Certificate of Designation of Rights and Preferences 
                        for Series C Preferred Stock
                                     of
                              fonix corporation
 
     Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, fonix corporation, a Delaware corporation (the "Company"), does
hereby certify:
 
     FIRST: That pursuant to authority expressly vested in it by the
Certificate of Incorporation of the Company, the Board of Directors of the
Company has adopted the following unanimous consent resolutions establishing
a new series of Preferred Stock of the Company, consisting of 187,500 shares
designated "Series C Convertible Preferred Stock," with such powers,
designations, preferences and relative participating, optional or other
rights, if any, and the qualifications, limitations or restrictions thereof,
as are set forth in the resolutions :

     FURTHER RESOLVED, that the Company's Board of Directors
     hereby unanimously approves the designation and issuance of the
     Series C Preferred Stock according to the terms and conditions
     as set forth in Exhibit D and authorizes and instructs the
     Company's Executive Officers to proceed in filing the
     Certificate of Designation with the State of Delaware and to
     take such other action as shall be appropriate in connection
     with the issuance of the Series C Preferred Stock.


     SECOND: That said resolutions of the directors of the Company were
duly adopted in accordance with the provisions of Section 151(g)  of the
General Corporation Law of the State of Delaware.
 
     IN WITNESS WHEREOF, the undersigned hereby affirms, under penalties of
perjury, that the foregoing instrument is the act and deed of the Company
and that the facts stated therein are true.  Dated this 24th day of October,
1997.
 
                                 fonix corporation
 


                                 By: /s/ JEFFREY N. CLAYTON
                                    -------------------------------
                                      Jeffrey N. Clayton

                                      Title: Vice President and Secretary

<PAGE>
                              SERIES C TERMS

      Section 1. Designation, Amount and Par Value.  The series of
preferred stock shall be designated as the 5% Series C Convertible Preferred
Stock (the "Preferred Stock"), and the number of shares so designated and
authorized shall be 187,500.  Each share of Preferred Stock shall have a par
value of $.0001 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, quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing December
31, 1997, and on each Conversion Date (as hereinafter defined), cumulative
dividends on the Preferred Stock at the rate per share (as a percentage of
the Stated Value per share) equal to 5% per annum, payable in cash or shares
of Common Stock (as defined in Section 7) at the option of the Company.  The
number of shares of Common Stock issuable as payment of dividends hereunder
shall equal the aggregate dollar amount of dividends then being paid,
divided by the Conversion Price (as defined in Section 5(c)(i)) then in
effect.  Dividends on the Preferred Stock shall be calculated on the basis
of a 360-day year, 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 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
then held by each holder.  In order for the Company to exercise its right to
pay dividends in shares of Common Stock, the Company shall, no less than two
(2) Trading Days prior to the first day of the calendar quarter in which a
dividend payment date (other than a Conversion Date) occurs, provide the
holders of the Preferred Stock written notice of its intention to pay
dividends in shares of Common Stock.  In order for the Company to exercise
its right to pay dividends in shares of Common Stock on any Conversion Date,
the Company must provide written notice to the holders of Preferred Stock at
least one Trading Day prior to the issuance of shares of Common Stock as
payment therefor, which notice will remain in effect for subsequent
Conversion Notices until rescinded by the Company in a written notice to
such effect that is addressed to the holders of the Preferred Stock. 
Notwithstanding the foregoing, if any such holder shall deliver a Conversion
Notice (as hereinafter defined) within five (5) Trading Days after receipt
of such rescinding notice from the Company, such holder shall be entitled to
receive payment of dividends in shares of Common Stock.

     (b)  Notwithstanding anything to the contrary contained herein,
the Company may not issue shares of Common Stock in payment of dividends on
the Preferred Stock (and must deliver cash in respect thereof) if:  (  the
number of shares of Common Stock at the time authorized, unissued 

<PAGE>
and unreserved for all purposes, or held as treasury stock, is either
insufficient to issue such dividends in shares of Common Stock or the
Company has not duly reserved for issuance in respect of such dividends a
sufficient number of shares of Common Stock, ( such shares are not
registered for resale pursuant to an effective Underlying Securities
Registration Statement (as defined in Section 7) and may not be sold without
volume restrictions pursuant to Rule 144(k) promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), as determined by counsel to
the Company pursuant to a written opinion letter, addressed and acceptable
to the Company's transfer agent or other Person performing functions similar
thereto, ( such shares are not listed for trading on the Nasdaq SmallCap
Market, Nasdaq National Market, The New York Stock Exchange ("NYSE") or the
American Stock Exchange (the "AMEX") (and any other exchange, market or
trading facility in which the Common Stock is then listed for trading), ( 
the issuance of such shares would result in the recipient thereof
beneficially owning, determined in accordance with Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended, more than 4.999% of
the then issued and outstanding shares of Common Stock, unless the issuance
of shares of Common Stock in excess of such amount is then permitted by
Section 3.8 of the Purchase Agreement, or (v) the Company shall have failed
to timely satisfy its obligations pursuant to any Conversion Notice.

