EXHIBIT 3.1.1


                           CERTIFICATE OF DESIGNATION
                                       FOR
                       SENIOR CONVERTIBLE PREFERRED STOCK

(Pursuant to Minnesota Statutes, Section 302A.401, Subd. 3(b))

---------------


         The undersigned, being the Chief Executive Officer of Orphan Medical,
Inc. (the "Corporation"), a corporation organized and existing under the
Minnesota Business Corporation Act, in accordance with the provisions of
Minnesota Statutes, Section 302A.401, Subd. 3(b), does hereby certify that:

         Pursuant to the authority vested in the Board of Directors of the
Corporation by the Articles of Incorporation of the Corporation, the Board of
Directors on July 14, 1998, in accordance with Minnesota Statutes, Section
302A.401, Subd. 3, duly adopted the following resolution establishing a series
of 14,000 shares of the Corporation's Preferred Stock, to be designated as its
Senior Convertible Preferred Stock.

         RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation (the "Board of Directors") by the Articles of
Incorporation of the Corporation, the Board of Directors hereby establishes a
series of Senior Convertible Preferred Stock of the Corporation and hereby
states the designation and number of shares, and fixes the relative rights and
preferences, of such series of shares as follows:

SENIOR CONVERTIBLE PREFERRED STOCK

         Section 1. Designation; Number of Shares. The shares of such series
shall be designated as "Senior Convertible Preferred Stock" (the "Convertible
Preferred Stock"), and the number of authorized shares constituting the
Convertible Preferred Stock shall be 14,000.

         Section 2. Par Value; No Cumulative Voting; No Preemptive Rights. The
Convertible Preferred Stock shall have a par value of $0.01 per share. As
provided in Articles IV and V of the Corporation's Articles of Incorporation,
holders of Convertible Preferred Stock shall not be entitled to cumulate their
votes in any election of directors in which they are entitled to vote and,
except as provided in an agreement between the Corporation and any holder of
Convertible Preferred Stock, shall not be entitled to any preemptive rights to
acquire shares of any class or series of capital stock of the Corporation.

         Section 3. Rank. The Convertible Preferred Stock shall rank prior to
all of the Corporation's Common Stock, par value $0.01 per share (the "Common
Stock") and other classes of preferred stock now outstanding or hereafter
issued, both as to payment of dividends and as to distributions of assets upon
the liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary.

         Section 4. Dividends and Distributions.

                  (a) Holders of the Convertible Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, cumulative
dividends at the rate, in the form, at the times and in the manner set forth in
this Section 4. Such dividends shall accrue on any given share from the day of
issuance of such share and shall accrue from day to day whether or not earned or
declared.

                  (b) The dividend rate on the Convertible Preferred Stock shall
be $75.00 per annum per share; provided that (i) in the event that at any time
during any 730-day period individuals who constituted the Board of Directors at
the beginning of such period, or the First Issuance Date (as defined in Section
7) (whichever is later), cease for any reason to constitute a majority of the
Board of Directors then in office or (ii) the Board of Directors fails to
declare and pay in full, on any Dividend Payment Date (as defined in Section
4(c)), all dividends accrued since the last Dividend Payment Date (or with
respect to the

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first Dividend Payment Date, since the date of issuance), the dividend rate on
the Convertible Preferred Stock shall be increased to $200 per annum per share
unless holders of a majority of the then outstanding shares of Convertible
Preferred Stock agree to waive such increase. Any change of the dividend rate in
accordance with this Section 4(b) shall be deemed to occur on the date upon
which the event in question occurs. In the event the dividend rate is adjusted
in accordance with this Section 4(b), the Corporation shall pay such dividends
in cash.

                  (c) Dividends shall be payable in arrears, when and as
declared by the Board of Directors on August 1 and February 1 of each year,
commencing February 1, 1999 (each such semiannual payment date, a "Dividend
Payment Date"), except that if any such date is a Saturday, Sunday or legal
holiday then such dividend shall be payable on the first immediately succeeding
calendar day which is not a Saturday, Sunday or legal holiday. Dividends shall
accrue on each share of Convertible Preferred Stock from the date of issuance of
such shares and, after payment of a dividend as required hereunder, from and
after each Dividend Payment Date based on the number of days elapsed and a
365-day year; provided that to the extent that a dividend is not paid in cash or
stock on any Dividend Payment Date as provided in paragraph (d) below such
unpaid amount shall in turn accrue dividends at the rate specified herein until
paid as provided herein. The dividend payable on the first Dividend Payment Date
with respect to any shares of Convertible Preferred Stock shall be the pro rata
portion of the dividend rate based upon the number of days from and including
the date of issuance, up to and including such first Dividend Payment Date and a
365-day year. Each dividend shall be paid to the holders of record of shares of
the Convertible Preferred Stock as they appear on the books of the Corporation
on such record date, not more than sixty (60) days nor fewer than ten (10) days
preceding the respective Dividend Payment Date, as shall be fixed by the Board
of Directors.

