CERTIFICATE OF DESIGNATION, PREFERENCES,

                                  AND RIGHTS OF

                 SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK

                                       OF

                              SUNPHARM CORPORATION

         SUNPHARM CORPORATION, a Delaware corporation (the "Corporation"),  does
hereby certify that,  pursuant to authority  conferred on the Board of Directors
of the Corporation by the Certificate of Incorporation  of the  Corporation,  as
amended,  and  pursuant  to the  provisions  of  Section  151 of  Title 8 of the
Delaware  Code, the Board of Directors,  by a unanimous  consent dated March 31,
1999 in lieu of a  special  meeting,  adopted  a  resolution  providing  for the
designation, preferences and relative, participating,  optional or other rights,
and  qualifications,  limitations or restrictions  thereof, of 200,000 shares of
the Corporation's  Preferred Stock, par value $.001 per share,  which resolution
is as follows:

RESOLVED:         That  pursuant to the  authority  granted to and vested in the
                  Board of Directors of the  Corporation in accordance  with the
                  provisions of the Certificate of Incorporation, as amended, of
                  the  Corporation,  the  Board  hereby  designates  a series of
                  Preferred Stock of the Corporation,  par value $.001 per share
                  (the "Preferred  Stock"),  consisting of 200,000 shares of the
                  authorized  unissued  Preferred  Stock, as Series B Redeemable
                  Convertible  Preferred  Stock (the "Series B Preferred"),  and
                  hereby fixes such  designation  and number of shares,  and the
                  powers, preferences and relative,  participating,  optional or
                  other  rights,   and  the   qualifications,   limitations  and
                  restrictions thereof as set forth below, and that the officers
                  of  the  Corporation,  and  each  acting  singly,  are  hereby
                  authorized,  empowered and directed to file with the Secretary
                  of  State  of  the  State  of   Delaware  a   Certificate   of
                  Designation, Preferences and Rights of the Series B Redeemable
                  Convertible Preferred Stock, as such officer or officers shall
                  deem  necessary or advisable to carry out the purposes of this
                  Resolution.

         SERIES B  REDEEMABLE  CONVERTIBLE  PREFERRED  STOCK.  The  preferences,
privileges and restrictions  granted to or imposed upon the Corporation's Series
B Redeemable  Convertible  Preferred  Stock,  par value $.001 per share,  or the
holders thereof, are as follows:

         1.       LIQUIDATION RIGHTS.

         (a)      TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP.

                  (i) Except as otherwise provided in Section 1(b) below, in the
         event of any  liquidation,  dissolution  or winding  up of the  affairs
         (each  event,  a  "Liquidation  Event")  of

<PAGE>

         the  Corporation,  whether  voluntary  or  involuntary,  the holders of
         Series B Preferred shall be entitled to be paid first out of the assets
         of  the  Corporation  available  for  distribution  to  holders  of the
         Corporation's   capital  stock  of  all  classes,   before  payment  or
         distribution of any of such assets to the holders of any other class or
         series of the  Corporation's  capital stock  designated to be junior to
         the Series B Preferred,  an amount equal to the original purchase price
         of $4.00 per share of Series B Preferred (which amount shall be subject
         to equitable  adjustment  whenever there shall occur a stock  dividend,
         distribution,  combination of shares, reclassification or other similar
         event with respect to Series B Preferred  and, as so adjusted from time
         to time, is hereinafter  referred to as the "Base  Liquidation  Price")
         plus all dividends accrued or declared but unpaid, to and including the
         date  full  payment  shall  be  tendered  to the  holders  of  Series B
         Preferred with respect to such Liquidation Event.

                  (ii)  Following  payment  in full to the  holders  of Series B
         Preferred of all amounts  distributable  to them under Section  1(a)(i)
         hereof,   the  remaining  assets  of  the  Corporation   available  for
         distribution  to holders of the  Corporation's  capital  stock shall be
         distributed  on a pro rata  basis  among the  holders  of the  Series B
         Preferred on an as converted basis and the holders of the Common Stock.

                  (iii) If the assets of the  Corporation  shall be insufficient
         to permit the payment in full to the  holders of Series B Preferred  of
         all amounts  distributable  to them under Section 1(a)(i) hereof,  then
         the entire assets of the  Corporation  available for such  distribution
         shall be distributed ratably among the holders of Series B Preferred.

         (b)      TREATMENT  OF  REORGANIZATIONS,  CONSOLIDATIONS,  MERGERS  AND
SALES OF ASSETS.  Except as otherwise provided in Subsection 2(d)(vii) hereof, a
Reorganization (as defined in Subsection  2(d)(vii) hereof) shall be regarded as
a  Liquidation  Event of the  Corporation  within the meaning of this Section 1,
provided,  however,  that the holders of at least a majority of the  outstanding
shares of the Series B Preferred upon the occurrence of a  Reorganization  shall
have the option to elect the  benefits of  Subsection  2(d)(vii)  hereof for the
Series B Preferred in lieu of receiving  payment in a  Liquidation  Event of the
Corporation  pursuant to this Section 1. The provisions of this  Subsection 1(b)
shall not apply to any  reorganization,  merger or  consolidation  involving (1)
only a change in the state of incorporation of the Corporation,  (2) a merger of
the Corporation with or into a wholly-owned  subsidiary of the Corporation which
is  incorporated  in the United  States of  America,  or (3) an  acquisition  by
merger,   reorganization   or   consolidation,   in  which  the  Corporation  is
substantively  the surviving  corporation  and operates as a going  concern,  of
another  corporation  which is  incorporated in the United States of America and
which is  engaged in a business  similar  to or related to the  business  of the
Corporation  and which  does not  involve a change in the terms of the  Series B
Preferred or of the Common Stock.