     Payment of dividends in shares of Common Stock is further subject to
the provision of Section 5(a)(ii).
 
     (c)  So long as any shares of Preferred Stock remain
outstanding, neither the Company nor any subsidiary thereof shall, without
the consent of the holders of 66 2/3% of the shares of Preferred Stock then
outstanding, redeem, repurchase 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. 
Notwithstanding the foregoing, the Company may redeem, repurchase or
otherwise acquire shares of the Company's Series B Convertible Preferred
Stock, provided that any such redemption, repurchase or acquisition is
carried out pro rata with the Preferred Stock.

      Section 3.  Voting Rights; Protective Provisions.  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 and shall cause its
subsidiaries not to, without the affirmative vote of each of the holders of
the Preferred Stock then outstanding,  alter or change adversely the powers,
preferences or rights given to the Preferred Stock, (b) alter or amend this
Certificate of Designation, (c) authorize or create any class of stock
ranking as to dividends or distribution of assets upon a Liquidation (as
defined in Section 4) or otherwise senior to or pari passu with the
Preferred Stock (other than the Company's Series B Convertible Preferred
Stock, which shall rank pari passu with the Preferred Stock), (d) amend its
certificate of incorporation, bylaws or other charter documents so as to
affect adversely any rights of any holders of the Preferred Stock, (e)
increase the authorized or designated number of shares of Preferred Stock,
(f) issue any additional shares of Preferred Stock or (g) enter into any
agreement with respect to the foregoing.

                                     -2-
<PAGE>
      Section 4.  Liquidation.  Upon any liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary (a
"Liquidation"), the holders of the 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, and all other amounts in respect thereof (including liquidated damages,
if any) then due and payable 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.

      Section 5.  Conversion.

     (a)(i)  Each share of Preferred Stock is convertible at the
option of the holder in whole or in part at any time after the Original
Issue Date into shares of Common Stock (subject to reduction pursuant to
Section 5(a)(ii) hereof and Section 3.8 of the Purchase Agreement) at the
Conversion Ratio (as defined in Section 7).  A holder shall effect
conversions by surrendering the certificate or certificates representing the
shares of Preferred Stock to be converted to the Company, together with the
form of conversion notice attached hereto as Exhibit A (the "Conversion
Notice").  Each 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 Conversion Notice by facsimile (the "Conversion Date").  If no
Conversion Date is specified in a Conversion Notice, the Conversion Date
shall be the date that the Conversion Notice is deemed delivered pursuant to
Section 5(i).  Subject to Sections 5(b) and 5(a)(ii) hereof and Section 3.8
of the Purchase Agreement, each Conversion Notice, once given, shall be
irrevocable.  If the holder is converting less than all of the shares of
Preferred Stock represented by the certificate or certificates tendered by
the holder with the 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)  Certain Regulatory Approval.  If on any Conversion
Date (A) the Common Stock is listed for trading on the Nasdaq National
Market, Nasdaq SmallCap Market, the NYSE or the AMEX, (B) the Conversion
Price then in effect is such that the aggregate number of shares of the
Common Stock that would then be issuable upon conversion in full of all of
the shares of Preferred Stock then outstanding, together with any shares of
the Common Stock previously issued upon conversion of Preferred Stock and as
payment of dividends thereon would equal or exceed 20% of the number of
shares of the Common Stock outstanding on the Original Issue Date 