                  (d) Any dividend payment made with respect to the Convertible
Preferred Stock, may be made, at the sole discretion of the Board of Directors,
in cash out of funds legally available for such purpose or (i) in respect of
dividends accruing on the Convertible Preferred Stock on or prior to August 1,
2000, by issuing the number of shares of Convertible Preferred Stock equal to
the amount of the dividend divided by $1,000 and (ii) in respect of dividends
accruing on the Convertible Preferred Stock after August 1, 2000, by issuing a
number of shares of Common Stock equal to the amount of the dividend divided by
the average last sale price of the Common Stock for the five (5) trading days
preceding the dividend payment date (the "Dividend Conversion Price"); provided,
that no fractional shares shall be issued; provided, further, that the
Corporation shall pay dividends in cash to the extent that the issuance of stock
would require shareholder approval pursuant to Section 4460(i) of the Rules of
the NASDAQ Stock Market or any successor rule thereto and such approval has not
been obtained. Any such dividend payment may be made, in the sole discretion of
the Board of Directors, partially in cash and partially in shares of Convertible
Preferred Stock or Common Stock, as applicable, determined in accordance with
the preceding formula; provided, that in the event that any such dividend
payment is made partially in cash and partially in shares of Convertible
Preferred Stock or Common Stock, each holder of Convertible Preferred Stock
shall receive a ratable amount of cash and Convertible Preferred Stock or Common
Stock, as the case may be, that is proportionate to the amount of Convertible
Preferred Stock held by such holder on which such dividend is paid. If any
fractional interest in a share of Convertible Preferred Stock or Common Stock
would be delivered upon any payment of dividends pursuant to this Section 4, the
Corporation, in lieu of delivering the fractional share of Convertible Preferred
Stock or Common Stock shall pay an amount to the holder thereof equal to such
fraction multiplied by $1,000 or equal to the Dividend Conversion Price, as
applicable. All shares of Convertible Preferred Stock and Common Stock issued as
a dividend shall be fully paid and nonassessable.

                  (e) No dividends or other distributions (other than dividends
payable in Junior Dividend Stock (as defined below)) shall be paid or set apart
for payment on, and no purchase, redemption or other acquisition shall be made
by the Corporation, or any of its subsidiaries, of, any shares of Common Stock
or other capital stock of the Corporation ranking junior as to payment of
dividends on the Convertible Preferred Stock (such Common Stock and other
capital stock being referred to herein collectively as "Junior Dividend Stock");
provided that dividends or other distributions may be paid or set

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apart for payment on any shares of Junior Dividend Stock at such time as less
than 20% of the Denominator Shares (as defined in Section 6(b)) remain
outstanding. Any reference to "distribution" contained in this Section 4 shall
not be deemed to include any distribution made in connection with a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.

         Section 5. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of Convertible Preferred Stock shall be entitled to receive out of
the assets of the Corporation an amount equal to the dividends accumulated and
unpaid thereon to the date of final distribution to such holders, whether or not
declared, without interest, plus a sum equal to $1,000 per share, and no more,
before any payment shall be made or any assets distributed to the holders of
Common Stock or any other capital stock of the Corporation ranking junior as to
liquidation rights to the Convertible Preferred Stock (such Common Stock and
other capital stock being referred to herein collectively as "Junior Liquidation
Stock"). The entire assets of the Corporation available for distribution shall
be distributed ratably among the holders of the Convertible Preferred Stock.
After payment in full of the liquidation preference of the shares of the
Convertible Preferred Stock, the holders of such shares shall not be entitled to
any further participation in any distribution of assets by the Corporation.
Neither a consolidation or merger of the Corporation with another corporation
nor a sale or transfer of all or part of the Corporation's assets for cash,
securities or other property will be deemed a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 5.

         Section 6. Ten Year Conversion or Redemption.

                  (a) On the tenth anniversary (the "Anniversary Date") of the
First Issuance Date (as defined in Section 7), the Corporation, at its election,
shall either require the conversion of all then issued and outstanding shares of
Convertible Preferred Stock into fully paid and nonassessable shares of Common
Stock at the Conversion Price (the "Anniversary Conversion") or redeem the then
issued and outstanding shares of Convertible Preferred Stock (the "Redemption")
as provided below.

