<PAGE>
 
                                                                     EXHIBIT 3.1

                         CERTIFICATE OF DETERMINATION
                                      OF
                                 CHATCOM, INC.
                           A CALIFORNIA CORPORATION



     The undersigned, James B. Mariner and James R. Spievak, hereby certify
that:

     a.   They are the duly elected and acting President and Assistant
Secretary, respectively, of ChatCom, Inc., a California corporation (the
"Company").

     b.   All shares of Series B Preferred Stock that had been outstanding
previously have been converted into shares of the Company's Common Stock (the
"Common Stock"), there currently are no shares of Series B Preferred Stock
outstanding, and the decrease in the number of shares constituting that Series
is 1,000, which was the entire number of authorized shares of that Series.  The
Company's board of directors adopted the following resolution for this purpose:

          RESOLVED FURTHER, that the number of authorized shares of the
     Company's Series B Preferred Stock is hereby reduced from 1,000 to 0, the
     certificate of determination whereby the Series B Preferred Stock was
     established is no longer in force and the Series B Preferred Stock is no
     longer authorized as a series of the Company's preferred stock;

     c.   All shares of Series C Preferred Stock that had been outstanding
previously have been converted into shares of the Company's Common Stock, there
currently are no shares of Series C Preferred Stock outstanding, and the
decrease in the number of shares constituting that Series is 1,000, which was
the entire number of authorized shares of that Series.  The Company's board of
directors adopted the following resolution for this purpose:

          RESOLVED FURTHER, that the number of authorized shares of the
     Company's Series C Preferred Stock is hereby reduced from 1,000 to 0, the
     certificate of determination whereby the Series C Preferred Stock was
     established is no longer in force and the Series C Preferred Stock is no
     longer
<PAGE>
 
     authorized as a series of the Company's preferred stock;

     d.   The number of shares of Series D Convertible Preferred Stock is 5,000,
of which 2,496 shares are issued and outstanding.

     e.   The number of shares of Series E Convertible Redeemable Preferred
Stock of the Company is 2,000, none of which have been issued.

     f.   Pursuant to authority given by the Company's Articles of
Incorporation, as amended, the Board of Directors of the Company has duly
adopted the following recitals and resolutions:

     WHEREAS, the Articles of Incorporation, as amended, of the Company provide
for a class of shares known as Preferred Stock, issuable from time to time in
one or more series; and

     WHEREAS, the Board of Directors of the Company is authorized to determine
or alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock, to fix the number
of shares constituting any such series and to determine the designation thereof,
or any of them; and

     WHEREAS, the Company has 5,000 authorized shares of Series D Preferred
Stock, of which 2,496 shares are outstanding and, except for shares of Series E
Preferred Stock, no other shares of any series of Preferred Stock authorized or
outstanding; and

     WHEREAS, the Company has 2,000 authorized shares of Series E Convertible
Redeemable Preferred Stock, of which none are outstanding and, except for shares
of Series D Preferred Stock, no other shares of any series of Preferred Stock
are authorized or outstanding;

     NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby fixes
and determines the designation of, the number of shares constituting, and the
rights, preferences, privileges and restrictions relating to, a series of
Preferred Stock as follows:

     1.   Designation of Series; Rank of Series.  The designation of such
          -------------------------------------                           
series of Preferred Stock is Series E Convertible Redeemable Preferred Stock
("Series E Preferred Stock").  The number of shares constituting such series is
2,000, with a stated value of $1,000 per share.  Shares of Series E Preferred
Stock converted, redeemed or purchased by the Company shall be canceled and
shall revert to authorized but unissued shares of Preferred Stock undesignated
as to series.  Shares of the Series E Preferred Stock shall rank pari passu

                                       2.
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and share in dividends and other distributions on a pro rata basis with the
Series D Preferred Stock and with shares of any other series of preferred stock
hereafter issued by the Company with substantially equivalent rights,
preferences, privileges and limitations as those of this Series.

