<PAGE>

                            CERTIFICATE OF INCORPORATION
                                         OF
                            TURBODYNE TECHNOLOGIES INC.


     I.   The name of the Corporation is Turbodyne Technologies Inc.

     II.  The address of the Corporation's registered office in the State of 
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County of New 
Castle.  The name of its registered agent at such address is The Corporation 
Trust Company.

     III. The purpose of this Corporation is to engage in any lawful act or 
activity for which Corporations may be organized under the General 
Corporation Law of the State of Delaware (the "Delaware Law").

     IV.  This Corporation is authorized to issue two classes of shares, 
designated, respectively, "Preferred Stock" and "Common Stock."  Each class 
of stock shall have a par value of $.001 per share.  The number of shares of 
Preferred Stock authorized to be issued is 1,000,000 and the number of shares 
of Common Stock authorized to be issued is 60,000,000.  The rights, 
preferences, privileges and restrictions granted to or imposed upon the first 
two series of Preferred Stock, designated "Series A Convertible Preferred 
Stock" (the "Series A Preferred Stock") and "Series B Convertible Preferred 
Stock" (the "Series B Preferred Stock" and together with the Series A 
Preferred Stock, the "Convertible Preferred Stock"), of which the Corporation 
is authorized to issue 10,000 shares and 10,000 shares, respectively, are set 
forth in Article V below.

     Any shares of Preferred Stock, other than the Convertible Preferred 
Stock, may be issued from time to time in one or more series. The Board of 
Directors is hereby authorized to fix or alter from time to time the 
designation, powers, preferences and rights of the shares of each such series 
including, without limitation, the voting powers and the qualifications, 
limitations or restrictions of any wholly unissued series of Preferred Stock, 
and to establish from time to time the number of shares constituting any such 
series or any of them; and to increase or decrease the number of shares of 
any series subsequent to the issuance of shares of that series, but not below 
the number of shares of such series then outstanding.  In case the number of 
shares of any series shall be decreased in accordance with the foregoing 
sentence, the shares constituting such decrease shall resume the status that 
they had prior to the adoption of the resolution originally fixing the number 
of shares of such series.

     V.   The relative rights, preferences, privileges and restrictions 
granted to or imposed upon the Convertible Preferred Stock and the holders 
thereof are as follows:

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     Section 1.  DIVIDENDS.

     (a)  Holders of the Convertible Preferred Stock shall be entitled to 
receive cumulative dividends at the rate per share (as a percentage of the 
Stated Value per share) equal to 7% per annum.  Such dividends shall be 
payable in arrears on the Conversion Date in cash or Common Stock out of 
funds legally available therefore.  Dividends on the Series A Preferred Stock 
shall accrue daily commencing September 8, 1997 and dividends on the Series B 
Preferred Stock shall accrue daily commencing on the Series B Issue Date.  No 
dividends (other than those payable solely in the Common Stock of the 
Corporation) shall be paid on any Common Stock of the Corporation during any 
fiscal year of the Corporation until dividends in the total amount per share 
(as a percentage of the Stated Value per share) equal to 7% per annum (as 
adjusted for any stock dividends, combinations or splits with respect to such 
shares) on the Convertible Preferred Stock shall have been paid or declared 
and set apart during that fiscal year and any prior year in which dividends 
accumulated but remain unpaid. 

     (b)  So long as any Convertible Preferred Stock shall remain 
outstanding, neither the Corporation nor any subsidiary thereof, shall 
redeem, purchase or otherwise acquire directly or indirectly any Junior 
Securities, nor shall the Corporation directly or indirectly pay or declare 
any dividend or make any distribution (other than a dividend or distribution 
described in Section 1) upon, nor shall any distribution be made in respect 
of, any Junior Securities, nor shall any monies be set aside for or applied 
to the purchase or redemption (through a sinking fund or otherwise) of any 
Junior Securities unless all dividends on the Convertible Preferred Stock for 
all past dividend periods shall have been paid.  Each Holder shall be deemed 
to have consented, for the purposes of the Delaware Law, to repurchase of 
shares of Common Stock by the Corporation issued to or held by employees or 
consultants upon termination of their employment or services pursuant to 
pre-existing agreements between the Corporation and such persons providing 
for the Corporation's rights of said repurchase.

     Section 2.  VOTING RIGHTS

     (a)  Except as otherwise provided for herein or in the Delaware Law, the 
Convertible Preferred Stock shall have no voting rights.  Notwithstanding the 
foregoing, so long as any shares of Convertible Preferred Stock remain 
outstanding, the Corporation shall not, (i) without the affirmative vote of 
the holders of a majority of the shares of the Series A Preferred Stock then 
outstanding alter or change adversely the rights, privileges, restrictions 
and conditions attaching to the Series A Preferred Stock, and (ii) without 
the affirmative vote of the holders of a majority of the shares of the Series 
B Preferred Stock then outstanding alter or change adversely the rights, 
privileges, restrictions and conditions attaching to the Series B Preferred 
Stock.

     Section 3.  LIQUIDATION

     (a)  Upon any liquidation, dissolution or winding-up of the Corporation, 
whether voluntary or involuntary, the holders of Convertible Preferred Stock 
shall be entitled to receive, prior and in preference to any distribution of 
any of the assets or surplus funds of the 

                                       2
<PAGE>

Corporation to the holders of Junior Securities by reason of their ownership 
thereof, for each share of Convertible Preferred Stock, an amount equal to 
the Stated Value, plus an amount equal to accrued but unpaid dividends per 
share, whether declared or not, but without interest (as adjusted for any 
stock dividends, combinations or splits with respect to such shares).  All 
of the preferential amounts to be paid to the holders of Convertible 
Preferred Stock under this Section 3(a) shall be paid or set apart for 
payment before the payment or setting apart for payment of any amount for, or 
the distribution of any assets of the Corporation to, the holders of the 
Junior Securities in connection with any such liquidation, dissolution or 
winding up.  After the payment or the setting apart for payment to the 
holders of Convertible Preferred Stock of the preferential amounts so payable 
to them, the remaining assets of the Corporation available for distribution 
shall be distributed in accordance with the provisions of Section 3(b).  If 
upon the occurrence of any liquidation, dissolution or winding-up of the 
Corporation, the assets and funds thus distributed among the holders of 
Convertible Preferred Stock shall be insufficient to permit the payment to 
the holders of Convertible Preferred Stock of the full aforesaid preferential 
amount, then the entire assets and funds of the Corporation legally available 
for distribution shall be distributed ratably among the holders of 
Convertible Preferred Stock in proportion to the preferential amount each 
such holder is otherwise entitled to receive.