                  (b) If the Corporation elects the Anniversary Conversion, the
Corporation shall pay a conversion fee equal to $3,000,000 (the "Conversion
Fee"), subject to adjustment, on a pro rata basis to the holders of the then
issued and outstanding shares of Convertible Preferred Stock. The Corporation
shall pay the Conversion Fee, at the election of the Board of Directors, in (i)
cash or (ii) a number of shares of Common Stock equal to the Conversion Fee
divided by the average last sale price of the Common Stock for the five (5)
trading days immediately preceding the Anniversary Date; provided, however, that
the Corporation shall pay the Conversion Fee in cash to the extent that the
issuance of stock would require shareholder approval pursuant to Section 4460(i)
of the Rules of the NASDAQ Stock Market or any successor rule thereto and such
approval has not been obtained. In the event that the number of shares of
Convertible Preferred Stock issued and outstanding as of the Anniversary Date is
less than the sum of the number of Initial Shares (as defined in Section 7(b)
below) and shares issued as dividends, if any, on the Convertible Preferred
Stock (such sum is hereinafter referred to as the "Denominator Shares") pursuant
to Section 4 hereof, then the Conversion Fee will be adjusted downward to equal
the product of (a) $3,000,000 and (b) the quotient of the number of shares of
Convertible Preferred Stock issued and outstanding as of the Anniversary Date
divided by the Denominator Shares (as adjusted for any stock split, stock
dividend, recapitalization or otherwise). On or after the Anniversary Date, each
holder of Convertible Preferred Stock shall surrender the certificate or
certificates evidencing such shares to the Corporation and the Corporation shall
deliver to such holder (i) a certificate or certificates representing the number
of shares of Common Stock equal to the number of shares of Convertible Preferred
Stock to be converted multiplied by $1,000 divided by the Conversion Price set
forth in the notice to the holder, (ii) the holder's pro rata portion of the
Conversion Fee and (iii) accrued and unpaid dividends in cash or a number of
shares of Common Stock equal to the dividend amount divided by the Conversion
Price. In addition, the following provisions of Section 7 shall be applicable to
the Anniversary Conversion: the second sentence of the second paragraph of
Section 7(a), third paragraph of Section 7(b), Section 7(d) and Section 7(e).

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                  (c) In the event the Corporation elects a Redemption, the
Corporation shall redeem for cash on the Anniversary Date all issued and
outstanding shares of Convertible Preferred Stock at a price per share equal to
$1,000 plus all accrued and unpaid dividends on such share to the Anniversary
Date (such sum being hereinafter referred to as the "Redemption Price"). On or
after the Anniversary Date, each holder of Convertible Preferred Stock shall
surrender the certificate or certificates evidencing such shares to the
Corporation at the place designated in the notice to the holder and shall
thereupon be entitled to receive payment of the Redemption Price. If, on the
Anniversary Date, funds necessary for the Redemption shall be available therefor
and shall have been irrevocably deposited or set aside, then, notwithstanding
that the certificates evidencing any shares so called for redemption shall not
have been surrendered, on the Anniversary Date, the dividends with respect to
the shares so called shall cease to accrue, such shares shall no longer be
deemed outstanding, the holders thereof shall cease to be shareholders and all
rights whatsoever with respect to such shares (except the right of the holders
thereof to receive the Redemption Price upon surrender of their certificates)
shall terminate.

                  (d) No more than sixty (60) nor less than twenty (20) days
prior to the Anniversary Date, the Corporation shall deliver notice, by first
class mail, postage prepaid, to each holder of record of the Convertible
Preferred Stock, addressed to such shareholder at its last address as shown on
the stock books of the Corporation. Such notice shall state whether the
Corporation has elected to effect the Anniversary Conversion or the Redemption.
If the Corporation fails to give notice as provided above, the Corporation shall
be deemed to have elected the Redemption. In the event of the Anniversary
Conversion, the notice shall also state that the Anniversary Date is the date
fixed for conversion, the then-effective Conversion Price (as defined in Section
7), whether the Conversion Fee will be paid in cash or shares of Common Stock
and the holder's pro rata portion of such, whether the accumulated and unpaid
dividends to the Anniversary Date will be paid in cash or shares of Common Stock
and that on and after the Anniversary Date, dividends will cease to accumulate
on such shares of Convertible Preferred Stock; provided that there is no default
in the payment of the Conversion Fee. In the event of the Redemption, the notice
shall also state that the Anniversary Date is the date fixed for redemption, the
Redemption Price, the place or places of payment, that the right of holders of
Convertible Preferred Stock to exercise their conversion rights in accordance
with Section 7 shall expire at the close of business on the Anniversary Date
(provided that there is no default in payment of the Redemption Price) and that
payment of the Redemption Price will be made upon presentation and surrender of
certificates representing the Convertible Preferred Stock to the Corporation or
its agent as provided in the notice

         Section 7. Conversion.

