<PAGE>
                                                                    EXHIBIT 3.1


                     CERTIFICATE OF AMENDMENT

                              OF THE

                   CERTIFICATE OF INCORPORATION

                                OF

                           PSINet INC.


        Under Section 805 of the Business Corporation Law



     The undersigned, being the President and Assistant Secretary of PSINet 
Inc. (the "Corporation"), respectively, in order to amend the Corporation's 
Certificate of Incorporation, do hereby certify that:

     FIRST:  The name of the Corporation is PSINet Inc.

     SECOND:  The Certificate of Incorporation of the Corporation was filed 
by the Department of State of the State of New York on October 21, 1988 under 
the name Graphic Specialty Finishers, Inc.

     THIRD:  The Certificate of Incorporation is hereby amended to effect the 
following amendments authorized by the Business Corporation Law:

          (a)  To amend Paragraph FOURTH, relating to the
               aggregate number of shares which the Corporation
               shall have authority to issue, to add a provision
               stating the number, designation, relative rights,
               preferences and limitations of a new series of
               Preferred Stock, as fixed by the Board of
               Directors of the Corporation, which shall be
               designated as Series B 8% Convertible Preferred
               Stock, par value $.01 per share, and to set forth
               in full the text of such provision; and

          (b)  To amend Paragraph SEVENTH regarding the address
               for service of process.


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                                -2-


     FOURTH:  To effect the foregoing:

          (a)  Paragraph FOURTH is hereby amended to add the
following at the end of such Paragraph FOURTH:

Series B 8% Convertible Preferred Stock

     The Corporation is hereby authorized to establish a series of Preferred 
Stock of the Corporation of the designation and number of shares, and having 
the relative rights, preferences and limitations thereof (in addition to the 
provisions set forth in this Certificate of Incorporation which are 
applicable to all classes and series of Preferred Stock) as set forth in the 
following Sections 1 through 9 and in Exhibit A attached hereto and made a 
part hereof.

     Section 1.  Designation, Amount and Par Value.  The series of preferred 
stock shall be designated as the Series B 8% Convertible Preferred Stock (the 
"Series B Preferred Stock"), and the number of shares so designated shall be 
675,142  (which shall not be subject to increase without the prior approval 
of the holders (each holder of shares of Series B Preferred Stock, a "Holder" 
and together with all other Holders, the "Holders") of 66 2/3% of the shares 
of Series B Preferred Stock then outstanding).  Each share of Series B 
Preferred Stock shall have a par value of $.01 per share and a stated value 
of $50.00 per share (the "Stated Value").   Of the designated shares of 
Series B Preferred Stock, 600,000 shares are being issued initially and 
75,142 shares are being authorized for payment of dividends in shares of 
Series B Preferred Stock when, as and if declared by the Board of Directors.  
As used in this Section 1 and the immediately following Sections 2 through 9, 
all references to a "Section" or "Sections" shall be to any one or more of 
this Section 1 and such Sections 2 through 9, as appropriate, and not to any 
other provision of this Certificate of Incorporation.    

     Section 2.  Dividends.

     (a)       (i)   Holders shall be entitled to receive, when, as and if 
declared by the Board of Directors out of funds legally available therefor, 
and the Corporation shall, to the extent funds are legally available 
therefor, pay on each Dividend Payment Date, in arrears, cumulative dividends 
on the Series B Preferred Stock at the rate per share (as a percentage of the 
Stated Value per share) equal to 8% per annum (subject to adjustment as 
provided in Section 2(d)), payable in cash or shares of Series B Preferred 
Stock, or any combination thereof, at (subject to the terms and conditions 
set forth herein) the option of the Corporation.   Dividends on the Series B 
Preferred Stock shall be calculated on the basis of a 360-day year, shall 
accrue daily commencing the Original Issue Date, and 

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                               -3-

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 Corporation 
legally available for the payment of dividends.  The party that holds of 
record the Series B Preferred Stock on the record date for the applicable 
Dividend Payment Date for any dividend payment will be entitled to receive, 
when, as and if declared by the Board of Directors out of funds legally 
available therefor, 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 Series B Preferred Stock subsequent to the 
applicable record date but prior to the applicable Dividend Payment Date.  
Except as otherwise provided in this Certificate of Incorporation or as 
required by law, if at any time the Corporation pays a portion of but less 
than the total amount of dividends then accrued on account of the Series B 
Preferred Stock, such payment shall be distributed ratably among the Holders 
based upon the number of shares held by each Holder.  In order for the 
Corporation to exercise its right to pay dividends in shares of Series B 
Preferred Stock on a Dividend Payment Date, the Corporation shall, no less 
than thirty (30) days prior to the Dividend Payment Date, provide each Holder 
notice ("Series B Preferred Stock Dividend Notice") of its intention to pay 
dividends in shares of Series B Preferred Stock.  If the Corporation elects 
to pay dividends in shares of Series B Preferred Stock, then the number of 
shares of Series B Preferred Stock issuable with respect to each share of 
Series B Preferred Stock outstanding on the record date for payment of such 
dividend shall be equal to (i) a number which is the Conversion Price at such 
time divided by the Stated Value of a share of Series B Preferred Stock 
multiplied by (ii)(a) the aggregate dollar amount of dividends then payable 
in respect of such share, divided by (b) the Five Day Average Market Price at 
the applicable Dividend Payment Date.  The Corporation shall, at its option, 
have the right to redeem all, but not less than all, of the shares of Series 
B Preferred Stock paid in the form of dividends pursuant to this Section 2(a) 
(the "Dividend Shares") for $.01 per share with such redemption to be 
effective on the Trading Day following the payment of such dividend (the 
"Dividend Redemption Date").  If the Corporation does not desire to effect 
such a redemption, it shall give written notice (the "Dividend Non-Redemption 
Notice") to the Holders, at least five (5) days prior to the applicable 
Dividend Payment Date, of its intent not to redeem the Dividend Shares on 
such Dividend Payment Date.  If the Corporation does not give a Dividend 
Non-Redemption Notice to the Holders by the time set forth in the preceding 
sentence, each Holder shall have the option, exercisable by failing to give a 
Non-Conversion Notice, as hereinafter defined, to convert on the applicable 
Dividend Payment Date, its Dividend Shares, with the Conversion Price being 
equal to the Conversion Price in effect on the applicable Dividend Payment 
Date and, notwithstanding any provision of this Certificate of Incorporation 
to the contrary, such Holder shall be deemed to have elected to so convert, 
effective on the Dividend Payment Date, if the Corporation does not actually 
receive written notice to the contrary (a "Non-Conversion Notice") prior to 
the Dividend Payment Date.  To the extent that a Holder cannot convert 
Dividend Shares on such Dividend Payment Date as a result of the application 
of Section 5(a)(ii), and retains any of such Dividend Shares after the 
applicable Dividend 

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                               -4-

Redemption Date, such retained shares shall not be redeemed, and shall remain 
outstanding, provided, however, that notwithstanding any other provision of 
this Certificate of Incorporation to the contrary and regardless of the then 
per share market value of the Common Stock (i) dividends shall, except as 
required by applicable law, cease to accrue on such shares and, except as 
required by law, such shares shall have no rights pursuant to Sections 3, 4 
or 7 (other than, to the extent permitted by applicable law, Section 7(a)) 
and (ii) the Holder of such shares, or any transferee of the Holder, shall 
convert such shares into Common Stock within 120 days of such Dividend 
Payment Date at a Conversion Price equal to the Conversion Price on the 
applicable Dividend Payment Date; provided that if any such shares remain 
outstanding on the Business Day immediately following such 120th day, the 
Corporation may redeem such shares for $.01 per share.   To the extent any 
Dividend Shares are called for redemption pursuant to this Section 2(a) and 
the Holder thereof shall not have converted such shares prior to the 
applicable Dividend Redemption Date  (other than by reason of Section 
5(c)(ii)) and the Corporation shall have set aside funds for such redemption, 
such Dividend Shares to be so redeemed shall, for all purposes, no longer be 
deemed to be issued and outstanding on and after the applicable Dividend 
Redemption Date.   