     (b)  In the event of a liquidation, dissolution or winding-up of the 
Corporation, after the distribution to holders of Convertible Preferred Stock 
in the amounts set forth in Section 3(a) above, the remaining assets of the 
Corporation legally available for distribution, if any, to stockholders shall 
be distributed ratably to the holders of the Common Stock then outstanding.

     (c)  For purposes of this Section 3, (i) any transaction or series of 
related transactions in which the stockholders of the Corporation shall own 
less than 50% of the voting securities of the surviving corporation or (ii) a 
sale of all or substantially all of the assets of the Corporation, shall, at 
the option of the holder, be treated as a liquidation, dissolution or winding 
up of the Corporation and shall entitle the holders of Convertible Preferred 
Stock and Common Stock to receive at the closing in cash, securities or other 
property amounts as specified in Sections 3(a) and 3(b) above; provided 
however, that a consolidation or merger of the Corporation with or into any 
other Corporation shall not be treated as a liquidation, but instead shall be 
subject to the provisions of Section 4(j).  The Corporation shall mail 
written notice of any such liquidation, not less than 60 days prior to the 
payment date stated therein, to each record holder of Convertible Preferred 
Stock.

     Section 4.  CONVERSION

     (a)  RIGHT TO CONVERT.  Each share of Series A Preferred Stock shall be 
convertible into shares of Common Stock at the Series A Conversion Ratio at 
the option of the holder in whole or in part at any time after January 5, 
1998 and on or prior to the fifth day prior to the Redemption Date, if any, 
as may have been fixed in any Redemption Notice with respect to the Series A 
Preferred Stock.  Each share of Series B Preferred Stock shall be convertible 
into shares of Common Stock at the Series B Conversion Ratio at the option of 
the holder in whole or in part at any time after the expiration of 120 days 
after the Series B Issue Date and on or prior 

                                       3
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to the fifth day prior to the Redemption Date, if any, as may have been fixed 
in any Redemption Notice with respect to the Series B Preferred Stock.  Any 
conversion under this Section 4(a) shall be of a minimum amount of at least 
ten (10) shares of Convertible Preferred Stock.  

     (b)  CONVERSION PRICE.

          (i)    The conversion price for each share of Series A Preferred 
Stock in effect on any Conversion Date shall be the LESSER of X or Y where:

               X is the greater of:

               (x)  $5.00 (the "Series A Fixed Price"); or

               (y)                C
                    ---------------
                    [(C DIVIDED BY Series A Fixed Price) + 1.75] DIVIDED BY 2

               where

               C = the average Per Share Market Value of the five (5) Trading 
Days immediately preceding the Conversion Date; and 

               Y = 90% less 1% multiplied by the number of whole calendar 
months from September 8, 1997 to the Conversion Date (subject to a minimum of 
80%) multiplied by the average Per Shares Market Value of the five (5) 
Trading Days immediately preceding the Conversion Date (the "Five Day 
Average") (e.g., if the Conversion date is five (5) months after September 8, 
1997, then Y is 85% multiplied by the Five Day Average)(the "Series A 
Floating Price).

          (ii)   The conversion price for each share of Series B Preferred 
Stock in effect on any Conversion Date shall be the LESSER of A or B where:

               A is the greater of:

               (x)  $110% of the Per Share Market Value on the Trading Day
immediately preceding the Series B Issue Date (the "Series B Fixed Price"); or

               (y)                C
                    ---------------
                    [(C DIVIDED BY Series B Fixed Price) + 1.75] DIVIDED BY 2

               where

               C = the average Per Share Market Value of the five (5) Trading 
Days immediately preceding the Conversion Date; and 

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<PAGE>

               B = 90% less 1% multiplied by the number of whole calendar 
months from Series B Issued Date to the Conversion Date (subject to a minimum 
of 80%) multiplied by the average Per Shares Market Value of the five (5) 
Trading Days immediately preceding the Conversion Date (the "Five Day 
Average") (e.g., if the Conversion date is five (5) months after the Series B 
Issue Date, then Y is 85% multiplied by the Five Day Average)(the "Series B 
Floating Price);

provided, however, if the registration statement to be filed by the 
Corporation in accordance with the registration rights agreement executed 
between the Corporation and the purchasers of the Series B Preferred Stock 
(the "Series B Registration Rights Agreement") is not declared effective by 
the Commission for any reason by the Effective Date, as defined in the Series 
B Registration Rights Agreement, then clauses (A) and (B) above shall be 
decreased by 3% on the Effective Date and, if the registration statement 
shall still not be effective, by an additional 3% on each of the 30th and 
60th days following the Effective Date (i.e., if such registration statement 
is declared effective after the Effective Date and within 30 days of the 
Effective Date then a 3% reduction, between 31 and 60 days then a 6% 
reduction, or between 61 and 90 days, a 9% reduction).

     (c)  AUTOMATIC CONVERSION.  Each share of Series A Preferred Stock 
outstanding on September 8, 2000 shall automatically be converted into shares 
of Common Stock at the then effective Series A Conversion Ratio.  Each share 
of Series B Preferred Stock outstanding on January 10, 2001 shall 
automatically be converted into shares of Common Stock at the then effective 
Series B Conversion Ratio.

