the adjournment of the annual meeting. Abstentions will be treated as votes against this proposal. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote.

	Proposal 10: Ratify Selection of Auditors		The affirmative vote of a majority of the votes present or represented by proxy and entitled to vote at the annual meeting is required to ratify the selection of independent auditors. Abstentions will be treated as votes against this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote. We are not required to obtain the approval of our stockholders to select our independent registered public accounting firm. However, if our stockholders do not ratify the selection of J.H. Cohn LLP as our independent registered public accounting firm for 2007, the Audit Committee of our Board of Directors may reconsider its selection.

We cannot complete the financing transaction unless you approve the amendment to the Alteon 2005 Stock Plan, the increase in the number of authorized shares of preferred stock, the designation of the Series B Preferred Stock, the issuance of shares and warrants as part of the financing transaction, the reverse stock split, and Alteon’s Amended and Restated Certificate of Incorporation. In addition, proposal 2 can not be passed without the passage of proposals 1, 3, 4 and 8; proposal 4 can not be passed without the passage of proposals 2 and 3 and proposal 8 can not be passed without the passage of proposals 2, 3 and 4.

Q:	*Is voting confidential?*

We will keep all the proxies, ballots and voting tabulations private. We only let our Inspector of Elections (American Stock Transfer & Trust Company) examine these documents. Management will not know how you voted on a specific proposal unless it is necessary to meet legal requirements. We will, however, forward to management any written comments you make, on the proxy card or elsewhere.

Q:	*What are the costs of soliciting these proxies?*

Alteon will pay all of the costs of soliciting the proxies. Alteon directors and employees may solicit proxies in person or by telephone, fax or e-mail. Alteon will pay these employees and directors no additional compensation for these services. Alteon will ask banks, brokers and other institutions, nominees and fiduciaries to forward these proxy materials to their principals and to obtain authority to execute proxies. Alteon will then reimburse them for their expenses.

Q:	*What does “Householding of Annual Disclosure Documents” mean?*

In December 2000, the Securities and Exchange Commission adopted a rule concerning the delivery of annual disclosure documents. The rule allows us or your broker to send a single set of our annual report and proxy statement to any household at which two or more of our stockholders reside, if we or your broker believe that the stockholders are members of the same family. This practice, referred to as “householding,” benefits both you and the Company. It reduces the volume of duplicate information received at your household and helps to reduce the Company’s expenses. The rule applies to our annual reports, proxy statements and information statements. Once you receive notice from your broker or from us that communications to your address will be “householded,” the practice will continue until you are otherwise notified or until you revoke your consent to the practice. Each stockholder will continue to receive a separate proxy card or voting instruction card.

If your household received a single set of disclosure documents this year, but you would prefer to receive your own copy, please contact our transfer agent, American Stock Transfer & Trust Company, by calling their toll free number, 1-800-937-5449.

If you do not wish to participate in “householding” and would like to receive your own set of our annual disclosure documents in future years, or, conversely, if you share an address with another one of our stockholders and together both of you would like to receive only a single set of our annual disclosure documents, follow these instructions:

If your Company shares are registered in your own name, please contact our transfer agent, American Stock Transfer & Trust Company, and inform them of your request by calling them at 1-800-937-5449 or writing to them at 6201 15th Avenue, Brooklyn, NY 11219.

If a broker or other nominee holds your Company shares, please contact the broker or other nominee directly and inform them of your request. Be sure to include your name, the name of your brokerage firm and your account number.

Q:	*Will representatives of J.H. Cohn LLP, Alteon’s independent registered public accounting firm, be present at the annual meeting?*

A:	Yes. Representatives of J.H. Cohn are expected to be present at the annual meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

Q:	*Who do I call if I have questions about the meeting or the Financing?*

A:	Alteon stockholders may call Alteon Investor Relations at 201-934-5000.

xii

GENERAL INFORMATION

Our Board of Directors is soliciting proxies for the annual meeting of stockholders to be held on July 20, 2007 at 10:00 a.m., Eastern Time at the Marriott Park Ridge, 300 Brae Boulevard, Park Ridge, NJ 07656, and at any adjournment or postponement of the annual meeting. This proxy statement contains important information for you to consider when deciding how to vote on the matters before the annual meeting.

Voting materials, which include this proxy statement and the proxy card, will be mailed to stockholders entitled to notice of, and to vote at, the annual meeting on or about June 28, 2007. Our principal executive office is located at 221 West Grand Avenue, Suite 200, Montvale, New Jersey 07645, and our telephone number is (201) 934-5000.

Solicitation

We will bear the cost of solicitation of proxies, including expenses in connection with preparing and mailing this proxy statement. We will furnish copies of solicitation materials to brokerage houses, fiduciaries, and custodians to forward to beneficial owners of our common stock held in their names. In addition, we will reimburse brokerage firms and other persons representing beneficial owners of stock for their expenses in forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram and personal solicitation by our directors, officers and other employees. No additional compensation will be paid to our directors, officers or other employees for such services.

Record Date, Voting Rights and Outstanding Shares

Our Board of Directors has set May 24, 2007 as the record date for the annual meeting. Only holders of record at the close of business on that date will be entitled to notice of, and to vote at, the annual meeting. As of May 24, 2007 we had 129,318,858 shares of common stock outstanding. Each share of common stock is entitled to one vote on each proposal that will come before the annual meeting. A majority of the outstanding shares of common stock will constitute a quorum at the annual meeting. Abstentions and broker non-votes (as described below) are counted as present for purposes of determining the presence or absence of a quorum for the transaction of business.

Broker Non-Votes

A broker non-vote occurs when a broker cannot vote a customer’s shares registered in the broker’s name because the customer did not send the broker instructions on how to vote on the matter. If the broker does not have instructions and is barred by law or applicable rules from exercising its discretionary voting authority in the particular matter, then the shares will not be voted on the matter, resulting in a “broker non-vote.”

Revocability of Proxy and Voting of Shares

Any stockholder giving a proxy has the power to revoke it at any time before the annual meeting. It may be revoked by mailing to our Secretary at our principal executive offices, 221 West Grand Avenue, Suite 200, Montvale, New Jersey 07645, an instrument of revocation or a duly executed proxy bearing a later date. If a stockholder is permitted to vote electronically via the Internet or telephone, a proxy may be revoked by the submission of a later electronic proxy. A proxy may also be revoked by attendance at the annual meeting and an election given to our Secretary to vote in person (subject to the restriction that a stockholder holding shares in street name must bring to the annual meeting a legal proxy from the broker, bank or other nominee holding that stockholder’s shares that confirms that stockholder’s beneficial ownership of the shares and gives the stockholder the right to vote the shares). If not revoked, the proxy will be voted at the annual meeting in accordance with the stockholder’s instructions. If no instructions are indicated, the proxy will be voted (i) FOR each proposal presented by Alteon management for a vote at the meeting, (ii) FOR any proposal by the Alteon Board of Directors to adjourn the meeting, and (iii) according to the best judgment of the proxy holder if a proposal comes up for a vote at the annual meeting that is not on the proxy card or for the adjournment or postponement of the annual meeting.

Dissenters’ Rights of Appraisal

Our stockholders do not have dissenters’ rights of appraisal with respect to proposals being voted upon at the annual meeting.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our common stock as of May 24, 2007, except as otherwise set forth below, by (i) each person who is known by us to own beneficially more than 5% of the common stock, (ii) each director, (iii) each named executive officer and (iv) all current directors and named executive officers as a group. Unless otherwise indicated, the address for each director and executive officer listed is 221 West Grand Avenue, Suite 200, Montvale, NJ 07645.

Name of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(1)				Percent of Class(2)

Genentech, Inc. 1 DNA Way South San Francisco, CA 94080-4990		14,290,663				11	%

Noah Berkowitz, M.D., Ph.D.		8,931,700				7	%
Noah C. Berkowitz Family Trust		6,337,800	(3	)		5	%
Marilyn G. Breslow		358,201	(4	)		*
Thomas A. Moore		322,334	(5	)		*
Malcolm MacNab, M.D., Ph.D.		704,200	(6	)		1	%
Mary C. Tanner		7,203,648	(7	)		6	%
Wayne P. Yetter		744,394	(8	)		1	%
All current directors and officers as a group (6 persons)		18,264,477	(9	)		15	%

——————

*	Less than one percent

(1)

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, and generally includes voting or investment power with respect to securities. Shares of common stock subject to stock options and warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding such options and the percentage ownership of any group of which the holder is a member, but are not deemed outstanding for computing the percentage ownership of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

(2)	Applicable percentage of ownership is based on 129,318,858 shares of common stock outstanding.

(3)	Dr. Berkowitz’s wife is the trustee and has the power to vote and dispose of the shares. Dr. Berkowitz disclaims beneficial ownership of the shares.

(4)

Includes 198,201 shares of common stock subject to options that are exercisable within 60 days of May 24, 2007 and 160,000 shares of common stock subject to a restricted stock agreement that vest in annual installments of 54,000, 53,000 and 53,000 on July 21, 2007, July 21, 2008 and July 21, 2009, respectively, with the unvested portion subject to repurchase by the Company.

(5)

Includes 24,000 shares of common stock held directly by Mr. Moore and 138,334 shares of common stock subject to options which are exercisable within 60 days of May 24, 2007 and 160,000 shares of common stock subject to a restricted stock agreement that vest in annual installments of 54,000, 53,000 and 53,000 on July 21, 2007, July 21, 2008 and July 21, 2009, respectively, with the unvested portion subject to repurchase by the Company.

(6)	Includes 704,200 shares of common stock subject to options that are exercisable within 60 days of May 24, 2007.

(7)

Includes 5,212,146 shares of common stock held directly by Ms. Tanner and 1,831,502 shares of common stock subject to options and warrants which are exercisable within 60 days of May 24, 2007 and 160,000 shares of common stock subject to a restricted stock agreement that vest in annual installments of 54,000, 53,000 and 53,000 on July 21, 2007, July 21, 2008 and July 21, 2009, respectively, with the unvested portion subject to repurchase by the Company.

(8)

Includes 306,327 shares of common stock held directly by Mr. Yetter and 278,067 shares of common stock subject to options that are exercisable within 60 days of May 24, 2007 and 160,000 shares of common stock subject to a restricted stock agreement that vest in annual installments of 54,000, 53,000 and 53,000 on July 21, 2007, July 21, 2008 and July 21, 2009, respectively, with the unvested portion subject to repurchase by the Company.

(9)

Includes 14,474,173 shares of common stock held directly by all current officers and directors and 3,150,304 shares of common stock subject to options and warrants which are exercisable within 60 days of May 24, 2007 and 640,000 shares of common stock subject to a restricted stock agreement that vest in annual installments of 216,000, 212,000 and 212,000 on July 21, 2007, July 21, 2008 and July 21, 2009, respectively, with the unvested portion subject to repurchase by the Company.

MANAGEMENT

The Board of Directors

Pursuant to our Restated Certificate of Incorporation, our Board of Directors is divided into three classes, each of which serves a term of three years. Class A consists of Mr. Moore and Ms. Breslow, whose terms will expire at the upcoming annual meeting. Class B consists of Dr. Berkowitz, whose term will expire at the annual meeting of stockholders in 2008. Class C consists of Ms. Tanner and Mr. Yetter, whose terms will expire at the annual meeting of stockholders in 2009.

Following the closing of the Financing described below under Proposal 2, for so long as the purchasers in the Financing who held convertible promissory notes that were converted into shares of Series B Preferred Stock at the closing of the Financing hold 50% of the shares purchased at the closing of the Financing, such purchasers will have the right, but not the obligation, to designate two directors to our Board of Directors. Promptly following written notice by such purchasers of their election to exercise the designation right pursuant to the Purchase Agreement, and only if there are more than five directors then serving on the Board of Directors, the Board of Directors shall use its commercially reasonable efforts to cause two of its then-current members to resign their positions in order to create vacant seats for the purchaser designees. The purchasers have not yet identified the persons whom they intend to designate as members of the Board of Directors.

The current Board of Directors is comprised of the following persons:

Name	Age	Served as a Director Since	Positions with Alteon

Noah Berkowitz, M.D., Ph.D.	43	2006	President, Chief Executive Officer and Director
Marilyn G. Breslow*	62	1988	Director
Thomas A. Moore*	56	2001	Director
Mary C. Tanner	56	2006	Director
Wayne P. Yetter	61	2006	Director

——————

*	Ms. Breslow and Mr. Moore have decided not to stand for re-election to the Board of Directors at the annual meeting.

The Company is undertaking the process of identifying qualified candidates to serve on the Company’s Board of Directors to fill the vacancies created by the departure of Ms. Breslow and Mr. Moore following the annual meeting. The Company is actively searching for candidates with suitable qualifications, experience and expertise to serve on the Board of Directors.

Our Board has determined that the following members of the Board qualify as independent under the definition promulgated by the American Stock Exchange: Ms. Breslow, Mr. Moore, Ms. Tanner and Mr. Yetter.

The principal occupations and business experience, for at least the past five years, of each director are as follows:

Noah Berkowitz, M.D., Ph.D., the Company’s President and Chief Executive Officer, joined the Company following its merger with HaptoGuard in July 2006. Dr. Berkowitz earned his B.A., M.D., and Ph.D. from Columbia University and trained at the National Cancer Institute in medical oncology. Prior to founding HaptoGuard in 2004, he was a consultant to a variety of biotechnology companies in Israel, including Predix Pharmaceuticals, IDGene and Teva. He was previously Vice President of Clinical Development at IMPATH Inc., a NASDAQ-traded, “cancer information company” where he co-developed a division, IMPATH Predictive Oncology, focused on biopharmaceutical partnerships supporting the discovery and development of cancer-related, targeted diagnostics and therapeutics. Prior to IMPATH, Dr. Berkowitz was the founder of Physician Choice Inc., a contract research organization specializing in pharmacoeconomics and outcomes.

Mary C. Tanner has served as a director of the Company since July 2006. Ms. Tanner is a Principal and founder of Life Sciences Partners, a healthcare advisory and investment firm. Previously, from 2000 to 2004, she was Senior Managing Director at Bear Stearns & Co., and Senior Managing Director and head of the Life Sciences practice at Lehman Brothers, Inc. During her 25 year career on Wall Street, Ms. Tanner has worked on or supervised over 550 transactions with a total value of over $175 billion, including ten large pharmaceutical mergers. Ms. Tanner received her B.A. from Harvard University.

Wayne P. Yetter has served as a director of the Company since July 2006. Mr. Yetter has served as Chief Executive Officer of Verispan, LLC, a healthcare information company founded by Quintiles Transnational Corp. and McKesson Corp, since September 2005. From November 2004 through September 2005, Mr. Yetter served as President and Chief Executive Officer of Odyssey Pharmaceuticals, Inc. to assist Odyssey’s parent, PLIVA d.d., implement its strategy to exit the proprietary pharmaceutical business. After serving in Vietnam, Mr. Yetter began his career in the pharmaceuticals industry in 1970 as a sales representative for Pfizer. From Pfizer, he joined Merck & Co in 1977, where he led the Marketing Operations Group and then became President of the Asia Pacific region before starting the new company, Astra Merck, in 1991 as President and CEO. Mr. Yetter then joined Novartis Pharmaceuticals in 1997, where he was President and CEO of the U.S. pharmaceutical business. In 1999, he joined IMS and later led its spinout company, Synavant, where he was Chairman and CEO for three years before the company merged with Dendrite International in 2003. Following the merger, Mr. Yetter founded and has acted as principal of BioPharm Advisory LLC since September 2003. Mr. Yetter was formerly Chairman of the Board for Transkaryotic Therapies Inc., which was acquired by Shire Pharmaceuticals in 2005. Mr. Yetter received his B.A. in Biology from the Wilkes University, and his M.B.A. from Bryant University.

Committees of the Board of Directors and Meetings

The Board of Directors has a Compensation Committee, which reviews compensation arrangements for employees of and consultants to Alteon, as well as salaries and compensation arrangements for executive officers. In 2006, the Compensation Committee was comprised of Alan J. Dalby, Thomas A. Moore, George M. Naimark, Ph.D., and Wayne P. Yetter.

The Board of Directors has a Nominating Committee, which reviews the qualifications of candidates and proposes nominees to serve as directors on our Board of Directors and nominees for membership on Board committees. In 2006, the Nominating Committee was comprised of Edwin D. Bransome, Jr., M.D., David K. McCurdy, Thomas A. Moore and Wayne P. Yetter.

The Board of Directors has an Audit Committee, which oversees the accounting and financial reporting processes and the audits of our financial statements. In 2006, the Audit Committee was comprised of Edwin D. Bransome, Jr., Marilyn G. Breslow, David K. McCurdy, Thomas A. Moore, Mark Novitch, M.D. and Mary Tanner.

During 2006, Edwin D. Bransome, Jr., M.D., David K. McCurdy, Mark Novitch, Alan J. Dalby, and George M. Naimark, Ph.D., each resigned from our Board of Directors.

All of the current members of the Compensation Committee, the Nominating Committee and the Audit Committee are independent, as such term is defined by Section 121.A of the American Stock Exchange listing standards. The Board of Directors does not currently have an “audit committee financial expert,” within the meaning of applicable regulations of the Securities and Exchange Commission, serving on its Audit Committee. The Board of Directors believes that one or more members of the Audit Committee satisfy the financial sophistication requirement of the American Stock Exchange and are capable of (i) understanding generally accepted accounting principles (“GAAP”) and financial statements; (ii) assessing the application of GAAP in connection with our accounting for estimates, accruals and reserves; (iii) analyzing and evaluating our financial statements; (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the Board of Directors believes that these members may not have obtained these attributes through the experience specified in the Securities and Exchange Commission’s rules with respect to audit committee financial experts, and therefore, may not qualify to serve in that role.

Please see the Compensation Committee Report and Compensation Discussion and Analysis set forth elsewhere in this proxy statement for a discussion about the processes and procedures adopted by the Compensation Committee for the consideration and determination of executive and director compensation.

The Audit Committee held 8 meetings, the Compensation Committee held 4 meetings and the Nominating Committee held no meetings during the year ended December 31, 2006. There were 22 meetings of the Board of Directors in 2006. Each of the incumbent directors attended at least 75% of the aggregate of (i) the total number of meetings of the Board of Directors held during the year ended December 31, 2006 and (ii) the total number of meetings held by all committees of the Board on which he or she served during the year ended December 31, 2006, except for Mr. Alan J. Dalby, who attended 1 of the 9 meetings of the Board and committees of the Board held until his resignation in July 2006. The Board has adopted a written charter for the Audit Committee, the Compensation Committee and the Nominating Committee. These written charters are available on our website at www.alteon.com.

