<PAGE>

                                                                    Exhibit 10.3


                         CYPRESS COMMUNICATIONS, INC.

                         EMPLOYEE STOCK PURCHASE PLAN


     The purpose of the Cypress Communications, Inc. Employee Stock Purchase
Plan (the "Plan") is to provide eligible employees of Cypress Communications,
Inc. (the "Company") and certain of its subsidiaries with opportunities to
purchase shares of the Company's common stock, par value $0.001 per share (the
"Common Stock"). 900,000 shares of Common Stock in the aggregate have been
approved and reserved for this purpose. The Plan is intended to constitute an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), and shall be interpreted
in accordance with that intent.

     1.   Administration.  The Plan will be administered by the person or
          --------------
persons (the "Administrator") appointed by the Company's Board of Directors (the
"Board") for such purpose.  The Administrator has authority to make rules and
regulations for the administration of the Plan, and its interpretations and
decisions with regard thereto shall be final and conclusive. No member of the
Board or individual exercising administrative authority with respect to the Plan
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted hereunder.

     2.   Offerings.  The Company will make one or more offerings to eligible
          ---------
employees to purchase Common Stock under the Plan ("Offerings").  The initial
Offering will begin on the first day of the Company's Initial Public Offering
and will end on the following
<PAGE>

October 31, 2000 (the "Initial Offering"). Thereafter, unless otherwise
determined by the Administrator, an Offering will begin on the first business
day occurring on or after each November 1 and May 1 and will end on the last
business day occurring on or before the following April 30 and October 31,
respectively. The Administrator may, in its discretion, designate a different
period for any Offering, provided that no Offering shall exceed six months in
duration or overlap any other Offering.

     3.   Eligibility.  All employees of the Company (including employees who
          -----------
are also directors of the Company) and all employees of each Designated
Subsidiary (as defined in Section 11) are eligible to participate in any one or
more of the Offerings under the Plan, provided that as of the first day of the
applicable Offering (the "Offering Date") they are customarily employed by the
Company or a Designated Subsidiary for more than 20 hours a week.

     4.   Participation.  An employee eligible on any Offering Date may
          -------------
participate in such Offering by submitting an enrollment form to his appropriate
payroll location at least 15 business days before the Offering Date (or by such
other deadline as shall be established for the Offering). The form will (a)
state a whole percentage to be deducted from his Compensation (as defined in
Section 11) per pay period, (b) authorize the purchase of Common Stock for him
in each Offering in accordance with the terms of the Plan and (c) specify the
exact name or names in which shares of Common Stock purchased for him are to be
issued pursuant to Section 10.  An employee who does not enroll in accordance
with these procedures will be deemed to have waived his right to participate.
Unless an employee files a new

                                       2
<PAGE>

enrollment form or withdraws from the Plan, his deductions and purchases will
continue at the same percentage of Compensation for future Offerings, provided
he remains eligible. Notwithstanding the foregoing, participation in the Plan
will neither be permitted nor be denied contrary to the requirements of the
Code.

     5.   Employee Contributions.  Each eligible employee may authorize payroll
          ----------------------
deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%)
of his Compensation for each pay period.  The Company will maintain book
accounts showing the amount of payroll deductions made by each participating
employee for each Offering.  No interest will accrue or be paid on payroll
deductions.

     6.   Deduction Changes.  Except as may be determined by the Administrator
          -----------------
in advance of an Offering, an employee may not increase or decrease his payroll
deduction during any Offering, but may increase or decrease his payroll
deduction with respect to the next Offering (subject to the limitations of
Section 5) by filing a new enrollment form at least 15 business days before the
next Offering Date (or by such other deadline as shall be established for the
Offering). The Administrator may, in advance of any Offering, establish rules
permitting an employee to increase, decrease or terminate his payroll deduction
during an Offering.

     7.   Withdrawal.  An employee may withdraw from participation in the Plan
          ----------
by delivering a written notice of withdrawal to his appropriate payroll
location. The employee's withdrawal will be effective as of the next business
day. Following an employee's withdrawal, the Company will promptly refund to him
his entire account balance under the Plan (after

                                       3
<PAGE>

payment for any Common Stock purchased before the effective date of withdrawal).
Partial withdrawals are not permitted. The employee may not begin participation
again during the remainder of the Offering, but may enroll in a subsequent
Offering in accordance with Section 4.