                    (ii)    Notwithstanding anything contained in this 
Certificate of Incorporation to the contrary, no dividends or distributions 
on shares of Series B Preferred Stock shall be declared by the Board of 
Directors of the Corporation or paid or set apart for payment by the 
Corporation at such time as the terms and provisions of any agreement, 
instrument or indenture of the Corporation relating to its indebtedness 
specifically prohibits such declaration, payment or setting apart for payment 
or provides that such declaration, payment or setting apart for payment would 
constitute a breach thereof or a default or event of default thereunder; 
provided, however, that nothing contained in this Certificate of 
Incorporation shall be construed or deemed to require the Board of Directors 
to declare or the Corporation to pay or set apart for payment any dividends 
or distributions on shares of Series B Preferred Stock at any time, whether 
permitted by any of such agreements, instruments or indentures, or not.

     (b)  Notwithstanding anything to the contrary contained in Section 2(a) 
above, the Corporation may not pay dividends on the Series B Preferred Stock 
in shares of Series B Preferred Stock (and, except as otherwise provided 
below, must deliver cash in respect thereof) if at the date of declaration of 
such dividend:

                    (i)  (A) the number of shares of Series B Preferred Stock 
at the time reserved for issuance for the payment of such dividends in shares 
of Series B Preferred Stock on such Dividend Payment Date, together with the 
number of shares held as treasury stock, are insufficient to satisfy the 
Corporation's then existing obligations to issue shares of Series B Preferred 
Stock for the payment of such dividends in shares of 

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                                  -5-

Series B Preferred Stock on such Dividend Payment Date or (B) the number of 
shares equal to the sum of (i) the number of shares of Common Stock at the 
time reserved for issuance for the conversion of shares of Series B Preferred 
Stock to be paid to Holders as dividends hereunder on such Dividend Payment 
Date, (ii) the number of authorized but unissued shares of Common Stock not 
reserved for any purpose, (iii) the number of shares of Common Stock at the 
time reserved for issuance for all other purposes and (iv) the number of 
shares held as treasury stock, is insufficient to satisfy the Corporation's 
then existing obligations to issue shares of Common Stock for all purposes 
(including the conversion of shares of Series B Preferred Stock paid to 
Holders as dividends hereunder on such Dividend Payment Date); 

                    (ii) solely with respect to the applicable Holder, the 
shares of Common Stock issuable upon conversion of Series B Preferred Stock 
issued in payment of such dividends are not registered under the Securities 
Act of 1933, as amended (the "Securities Act"), for resale pursuant to an 
effective registration statement, or may not be sold by such Holder pursuant 
to an effective registration statement because the Corporation is not 
allowing sales to be made thereunder, that names the recipient of such 
dividend as a selling stockholder thereunder (unless such registration 
statement is not declared effective or such sales may not be made as a result 
of the actions of such recipient or such recipient has not requested in 
writing to be named therein as a selling stockholder on or prior to the date 
of the related Series B Preferred Stock Dividend Notice) and may not be sold 
without volume restrictions pursuant to Rule 144(k) promulgated under the 
Securities Act, as determined by counsel to the Corporation (which may be 
counsel employed by the Corporation);

                    (iii)     the shares of Common Stock issuable upon 
conversion of the shares of Series B Preferred Stock to be delivered in 
respect of such dividends are not designated for quotation on the Nasdaq 
National Market or the Nasdaq SmallCap Market or listed on The New York Stock 
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX"); 

                    (iv) solely with respect to the applicable Holder and to 
the extent permitted by applicable law, the Corporation shall have been 
notified in writing by a Holder that the conversion of such shares would 
result in (A) such Holder beneficially owning, in accordance with Rule 13d-3 
promulgated under the Exchange Act (exclusive of any shares of Common Stock 
beneficially owned by such Holder otherwise than as a result of the issuance 
of Common Stock upon conversion of the Series B Preferred Stock owned by such 
Holder) more than 4.999% of the issued and outstanding shares of Common Stock 
and (B) if such Holder is subject to the Bank Holding Company Act of 1956, as 
amended (the "Bank Holding Company Act"), such Holder owning or controlling 
more than 4.999% of the voting shares of the Corporation for purposes of 
Section 4(c)(6) thereof and Regulation Y thereunder, unless, in the case of 
clause (A) above, the provisions of this Section 2(b)(iv) 

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                                 -6-

shall have theretofore been waived (except as otherwise provided by 
applicable law, if the Holder provides to the Corporation the written notice 
described above in this paragraph, the Corporation shall not be obligated to 
deliver cash dividend payments in lieu of such payment in Series B Preferred 
Stock and, to the extent permitted by applicable law, such dividend shall not 
be payable until such time as the Holder delivers to the Corporation a 
written notice to so deliver such dividend shares); provided, however, that, 
the Corporation may continue to pay dividends on the Series B Preferred Stock 
in shares of Series B Preferred Stock to Holders who are not then restricted 
from receiving such Series B Preferred Stock pursuant to this Section 
2(b)(iv); 

                    (v)  the Corporation has failed to timely
satisfy its obligations with respect to any Conversion Notice and
such failure shall be continuing as of such Dividend Payment
Date; or

                    (vi)        the aggregate number of shares of Common 
Stock then held by the Holders of Series B Preferred Stock which were issued 
upon the conversion of shares of Series B Preferred Stock plus the number of 
shares of Common Stock issuable upon the conversion of any shares of Series B 
Preferred Stock held by such Holders which were received as dividends on 
Series B Preferred Stock, including in payment of the current dividend, 
exceeds 8,086,580 shares of Common Stock (as such amount may be adjusted to 
reflect the occurrence of any of the events described in Sections 
5(c)(ii)(b), (c) and (d)).

     (c)  So long as any Series B Preferred Stock shall remain outstanding, 
except for any payment which may be made in connection with the IXC 
Transaction, neither the Corporation nor any Subsidiary shall (i) redeem, 
purchase or otherwise acquire directly or indirectly any Junior Securities, 
(ii) directly or indirectly pay or declare any dividend or make any 
distribution (other than a dividend or distribution described in Section 
5(c)(ii) or 5(c)(iii) or a dividend or distribution or a distribution on 
securities issuable pursuant to any rights pursuant to the Rights Agreement 
dated as of May 8, 1996 between the Corporation and First Chicago Trust 
Company of New York, as the same may be amended from time to time) upon, nor 
shall any distribution (other than a dividend or distribution described in 
Section 5(c)(ii) or 5(c)(iii) or a distribution on securities issuable 
pursuant to any rights pursuant to the Rights Agreement dated as of May 8, 
1996 between the Corporation and First Chicago Trust Company of New York, as 
the same may be amended from time to time) be made in respect of, any Junior 
Securities, or (iii) set aside any funds for or apply any funds to the 
purchase, redemption or acquisition (through a sinking fund or otherwise) of 
any Junior Securities (other than pursuant to the Rights Agreement dated as 
of May 8, 1996 between the Corporation and First Chicago Trust Company of New 
York, as the same may be amended from time to time).  Notwithstanding the 
foregoing, during such period, the Corporation may redeem, purchase or 
otherwise acquire and set aside funds for and apply 

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                               -7-

funds to the purchase, redemption or acquisition of Junior Securities (a) for 
up to an aggregate amount not to exceed, at any point in time the sum of: (i) 
$10,000,000 plus (ii) an amount equal to 100% of the aggregate net cash 
proceeds received by the Corporation after the date hereof from the issuance 
of Junior Securities or debt securities that have been converted into Junior 
Securities plus (iii) an amount equal to 50% of the Corporation's cumulative 
consolidated positive earnings before interest, taxes, depreciation and 
amortization as reported by the Corporation in respect of each fiscal quarter 
of the Corporation commencing with the fiscal quarter ending December 31, 
1997 or (b) pursuant to Section 15.7 of the IRU Agreement, provided that 
immediately after giving effect to any such redemption, purchase, other 
acquisition or setting aside of funds for application to the purchase, 
redemption or other acquisition pursuant to such Section 15.7, the 
Corporation's consolidated shareholders' equity, as determined by the 
Corporation's Chief Financial Officer, shall not be less than $20,000,000. 

