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                                                                 EXHIBIT 3.1

                     RESTATED CERTIFICATE OF INCORPORATION

                                       OF

                            ALLEGIANCE TELECOM, INC.


                                  ARTICLE ONE


              The name of the Corporation is Allegiance Telecom, Inc.


                                  ARTICLE TWO


              The address of the Corporation's registered office in the State
of Delaware is  1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801.   The name of the Corporation's registered agent at such
address is The Corporation Trust Company.


                                 ARTICLE THREE


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


                                  ARTICLE FOUR

                             A.  AUTHORIZED SHARES

              The total number of shares of capital stock which the Corporation
has authority to issue is 198,524 shares, consisting of:

              (a)    96,000 shares of 12 % Cumulative Convertible Preferred
       Stock, par value $.01 per share (the "Preferred Stock") and

              (b)    102,524 shares of Common Stock, par value $.01 per share
       (the "Common Stock").

       Immediately upon the effectiveness of this amendment to Article IV of
the Certificate of Incorporation, all of the outstanding shares of the
Corporation's common stock, par value $.01
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per share, shall without further action by the Corporation or the holder
thereof be reclassified, changed and converted into one share of Common Stock.

                               B. PREFERRED STOCK

              Section  1.  Dividends.

              1A.    General Obligation.  When and as declared by the
Corporation's Board of Directors and to the extent permitted under the General
Corporation Law of Delaware, the Corporation shall pay preferential dividends
in cash to the holders of the Preferred Stock as provided in this Section 1.
Except as otherwise provided herein, dividends on each share of the Preferred
Stock (a "Share") shall accrue on a daily basis at the rate of 12% per annum of
the sum of the Liquidation Value thereof plus all accumulated and unpaid
dividends thereon from and including the date of issuance of such Share to and
including the first to occur of (i) the date on which the Liquidation Value of
such Share (plus all accrued and unpaid dividends thereon) is paid to the
holder thereof in connection with the liquidation of the Corporation, (ii) the
date on which such Share is converted into shares of Conversion Stock hereunder
or (iii) the date on which such share is otherwise acquired by the Corporation.
Such dividends shall accrue whether or not they have been declared and whether
or not there are profits, surplus or other funds of the Corporation legally
available for the payment of dividends, and such dividends shall be cumulative
such that all accrued and unpaid dividends shall be fully paid or declared with
funds irrevocably set apart for payment before any dividends, distributions,
redemptions or other payments may be made with respect to any Junior
Securities.  The date on which the Corporation initially issues any Share shall
be deemed to be its "date of issuance" regardless of the number of times
transfer of such Share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which may be issued to
evidence such Share.

              1B.    Dividend Reference Dates.  To the extent not paid on
December 31 of each year, beginning December 31, 1997 (the "Dividend Reference
Dates"), all dividends which have accrued on each Share outstanding during the
12-month period (or other period in the case of the initial Dividend Reference
Date) ending upon each such Dividend Reference Date shall be accumulated and
shall remain accumulated dividends with respect to such Share until paid to the
holder thereof.

              1C.    Distribution of Partial Dividend Payments.  Except as
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Preferred Stock,
such payment shall be distributed pro rata among the holders thereof based upon
the aggregate Liquidation Value (plus all accrued but unpaid dividends thereon)
of the Shares held by each such holder.

              Section 2.  Liquidation.

              Upon any liquidation, dissolution or winding up of the
Corporation (whether voluntary or involuntary), each holder of Preferred Stock
shall be entitled to be paid, before any





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distribution or payment is made upon any Junior Securities, an amount in cash
equal to the aggregate Liquidation Value of all Shares held by such holder
(plus all accrued and unpaid dividends thereon), and the holders of Preferred
Stock shall not be entitled to any further payment.  If upon any such
liquidation, dissolution or winding up of the Corporation the Corporation's
assets to be distributed among the holders of the Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid under this Section 2, then the entire assets
available to be distributed to the Corporation's stockholders shall be
distributed pro rata among such holders based upon the aggregate Liquidation
Value (plus all accrued and unpaid dividends) of the Preferred Stock held by
each such holder.  Prior to the liquidation, dissolution or winding up of the
Corporation, the Corporation shall declare for payment all accrued and unpaid
dividends with respect to the  Preferred Stock, but only to the extent of funds
of the Corporation legally available for the payment of dividends.  Not less
than 60 days prior to the payment date stated therein, the Corporation shall
mail written notice of any such liquidation, dissolution or winding up to each
record holder of  Preferred Stock, setting forth in reasonable detail the
amount of proceeds to be paid with resect to each Share and each share of
Common Stock in connection with such liquidation, dissolution or winding up.