     8.   Grant of Options.  On each Offering Date, the Company will grant to
          ----------------
each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, (a) a number of shares of Common
Stock, which number shall not exceed the number of whole shares which is less
than or equal to $12,500 divided by the closing price per share of Common Stock
on the Offering Date, or (b) such other lesser maximum number of shares as shall
have been established by the Administrator in advance of the Offering.
Notwithstanding the foregoing, on the Offering Date for the Initial Offering,
the Company will grant to each eligible employee who is then a participant in
the Plan an Option to purchase on the Exercise Date, at the Option Price
hereinafter provided for, a number of shares of Common Stock, which number shall
not exceed the number of whole shares which is less than or equal to $25,000
divided by the "Price to the Public" (or equivalent) set forth on the cover page
for the final prospectus relating to the Company's Initial Public Offering. The
purchase price for each share purchased under each Option (the "Option Price")
will be 85% of the Fair Market Value of the Common Stock on the Offering Date or
the Exercise Date, whichever is less.

     Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock

                                       4
<PAGE>

possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or any Parent or Subsidiary (as defined
in Section 11). For purposes of the preceding sentence, the attribution rules of
Section 424(d) of the Code shall apply in determining the stock ownership of an
employee, and all stock which the employee has a contractual right to purchase
shall be treated as stock owned by the employee. In addition, no employee may be
granted an Option which permits his rights to purchase stock under the Plan, and
any other employee stock purchase plan of the Company and its Parents and
Subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value
of such stock (determined on the option grant date or dates) for each calendar
year in which the Option is outstanding at any time. The purpose of the
limitation in the preceding sentence is to comply with Section 423(b)(8) of the
Code.

     9.   Exercise of Option and Purchase of Shares.  Each employee who
          -----------------------------------------
continues to be a participant in the Plan on the Exercise Date shall be deemed
to have exercised his Option on such date and shall acquire from the Company
such number of whole shares of Common Stock reserved for the purpose of the Plan
as his accumulated payroll deductions on such date will purchase at the Option
Price, subject to any other limitations contained in the Plan.  Any amount
remaining in an employee's account at the end of an Offering solely by reason of
the inability to purchase a fractional share will be carried forward to the next
Offering; any other balance remaining in an employee's account at the end of an
Offering will be refunded to the employee promptly.

     10.  Issuance of Certificates.  Certificates representing shares of Common
          ------------------------
Stock

                                       5
<PAGE>

purchased under the Plan may be issued only in the name of the employee, in the
name of the employee and another person of legal age as joint tenants with
rights of survivorship, or in the name of a broker authorized by the employee to
be his, or their, nominee for such purpose.

     11.  Definitions.
          -----------

     The term "Compensation" means the amount of base pay, prior to salary
reduction pursuant to either Section 125 or 401(k) of the Code, but excluding
overtime, commissions, incentive or bonus awards, allowances and reimbursements
for expenses such as relocation allowances or travel expenses, income or gains
on the exercise of Company stock options, and similar items.

     The term "Designated Subsidiary" means any present or future Subsidiary (as
defined below) that has been designated by the Board to participate in the Plan.
The Board may so designate any Subsidiary, or revoke any such designation, at
any time and from time to time, either before or after the Plan is approved by
the stockholders.

     The term "Fair Market Value of the Common Stock" on any given date means
the fair market value of the Common Stock determined in good faith by the
Administrator; provided, however, that if the Common Stock is admitted to
               --------  -------
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), NASDAQ National System or national securities exchange, the
determination shall be made by reference to market quotations. If there are no
market quotations for such date, the determination shall be made by reference to
the last date preceding such date for which there are market quotations.
Notwithstanding the foregoing, if the date for which Fair Market Value of the
Common Stock

                                       6
<PAGE>

is determined is the first day when trading prices for the Common Stock are
reported on NASDAQ or on a national securities exchange, the Fair Market Value
of the Common Stock shall be the "Price to the Public" (or equivalent) set forth
on the cover page for the final prospectus relating to the Company's Initial
Public Offering.

     The term "Initial Public Offering" means the consummation of the first
fully underwritten, firm commitment public offering pursuant to an effective
registration statement under the Securities Exchange Act of 1934, as amended,
other than on Forms S-4 or S-8 or their then equivalents, covering the offer and
sale by the Company of its Common Stock.