     2.   Dividends.  Each holder of the outstanding Series E Preferred Stock
          ---------                                                          
shall be entitled to receive, in cash or shares of the Common Stock, at the
Company's option, cumulative dividends at the annual rate of 8.0% of the stated
value of the Series E Preferred Stock per share of Series E Preferred Stock,
payable semiannually on September 30 and March 31 of each year after the Closing
Date (as defined below) on which such shares were issued, without any further
action or declaration by the Company's Board of Directors or shareholders of the
Company, out of funds legally available therefor.  Such dividends shall be
cumulative so that if such dividends shall not have been declared and paid for
all shares of Series E Preferred Stock at the time outstanding, the deficiency
shall be declared and paid for such shares before the Company makes any
Distribution (as hereinafter defined) to the holders of Common Stock or
Preferred Stock of any other series junior to the Series E Preferred Stock.
Accrued but unpaid dividends shall not bear interest.  "Distribution" in this
paragraph 2 means the transfer of cash or property without consideration,
whether by way of dividend or otherwise (except a dividend in shares of the
Company) or the purchase or redemption of shares of the Company for cash or
property (except for an exchange of shares of the Company or shares acquired by
the Company from employees pursuant to the terms of any employee incentive plan,
agreement or arrangement) including any such transfer, purchase or redemption by
a subsidiary of the Company.  The time of any distribution by way of dividend
shall be the date of declaration thereof and the time of any distribution by
purchase or redemption of shares shall be the day cash or property is
transferred by the Company, whether or not pursuant to a contract of an earlier
date; provided that where a negotiable debt security is issued in exchange for
shares the time of the distribution is the date when the Company acquires the
shares in such exchange.  The Board of Directors may fix a record date for the
determination of holders of Series E Preferred Stock entitled to receive
payment of a dividend declared thereon, which record date shall be no more than
sixty (60) days prior to the date fixed for the payment thereof.  Upon notice of
conversion or redemption, if not previously declared, the Board of Directors
shall declare, out of funds legally available therefor, dividends on the Series
E Preferred Stock in shares of Common Stock, or at the Company's option if
permitted by law, in cash, at the annual rate of 8.0% of the stated value of the
Series E Preferred Stock from the date of issuance to the date of conversion or
redemption of such shares of Series E Preferred Stock.  If upon redemption or
conversion of shares of Series E Preferred Stock the Company elects to pay
accrued

                                       3.
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dividends on such shares in shares of Common Stock, the number of shares of
Common Stock shall be determined by dividing the amount of such accrued
dividends as of the redemption date or the Conversion Date (as defined below) by
the Conversion Price (as defined below) on the applicable redemption date or
Conversion Date.

     3.   Voting Rights.   The holders of Series E Preferred Stock shall not be
          -------------                                                        
entitled to vote upon any matters presented to the stockholders, except as
provided by law and except that without the approval of holders of a majority of
the outstanding shares of Series E Preferred Stock, the Company shall not (a)
authorize, create or issue any shares of any class or series ranking senior to
the Series E Preferred Stock as to liquidation rights, (b) amend, alter or
repeal, by any means, the Articles of Incorporation if the powers, preferences,
or special rights of the Series E Preferred Stock would be adversely affected,
or (c) become subject to any restriction on the Series E Preferred Stock, other
than restrictions arising under the General Corporation Law of the State of
California or existing under the Articles of Incorporation as in effect on
September 10, 1997; provided, however, that the creation of additional series of
Preferred Stock with substantially equivalent rights, preferences, privileges
and limitations as those of this Series E Preferred Stock shall not be a
violation of this Section 3.

     4.   Liquidation, Dissolution or Winding Up.  In the event of a voluntary
          --------------------------------------                              
or involuntary liquidation, dissolution or winding up of the Company, the
holders of Series E Preferred Stock shall be entitled to receive out of the
assets of the Company, whether such assets are capital or surplus of any nature,
an amount per share of Series E Preferred Stock equal to the stated value of
such share of Series E Preferred Stock and a further amount equal to any
dividends accrued and unpaid thereon, as provided in paragraph 2 hereof, to the
date that payment is made available to the holders of Series E Preferred Stock,
whether earned or declared or not, and no more, before any payment shall be made
or any assets distributed to the holders of shares of stock of the Company
junior in rank to the Series E Preferred Stock.

     If upon such liquidation, dissolution or winding up, the assets thus
distributed among the holders of the Series E Preferred Stock and other series
of preferred stock that upon liquidation, dissolution or winding up share pari
passu with the Series E Preferred Stock shall be insufficient to permit the
payment to all such holders of the full preferential amounts aforesaid, then the
entire assets of the Company to be distributed shall be distributed ratably
among the holders of Series E Preferred Stock and such other series of Preferred
Stock.

                                       4.
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     A consolidation or merger of the Company with or into any other corporation
or corporations, or a sale of all or substantially all of the assets of the
Company, shall not be deemed to be a liquidation, dissolution or winding up
within the meaning of this paragraph 4.