         (c)      DISTRIBUTIONS  OTHER THAN CASH. The amount deemed  distributed
to the holders of Series B Preferred upon any Liquidation  Event  (including any
Reorganization treated as a Liquidation Event pursuant to Section 1(b)) shall be
the cash or the  fair  market  value  of the  property,  rights,  or  securities
distributed to such holders by the acquiring person,  firm, or other entity. The
value of such property,  rights, or other securities shall be determined in good
faith by the Board of Directors of the Corporation;  provided,  however, that in
the event that the amounts

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<PAGE>

paid pursuant to Section 1(b) consist of securities of an acquiring corporation,
(i) any shares  received that have been  registered  under the Securities Act of
1933, as amended (the "Securities  Act"), shall be valued at the average closing
price per share for such securities on the 10 days ending on the fifth day prior
to the  consummation  of the  Reorganization  (the  "Closing  Price"),  (ii) any
securities of a class that is registered  under the  Securities  Exchange Act of
1934, as amended (the "Exchange  Act"),  the offer and sale of which shares have
not been  registered  under  the  Securities  Act  shall be valued at 80% of the
Closing Price and (iii) securities of a class that has not been registered under
the Exchange Act shall be valued based on a valuation mutually acceptable to the
Board of Directors of the  Corporation and holders of at least a majority of the
Series B Preferred.

         2.       CONVERSION.  The  holders  of Series B  Preferred  shall  have
conversion rights as follows (the "Conversion Rights"):

         (a)      RIGHT TO  CONVERT;  CONVERSION  PRICE.  Each share of Series B
Preferred  shall  be   convertible,   without  the  payment  of  any  additional
consideration by the holder thereof and at the option of the holder thereof,  at
any  time  after  the date of  issuance  of such  share,  at the  office  of the
Corporation or any transfer  agent for the Series B Preferred,  into such number
of fully paid and  non-assessable  shares of Common  Stock as is  determined  by
dividing $2.00 by the Conversion Price,  determined as hereinafter  provided, in
effect  at the  time  of  conversion.  The  Conversion  Price  for  purposes  of
calculating  the number of shares of Common Stock  deliverable  upon  conversion
without the payment of any  additional  consideration  by the holder of Series B
Preferred  (the  "Conversion  Price")  shall  initially  be $2.00.  Such initial
Conversion  Price shall be subject to adjustment,  in order to adjust the number
of shares of Common  Stock into which  Series B  Preferred  is  convertible,  as
hereinafter provided.

         (b)      MECHANICS  OF  CONVERSION.  Before  any  holder  of  Series  B
Preferred  shall be  entitled  to  convert  the same into full  shares of Common
Stock,  such holder shall surrender the  certificate or  certificates  therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for the
Series B Preferred,  and shall give written  notice to the  Corporation  at such
office that such holder  elects to convert the same and shall state  therein the
name of such holder or the name or names of the nominees of such holder in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued.  No fractional shares of Common Stock shall be issued upon conversion
of any shares of Series B Preferred.  In lieu of any fractional shares of Common
Stock to which the holder would otherwise be entitled, the Corporation shall pay
cash equal to such fraction  multiplied by the then effective  Conversion Price.
The Corporation shall, as soon as practicable  thereafter,  issue and deliver at
such office to such holder of Series B Preferred, or to such holder's nominee or
nominees, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid,  together with cash in lieu
of any fraction of a share.  Such  conversion  shall be deemed to have been made
immediately  prior to the close of business on the date of such surrender of the
shares of Series B Preferred to be converted, and the person or persons entitled
to receive the shares of Common Stock issuable upon conversion  shall be treated
for all purposes as the record  holder or holders of such shares of Common Stock
on such date.

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<PAGE>

         (c)      [intentionally omitted]

         (d)      ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.

                  (i)      SPECIAL  DEFINITIONS.  For  purposes of this  Section
         2(d), the following definitions shall apply:

                           (A) "OPTION"  shall mean rights,  options or warrants
                  to subscribe for,  purchase or otherwise  acquire Common Stock
                  or Convertible Securities.

                           (B) "ORIGINAL  ISSUE  DATE"  shall  mean  the date on
                  which shares of Series B Preferred were first issued.

                           (C) "CONVERTIBLE SECURITIES" shall mean any evidences
                  of indebtedness,  shares (other than Common Stock and Series B
                  Preferred)   or  other   securities   directly  or  indirectly
                  convertible into or exchangeable for Common Stock.