     (d)  Notwithstanding anything to the contrary contained in this 
Certificate of Incorporation, if the Common Stock issuable upon conversion of 
the Series B Preferred Stock shall not be freely tradable without restriction 
under the United States federal securities laws as a result of (A) the 
failure by the Corporation to file a registration statement under the 
Securities Act as required by the Registration Rights Agreement for 30 days 
after such registration statement is required to have been filed (a "Delayed 
Filing Event") or (B) the suspension by the Corporation of the effectiveness 
of, or the prohibition by the Corporation of sales of Common Stock by the 
Holders under, such registration statement pursuant to the terms of the 
Registration Rights Agreement for more than 180 days in any calendar year 
period (an "Excessive Blackout Event"), then the dividend payable hereunder 
shall, in the case of a Delayed Filing Event, increase by 100 basis points, 
and shall increase by an additional 50 basis points on the first day of each 
successive 30 day period until such registration statement is filed, 
provided, that in no event shall the dividend payable hereunder be increased 
by more than 200 basis points for such Delayed Filing Event and in the case 
of an Excessive Blackout Event be increased by 75 basis points, and shall 
increase by an additional 25 basis points on the 31st day of such Excessive 
Blackout Event; provided, that, once such registration statement is filed or 
such suspension or prohibition is lifted, as the case may be, the dividend 
payable hereunder shall revert back to 8% per annum. 

     Section 3.  Voting Rights.  Except as otherwise provided herein and as 
otherwise required by law, the Series B Preferred Stock shall have no voting 
rights.  However, so long as any shares of Series B Preferred Stock are 
outstanding, the Corporation shall not, without the requisite approval of the 
Holders of the Series B Preferred Stock then outstanding, (a) take any of the 
actions described in Section 7, or (b) enter into any agreement or 
arrangement with respect to any other action which requires the approval  of 
the Holders of the Series B Preferred Stock then outstanding, unless 
conditioned upon receipt of the requisite approval of the Holders of the 
Series B Preferred Stock.

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                               -8-

     Section 4.  Liquidation.  Subject to applicable law, upon any 
liquidation, dissolution or winding-up of the Corporation, whether voluntary 
or involuntary (a "Liquidation"), the Holders shall be entitled to receive 
out of the assets of the Corporation, whether such assets are capital or 
surplus, for each share of Series B 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 Corporation shall 
be insufficient to pay in full such amounts and amounts payable to holders of 
Parity Stock, if any, then, subject to applicable law, the entire assets to 
be distributed to the Holders and the holders of Parity Stock, if any, shall 
be distributed among the Holders and the holders of Parity Stock, if any, 
ratably in accordance with the respective amounts that would be payable on 
such shares if all amounts payable thereon were paid in full.  Neither a 
transaction subject to the provisions of Section 6(a) nor a Subsidiary 
Merger, as defined in Section 6(a), shall be treated as a Liquidation, but 
rather shall be treated in accordance with Section 6(a).  The Corporation 
shall mail written notice of any such Liquidation not less than 45 days prior 
to the payment date stated therein to each Holder.

     Section 5.  Conversion.

     (a)       (i)       Subject to Section 5(a)(iii), each share of Series B 
Preferred Stock is convertible by the Holder thereof into shares of Common 
Stock (subject to adjustment as provided in this Section 5) at the Conversion 
Ratio at the option of the Holder at any time on or after the 130th day 
following the Original Issue Date, provided, however, that a Holder may 
convert its Series B Preferred Stock prior to such 130th day, in accordance 
with Section 6(a), during the pendency of a Merger Event (as defined in 
Section 6(a)).  A Holder shall effect conversions by surrendering the 
certificate or certificates representing the shares of Series B Preferred 
Stock to be converted to the Corporation, 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 Series B 
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 on which the Holder 
delivers such Conversion Notice (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 Section 5(b) hereof, each Conversion Notice, once given, shall be 
irrevocable.  If the Holder is converting less than all shares of Series B 
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 Corporation 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 of Series B Preferred Stock as have not 
been converted. Except as otherwise provided in this Certificate of 
Incorporation, on and after the effective date of conversion, the Holder 
entitled to receive Common Stock 

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                               -9-

issuable upon such conversion shall be treated for all purposes as the record 
holder of the shares of Common Stock issuable upon conversion, and the Series 
B Preferred Stock so converted shall no longer be deemed to be issued and 
outstanding.  

                    (ii)      Notwithstanding anything contained in this 
Certificate of Incorporation apart from this Section 5(a)(ii) to the 
contrary, in no event shall a Holder be permitted to convert any shares of 
Series B Preferred Stock in excess of the number of such shares upon the 
conversion of which, exclusive of any shares of Common Stock beneficially 
owned by such Holder otherwise than as a result of the issuance of Common 
Stock upon conversion of the Series B Preferred Stock held of record by such 
Holder, the sum of (w) the number of shares of Common Stock beneficially 
owned by such Holder immediately prior to such conversion plus (x) the number 
of shares of Common Stock that would be issuable upon such conversion would 
equal 4.999% of the sum of (y) the number of shares of Common Stock then 
issued and outstanding plus (z) the number of shares of Common Stock that 
would be issuable upon such conversion.  For purposes of the preceding 
sentence beneficial ownership shall be determined in accordance with Section 
13(d) of the Exchange Act and the rules thereunder.  Notwithstanding anything 
contained in this Certificate of Incorporation to the contrary and to the 
extent permitted by applicable law, in no event shall a Holder that is 
subject to the Bank Holding Company Act be permitted to convert any shares of 
Series B Preferred Stock in excess of the number of such shares upon the 
conversion of which the sum of (w) the number of shares of Common Stock owned 
or controlled by such Holder immediately prior to such conversion plus (x) 
the number of shares of Common Stock that would be issuable upon such 
conversion would equal 4.999% of the sum of (y) the number of shares of 
Common Stock then issued and outstanding plus (z) the number of shares of 
Common Stock that would be issuable upon such conversion.  For purposes of 
the preceding sentence, ownership and control shall be determined in 
accordance with the Bank Holding Company Act and Regulation Y thereunder.  
The determination of the number of shares of Series B Preferred Stock that 
are convertible at any time without exceeding any of the foregoing 
limitations that are applicable to a Holder shall be made by that Holder, and 
the submission of shares of Series B Preferred Stock for conversion shall be 
deemed to be such Holder's determination that such shares of Series B 
Preferred Stock are convertible without exceeding any such applicable 
limitation, and the Corporation shall have no obligation to verify or confirm 
the accuracy of such determination.  Except as otherwise required by law, 
this paragraph may be amended (i) in order to clarify an ambiguity or 
otherwise to give effect to the foregoing limitations, by the Board of 
Directors of the Corporation and the Holders of two-thirds (2/3) of the 
shares of Series B Preferred Stock then outstanding and (ii) for any other 
reason, with the further approval of the holders of a majority of the shares 
of Common Stock then outstanding, to the extent permitted by applicable law 
and subject to the rights and preferences of any securities ranking senior 
thereto or on parity therewith or, to the extent the holders thereof may have 
any approval rights with respect thereto, other preferred stock of the 
Corporation.  The 

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                               -10-

limitation imposed by the first sentence of this Section 5(a)(ii) may be 
waived by a Holder of Series B Preferred Stock as to itself (and solely as to 
itself) upon not less than 65 days prior written notice to the Corporation, 
and the provisions of this Section 5(a)(ii) shall continue to apply until 
such 65th Day (or later, if stated in the notice of waiver).       

