<PAGE>   1


                                                                  EXHIBIT 10.98

                          CERTIFICATE OF DESIGNATIONS,

                           PREFERENCES AND RIGHTS OF

                      SERIES A CONVERTIBLE PREFERRED STOCK



                                       OF



                           MEGO MORTGAGE CORPORATION



             PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW

                            OF THE STATE OF DELAWARE



           I, Jeffrey S. Moore, being the Chief Executive Officer, President
and Director of Mego Mortgage Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Company"), in
accordance with the provisions of Sections 103 and 151 thereof, DO HEREBY
CERTIFY:



           That pursuant to the authority conferred upon the Board of Directors
by the Certificate of Incorporation of the Company, the Board of Directors of
the Company, at a meeting duly called and held on May 13, 1998, at which a
quorum was present and acting throughout, duly adopted the following resolution
creating a series of 65,000 shares of Preferred Stock, par value $.01 per
share, designated "Series A Convertible Preferred Stock":



                       RESOLVED THAT, pursuant to the authority vested
             in the Board of Directors of the Company by the
             Certificate of Incorporation, the Board of Directors does
             hereby provide for the issue of a series of Preferred
             Stock, par value $.01 per share, of the Company, to be
             designated "Series A Convertible Preferred Stock"
             (hereinafter referred to as the "Series A Preferred Stock"
             or "this




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             series"), initially consisting of 65,000 shares, and to
             the extent that the designations, powers, preferences and
             relative and other special rights and the qualifications,
             limitations and restrictions of the Series A Preferred
             Stock are not stated and expressed in the Certificate of
             Incorporation, does hereby fix and herein state and
             express such designations, powers, preferences and
             relative and special rights and the qualifications,
             limitations and restrictions thereof, as follows (all
             terms used herein which are defined in the Certificate of
             Incorporation shall be deemed to have the meanings
             provided therein):



           SECTION 1.          DESIGNATION AND AMOUNT.



           The series shall be designated "Series A Convertible Preferred
Stock" par value $.01 per share (hereinafter called "Series A Preferred Stock")
and the number of shares constituting such series shall be 65,000. Such number
of shares may be increased or decreased by resolution of the Board of Directors
of the Company ("Board of Directors"); provided, that no decrease shall reduce
the number of Series A Preferred Stock to a number less than the number of
shares of the series then outstanding.



           SECTION 2.          RANK.



           The Series A Preferred Stock, with respect to dividend rights, will
rank on a parity with the $.01 par value common stock of the Company (the
"Common Stock") and all other classes and series of equity securities of the
Company now authorized, issued and outstanding. No class or series of equity
securities may rank senior to the Series A Preferred Stock as to the payment of
dividends. The Series A Preferred Stock, with respect to rights upon
liquidation, dissolution or winding up of the Company, ranks senior to the
Common Stock and to all other classes and series of equity securities of the
Company now authorized, issued and outstanding.



           SECTION 3.          DIVIDENDS.




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           Holders of shares of Series A Preferred Stock are entitled to
receive when, as and if declared by the Board of Directors and out of funds of
the Company legally available for the payment of dividends, cash dividends
equal to the amount of dividends payable on the number of shares of Common
Stock into which each share of Series A Preferred Stock is convertible. Cash
dividends or distributions on the Series A Preferred Stock shall be declared
simultaneously with the declaration of any cash dividends or distributions on
the Common Stock. The record date and payment date for any cash dividend
declared on the Series A Preferred Stock shall be the same as the record date
and payment date for the corresponding cash dividend declared on the Common
Stock.



           SECTION 4.          LIQUIDATION RIGHTS.



           In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the holders of shares of Series A
Preferred Stock are entitled to receive out of assets of the Company available
for distribution to stockholders under applicable law, before any payment or
distribution of assets is made to holders of Common Stock or any other class or
series of stock ranking junior to the Series A Preferred Stock upon
liquidation, liquidating distributions in the amount of $1,000 per share plus
accrued and unpaid dividends (whether or not earned) to the date fixed for such
liquidation, dissolution or winding up ("Liquidation Preference"). If upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the amounts payable with respect to the Series A Preferred Stock and any other
shares of stock of the Company ranking as to any such distribution on a parity
with the Series A Preferred Stock, are not paid in full, the holders of the
Series A Preferred Stock and of such other shares will share ratably in any
such distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. After payment of the full
amount of the liquidating distribution to which they are entitled, the holders
of shares of Series A Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Company.