     (d)  MECHANICS OF CONVERSION.  Before any holder of Convertible 
Preferred Stock shall be entitled to convert shares of Convertible Preferred 
Stock into shares of Common Stock, he shall surrender the certificate or 
certificates therefor, duly endorsed, at the office of the Corporation or of 
any transfer agent for such stock, and shall give written notice (the "Holder 
Conversion Notice") to the Corporation at such office that he elects to 
convert the same and shall state therein the name or names in which he wishes 
the certificate or certificates for shares of Common Stock to be issued.  The 
Corporation shall, within three Trading Days after the Conversion Date, issue 
and deliver to such holder, (i) a certificate or certificates, free of 
restrictive legends and trading restrictions (other than those then required 
by law) representing the number of shares of Common Stock to which he shall 
be entitled as aforesaid; and (ii) if the holder is converting less than all 
Convertible Preferred Stock represented by the certificate or certificates 
tendered by the holder, a certificate for such number of shares of 
Convertible Preferred Stock as have not been converted.  Such conversion 
shall be deemed to have been made immediately prior to the close of business 
on the date of surrender of the shares of Convertible Preferred Stock to be 
converted, and the person or persons entitled to receive the shares of Common 
Stock issuable upon such conversion shall be treated for all purposes as the 
record holder or holders of such shares of Common Stock on such date. 

     (e)  LIMITATION ON CONVERSION.  In no event shall a Holder be entitled 
to convert shares of Convertible Preferred Stock in excess of that number of 
shares of Convertible Preferred Stock which, upon giving effect to such 
conversion, would cause the aggregate 

                                       5
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number of shares of Common Stock Beneficially Owned by such holder and its 
affiliates to exceed 4.9% of the outstanding shares of Common Stock of the 
Corporation following conversion.  A holder may waive the foregoing 
limitations upon delivery of not less than 61 days prior written notice to 
the Corporation.

     (f)  ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES

          (i)    If the Corporation, at any time while any shares of 
Convertible Preferred Stock are outstanding, (a) shall pay a stock dividend 
or otherwise make a distribution or distributions on shares of Junior 
Securities payable in shares of its capital stock, (b) subdivide outstanding 
shares of Common Stock into a larger number of shares of Common Stock, (c) 
combine outstanding shares of Common Stock into a smaller number of shares of 
Common Stock, or (d) issue by reclassification of shares of Common Stock any 
shares of the Corporation, then in each such case, the Conversion Price 
designated in Section 4(b) shall be multiplied by a fraction the numerator of 
which shall be the number of shares of Common Stock outstanding before such 
event and the denominator of which shall be the number of shares of Common 
Stock outstanding after such event.  Any adjustment made pursuant to this 
Section 4(f) shall become effective immediately after the record date for the 
determination of stockholders entitled to receive such dividend or 
distribution and shall become effective immediately after the effective date 
in the case of a subdivision, combination or reclassification.

          (ii)   If the Corporation, at any time while any shares of 
Convertible Preferred Stock are outstanding, shall issue rights or warrants 
to all holders of shares of Common Stock entitling them to subscribe for or 
purchase shares of Common Stock at a price per share less than the Per Share 
Market Value of a share of Common Stock at the record date for the 
determination of stockholders entitled to receive such rights or warrants, 
the Conversion Price designated in Section 4(b) shall be multiplied by a 
fraction, the denominator of which shall be the number of shares of Common 
Stock (excluding treasury shares, if any) outstanding on the date of issuance 
of such rights or warrants plus the number of additional shares of Common 
Stock offered for subscription or purchase, and the numerator of which shall 
be the number of shares of Common Stock (excluding treasury shares, if any) 
outstanding on the date of issuance of such rights or warrants plus the 
number of shares which the aggregate offering price of the total number of 
shares so offered would purchase at such Per Share Market Value. Such 
adjustment shall be made whenever such rights or warrants are issued, and 
shall become effective immediately after the record date for the 
determination of stockholders entitled to receive such rights or warrants.  
However, upon the expiration of any right or warrant to purchase shares of 
Common Stock the issuance of which resulted in an adjustment in the 
Conversion Price designated in Section 4(b) pursuant to this Section 4(f) if 
any such right or warrant shall expire and shall not have been exercised, the 
Conversion Price designated in Section 4(b) shall immediately upon such 
expiration be increased to the price which it would have been (but reflecting 
any other adjustments in the Conversion Price made pursuant to the provisions 
of this Section 4(f) after the issuance of such rights or warrants) had the 
adjustment of the Conversion Price made upon the issuance of such rights or 
warrants been made on the basis of offering the subscription or purchase only 
that number of shares of Common Stock actually purchased upon the exercise of 
such rights or warrants actually exercised.

                                       6
<PAGE>

          (iii)  If the Corporation at any time while shares of Convertible 
Preferred Stock are outstanding, shall distribute to all holders of shares of 
Common Stock (and not to holders of the Convertible Preferred Stock) 
evidences of its indebtedness or assets or right or warrants to subscribe for 
or purchase any security (excluding those referred to in Section 4(f)(ii) 
above) then in each such case the Conversion Price at which each share of 
Convertible Preferred Stock shall thereafter be convertible shall be 
determined by multiplying the Conversion Price in effect immediately prior to 
the record date fixed for determination of stockholders entitled to receive 
such distribution by a fraction the denominator of which shall be the Per 
Share Market Value of a share of Common Stock determined as of the record 
date fixed for determination of stockholders entitled to receive such 
distribution, and the numerator of which shall be such Per Share Market Value 
of a share of Common Stock less the then fair market value at such record 
date of the portion of such assets or evidence of indebtedness so distributed 
applicable to one outstanding share of Common Stock as determined by the 
Board of Directors in good faith; provided, however, that in the event of a 
distribution exceeding 25% of the net assets of the Corporation, such fair 
market value shall be determined by a nationally recognized or major regional 
investment banking firm or firm of independent certified accountants of 
recognized standing (which may be the firm that regularly examines the 
financial statements of the Corporation) (an "Appraiser") selected in good 
faith by the holders of a majority in interest of the Convertible Preferred 
Stock, voting as a single class; and provided further that the Corporation 
after receipt of the determination by such Appraiser shall have the right to 
select an additional Appraiser, in which case the fair market value shall be 
equal to the average of the determination by each such Appraiser.  In either 
case the adjustments shall be described in a statement provided to all 
holders of Convertible Preferred Stock of the portion of assets or evidences 
of indebtedness so distributed or such subscription rights applicable on a 
share of Common Stock.  Such adjustment shall be made whenever any such 
distribution is made and shall become effective immediately after the record 
date mentioned above.

