RESTATED CERTIFICATE OF
INCORPORATION

OF

INTERFILM, INC.

INTERFILM,
INC., a corporation duly organized and existing under the laws of the State of Delaware
(the Corporation), hereby certifies as follows: The name under which the
Corporation was originally incorporated was Cinedco, Inc. The original Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the State of
Delaware on November 21, 1986.

1.
This Restated Certificate of Incorporation restates and integrates, but does not amend,
the Restated Certificate of Incorporation of the Corporation to read as set forth herein.

2.
Pursuant to Section 245 of the General Corporation Law of the State of Delaware, the text
of the Certificate of Incorporation as heretofore amended or supplemented is hereby
restated to read in full as follows:

ARTICLE I

Name

The
name of the Corporation is INTERFILM, INC.

ARTICLE II

Registered Office and
Registered Agent

The
registered office of the Corporation in the State of Delaware is located at c/o the
Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of New Castle,
State of Delaware, and the registered agent in charge thereof is The Corporation Trust
Company.

ARTICLE III

Corporate Purpose

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
(the General Corporation Law).

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ARTICLE IV

Capital Stock

Section
1. AUTHORIZED CAPITAL STOCK. The Corporation shall be authorized to issue two classes of
shares of capital stock to be designated, respectively, Preferred Stock and
Common Stock; the total number of shares of capital stock which the
Corporation shall have the authority to issue is 12,000,000, comprised of 10,000,000
shares of Common Stock, par value $.01 per share, and 2,000,000 shares of Preferred Stock,
par value $.01 per share.

Section
2. ISSUANCE OF PREFERRED STOCK. The Board of Directors is authorized, subject to
limitations prescribed by law and the provisions of this Article IV, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant
to the applicable law of the State of Delaware, to establish from time to time the number
of shares to be included in each such series, and to fix the designation, powers,
preferences, rights and privileges of the shares of each such series and the
qualifications, limitations or restrictions thereof.

The
authority of the Board of Directors with respect to each such series shall include, but
not be limited to, determination of the following:

(a)
The number of shares constituting such series and the distinctive designation of such
series;

(b)
The dividend rate on the shares of such series, whether dividends shall be cumulative,
and, if so, from which date or dates, and the relative rights of priority, if any, of
payment of dividends on shares of such series;

(c)
Whether such series shall have voting rights, in addition to the voting rights provided
by law, and, if so, the terms of such voting rights;

(d)
Whether such series shall have conversion privileges, and, if so, the terms and
conditions of such conversion, including provision for adjustment of the conversion rate
in such events as the Board of Directors shall determine;

(e)
Whether or not the shares of such series shall be redeemable, and, if so, the terms and
conditions of such redemption, including the date or dates upon or after which they shall
be redeemable, and the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;

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(f)
Whether such series shall have a sinking fund for the redemption or purchase of shares of
such series, and, if so, the terms and amount of such sinking fund;

(g)
The rights of the shares of such series in the event of voluntary or involuntary
liquidation, dissolution or winding up of the corporation, and the relative rights of
priority, if any, of payment of shares of such series;

(h)
Any other relative powers, preferences, rights, privileges, qualifications, limitations
and restrictions of such series.

Dividends
on outstanding shares of Preferred Stock shall be paid or declared and set apart for
payment before any dividends shall be paid or declared and set apart for payment on the
Common Stock with respect to the same dividend period.

If
upon any voluntary or involuntary liquidation, dissolution or winding up of the
corporation, the assets available for distribution to holders of shares of Preferred Stock
of all series shall be insufficient to pay such holders the full preferential amount to
which they are entitled, then such assets shall be distributed ratably among the shares of
all series of Preferred Stock in accordance with the respective preferential amounts
(including unpaid cumulative dividends, if any) payable with respect thereto.

Section
3. NO PREEMPTIVE RIGHTS. No holders of capital stock of the Corporation shall be entitled
to preemptive rights to purchase or subscribe for any shares of any class of capital stock
of the Corporation whether now or hereafter authorized.

ARTICLE V

Directors

Section
1. ELECTION OF DIRECTORS. Elections of directors of the Corporation need not be by written
ballot, except and to the extent provided in the By-laws of the Corporation.

Section
2. POWER WITH RESPECT TO BY-LAWS. The directors of the Corporation shall have the power to
adopt, amend or repeal By-laws.

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Section
3. PERSONAL LIABILITY OF DIRECTORS. To the fullest extent permitted by the General
Corporation Law as it now exists and as it may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or its stockholders for monetary
damages for breach of a fiduciary duty as a director.

ARTICLE VI

Indemnification of
Directors, Officers and Others

(1)
The Corporation shall indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in the right
of the Corporation) by reason of the fact that he or she is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses (including
attorneysfees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or proceeding if
he or she acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person seeking indemnification did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.

(2)
The Corporation shall indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the right of
the Corporation to procure a judgment in its favor by reason of the fact that he or she
is or was a director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against expenses
(including attorneys fees) actually and reasonably incurred by him or her in
connection with the defense or

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settlement of such action or suit if
he or she acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that the Court
of Chancery of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court shall deem
proper.

(3)
To the extent that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or proceeding
referred to in Sections (1) and (2) of this Article VI, or in defense of any claim, issue
or matter therein, he or she shall be indemnified against expenses (including attorneys fees)
actually and reasonably incurred by him or her in connection therewith.

(4)
Any indemnification under Sections (1) and (2) of this Article VI (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent is proper
in the circumstances because he or she has met the applicable standard of conduct set
forth in such Sections (1) and (2). Such determination shall be made (a) by the Board of
Directors of the Corporation by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion or (c) by the stockholders of the
Corporation.

(5)
Expenses (including attorneys fees) incurred by an officer or director in defending
any civil, criminal, administrative or investigative action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount if it shall ultimately be determined that he or she is not entitled to
be indemnified by the Corporation authorized in this Article VI. Such expenses (including
attorneys fees) incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors of the Corporation deems
appropriate.

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(6)
The indemnification and advancement of expenses provided by, or granted pursuant to, the
other sections of this Article VI shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses may be entitled under any
law, by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in an official capacity and as to action in another capacity while
holding such office.

(7)
The Corporation may purchase and maintain insurance on behalf of any person who is or was
a director, officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or arising
out of his status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of Section 145 of the
General Corporation Law.

(8)
For purposes of this Article VI, references to the Corporation shall include,
in addition to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article VI with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.

(9)
For purposes of this Article VI, references to other enterprisesshall include
employee benefit plans; references to fines shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to serving
at the request of the Corporation shall include any service as a director, officer,
employee or agent of the Corporation which imposes duties on, or involves service by,
such director, officer, employee or agent with respect to any employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a manner he or
she reasonably believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner not opposed to the
best interests of the Corporation as referred to in this Article VI.

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(10)
The indemnification and advancement of expenses provided by, or granted pursuant to, this
Article VI shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.

ARTICLE VII

Amendment

The
Corporation reserves the right to amend, alter, change or repeal any provision of this
Restated Certificate of Incorporation, in the manner now or hereafter prescribed by law,
and all rights conferred on stockholders in this Restated Certificate of Incorporation are
subject to this reservation.

3.
This Restated Certificate of Incorporation was duly adopted by the Board of Directors of
the Corporation without the approval of the holders of outstanding stock of the
Corporation in accordance with the provisions of Section 245 of the General Corporation
Law.

