Document:

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                               STOCK OPTION PLAN

                                BRAINTECH, INC.

                               FEBRUARY 11, 2000

                                   ARTICLE I

                                PURPOSE OF PLAN

       The purpose of this Plan is to strengthen BrainTech, Inc. (hereinafter
referred to as the "Company") by providing an additional means of attracting
and retaining competent directors, officers, employees and consultants and by
providing to such persons added incentive for high levels of performance and
for unusual efforts to increase the sales and earnings of the Company.  The
Plan seeks to accomplish these purposes and results by providing a means
whereby such persons may purchase shares of the capital stock of the Company
pursuant to options.

                                   ARTICLE II

                             ADMINISTRATION OF PLAN

       SECTION 2.01.  BOARD TO ADMINISTER.  This Plan shall be administered
by the Board of Directors of BrainTech, Inc. (hereinafter referred to as the
"Board").  Any action of the Board with respect to administration of the Plan
shall be taken pursuant to a majority vote, or to the written consent of a
majority of its members.

       SECTION 2.02.  AUTHORITY.  Subject to the express provisions of the
Plan, the Board shall have the authority to construe and interpret the Plan
and to define the terms used herein; to prescribe, amend and rescind the
rules and regulations relating to the administration of the Plan; and to make
all other determinations necessary or advisable for the administration of the
Plan.  The determination of the Board on the foregoing matters shall be
conclusive. Subject to the express

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provisions of the Plan, the Board shall determine from the eligible class the
individuals who shall receive options, and the terms and provisions of the
options (which need not be identical).

                                  ARTICLE III

                                 PARTICIPATION

       SECTION 3.01.  ELIGIBILITY.  Directors, officers and employees of the
Company and consultants to the Company shall be eligible for selection to
participate in the Plan.  An individual who has been granted an option may,
if otherwise eligible, be granted an additional option or options if the
Board shall so determine.

       SECTION 3.02.  TIME OF GRANTING OPTION.  The granting of an option
pursuant to this Plan shall take place at the time the Board designates an
eligible director, officer, employee or consultant as a participant in the
Plan; provided, however, that if the appropriate resolutions of the Board
indicate that an option is to be granted as of and at some future date, the
date of grant shall be such future date.

                                   ARTICLE IV

                           STOCK SUBJECT TO THE PLAN

       Subject to the adjustments as provided in Article XII of this Plan,
the stock to be offered under this Plan shall be shares of the Company's
authorized but unissued common stock, including reaquired common stock or
common stock previously issued but cancelled.  Subject to the following
proviso, the aggregate amount of stock to be delivered upon the exercise of
all options granted under this Plan shall not exceed 7.5 million (7,500,000)
shares.  At no time shall the aggregate amount of stock to be delivered upon
exercise of all options granted under this Plan and the December 17, 1997
Stock Option Plan exceed 30% of the outstanding shares of the Common Stock of
the Company.  If any option granted hereunder shall expire or terminate for
any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for the purposes of this Plan.
Subject to the general limitations contained in this Plan, the

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Board may make any adjustment in the exercise price, the number of shares
subject to, or the term of an option by amendment of said option or by
cancellation of an outstanding option and subsequent regranting of an option.
An option that is the result of  amendment or substitution may have an
exercise price which is higher or lower than the prior option, provide for a
greater or lesser number of shares subject to the option, or a longer or
shorter term than the prior option, and may otherwise be changed as the
Board, in its discretion, sees fit.

                                   ARTICLE V

                                  OPTION PRICE

       The purchase price of stock covered by each option shall be determined
by the Board.  The purchase price of any stock purchased shall be paid in
full by bank draft or by certified cheque at the time of each purchase, or
shall be paid in such other manner as the Board may determine in compliance
with applicable laws.

                                   ARTICLE VI

                                 OPTION PERIOD

       Each option and all rights or obligations thereunder shall expire on
such date as the Board shall determine, but not later than the fifth (5th)
anniversary of the date on which the option is granted, and shall be subject
to earlier termination as hereinafter provided.

                                  ARTICLE VII

                         PRIVILEGES OF STOCK OWNERSHIP

       The holder of an option pursuant to the Plan shall not be entitled to
the privileges of stock ownership as to any shares of stock not actually
issued and delivered to him.

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                                  ARTICLE VIII

                               EXERCISE OF OPTION

       Each option may be exercised in accordance with its terms and the
total number of shares subject thereto may be purchased, in instalments,
which need not be equal.  No option or instalment thereof shall be
exercisable except in respect to whole shares, and fractional share interests
shall be disregarded.

                                   ARTICLE IX

                        COMPLIANCE WITH SECURITIES LAWS

       Shares shall not be issued pursuant to the exercise of an option
unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the SECURITIES ACT of 1933, as amended, the
EXCHANGE ACT, the rules and regulations promulgated thereunder, and the
requirements of any Stock Exchange.

       As a condition to the exercise of an option, the optionor may require
the optionee to represent and warrant at the time of any such exercise that
the shares purchased are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the optionor, such a representation is required by law.

       Further, the optionor shall have no liability whatsoever (including,
but not restricted to, alternate compensation) to the optionee if a change in
the exercise price or a change in the terms and provisions of an option
and/or this Stock Option Plan  hereof is required pursuant to any applicable
laws.

       The optionor and optionee shall comply with all relevant provisions of
law relating to this Stock Option Plan and any option granted hereunder.

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                                   ARTICLE X

                             DEATH AND TERMINATION

       SECTION 10.01.  AGREEMENT TO REMAIN IN EMPLOY OF COMPANY.  Each person
to whom an option is granted is not required to remain in the employ of the
Company following the date of the grant of the option.  Nothing contained in
this Plan, or in any option granted pursuant to this Plan, shall confer upon
any employee any right to continue in the employ of the Company or constitute
any contract or agreement of employment or interfere in any way with the
right of the Company to reduce such person's compensation from the rate in
existence at the time of the granting of an option or to terminate such
person's employment, but nothing contained herein or in any option agreement
shall affect any contractual rights of an employee.

       SECTION 10.02.  DEATH OF AN EMPLOYEE.  If any option holder dies while
employed by the Company, such holder's option shall, subject to earlier
termination pursuant to Article VI, expire two years (2) years after the date
of such death, and during such period after such death such option may, to
the extent that the optionee may have exercised the option if alive during
such period, be exercised by the person or persons to whom the options
holder's rights under the option shall pass by will or by the applicable laws
of descent and distribution.

       SECTION 10.03  TERMINATION OF EMPLOYMENT.  If an optionee ceases to be
employed by the Company because of discharge for cause, such optionee's
option shall expire concurrently with such cessation of employment.  THIS
SECTION 10.03 SHALL NOT APPLY IN RESPECT OF AN OPTION, OR THAT PORTION OF AN
OPTION, THAT HAS FULLY VESTED IN AN OPTIONEE.

       SECTION 10.04  RESIGNATION.  If an optionee resigns or ceases to be
employed by the Company for any reason other than death or discharge for
cause, such holder's option shall, subject to earlier termination pursuant to
Article VI, expire thirty (30) days thereafter (or such period of time
greater than 30 days as the Board may determine or the Company may have
agreed to contractually), and during such period after such holder ceases to
be an employee, such option shall

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be exercisable only to the extent the optionee could have exercised the
option at the date the optionee ceased to be employed by the Company.

