<PAGE>

As filed with the Delaware Secretary of State on 3/23/95.


                       AMENDED AND RESTATED

                   CERTIFICATE OF INCORPORATION

                                OF

                       DMI FURNITURE, INC.

 Pursuant to Sections 242 and 245 of the General Corporation Law of the State of
Delaware, DMI Furniture, Inc. (the "Corporation"), a Delaware corporation,
hereby certifies as follows:

     1. The Corporation's present name is "DMI Furniture, Inc." The Corporation
was originally incorporated under the name "Dolmad Corporation." The
Corporation's original certificate of incorporation was filed with the Secretary
of State of the State of Delaware on January 29, 1969.

     2. The Corporation's Certificate of Incorporation is hereby amended:

          (a)  to eliminate the 21,698 authorized shares of Series A Preferred
               Stock par value $20 per share; and

          (b)  to delete all references to the Corporation's old Series A
               Preferred Stock.

     3. The amendments described in the preceding paragraph 2 (the "Amendments")
shall be effected by amending Article FOURTH of the Corporation's Certificate of
Incorporation to read in its entirety as set forth in paragraph 5 below.

     4. The Corporation's Amended and Restated Certificate of Incorporation
restates and integrates all of the provisions of its Certificate of
Incorporation that are now in effect as a result of having previously been filed
with the Secretary of State.


                                       E-3                               Page 44
<PAGE>

     5. The Certificate of Incorporation, amended as described in the preceding
paragraphs 2, 3 and 4, shall read in its entirety as follows:

     FIRST:  The name of the Corporation is DMI Furniture, Inc.

     SECOND: The address of its registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.

     THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

     FOURTH:

          (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 13,620,000 shares, consisting of
2,020,000 shares of Series C Preferred Stock, par value $2 per share (herein
called the "Series C Preferred Stock"); 2,000,000 shares of Series D Preferred
Stock, par value $10 per share (herein called the "Series D Preferred Stock");
and 9,600,000 shares of Common Stock, par value $0.10 per share (herein called
the "Common Stock"). Except as otherwise provided in this Article FOURTH,
including, without limitation, part I hereof, all shares of Preferred Stock of
any class or series shall rank PARI PASSU with respect to each other, and senior
with respect to the Common Stock. All cross-references in each part of this
Article FOURTH refer to other paragraphs in such part unless otherwise
indicated.

          (b) The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class of stock of the Corporation:

                                I

                     SERIES C PREFERRED STOCK

     1.   DIVIDENDS.

          1A. GENERAL DIVIDEND OBLIGATION. When and as declared by the board of
directors of the Corporation, the Corporation shall pay to the holders of the
Series C Preferred Stock, out of the assets of the Corporation available for the
payment of dividends under the General Corporation Law of the State of Delaware,
dividends at the times and in the amounts provided for in this paragraph 1,
provided that the Series C Preferred Stock shall be


                                       E-4                               Page 45
<PAGE>

entitled to the dividend preferences set forth in paragraph 1E of this part I.
Anything herein to the contrary notwithstanding, the declaration of such
dividends shall be in the sole discretion of the board of directors and they
shall have no obligation to declare such dividends, but, in the event such
dividends are not paid as and when required under paragraph 1C of this part I,
the holders of the Series C Preferred Stock shall have and retain all the rights
and remedies herein contained arising from the failure to pay such dividends as
and when due.

          1B. CALCULATION OF DIVIDENDS. Dividends on each share of Series C
Preferred Stock (each of which is referred to in this part as a "Share") shall
be calculated cumulatively (but shall not compound) on a daily basis at the rate
and in the manner prescribed herein from and including the date of issuance of
such Share to and including the date on which the Redemption Price of such Share
shall have been paid, whether or not such dividends shall have been declared and
whether or not there shall be (at the time such dividends are calculated or
become payable or at any other time) profits, surplus or other funds of the
Corporation legally available for the payment of dividends. For purposes of this
paragraph 1B and paragraph 1C, the date on which the shares of Series B
Preferred Stock are converted into shares of Series C Preferred Stock shall be
deemed to be their "date of issuance" regardless of the number of times transfer
of such Shares shall be made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which may be issued to
evidence such Shares (whether by reason of transfer of such Shares or for any
other reason).

          1C. DIVIDEND RATE. Dividends shall be calculated cumulatively on a
daily basis on each Share beginning September 1, 1986. During each fiscal year
of the Corporation, beginning with the fiscal year ending August 31, 1987, the
annual dividend rate for each Share shall be the lower of (i) twenty cents
($.20) or (ii) the Corporation's Consolidated Net Income (as defined below) in
excess of $500,000 for the Corporation's next preceding fiscal year divided by
the number of Shares outstanding on the last day of that next preceding fiscal
year. Dividends shall be payable on the first day of December, 1986, in the case
of dividends to that date and the first day of each March, June, September and
December thereafter (or if such day is not a Business Day, the immediately
preceding Business Day) (the term "Dividend Reference Date" shall mean December
1, 1986, and each of such payment dates thereafter). To the extent not paid, all
dividends which have been calculated on each Share then outstanding during the
period from and including the preceding Dividend Reference Date (or from and
including the original date of issuance of the Series C Preferred Stock in the
case of the initial Dividend Reference Date) shall be added to the Liquidation
Value of such Share and shall remain a part thereof until (but only until) such
dividends are paid. For the purposes of this part I, "Consolidated Net Income"
of the Corporation shall


                                       E-5                               Page 46
<PAGE>

mean the consolidated net income of the Corporation and its subsidiaries as set
forth in the financial statements included in its Annual Report to Stockholders
which shall also contain the report of the Corporation's independent certified
public accountants respecting those financial statements, and which shall be
conclusively binding upon the Corporation and all stockholders.

          1D. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. If at any time the
Corporation shall pay less than the total amount of dividends then calculated on
the Series C Preferred Stock, such payment shall be distributed among the
holders of the Series C Preferred Stock so that an equal amount shall be paid
with respect to each outstanding Share.

          1E. Priority. The Series C Preferred Stock shall rank senior to the
Common Stock in respect of dividend payments to the extent provided in this
paragraph 1E. So long as any Series C Preferred Stock shall remain outstanding,
no Junior Securities shall be acquired or redeemed by the Corporation or any
Subsidiary, nor shall any dividend be declared or paid, nor shall any distri-
bution be made, upon any Junior Securities by the Corporation; PROVIDED that, so
long as no Event of Noncompliance (including without limitation the failure to
pay dividends as contemplated by paragraph 5A(i)(a) of this part I) or Potential
Event of Noncompliance shall have occurred and be continuing, the Corporation
(a) may pay dividends and make distributions on Junior Securities if the same
are exclusively shares of Common Stock and, in addition, (b) may pay cash
dividends on any Junior Securities in an aggregate amount during any year not
greater than ten per cent (10%) of Consolidated Net Income for its prior fiscal
year as defined in paragraph 1C of this part I, from which Consolidated Net
Income shall first be deducted all dividends paid or required to be paid
(whether or not paid) on the Series C Preferred Stock.

     2. LIQUIDATION. Upon any liquidation (complete or partial), dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
the Series C Preferred Stock shall be entitled, before any distribution or
payment is made upon any Junior Securities of the Corporation, to be paid out of
the assets of the Corporation available for distribution to its stockholders
(whether from capital, surplus or earnings) an amount in cash equal to the
aggregate Liquidation Value of all Shares outstanding, and the holders of the
Series C Preferred Stock shall not be entitled to any further payment. If upon
such liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets of the Corporation to be distributed among
the holders of the Series C Preferred Stock shall be insufficient to permit
payment to the holders of Series C Preferred Stock of the amount which they are
entitled to be paid as aforesaid, then assets of the Corporation shall be
distributed to the holders of the Series C Preferred Stock ratably based upon
the aggregate Liquidation Value of the Shares held by them. Upon any such
liquidation, dissolution


                                       E-6                               Page 47
<PAGE>

or winding up of the Corporation, after the holders of the Series C Preferred
Stock shall have been paid in full the amounts to which they shall be entitled,
the remaining assets of the Corporation may be distributed to the holders of
Junior Securities of the Corporation. Written notice of such liquidation,
dissolution or winding up, stating a payment date, the amount of the payment and
the place where the amounts distributable shall be payable, shall be mailed by
certified or registered mail, return receipt requested, not less than sixty days
prior to the payment date stated therein, to each record holder of any Share at
the address for such record holder shown on the Corporation's records. Neither
the consolidation nor merger of the Corporation into or with any other
corporation or corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of any of the provisions of this paragraph 2.

     3.   REDEMPTIONS.

          3A. REDEMPTION PRICE. For each Share which is to be redeemed by the
Corporation at any time and for any reason in a redemption pursuant to this
paragraph 3, the Corporation shall be obligated on the Redemption Date,
regardless of whether the Corporation shall be able or legally permitted to
make such payment on the Redemption Date, to pay to the holder thereof (upon
surrender by each holder at the Corporation's principal office of the
certificate representing such Share duly endorsed in blank or accompanied by an
appropriate form of assignment) the amount set forth below (the "Redemption
Price" for such share), or such lesser amount per Share that the Corporation and
the holder(s) of the Shares to be redeemed may agree upon.

