PHOENIX NETWORK INC, S-3, 1997-08-07

PHOENIX NETWORK INC
S-3, 1997-08-07
COMMUNICATIONS SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1997

REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------------------

FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

--------------------------

PHOENIX NETWORK, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 4813 84-0881154
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

1687 COLE BOULEVARD
GOLDEN, CO 80401
(303) 205-3500
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)

WALLACE M. HAMMOND
PRESIDENT
PHOENIX NETWORK, INC.
1687 COLE BOULEVARD
GOLDEN, CO 80401
(303) 205-3500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

With Copies to:
ERNEST J. PANASCI, ESQ.
KEVIN G. O'CONNELL, ESQ.
SLIVKA ROBINSON WATERS & O'DORISIO, P.C.
1099 18TH STREET, SUITE 2600
DENVER, COLORADO 80202
(303) 297-2600
(303) 297-2750 (FAX)

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the Registration Statement becomes effective.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]

If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of earlier
effective registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of earlier effective registration
statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.[ ]

<PAGE> 2
CALCULATION OF REGISTRATION FEE

================================================================================
<TABLE>
<CAPTION>
Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Share Offering Price Fee
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 2,487,500 $1.8125(1) $4,508,593.75(1) $1,366.24
- --------------------------------------------------------------------------------------------------------------
Common Stock underlying Warrants 112,500 $2.00 $225,000 $68.18
- --------------------------------------------------------------------------------------------------------------
Total $4,733,593.75
- --------------------------------------------------------------------------------------------------------------
TOTAL REGISTRATION FEE $1,435
==============================================================================================================
</TABLE>

(1) Estimated pursuant to Rule 457(c) solely for purposes of calculating
the registration fee based on the average of the high and low prices
of the Registrant's Common Stock as reported on the American Stock
Exchange on August 4, 1997.

---------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

================================================================================

<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.

SUBJECT TO COMPLETION DATED AUGUST 7, 1997

PROSPECTUS
2,600,000 SHARES

PHOENIX NETWORK INC.

COMMON STOCK
(PAR VALUE $0.001 PER SHARE)

----------------------------------

This Prospectus relates to the public offering, which is not being
underwritten, of 2,600,000 shares (the "Shares") of Common Stock of Phoenix
Network, Inc. ("Phoenix" or the "Company"). The Shares may be offered by
certain stockholders of the Company (the "Selling Stockholders") from time to
time in transactions on the American Stock Exchange, in negotiated transactions
or otherwise, at fixed prices which may be changed, at prices related to
prevailing market prices or at negotiated prices. See "Plan of Distribution."
The Selling Stockholders may effect such transactions by selling the Shares to
or through broker-dealers, and such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Shares for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker might be in excess of customary commissions). To the extent
required, the specific Shares to be sold, the names of the Selling
Stockholders, the public offering price, the names of any such agent, dealer or
underwriter, and any applicable commission or discount with respect to any
particular offer will be set forth in an accompanying Prospectus Supplement.

None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company has agreed to bear
certain expenses (other than selling commissions and fees and expenses of
counsel and other advisors to the Selling Stockholders in excess of $10,000) in
connection with the registration of the Shares being offered by the Selling
Stockholders.

INVESTMENTS IN THE SHARES INVOLVES SIGNIFICANT RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN EVALUATING AN INVESTMENT IN PHOENIX COMMON STOCK.

The Common Stock of the Company is traded on the American Stock
Exchange under the trading symbol "PHX."

----------------------------------

The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of the Shares may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act of 1933 (the "Securities Act"), and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.

----------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

----------------------------------

The date of this Prospectus is August __, 1997

<PAGE> 4
AVAILABLE INFORMATION

Phoenix is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC"). Copies of such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at Room 1024, 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549 and at the following Regional
Offices of the SEC: CitiCorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549. The Company's Common Stock is listed and traded on the American
Stock Exchange (the "AMEX"). Reports, proxy statements and other information
concerning Phoenix may be inspected at the offices of the AMEX, 86 Trinity
Place, New York, New York 10006.

Phoenix has filed with the SEC a registration statement on Form S-3
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of the Company's Common Stock being offered by this Prospectus. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted pursuant to the rules
and regulations of the SEC. Such additional information may be obtained from
the SEC's principal office in Washington, D.C. The SEC maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM THE COMPANY. REQUESTS SHOULD BE DIRECTED TO PHOENIX NETWORK,
INC.'S PRINCIPAL EXECUTIVE OFFICES AT 1687 COLE BOULEVARD, GOLDEN, COLORADO
80401 ATTENTION: JON BEIZER, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
TELEPHONE (303) 205-3500.

Phoenix will provide without charge to each person, upon the written
or oral request of any such person, a copy of any and all of the documents
referred to below which have been or may be incorporated herein by reference,
other than exhibits to such documents, unless such exhibits are specifically
incorporated herein by reference. Requests for such documents should be
directed to the person indicated in the immediately preceding paragraph.

The following documents previously filed by Phoenix with the SEC
pursuant to the Exchange Act are incorporated herein by reference:

(a) Phoenix's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 as amended on Forms 10-K/A;

(b) Phoenix's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1996 as amended on Forms 10-Q/A;

(d) The description of Phoenix's Common Stock which is
contained in Phoenix's Registration Statement on Form 10, filed August
7, 1989 (File No. 0-17909) including any amendment or report filed for
the purpose of updating such description.

All documents filed by Phoenix pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the termination of
the offering of the Shares shall be deemed to be incorporated herein by
reference and to be a part hereof from the date of filing of such documents.
Statements contained in this Prospectus or in any document incorporated into
this Prospectus by reference as to the contents of any contract or other
document referred to herein or therein are not necessarily complete, and in
each instance reference is made to the copy of such contract

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<PAGE> 5
or other document filed as an exhibit to the Registration Statement or such
other document, each such statement being qualified in all respects by such
reference.

Any statement contained in a document incorporated or deemed to``````
be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that is deemed to
be incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection
with the offering made hereby, and given or made, such information or
representations must not be relied upon as having been authorized by the
Company, any Selling Stockholder or by any other person. Neither the delivery
of this Prospectus nor any sale made thereunder shall, under any circumstances,
create any implication that information herein is correct as of any time
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the Shares to any person or by anyone
in any jurisdiction in which such offer or solicitation may not lawfully be
made.

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act.
Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth below.
Reference is made to the particular discussions set forth under "THE COMPANY."
In connection with forward-looking statements which appear in these
disclosures, prospective investors should carefully review the factors set
forth in this Prospectus under "RISK FACTORS--Need to Deploy and Load a
Network; Need for Additional Capital," "--Possible Acquisitions; Need for
Additional Capital," "--Need to Successfully Integrate Mergers and
Acquisitions," "--Management of Rapid Growth," "--Ability to Successfully
Implement New Billing and Customer Care Platform," "--Reliance on Switching
Service Providers; Risks Associated with Network Deployment," "--Ability to
Successfully Develop New Products and Enter New Markets" and "--Customer
Attrition."

THE COMPANY

GENERAL

Phoenix is a facilities-based reseller of telecommunications services
which sells to residential accounts and small to medium-sized commercial
accounts. The Company signs up customers for long distance and other
telecommunications services and places them either on its own network or on the
network of the nation's largest facilities based carriers. In addition to
basic long distance service, Phoenix offers 800 numbers, calling cards,
conference calling, debit cards, private lines, dedicated circuits,
international callback and internet access.

During the latter half of 1995, Phoenix embarked on an acquisition
strategy with the stated goal of acquiring companies which could either add new
products to Phoenix's product portfolio or whose customer base and sales
organization would represent a profitable investment. During 1995, Phoenix
acquired Bright Telecom, L.P., a small international call-back provider and
Tele-Trend Communications, LLC, a Denver-based switchless reseller. During
1996, Phoenix acquired Automated Communications, Inc., a Denver
facilities-based reseller and AmeriConnect, Inc., an Overland Park-based
switchless reseller. Phoenix will continue to pursue acquisitions of companies
which could add profitable products or customer bases. To fund acquisitions,
Phoenix may incur additional indebtedness to banks and other financial
institutions and may issue, in public or private transactions, equity and debt
securities. If additional funds are raised by issuing equity securities
substantial dilution to Phoenix stockholders may result. The availability and
terms of any such financing will depend on market and other conditions, and
there can be no assurance that such additional financing will be available on
terms acceptable to Phoenix, if at all.

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RECENT DEVELOPMENTS

The Company's board of directors has authorized the Company to seek
the conversion into Common Stock of all of the issued and outstanding shares of
the Company's Series A Preferred Stock and Series B Preferred Stock. As of
August 4, 1997, 5,000 shares of Series A Preferred Stock and 10,000 shares of
Series B Preferred Stock were outstanding. As of August 4, 1997, the
conversion of the outstanding shares of Series A Preferred Stock and Series B
Preferred Stock would result in the issuance of an aggregate of approximately
122,168 shares of Common Stock. It is expected that such conversions, if they
occur, will take place in the third quarter of 1997.

The Company experienced a loss of $2.3 million for the first quarter
ended March 31, 1997. Revenues decreased to $21,357,696 compared with revenues
of $27,336,312 for the comparable period of the prior year. The decrease was
primarily due to a 14.2% decrease in the average revenue per minute due to the
Company's customers utilizing more competitively priced services offered by the
Company over the past year. In addition, selling, general and administrative
expenses have increased as a percentage of revenue by 4.5% between first
quarter 1996 and first quarter 1997.

In April 1997, the Company filed a Summons and Complaint in the
Circuit Court for Palm Beach County, Florida against Alpha Digital Technology,
a former customer ("Alpha Digital"), seeking to recover for services rendered
in the amount of approximately $560,000. The Company plans to file a Summons
and Complaint in the Circuit Court for Hillsborough County, Florida against
Classic Personnel Services, Inc. d/b/a World Placement Services, a former
customer ("World Placement"), seeking to recover for services rendered in the
amount of approximately $486,000. No revenue has been recorded related to these
amounts. To date, the Company has been unable to effectuate service of process
on Alpha Digital; efforts to do so are continuing. It is unlikely that the
actions against Alpha Digital and World Placement, if pursued, will be
successful because, to date, efforts to locate the defendants have been
unsuccessful and the defendants may never be found and/or may not be
financially viable. The Company has incurred approximately $510,000 in carrier
costs related to services provided to Alpha Digital and World Placement in the
second quarter ended June 30, 1997.

The Company's executive offices are located at 1687 Cole Boulevard,
Golden, Colorado 80401 (telephone: (303) 205-3500.

RISK FACTORS

In evaluating Phoenix's business, prospective investors should
consider carefully the following risk factors in addition to the other
information contained or incorporated by reference in this Prospectus.

Negative Cash Flow From Operations. For the years ended December 31,
1995 and 1996, the Company's consolidated loss before interest expense, income
taxes, depreciation and amortization, loss on abandonment of fixed assets,
aborted bond offering expenses and relocation expense was $148,000 and $5.1
million, respectively. The Company's ability to achieve positive cash flow from
operations will be dependent primarily upon the successful implementation of
the Company's business strategy, which relies largely upon the Company's
ability to increase cash flow through acquisitions and decrease average line
costs through deployment and loading of a long distance network

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system (the "Network"), consisting of switching equipment in major metropolitan
areas and leased transmission facilities between these switches. Other factors
that are beyond the control of the Company, such as the future actions of
competitors and regulators, may also affect the Company's realization of the
benefits of its business strategy. There can be no assurance that the Company
will be successful in improving its cash flow.

History of Operating Losses. Phoenix sustained operating losses of
$1.9 million, $1.4 million and $12.3 million in the years ended December 31,
1993, 1995 and 1996, respectively, and operating income of only $2,000 for the
year ended December 31, 1994. Phoenix expects to continue to incur operating
losses for the foreseeable future due to the high amortization of goodwill
charges resulting from acquisitions and increased competitiveness in the
telecommunications industry. Due to the increase in new competitors, the
overall decline in retail rates and price sensitivity in the telecommunications
industry, the Company's customer churn, bad debt and new customer acquisition
costs have increased over the last two years. Competitive pricing has resulted
in a decrease in the Company's average revenue per minute and lower gross
margins. In addition, while the Company's selling, general and administrative
expenses ("SG&A") have decreased in the first quarter of 1997 as compared to
the same period of the prior year, as a percentage of revenues SG&A have
increased. To finance its operations, Phoenix has a line of credit facility of
up to $10.0 million under the Amended and Restated Loan and Security Agreement
with Foothill Capital Corporation (the "Credit Facility") and may incur
additional indebtedness from time to time subject to restrictions in the Credit
Facility. If Phoenix cannot achieve operating profitability, it may have
difficulty in attracting equity capital or other financing, and the value of
its Common Stock may be adversely affected, which may limit the ability of
Phoenix to use its Common Stock to make future acquisitions. This, in turn,
could negatively affect Phoenix's ability to successfully implement its
business strategy.

Possible Volatility of Stock Price. The market price of Phoenix's
Common Stock has, in the past, fluctuated substantially over time and may in
the future be highly volatile. Factors such as announcements of rate changes
for various carriers and/or vendors, technological innovation or new products
or service offerings by Phoenix or its competitors, as well as market
conditions in the telecommunications industry generally and variations in
Phoenix's operating results, could cause the market price of Phoenix's Common
Stock to fluctuate substantially. Because the public float for Phoenix's Common
Stock is small, additional volatility may be experienced.

Substantial Leverage. The Company may incur up to $10.0 million of
indebtedness under the Credit Facility and may incur additional indebtedness
from time to time subject to restrictions in the Credit Facility. The level of
the Company's indebtedness could have adverse consequences, including the
effect of such indebtedness on (i) the Company's ability to fund internally, or
obtain additional debt or equity financing in the future for, acquisitions,
working capital, operating losses, capital expenditures and other purposes;
(ii) the Company's flexibility in planning for or reacting to changes in its
business and market conditions; (iii) the Company's flexibility to compete with
less highly leveraged competitors, particularly in the area of price
competition; and (iv) the Company's financial vulnerability in the event of a
downturn in its business or the general economy.

The Company's ability to satisfy its debt obligations will depend upon
its future operating performance, which will be affected by the successful
implementation of its business strategy and financial, business and other
factors, certain of which are beyond its control. If the Company's cash flow
and capital resources are insufficient to fund its debt service obligations,
the Company may be required to sell assets, obtain additional equity capital,
restructure its debt and/or reduce or delay capital expenditures. In such
event, the Company could face substantial liquidity problems, and there can be
no assurance as to the success of such measures or the proceeds that the
Company could realize therefrom.

Credit Facility Covenants. From time to time the Company has been, and
is currently, in violation of certain of its covenants in the Credit Facility.
The Company has in the past received waivers of its violations of these
covenants. In the future, should the Company violate, or have a continuing
violation of, any of the covenants constituting an event of default under the
Credit Facility, there can be no assurance that it will receive a waiver of
such violation. Under the terms of the Credit Facility, upon the occurrence of
an event of default, the lender may, among other things, declare all amounts
outstanding under the Credit Facility immediately due and payable, cease
advancing money or extending credit to the Company and/or, during the
continuance of an event of default, increase the interest rate on amounts
outstanding under the Credit Facility. If the lender were to exercise certain
of the remedies available to it upon an event of default, the Company may need
to obtain an alternate source of financing. The availability and terms of any
such financing will depend on market and other conditions, and there can be no
assurance that such alternate financing will be available on

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terms acceptable to the Company, if at all. If Phoenix is unable to meet its
obligations under the Credit Facility, its operations and financial condition
could be materially adversely affected.

Competition. The telecommunications services industry is highly
competitive and is significantly influenced by the marketing and pricing
decisions of the larger industry participants. It is characterized by low
barriers to entry (e.g., the major facilities-based carriers' bulk rate tariffs
are available to a wide range of potential market entrants), intense
competition for customers and high customer churn rates. Competition on the
basis of price, service offerings, and customer service is expected to increase
in the future.

Furthermore, the Telecommunications Act of 1996 (the "1996 Act") can
be expected to increase competition in the domestic long distance market as the
Regional Bell Operating Companies ("RBOCs") begin providing both in-region and
out-of-region long distance service. The RBOCs may build their own national
networks, resell telecommunications services of others, lease facilities from
others or acquire smaller domestic long distance service providers. To the
extent that the RBOCs enter the domestic long distance market by acquiring
other long distance providers, the domestic long distance service industry may
consolidate.

Certain of Phoenix's competitors are significantly larger, have
substantially greater financial, technical and marketing resources and larger
networks than Phoenix, control transmission lines and have long-standing
relationships with Phoenix's target customers. Phoenix competes with the same
facilities-based carriers from whom Phoenix procures bulk-rate services.
Certain of Phoenix's competitors are able to provide services comparable to or
more extensive than Phoenix's at rates competitive with Phoenix's rates.
Additionally, Phoenix's strategy of deploying and loading a network can be
replicated by some of its competitors.

Phoenix competes with the principal long distance carriers, AT&T
Corporation ("AT&T"), MCI Communications Corp. ("MCI"), and Sprint Corporation
("Sprint") as well as with other major providers of long distance services,
including Frontier Communications (a subsidiary of Frontier Corporation), and
LDDS/WorldCom, Inc. and its subsidiaries, including WilTel ("LDDS/WorldCom").
Moreover, as a result of Congress' recent enactment of the 1996 Act, the
nation's largest local telephone companies (i.e., the RBOCs) and the General
Telephone and Electronics operating companies (collectively "GTE"), energy
utilities, cable television companies, competitive local exchange carriers
("CLECs") such as MFS Communications Company, Inc., and other entities will
also be allowed to provide long distance service in the near future subject to
various regulatory requirements and safeguards. An increase in such competition
could have a material adverse effect on Phoenix's business, financial condition
and results of operations, including higher customer attrition.

There can be no assurance that Phoenix will be able to compete
successfully in the future. Phoenix intends to compete in the long distance
market and in the local market on the basis of price, service offerings and
customer service. Phoenix's ability to compete on the basis of price is
dependent on its ability to implement its planned Network and secure
volume-discount pricing from vendor carriers and wholesale local access and
local dial tone providers. The same volume-discount pricing that Phoenix
utilizes is available to current and potential competitors, and current and
potential competitors could lease or build networks in order to lower line
costs. Phoenix does not have proprietary contractual arrangements in this
regard. As a result, there are no substantial barriers to the entry of
additional competitors into the field. Furthermore, to the extent such
competitors acquire or develop facilities-based long distance and/or local dial
tone networks, such competitors may be able to offer rates as low as or lower
than those available from Phoenix.

Phoenix's competitors may reduce rates or offer incentives to existing
and potential customers of Phoenix, whether caused by general competitive
pressures or the entry of the RBOCs, GTE and other local exchange carriers
("LECs") into the long distance market. Phoenix has historically attracted
customers by pricing its services at a discount to the basic "1 plus" rates
offered by AT&T, MCI and Sprint. These and other large long distance providers
are offering an increasing number of flat rate and other rate plans in addition
to basic service, and these plans are likely to result in a reduction in the
number of long distance customers using basic "1 plus" rates. Because Phoenix
believes that to maintain its competitive position it must be able to reduce
its prices in order to maintain its relative price position in the market, a
decrease in the rates charged by others for long distance services could have a
material adverse effect on Phoenix's business, results of operations and
financial condition.

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In addition, in certain instances LECs have been afforded a degree of
pricing flexibility in differentiating among markets and carriers in setting
access charges and other rates in areas where adequate competition has emerged.
As LECs become free to set rates and to provide discounts to high-volume
customers, the ability of competitors that are substantially larger than
Phoenix to obtain volume discounts for access and termination charges could
adversely affect Phoenix by reducing the operating costs of its larger
competitors relative to those of Phoenix. In particular, it is expected that
the largest players in the long distance market, such as AT&T, MCI, Sprint and
LDDS/WorldCom will be able to guarantee substantially larger volumes to LECs
than will Phoenix. As deregulation of the local exchange market occurs, LECs
may be willing to grant large interexchange carriers ("IXCs") significant
discounts in return for guarantees of volume. There can be no assurance that
Phoenix will be able to obtain similar discounts.

Need to Deploy and Load a Network; Need for Additional Capital.
Phoenix's strategy includes acquiring or merging with a company operating its
own long distance network as a means of deploying and loading its own planned
Network. Originally, Phoenix had intended to merge with US One Communications
Corp. to achieve this objective, but such proposed merger has been abandoned.
See the Company's Current Reports on Form 8-K, as filed with the SEC on April
25, 1997, July 10, 1997 and July 17, 1997, and the respective exhibits thereto.
Accordingly, the Company will continue to seek suitable acquisition or merger
candidates that are operating compatible networks. There can be no assurance
that Phoenix will be able to locate or acquire or merge with a suitable
candidate, that such an acquisition or merger can be consummated, or that such
a network can be effectively and profitably integrated into Phoenix.

Such a merger, if consummated, would represent a strategic shift for
the Company, as the Company's Network would then likely consist of owned
switches and leased transmission facilities. Owning switches would
substantially increase the Company's need for capital. To raise additional
required capital, Phoenix may be required to incur additional indebtedness to
banks and other financial institutions and to issue, in public or private
transactions, equity and debt securities. If additional funds are raised by
issuing equity securities, dilution to Phoenix stockholders may result. The
availability and terms of any such financing will depend on market and other
conditions, and there can be no assurance that the Company will be able to
generate or raise sufficient capital on terms acceptable to it to enable the
Company to implement its business plan or pursue additional revenue
opportunities.

Furthermore, development (through acquisition or merger) and operation
of a Network would subject the Company and its stockholders to substantial
additional risk factors associated with the operation of such business.
Although the Company's strategy for developing its planned Network is intended
to enhance Phoenix's long-term profitability, consummation of an acquisition or
merger in furtherance of such strategy may negatively impact Phoenix's
operating results, particularly during the periods immediately following
consummation thereof.

Possible Acquisitions; Need for Additional Capital. As part of its
business strategy, Phoenix intends to pursue acquisitions of companies that
could add profitable products or customer bases. With respect to any future
acquisition, there can be no assurance that Phoenix will be able to locate or
acquire suitable acquisition candidates, or that any companies or customer
bases that are acquired can be effectively and profitably integrated into
Phoenix. The success of Phoenix's acquisition strategy is dependent on a number
of factors, many of which are not in Phoenix's control, including (i) Phoenix's
ability to identify attractive acquisition candidates; (ii) Phoenix's ability
to negotiate terms for such acquisitions that are favorable to Phoenix; (iii)
the timely completion of any agreed upon acquisitions; (iv) the successful
integration of the acquired businesses into Phoenix's existing business; and
(v) the ability of Phoenix to retain the acquired customers and sales personnel
after completion of the acquisition. The ability of Phoenix to transmit the
long distance calls of customers of acquired businesses on Phoenix's planned
Network may be affected by the terms of existing agreements of such acquired
businesses with facilities-based carriers, which could limit the economic
benefit of the migration of this traffic volume to the Network while such
agreements are in effect. While Phoenix believes it can acquire companies at
favorable prices, there can be no assurance that Phoenix will be able to do so
or that intense competition for such companies will not develop among certain
of Phoenix's competitors. Additionally, although acquisitions will be made with
the intent of enhancing Phoenix's long-term profitability, they may negatively
impact Phoenix's operating results, particularly during the periods immediately
following the acquisition. To fund acquisitions, Phoenix may incur additional
indebtedness to banks and other financial institutions and may issue, in public
or private transactions, equity and debt securities. If additional funds are
raised by issuing equity securities, substantial dilution to Phoenix
stockholders may result. The availability and terms of any such financing will
depend on market and other conditions, and there can be no assurance that such
additional financing will be available on terms acceptable to Phoenix, if at
all.