                                   ARTICLE XI

                         NONTRANSFERABILITY OF OPTIONS

       An option granted under this Plan shall, by its terms, be
nontransferable by the option holder other than by will or by the laws of
descent and distribution and shall be exercisable during his lifetime only by
the option holder.

                                  ARTICLE XII

                   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION

       SECTION 12.01.  CORPORATE REORGANIZATIONS.  If the outstanding shares
of the stock of the Company are increased, decreased or changed into, or
exchanged for, a different number or kind of shares or securities of the
Company through reorganization, recapitalization, reclassification, stock
split, stock dividend, stock consolidation, or merger as a result of which
the Company is the surviving corporation, or otherwise, an appropriate and
proportionate adjustment shall be made in the number and kind of shares as to
which options may be granted.  A corresponding adjustment changing the number
of shares and the exercise price per share allocated to unexercised options
or portions thereof, which shall have been granted prior to any such change,
shall likewise be made.  Any such adjustment, however, in an outstanding
option shall be made without change in the total price applicable to the
unexercised portion of the option but with a corresponding adjustment in the
price for each share covered by the option.

       SECTION 12.02  DISSOLUTION, LIQUIDATION.  Upon the dissolution or
liquidation of the Company, or upon reorganization, merger or consolidation
of the Company with one or more corporations as a result of which the Company
is not the surviving corporation, or upon the sale of substantially all of
the property of the Company to another corporation, this Plan shall
terminate, and any option theretofore granted hereunder shall terminate,
unless provision be made in

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connection with such transaction for the assumption of options theretofore
granted, or the substitution for such options of new options covering the
stock of a successor employer corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices.

       SECTION 12.03  ADJUSTMENTS MADE BY BOARD.  Adjustments pursuant to
this Article XII shall be made by the Board, whose determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding,
and conclusive.  No fractional shares of stock shall be issued under the Plan
on account of any such adjustment.

                                  ARTICLE XIII

                                INCOME TAX LAWS

       The Company and all optionees shall comply with all applicable income
tax laws and other tax laws (eg. any withholding tax or similar obligations).

                                  ARTICLE XIV

                           AMENDMENT AND TERMINATION

       The Board may at any time suspend, amend or terminate this Plan as the
Board, in its own discretion, sees fit.  No option may be granted during any
suspension of the Plan or after such termination.  The amendment, suspension
or termination of the Plan shall not, without the consent of the option
holder, alter or impair any rights or obligations under any option
theretofore granted under the Plan.

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                                      -8-

                                   ARTICLE XV

                                  TERMINATION

       Unless terminated sooner by the Board of Directors, this Plan shall
terminate at the close of business on February 11, 2010.

This Stock Option Plan is hereby approved and confirmed by the Board of
BrainTech, Inc.:

                                           "Owen Jones"
                                          -----------------------------------
                                          Owen Jones, Director

                                           "Grant Sutherland"
                                          -----------------------------------
                                          Grant Sutherland, Director

                                           "James Speros"
                                          -----------------------------------
                                          James Speros, Director<PAGE>

                                                                     EXHIBIT 4.1

                          CERTIFICATE OF INCORPORATION
                             OF PERCEPTRONICS, INC.

         FIRST:   The name of the Corporation is Perceptronics, Inc.
(hereinafter sometimes referred to as the "Corporation").

         SECOND:  The address of the registered office of the Corporation in
the State of Delaware is 229 So. State Street, Dover, Delaware 19901, in the
City of Dover, County of Kent.  The name of the registered agent at that
address is The Prentice-Hall Corporation System, Inc.

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

         FOURTH:

                  (a) The total number of shares of all classes of stock which
         the Corporation shall have authority to issue is sixteen million
         (16,000,000), consisting of:

                           (1) one million (1,000,000) shares of Preferred
                           Stock, par value one-tenth cent ($.001 per share)
                           (the "Preferred Stock"); and

                           (2) fifteen million (15,000,000) shares of Common
                           Stock, par value one-tenth cent ($.001) per share
                           (the "Common Stock").

                  (b) The Board of Directors is authorized, subject to any
         limitations prescribed by law, to provide for the issuance of the
         shares of Preferred Stock in series, and by filing a certificate
         pursuant to the applicable law of the State of Delaware, to establish
         from time to time the number of shares to be included in each such
         series, and to fix the designation, powers, preferences and rights of
         the shares of each such series and any qualifications, limitations or
         restrictions thereof, and to increase or decrease the number of shares
         of any such series to the extent permitted by the Delaware General
         Corporation Law, as amended from time to time.

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         FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its directors and shareholders:

                  (a) The holders of each class or series of stock entitled to
         vote in the election of directors shall be entitled to cumulative
         voting in the election of directors in the manner provided in the
         by-laws of the Corporation.

                  (b) The directors shall have the concurrent power with the
         stockholders to adopt, amend or repeal the by-laws of the Corporation.

         SIXTH: A director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.

         If the Delaware General Corporation Law is hereafter amended to
authorize the further elimination or limitation of the liability of a director,
then the liability of the directors of the Corporation shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation Law,
as so amended.

         Any repeal or modification of the foregoing provisions of this Article
SIXTH by the stockholders of the Corporation shall not adversely affect any
right or protections of a director of the Corporation existing at the time of
such repeal or modification.

         SEVENTH: 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.

         EIGHTH:  The names and mailing address of the sole incorporator are as
follows:

                  Name                      Mailing Address
                  ----                      ---------------

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            Charles Baclet             Prentice-Hall Corporate Services
                                       6430 Sunset Boulevard
                                       Los Angeles, California 90028

         I, THE UNDERSIGNED, being the incorporator, for the purpose of forming
a corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereto set my hand this 8th day of September, 1987.

                                                              /s/ Charles Baclet
                                                              ------------------
                                                              Charles Baclet

                                     3
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                          AGREEMENT AND PLAN OF MERGER

         THIS AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of September 11, 1987 by and between PERCEPTRONICS, INC.,
a California corporation (the "Company"), and PERCEPTRONICS, INC., a Delaware
corporation and a wholly-owned subsidiary of the Company ("Perceptronics
Delaware").

                                    RECITALS

         A. The Board of Directors of the Company and the Board of Directors of
Perceptronics Delaware deem it advisable that the Company merge into
Perceptronics Delaware pursuant to the General Corporation Law of the State of
Delaware ("Delaware Law") and the General Corporation Law of the State of
California ("California Law"), and the Board of Directors of each of such
corporations has approved this Agreement.

         B. The Board of Directors of the Company has directed that this
Agreement be submitted to a vote of the Company's shareholders at the 1987
Annual Meeting of Shareholders to be held on October 15, 1987, or any
adjournment thereof.

         C. The Company, as the sole shareholder of Perceptronics Delaware, has
adopted and approved this Agreement by written consent dated as of September 11,
1987.

         NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that the Company shall
merge into Perceptronics Delaware on the following terms, conditions and other
provisions:

                             I. TERMS AND CONDITIONS

         1.1 MERGER. The Company shall be merged with and into Perceptronics
Delaware, and Perceptronics Delaware shall be the surviving corporation (the
"Merger"), effective upon the date when a duly executed copy of this Merger
Agreement is filed with the Secretaries of State of Delaware and California (the
"Effective Date").

         1.2      EFFECT OF MERGER:

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                  (a) On the Effective Date, the separate corporate existence of
         the Company shall cease and the corporate existence of Perceptronics
         Delaware, as governed by Delaware Law, shall continue unimpaired and
         unaffected by the Merger.