           SECTION 5.          REDEMPTION.



           Series A Preferred Stock is not redeemable.




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           SECTION 6.          VOTING RIGHTS.



           Except as expressly required by applicable law, the holders of the
Series A Preferred Stock will not be entitled to vote.



           On any matter on which the holders of Series A Preferred Stock may
vote, they will be entitled to one vote for each share held. The holders of
Series A Preferred Stock may vote only as a separate class, and their votes
will not be counted together with the holders of the Common Stock or any other
class or series of Preferred Stock as a single class.



           The holders of the Series A Preferred Stock are entitled to
dissenters' rights pursuant to, and to the fullest extent permitted by, Section
262 of the General Corporation Law of the State of Delaware in the event of a
merger or consolidation in which the Company is a constituent corporation or
the sale of substantially all of the assets of the Company.



           SECTION 7.          CONVERSION RIGHTS.



           (a) Subject to and upon compliance with the provisions of this
Section 7, each outstanding share of Series A Preferred Stock will be
convertible at the option of the holder on or after December 15, 1998 by
surrendering the shares to be converted (in the manner provided in paragraph
(b) of this Section 7 below), and will automatically convert on June 18, 2000,
into a number of shares of Common Stock equal to $1,000 divided by the
Conversion Price as defined in paragraph (d) of this Section 7 below).



           (b) (1) In order to exercise the conversion privilege, the holder of
each share of the Series A Preferred Stock to be converted shall surrender the
certificate representing such share to the Conversion Agent for the Series A
Preferred Stock appointed for such purpose by the Company (the "Conversion
Agent"), or, if no Conversion Agent has been appointed or if the holder has not
received notice of such appointment, then to the Company, with the Notice of
Election to Convert on the back of said certificate duly completed and signed,
at the principal office of the Conversion Agent or the Company, as the case may
be. Unless the shares issuable on conversion are to be issued in the same name
as the name in which the shares of the Series A Preferred Stock are registered,
each


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share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Company, duly executed by the holder or
its duly authorized attorney and by funds in an amount sufficient to pay any
transfer or similar tax.



               (2) The holders of shares of the Series A Preferred Stock at the
close of business on a record date for the payment of dividends (each a
"Dividend Record Date") shall be entitled to receive the dividend payable on
those shares on the corresponding Dividend Payment Date notwithstanding the
conversion of the shares after the Dividend Record Date or the Company's
default in payment of the dividend due on the Dividend Payment Date. Except as
provided above, the Company shall make no payment or adjustment for accrued and
unpaid dividends on shares of the Series A Preferred Stock whether or not in
arrears, on conversion of those shares or for dividends on the shares of Common
Stock issued upon the conversion.



               (3) As promptly as practicable after the surrender by a holder
of any certificates for shares of the Series A Preferred Stock in accordance
with this paragraph (b), the Company shall issue and shall deliver at the
office of the Conversion Agent to the holder, or on its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of those shares in accordance with the provisions
of this paragraph (b)(3), and any fractional interest in respect of a share of
Common Stock arising upon the conversion shall be settled as provided in
paragraph (c) of this Section 7 below.



               (4) Each conversion shall be deemed to have been effected as of
the close of business on the date on which all of the conditions specified in
paragraph (b)(1) of this Section 7 above shall have been satisfied and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed
to have become the holder or holders of record of the shares of Common Stock
represented by those certificates at such time on such date and such conversion
shall be at the Conversion Price in effect at such time as provided, that if
the stock transfer books of the Company are not open on the date of such
conversion, then such conversion shall be effective for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open. All shares of Common Stock delivered upon conversion of the
Series A Preferred Stock will upon delivery be duly and validly issued and
fully paid and nonassessable, free of all liens and charges and not subject to
any preemptive rights. Upon the surrender of certificates representing shares
of the Series A Preferred Stock to be converted, the shares shall no longer be
deemed to be outstanding and all rights of a holder with respect to the shares
surrendered for conversion shall immediately terminate except the right to
receive the Common Stock or other securities, cash or other assets (including
without limitation any dividend payable as specified in paragraph (b)(2) of
this Section 7 above) as herein provided.


