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                                                                     EXHIBIT 3.1

             THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                               GENAERA CORPORATION

         Genaera Corporation, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:

         1. The present name of the Corporation is Genaera Corporation and the
original name of the Corporation was Molecular Antibiotics, Inc. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on June 29, 1987.

         2. This Third Amended and Restated Certificate of Incorporation
restates and integrates and further amends the Second Restated Certificate of
Incorporation filed with the Secretary of State of the State of Delaware on May
20, 2002 and all subsequent amendments thereto by changing the beginning date of
the First Conversion Period to June 30, 2003 for the Series A Preferred Stock.

         3. This Third Amended and Restated Certificate of Incorporation was
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware.

         4. The text of the Corporation's Certificate of Incorporation is hereby
amended and restated and is set forth in its entirety in the form attached as
Exhibit I.

         5. This Third Amended and Restated Certificate of Incorporation shall
become effective immediately upon its filing with the Office of the Secretary of
State of the State of Delaware.

         IN WITNESS WHEREOF, the Corporation has caused this Amended and
Restated Certificate to be executed and attested by the undersigned this 30th
day of June, 2003.

                                      GENAERA CORPORATION


                                      By: /s/ Roy C. Levitt, M.D.
                                          -----------------------
                                          Roy C. Levitt, M.D.
                                          President and Chief Executive Officer

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                                                                       EXHIBIT I

             THIRD AMENDED AND 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:

                 (A)   PREFERRED STOCK

                       (1)  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:

                            (i)  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;

                            (ii) 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;

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                            (iii) 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;

                            (iv) 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;

                            (v) 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;

                            (vi) 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;

                            (vii) 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;

                            (viii) 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;

                            (ix) 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

                            (x) 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

                                        2

<PAGE>

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 Stock, $.001 par value 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 and shall
have the terms set forth on Attachment B hereto.

                         (4) Designation of Series C-1 Convertible Preferred
Stock. 2,500 shares of the Preferred Stock of the Corporation shall be
designated as Series C-1 Convertible Preferred Stock, $.001 par value and shall
have the terms set forth on Attachment C hereto.

                         (5) Designation of Series C-2 Convertible Preferred
Stock. 2,500 shares of the Preferred Stock of the Corporation shall be
designated as Series C-2 Convertible Preferred Stock, $.001 par value and shall
have the terms set forth on Attachment D hereto.

                     (B) COMMON STOCK

                         (1)  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.

                         (2)  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

                                        3

<PAGE>

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 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:

              (A) 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:

                  (1) 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;

                  (2) 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;

                  (3) 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

                                        4

<PAGE>

stockholders, and to direct and determine the use and disposition of any such
net profits or such surplus; and

                 (4) 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.

             (B) 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.

             (C) 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 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 time 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

<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(c) 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 June 30, 2003 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

<PAGE>


                                                                    ATTACHMENT C

                           SERIES C-1 PREFERRED STOCK

                                       of

                               GENAERA CORPORATION

     1. Number and Designation. 2,500 shares of the Preferred Stock of the
Corporation shall be designated as Series C-1 Convertible Preferred Stock, $.001
par value (the "Series C-1 Preferred Stock").

     2. Rank. The Series C-1 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 and the Series B Preferred Stock. All equity
securities of the Corporation to which the Series C-1 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 C-1 Preferred Stock ranks on a parity are collectively
referred to as "Parity Securities" (it being understood that the Corporation's
Series C-2 Preferred Stock is a Parity Security with respect to the Series C-1
Preferred Stock) and all equity securities of the Corporation to which the
Series C-1 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 C-1 Preferred Stock shall be subject to the creation of
Junior Securities but not subject to the creation of Parity Securities or 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 C-1 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 C-1 Preferred
     Stock shall receive, with respect to each share of Series C-1 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 C-1 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 Common
     Stock Conversion Price (as hereinafter defined) pursuant to Section 5(f).