                  (b) On the Effective Date, the shares of Perceptronics
         Delaware Common Stock theretofore issued and outstanding shall be
         retired and canceled.

                  (c) On the Effective Date, each share of the Company's Common
         Stock issued and outstanding shall be converted by reason of the Merger
         and without any action on the part of the holders thereof into and
         become one share of Perceptronics Delaware Common Stock. The shares of
         the Company's Common Stock so converted shall cease to exist as such
         and shall exist only as shares of Perceptronics Delaware Common Stock.

         1.3 STOCK CERTIFICATES. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock of the Company shall be deemed for all purposes to evidence
ownership of and to represent the shares of Perceptronics Delaware into which
the shares of the Company represented by such certificates have been
converted as herein provided. The registered owner on the books and records
of the Company or its transfer agents of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to Perceptronics Delaware
or its transfer agents, have and be entitled to exercise any voting and other
rights with respect to and to receive any dividend and other distributions
upon the shares of Perceptronics Delaware evidenced by such outstanding
certificate as above provided.

         1.4 OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES. Upon the Effective
Date, Perceptronics Delaware will assume and continue the Company's 1982
Incentive Stock Option Plan and 1984 Non-Qualified Stock Option Plan, and
each option, warrant or other security exercisable or convertible into Common
Stock of the Company outstanding immediately prior to the Merger shall, by
virtue of the Merger and without any action on the part of the holder
thereof, become an option, warrant or other security to purchase the same
number of shares of Common Stock of Perceptronics Delaware with no other
changes in the terms and conditions thereof, including exercise of conversion
prices.

                  II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS

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         2.1 PERCEPTRONICS DELAWARE CERTIFICATE OF INCORPORATION AND BY-LAWS.
The Certificate of Incorporation of Perceptronics Delaware, as in effect on
the Effective Date, shall continue to be the Certificate of Incorporation of
Perceptronics Delaware until further amended in accordance with the
provisions thereof and applicable law. The By-laws of Perceptronics Delaware,
as amended and in effect on the Effective Date, shall continue to be the
By-laws of Perceptronics Delaware without change or amendment until further
amended in accordance with the provisions thereof and applicable law.

         2.2 PERCEPTRONICS DELAWARE DIRECTORS AND OFFICERS. The directors of
Perceptronics Delaware shall continue in office for their current terms and
until their successors are elected and qualified, or until their death,
resignation or removal. The officers of Perceptronics Delaware shall remain
officers of Perceptronics Delaware on the Effective Date and shall serve at
the pleasure of the Board of Directors.

                            III. CONDITIONS TO MERGER

         3.1 CONDITIONS. The consummation of the Merger and the other
transactions contemplated by this Agreement is subject to the satisfaction of
the following conditions prior to or on the Effective Date:

                  (a)      SHAREHOLDER APPROVAL.  The principal terms of this
         Agreement shall have been approved by the Company's shareholders; and

                  (b) LISTING. The shares of Perceptronics Delaware Common Stock
         to be issued shall be, upon official notice of issuance, listed on the
         National Association of Securities Dealers' Automatic Quotation System
         ("NASDAQ").

                     IV. TRANSFER OF ASSETS AND LIABILITIES

         On the Effective Date, the rights, privileges, powers and franchises,
both of a public as well as of a private nature, of each of the Company and
Perceptronics Delaware shall be vested in and possessed by Perceptronics
Delaware, subject to all the disabilities, duties and restrictions of or upon
each of the Company and Perceptronics Delaware; and all rights, privileges,
powers and franchises of each of the Company and Perceptronics Delaware, and all
property, real, personal and mixed, of each of the Company and Perceptronics
Delaware, and all debts due to each of the Company and Perceptronics Delaware on
whatever account, and all things in action or belonging to each of the Company
and Perceptronics Delaware shall be transferred to and wasted in Perceptronics
Delaware; and all property, rights, privileges, powers and

                                     6
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franchises, and all and every other interest, shall be thereafter as
effectually the property of Perceptronics Delaware as they were of the
Company and Perceptronics Delaware, and the title to any real estate vested
by deed or otherwise in either of the Company or Perceptronics Delaware shall
not revert or be in any way impaired by reason of the Merger; PROVIDED,
HOWEVER, that the liabilities of the Company and Perceptronics Delaware and
of their shareholders, directors and officers shall not be affected and all
rights of creditors and all liens upon any property or either of the Company
or Perceptronics Delaware shall be preserved unimpaired, and any claim
existing or action or proceeding pending by or against either the Company or
Perceptronics Delaware may be prosecuted to judgment as if such Merger had
not taken place except as they may be modified with the consent of such
creditors and all debts, liabilities and duties of or upon each of the
Company and Perceptronics Delaware shall attach to Perceptronics Delaware,
and may be enforced against it to the same extent as if such debts,
liabilities and duties had been incurred or contracted by it. The parties
hereto agree that from time to time and as and when requested by
Perceptronics Delaware, or by its successors or assigns, to the extent
permitted by law, the officers and directors of Company or Perceptronics
Delaware are fully authorized in the name of the Company or otherwise to
execute and deliver all such deeds, assignments, confirmations, assurances
and other instruments and to take or cause to be taken all such further
action as Perceptronics Delaware may deem necessary or desirable in order to
vest, perfect, confirm in or assure Perceptronics Delaware title to and
possession of all of said property, rights, privileges, powers and franchises
and otherwise to carry out the intent and purposes of this Merger Agreement.

                                V. MISCELLANEOUS

         5.1 ABANDONMENT. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of the Company, notwithstanding approval of this Merger Agreement
by the shareholders of the Company.

         5.2 AMENDMENT. At any time before the Effective Date, this Merger
Agreement may be amended, modified or supplemented by the Board of Directors
of the parties hereto, notwithstanding approval of this Merger Agreement by
the shareholders of the Company, provided, however, that no such amendment,
modification or supplement not approved by the shareholders shall change any
of this Agreement's principal terms.

         5.3 COUNTERPARTS. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,

                                     7
<PAGE>

each of which shall be deemed to be an original.

         IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by the Board of Directors of each of the parties hereto, is hereby
executed on behalf of each of said corporations and attested by their
respective officers thereunto duly authorized.

                                 PERCEPTRONICS, INC.
                                 A California corporation

                                 By:  /s/ Gershon Weltman
                                      ----------------------------------------
                                      Gershon Weltman, Chief Executive Officer
Officer

                                 ATTEST:

                                 /s/ Sarah A. S. Goldberg
                                 -----------------------------------------
                                 Sarah A. S. Goldberg, Secretary

                                 PERCEPTRONICS, INC.
                                 A Delaware corporation

                                 By:  /s/ Gershon Weltman
                                      ----------------------------------------
                                      Gershon Weltman, Chief Executive Officer
Officer

                                 ATTEST:

                                 /s/ Sarah A. S. Goldberg
                                 -----------------------------------------
                                 Sarah A. S. Goldberg, Secretary

                                      8
<PAGE>

                           CERTIFICATE OF SECRETARY OF

                   PERCEPTRONICS, INC., A DELAWARE CORPORATION

         The undersigned, being the Secretary of Perceptronics, Inc., a
Delaware corporation, does hereby certify that the foregoing Agreement and
Plan of Merger was adopted and approved by the sole shareholder of
Perceptronics, Inc., a Delaware corporation, by written consent dated as of
September 11, 1987.