          Redemption Date               Redemption Price
          ---------------               ----------------

          Before 9-1-90                      $2.50

          On or after 9-1-90 and             $2.75
          before 9-1-91

          On or after 9-1-91                 $3.00

Provided, that nothing herein shall be construed to require any actual payment
before such can be made without contravening applicable law.

          3B. REDEEMED OR OTHERWISE ACQUIRED SHARES NOT TO BE REISSUED. Any
Shares redeemed pursuant to this paragraph 3 or otherwise acquired by the
Corporation in any manner whatsoever shall not under any circumstances be
reissued, sold or transferred by the Corporation.


                                       E-7                               Page 48
<PAGE>

          3C. REDEMPTION AT THE CORPORATION'S OPTION. The Corporation may from
time to time redeem all or any portion of the Shares then outstanding at an
amount for each Share to be redeemed either (i) equal to the Redemption Price or
(ii) greater than the Redemption Price but less than the Lowest Common Stock
Equivalent Value per Share. Lowest Common Stock Equivalent Value per Share shall
equal the par value of the Shares (i) divided by the highest Purchase Price of
the Common Stock of any holder of Shares for purposes of the conversion rights
set forth in paragraph 15 (which may be set forth in a contract between the
Corporation and such holder) and (ii) multiplied by the Average Price of the
Common Stock. Average Price of the Common Stock shall mean the average of the
closing bid or sales prices (as the case may be) for the Common Stock quoted on
the NASDAQ System on each of the ten trading days before the date of the notice
of redemption required by paragraph 3D. If the Corporation redeems fewer than
all of the Shares then outstanding pursuant to this paragraph 3C, the
Corporation shall effect such redemption pro rata among all holders of Shares.
The number of Shares to be redeemed from each holder thereof in any redemption
pursuant to this paragraph 3C shall be determined by multiplying the total
number of Shares to be redeemed times a fraction, the numerator of which shall
be the total number of shares then held by such holder and the denominator of
which shall be the total number of Shares then outstanding, provided that the
Corporation shall not be required to redeem any fractional shares and redeem
from such holders only the whole number of shares resulting from such
calculation.

          3D. NOTICE OF REDEMPTION AT THE CORPORATION'S OPTION. The Corporation
shall mail notice of any redemption pursuant to paragraph 3C by certified or
registered mail, return receipt requested, to each holder of record of Shares at
the address for such holder shown on the Corporation's records, not more than
sixty nor less than thirty days before the date on which such redemption is to
be made. The notice shall also specify the number of Shares and the certificate
numbers thereof which are to be redeemed. Upon mailing any notice of redemption
pursuant to this paragraph 3D, the Corporation shall become obligated to redeem
at the time of redemption specified therein all Shares therein specified. If
fewer than all the Shares represented by any certificate are redeemed, a new
certificate representing the unredeemed Shares shall be issued to the holder
thereof without cost to such holder.

          3E. REDEMPTION OTHER THAN AT THE REDEMPTION PRICE. The Corporation may
from time to time redeem all or any portion of the Shares then outstanding, at
an amount less than the Redemption Price, from holders who accept an offer to
redeem their Shares made by the Corporation pursuant to this paragraph 3E.

               (a) To effect any redemption pursuant to this paragraph 3E, the
Corporation shall mail a written offer to redeem Shares by certified or
registered mail, return receipt requested,


                                       E-8                               Page 49
<PAGE>

to each holder of Shares, at the address for such holder shown on the
Corporation's records, not more than ninety nor less than sixty days before the
date on which such redemption is to be made. The offer shall specify the
aggregate number of Shares proposed to be redeemed, and the amount per Share to
be paid for the Shares to be redeemed, and the time and place of redemption.

               (b) Each holder of Shares may then deliver to the Secretary of
the Corporation, not later than thirty days before the time of redemption
specified in the Corporation's offer to redeem, a written notice designating the
number of whole Shares that such holder (a "Redeeming Holder") wishes the
Corporation to redeem. The number of Shares that the Corporation shall redeem
from each Redeeming Holder shall be determined as follows:

     FIRST STEP:  Determine with respect to each Redeeming Holder
the smaller of

         (a) The number of Shares the Redeeming Holder has designated as
     Shares he wishes the Corporation to redeem, and

         (b)  A/B x C

         Where:

         A is the number of Shares owned by the Redeeming Holder making the
     designation;

         B is the number of Shares owned by all the Redeeming Holders who make
     designations; and

         C is the number of Shares the Corporation proposes to redeem.

         SECOND STEP: If the number of Shares the Corporation proposes to redeem
exceeds the aggregate number of Shares determined for all Redeeming Holders in
the First Step, the excess shall be allocated (proportionately according to
their ownership of Shares) among the Redeeming Holders for whom the First Step
produced fewer shares than they wished the Corporation to redeem, but in the
allocation no Redeeming Holder shall be allocated a number of Shares greater
than the number necessary to produce for him in the Third Step the number of
Shares that he designated as Shares he wished the Corporation to redeem.

         Third Step: The number of Shares each Redeeming Holder is entitled to
have the Corporation redeem shall be determined by combining with respect to
each Redeeming Holder the number of Shares determined in the First Step and the
number of Shares allocated in the Second Step and then rounding that sum to the
nearest whole number.


                                       E-9                               Page 50
<PAGE>

              (c) The Corporation shall mail notice of any redemption pursuant
to this paragraph 3E by certified or registered mail, return receipt requested,
to each Redeeming Holder not less than fifteen days before the date on which the
redemption is to be made. The notice shall specify the number of Shares to be
redeemed. Upon mailing any notice of redemption pursuant to this paragraph 3E,
the Corporation shall become obligated to redeem at the time of redemption
specified therein all Shares therein specified. If fewer than all the Shares
represented by any certificate are redeemed, a new certificate representing the
unredeemed Shares shall be issued to the Redeeming Holder thereof without cost
to such Redeeming Holder.

         3F. DIVIDENDS AFTER REDEMPTION DATE. No Share shall be entitled to any
dividends calculated after its Redemption Date, and on such Redemption Date all
rights of the holder of such Share as a stockholder of the Corporation by reason
of the ownership of such Share, shall cease, except the right to receive the
Redemption Price of such Share upon presentation and surrender of the
certificate representing such Share, and such Share shall not after such
Redemption Date be deemed to be outstanding.

         3G. OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall neither
redeem nor otherwise acquire any Series C Preferred Stock except as expressly
authorized in this part I.

         3H. CALCULATED DIVIDENDS MUST BE PAID PRIOR TO ANY REDEMPTION. The
Corporation must pay all dividends calculated on the Series C Preferred Stock
through the Redemption Date at the time of redemption thereof, or shall not
redeem any such shares.

    4.   ELECTION OF DIRECTORS.

         (i) At each annual meeting of the stockholders of the Corporation, the
holders of Series C Preferred Stock, voting as a single class, shall be entitled
to elect the greatest integral number of directors that does not exceed
one-fifth (1/5) of the total number of directors, or two directors, whichever is
greater, and the number of members constituting the board of directors shall be
increased by such number, and the remaining members of the board of directors
shall (subject to the right of holders of any class or series of stock or other
securities of the Corporation other than the Series C Preferred Stock to elect
directors upon the happening of an event, such as a default in the payment of
dividends) be elected by the holders of the securities of the Corporation
entitled at the time to vote for the election of directors.

         (ii) The directors elected by the holders of the Series C Preferred
Stock may be removed only by the vote of the holders of record of the majority
of Shares at a meeting of the Stockholders or of the holders of Shares called
for that purpose in the manner set forth in paragraph 5B(iii). Any vacancy in
the office of any of


                                      E-10                               Page 51
<PAGE>

such directors may be filled by designation to the Corporation in writing by the
remaining director or directors then in office elected by the holders of the
Series C Preferred Stock pursuant to this paragraph 4, or, if not so filled
within thirty days after the vacancy occurs, by the holders of the Series C
Preferred Stock at any meeting, annual or special, for the election of directors
held thereafter. A special meeting of the holders of shares of Series C
Preferred Stock may be called for the purpose of filling any such vacancy in the
manner set forth in paragraph 5B(iii). In the case of removal of any such
director, the vacancy may be filled at the same meeting at which such removal
was voted.

    5.   EVENTS OF NONCOMPLIANCE.

         5A.  DEFINITION.