<PAGE>

         (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 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 C-1 Preferred
     Stock and any Junior Securities by reason of their ownership of such stock,
     the holders of Series A Preferred Stock and Series B Preferred Stock shall
     be entitled to receive for each outstanding share of Series A Preferred
     Stock and Series B Preferred Stock then held by them an amount equal to
     $1,000.00 (the "Series A/B 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/B 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 C-1 Preferred Stock shall be
     entitled to receive for each outstanding share of Series C-1 Preferred
     Stock then held by them in an amount equal to $1,000.00 (the "Series C-1
     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
     C-1 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 C-1 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 C-1 Preferred Stock and such Parity
     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 C-1 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

                                       2

<PAGE>

     distributed, and the holders of the Series C-1 Preferred Stock shall not be
     entitled to share therein.

     5. Conversion.

          (a) Automatic Conversion of Series C-1 Preferred Stock.

               (i) Upon the occurrence of a Change of Control (as defined
          below), each share of Series C-1 Preferred Stock shall be
          automatically converted in accordance with Section 5(c)(i) hereof. A
          "Change of Control" shall occur upon the occurrence of (i) any sale,
          exchange, conveyance or other disposition of capital stock of the
          Corporation in a transaction or series of related transactions in
          which more than forty percent (40%) of the voting power of the
          Corporation is disposed of and the Corporation is a party to such
          transaction(s), (ii) upon the sale of all or substantially all of the
          assets of the Corporation, or (iii) the consolidation, merger or
          similar transaction of the Corporation into or with any other entity
          or entities (other than a consolidation, merger or similar transaction
          which the Corporation is a party to such transaction(s) and in which
          the stockholders of the Corporation immediately prior to such
          consolidation, merger or similar transaction will own at least sixty
          percent (60%) of the voting power of the combined or surviving entity
          by virtue of their ownership of shares of capital stock of the
          Corporation).

          (b) Optional Conversion of Series C-1 Preferred Stock.

               (i)   Upon receipt by a holder of Series C-1 Preferred Stock of a
          Notice of Redemption (as defined below), each share of Series C-1
          Preferred Stock shall be convertible at the election of the holder of
          the Series C-1 Preferred Stock in accordance with Section 5(c)(ii)
          hereof.

               (ii)  Upon the occurrence of a Series C-1 Stock Price Trigger (as
          defined below), each share of Series C-1 Preferred Stock shall be
          convertible at the election of the holder of the Series C-1 Preferred
          Stock in accordance with Section 5(c)(ii) hereof. A "Series C-1 Stock
          Price Trigger" shall occur if, at any time prior to November 23, 2004,
          the average closing bid price of the Common Stock (as quoted on the
          Nasdaq Small Cap Market, or any other established exchange, national
          system or automated quotation system on which the Common Stock is
          listed) over a twenty (20) consecutive Trading Day period is equal to
          or greater than $3.00, subject to adjustment as provided in Section
          5(f)(i) hereof.

               (iii) Each share of Series C-1 Preferred Stock, if not already
          converted, shall be convertible at the election of the holder of the
          Series C-1 Preferred Stock in accordance with Section 5(c)(ii) hereof
          on and after November 23, 2004.

                                       3

<PAGE>

                       (iv) Each share of Series C-1 Preferred Stock, if not
                  already converted, shall be convertible at the election of the
                  Corporation in accordance with Section 5(c)(iii) hereof on or
                  after May 23, 2006, subject to adjustment as provided in
                  Section 5(f)(i) hereof.

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

                       (i)  Pursuant to Section 5(a)(i) hereof, each share of

                  Series C-1 Preferred Stock shall be converted in accordance
                  with Section 5(d) hereof at the election of each holder of
                  Series C-1 Preferred Stock, into either (i) 1,000 fully paid
                  and non-assessable shares of Common Stock (the "Conversion
                  Share Amount"), subject to adjustment as provided in Section 5
                  (f)(i) hereof, or (ii) cash in an amount equal to the price of
                  $1,000.00 per share of Series C-1 Preferred Stock, together
                  with declared and unpaid dividends thereon to the date fixed
                  for redemption, without interest (the "Series C-1 Price").

                       (ii) Pursuant to Section 5(b) hereof, each share of
                  Series C-1 Preferred Stock shall be convertible in accordance
                  with Section 5(d) hereof at the election of each holder of
                  Series C-1 Preferred Stock, into the Conversion Share Amount,
                  subject to adjustment as provided in Section 5(f)(i) hereof.

                       (iii) Pursuant to Section 5(b)(iv), each share of
                  Series C-1 Preferred Stock, if not already converted, shall be
                  convertible in accordance with Section 5(k) hereof at the
                  election of the Corporation, into the Conversion Share Amount,
                  subject to adjustment as provided in Section 5(f)(i) hereof.