                    (iii)  Notwithstanding anything contained in this 
Certificate of Incorporation, in no event shall the Corporation be obligated 
to issue more than an aggregate of 8,086,580 shares of Common Stock (as such 
amount may be adjusted to reflect the occurrence of any of the events 
described in Sections 5(c)(ii)(b), (c) and (d)) upon conversion  of the 
Series B Preferred Stock (such amount being equal to 19.999% of the 
outstanding Common Stock on the Original Issue Date), and in no event shall 
the Corporation be obligated to issue more than an aggregate of 11.9776 
shares of Common Stock upon conversion of each share of Series B Preferred 
Stock (the "Maximum Conversion Ratio"), provided, however, that the Maximum 
Conversion Ratio shall be adjusted to reflect the occurrence of any of the 
events described in Sections 5(c)(ii)(b), (c) and (d).  On or after the third 
anniversary of the Original Issue Date, if the Corporation has issued to the 
Holders the maximum number of shares of Common Stock permitted pursuant to 
this Section 5(a)(iii), then the Corporation shall, at its option, have the 
right to redeem the then outstanding shares of Series B Preferred Stock for 
$.01 per share.  If the Corporation does determine to so redeem the then 
outstanding Series B Preferred Stock as set forth above, then once the 
Corporation has set aside such funds for such redemption the then outstanding 
Series B Preferred Stock to be so redeemed shall, for all purposes, no longer 
be deemed to be issued and outstanding on and after the date fixed for 
redemption.

                    (iv)      In the case of a Merger Event (as defined in 
Section 6(a)) (other than solely a Cash Event (as defined in Section 6(a)) 
where the Corporation does not deliver a Merger Event Redemption Notice 
pursuant to Section 6(a), the Holders (1) shall be issued shares of 
convertible preferred stock or, to the extent possible and to the extent 
permitted by applicable law, at the Corporation's option, convertible 
debentures of the entity with which such Merger Event takes place, which 
newly issued convertible security shall, to the extent possible and to the 
extent permitted by applicable law, have terms substantially similar in all 
material respects to the terms of the Series B Preferred Stock (including 
with respect to conversion and registration) and shall, to the extent 
possible and to the extent permitted by applicable law, be entitled to all of 
the rights and privileges of a Holder of Series B Preferred Stock set forth 
in this Certificate of Incorporation, the Registration Rights Agreement and 
the Purchase Agreement (including, without limitation, as such rights relate 
to the acquisition, transferability, registration and listing of such shares 
of stock or other securities issuable upon conversion of such convertible 
security), and (2) simultaneously with such issuance of the convertible 
security, shall have the right to convert such convertible security only into 
the shares of stock and other securities, cash and property receivable upon 
or deemed to be held by holders of 

<PAGE>

                               -11-

Common Stock upon the effectiveness of such Merger Event, provided, that the 
conversion price for such newly issued convertible security 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 and the terms of any such consolidation, 
merger, sale, transfer or other disposition shall include such terms so as to 
continue to give to the Holder the right to receive the securities, cash or 
property set forth in this Section 5(a)(iv) upon any conversion or redemption 
following such consolidation, merger, sale, transfer or other disposition.  
In the case of solely a Cash Event where the Corporation does not deliver a 
Merger Event Redemption Notice pursuant to Section 6(a), the Conversion 
Price, at the option of each Holder, shall be adjusted so that it is equal to 
the cash price paid for each share of Common Stock in accordance with the 
terms of Section 6(a).  Notwithstanding anything else contained in this 
Certificate of Incorporation, if the Corporation does not redeem the Series B 
Preferred Stock and the Conversion Price is adjusted pursuant to this Section 
5(a)(iv), then such Conversion Price shall be further adjusted on any 
subsequent Reset Date to the lower of such adjusted Conversion Price and the 
Conversion Price which would have otherwise gone into effect on such 
subsequent Reset Date.  

     (b)  Not later than three (3) Business Days after a Conversion Date, the 
Corporation will deliver to the converting Holder (i) a certificate or 
certificates which shall be free of restrictive legends and trading 
restrictions (other than those required by Section 3.1(b) of the Purchase 
Agreement) representing the number of shares of Common Stock being issued 
upon the conversion of shares of Series B Preferred Stock, (ii) one or more 
certificates representing the number of shares of Series B Preferred Stock 
not converted, (iii) to the extent funds are legally available therefor, a 
bank check in the amount of accrued and unpaid dividends (if the Corporation 
has elected or is required hereunder to pay accrued dividends in cash) and 
(iv) to the extent funds are legally available therefor, if the Corporation 
has elected and is permitted hereunder (notwithstanding any applicable notice 
period) to pay accrued dividends in shares of Series B Preferred Stock, and 
the record holders of the shares of Series B Preferred Stock with respect to 
which such dividends are paid did not deliver a Non-Conversion Notice to the 
Corporation prior to the Dividend Conversion Date with respect to such shares 
of Series B Preferred Stock paid as dividends, certificates, which shall be 
free of restrictive legends and trading restrictions (other than those 
required by Section 3.1(b) of the Purchase Agreement), representing such 
number of Shares of Common Stock are as issuable on account of accrued 
dividends determined in accordance with Section 2(a); provided, however, that 
the Corporation shall not be obligated to issue certificates evidencing the 
shares of Common Stock issuable upon conversion of any shares of Series B 
Preferred Stock until certificates evidencing such shares of Series B 
Preferred Stock are either delivered for conversion to the Corporation or, if 
so directed by the Corporation, to any transfer agent for the Series B 
Preferred Stock or Common Stock, or the Holder of such Series B Preferred 
Stock certifies to the Corporation and, if required, any 

<PAGE>

                               -12-

transfer agent for the Series B Preferred Stock that such certificates have 
been lost, stolen or destroyed and provides a bond (or other adequate 
security) reasonably satisfactory to the Corporation and any such transfer 
agent to indemnify and hold harmless the Corporation and any such transfer 
agent from any loss incurred by it in connection therewith.  The Corporation 
shall, upon request of the Holder, use its reasonable best efforts to deliver 
any certificate or certificates required to be delivered by the Corporation 
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 close of business 
on the third Business Day after the Conversion Date, the Holder shall be 
entitled by written notice to the Corporation at any time on or before its 
receipt of such certificate or certificates thereafter, to rescind such 
conversion, in which event the Corporation shall immediately return the 
certificates representing the shares of Series B Preferred Stock tendered to 
it for conversion and thereupon shall no longer be treated as a record holder 
of the shares of Common Stock issuable upon conversion.  