                           (D)  "ADDITIONAL  SHARES OF COMMON  STOCK" shall mean
                  all shares of Common  Stock  issued  (or,  pursuant to Section
                  2(d)(iii),  deemed to be issued) by the Corporation  after the
                  Original Issue Date,  other than the following  (collectively,
                  "EXCLUDED SHARES"):

                                (I)       shares  of  Common   Stock  issued  or
                           issuable upon the conversion of Series B Preferred;

                                (II)      shares  of  Common   Stock  issued  or
                           issuable as a dividend on the Series B Preferred:

                                (III)     by reason of a  dividend,  stock split
                           or other distribution on shares of Common Stock;

                                (IV)      Options to  purchase  shares of Common
                           Stock  issued or issuable to  officers,  employees or
                           directors  of, or  consultants  to,  the  Corporation
                           pursuant to the  Corporation's  Amended and  Restated
                           1994 Stock Option Plan, the Corporation's Amended and
                           Restated  1995  Nonemployee  Directors'  Stock Option
                           Plan or any  stock  option  plan  of the  Corporation
                           adopted by the Board of Directors of the  Corporation
                           and approved by the  stockholders  of the Corporation
                           after the Original Issue Date;

                                (V)      shares  of  Common   Stock   issued  or
                           issuable upon the exercise of Options  outstanding on
                           the  Original  Issue Date or upon the exercise of the
                           Options referred to in the foregoing clause (IV).

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<PAGE>

                  (ii)     NO ADJUSTMENT OF CONVERSION  PRICE.  No adjustment in
         the  number of shares of Common  Stock  into  which a share of Series B
         Preferred is convertible  shall be made by adjustment in the Conversion
         Price in respect of the issuance of  Additional  Shares of Common Stock
         or otherwise unless (i) the  consideration  per share for an Additional
         Share of Common Stock issued or deemed to be issued by the  Corporation
         is less  than the  Conversion  Price  in  effect  on the  date of,  and
         immediately  prior to,  the issue of such  Additional  Shares of Common
         Stock  and  (ii),  prior to such  issuance,  the  Corporation  fails to
         receive  written  notice from the holders of at least a majority of the
         then  outstanding  shares of Series B Preferred  agreeing  that no such
         adjustment  shall be made as the result of the  issuance of  Additional
         Shares of Common Stock.

                  (iii)    ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
         OF COMMON STOCK.

                                    (A)  OPTIONS AND CONVERTIBLE SECURITIES.  In
                  the event the Corporation at any time after the Original Issue
                  Date shall  issue any  Options or  Convertible  Securities  or
                  shall fix a record  date for the  determination  of holders of
                  any class of  securities  entitled to receive any such Options
                  or Convertible  Securities,  then the maximum number of shares
                  (as set  forth  in the  instrument  relating  thereto  without
                  regard to any  provisions  contained  therein for a subsequent
                  adjustment  of  such  number)  of  Common  Stock  (other  than
                  Excluded  Shares)  issuable  upon the exercise of such Options
                  or,  in  the  case  of  Convertible   Securities  and  Options
                  therefor,  the  conversion  or  exchange  of such  Convertible
                  Securities,  shall be deemed to be Additional Shares of Common
                  Stock  issued as of the time of such  issue or, in case such a
                  record date shall have been fixed, as of the close of business
                  on such record date, provided that Additional Shares of Common
                  Stock  shall  not be deemed to have  been  issued  unless  the
                  consideration  per  share  (determined   pursuant  to  Section
                  2(d)(v)  hereof)  of such  Additional  Shares of Common  Stock
                  would be less than the Conversion  Price in effect on the date
                  of and  immediately  prior to such issue, or such record date,
                  as the case may be, and provided further that in any such case
                  in which  Additional  Shares of Common  Stock are deemed to be
                  issued:

                                    (I) No further  adjustment in the Conversion
                           Price  shall  be made  upon the  subsequent  issue of
                           Convertible Securities or shares of Common Stock upon
                           the  exercise  of  such  Options  or   conversion  or
                           exchange of such Convertible Securities;

                                    (II)  If   such   Options   or   Convertible
                           Securities by their terms  provide,  with the passage
                           of  time  or  otherwise,  for  any  increase  in  the
                           consideration payable to the Corporation, or decrease
                           in the number of shares of Common Stock issuable upon
                           the  exercise,  conversion or exchange  thereof,  the
                           Conversion  Price  computed  upon the original  issue
                           thereof (or upon the occurrence of a record date with
                           respect  thereto),  and  any  subsequent  adjustments
                           based  thereon,  shall,  upon  any such  increase  or

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<PAGE>

                           decrease becoming effective, be recomputed to reflect
                           such increase or decrease  insofar as it affects such
                           Options or the rights of conversion or exchange under
                           such Convertible Securities;

                                    (III)  Upon  the   expiration  of  any  such
                           options or any rights of conversion or exchange under
                           such Convertible Securities which shall not have been
                           exercised,  the  Conversion  Price  computed upon the
                           original  issue thereof (or upon the  occurrence of a
                           record date with respect thereto), and any subsequent
                           adjustments   based   thereon,   shall,   upon   such
                           expiration, be recomputed as if:

                                            (a)  In  the  case  of   Convertible
                                    Securities  or Options for Common  Stock the
                                    only  Additional   Shares  of  Common  Stock
                                    issued were the shares of Common  Stock,  if
                                    any,  actually  issued upon the  exercise of
                                    such Options or the  conversion  or exchange
                                    of  such  Convertible   Securities  and  the
                                    consideration   received  therefor  was  the
                                    consideration   actually   received  by  the
                                    Corporation   for  the  issue  of  all  such
                                    Options, whether or not exercised,  plus the
                                    consideration   actually   received  by  the
                                    Corporation  upon such exercise,  or for the
                                    issue  of all  such  Convertible  Securities
                                    which were actually  converted or exchanged,
                                    plus the additional  consideration,  if any,
                                    actually  received by the  Corporation  upon
                                    such conversion or exchange; and