          (iv)   All calculations under this Section 4(f) shall be made to 
the nearest cent or the nearest 1/100th of a share, as the case may be.

          (v)    Whenever the Conversion Price is adjusted pursuant to 
Section 4(f)(i), (ii) or (iii), the Corporation shall promptly mail to each 
holder of Convertible Preferred Stock, a notice setting forth the Conversion 
Price after such adjustment and setting forth a brief statement of the facts 
requiring such adjustment.

     (g)  NO FRACTIONAL SHARES.  No fractional shares of Common shall be 
issued upon conversion of the Convertible Preferred Stock. If more than one 
certificate shall be surrendered for conversion at any one time by the same 
holder, the number of full shares of Common Stock issuable upon conversion 
thereof shall be computed on the basis of the aggregate number of shares so 
surrendered.  In lieu of any fractional shares to which the holder would 
otherwise be entitled, the Corporation at its election shall either pay cash 
equal to such fraction multiplied by the then effective Per Share Market 
Value at such time or issue one whole share for each fraction of a share 
outstanding, after aggregating all fractional shares held by each stockholder.

                                       7
<PAGE>

     h)   RESERVATION OF SHARES OF COMMON STOCK.  The Corporation shall at 
all times reserve and keep available out of its authorized but unissued 
shares of Common Stock, solely for the purpose of effecting the conversion of 
the shares of the Convertible Preferred Stock, such number of its shares of 
Common Stock as shall from time to time be sufficient to effect the 
conversion of all outstanding shares of the Convertible Preferred Stock; and 
if at any time the number of authorized but unissued shares of Common Stock 
shall not be sufficient to effect the conversion of all then outstanding 
shares of the Convertible Preferred Stock, the Corporation will take such 
corporate action as may be necessary to increase its authorized but unissued 
shares of Common Stock to such number of shares as shall be sufficient for 
such purpose, including, without limitation, engaging in best efforts to 
obtain the requisite stockholder approval of any necessary amendment to this 
Certificate of Incorporation.

     (i)  ISSUE TAXES.  The Corporation shall pay any and all issue and other 
taxes that may be payable in respect of any issue or delivery of shares of 
Common Stock on conversion of shares of Convertible Preferred Stock pursuant 
hereto; provided, however, that the Corporation shall not be obligated to pay 
any transfer taxes resulting from any transfer requested by any holder in 
connection with any such conversion.

     (j)  RECLASSIFICATION; MERGER; CONSOLIDATION.  In the case of any 
reclassification of shares of Common Stock, any consolidation or merger of 
the Corporation with or into another Person, or the sale or transfer of all 
or substantially all of the assets of the Corporation, the holders of the 
Convertible Preferred Stock then outstanding shall have the right thereafter 
to convert such shares only into the shares and other securities and property 
receivable upon or deemed to be held by holders of shares of Common Stock 
following such reclassification, consolidation, merger, sale or transfer and 
the holders of the Convertible Preferred Stock shall be entitled upon such 
transfer to receive such amount of securities or property as the shares of 
Common Stock of the Corporation into which such shares of Convertible 
Preferred Stock could have been converted immediately prior to such 
reclassification, consolidation, merger, sale or transfer would have been 
entitled.  The terms of any such reclassification, consolidation, merger, 
sale or transfer shall include such terms so as to  continue to give to the 
holder of the Convertible Preferred Stock the right to receive the securities 
or property set forth in this Section 4(j) upon any conversion following such 
reclassification, consolidation, merger, sale or transfer.  This provision 
shall similarly apply to successive reclassifications, consolidations, 
mergers, sales and transfers.

     (k)  NOTICE OF CERTAIN EVENTS.  In the event that:

          (i)    the Corporation declares a dividend (or any other 
distribution) on its shares of Common Stock; or

          (ii)   the Corporation shall declare a special nonrecurring cash 
dividend on or a redemption of its shares of Common Stock; or 

                                       8
<PAGE>

          (iii)  the Corporation shall authorize the granting to all holders 
of shares of Common Stock rights or warrants to subscribe for or purchase any 
shares of capital stock of any class or of any rights; or 

          (iv)   the approval of any stockholders of the Corporation shall be 
required in connection with any reclassification of the shares of Common 
Stock of the Corporation (other than a subdivision or combination of the 
outstanding shares of Common Stock) any consolidation or merger to which the 
Corporation is a party or any sale or transfer of all or substantially all of 
the assets of the Corporation; or 

          (v)    the Corporation shall authorize the voluntary or involuntary 
dissolution, liquidation or winding-up of the affairs of the Corporation 
including, without limitation, any of the events described in Section 3 
herein, then the Corporation shall cause to be filed at each office or agency 
maintained for the purpose of conversion of the Convertible Preferred Stock, 
and shall cause to be mailed to the holders of the Convertible Preferred 
Stock at their last addresses as they shall appear upon the share register of 
the Corporation, at least 30 calendar days prior to the applicable record or 
effective date hereinafter specified, a notice stating (x) the date on which 
a record is to be taken for the purpose of such dividend, distribution, 
redemption, rights or warrants, or if a record is not to be taken, the date 
as of which the holders of shares of Common Stock of record to be entitled to 
such dividend, distribution, redemption, rights or warrants are to be 
determined, or (y) the date on which such reclassification, consolidation, 
merger, sale, transfer, dissolution, liquidation or winding-up is expected to 
become effective, and the date as of which it is expected that holders of 
shares of Common Stock of record shall be entitled to exchange entire shares 
of Common Stock for securities or other property deliverable upon such 
reclassification, consolidation, merger, sale, transfer, dissolution, 
liquidation or winding-up; provided, however, if the notice referred to 
herein will contain material non-public information if distributed at the 
time period specified herein, then the notice shall be distributed to the 
holders of the Convertible Preferred Stock on the later to occur of (a) 30 
calendar days prior to the applicable record or effective date specified 
herein or (b) the date that such information is made publicly available or 
(c) at such time as such information otherwise ceases to be material 
non-public information; provided further that the notice requirement to be 
distributed pursuant to this section shall be distributed at least five (5) 
calendar days prior to the applicable record or effective date.