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           (c) No fractional shares or securities representing fractional
shares of Common Stock shall be issued upon conversion of the Series A
Preferred Stock. Any fractional shares of Common Stock resulting from
conversion of a share of the Series A Preferred Stock shall be paid in cash
(computed to the nearest cent) based on the Current Market Price (as defined in
paragraph (d)(4) of this Section 7 below) of the Common Stock one the Trading
Day (as defined in paragraph (d)(4) of this Section (7) below) next preceding
the day of conversion. If more than one share of Series A Preferred Stock shall
be surrendered for conversion at one time by the same holder, the number of
whole shares of Common Stock issuable upon the conversion shall be calculated
based on the aggregate number of shares of Series A Preferred Stock so
surrendered.



           (d) The "Conversion Price" per share of the Series A Preferred Stock
shall be $1.50, subject to adjustment from time to time as follows:



               (1) In case the Company shall (1) pay a dividend or make a
           distribution on its Common Stock in shares of its Common Stock, (2)
           subdivide its outstanding Common Stock into a greater number of
           shares, or (3) combine its outstanding Common Stock into a smaller
           number of shares, the Conversion Price in effect immediately prior
           to such event shall be proportionally adjusted so that the holder of
           any share of the Series A Preferred Stock thereafter surrendered for
           conversion shall be entitled to receive the number and kind of
           shares of Common Stock of the Company which such holder would have
           been entitled to receive had the share been converted immediately
           prior to the happening of such event. An adjustment made pursuant to
           this paragraph (d)(1) shall become effective immediately after the
           record date in the case of a dividend or distribution except as
           provided in paragraph (d)(7) of this Section 7 below, and shall
           become effective immediately after the effective date in the case of
           subdivision or combination. If any dividend or distribution is not
           paid or made, the Conversion Price then in effect shall be
           appropriately readjusted.



               (2) Except with respect to the issuance of rights announced prior
            to the date of this Certificate of Designation, in case the Company
            shall distribute or issue options, rights or warrants to all holders
            of its Common Stock entitling them to subscribe for or purchase
            Common Stock at a price per share less than the Current Market Price
            (as defined in paragraph (d)(4) of this Section 7 below) of the
            Common Stock at the record date for the determination of
            stockholders entitled to receive the options, rights or warrants,
            the Conversion Price in effect immediately prior to the distribution
            or issuance of such options, rights or warrants shall be adjusted so
            that it shall equal the price determined by multiplying the
            Conversion Price in effect immediately prior to the date of
            distribution or issuance of the options, rights or warrants by a
            fraction of which the numerator shall be the number of shares of
            Common Stock outstanding on the date of distribution or issuance of
            the options, rights


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           or warrants plus the number of shares of Common Stock which may be
           purchased at the Current Market Price based upon the aggregate
           offering price of such options, rights or warrants and the
           denominator shall be the total number of shares of Common Stock then
           outstanding plus the number of additional shares of Common Stock
           issuable upon the exercise of such options, rights and warrants. The
           adjustment provided for in this paragraph (d)(2) shall be made
           successively whenever any such options, rights or warrants are
           distributed or issued, and shall become effective immediately,
           except as provided in paragraph (d)(7) of this Section 7 below,
           after such record date. In determining whether any rights or
           warrants entitle the holders of the Common Stock to subscribe for or
           purchase shares of Common Stock at less than the Current Market
           Price, and in determining the aggregate offering price of the shares
           of Common Stock so offered, there shall be taken into account any
           consideration received by the Company for such rights or warrants,
           the value of such consideration, if other than cash, to be
           determined by the Board of Directors (whose determination, if made
           in good faith, shall be conclusive). If any or all of such options,
           rights or warrants are not so distributed or issued or expire or
           terminate (within 45 days after the same shall have been issued by
           the Company) without having been exercised, the Conversion Price
           then in effect shall be appropriately readjusted to the Conversion
           Price that would have been in effect if no adjustment had been made
           on account of such issuance or distribution which was not made or
           such distribution or issuance of options, rights or warrants which
           expired or terminated..