                                  -3-
<PAGE>
(such maximum number of shares as would not equal or exceed such 20% limit,
the "Issuable Maximum"), and (C) the Company shall not have previously
obtained the vote of shareholders, if any, as may be required by the rules
and regulations of The Nasdaq Stock Market, the NYSE or the AMEX (as
applicable) applicable to approve the issuance of Common Stock in excess of
the Issuable Maximum in a private placement for less than the greater of
book or fair market value of the Common Stock (as applicable, the
"Shareholder Approval"), then the Company shall issue to the holder so
requesting a conversion of Preferred Stock its pro rata portion of the
Issuable Maximum in the same ratio that the number of shares of Preferred
Stock then outstanding and held by such holder bears to the aggregate number
of shares of Preferred Stock then outstanding and, with respect to the
remainder of the shares of Preferred Stock then held by such holder for
which a conversion in accordance with the Conversion Price would result in
an issuance of Common Stock in excess of such holder's pro rata portion of
the Issuable Maximum, the converting holder shall have the option to require
the Company to either (1) use its best efforts to obtain the Shareholder
Approval applicable to such issuance as soon as is possible, but in any
event not later than the 60th day after such request, or (2)(i) issue and
deliver to such holder a number of shares of Common Stock as equals (x) the
number of shares of Preferred Stock (or such portions thereof) tendered for
conversion in respect of the Conversion Notice at issue but for which a
conversion in accordance with the other terms hereof would result in an
issuance of Common Stock in excess of such holder's pro rata portion of the
Issuable Maximum, divided by (y) the Initial Conversion Price (as defined in
Section 5(c)(i)), and (ii) cash in an amount equal to the product of (x) the
Per Share Market Value on the Conversion Date and (y) the number of shares
of Common Stock in excess of such holder's pro rata portion of the Issuable
Maximum that would have otherwise been issuable to the holder in respect of
such conversion but for the provisions of this Section (such amount of cash
being hereinafter referred to as the "Discount Equivalent").  If the Company
fails to pay the Discount Equivalent in full pursuant to this Section within
seven (7) days after the date payable, the Company will pay interest thereon
at a rate of 18% per annum to the converting holder, accruing daily from the
Conversion Date until such amount, plus all such interest thereon, is paid
in full.  The entire Discount Equivalent, including interest thereon, shall
be paid in cash. 

     (b) Not later than three (3) Trading Days after a 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 issued
upon the conversion of shares of Preferred Stock (subject to reduction
pursuant to Section 5(a)(ii) hereof and Section 3.8 of the Purchase
Agreement), (ii) one or more certificates representing the number of shares
of Preferred Stock not converted, (iii) a bank check in the amount of
accrued and unpaid dividends (if the Company has elected or is required to
pay accrued and unpaid dividends in cash) and (iv) if the Company has
elected and is permitted hereunder to pay accrued dividends in shares of
Common Stock, 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 such number of shares of Common Stock as
are issuable on account of accrued dividends in such number as determined in
accordance with Section 2(a).  Notwithstanding the foregoing, 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, or the 

                                   -4-
<PAGE>
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.  The Company shall,
upon request of the holder, use its best efforts to deliver any certificate
or certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.  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, 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 (5th) Trading Day after the Conversion Date, the Company
shall pay to such holder, in cash, as liquidated damages and not as a
penalty, $2,500 for each day after such fifth (5th) 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
twelfth (12th) 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 and all other amounts then owing on account of the
Preferred Stock for which the Company shall have failed to issue Common
Stock certificates hereunder, in cash.  The redemption price for the shares
of Preferred Stock to be redeemed in accordance with this Section shall be
the Redemption Price (as defined in Section 7).  If the holder has requested
redemption pursuant to this Section and the Company fails for any reason to
pay the Redemption Price under this Section within seven (7) days after such
notice is given pursuant to Section 5(i), the Company will pay interest on
the unpaid portion of the Redemption Price at a rate of 18% per annum,
accruing from such seventh day until the Redemption Price and any accrued
interest thereon is paid in full.  Nothing herein shall limit a holder's
right to pursue actual damages for the Company's failure to deliver
certificates representing shares of Common upon conversion within the period
specified herein (including, without limitation, damages relating to any
purchase of shares of Common Stock by such holder to make delivery on a sale
effected in anticipation of receiving certificates representing shares of
Common Stock upon conversion, such damages to be in an amount equal to (A)
the aggregate amount paid by such holder for the shares of Common Stock so
purchased minus (B) the aggregate amount of net proceeds, if any, received
by such holder from the sale of the shares of Common Stock issued by the
Company pursuant to such conversion), and such holder shall have the right
to pursue all remedies available to it at law or in equity (including,
without limitation, a decree of specific performance and/or injunctive
relief).