Date:    October 21, 1987                  /s/ Sarah A. S. Goldberg
                                           -------------------------------
                                           Sarah A. S. Goldberg, Secretary

                                      9
<PAGE>

                   Certificate of Designation, voting Powers,
                      Preferences and Rights of Two Series
                    of Preferred Stock of Perceptronics, Inc.

          Pursuant to Section 151(g) of the Delaware General Corporation Law,
I, Gershon Weltman, Ph.D., Chief Executive Officer of Perceptronics, Inc., a
Delaware corporation (the "Corporation"), hereby certify that the following
is a true and correct copy of a resolution duly adopted by the Corporation's
Board of Directors at meetings hold on April 27, 1993, at which a quorum was
present and acting throughout, and that the resolution has not bean rescinded
or amended and is in full force and effect at the date hereof:

         RESOLVED, that pursuant to the authority expressly granted to and
vested in the Corporation's Board of Directors by the Corporation's
Certificate of Incorporation, as amended to date, the Board of Directors
hereby creates two series of Preferred Stock of the Corporation, to be
designated "Series A Convertible Preferred Stock," consisting of 500,000
shares, and "Series B Convertible Preferred Stock," consisting of 246,700
shares, (hereinafter referred to as the "Preferred Stock") and hereby fixes
the voting powers, designations, preferences and relative participating,
optional or other rights, and the qualifications, limitations or restrictions
thereof, of the Preferred Stock, as follows; and

         RESOLVED, FURTHER, that the Series A Preferred Stock shall be issued in
two classes, which shall be designated and known as "Series A-1 Preferred Stock"
and "Series A-2 Preferred Stock," and that the number of shares constituting
each class shall be 250,000 shares of Series A-1 Preferred Stock and 250,000
shares of Series A-2 Preferred Stock, and that all series and classes of
Preferred Stock shall be identical with each other in all respects except as
otherwise provided herein.

         Section 1.  DEFINITIONS.  The following terms shall have the
following meanings:

                  1.1 "Additional Shares of Common Stock," shall mean all shares
of Common Stock of the Corporation issued by the Corporation after March 31,
1993 except Common Stock which may be issued pursuant to (a) the conversion of
the Preferred Stock and (b) the exercise by employees or directors of or
consultants to the Corporation or any of its subsidiaries of options outstanding
on the date hereof or granted after the date hereof pursuant to any stock option
plan presently in effect or which may here after be adopted by the Corporation.

                                      10
<PAGE>

                  1.2 "Base Series A Conversion Rate," means the sum of (a)
6.154 shares of Common Stock for each share of Series A Preferred Stock, plus
(b) on the first business day of each January, April, July and October in each
year beginning July 1, 1993, 0.75% of the Base Series A Conversion Rate at such
time for each share of Series A Preferred Stock, as such rate may be adjusted
from time to time in accordance with Section 5 hereof. "Base Series B Conversion
Rate" shall mean a rate equal to 10 shares of Common Stock for each share of
Series B Preferred Stock, as such rate may be adjusted from time to time in
accordance with Section 5 hereof.

                  1.3 "Common Stock" shall include any stock into which the
Company 's Common Stock may hereinafter be changed.

                  1.4 "Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in cash or
property, for Additional Shares of Common Stock, either immediately or upon the
arrival of a specified date or the happening of a specified event.

                  1.5 "Current Market Price" per share of Common Stock at any
date herein specified shall mean the average of the daily market prices for 30
consecutive Trading Days commencing 45 days before such date, except that for
purposes of this Section 1.5, the "Current Market Price" per share of Common
Stock shall mean the market price on the Trading Day therein specified; provided
that the Current Market Price of any securities sold in an underwritten pubic
offering shall be the price at which such securities are offered to the public
therein. The market price for each such Trading Day shall be the last reported
sales price on the principal exchange on which the Common Stock is listed, or
the NASDAQ National Market System or over-the-counter market.

                  1.6 "Junior Stock" shall mean the Common Stock or any other
class or series of capital stock of the Corporation which at the time of
issuance is not declared to be senior to or on a parity with the Preferred Stock
as to dividends or rights upon liquidation.

                  1.7 "Liquidation Preference" shall mean (a) with respect to
the Series A Preferred Stock $4.00 per share; provided, that on the first
business day of each January, April, July and October in each year beginning
July 1, 1993, the Liquidation Preference for the Series A Preferred Stock shall
automatically be increased by 0.75% of the amount of the Liquidation Preference
for the Series A Preferred Stock at such time, for each share; and (b) with
respect to the Series B Preferred Stock, zero dollars ($0.00).

                                      11
<PAGE>

                  1.8 "Person" shall mean any individual, corporation,
association, company, business trust, partnership, joint venture, joint-stock
company, trust, unincorporated organization or association or government or any
agency or political subdivision thereof.

                  1.9 "Trading Day" shall mean any day on which trading takes
place (a) in the over-the-counter-market and prices reflecting such trading are
published by the National Association of Securities Dealers Automated Quotation
System or (b) if the Common Stock is then listed or admitted to trading on a
national securities exchange, on the principal national securities exchange on
which the Common Stock is then listed or admitted to trading.

         Section 2. DIVIDENDS. The Corporation shall not declare or make any
dividend or distribution with respect to Common Stock, unless each holder of
Series B Preferred Stock concurrently receives dividends or distributions
equal in amount and in the same kind of property (whether cash, securities or
other property) as such holder would be entitled to receive if all of the
outstanding Series B Preferred Stock were converted into Common Stock as of
the record date of such dividend or distribution with respect to Common
Stock. Except as provided in this Section 2, the Preferred Stock shall not be
entitled to receive any dividends.

         Section 3. LIQUIDATION OR DISSOLUTION. Subject to the prior rights
of the Corporation's creditors and holders of securities senior to the
Preferred Stock in respect of distributions upon liquidation, dissolution or
winding-up of the Corporation, in the event of the voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, the holders of
Preferred Stock shall be entitled to receive the Liquidation Preference per
share, together with accrued and unpaid dividends payable thereon to the d
ate fixed for payment of such distribution, if any, before any distribution
is made to holders of any Junior Stock. If, upon any such liquidation,
dissolution or winding-up of the Corporation, the assets distributable among
the holders of Preferred Stock (and any series of preferred stock ranking in
parity with the Preferred Stock in respect of distributions upon liquidation,
dissolution or winding-up of the Corporation) shall be insufficient to permit
the payment in full to such holders of the preferential amount payable to
such holders determined as aforesaid, then the holders of Preferred Stock
will share ratably in any distribution of the Corporation's assets in
proportion to the respective preferential amounts that would have been
payable if such assets were sufficient to permit payment in full of all such
amounts. After payment of the full amount of the Liquidation Preference for
the Series A Preferred Stock, the remaining assets of the Corporation shall
be distributed to the holders of the Series B Preferred Stock

                                      12
<PAGE>

and the Common Stock on a basis which assumes that each outstanding share of
Series B Preferred Stock has been converted to 10 shares of Common Stock.
Under this Section 3, a distribution of assets in any dissolution,
winding-up, liquidation or reorganization shall not include (a) any
consolidation or merger of the Corporation with or into any other
corporation, (b) any dissolution, liquidation, winding-up or reorganization
of the Corporation immediately followed by reincorporation of a successor
corporation or (c) a sale or other disposition of all or substantially all of
the Corporation's assets in consideration for the issuance of equity
securities of another corporation, provided that the consolidation, merger,
dissolution, liquidation, winding-up, reorganization, sale or other
disposition does not amend, alter, or change the preferences or rights of the
Preferred Stock or the qualifications, limitations or restrictions thereof in
a manner that adversely affects the Preferred Stock.