                  (d)  Notice of Conversion by the Holders. In order to convert
            the Series C-1 Preferred Stock into Common Stock or cash, as
            applicable, pursuant to Section 5(a) or (b) hereof, the holder of
            the Series C-1 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 C-1 Preferred Stock to be converted on
            the Conversion Date, (iii) the number of shares of Common Stock held
            by such holder, (iv) the names (and addresses) in which the
            certificates for shares of Common Stock issuable upon conversion
            shall be issued, and (v) the number of shares to be converted into
            Common Stock or cash, as applicable. With respect to any conversion
            by a holder of Series C-1 Preferred Stock, such holder shall not
            sell in the market any shares of Common Stock held by it during the
            twenty (20) days preceding the Series C-1 Conversion Date.

                  (e)  Partial Conversion. In the event that some but not all of
            the Series C-1 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

                                       4

<PAGE>

            of the holder, at the expense of the Corporation, a new certificate
            representing the number of shares of Series C-1 Preferred Stock that
            were not converted.

                  (f)  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 C-1 Preferred Stock is convertible pursuant to
                  Section 5(c) 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 C-1 Preferred Stock is convertible
                  pursuant to Section 5(c) then in effect immediately before the
                  combination shall be proportionately decreased. Any adjustment
                  under this subsection 5(f)(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.

                       (ii) If converted by a holder of Series C-1 Preferred
                  Stock or the Corporation, 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 (as
                       defined below) 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.

                                       5

<PAGE>

                       (iii) Any adjustment under this subsection 5(f) 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)  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(f)(i) through 5(f)(ii), then, in each such case each holder
                  of Series C-1 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 C-1 Preferred Stock
                  are convertible as of the record date fixed for the
                  determination of the holders of Common Stock entitled to
                  receive such distribution.

                       (v)   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 (e)), provision shall be made so that each
                  holder of Series C-1 Preferred Stock shall thereafter be
                  entitled to receive upon any conversion of the Series C-1
                  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 C-1 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 C-1 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.

                  (g)  Mechanics of Conversion. On the Conversion Date, the
            holder shall surrender the certificates representing the shares of
            Series C-1 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 C-1 Preferred Stock. No fractional shares of Common Stock
            shall be issued upon conversion of Series C-1 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 Common Stock Conversion Price of
            the Series C-1 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 C-1 Preferred Stock shall cease, and the
            Persons in

                                       6

<PAGE>

            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.

                  (h)  Status of Converted Stock. In the event any shares of
            Series C-1 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.

                  (i)  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 C-1 Preferred Stock against impairment.

                  (j)  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 C-1 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

                                       7

<PAGE>

                       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 C-1 Preferred
                       Stock at the address for each such holder as shown on
                       the books and records of the Corporation.

                  (k)  Notice of Conversion by the Corporation. In order to
            convert the Series C-1 Preferred Stock into Common Stock or cash, as
            applicable, pursuant to Section 5(b)(iv) hereof, Corporation shall
            mail a notice to each holder of record of shares of Series C-1
            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, at least five (5)
            business days prior to the intended date of conversion (the
            "Corporation Conversion Date") setting forth (i) the Conversion
            Date, (ii) the number of shares of Series C-1 Preferred Stock to be
            converted on the Conversion Date, and (iii) the number of shares of
            Common Stock held by such holder. On the Corporation Conversion Date
            the Series C-1 Preferred Stock shall automatically convert into the
            Conversion Share Amount without any action on the part of the
            holders of the Series C-1 Preferred Stock.

            6.    Voting Rights.  Except as set forth herein or as otherwise
     required by law, at all times prior to the conversion or redemption of the
     Series C-1 Preferred Stock, a holder of Series C-1 Preferred Stock shall be
     entitled to that number of votes per share of Series C-1 Preferred Stock
     equal to the Conversion Share Amount, subject to adjustment as provided in
     Section 5(f)(i) hereof, such votes to be counted together with all other
     shares of stock of the Corporation having general voting power and not
     counted separately as a class. The holders of Series C-1 Preferred Stock
     may vote on every matter put to a vote of the Corporation's stockholders,
     except for any matter reserved solely for the vote of the holders of any
     series of Preferred Stock other than the Series C-1 Preferred Stock.