     (c)(i)  The conversion price for each share of Preferred Stock
(the "Conversion Price") on any Conversion Date shall be the lesser of (A)
the Average Price on the Original Issue Date (the "Initial Conversion
Price") and (B) the Applicable Percentage (as defined in Section 7)
multiplied by the average of the five (5) lowest Per Share Market Values
during the fifteen (15) Trading Days immediately preceding the Conversion
Date; provided that, (a) if an Underlying Securities 

                                     -5-
<PAGE>
Registration Statement is not filed on or prior to the Filing Date (as such
term is defined in the Registration Rights Agreement), or (b) if the Company
fails to file with the Commission a request for acceleration in accordance
with Rule 461 promulgated under the Securities Act 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 Securities Registration
Statement will not be "reviewed" or is not subject to further review or
comment by the Commission, or (c) if the Underlying Securities Registration
Statement is not declared effective by the Commission on or prior to the
75th day after the Original Issue Date, or (d) if such Underlying Securities
Registration Statement is filed with and declared effective by the
Commission but thereafter ceases to be effective 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 by
a subsequent Underlying Securities Registration Statement filed with and
declared effective by the Commission within ten (10) days, or (e) if trading
in the Common Stock shall be suspended, or if the Common Stock shall be
delisted from trading, on the Nasdaq SmallCap Market or on any other
national securities market, exchange or trading facility on which the Common
Stock is then listed or quoted for trading for any reason for more than
three (3) Trading Days, or (f) if the conversion rights of any holder of
Preferred Stock are suspended for any reason or if any holder is not
permitted to resell Registrable Securities under the Underlying Securities
Registration Statement, or (g) if an amendment to the Underlying Securities
Registration Statement is not filed by the Company with the Commission
within ten (10) days after notification by the Commission that such
amendment is required in order for the Underlying Securities Registration
Statement to remain effective (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 clauses (d) and (g) the date
which such ten (10) day period is exceeded, or for purposes of clause (e)
the date on which such three (3) Trading Day period is exceeded, being
referred to as "Event Date"), the Conversion Price shall be decreased by
2.5% each month (i.e., the Conversion Price would decrease by 2.5% as of the
Event Date and additional 2.5% as of each monthly 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, the Company shall pay to each
holder of Preferred Stock the product of 2.5% and the aggregate of the
Stated Values for the shares of Preferred Stock then held by such holder, in
cash as liquidated damages, and not as a penalty on the first day of each
monthly anniversary of the Event Date 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.

     (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 on account of or to holders of Junior Securities payable
in shares of Common Stock, (b) subdivide outstanding shares of Common Stock
into a larger number of shares, or (c) combine outstanding shares of Common
Stock into a smaller number of shares, then the Initial Conversion Price
shall be multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event.  Any
adjustment made pursuant to this Section 5(c)(ii) 

                                    -6-
<PAGE>
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 or combination.

     (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, the denominator of which shall be
the number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and the numerator of which shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of
issuance of such rights or warrants plus the number of shares which the
aggregate offering price of the total number of shares so offered would
purchase at such Per Share Market Value.  Such adjustment shall be made
whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants.  However, upon the expiration
of any right or warrant to purchase 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 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

                                    -7-
<PAGE>
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)  In case of any reclassification of the Common Stock,
any consolidation or merger of the Company with or into another Person
pursuant to which the Company will not be the surviving entity, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property (collectively, a "Business
Combination"), the holders of the Preferred Stock then outstanding shall
have the right thereafter to, at their option, (A) convert such shares of
Preferred Stock, together with all accrued and unpaid dividends thereon,
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, consolidation, merger, sale, transfer 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, together with all accrued and unpaid dividends thereon could have
been converted immediately prior to such reclassification, consolidation,
merger, sale, transfer or share exchange would have been entitled, (B)
require the Company to redeem its shares of Preferred Stock then outstanding
at the Redemption Price, but only if the Business Combination was the
voluntary act of the Company (i.e. not a tender offer) or (C) to require
that the Person with whom such consolidation, merger, sale or transfer or
share exchange takes place issue and deliver to the holders of the Preferred
Stock shares of convertible preferred stock or convertible debentures of
such Person 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 herein, in the Registration Rights Agreement and in the Purchase
Agreement (including without limitation, such rights as relates to the
acquisition, transferability, registration and listing of the stock or other
securities issuable upon conversion of such convertible preferred stock or
convertible debentures).  In such case, the conversion price for such newly
issued convertible securities shall be based upon the amount of securities,
cash or property that each share of Common Stock would receive in the
transaction giving rise to the obligation to issue such securities, 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
consolidation, merger, sale, transfer or share exchange shall include such
terms so as to continue to give to the holders of Preferred Stock the right
to receive the securities, cash or property set forth in this Section upon
any conversion following such consolidation, merger, sale, transfer or share
exchange.  This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.  If the holder has requested redemption pursuant to this Section
and the Company fails for any reason to pay the Redemption Price under this
Section within seven (7) days after such notice is given pursuant to Section
5(i), the Company will pay interest on the unpaid portion of the Redemption
Price at a rate of 18% per annum, accruing from such seventh day until the
Redemption Price and any accrued interest thereon is paid in full.