                  (a) Holders of Convertible Preferred Stock may, at their
option upon surrender of the certificates therefor, convert any or all of their
shares of Convertible Preferred Stock into fully paid and nonassessable shares
of Common Stock (and such other securities and property as they may be entitled
to, as hereinafter provided) at any time after issuance thereof; provided, that
such conversion right shall expire at the close of business on the date, if any,
fixed for the redemption of Convertible Preferred Stock in any notice of
redemption given pursuant to Section 6 hereof if there is no default in payment
of the Redemption Price. Each share of Convertible Preferred Stock shall be
convertible at the office of any transfer agent for the Convertible Preferred
Stock, and at such other office or offices, if any, as the Board of Directors
may designate, into that number of fully paid and nonassessable shares of Common
Stock (calculated as to each conversion to the nearest whole share) as shall be
equal to $1,000 divided by the Conversion Price (as defined below) in effect at
the time of conversion. The initial Conversion Price will be the lesser of (i)
110% of the average last sale price of the Common Stock for the twenty (20)
trading days immediately prior to July 23, 1998 (the "First Issuance Date") or,
(ii) 110% of the average last sale price of the Common Stock for the twenty (20)
days immediately prior to the date that is ninety (90) days from the First
Issuance Date of the Convertible Preferred Stock, subject to adjustment from
time to time as provided in Section 8 (such conversion rate, as so adjusted from
time to time, being referred to herein as the "Conversion Price"); provided,
that in no event shall the initial Conversion Price (prior to any adjustment
provided in Section 8) be less than $8.50.

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                  The right of holders of Convertible Preferred Stock to convert
their shares shall be exercised by surrendering for such purpose to the
Corporation or its agent, as provided above, certificates representing shares to
be converted, duly endorsed in blank or accompanied by proper instruments of
transfer. The Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of Common
Stock or other securities or property upon conversion of Convertible Preferred
Stock in a name other than that of the holder of the shares of Convertible
Preferred Stock being converted, nor shall the Corporation be required to issue
or deliver any such shares or other securities or property unless and until the
person or persons requesting the issuance thereof shall have paid to the
Corporation the amount of any such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.

                  (b) In the event the Common Stock trades above $40 per share
for ninety (90) consecutive trading days and the average daily reported volume
in trading for the Common Stock on all national securities exchanges and/or
reported through the automated quotation system of a registered securities
association for any twenty (20) consecutive trading days during such 90-day
period exceeds 10% of the number of shares of Common Stock into which the sum of
the number of shares of Convertible Preferred Stock issued on the First Issuance
Date and the additional shares of Convertible Preferred Stock issued to such
holders within one hundred twenty (120) days after the First Issuance Date (the
"Initial Shares") could be converted, adjusted to eliminate the effect of any
reporting of both the buy and sell side of any trade, the Corporation may, by
notice to the holders thereof, within thirty (30) days after such 90-day period,
elect to require the conversion of all the shares of Convertible Preferred Stock
then outstanding into fully paid and nonassessable shares of Common Stock at the
applicable Conversion Price.

                  Such notice shall be delivered by first class mail, postage
prepaid, shall be given to the holders of record of the Convertible Preferred
Stock to be converted, addressed to such shareholders at their last addresses as
shown on the stock books of the Corporation. Each such notice of conversion
shall specify the date fixed for conversion; the then-effective Conversion
Price; that accumulated but unpaid dividends to the date fixed for conversion
will be paid, at the election of the Board of Directors, in cash or in a number
of shares of Common Stock equal to the dividend amount divided by the Conversion
Price on the date fixed for conversion (which shall be within thirty (30) days
of the notice); and that on and after the conversion date, dividends will cease
to accumulate on such shares.

                  Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given, whether or not a holder of the
Convertible Preferred Stock receives such notice; and failure so to give such
notice, or any defect in such notice, to the holders of any shares designated
for conversion shall not affect the validity of the proceedings for the
conversion of any other shares of Convertible Preferred Stock.

                  (c) A number of shares of the authorized but unissued Common
Stock sufficient to provide for the conversion of the Convertible Preferred
Stock outstanding upon the basis hereinbefore provided shall at all times be
reserved by the Corporation, free from preemptive rights, for such conversion,
subject to the provisions of the next paragraph. If the Corporation shall issue
any securities or make any change in its capital structure which would change
the number of shares of Common Stock into which each share of the Convertible
Preferred Stock shall be convertible as herein provided, the Corporation shall
at the same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Convertible Preferred Stock
on the new basis. The Corporation shall comply with all securities laws
regulating the offer and delivery of shares of Common Stock upon conversion of
the Convertible Preferred Stock and shall use its best efforts to list such
shares on each national securities exchange on which the Common Stock is listed
or to have such shares admitted for quotation on the NASDAQ National Market
System if the Common Stock is admitted for quotation thereon.

                  (d) Upon the surrender of certificates representing shares of
Convertible Preferred Stock to be converted, duly endorsed or accompanied by
proper instruments of transfer as provided above,

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the person converting such shares shall be deemed to be the holder of record of
the Common Stock issuable upon such conversion, and all rights with respect to
the shares surrendered shall forthwith terminate except the right to receive the
Common Stock or other securities, cash or other assets as herein provided.