IN
WITNESS WHEREOF, the Corporation has caused this certificate to be executed by its
President, Chief Executive Officer and Secretary this 1st day of November, 1993.

| |                 |                                                                                | 
| | --------------- | ------------------------------------------------------------------------------ | 
| | INTERFILM, INC. |                                                                               
|
| | By:             | /s/ Lawrence B. Kuppin                                                         | 
| |                 | Lawrence B. KuppinPresident, Chief Executive
            Officer and Secretary | 

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CERTIFICATE OF AMENDMENT

TO THE

RESTATED CERTIFICATE OF
INCORPORATION

OF

INTERFILM, INC.

_________________

Under Section 242 of the

General Corporation Law

_________________

The
undersigned officer of Interfilm, Inc., a Delaware corporation (the
Corporation), in order to amend the Restated Certificate of Incorporation of
the Corporation, pursuant to the provisions of Section 242 of the General Corporation Law
of the State of Delaware, does hereby certify as follows:

1.
The name of the Corporation is Interfilm, Inc.

2.
The name under which the Corporation was originally incorporated was Cinedco, Inc. The
original Certificate of Incorporation of the Corporation was filed by the Secretary of
State of the State of Delaware on November 21, 1986.

3.
The purpose of this amendment to the Restated Certificate of Incorporation of the
Corporation is: (i) to change the name of the Corporation to Palatin Technologies,
Inc., (ii) to increase the authorized shares of the Companys common stock,
par value $.01 per share (the Common Stock), from 10,000,000 to 25,000,000,
and (iii) to effect a 1-for-10 reverse split of the Common Stock.

4.
The Restated Certificate of Incorporation of the Corporation is hereby amended by
striking out Article I thereof in its entirety and by substituting in lieu of said
Article the following new Article I:

ARTICLE I

Name

The
name of the Corporation is PALATIN TECHNOLOGIES, INC.

5.
The Restated Certificate of Incorporation of the Corporation is hereby amended by
striking out Section 1 of Article IV thereof in its entirety and by substituting in lieu
of said Section 1 the following new Section 1:

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Section
1. Authorized Capital Stock. The Corporation shall be authorized to issue two classes of
shares of capital stock to be designated, respectively, Preferred Stock and
Common Stock. The total number of shares of capital stock which the
Corporation shall have the authority to issue is 27,000,000, comprised of 25,000,000
shares of Common Stock, par value $.01 per share, and 2,000,000 shares of Preferred Stock,
par value $.01 per share.

On
the effective date of this amendment to the Restated Certificate of Incorporation (the
Effective Date), the Common Stock of the Corporation will be reverse split on
a one-for-ten basis so that each share of Common Stock issued and outstanding immediately
prior to the Effective Date shall automatically be converted into and reconstituted as
one-tenth of a share of Common Stock (the Reverse Split). No fractional shares
will be issued by the Corporation as a result of the Reverse Split. In lieu thereof, each
stockholder whose shares of Common Stock are not evenly divisible by ten will receive an
amount of cash equal to the average of the average last reported bid and asked price of
the Common Stock of the Corporation on the OTC Electronic Bulletin Board for each of the
first three days subsequent to the Effective Date on which the Common Stock of the
Corporation is traded multiplied by the fractional interest.

6.
The foregoing amendment to the Corporations Restated Certificate of Incorporation
was duly authorized and adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware by unanimous written consent of the
Board of Directors of the Corporation dated June 13, 1996, and by written consent of a
majority of the Common Stockholders of the Corporation dated June 13, 1996.

IN
WITNESS WHEREOF, the undersigned has signed this Certificate and does hereby affirm, under
penalty of perjury, that the statements contained herein are true and correct, this 19th
day of July 1996.

| |                          
| | -------------------------
| | /s/ John J. McDonough    
| | Name:   John J. McDonough
| | Title:   Vice President  

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CERTIFICATE OF
DESIGNATIONS

of

SERIES A CONVERTIBLE
PREFERRED STOCK

of

PALATIN TECHNOLOGIES,
INC.

Pursuant to Section 151
of the

General Corporation Law
of the State of Delaware

PALATIN
TECHNOLOGIES, INC., a corporation organized and existing under the laws of the State of
Delaware (the Corporation), does hereby certify that, pursuant to the
authority conferred on the Board of Directors of the Corporation by the Certificate of
Incorporation, as amended to date (the Certificate of Incorporation), of the
Corporation and in accordance with Section 151 of the General Corporation Law of the State
of Delaware, the Board of Directors of the Corporation adopted the following resolution
establishing a series of 264,000 shares of Preferred Stock of the Corporation designated
as Series A Convertible Preferred Stock:

| | RESOLVED,
that pursuant to the authority conferred on the Board of Directors of this Corporation by
the Certificate of Incorporation, a series of Preferred Stock, par value $.01 per share,
of the Corporation is hereby established and created, and that the designation and number
of shares thereof and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such series and the
qualifications, limitations and restrictions thereof are as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SERIES A CONVERTIBLE
PREFERRED STOCK

1.
Designation and Amount. There shall be a series of Preferred Stock designated
as Series A Convertible Preferred Stock and the number of shares
constituting such series shall be 264,000. Such series is referred to herein as
the Series A Preferred Stock. Such number of shares of Series A
Preferred Stock may be increased prior to the Final Closing Date (as defined
below) or decreased by resolution of the Board of Directors of the Corporation;
provided, however, that no decrease shall reduce the number of shares of Series
A Preferred Stock to less than the number of shares then issued and
outstanding.

2.
Dividends and Distributions. (a) Subject to the prior and superior rights of
the holders of any shares of any series or class of capital stock ranking prior
and superior to the shares of Series A Preferred Stock with respect to
dividends, the holders of shares of Series A

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Preferred Stock shall be entitled to
receive, as, when and if declared by the Board of Directors of the Corporation, out of
assets legally available for that purpose, dividends or distributions in cash, stock or
otherwise.

(b)
The Corporation shall not declare any dividend or distribution on any Junior Stock (as
defined below) or any other capital stock of the Company unless and until a special
dividend or distribution of $100.00 per share (subject to appropriate adjustment to
reflect any stock split, combination, reclassification or reorganization of the Series A
Preferred Stock) has been declared and paid on the Series A Preferred Stock. In the event
such special dividend or distribution is declared and paid on the Series A Preferred
Stock, an aggregate per share dividend or distribution equal to (i) $100.00 divided by
(ii) the effective Conversion Rate at the time of such special dividend or distribution
on the Series A Preferred Stock may be declared and paid on the Common Stock. Except as
aforesaid, the Corporation shall not declare any dividend or distribution on any Junior
Stock, unless the Corporation shall, concurrently with the declaration of such dividend
or distribution on the Junior Stock, declare a like dividend or distribution, as the case
may be, on the Series A Preferred Stock, which in the case of dividends or distributions
on Common Stock or Junior Stock convertible into Common Stock, shall be in an amount per
share equal to at least (x) the amount of the dividend or distribution per share of
Common Stock multiplied by (y) the effective Conversion Rate at the time of such dividend
or distribution.

(c)
Any dividend or distribution (other than that referenced in the first sentence of Section
2(b)) payable to the holders of the Series A Preferred Stock pursuant to this Section 2
shall be paid to such holders at the same time as the dividend or distribution on the
Junior Stock or any other capital stock of the Company by which it is measured is paid.

(d)
All dividends or distributions declared upon the Series A Preferred Stock shall be
declared pro rata per share.

(e)
Any reference to distribution contained in this Section 2 shall not be deemed
to include any distribution made in connection with or in lieu of any Liquidation Event
(as defined below).