7
<PAGE> 10
Need to Successfully Integrate Mergers and Acquisitions. Phoenix must
be able to rapidly and effectively integrate the businesses of merged and
acquired ("acquired") companies with its own in order to successfully implement
its business strategy. The successful integration of acquired businesses is
dependent on a number of factors, including minimizing the costs of
assimilating the operations and personnel of the acquired business with
Phoenix's, minimizing customer attrition following the acquisition, avoiding
disruption of Phoenix's ongoing business, including the distraction of
management from day-to-day operations, maximizing the potential of any acquired
products or services, eliminating duplicative costs and maintaining uniform
standards, controls, procedures and policies. Phoenix will be required to
assess and manage the obligations of acquired companies, including contingent
liabilities which may be difficult to quantify. The management information
systems ("MIS systems"), including the billing systems, of the acquired
companies may be different from those of Phoenix's, may be subject to existing
contracts with third party providers and typically must be integrated into
Phoenix's. To the extent Phoenix acquires businesses in which its management
has no prior experience, Phoenix may be dependent on the management of the
acquired business.

Management of Rapid Growth. Phoenix's strategy to acquire or merge
with a company operating its own switch network and to grow through additional
acquisitions and enter new markets will place additional demands upon Phoenix's
management and its customer service, sales, marketing and administrative
resources. The growth of Phoenix will result in an increased level of
responsibility for both existing and new management personnel. Phoenix will be
required to implement and improve its operating and financial systems and
controls and to attract, retain, train and manage new employees. Phoenix's
management will be required to manage the day-to-day operations of Phoenix's
current long distance service while pursuing possible acquisitions and
developing and introducing new products and services. If Phoenix is unable to
meet the demands of expected growth, its operations and financial condition
could be materially adversely affected.

Ability to Successfully Implement New Billing and Customer Care
Platform. Primarily as a result of previous acquisitions, Phoenix currently
uses seven distinct billing systems. In addition, it is likely that any
businesses acquired pursuant to Phoenix's acquisition strategy will also have
partially or completely distinct billing systems. Phoenix is in the process of
implementing a new billing and customer care platform (the "New Billing and
Customer Care Platform") to replace the existing billing systems. The New
Billing and Customer Care Platform is fully installed and in the process of
being tested and evaluated. Phoenix is presently evaluating its timetable for
phasing customers onto the New Billing and Customer Care Platform. There can be
no assurance that the New Billing and Customer Care Platform will be fully
operational when anticipated or will operate as expected, and any difficulties
in operating the New Billing and Customer Care Platform or integrating MIS
systems could adversely affect Phoenix's ability to generate timely billing
information and management reports.

Dependence on Independent Distributors. Like many other companies in
the telecommunications industry, Phoenix relies on independent distributors for
a significant percentage of its new business sales. While Phoenix devotes
significant resources on training and building relationships with these
distributors, they are independent contractors who, in some instances, also do
business with other telecommunications providers. Phoenix has only a limited
degree of control over the operations of these distributors and adherence by
the distributors to Company policies and procedures.

Reliance on Switching Service Providers; Risks Associated with Network
Deployment. A key component of Phoenix's business strategy has been to lower
its line costs by deploying and loading a Network as an alternative to
purchasing bulk capacity from facilities-based carriers on a bundled basis. If
Phoenix is successful in deploying it planned Network, Phoenix will own some or
all of the switching equipment necessary to fulfill its switching needs. Until
such time, and for the foreseeable future if the Network is not fully deployed
as planned, Phoenix will be reliant on switching service providers to lease
switching capacity to the Company.

Ability to Successfully Develop New Products and Enter New Markets.
Phoenix believes that offering a full range of telecommunications products and
services will be crucial for it to remain competitive and attract and retain
customers. Phoenix's strategy includes offering local dial tone service, either
utilizing its own capabilities following deployment of its Network, or
reselling the wholesale dial tone product of a switching service provider or
other outside vendor. In either event, local dial tone service is an area in
which Phoenix has no experience. The costs of providing such service and the
related increased customer service support and marketing costs could be
substantial.

8
<PAGE> 11
Phoenix is also seeking to increase the number of residential
customers it serves in the long distance market in anticipation of deployment
of its planned Network. Residential customers have historically accounted for
less than 5% of Phoenix's revenues. Attrition rates for residential customers
in the long distance industry are substantially higher than attrition rates for
business customers.

In addition, in pursuing its acquisition strategy Phoenix may acquire
companies with lines of businesses in which Phoenix has no experience. Entry
into new markets entails risks associated with the state of the market,
competition from companies in those markets and increased selling and marketing
expenses. There can be no assurance that Phoenix's new products or services
will improve its operating results.

Dependence on Service Providers. Presently, substantially all of the
long distance calls made by Phoenix's customers are transmitted entirely or
partially on the networks of facilities-based carriers that compete with
Phoenix, including LDDS/WorldCom, Sprint and Frontier. Unless Phoenix is able
to deploy and load its planned Network, and even thereafter with respect to
traffic that may not be transmitted fully on such Network, Phoenix will be
dependent on its ability to obtain bulk-rate long distance transmission
capacity from such vendor carriers on a cost-effective basis. Phoenix is
vulnerable to changes in its arrangements with such carriers, such as price
increases and service cancellations. Phoenix's current agreement with Sprint
expires in September 1998 and requires Phoenix to pay minimum usage fees of $20
million during the term of the contract, of which at least $12 million must be
spent in the first twelve months of the contract. Phoenix's current agreement
with LDDS/WorldCom, which became effective in August 1996 and expires in May
1999, obligates Phoenix to pay minimum usage fees of $15 million, $12 million
and $9 million, respectively, during each of the first three six-month periods
of the agreement and $12 million during the 12-month period commencing February
1998. Phoenix's current agreement with Frontier expires in March 1998 and
requires Phoenix to pay minimum monthly usage fees of $1 million for domestic
calls (before discounts) and $200,000 for international calls (after
discounts). Phoenix has in certain instances in the past failed to place
calling traffic on the networks of vendor carriers sufficient to meet minimum
usage requirements. However, in all instances to date where Phoenix has missed
a minimum usage requirement and such miss resulted in an obligation to pay a
material sum to a vendor carrier, the vendor carrier has waived the obligation
or Phoenix has been reimbursed by a third party for the amount of such material
sum. Although Phoenix expects to be able to meet its minimum usage requirements
going forward, the minimum usage requirements may, depending upon traffic
volume, reduce the benefit to Phoenix of the availability of its planned
Network until the minimum requirements decrease per the terms of the agreements
or the agreements expire.

Phoenix is dependent on its facilities-based carriers and other
vendors to provide it promptly with the detailed information on which Phoenix
bases customer billings. Any failure of such carriers or vendors to provide
accurate information on a timely basis could have a material adverse effect on
Phoenix's ability to recover charges from its customers.

Customer Attrition. The long distance industry is characterized by a
high level of customer attrition. Customer attrition is measured by the number
of customers who utilize Phoenix's service in a given month and do not utilize
Phoenix's services in the next succeeding month. Phoenix believes its attrition
rate is comparable to the attrition rates of long distance providers of
comparable size. Attrition in the long distance telecommunications industry is
generally attributable to a number of factors, including (i) marketing
initiatives of existing and new competitors as they engage in, among other
things, national advertising campaigns, telemarketing programs, and the
issuance of cash and other forms of customer "win back" initiatives and other
customer acquisition programs and (ii) termination of service for non-payment.
As Phoenix acquires residential customers both for long distance and future
local dial tone service, Phoenix's customer attrition rate is likely to
increase. An increase in Phoenix's customer attrition rate could have a
material adverse effect on Phoenix's business, financial condition and results
of operations.

Regulatory and Legislative Uncertainty. Federal and state regulations,
regulatory actions and court decisions have had, and may have in the future,
both positive and negative effects on Phoenix and its ability to compete.
Phoenix is subject to regulation by the Federal Communications Commission (the
"FCC") and by various state Public Utilities Commissions ("PUCs") as a
nondominant IXC. Phoenix is required to file tariffs or obtain other approvals
in most of the states in which it operates. The large majority of states
require long distance service providers to apply for authority to provide
telecommunications services and to make filings regarding their activities.
Neither the FCC nor the state PUCs currently regulate Phoenix's profit levels,
but they often reserve the authority to do so. There can be no assurance that
future regulatory, judicial and legislative changes or other activities will
not have a material adverse effect on Phoenix or that regulators or third
parties will not raise material issues with regard to Phoenix's compliance with
applicable laws and regulations.

9
<PAGE> 12
Phoenix has historically been required to file tariffs specifying the
rates, terms and conditions of its interstate and international services with
the FCC. On October 31, 1996, the FCC released an order which, among other
things, requires all nondominant IXCs to cancel their currently-filed tariffs
for interstate domestic services within nine months of the effective date of
the order and prohibits such tariff filings in the future. Although information
regarding the larger carriers' rate plans is expected to continue to be
available through other means, the elimination of the tariff requirement may
make Phoenix's pricing policies more difficult to benchmark against the rates
of the larger IXCs. Additionally, the elimination of tariff filings may result
in the need for Phoenix to formulate and execute bilateral agreements with its
customers, give notice to customers of any change in rates, terms and
conditions of service, and otherwise increase administrative costs. The absence
of an FCC tariff filing requirement may also result in consumers being able to
pursue remedies for disputes under state consumer protection and contract laws
in a manner currently precluded by the FCC's "filed-rate" doctrine.

On October 15, 1996, a Federal appeals court issued a stay of
effectiveness of certain regulations adopted by the FCC in August 1996
regarding the prices that an incumbent LEC may charge incoming competitors for
interconnection, unbundled access to network elements, and resale of LEC
services. The stay had been sought by RBOCs, GTE and state regulatory
commissions as part of ongoing litigation challenging the regulations issued by
the FCC pursuant to the 1996 Act to implement competition in local exchange
markets. The stay will remain in effect until the case is decided by the court,
probably sometime in 1997. The effect of the stay is to create an ambiguity of
authority and further regulatory uncertainty concerning the rules that will
apply to the pricing policies of the incumbent LECs. In the absence of
effective FCC rules, the state PUCs, through the details of their
implementation of competition in their local exchange markets, may produce
results that are inconsistent with the FCC's uniform national model. Phoenix
cannot predict the impact of this litigation on its plans to offer its own or
resold local dial tone service, or what further actions the FCC may take in
response to the ultimate outcome of the case.

Technological Change. The telecommunications industry has been
characterized by rapid technological change, frequent new service introductions
and evolving industry standards. Phoenix believes that its future success will
depend on its ability to anticipate such changes and to offer market responsive
services that meet these evolving industry standards on a timely basis. The
effect of technological change upon Phoenix's business cannot be predicted and
there can be no assurance that Phoenix will have sufficient resources to make
the investments necessary to acquire new technology or to introduce new
services to satisfy an expanded range of customer needs.

Dependence on Key Personnel. Phoenix believes that its success
depends, to a significant extent, on the efforts and abilities of its senior
management. Among others, the loss of Wallace M. Hammond, Phoenix's President
and Chief Executive Officer or Jon Beizer, Phoenix's Senior Vice President and
Chief Financial Officer, could have a material adverse effect on Phoenix.
Phoenix believes that its success will depend in large part upon its ability to
attract, retain and motivate skilled employees and other senior management
personnel. Although Phoenix expects to continue to attract sufficient numbers
of such persons for the foreseeable future, there can be no assurance that
Phoenix will be able to do so. In addition, because Phoenix may acquire one or
more businesses in the future, Phoenix's success will be in part dependent upon
its ability to retain and integrate into its own operations personnel from
acquired entities who are necessary to the continued success or successful
integration of the acquired business.

Control by Officers and Directors. As of December 31, 1996, Phoenix's
executive officers and directors beneficially owned or controlled approximately
25.6% of the outstanding shares of Phoenix's Common Stock, on a fully diluted
basis (assuming full conversion of preferred stock). The votes represented by
the shares beneficially owned or controlled by Phoenix's executive officers and
directors could, if they were cast together, potentially control the election
of a majority of Phoenix's directors and the outcome of most corporate actions
requiring stockholder approval.

Investors who purchase Phoenix's Common Stock may be subject to
certain risks due to the concentrated ownership of Phoenix's Common Stock. Such
risks include: (i) the shares beneficially owned or controlled by Phoenix's
executive officers and directors could, if they were cast together, approve,
delay, defer or prevent a change in control of Phoenix, such as an unsolicited
takeover, which might be beneficial to the stockholders, and (ii) due to the
substantial ownership or control of outstanding shares by Phoenix's executive
officers and directors and the potential adverse impact of such substantial
ownership or control on a change in control of Phoenix, it is less likely that
the prevailing market

10
<PAGE> 13
price of the outstanding shares of Phoenix's Common Stock will reflect a
"premium for control" than would be the case if ownership of the outstanding
shares were less concentrated.

Market Overhang. As part of this offering, the Selling Stockholders
may sell up to 2,600,000 Shares, which represents approximately 9% of Phoenix's
total outstanding shares of Common Stock. The registration of these Shares will
have the immediate effect of increasing the public float of Phoenix's stock.
Such increase may cause the market price of Phoenix's Common Stock to decline
or fluctuate significantly.

USE OF PROCEEDS

The Company will not receive any proceeds from the sale of Shares
offered hereby although the Company will receive a total of $225,000 for these
Shares if JNC Opportunity Fund Ltd. ("JNC"), Wharton Capital Partners, Ltd.
("Wharton") and Keith A. Rhodes ("Rhodes") exercise their warrants to acquire
75,000, 30,000 and 7,500 Shares, respectively, at an exercise price of $2.00
per share. The proceeds, if any, from the exercise of the warrants will be
added to the Company's working capital. See "Selling Stockholders."

SELLING STOCKHOLDERS

JNC was issued 125,000 shares of the Company's Series I Convertible
Preferred Stock (the "Series I Preferred Stock")and a warrant to acquire 45,000
Shares on July 17, 1997 and a warrant to acquire 30,000 shares on July 23,
1997. Wharton received a warrant to acquire 19,000 Shares on July 17, 1997 and
a warrant to acquire 11,000 Shares on July 23, 1997 in partial payment of
financial advisory services to the Company. Rhodes received a warrant to
acquire 3,500 Shares on July 17, 1997 and a warrant to acquire 4,000 Shares on
July 23, 1997 in partial payment of financial advisory services to the Company.
JNC, Wharton and Rhodes are collectively referred to as the Selling
Stockholders. The Selling Stockholders were issued securities, for which the
Shares covered by this Prospectus are issuable, in a series of private
placements as summarized below:

Of the 2,600,000 Shares being registered: (i) an estimated
2,487,500 Shares will be issuable to JNC, subject to certain
limitations, upon the conversion of 125,000 shares of Series I
Preferred Stock issued to JNC in a private placement; (ii) 75,000
Shares will be issuable to JNC, 30,000 Shares will be issuable to
Wharton and 7,500 Shares will be issuable to Rhodes upon the exercise
of warrants issued to JNC (the "JNC Warrant"), Wharton (the "Wharton
Warrant") and Rhodes (the "Rhodes Warrant"). The number of Shares
covered by this Prospectus relating to JNC has been estimated to be
the maximum number of Shares issuable upon conversion of the Series I
Preferred Stock without partial redemption of the Series I Preferred
Stock or other specified events.

In each case, the issuance of securities by Phoenix to the Selling
Stockholders was undertaken pursuant to Section 4(2) of the Securities Act.

In addition, in connection with the private placement of the Series I
Preferred Stock described above, the Company and JNC entered into a
registration rights agreement (the "Registration Rights Agreement") providing,
among other things, for the registration of the Shares issuable upon conversion
of the Series I Preferred Stock. The JNC Warrant, the Wharton Warrant and the
Rhodes Warrant provide for registration rights relating to the Shares
underlying such warrants on substantially the same terms as the Registration
Rights Agreement.

11
<PAGE> 14
The following table sets forth the names of the Selling Stockholders,
the number of shares of Common Stock owned beneficially by each of them as of
August 5, 1997, the number of Shares which may be offered pursuant to this
Prospectus and the number of shares of Common Stock owned beneficially after
this offering assuming the sale of all of the Shares. This information is based
upon information provided by the Selling Stockholders. Except as provided
below, the Selling Stockholders have not held any positions or offices with,
been employed by, or otherwise had a material relationship with, the Company or
any of its predecessors or affiliates since August 1, 1994.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER
SHARES BENEFICIALLY SHARES OFFERING(1)(2)
OWNED PRIOR TO BEING -----------------------------
NAME OFFERING(1) OFFERED(2) NUMBER PERCENT(3)
- ----- ------------------------- ---------- ------ ----------
<S> <C> <C> <C> <C>
JNC Opportunity Fund, Ltd. 4,028,643(4) 2,562,500 1,466,143 4.8%
Wharton Capital Partners, Ltd. 80,000(5) 30,000 30,000 0
Keith A. Rhodes 17,500(6) 7,500 7,500 0

</TABLE>
* Less than one percent

(1) Unless otherwise indicated below, the persons named in the table have
sole voting and investment power with respect to all shares
beneficially owned by them, subject to community property laws where
applicable.
(2) Assumes the sale of all shares offered hereby.
(3) Applicable percentage of ownership is based on 29,138,193 shares of
Common Stock outstanding on August 5, 1997.
(4) Includes (i) an estimated maximum of 2,487,500 shares issuable upon
conversion of 125,000 shares of Series I Preferred Stock, (ii) 75,000
shares issuable upon exercise of the JNC Warrant and (iii) 1,397,022
shares issuable upon conversion of 92,000 shares of Series G
Preferred Stock.

The Company issued 125,000 shares of Series I Preferred Stock to JNC.
The Series I Preferred Stock provides for conversion into Shares on
the basis of a floating conversion ratio tied to a percentage of the
market price of the Company's Common Stock. The stated value of $20
per share of each share of Series I Preferred Stock is convertible
into shares of the Company's Common Stock at any time at the lower of
(i) the fixed price conversion of $1.875 and (ii) a 17% discount to
the average of the lowest five closing bid prices during the ten
trading days immediately preceding a conversion, subject to adjustment
under certain circumstances. In addition, all dividends payable with
regards to the Series I Preferred Stock are payable in Shares of the
Company at the lower of (i) and (ii) above. The Company may not issue
Shares either in payment of dividends on the Series I Preferred Stock
or in conversion of the Series I Preferred Stock if any such issuance
would result in the recipient thereof beneficially owning more than
4.9% of the issued and outstanding shares of the Company's Common
Stock. In the event that the conversion price would result in the
issuance of Shares equal to or in excess of 20% of the number of
shares of the Company's Common Stock outstanding on July 17, 1997 (the
"Maximum Issuable Shares") upon conversion of the Series I Preferred
Stock, the Company shall issue the Maximum Issuable Shares and, at
JNC's election, shall: (a) obtain stockholder approval of such
issuance or (b) redeem a portion of the Series I Preferred Stock in
order to issue not more than the Maximum Issuable Shares. In the event
that the Company is unsuccessful in obtaining stockholder approval or
in effecting a partial redemption, the Company is subject to the
payment of interest on the redemption price payable pursuant to (b)
above at a rate of 15% per annum until such redemption price and any
accrued interest thereon is paid in full.

JNC owns, as of August 5, 1997, 92,000 shares of Series G Preferred
Stock. The Series G Preferred Stock provides for conversion into
Shares on the basis of a floating conversion ratio tied to a
percentage of the market price of the Company's Common Stock. The
stated value of $20 per share of each share of Series G Preferred
Stock is convertible into shares of the Company's Common Stock at any
time at the lower of (i) the fixed price conversion of $2.45 and (ii)
a 20% discount to the five day average closing bid price prior to the
conversion date, subject to adjustment under certain circumstances. In
addition, all dividends payable with regards to the Series G Preferred
Stock are payable in Shares of the Company at the lower of (i) and
(ii) above. The Company may not issue Shares either in payment of
dividends on the Series G Preferred Stock or in conversion of the
Series G Preferred Stock if any such issuance would result in the
recipient thereof beneficially owning more than 4.9% of the issued and
outstanding shares of the Company's Common Stock. In the event that
the conversion price would result in the issuance of Shares equal to
or in excess of 20% of the number of shares

12
<PAGE> 15
of the Company's Common Stock outstanding on April 4, 1997 (the
"Maximum Issuable Shares") upon conversion of the Series G Preferred
Stock, the Company shall issue the Maximum Issuable Shares and, at
JNC's election, shall: (a) obtain stockholder approval of such
issuance or (b) redeem a portion of the Series G Preferred Stock in
order to issue not more than the Maximum Issuable Shares. In the event
that the Company is unsuccessful in obtaining stockholder approval or
in effecting a partial redemption, the Company is subject to the
payment of interest on the redemption price payable pursuant to (b)
above at a rate of 15% per annum until such redemption price and any
accrued interest thereon is paid in full.
(5) Represents (i) 30,0000 shares issuable upon exercise of the Wharton
Warrant and (ii) 50,000 shares issuable upon exercise of a warrant
owned by Wharton.
(6) Represents (i) 7,500 shares issuable upon exercise of the Rhodes
Warrant and (ii) 10,000 shares issuable upon exercise of a warrant
owned by Rhodes.

PLAN OF DISTRIBUTION

The Shares offered hereby are being offered directly by the Selling
Stockholders. The Company will receive no proceeds from the sale of any of the
Shares. The sale of the Shares may be effected by the Selling Stockholders from
time to time in transactions, including block transactions, on the American
Stock Exchange, in negotiated transactions or otherwise, at fixed prices which
may be changed, at prices related to prevailing market prices or at negotiated
prices. The Selling Stockholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). From time to time the Selling Stockholders may engage
in short sales, including short sales against the box, puts and calls and other
transactions in securities of the Company or derivatives thereof, and may sell
and deliver the Shares in connection therewith. Further, except as set forth
herein, the Selling Stockholders are not restricted as to the number of Shares
which may be sold at any one time, and it is possible that a significant number
of Shares could be sold at the same time, which may have a depressive effect on
the market price of the Common Stock. The Selling Stockholders may also pledge
Shares as collateral for margin accounts, and such Shares could be resold
pursuant to the terms of such accounts.