     The term "Parent" means a "parent corporation" with respect to the Company,
as defined in Section 424(e) of the Code.

     The term "Subsidiary" means a "subsidiary corporation" with respect to the
Company, as defined in Section 424(f) of the Code.

     12.  Rights on Termination of Employment.  If a participating employee's
          -----------------------------------
employment terminates for any reason before the Exercise Date for any Offering,
no payroll deduction will be taken from any pay due and owing to the employee
and the balance in his account will be paid to him or, in the case of his death,
to his designated beneficiary as if he had withdrawn from the Plan under Section
7.  An employee will be deemed to have terminated employment, for this purpose,
if the corporation that employs him, having been a Designated Subsidiary, ceases
to be a Subsidiary, or if the employee is transferred to any corporation other
than the Company or a Designated Subsidiary.

     13.  Special Rules.  Notwithstanding anything herein to the contrary, the
          -------------

                                       7
<PAGE>

Administrator may adopt special rules applicable to the employees of a
particular Designated Subsidiary, whenever the Administrator determines that
such rules are necessary or appropriate for the implementation of the Plan in a
jurisdiction where such Designated Subsidiary has employees; provided that such
rules are consistent with the requirements of Section 423(b) of the Code. Such
special rules may include (by way of example, but not by way of limitation) the
establishment of a method for employees of a given Designated Subsidiary to fund
the purchase of shares other than by payroll deduction, if the payroll deduction
method is prohibited by local law or is otherwise impracticable.  Any special
rules established pursuant to this Section 13 shall, to the extent possible,
result in the employees subject to such rules having substantially the same
rights as other participants in the Plan.

     14.  Optionees Not Stockholders.  Neither the granting of an Option to an
          --------------------------
employee nor the deductions from his pay shall constitute such employee a holder
of the shares of Common Stock covered by an Option under the Plan until such
shares have been purchased by and issued to him.

     15.  Rights Not Transferable.  Rights under the Plan are not transferable
          -----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.

     16.  Application of Funds.  All funds received or held by the Company under
          --------------------
the Plan may be combined with other corporate funds and may be used for any
corporate purpose.

     17.  Adjustment in Case of Changes Affecting Common Stock.  In the event of
          ----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common

                                       8
<PAGE>

Stock, the number of shares approved for the Plan, and the share limitation set
forth in Section 8, shall be increased proportionately, and such other
adjustment shall be made as may be deemed equitable by the Administrator. In the
event of any other change affecting the Common Stock, such adjustment shall be
made as may be deemed equitable by the Administrator to give proper effect to
such event.

     18.  Amendment of the Plan.  The Board may at any time, and from time to
          ---------------------
time, amend the Plan in any respect, except that without the approval, within 12
months of such Board action, by the stockholders, no amendment shall be made
increasing the number of shares approved for the Plan or making any other change
that would require stockholder approval in order for the Plan, as amended, to
qualify as an "employee stock purchase plan" under Section 423(b) of the Code.

     19.  Insufficient Shares.  If the total number of shares of Common Stock
          -------------------
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of
shares issuable under the Plan, the shares then available shall be apportioned
among participants in proportion to the amount of payroll deductions accumulated
on behalf of each participant that would otherwise be used to purchase Common
Stock on such Exercise Date.

     20.  Termination of the Plan.  The Plan may be terminated at any time by
          -----------------------
the Board. Upon termination of the Plan, all amounts in the accounts of
participating employees shall be promptly refunded.

     21.  Governmental Regulations.  The Company's obligation to sell and
          ------------------------
deliver

                                       9
<PAGE>

Common Stock under the Plan is subject to obtaining all governmental approvals
required in connection with the authorization, issuance, or sale of such stock.

     The Plan shall be governed by Delaware law except to the extent that such
law is preempted by federal law.

     22.  Issuance of Shares.  Shares may be issued upon exercise of an Option
          ------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.

     23.  Tax Withholding.  Participation in the Plan is subject to any minimum
          ---------------
required tax withholding on income of the participant in connection with the
Plan.  Each employee agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right to deduct any such taxes from any payment of
any kind otherwise due to the employee, including shares issuable under the
Plan.