                  (a)  Approval by Series C-1 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
            C-1 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 C-1 Preferred Stock;

                                       8

<PAGE>

                       (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 C-1 Preferred Stock; or

                       (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 C-1 Preferred Stock, at any time in whole or from time to
            time in part, at the Series C-1 Price.

                       (i)   Notice of Redemption; Payment; Surrender of
                  Certificates. In the event of the redemption of shares of
                  Series C-1 Preferred Stock pursuant to paragraph 7(a), the
                  Corporation shall mail a notice of redemption ("Notice of
                  Redemption") to each holder of record of shares of Series C-1
                  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 (the "Redemption Date"), (ii) the place at which
                  the stockholders may obtain payment of the Series C-1 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 Series C-1 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 Series C-1 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 C-1 Preferred Stock may be waived and
     the provisions of this Certificate of Designation may be amended by the
     holders of a majority of the outstanding shares of Series C-1 Preferred
     Stock and such waiver shall be binding on all holders of Series C-1
     Preferred Stock.

            9.    General Provisions.

                                       9

<PAGE>

                  (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 term "Trading Day" shall mean a day on which the
              Nasdaq Small Cap Market, or any other established exchange or
              national system on which the Common Stock is listed, is open for
              trading.

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

                                       10

<PAGE>

                                                                    ATTACHMENT D

                           SERIES C-2 PREFERRED STOCK

                                       of

                               GENAERA CORPORATION

              1.  Number and Designation. 2,500 shares of the Preferred Stock of
         the Corporation shall be designated as Series C-2 Convertible Preferred
         Stock, $.001 par value (the "Series C-2 Preferred Stock").

              2.  Rank. The Series C-2 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 and the Series
         B Preferred Stock. All equity securities of the Corporation to which
         the Series C-2 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 C-2 Preferred Stock ranks on a parity are collectively
         referred to as "Parity Securities" (it being understood that the
         Corporation's Series C-1 Preferred Stock is a Parity Security with
         respect to the Series C-2 Preferred Stock) and all equity securities of
         the Corporation to which the Series C-2 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 C-2 Preferred Stock shall be subject to the
         creation of Junior Securities but not subject to the creation of Parity
         Securities or 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 C-2 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 C-2 Preferred Stock shall
              receive, with respect to each share of Series C-2 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
              C-2 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 Common Stock Conversion Price (as
              hereinafter defined) pursuant to Section 5(f).

<PAGE>

                       (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 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 C-2 Preferred Stock and any Junior Securities by
         reason of their ownership of such stock, the holders of Series A
         Preferred Stock and Series B Preferred Stock shall be entitled to
         receive for each outstanding share of Series A Preferred Stock and
         Series B Preferred Stock then held by them an amount equal to $1,000.00
         (the "Series A/B 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/B 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 C-2 Preferred Stock shall be entitled to receive for each
         outstanding share of Series C-2 Preferred Stock then held by them in an
         amount equal to $1,000.00 (the "Series C-2 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 C-2 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 C-2 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 C-2
         Preferred Stock and such Parity 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 C-2 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

                                        2

<PAGE>

         distributed, and the holders of the Series C-2 Preferred Stock shall
         not be entitled to share therein.

         5.   Conversion.

                  (a)  Automatic Conversion of Series C-2 Preferred Stock.

                       (i)    Upon the occurrence of a Change of Control (as
                  defined below), each share of Series C-2 Preferred Stock shall
                  be automatically converted in accordance with Section 5(c)(i)
                  hereof. A "Change of Control" shall occur upon the occurrence
                  of (i) any sale, exchange, conveyance or other disposition of
                  capital stock of the Corporation in a transaction or series of
                  related transactions in which more than forty percent (40%) of
                  the voting power of the Corporation is disposed of and the
                  Corporation is a party to such transaction(s), (ii) upon the
                  sale of all or substantially all of the assets of the
                  Corporation, or (iii) the consolidation, merger or similar
                  transaction of the Corporation into or with any other entity
                  or entities (other than a consolidation, merger or similar
                  transaction which the Corporation is a party to such
                  transaction(s) and in which the stockholders of the
                  Corporation immediately prior to such consolidation, merger or
                  similar transaction will own at least sixty percent (60%) of
                  the voting power of the combined or surviving entity by virtue
                  of their ownership of shares of capital stock of the
                  Corporation).