At the time a particular offer of Shares is made, to the extent
required, a supplemental Prospectus will be distributed which will set forth
the number of Shares being offered and the terms of the offering including the
name or names of any underwriters, dealers or agents, the purchase price paid
by any underwriter for the Shares purchased from the Selling Stockholders, any
discounts, commissions and other items constituting compensation from the
Selling Stockholders and any discounts, commissions or discounts allowed or
reallowed or paid to dealers.

In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale
in the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

The Selling Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders in the distribution
of the Shares may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act, and any commissions received by them and any
profit on the sale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.

Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Shares may not simultaneously engage
in market making activities with respect to the Common Stock of the Company for
a period of two business days prior to the commencement of such distribution.
In addition and without limiting the foregoing, the Selling Stockholders will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which
provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Stockholders.

Any securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that Rule
rather than pursuant to his Prospectus.

13
<PAGE> 16
There can be no assurance that the Selling Stockholders will sell any
or all of the Shares offered by them hereunder.

The Company has agreed to indemnify the Selling Stockholders against
certain civil liabilities, including certain liabilities under the Securities
Act, in connection with the sale of the Shares.

LEGAL MATTERS

The validity of the securities offered hereby will be passed upon for
the Company by Slivka Robinson Waters & O'Dorisio, P.C., Denver, Colorado. A
shareholder of such firm serves as Secretary of the Company.

EXPERTS

The audited consolidated financial statements as of December 31, 1995
and 1996 and for each of the three years in the period ended December 31, 1996,
which are included in the Company's Annual Report on Form 10-K and the audited
consolidated financial statements and supplemental consolidated financial
statements of the Company, and the consolidated financial statements of
AmeriConnect, Inc. as of December 31, 1994 and 1995, and for each of the three
years in the period ended December 31, 1995, which are included in the
Company's Form 8-K dated January 23, 1997, have been incorporated herein by
reference in reliance on the reports of Grant Thornton LLP, independent
certified public accountants upon the authority of said firm as experts in
accounting and auditing.

14
<PAGE> 17
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>

2,600,000 SHARES

PHOENIX NETWORK, INC.

COMMON STOCK

PROSPECTUS

AUGUST __, 1997

<PAGE> 18
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth an itemized statement of all estimated
expenses in connection with the issuance and distribution of the securities
being registered:

<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,435
Legal expenses* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Accounting fees and expenses* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Miscellaneous* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,435
</TABLE>

- -------------------------------
* Estimated

The Selling Stockholders will bear their own legal fees, sales
commissions and related sales expenses in connection with this offering, but
will not bear any of expenses listed above.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Article VI of the Registrant's Certificate of Incorporation ("Article
VI") is consistent with Section 102(b)(7) of the Delaware General Corporation
Law, which generally permits a company to include a provision limiting the
personal liability of a director in the company's certificate of incorporation.
With limitations, Article VI eliminates the personal liability of the
Registrant's directors to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director. However, Article VI does not
eliminate director liability: (i) for breaches of the duty of loyalty to the
Registrant or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
any transaction from which a director derives an improper personal benefit; and
(iv) under Section 174 of the Delaware General Corporation Law ("Section 174").
Section 174 makes directors personally liable for unlawful dividends and stock
repurchases or redemptions and expressly sets forth a negligence standard with
respect to such liability. While Article VI protects the directors from awards
for monetary damages for breaches of their duty of care, it does not eliminate
their duty of care. The limitations in Article VI have no effect on claims
arising under the federal securities laws.

With certain limitations, Article XI of the Registrant's By-Laws
("By-Laws Article XI") provides for indemnification of any of the Registrant's
past, present and future officers and directors against liabilities and
reasonable expenses incurred in any criminal or civil action by reason of such
person's being or having been an officer or director of the Registrant or of
any other corporation which such person serves as such at the request of the
Registrant. Indemnification under By-Laws Article XI is limited to officers
and directors who have acted in good faith and in a manner they reasonably
believed to be in the best interests of the Registrant. Any questions
regarding whether the officer or director has met the required standards of
conduct are to be answered by (i) a majority of disinterested directors, or
(ii) a written opinion of independent legal counsel selected by the Board.
Indemnification rights under By-Laws Article XI are non-exclusive. In the
event of an officer's or director's death, such person's indemnification rights
shall extend to his or her heirs and legal representatives. Rights under
By-Laws Article XI are separable, and if any part of that section is determined
to be invalid for any reason, all other parts remain in effect.

Under Section 145 of the Delaware General Corporation Law, directors
and officers, as well as other employees and individuals, may be indemnified
against expenses (including attorneys' fees), judgments, fines, amounts paid in
settlement in connection with specified actions, suits, or proceedings, whether
civil, criminal, administrative, or investigative (other than an action by or
in the right of the corporation -- a "derivative action") if they acted in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation, and, with

II-1
<PAGE> 19
respect to criminal actions or proceedings, had no reasonable cause to believe
their conduct was unlawful. A similar standard of care is applicable in the
case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of such an action, and the Delaware General Corporation Law requires
court approval before there can be any indemnification where the person seeking
indemnification has been found liable to the corporation.

ITEM 16. EXHIBITS

The list of exhibits is incorporated herein by reference to the Index
to Exhibits immediately preceding the Exhibits to this Registration Statement.

ITEM 17. UNDERTAKINGS

1. The undersigned Registrant hereby undertakes:

(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement;

(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration
Statement (or most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective Registration
Statement;

(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the Registration Statement or any material change to such
information in the registration statement;

Provided, however, that paragraphs (a)(i) and (a)(ii)
do not apply if the Registration Statement is on Form S-3 or
Form S-8 and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the issuer pursuant to section 13 or
section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement;

(b) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof;

(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.

2. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-2
<PAGE> 20
3. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

II-3
<PAGE> 21
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Golden, State of Colorado, on August 7, 1997.

PHOENIX NETWORK, INC.

By: /s/ Wallace M. Hammond
---------------------------------------
Wallace M. Hammond
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Wallace M. Hammond and Jon Beizer, and
each of them singly, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities (including his capacity as a director and
officer of Phoenix Network, Inc.), to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact and
agent, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 7, 1997.

<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Wallace M. Hammond President, Chief Executive Officer
- ------------------------------------------------ and Director
Wallace M. Hammond (Principal Executive Officer)

/s/ Jon Beizer Senior Vice President and Chief
- ------------------------------------------------ Financial Officer
Jon Beizer (Principal Financial and Accounting Officer)
</TABLE>

II-4

<PAGE> 22

<TABLE>
<S> <C>
/s/ Thomas H. Bell Director
- ------------------------------------------------
Thomas H. Bell

/s/ James W. Gallaway Director
- ------------------------------------------------
James W. Gallaway

/s/ Merrill L. Magowan Director
- ------------------------------------------------
Merrill L. Magowan

/s/ Charles C. McGettigan Director
- ------------------------------------------------
Charles C. McGettigan

Director
- ------------------------------------------------
David Singleton

Director
- ------------------------------------------------
Max E. Thornhill
</TABLE>

II-5
<PAGE> 23
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --- -----------
<S> <C>
4.1 Certificate of Incorporation of the Registrant as amended to date.
4.2 Bylaws of the Registrant filed as an exhibit to the Registrant's Registration Statement on Form S-3 filed
January 31, 1997, and amended on Form S-3/A on February 12, 1997 (Registration No. 333-20923) is hereby
incorporated by reference.
4.3 Convertible Preferred Stock Purchase Agreement between the Registrant and JNC Opportunity Fund Ltd., dated as
of July 17, 1997.
4.4 Registration Rights Agreement between the Registrant and JNC Opportunity Fund Ltd., dated as of July 17, 1997.
5.1 Opinion of Slivka Robinson Waters & O'Dorisio, P.C. *
23.1 Consent of Slivka Robinson Waters & O'Dorisio, P.C. (contained in Exhibit 5.1)
23.2 Consent of Grant Thornton LLP
24.1 Power of Attorney (contained on the signature pages)
</TABLE>

- ------------------------
* To be filed by Amendment.

II-6

<PAGE> 1
EXHIBIT 4.1

RESTATED CERTIFICATE OF INCORPORATION
OF
PHOENIX NETWORK, INC.

PHOENIX NETWORK, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

FIRST: The Certificate of Incorporation of Phoenix Network, Inc. was
filed with the Secretary of State of Delaware on May 17, 1989.

SECOND: The Restated Certificate of Incorporation of Phoenix Network,
Inc. in the form attached hereto as Exhibit A, has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware by a majority of the directors and
stockholders of the Corporation.

THIRD: The Restated Certificate of Incorporation so adopted reads in
full as set forth in Exhibit A attached hereto and hereby incorporated by
reference.

IN WITNESS WHEREOF, Phoenix Network, Inc. has caused this certificate to
be signed by the President this 11th day of December, 1990.

PHOENIX NETWORK, INC.

By /s/ Marc L. Goyette
-------------------------------
Marc L. Goyette
President

ATTEST:

/s/ Kenneth L. Guernsey
- ---------------------------------
Kenneth L. Guernsey
Secretary

1.
<PAGE> 2
EXHIBIT A

RESTATED CERTIFICATE OF INCORPORATION

PHOENIX NETWORK, INC.

ARTICLE I

The name of the corporation (hereinafter called the "Corporation") is
Phoenix Network, Inc.

ARTICLE II

The address of the registered office of the Corporation in the State of
Delaware is 229 South State Street, County of Kent, Dover, Delaware and the
name of the registered agent of the Corporation in the State of Delaware at
such address is The Prentice-Hall Corporation Systems, Inc.

ARTICLE III

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

ARTICLE IV

A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is Twenty-Five
Million (25,000,000) shares. Twenty Million (20,000,000) shares shall be
Common Stock, each having a par value of $0.001. Five Million (5,000,000)
shares shall be Preferred Stock, each having a par value of $0.001.

B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, to fix or alter the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), redemption price or
prices, and the liquidation preferences of any wholly unissued

2.
<PAGE> 3
series of Preferred Stock, and the number of shares constituting any such
series and the designation thereof, or any of them; and to increase or decrease
the number of shares of any series subsequent to the issuance of shares of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.

C. The relative rights, preferences, privileges, and restrictions
granted to or imposed upon the corporation's Common and Preferred or the holders
thereof are as follows:

1. Designation of Preferred Stock. Three Hundred Thousand
(300,000) of the authorized shares of Preferred Stock are hereby designated
"Series A Preferred Stock." The rights, preferences, privileges, restrictions
and other matters relating to the Three Hundred Thousand (300,000) shares of
Series A Preferred Stock are as set forth herein.

2. Dividends. In each fiscal year of the Corporation, the
holders of the Series A Preferred Stock shall be entitled to receive, before
any cash dividends shall be declared and paid upon or set aside for the Common
Stock in such fiscal year, a dividend at the rate of ninety cents ($0.90) per
share per annum (as adjusted for any combinations, consolidations, stock
distributions or stock dividends with respect to such shares), payable when, as
and if declared by the Board of Directors out of funds legally available
therefor. Such dividends shall be cumulative and shall accrue daily on each
share of Series A Preferred Stock whether or not declared. No dividends (other
than those payable solely in the Common Stock of the Corporation) shall be
declared or paid on any Common Stock of the Corporation until all accrued but
unpaid dividends on the Series A Preferred Stock shall have been declared and
paid or set apart.

3. Liquidation Preference.

i. In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series A Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, the amount of ten dollars ($10.00) per share (as adjusted for any
combinations, consolidations, stock distributions or stock dividends with
respect to such shares) plus all accrued but unpaid dividends on such share for
each share of Series A Preferred Stock then held by them and no more. If upon
the occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amount, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed among the holders

3.
<PAGE> 4
of the Series A Preferred Stock in proportion to the shares of Series A
Preferred Stock then held by them.

ii. After payment to the holders of the Series A
Preferred Stock of the amount set forth in subparagraph (a) above, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock in proportion to the shares of Common Stock then held by them.

(c) A consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation shall be deemed a
liquidation, dissolution or winding up within the meaning of this Section if
more than fifty percent (50%) of the surviving entity is not owned by persons
who were holders of capital stock or securities convertible into capital stock
of the Corporation immediately prior to such merger, consolidation or sale.

4. Voting Rights. Except as otherwise expressly provided
herein or as required by law, the Series A Preferred Stock shall vote together
with the Common Stock as a single class. The holder of each share of Series A
Preferred Stock shall be entitled to that number of votes equal to the number
of shares of Common Stock into which such share could then be converted and
shall be entitled to notice of all stockholders' meetings in accordance with
the Bylaws of the Corporation.

5. Conversion. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):

iii. Right to Convert.

(1) Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the date
of issuance of such share, at the office of the Corporation or any transfer
agent for such stock, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing ten dollars ($10.00) (the
"Original Issue Price") plus all declared but unpaid dividends on each share of
Series A Preferred Stock by the then applicable Conversion Price, determined as
hereinafter provided, in effect on the date the certificate is surrendered for
conversion. The price at which shares of Common Stock shall be deliverable
upon conversion (the "Conversion Price") shall initially be two dollars and
fifty cents ($2.50) per share of Common Stock. Such initial Conversion Price
shall be adjusted as hereinafter provided.

(b) Mechanics of Conversion. Before any holder of
Series A Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall

4.
<PAGE> 5
surrender the certificate or certificates thereof, duly endorsed, at the office
of the Corporation or of any transfer agent for such stock, and shall give
written notice to the Corporation at such office that he elects to convert the
same and shall state therein the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of the
shares of Series A Preferred Stock to be converted, and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on such date.

(i) Special Definitions. For purposes of this
Section 5(c), the following definitions shall apply:

(a) 'Options' shall mean rights,
options, or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities.

(b) 'Original Issue Date' shall mean the
date on which a share of Series A Preferred Stock was first issued.

(c) 'Convertible Securities' shall mean
any evidences of indebtedness, shares (other than Common Stock and Series A
Preferred Stock) or other securities convertible into or exchangeable for
Common Stock.

(d) 'Additional Shares of Common Stock'
shall mean all shares of Common Stock issued (or, pursuant to Section
5(c)(iii), deemed to be issued) by the Corporation after the Original Issue
Date, other than shares of Common Stock issued or issuable:

(i) upon conversion of shares of
Series A Preferred Stock;

(ii) to officers, directors or
employees of, or consultants to, the Corporation, on terms approved by the
Board of Directors;

(iii) as a dividend or distribution on
Preferred

5.
<PAGE> 6
Stock; or

(iv) for which adjustment of the
Conversion Price is made pursuant to Section 5(c)(vi).

(E) in any transaction approved by the
Company's Board of Directors involving the acquisition of more than fifty
percent (50%) of the stock of another corporation or substantially all of the
assets of another corporation or business, whether by merger, exchange of
shares, purchase of assets, or otherwise.

(2) No Adjustment of Conversion Price. No
adjustment in the Conversion Price of a particular share of Series A Preferred
Stock shall be made in respect of the issuance of Additional Shares of Common
Stock unless the consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price in effect on the date of, and immediately prior to such issue,
for such share of Series A Preferred Stock.

(3) Deemed Issue of Additional Shares of Common
Stock. Subject to paragraph 5(c)(i)(4)(B) herein, in the event the Corporation
at any time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities then entitled to receive
any such Options or Convertible Securities, then the maximum number of shares
(as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as
of the time of such issue or, in case such a record date shall have been fixed,
as of the close of business on such record date, provided that Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 5(c)(v) hereof) of such
Additional Shares of Common Stock would be less than the Conversion Price in
effect on the date of and immediately prior to such issue, or such record date,
as the case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:

(a) no further adjustments in the
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;

(b) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration

6.
<PAGE> 7
payable to the Corporation, or decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof, the Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the Conversion Price
shall affect Common Stock previously issued upon conversion of the Series A
Preferred Stock);

(c) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Series A Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:

(i) in the case of Convertible
Securities or Options for Common Stock the only Additional Shares of Common
issued were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such conversion or exchange, and

(ii) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration deemed to have been received by the
Corporation (determined pursuant to Section 5(c)(v)) upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised;

(d) no readjustment pursuant to clauses
(2) or (3) above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (A) the Conversion Price on the original
adjustment date, or (B) the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the original adjustment
date and such readjustment date;

(e) in the case of any Options that
expire by their terms

7.
<PAGE> 8
not more than thirty (30) days after the date of issue thereof, no adjustment
of the Series A Conversion Price shall be made, except as to shares of Series A
Preferred Stock converted in such period, until the expiration or exercise of
all such Options, whereupon such adjustment shall be made in the same manner
provided in clause (3) above; and

(f) if any such record date shall have
been fixed and such Options or Convertible Securities are not issued on the
date fixed thereof, the adjustment previously made in the Series A Conversion
Price which became effective on such record date shall be cancelled as of the
close of business on such record date, and shall instead be made on the actual
date of issuance, if any.

(4) Adjustment of Conversion Price Upon
Issuance of Additional Shares of Common Stock. In the event the Corporation
shall issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 5(c)(iii)) without
consideration or for a consideration per share less than the Conversion Price
in effect on the date of and immediately prior to such issue, then and in such
event, such Conversion Price shall be reduced, concurrently with such issue, to
a price (calculated to the nearest cent) determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding and the number of shares of Common Stock
issuable upon conversion of the shares of Series A Preferred Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock that
the aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Conversion
Price, and the denominator of which shall be the number of shares of Common
Stock outstanding and the number of shares of Common Stock issuable upon
conversion of the shares of Series A Preferred Stock outstanding immediately
prior to such issue plus the number of such Additional Shares of Common Stock
so issued.

(5) Determination of Consideration. For
purposes of this Section 5(c), the consideration received by the Corporation
for the issue of any Additional Shares of Common Stock shall be computed as
follows:

(a) Cash and Property: Such consideration
shall:

(i) insofar as it consists of cash,
be computed at the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;

(ii) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith

8.
<PAGE> 9
by the Board; and

(iii) in the event Additional Shares of
Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors.

(b) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to Section 5(c)(iii),
relating to Options and Convertible Securities, shall be determined by dividing

(i) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein designed to protect against
dilution) payable to the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities by

(ii) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution)
issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.

(6) Adjustments for Combinations or Subdivisions
of Common Stock. In the event the Corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend on the Common
Stock payable in Common Stock or in any right to acquire Common Stock, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or
otherwise), or in the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then the Conversion Price in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate.

(d) Redemption.

9.
<PAGE> 10
(i) Right to Redeem. Any or all of the
outstanding shares of Series A Preferred Stock shall be redeemable by the
Corporation in the event that (1) the market price of the Corporation's
outstanding Common Stock (as quoted on any national or regional securities
exchange or automated quotation system on which or through which the
Corporation's Common Stock is traded) has equaled or exceed for a period of at
least twenty (20) consecutive trading days 200% of the Conversion Price in
effect during such period and (2) the managing underwriter of a registered
public offering of the Corporation's Common Stock agrees to register and offer
at least 50% of the shares of Common Stock into which the then outstanding
Series A Preferred Stock is then convertible.

(ii) Mechanics of Redemption. Before the
Corporation shall be entitled to redeem any of the shares of Series A Preferred
Stock, it shall give written notice to each holder thereof whose shares of
Series A Preferred Stock are to be redeemed indicating the number of shares of
Series A Preferred Stock to be redeemed. Each holder thereof shall, as soon as
practicable thereafter, surrender its certificates for such shares, duly
endorsed, at the office of the Corporation or of any transfer agent for such
shares, at which time the Corporation shall pay to such holder the Redemption
Price (defined below) for each such share to be redeemed. The Redemption Price
shall be payable in cash or by check, which need not be certified. Such
redemption shall be deemed to have been made immediately prior to the close of
business on the date of tender of the Redemption Price for the shares of Series
A Preferred Stock to be redeemed.

(iii) Redemption Price Defined. The "Redemption
Price" shall mean the Original Issue Price plus all accrued but unpaid
dividends on each share of Series A Preferred Stock to be redeemed.

(e) Other Distributions. In the event the Corporation
shall at any time or from time to time make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or any of it
subsidiaries other than Additional Shares of Common Stock, then in each such
event provision shall be made so that the holders of Series A Preferred Stock
shall receive, upon the conversion thereof, the securities of the Corporation
which they would have received had their stock been converted into Common Stock
on the date of such event.

(f) No Impairment. The Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 5 and in the taking of all such action as
may be necessary or

10.
<PAGE> 11
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.

(g) Certificates as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion Price pursuant
to this Section 5, the Corporation shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series A Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series A
Preferred Stock.

(h) Notices of Record Date. In the event of any taking
by the Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive Additional
Shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property,
or to receive any other right, the Corporation shall mail to each holder of
Series A Preferred Stock at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution, security or right, and the
amount and character of such dividend, distribution, security or right.

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

(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of

11.
<PAGE> 12
shares as shall be sufficient for such purpose, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to these Articles.

(k) Fractional Shares. No fractional share shall be
issued upon the conversion of any share or shares of Series A Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series A Preferred Stock by a holder
thereof shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Corporation).

(l) Notices. Any notice required by the provisions of
this Section 5 to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.

(m) Adjustments. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any consolidation or
merger of the Corporation with or into another corporation or corporations, or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation, each share of Series A Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Series A Preferred Stock would
have been entitled upon the record date of (or date of, if no record date is
fixed) such reorganization, reclassification, consolidation, merger or
conveyance; and, in any case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the holders of
such Series A Preferred Stock, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as equivalent as is practicable, in
relation to any shares of stock or the securities or property (including cash)
thereafter deliverable upon the conversion of the shares of such Series A
Preferred Stock.

6. Restrictions and Limitations. So long as at least One
Hundred Thousand (100,000) shares of Series A Preferred Stock remain
outstanding, the Corporation shall not, without the vote or written consent by
the holders of not less than a majority of the then outstanding shares of
Series A Preferred Stock voting together as a single class, amend, repeal or
waive any provision of, or add any provision to, the Corporation's Articles of
Incorporation

12.
<PAGE> 13
or Bylaws if such action would materially and adversely alter the preferences,
rights, privileges or powers of, or the restrictions provided for the benefit
of, the Preferred Stock.

7. Amendment. Any term relating to the Series A Preferred
Stock may be amended only with the vote or written consent of holders of not
less than a majority of all Series A Preferred Stock then outstanding. Any
such amendment shall be binding upon the Corporation and any holder of Series A
Preferred Stock.

ARTICLE V

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors shall have the power to adopt, amend, repeal or
otherwise alter the bylaws without any action on the part of the stockholders;
provided, however, that any bylaws made by the Board of Directors and any and
all powers conferred by any of said bylaws may be amended, altered or repealed
by the stockholders.

ARTICLE VI

A director of the Corporation shall, to the full extent permitted by the
Delaware General Corporation Law, not be liable to the Corporation or its
stockholders for monetary damages for breach of his fiduciary duty as a
director.

