AtheroGenics Noteholders Expect Company Will Elect Not to Pay 2008 Notes When Due

ATLANTA--(BUSINESS WIRE)--CNH Partners, LLC, Tamalpais Asset Management LP, Tang Capital Partners, LP, and Zazove Associates LLC (the "08 Noteholders"), which collectively hold approximately 96% of the outstanding 4 ½ % Convertible Notes Due 2008 (the "08 Notes") issued by AtheroGenics, Inc. ("AtheroGenics"), today announced that they expect, based on conversations with representatives of AtheroGenics, that AtheroGenics will elect not to repay their debt under the 08 Notes. The 08 Notes mature today, September 2, 2008, and the principal amount of approximately $30.5 million is due and payable. According to AtheroGenic's latest Quarterly Report on Form 10-Q, AtheroGenics had approximately $66.2 million in cash, cash equivalents, and short term investments as of June 30, 2008. Moreover, the 08 Noteholders believe additional funds are available at market terms to fund ongoing operations, including from the 08 Noteholders, although the 08 Noteholders are not aware that AtheroGenics has made any attempt to secure such financing.

On Sunday, August 31, 2008, the 08 Noteholders sent AtheroGenics the letter and term sheet below describing a proposal for a financing that was rejected by AtheroGenics. This proposal culminated a series of offers by the 08 Noteholders to provide financing that would have allowed AtheroGenics to pay its debts in the ordinary course and continue to pursue its business objectives. The attached proposal contemplated that AtheroGenics offer to the holders of all of AtheroGenics' outstanding debt the opportunity to participate, pro-rata, in a $39 million financing on market terms, which the 08 Noteholders would backstop to ensure the entire amount would be funded. The offer was conditioned on the payment of the 08 Notes in full when due. The 08 Noteholders believe that the proposal would have permitted AtheroGenics to meet its payment obligations under the 08 Notes and to meet other short- and long-term goals, including completion of the development of AGI-1067 through its second, confirmatory Phase 3 trial, and to avoid defaults of AtheroGenics' other outstanding debt.

For further information, please contact: Todd Pulvino, CNH Partners LLC (203.742.3002); Paul Giordano, Tamalpais Asset Management LP (415.289.3600); Kevin C. Tang, Tang Capital Partners, LP (858.200.3830); or Steven M. Kleiman, Zazove Associates, LLC (847.239.7100).

Dear Board of Directors:

The undersigned, CNH Partners, LLC, Tang Capital Partners, LP, Tamalpais Asset Management LP and Zazove Associates LLC (the "08 Noteholders"), each of which is a holder of the 4 ½ % Convertible Notes Due 2008 (the "08 Notes") issued by AtheroGenics, Inc. (the "Company"), collectively own in the aggregate 96% of the outstanding 08 Notes. As you know, the 08 Notes mature this Tuesday, September 2, 2008, at which time the principal amount of approximately $30.5 million will be due and payable. If the 08 Notes are not paid at that time, a cross-default may be triggered with respect to approximately $270 million of Convertible Notes Due 2011 and 2012 (the "Long Term Notes") issued by the Company and currently outstanding.

As the Company's Board of Directors considers available options to address this situation, it is imperative that it act to maximize the value of the Company for the benefit of all stakeholders. We are concerned, however, that the Board has lost sight of its fiduciary duty in that regard. Rather than engaging in a productive dialogue to restructure the 08 Notes-securities that form only approximately 10% of the Company's indebtedness-the Board seems focused on using a Chapter 11 bankruptcy case as means to distribute whatever remains of the Company in a process that has the imprimatur of being "fair." While the Board might view Chapter 11 as a safe haven for serving the interests of all stakeholders, it will have failed to appreciate that the overall enterprise value of the Company will have been greatly, and unnecessarily, diminished. No one benefits in that scenario.

Rather than proceed down that path, the 08 Noteholders believe it is in the best interest of all involved-the Company, its creditors and shareholders alike-for the Company to pay its debts as they come due, as all companies that intend to remain in business seek to do. This will result in an immediate drawdown of $30.5 million of cash and a commensurate decrease in the amount of debt outstanding. To replace the cash, the holders of all outstanding debt can be offered the opportunity to participate, pro-rata, in a financing on the terms described in the attached term sheet (the "Financing"). The 08 Noteholders are prepared to backstop the Financing to the extent necessary to ensure that the Company receives the full amount contemplated by the proposed Financing. By not requiring any cash out of pocket from the Company, this proposal provides the Company with the financial accommodations that we understand satisfy its short- and long-term goals, including the completion of the development of AGI-1067 through its second, confirmatory Phase 3 trial.