Director Nomination Process

The Nominating Committee reviews the qualifications of candidates and proposes nominees to serve as directors on our Board of Directors and nominees for membership on Board committees. It is the Nominating Committee’s policy to consider potential candidates for Board membership recommended by its members, management, stockholders and others. The Nominating Committee has not established any specific minimum qualifications that must be met for a recommendation for a position on the Board of Directors. Instead, the Nominating Committee conducts appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates for nomination to the Board of Directors giving due consideration to such criteria, including without limitation, diversity, experience, skill set and the ability to act on behalf of stockholders, as it believes appropriate and in the best interests of Alteon and its stockholders. All potential director candidates are evaluated based upon the same criteria, and the Nominating Committee makes no distinction in its evaluation of candidates based upon whether such candidates are recommended by stockholders or others. Once the evaluation is complete, the Nominating Committee recommends the nominees to the Board of Directors, which makes the final determination. If a stockholder wishes to nominate a candidate to be considered for election as a director at the 2008 annual meeting of stockholders using the procedures set forth in our amended and restated by-laws, it must follow the procedures described in “Advance Notice of Stockholder Nominees for Director and Other Stockholder Proposals” set forth in our amended and restated by-laws. If a stockholder wishes simply to propose a candidate for consideration as a nominee by the Nominating Committee, it should follow the procedures set forth in Appendix B, “Procedures for Shareholders Submitting Nominating Recommendations,” to our Nominating Committee Charter, which is available on our website at www.alteon.com.

Stockholder Communications to the Board

Stockholders and other parties interested in communicating directly with the Chairman or with the Board of Directors as a group may do so by writing to Chairman, Alteon Inc., 221 West Grand Avenue, Suite 200, Montvale, New Jersey 07645. All correspondence received by Alteon and addressed to the Chairman is forwarded directly to the Board of Directors.

Director Attendance at Annual Meeting

Our incumbent Directors, except for Ms. Tanner and Mr. Yetter, attended our annual meeting of stockholders in 2006. Ms. Tanner and Mr. Yetter were not serving on our Board of Directors at the time of our 2006 annual meeting. Each Director is expected to dedicate sufficient time, energy and attention to ensure the diligent performance of his or her duties, including attending meetings of the stockholders, the Board and committees of which he or she is a member.

Executive Officers

The following table sets forth certain information regarding our executive officer who is not also a director. We have employment agreements with Noah Berkowitz, M.D., Ph.D., and Malcolm MacNab, M.D., Ph.D., the terms of which are described elsewhere in this proxy statement.

Name	Age	Position

Malcolm W. MacNab, M.D., Ph.D.	60	Vice President, Clinical Development

Dr. MacNab has served as our Vice President, Clinical Development since July 2006. Dr. MacNab received his M.D. and Ph.D. in vascular pharmacology from Temple University in Philadelphia, and received post-graduate training in Internal Medicine and Hematology at the Medical College of Pennsylvania. Prior to joining Alteon, from 2004 to 2006, Dr. MacNab served as Vice President, Clinical Development of HaptoGuard. From 1997 to 2004, Dr. MacNab served as the Vice President of Cardiovascular and Metabolism Clinical Development and Medical Affairs at Novartis, where he was instrumental in the development, approval and marketing of Diovan, an angiotensin receptor blocker used for the treatment of hypertension and heart failure, and Lotrel, a combination product for the treatment of hypertension. Prior to Novartis, Dr. MacNab was Vice President in Cardiovascular Development at CIBA Pharmaceuticals.

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Discussion and Analysis

We have prepared the following Compensation Discussion and Analysis to provide you with information that we believe is necessary to understand our executive compensation policies and decisions as they relate to the compensation of our named executive officers.

We have developed and implemented compensation policies, plans and programs which (1) provide a total compensation package that is intended to be competitive with the compensation arrangements used by our peer companies within the biotechnology industry, in order to enable us to attract and retain high-caliber executive personnel, and (2) seek to align the financial interests of our employees with those of our stockholders by relying heavily on long-term incentive compensation, in the form of stock options, for which the number of shares to be granted is based on performance. To achieve these objectives, the Compensation Committee of our Board of Directors has implemented compensation plans that tie a portion of executive officers’ overall compensation to meeting specific research, clinical, regulatory and operational goals. Because we believe the performance of every employee is important to our success, we are mindful of the effect our executive compensation and incentive programs have on all of our employees.

Our management develops our compensation plans by analyzing publicly-available compensation data for national and regional companies in the biotechnology and pharmaceutical industries that are at a similar size and stage of development as we are. We believe that the practices of this group of companies provide us with appropriate compensation benchmarks because these companies have similar organizational structures and tend to compete with us for executives and other key personnel in the clinical, financial and administrative areas, among others. As part of the process of benchmarking executive compensation, we review biopharmaceutical companies that have specified criteria that we believe will give us the most accurate comparison, including market capitalization, revenue and location of offices. Specifically, we conducted an analysis of proxy statement information for comparable companies meeting the following criteria: “Biopharmaceutical company, market capitalization of in a range of $20 million to $200 million, little or no revenue and located on either the East or West Coast.” Approximately 30 companies met these criteria. Information on executive compensation from each of these companies was gathered from their individual proxy statements and outlined for comparison. The information gathered included annual base salary, annual cash bonus, and other annual compensation and stock option grants. At the time at which our analysis was conducted, our market capitalization was greater than $20 million. It has since been reduced due to a decrease in our price per share.

Based on an analysis of the data gathered, the average points of the data are calculated and a comparison of our executive officers’ total compensation package, including long-term stock options, is made. We believe that analyzing the compensation packages of companies with whom we compete for talent enables us to create compensation packages that are fair and competitive to attract and retain top talent. We have engaged an experienced consultant to help us analyze these data and to compare our compensation programs with the practices of the companies represented in the compensation data we review.

Based on management’s analyses and recommendations, the Compensation Committee has approved a pay-for-performance compensation philosophy, which is intended to bring base salaries and total executive compensation in line with approximately the 50th percentile of the companies in our industry with a similar market capitalization, financial status and geographic location, represented in the compensation data we review.

We work within the framework of a pay-for-performance philosophy to determine each component of an executive officer’s initial and ongoing compensation package based on numerous factors, including:

the individual’s particular background and circumstances, including prior relevant work experience and depth of experience;

the individual’s role with us and the compensation paid to persons with similar roles and responsibilities in the companies represented in the compensation data that we have reviewed;

the demand for individuals with the individual’s specific expertise and experience at the time of hire;

performance goals and other expectations for the position;

comparison to other executives within our company having similar levels of expertise and experience; and

uniqueness of industry skills.

The Compensation Committee of our Board of Directors also has implemented an annual performance management program, under which annual performance goals are determined and set forth in writing at the beginning of each calendar year for the corporation as a whole and each individual employee. Annual corporate goals are proposed by management and approved by the Compensation Committee and set during the first quarter of each calendar year. These corporate goals target the achievement of specific research, clinical, regulatory and operational milestones. Annual individual goals focus on contributions that are expected to facilitate the achievement of the corporate goals and are set during the first quarter of each calendar year. The Chief Executive Officer establishes the individual goals for the executive officers who directly report to him. The Chief Executive Officer’s individual goals are approved by the Compensation Committee. With respect to non-executive employees, individual goals are proposed by the individual’s direct supervisor. Annual salary increases, annual cash bonuses and annual stock option awards granted to employees are tied to the achievement of these corporate and each individual’s performance goals.

At the end of each calendar year, we evaluate corporate and individual performance against the written goals for the recently completed year. Consistent with our compensation philosophy, the supervisor prepares a written evaluation of the employee’s performance, and receives input from other employees. The employee then has the opportunity to evaluate him or herself. The supervisor and employee meet to review and discuss the evaluation, with an emphasis on clear and strong communication by both parties. This process leads to a recommendation for annual employee salary increases, annual stock option awards and bonuses, if any, which are then reviewed and approved by the Compensation Committee. The Chief Executive Officer prepares written evaluations of the other executive officers and gives such executive officers the opportunity to complete a written self-evaluation. Both parties then meet to discuss the evaluations. The Chief Executive Officer then submits recommendations to the Compensation Committee for salary increases, stock option awards and bonuses, if any. With respect to the Chief Executive Officer, corporate and individual goals for the upcoming year are established by the Compensation Committee. The Chief Executive Officer’s individual performance evaluation is conducted by the Compensation Committee, which determines his compensation adjustments and awards. The performance review process begins in October and concludes at the December meeting of our Board of Directors. For all employees, including our executive officers, annual base salary increases, annual stock option awards and annual cash bonuses, to the extent granted, are implemented during the fourth quarter of the calendar year.

Compensation Components

The primary components of executive compensation include base salary and long-term equity incentives in the form of stock options. We primarily rely on long-term incentive compensation, in the form of stock options, to motivate the executive officers and other employees. This allows us to retain cash for research and development projects.

Executive officers also are eligible to earn an annual cash incentive award, the amount of which is based upon (1) the position level of the executive officer, and (2) the attainment of specific individual non-financial performance objectives. The Committee sets these performance objectives at the beginning of the fiscal year.

The components of our compensation package are as follows:

Base Salary

Base salaries for our executive officers are established based on the scope of their responsibilities, their prior relevant background and depth of experience, taking into account competitive market compensation paid by companies represented in the compensation data we review for similar positions and the overall market demand for such executives at the time of hire. As with total executive compensation, we believe that executive officers’ base salaries should generally target the average, or 50%, calculation of the range of salaries for executives in similar positions and responsibilities in the companies of similar market capitalization, financial status, and geographic location to us represented in the compensation data we review. An executive officer’s base salary also is evaluated together with other components of the executive officer’s compensation to ensure that the executive officer’s total compensation is in line with our overall compensation philosophy. The average current salary, based on approximately 30 comparable companies, for a President & CEO is $361,377 and $252,925 for a Vice President in Clinical Development. Comparatives were not completed for Kenneth I. Moch, Judith Hedstrom or Mary Phelan since their relationship with the Company had terminated prior to our annual review process.

The Chief Executive Officer is responsible for developing the annual salary plan for our other executive officers. This plan is presented for review and approval by the Compensation Committee. The compensation packages of comparable companies are evaluated to determine whether and to what extent that compensation is comparable to the present compensation packages of the executive officers. Taking into account this analysis and the above factors, the Chief Executive Officer is able to make a qualified decision regarding any increases to the executive officer’s compensation. Other executive officers are responsible only for the compensation decisions of the non-executive employees who directly report to them.

The same criteria are used by the Compensation Committee in deciding the Chief Executive Officer’s compensation. Data from comparable companies’ chief executive officers is evaluated, along with factors such as level of responsibility, depth of experience, achievement of goals and expected future contributions, before making a final decision on the Chief Executive Officer’s compensation package. Our Chief Executive Officer’s compensation is governed in part by the employment agreement that he has entered into with us, which we assumed as part of the merger that we engaged in with HaptoGuard in July 2006. Under that agreement, Dr. Berkowitz is entitled to a base salary of $264,000 per year.

Base salaries are reviewed annually as part of our performance management program and increased for merit reasons, based on the executive officer’s success in meeting or exceeding individual performance objectives and an assessment of whether significant corporate goals were achieved. If necessary, we also realign base salaries with market levels for the same positions in the companies of similar market capitalization, financial status, and geographic location to us represented in the compensation data we review, if we identify significant market changes in our data analysis. Additionally, we may adjust base salaries as warranted throughout the year for promotions or other changes in the scope or breadth of an executive officer’s role or responsibilities. The factors used for setting compensation and decision making are the same factors used to evaluate whether an executive officer’s compensation should be increased or decreased.

Annual Cash Bonus

Our compensation program provides executive officers with the opportunity to earn an annual cash incentive award, the amount of which is based upon (1) the position level of the executive officer, and (2) the attainment of specific individual non-financial performance objectives. The Compensation Committee sets these performance objectives at the beginning of the fiscal year. Currently, executive officers and certain senior non-executive employees may be eligible for annual performance-based cash bonuses in amounts ranging from 15%-35% of their base salaries, as set forth in their employment offer letters. In its discretion, the Compensation Committee may, however, award bonus payments to our executive officers above or below the amounts specified in their respective offer letters, depending on the achievement by the executive officers of performance goals as set and determined by the Committee. As provided in his employment agreement, our Chief Executive Officer is eligible for an annual performance-based bonus of up to 35% of his annual base salary, the specific amount of which, if any, will be determined by the Board of Directors or the Compensation Committee in their sole discretion.

Performance objectives for Dr. Berkowitz for the year ended December 31, 2006 included achieving milestones in the development of the company’s lead compounds as well as executing the merger of HaptoGuard, Inc. into Alteon which was completed in July 2006, expanding certain intellectual property rights to our licensed compounds and seeking appropriate financing and partnership agreements to advance the development of the company’s lead compounds.

Performance objectives for Dr. MacNab focused on the design and implementation of research and clinical programs to advance the development of the company’s lead compounds. The specific plans were adjusted throughout the year due to limited financial resources to fund programs and the rationalization of HaptoGuard and Alteon scientific programs following the merger. A key objective was the initiation of a Phase II clinical trial for ALT - 2074, which was achieved.

The Compensation Committee used its discretion to assess the overall performance of Dr. Berkowitz in achieving key 2006 objectives and awarded Dr. Berkowitz a bonus of 75% of his target award. The Compensation Committee considered Dr. Berkowitz’s accomplishments in light of the significant changes that occurred during the year including the HaptoGuard merger with Alteon. The Compensation Committee can use its discretion to grant bonuses even if established performance objectives are not met, but would consider mitigating circumstances and other accomplishments achieved during the year that may not have been anticipated when the objectives were established. The Compensation Committee does embrace a “pay for performance” philosophy.

The Compensation Committee also assessed the accomplishments of Dr. MacNab during 2006 and supported the recommendation of Dr. Berkowitz that Dr. MacNab be awarded a bonus for 2006 at 50% of target.

Ms. Phelan was granted a retention bonus in 2006.

Stock Options

Initial Stock Option Awards

Executive officers who join us are awarded initial stock option grants. These grants have an exercise price equal to the fair market value of our common stock on the day the grant is approved by the Compensation Committee and a four-year vesting schedule with 25% of the shares vesting on the first anniversary of the date of hire and annually thereafter for the next three years. All options granted to employees follow this vesting schedule. The amount of the initial stock option award is determined based on the executive’s position with us and analysis of the competitive practices of companies of similar market capitalization, financial status, and geographic location to us represented in the compensation data we review with the goal of creating a total compensation package for new employees that is competitive with other similarly situated biotechnology companies and that we believe will enable us to attract high quality people.

Annual and Periodic Stock Option Awards

Our practice is to make annual stock option awards part of our overall performance management program. We intend that the annual aggregate value of these awards will be set near competitive median levels for companies represented in the compensation data we review. As is the case when the amounts of base salary and initial equity awards are determined, a review of all components of the executive officer’s compensation is conducted when determining annual equity awards to ensure that an executive officer’s total compensation conforms to our overall philosophy and objectives.

The Compensation Committee may also, in its discretion, grant periodic option awards to our executive officers if it deems such awards to be warranted as a result of extraordinary service or achievements. For example, on November 1, 2006, Dr. Malcolm MacNab was granted an option to purchase 1,000,000 shares of our common stock in recognition of his significant contributions in developing plans and strategy to support our clinical research projects during the 2006 fiscal year, as well as to target ownership of 1.5% of the Company. This was the only option grant made by us to one of our executive officers during the 2006 fiscal year.

In determining the size of stock option grants to individual executives, the Compensation Committee determines the type, amount, grant date and vesting schedule for all grants of stock options to executive officers. The Compensation Committee considers a number of factors, including the level of an executive officer’s job responsibilities, the executive officer’s past performance, the size and frequency of grants by comparable companies, the executive officer’s salary level, the need to provide an incentive for the purpose of retaining qualified personnel in light of our current conditions and prospects, the size of any prior grants, and the achievement of designated milestones by the executive officer.

All stock grants to executive officers, except the Chief Executive Officer, are proposed by the Chief Executive Officer to the Compensation Committee for approval. All proposals of stock option grants to the Chief Executive Officer are made and approved by our Compensation Committee. The terms of the initial stock option grants to executive officers were incorporated into their employment agreements.

Other Compensation

Our executive officers receive the same benefit package as our other employees, which includes medical, dental, long-term disability, life insurance and a 401(k) plan with an employer contribution that matches 25% of the employee’s contribution, up to 5% of his or her base salary.

Perquisites for executive officers are limited to an annual car allowance that only the Chief Executive Officer is eligible to receive in an amount of up to $1,000 per month. Our Board of Directors and Compensation Committee believe that these payments are appropriate as the Chief Executive Officer is required to travel frequently in the conduct of significant business activities on our behalf.

Termination Based Compensation

Severance

Noah Berkowitz, M.D., Ph.D.

President and Chief Executive Officer

Upon termination of employment, our Chief Executive Officer is entitled to receive severance payments under his employment agreement. In determining whether to approve and in setting the terms of severance arrangements, the Compensation Committee recognizes that executive officers, especially highly ranked executive officers, often face challenges securing new employment following termination. Our Chief Executive Officer’s employment agreement provides for salary and benefits for 12 months from the date of termination if his employment is terminated without cause. In addition, the monthly vesting of his options shall continue for an additional 12 months from such termination date. The Compensation Committee approved the severance package based on the continuation of the employment agreement that was assumed upon the merger with HaptoGuard, Inc.

Malcolm MacNab, M.D., Ph.D.

Vice President, Clinical Development

Upon termination of employment, Dr. MacNab is not entitled to receive severance under his employment agreement. Dr. MacNab may exercise those options which have vested up to 90 days following his termination.

Kenneth I. Moch

Former President and Chief Executive Officer

We entered into a three-year amended and restated employment agreement with Kenneth I. Moch, dated as of December 15, 2004. At meetings of our Board of Directors held on November 4, 2005 and December 7, 2005, the Board agreed that Mr. Moch should also be paid an amount equal to six months of his then-current annual salary upon the closing of a strategic transaction or liquidation, in a manner that was designed to maximize the tax benefit to Mr. Moch and us. Under the terms of an amended and restated employment agreement, Mr. Moch served as our Chief Executive Officer and was entitled to an annual salary for the 2006 fiscal year of $382,454 and a bonus of up to $150,000. Mr. Moch resigned as our President and Chief Executive Officer on July 21, 2006, as a result of our merger with HaptoGuard, Inc. In connection with his resignation, Mr. Moch received a lump sum payment of $863,159, which represented 30 months of his annual base salary under his employment agreement and change of control arrangements. See “—Employment Agreements” and “Potential Payments Upon Termination or Change in Control” below.