     24.  Notification Upon Sale of Shares.  Each employee agrees, by entering
          --------------------------------
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.

     25.  Effective Date and Approval of Shareholders.  The Plan shall take
          -------------------------------------------
effect on the first day of the Company's Initial Public Offering, subject to
approval by the holders of a majority of the votes cast at a meeting of
stockholders at which a quorum is present or by written consent of stockholders.

                                       10
<PAGE>

                                                                       Exhibit A
                                                                       ---------



                                 TERMS OF THE
                   SERIES Z JUNIOR PARTICIPATING CUMULATIVE
                                PREFERRED STOCK

                                      of

                         CYPRESS COMMUNICATIONS, INC.

     1.   Designation and Amount. The total number of shares of Series Z
          ----------------------
Preferred Stock which the Corporation shall have authority to issue is [number
spelled out] ([number]) shares.

      2.  Dividends and Distributions.
          ---------------------------

          (a)  (i)  Subject to the rights of the holders of any shares of any
series of Undesignated Preferred Stock (or any similar stock) ranking prior and
superior to the Series Z Preferred Stock with respect to dividends, the holders
of shares of Series Z Preferred Stock, in preference to the holders of shares of
Common Stock and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series Z Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provisions
for adjustment hereinafter set forth, 1,000 times the aggregate per share amount
of all cash dividends, and 1,000 times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series Z Preferred Stock.  The multiple
of cash and non-cash dividends declared on the Common Stock to which holders of
the Series Z Preferred Stock are entitled, which shall be 1,000 initially but
which shall be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Dividend Multiple."  In the event the
Corporation shall at any time after __________, 2000 (the "Rights Declaration
Date") (i) declare or pay any dividend on Common Stock payable in shares of
Common Stock, or (ii) effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the Dividend Multiple
thereafter applicable to the determination of the amount of dividends which
holders of shares of Series Z

                                      A-1
<PAGE>

Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

               (ii)  Notwithstanding anything else contained in this paragraph
(a), the Corporation shall, out of funds legally available for that purpose,
declare a dividend or distribution on the Series Z Preferred Stock as provided
in this paragraph (a) immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series Z Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.

          (b)  Dividends shall begin to accrue and be cumulative on outstanding
shares of Series Z Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series Z Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series Z Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall
not bear interest.  Dividends paid on the shares of Series Z Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.  The Board of Directors may fix
in accordance with applicable law a record date for the determination of holders
of shares of Series Z Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be not more than such
number of days prior to the date fixed for the payment thereof as may be allowed
by applicable law.

     3.   Voting Rights.  In addition to any other voting rights required by
          -------------
law, the holders of shares of Series Z Preferred Stock shall have the following
voting rights:

          (a)  Subject to the provision for adjustment hereinafter set forth,
each share of Series Z Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
The number of votes which a holder of a share of Series Z Preferred Stock is
entitled to cast, which shall initially be 1,000 but which may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple."  In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on Common Stock payable in
shares of Common Stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into

                                      A-2
<PAGE>

a greater or lesser number of shares of Common Stock, then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series Z Preferred Stock shall be
entitled shall be the Vote Multiple immediately prior to such event multiplied
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

          (b)  Except as otherwise provided herein or by law, the holders of
shares of Series Z Preferred Stock and the holders of shares of Common Stock and
the holders of shares of any other capital stock of this Corporation having
general voting rights, shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.

          (c)  Except as otherwise required by applicable law or as set forth
herein, holders of Series Z Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.

     4.   Certain Restrictions.
          --------------------

          (a)  Whenever dividends or distributions payable on the Series Z
Preferred Stock as provided in Section C.2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series Z Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:

               (i)    declare or pay dividends on, make any other distributions
                      on, or redeem or purchase or otherwise acquire for
                      consideration any shares of stock ranking junior (either
                      as to dividends or upon liquidation, dissolution or
                      winding up) to the Series Z Preferred Stock;

               (ii)   declare or pay dividends on or make any other
                      distributions on any shares of stock ranking on a parity
                      (either as to dividends or upon liquidation, dissolution
                      or winding up) with the Series Z Preferred Stock, except
                      dividends paid ratably on the Series Z Preferred Stock and
                      all such parity stock on which dividends are payable or in
                      arrears in proportion to the total amounts to which the
                      holders of all such shares are then entitled;

