<PAGE>

                                                                     Exhibit 3.1

                  SECOND RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                               GENAERA CORPORATION

       FIRST: The name of the corporation (hereinafter called the "Corporation")
is Genaera Corporation.

       SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation at such address is The Corporation Trust Company.

       THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

       FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 84,211,031 shares, consisting of
9,211,031 shares of Convertible Preferred Stock, $.001 par value (the "Preferred
Stock"), and 75,000,000 shares of Common Stock, $.002 par value (the "Common
Stock").

       The Preferred Stock may be issued in any number of series designated by
the Board of Directors pursuant to Section A hereof.

       The designations, powers, preferences and relative, participating,
optional or other special rights, and the qualification, limitations and
restrictions thereof in respect of the Preferred Stock and the Common Stock are
as follows:

       PREFERRED STOCK

       Designation of Series of Preferred Stock. The Board of Directors is
hereby expressly authorized to provide for, designate and issue, out of the
authorized but unissued shares of Preferred Stock one or more series of
Preferred Stock. Before any shares of any such series are issued, the Board of
Directors shall fix, and hereby is expressly empowered to fix, by resolution or
resolutions, the following provisions of the shares of any such series:

       the designation of such series, the number of shares to constitute such
series and the stated value thereof if different from the par value thereof;

       whether the shares of such series shall have voting rights or powers, in
addition to any voting rights required by law, and, if so, the terms of such
voting rights or powers, which may be full or limited;

                                       1

<PAGE>

       the dividends, if any, payable on such series, whether any such dividends
shall be cumulative, and, if so, from what dates, the conditions and dates upon
which such dividends shall be payable, the preference or relation which such
dividends shall bear to the dividends payable on any shares of stock of any
other class or any other series of this class;

       the amount or amounts payable upon shares of such series upon, and the
rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding-up, or upon any distribution of the assets,
of the corporation;

       whether the shares of such series shall be subject to redemption by the
Corporation, and, if so, the times, prices and other conditions of such
redemption;

       whether the shares of such series shall be subject to the operation of a
retirement or sinking fund and, if so, the extent to and manner in which any
such retirement or sinking fund shall be applied to the purchase or redemption
of the shares of such series for retirement or other corporate purposes and the
terms and provisions relative to the operation thereof;

       whether the shares of such series shall be convertible into, or
exchangeable for, shares of stock of any other class or any other series of this
class or any other securities and, if so, the price or prices or the rate or
rates of conversion or exchange and the method, if any, of adjusting the same,
and any other terms and conditions of conversion or exchange;

       the limitations and restrictions, if any, to be effective while any
shares of such series are outstanding upon the payment of dividends or the
making of other distributions on, and upon the purchase, redemption or other
acquisition by the Corporation of, the Common Stock or stock of shares of any
other class or any other series of this class;

       the conditions or restrictions, if any, upon the creation of indebtedness
of the Corporation or upon the issue of any additional stock, including
additional shares of such series or of any other series of this class or of any
other class; and

       any other powers, designations, preferences and relative, participating,
optional or other special rights, and any qualifications, limitations or
restrictions thereof.

The powers, designations, preferences and relative, participating, optional or
other special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. The Board of Directors is hereby
expressly authorized from time to time to increase (but not above the total
number of authorized shares of Preferred Stock) or decrease (but not below the
number of shares thereof then outstanding) the number of shares of stock of any
series of Preferred Stock designated pursuant to this Section A(1).

       2. Designation of Series A Convertible Preferred Stock. 80,000 shares of
the Preferred Stock of the Corporation shall be designated as Series A
Convertible Preferred

                                       2

<PAGE>

Stock, $.001 par value (the "Series A Preferred Stock") and shall have the terms
set forth on Attachment A hereto.

       3. Designation of Series A Convertible Preferred Stock. 10,000 shares of
the Preferred Stock of the Corporation shall be designated as Series B
Convertible Preferred Stock, $.001 par value (the "Series B Preferred Stock")
and shall have the terms set forth on Attachment B hereto.

       COMMON STOCK

       Voting. Each holder of shares of Common Stock shall be entitled to one
vote for each share of Common Stock held of record on all matters as to which
holders of Common Stock shall be entitled to vote. In any election of directors,
no holder of Common Stock shall be entitled to accumulate the holder's votes by
giving one candidate more than one vote per share.

       Other Rights. Each share of Common Stock issued and outstanding shall be
identical in all respects to each other such share, and no dividends shall be
paid on any shares of Common Stock unless the same dividend is paid on all
shares of Common Stock outstanding at the time of such payment, provided,
however, that the per share amount, if any, of all dividends for the Common
Stock in any fiscal year of the Corporation shall not be greater than the per
share amount, if any, of all dividends declared for Preferred Stock during such
fiscal year (assuming for the calculation of the per share amounts for Preferred
Stock the conversion at the time of such calculation of all Preferred Stock into
Common Stock). Except for and subject to those rights expressly granted to the
holders of Preferred Stock, or except as may be provided by the laws of the
State of Delaware, the holders of Common Stock shall have exclusively all other
rights of stockholders including, but not by way of limitation, (i) the right to
receive dividends, when and as declared by the Board of Directors of the
Corporation, out of assets lawfully available therefor, and (ii) in the event of
any distribution of assets upon a liquidation or otherwise, the right to receive
ratably and equally, together with the holders of Preferred Stock, all the
assets and funds of the Corporation remaining after the payment to the holders
of the Preferred Stock of the specific amounts which they are entitled to
receive upon such liquidation as herein provided.

       FIFTH: The number of directors of the Corporation shall be such as from
time to time shall be fixed in the manner provided in the By-laws of the
Corporation. The election of directors of the Corporation need not be by ballot
unless the By-laws so require.

       SIXTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts of
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the

                                       3

<PAGE>

director derived any improper personal benefit. If the Delaware General
Corporation Law is amended after the date of incorporation of the Corporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.

       Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.

       SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, it is
further provided:

       In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware, the Board of Delaware, the Board of Directors is
expressly authorized and empowered:

       to make, alter, amend or repeal the By-laws in any manner not
inconsistent with the laws of the State of Delaware or this Certificate of
Incorporation;

       without the assent or vote of the stockholders, to authorize and issue
securities and obligations of the Corporation, secured or unsecured, and to
include therein such provisions as to redemption, conversion or other terms
thereof as the Board of Directors in its sole discretion may determine, and to
authorize the mortgaging or pledging, as security therefor, of any property of
the Corporation, real or personal, including after-acquired property;

       to determine whether any, and if any, what part, of the net profits of
the Corporation or of its surplus shall be declared in dividends and paid to the
stockholders, and to direct and determine the use and disposition of any such
net profits or such surplus; and

       to fix from time to time the amount of net profits of the Corporation or
of its surplus to be reserved as working capital or for any other lawful
purpose.

         In addition to the powers and authorities herein or by statute
         expressly conferred upon it, the Board of Directors may exercise all
         such powers and do all such acts and things as may be exercised or done
         by the Corporation, subject, nevertheless, to the provisions of the
         laws of the State of Delaware, of this Certificate of Incorporation and
         of the By-laws of the Corporation.

       Any director or any officer elected or appointed by the stockholders or
by the Board of Directors may be removed at any time in such manner as shall be
provided in the By-laws of the Corporation.