Judith S. Hedstrom

Former Chief Operating Officer

We entered into a three-year amended and restated employment agreement with Judith S. Hedstrom, dated as of February 11, 2005. At meetings of our Board of Directors held on November 4, 2005 and December 7, 2005, the Board confirmed that Ms. Hedstrom would receive an amount equal to one year of her then-current annual salary if she was terminated without cause prior to a change in control transaction. Further, the Board agreed to offer her a consulting contract for three months following her termination, under which she would be available to us for up to 15 days during that period. Ms. Hedstrom’s compensation under this agreement was an extension of her right, set forth in her employment agreement, to exercise her stock options for a two-year period commencing on April 30, 2006. The Board also agreed that she would remain entitled to receive benefits allocated to her under the Change in Control Severance Plan (discussed below) upon a change in control. Ms. Hedstrom resigned as our Chief Operating Officer on January 31, 2006. In connection with her resignation, Ms. Hedstrom received a lump sum payment of $294,088 on January 31, 2006 pursuant to her employment agreement and received a lump sum payment of $293,202 on July 21, 2006, in connection with her change of control arrangements as a result of our merger with HaptoGuard, Inc. See “—Employment Agreements” and “Potential Payments Upon Termination or Change in Control” below.

Severance and Change in Control Arrangements

In February 1996, we adopted the Alteon Inc. Change in Control Severance Benefits Plan (“Change in Control Severance Plan”) to protect and retain qualified employees and to encourage their full attention, free from distractions caused by personal uncertainties and risks in the event of a pending or threatened change in control. The Change in Control Severance Plan provided for severance benefits to certain employees upon certain terminations of employment after or in connection with a change in control as defined in the Change in Control Severance Plan. Following a qualifying termination that occurred as a result of a change in control, our executive officers would be entitled to continuation of (1) their base salary for a period of 24 months, and (2) all benefit programs and plans providing for health and insurance benefits for a period of up to 18 months. In addition, upon a change in control, all outstanding unexercisable stock options held by certain employees that were participants in the Change in Control Severance Plan would become exercisable. The Change in Control Severance Plan was terminated in November 2005. However, as described above, such provisions remained in effect for Mr. Moch and Ms. Hedstrom pursuant to the terms of their employment agreements.

Acceleration of Vesting of Stock Option Awards

Pursuant to our stock option agreement with Dr. MacNab, in the event of a change in control, as defined in his agreement, any portion of Dr. MacNab’s options which are not vested and exercisable, shall vest and become exercisable immediately prior to a change in control. See “—Employment Agreements” and “Potential Payments Upon Termination or Change in Control” below.

Conclusion

We believe that to attract, motivate and retain high-performing executives a competitive base salary and stock option package are necessary for top performance and attainment of long-term goals. We believe that our compensation policies are designed to accomplish these goals and to ultimately reward our key personnel for outstanding individual and corporate performance.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table shows the total compensation paid or accrued during the fiscal year ended December 31, 2006 to (1) our Chief Executive Officer, (2) our Vice President of Clinical Development, (3) our former Chief Executive Officer and (4) two other former executive officers who earned more than $100,000 during the fiscal year ended December 31, 2006.

Name and Principal Position	Year	Salary ($)		Bonus ($)		Option Awards ($)		All Other Compensation ($)		Total ($)

Noah Berkowitz, M.D., Ph.D.	2006	240,000		54,000	(1)	—		3,558	(2)	297,558
President and Chief Executive Officer

Malcolm W. MacNab, M.D., Ph.D.	2006	240,000		36,000	(3)	58,206	(4)	—		334,206
Vice President, Clinical Development

Kenneth I. Moch	2006	230,934	(5)	—		—		883,863	(6)	1,114,797
Former President and Chief Executive Officer

Judith S. Hedstrom	2006	40,761	(7)	—		—		604,190	(8)	644,951
Former Chief Operating Officer

Mary Phelan	2006	68,785	(9)	28,000	(10)	—		—		96,785
Former Director of Finance and Financial Reporting

——————

(1)	Represents a cash bonus for performance during the fiscal year ended December 31, 2006, which was paid in 2007.

(2)	Represents an expense for a car allowance.

(3)	Represents a cash bonus for performance during the fiscal year ended December 31, 2006, which was paid in 2007.

(4)

Represents the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006, in accordance with FAS 123(R), of awards pursuant to the stock option program. Assumptions used in the calculations of this amount are included in Note 9 - Stockholders’ Equity to our audited consolidated financial statements for the fiscal year ended December 31, 2006 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2007.

(5)	Mr. Moch resigned as our President and Chief Executive Officer on July 21, 2006.

(6)

Represents (i) a lump sum payment of $863,159 representing 30 months of Mr. Moch’s annual base salary under his employment agreement and change in control arrangements paid on July 21, 2006, as a result of our merger with HaptoGuard, Inc., (ii) COBRA coverage in the amount of $10,200, (iii) car allowance of $5,504, and (iv) matching 401(k) contribution of $5,000.

(7)	Ms. Hedstrom resigned as our Chief Operating Officer on January 31, 2006.

(8)

Represents (i) a lump sum payment of $294,088 paid on January 31, 2006 under Ms. Hedstrom’s employment agreement, (ii) a lump sum payment of $293,202 paid on July 21, 2006 under Ms. Hedstrom’s change in control arrangements, as a result of our merger with HaptoGuard, Inc., (iii) COBRA coverage in the amount of $11,900, and (iv) matching 401(k) contribution of $5,000.

(9)	Ms. Phelan resigned from her position with us on May 31, 2006.

(10)	Represents a retention bonus.

2006 Grants of Plan-Based Awards

The following table shows information regarding grants of non-equity incentive plan awards and grants of equity awards that we made during the fiscal year ended December 31, 2006 to each of the executive officers named in the Summary Compensation Table.

Name	Grant Date	All Other Option Awards: Number of Securities Underlying Options (#)	Exercise or Base Price of Option Awards ($/Sh) (1)	Grant Date Fair Value of Stock and Option Awards (2)

Noah Berkowitz, M.D., Ph.D.	—	—	—		—
President and Chief Executive Officer

Malcolm W. MacNab, M.D., Ph.D.	11/1/2006	1,000,000(3)	0.15		$142,100
Vice President, Clinical Development

Kenneth I. Moch	—	—	—		—
Former President and Chief Executive Officer

Judith S. Hedstrom	—	—	—		—
Former Chief Operating Officer

Mary Phelan	—	—	—		—
Former Director of Finance and Financial Reporting

——————

(1)

The Company’s 2005 Stock Option Plan as amended on July 19, 2006 provides that the exercise price shall be determined by using the fair market value of the Company’s common stock, which is defined under the 2005 Stock Option Plan as the closing price of the Company’s common stock on the date of grant, as determined by our board of directors.

(2)

Represents the grant date fair value in accordance with FAS 123(R). Assumptions used in this calculation are included in Note 9 - Stockholders’ Equity to our audited consolidated financial statements for the fiscal year ended December 31, 2006 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2007.

(3)	Represents annual stock option grant as part of annual compensation for performance during 2006.

Employment Agreements

Noah Berkowitz, M.D., Ph.D.

President and Chief Executive Officer

On February 1, 2007, we entered into an amendment to Dr. Berkowitz’s Employment Agreement dated March 1, 2005. Pursuant to the amendment, Dr. Berkowitz is entitled to receive an annual base salary of $264,000. He is also eligible to receive an annual cash bonus in an amount up to 35% of his annual base salary, based upon the achievement of certain milestones and objectives. The percentage amount associated with each of these milestones will be established in the first quarter of the year by the Compensation Committee. Dr. Berkowitz also receives a car allowance in the amount of $1,000 per month.

Dr. Berkowitz is entitled to certain benefits in connection with a termination of his employment or a change in control discussed below under “—Potential Payments Upon Termination of Change in Control.”

Malcolm MacNab, M.D., Ph.D.

Vice President, Clinical Development

The Board of Directors has amended Dr. MacNab’s Employment Agreement dated February 7, 2005. Pursuant to this amendment, in lieu of an increase in base salary, which will remain at $240,000 per year, we are obligated to pay travel expenses to our offices in New Jersey from his home in Massachusetts. He is still eligible to receive an annual cash bonus in an amount up to 30% of his annual base salary. One-half of his bonus is dependent on the achievement of corporate milestones and one-half of his bonus is dependent on the achievement of individual milestones. The annual milestones, as well as the specified percentage of the total bonus of each specific milestone, shall be established by the Chief Executive Officer and/or the Board of Directors.

On November 1, 2006, Dr. MacNab received an option to purchase 1,000,000 shares of common stock which was based on targeting 1.5% ownership of the Company on a fully diluted basis. The fair value of this award using the Black-Scholes model is $142,100. These options will vest and become exercisable in four equal annual installments commencing on January 1, 2007 until fully vested.

Dr. MacNab is entitled to certain benefits in a change in control discussed below under “—Potential Payments Upon Termination or Change-in-Control.”

Kenneth I. Moch

Former President and Chief Executive Officer

On December 15, 2004, we entered into an Amended and Restated Employment Agreement with Mr. Moch. The term of the Employment Agreement was for a period of three years, terminating on December 31, 2007. As our President and Chief Executive Officer, Mr. Moch was entitled to receive an annual base salary of $382,454 and an annual bonus amount of up to $150,000 dependent on the attainment of stated goals and objectives by the Compensation Committee.

Mr. Moch resigned as our President and Chief Executive Officer on July 21, 2006, as a result of our merger with HaptoGuard, Inc. According to Mr. Moch’s Employment Agreement, because he was terminated without cause prior to the termination of his Employment Agreement, he was entitled to a base salary amount equal to his then current annual salary in equal installments over a 12-month period. In addition, we entered into a consulting agreement with him for a period of 12 months for an annual consulting fee equal to one-half of his annual salary at the time of his termination of employment. In addition, we amended the terms of his stock option grant agreements to provide that all options which are vested on the effective date of the termination of his employment are exercisable until the earlier of the expiration date set forth in the stock option grant agreement (without regard to the effect of the termination of his employment on the term of the option) or the second anniversary of the effective date of his resignation from the Board of Directors. After resigning from our Board of Directors, Mr. Moch provided strategic advisory services to the Company, focused, in particular on financing activities, for which he was paid an aggregate of $60,000 in the first and second quarters of 2007.

Mr. Moch is entitled to certain benefits in connection with a termination of his employment or a change in control discussed below under “—Potential Payments Upon Termination or Change-in-Control.”

Judith S. Hedstrom

Former Chief Operating Officer

On February 11, 2005, we entered into an Amended and Restated Employment Agreement with Ms. Hedstrom. The term of the Employment Agreement was for a period of three years, terminating on February 11, 2008. As the Company’s Chief Operating Officer, Ms. Hedstrom was entitled to receive an annual base salary of $300,000 and an annual bonus amount of up to $75,000 dependent on the attainment of stated goals and objectives by the Compensation Committee.

Ms. Hedstrom resigned as Chief Operating Officer on January 31, 2006. Pursuant to Ms. Hedstrom’s Employment Agreement, because she was terminated without cause prior to the termination of the Employment Agreement, she was entitled to receive her base salary amount equal to her then current annual salary in equal installment over a twelve-month period. For a period of 18 months following the effective date of the termination of employment, we will provide her with all health, dental and hospital insurance benefits to which she is entitled under the federal law, without cost, as long as reasonable comparable coverage is not provided to her by another person or entity with which she has commenced employment. In addition, we amended the terms of her stock option grant agreements to provide that all options which are vested on the effective date of the termination of her employment are exercisable until the earlier of the expiration date set forth in the stock option grant agreement (without regard to the effect of the termination of her employment on the term of the option) or the second anniversary of the effective date of the termination of her employment.

Ms. Hedstrom is entitled to certain benefits in connection with a termination of her employment or a change in control discussed below under “—Potential Payments Upon Termination or Change-in-Control.”

In addition to provisions in the above-described agreements requiring each individual to maintain the confidentiality of our information and assign inventions to us, the above named executive officers have agreed that during the terms of their agreements and for one year thereafter, they will not compete with us by engaging in any capacity in any business that is competitive with our business.

401(k) Plan

We have a tax-qualified employee savings and retirement plan (the “401(k) Plan”) covering all of our employees. Pursuant to the 401(k) Plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit, which was $15,000 in 2006, and have the amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan does not require that we make additional matching contributions to the 401(k) Plan on behalf of participants in the 401(k) Plan. However, in 1998, we began making discretionary contributions at a rate of 25% of employee contributions up to a maximum of 5% of their base salary. Contributions by employees to the 401(k) Plan and income earned on such contributions are not taxable to employees until the contributions are withdrawn from the 401(k) Plan. The Trustees under the 401(k) Plan invest the assets of the 401(k) Plan at the direction of each participant.

Outstanding Equity Awards at Fiscal Year-End

The following table shows grants of stock options and grants of unvested stock awards outstanding on the last day of the fiscal year ended December 31, 2006, including both awards subject to performance conditions and non-performance-based awards, to each of the executive officers named in the Summary Compensation Table.

Option Awards

Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable		Option Exercise Price ($)	Option Expiration Date

Noah Berkowitz, M.D., Ph.D.	—	—		—	—
President and Chief Executive Officer

Malcolm W. MacNab, M.D., Ph.D.	—	1,000,000	(1)	0.15	11/1/2016
Vice President, Clinical Development	528,150	528,150	(2)	0.16	2/07/2015

Kenneth I. Moch	—	—		—	—
Former President and Chief Executive Officer

Judith S. Hedstrom	—	—		—	—
Former Chief Operating Officer

Mary Phelan	—	—		—	—
Former Director of Finance and Financial Reporting

——————

(1)	The options will vest and become exercisable in four equal annual installments commencing on January 1, 2007 until fully vested.

(2)	The option vested and will continue to vest semi-annually over three years commencing on February 7, 2005.

Option Exercises and Stock Vested

There were no exercises of stock options held by the executive officers named in the Summary Compensation Table during the fiscal year ended December 31, 2006.

Pension Benefits

We do not have any qualified or non-qualified defined benefit plans.

Nonqualified Deferred Compensation

We do not have any qualified or non-qualified defined benefit plans.

Potential Payments upon Termination or Change-In-Control

Noah Berkowitz, M.D., Ph.D.,

President and Chief Executive Officer

Our employment agreement with Dr. Berkowitz provides for two types of terminations:

“Termination of Employment by the Company.” In the event that Dr. Berkowitz is terminated due to “Disability,” we are obligated to pay his salary and benefits for 12 months following the date of termination in equal, monthly installments. For a termination constituting “Cause,” we are obligated to pay only his accrued and unpaid salary and benefits through the date of such termination. All unvested options on the termination date will be cancelled. In the event of a termination “Without Cause” is determined by a majority vote by the Board of Directors, Dr. Berkowitz is entitled to receive his salary and benefits for a period of 12 months after the termination date. In addition, the monthly vesting of his options shall continue for an additional 12 months from the termination date. If Dr. Berkowitz had been terminated under the above circumstance on December 31, 2006, he would have been eligible to receive an aggregate of approximately $242,400, which is inclusive of his annual salary and life insurance premium benefit.

“Termination of Employment by the Executive.” Dr. Berkowitz may choose to resign from his position for “Good Reason.” Events that qualify as “Good Reason” include (i) a change in his title or responsibilities, (ii) our failure to provide executive salary or benefits, or (iii) the relocation of our primary office to a location, or the requirement to perform a majority of his duties at any location to which the commute time exceeds one hour and fifteen minutes. If Dr. Berkowitz elects to terminate his employment due to event (i) or (ii), we are obligated to pay his salary and benefits for a period of 12 months after the termination date. The monthly vesting of his options shall continue for an additional 12 months from the termination date. If he elects to terminate his employment due to event (iii), we would be obligated to pay his salary and benefits for a period of six months after the termination date. If Dr. Berkowitz had been terminated under the above circumstance on December 31, 2006, he would have been eligible to receive an aggregate of approximately $121,200, which is inclusive of six months of salary and life insurance premium benefit. The monthly vesting of his options shall continue for an additional six months from the termination date.

If Dr. Berkowitz elects to terminate his employment for any other reason than those stated above, his employment agreement will terminate immediately and he would receive the accrued and unpaid salary benefits through the date of such termination.

Malcolm MacNab, M.D., Ph.D.,

Vice President, Clinical Development

Pursuant to our Stock Option Grant Agreement with Dr. MacNab dated November 1, 2006, upon a change in control, any portion of Dr. MacNab’s options, which are not vested and exercisable, shall vest and become exercisable immediately prior to a change in control. As defined in the Stock Option Grant Agreement, a change in control shall be deemed to occur if (i) we are merged with or into or consolidated with another corporation or other entity under circumstances where our stockholders immediately prior to such merger or consolidation do not own after such merger or consolidation shares representing at least 50% of the voting power of us or the surviving or resulting corporation or other entity, as the case may be, or (ii) we are liquidated, sell or otherwise dispose of substantially all of our assets to another corporation or entity, or (iii) any person (as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 40% or more of our common stock other than pursuant to a plan or arrangement entered into by such person and us or otherwise approved by our Board of Directors, or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board of Directors shall cease for any reason to constitute a majority of the Board unless the election or nomination for election by our stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. If Dr. MacNab had been terminated under the above circumstance on December 31, 2006, he would have been eligible to purchase 2,056,300 shares of common stock subject to options.

Kenneth I. Moch, Former President and Chief Executive Officer

Judith S. Hedstrom, Former Chief Operating Officer

In February 1996, we adopted the Alteon Inc. Change in Control Severance Benefits Plan (the “Change in Control Severance Plan”) to protect and retain qualified employees and to encourage their full attention, free from distractions caused by personal uncertainties and risks in the event of a pending or threatened change in control. The Change in Control Severance Plan provided for severance benefits to certain employees upon certain terminations of employment after or in connection with a change in control as defined in the Change in Control Severance Plan. Following a qualifying termination that occurs as a result of a change in control, these employees would have been entitled to continuation of (i) their base salary for a period of 24 months, and (ii) all benefit programs and plans providing for health and insurance benefits for a period of up to 18 months. In addition, upon a change in control, all outstanding unexercisable stock options held by certain employees who were participants in the Change in Control Severance Plan would have become exercisable. The Change in Control Severance Plan was terminated in November 2005. However, such provisions remained in effect for Mr. Moch and Ms. Hedstrom pursuant to the terms of their employment agreements.

Director Compensation

The following table shows the total compensation paid or accrued during the fiscal year ended December 31, 2006 to each of our directors who were in office during 2006.

