CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
                   OF SERIES C CONVERTIBLE PREFERRED STOCK OF
                             THE THAXTON GROUP, INC.


         THE THAXTON GROUP, INC., a Company organized and existing under the
laws of the State of South Carolina (the "Company"),

         DOES HEREBY CERTIFY:

         That, pursuant to authority conferred upon the Board of Directors by
the Amended and Restated Articles of Incorporation of the Company, and pursuant
to the provisions of Section 33-6-102 of the Code of Laws of South Carolina
1976, the Board of Directors, by unanimous consent to action without meeting
effective December 1, 1997, adopted a resolution providing for the designations,
preferences, and relative, participating, optional, or other rights, and the
qualifications, limitations, or restrictions thereof, of the Series C
Convertible Preferred Stock, which resolution is as follows:

         RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company in accordance with the provisions of the
Amended and Restated Articles of Incorporation, the Board of Directors hereby
creates a series of redeemable convertible preferred stock, with a par value of
$0.01 per share, of the Company and hereby states the designation and number of
shares, and fixes the relative rights, preferences, and limitation thereof (in
addition to the provisions in the Amended and Restated Articles of Incorporation
that are applicable to the preferred stock of all series) as follows:

                      Series C Convertible Preferred Stock

                  Section 1. Designation and Amount. The shares of such series
         shall be designated as Series C Convertible Preferred Stock, with a par
         value of $0.01 per share (the "Series C Preferred Stock"), and the
         number of shares constituting such series shall be fifty thousand
         (50,000).

                  Section 2. Dividends. The holders of shares of Series C
         Preferred Stock shall be entitled to receive dividends, when, as, and
         if declared by the Board of Directors or a duly authorized committee
         thereof, out of funds legally available for the payment of dividends.
         Through December 31, 2000, dividends shall be paid in respect of each
         share of Series C Preferred Stock outstanding at the rate of one dollar
         ($1.00) per share per annum, and thereafter at the rate of one dollar
         and eighty cents ($1.80) per share per annum, payable in cash quarterly
         commencing on March 31, 1998 and thereafter on the last day of June,
         September, December and March of each year that any shares of Series C
         Preferred Stock are outstanding; provided, however, that dividends in
         respect of each share of Series C Preferred Stock issued at any time
         during the year ending December 31, 1997 or any calendar quarter
         thereafter, shall be payable in cash at such annual rate, pro 



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         rated from the date of issuance, on December 31, 1997 or the last day 
         of such quarter, as applicable. Such dividends are prior and in 
         preference to any declaration or payment of any distribution (as
         defined below) on the common stock of the Company (the "Common Stock"),
         but shall be paid pro rata and concurrently with any payment of 
         dividends to holders of Series A Convertible Preferred Stock ("the 
         Series A Preferred Stock") and Series B Convertible Preferred Stock 
         (the "Series B Preferred Stock"). Such dividends are cumulative and 
         shall accrue on each share of Series C Preferred Stock from day to day 
         from the date of initial issuance thereof whether or not earned or 
         declared so that if such dividends with respect to any previous 
         dividend period at the rate provided for herein have not been paid or 
         declared and set apart for all shares of Series C Preferred Stock at 
         the time outstanding, the deficiency shall be fully paid on, or 
         declared and set apart for, such shares before any distribution shall 
         be paid on, or declared and set apart for the Common Stock. For 
         purposes of this Section 2, unless the  context otherwise requires, 
         "distribution" shall mean the transfer of cash or property without 
         consideration, whether by way of dividend or otherwise, payable other 
         than in Common Stock, for the purchase or redemption of shares of the 
         Company's Common Stock (other than redemption as set forth in Section 
         5) for cash or property, including any such transfer, purchase, or 
         redemption by a subsidiary of the Company.