       From time to time any of the provisions of this Certificate of
Incorporation may be altered, amended or repealed, and other provisions
authorized by the laws of the State of

                                       4

<PAGE>

Delaware at the time in force may be added or inserted, in the manner and at the
time prescribed by said laws, and all rights at any time conferred upon the
stockholders of the corporation by this Certificate of Incorporation are granted
subject to the provisions of this paragraph (c).

       EIGHTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application or any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directors. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree on any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.

                                       5

<PAGE>

                                                                    ATTACHMENT A

                            SERIES A PREFERRED STOCK

                                       of

                               GENAERA CORPORATION

1.   Number and Designation. 80,000 shares of the Preferred Stock of the
Corporation shall be designated as Series A Convertible Preferred Stock, $.001
par value (the "Series A Preferred Stock").

2.   Rank. The Series A Preferred Stock shall, with respect to dividend rights
and rights on liquidation, dissolution and winding up, rank prior to all classes
or series of equity securities of the Corporation, including the Corporation's
common stock, $.002 par value ("Common Stock"). All equity securities of the
Corporation to which the Series A Preferred Stock ranks prior (whether with
respect to dividends or upon liquidation, dissolution, winding up or otherwise),
including the Common Stock, are collectively referred to herein as the "Junior
Securities." All equity securities of the Corporation with which the Series A
Preferred Stock ranks on a parity (whether with respect to dividends or upon
liquidation, dissolution or winding up) are collectively referred to herein as
the "Parity Securities." The respective definitions of Junior Securities and
Parity Securities shall also include any rights or options exercisable for or
convertible into any of the Junior Securities and Parity Securities, as the case
may be. The Series A Preferred Stock shall be subject to the creation of Junior
Securities but not subject to the creation of Parity Securities except as
provided in paragraph 6(b) hereof.

3.   Dividends.

     (a)   The holders of shares of Series A Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of funds
legally available for the payment of dividends, dividends at the Applicable Rate
from time to in effect. The "Applicable Rate" per annum for each Dividend Period
will be equal to 2% plus the highest prime rate of major banking institutions as
reported in the Federal Reserve H.15 weekly bulletin that is in effect for such
Dividend Period. Dividends shall be payable in arrears in equal amounts
quarterly on April 15, July 15, October 15 and January 15 of each year unless
such day is not a Business Day, in which event on the next succeeding Business
Day) (each of such dates being a "Dividend Payment Date" and each such quarterly
period being a "Dividend Period"). The term "Business Day" means a day other
than a Saturday, Sunday or day on which banking institutions in San Francisco
are authorized or required to remain closed. The amount of dividends per share
of Series A Preferred Stock for any Dividend Period shall be computed by
multiplying the Applicable Rate for such Dividend Period by the Liquidation
Preference and dividing the result by four. The amount of dividends payable for
the initial Dividend

                                      A-1


<PAGE>

Period, or any other period shorter or longer than a full Dividend Period, on
the Series A Preferred Stock shall be computed on the basis of the actual number
of days in such period compared to a 360-day year.

       (b) Dividends shall be cumulative from the date of issue, whether or not
in any Dividend Period or Periods there shall be funds of the Corporation
legally available for the payment of such dividends. Each such dividend shall be
payable to the holders of record of shares of the Series A Preferred Stock, as
they appear on the stock records of the Corporation at the close of business on
such record dates, not more than 60 days or less than 10 days preceding the
payment dates thereof, as shall be fixed by the Board of Directors. Accrued and
unpaid dividends for any past Dividend Periods may be declared and paid at any
time, without reference to any Dividend Payment Date, to holders of record on
such date, not more than 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors. Holders of shares of Series A Preferred Stock
shall be entitled to full cumulative dividends, as provided herein, and no
additional amounts. Except as set forth in paragraph 3(e) below, no interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on the Series A Preferred Stock that may be in arrears.

       (c) The Corporation, at its option, may pay dividends either in cash or
through the issuance of additional shares of Series A Preferred Stock
("Additional Shares"). Shares of Series A Preferred Stock issued in payment of
dividends shall be valued at all times at the Liquidation Preference. The number
of Additional Shares that are issued to the holders of Series A Preferred Stock
under this paragraph 3(b) will be the number obtained by dividing (i) the total
dollar amount of cumulative dividends due and payable on the applicable Dividend
Payment Date by (ii) the Liquidation Preference, provided that the Corporation
shall not be required to issue fractional shares of Series A Preferred Stock,
but in lieu thereof shall pay in cash the portion of any dividend payable in
shares of Series A Preferred Stock that would otherwise require the issuance of
a fractional share.

       (d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Parity Securities, for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series A Preferred Stock for all Dividend Periods
terminating on or prior to the date of payment of the dividend on such class or
series of parity stock, nor shall any Parity Securities be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such stock)
by the Corporation, directly or indirectly (except by conversion into or
exchange for Junior Securities or other Parity Securities), unless in each case
(i) the full cumulative dividends on all outstanding shares of the Series A
Preferred Stock shall have been paid or set apart for payment for all past
Dividend Periods with respect to the Series A Preferred Stock and (ii)
sufficient funds shall have been paid or set apart for the payment of the
dividend for the current Dividend Period with respect to the Series A Preferred
Stock. When dividends are not paid in full or a sum sufficient for such payment
is not set

                                      A-2


<PAGE>

apart, as aforesaid, all dividends declared upon shares of the Series A
Preferred Stock and all dividends declared upon any Parity Securities shall be
declared ratably in proportion to the respective amounts of dividends
accumulated and unpaid on the Series A Preferred Stock and accumulated and
unpaid on such Parity Securities.

       (e) The terms "accrued dividends" and "dividends in arrears" whenever
used herein with reference to shares of Series A Preferred Stock shall be deemed
to mean an amount which shall be equal to dividends thereon at the Applicable
Rate per share for the Series A Preferred Stock from the date or dates on which
such dividends commence to accrue to the end of the then current Dividend Period
(or, in the case of redemption, to the date of redemption), whether or not
earned or declared and whether or not assets for the Corporation are legally
available therefor, and if full dividends are not declared or paid (whether in
cash or Additional Securities), then such dividends shall cumulate, with
additional dividends thereon, compounded quarterly, at the Applicable Rate, for
each Dividend Period during which such dividends remain unpaid, less the amount
of all dividends paid, or declared in full and sums set aside for the payment
thereof, upon such shares of Series A Preferred Stock.

       (f) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in shares
of, or options, warrants or rights to subscribe for or purchase shares of,
Junior Securities) shall be declared or paid or set apart for payment or other
distribution declared or made upon Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (all such dividends,
distributions, redemptions or purchases being hereinafter referred to as a
"Junior Securities Distribution") for any consideration (or any moneys be paid
to or made available for a sinking fund for the redemption of any shares of any
such stock) by the Corporation, directly or indirectly (except by conversion
into or exchange for Junior Securities), unless in each case (i) the full
cumulative dividends on all outstanding shares of the Series A Preferred Stock
and any other Parity Securities shall have been paid or set apart for payment
for all past Dividend Periods with respect to the Series A Preferred Stock and
all past dividend periods with respect to such Parity Securities and (ii)
sufficient funds shall have been paid or set apart for the payment of the
dividend for the current Dividend Period with respect to the Series A Preferred
Stock and the current dividend period with respect to such Parity Securities.