                                            (b)  In  the  case  of  Options  for
                                    Convertible  Securities only the Convertible
                                    Securities, if any, actually issued upon the
                                    exercise  thereof were issued at the time of
                                    issue of such Options, and the consideration
                                    received   by  the   Corporation   for   the
                                    Additional  Shares of Common Stock deemed to
                                    have been then issued was the  consideration
                                    actually received by the Corporation for the
                                    issue of all such  Options,  whether  or not
                                    exercised,  plus the consideration deemed to
                                    have  been   received  by  the   Corporation
                                    (determined  pursuant  to  Section  2(d)(v))
                                    upon the issue of the Convertible Securities
                                    with  respect  to which  such  Options  were
                                    actually exercised;

                                    (IV) No readjustment pursuant to clause (II)
                           or (III)  above  shall have the effect of  increasing
                           the  Conversion  Price to an amount which exceeds the
                           lower of (a) the  Conversion  Price  on the  original
                           adjustment  date,  or (b) the  Conversion  Price that
                           would have  resulted  from any issuance of Additional
                           Shares  of  Common   Stock   between   the   original
                           adjustment date and such readjustment date;

                                    (V) In the case of any Options  which expire
                           by their  terms not more than 30 days  after the date
                           of issue  thereof,  no adjustment  of the  Conversion
                           Price shall be made until the  expiration or exercise
                           of all such

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<PAGE>

                           Options,  whereupon such adjustment  shall be made in
                           the same manner provided in clause (III) above; and

                                    (VI) If such  record  date  shall  have been
                           fixed and such Options or Convertible  Securities are
                           not issued on the date fixed therefor, the adjustment
                           previously made in the Conversion  Price which became
                           effective on such record date shall be canceled as of
                           the  close  of  business  on such  record  date,  and
                           thereafter  the  Conversion  Price  shall be adjusted
                           pursuant to this  Section  2(d)(iii) as of the actual
                           date of their issuance.

                           (B)      STOCK  DIVIDENDS,  STOCK  DISTRIBUTIONS  AND
                  SUBDIVISIONS. In the event the Corporation at any time or from
                  time to time after the  Original  Issue Date shall  declare or
                  pay any dividend or make any other  distribution on the Common
                  Stock payable in Common Stock or effect a  subdivision  of the
                  outstanding  shares of Common  Stock (by  reclassification  or
                  otherwise than by payment of a dividend in Common Stock), then
                  and in any such event, Additional Shares of Common Stock shall
                  be deemed to have been issued:

                                    (I) In the  case  of any  such  dividend  or
                           distribution, immediately after the close of business
                           on the record date for the  determination  of holders
                           of any class of  securities  entitled to receive such
                           dividend or distribution, or

                                    (II) In the case of any such subdivision, at
                           the close of business on the date  immediately  prior
                           to the  date  upon  which  corporate  action  becomes
                           effective.

                           If such record date shall have been fixed and no part
                  of such  dividend  shall  have  been  paid on the  date  fixed
                  therefor,  the adjustment  previously  made for the Conversion
                  Price  which  became  effective  on such  record date shall be
                  canceled as of the close of business on such record date,  and
                  thereafter the Conversion Price shall be adjusted  pursuant to
                  this  Section  2(d)(iii)  as to the time of actual  payment of
                  such dividend.

                  (iv)     ADJUSTMENT  OF  CONVERSION  PRICE  UPON  ISSUANCE  OF
         ADDITIONAL SHARES OF COMMON STOCK.

                                    (A) In the event the Corporation shall issue
                  Additional   Shares  of  Common  Stock   (including,   without
                  limitation,  Additional  Shares of Common  Stock  deemed to be
                  issued pursuant to Section 2(d)(iii) but excluding  Additional
                  Shares of Common Stock deemed to be issued pursuant to Section
                  2(d)(iii)(B),  which  event is dealt with in Section  2(d)(vi)
                  hereof),  without  consideration  or for a  consideration  per
                  share less than the applicable  Conversion  Price in effect on
                  the date of and immediately  prior to such issue,  then and in
                  such   event,   such   Conversion   Price  shall  be  reduced,
                  concurrently  with such issue,  to a price  (calculated to the
                  nearest cent)  determined by multiplying such Conversion Price
                  by a fraction,  the numerator of

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<PAGE>

                  which  shall be (I) the  number  of  shares  of  Common  Stock
                  outstanding  immediately  prior to such  issue  plus  (II) the
                  number  of  shares  of  Common   Stock  which  the   aggregate
                  consideration  received or deemed to have been received by the
                  corporation  for the  total  number  of  Additional  Shares of
                  Common  Stock so  issued  would  purchase  at such  Conversion
                  Price, and the denominator of which shall be (I) the number of
                  shares of Common Stock  outstanding  immediately prior to such
                  issue  plus  (II) the  number of  Additional  Shares of Common
                  Stock so issued or deemed to be issued.

                          (B)  For the purposes of Section  2(d)(iv)(A)  hereof,
                  (i) all shares of Common Stock  issuable  upon  conversion  of
                  shares of Series B Preferred  and upon  exercise of Options or
                  conversion or exchange of Convertible  Securities  outstanding
                  immediately  prior to any issue of Additional Shares of Common
                  Stock, or any event with respect to which Additional Shares of
                  Common Stock shall be deemed to be issued,  shall be deemed to
                  be  outstanding  and (ii)  immediately  after  any  Additional
                  Shares of Common Stock are deemed  issued  pursuant to Section
                  2(d)(iii),  such  Additional  Shares of Common  Stock shall be
                  deemed to be outstanding.