              (i)   An Event of Noncompliance shall be deemed to have occurred
if:

                   (a)  the Corporation fails for any reason to pay on any
Dividend Reference Date the full amount of dividends then calculated on the
Shares but unpaid;

                   (b)  the Corporation fails for any reason to redeem on any
date specified in any notice of redemption mailed pursuant to paragraph 3E all
of the Shares specified in such notice to be redeemed on such date;

                   (c)  the Corporation otherwise fails to perform or observe
any other covenant or agreement set forth in this part I or in any Warrant;

                   (d)  the Corporation or any Subsidiary mate- rially fails to
perform or observe any term, provision, covenant or agreement set forth in the
Purchase Agreement;

                   (e)  any representation or warranty in writing furnished by
the Corporation, any Subsidiary or any Person to any holder of Series C
Preferred Stock is (or proves to have been) false or misleading in any material
respect on the date made or furnished;

                   (f)  the Corporation or any Subsidiary makes an assignment 
for the benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation or any Subsidiary bankrupt or insolvent; or any
order for relief with respect to the Corporation or any Subsidiary is entered
under the Bankruptcy Act; or the Corporation or any Subsidiary petitions or
applies to any tribunal for the appointment of a trustee, receiver or liquidator
of the Corporation or any Subsidiary, or of any substantial part of the assets
of the Corporation or any


                                      E-11                               Page 52
<PAGE>

Subsidiary, or commences any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Subsidiary) relating to the
Corporation or any Subsidiary under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or hereafter in effect; or any such petition or
application is filed, or any such proceedings are commenced against the
Corporation or any Subsidiary and the Corporation or any such Subsidiary by any
act indicates its approval thereof, consent thereto or acquiescence therein, or
an order, judgment or decree is entered appointing any such trustee, receiver or
liquidator, or approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than sixty days; or
any involuntary case is commenced under the Bankruptcy Code with respect to the
Corporation or any Subsidiary and is not dismissed within sixty days; or any
order, judgment or decree is entered in any proceedings against the Corporation
or any Subsidiary decreeing the dissolution of the Corporation or such
Subsidiary and such order, judgment or decree remains unstayed and in effect for
more than sixty days; or any order, judgment or decree is entered in any
proceedings against the Corporation or any Subsidiary decreeing a split-up of
the Corporation or such Subsidiary and such order, judgment or decree remains
unstayed and in effect for more than sixty days;

                   (g)  the Corporation or any Subsidiary defaults in any
payment of principal of or interest on any obligation for money borrowed or
received (or any obligation under conditional sale or other title retention
agreement or any obligation issued or assumed as full or partial payment for
property whether or not secured by purchase money mortgage or any obligation
under notes payable or drafts accepted representing extensions of credit) beyond
any period of grace provided with respect thereto, or defaults in the
performance of any other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other default under any
such agreement shall occur and be continuing) if the effect of such default is
to cause, or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become due prior
to its stated maturity; or

                   (h)  a final judgment in an amount in excess of one
million dollars ($1,000,000) is rendered against the Corpo- ration or any
Subsidiary and, within sixty days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within sixty days
after the expiration of any such stay, such judgment is not discharged.

         (ii)  The existence or continuation of any Event of Noncompliance 
shall be irrespective of whether such event or the underlying facts shall have 
come about voluntarily or involuntarily


                                      E-12                               Page 53
<PAGE>

or shall be beyond the Corporation's or any Subsidiary's control or shall have
come about or been effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body or because of paragraph 3I of this
part I.
         (iii)  The term "Potential Event of Noncompliance" means
the occurrence of any event which with the passage of time or the giving of
notice or both would become an Event of Noncompliance.

    5B.  CONSEQUENCES OF CERTAIN EVENTS.

         (i)    If and whenever (a) the Corporation shall have failed to earn
Consolidated Net Income of at least $769,500 for the preceding fiscal year, or
accrued dividends on the Series C Preferred Stock amounting to $269,500 or more
at any time shall not have been paid, or (b) any Event of Noncompliance other
than the failure to pay dividends on the Series C Preferred Stock shall occur,
then the holders of the Series C Preferred Stock until divested of such right as
hereinafter provided, shall be entitled, voting as a single class to elect a
majority of the members of the board of directors (which shall include the
directors elected as provided in paragraph 4), and each Share shall be entitled
to one vote. In the event that the holders of Series C Preferred Stock shall
become so entitled to elect a majority of the members of the board of directors,
a special meeting for the election of such directors (the "Special Meeting")
shall be called in the manner set forth in paragraph 5B(iii), and the holders of
the Series C Preferred Stock, voting as a single class, shall elect such
majority of the members of the board of directors, and the remaining members of
the board of directors shall (subject to the right of holders of any class or
series of stock or other securities of the Corporation other than the Series C
Preferred Stock to elect directors upon the happening of an event, such as a
default in the payment of dividends) be elected by the holders of the securities
of the Corporation entitled at the time to vote for the election of directors.
Thereafter, at each annual meeting of the stockholders of the Corporation, until
divested as hereinafter provided of their right to elect a majority of the
members of the board of directors, the holders of the Series C Preferred Stock,
voting as a single class, shall elect a majority of the members of the board of
directors, and the remaining members of the board of directors shall (subject to
the right of holders of any class or series of stock or other securities of the
Corporation other than the Series C Preferred Stock to elect directors upon the
happening of an event, such as a default in the payment of dividends) be elected
by the holders of the securities of the Corporation entitled at the time to
vote for the election of directors.

         (ii)   The directors (other than those elected as provided in
paragraph 4) elected by the holders of the Series C Preferred


                                      E-13                               Page 54
<PAGE>

Stock voting as a single class pursuant to the aforesaid right or designated
pursuant to the provisions of this paragraph shall automatically cease to serve
as such whenever (a) if the Corporation's failure to earn Consolidated Net
Income of $769,500 for a preceding fiscal year or the non-payment of dividends
on the Series C Preferred Stock entitled the Series C Preferred Stock to elect a
majority of the board of directors, when the Corporation shall have earned
Consolidated Net Income of at least $769,500 for a subsequent fiscal year, and
the unpaid accrued dividends on the Series C Preferred Stock shall be less than
$269,500, or (b) if an Event of Noncompliance other than the failure to pay
dividends on the Series C Preferred Stock entitled the Series C Preferred Stock
to elect a majority of the board of directors, when all Events of Noncompliance,
except the nonpayment of dividends, are cured. Any such directors may otherwise
be removed only by the vote of the holders of record of the majority of Shares
at a meeting of the stockholders or of the holders of Shares called for that
purpose. Any vacancy in the office of any of such directors may be filled by
designation to the Corporation in writing by the remaining directors then in
office who were elected by the holders of the Series C Preferred Stock pursuant
to this paragraph 5B, or, if not so filled within thirty days after the vacancy
occurs, by the holders of the Series C Preferred Stock at any meeting, annual or
special, for the election of directors held thereafter. A special meeting of the
holders of shares of Series C Preferred Stock may be called for the purpose of
filling any such vacancy. In the case of removal of any such director, the
vacancy may be filled at the same meeting at which such removal was voted.

         (iii)  At any time when such special voting power shall have vested in
the holders of the Series C Preferred Stock as provided in paragraph 5B, and at
other times as provided in paragraph 4, a proper officer of the Corporation
shall, upon the written request of the holders of record of at least ten percent
(10%) of the Series C Preferred Stock, addressed to the Secretary of the
Corporation, call a Special Meeting of the holders of the Series C Preferred
Stock and the Common Stock for the purpose of electing the directors necessary
to constitute a majority of the board of directors in the manner provided by
paragraph 5B(iv). The Special Meeting shall be held at the earliest practicable
date at the principal office of the Corporation in the State of Delaware, as
shall be designated by such officer and specified in the notice of the Special
Meeting. If the Special Meeting shall not be called by the proper officers of
the Corporation within twenty days after personal service of said written
request upon the Secretary of the Corporation or within twenty days after
mailing the same within the United States of America, by registered mail
addressed to the Secretary of the Corporation at its principal office, then the
holders of record of at least ten percent (10%) of the Series C Preferred Stock
then outstanding may designate in writing one of their number to call the
Special Meeting at the expense of the Corporation; and the Special Meeting may
be called by such person


                                      E-14                               Page 55
<PAGE>

so designated upon the notice required for annual meetings of stockholders and
shall be held at the principal office of the Corporation in the State of
Delaware. Any holder of Series C Preferred Stock so designated shall have access
to the stock books of the Corporation for the purpose of causing a Special
Meeting of stockholders to be called pursuant to these provisions.
Notwithstanding the provisions of this paragraph, no Special Meeting shall be
called or held during the period within ninety days immediately preceding the
date fixed for the next annual meeting of stockholders.

         (iv)   Upon the calling of the Special Meeting as provided in
paragraph 5B(iii), vacancies shall be created on the Corporation's board of
directors in accordance with the Corporation's bylaws. If the Corporation's
bylaws do not provide for such vacancies, all directors elected by holders of
the Corporation's securities other than Series C Preferred Stock shall cease to
serve except those directors specifically reelected at the Special Meeting in
accordance with this paragraph 5B(iv). At the Special Meeting, (a) holders of
Series C Preferred Stock shall elect the number of directors which, together
with the directors elected as provided in paragraph 4 constitutes a majority of
the Corporation's directors, and (b) remaining members of the board of directors
shall (subject to the right of holders of any class or series or other
securities of the Corporation other than the Series C Preferred Stock to elect
directors upon the happening of an event, such as default in the payment of
dividends) be elected by the holders of the securities of the Corporation
entitled at the time to vote for the election of directors. If for any reason
the remaining members of the board of directors are not elected at the Special
Meeting, the directors elected by Series C Preferred Stock may fill any
remaining vacancies on the board of directors.

         (v)    If any Event of Noncompliance shall exist, each holder of any
Shares shall have, in addition to the rights expressly provided in this
paragraph 5B, any other rights which such holder may have been afforded under
any contract or agreement at any time and any other rights which such holder may
have under applicable law, but no such right shall include the right to cause
redemption of the Series C Preferred Stock when it is prohibited by paragraph 3I
of this part I.