(f)
Junior Stock shall mean the Common Stock and any shares of preferred stock of
any series or class of the Corporation, whether presently outstanding or hereafter
issued, which are junior to the shares of Series A Preferred Stock with respect to (i)
the distribution of assets on any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, (ii) dividends and (iii) voting.

3.
Liquidation Preference. (a) In the event of a (i) liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, (ii) a sale or other disposition of
all or substantially all of the assets of the Corporation or (iii) any consolidation,
merger, combination, reorganization or other transaction in which the Corporation is not
the surviving entity or the shares of Common Stock constituting in excess of 50% of the
voting power of the Corporation are exchanged for or changed into stock or securities of
another entity, cash and/or any other property (a Merger Transaction)
(subparagraphs (i), (ii) and (iii) being collectively referred to as a

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Liquidation Event), after
payment or provision for payment of debts and other liabilities of the Corporation, the
holders of the Series A Preferred Stock then outstanding shall be entitled to be paid out
of the assets of the Corporation available for distribution to its stockholders, whether
such assets are capital, surplus, or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of any Junior Stock or
any other capital stock of the Company, an amount equal to $100.00 per share plus an
amount equal to all declared and unpaid dividends thereon; provided, however, in the case
of a Merger Transaction, such $100.00 per share may be paid in cash, property (valued as
provided in Section 3(b)) and/or securities (valued as provided in Section 3(b)) of the
entity surviving such Merger Transaction. If upon any Liquidation Event, whether voluntary
or involuntary, the assets to be distributed to the holders of the Series A Preferred
Stock shall be insufficient to permit the payment to such stockholders of the full
preferential amounts aforesaid, then all of the assets of the Corporation to be
distributed shall be so distributed ratably to the holders of the Series A Preferred Stock
on the basis of the number of shares of Series A Preferred Stock held. A consolidation or
merger of the Corporation with or into another corporation, other than in a transaction
described in this Section 3(a) above, shall not be considered a liquidation, dissolution
or winding up of the Corporation or a sale or other disposition of all or substantially
all of the assets of the Corporation and accordingly the Corporation shall make
appropriate provision to ensure that the terms of this Certificate of Designations survive
any such transaction. All shares of Series A Preferred Stock shall rank as to payment upon
the occurrence of any Liquidation Event senior to the Common Stock as provided herein and,
unless the terms of such series shall provide otherwise, senior to all other series of the
Corporations preferred stock.

(b)
Any securities or other property to be delivered to the holders of the Series A Preferred
Stock pursuant to Section 3(a) hereof shall be valued as follows:

| | (i)
     Securities not subject to an investment letter or other similar restriction on
     free marketability:
| | ----------------------------------------------------------------------------------------------------------------

| | (A)
If traded on a securities exchange or on Nasdaq (as defined below), or if actively traded
over-the-counter, the value shall be deemed to be the Market Price (as defined below) of
the securities as of the third day prior to the date of valuation.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (B)
If there is no such active public market for the securities, the value shall be the Fair
Market Value (as defined below) of the securities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------

| | Market
Price of a security shall mean the average Closing Bid Price (as defined below) of
such security, for twenty (20) consecutive trading days, ending with the day prior to the
date as of which the Market Price is being determined.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fair
Market Value of any asset (including any security) means the fair market value
thereof as mutually determined by the Corporation and the holders of a majority (measured
in terms of voting power) of the outstanding Series A Preferred Stock.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | The
Closing Bid Price for any security for each trading day shall be the reported
closing bid price of such security on the national securities exchange on which such
security is listed or admitted to trading, or, if such security is not listed or admitted
to trading on any national securities exchange, shall mean the reported closing bid price
of such security on the Nasdaq SmallCap Market or the Nasdaq National Market System
(collectively referred to as, Nasdaq) or, if such security is not listed or
admitted to trading on any national securities exchange or quoted on Nasdaq, shall mean
the reported closing bid price of such security on the principal securities exchange on
which such security is listed or admitted to trading (based on the aggregate dollar value
of all securities listed or admitted to trading) or, if such security is not listed or
admitted to trading on a national securities exchange, quoted on Nasdaq or listed or
admitted to trading on any other securities exchange, shall mean the closing bid price in
the over-the-counter market as furnished by any NASD member firm selected from time to
time by the Corporation for that purpose.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Trading
day shall mean a day on which the securities exchange or NASDAQ used to determine
the Closing Bid Price is open for the transaction of business or the reporting of trades
or, if the Closing Bid Price is not so determined, a day on which such securities
exchange is open for the transaction of business.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii)
     For securities for which there is an active public market but which are subject
     to investment letter or other restrictions on free marketability, the value
     shall be the Fair Market Value thereof, determined by discounting appropriately
     the Market Price thereof.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii)
     For all other securities, the value shall be the Fair Market Value thereof.
| | --------------------------------------------------------------------------------------

If the holders of a majority of the
Series A Preferred Stock and the Corporation are unable to reach agreement on any
valuation matter, such valuation shall be submitted to and determined by a nationally
recognized independent investment bank selected by the Board of Directors of the
Corporation and the holders of a majority of the Series A Preferred Stock (or, if such
selection cannot be agreed upon promptly, or in any event within ten days, then such
valuation shall be made by a nationally recognized independent investment banking firm
selected by the American Arbitration Association in New York City in accordance with its
rules).

4.
Conversion.

(a)
RIGHT OF CONVERSION. The shares of Series A Preferred Stock shall be convertible, in
whole or in part, at the option of the holder thereof and upon notice to the Corporation
as set forth in Section 4(b) below, into fully paid and nonassessable shares of Common
Stock and such other securities and property as hereinafter provided. The initial
conversion price per share of Common Stock is $1.78 (the Conversion Price)
and shall be subject to adjustment as provided herein. The rate at which each share of
Series A Preferred Stock is convertible at any time into Common Stock (the Conversion
Rate) shall be determined by dividing the then existing Conversion Price into
$100.00.

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Subject
to adjustment pursuant to the provisions of Section 4(c) below, in the event that the
Conversion Price in effect at the time of each Interim Closing Date (as defined below) and
the Final Closing Date (as defined below) is greater than 90% of the Market Price (as
defined in Section 3(b)) of the Common Stock as of (x) any interim closing date of the
issuance and sale of the Series A Preferred Stock (each an Interim Closing
Date) or (y) the final closing date of the issuance and sale of the Series A
Preferred Stock (the Final Closing Date) pursuant to the subscription
agreements entered into in connection therewith, then the Conversion Price shall be
adjusted to equal 90% of the lesser of any such Market Price. If there is any change in
the Conversion Price as a result of the preceding sentence, then the Conversion Rate shall
be changed accordingly as set forth above. For purposes of this Section 4, in the event
the prices referenced in the definition of Closing Bid Price in Section 3(b) cannot be
determined, the Market Price of the Common Stock shall be deemed to be the Fair Market
Value (as defined in Section 3(b)) of the Common Stock as of the date of determination.

The
Board of Directors of the Corporation, or a committee designated by it for such purpose,
may specify an initial conversion price applicable to the shares of Series A Preferred
Stock issued at any closing lower than the initial conversion price that would otherwise
obtain pursuant to the preceding paragraphs and, in the event an initial conversion price
is so specified, it shall be applicable to all shares of the Series A Preferred Stock.