                           (C) Notwithstanding    anything   to   the   contrary
                  contained herein, the applicable Conversion Price in effect at
                  the time  Additional  Shares  of Common  Stock  are  issued or
                  deemed to be issued  shall not be reduced  pursuant to Section
                  2(d)(iv)(A)  hereof  at  such  time  if  the  amount  of  such
                  reduction  would be an amount  less than  $0.01,  but any such
                  amount  shall be carried  forward and  reduction  with respect
                  thereto made at the time of and together  with any  subsequent
                  reduction  which,  together  with  such  amount  and any other
                  amount or amounts so carried forward, shall aggregate $0.01 or
                  more.

                  (v)  DETERMINATION  OF  CONSIDERATION.  For  purposes  of this
         Section 2(d), the  consideration  received by the  Corporation  for the
         issue of any  Additional  Shares of Common  Stock  shall be computed as
         follows:

                       (A) CASH AND PROPERTY. Such consideration shall:

                                   (I)   Insofar  as it  consists  of  cash,  be
                           computed at the aggregate amounts of cash received by
                           the Corporation excluding amounts paid or payable for
                           accrued interest or accrued  dividends at the time of
                           such issue;

                                   (II)  Insofar  as  it  consists  of  property
                           other than cash, be computed at the fair market value
                           thereof at the time of such issue,  as  determined in
                           good faith by the Board of Directors; and

                                   (III) In the event that Additional  Shares of
                           Common Stock are issued together with other shares or
                           securities  or other  assets of the

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<PAGE>

                           Corporation for  consideration  which covers both, be
                           the  proportion  of such  consideration  so received,
                           computed  as  provided in clauses (I) and (II) above,
                           as   determined   in  good  faith  by  the  Board  of
                           Directors.

                           (B) OPTIONS   AND   CONVERTIBLE    SECURITIES.    The
                  consideration  per  share  received  by  the  Corporation  for
                  Additional  Shares of Common  Stock deemed to have been issued
                  pursuant  to Section  2(d)(iii)(A),  relating  to Options  and
                  Convertible  Securities,  shall be  determined by dividing (I)
                  the  total  amount,  if any,  received  or  receivable  by the
                  Corporation as consideration  for the issue of such Options or
                  Convertible  Securities,  plus the minimum aggregate amount of
                  additional  consideration  (as set  forth  in the  instruments
                  relating  thereto,  without regard to any provision  contained
                  therein for a  subsequent  adjustment  of such  consideration)
                  payable to the  Corporation  upon the exercise of such Options
                  or the conversion or exchange of such Convertible  Securities,
                  or in the case of  Options  for  Convertible  Securities,  the
                  exercise of such Options for  Convertible  Securities  and the
                  conversion or exchange of such Convertible Securities, by (II)
                  the maximum  number of shares of Common Stock (as set forth in
                  the  instruments  relating  thereto,  without  regard  to  any
                  provision  contained  therein for a subsequent  adjustment  of
                  such number) issuable upon the exercise of such Options or the
                  conversion or exchange of such Convertible Securities.

                  (vi)     ADJUSTMENT     FOR     DIVIDENDS,      DISTRIBUTIONS,
         SUBDIVISIONS, COMBINATIONS OR CONSOLIDATIONS OF COMMON STOCK.

                           (A) STOCK  DIVIDENDS,  DISTRIBUTIONS OR SUBDIVISIONS.
                  In the event the Corporation  shall issue Additional Shares of
                  Common  Stock  pursuant  to  Section  2(d)(iii)(B)  in a stock
                  dividend,  stock  distribution or subdivision,  the Conversion
                  Price in  effect  immediately  prior to such  stock  dividend,
                  stock distribution or subdivision shall, concurrently with the
                  effectiveness  of such stock dividend,  stock  distribution or
                  subdivision, be proportionately decreased.

                           (B) COMBINATIONS OR CONSOLIDATIONS.  In the event the
                  outstanding  shares  of  Common  Stock  shall be  combined  or
                  consolidated,  by reclassification or otherwise, into a lesser
                  number  of shares of Common  Stock,  the  Conversion  Price in
                  effect  immediately prior to such combination or consolidation
                  shall, concurrently with the effectiveness of such combination
                  or consolidation, be proportionately increased.

                  (vii) CAPITAL REORGANIZATION,  MERGER OR SALE OF ASSETS. If at
         any time or from time to time there  shall be a capital  reorganization
         of  the  Common   Stock   (other  than  a   subdivision,   combination,
         recapitalization,  reclassification  or exchange of shares provided for
         elsewhere  in this  Section  2) or a  consolidation  or  merger  of the
         Corporation, or a sale of all or substantially all of the assets of the
         Corporation,  other  than a  merger,  consolidation  or  sale of all or
         substantially  all of the assets of the Corporation in a transaction in
         which the  shareholders  of the  Corporation  immediately  prior to the
         transaction  possess  more  than 50%

                                       9

<PAGE>

         of the voting  securities of the surviving  entity (or parent,  if any)
         immediately after the transaction (a "Reorganization"), then, as a part
         of and as a condition to such  Reorganization,  provision shall be made
         so  that  the  holders  of  shares  of the  Series  B  Preferred  shall
         thereafter be entitled to receive upon  conversion of the shares of the
         Series  B  Preferred  the  same  kind  and  amount  of  stock  or other
         securities or property  (including cash) of the Corporation,  or of the
         successor corporation resulting from such Reorganization, to which such
         holder would have been entitled if such holder had converted its shares
         of the Series B Preferred  immediately  prior to the effective  time of
         such Reorganization.  In any such case, appropriate adjustment shall be
         made in the  application of the provisions of this Section 2 to the end
         that the  provisions  of this  Section 2 (including  adjustment  of the
         Conversion  Price  then in  effect  and the  number of shares of Common
         Stock or other securities issuable upon conversion of the shares of the
         Series B Preferred) shall be applicable after such Reorganization in as
         nearly equivalent manner as may be reasonably practicable.