13.
<PAGE> 14

CERTIFICATE OF
DESIGNATION OF
PREFERENCES OF
SERIES B PREFERRED STOCK

---------------

The undersigned, Thomas H. Bell, the Chief Executive Officer of Phoenix
Network, Inc., a Delaware corporation (the "Corporation"), the Certificate of
Incorporation of which was filed in the office of the Secretary of State the
State of Delaware on May 17, 1989, acting pursuant to Section 151 of the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: That at
a meeting of the Board of Directors of the Corporation duly convened and held
on December 20, 1991 the following resolution was adopted:

RESOLVED, that pursuant to Article IV of the Corporation's
Certificate of Incorporation relating to the shares of the Corporation,
the Board of Directors hereby authorizes, fixes and creates a series of
Preferred Stock having the following powers, preferences, designations,
rights and other characteristics:

A. Two Hundred Thousand (200,000) of the authorized shares of
Preferred Stock are hereby designated "Series B Preferred Stock."

B. The rights, preferences, privileges, restrictions and other
matters relating to the Two Hundred Thousand (200,000) shares of Series B
Preferred Stock are as follows:

1. Dividends. In each fiscal year of the Corporation, the holders
of the Series B Preferred Stock shall be entitled to receive, before any cash
dividends shall be declared and paid upon or set aside for the Common Stock in
such fiscal year, a dividend at the rate of ninety cents ($0.90) per share per
annum (as adjusted for any combinations, consolidations, stock distributions or
stock dividends with respect to such shares), payable when, as and if declared
by the Board of Directors out of funds legally available therefor. Such
dividends shall be cumulative and shall accrue daily on each share of Series B
Preferred Stock whether or not declared. No dividends (other than those
payable solely in the Common Stock of the Corporation) shall be declared or
paid on any Common Stock of the Corporation until all accrued but unpaid
dividends on the Series B Preferred Stock shall have been declared and paid or
set apart.

1.
<PAGE> 15
2. Liquidation Preference.

(a) In the event of any liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, the holders of the Series
B Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, the amount of
ten dollars ($10.00) per share (as adjusted for any combinations,
consolidations, stock distributions or stock dividends with respect to such
shares) plus all accrued but unpaid dividends on such share for each share of
Series B Preferred Stock then held by them and no more. If upon the occurrence
of such event, the assets and funds thus distributed among the holders of the
Series B Preferred Stock shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amount, then the entire assets and
funds of the Corporation legally available for distribution shall be
distributed among the holders of the Series B Preferred Stock in proportion to
the shares of Series B Preferred Stock then held by them.

(b) After payment to the holders of the Series B Preferred
Stock of the amount set forth in subparagraph (a) above, the entire remaining
assets and funds of the Corporation legally available for distribution, if any,
shall be distributed among the holders of the Common Stock in proportion to the
shares of Common Stock then held by them.

(c) A consolidation or merger of the Corporation with or into
any other corporation or corporations, or a sale of all or substantially all of
the assets of the Corporation shall be deemed a liquidation, dissolution or
winding up within the meaning of this Section if more than fifty percent (50%)
of the surviving entity is not owned by persons who were holders of capital
stock or securities convertible into capital stock of the Corporation
immediately prior to such merger, consolidation or sale.

3. Voting Rights. Except as otherwise expressly provided herein or
as required by law, the Series B Preferred Stock shall vote together with the
Common Stock as a single class. The holder of each share of Series B Preferred
Stock shall be entitled to that number of votes equal to the number of shares
of Common Stock into which such share could then be converted and shall be
entitled to notice of all stockholders' meetings in accordance with the Bylaws
of the Corporation.

4. Conversion. The holders of the Series B Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):

(a) Right to Convert.

(i) Each share of Series B Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable

2.
<PAGE> 16
shares of Common Stock as is determined by dividing ten dollars ($10.00) (the
"Original Issue Price") plus all declared but unpaid dividends on each share of
Series B Preferred Stock by the then applicable Conversion Price, determined as
hereinafter provided, in effect on the date the certificate is surrendered for
conversion. The price at which shares of Common Stock shall be deliverable
upon conversion (the "Conversion Price") shall initially be two dollars ($2.00)
per share of Common Stock. Such initial Conversion Price shall be adjusted as
hereinafter provided.

(b) Mechanics of Conversion. Before any holder of Series B
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates thereof, duly
endorsed, at the office of the Corporation or of any transfer agent for such
stock, and shall give written notice to the Corporation at such office that he
elects to convert the same and shall state therein the name or names in which
he wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series B Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of surrender
of the shares of Series B Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.

(i) Special Definitions. For purposes of this Section
4(c), the following definitions shall apply:

(1) 'Options' shall mean rights, options, or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.

(2) 'Original Issue Date' shall mean the date on
which a share of Series B Preferred Stock was first issued.

(3) 'Convertible Securities' shall mean any
evidences of indebtedness, shares (other than Common Stock and Series B
Preferred Stock) or other securities convertible into or exchangeable for
Common Stock.

(4) 'Additional Shares of Common Stock' shall
mean all shares of Common Stock issued (or, pursuant to Section 4(c)(iii),
deemed to be issued) by the Corporation after the Original Issue Date, other
than shares of Common Stock issued or issuable:

(A) upon conversion of shares of Series
B Preferred Stock;

3.
<PAGE> 17
(B) to officers, directors or employees
of, or consultants to, the Corporation, on terms approved by the Board of
Directors;

(D) for which adjustment of the
Conversion Price is made pursuant to Section 4(c)(vi).

(ii) No Adjustment of Conversion Price. No adjustment
in the Conversion Price of a particular share of Series B Preferred Stock shall
be made in respect of the issuance of Additional Shares of Common Stock unless
the consideration per share for an Additional Share of Common Stock issued or
deemed to be issued by the Corporation is less than the Conversion Price in
effect on the date of, and immediately prior to such issue, for such share of
Series B Preferred Stock.

(iii) Deemed Issue of Additional Shares of Common Stock.
Subject to paragraph 4(c)(i)(4)(B) herein, in the event the Corporation at any
time or from time to time after the Original Issue Date shall issue any Options
or Convertible Securities or shall fix a record date for the determination of
holders of any class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
designed to protect against dilution) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 4(c)(v) hereof) of such Additional Shares of
Common Stock would be less than the Conversion Price in effect on the date of
and immediately prior to such issue, or such record date, as the case may be,
and provided further that in any such case in which Additional Shares of Common
Stock are deemed to be issued:

(1) no further adjustments in the Conversion
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;

4.
<PAGE> 18
(2) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price computed upon the original issue thereof (or upon
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment of the
Conversion Price shall affect Common Stock previously issued upon conversion of
the Series B Preferred Stock);

(3) upon the expiration of any such Options or
any rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the Series B Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if:

(A) in the case of Convertible
Securities or Options for Common Stock the only Additional Shares of Common
issued were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such conversion or exchange, and

(B) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration deemed to have been received by the
Corporation (determined pursuant to Section 4(c)(v)) upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised;

(4) no readjustment pursuant to clauses (2) or
(3) above shall have the effect of increasing the Conversion Price to an amount
which exceeds the lower of (A) the Conversion Price on the original adjustment
date, or (B) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date;

(5) in the case of any Options that expire by
their terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Series B Conversion Price

5.
<PAGE> 19
shall be made, except as to shares of Series B Preferred Stock converted in
such period, until the expiration or exercise of all such Options, whereupon
such adjustment shall be made in the same manner provided in clause (3) above;
and

(6) if any such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed thereof, the adjustment previously made in the Series B Conversion Price
which became effective on such record date shall be cancelled as of the close
of business on such record date, and shall instead be made on the actual date
of issuance, if any.

(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 4(c)(iii)) without consideration or for
a consideration per share less than the Conversion Price in effect on the date
of and immediately prior to such issue, then and in such event, such Conversion
Price shall be reduced, concurrently with such issue in order to increase the
number of shares of Common Stock into which the Series B Preferred Stock is
convertible, to a price equal to the consideration per share received by the
Corporation for such Additional Shares of Common Stock.

(v) Determination of Consideration. For purposes of
this Section 4(c), the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:

(1) Cash and Property: Such consideration
shall:

(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;

(B) insofar as it consists of property
other than cash, be computed at the fair value thereof at the time of such
issue, as determined in good faith by the Board; and

(C) in the event Additional Shares of
Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors.

(2) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4(c)(iii), relating
to Options and Convertible Securities, shall be

6.
<PAGE> 20
determined by dividing

(A) the total amount, if any, received
or receivable by the Corporation as consideration for the issue of such Options
or Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution)
payable to the Corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities by

(B) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution)
issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.

(vi) Adjustments for Combinations or Subdivisions of
Common Stock. In the event the Corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend on the Common
Stock payable in Common Stock or in any right to acquire Common Stock, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or
otherwise), or in the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then the Conversion Price in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate.

(d) Redemption.

(i) Right to Redeem. Any or all of the outstanding
shares of Series B Preferred Stock shall be redeemable by the Corporation in
the event that (1) the market price of the Corporation's outstanding Common
Stock (as quoted on any national or regional securities exchange or automated
quotation system on which or through which the Corporation's Common Stock is
traded) has equaled or exceed for a period of at least twenty (20) consecutive
trading days 200% of the Conversion Price in effect during such period and (2)
upon such time as such stock can be traded on a public market or sold pursuant
to Rule 144 or any other applicable rule of the Securities and Exchange
Commission.

(ii) Mechanics of Redemption. Before the Corporation
shall be entitled to redeem any of the shares of Series B Preferred Stock, it
shall give written notice to each holder thereof whose shares of Series B
Preferred Stock are to be redeemed indicating the number of shares of Series B
Preferred Stock to be redeemed. Each holder thereof shall, as soon as
practicable

7.
<PAGE> 21
thereafter, surrender its certificates for such shares, duly endorsed, at the
office of the Corporation or of any transfer agent for such shares, at which
time the Corporation shall pay to such holder the Redemption Price (defined
below) for each such share to be redeemed. The Redemption Price shall be
payable in cash or by check, which need not be certified. Such redemption
shall be deemed to have been made immediately prior to the close of business on
the date of tender of the Redemption Price for the shares of Series B Preferred
Stock to be redeemed.

(iii) Redemption Price Defined. The "Redemption
Price" shall mean the Original Issue Price plus all accrued but unpaid
dividends on each share of Series B Preferred Stock to be redeemed.

(e) Other Distributions. In the event the Corporation shall at
any time or from time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or any of it
subsidiaries other than Additional Shares of Common Stock, then in each such
event provision shall be made so that the holders of Series B Preferred Stock
shall receive, upon the conversion thereof, the securities of the Corporation
which they would have received had their stock been converted into Common Stock
on the date of such event.

(f) No Impairment. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series B Preferred Stock against impairment.

(g) Certificates as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to this
Section 4, the Corporation shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series B Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series B Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series B
Preferred Stock.

8.
<PAGE> 22
right convertible into or entitling the holder thereof to receive Additional
Shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property,
or to receive any other right, the Corporation shall mail to each holder of
Series B Preferred Stock at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution, security or right, and the
amount and character of such dividend, distribution, security or right.

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

(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series B Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series B Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series B Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to these
Articles.

(k) Fractional Shares. No fractional share shall be issued
upon the conversion of any share or shares of Series B Preferred Stock. All
shares of Common Stock (including fractions thereof) issuable upon conversion
of more than one share of Series B Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion would result in
the issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of a fraction of a
share of Common Stock, the Corporation shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum in cash equal
to the fair market value of such fraction on the date of conversion (as
determined in good faith by the Board of Directors of the Corporation).

(l) Notices. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series B Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.

9.
<PAGE> 23
(m) Adjustments. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any consolidation or
merger of the Corporation with or into another corporation or corporations, or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation, each share of Series B Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Series B Preferred Stock would
have been entitled upon the record date of (or date of, if no record date is
fixed) such reorganization, reclassification, consolidation, merger or
conveyance; and, in any case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the holders of
such Series B Preferred Stock, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as equivalent as is practicable, in
relation to any shares of stock or the securities or property (including cash)
thereafter deliverable upon the conversion of the shares of such Series B
Preferred Stock.

5. Restrictions and Limitations. So long as at least One Hundred
Thousand (100,000) shares of Series B Preferred Stock remain outstanding, the
Corporation shall not, without the vote or written consent by the holders of
not less than a majority of the then outstanding shares of Series B Preferred
Stock voting together as a single class, amend, repeal or waive any provision
of, or add any provision to, the Corporation's Articles of Incorporation or
Bylaws if such action would materially and adversely alter the preferences,
rights, privileges or powers of, or the restrictions provided for the benefit
of, the Preferred Stock.

6. Amendment. Any term relating to the Series B Preferred Stock may
be amended only with the vote or written consent of holders of not less than a
majority of all Series B Preferred Stock then outstanding. Any such amendment
shall be binding upon the Corporation and any holder of Series B Preferred
Stock.

10.
<PAGE> 24
IN WITNESS WHEREOF, I have executed this Certificate this 23 day of
December, 1991.

/s/ Thomas H. Bell
------------------------------------
Thomas H. Bell
Chief Executive Officer

ATTEST:

/s/ Kenneth L. Guernsey
- ------------------------------
Kenneth L. Guernsey
Secretary

11.
<PAGE> 25

CERTIFICATE OF DESIGNATION
OF PREFERENCES OF
SERIES C PREFERRED STOCK

---------------

The undersigned, Robert R. Curtis, the Chief Executive Officer of
Phoenix Network, Inc., a Delaware corporation (the "Corporation"), the Restated
Certificate of Incorporation of which was filed in the office of the Secretary
of State the State of Delaware on December 12, 1990, acting pursuant to Section
151 of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY: That pursuant to an action by unanimous written consent of the Board
of Directors of the Corporation dated as of August 21, 1992 the following
resolution was adopted:

RESOLVED, that pursuant to Article IV of the Corporation's
Restated Certificate of Incorporation relating to the shares of the
Corporation, the Board of Directors hereby authorizes, fixes and creates
a series of Preferred Stock having the following powers, preferences,
designations, rights and other characteristics:

A. One Million (1,000,000) of the authorized shares of Preferred
Stock are hereby designated "Series C Preferred Stock."

B. The rights, preferences, privileges, restrictions and other
matters relating to the One Million (1,000,000) shares of Series C Preferred
Stock are as follows:

1. Dividends. In each fiscal year of the Corporation, the
holders of the Series C Preferred Stock shall be entitled to receive, before
any cash dividends shall be declared and paid upon or set aside for the Common
Stock in such fiscal year, but after any cash dividends shall be declared and
paid upon or set aside for the Series A or Series B Preferred Stock of the
Corporation in such fiscal year, a dividend for each share of Series C
Preferred Stock held equal to four percent (4%) per annum of the Original
Issuance Price (as defined in Section 4(a)), as adjusted for any combinations,
consolidations, stock distributions or stock dividends with respect to such
shares, payable when, as and if declared by the Board of Directors out of funds
legally available therefor. Such dividends shall be non-cumulative and shall
not accrue unless declared by the Board of Directors. No dividends (other than
those payable solely in the Common Stock of the Corporation)

1.
<PAGE> 26
shall be declared or paid on any Common Stock of the Corporation until
all accrued but unpaid dividends on the Series C Preferred Stock shall
have been declared and paid or set apart.

2. Liquidation Preference.

(a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series C Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, but subsequent to the distribution of any of the assets or surplus
funds of the Corporation to the holders of the Series A and Series B Preferred
Stock of the Corporation, an amount per share equal to the par value of the
Series C Preferred Stock (as adjusted for any combinations, consolidations,
stock distributions or stock dividends with respect to such shares) plus all
accrued but unpaid dividends on such share for each share of Series C Preferred
Stock then held by them and no more. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series C Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed among the
holders of the Series C Preferred Stock in proportion to the shares of Series C
Preferred Stock then held by them.

(b) After payment to the holders of the Series C
Preferred Stock of the amount set forth in subparagraph (a) above, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock in proportion to the shares of Common Stock then held by them.

(c) A consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation shall not be deemed a
liquidation, dissolution or winding up within the meaning of this Section.

3. Voting Rights. The Series C Preferred Stock shall be
nonvoting, but shall be entitled to notice of all stockholders' meetings in
accordance with the Bylaws of the Corporation.

4. Conversion. The holders of the Series C Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):

(a) Right to Convert. Subject to the terms and
conditions of the Agreement dated as of June 1, 1992 between Sprint
Communications Company L.P., a Delaware limited partnership, and the
Corporation (the "Agreement") (a copy of which is available for inspection at
the principal executive offices of the Corporation), which terms and conditions
include but are not limited to the delivery of a Notice of Default (as that
term is defined in the Agreement) prior to conversion, each share of
outstanding Series C Preferred Stock shall be convertible at the office of the
Corporation or any transfer agent for such stock into such number of fully paid
and

2.
<PAGE> 27
nonassessable shares of Common Stock as is determined by dividing the original
issuance price per share of the Series C Preferred Stock as calculated pursuant
to the Agreement (the "Original Issuance Price") plus all declared but unpaid
dividends on each share of the Series C Preferred Stock by the Series C
Conversion Price (as hereinafter defined) in effect on the date the certificate
is surrendered for conversion. The "Series C Conversion Price" shall initially
be one-half of the Original Issuance Price. Such Series C Conversion Price
shall be adjusted as hereinafter provided.

(b) Mechanics of Conversion. Before any holder of
Series C Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates thereof, duly
endorsed, at the office of the Corporation or of any transfer agent for such
stock, and shall give written notice to the Corporation at such office that he
elects to convert the same and shall state therein the name or names in which
he wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series C Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of surrender
of the shares of Series C Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.

(c) Adjustments for Combinations or Subdivisions of
Common Stock. In the event the Corporation at any time or from time to time
after the date on which a share of Series C Preferred Stock was first issued
shall declare or pay any dividend on the Common Stock payable in Common Stock
or in any right to acquire Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise), or in the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then the Series C Conversion Price in effect immediately prior to such event
shall, concurrently with the effectiveness of such event, be proportionately
decreased or increased, as appropriate.

(d) Redemption. Neither the Corporation nor any holder
of the Series C Preferred Stock shall have the right to require the redemption
of any shares of the Series C Preferred Stock.

(e) No Impairment. The Corporation will not, by
amendment of its Restated Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series C Preferred Stock against
impairment.

3.
<PAGE> 28
(f) Certificates as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Series C Conversion Price
pursuant to this Section 4, the Corporation shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series C Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series C Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Series C Conversion Price at the time
in effect, and (iii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of Series C Preferred Stock.

(g) Issue Taxes. The Corporation shall not pay any
issue or other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series C Preferred Stock
pursuant hereto nor shall the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.

(h) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series C Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series C Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to this
Certificate.

(i) Fractional Shares. No fractional share shall be
issued upon the conversion of any share or shares of Series C Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series C Preferred Stock by a holder
thereof shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Corporation).

(j) Notices. Any notice required by the provisions of
this Section 4 to be given to the holders of shares of Series C Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing

4.
<PAGE> 29
on the books of the Corporation.

(k) Adjustments. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any consolidation or
merger of the Corporation with or into another corporation or corporations, or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation, each share of Series C Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Series C Preferred Stock would
have been entitled upon the record date of (or date of, if no record date is
fixed) such reorganization, reclassification, consolidation, merger or
conveyance; and, in any case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the holders of
such Series C Preferred Stock, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as equivalent as is practicable, in
relation to any shares of stock or the securities or property (including cash)
thereafter deliverable upon the conversion of the shares of such Series C
Preferred Stock.

5. Restrictions and Limitations. So long as at least Fifty
Thousand (50,000) shares of Series C Preferred Stock remain outstanding, the
Corporation shall not, without the vote or written consent by the holders of
not less than a majority of the then outstanding shares of Series C Preferred
Stock voting together as a single class, amend, repeal or waive any provision
of, or add any provision to, the Corporation's Restated Certificate of
Incorporation or Bylaws if such action would materially and adversely alter the
preferences, rights, privileges or powers of, or the restrictions provided for
the benefit of, the Preferred Stock.

6. Amendment. Any term relating to the Series C Preferred
Stock may be amended only with the vote or written consent of holders of not
less than a majority of all Series C Preferred Stock then outstanding. Any
such amendment shall be binding upon the Corporation and any holder of Series C
Preferred Stock.

5.
<PAGE> 30
IN WITNESS WHEREOF, I have executed this Certificate this 3rd day of
November, 1992.

/s/ Robert R. Curtis
-------------------------------------
Robert R. Curtis
President and
Chief Executive Officer

ATTEST:

/s/ Kenneth L. Guernsey
- -----------------------------
Kenneth L. Guernsey
Secretary

6.
<PAGE> 31

CERTIFICATE OF DESIGNATION
OF PREFERENCES OF
SERIES D PREFERRED STOCK

---------------

The undersigned, Robert R. Curtis, the President and Chief Executive
Officer of Phoenix Network, Inc., a Delaware corporation (the "Corporation"),
the Restated Certificate of Incorporation of which was filed in the office of
the Secretary of State the State of Delaware on December 12, 1990, acting
pursuant to Section 151 of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY: That pursuant to an action by the Board of
Directors of the Corporation taken at a meeting of the Board of Directors on
December 14, 1992 the following resolution was adopted:

A. Six Hundred Sixty-six Thousand Six Hundred Sixty-six (666,666) of
the authorized shares of Preferred Stock are hereby designated "Series D
Preferred Stock."

B. The rights, preferences, privileges, restrictions and other
matters relating to the Six Hundred Sixty-six Thousand Six Hundred Sixty-six
(666,666) shares of Series D Preferred Stock are as follows:

1. Dividends. In each fiscal year of the Corporation, the
holders of the Series D Preferred Stock shall be entitled to receive, before
any cash dividends shall be declared and paid upon or set aside for the Common
Stock in such fiscal year, but after any cash dividends shall be declared and
paid upon or set aside for the Series A, Series B or Series C Preferred Stock
of the Corporation in such fiscal year, a dividend for each share of Series D
Preferred Stock held equal to six percent (6%) per annum of the Original
Issuance Price (as defined in Section 4(a)), as adjusted for any combinations,
consolidations, stock distributions or stock dividends with respect to such
shares, payable when, as and if declared by the Board of Directors out of funds
legally available therefor. Such dividends shall be non-cumulative and shall
not accrue unless declared by the Board of Directors. No dividends (other than
those payable solely in the Common Stock of the

1.
<PAGE> 32
Corporation) shall be declared or paid on any Common Stock of the Corporation
until all accrued but unpaid dividends on the Series D Preferred Stock shall
have been declared and paid or set apart.

2. Liquidation Preference.

(a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series D Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, but subsequent to the distribution of any of the assets or surplus
funds of the Corporation to the holders of the Series A, Series B and Series C
Preferred Stock of the Corporation, an amount per share equal to the Original
Issuance Price (as defined below) of the Series D Preferred Stock (as adjusted
for any combinations, consolidations, stock distributions or stock dividends
with respect to such shares) plus all accrued but unpaid dividends on such
share for each share of Series D Preferred Stock then held by them and no more.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series D Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amount,
then the entire assets and funds of the Corporation legally available for
distribution shall be distributed among the holders of the Series D Preferred
Stock in proportion to the shares of Series D Preferred Stock then held by
them.