                  Section 3. Liquidation Preferences. Upon any liquidation,
         dissolution, or winding up of the Company, no distribution shall be
         made to the holders of shares of Common Stock or shares of any other
         class or series of stock ranking junior to the Series C Preferred Stock
         unless, prior thereto, the holders of shares of Series C Preferred
         Stock shall have received $10 per share plus any accrued but unpaid
         dividends. Following the payment of the full amount of such liquidation
         preference, no additional distributions shall be made to the holders of
         shares of Series C Preferred Stock. If, upon any liquidation,
         dissolution, or winding up of the Company, the assets of the Company,
         or proceeds thereof, distributable among the holders of shares of
         Series C Preferred Stock or any capital stock ranking on a par with the
         Series C Preferred Stock upon liquidation, dissolution, or winding up
         of the Company, shall be insufficient to pay in full the preferential
         amounts to which such stock would be entitled, then such assets, or the
         proceeds thereof, shall be distributable among such holders ratably in
         accordance with the respective amounts which would be payable on such
         shares if all amounts payable thereon were payable in full.

                  Section 4.        Conversion Rights, Antidilution Provisions.

                  A. Shares of the Series C Preferred Stock shall be
         convertible, in whole or in part, at the option of the holder, into
         Common Stock, at any time or from time to time, subject to the
         following terms and conditions.

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                  B. The shares of the Series C Preferred Stock shall be
         convertible at the principal executive offices of the Company, and at
         such other office or offices, if any, as the Board of Directors may
         designate, into fully paid and nonassessable shares of Common Stock of
         the Company, at an initial conversion rate of one (1) share of Common
         Stock for each share of Series C Preferred Stock, subject to adjustment
         as described in this Section 4.

                  C. In order to convert shares of the Series C Preferred Stock
         into Common Stock, the holder thereof shall surrender, at any office
         hereinabove mentioned the certificate or certificates therefor, duly
         endorsed or assigned to the Company or in blank, and give written
         notice to the Company at such office that such holder elects to convert
         such shares. Shares of the Series C Preferred Stock shall be deemed to
         have been converted immediately prior to the close of business on the
         day of the surrender of such shares for conversion in accordance with
         the foregoing provisions, and the person or persons entitled to receive
         the Common Stock issuable upon such conversion shall be treated for all
         purposes as the record holder or holders of such Common Stock at such
         time. As promptly as practicable on or after the conversion date, the
         Company shall issue and shall deliver at such office a certificate or
         certificates for the number of full shares of Common Stock issuable
         upon such conversion, together with payment in lieu of any fraction of
         a share, as hereinafter provided, to the person or persons entitled to
         receive the same.

                  D. If at any time the Company shall subdivide or combine its
         outstanding shares of Common Stock into a different number of shares of
         Common Stock, each share of Series C Preferred Stock shall thereafter
         be convertible into the same number of shares of Common Stock to which
         the holder of such shares of Series C Preferred Stock would thereafter
         have been entitled had such shares of Series C Preferred Stock been
         converted into Common Stock immediately prior to the effective date of
         such subdivision or combination.

                  E. If there occurs any capital reorganization or any
         reclassification of the capital stock of the Company or consolidation
         or merger of the Company with or into another Company or entity, each
         share of Series C Preferred Stock shall thereafter be convertible into,
         in lieu of Common Stock, the same kind and amounts of securities or
         other assets, or both, which were issuable or distributable to the
         holders of shares of outstanding Common Stock of the Company upon such
         reorganization, reclassification, consolidation, or merger in respect
         of that number of shares of Common Stock into which such share of
         Series C Preferred Stock would have been converted had such share of
         Series C Preferred Stock been converted into Common Stock immediately
         prior to such reorganization, reclassification, consolidation, or
         merger.

                  F. Upon any event described in subparagraphs D and E of this
         Section 4, the Company shall promptly mail to each holder of Series C
         Preferred Stock a

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         notice which shall describe such event and the change in the number of 
         shares or other assets or securities issuable upon the conversion of
         Series C Preferred Stock, setting forth in reasonable detail the 
         method of calculation and the facts upon which such calculation 
         is based.

                  G. The Company shall at all times reserve and keep available,
         free from pre-emptive rights, out of its authorized but unissued Common
         Stock, for the purpose of effecting the conversion of the Series C
         Preferred Stock, the full number of shares of Common Stock then
         issuable upon the conversion of all shares of Series C Preferred Stock
         then outstanding and shall take all such action and obtain all such
         permits or orders as may be necessary to enable the Company lawfully to
         issue such Common Stock upon such conversion.

                  H. If a share of Series C Preferred Stock is called for
         redemption the holder may convert it into a share of Common Stock in
         accordance with subsection B of this Section 4 at any time before the
         fifth (5th) day prior to the Redemption Date by complying with the
         conversion requirements of subsection C of this Section 4.