                  In the case of a  transaction  to which  both this  Subsection
         2(d)(vii) and Subsection  1(b) hereof apply,  the holders of at least a
         majority of the  outstanding  shares of the Series B Preferred upon the
         occurrence of a Reorganization shall have the option to elect treatment
         either under this Subsection 2(d)(vii) or under Subsection 1(b) hereof,
         notice of which election  shall be given in writing to the  Corporation
         not less than five (5)  business  days prior to the  effective  date of
         such Reorganization. If no such election is timely made, the provisions
         of Subsection 1(b) and not of this Subsection 2(d)(vii) shall apply.

                  The provisions of this Subsection 2(d)(vii) shall not apply to
         any reorganization, merger or consolidation involving (1) only a change
         in the state of incorporation  of the Corporation,  (2) a merger of the
         Corporation  with or into a wholly-owned  subsidiary of the Corporation
         which is  incorporated  in the  United  States  of  America,  or (3) an
         acquisition by merger,  reorganization or  consolidation,  in which the
         Corporation is substantively the surviving  corporation and operates as
         a going concern,  of another  corporation  which is incorporated in the
         United States of America and which is engaged in a business  similar to
         or  related  to the  business  of the  Corporation  and which  does not
         involve  a change  in the  terms of the  Series B  Preferred  or of the
         Common Stock.

         (e)      NO IMPAIRMENT.  The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed  hereunder by the Corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section  2 and in the  taking  of  all  such  action  as  may  be  necessary  or
appropriate in order to protect the conversion rights of the holders of Series B
Preferred against impairment.

         (f)      CERTIFICATE  AS TO  ADJUSTMENTS.  Upon the  occurrence of each
adjustment or readjustment  of the Conversion  Price pursuant to this Section 2,
the  Corporation  at its expense  shall  promptly  compute  such  adjustment  or
readjustment  in  accordance  with the terms hereof and furnish to each affected
holder of Series B Preferred,  a certificate  setting  forth such  adjustment or

                                       10

<PAGE>

readjustment  and  showing in detail the facts  upon  which such  adjustment  or
readjustment is based.  The Corporation  shall,  upon the written request at any
time of any  affected  holder of Series B Preferred  furnished  to such holder a
like certificate setting forth (i) such adjustments and readjustments,  (ii) the
Conversion Price at the time in effect, and (iii) the number of shares of Common
Stock and the  amount,  if any,  of other  property  which at the time  would be
received upon conversion of each share of Series B Preferred.

         (g)      NOTICES  OF RECORD  DATE.  In the  event of any  taking by the
Corporation  of a record  of the  holders  of any  class of  securities  for the
purpose of  determining  the  holders  thereof  who are  entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous  quarters) or other  distribution,  the Corporation  shall mail to each
holder of Series B Preferred  at least ten (10) days prior to such record date a
notice  specifying  the date on which  any such  record  is to be taken  for the
purpose of such dividend or distribution.

         (h)      COMMON STOCK RESERVED.  The Corporation shall reserve and keep
available out of its authorized but unissued  Common Stock such number of shares
of  Common  Stock  as  shall  from  time to time be  sufficient  to  effect  the
conversion of all outstanding shares of Series B Preferred.

         (i)      CERTAIN TAXES. The Corporation shall pay any issue or transfer
taxes  payable  in  connection  with the  conversion  of any  shares of Series B
Preferred,  provided, however, that the Corporation shall not be required to pay
any tax which may be payable in  respect  of any  transfer  to a name other than
that of the holder of such Series B Preferred.

         (j)      CLOSING OF BOOKS.  The corporation  shall at no time close its
transfer books against the transfer of any Series B Preferred,  or of any shares
of Common Stock issued or issuable upon the conversion of any shares of Series B
Preferred in any manner which interferes with the timely  conversion or transfer
of such Series B Preferred.

         3.       VOTING RIGHTS.

         (a)      Except as  otherwise  required by law or this  Certificate  of
Incorporation  the holders of Series B Preferred and the holders of Common Stock
shall be entitled to notice of any stockholders' meeting and to vote as a single
class upon any matter submitted to the stockholders for a vote, on the following
basis:

                  (i)      Holders of Common Stock shall have one vote per share
         of Common Stock held by them; and

                  (ii)     Holders of Series B Preferred  shall have that number
         of votes per share of Series B  Preferred  as is equal to the number of
         shares of Common Stock into which each such share of Series B Preferred
         held by such holder could be converted on the date for determination of
         stockholders entitled to vote at the meeting.

         (b)      ELECTION OF DIRECTORS. In addition to voting as a single class
with the holders of the Common Stock for the election of  directors,  so long as
there  shall be  outstanding  at least  100,000

                                       11

<PAGE>

shares of Series B Preferred (adjusted for any stock splits, dividend or similar
events affecting the Series B Preferred after the date of this  Certificate),  a
majority  of the holders of the Series B Preferred  voting  separately  from the
holders of Common  Stock  shall at all times be  entitled to elect one member of
the Board of Directors.