                  (b)  Optional Conversion of Series C-2 Preferred Stock.

                       (i)    Upon receipt by a holder of Series C-2 Preferred
                  Stock of a Notice of Redemption (as defined below), each share
                  of Series C-2 Preferred Stock shall be convertible at the
                  election of the holder of the Series C-2 Preferred Stock in
                  accordance with Section 5(c)(ii) hereof.

                       (ii)   Upon the occurrence of a Series C-2 Stock Price
                  Trigger (as defined below), each share of Series C-2 Preferred
                  Stock shall be convertible at the election of the holder of
                  the Series C-2 Preferred Stock in accordance with Section
                  5(c)(ii) hereof. A "Series C-2 Stock Price Trigger" shall
                  occur if, at any time prior to November 23, 2004, the average
                  closing bid price of the Common Stock (as quoted on the Nasdaq
                  Small Cap Market, or any other established exchange, national
                  system or automated quotation system on which the Common Stock
                  is listed) over a twenty (20) consecutive Trading Day period
                  is equal to or greater than $4.00, subject to adjustment as
                  provided in Section 5(f)(i) hereof.

                       (iii)  Each share of Series C-2 Preferred Stock, if not
                  already converted, shall be convertible at the election of the
                  holder of the Series C-2 Preferred Stock in accordance with
                  Section 5(c)(ii) hereof on and after November 23, 2004.

                                        3

<PAGE>

                       (iv)   Each share of Series C-2 Preferred Stock, if not
                  already converted, shall be convertible at the election of the
                  Corporation in accordance with Section 5(c)(iii) hereof on or
                  after May 23, 2006, subject to adjustment as provided in
                  Section 5(f)(i) hereof.

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

                       (i)    Pursuant to Section 5(a)(i) hereof, each share of
                  Series C-2 Preferred Stock shall be converted in accordance
                  with Section 5(d) hereof at the election of each holder of
                  Series C-2 Preferred Stock, into either (i) 1,000 fully paid
                  and non-assessable shares of Common Stock (the "Conversion
                  Share Amount"), subject to adjustment as provided in Section
                  5(f)(i) hereof, or (ii) cash in an amount equal to the price
                  of $1,000.00 per share of Series C-2 Preferred Stock, together
                  with declared and unpaid dividends thereon to the date fixed
                  for redemption, without interest (the "Series C-2 Price").

                       (ii)   Pursuant to Section 5(b) hereof, each share of
                  Series C-2 Preferred Stock shall be convertible in accordance
                  with Section 5(d) hereof at the election of each holder of
                  Series C-2 Preferred Stock, into the Conversion Share Amount,
                  subject to adjustment as provided in Section 5(f)(i) hereof.

                       (iii)  Pursuant to Section 5(b)(iv), each share of Series
                  C-2 Preferred Stock, if not already converted, shall be
                  convertible in accordance with Section 5(k) hereof at the
                  election of the Corporation, into the Conversion Share Amount,
                  subject to adjustment as provided in Section 5(f)(i) hereof.

                  (d)  Notice of Conversion by the Holders.  In order to convert
         the Series C-2 Preferred Stock into Common Stock or cash, as
         applicable, pursuant to Section 5(a) or (b) hereof, the holder of the
         Series C-2 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 C-2 Preferred Stock to be converted on the Conversion Date,
         (iii) the number of shares of Common Stock held by such holder, (iv)
         the names (and addresses) in which the certificates for shares of
         Common Stock issuable upon conversion shall be issued, and (v) the
         number of shares to be converted into Common Stock or cash, as
         applicable. With respect to any conversion by a holder of Series C-2
         Preferred Stock, such holder shall not sell in the market any shares of
         Common Stock held by it during the twenty (20) days preceding the
         Series C-2 Conversion Date.

                  (e)  Partial Conversion. In the event that some but not all of
         the Series C-2 Preferred Stock represented by a certificate or
         certificates surrendered by a

                                        4

<PAGE>

              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 C-2
              Preferred Stock that were not converted.