               (iii)  except as permitted in subsection C.4(a)(iv) below,
                      redeem, purchase or otherwise acquire for consideration
                      shares of any stock ranking on a parity (either as to
                      dividends or upon liquidation, dissolution or winding up)
                      with the Series Z Preferred Stock, provided that the
                      Corporation may at any time redeem, purchase or otherwise
                      acquire shares of any such parity stock in exchange for

                                      A-3
<PAGE>

                      shares of any stock of the Corporation ranking junior
                      (either as to dividends or upon dissolution, liquidation
                      or winding up) to the Series Z Preferred Stock; or

               (iv)   purchase or otherwise acquire for consideration any shares
                      of Series Z Preferred Stock, or any shares of any stock
                      ranking on a parity (either as to dividends or upon
                      liquidation, dissolution or winding up) with the Series Z
                      Preferred Stock, except in accordance with a purchase
                      offer made in writing or by publication (as determined by
                      the Board of Directors) to all holders of such shares upon
                      such terms as the Board of Directors, after consideration
                      of the respective annual dividend rates and other relative
                      rights and preferences of the respective series and
                      classes, shall determine in good faith will result in fair
                      and equitable treatment among the respective series or
                      classes.

          (b)  The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subsection (a) of
this Section C.4, purchase or otherwise acquire such shares at such time and in
such manner.

     5.   Reacquired Shares.  Any shares of Series Z Preferred Stock purchased
          -----------------
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof.

     6.   Liquidation, Dissolution or Winding Up.  Upon any liquidation
          --------------------------------------
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series Z Preferred Stock unless, prior thereto, the holders of shares of Series
Z Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $1,000.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock, or (y) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series Z Preferred Stock, except distributions made ratably
on the Series Z Preferred Stock and all other such parity stock in proportion to
the total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.  In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare or pay any dividend on
Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount per share to which holders of shares of Series Z
Preferred Stock were entitled immediately prior to such event under clause (x)
of the preceding

                                      A-4
<PAGE>

sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

     Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section C.6.

     7.   Consolidation, Merger, etc.  In case the Corporation shall enter into
          --------------------------
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series Z
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged, plus accrued and unpaid
dividends, if any, payable with respect to the Series Z Preferred Stock.  In the
event the Corporation shall at any time after the Rights Declaration Date (i)
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or (ii) effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series Z Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

     8.   Redemption.  The shares of Series Z Preferred Stock shall not be
          ----------
redeemable; provided, however, that the foregoing shall not limit the ability of
the Corporation to purchase or otherwise deal in such shares to the extent
otherwise permitted hereby and by law.

     9.   Ranking.  Unless otherwise expressly provided in this Certificate or a
          -------
certificate of designations relating to any other series of Undesignated
Preferred Stock, the Series Z Preferred Stock shall rank junior to every other
series of Preferred Stock previously or hereafter authorized, as to the payment
of dividends and the distribution of assets on liquidation, dissolution or
winding up and shall rank senior to the Common Stock.

     10.  Amendment.  This Certificate shall not be amended in any manner which
          ---------
would materially alter or change the powers, preferences or special rights of
the Series Z Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series Z Preferred Stock, voting separately as a class.

                                      A-5
<PAGE>

     11.  Fractional Shares.  Series Z Preferred Stock may be issued in whole
          -----------------
shares or in any fraction of a share that is one one-thousandth (1/1,000th) of a
share or any integral multiple of such fraction, which shall entitle the holder,
in proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series Z Preferred Stock.  In lieu of fractional
shares, the Corporation may elect to make a cash payment as provided in the
Shareholder Rights Agreement, dated ___________, 2000, between the Corporation
and State Street Bank & Trust Company, for fractions of a share other than one
one-thousandth (1/1,000th) of a share or any integral multiple thereof.

                                      A-6
<PAGE>

                                                                       Exhibit B
                                                                       ---------


                          [Form of Right Certificate]


Certificate No. R-                                                 ______ Rights


NOT EXERCISABLE AFTER _____________, 2010 OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF CYPRESS
COMMUNICATIONS, INC., AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE
SHAREHOLDER RIGHTS AGREEMENT BETWEEN CYPRESS COMMUNICATIONS, INC. AND STATE
STREET BANK AND TRUST COMPANY, AS RIGHTS AGENT, DATED AS OF ___________, 2000
(THE "RIGHTS AGREEMENT").  AS SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF
AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS BECOME NULL AND VOID.