(b) After payment to the holders of the Series D
Preferred Stock of the amount set forth in subparagraph (a) above, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock in proportion to the shares of Common Stock then held by them.

3. Voting Rights. Except as otherwise expressly provided
herein or as required by law, the Series D Preferred Stock shall vote together
with the Common Stock as a single class. The holder of each share of Series D
Preferred Stock shall be entitled to that number of votes equal to the number
of shares of Common Stock into which such share could then be converted and
shall be entitled to notice of all stockholders' meetings in accordance with
the Bylaws of the Corporation.

4. Conversion. The holders of the Series D Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):

(a) Right to Convert. Each share of outstanding Series
D Preferred Stock shall be convertible at the office of the Corporation or any
transfer agent for such stock into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing $1.50 (the "Original
Issuance Price") plus all declared but unpaid dividends on each share of the
Series D

2.
<PAGE> 33
Preferred Stock by the Series D Conversion Price (as hereinafter defined) in
effect on the date the certificate is surrendered for conversion. The "Series
D Conversion Price" shall initially be $1.50. Such Series D Conversion Price
shall be adjusted as hereinafter provided.

(b) Mechanics of Conversion. Before any holder of
Series D Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates thereof, duly
endorsed, at the office of the Corporation or of any transfer agent for such
stock, and shall give written notice to the Corporation at such office that he
elects to convert the same and shall state therein the name or names in which
he wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series D Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of surrender
of the shares of Series D Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.

(c) Adjustments for Combinations or Subdivisions of
Common Stock. In the event the Corporation at any time or from time to time
after the date on which a share of Series D Preferred Stock was first issued
shall declare or pay any dividend on the Common Stock payable in Common Stock
or in any right to acquire Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by stock split, reclassification or otherwise), or in the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
then the Series D Conversion Price in effect immediately prior to such event
shall, concurrently with the effectiveness of such event, be proportionately
decreased or increased, as appropriate.

(d) Redemption. Neither the Corporation nor any holder
of the Series D Preferred Stock shall have the right to require the redemption
of any shares of the Series D Preferred Stock.

(f) Certificates as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Series D Conversion Price
pursuant to this Section 4, the Corporation shall

3.
<PAGE> 34
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series D Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series D Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Series D
Conversion Price at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of Series D Preferred Stock.

(g) Issue Taxes. The Corporation shall pay any issue
or other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Series D Preferred Stock
pursuant hereto, but the Corporation shall not be obligated to pay any transfer
taxes resulting from any transfer requested by any holder in connection with
any such conversion.

(h) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series D Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series D Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series D Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to this
Certificate.

(i) Fractional Shares. No fractional share shall be
issued upon the conversion of any share or shares of Series D Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series D Preferred Stock by a holder
thereof shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Corporation).

(j) Notices. Any notice required by the provisions of
this Section 4 to be given to the holders of shares of Series D Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.

4.
<PAGE> 35
(k) Adjustments. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any consolidation or
merger of the Corporation with or into another corporation or corporations, or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation, each share of Series D Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Series D Preferred Stock would
have been entitled upon the record date of (or date of, if no record date is
fixed) such reorganization, reclassification, consolidation, merger or
conveyance; and, in any case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the holders of
such Series D Preferred Stock, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as equivalent as is practicable, in
relation to any shares of stock or the securities or property (including cash)
thereafter deliverable upon the conversion of the shares of such Series D
Preferred Stock.

5. Restrictions and Limitations. So long as at least One
Hundred Thousand (100,000) shares of Series D Preferred Stock remain
outstanding, the Corporation shall not, without the vote or written consent by
the holders of not less than a majority of the then outstanding shares of
Series D Preferred Stock voting together as a single class, amend, repeal or
waive any provision of, or add any provision to, the Corporation's Restated
Certificate of Incorporation or Bylaws if such action would materially and
adversely alter the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Preferred Stock.

6. Amendment. Any term relating to the Series D Preferred
Stock may be amended only with the vote or written consent of holders of not
less than a majority of all Series D Preferred Stock then outstanding. Any
such amendment shall be binding upon the Corporation and any holder of Series D
Preferred Stock.

5.
<PAGE> 36
IN WITNESS WHEREOF, I have executed this Certificate this 14th day of
December, 1992.

/s/ Robert R. Curtis
-------------------------------------
Robert R. Curtis
President and
Chief Executive Officer

ATTEST:

/s/ Kenneth L. Guernsey
- ----------------------------
Kenneth L. Guernsey
Secretary

6.
<PAGE> 37

CERTIFICATE OF
DESIGNATION OF
PREFERENCES OF
SERIES E PREFERRED STOCK

---------------

The undersigned, WALLACE M. HAMMOND, the President of PHOENIX NETWORK,
INC., a Delaware corporation (the "Corporation"), the Restated Certificate of
Incorporation of which was filed in the office of the Secretary of State of the
State of Delaware on December 12, 1990, acting pursuant to Section 151 of the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: That at
a meeting of the Board of Directors of the Corporation duly convened and held
on April 5, 1995 the following resolution was adopted:

A. Two Hundred Thousand (200,000) of the authorized shares of
Preferred Stock are hereby designated "Series E Preferred Stock."

B. The rights, preferences, privileges, restrictions and other
matters relating to the Two Hundred Thousand (200,000) shares of Series E
Preferred Stock are as follows:

1. DIVIDENDS. In each fiscal year of the Corporation, the
holders of the Series E Preferred Stock shall be entitled to receive, before
any cash dividends shall be declared and paid upon or set aside for the Common
Stock in such fiscal year, a dividend at the rate of ninety cents ($0.90) per
share per annum (as adjusted for any combinations, consolidations, stock
distributions or stock dividends with respect to such shares), payable when, as
and if declared by the Board of Directors out of funds legally available
therefor. Such dividends shall be cumulative and shall accrue daily on each
share of Series E Preferred Stock whether or not declared. No dividends (other
than those payable solely in the Common Stock of the Corporation) shall be
declared or paid on any Common Stock of the Corporation until all accrued but
unpaid dividends on the Series E Preferred Stock shall have been declared and
paid or set apart.

1.
<PAGE> 38
2. LIQUIDATION PREFERENCE.

(A) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, the holders of
the Series E Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, but subsequent to the distribution of any assets or surplus funds of
the Corporation to the holders of the Series A, Series B, Series C and Series D
Preferred Stock of the Corporation, the amount of ten dollars ($10.00) per
share (as adjusted for any combinations, consolidations, stock distributions or
stock dividends with respect to such shares) plus all accrued but unpaid
dividends on such share for each share of Series E Preferred Stock then held by
them and no more. If upon the occurrence of such event, the assets and funds
thus distributed among the holders of the Series E Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed among the holders of
the Series E Preferred Stock in proportion to the shares of Series E Preferred
Stock then held by them.

(B) After payment to the holders of the Series E
Preferred Stock of the amount set forth in subparagraph (a) above, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock in proportion to the shares of Common Stock then held by them.

(C) A consolidation or merger of the Corporation with
or into any other corporation or corporations, or a sale of all or
substantially all of the assets of the Corporation shall be deemed a
liquidation, dissolution or winding up within the meaning of this Section if
more than fifty percent (50%) of the surviving entity is not owned by persons
who were holders of capital stock or securities convertible into capital stock
of the Corporation immediately prior to such merger, consolidation or sale.

3. VOTING RIGHTS. Except as otherwise expressly provided
herein or as required by law, the Series E Preferred Stock shall vote together
with the Common Stock as a single class. The holder of each share of Series E
Preferred Stock shall be entitled to that number of votes equal to the number
of shares of Common Stock into which such share could then be converted and
shall be entitled to notice of all stockholders' meetings in accordance with
the Bylaws of the Corporation.

4. CONVERSION. The holders of the Series E Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):

(A) RIGHT TO CONVERT.

(I) Each share of Series E Preferred Stock shall
be convertible, at the option of the holder thereof, at any time after the date
of issuance of such share, at the office

2.
<PAGE> 39
of the Corporation or any transfer agent for such stock, into such number of
fully paid and nonassessable shares of Common Stock as is determined by
dividing ten dollars ($10.00) (the "Original Issue Price") plus all declared
but unpaid dividends on each share of Series E Preferred Stock by the then
applicable Conversion Price, determined as hereinafter provided, in effect on
the date the certificate is surrendered for conversion. The price at which
shares of Common Stock shall be deliverable upon conversion (the "Conversion
Price") shall initially be one dollar and seventy-five cents ($1.75) per share
of Common Stock. Such initial Conversion Price shall be adjusted as
hereinafter provided.

(B) MECHANICS OF CONVERSION. Before any holder of
Series E Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates thereof, duly
endorsed, at the office of the Corporation or of any transfer agent for such
stock, and shall give written notice to the Corporation at such office that he
elects to convert the same and shall state therein the name or names in which
he wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series E Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of surrender
of the shares of Series E Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.

(I) SPECIAL DEFINITIONS. For purposes of this
Section 4(c), the following definitions shall apply:

(1) "OPTIONS" shall mean rights,
options, or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities.

(2) "ORIGINAL ISSUE DATE" shall mean the
date on which a share of Series E Preferred Stock was first issued.

(3) "CONVERTIBLE SECURITIES" shall mean
any evidences of indebtedness, shares (other than Common Stock and Series E
Preferred Stock) or other securities convertible into or exchangeable for
Common Stock.

(4) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to Section
4(c)(iii), deemed to be issued) by the Corporation after the Original Issue
Date, other than shares of Common Stock issued or issuable:

3.
<PAGE> 40
(A) upon conversion of shares of
Series E Preferred Stock;

(B) to officers, directors or
employees of, or consultants to, the Corporation, on terms approved by the
Board of Directors;

(D) for which adjustment of the
Conversion Price is made pursuant to Section 4(c)(vi).

(E) in any transaction approved by
the Company's Board of Directors involving the acquisition of more than fifty
percent (50%) of the stock of another corporation or substantially all of the
assets of another corporation or business, whether by merger, exchange of
shares, purchase of assets, or otherwise.

(II) No Adjustment of Conversion Price. No
adjustment in the Conversion Price of a particular share of Series E Preferred
Stock shall be made in respect of the issuance of Additional Shares of Common
Stock unless the consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price in effect on the date of, and immediately prior to such issue,
for such share of Series E Preferred Stock.

(III) Deemed Issue of Additional Shares of Common
Stock. Subject to paragraph 4(c)(i)(4)(B) herein, in the event the Corporation
at any time or from time to time after the Original Issue Date shall issue any
Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities then entitled to receive
any such Options or Convertible Securities, then the maximum number of shares
(as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as
of the time of such issue or, in case such a record date shall have been fixed,
as of the close of business on such record date, provided that Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 4(c)(v) hereof) of such
Additional Shares of Common Stock would be less than the Conversion Price in
effect on the date of and immediately prior to such issue, or such record date,
as the case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:

(1) no further adjustments in the
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the

4.
<PAGE> 41
exercise of such Options or conversion or exchange of such Convertible
Securities;

(2) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Corporation, or decrease in
the number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such adjustment of the
Conversion Price shall affect Common Stock previously issued upon conversion of
the Series E Preferred Stock);

(3) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Series E Conversion Price
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:

(4) no readjustment pursuant to clauses
(2) or (3) above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (A) the Conversion Price on the original
adjustment date, or (B) the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the original adjustment
date and such readjustment date;

5.
<PAGE> 42
(5) in the case of any Options that
expire by their terms not more than thirty (30) days after the date of issue
thereof, no adjustment of the Series E Conversion Price shall be made, except
as to shares of Series E Preferred Stock converted in such period, until the
expiration or exercise of all such Options, whereupon such adjustment shall be
made in the same manner provided in clause (3) above; and

(6) if any such record date shall have
been fixed and such Options or Convertible Securities are not issued on the
date fixed thereof, the adjustment previously made in the Series E Conversion
Price which became effective on such record date shall be cancelled as of the
close of business on such record date, and shall instead be made on the actual
date of issuance, if any.

(IV) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE
OF ADDITIONAL SHARES OF COMMON STOCK. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 4(c)(iii)) without consideration or for
a consideration per share less than the Conversion Price in effect on the date
of and immediately prior to such issue, then and in such event, such Conversion
Price shall be reduced, concurrently with such issue in order to increase the
number of shares of Common Stock into which the Series E Preferred Stock is
convertible, to a price equal to the consideration per share received by the
Corporation for such Additional Shares of Common Stock.

(V) DETERMINATION OF CONSIDERATION. For
purposes of this Section 4(c), the consideration received by the Corporation
for the issue of any Additional Shares of Common Stock shall be computed as
follows:

(1) CASH AND PROPERTY: Such
consideration shall:

(A) insofar as it consists of cash,
be computed at the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;

(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board; and

(C) in the event Additional Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors.

(2) OPTIONS AND CONVERTIBLE SECURITIES.
The

6.
<PAGE> 43
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4(c)(iii), relating
to Options and Convertible Securities, shall be determined by dividing

(A) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein designed to protect against
dilution) payable to the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities by

(VI) ADJUSTMENTS FOR COMBINATIONS OR SUBDIVISIONS
OF COMMON STOCK. In the event the Corporation at any time or from time to time
after the Original Issue Date shall declare or pay any dividend on the Common
Stock payable in Common Stock or in any right to acquire Common Stock, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or
otherwise), or in the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then the Conversion Price in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate.

(D) REDEMPTION.

(I) RIGHT TO REDEEM. Any or all of the
outstanding shares of Series E Preferred Stock shall be redeemable by the
Corporation in the event that (1) the market price of the Corporation's
outstanding Common Stock (as quoted on any national or regional securities
exchange or automated quotation system on which or through which the
Corporation's Common Stock is traded) has equaled or exceed for a period of at
least twenty (20) consecutive trading days 200% of the Conversion Price in
effect during such period and (2) upon such time as such stock can be traded on
a public market or sold pursuant to Rule 144 or any other applicable rule of
the Securities and Exchange Commission.

(II) MECHANICS OF REDEMPTION. Before the
Corporation shall be entitled to redeem any of the shares of Series E Preferred
Stock, it shall give written notice to each holder thereof whose shares of
Series E Preferred Stock are to be redeemed indicating the number

7.
<PAGE> 44
of shares of Series E Preferred Stock to be redeemed. Each holder thereof
shall, as soon as practicable thereafter, surrender its certificates for such
shares, duly endorsed, at the office of the Corporation or of any transfer
agent for such shares, at which time the Corporation shall pay to such holder
the Redemption Price (defined below) for each such share to be redeemed. The
Redemption Price shall be payable in cash or by check, which need not be
certified. Such redemption shall be deemed to have been made immediately prior
to the close of business on the date of tender of the Redemption Price for the
shares of Series E Preferred Stock to be redeemed.

(III) REDEMPTION PRICE DEFINED. The "Redemption
Price" shall mean the Original Issue Price plus all accrued but unpaid
dividends on each share of Series E Preferred Stock to be redeemed.

(E) OTHER DISTRIBUTIONS. In the event the Corporation
shall at any time or from time to time make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or any of it
subsidiaries other than Additional Shares of Common Stock, then in each such
event provision shall be made so that the holders of Series E Preferred Stock
shall receive, upon the conversion thereof, the securities of the Corporation
which they would have received had their stock been converted into Common Stock
on the date of such event.

(F) NO IMPAIRMENT. The Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of
the holders of the Series E Preferred Stock against impairment.

(G) CERTIFICATES AS TO ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of the Conversion Price pursuant
to this Section 4, the Corporation shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series E Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series E Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series E
Preferred Stock.

(H) NOTICES OF RECORD DATE. In the event of any taking
by the Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other

8.
<PAGE> 45
distribution, any security or right convertible into or entitling the holder
thereof to receive Additional Shares of Common Stock, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series E Preferred Stock at least twenty (20) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution,
security or right, and the amount and character of such dividend, distribution,
security or right.

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

(J) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series E Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series E Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series E Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to these
Articles.

(K) FRACTIONAL SHARES. No fractional share shall be
issued upon the conversion of any share or shares of Series E Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series E Preferred Stock by a holder
thereof shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Corporation).

(L) NOTICES. Any notice required by the provisions of
this Section 4 to be given to the holders of shares of Series E Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.

(M) ADJUSTMENTS. In case of any reorganization or any
reclassification

9.
<PAGE> 46
of the capital stock of the Corporation, any consolidation or merger of the
Corporation with or into another corporation or corporations, or the conveyance
of all or substantially all of the assets of the Corporation to another
corporation, each share of Series E Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Series E Preferred Stock would
have been entitled upon the record date of (or date of, if no record date is
fixed) such reorganization, reclassification, consolidation, merger or
conveyance; and, in any case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to the rights and interests thereafter of the holders of
such Series E Preferred Stock, to the end that the provisions set forth herein
shall thereafter be applicable, as nearly as equivalent as is practicable, in
relation to any shares of stock or the securities or property (including cash)
thereafter deliverable upon the conversion of the shares of such Series E
Preferred Stock.

5. RESTRICTIONS AND LIMITATIONS. So long as at least
Seventy-Five Thousand (75,000) shares of Series E Preferred Stock remain
outstanding, the Corporation shall not, without the vote or written consent by
the holders of not less than a majority of the then outstanding shares of
Series E Preferred Stock voting together as a single class, amend, repeal or
waive any provision of, or add any provision to, the Corporation's Articles of
Incorporation or Bylaws if such action would materially and adversely alter the
preferences, rights, privileges or powers of, or the restrictions provided for
the benefit of, the Preferred Stock.

6. AMENDMENT. Any term relating to the Series E Preferred
Stock may be amended only with the vote or written consent of holders of not
less than a majority of all Series E Preferred Stock then outstanding. Any
such amendment shall be binding upon the Corporation and any holder of Series E
Preferred Stock.

10.
<PAGE> 47
IN WITNESS WHEREOF, I have executed this Certificate this 6 day of
April, 1995.

/s/ Wallace M. Hammond
-------------------------------------
WALLACE M. HAMMOND

President

ATTEST:

/s/ Kenneth L. Guernsey
- ----------------------------
KENNETH L. GUERNSEY
Secretary

11.
<PAGE> 48

CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
PHOENIX NETWORK, INC.

PHOENIX NETWORK, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that the original Certificate of
Incorporation of Corporation was filed with the Delaware Secretary of State on
May 17, 1989. The Corporation further hereby certifies that:

1. The Board of Directors of the Corporation adopted resolutions to
amend paragraph A of Article IV of the Restated Certificate of Incorporation of
the Corporation to read in its entirety as follows:

"ARTICLE IV

A. This Corporation is authorized to issue two classes of
shares to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized
to issue is Thirty-Five Million (35,000,000) shares. Thirty Million
(30,000,000) shares shall be Common Stock, each having a par value of
$0.001. Five Million (5,000,000) shares shall be Preferred Stock, each
having a par value of $0.001."

II. Thereafter at the Corporation's Annual Meeting of Stockholders,
held August 24, 1995, the necessary number of shares as required by statute
were voted in favor of the amendment.

III. The aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 of the Delaware General Incorporation Law.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of the Restated Certificate of Incorporation to be signed by Wallace
M. Hammond, President and Chief Executive Officer, and by Kenneth L. Guernsey,
Secretary, this 29th day of September, 1995.

PHOENIX NETWORK, INC.

/s/ Wallace M. Hammond
-----------------------------
Wallace M. Hammond
President & Chief Executive
Officer
ATTEST:

/s/ Kenneth L. Guernsey
- --------------------------
Kenneth L. Guernsey
Secretary
<PAGE> 49

PHOENIX NETWORK, INC.
CERTIFICATE OF
DESIGNATIONS OF
SERIES F PREFERRED STOCK

--------------------

The undersigned, WALLACE M. HAMMOND, the President of PHOENIX NETWORK,
INC., a Delaware corporation (the "Corporation"), the Restated Certificate of
Incorporation of which was filed in the office of the Secretary of State of the
State of Delaware on December 12, 1990, acting pursuant to Section 151 of the
General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY that at a
meeting of the Board of Directors of the Corporation duly convened and held on
September 29, 1995 the following resolution was adopted:

RESOLVED, that pursuant to Article IV of the Corporation's
Restated Certificate of Incorporation relating to the shares of the
Corporation, the Board of Directors hereby authorizes, fixes and
creates a series of Preferred Stock, par value $.01 per share, having
the following powers, preferences, designations, rights and other
characteristics:

A. One Million Two Hundred Thousand (1,200,000) of the authorized
shares of Preferred Stock are hereby designated "Series F Preferred Stock."

B. The rights, preferences, privileges, restrictions and other
matters relating to the Series F Preferred Stock are as follows:

1. RANKING. The Series F Preferred Stock shall rank as
to dividends and upon liquidation, dissolution or winding up of the Corporation
(i) on a parity with the Corporations's Series A Preferred and Series B
Preferred Stock and with any class or series of Preferred Stock which by its
express terms provides that it ranks on a parity with the Series F Preferred
Stock (collectively, the "Pari Passu Stock"), and (ii) prior to any class of
common equity of the Corporation and any other class or series of capital stock
which by its express terms provides that it ranks junior to the Series F
Preferred Stock or which does not expressly provide for any ranking as to
dividends, liquidation, dissolution or winding up (collectively, the "Junior
Stock").

1.
<PAGE> 50
2. DIVIDENDS.

(a) The holders of Series F Preferred Stock shall
be entitled to receive cumulative dividends at the rate of nine percent (9%)
per annum per share (as adjusted for any combinations, consolidations, stock
distributions or dividends, stock splits, reverse stock splits or other similar
transactions with respect to such shares) payable, when, as and if declared by
the Board of Directors out of legally available funds therefor. Subject to
Section 2(b) below, such dividends shall be payable in cash annually on January
1st of each year (unless such day is not a business day, in which event on the
next succeeding business day) (each a "Dividend Payment Date"), commencing on
the next Dividend Payment Date succeeding the date of original issue of such
shares of Series F Preferred Stock, to holders of record as they appear on the
register of the Corporation for the Series F Preferred Stock on the 15th day
immediately preceding such Dividend Payment Date. Dividends on shares of
Series F Preferred Stock shall be computed on the basis of a 360-day year of
twelve 30-day months and shall accumulate from the date of original issue of
such shares. Any declaration of a dividend may be for a portion, or all, of
the then accumulated dividends. Any accumulated dividends that are not paid
will continue to cumulate in the manner described above.

(b) Solely at the option of the Corporation, dividends
may be paid, instead of in cash, on declaration of the Board of Directors, in
shares of the Corporation's common stock, par value $.001 per share (the
"Common Stock"), to the extent of legally available surplus of the Corporation,
in respect of any or all Dividend Payment Dates. The aggregate par value of
Common Stock issued in payment of any dividend shall be transferred from the
legal surplus of the Corporation to its capital at the time of such payment.
If a dividend is to be paid in Common Stock, the number of shares of Common
Stock to be issued in payment of the dividend with respect to each outstanding
share of Series F Preferred Stock shall be determined by dividing the amount of
the dividend to be paid with respect to such share of Series F Preferred Stock
by an amount equal to the Fair Market Value (as defined in Section 5(c) below)
of the Common Stock on the date such dividend is declared by the Board of
Directors. Any such shares distributed as a dividend shall first be registered
on a registration statement with the Securities and Exchange Commission (the
"SEC") and such registration statement shall have been declared effective by
the SEC.