         Section 4. No Voting Rights.  The holders of Preferred Stock shall
have no right to vote with respect to such stock on any matter which the
stockholders of the Corporation have the right to vote.

         Section 5. Conversion Rights.

                 5.1 Conversion of Preferred Stock.

                           5.1.1 The Preferred Stock shall be convertible at
the option of the holders thereof (at no expense to such holders) into fully
paid and non-assessable Common Stock at the times set forth in subsection
5.1.5, at the rate (i) in the case of Series A Preferred Stock, the Base
Series A Conversion Rate, and (ii ) in the case of Series B Preferred Stock,
the Base Series B Conversion Rate; or at the rate which results from the
making of any adjustment specified in Section 5.2 hereof. (As used herein,
the 'Conversion Rate" shall mean (a) with respect to the Series A Preferred
Stock, the Base Series A Conversion Rate; and (b) with respect to the Series
B Preferred Stock, the Base Series B Conversion Rate, in each case as
adjusted from time to time in accordance with this Section 5.

                           5.1.2 The holder of any shares of Preferred Stock
may exercise the conversion right as to any part thereof by delivering to the
Corporation during regular business hours, at the office of any transfer
agent of the Corporation for the Preferred Stock or at such other place as
may be designated by the Corporation, the certificate or certificates for the
shares to be converted, duly endorsed or assigned in blank or to the
Corporation (if required by it), accompanied by written notice stating that
the holder elects to convert such shares and, subject to applicable
securities laws, stating the name or names (with address) in which the
certificate or certificates for the share of

                                      13
<PAGE>

Common Stock are to be issued. Conversion shall be deemed to have been
effected on the date when such delivery is made and such date is referred to
herein as the "Conversion Date." As promptly as practicable there after, the
Corporation shall issue and deliver to or upon the written order of such
holder, at such office or other place designated by the Corporation, a
certificate or certificates for the number of full shares of Common Stock to
which such holder is entitled and a check or cash in respect to any
fractional interest in a share of Common Stock as provided in subsection
5.1.3 hereof. The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a stockholder of
record on the applicable Conversion Date unless the transfer books of the
Corporation are closed on that date, in which event he shall be deemed to
have become a stockholder of record on the next succeeding date on which the
transfer books are open, but the Conversion Rate shall be that in effect on
the Conversion Date. Upon conversion of only a portion of the number of
shares covered by a certificate representing shares of Preferred Stock
surrendered for conversion, the Corporation shall issue and deliver to or
upon the written order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new certificate covering the
number of shares of Preferred Stock representing the unconverted portion of
the certificate so surrendered, which new certificate shall entitle in all
respects the bolder thereof to the rights of Preferred Stock represented
thereby to the same extent as if the certificate theretofore covering such
unconverted shares had not been surrendered for conversion.

                            5.1.3 No fractional shares of Common Stock or
scrip shall be issued upon conversion of shares of Preferred Stock. If more
than one share of Preferred Stock 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 of Preferred Stock so surrendered. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount determined on
the basis of the then Current Market Price per share of Common Stock.
Fractional interests shall not be entitled to dividends, and the holders
thereof shall not be entitled to any rights as stockholders of the
Corporation in respect of such fractional interests.

                           5.1.4 All dividends accrued and unpaid on
Preferred Stock to and including the date of conversion, whether or not
declared by the Board of Directors, shall constitute a debt of the
Corporation payable without interest to the converting holders and shall be
paid by the Corporation on the Conversion Date, in its option, either in cash
or by the issuance of Common

                                     14
<PAGE>

Stock at the then Current Market Price per share. in case any shares of
Preferred Stock are redeemed, such right of conversion shall cease and
terminate, as to the shares to be redeemed, as of the close of business on
the business day preceding the Redemption Date (as defined herein) unless
default shall be made in the payment of the redemption price for the shares
to be so redeemed.

                           5.1.5   The shares of Series B Preferred Stock shall
be convertible pursuant to the provisions of this Section 5 at any time after
their issuance, at the option of the holders thereof. The shares of Series
A-1 Preferred Stock shall be convertible pursuant to the provisions of this
Section 5 at the option of the holders thereof, at any time after the earlier
of (i) March 31, 1999 and (ii) the date that is one year after the payment in
full by the Company of its 8.125% Secured Notes due March 31, 1998 (the "New
Notes"). The shares of Series A-2 Preferred Stock shall be convertible
pursuant to the provisions of this Section 5 at the option of the holders
thereof, at any time after the earlier of (i) March 31, 2000 and (ii) the
date that is two year after the payment in full by the Company of the New
Notes.

                  5.2  ADJUSTMENTS. The conversion Rate shall be subject to
adjustment from time to time as set forth in this Section 5.2.

                           5.2.1  STOCK DIVIDENDS, SUBDIVISIONS AND
         COMBINATIONS.  In case at any time, or from time to time, the
         Corporation shall:

                                    5.2.1(a)   take a record of the
         holders of its Common Stock for the purpose of entitling them to
         receive a dividend payable in, or other distribution of, Common Stock;

                                    5.2.1(b)   subdivide its outstanding shares
         of  Common Stock into a larger number of shares of Common Stock;

                                    5.2.1(c)   combine its outstanding shares
         of Common Stock into a smaller number of shares of Common Stock; or

                                    5.2.1(d)   issue by reclassification or
         recapitalization of its Common Stock any other class or series of
         shares of the Corporation;

then the Conversion Rate in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the holder of any
Preferred Stock surrendered for conversion after such time shall be entitled
to

                                     15
<PAGE>

receive the number and kind of shares which he would have owned or have been
entitled to receive had such Preferred Stock been converted immediately prior
to such time. Such adjustment shall be made whenever any event listed above
shall occur.

                           5.2.2   ISSUANCE OF ADDITIONAL SHARES OF COMMON
STOCK.  In case at any time, or from time to time, the Corporation shall
(except as hereinafter provided) issue or sell any Additional Shares of
Common Stock for a consideration per share less than the Current Market Price
per share of Common Stock, then the Conversion Rate with respect to the
Series A Preferred Stock only (the "Series A Conversion Rate") shall, on the
date specified below for determining the Current Market Price, subject to the
provisions of subsection 5.2.5 hereof, be adjusted to that number determined
by multiplying the Series A Conversion Rate immediately prior to such
adjustment by a fraction (a) the numerator of which shall be the number of
shares of Common Stock otustanding immediately prior to the issuance of such
Additional Shares of Common Stock plus the number of such Additional Shares
of Common Stock so issued (including shares deemed to have been issued
pursuant to subsections 5.2.3 or 5.2.4 hereof), and (b) the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to the issuance of such Additional Shares of Common Stock (including
shares deemed to have been issued pursuant to subsections 5.2.3 or 5.2.4
hereof) plus the number of shares of Common Stock which the aggregate
consideration for the total number of such Additional Shares of Common Stock
so issued would purchase at the Current Market Price. For the purposes of
this subsection 5.2.2, the date as of which the Current Market Price per
share of Common Stock shall be computed shall be the earlier of (i) the date
on which the Corporation shall enter into a firm contract for the issuance or
sale of such Additional Shares of Common Stock or (ii) the date of actual
issuance of such Additional Shares of Common Stock. The provisions of this
subsection 5.2.2 shall not apply to any issuance of Additional Shares of
Common Stock for which an adjustment is provided under subsection 5.2.1
hereof. No adjustment of the Series A Conversion Rate shall be made under
this subsection 5.2.2 upon the issuance of any Additional Shares of Common
Stock which are issued pursuant to the exercise of any warrant or other
subscription or purchase rights or pursuant to the exercise of any conversion
or exchange rights in any Convertible Securities, if any such adjustment
shall previously have been made upon the issuance of such warrants or other
rights or upon the issuance of such Convertible Securities (or upon the
issuance of any warrant or other rights therefor) pursuant to subsections
5.2.3 or 5.2.4 hereof.