The proposed Financing does not require shareholder approval under NASDAQ rules. However, should the Company desire to seek input of shareholders on the Financing, we are prepared to grant a short extension on the maturity of our notes to accommodate a shareholder vote. To be clear, we are only willing to grant such extension if the Company agrees to our proposal, subject only to the shareholder vote.

As the Company has indicated, the completion of the second, confirmatory Phase 3 clinical trial of AGI-1067 is believed to be the major value driver for the Company. The Financing gives the Company and its other creditors and shareholders the opportunity to realize substantial value by completing this key clinical trial. Specifically, if the Company is able to successfully complete this trial, the holders of the Long Term Notes have a significant chance of having their notes paid in full upon maturity. Thus, assuming even a reasonable chance of success in this trial, the holders of the Long Term Notes, on a risk adjusted basis, are significantly better off if the Company pursues the Financing. Likewise, continuing the development of AGI-1067 to a positive outcome enables the Company's shareholders the only path to retain and realize value on their investment.

In contrast, we believe that the prospects for the Company and its stakeholders in a bankruptcy are poor. First and foremost, bankruptcy is an extremely expensive, time-consuming and disruptive process, as I am sure you have been advised. During this process, precious capital would be spent on activities not related to creating value for stakeholders. The ability to develop the Company's principal non-financial asset, AGI-1067, would be compromised by the disruption to the organization. Furthermore, this asset's value would depreciate as subjects refrain from participating in drug trials run by a bankrupt company, all the while time is lost to competitors in development. At the end of all of this, the Company's creditors may force the Company to liquidate through a sale of its assets and preclude the Company from developing AGI-1067 altogether. Finally, under any bankruptcy scenario, the Company's equity holders would most likely realize nothing-the expected result when a biotech company files bankruptcy. Pursuant to the Board of Directors' fiduciary duties, maximizing both enterprise value and shareholder value can only be accomplished by avoiding a costly bankruptcy.

With the availability of fresh capital, the Company is not in the zone of insolvency and will not be in the zone of insolvency unless the next trial AGI-1067 fails-an outcome that will not be known for another 18 months at least. Given management's stated optimism regarding AGI-1067, it does not seem prudent to operate the business as if it is in the zone of insolvency simply because there is some probability that the drug will fail. To do this would imply that all drug development companies with any debt financing are operating in the zone of insolvency.

If the Company chooses to forego this opportunity to pay its debts as they become due and obtain additional financing, but rather elects to default on the 08 Notes and accelerate other indebtedness that is not otherwise due, with the resultant litigation and ultimately bankruptcy, then we would have serious concerns about the motivation for such a decision by the Company's decision makers. In that instance, we would find it wholly appropriate for an examiner to be appointed in the Company's Chapter 11 case to investigate the underlying reasons and rationale for such a decision. Moreover, given the apparent disregard for the Company's well-being, it may also be appropriate for the Court to appoint a Chapter 11 trustee.

Again, we believe that all constituencies are best served if the Company, like all well-run companies, pays its debts when due and obtains additional financing to continue its operations. By making this offer-indeed, it is our third attempt to provide financing to the Company- we are unquestionably demonstrating that such financing is readily available, despite the Company's lack of efforts to seek it, at least as communicated to some of us. Moreover, some of us have attempted to meet with you in person at the locale of your choice to discuss the optimal path for maximizing the value for all stakeholders, not just ourselves, but have not had any success whatsoever in those endeavors. In light of the impending maturity of the 08 Notes, both parties must act as soon as possible. Accordingly, this offer will remain open until 7 p.m. eastern time on Monday, September 1, 2008.

Finally, we believe the Company's shareholders should be promptly apprised if the Company fails to reach agreement regarding the repayment of the 08 Notes and replacement financing and, therefore, falls into immediate, and perhaps unmanageable, financial distress. In that regard, if the Company and the 08 Noteholders do not reach a deal, then we intend to make a public statement before the markets open Tuesday morning to advise interested constituencies concerning the efforts by the 08 Noteholders to restructure the Company's obligations without the need for a bankruptcy filing and the Company's corresponding decision to forego that opportunity. We hope never to reach such a point.

We look forward to your prompt response.

Sincerely,

Executed as of August 31, 2008.