                  I. No fractional shares of Common Stock shall be issued upon
         conversion, but, instead of any fraction of a share which would
         otherwise be issuable, the Company shall pay a cash adjustment in
         respect of such fraction.

                  Section 5.        Redemption.

                  A. At any time after December 31, 2000, the Company may, at
         its option, redeem all or part of the outstanding shares of the Series
         C Preferred Stock at the redemption price set forth in subparagraph B
         below, provided that the Company shall give written notice by mail,
         postage prepaid, to the holders of the Series C Preferred Stock to be
         redeemed at least 30 but not more than 60 days prior to the date
         specified for redemption (the "Redemption Date"). Such notice shall be
         addressed to each such shareholder at the address of such shareholder
         appearing on the books of the Company or given by such holder to the
         Company for the purpose of notice, or if no such address appears or if
         so given, at the place where the principal office of the Company is
         located. Such notice shall state (1) the Redemption Date, (2) the
         Redemption Price (hereinafter defined), (3) the number of shares of
         Series C Preferred Stock to be redeemed, (4) that holders who wish to
         convert the shares of Series C Preferred Stock called for redemption
         must satisfy the requirements of Section 4 hereof, and (5) that the
         shares of Series C Preferred Stock called for redemption must be
         surrendered to the Company on or before the Redemption Date, at the
         place designated in the notice. On or after the Redemption Date, each
         holder of shares of Series C Preferred Stock called for redemption that
         surrenders the certificate evidencing such shares to the Company for
         redemption at the place designated in such notice shall thereupon be
         entitled to receive payment of the Redemption Price. If less than all
         of the outstanding 


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         shares of Series C Preferred Stock are to be redeemed, then the Company
         shall redeem a pro rata portion from each holder of Series C Preferred 
         Stock according to the respective number of shares of Series C 
         Preferred Stock held by such holder.

                  B. The Series C Preferred Stock may be redeemed at a cash
         price equal to Ten Dollars ($10.00) per share, together with all
         declared, unpaid and/or accrued dividends to and including the
         Redemption Date (the "Redemption Price").

                  C. From and after the Redemption Date (unless default shall be
         made by the Company in duly paying the Redemption Price in which case
         all the rights of holders of shares shall continue) the holders of the
         shares of the Series C Preferred Stock called for redemption, who shall
         not have converted such shares into Common Stock in accordance with
         Section 4 hereof, shall cease to have any rights as shareholders of the
         Company except the right to receive, without interest, the Redemption
         Price thereof upon surrender of certificates representing the shares of
         Series C Preferred Stock and such shares shall not thereafter be
         transferred (except with the consent of Company) on the books of the
         Company and shall not be deemed outstanding for any purpose whatsoever.

                  D. There shall be no redemption of any shares of Series C
         Preferred Stock of the Company where such action would be in violation
         of applicable law.

                  Section 6. Voting Rights. Except as otherwise required by law,
         the holders of the Series C Preferred Stock shall not be entitled to
         vote at any annual or special meeting of shareholders of the Company
         nor may they act by written consent in lieu of such meetings.

                  Section 7. Exchange. Certificates representing shares of the
         Series C Preferred Stock and, if converted in accordance with the terms
         and conditions hereof, after conversion thereof into Common Stock,
         certificates representing such shares, shall be exchangeable, at the
         option of the holder, for a new certificate or certificates of the same
         or different denominations representing in the aggregate the same
         number of shares of Series C Preferred Stock or shares of Common Stock,
         as the case may be.

                  Section 8. Shares to be Retired. All shares of Series C
         Preferred Stock which are converted into Common Stock shall revert to
         the status of authorized but unissued shares of preferred stock of the
         Company but shall not thereafter be reissued as shares of Series C
         Preferred Stock.


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         IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed on its behalf by its undersigned President and Chief Executive Officer
and attested to by its Secretary this 1st day of December, 1997.



                                 ----------------------------------------------
                                 Name:    James D. Thaxton
                                 Title:   President and Chief Executive Officer

ATTEST:



-------------------------
Name:    Kenneth H. James
Title:   Secretary


[Corporate Seal]


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