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)(1)		Option Awards ($)(2)			Total ($)

Noah Berkowitz, M.D., Ph.D.(3)		—		—		—			—
Edwin Bransome, M.D.(4)	$	9,000		—		—		$	9,000
Marilyn Breslow(5)	$	20,000	$	3,573	$	2,708		$	26,281
Alan Dalby(6)	$	3,500		—		—		$	3,500
David K. McCurdy(7)	$	6,500		—		—		$	6,500
Kenneth I. Moch(8)	$	7,000	$	3,616	$	2,708		$	13,324
Thomas A. Moore(9)	$	19,000	$	3,616	$	2,708		$	25,324
George Naimark, Ph.D.(10)	$	17,500		—	$	2,708		$	20,208
Mark Novitch, M.D.(11)	$	8,000		—		—		$	8,000
Mary C. Tanner	$	11,500	$	3,573	$	21,121	(12)	$	36,194
Wayne Yetter(13)	$	9,000	$	3,573	$	2,708		$	15,281

——————

(1)

Represents the closing price of our common stock on the American Stock Exchange on July 19, 2006, for 160,000 shares granted in the form of restricted stock on July 19, 2006 to each non-employee director, the grant date fair value of which was $24,000, in accordance with FAS 123(R). Assumptions used in the calculation are included in Note 9 - Stockholders’ Equity to our audited consolidated financial statements for the fiscal year ended December 31, 2006 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2007.

(2)

Represents the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006 in accordance with FAS 123(R), the grant date fair value of which was $12,526. Assumptions used in the calculation are included in Note 9 - Stockholders’ Equity to our audited consolidated financial statements for the fiscal year ended December 31, 2006 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2007.

(3)	Dr. Berkowitz, our President and Chief Executive Officer, receives no compensation for his services as Director.

(4)	Dr. Bransome resigned effective July 19, 2006. As of December 31, 2006, there were outstanding options to purchase 120,000 shares of common stock issued to Dr. Bransome.

(5)	As of December 31, 2006, there were outstanding 160,000 shares of restricted stock and options to purchase 244,867 shares of common stock issued to Ms. Breslow.

(6)	Mr. Dalby resigned effective July 19, 2006. As of December 31, 2006, there were outstanding options to purchase 142,400 shares of common stock issued to Mr. Dalby.

(7)	Mr. McCurdy resigned effective July 19, 2006. As of December 31, 2006, there were outstanding options to purchase 166,067 shares of common stock issued to Mr. McCurdy.

(8)	Mr. Moch resigned effective February 5, 2007. As of December 31, 2006, there were outstanding 160,000 shares of restricted stock and options to purchase 2,792,000 shares of common stock issued to Mr. Moch.

(9)	As of December 31, 2006, there were outstanding 160,000 shares of restricted stock and options to purchase 185,000 shares of common stock issued to Mr. Moore.

(10)	Dr. Naimark resigned effective November 17, 2006. As of December 31, 2006, there were outstanding options to purchase 133,337 shares of common stock issued to Dr. Naimark.

(11)	Dr. Novitch resigned effective July 19, 2006. As of December 31, 2006, there were outstanding options to purchase 416,067 shares of common stock issued to Dr. Novitch.

(12)

Represents the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2006 in accordance with FAS 123(R), the grant date fair value of which was $79,394. Assumptions used in the calculation are included in Note 9 - Stockholders’ Equity to our audited consolidated financial statements for the fiscal year ended December 31, 2006 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 2007. As of December 31, 2006, there were outstanding 160,000 shares of restricted stock and options to purchase 1,271,300 shares of common stock issued to Ms. Tanner.

(13)	As of December 31, 2006, there were outstanding 160,000 shares of restricted stock and options to purchase 442,100 shares of common stock issued to Mr. Yetter.

Director Compensation Policy

All of our Board of Directors are reimbursed for their expenses for each Board meeting attended. Directors who are not also compensated as our employees receive $1,500 per Board meeting attended in person and $1,000 for each Board meeting attended by telephone.

Pursuant to the Alteon 2005 Stock Plan, as amended on July 19, 2006, non-employee directors also receive, upon the date of their election or re-election to the Board and on the dates of the next two annual meetings of stockholders (subject to their continued service on the Board of Directors), a stock option to purchase 20,000 shares of our common stock (subject to adjustment if they received stock options upon appointment to the Board between annual meetings of stockholders to fill a vacancy or newly created directorship) at an exercise price equal to the fair market value of our common stock on the date of grant. Each of these options will vest and become exercisable upon completion of one full year of service and shall have a term of ten years regardless of whether the director ceases to be a director.

Following the Annual Meeting of Stockholders held on July 19, 2006, each member of the Board of Directors received a stock option to purchase 70,000 shares of our common stock at an exercise price equal to the fair market value of our common stock on the date of grant which will vest and become exercisable over a period of three years in three annual installments of 23,000, 23,000 and 24,000 options, respectively, until fully vested, each on the anniversary of the date of grant.

In addition, each member of the Board of Directors also received 160,000 shares of our common stock with a lapsing repurchase right and annual vesting over three years on the anniversary of the grant date until fully vested at a purchase price equal to the fair market value on the date of grant.

The Chairman of the Audit Committee receives $1,000 per meeting attended and the other members of the Audit Committee receive $250 per meeting attended.

Equity Compensation Plan Information

The following table provides certain aggregate information with respect to all of our equity compensation plans in effect as of December 31, 2006.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available For Future Issuance Under Existing Equity Compensation Plans

Equity compensation plans approved by security holders(1)	10,790,137	$	1.25	5,186,200
Equity compensation plans not approved by security holders	—		—	—
Total	10,790,137	$	1.25	5,186,200

——————

(1)	These plans consist of our Amended and Restated 1987 Stock Option Plan, our Amended 1995 Stock Option Plan and our 2005 Stock Plan as amended on July 19, 2006.

Indemnification; Directors’ and Officers’ Insurance

The Delaware General Corporation Law authorizes corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations and their stockholders for monetary damages for breach of their fiduciary duties. Our restated certificate of incorporation and restated bylaws limit the liability of our directors to the fullest extent permitted by Delaware law.

We have obtained director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their services to us, including matters arising under the Securities Act of 1933, as amended (the “Securities Act”). Our restated certificate of incorporation and restated bylaws also provide that we will indemnify any of our directors and officers who, by reason of the fact that he or she is one of our officers or directors, is involved in a legal proceeding of any nature. We will repay certain expenses incurred by a director or officer in connection with any civil or criminal action or proceeding, specifically including actions by us or in our name (derivative suits). Such indemnifiable expenses include, to the maximum extent permitted by law, attorneys’ fees, judgments, civil or criminal fines, settlement amounts and other expenses customarily incurred in connection with legal proceedings. A director or officer will not receive indemnification if he or she is found not to have acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interest. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers.

Such limitation of liability and indemnification does not affect the availability of equitable remedies. In addition, we have been advised that in the opinion of the Securities and Exchange Commission, indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act and is therefore unenforceable.

There is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K, which appears elsewhere in this proxy statement, with our management. Based on this review and discussion, the Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our proxy statement.

	Compensation Committee
	Wayne P. Yetter
	Thomas A. Moore

AUDIT COMMITTEE REPORT

The Audit Committee’s powers and responsibilities and the qualifications required of each of its members are set forth in the Audit Committee Charter, which is available on our website at www.alteon.com.

Responsibilities

The primary function of the Audit Committee is to oversee Alteon’s accounting and financial reporting processes, the audits of its financial statements and internal controls over financial reporting. Management is solely responsible for the financial statements and the financial reporting process, including the system of internal controls, and has represented to the Audit Committee and the Board of Directors that the financial statements discussed below were prepared in accordance with accounting principles generally accepted in the United States of America appropriate in the circumstances and necessarily include some amounts based on management’s estimates and judgments. Alteon’s independent registered public accounting firm is responsible for auditing those financial statements and expressing an opinion on the conformity of these financial statements, in all material respects, with accounting principles generally accepted in the United States of America.

Independence

As required by Independence Standards Board Standard No. 1, as adopted by the Public Company Accounting Oversight Board in Rule 3600T, Alteon’s independent registered public accounting firm, J.H. Cohn LLP (“J.H. Cohn”) has disclosed to the Audit Committee any relationships between it (and its related entities) and Alteon (and its related entities), which, in J.H. Cohn’s professional judgment, may reasonably be thought to affect its ability to be independent. In addition, J.H. Cohn has discussed its independence with the Audit Committee and confirmed in a letter to the Audit Committee that, in its professional judgment, it is independent of Alteon within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.

Recommendation

Acting pursuant to its Charter, the Audit Committee has reviewed Alteon’s audited annual consolidated financial statements for the year ended December 31, 2006 and the related report of J.H. Cohn, and has discussed the audited financial statements and report with management and with the independent registered public accounting firm. The Audit Committee has also discussed with management and the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. These matters include significant accounting policies, management judgments and accounting estimates, management’s consultation with other accountants, and any difficulties encountered in performing the audit, significant audit adjustments or disagreements with management. Based on the review and discussions described above, the Audit Committee recommended to Alteon’s Board of Directors that the audited consolidated financial statements be included in Alteon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 for filing with the Securities and Exchange Commission.

		Audit Committee
		Marilyn G. Breslow
		Thomas A. Moore
		Mary Tanner

Compensation Committee Interlocks and Insider Participation

The persons who served as members of the Compensation Committee of the Board of Directors during 2006 were Alan J. Dalby, Edwin D. Bransome, Jr., M.D., Marilyn G. Breslow, David K. McCurdy, Thomas A. Moore, George M. Naimark, Ph.D., Mark Novitch, M.D and Wayne P. Yetter. None of the members of the Compensation Committee was an officer, former officer or employee of ours or had any relationship with us that requires disclosure under Item 404 of the Securities and Exchange Commission’s Regulation S-K.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. Officers, directors and greater than 10% stockholders are required by Securities and Exchange Commission regulation to furnish us with copies of all Forms 3, 4 and 5, and any amendments thereto, they file.

Based solely on our review of the copies of such forms we have received and written representations from certain reporting persons that they were not required to file Forms 5 for specified fiscal years, we believe that all of our officers, directors, and greater than 10% beneficial owners complied with all filing requirements applicable to them with respect to transactions in our equity securities during fiscal year 2006.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our Audit Committee reviews and approves, in advance, all related party transactions.

In a private placement conducted in September 2006, Ms. Tanner, a member of our Board of Directors, purchased 800,333 shares of our common stock and warrants to purchase 800,333 shares of our common stock that are exercisable beginning six months after September 13, 2006 for a period of five years for $0.1875 per share, at an aggregate purchase price of $120,050. Such transaction was approved by our entire Board of Directors. The closing price per share of the Company’s common stock on the day immediately prior to such sale as reported on AMEX, was $0.16.

PROPOSAL 1

INCREASE IN THE AGGREGATE NUMBER OF SHARES

AVAILABLE UNDER THE ALTEON 2005 STOCK PLAN

Our Board of Directors is asking you to approve an amendment to the Alteon 2005 Stock Plan (the “Plan”), which is a condition for us to close the Financing. The amendment provides for an increase in the number of shares available for issuance under the Plan from 10,000,000 shares, as presently constituted, to the sum of 13,000,000 plus 10% of the number of shares of Series B Preferred Stock issued in the Financing. We anticipate issuing 500,000,000 shares (prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement) of Series B Preferred Stock in the Financing, so we are asking that you approve an amendment to the Plan to increase the number of shares available for issuance under the Plan from 10,000,000 to 63,000,000. As of May 24, 2007, approximately 5,186,200 shares remain available for the grant of options and other stock-based awards in the future if the proposed amendment to the Plan is not approved.

The fundamental objective of our compensation policy remains the attraction and retention of highly qualified persons to serve as directors, officers, key employees and consultants. This objective is balanced against, and is strongly influenced by, our need to preserve our cash resources. Therefore, we have traditionally considered options and other equity incentives to be an important element of our overall compensation philosophy.

We are requesting that you approve the amendment to the Plan in order that the Company may have sufficient shares available for the grant of stock-based awards in the future. We believe the increased number of shares we are asking you to approve is necessary for the Company to be able to attract and retain executive officers and key employees, directors and consultants while continuing the Company’s policy of conserving its cash resources.

Accordingly, the Board of Directors adopted the amendment to the Plan on April 6, 2007, subject to stockholder approval. The affirmative vote of the holders of a majority of the shares represented in person or by proxy at the annual meeting is required to approve the amendment to the Plan. Below is a summary of the principal provisions of the Plan and its operation. A copy of the Plan was filed as an Appendix to the proxy statement on Schedule 14A filed with the Securities and Exchange Commission on May 2, 2005 and is available on the Securities and Exchange Commission’s website at www.sec.gov. The following description of the Plan is qualified in its entirety by reference to that exhibit.


Shares Subject to Plan		Upon stockholder approval at the annual meeting, awards with respect to a maximum of up to 58,186,200 shares of common stock may be made under the Plan, as amended. Of that number of shares, the proposed amendment would add 53,000,000 shares to the 10,000,000 shares already approved, of which only approximately 5,186,200 remain available for the grant of new options.

Plan Administration		The Plan is administered by the Board of Directors of Alteon, or a committee thereof, as delegated by the Board of Directors. The administrator will have authority, subject to the terms of the Plan, to determine when and to whom to make grants under the Plan, the number of shares to be covered by the grants, the types and terms of options and other stock-based award granted, the exercise price of the shares of common stock covered by options granted and to prescribe, amend and rescind rules and regulations relating to the Plan. New options granted to non-employee directors are governed by the formula discussed below.

Eligibility		Certain of our directors, officers, employees, consultants and advisors may be granted options to purchase shares of our common stock under the Plan. The number of persons eligible to receive awards under the Plan is not presently determinable.

Transfer of Awards		Generally, awards may not be transferred to another person, except by will or the laws of descent and distribution, or as approved by the administrator.

Termination		Options expire ten years from the option grant date, except that an incentive stock option granted to an employee who is the holder of 10% or more of our outstanding shares expires five years from the option grant date.

Initial Director Options		Each director who is not an employee of the Company is granted an option to purchase 20,000 shares on the date of each annual meeting of stockholders, whether or not such director is up for election or reelection, so long as on such date, the director is serving as a director of Alteon. The per share exercise price of an option will be equal to the fair market value of a share of common stock on the grant date. Each option will vest, and be exercisable, upon completion of one full year of service on the Board of Directors, so long as on such date, the director is serving as a director of Alteon.

General Options		Under the Plan, incentive stock options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (“Code”), nonqualified stock options (“NQSOs”) and other stock-based award may be granted by the administrator to directors, employees and consultants of the Company and any of its Affiliates (as defined in the Plan), except that ISOs may be granted only to employees of the Company and any of its subsidiaries. The per share purchase price (or “option price”) under each option is established by the committee at the time the option is granted. However, the per share option price of an ISO granted to a participant must be at least 100% of the fair market value of a share on the date the ISO is granted (110% in the case of an ISO granted to a holder of 10% or more of our outstanding shares). Options will be exercisable at such times and in such installments as determined by the administrator.

Exercisability		Options generally may not be exercised more than three months after the option holder ceases to provide services to the Company or an affiliate, except that in the event of the death or disability of the option holder, the option may be exercised by the holder (or the holder’s estate), for a period of up to one year after the date of death or disability. The agreements evidencing the grant of an option (other than an option to a non-employee director) may, in the discretion of the committee, set forth additional or different terms and conditions applicable to such option upon a termination or change in status of the employment or service of the optionee. Options terminate immediately if the option holder’s service was terminated for cause.

Payment of Exercise Price		The shares purchased upon the exercise of an option must be paid for in cash (including cash that may be received from the Company at the time of exercise as additional compensation) or through the delivery of other shares of common stock with a value equal to the total option price or in a combination of cash and such shares, subject to the power of the administrator to vary the payment arrangement, including delivery of a personal recourse note, to meet the tax needs of an individual non-U.S. recipient if such variance does not change the substance of the arrangement set forth herein insofar as it affects the Company. In addition, the option holder may have the option price paid by a broker or dealer and the shares issued upon exercise of the option delivered directly to the broker or dealer.

Amendment or Termination		Our Board of Directors has the power to terminate or amend the Plan at any time. If the Board of Directors does not take action to earlier terminate the Plan, it will terminate on April 19, 2015. Certain amendments may require stockholder approval, and no amendment may adversely affect options that have previously been granted.

As of December 31, 2006, an aggregate of 4,813,800 shares had been issued upon the exercise of options or are issuable upon the exercise of options outstanding under the Plan. On May 24, 2007, the closing market price per share of our common stock was $0.05, as reported on the AMEX.

Federal Income Tax Considerations

The following is a brief summary of the applicable federal income tax laws relating to stock options and stock grants under the Plan:


Incentive Stock Options:		Incentive stock options are intended to qualify for treatment under Section 422 of the Code. An incentive stock option does not result in taxable income to the optionee or deduction to Alteon at the time it is granted or exercised, provided that no disposition is made by the optionee of the shares acquired pursuant to the option within two years after the date of grant of the option nor within one year after the date of issuance of shares to the optionee (referred to as the “ISO holding period”). However, the difference between the fair market value of the shares on the date of exercise and the option price will be an item of tax preference includible in “alternative minimum taxable income.” Upon disposition of the shares after the expiration of the ISO holding period, the optionee will generally recognize long-term capital gain or loss based on the difference between the disposition proceeds and the option price paid for the shares. If the shares are disposed of prior to the expiration of the ISO holding period, the optionee generally will recognize taxable compensation, and Alteon will have a corresponding deduction, in the year of the disposition, equal to the excess of the fair market value of the shares on the date of exercise of the option over the option price. Any additional gain realized on the disposition will normally constitute capital gain. If the amount realized upon such a disqualifying disposition is less than fair market value of the shares on the date of exercise, the amount of compensation income will be limited to the excess of the amount realized over the optionee’s adjusted basis in the shares.

Non-Qualified Options:		Options otherwise qualifying as incentive stock options, to the extent the aggregate fair market value of shares with respect to which such options are first exercisable by an individual in any calendar year exceeds $100,000, and options designated as non-qualified options will be treated as options that are not incentive stock options.

		A non-qualified option ordinarily will not result in income to the optionee or deduction to Alteon at the time of grant. The optionee will recognize compensation income at the time of exercise of such non-qualified option in an amount equal to the excess of the then value of the shares over the option price per share. Such compensation income of the optionee may be subject to withholding taxes, and a deduction may then be allowable to Alteon in an amount equal to the optionee’s compensation income.