                  (e) No fractional shares of Common Stock shall be issued upon
conversion of Convertible Preferred Stock but, in lieu of any fraction of a
share of Common Stock which would otherwise be issuable in respect of the
aggregate number of such shares surrendered for conversion at one time by the
same holder, the Corporation shall pay in cash an amount equal to the product of
(a)the Closing Price of a share of Common Stock (as defined in the next
sentence) on the last trading day before the conversion date and (b)such
fraction of a share. The "Closing Price" for each day shall be the last reported
sale price or, in case no sale takes place on such day, the average of the
closing bid and asked price on such day, in either case as reported on the New
York Stock Exchange Composite Tape, or, if the Common Stock is not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange, on the NASDAQ National Market System, or, if the Common Stock is not
admitted for quotation on the NASDAQ National Market System, the average of the
high bid and low asked prices on such day as recorded by the National
Association of Securities Dealers, Inc. through NASDAQ, or, if the National
Association of Securities Dealers, Inc. through NASDAQ shall not have reported
any bid and asked prices for the Common Stock on such day, the average of the
bid and asked prices for such day as furnished by any New York Stock Exchange
member firm selected from time to time by the Corporation for such purpose, or,
if no such bid and asked prices can be obtained from any such firm, the fair
market value of one share of the Common Stock on such day as determined in good
faith by the Board of Directors of the Corporation.

         Section 8. Adjustments to Conversion Price. Notwithstanding anything in
this Section 8 to the contrary, no change in the Conversion Price shall be made
until the cumulative effect of the adjustments called for by this Section8 since
the date of the last change in the Conversion Price would change the Conversion
Price by more than 1%. However, once the cumulative effect would result in such
a change, then the Conversion Price shall be changed to reflect all adjustments
called for by this Section8 and not previously made. Additionally, there shall
be no adjustment in the Conversion Price as a result of any issue or sale (or
deemed issue or sale) of (i)(A)shares of Common Stock that may be issued after
the First Issuance Date to Chronimed, Inc. pursuant to the terms of the
Termination Agreement between the Corporation and Chronimed, Inc., (B) shares of
Common Stock that may be issued upon exercise of stock options that are
outstanding on the First Issuance Date (as such number of shares is
proportionately adjusted for subsequent stock splits, combinations of shares and
stock dividends affecting the Common Stock), in each case pursuant to the terms
thereof as in effect on the First Issuance Date, and (C) stock options and
shares of Common Stock issuable upon exercise of such options granted to
employees and directors of the Corporation and its Subsidiaries pursuant to the
terms of stock option plans approved by the Corporation's Board of Directors if
such options are exercisable at the market price on the date of grant; provided
that the aggregate number of shares of Common Stock issued, or issuable,
pursuant to this clause (i) shall not exceed two million shares, (ii) Common
Stock upon the exercise of warrants that, as of June 30, 1998, entitled holders
to purchase an aggregate of 213,255 shares of Common Stock (which warrants were
originally issued on May 19, 1995 to R.J. Steichen & Company and a portion of
which were subsequently assigned to employees and affiliates of R.J. Steichen &
Company), (iii) Common Stock upon the conversion or exchange of the Preferred
Stock or (iv) securities pursuant to any public offering of the Company's
securities registered under the Securities Act (collectively referred to as
"Permitted Issuances"). Subject to the foregoing, the Conversion Price shall be
adjusted from time to pursuant to Section 8(a).

                  (a) If and whenever, on or after the First Issuance Date, the
Corporation issues or sells, or in accordance with this Section 8(a) is deemed
to have issued or sold, any shares of its Common Stock for consideration per
share less than the Conversion Price in effect immediately prior to the time of
such issue or sale, then, unless such issuance or sale was a Permitted Issuance,
immediately upon such

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issue or sale or deemed issue or sale the Conversion Price shall be reduced to
the Conversion Price determined by dividing (i) the sum of (1) the product
derived by multiplying the Conversion Price in effect immediately prior to such
issue or sale by the number of shares of Common Stock deemed outstanding
immediately prior to such issue or sale, plus (2) the consideration, if any,
received by the Corporation upon such issue or sale, by (ii) the number of
shares of Common Stock deemed outstanding immediately after such issue or sale.

                           (i) Issuance of Rights or Options. If the Corporation
in any manner grants or sells any options and the price per share for which
Common Stock is issuable upon the exercise of such options, or upon conversion
or exchange of any convertible securities issuable upon exercise of such
options, is less than the Conversion Price in effect immediately prior to the
time of the granting or sale of such options, then, unless such issuance or sale
was a Permitted Issuance, the total maximum number of shares of Common Stock
issuable upon the exercise of such options or upon conversion or exchange of the
total maximum amount of such convertible securities issuable upon the exercise
of such options shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the granting or sale of such options for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable" shall be determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the granting or sale of such options, plus the minimum aggregate amount of
additional consideration payable to the Corporation upon exercise of all such
options, plus in the case of such options which relate to convertible
securities, the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the issuance or sale of such convertible
securities and the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the exercise of such options or
upon the conversion or exchange of all such convertible securities issuable upon
the exercise of such options. No further adjustment of the Conversion Price
shall be made when convertible securities are actually issued upon the exercise
of such options or when Common Stock is actually issued upon the exercise of
such options or the conversion or exchange of such convertible securities.