     (c)       (i)       The conversion price for each share of Series B 
Preferred Stock (the "Conversion Price") on any Conversion Date shall be 
equal to 125% of the Five Day Average Market Price as of the Original Issue 
Date; provided, however, that (A) if on the first anniversary of the Original 
Issue Date (the "One Year Date") the Thirty Day Average Market Price of the 
Common Stock (the "One Year Reset Price") is less than the then effective 
Conversion Price, then on and after the One Year Date the Conversion Price 
shall be equal to the One Year Reset Price; and (B) if on the second 
anniversary of the Original Issue Date (the "Two Year Date") the Thirty Day 
Average Market Price of the Common Stock (the "Two Year Reset Price") is less 
than the then effective Conversion Price, then on and after the Two Year Date 
the Conversion Price shall be equal to the Two Year Reset Price; and (C) if 
on the third anniversary of the Original Issue Date (the "Three Year Date") 
the Thirty Day Average Market Price of the Common Stock (the "Three Year 
Reset Price") is less than the then effective Conversion Price, then on and 
after the Three Year Date the Conversion Price shall be equal to 95% of the 
Three Year Reset Price.  The Conversion Price determined in accordance with 
this Section 5(c)(i) shall be subject to further adjustment as set forth in 
Sections 5(c)(ii) and (iii) and Section 6. Notwithstanding the foregoing, to 
the extent that a Holder converts such Holder's Series B Preferred Stock and 
at the time of such conversion the Corporation has not paid all accrued but 
unpaid dividends (whether such dividends were to have been paid in cash or in 
shares of Series B Preferred Stock), then at the time of such conversion the 
Conversion Price for such Series B Preferred Stock shall be adjusted so that 
the total amount of Common Stock received upon conversion is equal to the 
amount of Common Stock that would have been received in respect of such 
Series B Preferred Stock immediately prior to such adjustment plus an 

<PAGE>

                               -13-


amount of Common Stock equal in value to the Common Stock which would have 
been issuable upon conversion of any Series B Preferred Stock which, on the 
date of conversion, would have been issuable in payment of accrued but unpaid 
dividends (whether such dividends were to have been paid in cash or in shares 
of Series B Preferred Stock) in respect of such Series B Preferred Stock, and 
thereupon the Corporation shall have no further obligation with respect to 
such dividends.

                    (ii)      If the Corporation, at any time while any 
shares of Series B Preferred Stock are outstanding, (a) shall pay a stock 
dividend or otherwise make a distribution or distributions on shares of its 
Common Stock 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 Corporation, the Conversion Price shall be adjusted by 
multiplying the Conversion Price then in effect by a fraction the numerator 
of which shall be the number of shares of Common Stock outstanding before 
such event and the denominator of which shall be the number of shares of 
Common Stock outstanding after such event.  Any adjustment made pursuant to 
this Section 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.  
Notwithstanding the foregoing, in no event shall the Conversion Price be 
adjusted by reason of the issuance or exercise of any rights pursuant to the 
Rights Agreement dated as of May 8, 1996 between the Corporation and First 
Chicago Trust Company of New York, as the same may be amended from time to 
time, or any dividends or distributions or distributions on securities 
issuable pursuant to such rights.

                    (iii)      If the Corporation, at any time while shares 
of Series B Preferred Stock are outstanding, shall distribute to all holders 
of Common Stock as a class (and not to Holders) evidences of its indebtedness 
or assets, then in each such case the Conversion Price at which each share of 
Series B Preferred Stock shall thereafter be convertible shall be adjusted by 
multiplying the Conversion Price in effect immediately prior to the record 
date fixed for determination of stockholders entitled to receive such 
distribution by a fraction the denominator of which shall be the Five Day 
Average Market Price of Common Stock determined as of the record date 
mentioned above, and the numerator of which shall be such Five Day Average 
Market Price 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 the value 
of such 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 Corporation, 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 

<PAGE>

                               -14-

recognized standing (which may be the firm that regularly examines the 
financial statements of the Corporation) (an "Appraiser") selected in good 
faith by the Corporation and reasonably acceptable to the Holders of a 
majority in interest of the shares of Series B Preferred Stock then 
outstanding.  Such adjustment shall be made whenever any such distribution is 
made and shall become effective immediately after the record date mentioned 
above.

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

                    (v)        Whenever the Conversion Price is adjusted 
pursuant to Section 5(c)(i) or (ii), the Corporation shall promptly give 
notice to each Holder, which notice shall set forth the Conversion Price 
after such adjustment and a brief statement of the facts requiring such 
adjustment.

                    (vi)      If:

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

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

                              C.  the Corporation shall authorize the 
                                  granting to all holders of the Common 
                                  Stock, as a class, 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 
                                  Corporation shall be required in connection 
                                  with any reclassification of the Common 
                                  Stock of the Corporation, any consolidation 
                                  or merger to which the Corporation is a 
                                  party (other than any merger of the 
                                  Corporation into a subsidiary of the 
                                  Corporation in connection with the IXC 
                                  Transaction), any sale or  

<PAGE>

                               -15-

                                  transfer of all or substantially all of the 
                                  assets of the Corporation; or

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

then the Corporation shall cause to be filed at each office or agency 
maintained for the purpose of conversion and transfer of Series B Preferred 
Stock, and shall cause to be mailed to the Holders at their last addresses as 
they shall appear upon the stock books of the Corporation, at least 30 
calendar days prior to the applicable record or effective date hereinafter 
specified, a notice stating (x) the date on which a record is to be taken for 
the purpose of such dividend, distribution, redemption, rights or warrants, 
or if a record is not to be taken, the date as of which the holders of 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 or transfer is expected by the 
Corporation 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 or 
transfer; 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.  Except as required 
by applicable law, no such notice shall be required in connection with any 
matter relating to the IXC Transaction.

     (d)  If at any time conditions shall arise by reason of action taken by 
the Corporation which in the opinion of the Board of Directors are not 
adequately covered by the other provisions hereof and which would materially 
and adversely affect the rights of the Holders (different than or 
distinguished from the effect generally on rights of holders of any class of 
the Corporation's capital stock) or if at any time any such conditions are 
expected by the Corporation to arise by reason of any action contemplated by 
the Corporation, the Corporation shall mail a written notice briefly 
describing the action contemplated and the material adverse effects of such 
action on the rights of the Holders at least 30 calendar days prior to the 
effective date of such action, and an Appraiser selected by the Corporation 
and reasonably acceptable to the Holders of a majority in interest of the 
Series B Preferred Stock then outstanding, 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 Series B Preferred Stock may 
thereafter be convertible) and any distribution which is or would be required 
to preserve without diluting the rights of the Holders.  To the extent 
permitted by applicable law and stock exchange or Nasdaq rules, the 
Corporation shall make the adjustment recommended forthwith 

<PAGE>

                               -16-

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 Corporation 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 Series B Preferred Stock as herein provided, free from 
preemptive rights or any other actual contingent purchase rights of persons 
other than the Holders, not less than the number of shares of Common Stock as 
shall (subject to any additional requirements of the Corporation 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 Series B Preferred Stock assuming 
the payment of all future dividends in shares of Series B Preferred Stock in 
accordance with the terms hereof.  All shares of Common Stock that shall be 
so issuable shall, upon issue, be duly authorized, validly issued and fully 
paid, and nonassessable subject to Section 630 of the New York Business 
Corporation Law. At such time as the Corporation would be, if a notice of 
conversion were to be delivered on such date, precluded from converting the 
then outstanding Series B Preferred Stock by reason of an insufficient number 
of authorized shares of Common Stock then being authorized for issuance, the 
Corporation shall promptly prepare and mail to the shareholders of the 
Corporation proxy materials requesting authorization to amend the 
Corporation's Certificate of Incorporation to increase the number of shares 
of Common Stock which the Corporation is authorized to issue to at least a 
number of shares equal to the sum of (i) all shares of Common Stock then 
outstanding, (ii) the number of shares of Common Stock issuable on account of 
all outstanding warrants, options and convertible securities (other than the 
Series B Preferred Stock) and on account of all shares reserved under any 
stock option, stock purchase, warrant or similar plan and  (iii) the number 
of Underlying Shares as would then be issuable upon a conversion in full of 
the Series B Preferred Stock assuming the payment of all future dividends in 
shares of Series B Preferred Stock in accordance with the terms hereof.  In 
connection therewith, the Corporation shall use reasonable efforts to cause 
its Board of Directors to (a) adopt proper resolutions authorizing such 
increase, (b) recommend to and otherwise use its reasonable best efforts to 
promptly and duly obtain shareholder approval to carry out such resolutions 
(and hold a special meeting of the shareholders no later than the 60th day 
after delivery of the proxy materials to the shareholders relating to such 
meeting) and (c) within 5 Trading Days of obtaining such shareholder 
authorization, file an appropriate amendment to the Corporation's certificate 
of incorporation to evidence such increase.