     5.   Conversion Rights.  (a)   Each holder of Series E Preferred Stock
          -----------------                                                
shall have the right, exercisable at the option of such holder at any time after
the dates set forth below, to convert, subject to the terms and provisions set
forth herein, the shares of Series E Preferred Stock into duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock at the
Conversion Price (as defined below) on the applicable Conversion Date (as
defined below).  The shares of Series E Preferred Stock may be issued at one or
more dates (each a "Closing Date") to one or more holders.  No shares of Series
E Preferred Stock may be converted during the first 50 days after the Closing
Date on which such shares were issued.  Commencing on the 51st day after a
Closing Date and continuing until the close of business on the 90th day after a
Closing Date, an aggregate cumulative total of one-half of all shares issued to
all holders of the Series E Preferred Stock on the applicable Closing Date may
be converted into shares of Common Stock.  Commencing on the 91st day after the
Closing Date for any shares of Series E Preferred Stock, all shares of Series E
Preferred Stock issued on the Closing Date shall thereafter be convertible into
Common Stock.

          (b)  The Company shall have the right to redeem the Series E Preferred
Stock, in whole or in part, as provided in paragraph 13.

     6.   Conversion Price.  Each share of Series E Preferred Stock shall be
          ----------------                                                  
converted into a number of shares of Common Stock determined by dividing $1,000
and accrued dividends by an amount equal to the lesser of (a) $1-3/8 (the "First
Market Price"), or (b) 75% of the Market Price on the Conversion Date (the
"Variable Price").  The lesser of the First Market Price and the Variable Price
is herein referred to as the "Conversion Price."  For purposes of determining
the Variable Price, the "Market Price" shall be (i) if the Common Stock is
listed or admitted to trade on a national securities exchange, on the Nasdaq
National Market ("NNM"), or on the Nasdaq SmallCap Market ("SmallCap"), the
average of the last closing bid prices of the Common Stock for the five (5)
trading days immediately preceding the Conversion Date (in the case of the
Variable Price), on the composite tape of the principal national securities
exchange on which the Common Stock is so listed or admitted to trade or on the
NNM or SmallCap markets, as the case may be; or (ii) if the Common Stock is not
listed or admitted to trade on an exchange or a system that publishes daily
closing prices,  the average closing bid prices as reported by such other inter-
dealer quotation system as may list the Common Stock.  The First Market Price
shall be subject to further adjustment as set forth in paragraph 8.

                                       5.
<PAGE>
 
     7.   Conversion Procedure.   The holder of any shares of the Series E
          --------------------                                            
Preferred Stock may exercise its rights to convert such shares into shares of
Common Stock by surrendering the share certificates for the Series E Preferred
Stock to be converted to the Company, at its principal office or at such other
office or agency maintained by the Company for that purpose, with the conversion
certificate (provided by the Company to the holder of such shares) executed by
the holder thereof, or a specified portion of such shares (as provided in the
conversion certificate, but for not less than $50,000 aggregate stated value of
Series E Preferred Stock), and accompanied, if required by the Company, by
proper assignment in blank.  The date of execution of such certificate and
delivery by facsimile to the Company at (818) 822-1424 (or such other facsimile
number as shall be given to the holder by the Company) shall be defined as the
"Conversion Date," provided share certificates are delivered within three (3)
business days to the Company or its transfer agent.

     If the holder of such certificate wishes the certificate or certificates
for the shares of Common Stock to be issued in another name, the holder shall
specify the name or names in which such shares of Common Stock are to be issued.
In case such Conversion Certificate shall specify a name or names other than
that of such holder, such notice shall be accompanied by payment of all transfer
taxes payable upon the issuance of shares of Common Stock in such name or names.
As promptly as practicable, and in any event within five business day after the
surrender of such certificates and the receipt of such notice relating thereto
and, if applicable, payment of all transfer taxes, the Company shall deliver or
cause to be delivered (i) certificates representing the number of validly
issued, fully paid and nonassessable shares of Common Stock to which the holder
of the Series E Preferred Stock so converted shall be entitled and (ii) if less
than the full number of shares of the Series E Preferred Stock evidenced by the
surrendered certificate or certificates are being converted, a new certificate
or certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares converted.
Such conversions shall be deemed to have been made at the close of business on
the date of giving of such notice and of such surrender of the certificate or
certificates representing the shares of the Series E Preferred Stock to be
converted so that the rights of the holder thereof shall cease except for the
right to receive Common Stock in accordance herewith, and the converting holder
shall be treated for all purposes as having become the record holder of such
Common Stock at such time.