    6.   RESTRICTIONS.

         (a)   So long as any Series C Preferred Stock shall be outstanding, the
Corporation shall not create any class or series of stock ranking, as to parity,
payment of dividends or as to liquidation preference, prior to, or equal to, the
Series C Preferred Stock.

         (b)  So long as any Series C Preferred Stock shall remain outstanding,
the Corporation shall not, except with the prior


                                      E-15                               Page 56
<PAGE>

written consent or the affirmative vote of the holders of record of at least
eighty percent of the then outstanding shares of Series C Preferred Stock, (i)
amend, alter or repeal this part I, (ii) otherwise amend, alter or repeal the
certificate of incorporation or its by-laws, or file any directors'
resolutions pursuant to the General Corporation Law of the State of Delaware,
adversely affecting any of the powers, preferences and special rights set forth
in this part I, or (iii) be a party to or enter into any agreement which would
prohibit or in any way restrict the Corporation from declaring or paying
dividends on, or redeeming, the Series C Preferred Stock, or performing any
other obligation to the holders of the Series C Preferred Stock imposed on the
Corpora- tion by this part I, or permit any Subsidiary to be a party to or to
enter into any agreement which would by its terms prohibit or in any way
restrict such Subsidiary from declaring or paying dividends to the Corporation
(directly, or indirectly through one or more other Subsidiaries) or the
Corporation from declaring or paying dividends on, or redeeming the Series C
Preferred Stock, or performing any other obligation to the holders of the Series
C Preferred Stock imposed on the Corporation by this part I.

    7.  VOTING RIGHTS. Except as otherwise provided by law, or as otherwise
provided in this part I of Article FOURTH, Shares shall entitle the holders
thereof to no voting rights.

    8.  CLOSING OF BOOKS. The Corporation will not close its books against the
transfer of any Share.

    9.  REGISTRATION OF TRANSFER. The Corporation shall keep at its principal
office (or such other place as the Corporation reasonably designates) a register
for the registration of Shares. Upon the surrender of any certificate
representing Series C Preferred Stock at such place, the Corporation shall, at
the request of the registered holder of such certificate, execute and deliver a
new certificate or certificates in exchange therefor representing in the
aggregate the number of Shares represented by the surrendered certificate (and
the Corporation forthwith shall cancel such surrendered certificate), subject to
the requirements of applicable securities laws. Each such new certificate shall
be registered in such name and shall represent such number of Shares as shall be
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate; and dividends
shall be calculated cumulatively on a daily basis on the Shares represented by
such new certificate from the date to which dividends have been fully paid on
the Shares represented by the surrendered certificate at the rate and in the
manner applicable to such surrendered certificate. The issuance of new
certificates shall be made without charge to the holders of the surrendered
certificates for any issuance tax in respect thereof or other cost incurred by
the Corporation in connection with such issuance; provided that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer


                                      E-16                               Page 57
<PAGE>

involved in the issuance and delivery of any certificate in a name other than
that of the holder of the surrendered certificate.

    10.  REPLACEMENT.

         (i)  Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder, without bond, shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing one or more Shares and, in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the registered holder is an institution, its own
agreement of indemnity shall be satisfactory), or, in the case of any such
mutilation, upon surrender of such certificate, the Corporation shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the number of Shares represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate, on which dividends shall be calculated
cumulatively on a daily basis from the date to which dividends have been fully
paid on such lost, stolen, destroyed or mutilated certificate at the rate and in
the manner applicable to such certificate.

         (ii)  The term "outstanding" when used in this part I with reference to
Shares as of any particular time shall not include any Shares represented by any
certificate in lieu of which a new certificate has been executed and delivered
by the Corporation in accordance with paragraph 9 or this paragraph 10, but
shall include only those Shares represented by such new certificate.

    11.  DEFINITIONS. The following terms shall have the following meanings,
which meanings shall be equally applicable to the singular and plural forms of
such terms:

         (i)  "Business Day" means any day which is not a Saturday or a Sunday
or a bank holiday in New York, New York.

        (ii)   "Junior Security" means any equity security of any kind which the
Corporation or any Subsidiary shall at any time issue or be authorized to issue
other than the Series C Preferred Stock.

       (iii)   "Liquidation Value" of any Share as of any particu- lar date
shall be equal to the sum of two dollars ($2.00), plus any unpaid dividends on
such Share added to the Liquidation Value of such Share on any Dividend
Reference Date pursuant to paragraph 1C of this part I and not thereafter paid;
and, in the event of any liquidation, dissolution or winding up of the
Corporation, unpaid dividends on such Share shall be added to the Liquidation
Value of such Share on the payment date under paragraph 2, calculated


                                     Page 17                             Page 58
<PAGE>

cumulatively to the close of business on such payment date on a daily basis.

          (iv)   "Person" includes an individual, a partnership, a corporation,
a trust, a joint venture, an unincorporated organization and a government or
any department or agency thereof.

           (v)   "Purchase Agreement" means the Preferred Stock and Warrant
Purchase Agreement dated January 3, 1984, pursuant to which the Shares were
issued as the same shall from time to time be modified and amended.

          (vi)   "Redemption Date" as to any Share means the date specified in
the notice of redemption in the case of a redemption of such Share pursuant to
paragraph 3D, provided that for purposes of paragraph 3F no such date shall be a
Redemption Date unless on such date the applicable Redemption Price is actually
paid or funds as required to pay the applicable Redemption Price are set aside
by the Corporation, separate and apart from its other funds, in trust for the
pro rata benefit of holders of shares of Series C Preferred Stock to be
redeemed. Should those funds be thus set aside, then notwithstanding any failure
to surrender for cancellation any shares of Series C Preferred Stock being
redeemed, the shares represented thereby shall no longer be deemed outstanding,
the right to receive dividends thereon shall cease to accrue from and after the
Redemption Date, and all rights of the holders of such shares shall terminate
after that date save only the right of those holders to receive the redemption
price therefor without interest. Any funds thus set aside that remain unclaimed
for one year after the Redemption Date shall revert to the Corporation's general
funds, and thereafter the holders of redeemed shares shall look only to the
Corporation for payment of the redemption price although such shares shall not
be deemed outstanding.

         (vii)   "Subsidiary" means any corporation or other entity at least a
majority of the Voting Stock or capital or equity, however named, of which is,
at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through one or more Subsidiaries.

        (viii)   "Voting Stock" means any shares of stock having general voting
power in electing the board of directors (irrespective of whether or not at
the time stock of any other class or classes has or might have voting power by
reason of the happening of any contingency).

          (ix)   "Warrants" means the Warrants issued in conjunction with the
initial issuance of the Series B Preferred Stock.

           (x)   "Wholly-owned Subsidiary" means any Subsidiary all of the
Voting Stock or capital or equity, however named, of which (except directors'
qualifying shares) is, and all securities con-


                                      E-18                               Page 59
<PAGE>


vertible into or exchangeable or exercisable for any such Voting Stock or
capital or equity of which are, and all rights (contingent or otherwise) to
subscribe for or to purchase any such capital stock or any such securities are,
at the time as of which any such determination is being made, owned by the
Corporation either directly or indirectly through one or more Wholly-owned
Subsidiaries.

    12.  NO SALE, LEASE OR EXCHANGE OF ASSETS, MERGER OR CONSOLIDATION, OR
CERTAIN ACQUISITIONS WITHOUT CONSENT OF HOLDERS OF SERIES C PREFERRED STOCK.
Without the prior written consent of the holders of at least 66.67 percent of
the Shares outstanding or the vote of such percentage of the holders thereof
after due and proper notice, the Corporation will not (a) sell, lease or
exchange all or substantially all of its properties or assets, whether or not in
the ordinary course of business and whether directly or through the sale or
exchange of stock of any Subsidiary or Subsidiaries, other than liquidation of a
Subsidiary existing on December 31, 1983, into the Corporation, (b) merge or
consolidate with or into any other entity other than a merger of a Wholly-owned
Subsidiary existing on December 31, 1983, into the Corporation, or (c) acquire
directly or indirectly any business, whether by purchase of assets, stock or
otherwise, (i) for a consideration, whether cash, notes, securities or
otherwise, in excess of $5,000,000, or (ii) which business has total liabilities
exceeding its shareholders equity, both determined in accordance with generally
accepted accounting principles.

    13.  AMENDMENT AND WAIVER. (a) No amendment, modification or waiver of any
provision of this part I (or of the percentage of Shares required to approve
such amendment, modification or waiver) shall be binding or effective without
the prior written consent or the affirmative vote of the holders of at least 80
per cent of the Shares outstanding at the time such change shall be made.

     (b)  No amendment, modification or waiver of any provision of this part I
shall extend to or affect any obligation not expressly amended, modified or
waived or impair any right consequent thereon. No course of dealing, and no
failure to exercise or delay in exercising any right, remedy, power or privilege
under this part I, shall operate as a waiver, amendment or modification of any
provision of this part I.