               (3) In case the Company shall distribute to all holders of
           its Common Stock any shares of capital stock of the Company (other
           than Common Stock) or evidences of indebtedness or assets (excluding
           cash dividends or distributions paid from retained earnings of the
           Company) or options, rights or warrants to subscribe for or purchase
           any of its securities (excluding those referred to in paragraph
           (d)(2) of this Section 7 above) then, in each such case, the
           Conversion Price shall be adjusted so that it shall equal the price
           determined by multiplying the Conversion Price in effect immediately
           prior to the date of the distribution by a fraction the numerator of
           which shall be the Current Market Price of the Common Stock on the
           record date mentioned below less the then fair market value per
           share (as determined by the Board of Directors, whose determination,
           if made in good faith, shall be conclusive) of the capital stock or
           assets or evidences of indebtedness or option, rights or warrants so
           distributed and the denominator of which shall be the Current Market
           Price of the Common Stock on the record date. Such adjustment shall
           become effective immediately, except as provided in paragraph (d)(4)
           of this Section 7 below, after the record date for the determination
           of stockholders entitled to receive such distribution. If any such
           distribution is not made or if any or all of such options, rights or
           warrants expire or terminate without having been exercised, the
           Conversion Price then in effect shall be appropriately readjusted to
           the Conversion Price that would have been in effect if no adjustment
           had been made on account of such distribution which was not made or
           such distribution of options, rights or warrants which expired or
           terminated.


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               (4) For the purpose of any computation under paragraphs
           (d)(2) or (d)(3) of this Section 7 above, the "Current Market Price"
           of the Common Stock at any date shall be the average of the last
           reported sale prices per share for the ten consecutive Trading Days
           (as defined below) preceding the date of such computation. The last
           reported sale price for each day shall be (i) the last reported sale
           price of the Common Stock on The Nasdaq National Market (the "Nasdaq
           National Market"), or any similar system of automated dissemination
           of quotations of securities prices then in common use, if so quoted,
           or (ii) if not quoted as described in clause (i), the mean between
           the high bid and low asked quotations for the Common Stock as
           reported by the National Quotation Bureau Incorporated if at least
           two securities dealers have inserted both bid and asked quotations
           for the Common Stock on at least five of the ten preceding days, or
           (iii) if the Common Stock is listed or admitted for trading on any
           national securities exchange, the last sale price, or the closing
           bid price if no sale occurred, of the Common Stock on the principal
           securities exchange on which the Common Stock is listed. If the
           Common Stock is quoted on a national securities or central market
           system, in lieu of a market or quotation system described above, the
           last reported sale price shall be determined in the manner set forth
           in clause (ii) of the preceding sentence if bid and asked quotations
           are reported but actual transactions are not, and in the manner set
           forth in clause (iii) of the preceding sentence if actual
           transactions are reported. If none of the conditions set forth above
           is met, the last reported sale price of the Common Stock on any date
           or the average of such last reported sale prices for any period
           shall be the fair market value of such class of stock as determined
           by a member firm of the New York Stock Exchange, Inc. selected by
           the Company. As used herein the term "Trading Days" means (x) if the
           Common Stock is quoted on the Nasdaq National Market or any similar
           system of automated dissemination of quotations of securities
           prices, days on which trades may be made on such system, or (y) if
           not quoted as described in clause (x), days on which quotations are
           reported by the National Quotation Bureau Incorporated, or (z) if
           the Common Stock is listed or admitted for trading on any national
           securities exchange, days on which such national securities exchange
           is open for business.



               (5) No adjustment in the Conversion Price shall be
           required unless such adjustment would require a change of at least
           one percent in the Conversion Price; provided, however, that any
           adjustments which by reason of this paragraph (d)(5) are not
           required to be made shall be carried forward and taken into account
           in any subsequent adjustment; and provided, further, that adjustment
           shall be required and made in accordance with the provisions of this
           Section 7 (other than this paragraph (d)(5)) not later than such
           time as may be required in order to preserve the tax free nature of
           a distribution to the holders of shares of Common Stock. All
           calculations under this Section 7 shall be made to the nearest cent
           or the nearest one hundredth of a share, as the case may be.
           Anything in this paragraph (d) to the contrary notwithstanding, the
           Company shall be entitled to make such reductions in the Conversion
           Price, in addition to those required by this paragraph (d), as it in
           its discretion shall determine to be advisable in order that any
           stock dividend, subdivision or combination


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<PAGE>   9



           of shares, distribution of capital stock or options, rights or
           warrants to purchase stock or securities, or distribution of
           evidences of indebtedness or assets (other than cash dividends or
           distributions paid from retained earnings) hereinafter made by the
           Company to its stockholders shall be a tax free distribution for
           federal income tax purposes.