                                   -8-
<PAGE>
     (vi)  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)  Whenever the Initial Conversion Price is adjusted
pursuant to Section 5(c)(ii), (iii), (iv) or (v) 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.

     (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

     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, or any compulsory share
          or 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 45 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 

                                     -9-
<PAGE>
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. 

     (ix)  If the Company (i) makes a public announcement that
it intends to enter into a Change of Control Transaction (as defined below)
or (ii) any Person or group of Persons (including the Company, but excluding
a holder or any affiliate of a holder) publicly announces a bona fide tender
offer, exchange offer or other transaction to purchase 50% or more of the
Common Stock (such announcement being referred to herein as a "Major
Announcement" and the date on which a Major Announcement is made, the
"Announcement Date"), then, in the event that a holder of Preferred Stock
seeks to convert shares of Preferred Stock on or following the Announcement
Date, the Conversion Price shall, effective upon the Announcement Date and
continuing through the earlier to occur of the consummation of the proposed
transaction or tender offer, exchange offer or other transaction and the
Abandonment Date (as defined below), be equal to the lower of (x) the
Conversion Price measured on the Announcement Date and (y) the Conversion
Price in effect on the Conversion Date for such Preferred Stock. 
"Abandonment Date" means with respect to any proposed transaction or tender
offer, exchange offer or other transaction for which a public announcement
as contemplated by this paragraph has been made, the date upon which the
Company (in the case of clause (i) above) or the person, group or entity (in
the case of clause (ii) above) publicly announces the termination or
abandonment of the proposed transaction or tender offer, exchange offer or
another transaction which caused this paragraph to become operative.

     (d)  If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which might materially
and adversely affect the rights of the holders of Preferred Stock (different
than or distinguished from the effect generally on rights of holders of any
class of the Company's capital stock) or if at any time any such conditions
are expected to arise by reason of any action contemplated by the Company,
the Company shall mail a written notice briefly describing the action
contemplated and the material adverse effects of such action on the rights
of the holders of Preferred Stock at least 30 calendar days prior to the
effective date of such action, and an Appraiser selected by the holders of
majority in interest of the Preferred Stock shall give its opinion as to the
adjustment, if any (not inconsistent with the standards established in this
Section 5), of the Conversion Price (including, if necessary, any adjustment
as to the securities into which shares of Preferred Stock may thereafter be
convertible) and any distribution which is or would be required to preserve
without diluting the rights of the holders of shares of 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
good faith, in which case the adjustment shall be equal to the average of
the adjustments recommended by each such Appraiser.  The Board of Directors
shall make the adjustment recommended forthwith upon the receipt of such
opinion or opinions or the taking of any such action contemplated, as the
case may be; provided, however, that no such adjustment of the Conversion
Price shall be made which in the opinion of the Appraiser(s) giving the
aforesaid opinion or opinions would result in an increase of the Conversion
Price to more than the Conversion Price then in effect.

     (e)  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 

                                     -10-
<PAGE>
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. 
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.

     (f)  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)  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.

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

     (i)  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 Financial 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 5:00 p.m. (Salt Lake
City 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 5:00 p.m. (Salt Lake 

                                   -11-
<PAGE>
City time) on any date and earlier than 11:59 p.m. (Salt Lake City 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.  For purposes of Section
5(c)(i), if a Conversion Notice is delivered by facsimile prior to 5:00 p.m.
(Salt Lake City time) on any date, then the day prior to such date shall be
the last Trading Day calculated to determine the Conversion Price applicable
to such Conversion Notice, and the date of such delivery shall commence the
counting of days for purposes of Section 5(b).

      Section 6.  Optional Redemption.  