     (f)  Upon a conversion hereunder the Corporation shall not be required 
to issue stock certificates representing fractions of shares of Common Stock, 
but may, to the 

<PAGE>

                               -17-

extent permitted by applicable law, make a cash payment in respect of any 
final fraction of a share based on the Five Day Average Market Price at the 
applicable Conversion Date. 

     (g)  The issuance of certificates for shares of Common Stock on 
conversion of Series B 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 certificates, provided 
that the Corporation 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 Series B Preferred Stock so converted and the Corporation 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 Corporation 
the amount of such tax or shall have established to the satisfaction of the 
Corporation that such tax has been paid.

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

     (i)  Except as may be otherwise required by applicable law, any and all 
notices or other communications or deliveries to be provided by the Holders 
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 Corporation, with a copy to the Corporation's General Counsel (provided 
that the failure to send a copy of such notice to the Corporation's General 
Counsel shall not affect the validity of such notice), at the facsimile 
telephone number or address of the principal place of business of the 
Corporation as set forth in the Purchase Agreement, or at such other 
facsimile number or address as the Corporation may notify the Holders from 
time to time.  Except as otherwise specifically provided herein, any and all 
notices or other communications or deliveries to be provided by the 
Corporation hereunder shall be delivered in accordance with the provisions of 
Section 5.3 of the Purchase Agreement and deemed given on the date or time 
provided therein.

     Section 6.     Optional Redemptions.  

     (a)  In case of any consolidation or merger of the Corporation with or 
into another Person pursuant to which the Corporation will not be the 
surviving entity (other than any merger of the Corporation into a subsidiary 
of the Corporation where the holders of Voting Securities of the Corporation 
immediately prior to such merger own at least 50% of the Voting Securities of 
the subsidiary of the Corporation immediately subsequent to such merger (a 
"Subsidiary Merger")) or the sale, transfer or other disposition of all or 

<PAGE>

                               -18-

substantially all of the assets of the Corporation pursuant to which the 
Common Stock is converted into other securities or property (a "Stock 
Event"), or any consolidation or merger of the Corporation with or into 
another Person pursuant to which the Corporation will not be the surviving 
entity (other than any Subsidiary Merger), or any sale, transfer or other 
disposition of all or substantially all of the assets of the Corporation 
pursuant to which the Common Stock is converted into the right to receive 
cash (a "Cash Event" and together with a Stock Event, or any combination 
thereof, a "Merger Event"), then the Corporation shall, at its option, have 
the right to redeem all, but not less than all, of the then outstanding 
shares of Series B Preferred Stock for $.01 per share with such redemption to 
be effective immediately prior to the effective time of the Merger Event (the 
"Merger Event Redemption Time").  If the Corporation desires to effect such a 
redemption it shall give written notice (the "Merger Event Redemption 
Notice") to the Holders of its intent to redeem the Series B Preferred Stock 
at least thirty (30) days prior to the Merger Event Redemption Time and each 
Holder shall have the option to convert its shares of Series B Preferred 
Stock at any time from the date of the Merger Event Redemption Notice to a 
time immediately prior to the Merger Event Redemption Time with the 
Conversion Price, at the option of each Holder, being equal to (A) the 
Conversion Price in effect on the date of the Merger Event Redemption Notice 
or (B) the price equal to the consideration to be paid for each share of 
Common Stock pursuant to the Merger Event, provided, that if a Holder shall 
elect to convert using the price set forth in (B) above, such Holder shall, 
upon such conversion, receive, if subsequent to the Original Issue Date but 
prior to the One Year Date, 110%, if subsequent to the One Year Date but 
prior to the Two Year Date, 105%, and if subsequent to the Two Year Date, 
100%, of the number of shares of Common Stock that it otherwise would have 
received upon such conversion.  To the extent that a Holder cannot convert 
shares of Series B Preferred Stock as a result of the application of Section 
5(a)(ii), and retains shares of Series B Preferred Stock at the Merger Event 
Redemption Time, such retained shares shall not be redeemed, shall remain 
outstanding and shall be converted into such number of shares of stock and 
such amount of other securities, cash and property receivable by holdders of 
Common Stock  upon the effectiveness of such Merger Event as such Holder 
would have been entitled to receive if such Holder had converted such Series 
B Preferred Stock immediately prior to the time of the effectiveness of the 
Merger Event Redemption Time. To the extent any shares of Series B Preferred 
Stock are called for redemption pursuant to this Section 6(a) and the Holder 
thereof shall not have converted such shares prior to the Merger Event 
Redemption Time (other than by reason of Section 5(c)(ii)) and the 
Corporation shall have set aside funds for such redemption, such Series B 
Preferred Stock to be so redeemed shall, for all purposes, no longer be 
deemed to be issued and outstanding on and after the Merger Event Redemption 
Time.

     (b)  If at any time (the "225% Date") after the 180th day after the 
Original Issue Date (A) the Per Share Market Value for at least 30 
consecutive Trading Days (provided, however, that, for purposes of such 
calculation, at the option of the Corporation, 

<PAGE>

                               -19-

any day during such 30 Trading Day period on which a Holder sets the last 
closing bid price on the Common Stock shall not be used in such calculation, 
in which case the first Trading Day preceding such 30 Trading Day period on 
which no Holder set the last closing bid price on the Common Stock shall be 
used for determining such calculation) is greater than 225% of the lesser of 
(1) the then effective Conversion Price and (2) the Five Day Average Market 
Price as of the Original Issue Date (as adjusted for stock splits, reverse 
stock splits, stock dividends, recapitalizations and similar events), and (B) 
the average daily trading volume of the Common Stock on the Nasdaq National 
Market (or such other national securities market on which the shares of 
Common Stock are listed or quoted) for such 30 consecutive Trading Days 
exceeds 100,000 shares (as adjusted for stock splits, reverse stock splits, 
stock dividends recapitalizations and similar events), then the Corporation 
shall, at its option, have the right to redeem all, but not less than all, of 
the then outstanding shares of Series B Preferred Stock for $.01 per share.  
If the Corporation elects to effect such a redemption it shall, within 
fifteen (15) days after the 225% Date, give written notice (the "225% 
Redemption Notice") to the Holders of its intent to redeem the Series B 
Preferred Stock on the date which is thirty (30) days subsequent to the date 
of the 225% Redemption Notice (the "225% Redemption Date"), and each Holder 
shall have the option to convert its shares of Series B Preferred Stock at 
any time from the date of the 225% Redemption Notice to a time immediately 
prior to the 225% Redemption Date with the Conversion Price being equal to 
the Conversion Price in effect on the date of the 225% Redemption Notice; 
provided, however, that no such redemption shall be permitted unless at the 
time of the delivery of the 225% Redemption Notice and on the 225% Redemption 
Date, (a) the shares of Common Stock which would be issuable upon conversion 
of the Series B Preferred Stock are designated for quotation or listed for 
trading on the Nasdaq National Market, the Nasdaq Small Cap Market, the NYSE 
or the AMEX, (b) the Corporation has duly reserved for issuance the shares of 
Common Stock which would be issuable upon such conversion, and (c) the Common 
Stock to be issued upon such conversion is freely tradable under a 
registration statement effective under the Securities Act or under Rule 
144(k) under the Securities Act; provided, however, that if such Common Stock 
is not so freely tradable on the 225% Redemption Date due solely to the last 
paragraph of Section 3 of the Registration Rights Agreement, then the 
Corporation shall have 60 days from the 225% Redemption Date (as specified in 
the 225% Redemption Notice) to cause such Common Stock to be freely tradable 
and, if the conditions of (a) and (b) above remain satisfied, the 225% 
Redemption Date shall be postponed to the date immediately following the 
first Trading Day within such 60 day period on which such Common Stock 
becomes freely tradable.  If no such date occurs at or prior to the end of 
such 60 day period, then such 225% Redemption Notice shall be void and of no 
effect.  Each 225% Redemption Notice under this Section shall specify the 
225% Redemption Date.  To the extent that a Holder cannot convert shares of 
Series B Preferred Stock, and retains shares of Series B Preferred Stock 
after the 225% Redemption Date, as a result of the application of Section 
5(a)(ii), such retained shares shall not be redeemed, and shall remain 
outstanding, provided, however, that notwithstanding any other provision of 
this 