(c) No dividend or distribution in cash, shares of
capital stock or other property shall be paid or declared and set apart for
payment on any date on or in respect of (i) the Junior Stock (any such dividend
or distribution on such stock hereinafter referred to as a "Junior Stock
Distribution"), or (ii) any Pari Passu Stock (any such dividends or
distributions on such stock hereinafter referred to as a "Pari Passu Stock
Distribution"), unless, contemporaneously therewith or with respect to the
immediately preceding Dividend Payment Date for the Series F Preferred Stock, a
dividend or distribution is or was paid or declared and set apart for payment
on or in respect of the Series F Preferred Stock, payable at the rate set forth
herein and payable on a date no later than the payment date set forth for such
Junior Stock Distribution or Pari Passu Stock Distribution, as the case may be.

2.
<PAGE> 51
(d) In no event may the Corporation (i) make a Junior
Stock Distribution or a Pari Passu Stock Distribution while there are dividends
in arrears on the Series F Preferred Stock or (ii) redeem, purchase or
otherwise acquire for value any Junior Stock or Pari Passu Stock unless, prior
to or contemporaneously with such redemption, purchase or acquisition the
Series F Preferred Stock is redeemed in full (in the case of redemption,
purchase or acquisition of Junior Stock) or on a pro rata basis based on
liquidation preference (in the case of redemption, purchase or acquisition of
Pari Passu Stock).

3. LIQUIDATION PREFERENCE.

(a) In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, the holders
of the Series F Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Junior Stock, the amount of Ten Dollars
($10.00) per share in cash (as adjusted for any stock subdivisions,
combinations or consolidations or any stock distributions or dividends with
respect to such shares) plus an amount in cash equal to all accrued but unpaid
dividends (the "Liquidation Preference") on each share of Series F Preferred
Stock then held by them and no more. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series F Preferred
Stock and the Pari Passu Stock shall be insufficient to permit the payment to
such holders of their Liquidation Preference, then the entire assets and funds
of the Corporation legally available for distribution shall be distributed
among the holders of the Series F Preferred Stock and the Pari Passu Stock
ratably in accordance with the respective amounts which would be payable on
such shares if all amounts payable thereon were paid in full.

(b) After payment to the holders of the Series F
Preferred Stock of the Liquidation Preference, the entire remaining assets and
funds of the Corporation legally available for distribution, if any, shall be
distributed among the holders of the Junior Stock in accordance with the
corporation's Certificate of Incorporation or any other Certificate of
Designation with respect to the Preferred Stock.

(c) For the purposes of this Section 3, neither
the merger or the consolidation of the Corporation into or with another
corporation, nor the merger or consolidation of any other corporation into or
with the Corporation, nor the voluntary sale, conveyance, exchange, transfer or
other disposition (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation, shall be deemed to be a voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation.

4. VOTING RIGHTS.

(a) Except as otherwise expressly provided herein
or as required by law, the Series F Preferred Stock shall vote together with
the Series A Preferred Stock, Series B Preferred

3.
<PAGE> 52
Stock, Series D Preferred Stock, Series E Preferred Stock and the Common Stock
as a single class. The holder of each share of Series F Preferred Stock shall
be entitled to that number of votes equal to the number of shares of Common
Stock into which such share could then be converted pursuant hereto and shall
be entitled to notice of all stockholders' meetings in accordance with the
Bylaws of the Corporation.

(b) So long as at least Two Hundred Thousand
(200,000) shares of Series F Preferred Stock remain outstanding, the holders of
the Series F Preferred Stock then outstanding shall be entitled, voting
together as a class, to elect two (2) directors of the Corporation at each
election of directors. If there shall cease to be at least One Hundred Fifty
Thousand (150,000) shares of Series F Preferred Stock outstanding but there
shall remain at least Seventy Five Thousand (75,000) shares of such stock
outstanding, the holders of the Series F Preferred Stock then shall be entitled
voting as a class to elect one (1) director. Any vacancy occurring because of
the death, resignation or removal of a director elected by the holders of
Series F Preferred Stock shall be filled by the vote or written consent of the
holders of a majority of the shares of Series F Preferred Stock.

5. CONVERSION. The holders of the Series F Preferred
Stock shall have conversion rights as follows (the "Conversion Rights"):

(a) RIGHT TO CONVERT. Each share of Series F
Preferred Stock shall be convertible, at the option of the holder thereof, or,
with respect to all of the Series F Preferred Stock, upon the vote or written
consent of the holders of at least sixty-six and two thirds percent (66 2/3%)
in interest of the Series F Preferred Stock, at any time after the date of
issuance of such shares, at the office of the Corporation or any transfer agent
for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing ten dollars ($10.00) (the "Original
Issue Price") plus all accrued and unpaid dividends, on each share of Series F
Preferred Stock by the then applicable Conversion Price (as hereinafter
defined) in effect on the date the certificate is surrendered for conversion.
The price at which shares of Common Stock shall be deliverable upon conversion
(the "Conversion Price") shall initially be two dollars and fifty cents ($2.50)
per share of Common Stock. Such initial Conversion Price shall be adjusted as
hereinafter provided.

(b) MECHANICS OF CONVERSION. Before any holder
of Series F Preferred Stock shall be entitled to convert the same into shares
of Common Stock, he shall surrender the certificate or certificates thereof,
duly endorsed, at the office of the Corporation or of any transfer agent for
such stock, and shall give written notice to the Corporation at such office
that he elects to convert the same and shall state therein the name or names in
which he wishes the certificate or certificates for shares of Common Stock to
be issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series F Preferred Stock, a
certificate or certificates for the number of shares of Common Stock to which
he shall be entitled as aforesaid. Such conversion shall be deemed to have
been made immediately prior to the close of business on

4.
<PAGE> 53
the date of surrender of the shares of Series F Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.

(i) SPECIAL DEFINITIONS. For purposes
of this Section 5(c), the following definitions shall apply:

(1) "OPTIONS" shall mean rights, options,
or warrants to subscribe for, purchase or otherwise acquire either Common Stock
or Convertible Securities.

(2) "ORIGINAL ISSUE DATE" shall mean the
date on which a share of Series F Preferred Stock was first issued.

(3) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares (other than Common Stock and Series F
Preferred Stock) or other securities convertible into or exchangeable for
Common Stock.

(4) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to Section
5(c)(iii), deemed to be issued) by the Corporation after the Original Issue
Date, other than shares of Common Stock issued or issuable:

(A) upon conversion of shares of
Series F Preferred Stock;

(B) to officers, directors or
employees of the Corporation, under a stock option plan approved by the Board
of Directors, to the extent such issuances do not exceed 15% of the fully
diluted Common Stock outstanding on the date of the original issue of Series F
Preferred Stock;

(C) as a dividend or distribution
on the Preferred Stock authorized and outstanding on the date hereof in
accordance with the terms of any applicable Certificate of Designations; or

(D) for which adjustment of the
Conversion Price is made pursuant to Section 5(c)(vi).

(5) "FAIR MARKET VALUE" shall mean the
average closing price of the Company's Common Stock as listed on the American
Stock Exchange over the twenty (20) business days immediately preceding the
determination of Fair Market Value or in the event

5.
<PAGE> 54
such Common Stock is not listed on the American Stock Exchange then on any
other recognized exchange using the same twenty (20) day trading period or if
not listed on any exchange, then Fair Market Value shall be determined in good
faith by the Board of Directors of the Corporation.

(ii) NO ADJUSTMENT OF CONVERSION PRICE. No
adjustment in the Conversion Price of a particular share of Series F Preferred
Stock shall be made in respect of the issuance of Additional Shares of Common
Stock unless the consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than the Fair
Market Value in effect on the date of such issuance.

(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK. Subject to paragraph 5(c)(i)(4)(B) herein, in the event the
Corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record date
for the determination of holders of any class of securities then entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as
of the time of such issue or, in case such a record date shall have been fixed,
as of the close of business on such record date, provided that Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 5(c)(v) hereof) of such
Additional Shares of Common Stock would be less than the Fair Market Value on
the date of issuance, or such record date, as the case may be, and provided
further that in any such case in which Additional Shares of Common Stock are
deemed to be issued:

(1) no further adjustments in the
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;

(3) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised,

6.
<PAGE> 55
the Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:

(A) in the case of Convertible
Securities or Options for Common Stock the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such conversion or exchange, and

(B) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually
issued upon the exercise thereof were issued at the time of issue of such
Options and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration deemed to have been received by the
Corporation (determined pursuant to Section 5(c)(v)) upon the issue of the
Convertible Securities with respect to which such Options were actually
exercised;

(4) no readjustment pursuant to clauses (2)
or (3) above shall have the effect of increasing the Conversion Price to an
amount which exceeds the lower of (A) the Conversion Price on the original
adjustment date, or (B) the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the original adjustment
date and such readjustment date;

(5) in the case of any Options that expire
by their terms not more than thirty (30) days after the date of issue thereof,
no adjustment of the Conversion Price shall be made, except as to shares of
Series F Preferred Stock converted in such period, until the expiration or
exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (3) above; and

(6) if any such record date shall have been
fixed and such Options or Convertible Securities are not issued on the date
fixed thereof, the adjustment previously made in the Series F Conversion Price
which became effective on such record date shall be canceled as of the close of
business on such record date, and shall instead be made on the actual date of
issuance, if any.

(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event the Corporation shall issue
Additional Shares

7.
<PAGE> 56
of Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to Section 5(c)(iii)) without consideration or for a
consideration per share less than the Fair Market Value in effect on the date
of and immediately prior to such issue, then and in such event, such Conversion
Price shall be adjusted, concurrently with such issue, to the price (calculated
to the nearest cent) determined by multiplying the Conversion Price by a
fraction (a) the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such Additional Shares
of Common Stock 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 Fair Market Value, 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 plus the number
of such Additional Shares of common stock so issued.

(v) DETERMINATION OF CONSIDERATION. For purposes
of this Section 5(c), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:

(1) CASH AND PROPERTY. Such consideration
shall:

(A) insofar as it consists of
cash, be computed at the aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or accrued dividends;

(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board of Directors; and

(C) in the event Additional Shares
of Common Stock are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors.

(2) OPTIONS AND CONVERTIBLE
SECURITIES. The consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued pursuant to
Section 5(c)(iii), relating to Options and Convertible Securities, shall be
determined by dividing

(A) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein designed to protect against
dilution) payable to the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such

8.
<PAGE> 57
Options for Convertible Securities and the conversion or exchange of such
Convertible Securities by

(B) the maximum number of shares
of Common Stock (as set forth in the instruments relating thereto, without
regard to any provision contained therein designed to protect against dilution)
issuable upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.

(vi) ADJUSTMENTS FOR COMBINATIONS OR
SUBDIVISIONS OF COMMON STOCK. In the event the Corporation at any time or from
time to time after the Original Issue Date shall declare or pay any dividend on
the Junior Stock in Common Stock or in any right to acquire Common Stock, or
shall effect a subdivision of the outstanding shares of Common Stock into a
greater number of shares of Common Stock (by stock split, reclassification or
otherwise), or in the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, then the Conversion Price in effect
immediately prior to such event shall, concurrently with the effectiveness of
such event, be proportionately decreased or increased, as appropriate.

(d) REDEMPTION.

(i) RIGHT TO REDEEM AND VOLUNTARY CONVERSION.
Any or all of the outstanding shares of Series F Preferred Stock shall be
redeemable by the Corporation in the event that the market price of the
Corporation's outstanding Common Stock (as quoted on any national or regional
securities exchange or automated quotation system on which or through which the
Corporation's Common Stock is traded) has equaled or exceed for a period of at
least twenty (20) consecutive trading days 200% of the Conversion Price in
effect during such period. In the event that any holder of Series F Preferred
Stock has not responded to the Corporation's notice of redemption within ten
(10) days, then such Series F Preferred shall be deemed to be a voluntary
conversion of such Series F Preferred Stock into Common Stock by the holder
pursuant to Section 5(a) above.

(ii) MECHANICS OF REDEMPTION. Before the
Corporation shall be entitled to redeem any of the shares of Series F Preferred
Stock, it shall give written notice to each holder thereof whose shares of
Series F Preferred Stock are to be redeemed indicating the number of shares of
Series F Preferred Stock to be redeemed. Each holder thereof shall, as soon as
practicable thereafter, surrender its certificates for such shares, duly
endorsed, at the office of the Corporation or of any transfer agent for such
shares, at which time the Corporation shall pay to such holder the Redemption
Price (defined below) for each such share to be redeemed. The Redemption Price
shall be payable in cash or by check, which need not be certified. Such
redemption shall be deemed to have been made immediately prior to the close of
business on the date of tender of the Redemption Price for the shares of Series
F Preferred Stock to be redeemed.

9.
<PAGE> 58
(iii) REDEMPTION PRICE DEFINED. The
"Redemption Price" shall mean the Original Issue Price plus all accrued but
unpaid dividends on each share of Series F Preferred Stock to be redeemed.

(e) OTHER DISTRIBUTIONS. In the event the Corporation
shall at any time or from time to time make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in securities of the Corporation or any of it
subsidiaries other than Additional Shares of Common Stock, then in each such
event provision shall be made so that the holders of Series F Preferred Stock
shall receive, upon the conversion thereof, the securities of the Corporation
which they would have received had their stock been converted into Common Stock
on the date of such event.

(f) NO IMPAIRMENT. The Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 5 and in the taking of all such action as
may be necessary or appropriate in order to protect the Conversion Rights of
the holders of the Series F Preferred Stock against impairment.

(g) CERTIFICATES AS TO ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of the Conversion Price pursuant
to this Section 5, the Corporation shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series F Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series F Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of Series F
Preferred Stock.

(h) NOTICES OF RECORD DATE. In the event of any
taking by the Corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend (other than a cash dividend) or other distribution, any security
or right convertible into or entitling the holder thereof to receive Additional
Shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property,
or to receive any other right, the Corporation shall mail to each holder of
Series F Preferred Stock at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution, security or right, and the
amount and character of such dividend, distribution, security or right.

10.
<PAGE> 59
(i) ISSUE TAXES. The Corporation shall pay any and
all issue and other taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of Series F
Preferred Stock pursuant hereto; provided, however, that the Corporation shall
not be obligated to pay any transfer taxes resulting from any transfer
requested by any holder in connection with any such conversion.

(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION.
The Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series F Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series F Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series F Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to these Articles.

(k) FRACTIONAL SHARES. No fractional share shall be
issued upon the conversion of any share or shares of Series F Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series F Preferred Stock by a holder
thereof shall be aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors of the
Corporation).

(l) NOTICES. Any notice required by the provisions
of this Section 4 to be given to the holders of shares of Series F Preferred
Stock shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of the Corporation.

(m) ADJUSTMENTS. In case of any reorganization
or any reclassification of the capital stock of the Corporation, any
consolidation or merger of the Corporation with or into another corporation or
corporations, or the conveyance of all or substantially all of the assets of
the Corporation to another corporation, each share of Series F Preferred Stock
shall thereafter be convertible into the number of shares of stock or other
securities or property (including cash) to which a holder of the number of
shares of Common Stock deliverable upon conversion of such share of Series F
Preferred Stock would have been entitled upon the record date of (or date of,
if no record date is fixed) such reorganization, reclassification,
consolidation, merger or conveyance; and, in any case, appropriate adjustment
(as determined by the Board of Directors) shall be made in the

11.
<PAGE> 60
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of such Series F Preferred Stock, to the
end that the provisions set forth herein shall thereafter be applicable, as
nearly as equivalent as is practicable, in relation to any shares of stock or
the securities or property (including cash) thereafter deliverable upon the
conversion of the shares of such Series F Preferred Stock.

6. RESTRICTIONS AND LIMITATIONS. So long as at least
Two Hundred Thousand (200,000) shares of Series F Preferred Stock remain
outstanding, the Corporation shall not, without the vote or written consent by
the holders of not less than sixty-six and two thirds percent (66 2/3%) in
interest of the then outstanding shares of Series F Preferred Stock voting
together as a single class, amend, repeal or waive any provision of, or add any
provision to, the Corporation's Certificate of Incorporation or Bylaws if such
action would materially and adversely alter the preferences, rights, privileges
or powers of, or the restrictions provided for the benefit of, the Preferred
Stock.

7. AMENDMENT. Any term relating to the Series F
Preferred Stock may be amended only with the vote or written consent of holders
of not less than sixty-six and two thirds percent (66 2/3%) in interest of all
Series F Preferred Stock then outstanding. Any such amendment shall be binding
upon the Corporation and any holder of Series F Preferred Stock.

IN WITNESS WHEREOF,I have executed this Certificate this 3rd day of
October, 1995.

/s/ Wallace M. Hammond
---------------------------
WALLACE M. HAMMOND
President

ATTEST:

/s/ Kenneth L. Guernsey
- ----------------------------------
KENNETH L. GUERNSEY
Secretary

12.
<PAGE> 61

CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
PHOENIX NETWORK, INC.

PHOENIX NETWORK, INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that:

1. The Board of Directors of the Corporation adopted resolutions
to amend paragraph A of Article IV of the Restated Certificate of Incorporation
of the Corporation to read in its entirety as follows:

"A. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is
authorized to issue is Fifty-Five Million (55,000,000) shares. Fifty
Million (50,000,000) shares shall be Common Stock, each having a par
value of $0.001. Five Million (5,000,000) shares shall be Preferred
Stock, each having a par value of $0.001."

II. Thereafter at the Corporation's Annual Meeting of
Stockholders, held September 26, 1996 the necessary number of shares as
required by statute were voted in favor of the amendment.

III. The aforesaid amendment was duly adopted in accordance with
the applicable provisions of Section 242 of the Delaware General Incorporation
Law.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of the Restated Certificate of Incorporation to be signed by Wallace
M. Hammond, President and Chief Executive Officer, and by Ernest J. Panasci,
Secretary, this 1st day of October, 1996.

PHOENIX NETWORK, INC.

/s/ Wallace M. Hammond
----------------------------
Wallace M. Hammond
President & CEO
ATTEST:

/s/ Ernest J. Panasci
- ------------------------
Ernest J. Panasci
Secretary
<PAGE> 62

CERTIFICATE OF DESIGNATION OF
SERIES G CONVERTIBLE PREFERRED STOCK OF
PHOENIX NETWORK, INC.

The undersigned, Jonathan F. Beizer and Ernest J. Panasci, hereby
certify that:

I. They are the duly elected and acting Senior Vice President
and Secretary, respectively, of Phoenix Network, Inc., a Delaware corporation
(the "Company").

II. The Certificate of Incorporation of the Company authorizes
5,000,000 shares of preferred stock, par value $.001 per share, of which
546,458 are issued and outstanding.

III. The following is a true and correct copy of resolutions
duly adopted by the Board of Directors of the Company (the "Board of
Directors") at a meeting duly held March 27, 1997, which constituted all
requisite action on the part of the Company for adoption of such resolutions.

RESOLUTIONS

WHEREAS, the Board of Directors is authorized to provide for the
issuance of the shares of preferred stock from time to time in one or more
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 or alter the dividend rights, dividend rate,
conversion rights, voting rights, rights and terms of redemption (including any
sinking fund provisions), redemption price or prices, and the liquidation
preferences of any wholly unissued series of preferred stock.

WHEREAS, the Board of Directors desires, pursuant to its
authority as aforesaid, to designate a new series of preferred stock, set the
number of shares constituting such series and fix the rights, preferences,
privileges and restrictions of such series.

NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
hereby designates a new series of preferred stock and the number of shares
constituting such series and fixes the rights, preferences, privileges and
restrictions relating to such series as follows:
<PAGE> 63
Section 1. Designation, Amount and Par Value. The series of
preferred stock shall be designated as the Series G Convertible Preferred Stock
(the "Preferred Stock"), and the number of shares so designated shall be
150,000 (which shall not be subject to increase without the consent of the
holders ("Holder") thereof). Each share of Preferred Stock shall have a par
value of $.001 per share and a stated value of $20 per share (the "Stated
Value").

Section 2. Dividends.

(a) Holders of Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors out of funds legally available
therefor, and the Company shall pay, cumulative dividends at the rate per share
(as a percentage of the Stated Value per share) equal to 5% per annum, payable,
in shares of Common Stock (as defined in Section 7), quarterly in arrears, but
in no event later than the Conversion Date (as hereinafter defined) applicable
to such share of Preferred Stock. Dividends on the Preferred Stock shall
accrue daily commencing the Original Issue Date (as defined in Section 7), and
shall be deemed to accrue on such date whether or not earned or declared and
whether or not there are profits, surplus or other funds of the Company legally
available for the payment of dividends. The party that holds the Preferred
Stock of record on an applicable record date for any dividend payment will be
entitled to receive such dividend payment and any other accrued and unpaid
dividends which accrued prior to such dividend payment date, without regard to
any sale or disposition of such Preferred Stock subsequent to the applicable
record date but prior to the applicable dividend payment date. Except as
otherwise provided herein, if at any time the Company pays less than the total
amount of dividends then accrued on account of the Preferred Stock, such
payment shall be distributed ratably among the Holders of the Preferred Stock
based upon the number of shares held by each Holder. Payment of dividends on
the Preferred Stock is further subject to the provisions of Section 5(c)(i).

(b) Notwithstanding anything to the contrary contained herein,
the Company may not issue shares of Common Stock in payment of dividends (and,
at the option of the Holder, shall be required to either deliver cash in
respect thereof or such dividends shall accrue without interest thereon) on the
Preferred Stock if:

(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury
stock, is insufficient to issue such dividends to be paid in shares of Common
Stock;

(ii) the shares of Common Stock to be issued in respect
of such dividends are not registered for resale pursuant to an effective
registration statement that names the recipient of such dividend as a selling
stockholder thereunder or may not be sold without volume restrictions pursuant
to Rule 144 as determined by counsel to the Company pursuant to a written
opinion letter, addressed to the Holder, in form and substance acceptable to
such Holder.

(iii) the shares of Common Stock to be issued in respect
of such dividends are not listed on the American Stock Exchange (or Nasdaq
National Market, Nasdaq SmallCap

-2-
<PAGE> 64
Market or The New York Stock Exchange) and any other exchange or quotation
system on which the Common Stock is then listed for trading; or

(iv) the issuance of such shares would result in the
recipient thereof beneficially owning, in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended, more than
4.9% of the issued and outstanding shares of Common Stock.