    14.  FULLY PAID AND NON-ASSESSABLE.  The Shares of the Series C Preferred
Stock shall be fully paid and non-assessable.

    15.  CONVERSION.

         15A. CONVERSION OPTION. Subject to the provisions for adjustment
subsequently set forth in this paragraph 15, each Share of the Series C
Preferred Stock shall be convertible at the option of the holder thereof, upon
surrender to the Corporation of the


                                      E-19                               Page 60
<PAGE>

certificate for the Share or Shares to be converted, into fully paid and
non-assessable shares of Common Stock on the basis of treating the par value of
the converted Shares as payment for the purchase price of the Common Stock
determined in accordance with the following schedule (the "Purchase Price"):


Date Preferred Certificate   Purchase Price of each Share
Surrendered for Conversion          of Common Stock
--------------------------   ----------------------------
Before 9-1-87                           $2.25

On or after 9-1-87 and
before 9-1-88                            2.00

On or after 9-1-88 and
before 9-1-89                            1.75

On or after 9-1-89 and
before 9-1-90                            1.50

On or after 9-1-90                       1.00

Any Shares so surrendered for conversion shall be duly endorsed, or accompanied
by proper instrument of transfer, to the Corporation or in blank, together with
a written notice to the Corporation of the election to make such conversion and
of the name or names in which the certificate or certificates to represent
Shares of the Common Stock shall be issued. The right to convert Shares of the
Series C Preferred Stock called for redemption shall terminate at the close of
business on the date fixed for such redemption or at the close of business on
such earlier day, not earlier than the fifth day prior to the date fixed for
such redemption, as shall be determined by the board of directors. Upon
conversion of any Shares of the Series C Preferred Stock, no allowance or
adjustment shall be made for accumulated unpaid dividends on the Series C Pre-
ferred Stock or for dividends on the Common Stock issued upon such conversion.
The Corporation shall pay all taxes and other charges in respect of the issue of
shares of the Common Stock upon any such conversion; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of shares of the Common
Stock in a name other than that in which the Shares of the Series C Preferred
Stock so converted were registered.

         15B.  ANTI-DILUTION PROVISIONS; ADJUSTMENT OF PURCHASE PRICE. The
Purchase Price shall be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Purchase Price, the holder of each Share
shall thereafter be entitled to acquire by conversion, at the Purchase Price
resulting from such adjustment, the number of shares of Common Stock (calculated
to the nearest whole share) obtained by multiplying the


                                      E-20                               Page 61
<PAGE>

Purchase Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Purchase Price resulting from such
adjustment.

         15C.  ADJUSTMENT FORMULAS FOR PURCHASE PRICE. If and whenever after the
effective date (as defined in Section (b) of Article FOURTH) the Corporation
shall issue or sell any shares of its Common Stock for a consideration per share
less than the Purchase Price in effect immediately prior to such issue or sale,
then forthwith such Purchase Price shall be reduced to a price (calculated to
the nearest $0.01) determined by dividing (1) an amount equal to the sum of (aa)
the number of shares of Common Stock outstanding immediately prior to such issue
or sale multiplied by such then existing Purchase Price, and (bb) the
consideration, if any, received and deemed received by the Corporation upon
such issue or sale, by (2) the total number of shares of Common Stock
outstanding and deemed outstanding immediately after such issue or sale. No
adjustment of the Purchase Price, however, shall be made in an amount less than
$0.01 per share, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to $0.01 per share
or more.
         15D.  CONSTRUCTIVE ISSUANCES OF STOCK; CONVERTIBLE SECURITIES; RIGHTS
AND OPTIONS; STOCK DIVIDENDS. For the purposes of paragraph 15C, the following
provisions (1) to (7), inclusive, shall also be applicable.

    (1)  In case at any time the Corporation shall in any manner grant any 
rights to subscribe for or to purchase, or any options for the purchase of, 
Common Stock or any stock or securities convertible into or exchangeable for 
Common Stock (such convertible or exchangeable stock of securities being 
herein called "Convertible Securities"), whether or not such rights or 
options or the right to convert or exchange any such Convertible Securities 
are immediately exercisable, and the price per share for which Common Stock 
is issuable upon the exercise of such rights or options or upon conversion or 
exchange of such Convertible Securities (determined by dividing (a) the total 
amount, if any, received or receivable by the Corporation as consideration 
for the granting of such rights or options, plus the minimum aggregate amount 
of additional consideration, if any, payable to the Corporation upon the 
exercise of such rights or options, plus, in the case of any such rights or 
options which relate to such Convertible Securities, the minimum aggregate 
amount of additional consideration, if any, payable upon the issue or sale of 
such Convertible Securities and upon the conversion or exchange thereof, by 
(b) the total maximum number of shares of Common Stock issuable upon the 
exercise of such rights or options or upon the conversion or exchange of all 
such Convertible Securities issuable upon the exercise of such rights or 
options)

                                      E-21                               Page 62
<PAGE>

shall be less than the Purchase Price in effect immediately prior to the time of
the granting of such rights or options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such rights or options shall (as of the
date of granting of such rights or options) be deemed to be outstanding and to
have been issued for such price per share. Except as provided in subdivision (3)
below no further adjustments of the Purchase Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon exercise of
such rights or options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.

    (2)  In case at any time the Corporation shall in any manner issue or sell
any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon such conversion or exchange (determined by dividing (a)
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 (b) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Purchase Price in effect immediately prior to
the time of such issue or sale, then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of such Convertible
Securities) be deemed to be outstanding and to have been issued for such price
per share; PROVIDED, that, except as otherwise specified in subdivision (3)
below, (x) no further adjustments of the Purchase Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (y) if any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to purchase
or any option to purchase any such Convertible Securities for which adjustments
of the Purchase Price has been or is to be made pursuant to other provisions of
this paragraph 15D, no further adjustment of the Purchase Price shall be made by
reason of such issue or sale.

    (3)  If the purchase price provided for in any right or option referred to
in subdivision (1) of this paragraph 15D, or the rate at which any Convertible
Securities referred to in subdivisions (1) and (2) of this paragraph 15D are
convertible into or exchangeable for Common Stock, shall change or a different
purchase price or rate shall become effective at any time or from time to time
(other than under or by reason of provisions designed to protect against
dilution) then, upon such change becoming effective, the Purchase Price then in
effect hereunder shall forthwith be increased (but not above the prices
scheduled in paragraph 15A for each relevant


                                      E-22                               Page 63
<PAGE>

time period) or decreased to such Purchase Price as would have obtained had the
adjustments made upon the issuance of such rights or options or Convertible
Securities been made upon the basis of (and the total consideration received
therefor) (a) the issuance of the number of shares of Common Stock theretofore
actually delivered upon the exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities, (b) the issuance of all
Common Stock and all other rights, options and Convertible Securities issued
after the issuance of such rights, options or Convertible Securities, and (c)
the original issuance at the time of such change of any such options, rights and
Convertible Securities then still outstanding. On the expiration of any such
option or right or the termination of any such right to convert or exchange such
Convertible Securities, the Purchase Price then in effect hereunder shall
forthwith be increased (but not above the prices scheduled in paragraph 15A for
each relevant time period) or decreased to such Purchase Price as would have
obtained (x) had the adjustments made upon the issuance of such rights or
options or Convertible Securities been made upon the basis of the issuance of
only the number of shares of Common Stock theretofore actually delivered (and
the total consideration received therefor) upon the exercise of such rights or
options or upon the conversion or exchange of such Convertible Securities and
(y) had adjustments been made on the basis of the Purchase Price as adjusted
under the immediately preceding clause (x) for all issues or sales of Common
Stock or rights, options or Convertible Securities made after the issuance of
such rights or options or Convertible Securities. If the purchase price provided
for in any right or option referred to in subdivision (1) of this paragraph 15D,
or the rate at which any Convertible Securities referred to in subdivisions (1)
and (2) of this paragraph 15D are convertible into or exchangeable for Common
Stock, shall decrease at any time to an amount below the Purchase Price then in
effect under or by reason of provisions with respect thereto designed to protect
against dilution and the dilutive event causing such decrease is one that did
not also require an adjustment in the Purchase Price under the provisions of
this paragraph 15, then in the case of the delivery of shares of Common Stock
upon the exercise of any such right or option or upon conversion or exchange of
any such Convertible Securities, the Purchase Price then in effect hereunder
shall forthwith be decreased to such Purchase Price as would have obtained had
the adjustments made upon issuance of such right or option or Convertible
Securities been made upon the basis of the issuance of (and the total
consideration received for) the shares of Common Stock delivered as aforesaid.

    (4)  In case at any time the Corporation shall declare a dividend or make
any other distribution upon any stock of the Corporation payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.


                                      E-23                               Page 64
<PAGE>

    (5)  In case at any time any shares of Common Stock or Con- vertible
Securities or any rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount payable to the Corporation
therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by the
Corporation in connection therewith. In case any shares of Common Stock or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash payable to the Corporation
shall be deemed to be the fair value of such consideration as reasonably
determined by the Board of Directors of the Corporation, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Corporation in connection
therewith. In case any shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or Convertible Securities
shall be issued in connection with any merger of another corporation into the
Corporation, the amount of consideration therefor shall be deemed to be the fair
value as reasonably determined by the Board of Directors of the Corporation of
such portion of the assets of such merged corporation as such Board shall
determine to be attributable to such Common Stock, Convertible Securities,
rights or options, as the case may be.