     (l)  NOTICES.  Each Holder Conversion Notice shall be given by facsimile 
and by mail, postage prepaid, addressed to the attention of the Chief 
Financial Officer of the Corporation at the facsimile number and address of 
the principal place of business of the Corporation.  Any such notice shall be 
deemed given and effective upon the earlier to occur of (i)(a) if such Holder 
Conversion Notice is delivered via facsimile at the facsimile number 
specified in this Section 4(l) prior to 4:30 p.m. (New York time) on any 
Trading Day, such Trading Day or such later date as is specified in the 
Holder Conversion Notice, and (b) if such Holder Conversion Notice is 
delivered via facsimile at the facsimile number specified in this Section 
4(l) after 4:30 p.m. (New York time) on any Trading Day, the next Trading Day 
or such later date as specified in the Holder Conversion Notice, (ii) five 
(5) days after deposit in the 

                                       9
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United States mails or (iii) upon actual receipt by the party to whom such 
notice is required to be given.

     Section 5.  REDEMPTION

     (a)  CORPORATION REDEMPTION.  The Corporation may redeem, from any 
source of funds legally available therefor, at any time any or all shares of 
the Convertible Preferred Stock then outstanding by delivering a notice (the 
"Redemption Notice") to the holders of the Convertible Preferred Stock being 
redeemed setting forth the date of such redemption (the "Redemption Date") 
(which shall be no less than thirty days following the date of the Redemption 
Notice) and paying to the holder (x) a cash payment (the "Redemption Price") 
equal to the product of (i) the greater of: (a) the Per Share Market Value on 
the Trading Day immediately preceding the Redemption Date; or (b) the average 
of the Per Share Market Values for the five (5) Trading Days immediately 
preceding the Redemption Date, (ii) the number of shares of Convertible 
Preferred Stock to be redeemed, and (iii) the Series A Conversion Ratio or 
the Series B Conversion Ratio, as applicable; and (y) a warrant (the 
"Redemption Warrant") to purchase a number of shares of Common Stock equal to 
the Stated Value plus unpaid accrued dividends of the Convertible Preferred 
Stock being redeemed divided by the Series A Fixed Price or the Series B 
Fixed Price, as applicable, exercisable at the Series A Fixed Price or the 
Series B Fixed Price, as applicable, with an expiration date of the third 
anniversary of the Series A Issue Date or the Series B Issue Date, as 
applicable.  The Redemption Price shall be payable by the Corporation on the 
Redemption Date.  Any redemption effected pursuant to this Section 5(a) shall 
be made on a pro-rata basis among the holders of the Series A Preferred Stock 
and Series B Preferred Stock in proportion to the shares of Series A 
Preferred Stock and Series B Preferred Stock then held by them.

     (b)  HOLDER REDEMPTION.  Each holder of Convertible Preferred Stock has 
the right to require the Corporation to redeem any or all of the shares of 
Convertible Preferred Stock then held by the holder (a "Forced Redemption") 
upon the occurrence of one of the following events (each a  "Forced 
Redemption Event"):

          (i)    the registration statement required to be filed by the 
Corporation pursuant to the registration rights agreements dated September 8, 
1997 and September 19, 1997 between the Corporation and each holder of Series 
A Preferred Stock (the "Series A Registration Rights Agreement") or the 
Series B Registration Rights Agreement has not been filed and declared 
effective by the date which is 210 days from the Series A Issue Date or the 
Series B Issue Date, as applicable, or there is a lapse in the effectiveness 
of the registration statement filed pursuant to the Series A Registration 
Rights Agreement or the Series B Registration Rights Agreement which 
continues for an aggregate of 40 Trading Days, excluding from such time 
calculation any Blackout Periods, as defined in each of the Series A 
Registration Rights Agreement and the Series B Registration Rights Agreement; 

          (ii)   the shares of Common Stock (including any of the shares of 
Common Stock issuable upon conversion of the Convertible Preferred Stock) 
shall (a) cease to be listed or authorized for trading on any of the Nasdaq 
National Market, the Nasdaq Small Cap 

                                       10
<PAGE>

Market, the American Stock Exchange or the New York Stock Exchange 
(collectively, the "Exchanges"), or (b) are suspended from trading on any of 
the Exchanges, each for a consecutive 20 calendar day period; or 

          (iii)  the Corporation fails to deliver stock certificates 
representing the shares of Common Stock to be issued upon conversion of the 
Convertible Preferred Stock within 30 Trading Days of the Conversion Date.

In the event of a Forced Redemption, the holder will deliver written notice 
to the Corporation and, within thirty (30) days of receipt of such notice, 
the Corporation will redeem the shares of Convertible Preferred Stock by 
paying to the holder a payment in cash, check or wire transfer equal to the 
Redemption Price.

     (c)  From and after the Redemption Date, unless there shall have been a 
default in payment of the Redemption Price, all rights of the holders of 
shares of Convertible Preferred Stock designated for redemption in the 
Redemption Notice as holders of Convertible Preferred Stock (except the right 
to receive the Redemption Price without interest upon surrender of their 
certificate or certificates) shall cease with respect to such shares, and 
such shares shall not thereafter be transferred on the books of the 
Corporation or be deemed to be outstanding for any purpose whatsoever.  If 
the funds of the Corporation legally available for redemption of shares of 
Convertible Preferred Stock on any Redemption Date are insufficient to redeem 
the total number of shares of Convertible Preferred Stock to be redeemed on 
such date, those funds which are legally available will be used to redeem the 
maximum possible number of such shares ratably among the holders of the 
Convertible Preferred Stock to be redeemed.  The shares of Convertible 
Preferred Stock or Series B Preferred Stock not redeemed shall remain 
outstanding and entitled to all rights and preferences provided herein.  At 
any time thereafter when additional funds of the Corporation are legally 
available for the redemption of shares of Convertible Preferred Stock such 
funds will immediately be used to redeem the balance of the shares which the 
Corporation has become obligated to redeem on an Redemption Date, but which 
it has not redeemed.