       (g) The Corporation shall take any and all corporate action necessary to
declare and pay such dividends described in this paragraph 3.

4.     Liquidation Preference.

       (a) In the event of any liquidation, dissolution or winding up of the
Corporation, prior and in preference to any distribution of any of the assets or
funds of the Corporation to the holders of Junior Securities by reason of their
ownership of such stock, the holders of Series A Preferred Stock shall be
entitled to receive for each outstanding share of Series A Preferred Stock then
held by them an amount equal to $1000 (the "Liquidation Preference" ) plus
accrued and unpaid cumulative dividends on such share (as adjusted for any
recapitalizations, stock combinations, stock dividends,

                                      A-3

<PAGE>

stock splits and the like). If, upon the occurrence of a liquidation,
dissolution or winding up, the assets and funds of the Corporation legally
available for distribution to stockholders by reason of their ownership of stock
of the Corporation shall be insufficient to permit the payment of the full
aforementioned preferential amount on the Series A Preferred Stock and
liquidating payments on any Parity Securities, then the entire assets and funds
of the Corporation legally available for distribution to stockholders by reason
of their ownership of stock of the Corporation shall be distributed among the
holders of Series A Preferred Stock and holders of any other such Parity
Securities ratably in accordance with the respective amounts that would be
payable on such shares of Series A Preferred Stock and such Parity Securities if
the amounts payable thereon were paid in full.

       (b) Subject to the rights of the holders of any Parity Securities, after
payment shall have been made in full to the holders of the Series A Preferred
Stock, as provided in this paragraph 4, any other series or class or classes of
Junior Securities shall, subject to the respective terms and provisions (if any)
applying thereto, be entitled to receive any and all assets remaining to be paid
or distributed, and the holders of the Series A Preferred Stock shall not be
entitled to share therein.

5.     Conversion.

       (a) Conversion of Series A Preferred Stock. Each share of Preferred Stock
issued prior to May 10, 2005 will be convertible, at either the option of the
holder thereof or the option of the Corporation (subject to the limits on the
Corporation's right to convert in paragraph 5(d)), whichever first delivers a
notice of conversion pursuant to paragraph 5(c) or paragraph 5(d) as the case
may be, on one (1) date in the period beginning on May 10, 2005 and ending on
November 10, 2006 (the "First Conversion Period"). Each share of Preferred Stock
issued on or after May 10, 2005 will be convertible, at either the option of the
holder thereof or the option of the Corporation (subject to the limits on the
Corporation's right to convert in paragraph 5(d)), whichever first delivers a
notice of conversion pursuant to paragraph 5(c) or paragraph 5(d) as the case
may be, on one (1) date in the period beginning on December 31, 2008 and ending
on June 30, 2009 (the "Second Conversion Period"). Each share of Series A
Preferred Stock shall also be convertible, after November 10, 2000, at the
option of the holder thereof, at the earlier of (i) at any time following the
execution of a definitive agreement (and prior to the closing of such agreement)
providing for the merger or consolidation of the Corporation with or into any
other corporation or corporations or a sale of all or substantially all of the
assets of the Corporation (a "Merger Event") and (ii) at any time following the
first date upon which the number obtained by multiplying the sum of (A) the
number of issued and outstanding shares of Common Stock, (B) the number of
shares of Common Stock issuable upon exercise of vested options and exercisable
warrants and (C) the number of shares of Common Stock that would be issued upon
conversion of the outstanding Series A Preferred Stock (employing for the
purpose of calculating the number of shares of Common Stock to be issued upon
such conversion, in lieu of the Conversion Price, the closing price of the
Common Stock on the immediately preceding Trading Day), by the average closing
price of such Common Stock in the preceding ten (10) Trading Days is less than
500% of the aggregate Original Issue Price of the all then

                                      A-4

<PAGE>

outstanding shares of Series A Preferred Stock plus any accrued and unpaid
cumulative dividends thereon (a "Capitalization Event"). The Corporation will
give prompt notice to the holders of Series A Preferred Stock of the occurrence
of a Merger Event or a Capitalization Event. No further shares of Series A
Preferred Stock shall be issued and sold by the Corporation upon the occurrence
of a either a Merger Event or a Capitalization Event.

       (b) Determination of Number of Shares of Common Stock to be Issued Upon
Conversion. Each share of Series A Preferred shall be convertible into such
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing the Original Issue Price of such share of Series A Preferred Stock
by the Conversion Price at the time in effect for a share of Series A Preferred
Stock. The "Original Issue Price" per share of Series A Preferred Stock is
$1000. The "Conversion Price" per share of Series A Preferred Stock shall be the
average closing price of the Common Stock in the five (5) Trading Days preceding
the Conversion Date (defined below). "Trading Day", as used herein, shall mean a
day on which the Nasdaq National Market, or any other established exchange or
national system on which the Common Stock is listed, is open for trading.

       (c) Notice of Conversion by the Holders. In order to convert the Series A
Preferred Stock into Common Stock, the holder of the Series A Preferred Stock
shall deliver to the Corporation a notice of its election to make such
conversion at least ten (10) days prior to the intended date of conversion (the
"Conversion Date") setting forth (i) the Conversion Date, (ii) the number of
shares of Series A Preferred Stock to be converted on the Conversion Date, (iii)
the number of shares of Common Stock held by such holder and (iv) the names (and
addresses) in which the certificates for shares of Common Stock issuable upon
conversion shall be issued. The holder of Series A Preferred Stock that has
delivered a notice of conversion shall not sell its shares of Common Stock in
the market during the ten (10) days preceding the Conversion Date.

       (d) Limit on Corporation's Right to Convert and Notice of Conversion by
the Corporation. The Corporation's right to have the holders of the Series A
Preferred Stock convert their shares of Series A Preferred Stock pursuant to
Section 5(a) will be exercisable only if (i) the Corporation can convert all
outstanding shares of Series A Preferred Stock (subject to the limitation in
paragraph 5(e)) and (ii) as a result of such conversion (A) Genentech, Inc., a
Delaware corporation ("Genentech"), and its Affiliates would not become the
beneficial owner (as defined in Rule 13d-3 promulgated pursuant to the
Securities Exchange Act of 1934, as amended from time to time) ("Beneficial
Owner") of more than ten percent (10%) of the Common Stock that (but for this
paragraph 5) would be outstanding following any such conversion and (B)
Genentech, as the holder of the shares of Common Stock to be issued upon
conversion, would be not be required to make a filing pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 in advance of the
acquisition of such shares. The Corporation can exercise its right have the
holders of the Series A Preferred Stock convert their shares of Series A
Preferred Stock pursuant to Section 5(a) by mailing a notice of conversion to
each holder of record of shares of Series A Preferred Stock addressed to the
holder at the address of such holder appearing on the books of the Corporation
or given by the holder to the

                                      A-5

<PAGE>

Corporation for the purpose of notice, or, if no such address appears or is
given, then at the place where the principal executive office of the Corporation
is located, not later than ten (10) days before the Conversion Date. The notice
of conversion shall (i) include (A) the Conversion Date and (B) the place at
which the stockholders may exchange certificates representing their shares of
Series A Preferred Stock for certificates representing shares of Common Stock
issuable upon conversion and (ii) state that the certificates for shares of
Common Stock issuable upon conversion shall be issued in the name (and address)
of the holder, unless instructed otherwise by such holder. The holder of Series
A Preferred Stock that has had a notice of conversion delivered to it by the
Corporation shall not sell its shares of Common Stock in the market during the
ten (10) days preceding the Conversion Date