         4.       DIVIDEND RIGHTS.

         (a)      From and after the Original Issue Date, dividends shall accrue
on each  share of the  Series B  Preferred,  whether  or not funds  are  legally
available therefor and whether or not declared by the Board of Directors, at the
rate per annum  equal to $0.32 per share of Series B  Preferred  (the  "Series B
Dividends").  From time to time the Board of  Directors of the  Corporation  may
declare  and pay  dividends  or  distributions  on shares of the  Common  Stock,
provided that no such dividend or other  distribution may be declared or paid on
the Common Stock (other than a dividend payable entirely in shares of the Common
Stock of the  Corporation)  unless (1) all accrued Series B Dividends shall have
been  paid  in full  prior  to the  date of any  such  declaration,  payment  or
distribution and (2) no shares of Series B Preferred  remain  outstanding on the
date of any such declaration, payment or distribution.

         (b)      If,  with the consent of the holders of at least a majority of
the  outstanding  Series B Preferred,  the Board of Directors of the Corporation
shall declare a dividend payable upon the then outstanding  shares of the Common
Stock (other than a dividend  payable  entirely in shares of the Common Stock of
the  Corporation),  then the Board of Directors shall declare at the same time a
dividend upon the then outstanding  shares of the Series B Preferred  payable at
the same time as the dividend  paid on the Common  Stock,  in an amount equal to
the  amount of  dividends  per share of Series B  Preferred  as would  have been
payable on the largest  number of whole  shares of Common Stock which each share
of Series B Preferred  held by each holder  thereof  would have received if such
Series B Preferred had been converted to Common Stock pursuant to the provisions
of Section 2 hereof as of the record  date for the  determination  of holders of
Common Stock entitled to receive such dividends.

         (c)      In the event the Board of Directors of the  Corporation  shall
declare a  dividend  payable  upon any class or series of  capital  stock of the
corporation other than Common Stock, the Board of Directors shall declare at the
same time a dividend  upon the then  outstanding  shares of Series B  Preferred,
payable  at the same  time as such  dividend  on such  other  class or series of
capital  stock in an  amount  equal to (i) in the  case of any  series  or class
convertible into Common Stock,  that dividend per share of Series B Preferred as
would equal the dividend payable on such other class or series  determined as if
all such shares of such class or series had been  converted  to Common Stock and
all shares of Series B  Preferred  have been  converted  to Common  Stock on the
record date for the  determination  of holders entitled to receive such dividend
or (ii) if such class or series of capital stock is not convertible  into Common
Stock,  at a rate per share of Series B Preferred  determined  by  dividing  the
amount of the dividend  payable on each share of such class or series of capital
stock by the original  issuance  price of such class or series of capital  stock
and multiplying such fraction by the Base Liquidation Price then in effect.

                                       12

<PAGE>

         (d)      Notwithstanding  the  foregoing  provisions of this Section 4:
(i) upon any  conversion of the Series B Preferred  pursuant to Section 2 above,
all accrued  and unpaid  dividends  on such shares of Series B Preferred  to and
until the date of such  conversion  shall be forfeited  and shall not be due and
payable;  and (ii) the  payment  of all or any  portion  of  accrued  and unpaid
dividends on Series B Preferred may be waived by the affirmative vote of holders
of not less than a majority in interest of the Series B  Preferred,  voting as a
separate class.

         5.       COVENANTS.

         The   Corporation   shall  not,   without  first  having  obtained  the
affirmative  vote or written  consent of the holders of not less than two-thirds
in voting power of the outstanding shares of Series B Preferred:

                  (i)      Amend,  alter or repeal any  provision of, or add any
         provision  to,  the  Corporation's   Certificate  of  Incorporation  or
         By-Laws;

                  (ii)     Alter or change the preferences,  rights,  privileges
         or powers of, or the  restrictions  provided  for the  benefit  of, the
         Series B Preferred;

                  (iii)    Increase  the  authorized  number  of  shares  of the
         Series  B  Preferred  or any  other  series  of  capital  stock  of the
         Corporation;

                  (iv)     Reclassify  any  shares of any class or series of the
         capital stock of the  Corporation  into shares having any preference or
         priority  superior  to or on a  parity  with  any  such  preference  or
         priority of the Series B Preferred;

                  (v)      Create,  authorize or issue any other class or series
         of capital stock or any security  convertible  into or  evidencing  the
         right to purchase shares of any class or series of capital stock of the
         Corporation  having any  preference  or  priority  superior  to or on a
         parity with any such  preference or priority of the Series B Preferred;
         or

                  (vi)     Effect (A) any  Liquidation  Event of the Corporation
         or any of its subsidiaries,  (B) any sale, lease, assignment,  transfer
         or other  conveyance  (other  than the grant of a mortgage  or security
         interest in connection with  indebtedness for borrowed money) of all or
         substantially   all  the  assets  of  the   Corporation,   or  (C)  any
         consolidation  or  merger  of the  Corporation  with or into any  other
         entity.

         6.       NO  REISSUANCE  OF SERIES B  PREFERRED.  No share or shares of
Series  B  Preferred  acquired  by the  Corporation  by  reason  of  redemption,
purchase,  conversion or otherwise shall be reissued,  and all such shares shall
be canceled,  retired and eliminated from the shares which the corporation shall
be authorized to issue.