     Shares of the Series E Preferred Stock may be converted  at any time up to
but not after the close of business on the fifth business day of the ten day
redemption notice period for such shares pursuant to paragraph 13.

                                       6.
<PAGE>
 
     8.   First Market Price Adjustments.  The First Market Price shall be
          ------------------------------                                  
subject to adjustment from time to time upon the occurrence of certain events as
follows:

          (a)  Reclassifications or Combinations.  If the Company shall combine
               ---------------------------------                               
or reclassify the outstanding Common Stock into a smaller number of shares, the
First Market Price in effect at the time of the record date of such combination
or reclassification shall be proportionately adjusted by multiplying such price
by a fraction, the numerator of which is the number of shares being surrendered
to the Company and the denominator of which is the number of shares being issued
by the Company in such combination or reclassification (i.e. in the case of a 2-
for-5 reverse stock split the First Market Price would be multiplied by five and
divided by two).  If such combination or reclassification shall occur during the
five-trading-day period used to calculate the Variable Price, a similar
adjustment shall be made to the closing prices for the trading days during such
period prior to such combination or reclassification.

          (b)  Rounding of Calculations; Minimum Adjustment.  All calculations
               --------------------------------------------                   
under this paragraph 8 shall be made to the nearest cent.  No adjustment in the
First Market Price shall be made if the amount of such adjustment would be less
than $0.01, but any such amount shall be carried forward and an adjustment with
respect thereto shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $0.01 or more.

          (c)  Adjustments for Consolidation, Merger, etc.  If the Company shall
               ------------------------------------------                       
at any time consolidate with or merge into another corporation (where the
Company is not the continuing corporation after such merger or consolidation),
the holder of Series E Preferred Stock shall thereafter be entitled to receive,
upon the conversion of the shares of Series E Preferred Stock, the securities or
property to which a holder of the number of shares of Common Stock then
deliverable upon the conversion thereof would have been entitled upon such
consolidation or merger had such holder converted immediately prior to such
consolidation or merger (subject to subsequent adjustments under paragraph 8
hereof), and the Company shall take such steps in connection with such
consolidation or merger as may be reasonably necessary to assure such holder
that the provisions of this Certificate of Determination, shall thereafter be
applicable in relation to any securities or property thereafter deliverable upon
the conversion of the Series E Preferred Stock, including, but not limited to,
obtaining a written acknowledgment from the continuing corporation of its
obligation to supply such securities or property upon such conversion.  A sale
of all or substantially all of the assets of the Company shall be deemed a
consolidation or merger for the foregoing purposes.

                                       7.
<PAGE>
 
     9.   Voluntary Adjustment.  The Company may make, but shall not be
          --------------------                                         
obligated to make, such decreases in the First Market Price and the Variable
Price so as to increase the number of shares of Common Stock into which the
Series E Preferred Stock may be converted, in addition to those required by
paragraph 8, as it considers to be advisable in order to avoid federal income
tax treatment as a dividend of stock or stock rights.

     10.  Reservation of Shares of Common Stock for Conversion.  The Company
          ----------------------------------------------------              
shall at all times reserve and keep available out of its authorized and unissued
shares of Common Stock such number of shares of Common Stock as shall from time
to time be sufficient to effect the conversion of all shares of Series E
Preferred Stock that are then outstanding.  The Company shall use its reasonable
best efforts to take the action necessary to increase the number of reserved
shares from time to time if needed, and to increase the number of authorized
shares of Common Stock if such an increase should become necessary to effect
conversion of all shares of Series E Preferred Stock that are then outstanding.

     11.  Notice of Adjustment of First Market Price.  Whenever the First Market
          ------------------------------------------                            
Price is adjusted as herein provided, the Company shall forthwith file with any
transfer agent or agents, if any, for the Series E Preferred Stock, and at the
principal office of the Company, a statement signed by the President or a Vice-
President and by the Chief Financial Officer or the Secretary or the Assistant
Secretary of the Company setting forth the adjusted First Market Price.  The
statement so filed shall be open to inspection by any holder of record of shares
of Series E Preferred Stock.  The Company shall also, at the time of filing any
such statement, mail notice to the same effect to the holders of shares of
Series E Preferred Stock at their addresses appearing on the books of the
Company or supplied by such holder to the Company for the purpose of notice.