       (e) Limit on Common Stock Issued on Conversion. The aggregate number of
shares of Common Stock issued on conversion of shares of Series A Preferred
Shares pursuant to paragraphs 5(a) and 5(f) shall not exceed 5,388,595. To the
extent a conversion notice pursuant to paragraph 5(c) or paragraph 5(d) provides
for the conversion on the Conversion Date of shares of Series A Preferred Stock
such that the sum of the shares of Common Stock previously issued through
conversion of Series A Preferred Shares and the shares of Common Stock that
would be issued upon conversion of the number of Series A Preferred Shares
specified in the conversion notice would exceed 5,388,595, the conversion notice
shall be deemed to cover the maximum number of shares of Series A Preferred
Stock that the Corporation is entitled to convert on such Conversion Date.
Moreover, if an automatic conversion pursuant to paragraph 5(f) requires
issuance of a greater number of shares of Common Stock than are permitted under
this paragraph 5(e), such automatic conversion shall be deemed to cover the
maximum number of shares of Common Stock as are permitted under this paragraph
5(e). To the extent that, due to the restriction in this paragraph 5(e), holders
of Series A Preferred Stock are unable to convert their shares of Series A
Preferred Stock or the Corporation is unable to convert all outstanding shares
of Series A Preferred Stock or an automatic conversion under paragraph 5(f) does
not cover all the shares of Series A Preferred Stock transferred by Genentech,
the Corporation shall immediately (and in the case of an automatic conversion,
upon notice from Genentech or from the transferee of Genentech's shares of
Series A Preferred Stock) redeem such shares of Series A Preferred Stock at the
redemption price of $ 1000 per share in cash, together with accrued and unpaid
cumulative dividends thereon to the date of redemption.

       (f) Automatic Conversion. At any time during the First Conversion Period
or the Second Conversion Period, Genentech's shares of Series A Preferred Stock
shall, upon sale, gift, assignment, conveyance or other disposition to a Person
who is not an Affiliate of Genentech, automatically and without any further
action by the Corporation or its stockholders, convert, subject to the
limitation in paragraph 5(e), into such number of fully paid and non-assessable
shares of Common Stock as is determined by dividing the Original Issue Price of
such shares of Series A Preferred Stock by the Conversion Price at the time in
effect. The Corporation shall not be obligated to issue certificates evidencing
the shares of Common Stock issuable upon such upon such automatic conversion
unless certificates evidencing such shares of Series A Preferred Stock are
delivered to the Corporation or any transfer agent for such Series A Preferred

                                      A-6

<PAGE>

Stock. Such conversion shall be deemed to have been made on the date of transfer
to such third party holder and the Person(s) entitled to receive shares of
Common Stock (subject to the limitation in paragraph 5(e)) issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date.

       (g)   Partial Conversion. In the event that some but not all of the
Series A Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series A Preferred Stock that
were not converted.

       (h)   Adjustments for Stock Splits, Recombinations, etc.

             (i)   The Conversion Date shall be subject to adjustment from time
to  time as follows:

                   (A) In the event the Corporation should at any time or from
time to time after the date hereof fix a record date which is less than six (6)
Trading Days prior to a Conversion Date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter, the " Common Stock
Equivalents") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including the
additional shares of Common Stock issuable upon conversion or exercise thereof),
then such Conversion Date shall be extended to the date which is six (6) Trading
Days after such record date.

                   (B) In the event the Corporation should at any time or from
time to time after the date hereof fix a record date which is less than six (6)
Trading Days prior to a Conversion Date for a combination of the outstanding
shares of Common Stock, then such Conversion Date shall be extended to the date
which is six (6) Trading Days after such record date.

             (ii)  In the event that after the date hereof the Corporation shall
declare a dividend payable in securities of other persons, evidences of
indebtedness issued by this Corporation or other persons, assets (excluding cash
dividends), or options or rights not referred to in Section 5(h)(i), then, in
each such case each holder of Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though such holder were the
holder of the number of shares of Common Stock into which such holder's shares
of Series A Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock entitled to receive such
distribution. For purposes of the foregoing, the average closing price of the
Common Stock in the five (5) Trading Days preceding the record date shall be
utilized as the Conversion Price.

                                      A-7

<PAGE>

             (iii)  If at any time or from time to time after the date hereof
there shall be a recapitalization of the Common Stock (other than a subdivision
or combination provided for above in this Section 5 (h)), provision shall be
made so that each holder of Series A Preferred Stock shall thereafter be
entitled to receive upon any conversion of the Series A Preferred Stock under
this Section 5 the number of shares of stock or other securities or property of
the Corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion of Series A Preferred Stock pursuant to Section 5 would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 5 with
respect to the rights of the holders of Series A Preferred Stock after the
recapitalization to the end that the provision of this Section 5 (including the
adjustment in the number of shares of Common Stock issuable on conversion) shall
be applicable after that event as nearly equivalent as may be practicable.

       (i)   Mechanics of Conversion. On the Conversion Date, the holder shall
surrender the certificates representing the shares of Series A Preferred Stock
being converted, duly endorsed, to the Corporation at its principal office or at
the office of its transfer agent. As promptly as possible after the Conversion
Date, the Corporation shall issue and deliver to such holder, such certificates
as the holder may request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Series A Preferred Stock. No
fractional shares of Common Stock shall be issued upon conversion of Series A
Preferred Stock. In lieu of any fractional shares to which the holder would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the then effective Conversion Price of the Series A Preferred
Stock. Such conversion shall be deemed to have been effected immediately prior
to the close of business on the Conversion Date, and at such time the rights of
the holder of the converted shares of Series A Preferred Stock shall cease, and
the Persons in whose names any certificates of shares of Common Stock shall be
issuable shall be deemed to have become holders of record of the shares of
Common Stock represented thereby.

       (j)   Status of Converted Stock. In the event any shares of Series A
Preferred Stock shall be converted pursuant to this paragraph 5, the shares so
converted shall revert to the status of authorized shares of Preferred Stock
undesignated as to series or other terms.

       (k)   No Impairment. The Corporation will not, by amendment of this
Certificate of Designations or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
paragraph 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Preferred Stock against impairment.

       (l) Notices of Record Date. In the event that the Corporation shall
propose at any time:

                                      A-8

<PAGE>

             (i)   to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;

             (ii)  to offer for subscription pro rata to the holders of Common
Stock any additional shares of stock of any class or series or other rights;

             (iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or

             (iv)  to merge or consolidate with or into any other corporation,
or sell, lease or convey all or substantially all of its property or business,
or to liquidate, dissolve or wind up;

             then, in connection with any such event, the Corporation shall send
       to the holders of Series A Preferred Stock

                 (A)  in the case of the matters referred to in (i) and (ii)
above, at least ten (10) days prior written notice of the date on which a record
shall be taken for such dividend, distribution or subscription rights (and
specifying the date on which the holders of Common Stock shall be entitled
thereto); and

                 (B)  in the case of the matters referred to in (iii) and (iv)
above, at least ten (10) days prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).