(c) So long as any Preferred Stock shall remain outstanding,
neither the Company nor any subsidiary thereof shall redeem, purchase or
otherwise acquire directly or indirectly any Junior Securities (as defined in
Section 7), nor shall the Company directly or indirectly pay or declare any
dividend or make any distribution (other than a dividend or distribution
described in Section 5) upon, nor shall any distribution be made in respect of,
any Junior Securities, nor shall any monies be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any Junior
Securities unless all accrued and unpaid dividends on the Preferred Stock for
all past dividend periods shall have been paid.

Section 3. Voting Rights. Except as otherwise provided herein
and as otherwise required by law, the Preferred Stock shall have no voting
rights. However, so long as any shares of Preferred Stock are outstanding, the
Company shall not, without the affirmative vote of the Holders of a majority of
the shares of the Preferred Stock then outstanding, (a) alter or change
adversely the powers, preferences or rights given to the Preferred Stock, (b)
alter or amend this Certificate of Designation or (c) authorize or create any
class of stock ranking as to dividends or distribution of assets upon a
Liquidation (as defined in Section 4) senior or prior to the Preferred Stock.

Section 4. Liquidation. Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a "Liquidation"),
the Holders of Preferred Stock shall be entitled to receive out of the assets
of the Company, whether such assets are capital or surplus, for each share of
Preferred Stock an amount equal to the Stated Value plus all accrued but unpaid
dividends per share, whether declared or not, before any distribution or
payment shall be made to the Holders of any Junior Securities, and if the
assets of the Company shall be insufficient to pay in full such amounts, then
the entire assets to be distributed to the Holders of Preferred Stock shall be
distributed among the Holders of Preferred Stock ratably in accordance with the
respective amounts that would be payable on such shares if all amounts payable
thereon were paid in full. A sale, conveyance or disposition of all or
substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of, or a consolidation or
merger of the Company with or into any other company or companies shall not be
treated as a Liquidation, but instead shall be subject to the provisions of
Section 5. The Company shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each record
Holder of Preferred Stock.

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Section 5. Conversion.

(a)(i) Each share of Preferred Stock shall be convertible into
shares of Common Stock (subject to reduction pursuant to Section 5(a)(iii)
below and Section 4.10 of the Purchase Agreement (as defined in Section 7)) at
the Conversion Ratio (as defined in Section 7) at the option of the Holder in
whole or in part at any time after the expiration of the earlier to occur of:
(A) 90 days after the Original Issue Date or (B) the date the Securities and
Exchange Commission (the "Commission") declares effective under the Securities
Act of 1933, as amended (the "Securities Act"), the registration statement
contemplated by the Registration Rights Agreement, dated the Original Issue
Date (the "Registration Rights Agreement"), between the Company and the
original Holder of the Preferred Stock, pursuant to which the Company is, among
other things, required to register the resale of the shares of Common Stock
issuable upon conversion of the Preferred Stock (the "Underlying Shares
Registration Statement"). The Holder shall effect conversions by surrendering
the certificate or certificates representing the shares of Preferred Stock to
be converted to the Company, duly endorsed or accompanied by a validly executed
stock power, together with the form of conversion notice attached hereto as
Exhibit A (the "Holder Conversion Notice"). Each Holder Conversion Notice
shall specify the number of shares of Preferred Stock to be converted and the
date on which such conversion is to be effected, which date may not be prior to
the date the Holder delivers such Holder Conversion Notice by facsimile (the
"Holder Conversion Date"). If no Holder Conversion Date is specified in a
Holder Conversion Notice, the Holder Conversion Date shall be the date that the
Holder Conversion Notice is deemed delivered pursuant to Section 5(h). Subject
to Sections 5(b) and 5(a)(iii) hereof and Section 4.10 of the Purchase
Agreement, each Holder Conversion Notice, once given, shall be irrevocable. If
the Holder is converting less than all shares of Preferred Stock represented by
the certificate or certificates tendered by the Holder with the Holder
Conversion Notice, or if a conversion hereunder cannot be effected in full for
any reason, the Company shall promptly deliver to such Holder (in the manner
and within the time set forth in Section 5(b)) a certificate for such number of
shares as have not been converted.

(ii) The Company may from time to time require the
conversion of all or any portion of the then outstanding and unconverted shares
of Preferred Stock at the Conversion Ratio (subject to reduction pursuant to
Section 5(a)(iii) below and Section 4.10 of the Purchase Agreement) by
delivering to the Holder of such shares to be converted a notice in the form
attached hereto as Exhibit B (the "Company Conversion Notice"), provided, that,
no such conversion is permitted unless at the time of the delivery of the
Company Conversion Notice and on the Company Conversion Date (as defined
below), (a) an Underlying Shares Registration Statement covering the resale of
the shares of Common Stock issuable upon such conversion is effective, (b) the
shares of Common Stock issuable upon such conversion are listed for trading on
the American Stock Exchange (or Nasdaq National Market, Nasdaq SmallCap Market
or The New York Stock Exchange) and any other exchange or quotation system on
which the Common Stock is then listed for trading, and (c) the Average Per
Share Market Value for the 20 Trading Days immediately preceding the Company
Conversion Date exceeds two times the Initial Conversion Price (defined in
Section 5(c)(i)). Each Company Conversion Notice shall specify the number of
shares of Preferred Stock to be converted and the date on which such conversion
is to be effected, which date

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may not be prior to the day after the Company delivers such Company Conversion
Notice by facsimile (the "Company Conversion Date"). If no Company Conversion
Date is specified in a Company Conversion Notice, the Company Conversion Date
shall be the date that the Company Conversion Notice is deemed delivered
pursuant to Section 5(h). A Holder Conversion Date and a Company Conversion
Date are sometimes referred to herein as the "Conversion Date" and a Holder
Conversion Notice and a Company Conversion Notice are sometimes referred to as
a "Conversion Notice." Any conversion pursuant to this Section 5(a)(ii) shall
be subject to Section 5(b) with respect to consequences of the Company's
failure to deliver shares of Common Stock in respect of a conversion under this
Section. If the Company is converting less than all shares of Preferred Stock
represented by the certificate or certificates tendered by the Holder in
response to a Company Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Company shall promptly deliver to such
tendering Holder (in the manner and within the time set forth in Section 5(b))
a certificate for such number of shares as have not been converted.

(iii) Certain Regulatory Approval. If on the Conversion
Date applicable to any conversion under this Section 5(a), (A) the Common Stock
is then listed for trading on the American Stock Exchange or the Nasdaq
National Market or if the rules of the Nasdaq Stock Market are hereafter
amended to extend Rule 4460(i) promulgated thereby (or any successor or
replacement provision thereof) to the Nasdaq SmallCap Market and the Company's
Common Stock is then listed for trading on such market, (B) the Conversion
Price then in effect is such that the aggregate number of shares of Common
Stock that would then be issuable upon conversion of all outstanding shares of
Preferred Stock, together with any shares of Common Stock previously issued
upon conversion of Preferred Stock and in respect of payment of dividends
hereunder, would equal or exceed 20% of the number of shares of Common Stock
outstanding on the Original Issue Date (the "Issuable Maximum"), and (C) the
Company has not previously obtained Shareholder Approval (as defined below),
then the Company shall issue to the Holder so requesting conversion of
Preferred Stock the Issuable Maximum and, with respect to any shares of Common
Stock that otherwise would have been issuable to such Holder in respect of the
Conversion Notice at issue or in respect of payment of dividends hereunder in
excess of the Issuable Maximum, the Holder shall have the option to require the
Company to either (1) as promptly as possible, but in no event later than 60
days after such Conversion Date, convene a meeting of the holders of the Common
Stock and use its best efforts to obtain the Shareholder Approval or (2)
redeem, from funds legally available therefor at the time of such redemption,
the balance of the Preferred Stock subject to such Conversion Notice at a price
per share equal to the product of (i) the average Per Share Market Value for
the five (5) Trading Days immediately preceding (1) the Conversion Date or (2)
the date of payment in full by the Company of such redemption price, whichever
is greater, and (ii) the Conversion Ratio calculated on the Conversion Date;
provided, however, that if the Holder has requested that the Company obtain
Shareholder Approval under paragraph (1) above and the Company fails for any
reason to obtain such Shareholder Approval within the time period set forth in
(1) above, the Company shall be obligated to redeem the Preferred Stock not
converted as a result of the provisions of this Section in accordance with the
provisions of paragraph (2) above, and in such case the interest contemplated
by the immediately succeeding sentence shall be deemed to accrue from the
Conversion Date. If the Holder has requested that the Company redeem shares of
Preferred Stock pursuant to this Section

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and the Company fails for any reason to pay the redemption price under (2)
above within seven days after the Conversion Date, the Company will pay
interest on such redemption price at a rate of 15% per annum to the converting
Holder of Preferred Stock, accruing from the Conversion Date until the
redemption price plus any accrued interest thereon is paid in full. The entire
redemption price, including interest thereon, shall be paid in cash.
"Shareholder Approval" means the approval by a majority of the total votes cast
on the proposal, in person or by proxy, at a meeting of the shareholders of the
Company held in accordance with the Company's Certificate of Incorporation and
by-laws, of the issuance by the Company of shares of Common Stock exceeding the
Issuable Maximum as a consequence of the conversion of Preferred Stock into
Common Stock at a price less than the greater of the book or market value on
the Original Issue Date as and to the extent required pursuant to Rule 713 of
the American Stock Exchange or Rule 4460(i) of the Nasdaq Stock Market (or any
successor or replacement provision thereof), as applicable.

(b) Not later than three Trading Days after the Conversion
Date, the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 4.1(b) of the Purchase Agreement) representing the
number of shares of Common Stock being acquired upon the conversion of shares
of Preferred Stock (subject to reduction pursuant to Section 5(a)(iii) and
Section 4.10 of the Purchase Agreement) and (ii) one or more certificates
representing the number of shares of Preferred Stock not converted; provided,
however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares of
Preferred Stock until certificates evidencing such shares of Preferred Stock
are either delivered for conversion to the Company or any transfer agent for
the Preferred Stock or Common Stock duly endorsed or accompanied by a validly
executed stock power, or the Holder of such Preferred Stock notifies the
Company that such certificates have been lost, stolen or destroyed and provides
a bond (or other adequate security) reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection therewith. If
in the case of any Conversion Notice such certificate or certificates,
including for purposes hereof, any shares of Common Stock to be issued on the
Conversion Date on account of accrued but unpaid dividends hereunder, are not
delivered to or as directed by the applicable Holder by the third Trading Day
after the Conversion Date, the Holder shall be entitled by written notice to
the Company at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the Company
shall immediately return the certificates representing the shares of Preferred
Stock tendered for conversion. If the Company fails to deliver to the Holder
such certificate or certificates pursuant to this Section, including for
purposes hereof, any shares of Common Stock to be issued on the Conversion Date
on account of accrued but unpaid dividends hereunder, prior to the fifth
Trading Day after the Conversion Date, the Company shall pay to such Holder, in
cash, as liquidated damages and not as a penalty, $1,500 for each day after
such fifth Trading Day until such certificates are delivered. If the Company
fails to deliver to the Holder such certificate or certificates pursuant to
this Section prior to the 20th day after the Conversion Date, the Company
shall, at the Holder's option (i) redeem, from funds legally available therefor
at the time of such redemption, such number of shares of Preferred Stock then
held by such Holder, as requested by such Holder, and (ii) pay all accrued but
unpaid dividends on account of the Preferred Stock for which the Company shall
have

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failed to issue Common Stock certificates hereunder, in cash. The redemption
price per share shall be equal to the product of (A) the average Per Share
Market Value for the five (5) Trading Days immediately preceding (1) the
Conversion Date or (2) the date of payment in full by the Company of such
redemption price, whichever is greater, and (ii) the Conversion Ratio
calculated on the Conversion Date. If the Holder has requested that the
Company redeem shares of Preferred Stock pursuant to this Section and the
Company fails for any reason to pay the redemption price under (2) above within
seven days after such notice is deemed delivered pursuant to Section 5(h), the
Company will pay, to such Holder, interest on the redemption price at a rate of
15% per annum, in cash or shares of Common Stock at the option of the Holder,
accruing from such seventh day until the redemption price and any accrued
interest thereon is paid in full.

(c) (i) The conversion price for each share of Preferred
Stock (the "Conversion Price") in effect on any Conversion Date shall be the
lesser of (A) $2.45 (the "Initial Conversion Price") or (B) 80% of the average
Per Share Market Value for the five (5) Trading Days immediately preceding the
Conversion Date; provided that, (a) if the Underlying Shares Registration
Statement is not filed on or prior to the 20th day after the Original Issue
Date, or (b) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended, within five (5) days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that an Underlying Shares Registration Statement will not be
"reviewed," or (c) if the Underlying Shares Registration Statement is not
declared effective by the Commission on or prior to the 90th day after the
Original Issue Date, or (d) if such Underlying Shares Registration Statement is
filed with and declared effective by the Commission but thereafter ceases to be
effective (whether by action of the Commission or by virtue of a notice
delivered by the Company) as to all Registrable Securities (as such term is
defined in the Registration Rights Agreement) at any time prior to the
expiration of the "Effectiveness Period" (as such term as defined in the
Registration Rights Agreement), without being succeeded within 10 Business Days
by a subsequent Underlying Shares Registration Statement filed with and
declared effective by the Commission, or (e) if trading in the Common Stock
shall be suspended for any reason for more than three Trading Days, or (f) if
the conversion rights of the Holders of Preferred Stock hereunder are suspended
for any reason (any such failure being referred to as an "Event," and for
purposes of clauses (a), (c) and (f) the date on which such Event occurs, or
for purposes of clause (b) the date on which such five (5) days period is
exceeded, or for purposes of clause (d) the date which such 10 Business Day-
period is exceeded, or for purposes of clause (e) the date on which such three
Trading Day period is exceeded, being referred to as "Event Date"), the
Conversion Price shall be decreased by 2.5% each month (i.e., 77.5% as of the
Event Date and 75% as of the one month anniversary of the Event Date) until the
earlier to occur of the second month anniversary after the Event Date and such
time as the applicable Event is cured. Commencing the second month anniversary
after the Event Date, at the option of each Holder for each applicable monthly
period either (a) the Company shall pay to the Holders of the Preferred Stock
2.5% of the product of the number of outstanding shares of Preferred Stock and
the Stated Value (each Holder being entitled to receive such portion of such
amount as equals its pro rata portion of the Preferred Stock then outstanding),
in cash or (b) the Conversion Price shall be decreased by 2.5% for each
additional such month (to be effective in full on the monthly applicable Event
Date) as liquidated

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damages, and not as a penalty on the first day of each monthly anniversary of
the Event Date in either case until such time as the applicable Event is cured.
Any decrease in the Conversion Price pursuant to this Section shall continue
notwithstanding the fact that the Event causing such decrease has been
subsequently cured. The provisions of this Section are not exclusive and shall
in no way limit the Company's obligations under the Registration Rights
Agreement. Notwithstanding anything to the contrary set forth herein, the
Company may not, without the prior written consent of the Holders, pay
liquidated damages hereunder in cash unless it shall have received the prior
written consent of all lenders of the Company or its Affiliates that have the
right to require such consent or to subordinate any such cash payment, which
consent shall provide that the payment by the Company of any such liquidated
damages hereunder (and the retention of such sum by the receiving Holder) is
not subject to any applicable subordination rights of such lender.

(ii) If the Company, at any time while any shares of
Preferred Stock are outstanding, (a) shall pay a stock dividend or otherwise
make a distribution or distributions on shares of its Junior Securities payable
in shares of Common Stock, (b) subdivide outstanding shares of Common Stock
into a larger number of shares, (c) combine outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of shares of
Common Stock any shares of capital stock of the Company, the Initial Conversion
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 5(c)(ii) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

(iii) If the Company, at any time while any shares of
Preferred Stock are outstanding, shall issue rights or warrants to all Holders
of Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Per Share Market Value of Common Stock
at the record date mentioned below, the Initial Conversion Price shall be
multiplied by a fraction, of which the denominator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase, and of which the
numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total
number of shares so offered would purchase at such Per Share Market Value.
Such adjustment shall be made whenever such rights or warrants are issued, and
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such rights or warrants. However, upon the
expiration of any right or warrant to purchase Common Stock the issuance of
which resulted in an adjustment in the Initial Conversion Price pursuant to
this Section 5(c)(iii), if any such right or warrant shall expire and shall not
have been exercised, the Initial Conversion Price shall immediately upon such
expiration be recomputed and effective immediately upon such expiration be
increased to the price which it would have been (but reflecting any other
adjustments in the Initial Conversion Price made pursuant to the

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provisions of this Section 5 after the issuance of such rights or warrants) had
the adjustment of the Initial Conversion Price made upon the issuance of such
rights or warrants been made on the basis of offering for subscription or
purchase only that number of shares of Common Stock actually purchased upon the
exercise of such rights or warrants actually exercised.

(iv) If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all Holders of Common
Stock (and not to Holders of Preferred Stock) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Sections 5(c)(ii) and (iii) above), then in
each such case the Initial Conversion Price at which each share of Preferred
Stock shall thereafter be convertible shall be determined by multiplying the
Initial Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value of Common
Stock determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors in
good faith; provided, however, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value
shall be determined by a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company) (an "Appraiser") selected in good faith by the
Holders of a majority in interest of the shares of Preferred Stock then
outstanding; and provided, further, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the Holders of
Preferred Stock of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date mentioned above.

(v) All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.

(vi) Whenever the Initial Conversion Price is adjusted
pursuant to Section 5(c)(ii),(iii) or (iv), the Company shall promptly mail to
each Holder of Preferred Stock, a notice setting forth the Initial Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.

(vii)

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the Preferred Stock then outstanding shall have the right thereafter to convert
such shares only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by Holders of Common Stock
following such reclassification or share exchange, and the Holders of the
Preferred Stock shall be entitled upon such event to receive such amount of
securities, cash or property as the shares of the Common Stock of the Company
into which such shares of Preferred Stock could have been converted immediately
prior to such reclassification or share exchange would have been entitled.

B. In the case of any consolidation or merger of the
Company with or into another person or entity pursuant to which the Company
will not be the surviving entity, any sale or transfer of all or substantially
all of the assets of the Company, sale or transfer, or compulsory share
exchange pursuant to which the Common Stock is converted into securities of an
entity other than the Company, the Holders of the Preferred Stock then
outstanding (1) shall be issued shares of convertible preferred stock or
convertible debentures of the entity with which such consolidation, merger,
sale or transfer, or share exchange takes place, which newly issued shares or
debentures (as the case may be), shall have terms substantially similar in all
material respects to the terms of the Preferred Stock (including with respect
to conversion) and shall be entitled to all of the rights and privileges of a
Holder of Preferred Stock set forth in this Certificate of Designation, the
Registration Rights Agreement and the Purchase Agreement (including, without
limitation, as such rights relate to the acquisition, transferability,
registration and listing of such freely tradeable shares of stock or other
securities issuable upon conversion of such convertible preferred stock or
convertible debentures), and (2) simultaneously with such issuance of
convertible preferred stock or convertible debentures, shall have the right to
convert such shares only into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by Holders of Common Stock
following such consolidation, merger, sale or transfer, or share exchange. In
such case, the conversion price for such shares shall retain the discounts
present in the Certificate of Designation. The conversion price for such newly
issued shares shall be based upon the amount of securities, cash or property
that each share of Common Stock would receive in such transaction, the
Conversion Ratio immediately prior to the effective or closing date for such
transaction and the Conversion Price stated herein.

The terms of any such reclassification, consolidation, merger, sale,
transfer or share exchange under this Section 5(c)(vii) shall include such
terms so as to continue to give to the Holder of Preferred Stock the right to
receive the securities, cash or property set forth in this Section 5(c)(vii)
upon any conversion or redemption following such reclassification,
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers,
sales, transfers or share exchanges.

(viii) If:

A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or

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B. the Company shall declare a special
nonrecurring cash dividend on or a redemption
of its Common Stock; or

C. the Company shall authorize the granting to
all Holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or

D. the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company, any consolidation or merger to
which the Company is a party, any sale or
transfer of all or substantially all of the
assets of the Company, of any compulsory
share of exchange whereby the Common Stock
is converted into other securities, cash or
property; or

E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or
winding up of the affairs of the Company;

then the Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of Preferred Stock, and shall cause to be mailed
to the Holders of Preferred Stock at their last addresses as they shall appear
upon the stock books of the Company, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the Holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that Holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however,
that the failure to mail such notice or any defect therein or in the mailing
thereof shall not affect the validity of the corporate action required to be
specified in such notice. Holders are entitled to convert shares of Preferred
Stock during the 30-day period commencing the date of such notice to the
effective date of the event triggering such notice.

(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Preferred Stock and payment of
dividends on Preferred Stock, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders of Preferred Stock, not less than such number of shares of Common Stock
as shall (subject to any additional requirements of the Company as to
reservation of such shares set forth in the Purchase Agreement) be issuable
(taking into account the adjustments and restrictions of Section 5(c)) upon the
conversion of all outstanding shares of Preferred Stock and payment of
dividends hereunder.

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The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and freely tradeable.

(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not, or is unable, to make such a cash payment, the Holder
of a share of Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.

(f) The issuance of certificates for shares of Common Stock on
conversion of Preferred Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the Company
shall not be required to pay any tax that may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such shares of Preferred
Stock so converted and the Company shall not be required to issue or deliver
such certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.

(g) Shares of Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued shares
of undesignated stock.

(h) Any and all notices or other communications or deliveries
to be provided by the Holders of the Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed to
the attention of the Chief Executive Officer of the Company at the facsimile
telephone number or address of the principal place of business of the Company
as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be
in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to each Holder of Preferred Stock at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
4:30 p.m. (Eastern Time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 4:30 p.m. (Eastern Time) on any
date and earlier than 11:59 p.m. (Eastern Time) on such date, (iii) four days
after deposit in the United States mails, (iv) the Business Day following the
date of mailing, if send by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to be
given.

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<PAGE> 74
Section 6. Redemption.

(a) The Company shall have the right, exercisable at any time
upon 20 Trading Days notice to the Holders of the Preferred Stock given at any
time after the Original Issue Date to redeem, from funds legally available
therefor at the time of such redemption, all or any portion of the shares of
Preferred Stock which have not previously been converted or redeemed, at a
price per share equal to the product of (i) the average Per Share Market Value
for the five (5) Trading Days immediately preceding (1) the date of the
redemption notice referenced above or (2) the date of payment in full by the
Company of the redemption price hereunder, whichever is greater, and (ii) the
Conversion Ratio calculated on the date of such redemption notice. The entire
redemption price shall be paid in cash. Holders of Preferred Stock may convert
any shares of Preferred Stock, including shares subject to a redemption notice
given under this Section, during the period from the date of such redemption
notice through the 18th Trading Day thereafter.