     12.  Fractional Shares in Conversion.  The Company shall not be required to
          -------------------------------                                       
issue fractions of shares of Common Stock on the conversion of Series E
Preferred Stock.  If any fraction of a share of Common Stock would be issuable
upon the conversion of a share, except for the provisions hereof, the Company
shall purchase such fraction for an amount in cash equal to the Market Price at
the Conversion Date multiplied by such fraction.  If more than one certificate
for shares of Series E Preferred Stock shall be presented for conversion at any
one time by the same registered holder, the number of shares of Common Stock
that shall be issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of Common Stock issuable upon conversion of the
shares so presented.  All calculations under this paragraph 12 shall be made to
the nearest one-hundredth of a share.

                                       8.
<PAGE>
 
     13.  Redemption.
          ---------- 

          (a)  Mandatory Redemption.  If on September 1, 1998 the resale of all
               --------------------                                            
of the shares of Common Stock issuable upon conversion of the then outstanding
shares of Series E Preferred Stock is not at that time duly registered with the
Securities and Exchange Commission on Form S-3, or on another appropriate form
for such registration (the "Registration Statement"), the Company, at the demand
of any holder, and subject to applicable California law, shall thereafter during
any period when a Registration Statement is not effective redeem such holder's
shares of Series E Preferred Stock for a total amount equal to the Market Price
times the number of shares of Common Stock into which such shares of Series E
Preferred Stock are convertible on the date of such demand, and shall also pay
to such holder accrued dividends on such shares of Series E Preferred Stock,
whether or not declared, to the redemption date.

          (b)  Voluntary Redemption.  Shares of the Series E Preferred Stock may
               --------------------                                             
be redeemed, at the option of the Company by resolution of its Board of
Directors, in whole or in part, upon fifteen days written notice, at any time
after the later of January 31, 1998 or 50 days after the effective date of a
Registration Statement for a total amount equal to 133% of the stated value of
Series E Preferred stock, and shall also pay to such holder accrued dividends on
such shares of Series E Preferred Stock, whether or not declared, to the
redemption date.  In case of the redemption of a part only of the outstanding
shares of Series E Preferred Stock, the shares to be redeemed shall be selected
pro rata from each record holder of such shares.  During the first ten business
days of such fifteen-day period, each holder of shares of the Series E Preferred
Stock shall have the right to convert such shares as provided above.

     At least fifteen days' previous notice by mail, postage prepaid, shall be
given to the holders of record of the shares of Series E Preferred Stock to be
redeemed, such notice to be addressed to each such stockholder at the address of
such holder appearing on the books of the Company or given by such holder to the
Company for the purpose of notice, or if no such address appears or is so given,
at the place where the principal office of the Company is located.  Such notice
shall state the date fixed for redemption and the redemption price and shall
call upon such holder to surrender to the Company on said date at the place
designated in the notice such holder's certificate or certificates representing
the shares to be redeemed.  On or after the date fixed for redemption and stated
in such notice, each holder of shares of Series E Preferred Stock called for
redemption shall surrender the certificate evidencing such shares to the Company
at the place designated in such notice and shall thereupon be entitled to
receive payment of the redemption price, together with accrued dividends to the
date fixed for redemption.  If less than all the shares represented by any such
surrendered certificate are

                                       9.
<PAGE>
 
redeemed, a new certificate shall be issued representing the unredeemed shares.
If such notice of redemption shall have been duly given, and if on the date
fixed for redemption funds necessary for the redemption shall be available
therefor, then, notwithstanding that the certificate evidencing any shares of
Series E Preferred Stock so called for redemption shall not have been
surrendered, the dividends with respect to the shares so called for redemption
shall forthwith after such date cease to accrue and all other rights pertaining
to such shares shall terminate, except only the right of the holders to receive
the redemption price, together with accrued and unpaid dividends to the date
fixed for redemption, without interest, upon surrender of their certificates
therefor.  If such notice of redemption shall have been given, and if on the
date fixed for such redemption the Company shall fail for any reason (other than
force majeure) to redeem the shares of Series E Preferred Stock for which it
gave such notice, the Company shall no longer be entitled to redeem such shares.

     RESOLVED FURTHER, that the President and Assistant Secretary of the Company
be, and hereby are, authorized and directed to prepare, execute, verify, and
file in the Office of the California Secretary of State, a Certificate of
Determination in accordance with this resolution and as required by law.

                                      10.
<PAGE>
 
     We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.


Dated:  September 10, 1997    /s/ James B. Mariner
                            -------------------------------
                            James B. Mariner, President

                                      11.
<PAGE>
 
     We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.


Dated:  September 10, 1997    /s/ James R. Spievak
                            -------------------------------
                            James R. Spievak,
                            Assistant Secretary

                                      12.