		An optionee’s initial basis in shares so acquired will be the amount paid on exercise of the non-qualified option plus the amount of any corresponding compensation income. Any gain or loss as a result of a subsequent disposition of the shares so acquired will be capital gain or loss.

		With respect to stock grants under the Plan that result in the issuance of shares that are either not restricted as to transferability or not subject to a substantial risk of forfeiture, the grantee must generally recognize ordinary income equal to the fair market value of shares received. Thus, deferral of the time of issuance will generally result in the deferral of the time the grantee will be liable for income taxes with respect to such issuance. Alteon generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the grantee.

Stock Grants:		With respect to stock grants involving the issuance of shares that are restricted as to transferability and subject to a substantial risk of forfeiture, the grantee must generally recognize ordinary income equal to the fair market value of the shares received at the first time the shares become transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier. A grantee may elect to be taxed at the time of receipt of shares rather than upon lapse of restrictions on transferability or substantial risk of forfeiture, but if the grantee subsequently forfeits such shares, the grantee would not be entitled to any tax deduction, including as a capital loss, for the value of the shares on which he previously paid tax. The grantee must file such election with the Internal Revenue Service within 30 days of the receipt of the shares. Alteon generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the grantee.

New Plan Benefits

The currently proposed amendment to the Plan provides for an increase in the number of shares available for issuance under the Plan from 10,000,000 shares, as presently constituted, to the sum of 13,000,000 plus 10% of the number of shares of Series B Preferred Stock issued in the Financing. We anticipate issuing 500,000,000 shares (prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement) of Series B Preferred Stock in the Financing, so we are asking that you approve an amendment to the Plan to increase the number of shares available for issuance under the Plan from 10,000,000 to 63,000,000.

The amounts of future grants under the Plan are not determinable as awards under the Plan and will be granted at the sole discretion of the Compensation Committee and we cannot determine at this time either the persons who will receive awards under the Plan or the amount or types of any such awards. However, it is anticipated that a significant portion of the future grants will be allocated to our executive officers to incentivize them to continue to provide services to the Company.

Votes Required to Approve Amendment to the Alteon 2005 Stock Plan

The affirmative vote of the holders of a majority of the shares represented in person or by proxy at the annual meeting is required to approve the amendment to the Plan. Abstentions will be counted towards the vote total for this proposal, and will have the same effect as votes against the proposal. Broker non-votes will have no effect and will not be counted towards the vote total for this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE AMENDMENT TO THE ALTEON 2005 STOCK PLAN, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE AMENDMENT UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

PROPOSAL 2

THE ISSUANCE OF SECURITIES IN THE FINANCING

The stockholders of Alteon are being asked to approve the issuance of Alteon Series B Preferred Stock, warrants to purchase Series B Preferred Stock, shares of Series B Preferred Stock issuable upon exercise of such warrants and Alteon common stock issuable upon conversion of Series B Preferred Stock pursuant to the Series B Preferred Stock and Warrant Purchase Agreement, dated as of April 5, 2007, as amended on June 1, 2007 (as so amended, the “Purchase Agreement”) by and among Alteon and certain purchasers identified on the signature pages thereto, including Baker Brothers Investments. Baker Brothers Investments (“BBI”) is a collection of funds dedicated to investing in public and private healthcare companies. BBI includes the following funds that will be investing the Financing, and are holders of the convertible promissory notes: Baker/Tisch Investments, L.P., Baker Biotech Fund I, L.P., Baker Brothers Life Sciences, L.P., 14159, L.P., and Baker Bros. Investments II, L.P. The purchasers also include Atticus Global Advisors, Ltd. and Green Way Managed Account Series, Ltd., in respect to its segregated account, Green Way Portfolio D (collectively “Atticus”).

The Company was introduced to BBI and Atticus by Rodman & Renshaw, LLC, who acted as placement agent for the Financing and assisted the Company in identifying potential investors. The officers and directors of the Company had no prior relationship with any of the purchasers participating in the Financing.

Alteon’s Board of Directors has unanimously approved the Purchase Agreement and the issuance of securities thereunder and recommended that the issuance of such securities pursuant to the Purchase Agreement be presented to the Alteon stockholders for approval in order to comply with the stockholder approval requirements of the AMEX.

Necessity of Stockholder Approval

As a result of being listed for trading on the AMEX, issuances of our common stock are subject to the AMEX Company Guide, including Rule 713 thereof. Under Rule 713, stockholder approval must be sought in connection with the sale, issuance, or potential issuance by a company of common stock (or securities convertible into common stock) equal to 20% or more of presently outstanding stock for less than the greater of book or market value of the stock. Pursuant to the terms of the Financing, the price per share of the Series B Preferred Stock, and the exercise price of the warrants to purchase shares of Series B Preferred Stock that will be issued in connection with the Financing, will be $0.05 (calculated prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement). On April 4, 2007, the closing price of our common stock as reported on AMEX was $0.10 per share. As a result, we are seeking stockholder approval of the issuance of securities in the Financing pursuant to the Purchase Agreement.

Series B Preferred Stock

The following summary of the Purchase Agreement is qualified by reference to the complete text of the Purchase Agreement, which is incorporated by reference and attached hereto as Annex A.

Dividends. Holders of Series B Preferred Stock will be entitled to receive cumulative dividends at an annual rate of 8% of the Series B Preferred Stock original issue price for a period of 5 years from the date of issuance. Such dividends, shall, at the option of the holders of a majority of the Series B Preferred Stock outstanding, be paid in cash or in shares of Series B Preferred Stock. Alteon will agree not to declare any dividends on its junior preferred or common stock until after it has paid all accrued but unpaid dividends on its Series B Preferred Stock.

Voting. Holders of Series B Preferred Stock will be entitled to cast the number of votes equal to one-half of the number of shares of common stock into which their Series B Preferred Stock would be convertible on the applicable record date. The Series B Preferred Stock will vote on a 1-for-1 basis following its conversion into common stock.

Liquidation Preference. Upon liquidation, including deemed liquidations pursuant to a merger, consolidation or a sale of all or substantially all of Alteon’s assets, holders of Series B Preferred Stock will be entitled to a payment per share equal to the price at which shares of Series B Preferred Stock were sold in the Financing, plus accrued but unpaid dividends, prior to payment of any amounts on Alteon’s junior preferred or common stock. The holders of the Series B Preferred Stock will be entitled to receive the proceeds out of any sale or liquidation of the Company before any such proceeds are paid to holders of our common stock. In general, if the proceeds received upon any sale or liquidation do not exceed the total liquidation proceeds payable to the holders of the Series B Preferred Stock, which, prior to any adjustment in accordance with the terms of the Series B Preferred Stock is equal to the aggregate cash proceeds received by the Company in the Financing, holders of common stock would receive no value for their shares upon such a sale or liquidation.

Protective Provisions. At any time when any shares of Series B Preferred Stock remain outstanding, the Company may not, without the consent of the holders of a majority of the shares held by holders of at least $4,000,000 (measured as of the original issue date) worth of Series B Preferred Stock: (i) incur debt in excess of $2,000,000, (ii) authorize securities at a price per share less than the price per share that the Series B Preferred Stock is being sold under the Purchase Agreement, (iii) increase the authorized capital of the Company, (iv) create any new classes or series of stock with rights senior to the common stock, (v) issue any shares of the Company’s Series A Preferred Stock, other than in accordance with the Alteon shareholder rights plan, (vi) amend any provision of the Company’s Certificate of Incorporation or Bylaws that changes the rights of the Series B Preferred Stock, (vii) pay or declare any dividend on any capital stock of the Company, (viii) purchase or redeem any securities, (ix) issue any securities to employees other than pursuant to the Plan, or increase the number of shares of common stock reserved for issuance under the Plan, (x) liquidate, dissolve or wind-up, (xi) merge with another entity or (xii) sell or dispose of any assets of the Company, including the sale or license of its intellectual property, (xiii) change the number of directors, (xiv) amend any portion of the Company’s Certificate of Incorporation or Bylaws, (xv) materially change the nature of the Company’s business, (xvi) intentionally take any action that may result in the Company’s stock no longer being approved for quotation on the AMEX or NASDAQ, or that would cause the common stock of the Company to no longer be registered pursuant to Section 12 of the Securities Exchange Act of 1934, or (xvii) amend any material agreement that has been filed with the Securities and Exchange Commission.

Conversion. Holders of Series B Preferred Stock will have an option to convert their Series B Preferred Stock, plus, prior to the fifth anniversary of the original issuance of Series B Preferred Stock, all accrued and unpaid dividends, into common stock at the initial conversion price equal to the price at which shares of Series B Preferred Stock were sold in the Financing, as adjusted in accordance with the provisions of the Amended and Restated Certificate of Incorporation. An equivalent of $7,500,000 (measured as of the original issue date) of Series B Preferred Stock will automatically be converted into common stock when (i) the thirty-day prior trailing average closing price of Alteon common stock, as reported by the American Stock Exchange, for the entire six months preceding such time is equal to at least the price at which shares of Series B Preferred Stock were sold in the Financing and (ii) the registration statement for resale of securities issued in the Financing has been declared effective by the SEC and is continuously effective for a one and one-half year period. Thereafter, the remainder of the outstanding Series B Preferred Stock will automatically be converted into common stock when (i) the thirty-day prior trailing average closing price of Alteon common stock, as reported by the American Stock Exchange for the entire six months preceding such time is equal to at least two times the price at which shares of Series B Preferred Stock were sold in the Financing and (ii) the registration statement for resale of securities issued in the Financing has been declared effective by the SEC and continuously effective for a one and one-half year period.

Anti-Dilution Protection. The rights and preferences of the Series B Preferred Stock include weighted-average anti-dilution protection. Each share of Series B Preferred Stock is initially convertible into shares of Alteon common stock by multiplying the number of shares of Series B Preferred Stock to be converted, by a ratio, the numerator of which is the purchase price, or the price per share at which the Series B Preferred Stock was initially sold, and the denominator of which is the conversion price. Initially, the purchase price and the conversion price are the same, which makes the initial conversion rate of the Series B Preferred Stock 1:1. In the event the Company issues securities at a price per share less than the initial price per share of the Series B Preferred Stock (other than certain excluded issuances such as options pursuant to the Company’s approved stock option plans), the conversion price would decrease based upon a formula in the Company’s amended and restated certificate of incorporation, and the ratio against which the number of shares of Series B Preferred Stock to be converted is multiplied would become greater than 1:1, thus increasing the number of shares of common stock into which shares of the Series B Preferred Stock will convert.

Effect of Financing on Current Stockholders

If approved by our stockholders and closed, the Financing will result in an issuance of up to 500,000,000 shares of our Series B Preferred Stock, at a price per share equal to $0.05 and warrants to purchase up to 125,000,000 shares of our Series B Preferred Stock, exercisable for a five-year period from the date of issuance with an exercise price of $0.05 per share (such number of shares and price per share calculated prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement). The Series B Preferred Stock will have certain rights and preferences superior to those of our common stock. Each holder of Series B Preferred Stock will be entitled to cast the number of votes equal to one-half of the number of whole shares of common stock into which the shares of Series B Preferred Stock held by such holder are convertible. Therefore, on the date of the issuance of the Series B Preferred Stock, the holders thereof will have approximately 41% of the voting power of Alteon. The Series B Preferred Stock will be convertible at any time at the option of the holder at an initial conversion price equal to the price per share at which it is sold in the Financing. If the Financing is completed, and all of the shares of Series B Preferred Stock issued in the Financing are converted into shares of common stock of Alteon and all of the warrants to purchase shares of Series B Preferred Stock that were issued in the Financing are exercised and thereafter converted into shares of common stock of Alteon, the holders of such shares will have approximately 83% of the voting power of Alteon. In addition, the shares of common stock of Alteon underlying the shares of Series B Preferred Stock and warrants issued at the closing of the Financing , will be registered for resale pursuant to a registration statement to be filed with the SEC within 30 days following the closing of the Financing. The subsequent sale of such shares of common stock may have an adverse effect on the per share price of our common stock.

Set forth below are the prospective purchasers of the Series B Preferred Stock in the Financing. The funds affiliated with BBI will purchase an aggregate of $21,000,000 of our Series B Preferred Stock, which includes the conversion of $6,000,000 of our issued and outstanding convertible promissory notes, plus accrued and unpaid interest thereon, which will be converted at the time of the closing of the Financing. Because we do not know when we will close the Financing, we are unable to determine the amount of interest that will accrue on the outstanding principal amount of the convertible promissory note, so the table below sets forth the purchase amounts of the BBI entities in an aggregated fashion. As mentioned above, BBI includes: Baker/Tisch Investments, L.P., Baker Biotech Fund I, L.P., Baker Brothers Life Sciences, L.P., 14159, L.P., and Baker Bros. Investments II, L.P. The table below also sets forth the shares of Series B Preferred Stock and related warrants to be issued by the Company in the Financing, and the potential ownership and voting power on the day of the closing of the Financing:

Name of Purchaser	Aggregate Purchase Price	Series B Preferred Stock (pre-reverse split)	Warrants (pre-reverse split)	Potential Ownership (1)	Voting Power at Closing (2)

BBI Affiliated Funds	$21,000,000	420,000,000	105,000,000	69.60%	34.80%

Atticus Global Advisors, Ltd.	$3,500,000	70,000,000	17,500,000	11.60%	5.80%

Green Way Managed Account Series, Ltd., in respect to its segregated account, Green Way Portfolio D	$500,000	10,000,000	2,500,000	1.66%	0.83%

Total	$25,000,000	500,000,000	125,000,000	82.86%	41.43%

(1)

Assuming conversion of the Series B Preferred Stock into common stock and exercise of all warrants issued and outstanding immediately following the Financing.

(2)

Based on shares of Series B Preferred Stock issued and outstanding immediately following the closing of the Financing.

Structure of the Financing and Terms of Outstanding Debt Securities

Under the terms of the Financing, the Series B Preferred Stock will be sold at a price per share of $0.05 (calculated prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement). Thus, if the Financing is approved, Alteon will issue 500,000,000 shares of Series B Preferred Stock, and warrants in substantially the form attached hereto as Annex B, to purchase up to 125,000,000 shares of its Series B Preferred Stock, exercisable for a five-year period from the date of issuance with an exercise price of $0.05 per share (such number of shares and exercise price calculated prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement). Further, additional shares of Series B Preferred Stock may be issued upon the operation of certain anti-dilution adjustments provided in the terms of the Series B Preferred Stock and the warrants. If the Financing is closed prior to July 31, 2007, the Senior Convertible Secured Promissory Notes, in an aggregate principal amount of $6,000,000, issued by Alteon pursuant to the Note and Warrant Purchase Agreement, dated January 11, 2007, as amended, by and among Alteon and certain institutional investors affiliated with BBI, plus all accrued but unpaid interest thereon, (approximately $92,055 through May 31, 2007), will be automatically converted pursuant to their terms into that number of shares of Series B Preferred Stock equal to the principal plus all accrued but unpaid interest on the notes divided by the price per share at which the Series B Preferred Stock is sold, and thereafter the promissory notes will be cancelled, and the warrants to purchase an aggregate of 25,734,453 shares of our common stock that were issued to certain institutional investors affiliated with BBI will terminate and be cancelled. If the Financing is not closed by July 31, 2007, $6,000,000 principal amount of the Senior Convertible Secured Promissory Notes, plus accrued and unpaid interest thereon, plus a $6,000,000 penalty, will become immediately due and payable. In addition, Alteon will be obligated to pay to the holders of the notes 30% of any amount received by Alteon from financing, sale or licensing transactions completed prior to June 30, 2009, subject to a cap of $8,000,000. The failure of the Company to repay the holders of the notes in full by July 31, 2007, is an event of default, which will entitle the holders to all lawful remedies afforded to them under the Uniform Commercial Code and the security agreements relating to the notes, including taking possession of all of the assets of the Company. As a result, it may not be possible for Alteon to continue operations beyond July 31, 2007 if the Financing is not closed, and the notes are not converted, on or prior to July 31, 2007.

If the Financing is approved and all of the Series B Preferred Stock and warrants are issued, current holders of our outstanding common stock will be subject to immediate and significant dilution of their investment.

Factors Considered by the Board of Directors in Recommending the Financing

In developing the recommendation to the stockholders to vote in favor of the issuance of our securities in the financing, the Board of Directors considered the following factors:

Stockholders’ best interests will be served if the Company continues to develop its technologies towards regulatory approval and marketing of its product candidates;

The research and development expenses to achieve its product development goals will be significant; and

Substantial long-term financing will be required to achieve key development milestones.

The Board explored several alternatives to achieve these financing requirements, including technology licensing and various strategic transactions, including mergers and acquisitions, as well as alternative equity financing transactions with investors other than those participating in the Financing.

The Board pursued and assessed numerous alternatives, but none provided the same level of long-term funding as the Financing. We therefore believe that the Financing provides the best opportunity to enable Alteon to move forward in an environment in which financing is generally difficult for small-cap companies. The Company’s technology is still in a relatively early stage of development and we believe it is critical to have access to sufficient financial resources to achieve meaningful development milestones. The Board also believes that completing the Financing will allow the Company to avoid further dissipation of management resources on continuous fundraising efforts, thus allowing management to remain focused on achievement of the Company’s clinical development programs.

Timing of Closing

The closing will occur promptly following the date on which the last of the conditions set forth in the purchase agreement has been satisfied or waived.

Conditions to the Completion of the Financing

The obligations of Alteon and the purchasers to complete the Financing are subject to the satisfaction or, to the extent legally permissible, waiver of certain conditions. The more significant conditions include:

execution of a Registration Rights Agreement by Alteon and the purchasers in the Financing to register for resale the shares of Alteon common stock issuable upon conversion of shares of Series B Preferred Stock issued in the Financing and shares of Series B Preferred Stock underlying the warrants issued in the Financing;

surrender by the purchasers of the Senior Convertible Secured Promissory Notes of Alteon in an aggregate amount of $6,000,000, issued pursuant to the Note and Warrant Purchase Agreement, dated as of January 11, 2007, as amended, by and among Alteon and certain institutional investors affiliated with BBI;

receipt by the purchasers of an opinion of counsel to Alteon regarding the Financing;

approval by the Alteon stockholders of the issuance of securities in the Financing pursuant to the Purchase Agreement;

implementation of the reverse stock split;

filing with the Secretary of State of the State of Delaware of Alteon’s Amended and Restated Certificate of Incorporation;

continuous trading of Alteon common stock;

accuracy as of the closing in all material respects of the representations and warranties made by each party to the extent specified in the Purchase Agreement; and

performance of all obligations, covenants and agreements of each party required to be performed at or prior to the closing by the Purchase Agreement.