The
Corporation shall prepare a certificate signed by the Chairman or President, and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, of the
Corporation setting forth the Conversion Rate as of the Final Closing Date, showing in
reasonable detail the facts upon which such adjusted Conversion Rate is based, and such
certificate shall forthwith be filed with the transfer agent of the Series A Preferred
Stock. A notice stating that the Conversion Rate has been adjusted pursuant to the second
preceding paragraph, or that no adjustment is necessary, and setting forth the Conversion
Rate in effect as of the Final Closing Date shall be mailed as promptly as practicable
after the Final Closing Date by the Corporation to all record holders of the Series A
Preferred Stock at their last addresses as they shall appear in the stock transfer books
of the Corporation.

(b)
Conversion Procedures. Any holder of shares of Series A Preferred Stock desiring to
convert such shares into Common Stock shall surrender the certificate or certificates
evidencing such shares of Series A Preferred Stock at the office of the transfer agent
for the Series A Preferred Stock, which certificate or certificates, if the Corporation
shall so require, shall be duly endorsed to the Corporation or in blank, or accompanied
by proper instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects so to convert such
shares of Series A Preferred Stock and specifying the name or names (with address) in
which a certificate or certificates evidencing shares of Common Stock are to be issued.
The Corporation need not deem a notice of conversion to be received unless the holder
complies with all the provisions hereof. The Corporation will instruct the transfer agent
(which may be the Corporation) to make a notation of the date that a notice of conversion
is received, which date shall be deemed to be the date of receipt for purposes hereof.

5

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The
Corporation shall, as soon as practicable after such deposit of certificates evidencing
shares of Series A Preferred Stock accompanied by the written notice and compliance with
any other conditions herein contained, deliver at such office of such transfer agent to
the person for whose account such shares of Series A Preferred Stock were so surrendered,
or to the nominee or nominees of such person, certificates evidencing the number of full
shares of Common Stock to which such person shall be entitled as aforesaid, together with
a cash adjustment of any fraction of a share as hereinafter provided. Subject to the
following provisions of this paragraph, such conversion shall be deemed to have been made
as of the date of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the Common Stock deliverable upon
conversion of such Series A Preferred Stock shall be treated for all purposes as the
record holder or holders of such Common Stock on such date; provided, however, that the
Corporation shall not be required to convert any shares of Series A Preferred Stock while
the stock transfer books of the Corporation are closed for any purpose, but the surrender
of Series A Preferred Stock for conversion during any period while such books are so
closed shall become effective for conversion immediately upon the reopening of such books
as if the surrender had been made on the date of such reopening, and the conversion shall
be at the conversion rate in effect on such date. No adjustments in respect of any
dividends on shares surrendered for conversion or any dividend on the Common Stock issued
upon conversion shall be made upon the conversion of any shares of Series A Preferred
Stock.

All
notices of conversion shall be irrevocable; provided, however, that if the Corporation has
sent notice of an event pursuant to Section 4(f) hereof, a holder of Series A Preferred
Stock may, at its election, provide in its notice of conversion that the conversion of its
shares of Series A Preferred Stock shall be contingent upon the occurrence of the record
date or effectiveness of such event (as specified by such holder), provided that such
notice of conversion is received by the Corporation prior to such record date or effective
date, as the case may be.

(c)
Adjustment of Conversion Rate and Conversion Price.

(i)
     Except as otherwise provided herein, in the event the Corporation shall, at any
     time or from time to time after the date hereof, (1) sell or issue any shares of
     Common Stock for a consideration per share less than either (i) the Conversion
     Price in effect on the date of such sale or issuance or (ii) the Market Price of
     the Common Stock as of the date of the sale or issuance, (2) issue any shares of
     Common Stock as a stock dividend to the holders of Common Stock, or (3)
     subdivide or combine the outstanding shares of Common Stock into a greater or
     lesser number of shares (any such sale, issuance, subdivision or combination
     being herein called a Change of Shares), then, and thereafter upon
     each further Change of Shares, the Conversion Price in effect immediately prior
     to such Change of Shares shall be changed to a price (rounded to the nearest
     cent) determined by multiplying the Conversion Price in effect immediately prior
     thereto by a fraction, the numerator of which shall be the sum of the number of
     shares of Common Stock outstanding immediately prior to the sale or issuance of
     such additional shares or such subdivision or combination and the number of
     shares of Common Stock which the aggregate consideration received (determined as
     provided in subsection 4(c)(v)(F) below) for the issuance of such additional
     shares would purchase at the greater of (i) the Conversion Price in effect on
     the date of such issuance or (ii) the Market Price as of such date, and the
     denominator of which shall be the number of shares of Common Stock outstanding

6

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immediately after the sale or
issuance of such additional shares or such subdivision or combination. Such adjustment
shall be made successively whenever such an issuance is made.

(ii)
     In case of any reclassification, capital reorganization or other change of
     outstanding shares of Common Stock, or in case of any consolidation or merger of
     the Corporation with or into another corporation (other than a consolidation or
     merger in which the Corporation is the continuing corporation and which does not
     result in any reclassification, capital reorganization or other change of
     outstanding shares of Common Stock other than the number thereof), or in case of
     any sale or conveyance to another corporation of the property of the Corporation
     as, or substantially as, an entirety (other than a sale/leaseback, mortgage or
     other financing transaction), the Corporation shall cause effective provision to
     be made so that each holder of a share of Series A Preferred Stock shall be
     entitled to receive, upon conversion of such share of Series A Preferred Stock,
     the kind and number of shares of stock or other securities or property
     (including cash) receivable upon such reclassification, capital reorganization
     or other change, consolidation, merger, sale or conveyance by a holder of the
     number of shares of Common Stock into which such share of Series A Preferred
     Stock was convertible immediately prior to such reclassification, capital
     reorganization or other change, consolidation, merger, sale or conveyance. Any
     such provision shall include provision for adjustments that shall be as nearly
     equivalent as may be practicable to the adjustments provided for in this Section
     4(c). The Corporation shall not effect any such consolidation, merger or sale
     unless prior to or simultaneously with the consummation thereof the successor
     (if other than the Corporation) resulting from such consolidation or merger or
     the corporation purchasing assets or other appropriate corporation or entity
     shall assume, by written instrument executed and delivered to the transfer agent
     for the Series A Preferred Stock (the Transfer Agent), the
     obligation to deliver to the holder of each share of Series A Preferred Stock
     such shares of stock, securities or assets as, in accordance with the foregoing
     provisions, such holders may be entitled to purchase and the other obligations
     under this Agreement. The foregoing provisions shall similarly apply to
     successive reclassifications, capital reorganizations and other changes of
     outstanding shares of Common Stock and to successive consolidations, mergers,
     sales or conveyances.

(iii)
     If, at any time or from time to time, the Corporation shall issue or distribute
     to the holders of shares of Common Stock evidence of its indebtedness, any other
     securities of the Corporation or any cash, property or other assets (excluding
     an issuance or distribution governed by one of the preceding subsections of this
     Section 4(c) and also excluding cash dividends or cash distributions paid out of
     net profits legally available therefor in the full amount thereof (any such
     non-excluded event being herein called a Special Dividend)), then in
     each case the holders of the Series A Preferred Stock shall be entitled to a
     proportionate share of any such Special Dividend as though they were the holders
     of the number of shares of Common Stock of the Corporation into which their
     shares of Series A Preferred Stock are convertible as of the record date fixed
     for the determination of the holders of Common Stock of the Corporation entitled
     to receive such Special Dividend.