    (6)  In case at any time the Corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them (a) to receive a dividend
or other distribution payable in Common Stock or in Convertible Securities, or
(b) to subscribe for or purchase Common Stock 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 the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.

    (7)  The number of shares of Common Stock outstanding at any given time
shall include shares owned or held by or for the account of the Corporation, and
the disposition of any such shares shall not be considered an issue or sale of
Common Stock for the purposes of paragraph 15C.

         15E. CORPORATION TO PREVENT DILUTION. In case at any time or from time
to time conditions arise by reason of action taken by the Corporation which are
not adequately covered by the provisions of this paragraph 15, and which might
materially and adversely affect the conversion rights of the holders of the
Shares under any provision of this paragraph 15, the Board of Directors shall
appoint a firm of independent certified public accountants of recognized
standing, who may be the firm regularly retained by the Corporation, who shall
give their opinion upon the adjustment, if any, on a basis consistent with the
standards established in the


                                      E-24                               Page 65
<PAGE>

other provisions of this paragraph 15, necessary with respect to the Purchase
Price, so as to preserve, without dilution, the exercise rights of the holders
of the Shares. Upon receipt of such opinion, the Board of Directors shall
forthwith make the adjustments described therein.

         15F. EFFECT OF CERTAIN DIVIDENDS. In case at any time the Corporation
shall declare a dividend upon the Common Stock (other than a dividend payable in
Common Stock) payable otherwise than out of net earnings after taxes accumulated
from and after August 31, 1985, the Purchase Price in effect immediately prior
to the declaration of such dividend shall be reduced by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per share of Common
Stock or, in the case of any other dividend, to the fair value thereof per share
of Common Stock as determined by the Board of Directors of the Corporation. Such
reductions shall take effect as of the date on which a record is taken for the
purpose of such dividend, or, if a record is not taken, the date as of which the
holders of record of Common Stock of record entitled to such dividend are to be
determined. As used in this Paragraph 15F, the term "dividend" shall mean any
distribution to the holders of Common Stock as such.

         15G. STOCK SPLITS AND REVERSE SPLITS. In case at any time the
Corporation shall subdivide its outstanding shares of Common Stock into a
greater number of shares, the Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of
Common Stock into which a Share is convertible immediately prior to such
subdivision shall be proportionately increased, and conversely, in case at any
time the Corporation shall combine its outstanding shares of Common Stock into a
smaller number of shares, the Purchase Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock into which a Share is convertible immediately prior to such
combination shall be proportionately reduced. Except as provided in this
paragraph 15G, no adjustment in the Purchase Price and no change in the number
of shares of Common Stock into which a Share is convertible shall be made
pursuant to this paragraph 15 as a result of or by reason of any such
subdivision or combination.

         15H. EFFECT OF REORGANIZATION AND ASSET SALES. If any capital
reorganization or reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with another corporation, or the sale
of all or substantially all of its assets to another corporation, shall be
effected in such a way that holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby each holder
of Shares shall thereafter have the right to receive, upon the terms and
conditions


                                      E-25                               Page 66
<PAGE>

herein contained, in lieu of the shares of the Common Stock of the Corporation
immediately theretofore receivable upon conversion of such Shares, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such stock immediately theretofore so receivable had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Purchase Price
and of the number of shares issuable upon conversion) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the conversion of such Shares. The
Corporation shall not effect any such consolidation, merger or sale unless prior
to or simultaneously with the consummation thereof the successor corporation
(if other than the Corporation) resulting from such consolidation or merger or
the corporation purchasing such assets shall assume by written instrument
executed and mailed or delivered to each holder of Shares, the obligation to
deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive, and containing the express assumption of such successor corporation of
the due and punctual performance and observance of each provision of this
paragraph 15 to be performed and observed by the Corporation and of all
liabilities and obligations of the Corporation under this paragraph 15.

          15I.  ACCOUNTANTS' CERTIFICATE. Upon each adjustment of the Purchase
Price and upon each change in the number of shares of Common Stock issuable upon
the conversion of a Share, and in the event of any change in the rights of the
holders of Shares under this paragraph 15 by reason of other events herein set
forth, then and in each such case, the Corporation will promptly obtain a
certificate of a firm of independent certified public accountants of recognized
standing selected by the Corporation's Board of Directors (who may be the
regular auditors of the Corporation), stating the adjusted Purchase Price and
the new number of shares of Common Stock issuable, or specifying the other
shares of stock, securities or assets and the amount thereof receivable as a
result of such change in rights, and setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based. The
Corporation will promptly mail a copy of such accountants' certificate to the
registered holders of all Shares. The certificate of such firm of independent
public accountants shall be conclusive evidence of the correctness of the
computation with respect to any such adjustment of the Purchase Price and any
such change in the number of such shares so issuable.

         15J. The Corporation shall at all times reserve and keep available out
of its authorized but unissued Common Stock the full


                                      E-26                               Page 67
<PAGE>

number of shares of Common Stock into which all shares of the Series C Preferred
Stock from time to time outstanding are convertible.

         15K. Shares of the Series C Preferred Stock surrendered for conversion
shall not under any circumstances be reissued, sold or transferred by the
Corporation.

    16.  REGISTRATION RIGHTS.

         16A. DEFINITIONS.  For purposes of this paragraph 16 of Part I, the
following terms shall have the following meanings:

    (1)  "Commission" shall mean the Securities and Exchange Commission.

    (2)  "Holders" shall mean any holder or holders of Registrable Securities.

    (3)  The terms "register," "registered," and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

    (4)  "Registrable Securities" shall mean all shares of (a) Series C
Preferred Stock which are issued and outstanding from time to time, (b) Common
Stock which were received by the holders of the Old Series B Preferred Stock as
a result of the change of the Old Series B Preferred Stock into shares of Common
Stock and of Series C Preferred Stock, and (c) Common Stock which are issued
upon conversion of shares of the Series C Preferred Stock in accordance with
paragraph 15A of this Part I.

    (5)  "Securities Act" shall mean the Securities Act of 1933, as amended.

         B.   NOTICE OF INTENTION TO TRANSFER; OPINION OF COUNSEL. Before any 
transfer of Registrable Securities, the Holder of such securities shall give 
written notice to the Corporation of its intention to effect such transfer 
describing such intended transfer as set forth in subdivision (1) of this 
paragraph 16B, and shall deliver to the Corporation an opinion of counsel for 
the Corporation or an opinion, reasonably satisfactory to counsel for the 
Corporation, of Eaton & Van Winkle or other counsel skilled in securities 
matters (selected by such Holder and reasonably satisfactory to the 
Corporation) as to the necessity or non-necessity of registration under the 
Securities Act, or an interpretative letter from the Commission to the effect 
that the proposed transfer may be made without registration under the 
Securities Act; provided, however, that the foregoing shall not apply with 
respect to any Registrable Securities as to which there is a

                                      E-27                               Page 68
<PAGE>

registration statement in effect under the Securities Act at the time of the
proposed transfer. In the case of such opinion of counsel, the following
provisions shall apply:

    (1)  If in such opinion of such counsel, the proposed transfer of the
Registrable Securities may be effected without registration under the Securities
Act of the Registrable Securities, the Holder of the Registrable Securities
shall be entitled to transfer the Registrable Securities in accordance with the
intended method of disposition specified in the notice delivered by such Holder
to the Corporation.

    (2)  If in such opinion of such counsel the proposed transfer of the
Registrable Securities may not be effected without registration under the
Securities Act of the Registrable Securities, the Holder of the Registrable
Securities shall not be enti- tled to transfer the Registrable Securities until
completion of such registration, but, upon the written request of Holders
representing in the aggregate at least 25 percent of the Registrable
Securities then outstanding, the Corporation shall be obligated to prepare and
file and to use its best efforts to effect the registration under the Securities
Act of such Registrable Securities as requested by such Holders, all in
accordance with the following provisions of this paragraph 16; provided, that
the Corporation shall only be obligated to effect a total of one such free
registration pursuant to this subdivision (2) of this paragraph 16B.

    Each Holder agrees to indemnify the Corporation against and hold it harmless
from all damages, losses, liabilities (including liability for rescission),
costs and expenses which the Corporation may incur under the Securities Act or
otherwise by reason of any misrepresentation by it of facts concerning it or any
proposed transfer of the Registrable Securities which are material with respect
to the availability of any exemption from registration under the Securities Act.

         C.   FREE REGISTRATION RIGHT.  Whenever the Corporation shall be
required by the Holders of Registrable Securities pursuant to subdivision (2) of
paragraph 16B to effect the registration of any of the Registrable Securities,
the Corporation shall promptly give written notice of such proposed registration
to all other Holders of Registrable Securities and thereupon shall, as
expeditiously as possible, file a registration statement and use its best
efforts within 120 days after the giving of such written request (or, in the
case of a request made within 60 days prior to the end of the Corporation's then
current fiscal year, 210 days after the giving of such written request) to
effect the registration under the Securities Act of


                                      E-28                               Page 69
<PAGE>

    (1)  the Registrable Securities which the Corporation has been requested to
register pursuant to subdivision (2) of paragraph 16B; and

    (2)  all other Registrable Securities which the Holders have, within 30 days
after the Corporation has given such written notice, requested the Corporation
to register;

all to the extent requisite to permit the disposition by the Holders of the
Registrable Securities so registered of such Registrable Securities. No other
outstanding securities of the Corporation shall be included in such registration
statement without the consent of the underwriter selected by the Holders to sell
the Registrable Securities so registered, which underwriter shall be a member
firm of the New York Stock Exchange of national standing with a net capital of
at least $10,000,000.