     (a)  The Company shall have the right, exercisable at any time,
to redeem from funds legally available therefor all or any portion of the
then outstanding and unconverted shares of Preferred Stock at a price equal
to the Redemption Price.  Any redemptions pursuant to this Section shall be
effected by the delivery of a notice to each holder of Preferred Stock to be
redeemed, which notice shall indicate the number of shares of Preferred
Stock of each holder to be redeemed and the date that such redemption is to
be effected, which shall be the 20th Trading Day after the date such notice
is deemed delivered pursuant to Section 5(i) (the "Optional Redemption
Date").  All redeemed shares of Preferred Stock shall cease to be
outstanding and shall have the status of authorized but undesignated stock,
but may not be reissued as Preferred Stock.  The entire Redemption Price
under this Section shall be paid in cash by the Optional Redemption Date. 
The holders of the Preferred Stock shall have the right to tender, and the
Company shall honor, Conversion Notices for shares of Preferred Stock,
including shares subject to the notice of redemption described in this
Section, at any time through the 19th Trading Day after receipt of such
notice of redemption.

     (b)  If any portion of the Redemption Price under this section
is not paid by the Company on or prior to the Optional Redemption Date,
interest shall accrue thereon at the rate of 18% per annum thereafter until
such 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 five (5)
calendar days after the date due, each holder of the Preferred Stock subject
to such redemption may elect, by written notice to the Company, 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 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 a holder elects option (i) above, the Company shall within
three (3) Trading Days of its receipt of such election deliver to such
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 such holder
elects option (ii) above, the Company shall promptly, and in any event not
later than three (3) Trading Days from receipt of the holder's notice of
such election, return to the holder all of the Unpaid Redemption Shares.

                                   -12-
<PAGE>
      Section 7.  Definitions.  For the purposes hereof, the following
terms shall have the following meanings:

     "Applicable Percentage" means (i) 91% for any conversion honored
prior to the 120th day after the Original Issue Date, (ii) 90% for any
conversion honored on or after the 120th and prior to the 180th after the
Original Date and (iii) 88% for any conversion honored thereafter.

     "Average Price" as at any date means the average Per Share
Market Value for the five (5) Trading Days immediately preceding such date. 

     "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 Delaware are authorized or required by law or other government
action to close.

     "Common Stock" means the common stock, $.0001 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, the numerator
of which is Stated Value plus accrued but unpaid dividends to the extent to
be paid in shares of Common Stock and the denominator of which is the
Conversion Price at such time.

     "Junior Securities" means the Common Stock and all other equity
securities of the Company.

     "Original Issue Date" means 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 Nasdaq
SmallCap Market or other principal stock exchange or quotation system on
which the Common Stock is then listed or quoted 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 Nasdaq SmallCap Market 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 

                                 -13-
<PAGE>
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 an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.

     "Purchase Agreement" means the Convertible Preferred Stock
Purchase Agreement, dated as of the Original Issue Date, between the Company
and the original holders of the Preferred Stock.

     "Redemption Price" shall be equal to the sum of (a) the number
of shares of Preferred Stock to be redeemed (including for purposes of any
redemption pursuant to Section 5(b), the number of shares of Preferred Stock
tendered for conversion but for which the Company shall have failed to issue
and deliver shares of Common Stock in respect thereof), multiplied by the
product of (i) the sum of $20 plus all accrued and unpaid dividends, divided
by the Conversion Price on (x) the date the Redemption Price is demanded (in
the case of a redemption pursuant to Section 5(b)) or the date such
Redemption Price is due (in the case of a redemption pursuant to Section 6)
or (y) the date the Redemption Price is paid in full, whichever is less,
multiplied by (ii) the average Per Share Market Value for the five (5)
Trading Days immediately preceding (x) the date that such Redemption Price
is demanded or due, as the case may be, or (y) the date the Redemption Price
is paid in full, whichever is greater, and (b) all other amounts, costs,
expenses and liquidated damages due in respect of such shares of Preferred
Stock to be redeemed.

     "Registration Rights Agreement" means the Registration Rights
Agreement, dated the Original Issue Date, 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 Nasdaq SmallCap Market 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 Nasdaq SmallCap Market 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 and shares of Common Stock issuable on account of
dividends on or with respect to the Preferred Stock.

     "Underlying Securities Registration Statement" shall mean a
registration statement under the Securities Act prepared by the Company and
filed with the Commission in accordance with the Registration Rights
Agreement, covering the resale of the Underlying Shares and naming the
holders of the Preferred Stock as "selling stockholders" thereunder.

                                    -14-
<PAGE>
                                   EXHIBIT A

                             NOTICE OF CONVERSION

(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 C
Convertible Preferred Stock indicated below, into shares of Common Stock,
par value $.0001 per share (the "Common Stock"), of fonix corporation (the
"Company") according to the conditions hereof, 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

                      _____________________________________________
                      Name of Holder


                      _____________________________________________

                      ______________________________________________
                      Address of Holder


                      __________________________________
                      Authorized Signature