(iv)
     After each adjustment of the Conversion Price pursuant to this Section 4(c), the
     Corporation will promptly prepare a certificate signed by the Chairman or
     President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
     Assistant Secretary, of the Corporation setting forth: (i) the Conversion Price
     as so adjusted, (ii) the Conversion Rate corresponding to such

7

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Conversion and (iii) a brief
statement of the facts accounting for such adjustment. The Corporation will promptly file
such certificate with the Transfer Agent and cause a brief summary thereof to be sent by
ordinary first class mail to each registered holder of Series A Preferred Stock at his
last address as it shall appear on the registry books of the Transfer Agent. No failure
to mail such notice nor any defect therein or in the mailing thereof shall affect the
validity of such adjustment. The affidavit of an officer of the Transfer Agent or the
Secretary or an Assistant Secretary of the Corporation that such notice has been mailed
shall, in the absence of fraud, be prima facie evidence of the facts stated therein. The
Transfer Agent may rely on the information in the certificate as true and correct and has
no duty or obligation to independently verify the amounts or calculations set forth
therein.

(v)
     For purposes of Section 4(c)(i) hereof, the following provisions (A) to (F)
     shall also be applicable:

| | (A)
     The number of shares of Common Stock deemed outstanding at any given time shall
     include all shares of capital stock convertible into or exchangeable for Common
     Stock and all shares of Common Stock issuable upon the exercise of any
     convertible debt, warrants outstanding on the date thereof and options
     outstanding on the date thereof.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (B)
     No adjustment of the Conversion Price shall be made unless such adjustment would
     require an increase or decrease of at least $.01 in such price; provided that
     any adjustments which by reason of this clause (B) are not required to be made
     shall be carried forward and shall be made at the time of and together with the
     next subsequent adjustment which, together with any adjustment(s) so carried
     forward, shall require an increase or decrease of at least $.01 in the
     Conversion Price then in effect hereunder.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (C)
     In case of (1) the sale by the Corporation (including as a component of a unit)
     of any rights or warrants to subscribe for or purchase, or any options for the
     purchase of, Common Stock or any securities convertible into or exchangeable for
     Common Stock (such securities convertible, exercisable or exchangeable into
     Common Stock being herein called Convertible Securities), or (2) the
     issuance by the Corporation, without the receipt by the Corporation of any
     consideration therefor, of any rights or warrants to subscribe for or purchase,
     or any options for the purchase of, Common Stock or Convertible Securities,
     whether or not such rights, warrants or options, or the right to convert or
     exchange such Convertible Securities, are immediately exercisable, and the
     consideration per share for which Common Stock is issuable upon the exercise of
     such rights, warrants or options or upon the conversion or exchange of such
     Convertible Securities (determined by dividing (x) the minimum aggregate
     consideration, as set forth in the instrument relating thereto without regard to
     any antidilution or similar provisions contained therein for a subsequent
     adjustment of such amount, payable to the Corporation upon the exercise of such
     rights, warrants or options, plus the consideration received by the Corporation
     for the issuance or sale of such rights, warrants or options, plus, in the case
     of such
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

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| | Convertible
Securities, the minimum aggregate amount, as set forth in the instrument relating thereto
without regard to any antidilution or similar provisions contained therein for a
subsequent adjustment of such amount, of additional consideration, if any, other than
such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the
total maximum number, as set forth in the instrument relating thereto without regard to
any antidilution or similar provisions contained therein for a subsequent adjustment of
such amount, of shares of Common Stock issuable upon the exercise of such rights,
warrants or options or upon the conversion or exchange of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less than either the
Conversion Price or the Market Price of the Common Stock as of the date of the issuance
or sale of such rights, warrants or options, then such total maximum number of shares of
Common Stock issuable upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities (as of the date of the issuance or
sale of such rights, warrants or options) shall be deemed to be Common Stock for
purposes of Section 4(c)(i) hereof and shall be deemed to have been sold for an amount
equal to such consideration per share and shall cause an adjustment to be made in
accordance with Section 4(c)(i).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (D)
     In case of the sale by the Corporation of any Convertible Securities, whether or
     not the right of conversion or exchange thereunder is immediately exercisable,
     and the price per share for which Common Stock is issuable upon the conversion
     or exchange of such Convertible Securities (determined by dividing (x) the total
     amount of consideration received by the Corporation for the sale of such
     Convertible Securities, plus the minimum aggregate amount, as set forth in the
     instrument relating thereto without regard to any antidilution or similar
     provisions contained therein for a subsequent adjustment of such amount, of
     additional consideration, if any, other than such Convertible Securities,
     payable upon the conversion or exchange thereof, by (y) the total maximum
     number, as set forth in the instrument relating thereto without regard to any
     antidilution or similar provisions contained therein for a subsequent adjustment
     of such amount, of shares of Common Stock issuable upon the conversion or
     exchange of such Convertible Securities) is less than either the Conversion
     Price or the Market Price of the Common Stock as of the date of the sale of such
     Convertible Securities, then such total maximum number of shares of Common Stock
     issuable upon the conversion or exchange of such Convertible Securities (as of
     the date of the sale of such Convertible Securities) shall be deemed to be
     Common Stock for purposes of Section 4(c)(i) hereof and shall be
     deemed to have been sold for an amount equal to such consideration per share and
     shall cause an adjustment to be made in accordance with Section 4(c)(i).
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (E)
     In case the Corporation shall modify the rights of conversion, exchange or
     exercise of any of the securities referred to in (C) and (D) above or any other
     securities of the Corporation convertible, exchangeable or exercisable for
     shares of Common Stock, for any reason other than an event that would require
     adjustment to prevent dilution, so that the consideration per share received by
     the Corporation
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

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| | after
such modification is less than either the Conversion Price or the Market Price as of the
date prior to such modification, then such securities, to the extent not theretofore
exercised, converted or exchanged, shall be deemed to have expired or terminated
immediately prior to the date of such modification and the Corporation shall be deemed
for purposes of calculating any adjustments pursuant to this Section 4(c) to have issued
such new securities upon such new terms on the date of modification. Such adjustment
shall become effective as of the date upon which such modification shall take effect. On
the expiration or cancellation of any such right, warrant or option or the termination or
cancellation of any such right to convert or exchange any such Convertible Securities,
the Conversion Price then in effect hereunder shall forthwith be readjusted to such
Conversion Price as would have obtained (a) had the adjustments made upon the issuance or
sale of such rights, warrants, options or Convertible Securities been made upon the basis
of the issuance of only the number of shares of Common Stock theretofore actually
delivered (and the total consideration received therefor) upon the exercise of such
rights, warrants or options or upon the conversion or exchange of such Convertible
Securities and (b) had adjustments been made on the basis of the Purchase Price as
adjusted under clause (a) for all transactions (which would have affected such adjusted
Purchase Price) made after the issuance or sale of such rights, warrants, options or
Convertible Securities.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (F)
     In case of the sale of any shares of Common Stock, any Convertible Securities,
     any rights or warrants to subscribe for or purchase, or any options for the
     purchase of, Common Stock or Convertible Securities, the consideration received
     by the Corporation therefor shall be deemed to be the gross sales price therefor
     without deducting therefrom any expense paid or incurred by the Corporation or
     any underwriting discounts or commissions or concessions paid or allowed by the
     Corporation in connection therewith. In the event that any securities shall be
     issued in connection with any other securities of the Corporation, together
     comprising one integral transaction in which no specific consideration is
     allocated among the securities, then each of such securities shall be deemed to
     have been issued for such consideration as the Board of Directors of the
     Corporation determines in good faith; provided, however that if holders of in
     excess of 10% of the then outstanding Series A Preferred Stock disagree with
     such determination, the Corporation shall retain an independent investment
     banking firm for the purpose of obtaining an appraisal.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(vi)
     Notwithstanding any other provision hereof, no adjustment to the Conversion
     Price will be made