<PAGE>

                               -20-

Certificate of Incorporation to the contrary and regardless of the then per 
share market value of the Common Stock (i) dividends shall, except as 
required by applicable law, cease to accrue on such shares and, except as 
required by law, such shares shall have no rights pursuant to Sections 3, 4 
or 7 (other than, to the extent permitted by applicable law,  Section 7(a)) 
and (ii) the Holder of such shares, or any transferee of the Holder, shall 
convert such shares into Common Stock within 120 days of the 225% Redemption 
Date at a Conversion Price equal to the Conversion Price on the date of the 
225% Redemption Notice; provided that if any such shares remain outstanding 
on the Business Day immediately following such 120th day, the Corporation may 
redeem such shares for $.01 per share.    To the extent any shares of Series 
B Preferred Stock are called for redemption pursuant to this Section 6(b) and 
the Holder thereof shall not have converted such shares prior to the 225% 
Redemption Date  (other than by reason of Section 5(c)(ii)) and the 
Corporation shall have set aside funds for such redemption, such Series B 
Preferred Stock to be so redeemed shall, for all purposes, no longer be 
deemed to be issued and outstanding on and after the 225% Redemption Date.

     (c)  Commencing on the third anniversary of the Original Issue Date (the 
"Third Anniversary Date"), the Corporation shall, at its option, have the 
right to redeem all, but not less than all, of the then outstanding shares of 
Series B Preferred Stock for $.01 per share.  If the Corporation desires to 
effect such a redemption it shall, within five (5) days following the Third 
Anniversary Date give written notice (the "Third Anniversary Redemption 
Notice") to the Holders of its intent to redeem the Series B Preferred Stock 
on the date which is thirty (30) days subsequent to the date of the Third 
Anniversary Redemption Notice (the "Third Anniversary Redemption Date"), and 
each Holder shall have the option to convert its shares of Series B Preferred 
Stock at any time from the date of the Third Anniversary Redemption Notice to 
a time immediately prior to the Third Anniversary Redemption Date with the 
Conversion Price being equal to the Conversion Price in effect on the date of 
the Third Anniversary Redemption Notice.  To the extent that a Holder cannot 
convert shares of Series B Preferred Stock, and retains shares of Series B 
Preferred Stock after the Third Anniversary Redemption Date, as a result of 
the application of Section 5(a)(ii), such retained shares shall not be 
redeemed, and shall remain outstanding, provided, however, that 
notwithstanding any other provision of this Certificate of Incorporation to 
the contrary and regardless of the then per share market value of the Common 
Stock (i) dividends shall, except as required by applicable law, cease to 
accrue on such shares and, except as required by law, such shares shall have 
no rights pursuant to Sections 3, 4 or 7 (other than, to the extent permitted 
by applicable law, Section 7(a)) and (ii) the Holder of such shares, or any 
transferee of the Holder, shall convert such shares into Common Stock within 
120 days of the Third Anniversary Redemption Date at a Conversion Price equal 
to the Conversion Price on the date of the Third Anniversary Redemption 
Notice; provided that if any such shares remain outstanding on the Business 
Day immediately following such 120th day, the Corporation may redeem such 
shares for $.01 per share.   To the extent any shares of Series B Preferred 
Stock are called for redemption pursuant to this Section 6(c) and the 

<PAGE>

                               -21-

Holder thereof shall not have converted such shares prior to the Third 
Anniversary Redemption Date (other than by reason of Section 5(c)(ii)) and 
the Corporation shall have set aside funds for such redemption, such Series B 
Preferred Stock to be so redeemed shall, for all purposes, no longer be 
deemed to be issued and outstanding on and after the Third Anniversary 
Redemption Date.   

     (d)  If at any time after the Original Issue Date the Conversion Price 
is equal to or less than the Threshold Price, then the Corporation shall have 
the option, to the extent funds are legally available therefor, to elect (a 
"Cash Redemption Election") to redeem any shares of Series B Preferred Stock 
in lieu of issuing Common Stock upon any conversion of the Series B Preferred 
Stock.  The Corporation shall notify the Holders of any Cash Redemption 
Election, and such Cash Redemption Election shall be applicable to any 
conversion of Series B Preferred Stock the Conversion Date of which is after 
the date of such notice and prior to the effective date of any termination or 
revocation of such Cash Redemption Election.  A Cash Redemption Election 
shall terminate if, at any time, during such Cash Redemption Election period 
the Corporation shall not have adequate funds legally available therefor.  
The Corporation shall give notice of such termination of the Cash Redemption 
Election to each Holder of the Series B Preferred Stock as soon as 
practicable prior to or following such termination.  The Corporation may 
revoke a Cash Redemption Election at any time during any Cash Redemption 
Election period upon one Trading Day's notice to each Holder of the Series B 
Preferred Stock.  During the period in which any Cash Redemption Election is 
effective, if any Holder tenders shares of Series B Preferred Stock for 
conversion, whether pursuant to Section 5(a), Section 6(a), Section 6(b), 
Section 6(c) or otherwise, the Corporation shall redeem each share of the 
Series B Preferred Stock tendered in lieu of delivering the shares of Common 
Stock that otherwise would have been issued on such conversion for a 
redemption price equal to the Five Day Average Market Price of the Common 
Stock as at the applicable Conversion Date times the number of shares of 
Common Stock the Holder would be entitled to receive upon conversion (taking 
into account limitations imposed pursuant to Section 5(a)(iii) hereof).  Such 
amount shall be payable in immediately available funds within three Trading 
Days after the applicable Conversion Date, and if such amount is not paid 
within such period the unpaid amount shall accrue interest at a rate equal to 
the Prime Rate plus 5% per annum (but in no event greater than 15% per annum) 
from the applicable Conversion Date until paid in full. For purposes of this 
Section 6(d), the "Threshold Price" shall mean $5.00, adjusted 
proportionately to take into account any stock splits, stock dividends, 
reverse stock splits, recapitalizations or similar transactions taking place 
after the Original Issue Date.  To the extent any shares of Series B 
Preferred Stock are redeemed pursuant to this Section 6(d), such Series B 
Preferred Stock so redeemed shall, for all purposes, no longer be deemed to 
be issued and outstanding.  

     Section 7.  Protective Provisions.  So long as shares of Series B 
Preferred Stock are outstanding, except as otherwise provided herein or by 
applicable law, the 

<PAGE>

                               -22-

Corporation shall not, without first obtaining the approval of the Holders of 
at least two-thirds (2/3) of the then outstanding shares of Series B 
Preferred Stock:

          (a)  alter or change the rights, preferences or privileges of the 
Series B Preferred Stock so as to affect adversely the Series B Preferred 
Stock as a class, provided, however, that neither the designation, creation 
or issuance of Junior Stock or Parity Stock nor the IXC Transaction shall be 
deemed to affect adversely the Series B Preferred Stock as a class;

          (b)  create any new class or series of capital stock having a 
preference over the Series B Preferred Stock as to redemption, the payment of 
dividends or distribution of assets upon a Liquidation Event or any other 
liquidation, dissolution or winding up of the Corporation;

          (c)  increase the authorized number of shares of Series B Preferred 
Stock; or

          (d)  issue any shares of Series B Preferred Stock other than 
pursuant to Section 2 of this Certificate of Incorporation or the Purchase 
Agreement.