Certain Covenants

Each of Alteon and the purchasers has undertaken certain covenants in the Purchase Agreement. The following summarizes the more significant of these covenants.

Listing of Common Stock. Alteon has agreed to use commercially reasonably efforts to maintain the listing of its common stock on the American Stock Exchange, and to promptly list the common stock issuable upon conversion of the securities issued in the Financing.

Pre-Emptive Rights. From the closing of the Financing until the later of (a) January 11, 2010, or (b) the date on which fewer than 50% of the shares of Series B Preferred Stock initially issued remain outstanding, each purchaser then holding 50% of the shares of Series B Preferred Stock issued to such purchaser in the Financing shall have the right to purchase up to 50% of such purchaser’s pro rata portion of a subsequent issuance by Alteon of its common stock, options or convertible securities. The Company is required to notify the purchasers of such subsequent financings, and upon notice, the applicable purchasers will have ten (10) business days to accept an offer to participate. The Company will then have thirty (30) days to complete the contemplated financing upon the terms set forth in the notice.

Abstention from Trading. Until the closing of the Financing, the purchasers will not engage in any financial market transactions (whether long, short or other hedging transactions) with respect to the Alteon common stock.

Board of Directors. Following the closing of the Financing, the Board of Directors of the Company will be fixed at seven (7) persons, consisting of (a) three (3) incumbent directors, (b) one (1) vacancy that may be filled at any time after the closing of the Financing with a new director designated by the investors affiliated with BBI who held convertible promissory notes that were converted into Series B Preferred Stock at the closing of the Financing, which new director shall be reasonably acceptable to the Company, and (c) three (3) additional vacancies. For so long as the investors affiliated with BBI who held convertible promissory notes that were converted into Series B Preferred Stock at the closing of the Financing hold at least that number of shares of Series B Preferred Stock that is equal to 50% of the shares issued to them in the Financing, such investor will have the right, but not the obligation, to designate and to fill two (2) of the three (3) additional vacancies that will exist following the closing of the Financing. If two (2) vacancies are not available at the time such purchasers choose to designate two (2) members of the Board of Directors, the Board shall use its commercially reasonable efforts to cause two (2) of its then-current members to resign their positions in order to create vacant seats for the purchaser designees. These seats will then be filled by appointment of such persons by the other members of the Board who are then in office, and not by election by our stockholders. No persons have yet been identified to serve in these vacant positions.

Option Pool Increase. On or before the closing, Alteon shall cause an increase in the shares of its common stock reserved for issuance under its equity incentive plan, as described in the Purchase Agreement and elsewhere in this proxy statement.

Representations and Warranties

The Purchase Agreement contains representations and warranties made by Alteon to the purchasers. The most significant of these relate to:

organization, standing and qualification of Alteon;

corporate authorization to enter into the Financing;

absence of any breach of organizational documents, law or certain material agreements as a result of the Financing;

capitalization;

litigation;

compliance with laws;

governmental consents;

title to assets;

regulatory matters;

material license agreements;

filing of reports with the SEC and financial statements;

Sarbanes-Oxley Act and internal accounting controls;

absence of changes;

patents and trademarks;

labor relations;

placement agent’s fees;

application of takeover protections;

Form S-3 eligibility; and

registration rights.

In addition, each purchaser represents and warrants to Alteon as to certain other matters, including:

organization and authorization to enter into the Financing;

investment intent;

“accredited investor” status; and

experience and sophistication in business and financial matters.

Expenses

Alteon has agreed to reimburse the purchasers for the reasonable fees and expenses of one special counsel to the purchasers in connection with the registration of common stock issuable upon conversion of securities issued in the Financing, subject to a maximum amount of $175,000. Alteon estimates that the reimbursable expenses described above will total approximately $175,000 assuming that the Financing is completed.

Amendments and Waivers

Any provision of the Purchase Agreement may be amended or waived if the amendment or waiver is in writing and signed by Alteon and investors representing a majority of the shares of Series B Preferred Stock issued in the Financing.

Registration Rights Agreement Related to the Financing

In connection with the Purchase Agreement, we will be entering into a Registration Rights Agreement with the purchasers of the Series B Preferred Stock. The following summary of the Registration Rights Agreement is qualified by reference to the complete text of the Form of Registration Rights Agreement, which is incorporated by reference and attached as Annex C. Under the terms of the Registration Rights Agreement, Alteon has agreed to file a registration statement with the Securities and Exchange Commission for the resale of the shares of common stock issuable upon conversion of Series B Preferred Stock issued in the Financing, as well as conversion of Series B Preferred Stock underlying the warrants sold in the Financing. Failure to file the registration statement in a timely manner will result in payment by Alteon to each investor of liquidated damages, subject to certain limitations set forth in the Registration Rights Agreement. Such liquidated damages are also payable in the event that the resale registration statement has not been declared effective within certain time periods or if sales cannot be made pursuant to the registration statement following its effectiveness, each as described in the Registration Rights Agreement.

Ownership of Alteon’s Executive Officers and Directors

In considering the recommendation of the Alteon Board of Directors that the Alteon stockholders vote FOR the issuance of securities in the Financing pursuant to the Purchase Agreement, stockholders should be aware that as of May 24, 2007, all executive officers and directors of Alteon, together with their affiliates, own as a group approximately 15% of the shares of Alteon common stock entitled to vote at the Alteon annual meeting. A vote of a majority of the total votes represented by the shares of Alteon common stock present in person or by proxy at the annual meeting is required to approve the Financing.

Board Membership and New Directors Following the Financing

Currently, the size of our Board of Directors has been fixed at six (6) persons. Following the closing of the Financing, the Board of Directors of the Company will be fixed at seven (7) persons, consisting of (a) three (3) incumbent directors, (b) one (1) vacancy that may be filled at any time after the closing of the Financing with a new director designated by the investors affiliated with BBI who held convertible promissory notes that were converted into Series B Preferred Stock at the closing of the Financing which, new director shall be reasonably acceptable to the Company, and (c) three (3) additional vacancies. For so long as the investors affiliated with BBI who held convertible promissory notes that were converted into Series B Preferred Stock at the closing of the Financing hold at least that number of shares of Series B Preferred Stock that is equal to 50% of the shares issued to them in the Financing, such investors will have the right, but not the obligation, to designate and to fill two (2) of the three (3) additional vacancies that will exist following the closing. If two (2) vacancies are not available at the time such purchasers choose to designate two (2) members of the Board of Directors, the Board shall use its commercially reasonable efforts to cause two (2) of its then-current members to resign their positions in order to create vacant seats for the purchaser designees. These seats will then be filled by appointment of such persons by the other members of the Board who are then in office, and not by election by our stockholders. No persons have yet been identified to serve in these vacant positions. Upon the appointment of the purchaser designees to the Board, each new director will be entitled to receive cash compensation and option grants. All members of the Board of Directors of Alteon are eligible to receive cash compensation and option grants.

Listing of Alteon Common Stock

The shares of Alteon common stock to be issued upon conversion of Series B Preferred Stock issued in the Financing and conversion of Series B Preferred Stock underlying the warrants issued in the Financing will be listed on the American Stock Exchange under the symbol “ALT.”

Use of Proceeds

We expect to receive approximately $22,500,000 in net proceeds, from the sale of Series B Preferred Stock in the Financing, including the conversion of the Company’s Senior Convertible Secured Promissory Notes, as discussed elsewhere in this proxy statement. The warrants that will be issued to the investors to purchase up to 125,000,000 shares (prior to the implementation of the reverse stock split discussed elsewhere in this proxy statement) of our Series B Preferred Stock are exercisable for a period of five years. The warrants are exercisable for cash and via cashless exercise. If all of the warrants were exercised for cash we would receive approximately $6,250,000 in proceeds.

We currently intend to use the net proceeds from the Financing as follows:

approximately $10,000,000 to fund a portion of our drug candidate ALT-2074’s development activities, including two Phase IIa clinical trials as well as a pharmacokinetics study and a Phase IIb study to demonstrate the efficacy of ALT-2074 in certain cardiovascular indications. and related toxicology studies and manufacturing and materials costs;

approximately $2,000,000 to fund a portion of our drug candidate alagebrium’s development activities, including two Phase II clinical trials in adults, and related toxicology studies and manufacturing and materials costs;

approximately $4,000,000 to fund research and development activities for the discovery of new organoselenium compounds, the identification of new indications for the Company's exisiting compounds, and the development of a diagnostic test for haptoglobin; and

approximately $1,000,000 that we owe to our collaborative partner Oxis International pursuant to a previously disclosed license agreement with Oxis; and

approximately $5,500,000 for general corporate purposes, which we currently expect to be comprised of our salary, lease payments legal and accounting costs, prosecution and administration of our intellectual property, insurance, travel and other general administrate expenses, as well as capital expenditures and working capital.

This expected use of net proceeds represents our current intentions based upon our present plans and business conditions. The amounts and timing of our actual expenditures will depend on numerous factors, including the ongoing status of and results from clinical trials and other studies for ALT-2074 and alagebrium, as well as the development of a haptoglobin test, and the advancement of additional organoselenium compounds, any collaborations we may enter into with third parties for our product candidates and any unforeseen cash needs. As a result, management will retain broad discretion over the allocation of the net proceeds from this offering. We do not expect the net proceeds and our other available funds to be sufficient to fund the completion of the development of any of our product candidates, and we expect that we will need to raise additional funds prior to being able to market any products. We have no current plans, agreements or commitments for acquisitions of any businesses, products or technologies.

Votes Required to Approve the Issuance of Securities in the Financing Pursuant to the Purchase Agreement

Approval of the issuance of securities in the Financing pursuant to the Purchase Agreement requires an affirmative vote of a majority of the votes cast. Abstentions will be counted towards the vote total for this proposal, and will have the same effect as “against” votes. Broker non-votes will have no effect and will not be counted towards the vote total for this proposal.

This proposal 2 can not be passed without the passage of proposals 1, 3, 4 and 8.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE ISSUANCE OF SECURITIES IN THE FINANCING PURSUANT TO THE PURCHASE AGREEMENT, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE ISSUANCE OF SECURITIES IN THE FINANCING UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

PROPOSAL 3

APPROVAL OF AMENDMENT TO ALTEON’S CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF PREFERRED STOCK

Alteon’s Restated Certificate of Incorporation currently authorizes 1,999,329 shares of preferred stock, and on May 24, 2007, no shares of Alteon preferred stock were outstanding.

In connection with the Purchase Agreement, the Series B Preferred Stock will be sold at a price per share of $0.05 (calculated prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement). Thus, if the Financing is approved, Alteon will issue 500,000,000 shares of Series B Preferred Stock, and warrants in substantially the form attached hereto as Annex B, to purchase up to 125,000,000 shares of its Series B Preferred Stock, exercisable for a five-year period from the date of issuance with an exercise price of $0.05 per share (such number of shares and exercise price calculated prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement). Further, additional shares of Series B Preferred Stock may be issued upon the operation of certain anti-dilution adjustments provided in the terms of the Series B Preferred Stock and the warrants. Upon the closing of the Financing, the Senior Convertible Secured Promissory Notes, in an aggregate principal amount of $6,000,000, issued by Alteon pursuant to the Note and Warrant Purchase Agreement, dated January 11, 2007, as amended, by and among Alteon and certain institutional investors affiliated with BBI, plus all accrued but unpaid interest thereon (approximately $92,055 through May 31, 2007), will be automatically converted pursuant to their terms into that number of shares of Series B Preferred Stock equal to the principal plus all accrued but unpaid interest on the notes divided by the price per share at which the Series B Preferred Stock is sold, and thereafter the promissory notes will be cancelled, and the warrants to purchase an aggregate of 25,734,453 shares of our common stock, that were issued to certain institutional investors affiliated with BBI will terminate and be cancelled.

The following table reflects the capital structure of the Company before and after the annual meeting assuming, for purposes of illustration only, the implementation of a reverse stock split in a ratio of 1:75, and taking into account the approval of all of the proposals being presented to the stockholders by this proxy statement:

	Prior to the 2007 Annual Meeting	After the 2007 Annual Meeting

Common Stock Authorized	300,000,000	300,000,000
Common Stock Issued and Outstanding	129,318,858	1,724,251
Common Stock Reserved for Issuance	66,758,107	11,492,752
Common Stock Unreserved and Unissued	103,923,035	286,782,997

Preferred Stock Authorized	1,999,329	15,000,000
Series A Preferred Stock Authorized (Shareholder Rights Plan)	400,000	400,000
Series A Preferred Stock Issued (Shareholder Rights Plan)	0	0
Series B Preferred Stock Authorized	0	8,333,333
Series B Preferred Stock Issued	0	6,666,667
Series B Preferred Stock Reserved for Issuance	0	1,666,667
Preferred Stock Unreserved and Unissued	1,599,329	6,266,667

Alteon currently does not have sufficient shares of authorized preferred stock to complete the Financing, and it is a condition to closing of the Financing that the number of authorized shares of preferred stock be increased to accommodate the issuance of the shares of Series B Preferred Stock in the Financing. At present, Alteon has no plans to issue shares for any other purpose. However, the Alteon Board of Directors believes it is also desirable to have additional shares available for other corporate purposes that might arise in the future, other than the Financing. For example, although Alteon currently meets its obligations to deliver shares under employee stock options and similar arrangements with treasury shares (meaning previously issued shares that have been reacquired by Alteon), it may become desirable in the future to use newly issued shares for this purpose. Shares could also be issued from time to time for acquisitions or to raise capital. Under some circumstances, it is also possible for a company to use unissued shares for anti-takeover purposes, but Alteon has no present intention to take any such action.

Whether or not any future issuance of shares unrelated to the Financing would be submitted for stockholder vote depends upon the nature of the issuance, legal and stock exchange requirements, and the judgment of Alteon’s Board at the time.

Increasing the number of shares of Alteon preferred stock authorized for issuance is required by the Financing documents.

Votes Required to Approve the Increase in the Authorized Number of Shares of Preferred Stock

Approval of the increase in the authorized number of shares of Preferred Stock requires the affirmative vote of a majority of the issued and outstanding shares of Alteon common stock. Abstentions and broker non-votes will be counted towards the vote total for this proposal, and will have the same effect as “against” votes.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE INCREASE IN THE AUTHORIZED NUMBER OF SHARES OF PREFERRED STOCK, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE INCREASE IN THE AUTHORIZED NUMBER OF SHARES OF PREFERRED STOCK UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

PROPOSAL 4

APPROVAL OF THE DESIGNATION OF THE SERIES B PREFERRED STOCK

The stockholders of Alteon are being asked to approve Alteon’s Amended and Restated Certificate of Incorporation. The full text of the proposed Form of Amended and Restated Certificate of Incorporation is attached to this proxy statement as Annex D. Contained in the proposed Amended and Restated Certificate of Incorporation is a designation of the rights and preferences of 8,333,333 shares of Series B Preferred Stock that will be issued in the Financing, assuming the implementation of a 1:75 reverse stock split. We are asking the stockholders of Alteon to approve the designation of the Series B Preferred Stock as set forth in the proposed Amended and Restated Certificate of Incorporation. The following summary of the terms of the Series B Preferred Stock is qualified by reference to the designation of the rights and preferences of such shares included in Annex D.

Terms of the Series B Preferred Stock

Upon completion of the Financing, and prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement, up to 500,000,000 shares of Series B Preferred Stock may be issued and outstanding, as well as warrants to purchase 125,000,000 shares of Series B Preferred Stock (prior to the implementation of the reverse stock split as discussed elsewhere in this proxy statement). Following the implementation of the reverse stock split and the amendment to the authorized number of shares of preferred stock, we will have 300,000,000 shares of Alteon common stock authorized for issuance and 15,000,000 shares of Alteon preferred stock authorized for issuance.

Dividends. Holders of Series B Preferred Stock will be entitled to receive cumulative dividends at an annual rate of 8% of the Series B Preferred Stock original issue price for a period of 5 years from the date of issuance. Such dividends shall, at the option of the holders of a majority of the Series B Preferred Stock outstanding, be paid in cash or in shares of Series B Preferred Stock. Alteon will agree not to declare any dividends on its junior preferred or common stock until after it has paid all accrued but unpaid dividends on its Series B Preferred Stock.

Liquidation Preference. Upon liquidation, including deemed liquidations pursuant to a merger, consolidation or a sale of all or substantially all of Alteon’s assets, holders of Series B Preferred Stock will be entitled to a payment per share equal to the price at which shares of Series B Preferred Stock were sold in the Financing, plus accrued but unpaid dividends, prior to payment of any amounts on its junior preferred or common stock. The holders of the Series B Preferred Stock will be entitled to receive the proceeds out of any sale or liquidation of Alteon before any such proceeds are paid to holders of our common stock. In general, if the proceeds received upon any sale or liquidation do not exceed the total liquidation proceeds payable to the holders of the Series B Preferred Stock, which, prior to any adjustment in accordance with the terms of the Series B Preferred Stock is equal to the aggregate cash proceeds received by Alteon in the Financing, holders of common stock would receive no value for their shares upon such a sale or liquidation.

Protective Provisions. At any time when any shares of Series B Preferred Stock remain outstanding, the Company may not, without the consent of the holders of a majority of the shares held by holders of at least $4,000,000 (measured as of the original issue date) worth of Series B Preferred Stock: (i) incur debt in excess of $2,000,000, (ii) authorize securities at a price per share less than the price per share that the Series B Preferred Stock is being sold under the purchase agreement, (iii) increase the authorized capital of Alteon, (iv) create any new classes or series of stock with rights senior to the common stock, (v) issue any shares of Alteon’s Series A Preferred Stock, other than in accordance with the shareholder rights plan, (vi) amend any provision of Alteon’s Certificate of Incorporation or Bylaws that changes the rights of the Series B Preferred Stock, (vii) pay or declare any dividend on any capital stock of Alteon, (viii) purchase or redeem any of its securities, (ix) issue any securities to employees other than pursuant to the Plan, or increase the number of shares of common stock reserved for issuance under the Plan, (x) liquidate, dissolve or wind-up, (xi) merge with another entity or (xii) sell or dispose of any assets of the Company, including the sale or license of its intellectual property, (xiii) change the number of directors, (xiv) amend any portion of the Company’s Certificate of Incorporation or Bylaws, (xv) materially change the nature of Alteon’s business, (xvi) intentionally take any action that may result in Alteon’s stock no longer being approved for quotation on the AMEX or NASDAQ, or that would cause the common stock of Alteon to no longer be registered pursuant to Section 12 of the Securities Exchange Act of 1934, or (xvii) amend any material agreement that has been filed with the Securities and Exchange Commission.