| | (A)
     upon the exercise of any of the options outstanding on the date hereof under the
     Corporations existing stock option plans; or
| | --------------------------------------------------------------------------------------------------------------------------------------------

| | (B)
     upon the issuance or exercise of options which may hereafter be granted with the
     approval of the Board of Directors, or exercised, under the Corporations
     1996 Stock Option Plan or under any other employee benefit plan of
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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| | the
Company to officers, directors or employees, but only with respect to such options as are
exercisable at prices no lower than the Closing Bid Price (or, if the prices referenced
in the definition of Closing Bid Price cannot be determined, the Fair Market Value) of
the Common Stock as of the date of grant thereof; or
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (C)
     upon the sale of any shares of Common Stock, warrants to purchase Common Stock
     or Convertible Securities in a firm commitment underwritten public offering,
     including, without limitation, shares sold upon the exercise of any
     overallotment option granted to the underwriters in connection with such
     offering; or
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (D)
     upon issuance or exercise of the Placement Warrants (in each case as defined in
     the placement agency agreement between the Corporation and the placement agent
     for sales of the Series A Preferred Stock), or upon the issuance or conversion
     of the Preferred Stock included in Liquidity Enhanced Exchangeable Preferred
     Stock Units of the Company issued (i) on or prior to the Final Closing Date or
     (ii) pursuant to the exercise of the Placement Warrants, or
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (E)
     upon the issuance or sale of Common Stock or Convertible Securities pursuant to
     the exercise of any rights, options or warrants to receive, subscribe for or
     purchase, or any options for the purchase of, Common Stock or Convertible
     Securities, whether or not such rights, warrants or options were outstanding on
     the date of the original sale of the Series A Preferred Stock or were thereafter
     issued or sold, provided that an adjustment was either made or not required to
     be made in accordance with Section 4(c)(i) in connection with the issuance or
     sale of such securities or any modification of the terms thereof; or
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (F)
     upon the issuance or sale of Common Stock upon conversion or exchange of any
     Convertible Securities, provided that any adjustments required to be made upon
     the issuance or sale of such Convertible Securities or any modification of the
     terms thereof were so made, and whether or not such Convertible Securities were
     outstanding on the date of the original sale of the Series A Preferred Stock or
     were thereafter issued or sold.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Section 4(c)(v)(E) shall nevertheless
apply to any modification of the rights of conversion, exchange or exercise of any of the
securities referred to in (A) through (C) or, to the extent effected with respect to less
than all of the outstanding Series A Preferred Stock, as the case may be, (D) above other
than automatic modifications made pursuant to applicable anti-dilution provisions with
respect to such securities.

(vii)
     As used in this Section 4(c), the term Common Stock shall mean and
     include the Corporations Common Stock authorized on the date of the
     original issue of the Units and shall also include any capital stock of any
     class of the Corporation thereafter authorized which shall not be limited to a
     fixed sum or percentage in respect of the rights of the holders thereof to
     participate in dividends and in the distribution of assets upon the voluntary
     liquidation, dissolution or winding up of the Corporation; provided, however,
     that the shares issuable upon conversion of the Series A

11

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Preferred Stock shall include only
shares of such class designated in the Corporations Certificate of Incorporation as
Common Stock on the date of the original issue of the Units or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the character
referred to in Section 4(c)(ii) hereof, the stock, securities or property provided for in
such section or (ii), in the case of any reclassification or change in the outstanding
shares of Common Stock issuable upon conversion of the Series A Preferred Stock as a
result of a subdivision or combination or consisting of a change in par value, or from
par value to no par value, or from no par value to par value, such shares of Common Stock
as so reclassified or changed.

(ix)
     Any determination as to whether an adjustment in the Conversion Price in effect
     hereunder is required pursuant to Section 4(c), or as to the amount of any such
     adjustment, if required, shall be binding upon the holders of the Series A
     Preferred Stock and the Company if made in good faith by the Board of Directors
     of the Company.

(d)
No Fractional Shares. No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon conversion of shares of Series A Preferred Stock. If
more than one certificate evidencing shares of Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full shares
issuable upon conversion thereof shall be computed on the basis of the aggregate number
of shares of Series A Preferred Stock so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any shares of Series A
Preferred Stock, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to the same fraction of the Market Price as of the
close of business on the day of conversion.

(e)
Reservation of Shares; Transfer Taxes; Etc. The Corporation shall at all times reserve
and keep available, out of its authorized and unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Series A Preferred Stock, such number of
shares of its Common Stock free of preemptive rights as shall be sufficient to effect the
conversion of all shares of Series A Preferred Stock from time to time outstanding. The
Corporation shall authorize and reserve a sufficient number of shares of the Common Stock
to permit the conversion in full of the Series A Preferred Stock (including in the event
of a Reset Event, as defined in Section 5). The Corporation shall use its best efforts to
effect such authorization by the date which is 90 days following the Final Closing Date
but in any event no later than the date which is 270 days following the Final Closing
Date. If such authorization is not effected by the date which is 270 days following the
Final Closing Date, the holder shall be entitled at its option, to require the
Corporation to repurchase the shares of Series A Preferred Stock then held by such holder
at $100.00 per share. In the event that on the date that a holder of Series A Preferred
Stock elects to convert such holders shares of Series A Preferred Stock the
Corporation has not authorized and reserved a sufficient number of shares of Common Stock
to permit such conversion in full, the holder will be entitled upon conversion to receive
the fair market value per share of Common Stock on account of the shares which would have
been issuable to the holder upon conversion but which the Corporation was unable to issue
due to the lack of authorized and reserved shares. The fair market value shall be paid in
cash, or, if the Corporation does not have sufficient cash, then with secured demand
notes. Fair market value per share of Common Stock for purposes of this Section 4(e)
shall mean the Closing Bid Price per share of the Common Stock for the trading day
immediately preceding the conversion. The

12

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Corporation shall use its best
efforts from time to time, in accordance with the laws of the State of Delaware, to
increase the authorized number of shares of Common Stock if at any time the number of
shares of authorized, unissued and unreserved Common Stock shall not be sufficient to
permit the conversion of all the then-outstanding shares of Series A Preferred Stock
(including in the event of a Reset Event, (as defined in Section 5).

The
Corporation shall pay any and all issue or other taxes that may be payable in respect of
any issue or delivery of shares of Common Stock on conversion of the Series A Preferred
Stock. The Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue or delivery of Common Stock (or other
securities or assets) in a name other than that in which the shares of Series A Preferred
Stock so converted were registered, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Corporation the amount of such tax
or has established, to the satisfaction of the Corporation, that such tax has been paid.

(f)
Prior Notice of Certain Events. In case:

(i)
     the Corporation shall declare any dividend (or any other distribution); or

(ii)
     the Corporation shall authorize the granting to the holders of Common Stock of
     rights or warrants to subscribe for or purchase any shares of stock of any class
     or of any other rights or warrants; or

(iii)
     of any reclassification of Common Stock (other than a subdivision or combination
     of the outstanding Common Stock, or a change in par value, or from par value to
     no par value, or from no par value to par value); or

(iv)
     of any consolidation or merger (including, without limitation, a Merger
     Transaction) to which the Corporation is a party and for which approval of any
     stockholders of the Corporation shall be required, or of the sale or transfer of
     all or substantially all of the assets of the Corporation or of any compulsory
     share exchange whereby the Common Stock is converted into other securities, cash
     or other property; or

(v)
     of the voluntary or involuntary dissolution, liquidation or winding up of the
     Corporation (including, without limitation, a Liquidation Event);

then the Corporation shall cause to
be filed with the transfer agent for the Series A Preferred Stock, and shall cause to be
mailed to the holders of record of the Series A Preferred Stock, at their last addresses
as they shall appear upon the stock transfer books of the Corporation, at least 20 days
prior to the applicable record date hereinafter specified, a notice stating (x) the date
on which a record (if any) is to be taken for the purpose of such dividend, distribution
or granting of rights or warrants or, if a record is not to be taken, the date as of which
the holders of Common Stock of record to be entitled to such dividend, distribution,
rights or warrants are to be determined and a description of the cash, securities or other
property to be received by such holders upon such dividend, distribution

13

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or granting of rights or warrants or
(y) the date on which such reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up or other Liquidation Event is expected to
become effective, the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such exchange, dissolution, liquidation or winding up or other
Liquidation Event and the consideration, including securities or other property, to be
received by such holders upon such exchange; provided, however, that no failure to mail
such notice or any defect therein or in the mailing thereof shall affect the validity of
the corporate action required to be specified in such notice.