Each such written notice shall be delivered personally or given by first class
mail, postage prepaid, addressed to the holders of the Series A Preferred Stock
at the address for each such holder as shown on the books and records of the
Corporation.

                                      A-9

<PAGE>

6.    Voting Rights.

      (a)   The holders of record of shares of Series A Preferred Stock shall
not be entitled to any voting rights except as hereinafter provided in this
paragraph 6 or as otherwise provided by law.

      (b)   Approval by Series A Preferred Stock. The Corporation shall not,
without first obtaining the approval of the holders of not less than a majority
of the total number of shares of the Series A Preferred Stock then outstanding
voting on an as-converted to Common Stock basis:

            (i)    amend or repeal any provision of, or add any provision to,
the Corporation's Certificate of Incorporation or Bylaws if such action would
materially and adversely affect the rights, preferences, privileges, or
restrictions of the Series A Preferred Stock;

            (ii)   authorize, create or issue shares of any class or series of
stock having any preference or priority superior to or on a parity with any such
preference or priority of the Series A Preferred Stock;

            (iii)  amend this paragraph 6(b).

7.    Redemption.

      (a)   Redemption by the Corporation. As and to the extent permitted by
law, the Corporation may redeem at its option shares of Series A Preferred
Stock, at any time in whole or from time to time in part, at a redemption price
of $ 1000 per share in cash, together with accrued and unpaid cumulative
dividends thereon to the date fixed for redemption, without interest.

      (b)   Notice of Redemption; Payment; Surrender of Certificates. In the
event of the redemption of shares of Series A Preferred Stock pursuant to
paragraph 7(a), the Corporation shall mail a notice of redemption to each holder
of record of shares of Series A Preferred Stock addressed to the holder at the
address of such holder appearing on the books of the Corporation or given by the
holder to the Corporation for the purpose of notice, or, if no such address
appears or is given, then at the place where the principal executive office of
the Corporation is located, not earlier than sixty (60) nor later than eight (8)
days before such payment is due, as set forth above. The notice of redemption
shall include (i) the date fixed for redemption, (ii) the place at which the
stockholders may obtain payment of the redemption price upon surrender of their
share certificates, (iii) the amount of the payment due, and (iv) the last date
prior to the date of redemption that the right of conversion may be exercised.
If funds are available on the date fixed for the redemption, then whether or not
the share certificates are surrendered for payment of the redemption price, the
shares shall no longer be outstanding and the holders thereof shall cease to be
stockholders of the Corporation with respect to the shares redeemed on and after
the date fixed for redemption and shall be entitled only to receive the
redemption price without interest upon surrender of the share certificate. If
less than all

                                      A-10

<PAGE>

the shares represented by one share certificate are to be redeemed, the
Corporation shall issue a new share certificate for the shares not redeemed.

8.     Waiver of Rights, Preferences or Privileges. Any right, preference or
privilege of the Series A Preferred Stock may be waived and the provisions of
this Attachment A may be amended by the holders of a majority of the outstanding
shares of Series A Preferred Stock and such waiver shall be binding on all
holders of Series A Preferred Stock.

9.     General Provisions.

       (a)   The term "Affiliate" as used herein shall have the meaning given it
in Rule 405 promulgated under the Securities Act of 1933, as amended from time
to time.

       (b)   The term "Person" as used herein means any corporation, limited
liability company, partnership, trust, organization, association, other entity
or individual.

       (c)   The term "outstanding", when used with reference to shares of
stock, shall mean issued shares, excluding shares held by the Corporation or a
subsidiary.

       (d)   The headings of the paragraphs, subparagraphs, clauses and
subclauses of this Attachment A are for convenience of reference only and shall
not define, limit or affect any of the provisions hereof.

                                      A-11

<PAGE>

                                                                    ATTACHMENT B

                            SERIES B PREFERRED STOCK

                                       of

                               GENAERA CORPORATION

       1.   Number and Designation. 10,000 shares of the Preferred Stock of the
Corporation shall be designated as Series B Convertible Preferred Stock, $.001
par value (the "Series B Preferred Stock").

       2.   Rank. The Series B Preferred Stock shall, with respect to dividend
rights and rights on liquidation, dissolution and winding up, rank prior to the
Corporation's common stock, $.002 par value ("Common Stock") and rank junior to
the Series A Preferred Stock. All equity securities of the Corporation to which
the Series B Preferred Stock ranks prior (whether with respect to dividends or
upon liquidation, dissolution, winding up or otherwise), including the Common
Stock, are collectively referred to herein as the "Junior Securities." All
equity securities of the Corporation with which the Series B Preferred Stock
ranks on a parity are collectively referred to as "Parity Securities" and all
equity securities of the Corporation to which the Series B Preferred Stock ranks
junior (whether with respect to dividends or upon liquidation, dissolution or
winding up) are collectively referred to herein as the "Senior Securities." The
respective definitions of Junior Securities and Senior Securities shall also
include any rights or options exercisable for or convertible into any of the
Junior Securities and Senior Securities, as the case may be. The Series B
Preferred Stock shall be subject to the creation of Junior Securities but not
subject to the creation of Senior Securities except as provided in paragraph
6(a) hereof.

       3.   Dividends.

            (a)   In the event that the Corporation declares a dividend with
       respect to or makes a distribution on the Common Stock, then the holders
       of the Series B Preferred Stock shall be entitled to participate with the
       holders of the Common Stock in any such dividends or distributions paid
       or set aside for payment, such that the holders of the Series B Preferred
       Stock shall receive, with respect to each share of Series B Preferred
       Stock held, an amount equal to (i) the dividend or distribution payable
       with respect to each share of Common Stock, multiplied by (ii) the number
       of shares of Common Stock into which such share of Series B Preferred
       Stock is convertible as of the record date for such dividend or
       distribution. The provision of this subsection 3(a) shall not apply to
       any dividends or distributions that would result in an adjustment of the
       Series B Conversion Price (as hereinafter defined) pursuant to Section
       5(g).

            (b)   For purposes of this Section 3, unless the context requires
       otherwise, "distribution" shall mean the transfer of cash or property
       without consideration, whether by way of dividend or otherwise, payable
       other than in Common Stock or

                                      B-1

<PAGE>

              other securities of the Corporation, or the purchase or redemption
              of shares of the Corporation (other than repurchases of Common
              Stock held by employees of, or consultants to, the Corporation
              upon termination of their employment or services pursuant to
              agreements providing for such repurchase or other than redemptions
              in liquidation or dissolution of the Corporation) for cash or
              property, including any such transfer, purchase, or redemption by
              a subsidiary of the Corporation.