(b) If any portion of the applicable redemption price under
Section 6(a) shall not be paid by the Company within seven (7) calendar days
after the date due, interest shall accrue thereon at the rate of 15% per annum
until the redemption price plus all such interest is paid in full (which amount
shall be paid as liquidated damages and not as a penalty). In addition, if any
portion of such redemption price remains unpaid for more than 7 calendar days
after the date due, the Holder of the Preferred Stock subject to such
redemption may elect, by written notice to the Company given within 30 days
after the date due, to either (i) demand conversion in accordance with the
formula and the time frame therefor set forth in Section 5 of all of the shares
of Preferred Stock for which such redemption price, plus accrued liquidated
damages thereof, has not been paid in full (the "Unpaid Redemption Shares"), in
which event the Per Share Market Price for such shares shall be the lower of
the Per Share Market Price calculated on the date such redemption price was
originally due and the Per Share Market Price as of the Holder's written demand
for conversion, or (ii) invalidate ab initio such redemption, notwithstanding
anything herein contained to the contrary. If the Holder elects option (i)
above, the Company shall within three (3) Trading Days of its receipt of such
election deliver to the Holder the shares of Common Stock issuable upon
conversion of the Unpaid Redemption Shares subject to such Holder conversion
demand and otherwise perform its obligations hereunder with respect thereto;
or, if the Holder elects option (ii) above, the Company shall promptly, and in
any event not later than three (3) Trading Days from receipt of Holder's notice
of such election, return to the Holder all of the Unpaid Redemption Shares.
Notwithstanding anything to the contrary contained herein, the Company may not,
without the written consent of the Holder, redeem shares of Preferred Stock
unless both the payment thereof and the retention of such paid cash by the
Holder is consented to in writing free of any subordination prior thereto by
all lenders of the Company who by agreement have the right to consent to or
force the subordination of such payment.

Section 7. Definitions. For the purposes hereof, the
following terms shall have the following meanings:

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<PAGE> 75
"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.

"Common Stock" means the Company's common stock, $.001 par value
per share, of the Company and stock of any other class into which such shares
may hereafter have been reclassified or changed.

"Conversion Ratio" means, at any time, a fraction, of which the
numerator is Stated Value plus accrued but unpaid dividends (including any
accrued but unpaid interest thereon) but only to the extent not paid in shares
of Common Stock in accordance with the terms hereof, and of which the
denominator is the Conversion Price at such time.

"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to the Preferred Stock.

"Original Issue Date" shall mean the date of the first issuance
of any shares of the Preferred Stock regardless of the number of transfers of
any particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.

"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the American
Stock Exchange or other stock exchange or quotation system on which the Common
Stock is then listed or if there is no such price on such date, then the
closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (b) if the Common Stock is not listed then on the
American Stock Exchange or any stock exchange or quotation system, the closing
bid price for a share of Common Stock in the over-the-counter market, as
reported by the Nasdaq Stock Market or in the National Quotation Bureau
Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common
Stock is not then reported by the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting
prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Appraiser selected in good faith by the
Holders of a majority in interest of the shares of the Preferred Stock;
provided, however, that the Company, after receipt of the determination by such
Appraiser, shall have the right to select an additional Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Appraiser.

"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.

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<PAGE> 76
"Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of March 31, 1997, between the Company and the
original Holder of the Preferred Stock.

"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 31, 1997, by and between the Company and the
original Holder of Preferred Stock.

"Trading Day" means (a) a day on which the Common Stock is traded
on the American Stock Exchange or other stock exchange or market on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
American Stock Exchange or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).

"Underlying Shares" means the number of shares of Common Stock
into which the Shares are convertible in accordance with the terms hereof and
the Purchase Agreement.

RESOLVED FURTHER, that the Senior Vice President and Secretary of
the Company be, and they hereby are, authorized and directed to prepare,
execute, verify, and file with the Secretary of State of Delaware, a
Certificate of Designation in accordance with these resolutions and as required
by law.

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<PAGE> 77
IN WITNESS WHEREOF, Phoenix Network, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Jonathan F. Beizer, its Senior Vice President, and attested by Ernest J.
Panasci, its Secretary, this 3rd day of April, 1997.

PHOENIX NETWORK, INC.

By: /s/ Jonathan F. Beizer
-------------------------------
Name: Jonathan F. Beizer
Title: Senior Vice President

Attest:

By: /s/ Ernest J. Panasci
-----------------------
Name: Ernest J. Panasci
Title: Secretary

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<PAGE> 78
EXHIBIT A

NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER

(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)

The undersigned hereby elects to convert the number of shares of Series G
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.001 per share (the "Common Stock"), of Phoenix Network, Inc. (the
"Company") pursuant to the terms of the Certificate of Designation of Series G
Convertible Preferred Stock of the Company, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.

Conversion calculations:
---------------------------------------------
Date to Effect Conversion

---------------------------------------------
Number of shares of Preferred Stock
to be Converted

---------------------------------------------
Number of shares of Common Stock
to be Issued

---------------------------------------------
Applicable Conversion Price

---------------------------------------------
Signature

---------------------------------------------
Name

---------------------------------------------
Address

The Company undertakes to promptly upon its receipt of this conversion notice
(and, in any case prior to the time it effects the conversion requested
hereby), notify the converting Holder by facsimile of the number of shares of
Common Stock outstanding on such date and the number of shares of Common Stock
which would be issuable to the Holder if the conversion requested in this
conversion notice were effected in full, whereupon, if the Company determines
that such conversion would result in it owning in excess of 4.9% of the
outstanding shares of Common Stock on such date, the Company shall convert up
to an amount equal to 4.9% of the outstanding shares of Common Stock and issue
to the Holder one or more certificates representing shares of Preferred Stock
which have not been converted as a result of this provision.
<PAGE> 79
EXHIBIT B

NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY

The undersigned in the name and on behalf of Phoenix Network, Inc. (the
"Company") hereby notifies the addressee hereof that the Company hereby elects
to exercise its right to convert [ ] shares of its Series G Convertible
Preferred Stock (the "Preferred Stock") held by the Holder into shares of
Common Stock, par value $.001 per share (the "Common Stock") of the Company
according to the terms hereof, as of the date written below. No fee will be
charged to the Holder for any conversion hereunder, except for such transfer
taxes, if any which may be incurred by the Company if shares are to be issued
in the name of a person other than the person to whom this notice is addressed.

Conversion calculations:
---------------------------------------------
Date to effect Conversion

---------------------------------------------
Number of shares of Preferred Stock
to be Converted

---------------------------------------------
Number of shares of Common Stock
to be Issued

---------------------------------------------
Applicable Conversion Price

---------------------------------------------
Name of Holder

---------------------------------------------
Address of Holder
<PAGE> 80

CERTIFICATE OF DESIGNATION OF
SERIES I CONVERTIBLE PREFERRED STOCK OF
PHOENIX NETWORK, INC.

The undersigned, Jonathan F. Beizer and Ernest J. Panasci, hereby
certify that:

I. They are the duly elected and acting Senior Vice President
and Secretary, respectively, of Phoenix Network, Inc., a Delaware corporation
(the "Company").

II. The Certificate of Incorporation of the Company authorizes
5,000,000 shares of preferred stock, par value $.001 per share, of which
150,000 are issued and outstanding.

III. The following is a true and correct copy of resolutions
duly adopted by the Board of Directors of the Company (the "Board of
Directors") at a meeting duly held July 2, 1997, which constituted all
requisite action on the part of the Company for adoption of such resolutions.

RESOLUTIONS

Section 1. Designation, Amount and Par Value. The series of
preferred stock shall be designated as the Series I Convertible Preferred Stock
(the "Preferred Stock"), and the
<PAGE> 81
number of shares so designated shall be 125,000 (which shall not be subject to
increase without the consent of the holders ("Holder") thereof). Each share of
Preferred Stock shall have a par value of $.001 per share and a stated value of
$20 per share (the "Stated Value").

Section 2. Dividends.

(iii) the shares of Common Stock to be issued in respect
of such dividends are not listed on the American Stock Exchange (or Nasdaq
National Market, Nasdaq SmallCap Market or The New York Stock Exchange) and any
other exchange or quotation system on which the Common Stock is then listed for
trading; or

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<PAGE> 82
(iv) the issuance of such shares would result in the
recipient thereof beneficially owning, in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended, more than
4.9% of the issued and outstanding shares of Common Stock.

Section 5. Conversion.

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<PAGE> 83
of the Holder in whole or in part at any time after the expiration of the
earlier to occur of: (A) 75 days after the Original Issue Date or (B) the date
the Securities and Exchange Commission (the "Commission") declares effective
under the Securities Act of 1933, as amended (the "Securities Act"), the
registration statement contemplated by the Registration Rights Agreement, dated
the Original Issue Date (the "Registration Rights Agreement"), between the
Company and the original Holder of the Preferred Stock, pursuant to which the
Company is, among other things, required to register the resale of the shares
of Common Stock issuable upon conversion of the Preferred Stock (the
"Underlying Shares Registration Statement"). The Holder shall effect
conversions by surrendering the certificate or certificates representing the
shares of Preferred Stock to be converted to the Company, duly endorsed or
accompanied by a validly executed stock power, together with the form of
conversion notice attached hereto as Exhibit A (the "Holder Conversion
Notice"). Each Holder Conversion Notice shall specify the number of shares of
Preferred Stock to be converted and the date on which such conversion is to be
effected, which date may not be prior to the date the Holder delivers such
Holder Conversion Notice by facsimile (the "Holder Conversion Date"). If no
Holder Conversion Date is specified in a Holder Conversion Notice, the Holder
Conversion Date shall be the date that the Holder Conversion Notice is deemed
delivered pursuant to Section 5(h). Subject to Sections 5(b) and 5(a)(iii)
hereof and Section 4.10 of the Purchase Agreement, each Holder Conversion
Notice, once given, shall be irrevocable. If the Holder is converting less
than all shares of Preferred Stock represented by the certificate or
certificates tendered by the Holder with the Holder Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company
shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 5(b)) a certificate for such number of shares as have not been
converted.

-4-
<PAGE> 84
Conversion Notice and a Company Conversion Notice are sometimes referred to as
a "Conversion Notice." Any conversion pursuant to this Section 5(a)(ii) shall
be subject to Section 5(b) with respect to consequences of the Company's
failure to deliver shares of Common Stock in respect of a conversion under this
Section. If the Company is converting less than all shares of Preferred Stock
represented by the certificate or certificates tendered by the Holder in
response to a Company Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Company shall promptly deliver to such
tendering Holder (in the manner and within the time set forth in Section 5(b))
a certificate for such number of shares as have not been converted.

-5-
<PAGE> 85
majority of the total votes cast on the proposal, in person or by proxy, at a
meeting of the shareholders of the Company held in accordance with the
Company's Certificate of Incorporation and by-laws, of the issuance by the
Company of shares of Common Stock exceeding the Issuable Maximum as a
consequence of the conversion of Preferred Stock into Common Stock at a price
less than the greater of the book or market value on the Original Issue Date as
and to the extent required pursuant to Rule 713 of the American Stock Exchange
or Rule 4460(i) of the Nasdaq Stock Market (or any successor or replacement
provision thereof), as applicable.

-6-
<PAGE> 86
pursuant to this Section and the Company fails for any reason to pay the
redemption price under (2) above within seven days after such notice is deemed
delivered pursuant to Section 5(h), the Company will pay, to such Holder,
interest on the redemption price at a rate of 15% per annum, in cash or shares
of Common Stock at the option of the Holder, accruing from such seventh day
until the redemption price and any accrued interest thereon is paid in full.

(c) (i) The conversion price for each share of Preferred
Stock (the "Conversion Price") in effect on any Conversion Date shall be the
lesser of (A) $1.875 (the "Initial Conversion Price") or (B) 83% of the average
of the lowest five (5) Per Share Market Values during the 10 Trading Days
immediately preceding such Conversion Date; provided that, (a) if the
Underlying Shares Registration Statement is not filed on or prior to the 20th
day after the Original Issue Date, or (b) the Company fails to file with the
Commission a request for acceleration in accordance with Rule 12d1-2
promulgated under the Securities Exchange Act of 1934, as amended, within five
(5) days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that an Underlying Shares Registration
Statement will not be "reviewed" or be subject to further review or comment or
(c) if the Underlying Shares Registration Statement is not declared effective
by the Commission on or prior to the 90th day after the Original Issue Date, or
(d) if such Underlying Shares Registration Statement is filed with and declared
effective by the Commission but thereafter ceases to be effective (whether by
action of the Commission or by virtue of a notice delivered by the Company) as
to all Registrable Securities (as such term is defined in the Registration
Rights Agreement) at any time prior to the expiration of the "Effectiveness
Period" (as such term as defined in the Registration Rights Agreement), without
being succeeded within 10 Business Days by a subsequent Underlying Shares
Registration Statement filed with and declared effective by the Commission, or
(e) if trading in the Common Stock shall be suspended for any reason for more
than three Trading Days, or (f) if the conversion rights of the Holders of
Preferred Stock hereunder are suspended for any reason (any such failure being
referred to as an "Event," and for purposes of clauses (a), (c) and (f) the
date on which such Event occurs, or for purposes of clause (b) the date on
which such five (5) days period is exceeded, or for purposes of clause (d) the
date which such 10 Business Day-period is exceeded, or for purposes of clause
(e) the date on which such three Trading Day period is exceeded, being referred
to as an"Event Date"), the Conversion Price shall be decreased by 2.5% each
month (i.e., 80.5% as of the Event Date and 78% as of the one month anniversary
of the Event Date) until the earlier to occur of the second month anniversary
after the Event Date and such time as the applicable Event is cured.
Commencing the second month anniversary after the Event Date, at the option of
each Holder for each applicable monthly period either (a) the Company shall pay
to the Holders of the Preferred Stock 2.5% of the product of the number of
outstanding shares of Preferred Stock and the Stated Value (each Holder being
entitled to receive such portion of such amount as equals its pro rata portion
of the Preferred Stock then outstanding), in cash or (b) the Conversion Price
shall be decreased by 2.5% for each additional such month (to be effective in
full on the monthly applicable Event Date) as liquidated damages, and not as a
penalty on the first day of each monthly anniversary of the Event Date in
either case until such time as the applicable Event is cured. Any decrease in
the Conversion Price pursuant to this Section shall continue notwithstanding
the fact that the Event causing such decrease has been subsequently cured. The
provisions of this Section are not exclusive and shall in no way limit the
Company's

-7-
<PAGE> 87
obligations under the Registration Rights Agreement. Notwithstanding anything
to the contrary set forth herein, the Company may not, without the prior
written consent of the Holders, pay liquidated damages hereunder in cash unless
it shall have received the prior written consent of all lenders of the Company
or its Affiliates that have the right to require such consent or to subordinate
any such cash payment, which consent shall provide that the payment by the
Company of any such liquidated damages hereunder (and the retention of such sum
by the receiving Holder) is not subject to any applicable subordination rights
of such lender.

-8-
<PAGE> 88
(iv) If the Company, at any time while shares of
Preferred Stock are outstanding, shall distribute to all Holders of Common
Stock (and not to Holders of Preferred Stock) evidences of its indebtedness or
assets or rights or warrants to subscribe for or purchase any security
(excluding those referred to in Sections 5(c)(ii) and (iii) above), then in
each such case the Initial Conversion Price at which each share of Preferred
Stock shall thereafter be convertible shall be determined by multiplying the
Initial Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value of Common
Stock determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors in
good faith; provided, however, that in the event of a distribution exceeding
ten percent (10%) of the net assets of the Company, such fair market value
shall be determined by a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial
statements of the Company) (an "Appraiser") selected in good faith by the
Holders of a majority in interest of the shares of Preferred Stock then
outstanding; and provided, further, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the Holders of
Preferred Stock of the portion of assets or evidences of indebtedness so
distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made
and shall become effective immediately after the record date mentioned above.

(v) All calculations under this Section 5 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.

(vii)

A. In the case of any reclassification of the
Common Stock into other securities of the Company or any such compulsory share
exchange pursuant to which the Common Stock is converted into cash, property or
other securities of the Company, the Holders of the Preferred Stock then
outstanding shall have the right thereafter to convert such shares only into
the shares of stock and other securities, cash and property receivable upon or
deemed to be held by Holders of Common Stock following such reclassification or
share exchange, and the Holders of the Preferred Stock shall be entitled upon
such event to receive such amount of securities, cash or property as the shares
of the Common Stock of the Company into which such shares of Preferred

-9-
<PAGE> 89
Stock could have been converted immediately prior to such reclassification or
share exchange would have been entitled.

(viii) If:

A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or

B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or

-10-
<PAGE> 90
C. the Company shall authorize the granting to
all Holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or

E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or
winding up of the affairs of the Company;

-11-
<PAGE> 91
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the Per Share Market Value at such time. If
the Company elects not, or is unable, to make such a cash payment, the Holder
of a share of Preferred Stock shall be entitled to receive, in lieu of the
final fraction of a share, one whole share of Common Stock.

(g) Shares of Preferred Stock converted into Common Stock
shall be canceled and shall have the status of authorized but unissued shares
of undesignated stock.

(h) Any and all notices or other communications or deliveries
to be provided by the Holders of the Preferred Stock hereunder, including,
without limitation, any Conversion Notice, shall be in writing and delivered
personally, by facsimile, sent by a nationally recognized overnight courier
service or sent by certified or registered mail, postage prepaid, addressed to
the attention of the Chief Executive Officer of the Company at the facsimile
telephone number or address of the principal place of business of the Company
as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be
in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to each Holder of Preferred Stock at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
4:30 p.m. (Eastern Time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 4:30 p.m. (Eastern Time) on any
date and earlier than 11:59 p.m. (Eastern Time) on such date, (iii) four days
after deposit in the United States mails, (iv) the Business Day following the
date of mailing, if sent by nationally recognized overnight courier service, or
(v) upon actual receipt by the party to whom such notice is required to be
given.

-12-
<PAGE> 92
Section 6. Redemption.

-13-
<PAGE> 93
Section 7. Definitions. For the purposes hereof, the
following terms shall have the following meanings:

"Business Day" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.

"Common Stock" means the Company's common stock, $.001 par value
per share, of the Company and stock of any other class into which such shares
may hereafter have been reclassified or changed.

"Junior Securities" means the Common Stock and all other equity
securities of the Company which are junior in rights and liquidation preference
to the Preferred Stock.

"Original Issue Date" shall mean the Initial Closing Date as
defined in the Purchase Agreement regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.

"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.

-14-
<PAGE> 94
"Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of July 17, 1997, between the Company and the
original Holder of the Preferred Stock.

"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of July 17, 1997, by and between the Company and the
original Holder of Preferred Stock.

"Underlying Shares" means the number of shares of Common Stock
into which the Shares are convertible in accordance with the terms hereof and
the Purchase Agreement.

-15-
<PAGE> 95
IN WITNESS WHEREOF, Phoenix Network, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
Jonathan F. Beizer, its Senior Vice President, and attested by Ernest J.
Panasci, its Secretary, this 17th day of July, 1997.

PHOENIX NETWORK, INC.

By: /s/ Jonathan F. Beizer
-------------------------
Name: Jonathan F. Beizer
Title: Senior Vice President

Attest:

By: /s/ Ernest J. Panasci
------------------------
Name: Ernest J. Panasci
Title: Secretary

-16-
<PAGE> 96
EXHIBIT A

NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER

(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)

The undersigned hereby elects to convert the number of shares of Series I
Convertible Preferred Stock indicated below, into shares of Common Stock, par
value $.001 per share (the "Common Stock"), of Phoenix Network, Inc. (the
"Company") pursuant to the terms of the Certificate of Designation of Series I
Convertible Preferred Stock of the Company, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the Holder for
any conversion, except for such transfer taxes, if any.

Conversion calculations:
--------------------------------------
Date to Effect Conversion

--------------------------------------
Number of shares of Preferred Stock
to be Converted

--------------------------------------
Number of shares of Common Stock
to be Issued

-------------------------------------
Applicable Conversion Price

-------------------------------------
Signature

-------------------------------------
Name

-------------------------------------
Address

NOTICE OF CONVERSION AT
THE ELECTION OF THE COMPANY

The undersigned in the name and on behalf of Phoenix Network, Inc. (the
"Company") hereby notifies the addressee hereof that the Company hereby elects
to exercise its right to convert [ ] shares of its Series I Convertible
Preferred Stock (the "Preferred Stock") held by the Holder into shares of
Common Stock, par value $.001 per share (the "Common Stock") of the Company
according to the terms hereof, as of the date written below. No fee will be
charged to the Holder for any conversion hereunder, except for such transfer
taxes, if any which may be incurred by the Company if shares are to be issued
in the name of a person other than the person to whom this notice is addressed.

Conversion calculations: --------------------------------------
Date to Effect Conversion

--------------------------------------
Number of shares of Preferred Stock
to be Converted

--------------------------------------
Number of shares of Common Stock
to be Issued

--------------------------------------
Applicable Conversion Price

--------------------------------------
Signature

--------------------------------------
Name

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Address

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EXHIBIT 4.3

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CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

Between

PHOENIX NETWORK, INC.

and

JNC OPPORTUNITY FUND LTD.

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July 17, 1997

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EXHIBIT 4.4

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this "Agreement") is made
and entered into as of July 17, 1997, between Phoenix Network, Inc., a Delaware
corporation (the "Company"), JNC Opportunity Fund Ltd., a Cayman Islands
corporation ("JNC"), and such other mutually acceptable parties signatory
hereto (such other parties, together with JNC, the "Purchasers").

This Agreement is made pursuant to the Convertible Preferred
Stock Purchase Agreement, dated as of the date hereof between the Company and
JNC (as amended, supplemented, restated or otherwise modified in accordance
with its terms, the "Purchase Agreement").

The Company and the Purchasers hereby agree as follows:

1. Definitions

Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

"Advice" shall have meaning set forth in Section 3(o).

"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.

"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in
the state of New York generally are authorized or required by law or other
government actions to close.

"Commission" means the Securities and Exchange Commission.

"Common Stock" means the Company's Common Stock, par value
$.001 per share.

"Effectiveness Date" means the 75th day after the Initial
Closing Date.

"Effectiveness Period" shall have the meaning set forth in
Section 2(a).

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EXHIBIT 23.2

CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS

We have issued our reports dated March 12, 1997, accompanying the consolidated
financial statements of Phoenix Network, Inc. and subsidiaries appearing in the
1996 Annual Report of the Company to its stockholders and accompanying the
schedule included in the Annual Report on Form 10-K for the year ended December
31, 1996. We have issued our reports dated March 28, 1996 (except for note A,
as to which the date is October 8, 1996) accompanying the 1995 consolidated
financial statements and supplemental consolidated financial statements of
Phoenix Network, Inc. and subsidiaries and our report dated February 16, 1996
accompanying the 1995 consolidated financial statements of AmeriConnect, Inc.
and subsidiaries appearing in the Company's Form 8-K dated January 23, 1997. We
consent to the incorporation by reference in the Form S-3 Registration Statement
of the aforementioned reports and to the use of our name as it appears under the
caption "Experts."

/s/ GRANT THORNTON LLP

GRANT THORNTON LLP

Denver, Colorado
August 7, 1997