                           5.2.3   ISSUANCE OF WARRANTS OR OTHER RIGHTS.  In
case at any time, or from time to time, the Corporation shall take a record
of the holders of

                                     16
<PAGE>

its Common Stock for the purpose of entitling them to receive a distribution
of, or shall otherwise issue, any warrants or other rights to subscribe for
or purchase either any Additional Shares of Common Stock or any Convertible
Securities and the consideration per share for which Additional Shares of
Common Stock may at any time thereafter be issuable pursuant to such warrants
or other rights or pursuant to the terms of such Convertible Securities shall
be less than the Current Market Price per share of Common Stock, then the
Series A Conversion Rate immediately thereafter shall, subject to the
provisions of subsection 5.2.5 hereof, be adjusted as provided in subsection
5.2.2 hereof on the basis that (a) the maximum number of Additional Shares of
Common Stock issuable pursuant to all such warrants or other rights or
necessary to affect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date for the
determination of the Current Market Price per share of Common Stock as
hereinafter provided, and (b) the aggregate consideration for such maximum
number of Additional Shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Corporation for the issuance of
such Additional Shares of Common Stock pursuant to such warrants or other
rights or pursuant to the terms of such Convertible Securities. For the
purposes of this subsection 5.2.3, the date as of which the Current Market
Price per share of Common Stock shall be computed shall be the earliest of
(i) the date on which the Corporation shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive any such
warrants or other rights, (ii) the date on which the Corporation shall enter
into a firm contract for the issuance of such warrants or other rights or
(iii) the date of actual issuance of such warrants or other rights.

                           5.2.4   ISSUANCE OF-CONVERTIBLE SECURITIES.  In
case at any time, or from time to time, the Corporation shall take a record
of the holders of its Common Stock for t he purpose of entitling them to
receive a distribution of, or shall otherwise issue, any Convertible
Securities and the consideration per share for which Additional Shares of
Common Stock may at any time thereafter be issuable pursuant to the terms of
such Convertible Securities shall be less than the Current Market Price per
share of Common Stock, then the Series A Conversion Rate shall, subject to
the provisions of subsection 5 .2.5 hereof, be adjusted as provided in
subsection 5.2.2 hereof on the basis that (a) the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or
exchange of all such Convertible Securities shall be deemed to have been
issued as of the date for the determination of the Current Market Price per
share of Common Stock as hereinafter provided, and (b) the aggregate
consideration for such maximum number of Additional Shares of Common Stock
shall be deemed to be the minimum consideration received and receivable by
the Corporation for the issuance of such Additional Shares of

                                     17
<PAGE>

Common Stock pursuant to the terms of such Convertible Securities. For the
purposes of this subsection 5.2.4, the date as of which the Current Market
Price per share of Common Stock shall be computed shall be the earliest of
(i) the date on which the Corporation shall take a record of the holders of
its Common Stock for the purpose of entitling them to receive any such
Convertible Securities, (ii) the date on which the Corporation shall enter
into a firm contract for the issuance of such Convertible Securities or (iii)
the date of actual issuance of such Convertible Securities. No adjustment of
the Series A Conversion Rate shall be made under this subsection 5.2.4 upon
the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor,
if any such adjustment shall previously have been made upon the issuance of
such warrants or other rights pursuant to subsection 5.2.3 hereof.

                           5.2.5   REDUCTION IN AMOUNT OF  ADJUSTMENT,  If,
at the time an adjustment is required by subsections 5.2.2, 5.2.3 or 5.2.4
hereof (hereinafter in this subsection 5.2.5 called a "Series A Adjustment"),
there has been any previous adjustment or adjustments of the Series A
Conversion Rate under subsections 5.2.3 or 5.2.4 hereof on the basis of the
issuance of warrants or other rights or the issuance of Convertible
Securities, and

                                    5.2.5(a)   a portion of such warrants or
rights, or the right of conversion or exchange in respect of a portion of
such other Convertible Securities, as the case may be, shall have expired
without having been exercised; and/or

                                    5.2.5(b)   the consideration per share,
for which shares of Common Stock are issuable pursuant to such warrants or
rights or the terms of such other Convertible Securities, shall have been
increased solely by virtue of provisions therein contained for an automatic
increase in such consideration upon the arrival of a specified date or the
happening of a specified event;

then the Series A Conversion Rate after such Adjustment shall be reduced by
the Sam (to the extent not used pursuant to this subsection 5.2.5 to reduce
previous Series A Adjustments) of the amounts of excess, in respect of each
such previous adjustment, of (i) the Series A Conversion Rate immediately
after such previous adjustment over (ii) the Series A Conversion Rate which
would have been applicable after such adjustment on the basis of

                           (A)   treating the Additional Shares of Common
Stock, if any, theretofore actually issued or issuable pursuant to the
previous exercise of such warrants or right 5 or such right of conversion or
exchange as having

                                     18
<PAGE>

been issued prior to the event requiring such adjustment and for the
consideration actually received and receivable therefor, and

                           (B)   treating any such warrants or rights or any
such other Convertible Securities which then remain outstanding as having
been granted or issued with such grant or issuance being the event requiring
such adjustment and with the consideration per share for which shares of
Common Stock are issuable pursuant thereto being the consideration then in
effect.

         If the reduction as provided above exceeds the amount of such Series
A Adjustment, the excess shall be carried over and used to reduce the amount
of any subsequent Series A Adjustment.

                           5.2.6   OTHER PROVISIONS  APPLICABLE TO
ADJUSTMENTS UNDER THIS SECTION.  The following provisions shall be applicable
to the making of adjustments of the Conversion Rate hereinbefore provided for
in this Section 5.2:

                                     5.2.6(a)   TREASURY STOCK.  The sale or
other disposition of any issued shares of Common Stock owned or held by or
for the account of the Corporation shall be deemed an issuance thereof for
purposes of this Section 5.2, but until so issued such shares shall not be
deemed to be outstanding.