         16D. PIGGY-BACK REGISTRATION RIGHTS. If the Corporation proposes to
register any shares of its capital stock under the Securities Act, and if the
registration statement is to be filed in a form of the Commission which can
include, or is at any time amended or changed to such a form which can include,
the Registrable Securities, the Corporation will at each such time give written
notice to all Holders of its intention to do so at least 30 days prior to the
filing of said registration statement.

    (1)  If the representative of the underwriters participating in the sale and
distribution of the Corporation's securities covered by said registration
statement agrees that a number of shares of Registrable Securities may be
included in the registration statement (the "Permissible Secondary Shares"), the
Corporation's notice shall afford the Holders an opportunity to elect within 30
days after receipt thereof to include in such filing their Registrable
Securities. If the aggregate number of Registrable Securities which the Holders
thereof desire to include in such filing exceeds the number of Permissible
Secondary Shares, then each such Holder shall be entitled to include that number
of Registrable Securities which bears the same ratio to the number of
Permissible Secondary Shares as the number of Registrable Securities such Holder
desires to include bears to the number of Registrable Securities all such
Holders desire to include.

    (2)  The Corporation agrees that it will not without the consent of the
Holders of two-thirds or more of the Registrable Securities hereafter grant to
any present or future shareholder any contractual "piggy-back" registration
rights covering in the aggregate (for all such rights granted after the
effective date (as defined in section (b) of Article FOURTH)) 125,000 shares of
Common Stock (as presently constituted), and also agrees that any Holder
entitled to include a given number of Registrable Securities in a filing as
provided in subdivision (1) of this paragraph l6D may assign or transfer such
right of inclusion to any other Holder.


                                      E-29                               Page 70
<PAGE>

    (3)  The inclusion of Registrable Securities in such filing shall be upon
the condition that the Holders thereof have their shares sold through the
underwriters on the same terms and conditions as applicable to the Corporation
or other selling shareholders of the Corporation.

    (4)  The Corporation shall be obligated under this subdivision (4) of
paragraph l6D to afford the Holders the right to participate in each such
registration until they have had an opportunity (whether or not availed of) to
participate in at least two registrations which become effective and such
additional registrations as become effective or may be necessary to have
afforded them the opportunity to include in such registrations and sell, in the
aggregate, a number of Registrable Shares equal to three times the maximum
number of Registrable Securities at any time held by them.

         16E. CONDITIONS TO REGISTRATION. The obligations of the Corporation
under this paragraph 16 are subject to the conditions that each Holder of
Registrable Shares which are to be included in any registration:

    (1)  Cooperates with the Corporation in preparing such registration, and
executes such agreements as may be reasonably necessary in favor of any
underwriter selected by the Corporation,

    (2)  Promptly supplies the Corporation with all information, documents,
representations and agreements reasonably necessary in connection with the
registration of such Holder's Registrable Securities, and

    (3)  Agrees in writing not to sell or transfer any Registrable Securities
not included in such registration for a period of 90 days after the effective
date of such registration statement without the underwriters' consent, but no
such Holder shall be required to make such agreement unless all other Holders of
Permissible Secondary Shares included in such registration similarly agree.

         16F. OPINION OF COUNSEL AS ALTERNATIVE TO REGISTRATION. The 
registration rights granted to the Holders under this paragraph 16 shall be 
subject to the condition that any registration of Registrable Securities 
proposed to be effected need not be effected if the Corporation shall deliver 
to the Holders requesting such registration an opinion reasonably 
satisfactory to such Holders and their counsel of counsel reasonably 
satisfactory to such Holders to the effect that such proposed sale or 
disposition for which registration was requested does not require 
registration under the Securities Act. The Corporation hereby indemnifies 
such Holders, and each of them, against and holds them harmless from all 
damages, losses, liabilities (including liability for rescission), costs and 
expenses which they may incur under the Securities Act or otherwise

                                      E-30                               Page 71
<PAGE>

by reason of their proceeding in accordance with such opinion of counsel.

         16G. CORPORATION'S REGISTRATION OBLIGATIONS. If and whenever the
Corporation is obligated by the provisions of this paragraph 16 to effect the
registration of any Registrable Securities under the Securities Act, as
expeditiously as possible the Corporation will, or will use its best efforts to,
as the case may be:

    (1)  Prepare and file with the Commission a registration statement with
respect to such Registrable Securities and cause such registration statement to
become and remain effective for a period of at least 90 days.

    (2)  Prepare and file with the Commission such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until the earlier
of the sale of all Registrable Securities covered thereby or the expiration of a
period of nine months from the date it became effective, and to comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement. In the event that
any Registrable Securities included in a registration statement subject to, or
required by, this paragraph 16 remain unsold at the end of the period during
which the Corporation is obligated to use its best efforts to maintain the
effectiveness of such registration statement, the Corporation, if and when a
further amendment or supplement would be required to comply with Section 10 of
the Securities Act, may file a post-effective amendment to the registration
statement for the purpose of removing such Registrable Securities from
registered status.

    (3)  Furnish to Holders of Registrable Securities for whom such shares are
registered or are to be registered such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such Holders may reasonably request
in order to facilitate the disposition of such shares.

    (4)  Register or qualify the Registrable Securities covered by such
registration statement under such other securities or blue sky laws of such
jurisdictions (not exceeding 10 in number for all Holders of Registrable
Securities participating in such offering and subject to the approval of any
managing underwriter involved) as the Holders for whom such Registrable
Securities are registered shall request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such Holders to
consummate the disposition in such jurisdictions of such Registrable Securities;
PROVIDED, HOWEVER, that the Corporation shall not be obligated, by reason
thereof, to qualify as a foreign


                                      E-31                               Page 72
<PAGE>

corporation or file any general consent to service of process under the laws of
any such jurisdiction or subject itself to taxation as doing business in any
such jurisdiction.

    (5)  Furnish to the Holders of Registrable Securities for whom such shares
are registered or are to be registered at the time of disposition an opinion of
counsel for the Corporation acceptable to such Holders and their counsel to the
effect that a registration statement covering such shares has been filed with
the Commission under the Securities Act and has been made effective by order of
the Commission, that a prospectus complying as to form with the requirements of
the Securities Act is available for delivery, that no stop order has been issued
by the Commission suspending the effectiveness of such registration statement
and that, to the best of such counsel's knowledge, no proceedings for the
issuance of such a stop order are threatened or contemplated, and that the
shares have been registered or qualified under the securities or blue sky laws
of each state in which the Corporation has been advised by the representatives
of the underwriters that they intend to sell such shares, if a firm offering or,
if not, as the Corporation shall be required to register or qualify such shares
as contemplated in subdivision (4) of this paragraph 16G.

    (6)  Notify the holders of Registrable Securities for whom such Registrable
Securities are registered or are to be registered and their counsel promptly
after the Corporation shall receive notice that any registration statement,
supplement or amendment has become effective, any registration statement is
required to be amended or supplemented, or any stop order has been issued.

         H.   EXPENSES OF REGISTRATION. The costs and expenses (other than
underwriting discount or commission) of all registrations and qualifications
under the Securities Act, and of all other actions, which the Corporation is
required to take or effect pursuant to this paragraph 16 shall be paid by the
Corporation (including, without limitation, all registration and filing fees,
printing expenses, costs of special audits incident to or required by any such
registration, fees and disbursements of counsel for the Corporation and up to
$50,000 of fees and disbursements of one special counsel acting for the Holders
of Registrable Securities requesting any registration) except that all such
expenses in connection with any amendment or supplement to the registration
statement or the prospectus used in connection therewith required to be filed
more than ninety days after the date on which such registration statement
becomes effective under the Securities Act because any Holder has not effected
the disposition of shares covered by such registration statement shall be borne
by such Holder or Holders, in such proportions as they may agree.

         I.   NOTICES TO BE COMPLETE. Notices and requests delivered by Holders
to the Corporation pursuant to this paragraph 16 shall contain such information
regarding the Registrable Securities


                                      E-32                               Page 73
<PAGE>

and the intended method of disposition thereof as reasonably shall be required
in connection with the action to be taken.