               (6) Whenever the Conversion Price is adjusted, as herein
           provided, the Company shall promptly file with the Conversion Agent
           an officers' certificate setting forth the Conversion Price after
           the adjustment and setting forth a brief statement of the facts
           requiring the adjustment. Promptly after delivery of the
           certificate, the Company shall prepare a notice of the adjustment of
           the Conversion Price setting forth the adjusted Conversion Price and
           the date on which the adjustment becomes effective and shall mail
           the notice of such adjustment of the Conversion Price to the holder
           of each outstanding share of the Series A Preferred Stock at such
           holder's last address as shown on the stock transfer books of the
           Company.



               (7) In any case in which this paragraph (d) provides that
           an adjustment shall become effective immediately after a record date
           for an event, the Company may defer until the occurrence of the
           event (i) issuing, to the holder of any share of the Series A
           Preferred Stock converted after the record date and before the
           occurrence of the event, the additional shares of Common Stock
           issuable upon the conversion by reason of the adjustment required by
           the event over and above the Common Stock issuable upon such
           conversion before giving effect to the adjustment and (ii) paying to
           the holder any amount in cash in lieu of any fractional share
           pursuant to paragraph (c) of this Section 7 above.



               (8) If, after the date hereof, the Company shall take any
           action affecting the Series A Preferred Stock, other than an action
           specifically contemplated in this Certificate of Designation, which
           in the opinion of the Board would have a material adverse effect
           upon the rights or economic interests of the holders of the Series A
           Preferred Stock, the Conversion Price shall be adjusted in such
           manner and at such time as the Board on the advice of the Company's
           independent public accountants may in good faith determine to be
           equitable in the circumstances.



           (e) If:




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<PAGE>   10



                     (1) the Company shall authorize the granting to the
           holders of the Common Stock of options, rights or warrants to
           subscribe for or purchase any shares of any class or any other
           options, rights or warrants; or



                     (2) there shall be any reclassification of the Common
           Stock (other than a subdivision or combination of the outstanding
           Common Stock and other than a change in the par value, or from par
           value to no par value, or from no par value to par value), or any
           consolidation, merger, or statutory share exchange to which the
           Company is a party, or any sale or transfer of all or substantially
           all the assets of the Company; or



                     (3) there shall be a voluntary or an involuntary 
           dissolution, liquidation or winding up of the Company;



then the Company shall cause to be filed with the Conversion Agent, and shall
cause to be mailed to the holders of outstanding shares of the Series A
Preferred Stock at their addresses as shown on the stock transfer books of the
Company, at least 15 days prior to the applicable date hereinafter specified, a
notice stating (i) the date on which a record is to be taken for the purpose of
the dividend, distribution of options, rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to the dividend, distribution or options, rights or warrants are to
be determined or (ii) the date on which the reclassification, consolidation,
merger, statutory share exchange, sale, transfer, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
the reclassification, consolidation, merger, statutory share exchange, sale,
transfer, dissolution, liquidation or winding up. Failure to give any such
notice or any defect in the notice shall not affect the legality or validity of
the proceedings described in this paragraph (e).



           (f) (1) The Company covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, for the purpose of effecting conversions
of the Series A Preferred Stock the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of the Series A
Preferred Stock not theretofore converted. For purposes of this paragraph (f),
the number of shares of Common Stock which shall be deliverable upon the
conversion of all outstanding shares of the Series A Preferred Stock shall be
computed as if at the time of computation all the outstanding shares were held
by a single holder.


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               (2) Before taking any action which would cause an adjustment
reducing the Conversion Price below the then par value (if any) of the shares
of Common Stock deliverable upon conversion of the Series A Preferred Stock,
the Company will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock at the adjusted Conversion
Price.



               (3) the Company will list the shares of Common Stock required to
be delivered upon conversion of the Series A Preferred Stock, prior to the
delivery, upon each national securities exchange, if any, upon which the
outstanding Common Stock is listed at the time of delivery.



