"We believe that the new AtheroGenics' Board continues to provide the expertise and experience to guide our Company going forward and to maximize value for all of our varied stakeholders," said Michael A. Henos, Chairman of the AtheroGenics Board of Directors.

In connection with the Board restructuring, David Bearman, T. Forcht Dagi, M.D., Arthur M. Pappas and William A. Scott, Ph.D., resigned from the Board of Directors. Mr. Henos commented, "We want to thank the departing Board members for their hard work and contributions to the Company."

About AtheroGenics

AtheroGenics is focused on the discovery, development and commercialization of novel drugs for the treatment of chronic inflammatory diseases, including diabetes and coronary heart disease (atherosclerosis). The Company's lead antioxidant and anti-inflammatory drug candidate, AGI-1067, is being studied for the treatment of diabetes and has completed a Phase 3 clinical trial known as ANDES (AGI-1067 as a Novel Anti-Diabetic Agent Evaluation Study). In addition, the Company has other clinical and preclinical anti-inflammatory compounds, including AGI-1096, an oral agent for the prevention of organ transplant rejection. For more information about AtheroGenics, please visit http://www.atherogenics.com.

SOURCE: AtheroGenics, Inc.

The company said it would miss scheduled interest payments on the 2008 notes and on 4.5 percent convertible notes due in 2011. AtheroGenics said it tried to restructure its 2008 notes before they matured, but it failed to agree on acceptable terms with note holders.

The drug is in late-stage testing, and the company currently has no products on the market.

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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).

August 31, 2008
The Board of Directors
c/o Mr. Mark P. Colonnese
Executive Vice President, Commercial Operations and Chief Financial
Officer
AtheroGenics, Inc.
8005 Westside Parkway
Alpharetta, GA 30004

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 1/2 % 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,

CNH Partners, LLC
By:                                   /s/ Todd Pulvino
                                      Name: Todd Pulvino, Principal
Tamalpais Asset Management LP
By:                                   /s/ Paul Giordano
                                      Name: Paul Giordano, CEO
Tang Capital Partners, LP
By its General Partner, Tang Capital Management, LLC
By:                                   /s/ Kevin C. Tang
                                      Name: Kevin C. Tang
                                      Title: Managing Director
Zazove Associates, LLC
By:                                   /s/ Chris Cook
                                      Name: Chris Cook, Portfolio Manager
Cc:                                   Dr. Russell M. Medford, President and Chief Executive Officer
                                      Mr. Simon Morgan, Morgan Stanley
                                      Mr. James Pardo, King & Spalding

Proposed Senior Secured Convertible Debenture Rights Offering
The purpose of this term sheet is to set forth the indicative
terms pursuant to which the undersigned holders of approximately
96% of the 4 1/2% Convertible Notes due September 1, 2008 would
purchase certain securities of AtheroGenics, Inc. (the "Company")
in a rights offering. The issuance and sale of such securities
(the "Financing") is
subject to the preparation of definitive documentation to effect
the Financing that is mutually satisfactory to all parties.
Issuer:                                       AtheroGenics, Inc.
Issue:                                        $39.355 million of Senior Secured Convertible Debentures (the "Debentures").
Investors:                                    The Debentures would be offered pro-rata to all holders of the
                                              Company's existing notes due 2008, 2011 and 2012. To the extent that
                                              any such holder does not purchase its pro-rata share of the
                                              Debentures, the undersigned holders would unconditionally agree to
                                              purchase such unsubscribed-for amount on a pro-rata basis.
Seniority:                                    The Debentures will be senior to all existing and future
                                              indebtedness and equity of the Company.
Security:                                     The Company's obligations under the Debentures shall be secured by a
                                              first priority, perfected security interest in all of the assets of
                                              the Company.
Conversion Price:                             The Debentures shall be immediately convertible into the common
                                              stock of the Company ("Common
                                              Stock") at any time in whole or part at the election of the
                                              holder at a conversion price equal to the market price of the
                                              Common Stock on the date of the Financing, subject to standard
                                              adjustments to be set forth in the definitive Financing documents.
Interest:                                     The Debentures shall bear interest at a 4.5% annual rate, payable
                                              quarterly or upon conversion or redemption. Interest may be paid in
                                              cash or, at the option of the Company, in freely-tradable shares of
                                              Common Stock. If interest is paid in Common Stock, the Common Stock
                                              will be valued at 90% of the market value (defined as the
                                              volume-weighted average price of the Common Stock on the trading day
                                              immediately preceding the interest payment date).
Maturity; Default:                            The Debentures shall mature five years from the closing of the
                                              Financing (the "Closing").
                                              The Debentures shall contain standard default provisions.
Interest Make-Whole:                          In connection with any conversion of the Debentures, the Company
                                              shall make a cash payment equal to the remaining interest otherwise
                                              due on the Debentures through the remainder of the five year term.
                                              The Company shall deposit $8.855 million out of the purchase price
                                              for the Debentures into an escrow account to secure payment of the
                                              make-whole amounts. Such funds shall be released to the Company when
                                              they are no longer needed to secure payment of the make-whole
                                              amounts.
No Prepayment:                                The outstanding amounts under the Debentures may not be prepaid in
                                              whole or in part at any time.
Conditions:                                   The Financing shall be subject to a condition that the $30.5 million
                                              4 1/2% Convertible Notes due September 1, 2008 are paid in full upon
                                              maturity. The undersigned will place the proceeds of the note
                                              repayment in escrow to be applied to the rights offering.
Expiration:                                   This term sheet will expire on September 1, 2008, at 7:00 p.m. EDT.

Executed as of August 31, 2008.

CNH Partners, LLC
By:                                   /s/ Todd Pulvino
                                      Name: Todd Pulvino, Principal
Tamalpais Asset Management LP
By:                                   /s/ Paul Giordano
                                      Name: Paul Giordano, CEO
Tang Capital Partners, LP
By its General Partner, Tang Capital Management, LLC
By:                                   /s/ Kevin C. Tang
                                      Name: Kevin C. Tang
                                      Title: Managing Director
Zazove Associates, LLC
By:                                   /s/ Chris Cook
                                      Name: Chris Cook, Portfolio Manager
Agreed to and accepted as of the date hereof:
AtheroGenics, Inc.
By:
                                      Name:
                                      Title:

SOURCE: 08 Noteholders

CNH Partners LLC 
Todd Pulvino, 203-742-3002 
or 
Tamalpais Asset Management LP 
Paul Giordano, 415-289-3600 
or 
Tang Capital Partners, LP 
Kevin C. Tang, 858-200-3830 
or 
Zazove Associates, LLC 
Steven M. Kleiman, 847-239-7100