              4.   Liquidation Preference.

                   (a)   In the event of any liquidation, dissolution or winding
              up of the Corporation, prior and in preference to any distribution
              of any of the assets or funds of the Corporation to the holders of
              Series B Preferred Stock and any Junior Securities by reason of
              their ownership of such stock, the holders of Series A Preferred
              Stock shall be entitled to receive for each outstanding share of
              Series A Preferred Stock then held by them an amount equal to
              $1,000.00 (the "Series A Liquidation Preference") plus accrued and
              unpaid cumulative dividends on such share (as adjusted for any
              recapitalizations, stock combinations, stock dividends, stock
              splits and the like). Following the payment of the Series A
              Liquidation Preference, and prior and in preference to any
              distribution of any of the assets or funds of the Corporation to
              the holders of Junior Securities by reason of their ownership of
              such stock, the holders of Series B Preferred Stock shall be
              entitled to receive for each outstanding share of Series B
              Preferred Stock then held by them in an amount equal to $1,000.00
              (the "Series B Liquidation Preference") plus any declared but
              unpaid dividends on such shares (as adjusted for any
              recapitalizations, stock combinations, stock dividends, stock
              splits and the like). If, upon the occurrence of a liquidation,
              dissolution or winding up, the assets and funds of the Corporation
              legally available for distribution to stockholders by reason of
              their ownership of stock of the Corporation shall be insufficient
              to permit the payment of the full aforementioned preferential
              amount on the Series B Preferred Stock, then the entire assets and
              funds of the Corporation legally available for distribution to
              stockholders by reason of their ownership of stock of the
              Corporation shall be distributed among the holders of Series B
              Preferred Stock and holders of any other such Parity Securities
              ratably in accordance with the respective amounts that would be
              payable on such shares of Series B Preferred Stock and such Senior
              Securities if the amounts payable thereon were paid in full.

                   (b)   Subject to the prior rights of the holders of any
              Senior Securities, after payment shall have been made in full to
              the holders of the Series B Preferred Stock, as provided in this
              Section 4, any other series or class or classes of Junior
              Securities shall, subject to the respective terms and provisions
              (if any) applying thereto, be entitled to receive any and all
              assets remaining to be paid or distributed, and the holders of the
              Series B Preferred Stock shall not be entitled to share therein.

              5.   Conversion.

                   (a)   Conversion of Series B Preferred Stock.

                                      B-2

<PAGE>

                  (i)   Each share of Series B Preferred Stock shall be
            convertible prior to April 19, 2006 at the option of the holder.
            Beginning on April 19, 2006, each share of Series B Preferred Stock
            will be convertible, at either the option of the holder thereof or
            the option of the Corporation, subject to the limitation set forth
            in paragraph 5(a)(ii), whichever first delivers a notice of
            conversion pursuant to paragraph 5(c) or paragraph 5(d) as the case
            may be.

                  (ii)  The Corporation may not provide notice of its intention
            to convert any shares of Series B Preferred Stock if the closing bid
            price of the Common Stock as quoted on the Nasdaq National Market,
            or any other established exchange or national system on which the
            Common Stock is listed, for the day prior to the date of such
            proposed notice is less than the Closing Common Stock Price. The
            "Closing Common Stock Price" shall be the average closing bid price
            of the Common Stock as quoted on the Nasdaq National Market, or any
            other established exchange or national system on which the Common
            Stock is listed, over the 20 Trading Days prior to the Closing Date
            as such term is defined in the Preferred Stock Purchase Agreement
            dated April 19, 2001 (the "Purchase Agreement") by and between the
            Corporation and MedImmune, Inc. ("MedImmune").

                  (iii) If there shall be (A) any merger or consolidation of the
            Corporation with or into any other corporation or corporations in
            which the Corporation is not the continuing or surviving corporation
            or pursuant to which the Common Stock would be converted into cash,
            securities and/or other rights or assets, or (B) any sale or
            conveyance of all or substantially all of the assets of the
            Corporation, (collectively, a "Merger Event"), then immediately
            prior to the consummation of such Merger Event, each share of Series
            B Preferred Stock shall be automatically converted without any
            action to be taken by the Corporation or a holder.

            (b)   Determination of Number of Shares of Common Stock to be Issued
       Upon Conversion.

                  (i)   If converted by a holder of Series B Preferred Stock
            prior to April 19, 2006, each share of Series B Preferred Stock
            shall be convertible into two hundred (200) fully paid and
            non-assessable shares of Common Stock, subject to adjustment as
            provided in Section 5(g)(i) hereof.

                  (ii) If converted by a holder of Series B Preferred Stock or
            the Corporation on or subsequent to April 19, 2006, or if
            automatically converted at any time as a result of a Merger Event,
            each share of Series B Preferred Stock shall be convertible into
            such number of fully paid and non-assessable shares of Common Stock
            as is determined by dividing the Series B Original Issue Price of
            such share of Series B Preferred Stock by the Series B Conversion
            Price at the time in effect for a share of Series B

                                      B-3

<PAGE>

                     Preferred Stock. The "Series B Original Issue Price" per
                     share of Series B Preferred Stock is $1,000.00. The "Series
                     B Conversion Price" per share of Series B Preferred Stock
                     shall be the lesser of (A) $5.00 and (B) the average
                     closing bid price of the Common Stock as quoted on the
                     Nasdaq National Market, or any other established exchange
                     or national system on which the Common Stock is listed, in
                     the twenty (20) Trading Days preceding the Conversion Date
                     (defined below) or, if automatically converted upon a
                     Merger Event, the twenty (20) Trading Days preceding the
                     closing of the Merger Event; provided that in no event
                     shall the Series B Conversion Price per share of Series B
                     Preferred Stock be less than the Closing Common Stock
                     Price. "Trading Day," as used herein, shall mean a day on
                     which the Nasdaq National Market, or any other established
                     exchange or national system on which the Common Stock is
                     listed, is open for trading.

                     (c)   Notice of Conversion by the Holders. In order to
              convert the Series B Preferred Stock into Common Stock, the holder
              of the Series B Preferred Stock shall deliver to the Corporation a
              notice of its election to make such conversion at least five (5)
              business days prior to the intended date of conversion (the
              "Conversion Date") setting forth (i) the Conversion Date, (ii) the
              number of shares of Series B Preferred Stock to be converted on
              the Conversion Date, (iii) the number of shares of Common Stock
              held by such holder and (iv) the names (and addresses) in which
              the certificates for shares of Common Stock issuable upon
              conversion shall be issued. With respect to any conversion by a
              holder of Series B Preferred Stock on or subsequent to April 19,
              2006, such holder shall not sell in the market any shares of
              Common Stock held by it during the twenty (20) days preceding the
              Series B Conversion Date.

                     (d)   Notice of Conversion by the Corporation. The
              Corporation can exercise its right to have the holders of the
              Series B Preferred Stock convert their shares of Series B
              Preferred Stock pursuant to Section 5(a) by mailing a notice of
              conversion to each holder of record of shares of Series B
              Preferred Stock addressed to the holder at the address of such
              holder appearing on the books of the Corporation or given by the
              holder to the Corporation for the purpose of notice, or, if no
              such address appears or is given, then at the place where the
              principal executive office of the Corporation is located, not
              later than twenty (20) days before the Conversion Date. The notice
              of conversion shall (i) include (A) the Conversion Date and (B)
              the place at which the stockholders may exchange certificates
              representing their shares of Series B Preferred Stock for
              certificates representing shares of Common Stock issuable upon
              conversion and (ii) state that the certificates for shares of
              Common Stock issuable upon conversion shall be issued in the name
              (and address) of the holder, unless instructed otherwise by such
              holder. The holder of Series B Preferred Stock that has had a
              notice of conversion delivered to it by the Corporation shall not
              sell its shares of Common Stock in the market during the twenty
              (20) days preceding the Conversion Date