Conversion. Holders of Series B Preferred Stock will have an option to convert their Series B Preferred Stock, plus, prior to the fifth anniversary of the original issuance of Series B Preferred Stock, all accrued and unpaid dividends, into common stock at the initial conversion price equal to the price at which shares of Series B Preferred Stock were sold in the Financing, as adjusted in accordance with the provisions of the Amended and Restated Certificate of Incorporation. An equivalent of $7,500,000 (measured as of the original issue date) of Series B Preferred Stock will automatically be converted into common stock when (i) the thirty-day prior trailing average closing price of Alteon common stock, as reported by the American Stock Exchange, for the entire six months preceding such time is equal to at least the price at which shares of Series B Preferred Stock were sold in the Financing and (ii) the registration statement for resale of securities issued in the Financing has been declared effective by the SEC and continuously effective for a one and one-half year period. Thereafter, the remainder of the outstanding Series B Preferred Stock will automatically be converted into common stock when (i) the thirty-day prior trailing average closing price of Alteon common stock, as reported by the American Stock Exchange for the entire six months preceding such time is equal to at least two-times the price at which shares of Series B Preferred Stock were sold in the Financing and (ii) the registration statement for resale of securities issued in the Financing has been declared effective by the SEC and continuously effective for one and one-half year period.

The designation of the Series B Preferred Stock is required by the Financing documents.

Votes Required to Approve the Authorization of the Series B Preferred Stock

Approval of the amendment to the Alteon Restated Certificate of Incorporation in order to authorize the Series B Preferred Stock requires the affirmative vote of a majority of the issued and outstanding shares of Alteon common stock. Abstentions and broker non-votes will be counted towards the vote total for this proposal, and will have the same effect as “against” votes.

This proposal 4 can not be passed without the passage of proposals 2 and 3.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE AMENDMENT TO THE ALTEON RESTATED CERTIFICATE OF INCORPORATION IN ORDER TO AUTHORIZE THE SERIES B PREFERRED STOCK, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE AMENDMENT TO THE ALTEON RESTATED CERTIFICATE OF INCORPORATION IN ORDER TO AUTHORIZE THE SERIES B PREFERRED STOCK UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

PROPOSAL 5

APPROVAL OF A CHANGE OF THE NAME OF THE CORPORATION

The Board of Directors has determined that it is advisable to change the name of the Company from Alteon Inc. to Synvista Therapeutics, Inc. and has voted to recommend that as part of the proposed amendment and restatement of our Restated Certificate of Incorporation, the stockholders adopt an amendment effecting the proposed name change.

The Board of Directors believes it is in the best interest of the Company to change its name. The Company merged with HaptoGuard, Inc. in July 2006, and as part of the merger, the management team of HaptoGuard joined Alteon.

Going forward, our principal development activities will be the development and commercialization of novel small molecule drugs to treat and prevent cardiovascular disease and diabetes, including the development of programs acquired as part of the merger with HaptoGuard. The name Synvista Therapeutics, Inc. is more closely associated with these principal development activities and we hope to obtain name recognition among clinicians, drug developers and investors interested in our novel drug candidates.

The approval of the change of the Company’s name is not required by the Financing documents.

Votes Required to Approve the Name Change

Approval of the amendment to the Alteon Restated Certificate of Incorporation in order to change the name of the Company requires the affirmative vote of a majority of the issued and outstanding shares of Alteon common stock. Abstentions and broker non-votes will be counted towards the vote total for this proposal, and will have the same effect as “against” votes.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE AMENDMENT TO THE ALTEON RESTATED CERTIFICATE OF INCORPORATION IN ORDER TO CHANGE THE NAME OF THE COMPANY, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE AMENDMENT TO THE ALTEON RESTATED CERTIFICATE OF INCORPORATION IN ORDER TO CHANGE THE NAME OF THE COMPANY UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

PROPOSAL 6

APPROVAL OF AMENDMENT TO ALTEON’S CERTIFICATE OF INCORPORATION TO CHANGE THE PROVISIONS REGARDING THE INDEMNIFICATION OF DIRECTORS

The proposed Amended and Restated Certificate of Incorporation will implement new indemnification provisions of officers and directors in accordance with the current state of the General Corporation Law of the State of Delaware. Below is a comparison of the current indemnification provisions and those set forth in the proposed Amended and Restated Certificate of Incorporation:

Current Indemnification Provisions:

·	The Board of Directors may adopt bylaws providing the fullest indemnification permitted under Delaware law.

·	The Board of Directors may also purchase and maintain insurance to protect directors, officers, employees or agents of the Company, against any liability.

No director shall be liable to the Company or the stockholders of the Company for monetary damages for breach of fiduciary duty except for: 1) breach of duty of loyalty; 2) acts or omissions not in good faith or which involve intentional misconduct; 3) violation of the Delaware law regarding payment of dividends; or 4) a transaction in which a director derived an improper personal benefit.

Proposed Indemnification Provisions:

Any director, officer, trustee of another corporation or partnership, joint venture or trust including service with respect to an employee benefit plan (an “Indemnitee”), that is made a party to any kind of suit or proceeding (civil, criminal, administrative or investigative) shall be indemnified and held harmless by the Company to the fullest extent allowed under Delaware law against all expense, liability and loss (including attorneys’ fees), provided, however, that the Company does not need to indemnify an Indemnitee if such Indemnitee initiated the proceeding unless the Board of Directors authorized such proceeding.

·	To the extent provided by Delaware law, an Indemnitee shall be entitled to advanced payment of any expenses (including attorney’s fees) incurred in defending such proceeding.

·	If the Company does not pay for the indemnified expenses within a certain period after it has received a written claim for such expenses from the Indemnitee, an Indemnitee can bring suit against Company to recover the unpaid amount.

·	The rights to indemnification are not exclusive.

·	The Company may maintain insurance at its expense to protect itself and any director, officer, employee or agent of the Company against any expense, liability or loss.

·	If authorized by the Board of Directors, the Company can grant the rights of indemnification to any employee or agent of the Company.

·	The rights conferred to Indemnitees shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of Indemnitee’s heirs and administrators.

·	The Board of Directors is expressly empowered to adopt, amend or repeal the bylaws of the Company by a vote of a majority of the authorized number of directors.

Amending the director indemnification provisions of our Restated Certificate of Incorporation is not required by the Financing documents, and Alteon is currently unaware of any proceedings or threatened proceedings that would be covered under the indemnification provisions that are proposed.

Votes Required to Amend the Director Indemnification Provisions

Approval of the amendment to the Alteon Restated Certificate of Incorporation in order to change the director indemnification provisions requires the affirmative vote of a majority of the issued and outstanding shares of Alteon common stock. Abstentions and broker non-votes will be counted towards the vote total for this proposal, and will have the same effect as “against” votes.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE AMENDMENT TO THE ALTEON RESTATED CERTIFICATE OF INCORPORATION IN ORDER TO CHANGE THE DIRECTOR INDEMNIFICATION PROVISIONS, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE AMENDMENT TO THE ALTEON RESTATED CERTIFICATE OF INCORPORATION IN ORDER TO CHANGE THE DIRECTOR INDEMNIFICATION PROVISIONS UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

PROPOSAL 7

APPROVAL OF AMENDMENT TO ALTEON’S CERTIFICATE OF INCORPORATION TO REMOVE REFERENCES TO RETIRED CLASSES OF PREFERRED STOCK

270,000 shares of Series A Preferred Stock, 400,000 shares of Series B Preferred Stock, 835,606 shares of Series C Preferred Stock, 233,531 shares of Series D Preferred Stock and 262,534 shares of Series E Preferred Stock, all designated on December 7, 1990, and retired on June 7, 1993;

5,000 shares of 6% Cumulative Preferred Stock, designated on April 23, 1997, and retired on February 10, 1998;

2,000 shares of Series G Preferred Stock, cancelled on the books and records of the Company on July 21, 2006, none of which are issued or outstanding; and

8,000 shares of Series H Preferred Stock, cancelled on the books and records of the Company on July 21, 2006 none of which are issued or outstanding.

In addition, 400,000 shares of the Company’s authorized Series F Preferred Stock will be reclassified as Series A Preferred Stock and will not be retired or cancelled. Such shares are currently reserved for issuance pursuant to the Company’s Stockholder Rights Plan, as amended, as previously filed with the Securities and Exchange Commission.

The Board of Directors has determined that it is in the best interest of the Company to eliminate any reference to classes of stock that were issued prior to our initial public offering, or for which there are no longer any issued and outstanding shares. The approval of the elimination of all references to retired and cancelled Alteon preferred stock is not required by the Financing documents.

Votes Required to Approve the Elimination of Retired and Cancelled Alteon Preferred Stock

Approval of the amendment to the Alteon Restated Certificate of Incorporation in order to eliminate the retired and cancelled Alteon Preferred Stock requires the affirmative vote of a majority of the issued and outstanding shares of Alteon common stock. Abstentions and broker non-votes will be counted towards the vote total for this proposal, and will have the same effect as “against” votes.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE AMENDMENT TO THE ALTEON RESTATED CERTIFICATE OF INCORPORATION IN ORDER TO ELIMINATE THE RETIRED AND CANCELLED ALTEON PREFERRED STOCK, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE AMENDMENT TO THE ALTEON RESTATED CERTIFICATE OF INCORPORATION IN ORDER TO ELIMINATE THE RETIRED AND CANCELLED ALTEON PREFERRED STOCK UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

PROPOSALS 8 AND 9

REVERSE STOCK SPLIT AND THE ADJOURNMENT OF THE ANNUAL MEETING

General

Holders of Alteon common stock are being asked to approve the proposal that Article Fourth of Alteon’s Restated Certificate of Incorporation be amended to effect a reverse stock split of the issued and outstanding shares of Alteon common stock (such split to combine a number between fifty (50) and one hundred (100) (such final number to be determined by the Board of Directors and reasonably acceptable to the investors affiliated with BBI) outstanding shares of Alteon common stock, such number consisting of only whole shares, into one (1) share of Alteon common stock). If approved by the Alteon stockholders, the reverse stock split would become effective upon filing of the Company’s Amended and Restated Certificate of Incorporation. Our Board may effect only one reverse stock split following the approval by the stockholders. The Board’s decision will be based on a number of factors, including market conditions, existing and expected trading prices for Alteon common stock and the continued listing requirements of the AMEX. Even if the stockholders approve the reverse stock split, Alteon reserves the right not to effect the reverse stock split if the Board does not deem it to be in the best interests of Alteon and its stockholders to effect the reverse stock split. The Board may determine to effect the reverse stock split, if it is approved by the stockholders, even if the other proposals to be acted upon at the meeting are not approved, including the Financing. In addition, the stockholders of Alteon are being asked to consider and vote upon an adjournment of the annual meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes in favor of approval of the issuance of securities in the Financing, the amendment to the 2005 Stock Plan, all of the proposals related to the Amended and Restated Certificate of Incorporation, and the reverse stock split.

The reverse stock split will be effected by filing of the Amended and Restated Certificate of Incorporation, following approval of this proposal at the annual meeting.

Purpose

The Alteon Board approved the proposal authorizing the reverse stock split for the following reasons:

the Board of Directors believes effecting the reverse stock split may be an effective means of avoiding a delisting of Alteon common stock from AMEX in light of the specific request by AMEX that Alteon effect the reverse stock split as part of its plan to regain compliance with AMEX continuing listing standards;

the Board of Directors believes a higher stock price may help generate investor interest in Alteon and help Alteon attract and retain employees; and

the reverse stock split is a condition to closing of the Financing.

If the reverse stock split successfully increases the per share price of our common stock, our Board of Directors believes this increase would facilitate future financings by Alteon and enhance Alteon’s ability to attract and retain employees and other service providers. We cannot assure you, however, that the reverse stock split will result in an increase in the per share price of our common stock, or if it does, how long the increase would be sustained, if at all. Although the stock split is designed to raise the stock price, there is no guarantee that the share price will rise proportionately to the reverse stock split, so the end result could be a loss of value.

Requirements for Listing on the AMEX

Alteon common stock is quoted on the AMEX under the symbol “ALT.” On January 24, 2007, we received a notice from the staff (the “Staff”) of AMEX that AMEX has accepted our plan to regain compliance with AMEX continued listing standards, and that our listing will be continued pursuant to an extension until April 9, 2008 (the “Extension Period”). The Staff requested that Alteon effect a reverse stock split of its common stock to address the low selling price of Alteon common stock.

We submitted a plan of compliance to AMEX on November 6, 2006, outlining our operational plan and strategic objectives, and amended our plan of compliance on January 3, 2007 and January 5, 2007 (the “Plan of Compliance”). The Plan of Compliance was prepared in response to a letter received from AMEX on October 9, 2006, indicating that Alteon was not in compliance with certain continued listing standards. These standards were (i) Section 1003(a)(i) of the AMEX Company Guide, as a result of the Company’s shareholder’s equity of less than $2,000,000 and losses from continuing operations and/or net losses in two out of its three most recent fiscal years; (ii) Section 1003(a)(ii) of the AMEX Company Guide, as a result of the Company’s shareholder’s equity of less than $4,000,000 and losses from continuing operations and/or net losses in three out of its four most recent fiscal years; and (iii) Section 1003(a)(iii) of the AMEX Company Guide, as a result of the Company’s shareholder’s equity of less than $6,000,000 and losses from continuing operations and/or net losses in its five most recent fiscal years. To date, we have not regained compliance with such continued listing standards, but are working towards achieving that goal consistent with our Plan of Compliance.

We will be subject to periodic review by the Staff during the Extension Period, and are required to provide the Staff with periodic updates in connection with the Plan of Compliance. Failure to make progress consistent with the Plan of Compliance or to regain compliance with the continued listing standards by the end of the Extension Period could result in the Company being delisted from AMEX .

Our Board of Directors believes that maintaining the listing on AMEX may provide a broader market for Alteon common stock and facilitate the use of Alteon common stock in financing and other transactions. The Board of Directors unanimously approved the reverse stock split partly as a means of increasing the share price of Alteon common stock. In addition, continuing listing on AMEX is a condition to the closing of the Financing with Baker Brothers Investments, and the reverse stock split will facilitate the continuation of such listing. We expect the reverse stock split to assist with our plan to regain compliance with AMEX listing standards, but the reverse stock split itself will not address the fact that our shareholder’s equity is less than $2,000,000, which is the other aspect of the AMEX listing standards with which we are not currently in compliance. We do, however, expect that our receipt of the net proceeds of the Financing will address the deficiency in our shareholder’s equity and allow us to regain compliance with the aspects of the AMEX listing standards relating to shareholder’s equity.

One of the effects of the reverse stock split will be to effectively increase the proportion of authorized but unissued shares to issued shares. This could result in Alteon’s management being able to issue more shares without further stockholder approval. For example, if Alteon effects the reverse stock split of its issued and outstanding common stock using a 1:75 ratio, and does not amend the number of authorized shares of common stock, its authorized but unissued shares of common stock following the stock split would be 103,923,035 compared to shares issued of 1,724,251. Alteon currently has no plans to issue shares, other than in the Financing and to satisfy obligations under the Company’s employee stock options from time to time as these options are exercised.

Potential Increased Investor Interest

On May 24, 2007, the closing price of Alteon common stock, as reported on AMEX, was $0.05 per share. In approving the proposal authorizing the reverse stock split, our Board of Directors considered that our common stock may not appeal to brokerage firms that are reluctant to recommend lower priced securities to their clients. Investors may also be dissuaded from purchasing lower priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower priced stocks. Also, the Alteon Board believes that most investment funds are reluctant to invest in lower priced stocks.

There are risks associated with the reverse stock split, including that the reverse stock split may not result in an increase in the per share price of Alteon common stock.

Alteon cannot predict whether the reverse stock split will increase the market price for Alteon common stock. The history of similar stock split combinations for companies in like circumstances is varied. There is no assurance that:

the market price per share of Alteon common stock after the reverse stock split will rise in proportion to the reduction in the number of shares of Alteon common stock outstanding before the reverse stock split;

the reverse stock split will result in a per share price that will attract brokers and investors who do not trade in lower priced stocks;

the reverse stock split will result in a per share price that will increase Alteon’s ability to attract and retain employees and other service providers; and

Alteon will meet the requirements of AMEX for continued inclusion for trading.

The market price of Alteon common stock will also be based on Alteon performance and other factors, some of which are unrelated to the number of shares outstanding. If the reverse stock split is effected and the market price of Alteon common stock declines, the percentage decline as an absolute number and as a percentage of Alteon’s overall market capitalization may be greater than would occur in the absence of a reverse stock split. Furthermore, the liquidity of Alteon common stock could be adversely affected by the reduced number of shares that would be outstanding after the reverse stock split.

Principal Effects of the Reverse Stock Split

If the stockholders approve the proposal to authorize our Board of Directors to implement the reverse stock split and our Board of Directors implements the reverse stock split, Alteon will amend the existing provision of Alteon’s Amended and Restated Certificate of Incorporation relating to Alteon’s authorized capital to add the following paragraph:

“Upon the effectiveness of this Restated Certificate, every [*] issued and outstanding shares of Common Stock of the Corporation shall be changed and reclassified into one (1) share of Common Stock, which shares shall be fully paid and nonassessable shares of Common Stock of the Corporation; provided, however, that in lieu of fractional interests in shares of Common Stock to which any stockholder would otherwise be entitled pursuant hereto (taking into account all shares of Common Stock owned by such stockholder), such stockholder shall be entitled to receive a cash payment equal to the fair value of one share of Common Stock multiplied by such fraction. The par value of the Common Stock shall remain $0.01 per share. All certificates representing shares of Common Stock outstanding immediately prior to the filing of this Restated Certificate shall immediately after the filing of this Restated Certificate represent instead the number of shares of Common Stock as provided above. Notwithstanding the foregoing, any holder of Common Stock may (but shall not be required to) surrender his, her or its stock certificate or certificates to the Corporation, and upon such surrender the Corporation will issue a certificate for the correct number of shares of Common Stock to which the holder is entitled under the provisions of this Restated Certificate. Shares of Common Stock that were outstanding prior to the filing of this Restated Certificate, and that are not outstanding after and as a result of the filing of this Restated Certificate, shall resume the status of authorized but unissued shares of Common Stock.”

——————

By approving this amendment stockholders will approve the combination of any whole number of shares of common stock between and including fifty (50) and one hundred (100) into one (1) share. The Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware will include only that number determined by the Board of Directors to be in the best interests of Alteon and its stockholders. In accordance with these resolutions, the Board of Directors will not implement any amendment providing for a different split ratio.