     Section 6.  GENERAL PROVISIONS

     The Corporation shall not, without first obtaining the approval by vote 
or written consent, in the manner provided under applicable law, of the 
holders of a majority of the Series A Preferred Stock then outstanding create 
(by reclassification of an existing class or series, or otherwise) any new 
class or series of shares of Preferred Stock senior to the Series A Preferred 
Stock as to voting rights, dividends, redemption or distribution of assets of 
the Corporation in liquidation.  The Corporation shall not, without first 
obtaining the approval by vote or written consent, in the manner provided 
under applicable law, of the holders of a majority of the Series B Preferred 
Stock then outstanding create (by reclassification of an existing class or 
series, or otherwise) any new class or series of shares of Preferred Stock 
senior to the Series B Preferred Stock as to voting rights, dividends, 
redemption or distribution of assets of the Corporation in liquidation. 

                                       11
<PAGE>

     Section 7.  DEFINITIONS

     (a)  "BENEFICIALLY OWNED" means and includes the number of shares of 
Common Stock issuable upon conversion of the Convertible Preferred Stock with 
respect to which the determination of such provision is being made, but shall 
exclude the number of shares of Common Stock which would be issuable upon (i) 
conversion of the remaining, non-converted shares of Convertible Preferred 
Stock beneficially owned by a holder and its affiliates and (ii) exercise or 
conversion of the unexercised or unconverted portion of any other securities 
of the Corporation (including, without limitation, any warrants) subject to a 
limitation on conversion or exercise analogous to the limitation contained 
herein Beneficially Owned by a holder and its affiliates.  Except as set 
forth in the preceding sentence, for purposes of this definition, beneficial 
ownership shall be calculated in accordance with Section 13(d) of the 
Securities Exchange Act of 1934, as amended.

     (b)  "COMMON STOCK" means shares of common stock, par value $.001 of the 
Corporation.

     (c)  "CONVERSION DATE" means the date of surrender of the shares of 
Convertible Preferred Stock to be converted pursuant to Section 4(d) of 
Article V.

     (d)  "JUNIOR SECURITIES" means the Common Stock and all other equity 
securities of the Corporation, except the Convertible Preferred Stock.

     (e)  "PER SHARE MARKET VALUE" means on any particular date (i) the 
closing bid price per share of the Common Stock on such date on the Nasdaq 
Stock Market or other stock exchange on which the shares of Common Stock have 
been listed or if there is no such price on such date, then the closing bid 
price on such exchange on the date nearest preceding such date, or (ii) if 
the shares of Common Stock are no longer publicly traded the fair market 
value of a share of Common Stock as determined by an Appraiser selected in 
good faith by the holders of a majority in interest of the Convertible 
Preferred Stock; provided, however, that the Corporation, after receipt of 
determination by such Appraiser, shall have the right to select an additional 
Appraiser, in which case, the fair market value shall be equal to the average 
of the determinations by each such Appraiser.

     (f)  "PERSON" means a corporation, association, partnership, limited 
liability company, organization, business, individual, government or 
political subdivision thereof or a government agency.

     (g)  "SERIES A CONVERSION RATIO" means, at any time, a fraction, the 
numerator of which is the Stated Value plus accrued but unpaid dividends, and 
the denominator of which is the Series A Conversion Price at such time.

     (h)  "SERIES A ISSUE DATE" means September 8, 1997.

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<PAGE>

     (i)  "SERIES B CONVERSION RATIO" means, at any time, a fraction, the 
numerator of which is the Stated Value plus accrued but unpaid dividends, and 
the denominator of which is the Series B Conversion Price at such time.

     (j)  "SERIES B ISSUE DATE" means the date of the first issuance of any 
Series B Preferred Stock regardless of the number of any particular shares of 
Series B Preferred Stock and regardless of the number of certificates which 
may be issued to evidence such shares of Series B Preferred Stock.

     (k)  "STATED VALUE" means $1,000 per share of Convertible Preferred 
Stock.

     (l)  "TRADING DAY" means a day on which the shares of Common Stock are 
traded on the Nasdaq Stock Market or on an exchange on which the shares of 
Common Stock have then been listed.

     VI.    Except and to the extent designated with respect to the Preferred 
Stock, all rights to vote and all voting power shall be vested in the Common 
Stock and the holders thereof shall be entitled at all elections of directors 
to one (1) vote per share.  Special meetings of the stockholders of the 
Corporation for any purpose or purposes may be called only by the Board of 
Directors, the Chairman of the Board, the Chief Executive Officer or the 
President of the Corporation.

     VII.   The directors of the Corporation shall be divided into three 
classes, designated Class I, Class II and Class III.  The term of the initial 
Class I directors shall terminate on the date of the 1998 annual meeting of 
stockholders; the term of the Class II directors shall terminate on the date 
of the 1999 annual meeting of stockholders and the term of the Class III 
directors shall terminate on the date of the 2000 annual meeting of 
stockholders.  At each annual meeting of stockholders beginning in 1998, 
successors to the class of directors whose term expires at that annual 
meeting shall be elected for a three-year term.  If the number of directors 
is changed, any increase or decease shall be apportioned among the classes so 
as to maintain the number of directors in each class as nearly equal as 
reasonably possible, and any additional directors of any class elected to 
fill a vacancy resulting form an increase in such class shall hold for a term 
that shall coincide with the remaining term of that class, but in no case 
will a decrease in the number of directors shorten the term of any incumbent 
directors.  A director shall hold office until the annual meeting for the 
year in which his term expires and until his successor shall be elected and 
shall qualify, subject, however, to prior death, resignation, retirement, 
disqualification or removal from office.  Any vacancy on the Board of 
Directors, however resulting, shall be filled only by a majority of the 
directors then in office, even if less than a quorum, or by a sole remaining 
director and not by the stockholders.  Any director  elected to fill a 
vacancy shall hold office for a term that shall coincide with the terms of 
the class to which such director shall have been elected.