(g)
OTHER CHANGES IN CONVERSION RATE. The Corporation from time to time may increase the
Conversion Rate by any amount for any period of time if the period is at least 20 days
and if the increase is irrevocable during the period. Whenever the Conversion Rate is so
increased, the Corporation shall mail to holders of record of the Series A Preferred
Stock a notice of the increase at least 15 days before the date the increased Conversion
Rate takes effect, and such notice shall state the increased Conversion Rate and the
period it will be in effect.

The
Corporation may make such increases in the Conversion Rate, in addition to those required
or allowed by this Section 4, as shall be determined by it, as evidenced by a resolution
of the Board of Directors, to be advisable in order to avoid or diminish any income tax to
holders of Common Stock resulting from any dividend or distribution of stock or issuance
of rights or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.

Notwithstanding
anything to the contrary herein, in no case shall the Conversion Price be adjusted to an
amount less than $.01 per share, the current par value of the Common Stock into which the
Series A Preferred Stock is convertible.

(h)
Ambiguities/Errors. The Board of Directors of the Corporation shall have the power to
resolve any ambiguity or correct any error in the provisions relating to the
convertibility of the Series A Preferred Stock, and its actions in so doing shall be
final and conclusive.

5.
Conversion Price Reset Event. The Conversion Price (subject to the adjustments pursuant
to the provisions of Section 4(c) above), is subject to adjustment on the date which is
twelve (12) months after the Final Closing Date (the Reset Date) if the
average Closing Bid Price of the Common Stock for the thirty (30) consecutive trading
days immediately preceding the Reset Date (the Reset Trading Price) is less
than 130% of the then applicable Conversion Price (a Reset Event). Upon a
Reset Event, the then applicable Conversion Price shall be reduced to equal the greater
of (i) the Reset Trading Price divided by 1.3 and (ii) 50% of the then applicable
Conversion Price. If there is any change in the Conversion Price as a result of the
preceding sentence, then the Conversion Rate shall be changed accordingly as set forth
above. The Corporation shall prepare a certificate signed by the principal financial
officer of the Corporation setting forth the Conversion Rate as of the Reset Date,
showing in reasonable detail the facts upon which such Conversion Rate is based, and such
certificate shall forthwith be filed with the transfer agent of the Series A Preferred
Stock. A notice stating that the Conversion Rate has been adjusted pursuant to this
paragraph, or that no adjustment is necessary, and setting forth the Conversion Rate in
effect as

14

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of the Reset Date shall be mailed as
promptly as practicable after the Reset Date by the Corporation to all record holders of
the Series A Preferred Stock at their last addresses as they shall appear in the stock
transfer books of the Corporation.

6.
Mandatory Conversion. At any time on or after the date that is 12 months after the Final
Closing Date, the Corporation, at its option, may cause the Series A Preferred Stock to
be converted in whole, or in part, on a pro rata basis, into fully paid and nonassessable
shares of Common Stock at the then effective Conversion Rate and such other securities
and property as herein provided if the Closing Bid Price of the Common Stock (or, if the
prices referenced in the definition of Closing Bid Price cannot be determined, the Fair
Market Value (as defined in Section 3(b)) of the Common Stock) shall have exceeded 200%
of the then applicable Conversion Price for at least 20 trading days in any 30
consecutive trading day period ending three days prior to the date of conversion. Any
shares of Series A Preferred Stock so converted shall be treated as having been
surrendered by the holder thereof for conversion pursuant to Section 4 on the date of
such mandatory conversion (unless previously converted at the option of the holder).

Not
more than 60 nor less than 20 days prior to the date of any such mandatory conversion,
notice by first class mail, postage prepaid, shall be given to the holders of record of
the Series A Preferred Stock to be converted, addressed to such holders at their last
addresses as shown on the stock transfer books of the Corporation. Each such notice shall
specify the date fixed for conversion, the place or places for surrender of shares of
Series A Preferred Stock, and the then effective Conversion Rate pursuant to Section 4.

Any
notice which is mailed as herein provided shall be conclusively presumed to have been duly
given by the Corporation on the date deposited in the mail, whether or not the holder of
the Series A Preferred Stock receives such notice; and failure properly to give such
notice by mail, or any defect in such notice, to the holders of the shares to be converted
shall not affect the validity of the proceedings for the conversion of any other shares of
Series A Preferred Stock. On or after the date fixed for conversion as stated in such
notice, each holder of shares called to be converted shall surrender the certificate
evidencing such shares to the Corporation at the place designated in such notice for
conversion. Notwithstanding that the certificates evidencing any shares properly called
for conversion shall not have been surrendered, the shares shall no longer be deemed
outstanding and all rights whatsoever with respect to the shares so called for conversion
(except the right of the holders to convert such shares upon surrender of their
certificates therefor) shall terminate.

7.
Voting Rights.

(a)
General. Except as otherwise provided herein, in the Certificate of Incorporation or the
By-laws or as required by applicable law, the holders of shares of Series A Preferred
Stock, the holders of shares of Common Stock and the holders of any other class or series
of shares entitled to vote with the Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation. In any such vote, each
share of Series A Preferred Stock shall entitle the holder thereof to cast the number of
votes equal to the number of votes which could be cast in such vote by a holder of the
Common Stock into which such share of

15

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Series A Preferred Stock is
convertible (regardless of whether the Corporation has sufficient authorized Shares of
Common Stock to issue upon the conversion of all outstanding Series A Preferred Stock) on
the record date for such vote, or if no record date has been established, on the date such
vote is taken. Any shares of Series A Preferred Stock held by the Corporation or any
entity controlled by the Corporation shall not have voting rights hereunder and shall not
be counted in determining the presence of a quorum.

(b)
Class Voting Rights. In addition to any vote specified in Section 7(a), so long as 50% of
the shares of Series A Preferred Stock (including those shares of Series A Preferred
Stock issued or issuable upon the exercise of the warrants issued to Paramount Capital,
Inc., the placement agent in connection with the offer and sale of the Series A Preferred
Stock or any other options for the purchase of Series A Preferred Stock) shall be
outstanding, the Corporation shall not, without the affirmative vote or consent of the
holders of at least 66.67% of all outstanding Series A Preferred Stock voting separately
as a class, (i) amend, alter or repeal any provision of the Certificate of Incorporation,
or the Bylaws of the Corporation so as adversely to affect the relative rights,
preferences, qualifications, limitations or restrictions of the Series A Preferred Stock,
(ii) declare or pay any dividend or distribution on any securities of the Corporation
other than the Series A Preferred Stock pursuant to and accordance with the provisions of
this Certificate of Designations, or authorize the repurchase of any securities of the
Corporation, or (iii) authorize or issue, or increase the authorized amount of, any
security ranking prior to the Series A Preferred Stock (A) upon a Liquidation Event or
(B) with respect to the payment of any dividends or distributions or (C) with respect to
voting rights. The vote as contemplated herein shall specifically not be required for (x)
issuances of Common Stock or capital stock of the Corporation on parity with the Series A
Preferred Stock , (y) the authorization, issuance or increase in the amount of the Series
A Preferred Stock prior to the Final Closing Date or (z) any consolidation or merger of
the Corporation with or into another corporation in which the Corporation is not the
surviving entity, a sale or transfer of all or part of the Corporations assets for
cash, securities or other property, or a compulsory share exchange.