         (ii) Issuance of Convertible Securities. If the Corporation in any
manner issues or sells any convertible securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
the Conversion Price in effect immediately prior to the time of such issue or
sale, then, unless such issuance or sale is a Permitted Issuance, the maximum
number of shares of Common Stock issuable upon conversion or exchange of such
convertible securities shall be deemed to be outstanding and to have been issued
and sold by the Corporation at the time of the issuance or sale of such
convertible securities for such price per share. For the purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such convertible
securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such convertible securities. No further adjustment of the
Conversion Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such convertible securities, and if any such issue or
sale of such convertible securities is made upon exercise of any options for
which adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this Section 8(a) no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.

                           (iii) Change in Option Price or Conversion Rate. If
the purchase price provided for in any options, the additional consideration, if
any, payable upon the conversion or exchange of any convertible securities or
the rate at which any convertible securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be immediately adjusted to the
Conversion Price which would have been in effect at such time had such options
or convertible securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold; provided that in no event shall the
Conversion Price be adjusted to a price higher than the Conversion Price 

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in effect prior to any actions described in this Section 8(a)(iii). For purposes
of this Section 8(a)(iii) if the terms of any option or convertible security
which was outstanding as of the First Issuance Date are changed in the manner
described in the immediately preceding sentence, then such option or convertible
security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change and no such change shall cause the Conversion Price hereunder to be
increased.

                           (iv) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any option or the termination of
any right to convert or exchange any convertible security without the exercise
of any such option or right, the Conversion Price then in effect hereunder shall
be adjusted immediately to the Conversion Price which would have been in effect
at the time of such expiration or termination had such option or convertible
security, to the extent outstanding immediately prior to such expiration or
termination, never been issued. For purposes of this Section 8(a) the expiration
or termination of any option or convertible security which was outstanding as of
the First Issuance Date shall not cause the Conversion Price hereunder to be
adjusted unless, and only to the extent that, a change in the terms of such
option or convertible security caused it to be deemed to have been issued after
the First Issuance Date. For purposes of this Section 8(a)(iv) if the terms of
any expired option or termination of any right to convert or exchange any
convertible security which was outstanding as of the First Issuance Date are
changed in the manner described in Section 8(a)(iii), then such option or
convertible security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change and no such change shall cause the Conversion Price
hereunder to be increased.

                           (v) Calculation of Consideration Received. If any
Common Stock, option or convertible security is issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor (net of discounts,
commissions and related expenses). If any Common Stock, option or convertible
security is issued or sold for a consideration other than cash, the amount of
the consideration other than cash received by the Corporation shall be the fair
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the
Corporation shall be the fair market price (calculated to be the average Closing
Price for the twenty (20) trading days immediately prior to the date of sale of
the securities described in the first sentence of this Section 8(a)(v)) thereof
as of the date of receipt. If any Common Stock, option or convertible Security
is issued to the owners of the non-surviving entity in connection with any
merger in which the Corporation is the surviving corporation, the amount of
consideration therefor shall be deemed to be the fair value of such portion of
the net assets and business of the non-surviving entity as is attributable to
such Common Stock, option or convertible security, as the case may be. The fair
value of any consideration other than cash and securities shall be determined
jointly by the Corporation and the holders of a majority of the outstanding
Convertible Preferred Stock. If such parties are unable to reach agreement
within a reasonable period of time, the fair value of such consideration shall
be determined by an independent appraiser experienced in valuing such type of
consideration jointly selected by the Corporation and the holders of a majority
of the outstanding Convertible Preferred Stock. The determination of such
appraiser shall be final and binding upon the parties, and the fees and expenses
of such appraiser shall be borne by the Corporation.

         (vi) Integrated Transactions. In case any option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such option by the parties thereto, the option
shall be deemed to have been issued for a consideration of $.00.

                           (vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.

<PAGE>


                           (viii) Record Date. If the Corporation takes a record
of the holders of Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, options or in
convertible securities or (ii) to subscribe for or purchase Common Stock,
options or convertible securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or upon the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

                  (b) Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision, or any applicable record date shall be
proportionally reduced, and if the Corporation at any time combines (by reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such combination or any applicable record date shall be
proportionately increased.