                                     5.2.6(b)   COMPUTATION OF CONSIDERATION.
To the extent that any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities shall be
issued for a cash consideration, the consideration received by the
Corporation therefor shall be deemed to be the amount of the cash received by
the Corporation therefor, or, if such Additional Shares of Common Stock or
Convertible Securities are offered by the Corporation for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering price,
in any such case excluding any amounts paid or receivable for accrued
interest or accrued dividends and without deduction of any compensation,
discounts or expenses paid or incurred by the Corporation for and in the
underwriting of, or otherwise in connection with, the issue thereof. To the
extent that such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the amount of such
consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined by the board of directors of the
Corporation or, if objected to in writing by holders of a

                                     19
<PAGE>

majority of the outstanding shares of Preferred Stock, a third party mutually
acceptable to the Company and such objecting holders. The consideration for
any Additional Shares of Common Stock issuable pursuant to any warrants or
other rights to subscribe for or purchase the same shall be the consideration
received by the Corporation for issuing such warrants or other rights, plus
the additional consideration payable to the Corporation upon the exercise of
such warrants or other rights. The consideration for any Additional Shares of
Common Stock issuable pursuant to the terms of any Convertible Securities
shall be the consideration received by the Corporation for issuing any
warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the Corporation in
respect of the subscription for or purchase of such Convertible Securities,
plus the additional consideration, if any, payable to the Corporation upon
the exercise of the right of conversion or exchange in such Convertible
Securities. In case of the issuance at any time of any Additional Shares of
Common Stock or Convertible Securities in payment or satisfaction of any
dividend upon any class of stock other than Common Stock or in payment of any
debt, the Corporation shall be deemed to have received for such Additional
Shares of Common Stock or Convertible Securities a consideration equal to the
amount of such dividend or debt so paid or satisfied.

                                    5.2.6(c)   WHEN ADJUSTMENTS ARE TO BE
MADE.  The adjustments required by the preceding subsections shall be made
whenever and as often as any specified event requiring an adjustment shall
occur, except that no adjustment of the Conversion Rate that would otherwise
be required shall be made (except in the case of a subdivision or combination
of shares of the Common Stock, as provided for in subsection 5.2.1 hereof)
unless and until such adjustment either by itself or with other adjustments
not previously made and after giving effect to any reduction provided for in
subsection 5.2.5 hereof adds at least 1/50th of a share to the Conversion
Rate immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as aforesaid)
shall be carried forward and made as soon as such adjustment, together with
other adjustments required by this Section 5.2 and not previously made, would
result in a minimum adjustment. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on
the date of its occurrence.

                                    5.2.6(d)   FRACTIONAL INTERESTS.  In
computing adjustments under this Section 5.2, fractional interests in Common
Stock shall be taken into account to the nearest one-thousandth of a share.

                                    5.2.6(e)   ANTIDILUTION PROVISIONS.  No
adjustment shall be made as a result of any increase in the number of
Additional Shares of

                                     20
<PAGE>

Common Stock issuable or any decrease in the consideration payable upon any
issuance of Additional Shares of common Stock, pursuant to any provisions
intended solely to avoid dilution contained in any warrants, rights or
Convertible Securities.

                                    5.2.6(f)   WHEN ADJUSTMENT NOT REQUIRED.
(i) If the Corporation shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or distribution or
subscription or purchase rights and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or
deliver such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.

                                        (ii) If the Corporation declares or
makes any dividend or distribution with respect to Common Stock, and each
holder of Series B Preferred Stock concurrently receives dividends or
distributions equal in amount and in the same kind of property (whether cash,
securities or other property) as such holder would be entitled to receive if
all of the outstanding Series B Preferred Stock were converted into Common
Stock as of the record date of such dividend or distribution with respect to
Common Stock, then thereafter no adjustment shall be required with respect to
such dividend or distribution.

                  5.2.7 MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. In
case the Corporation shall merge with or consolidate into another Person, or
shall sell, transfer or otherwise dispose of another Person, or shall sell
transfer or otherwise dispose of all or substantially all its property,
assets or business to another Person and, pursuant to the terms of such
merger, consolidation or disposition of assets, shares of common stock or
other securities, property or assets of the successor or acquiring
corporation or an affiliate thereof or cash are to be received by or
distributed to the holders of Common Stock of the Corporation, then each
holder of Preferred Stock shall have the right thereafter to receive, upon
conversion of such Preferred Stock, the same consideration that such holder
would have been entitled to receive had it converted all of its Preferred
Stock to Common Stock immediately prior to the record date with respect to
such event. The foregoing provisions of this subsection 5.2.7 shall similarly
apply to successive mergers, consolidations or dispositions of assets.

         If a purchase, tender or exchange offer is made to and accepted by the
holders of more than 50% of the outstanding shares of Common Stock, the
Corporation shall not effect any consolidation, merger or sale with the Person

                                     21
<PAGE>

having made such offer or with any affiliate of such Person, unless prior to
the consummation thereof each holder of shares of Preferred Stock shall have
been given a reasonable opportunity to then elect to receive, upon conversion
of the shares of Preferred Stock then held by such holder, either the stock,
securities, cash or assets then issuable with respect to the Common Stock or
the stock, securities, cash or assets, or the equivalent, issued to previous
holders of the Common Stock in accordance with such offer.

                           5.2.8   OTHER ACTION AFFECTING COMMON STOCK.  If a
state of facts shall occur which, without being specifically controlled by
the provisions of the foregoing Subsections 5.2.1 to 5.2.7, inclusive, would
not fairly protect the conversion rights of the Preferred Stock in accordance
with the essential intent and principles of such provisions, then the Board
of Directors of the Corporation shall in good faith make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such conversion rights.

                           5.2.9   NECESSARY CORPORATE ACTION.  Before taking
any action which would result in an adjustment in the Conversion Rate, the
Corporation shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction thereof.

                           5.2.10   TAXES UPON CONVERSION.  The Corporation
shall pay all documentary, stamp or other transaction taxes attributable to
the issuance or delivery of shares of Common Stock upon conversion of any
shares of Preferred Stock.

                  5.3 RESERVATION 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 or exchange of
shares of Preferred Stock, the full number of whole shares of Common Stock then
deliverable upon the conversion or exchange of all shares of Preferred Stock at
the time outstanding. All shares of Common Stock which shall be so issuable
shall, when issued upon conversion of all or any portion of the Preferred Stock,
be duly and validly issued and fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issuance thereof. Upon conversion
of Preferred Stock, the shares of Preferred Stock so converted shall have the
status of authorized and unissued Preferred Stock, and the number of shares of
preferred stock which the Corporation shall have authority to issue shall be
decreased by any such conversion.

                  5.4      NOTICE PROVISIONS.

                                     22
<PAGE>

                           5.4.1    NOTICE OF ADJUSTMENTS.  Whenever the
Conversion Rate or the Series A Conversion Rate shall be adjusted pursuant to
Section 5.2 hereof, the Corporation shall forthwith obtain a certificate
signed by the chief financial officer of the Corporation, setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated (including a description of the basis on which
the Corporation's board of directors determined the fair value of any
evidences of indebtedness, shares of stock, other securities or property or
assets or warrants or other subscription or purchase rights referred to in
Sections 5.2.2 or 5.2.7 hereof) and specifying the Conversion Rate or the
Series A Conversion Rate and (if such adjustment was made pursuant to
subsections 5.2.7 or 5.2.8 hereof) describing the amount and kind of common
stock, securities, property or assets or cash which may be received upon
conversion of the Preferred Stock, after giving effect to such adjustment.
The Corporation shall promptly cause a signed copy of such certificate to be
delivered to each holder of Preferred Stock.