     Subject to the rights, if any, of the holders of shares of Preferred 
Stock then outstanding, any or all of the directors of the Corporation may be 
removed from office at any time, for cause only, by the affirmative vote of 
the holders of a majority of the outstanding 

                                       13
<PAGE>

shares of the Corporation then entitled to vote generally in the election of 
the directors, considered for purposes of this Article VII. as one class.

     Notwithstanding the foregoing, whenever the holders of any one or more 
classes or series of Preferred Stock issued by the Corporation shall have the 
right, voting separately by class or series, to elect directors at an annual 
or special meeting of stockholders, the election, term of office, filling of 
vacancies and other features of such directorships shall be governed by the 
terms of this Certificate of Incorporation or the resolution or resolutions 
adopted by the Board of Directors pursuant to the second paragraph of Article 
V applicable thereto, and such directors so elected shall not be divided into 
classes pursuant to this Article VII. unless expressly provided by such terms.

     VIII.  Elections of directors at an annual or special meeting of 
stockholders need not be by written ballot unless the Bylaws of the 
Corporation shall otherwise provide.

     Any action required or permitted to be taken at any annual or special 
meeting of stockholders may be taken only upon the vote of the stockholders 
at an annual or special meeting duly noticed and called, as provided in the 
Bylaws of the Corporation, and may not be taken by written consent of the 
stockholders pursuant to the Delaware Law; PROVIDED, HOWEVER, if the 
Corporation has only one stockholder, then any action required or permitted 
to be taken at any annual or special meeting of stockholders may be taken by 
the written consent of such stockholder.

     IX.   The officers of the Corporation shall be chosen in such a manner, 
shall hold their offices for such terms and shall carry out such duties as 
are determined solely by the Board of Directors, subject to the right of the 
Board of Directors to remove any officer or officers at any time with or 
without cause.

     X.    The Corporation shall indemnify to the fullest extent authorized 
or permitted by law (as now or hereafter in effect) any person made, or 
threatened to be made, a defendant or witness to any action, suit or 
proceeding (whether civil or criminal or otherwise) by reason of the fact 
that she or he, her or his testator or intestate, is or was a director, 
officer, employee or agent of the Corporation or by reason of the fact that 
any person is or was serving at the request of the Corporation as a director, 
officer, employee or agent of another corporation, partnership, joint 
venture, trust, employee benefit plan or enterprise.  Nothing contained 
herein shall affect any rights to indemnification to which employees other 
than directors and officers may be entitled by law.  No amendment or repeal 
of this paragraph of Article X shall apply to or have any effect on any right 
to indemnification provided hereunder with respect to any acts or omissions 
occurring prior to such amendment or repeal.

     No director of the Corporation shall be personally liable to the 
Corporation or its stockholders for monetary damages for any breach of 
fiduciary duty by such a director as a director.  Notwithstanding the 
foregoing sentence, a director shall be liable to the extent provided by 
applicable law (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 

                                       14
<PAGE>

misconduct or a knowing violation of law, (iii) pursuant to Section 174 of 
the Delaware Law, or (iv) for any transaction from which such director 
derived an improper personal benefit.  No amendment to or repeal of this 
paragraph of Article X shall apply to or have any effect on the liability or 
alleged liability of any director of the Corporation for or with respect to 
any acts or omissions of such director occurring prior to such amendment or 
repeal.

     In furtherance and not in limitation of the powers conferred by statute:

                (i)   the Corporation may purchase and maintain insurance on 
     behalf of any person who is or was a director or officer, employee or 
     agent of the Corporation, or is serving at the request of the 
     Corporation as a director, officer, employee or agent of another 
     corporation, partnership, joint venture, trust, employee benefit plan or 
     other enterprise against any liability asserted against him or her and 
     incurred by him or her in any such capacity, or arising out of his or 
     her status as such, whether or not the Corporation would have the power 
     to indemnify against such liability under the provisions of law; and

                (ii)  the Corporation may create a trust fund, grant a 
     security interest and/or use other means (including, without limitation, 
     letters of credit, surety bonds and/or other similar arrangements), as 
     well as enter into contract providing indemnification to the full extent 
     authorized or permitted by law and including as part thereof provisions 
     with respect to any or all of the foregoing to ensure the payment of 
     such amounts as may become necessary to effect indemnification as 
     provided therein, or elsewhere.

     XI.   In furtherance and not in limitation of the powers conferred by 
the laws of the State of Delaware, the Board of Directors of the corporation 
shall have the authority to adopt, repeal, alter, amend or rescind the Bylaws 
of the Corporation.

     XII.  The Corporation reserves the right to amend or repeal any 
provision contained in this Certificate of Incorporation in the manner 
prescribed by the laws of the State of Delaware and all rights conferred upon 
stockholders are granted subject to this reservation; PROVIDED, HOWEVER, 
that, notwithstanding any other provision of this Certificate of 
Incorporation or any provision of law which might otherwise permit a lesser 
vote, but in addition to any vote of the holders of any class or series 
thereof of the stock of this Corporation required by law or by this 
Certificate of Incorporation, the affirmative vote of the holders of at least 
66 2/3 percent of the combined voting power of the outstanding shares of 
stock of all classes and series thereof of the Corporation entitled to vote 
generally in the election of directors, voting together as a single class, 
shall be required to amend, repeal or adopt any provision inconsistent with 
(i) the second sentence of Article VI, (ii) Article VII, (iii) the second 
paragraph of Article VIII, (iv) Article XI or (v) this Article XII.

                                       15
<PAGE>

     XIII.

     Section 1.