         7.       REDEMPTION.

                  (a)      At the  written  request in the form of notice to the
Corporation (the

                                       13

<PAGE>

"Redemption  Notice")  of the holder or  holders  of at least a majority  of the
shares of Series B Preferred then  outstanding  made at any time after March 31,
2001 , the  Corporation  shall  redeem on the  Redemption  Date (as such term is
defined  below),  at a  redemption  price per share  equal to the greater of the
original  Conversion  Price,  being $2.00 per share, or the Conversion  Price as
adjusted  at the  Redemption  Date for such Series B  Preferred,  plus an amount
equal to any accrued or declared but unpaid  dividends  thereon (the "Redemption
Price"), all of the outstanding Series B Preferred.  The Redemption Price may be
payable,  at the  Corporation's  option, in cash or a number of shares of Common
Stock, as determined pursuant to Section 7(d) below.

                  (b)      On and after the  Redemption  Date, all rights of all
holders with respect to those shares of Series B Preferred being redeemed by the
Corporation pursuant to Section 7(a), except the right to receive the Redemption
Price per share of Series B Preferred as hereinafter  provided,  shall cease and
terminate, and such shares of Series B Preferred shall no longer be deemed to be
outstanding,  whether or not the certificates representing such shares have been
received by the Corporation;  PROVIDED,  HOWEVER, that, notwithstanding anything
to the contrary set forth herein, if the Corporation  defaults in the payment of
the  Redemption  Price in respect of any share of Series B  Preferred,  then the
rights  of the  holder  or  holders  with  respect  to such  shares  of Series B
Preferred shall continue until the Corporation cures such default.

                  (c)      On the  twentieth  (20th)  business day following the
date upon which the Corporation  received the Redemption Notice (the "Redemption
Date") from a majority of holders of Series B Preferred  the  Corporation  shall
pay each holder of Series B Preferred the applicable  Redemption  Price pursuant
to the terms of Section  7(a),  provided  that the  Corporation  or its transfer
agent  has  received  the  certificate(s)  representing  the  shares of Series B
Preferred to be redeemed.

                  (d)      The  Redemption  Price  shall  be  payable,   at  the
Corporation's  option,  in cash or in shares of Common Stock, or any combination
thereof; PROVIDED that if the Corporation elects to pay the aggregate Redemption
Price in cash and shares of Common  Stock,  the cash portion  shall be allocated
pro rata to all holders of Series B Preferred. In the event that the Corporation
elects to pay all or any  portion  of the  Redemption  Price in shares of Common
Stock,  such  shares of Common  Stock  shall be valued at the  lowest of (i) the
Market Price Per Share (as defined below) of the Common Stock on March 31, 1999,
(ii) the Market Price Per Share of the Common  Stock on the original  issue date
of the Series B  Preferred  and (iii) the  Market  Price Per Share of the Common
Stock on the date which is two business days prior to the  Redemption  Date. The
"Market  Price Per Share" of the Common Stock on any date shall mean the average
of the daily  closing  prices per share of Common  Stock for the 20  consecutive
Trading Days immediately prior to such date; PROVIDED that in the event that the
current  market  price per share of Common Stock is  determined  during a period
following the  announcement by the Corporation of (A) a dividend or distribution
on the Common Stock payable in shares of Common Stock or securities  convertible
into  shares  of  Common   Stock  or  (B)  any   subdivision,   combination   or
reclassification  of the Common Stock and prior to the  expiration of 20 Trading
Days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision,  combination or  reclassification,  then, and in each
such

                                       14

<PAGE>

case,  the Current  Market  Price Per Share shall be  appropriately  adjusted to
reflect    ex-dividend    trading   or   such   subdivision,    combination   or
reclassification.  The  closing  price for each day  shall be (i) if the  Common
Stock is then quoted on the Nasdaq National  Market,  the Nasdaq SmallCap Market
or another primary national  securities  exchange,  the closing bid price of the
Common  Stock as reported by the Nasdaq  National  Market,  the Nasdaq  SmallCap
Market or such primary national  securities  exchange (as the case may be), (ii)
if the Common Stock is not then traded on the Nasdaq National Market, the Nasdaq
SmallCap Market nor on a national securities exchange,  the closing bid price in
the  over-the-counter   market  as  reported  by  the  National  Association  of
Securities Dealers' Automated Quotation System or, if not so reported, the price
as  reported  by the  National  Quotation  Bureau,  Inc.,  or  any  organization
performing a similar function or (iii) if no such prices are then furnished, the
fair market value of a share of Common Stock as mutually determined by the Board
of Directors of the Corporation and holders of at least a majority of the Series
B Preferred.

         8.       RESIDUAL RIGHTS. All rights accruing to the outstanding shares
of the  Corporation  not  expressly  provided  for in the terms of the  Series B
Preferred shall be vested in the Common Stock.

         The  holders of the Series B Preferred  shall vote as a separate  class
with respect to any matter or proposed action as to which applicable law or this
Certificate  of  Incorporation  require  the vote,  consent,  or approval of the
holders of the Series B Preferred.

         IN WITNESS  WHEREOF,  the  Corporation  has caused this  Certificate of
Designation to be signed by its duly authorized  officer this 31st day of March,
1999.

                                        SUNPHARM CORPORATION



                                        By:    /s/ STEFAN BORG
                                               ---------------------------------
                                        Name:  Stefan Borg
                                        Title: President