                  5.4.2 NOTICE OF CERTAIN CORPORATE ACTION. In case the
Corporation shall propose (a) to pay any dividend payable in stock of any class
to the holders of its Common Stock or to make any other distribution to the
holders of its Common Stock, (b) to offer to the holders of its Common Stock
rights to subscribe for or to purchase any Convertible Securities or Additional
Shares of Common Stock or shares of stock of any class or any other securities,
rights or options, (c) to effect any reclassification of its Common Stock (other
than a reclassification involving only the subdivision or combination of
outstanding shares of Common Stock), (d) to effect any capital reorganization,
(e) to effect any consolidation, merger or sale, transfer or other distribution
of all or substantially all its property, assets or business, or (f) to effect
the liquidation, dissolution or winding-up of the Corporation, then in each such
case, the Corporation shall give to each holder of Preferred Stock a notice of
such proposed action, which shall specify the date on which a record is to be
taken for the purposes of such stock dividend, distribution or rights, or the
date on which such reclassification, reorganization, consolidation, merger,
sale, transfer, disposition, liquidation, dissolution or winding-up is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed, and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the affect of such action
on the Common Stock, the Conversion Rate and the Series A Conversion Rate after
giving effect to any adjustment which will be required as a result of such
action. Such notice shall be so given in the case of any action covered by (a)
or (b) above at least 20 days prior to the record date for determining holders
of the Common Stock for purposes of such action and, in the case of any other
such action, at least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of Common Stock,
whichever

                                     23
<PAGE>

 shall be the earlier.

          Section 6.  OPTIONAL REDEMPTION.

                  6.1 REDEMPTION RIGHT. The Corporation shall have the right
to redeem the outstanding Series A Preferred Stock (but not the Series B
Preferred Stock), in whole or in part, at any time and from time to time, by
paying to the holders thereof in cash a redemption price per share equal to
the Liquidation Preference.

                  6 .2 NOTICE OF REDEMPTION. If any shares of Series A
Preferred Stock are to be redeemed pursuant to Section 6.1 hereof, notice
thereof (the "Redemption Notice) shall be sent at least 30 and not more than
60 days prior to the date fixed for redemption (the "Redemption Date") to
each holder of record whose Series A Preferred Stock is to be redeemed, by
first class mail, postage pre-paid, to such holder at such holder's address
as the same shall appear on the books of the Corporation. The Redemption
Notice shall state (a) the Redemption Date, (b) the redemption price, (c) the
then current Conversion Rate, (d) that the shares called for redemption may
be converted at any time before the close of business on the business day
preceding the Redemption Date, (e) that holders who want to convert shares of
Series A Preferred Stock must satisfy the requirements of Section 5.1.2
hereof, (f) the place at which certificates for shares of Series A Preferred
Stock called for redemption must be surrendered to collect the redemption
price, and (g) the Section of this Certificate of Designation, Voting Powers,
Preferences and Rights pursuant to which they are to be redeemed.

                  6.3 PARTIAL REDEMPTION. If less than all of the outstanding
shares of Preferred stock are to be redeemed, the shares to be redeemed shall
be determined pro rata or by lot in a manner fixed by the Board of Directors.
On or after the Redemption Date, each holder of shares of Preferred Stock
that were called for redemption shall present and surrender the certificate
or certificates for such shares to the Corporation at the place designated in
the Redemption Notice and thereupon the redemption price of such shares shall
be paid to, or to the order of, the person whose name appears on such
certificate or certificates as the owner thereof. From and after the
Redemption Date, unless the Corporation shall default in the payment of
redemption price pursuant to the Redemption Notice, all dividends on the
Preferred Stock shall cease to accrue and all rights of the holders thereof
as stockholders of the Corporation, except the right to receive the
redemption price (but without interest thereon), shall cease and terminate.
Any and all shares of Preferred Stock redeemed, purchased or otherwise
acquired by the Corporation thereafter shall be canceled and returned to the
status of authorized and

                                     24
<PAGE>

unissued Preferred Stock.

                  6.4 TRANSFER BOOKS. To facilitate the redemption of any
shares of Preferred Stock, the Board of Directors is authorized to cause the
transfer books for such Preferred Stock to be closed as to the shares to be
redeemed, unless the rules of any national securities exchange or automated
quotation system on which the Preferred Stock may be listed or quoted
prohibit the closing of such transfer books.

         Section 7. NO PREEMPTIVE RIGHTS. No holder of Preferred Stock shall
have any preemptive or preferential right of subscription to any shares of
stock of the Corporation, or to options, warrants or other interests therein
or therefor, or to any obligations convertible into stock of the Corporation,
issued or sold, or any right of subscription to any thereof other than such,
if any, as the Board of Directors, in its discretion, from time to time may
determine and at such price or prices as the Board of Directors from time to
time may fix pursuant to the authority conferred by the Corporation's
Certificate of Incorporation.

         Section 8. CERTAIN RESTRICTIONS. So long as any Preferred Stock is
outstanding, the Corporation shall not, without the consent of holders of a
majority of the outstanding shares of Preferred Stock, (i) purchase, redeem
or otherwise acquire any shares of any class of the Corporation's outstanding
capital stock, other than an amount of stock at any time permitted to be
purchased by the Company under Rule l0b-18 under the Securities Exchange Act
of 1934, (ii) issue any class or series of any class of capital stock which
ranks prior to or PARI PASSU with the Preferred Stock with respect to
dividend rights or rights on liquidation, winding-up or dissolution of the
Corporation or (iii) amend, alter or change the preferences or rights of any
series or class of capital stock of the Corporation (including the Preferred
Stock) or the qualifications, limitations or restrictions thereof if such
amendment, alteration or change adversely affects the Preferred Stock.

         IT WITNESS WHEREOF, Perceptronics, Inc. has caused its seal and
hereunto affixed and this certificate to be signed by its president and its
corporate seal attested to by its secretary as of this 27th day of April, 1993.

                                              PERCEPTRONICS, INC.

                                              By:  /s/ Gershon Weltman
                                                   ------------------------
                                                   Gershon Weltman, Ph.D.
                                                   Chief Executive Officer

                                  25
<PAGE>

(seal)

 ATTEST:

/s/ Sarah A.S. Goldberg
-------------------------
  4-27-93
-------------, Secretary

                                     26

<PAGE>

                    CERTIFICATE OF RESTORATION AND REVIVAL OF
                          CERTIFICATE OF INCORPORATION
                                       OF
                               PERCEPTRONICS, INC.

         Perceptronics, Inc. (hereinafter called the "corporation"), a
corporation organized under the laws of Delaware, the Certificate of
Incorporation of which was voided for failure to pay franchise taxes, now
desires to procure a restoration, renewal and revival of its Certificate of
Incorporation, and hereby certifies as follows:

         1.       The name of the corporation is Perceptronics, Inc.

         2.       The address of the registered office of the corporation in
the State of Delaware and the name of the registered agent at such address
are as follows: National Registered Agents, Inc. 9 East Lockerman Street,
Dover, Delaware 19901, County of Kent.

         3. The date of filing the corporation's Original Certificate of
Incorporation in the State of Delaware was on September 9, 1987.

         4. The corporation hereby procures a restoration and revival of its
Certificate of Incorporation, which became inoperative by law on March 1,
1997, pursuant to the General Corporation Law of the State of Delaware.

         5. The Certificate of Incorporation of the corporation, which
provides for and will continue to provide for, perpetual duration, shall,
upon the filing of this Certificate of Restoration and Revival of Certificate
of Incorporation in the Department of State of the State of Delaware, be
restored and revived and shall become fully operative.

         6. This Certificate of Restoration and Revival of Certificate of
Incorporation is filed by authority of the duly elected directors as
prescribed by Section 312 of the General Corporation Law of the State of
Delaware.

         Executed on this 29th day of June, 1998.

                                                     /s/ Gershon Weltman
                                                     ---------------------------
                                                     Dr. Gershon Weltman
                                                     Chief Executive Officer

                                     27

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