     In addition to the rights granted under Section 262 of the Delaware Law, 
and subject to the provisions of this Article XIII, a holder of shares of any 
class or series of capital stock of the Corporation is hereby empowered to 
dissent, and thereafter exercise the appraisal rights contemplated in Section 
262 of the Delaware Law, in the event that the Board of Directors resolves 
(i) to amend this Certificate of Incorporation to add, change or remove any 
provisions restricting or constraining the issue, transfer, or ownership of 
shares of that class or series of capital stock; (ii) to amend this 
Certificate of Incorporation in any manner which would require a vote of 
stockholders of the outstanding shares of such class or series under Section 
242 of the Delaware Law; (iii) to amend this Certificate of Incorporation to 
add, change or remove any restriction upon the business or businesses in 
which the Corporation may engage; (iv) to sell, lease or exchange all or 
substantially all of its assets; (v) to amend the provisions of this Article 
XIII; or (vi) to effect any merger or consolidation in which the Corporation 
is a constituent corporation, whether or not any appraisal rights are 
otherwise available under Section 262 of the Delaware Law.  Upon the passage 
of any such resolution, the procedures of Section 262 of the Delaware Law 
shall apply as nearly as is practicable, with the provisions of Section 
262(d)(1) being applicable if the proposed action is to be submitted or 
approval at a meeting of stockholders, and the provisions of Section 
262(d)(2) being applicable if not such meeting or vote of stockholders is 
required to implement such action.

     Section 2.

     Subject to any contrary provisions of the laws of the State of Delaware, 
a beneficial or record stockholder may apply to a court for leave to 
institute a cause of action in the name and on behalf of the Corporation, or 
to intervene in an action to which the Corporation is a party for the purpose 
of prosecuting, defending or discontinuing the action on behalf of the 
Corporation, provided that no such action may be brought and no intervention 
in any action may be made unless the court is satisfied that (i) the 
complainant has given reasonable notice to the Board of Directors of its 
intention to apply to the court to bring a derivative action if the 
Corporation does not itself bring, diligently prosecute or defend or 
discontinue the action; (ii) the complainant is acting in good faith; and 
(iii) it appears to be in the interest of the Corporation that the action be 
brought, prosecuted, defended or discontinued. 

     Section 3.

     Subject to any contrary provisions of the laws of the State of Delaware, 
a beneficial or record stockholder is hereby empowered to apply to a court of 
appropriate jurisdiction for an order to remedy a result that is oppressive 
or unfairly prejudicial to or that unfairly disregards the interest of any 
security holder, director or officer of the Corporation arising from (i) any 
act or omission of the Corporation; (ii) the carrying on or conduct of the 
business or affairs of the Corporation; or (iii) the exercise of the powers 
of the Board of 

                                       16
<PAGE>

Directors of the Corporation.  In connection with an action brought pursuant 
to rights granted under this Article XIII, the court may make an interim or 
final order it thinks fit including, without limiting the generality of the 
foregoing:

          (a)   an order restraining the conduct complained of;

          (b)   an order appointing a receiver or receiver-manager;

          (c)   an order directing an issue or exchange of securities;

          (d)   an order directing a corporation, subject to the last 
paragraph of this Section 3, or any other person, to purchase securities of a 
security holder;

          (e)   an order directing a corporation, subject to the last 
paragraph of this Section 3, or any other person, to pay a security holder 
any part of the monies paid by him for securities;

          (f)   an order varying or setting aside a transaction or contract 
to which a corporation is a party and compensating the corporation aor any 
other party of the transaction or contract;

          (g)   an order requiring a corporation, within a time specified by 
the court, to produce to the court or an interested person financial 
statements for accounting in such other form as the court may determine;

          (h)   an order compensating an aggrieved person;

          (i)   an order directing rectification of the stock register or 
other records of the Corporation;

          (j)   an order liquidating and dissolving the Corporation;

          (k)   an order directing an investigation into the affairs of the 
Corporation;

          (l)   an order requiring the trial of any issue; 

provided, however, that the Corporation shall not be compelled to make a 
payment to a stockholder under paragraph (d) or (e) above if there are 
reasonable grounds for believing that the Corporation is or would after that 
payment be unable to pay its liabilities as they become due, or that the 
realizable value of the Corporation's assets would thereby be less than 
aggregate of its liabilities.

                                       17
<PAGE>

     Section 4.  The Corporation shall remain incorporated under the Delaware 
General Corporation Law or any statutory modification or replacement thereof 
and shall not merge or consolidate with any entity except as provided in this 
Article XIII.

     Section 5.  The provisions of this Article XIII may only be amended:

     (a)  Where the effective date of such amendment occurs on or before a 
          specified date which is 5 years from the date of issue of the 
          Director's Letter of Satisfaction, by a resolution passed by the 
          affirmative vote of stockholders holding not less than 90% of the 
          shares of each class or series of stock, whether or not such class 
          or series of stock otherwise has voting rights;

     (b)  Where the effective date of such amendment occurs after a specified 
          date which is 5 years from the date of issue of the Director's 
          Letter of Satisfaction, by a resolution passed by the affirmative 
          vote of stockholders holding not less than 66-2/3% of the shares of 
          each class or series of stock, whether or not such class or series of 
          stock otherwise has voting rights.

     Section 6.  Notwithstanding Sections 4 and 5 of this Article XIII, the 
corporation may merge or consolidate with another entity if:

     (a)  the entity surviving such merger or consolidation is a corporation
          subject to the Delaware General Corporation Law and its Certificate 
          of Incorporation includes all of the provisions of this Article XIII; 
          or 

     (b)  Such entity owns or operates a significant business and is not 
          controlled by, or under common control with, the Corporation, and 
          such merger or consolidation does not have as its primary purpose, 
          the avoidance of this Article XIII;

and, in either case:

     (c)  Such merger or consolidation is approved in the same manner and by 
          the same majority of stockholders as is required by the Delaware 
          General Corporation Law; and

     (d)  Dissent and appraisal rights are provided to stockholders on the 
          same basis in respect of such merger or consolidation as is set 
          forth in Section 1 of this Article XIII.

                                       18
<PAGE>

     XIV.  The name and mailing address of the incorporator of the 
Corporation is as follows:

<TABLE>
<CAPTION>
         NAME                 ADDRESS
         ----                 --------
<S>                           <C>
     Leon Nowek               21700 Oxnard Street, Suite 1550
                              Woodland Hills, California 91367
</TABLE>




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     IN WITNESS WHEREOF, the undersigned being the sole incorporator has 
executed this Certificate of Incorporation this __ day of July, 1998.



                                                -----------------------------
                                                Leon Nowek
                                                Sole Incorporator






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