     Section 8.  Definitions.  For the purposes hereof, the following terms 
shall have the following meanings:

     "Business Day" means any day other than the following: Saturday, Sunday, 
any day which shall be a legal holiday in the State of New York and any 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 common stock, $.01 par value per share, of the 
Corporation and stock of any other class into which such shares may hereafter 
have been reclassified or changed.

     "Conversion Date" shall have the meaning set forth in Section 5(a)(i).

     "Conversion Notice" shall have the meaning set forth in Section 5(a)(i).

     "Conversion Price" shall have the meaning set forth in Section 5(c)(i).

     "Conversion Ratio" with respect to a share of Series B Preferred Stock 
means, at any time, a fraction, the numerator of which is the Stated Value of 
such share and the denominator of which is the Conversion Price at such time.

<PAGE>

                               -23-

     "Dividend Non-Redemption Notice" shall have the meaning set forth in 
Section 2(a).

     "Dividend Payment Date" shall mean March 31, June 30, September 30 and 
December 31 of each year, commencing December 31, 1997, and each Conversion 
Date.

     "Dividend Redemption Date" shall have the meaning set forth in Section 
2(a).

     "Dividend Shares" shall have the meaning set forth in Section 2(a).

     "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     "Five Day Average Market Price" as at any date shall mean the average 
Per Share Market Value for the five Trading Days immediately preceding but 
not including such   date, provided, however, that, at the Corporation's 
option, any Trading Day during such five Trading Day period on which a Holder 
sets the last closing bid price on the Common Stock shall not be used for 
determining the Five Day Average Market Price, in which case the first 
Trading Day preceding such five Trading Day period on which no Holder set the 
last closing bid price on the Common Stock shall be used for determining the 
Five Day Average Market Price.

     "IRU Agreement" means the Stock Purchase Agreement dated as of July 22, 
1997 between the Corporation and IXC Internet Services, Inc., as the same may 
be amended from time to time, a copy of which, in relevant part, is available 
for inspection at the principal corporate office of the Corporation.

     "IXC Transaction" means the transactions contemplated by the IRU and 
Stock Purchase Agreement dated as of July 22, 1997 between the Corporation 
and IXC Internet Services, Inc., as the same may be amended from time to 
time, pursuant to terms substantially similar to the terms in effect on the 
Original Issue Date or as contemplated in the Purchase Agreement.

     "Junior Securities" means the Common Stock and all other equity 
securities of the Corporation, other than Series B Preferred Stock and Parity 
Stock.

     "Non-Conversion Notice" shall have the meaning set forth in Section 2(a).

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

<PAGE>

                               -24-

     "Parity Stock" means any capital stock of the Corporation that ranks on 
parity with the Series B Preferred Stock as to the payment of dividends or 
distribution of assets upon a Liquidation Event or any other liquidation, 
dissolution or winding up of the Corporation.

     "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 National 
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 or 
quoted then on the Nasdaq National 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" 
bid quotes for the relevant day, 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 on such date as determined by an Appraiser 
selected in good faith by the Corporation and reasonably acceptable to 
Holders of a majority in interest of the shares of the Series B Preferred 
Stock then outstanding.

     "Person" means an individual or corporation, partnership, trust, 
incorporated or unincorporated association, joint venture, limited liability 
company, joint stock company, government (or an agency or subdivision 
thereof) or other entity of any kind.

     "Prime Rate" means the rate of interest (expressed as an annual rate) 
publicly announced by the Fleet National Bank, at its main office, from time 
to time as its "prime rate" or if such institution shall not announce such 
rate, the generally accepted prime rate, each change in such a rate to take 
effect on the date of effective change of such prime rate.

     "Purchase Agreement" means the Convertible Preferred Stock Purchase 
Agreement, dated as of the Original Issue Date, among the Corporation and the 
original Holders of the Series B Preferred Stock, a copy of which is 
available for inspection at the principal corporate office of the Corporation.

     "Registration Rights Agreement" means the Registration Rights Agreement, 
dated as of the Original Issue Date, by and among the Corporation and the 
original Holders of Series B Preferred Stock, a copy of which is available 
for inspection at the principal corporate office of the Corporation.

<PAGE>

                               -25-

     "Reset Date" means each of the One Year Date, the Two Year Date and the 
Three Year Date.

     "Series B Preferred Stock Dividend Notice" shall have the meaning set 
forth in Section 2(a).

     "Thirty Day Average Market Price" as at any date shall mean the average 
Per Share Market Value for the 30 Trading Days immediately preceding but not 
including such date, provided, however, that, at the Corporation's option, 
any Trading Day during such 30 Trading Day period on which a Holder sets the 
last closing bid price on the Common Stock shall not be used for determining 
the Thirty Day Average Market Price, in which case the first Trading Day 
preceding such 30 Trading Day period on which no Holder set the last closing 
bid price on the Common Stock shall be used for determining the Thirty Day 
Average Market Price.

     "Trading Day" means (a) a day on which the Common Stock is traded on the 
Nasdaq National Market or other stock exchange or market on which the Common 
Stock is listed or quoted, or (b) if the Common Stock is not listed or quoted 
on the Nasdaq National Market or any other national securities 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 to its 
functions of reporting prices).

     "Underlying Shares" means the shares of Common Stock into which the 
shares of Series B Preferred Stock are convertible in accordance with the 
terms hereof.

     "Voting Securities" means "voting securities" as such term is defined in 
Rule 12b-2 under the Exchange Act. 

     Section 9.  Tax Withholding.  Notwithstanding any provision hereof to 
the contrary, all payments, distributions or transfers in respect of Series B 
Preferred Stock shall be subject to such withholdings as may be required by 
applicable law.

     (b)  Paragraph SEVENTH is hereby amended in its entirety to read as 
follows:

     SEVENTH:  The Secretary of State of the State of New York is hereby 
designated as the agent of the Corporation upon whom process in any action or 
proceeding against the 

<PAGE>

                               -26-

Corporation may be served; the post office address to which the Secretary of 
State shall mail a copy of any such process so served is:

          510 Huntmar Park Drive
          Herndon, Virginia  20170
          ATTN:  President

     FIFTH:  No shares of the Corporation's Series A Junior Participating 
Preferred Stock have been issued as of the date hereof.  The foregoing 
amendments to the Certificate of Incorporation were authorized by the 
affirmative vote of a majority of the members of the Board of Directors of 
the Corporation at a meeting duly called and held on November 2, 1997.

<PAGE>

                               -27-


     IN WITNESS WHEREOF, we have made and subscribed this certificate and 
hereby affirm under the penalties of perjury that its contents are true this 
6th day of November, 1997.

                       /s/ William L. Schrader
                     ---------------------------------------
                       William L. Schrader, President



                       /s/ Teresa Zajonczkoski
                     ---------------------------------------
                       Teresa Zajonczkoski, Assistant Secretary


<PAGE>



                            EXHIBIT A

                       NOTICE OF CONVERSION
                    AT THE ELECTION OF HOLDER

(To be executed by the registered Holder
in order to convert shares of Series B Preferred Stock)

The undersigned hereby elects to convert the number of shares of Series B 8% 
Convertible Series B Preferred Stock of PSINet Inc. (the "Corporation") 
indicated below, into the number of shares of the Corporation's common stock, 
par value $.01 per share (the "Common Stock"), indicated below, as of the 
date written below. If shares are to be issued in the name of a person other 
than the 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 Corporation in connection therewith.  
No fee will be charged to the Holder for any conversion, except for such 
transfer taxes, if any.

Conversion calculations: 



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Date to Effect Conversion


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Number of shares of Series B Preferred Stock to be Converted


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Number of shares of Common Stock to be Issued


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Applicable Conversion Price


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Signature 


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Name

By:



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Address