                                      B-4

<PAGE>

                    (e)   Limit on Common Stock Issued on Conversion. The
              aggregate number of shares of Common Stock issued on conversion of
              shares of Series B Preferred Stock pursuant to paragraph 5(b)(i)
              shall be 2,000,000 (the "First Maximum Conversion Amount"). The
              aggregate number of shares of Common Stock issued on conversion of
              shares of Series B Preferred Stock pursuant to paragraph 5(b)(ii)
              shall not exceed the lesser of 6,508,777 shares and the quotient
              of $10,000,000 divided by the Closing Common Stock Price (the
              "Second Maximum Conversion Amount"). In the event that a
              conversion notice pursuant to paragraph 5(c) or paragraph 5(d)
              provides for the conversion on the Conversion Date of shares of
              Series B Preferred Stock such that the sum of the shares of Common
              Stock previously issued through conversion of Series B Preferred
              Shares and the shares of Common Stock that would be issued upon
              conversion of the number of Series B Preferred Shares specified in
              the conversion notice would exceed the Second Maximum Conversion
              Amount, the number of Series B Preferred Shares specified in the
              conversion notice shall be deemed to be converted for the number
              of Conversion Shares that is the difference between the Second
              Maximum Conversion Amount and the number of Conversion Shares
              previously issued through conversion of Series B Preferred Stock.
              In the event that some but not all of the Series B Preferred Stock
              are specified in a conversion notice seeking conversion pursuant
              to paragraph 5(b)(ii), the number of shares of Common Stock issued
              in such partial conversion shall not exceed the product of the
              Second Maximum Conversion Amount multiplied by the quotient of the
              number of shares of Series B Preferred Stock specified in the
              conversion notice divided by 10,000.

                    (f)   Partial Conversion. In the event that some but not all
              of the Series B Preferred Stock represented by a certificate or
              certificates surrendered by a holder are converted, the
              Corporation shall execute and deliver to or on the order of the
              holder, at the expense of the Corporation, a new certificate
              representing the number of shares of Series B Preferred Stock that
              were not converted.

                    (g)   Adjustments for Stock Splits, Recombinations, etc.

                          (i)   If the Corporation shall at any time or from
                    time to time effect a subdivision of the outstanding Common
                    Stock, or shall issue a dividend of Common Stock on its
                    outstanding Common Stock, the number of shares of Common
                    Stock into which the Series B Preferred Stock is
                    convertible pursuant to Section 5(b)(i) then in effect
                    immediately before that subdivision or dividend shall be
                    proportionately increased and conversely, if the
                    Corporation shall combine the outstanding shares of Common
                    Stock, the number of shares of Common Stock into which the
                    Series B Preferred Stock is convertible pursuant to Section
                    5(b)(i) then in effect immediately before the combination
                    shall be proportionately decreased. Any adjustment under
                    this subsection 5(g)(i) shall become effective at the close
                    of business on the date the subdivision or combination
                    becomes effective or on the date which the dividend is
                    declared.

                                      B-5

<PAGE>

                     (ii)   If converted by a holder of Series B Preferred Stock
              or the Corporation on or subsequent to April 19, 2006, the
              Conversion Date shall be subject to adjustment from time to time
              as follows:

                            (A) In the event the Corporation should at any time
                     or from time to time after the date hereof fix a record
                     date that is less than twenty (20) Trading Days prior to a
                     Conversion Date for the effectuation of a split or
                     subdivision of the outstanding shares of Common Stock or
                     the determination of holders of Common Stock entitled to
                     receive a dividend or other distribution payable in
                     additional shares of Common Stock or other securities or
                     rights convertible into, or entitling the holder thereof to
                     receive directly or indirectly, additional shares of Common
                     Stock (hereinafter, the "Common Stock Equivalents") without
                     payment of any consideration by such holder for the
                     additional shares of Common Stock or the Common Stock
                     Equivalents (including the additional shares of Common
                     Stock issuable upon conversion or exercise thereof), then
                     such Conversion Date shall be extended to the date which is
                     twenty (20) Trading Days after such record date.

                            (B) In the event the Corporation should at any time
                     or from time to time after the date hereof fix a record
                     date which is less than twenty (20) Trading Days prior to a
                     Conversion Date for a combination of the outstanding shares
                     of Common Stock, then such Conversion Date shall be
                     extended to the date which is twenty (20) Trading Days
                     after such record date.

                     (iii)  If the Corporation shall at any time or from time to
              time effect a subdivision of the outstanding Common Stock, or
              shall issue a dividend of Common Stock on its outstanding Common
              Stock, the $5.00 maximum Series B Conversion Price set forth in
              paragraph 5(b)(ii) shall be proportionately decreased and
              conversely, if the Corporation shall combine the outstanding
              shares of Common Stock, the $5.00 maximum Series B Conversion
              Price set forth in paragraph 5(b)(ii) and the $5.00 shall be
              proportionately increased. Any adjustment under this subsection
              5(g)(iii) shall become effective at the close of business on the
              date the subdivision or combination becomes effective or on the
              date which the dividend is declared.

                     (iv)   If the Corporation shall at any time or from time to
              time effect a subdivision of the outstanding Common Stock, or
              shall issue a dividend of Common Stock on its outstanding Common
              Stock, the First Maximum Conversion Amount and Second Maximum
              Conversion Amount set forth in paragraph 5(e) shall be
              proportionately decreased and, conversely, if the Corporation
              shall combine the outstanding shares of Common Stock, the First
              Maximum Conversion Amount and Second Maximum Conversion Amount set
              forth in paragraph 5(e) shall be

                                      B-6

<PAGE>

              proportionately increased. Any adjustment under this subsection
              5(g)(iv) shall become effective at the close of business on the
              date the subdivision or combination becomes effective or on the
              date which the dividend is declared.

                     (v)  In the event that after the date hereof the
              Corporation shall declare a dividend payable in securities of
              other persons, evidences of indebtedness issued by this
              Corporation or other persons, assets (excluding cash dividends),
              or options or rights not referred to in paragraphs 5(g)(i) through
              5(g)(iii), then, in each such case each holder of Series B
              Preferred Stock shall be entitled to a proportionate share of any
              such distribution as though such holder were the holder of the
              number of shares of Common Stock into which such holder's shares
              of Series B Preferred Stock are convertible as of the record date
              fixed for the determination of the holders of Common Stock
              entitled to receive such distribution. For purposes of the
              foregoing, the average closing price of the Common Stock in the
              five (5) Trading Days preceding the record date shall be utilized
              as the Series B Conversion Price.

                     (vi) If at any time or from time to time after the date
              hereof there shall be a recapitalization of the Common Stock
              (other than a subdivision or combination provided for above in
              this Section 5 (g)), provision shall be made so that each holder
              of Series B Preferred Stock shall thereafter be entitled to
              receive upon any conversion of the Series B Preferred Stock under
              this Section 5 the number of shares of stock or other securities
              or property of the Corporation or otherwise, to which a holder of
              Common Stock deliverable upon conversion of Series B Preferred
              Stock pursuant to this Section 5 would have been entitled on such
              recapitalization. In any such case, appropriate adjustment shall
              be made in the application of the provisions of this Section 5
              with respect to the rights of the holders of Series B Preferred
              Stock after the recapitalization to the end that the provision of
              this Section 5 (including the adjustment in the number of shares
              of Common Stock issuable on conversion) shall be applicable after
              that event as nearly equivalent as may be practicable.