         J.   INDEMNITY OF CORPORATION. In the event of any registration 
under the Securities Act of any Registrable Securities, the Corporation 
hereby indemnifies and holds harmless each Holder disposing of such shares 
and each other person, if any, who controls such Holder within the meaning of 
the Securities Act and each other person (including each underwriter, and 
each other person, if any who controls such underwriter) who participates in 
the offering of such Registrable Securities, against any losses, claims, 
damages or liabilities, joint or several, to which such Holder or controlling 
person or participating person may become subject under the Securities Act or 
otherwise, insofar as such losses, claims, damages or liabilities (or 
proceedings in respect thereof) arise out of or are based upon any untrue 
statement or alleged untrue statement of any material fact contained, on the 
effective date thereof, in any registration statement under which such 
Registrable Securities were registered under the Securities Act, in any 
preliminary prospectus or final prospectus contained therein, or in any 
amendment or supplement thereto, or arise out of or are based upon the 
omission or alleged omission to state therein a material fact required to be 
stated therein or necessary to make the statements therein not misleading, 
and will reimburse such Holder and each such controlling person or 
participating person for any legal or other expenses reasonably incurred by 
such Holder or such controlling person or participating person in connection 
with investigating or defending any such loss, claim, damage, liability or 
proceeding; PROVIDED, that the Corporation will not be liable in any such 
case to the extent that any such loss, claim, damage or liability arises out 
of or is based upon an untrue statement or alleged untrue statement or 
omission or alleged omission made in such registration statement, said 
preliminary or final prospectus or said amendment or supplement in reliance 
upon and in conformity with written information furnished to the Corporation 
by an instrument duly executed by such Holder or such controlling or 
participating person, as the case may be, specifically for use in the 
preparation thereof.

         K.   INDEMNITY OF HOLDER. In the event of any registration under the 
Securities Act of any Registrable Securities, each Holder thereof hereby 
severally indemnifies and holds harmless the Corporation, each other Holder 
disposing of such shares (the "Indemnified Holders"), each other person, if 
any, who controls such Indemnified Holders within the meaning of the 
Securities Act and each other person (including each underwriter, and each 
other person, if any, who controls each underwriter) who participates in the 
offering of such Registrable Securities, against any losses, claims, damages 
or liabilities, joint or several, to which the Corporation, such Indemnified 
Holders or controlling persons or participating persons may become subject 
under the Securities Act or otherwise, insofar as such losses, claims, 
damages or 




                                      E-33                               Page 74
<PAGE>

liabilities (or proceedings in respect thereof) arise out of or 
based upon any untrue statement or alleged untrue statement of any material 
fact contained, on the effective date thereof, in any registration statement 
under which such Indemnified Holders were registered under the Securities 
Act, in any preliminary prospectus or final prospectus contained therein, or 
in any amendment or supplement thereto, or arise out of or are based upon the 
omission or alleged omission to state therein a material fact required to be 
stated therein or necessary to make the statements therein not misleading, 
and will reimburse the Corporation, such Indemnified Holders and each of such 
controlling persons or participating persons for any legal or other expenses 
reasonably incurred by the Corporation, each Indemnified Holder or such 
controlling persons or participating persons in connection with investigating 
or defending any such loss, claim, damage, liability or proceeding; PROVIDED, 
that such Holder will be liable in any such case to the extent, and only to 
the extent that such loss, claim, damage or liability arises out of or is 
based upon an untrue statement or alleged untrue statement or omission or 
alleged omission made in such registration statement, said preliminary or 
final prospectus or said amendment or supplement in reliance upon and in 
conformity with written information furnished to the Corporation in an 
instrument duly executed by such Holder specifically for use in the 
preparation thereof.

                                II

                     SERIES D PREFERRED STOCK

    1.   The Series D Preferred Stock may be issued from time to time in one or
more subseries, the shares of each subseries to have such voting powers, full or
limited, and such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as are stated and expressed herein or in the resolution or resolutions
providing for the issue of such subseries adopted by the Board of Directors as
hereinafter provided.

    2.   Authority is hereby granted to the Board of Directors of the
Corporation, subject to the provisions of this Article FOURTH and to the
limitations prescribed by law, to authorize the issue of one or more subseries
of Series D Preferred Stock and with respect to each subseries to fix by
resolution or resolutions providing for the issue of such subseries the voting
powers, full or limited, if any, of the shares of such subseries and the
designations, preferences and relative, participating, optional or other special
rights and the qualifications, limitations or restrictions thereof. The
authority of the Board of Directors with respect to each subseries shall
include, but not be limited to, the determination or fixing of the following:

                  (i)   The designation of such subseries.


                                      E-34                               Page 75
<PAGE>

          (ii)   The dividend rate of such subseries, the conditions and dates
upon which such dividends shall be payable, the relation which such dividends
shall bear to the dividends payable on any other class or classes of stock, and
whether such dividends shall be cumulative or noncumulative.

         (iii)   Whether the shares of such subseries shall be subject to
redemption by the Corporation and, if made subject to such redemption, the
times, prices and other terms and conditions of such redemption.

          (iv)   The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such subseries.

           (v)   Whether or not the shares of such subseries shall be
convertible into or exchangeable for shares of any other class or classes or of
any other series of any class or classes of stock of the Corporation, and, if
provision be made for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or exchange.

          (vi)   The extent, if any, to which the holders of the shares of such
subseries shall be entitled to vote with respect to the election of directors or
otherwise.

         (vii)   The restrictions, if any, on the issue or reissue of any
additional Series D Preferred Stock, and subseries thereof.

        (viii)   The rights of the holders of the shares of such series and
subseries thereof upon the dissolution of, or upon the distribution of assets
of, the Corporation.

    3.   Except as otherwise required by law and except for such voting powers
with respect to the election of directors or other matters as may be stated in
the resolution or resolutions of the Board of Directors providing for the issue
of any subseries of Series D Preferred Stock, the holders of any such subseries
shall have no voting power whatsoever.

    4.   The Corporation may from time to time issue and dispose of any of the
authorized and unissued shares of Series D Preferred Stock for such
consideration, not less than its par value, as may be fixed from time to time by
the Board of Directors, without action by the Stockholders. The Board of
Directors may provide for payment thereof to be received by the Corporation in
cash, property or services. Any and all such shares of the Series D Preferred
Stock of the Corporation the issuance of which has been so authorized, and for
which consideration so fixed by the Board of Directors has been paid or
delivered, shall be fully paid and non-assessable.


                                      E-35                               Page 76
<PAGE>

                               III

                           COMMON STOCK

    1.   DIVIDENDS.  Subject to all prior rights of holders of the Corporation's
Preferred Stock of any class or series, holders of shares of Common Stock shall
be entitled to dividends when, as and if declared by the Corporation's Board of
Directors out of funds legally available therefor.

    2.   LIQUIDATION.  Upon any liquidation, dissolution or wining up of the
Corporation, after (a) the payment to holders of Series C Preferred Stock shall
have been made as provided by paragraph 2 of part I of this Article FOURTH, and
(b) any other payments required by the provisions of this Article FOURTH to be
made to holders of securities of the Corporation ranking senior to the Common
Stock, shall have been made, the holders of Common Stock shall be entitled
equally on a share-for-share basis to receive any and all assets remaining to be
paid or distributed to stockholders of the Corporation, and holders of Preferred
Stock of any class or series shall not be entitled to shares therein.

    3.   VOTING.  Except as otherwise provided by law or by express provision of
this Certificate of Incorporation, each share of Common Stock shall be entitled
to one vote on any matter submitted for the vote or written consent of
stockholders of the Corporation, including the election of directors.

    4.   FULLY PAID AND NON-ASSESSABLE.  Shares of Common Stock shall be fully
paid and non-assessable.

    FIFTH:  The number of directors which shall constitute the whole board of
directors shall be no less than five (5) and no more than nine (9), all of whom
shall be elected by the holders of the voting stock of the Corporation.

    SIXTH:  The Corporation shall make, not less than once annu- ally in advance
of its annual meeting of stockholders, periodic reports to its stockholders
which shall include balance sheets and profit and loss statements of the
Corporation prepared in accordance with sound business and accounting practice.
Any such annual reports shall be certified by a firm of certified public
accountants of good standing.

    SEVENTH:  In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to adopt, amend or
repeal the by-laws of the Corporation.

    EIGHTH:  Election of directors need not be by written ballot.

    NINTH:  A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages


                                      E-36                               Page 77
<PAGE>

for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. Any repeal or modification of
this paragraph by the stockholders of the Corporation shall be prospective
only, and shall not adversely affect any limitation on the personal liability of
a director of the Corporation existing at the time of such repeal or
modification.

    6.   In accordance with Section 228 of the General Corporation Law of the
State of Delaware and the Corporation's Certficate of Incorporation, the
Amendments were approved at the Corporation's 1995 Annual Meeting of
Stockholders by the affirmative vote of the holders of (a) more than eighty
percent (80%) of all of the issued and outstanding shares of the Corporation's
Series C Preferred Stock and (b) a majority of all of the issued and outstanding
shares of the Corporation's stock entitled to vote thereon (i.e., Common Stock
and Series C Preferred Stock).

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

    8.   This Amended and Restated Certificate of Incorporation shall be known
as the "1995 Restated Certificate of Incorporation of DMI Furniture, Inc."


                                      E-37                               Page 78
<PAGE>

    IN WITNESS WHEREOF, DMI Furniture, Inc., has caused its Chairman and its
Secretary to sign and attest this Amended and Restated Certificate of
Incorporation on March 21, 1995.
                                   DMI FURNITURE, INC.


                                   By /s/Donald D. Dreher
                                     Donald D. Dreher
                                     Chairman of the Board,
                                       President and Chief
                                       Executive Officer

ATTEST:


/s/Joseph G. Hill
Joseph G. Hill, Secretary


                                      E-38                               Page 79