               (4) Prior to the delivery of any securities which the Company
shall be obligated to deliver upon conversion of the Series A Preferred Stock,
the Company will endeavor, in good faith and as expeditiously as possible, to
comply with all federal and state laws and regulations thereunder requiring the
registration of those securities with, or any approval of or consent to the
delivery thereof by, any governmental authority.



           (g) The Company will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares
of Common Stock on conversion of the Series A Preferred Stock pursuant hereto;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the holder of the Series A
Preferred Stock to be converted and no such issue or delivery shall be made
unless and until the person requesting the issue or delivery has paid to the
Company the amount of any such tax or has established, to the satisfaction of
the Company, that the tax has been paid.



           (h) In case of any reclassification or change of outstanding shares
of Common Stock (other than change in par value, or as a result of subdivision
or combination), or in case of any consolidation of the Company with, or merger
of the Company with or into, any other entity that requires the vote of the
holders of Common Stock or that results in a reclassification, change,
conversion, exchange or cancellation of outstanding shares of Common Stock or
any sale or transfer of all or substantially all of the assets of the Company,
each holder of shares of the Series A Preferred Stock then outstanding shall,
in connection with such transaction, have the right to convert the shares of
the Series A Preferred Stock held by the holder into the kind and amount of
securities, cash and other property which the holder would have been entitled
to receive upon such reclassification, change, consolidation, merger, sale or
transfer if the holder had held the Common


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<PAGE>   12



Stock issuable upon the conversion of the shares of the Series A Preferred
Stock immediately prior to the reclassification, change, consolidation, merger,
sale or transfer.



           (i) In the event that the Company shall consummate any consolidation
or merger or similar business combination, pursuant to which the outstanding
shares of Common Stock are by operation of law exchanged solely for or changed,
reclassified or converted into stock, securities or cash or any other property,
or any combination thereof, then provision shall be made so that shares of the
Series A Preferred Stock that are not immediately converted and that do not
receive the consideration provided in paragraph (h) of this Section 7, shall,
in connection with such consolidation, merger or similar business combination,
be assumed by and shall become preferred stock of such successor or resulting
corporation, having in respect of such corporation, insofar as possible, the
same powers, preferences and relative rights, and the qualifications,
limitations or restrictions thereon, that the Series A Preferred Stock had
immediately prior to such transaction, except that after such transaction each
share of the Series A Preferred Stock shall be immediately convertible,
otherwise on the terms and conditions provided by this Section 7, into the
nature and kind of consideration so receivable by a holder of the number of
shares of Common Stock into which such shares of the Series A Preferred Stock
if such shares of the Series A Preferred Stock had been converted immediately
prior to such transaction. The rights of the Series A Preferred Stock as
preferred stock of such successor or resulting corporation shall successively
be subject to adjustments pursuant to the terms and conditions provided by this
Section 7 hereof after any such transaction as nearly equivalent as practicable
to the adjustment provided for by this Section 7 prior to such transaction. The
Company shall not consummate any such merger, consolidation or similar
transaction unless all then outstanding shares of the Series A Preferred Stock
(other than such shares that are converted pursuant to paragraph (h) of this
Section 7) shall be assumed and authorized by the successor or resulting
corporation as aforesaid.



           SECTION 8.          PREEMPTIVE RIGHTS.



           The holders of shares of Series A Preferred Stock shall not have any
preemptive right to acquire any unissued shares of any stock of the Company,
now or hereafter authorized, or any other securities of the Company, whether or
not convertible into shares of stock of the Company or carrying a right to
subscribe to or acquire any such shares of stock.




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<PAGE>   13



           IN WITNESS WHEREOF, Mego Mortgage Corporation has caused this
certificate to be executed by its Chief Executive Officer, President and
Director and attested by its Secretary this 29th day of June, 1998.



                                        MEGO MORTGAGE CORPORATION

Attest:

By:  /s/ Robert Bellacosa               By:  /s/ Jeffrey S. Moore
   ------------------------------          -----------------------------------
     Name:  Robert Bellacosa                 Name:  Jeffrey S. Moore
     Title: Secretary                        Title: Chief Executive Officer,
                                                    President and Director

















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