Right Certificate

CYPRESS COMMUNICATIONS, INC.


This certifies that _________________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Shareholder Rights Agreement dated as of _____________, 2000 (the "Rights
Agreement") between Cypress Communications, Inc.  (the "Company") and State
Street Bank and Trust Company, as Rights Agent (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to the close of business on
____________, 2010 at the office or offices of the Rights Agent designated for
such purpose, or its successors as Rights Agent, one one-thousandth of a fully
paid, non-assessable share of the Series Z Junior Participating Cumulative
Preferred Stock (the "Preferred Stock") of the Company, at a purchase price of
_____ per one one-thousandth of a share (the "Exercise Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase and the related Certificate duly executed.  The number of Rights
evidenced by this Right Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Exercise Price per
share set forth above, are the number and Exercise Price as of _______________,
based on the Preferred Stock as constituted at such date.

                                      B-1
<PAGE>

     Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
Person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.

     As provided in the Rights Agreement, the Exercise Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.

     This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.

     This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Certificates surrendered shall have entitled such holder to
purchase.  If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Certificates for the number of whole Rights not exercised.  If this Right
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.

     Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock or Preferred Stock at an exchange ratio (subject to
adjustment) specified in the Rights Agreement.

     Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Board of Directors of the Company at its
option at a

                                      B-2
<PAGE>

redemption price of $0.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors).

     The Company is not obligated to issue fractional shares of stock upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts).  If
the Company elects not to issue such fractional shares, in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

     No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock, Common Stock or any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

     This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.

     WITNESS the facsimile signature of the proper officers of the Company as a
document under seal.

Attested:                                CYPRESS COMMUNICATIONS, INC.

By:__________________________________    By: ___________________________________
  [Secretary or Assistant Secretary]         Name:
                                             Title: [Chairman, Vice Chairman,
                                                    President or Vice President]

Countersigned:

[RIGHTS AGENT]

By:____________________________________
   Name:
   Title:

                                      B-3
<PAGE>

                  [Form of Reverse Side of Right Certificate]

                              FORM OF ASSIGNMENT
                              ------------------

               (To be executed by the registered holder if such
              holder desires to transfer the Right Certificate.)


FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto ____________________________________ (Please print name and
address of transferee) ____________________________________ this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.


Dated: ______________, _____            ___________________________________
                                        Signature

Signature Guaranteed: _______________________

                                      B-4
<PAGE>

                                  CERTIFICATE
                                  -----------


     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  the Rights evidenced by this Right Certificate ____ are ____ are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and

     (2)  after due inquiry and to the best knowledge of the undersigned, the
undersigned ____ did ____ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.


Dated: ______________, _____            ___________________________________
                                        Signature

                                      B-5
<PAGE>

                                    NOTICE
                                    ------


          The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.

                                      B-6
<PAGE>

                         FORM OF ELECTION TO PURCHASE
                         ----------------------------

                     (To be executed if holder desires to
                       exercise the Right Certificate.)


To CYPRESS COMMUNICATIONS, INC.:

     The undersigned hereby irrevocably elects to exercise _______ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:

Please insert social security
or other identifying taxpayer number:  __________________

______________________________________________________________________________
                        (Please print name and address)

______________________________________________________________________________

______________________________________________________________________________

     If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section
11(a)(ii) of the Rights Agreement, a new Right Certificate for the balance of
such Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying taxpayer number:  _____________________

______________________________________________________________________________
                        (Please print name and address)

______________________________________________________________________________

______________________________________________________________________________


Dated: ______________, _____            ___________________________________
                                        Signature

Signature Guaranteed: _______________________

                                      B-7
<PAGE>

                                  CERTIFICATE
                                  -----------


     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  the Rights evidenced by this Right Certificate ____ are ____ are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and

     (2)  after due inquiry and to the best knowledge of the undersigned, the
undersigned ____ did ____ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person, or an Affiliate or Associate of any such Person.


Dated: __________________, ____              _______________________________
                                             Signature

                                      B-8
<PAGE>

                                    NOTICE
                                    ------

     The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.

                                      B-9