              (h)    Mechanics of Conversion. On the Conversion Date, the holder
       shall surrender the certificates representing the shares of Series B
       Preferred Stock being converted, duly endorsed, to the Corporation at its
       principal office or at the office of its transfer agent. As promptly as
       possible after the Conversion Date, the Corporation shall issue and
       deliver to such holder, such certificates as the holder may request for
       the number of whole shares of Common Stock issuable upon the conversion
       of such shares of Series B Preferred Stock. No fractional shares of
       Common Stock shall be issued upon conversion of Series B Preferred Stock.
       In lieu of any fractional shares to which the holder would otherwise be
       entitled, the Corporation shall pay cash equal to such fraction
       multiplied by the then effective Series B Conversion Price of the Series
       B Preferred Stock. Such conversion shall be deemed to have been effected
       immediately prior to the close of business on the

                                   B-7

<PAGE>

              Conversion Date, and at such time the rights of the holder of the
              converted shares of Series B Preferred Stock shall cease, and the
              Persons in whose names any certificates of shares of Common Stock
              shall be issuable shall be deemed to have become holders of record
              of the shares of Common Stock represented thereby.

                     (i)   Status of Converted Stock. In the event any shares of
              Series B Preferred Stock shall be converted pursuant to this
              Section 5, the shares so converted shall revert to the status of
              authorized shares of Preferred Stock undesignated as to series or
              other terms.

                     (j)   No Impairment. The Corporation will not, by amendment
              of this Certificate of Designations or through any reorganization,
              transfer of assets, consolidation, merger, dissolution, issue or
              sale of securities or any other voluntary action, avoid or seek to
              avoid the observance or performance of any of the terms to be
              observed or performed hereunder by the Corporation, but will at
              all times in good faith assist in the carrying out of all the
              provisions of this Section 5 and in the taking of all such action
              as may be necessary or appropriate in order to protect the
              conversion rights of the holders of the Series B Preferred Stock
              against impairment.

                     (k)   Notices of Record Date. In the event that the
              Corporation shall propose at any time:

                           (i)    to declare any dividend or distribution upon
                     its Common Stock, whether in cash, property, stock or other
                     securities, whether or not a regular cash dividend and
                     whether or not out of earnings or earned surplus;

                           (ii)   to offer for subscription pro rata to the
                     holders of Common Stock any additional shares of stock of
                     any class or series or other rights;

                           (iii)  to effect any reclassification or
                     recapitalization of its Common Stock outstanding involving
                     a change in the Common Stock; or

                           (iv)   to merge or consolidate with or into any other
                     corporation, or sell, lease or convey all or substantially
                     all of its property or business, or to liquidate, dissolve
                     or wind up;

                     then, in connection with any such event, the Corporation
              shall send to the holders of Series B Preferred Stock:

                                  (A)  in the case of the matters referred to in
                            (i) and (ii) above, at least ten (10) days prior
                            written notice of the date on which a record shall
                            be taken for such dividend, distribution or
                            subscription rights (and specifying the date on
                            which the holders of Common Stock shall be entitled
                            thereto); and

                                      B-8

<PAGE>

                                (B)  in the case of the matters referred to in
                          (iii) and (iv) above, at least ten (10) days prior
                          written notice of the date when the same shall take
                          place (and specifying the date on which the holders
                          of Common Stock shall be entitled to exchange their
                          Common Stock for securities or other property
                          deliverable upon the occurrence of such event).

                                Each such written notice shall be delivered
                          personally or given by first class mail, postage
                          prepaid, addressed to the holders of the Series B
                          Preferred Stock at the address for each such holder
                          as shown on the books and records of the
                          Corporation.

              6.     Voting Rights. The holders of record of shares of Series B
       Preferred Stock shall not be entitled to any voting rights except as
       hereinafter provided in this Section 6 or as otherwise provided under
       Sections 242 and 245 of the DGCL.

                     (a)  Approval by Series B Preferred Stock. The Corporation
              shall not, without first obtaining the approval of the holders of
              not less than a majority of the total number of shares of the
              Series B Preferred Stock then outstanding voting on an
              as-converted to Common Stock basis:

                          (i)   amend or repeal any provision of, or add any
                     provision to, the Corporation's Certificate of
                     Incorporation or Bylaws if such action would materially and
                     adversely affect the rights, preferences, privileges, or
                     restrictions of the Series B Preferred Stock;

                          (ii)  authorize, create or issue shares of any class
                     or series of stock having any preference or priority
                     superior to or on a parity with any such preference or
                     priority of the Series B Preferred Stock;

                          (iii) amend this paragraph 6(a).

              7.    Redemption.

                    (a)   Redemption by the Corporation. As and to the extent
              permitted by law, the Corporation may redeem at its option shares
              of Series B Preferred Stock, at any time in whole or from time to
              time in part, at a redemption price of $1,000.00 per share in
              cash, together with declared and unpaid dividends thereon to the
              date fixed for redemption, without interest.

                    (b)   Notice of Redemption; Payment; Surrender of
              Certificates. In the event of the redemption of shares of Series B
              Preferred Stock pursuant to paragraph 7(a), the Corporation shall
              mail a notice of redemption to each holder of record of shares of
              Series B Preferred Stock addressed to the holder at the address of
              such holder appearing on the books of the Corporation or given by
              the holder to the Corporation for the purpose of notice, or, if no
              such address appears or is given, then at the place where the
              principal executive office of the Corporation is located, not
              earlier than sixty (60) nor later than eight (8) days

                                      B-9

<PAGE>

              before such payment is due, as set forth above. The notice of
              redemption shall include (i) the date fixed for redemption, (ii)
              the place at which the stockholders may obtain payment of the
              redemption price upon surrender of their share certificates, (iii)
              the amount of the payment due, and (iv) the last date prior to the
              date of redemption that the right of conversion may be exercised.
              If funds are available on the date fixed for the redemption, then
              whether or not the share certificates are surrendered for payment
              of the redemption price, the shares shall no longer be outstanding
              and the holders thereof shall cease to be stockholders of the
              Corporation with respect to the shares redeemed on and after the
              date fixed for redemption and shall be entitled only to receive
              the redemption price without interest upon surrender of the share
              certificate. If less than all the shares represented by one share
              certificate are to be redeemed, the Corporation shall issue a new
              share certificate for the shares not redeemed.

              8.   Waiver of Rights, Preferences or Privileges. Any right,
       preference or privilege of the Series B Preferred Stock may be waived and
       the provisions of this Attachment B may be amended by the holders of a
       majority of the outstanding shares of Series B Preferred Stock and such
       waiver shall be binding on all holders of Series B Preferred Stock.

              9.   General Provisions.

                   (a)   The term "Affiliate" as used herein shall have the
              meaning given it in Rule 405 promulgated under the Securities Act
              of 1933, as amended from time to time.

                   (b)   The term "Person" as used herein means any corporation,
              limited liability company, partnership, trust, organization,
              association, other entity or individual.

                   (c)   The term "outstanding", when used with reference to
              shares of stock, shall mean issued shares, excluding shares held
              by the Corporation or a subsidiary.

                   (d)   The headings of the sections, paragraphs,
              subparagraphs, clauses and subclauses of this Attachment B are for
              convenience of reference only and shall not define, limit or
              affect any of the provisions hereof.

                                      B-10