The reverse stock split will be effected simultaneously for all Alteon common stock and the exchange ratio will be the same for all shares of Alteon common stock. The reverse stock split will affect all of our stockholders uniformly and will not affect any stockholder’s percentage ownership interests in Alteon, except to the extent that the reverse stock split results in any of our stockholders owning a fractional share. Common stock issued pursuant to the reverse stock split will remain fully paid and nonassessable. The reverse stock split will not affect Alteon’s continuing to be subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, despite the fact that, as a result of the proposed cash payment for any fractional shares resulting from the reverse stock split as described below under “ - Fractional Shares,” it is possible that we would have the ability to deregister our common stock from registration under the Exchange Act if the number of our stockholders after the reverse stock split were to fall below 300. The reverse stock split alone at any ratio within the range for which we are seeking approval will not cause the number of shareholders of record to fall below 300, and we do not have any current intention to take steps to deregister our common stock from registration under the Exchange Act.

Procedure for Effecting Reverse Stock Split and Exchange of Stock Certificates

If the reverse stock split is approved by our stockholders, and if our Board of Directors still believes that a reverse stock split is in the best interests of Alteon and our stockholders, the Board will determine the ratio of the reverse stock split to be implemented. Alteon will file the Amended and Restated Certificate of Incorporation, which will implement the reverse stock split provision, with the Secretary of State of the State of Delaware at such time as the Board of Directors has determined the appropriate effective time for the reverse stock split. Our Board of Directors may delay effecting the reverse stock split without resoliciting stockholder approval. Beginning on the effective date of the split, each certificate representing pre-split shares will be deemed for all corporate purposes to evidence ownership of post-split shares.

As soon as practicable after the effective date of the split, stockholders will be notified that the reverse stock split has been effected. Alteon expects that Alteon’s transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates. Holders of pre-split shares will be asked to surrender to the exchange agent certificates representing pre-split shares in exchange for certificates representing post-split shares in accordance with the procedures to be set forth in a letter of transmittal to be sent by Alteon. No new certificates will be issued to a stockholder until such stockholder has surrendered such stockholder’s outstanding certificate(s) together with the properly completed and executed letter of transmittal to the exchange agent. Any pre-split shares submitted for transfer, whether pursuant to a sale or other disposition, or otherwise, will automatically be exchanged for post-split shares. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.

Fractional Shares

No fractional shares will be issued in connection with the reverse stock split. Stockholders of record who otherwise would be entitled to receive fractional shares because they hold a number of pre-split shares not evenly divisible by the number of pre-split shares for which each post-split share is to be exchanged, will be entitled, upon surrender to the exchange agent of certificates representing such shares, to a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing price of the common stock, as reported in the Wall Street Journal, on the last trading day prior to the effective date of the split (or if such price is not available, the average of the last bid and asked prices of the common stock on such day or other price determined by our Board of Directors). The ownership of a fractional interest will not give the holder thereof any voting, dividend, or other rights except to receive payment therefor as described herein.

Stockholders should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where Alteon is domiciled, and where the funds will be deposited, sums due for fractional interests that are not timely claimed after the effective date of the split may be required to be paid to the designated agent for each such jurisdiction, unless correspondence has been received by Alteon or the exchange agent concerning ownership of such funds within the time permitted in such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds will have to seek to obtain them directly from the state to which they were paid.

Accounting Matters

The reverse stock split will not affect the stockholders’ equity section of Alteon’s balance sheet. However, because the par value of Alteon common stock will remain unchanged on the effective date of the split, certain components that are part of the stockholders’ equity section will change by offsetting amounts. Depending on the size of the reverse stock split the Board of Directors decides to implement, the stated capital component will be reduced to an amount between one-fiftieth (1/505) and one-hundredth (1/100) of its present amount, and the additional paid-in capital component will be increased with the amount by which the stated capital is reduced. The per share net income or loss and net book value of Alteon common stock will be increased because there will be fewer shares of Alteon common stock outstanding. Prior periods’ per share amounts will be restated to reflect the reverse stock split.

Potential Anti-Takeover Effect

Although the increased proportion of unissued authorized shares to issued shares could, under certain circumstances, have an anti-takeover effect (for example, by permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition of our Board of Directors or contemplating a tender offer or other transaction for the combination of Alteon with another company), the reverse stock split proposal is not being proposed in response to any effort of which we are aware to accumulate shares of Alteon common stock or obtain control of Alteon, nor is it part of a plan by management to recommend a series of similar amendments to our Board of Directors and stockholders. Other than the reverse stock split proposal, our Board of Directors does not currently contemplate recommending the adoption of any other actions that could be construed to affect the ability of third parties to take over or change control of Alteon.

No Dissenter’s Rights

Under the Delaware General Corporation Law, Alteon stockholders are not entitled to dissenter’s rights with respect to the reverse stock split, and Alteon will not independently provide stockholders with any such right.

Federal Income Tax Consequences of the Reverse Stock Split

The following is a summary of the material federal income tax consequences of the reverse stock split and does not purport to be a complete discussion of all of the possible federal income tax consequences of the reverse stock split. Further, it does not address any state, local or foreign income or other tax consequences. For example, the state and local tax consequences of the reverse stock split may vary significantly as to each stockholder, depending upon the state in which such stockholder resides. Also, it does not address the tax consequences to holders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, nonresident alien individuals, broker-dealers and tax-exempt entities. The discussion is based on the provisions of the United States federal income tax law as of the date hereof, which is subject to change retroactively, as well as prospectively. This summary also assumes that the pre-split shares were, and the post-split shares will be, held as a “capital asset,” as defined in the Internal Revenue Code of 1986, as amended (generally, property held for investment). The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the reverse stock split.

Other than the cash payments for fractional shares discussed below, no gain or loss should be recognized by a stockholder upon such stockholder’s exchange of pre-split shares for post-split shares pursuant to the reverse stock split. The aggregate tax basis of the post-split shares received in the reverse stock split, including any fraction of a post-split share deemed to have been received, will be the same as the stockholder’s aggregate tax basis in the pre-split shares that are exchanged. In general, stockholders who receive cash upon redemption of their fractional share interests in the post-split shares as a result of the reverse stock split will recognize gain or loss based on their adjusted basis in the fractional share interests redeemed. The federal income tax liability, if any, generated by the receipt of cash in lieu of a fractional interest should be minimal in view of the low value of the fractional interest. The stockholder’s holding period for the post-split shares will include the period during which the stockholder held the pre-split shares surrendered in the reverse stock split.

Alteon’s view regarding the tax consequence of the reverse stock split is not binding on the Internal Revenue Service or the courts. Accordingly, each stockholder should consult with such stockholder’s own tax advisor with respect to all of the potential tax consequences to such stockholder of the reverse stock split.

The approval of the reverse stock split is required by the Financing documents.

Votes Required to Approve the Reverse Stock Split

Approval of the reverse stock split requires the affirmative vote of a majority of the issued and outstanding shares of Alteon common stock. Abstentions and broker non-votes will be counted towards the vote total for this proposal, and will have the same effect as “against” votes.

This proposal 8 can not be passed without the passage of proposals 2, 3 and 4.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE REVERSE STOCK SPLIT, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE REVERSE STOCK SPLIT UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

Votes Required to Approve the Adjournment of the Annual Meeting

Approval of the adjournment of Alteon’s annual meeting, if necessary, if a quorum is present, to solicit additional proxies if there are not sufficient votes to approve the matters to be voted on at the meeting requires the affirmative vote of a majority of the votes cast. Abstentions will be counted towards the vote total for this proposal, and will have the same effect as “against” votes. Broker non-votes will have no effect and will not be counted towards the vote total for this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE ADJOURNMENT OF THE MEETING, IF NECESSARY, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF THE ADJOURNMENT UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

PROPOSAL 10

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board has appointed, subject to stockholder ratification, J.H. Cohn LLP (“J.H. Cohn”) to serve as Alteon’s independent registered public accounting firm for the fiscal year ending December 31, 2007. The Board recommends that our stockholders ratify the appointment of J.H. Cohn.

J.H. Cohn served as our independent registered public accounting firm for the fiscal years ended December 31, 2006, December 31, 2005, and December 31, 2004.

If the stockholders do not ratify the decision to appoint J.H. Cohn, the Audit Committee may reconsider its selection. The affirmative vote of a majority of the shares voted at the annual meeting is required for ratification.

Representatives of J.H. Cohn are expected to be present at the annual meeting to respond to appropriate questions from our stockholders. They will be given the opportunity to make a statement if they wish to do so.

The following table summarizes the fees paid or payable to J.H. Cohn for services rendered for the fiscal year ended December 31, 2006:

Type of Fees	Fiscal Year Ended December 31, 2006

Audit Fees	$	97,925
Audit-Related Fees		46,142
Tax Fees		—
All Other Fees		—
Total Fees	$	144,067

The following table summarizes the fees paid or payable to J.H. Cohn for services rendered for the fiscal year ended December 31, 2005:

Type of Fees	Fiscal Year Ended December 31, 2005

Audit Fees	$	288,966	*
Audit-Related Fees		46,142
Tax Fees		7,150
All Other Fees		—
Total Fees	$	296,116

——————

2005 Audit Fees to J.H. Cohn LLP included $196,239 for work related to the audit of our internal controls over financial reporting and related attestation to management’s report on the effectiveness of our internal controls over financial reporting which was required by Section 404 of the Sarbanes-Oxley Act of 2002.

Information set forth above under the caption “Audit Fees” relates to fees we paid the independent registered public accountants for professional services for the audit of our financial statements included in our Form 10-K, review of our financial statements included in our Forms 10-Q and for the issuance of comfort letters and/or consents in connection with registration statements. 2006 Audit Fees to J.H. Cohn LLP are fees for audit work performed in the preparation of financial statements. “Audit-Related Fees” are fees we paid for assurance and related services by the independent registered public accountants that are reasonably related to the performance of the audit or review of our financial statements, including special procedures required to meet certain regulatory requirements.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-audit Services of Independent Auditors

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor.

Prior to engagement of the independent auditor for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.

1. Audit services include audit work performed in connection with annual financial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards.

2. Audit-Related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements.

3. Tax services include all services performed by the independent auditor’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice.

4. Other Fees are those associated with services not captured in the other categories. The Company generally does not request such services from the independent registered public accounting firm.

Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent auditor.

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Votes Required to Ratify the Appointment of J.H. Cohn LLP

The affirmative vote of a majority of the shares voted at the annual meeting is required for ratification of the selection of J.H. Cohn LLP as Alteon’s independent registered public accounting firm for the fiscal year ending December 31, 2007. Abstentions will be counted towards the vote total for this proposal, and will have the same effect as “against” votes. Broker non-votes will have no effect and will not be counted towards the vote total for this proposal.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO RATIFY THE APPOINTMENT OF J.H. COHN LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR OF SUCH RATIFICATION UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.

FORWARD-LOOKING STATEMENTS AND CAUTIONARY STATEMENTS

Statements in this proxy statement that are not statements or descriptions of historical facts are “forward-looking” statements and are subject to numerous risks and uncertainties. These forward-looking statements and other forward-looking statements made by us or our representatives are based on a number of assumptions. The words “believe,” “expect,” “anticipate,” “intend,” “estimate” or other expressions, which are predictions of or indicate future events and trends and which do not relate to historical matters, identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, as they involve risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, including those set forth in Alteon’s SEC filings.

The forward-looking statements represent our judgments and expectations as of the date of this proxy statement. We assume no obligation to update any such forward-looking statements.

INCORPORATION BY REFERENCE

The following sections of our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as filed on March 22, 2007 and as amended on April 30, 2007 (file No. 001-16043), which is enclosed with this proxy statement, are incorporated by reference into this proxy statement:

Financial Statements, including the Notes thereto, and the unaudited quarterly financial data for the two-year period ended December 31, 2006 (Part II, Items 8(a) and 8(b);

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part II, Item 7); and

Qualitative and Quantitative Disclosures About Market Risk (Part II, Item 7A).

The following sections of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, as filed on May 14, 2007 (file No. 001-16043), which is enclosed with this proxy statement, are incorporated by reference into this proxy statement:

Unaudited condensed consolidated financial statements, including the Notes thereto (Part I, Item 1);

Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part I, Item 2); and

Qualitative and Quantitative Disclosures About Market Risk (Part I, Item 3).

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

CODE OF BUSINESS CONDUCT AND ETHICS

Alteon has adopted a code of business conduct and ethics that applies to all of its employees, including its chief executive officer and chief financial and accounting officers. The text of the code of business conduct and ethics is posted on Alteon’s website at www.alteon.com. Disclosure regarding any amendments to, or waivers from, provisions of the code of business conduct and ethics that apply to Alteon’s directors, principal executive and financial officers will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting of such amendments or waivers is then permitted by the rules of the American Stock Exchange, Inc.

STOCKHOLDER PROPOSALS

Stockholders deciding to submit proposals for inclusion in our proxy statement and proxy relating to our 2008 annual meeting of stockholders must advise Alteon’s Secretary of such proposals in writing by February 28, 2008. In addition, the proxy solicited by the Board of Directors for the 2008 annual meeting of stockholders will confer discretionary authority to vote on any stockholder proposal presented at that meeting of which notice was not timely received. In accordance with our bylaws, notice of a proposal will be considered untimely, unless Alteon’s Secretary receives written notice of such proposal by April 20, 2008 (but not earlier than March 21, 2008).

OTHER MATTERS

The Board of Directors of Alteon is not aware of any matter to be presented for action at the meeting other than the matters referred to above and does not intend to bring any other matters before the meeting. However, if other matters should properly come before the meeting, it is intended that holders of the proxies will vote thereon in their discretion.

GENERAL

The accompanying proxies are solicited by and on behalf of the Boards of Directors of Alteon, whose notice of meeting is attached to this proxy statement, and the entire cost of such solicitation will be borne by Alteon.

In addition to the use of the mails, proxies may be solicited by personal interview and telephone by directors, officers and other employees of Alteon who will not be specially compensated for these services. Alteon has retained the services of American Stock Transfer & Trust Company to assist in the proxy distribution at a fee estimated to be $20,000. Alteon will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held of record by such brokers, nominees, custodians and other fiduciaries. Alteon will reimburse such persons for their reasonable expenses in connection therewith.

Certain information contained in this proxy statement relating to the security holdings of directors and officers of Alteon is based upon information received from the individual directors and officers.

WHERE YOU CAN FIND MORE INFORMATION

Alteon files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information Alteon files at the SEC’s public reference rooms in Washington, D.C. (Station Place, 100 F Street, N.E.), New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Alteon’s SEC filings are also available to the public from commercial document retrieval services and at the website maintained by the SEC at www.sec.gov, as well as on Alteon’s website at www.alteon.com and, in paper form, to beneficial owners of Alteon common stock without charge upon written request to Alteon’s Secretary at Alteon’s principal executive offices, 221 West Grand Avenue, Suite 200, Montvale, New Jersey 07645.

ANNEX INDEX

ANNEX A -	SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT, AND AMENDMENT NO. 1 THERETO
ANNEX B -	FORM OF WARRANT
ANNEX C -	FORM OF REGISTRATION RIGHTS AGREEMENT
ANNEX D -	FORM OF ALTEON’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
ANNEX E -	PROXY CARD

ANNEX A

ALTEON INC.

SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

April 5, 2007

A-1

SERIES B PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

This Series B Preferred Stock and Warrant Purchase Agreement (this “Agreement”) is dated as of April 5, 2007, among Alteon Inc., a Delaware corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its successors and assigns, a “Purchaser” and collectively the “Purchasers”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described in this Agreement.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the meanings indicated in this Section 1.1:

“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person as such terms are used in and construed under Rule 144 under the Securities Act, provided, however, that for the avoidance of doubt it is acknowledged and agreed that Atticus Global Advisors, Ltd. and Green Way Managed Account Series, Ltd., in respect of its segregated account, Green Way Portfolio D, are affiliates.

“Amended and Restated Certificate of Incorporation” means that certain Amended and Restated Certificate of Incorporation to be filed with the Secretary of State of the State of Delaware in substantially the form attached hereto as Exhibit A.

“Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“Closing” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.

“Closing Date” means the Trading Day when all of the all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities have been satisfied or waived.

“Closing Price” means on any particular date (a) the last reported closing price per share of Common Stock on such date on the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (b) if there is no such price on such date, then the closing price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg L.P. at 4:15 PM (New York time)), or (c) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board or (d) if the Common Stock is not then listed or quoted on the Trading Market or the OTC Bulletin Board and if prices for the Common Stock are then reported in the “pink sheets” published by Pink Sheets LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent price per share of the Common Stock so reported, or (e) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined by an appraiser selected in good faith by the Purchasers representing at least a majority in interest of the Shares to be purchased hereunder.

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed into.

A-2

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

“Company Counsel” means Mintz Levin Cohn Ferris Glovsky and Popeo P.C.

“Conversion Shares” means the shares of Common Stock of the Company issuable upon conversion of the Series B Preferred Stock.

“Convertible Promissory Notes” means those certain Senior Convertible Secured Promissory Notes of the Company in an aggregate principal amount of $3,000,000 each dated January 11, 2007, issued pursuant to the Note and Warrant Purchase Agreement.

“Disclosure Schedules” means the Disclosure Schedules of the Company delivered concurrently herewith.

“Effective Date” means the date that the initial Registration Statement filed by the Company pursuant to the Registration Rights Agreement is first declared effective by the Commission.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“GAAP” shall have the meaning ascribed to such term in Section 3.1(k).

“Legend Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).

“Liens” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

“Note and Warrant Purchase Agreement” means the Note and Warrant Purchase Agreement dated January 11, 2007 by and among the Company and the lenders named therein.

“Per Share Purchase Price” means 50% of the average Closing Price of the Common Stock for the fifteen (15) Trading Days beginning after the later of the Shareholder Meeting or implementation of the Reverse Stock Split. The per share price shall in no event (i) exceed the equivalent of $0.075 per share immediately prior to the Reverse Stock Split or (ii) be less than the equivalent of $0.05 per share immediately prior the Reverse Stock Split.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Proxy Statement” means that certain Proxy Statement to be prepared by the Company and submitted to the Commission for review and comment in order to properly call and notice the Shareholder Meeting.

“Registration Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers, in the form of Exhibit B attached hereto.

“Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Purchasers of the Shares and the Warrant Shares.

“Reverse Stock Split” shall have the meaning ascribed to such term in Section 4.11.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“SEC Documents” shall have the meaning ascribed to such term in Section 3.1(k).

“Securities” means the Shares, the Conversion Shares, the Warrants and the Warrant Shares.

A-3

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.