                  (c) Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reclassification, consolidation, merger, sale of all
or substantially all of the Corporation's assets or other transaction, in each
case which is effected in such a manner that the holders of Common Stock are
entitled to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock, is
referred to herein as an "Organic Change." Prior to the consummation of any
Organic Change, the Corporation shall make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the Convertible Preferred
Stock then outstanding) to insure that each of the holders of Convertible
Preferred Stock shall thereafter have the right to acquire and receive, in lieu
of or in addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Convertible Preferred Stock, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted its Convertible Preferred Stock immediately prior to such Organic
Change, or any applicable record date thereon. In each such case, the
Corporation shall also make appropriate provisions (in form and substance
satisfactory to the holders of a majority of the Convertible Preferred Stock
then outstanding) to insure that the provisions of this Section 8 shall
thereafter be applicable to the Convertible Preferred Stock (including, in the
case of any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Corporation an immediate adjustment of the
Conversion Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Common Stock acquirable and receivable upon conversion
of Convertible Preferred Stock, if the value so reflected is less than the
Conversion Price in effect immediately prior to such consolidation, merger or
sale). The Corporation shall not effect any such consolidation, merger or sale,
unless prior to the consummation thereof, the successor entity (if other than
the Corporation) resulting from consolidation or merger or the entity purchasing
such assets assumes by written instrument (in form and substance reasonably
satisfactory to the holders of a majority of the Convertible Preferred Stock
then outstanding), the obligation to deliver to each such holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to acquire.

                  (d) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 8 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Corporation's Board of Directors shall make an appropriate adjustment
in the Conversion Price so as to protect the rights of the holders of
Convertible Preferred Stock; provided that no such adjustment shall increase the
Conversion Price as otherwise determined pursuant to this Section 8 or decrease
the number of shares of Common Stock issuable upon conversion of each share of
Convertible Preferred Stock.

                  (e) Notices.

<PAGE>


                           (i) Promptly after any adjustment of the Conversion
Price, the Corporation shall give written notice thereof to all holders of
Convertible Preferred Stock, setting forth in reasonable detail and certifying
the calculation of such adjustment.

                           (ii) The Corporation shall give written notice to all
holders of Convertible Preferred Stock at least twenty (20) days prior to the
date on which the Corporation closes its books or takes a record (a) with
respect to any dividend or distribution upon Common Stock, (b) with respect to
any pro rata subscription offer to holders of Common Stock or (c) for
determining rights to vote with respect to any Organic Change, dissolution or
liquidation.

                           (iii) The Corporation shall also give written notice
to the holders of Convertible Preferred Stock at least twenty (20) days prior to
the date on which any Organic Change shall take place.

         Section 9. Convertible Preferred Stock Not Redeemable at Option of
Holders or Exchangeable; No Sinking Fund. The Convertible Preferred Stock shall
not be redeemable upon the request of holders thereof or exchangeable for other
capital stock (except for Common Stock upon conversion as provided herein) or
indebtedness of the Corporation or other property. The Convertible Preferred
Stock shall not be subject to the operation of a purchase, retirement or sinking
fund.

         Section 10. Voting Rights. So long as 20% of the Initial Shares remain
outstanding, the holders of a majority of the Convertible Preferred Stock,
voting separately as a single class in the election of directors of the
Corporation, to the exclusion of all other classes of the Corporation's capital
stock and with each share of Convertible Preferred Stock entitled to one vote,
shall be entitled to elect one (1) director (the "Preferred Stock
Representative") to serve on the Corporation's Board of Directors until his
successor is duly elected by holders of a majority of the Convertible Preferred
Stock or he is removed from office by holders of a majority of the Convertible
Preferred Stock. If the holders of a majority of the Convertible Preferred Stock
for any reason fail to elect anyone to fill such directorship, such position
shall remain vacant until such time as the holders of a majority of the
Convertible Preferred Stock elect a director to fill such position and shall not
be filled by resolution or vote of the Corporation's Board of Directors or the
Corporation's other stockholders.

         The holders of the Convertible Preferred Stock shall vote separately as
a single class, and approval of holders of a majority of the outstanding shares
of Convertible Preferred Stock shall be required, whenever a shareholder vote is
required pursuant to Section 302A.671 of the Minnesota Business Corporation Act,
or any successor provision thereto, for the purpose of according voting rights
with respect to shares acquired or to be acquired in a control share acquisition
(as defined in Section 302A.011 Subdivision 38 of the Minnesota Business
Corporation Act).

         The holders of the Convertible Preferred Stock shall be entitled to
notice of all stockholders' meetings in accordance with the Corporation's
bylaws, and except in the election of directors and as otherwise provided
herein, the holders of the Convertible Preferred Stock shall be entitled to vote
on all matters submitted to the stockholders for a vote together with the
holders of the Common Stock voting together as a single class with each share of
Common Stock entitled to one vote per share and each share of Convertible
Preferred Stock entitled to one vote for each share of Common Stock issuable
upon conversion of the Convertible Preferred Stock as of the record date for
such vote or, if no record date is specified, as of the date of such vote.