                       (f)    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 C-2 Preferred Stock is
                       convertible pursuant to Section 5(c) 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 C-2 Preferred Stock is convertible
                       pursuant to Section 5(c) then in effect immediately
                       before the combination shall be proportionately
                       decreased. Any adjustment under this subsection 5(f)(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.

                              (ii) If converted by a holder of Series C-2
                       Preferred Stock or the Corporation, 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 (as defined below) 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.

                                        5

<PAGE>

                              (iii)  Any adjustment under this subsection 5(f)
                       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)   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(f)(i) through 5(f)(ii), then,
                       in each such case each holder of Series C-2 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 C-2 Preferred Stock are
                       convertible as of the record date fixed for the
                       determination of the holders of Common Stock entitled to
                       receive such distribution.

                              (v)    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 (e)), provision
                       shall be made so that each holder of Series C-2 Preferred
                       Stock shall thereafter be entitled to receive upon any
                       conversion of the Series C-2 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 C-2 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 C-2 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.

                       (g)    Mechanics of Conversion. On the Conversion Date,
              the holder shall surrender the certificates representing the
              shares of Series C-2 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 C-2 Preferred Stock. No fractional shares of
              Common Stock shall be issued upon conversion of Series C-2
              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 Common
              Stock Conversion Price of the Series C-2 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 C-2
              Preferred Stock shall cease, and the Persons

                                        6

<PAGE>

              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.

                     (h)   Status of Converted Stock. In the event any shares of
              Series C-2 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.

                     (i)   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 C-2 Preferred Stock
              against impairment.

                     (j)   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 C-2 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

                                        7

<PAGE>

                              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
                              C-2 Preferred Stock at the address for each such
                              holder as shown on the books and records of the
                              Corporation.

                     (k) Notice of Conversion by the Corporation. In order to
              convert the Series C-2 Preferred Stock into Common Stock or cash,
              as applicable, pursuant to Section 5(b)(iv) hereof, Corporation
              shall mail a notice to each holder of record of shares of Series
              C-2 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, at least
              five (5) business days prior to the intended date of conversion
              (the "Corporation Conversion Date") setting forth (i) the
              Conversion Date, (ii) the number of shares of Series C-2 Preferred
              Stock to be converted on the Conversion Date, and (iii) the number
              of shares of Common Stock held by such holder. On the Corporation
              Conversion Date the Series C-2 Preferred Stock shall automatically
              convert into the Conversion Share Amount without any action on the
              part of the holders of the Series C-2 Preferred Stock.

              6.     Voting Rights. Except as set forth herein or as otherwise
required by law, at all times prior to the conversion or redemption of the
Series C-2 Preferred Stock, a holder of Series C-2 Preferred Stock shall be
entitled to that number of votes per share of Series C-2 Preferred Stock equal
to the Conversion Share Amount, subject to adjustment as provided in Section
5(f)(i) hereof, such votes to be counted together with all other shares of stock
of the Corporation having general voting power and not counted separately as a
class. The holders of Series C-2 Preferred Stock may vote on every matter put to
a vote of the Corporation's stockholders, except for any matter reserved solely
for the vote of the holders of any series of Preferred Stock other than the
Series C-2 Preferred Stock.

                     (a)   Approval by Series C-2 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 C-2 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 C-2 Preferred Stock;

                                       8

<PAGE>

                        (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 C-2
              Preferred Stock; or

                        (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 C-2 Preferred Stock, at any time in whole or from time to time
         in part, at the Series C-2 Price.

                        (i)    Notice of Redemption; Payment; Surrender of
              Certificates. In the event of the redemption of shares of Series
              C-2 Preferred Stock pursuant to paragraph 7(a), the Corporation
              shall mail a notice of redemption ("Notice of Redemption") to each
              holder of record of shares of Series C-2 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 (the "Redemption Date"), (ii) the place at which the
              stockholders may obtain payment of the Series C-2 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
              Series C-2 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 Series C-2 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 C-2 Preferred Stock may be waived and the provisions
of this Certificate of Designation may be amended by the holders of a majority
of the outstanding shares of Series C-2 Preferred Stock and such waiver shall be
binding on all holders of Series C-2 Preferred Stock.

         9.   General Provisions.

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                  (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 term "Trading Day" shall mean a day on which the
            Nasdaq Small Cap Market, or any other established exchange or
            national system on which the Common Stock is listed, is open for
            trading.

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

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