8.
Outstanding Shares. For purposes of this Certificate of Designations, all shares of
Series A Preferred Stock shall be deemed outstanding except (i) from the date, or the
deemed date, of surrender of certificates evidencing shares of Series A Preferred Stock,
all shares of Series A Preferred Stock converted into Common Stock, (ii) from the date of
registration of transfer, all shares of Series A Preferred Stock held of record by the
Corporation or any subsidiary of the Corporation and (iii) any and all shares of Series A
Preferred Stock held in escrow prior to delivery of such stock by the Corporation to the
initial beneficial owners thereof.

16

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9.
Status of Acquired Shares. Shares of Series A Preferred Stock received upon conversion
pursuant to Section 4 or Section 5 or Section 6 or otherwise acquired by the Corporation
will be restored to the status of authorized but unissued shares of Preferred Stock,
without designation as to class, and may thereafter be issued, but not as shares of
Series A Preferred Stock.

10.
Preemptive Rights. The Series A Preferred Stock is not entitled to any preemptive or
subscription rights in respect of any securities of the Corporation.

11.
No Amendment or Impairment. The Corporation shall not amend its Certificate of
Incorporation or participate in any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action, for the
purpose of avoid ing or seeking 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 carrying out all such action as may be reasonably necessary or
appropriate in order to protect the rights of the holders of the Series A Preferred Stock
against impairment.

12.
Severability of Provisions. Whenever possible, each provision hereof shall be interpreted
in a manner as to be effective and valid under applicable law, but if any provision
hereof is held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity, without invalidating
or otherwise adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or enforceable if a
period of time were extended or shortened or a particular percentage were increased or
decreased, then such court may make such change as shall be necessary to render the
provision in question effective and valid under applicable law.

17

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IN
WITNESS WHEREOF, Palatin Technologies, Inc. has caused this certificate to be signed on
its behalf by Edward J. Quilty, its Chairman and Chief Executive Officer, this 21 day of
February, 1997.

| |                            |                                                                                   | 
| | -------------------------- | --------------------------------------------------------------------------------- | 
| | PALATIN TECHNOLOGIES, INC. |                                                                                  
|
| | By:                        | /s/ Edward J. Quilty                                                              | 
| |                            | Name:    Edward J. Quilty 
        Title:    Chairman and Chief Executive Officer | 

ATTEST:

/s/ John J. McDonoughSecretary

18

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CERTIFICATE OF AMENDMENT

TO THE

RESTATED CERTIFICATE OF
INCORPORATION

OF

PALATIN TECHNOLOGIES,
INC.

Under Section 242 of theGeneral Corporation Law
of the State of Delaware

The
undersigned officer of Palatin Technologies, Inc., a Delaware corporation (the
Corporation), in order to amend the Restated Certificate of Incorporation of
the Corporation, pursuant to the provisions of Section 242 of the General Corporation Law
of the State of Delaware, does hereby certify as follows:

1.
The Restated Certificate of Incorporation of the Corporation is hereby amended by
striking out Section 1 of Article IV thereof in its entirety and by substituting in lieu
of said Section 1 the following new Section 1:

| | Section
1. AUTHORIZED CAPITAL STOCK. The Corporation shall be authorized to issue two classes of
shares of capital stock to be designated, respectively, Preferred Stock and
Common Stock. The total number of shares of capital stock which the
Corporation shall have the authority to issue is 85,000,000, comprised of 75,000,000
shares of Common Stock, par value $.01 per share, and 10,000,000 shares of Preferred
Stock, par value $.01 per share.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.
The Restated Certificate of Incorporation of the Corporation is hereby amended by
including a new Section 4 of Article IV thereof as follows:

| | SECTION
4. Upon the date the Certificate of Amendment, including this Section 4, is filed with
the Secretary of State of the State of Delaware (the Effective Date), each
four shares of issued and outstanding shares of Common Stock of this Corporation shall be
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | automatically
combined into one share of Common Stock of this Corporation (the Reverse Stock Split).
In lieu of the issuance of any fractional shares that would otherwise result from the
Reverse Stock Split, the Corporation shall pay the cash value of fractions of a share
determined by the average closing price of the Common Stock for the five (5) trading days
immediately preceding the Effective Date multiplied by the fractional interest. Following
the Effective Date, certificates representing the shares of Common Stock to be
outstanding thereafter shall be exchanged for certificates now outstanding pursuant to
procedures adopted by the Corporations Board of Directors and communicated to those
who are to receive new certificates.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3.
The foregoing amendments to the Corporations Restated Certificate of Incorporation
were duly authorized and adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.

4.
This Certificate of Amendment shall become effective at 11:59 p.m., EDT, on September 5,
1997.

IN
WITNESS WHEREOF, the undersigned has signed this Certificate of Amendment and does hereby
affirm, under penalty of perjury, that the statements contained herein are true and
correct, this 5th day of September, 1997.

| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Palatin Technologies, Inc./s/ John J. McDonough
        Name:   John J. McDonoughTitle:   Vice President

---

STATE OF DELAWARE
CERTIFICATE OF AMENDMENT OF THERESTATED CERTIFICATE OF
INCORPORATIONOFPALATIN TECHNOLOGIES,
INC.

The corporation organized and
existing under and by virtue of the General Corporation Law of the State of Delaware does
hereby certify:

FIRST: That at a meeting of the Board
of Directors of Palatin Technologies, Inc., resolutions were duly adopted setting forth a
proposed amendment of the Restated Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the proposed amendment
is as follows:

RESOLVED, that the Restated
Certificate of Incorporation of this corporation be amended by striking out in its
entirety Section 1 of the Article thereof numbered IV and by substituting in
lieu of said Section 1 of said Article a new Section 1 which shall be and read as follows:

| | Section
1. Authorized Capital Stock. The Corporation shall be authorized to issue two classes of
shares of capital stock to be designated, respectively, Preferred Stock and
Common Stock. The total number of shares of capital stock which the
Corporation shall have the authority to issue is 160,000,000, comprised of 150,000,000
shares of Common Stock, par value $.01 per share, and 10,000,000 shares of Preferred
Stock, par value $.01 per share.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

SECOND: That thereafter, pursuant to
resolution of its Board of Directors, a special meeting of the stockholders of said
corporation was duly called and held upon notice in accordance with Section 222 of the
General Corporation Law of the State of Delaware at which meeting the necessary number of
shares as required by statute were voted in favor of the amendment.

THIRD: That said amendment was duly
adopted in accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.

FOURTH: That the capital of said
corporation shall not be reduced under or by reason of said amendment.

IN WITNESS WHEREOF, said corporation
has caused this certificate to be signed this 4th day of May 2005.

| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | By: /s/ Stephen T. Wills
        Name:  Stephen T. WillsTitle:  Executive Vice President and          
        Chief Financial Officer