         Section 11. Certain Actions Not to be Taken Without Vote of Holders of
Convertible Preferred Stock. So long as the Convertible Preferred Stock is
outstanding, the Corporation shall not, without first obtaining the affirmative
vote or written consent of holders of a majority of the then issued and
outstanding shares of Convertible Preferred Stock, voting as a single class:

<PAGE>


                  (a) amend, repeal, modify or supplement any provision of the
Articles of Incorporation, the Bylaws of the Corporation as in effect on July
23, 1998, or any successor bylaws or this Certificate of Designation if such
amendment, repeal, modification or supplement in any way adversely affects the
powers, designations, preferences or other rights of the Convertible Preferred
Stock;

                  (b) authorize or effect any recapitalization or reverse stock
split of the Corporation or any other action which in any way adversely affects
the powers, designations, preferences or other rights of the Convertible
Preferred Stock;

                  (c) authorize or effect, in a single transaction or through a
series of related transactions, a liquidation, winding up or dissolution of the
Corporation or adoption of any plan for the same;

                  (d) declare or pay or set aside for payment any cash dividend
or cash distribution or other payment upon the Junior Dividend Stock, nor
redeem, purchase or otherwise acquire any Junior Dividend Stock for any
consideration other than the redemption of Common Stock from employees of the
Corporation pursuant to a stock option plan approved by the Corporation's Board
of Directors; provided that dividends or other distributions may be paid or set
apart for payment on any shares of Junior Dividend Stock at such time as less
than 20% of the Denominator Shares remain outstanding;

                  (e) authorize or permit the Corporation or any subsidiary of
the Corporation to issue any equity securities except for Permitted Issuances
and payment of dividends as provided in Section 4 above;

                  (f) incur any indebtedness unless after giving effect to the
additional indebtedness the aggregate indebtedness of the Corporation and its
subsidiaries outstanding as of the date of such incurrence (the "Determination
Date"), excluding financing that is secured by accounts receivable but not by
the Corporation's intellectual property licenses or other intellectual property
rights, does not exceed two and one-half times EBITDA of the Corporation and its
subsidiaries for the twelve month period immediately prior to the Determination
Date for which there are quarterly financial statements available. For purposes
of this Section 11, EBITDA shall mean the sum of (i) net income, (ii) interest
expense (iii) depreciation and amortization of the Corporation and its
subsidiaries and other non-cash items properly deducted in determining net
income and (iv) federal, state and local income taxes, computed and calculated
in accordance with generally accepted accounting principles;

                  (g) authorize or effect in a single transaction or through a
series of related transactions, the consolidation of the Corporation with, or
merger of the Corporation with or into, another person or sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the Corporation's assets to any person, or the consolidation or merger of any
other person with or into the Corporation; or

                  (h) authorize or permit the Corporation to enter into any
transaction with an affiliate (as defined in Rule 405 promulgated under the
Securities Act of 1933, as amended) of the Corporation or any officer or
director of the Corporation other than in his capacity as an officer or director
unless such transaction was approved by a majority of disinterested members of
the Board of Directors, including the Preferred Stock Representative.

         Section 12. Outstanding Shares. For purposes of this Certificate of
Designations, all shares of Convertible Preferred Stock shall be deemed
outstanding except for (a) shares of Convertible Preferred Stock held of record
or beneficially by the Corporation or any subsidiary of the Corporation; (b)
from the date of surrender of certificates representing Convertible Preferred
Stock for conversion pursuant to Section 7, all shares of Convertible Preferred
Stock which have been converted into Common Stock or other securities or
property pursuant to Section 7; and (c) from the date fixed for redemption
pursuant to Section 6, all shares of Convertible Preferred Stock which have been
called for redemption, provided that

<PAGE>


funds necessary for such redemption are available therefor and have been
irrevocably deposited or set aside for such purpose.

         Section 13. Status of Convertible Preferred Stock Upon Retirement.
Shares of Convertible Preferred Stock which are acquired or redeemed by the
Corporation or converted pursuant to Section 7 shall return to the status of
authorized and unissued shares of Preferred Stock of the Corporation without
designation as to series. Upon the acquisition or redemption by the Corporation
or conversion pursuant to Section 7 of all outstanding shares of Convertible
Preferred stock, all provisions of this Certificate of Designation shall cease
to be of further effect. Upon the occurrence of such event, the Board of
Directors of the Corporation shall have the power, pursuant to Minnesota
Statutes, Section 302A.135, Subd. 5 or any successor provision and without
shareholder action, to cause restated articles of incorporation of the
Corporation or other appropriate documents to be prepared and filed with the
Secretary of State of the State of Minnesota which reflect such removal of all
provisions relating to the Convertible Preferred Stock and/or the cancellation
of this Certificate of Designations.

         IN WITNESS WHEREOF, Orphan Medical, Inc. has caused this certificate to
be signed by John Howell Bullion, it Chief Executive Officer, this 23rd day of
July, 1998.

                                      ORPHAN MEDICAL, INC.



                                      By
                                         John Howell Bullion
                                         Chief Executive Officer