              Upon the election of the holders of a majority of the Preferred
Stock delivered to the Corporation within 45 days after receipt of the
Corporation's notice to the holders of Preferred Stock under this Section 2,
any consolidation or merger of the Corporation with or into another entity or
entities (whether or not the Corporation is the surviving entity) or any sale
or transfer by the Corporation of more than 50% of its assets (determined
either for the Corporation alone or with its Subsidiaries on a consolidated
basis) or any sale, transfer or issuance or series of sales, transfers and/or
issuances of shares of the Corporation's capital stock by the Corporation or
the holders thereof as a result of which the holders of the Corporation's
outstanding capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Corporation's Board of Directors
immediately prior to such sale or issuance cease to own the Corporation's
outstanding capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Corporation's Board of Directors,
shall be deemed to be a liquidation, dissolution and winding up of the
Corporation for purposes of this Section 2, and the holders of the Preferred
Stock shall be entitled to receive payment from the Corporation of the amounts
payable with respect to the Preferred Stock upon a liquidation, dissolution or
winding up of the Corporation under this Section 2 in cancellation of their
Shares upon the consummation of any such transaction; provided that the
foregoing provision shall not apply to any merger in which (i) the Corporation
is the surviving entity, (ii) the terms of the Preferred Stock are not changed
and none of the Preferred Stock is exchanged for any cash, securities or other
property and (iii) the holders of the Corporation's outstanding capital stock
possessing the voting power (under ordinary circumstances) to elect a majority
of the Corporation's Board of Directors immediately prior to the merger
continue to own the Corporation's outstanding capital stock possessing the
voting power (under ordinary circumstances) to elect a majority of the
Corporation's Board of Directors immediately after the merger.





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              Section 3.  Priority of  Preferred on Dividends and Redemptions.

              So long as any Preferred Stock remains outstanding, without the
prior written consent of the holders of a majority of the outstanding shares of
Preferred Stock, the Corporation shall not, nor shall it permit any Subsidiary
to, redeem, purchase or otherwise acquire directly or indirectly any Junior
Securities, nor shall the Corporation directly or indirectly pay or declare any
dividend or make any distribution upon any Junior Securities, if at the time of
or immediately after any such redemption, purchase, acquisition, dividend or
distribution the Corporation has failed to pay the full amount of dividends
accrued on the  Preferred Stock or the Corporation has failed to make any
redemption of the Preferred Stock required hereunder; provided that the
Corporation may repurchase shares of Common Stock in accordance with the
provisions of the Stock Purchase Agreement and the Securityholders Agreement
and may repurchase shares of Common Stock from present or former employees of
the Corporation and its Subsidiaries in accordance with the provisions of the
Executive Purchase Agreements.

              Section 4.  Voting Rights.

              The holders of the Preferred Stock shall be entitled to notice of
all stockholders meetings in accordance with the Corporation's bylaws, and the
holders of the Preferred Stock shall be entitled to vote on all matters
submitted to the stockholders for a vote together with the holders of the
Common Stock voting together as a single class with each share of Common Stock
entitled to one vote per share and each Share of Preferred Stock entitled to
one vote for each share of Common Stock issuable upon conversion of the
Preferred Stock as of the record date for such vote or, if no record date is
specified, as of the date of such vote.

              Section 5.  Conversion.

              5A.    Conversion Procedure.

              (i)    At any time and from time to time, any holder of Preferred
Stock may convert all or any portion of the Preferred Stock (including any
fraction of a Share) held by such holder into a number of shares of Conversion
Stock computed by multiplying the number of Shares to be converted by $52.63
and dividing the result by the Conversion Price then in effect.

              (ii)   Except as otherwise provided herein, each conversion of
Preferred Stock shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing the
Preferred Stock to be converted have been surrendered for conversion at the
principal office of the Corporation.  At the time any such conversion has been
effected, the rights of the holder of the Shares converted as a holder of
Preferred Stock (including, without limitation, the rights to receive any
accrued but unpaid dividends thereon) shall cease and the Person or Persons in
whose name or names any certificate or certificates for shares of Conversion
Stock are to be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Conversion Stock represented
thereby.  Notwithstanding the foregoing, in connection





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with a conversion in which the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") is applicable, until such time as the applicable waiting
periods (and extensions thereof) under the HSR Act relating to any holder
converting Preferred Stock in such conversion have expired or otherwise been
terminated, such converting holder shall have no right to vote the Conversion
Stock issued upon such conversion (except for votes concerning proposed
amendments or waivers to this Certificate of Incorporation).

              (iii)  Notwithstanding any other provision hereof, if a
conversion of Preferred Stock is to be made in connection with any transaction
or proposed transaction affecting the Corporation (including, without
limitation, a public offering of the Corporation's securities, change of
control, or a liquidation or dissolution), the conversion of any Shares of
Preferred Stock may, at the election of the holder thereof, be conditioned upon
the consummation of such transaction, in which case such conversion shall be
deemed to be effective upon the consummation of such transaction or immediately
prior thereto (at the election of such holder).

              (iv)   As soon as possible after a conversion has been effected
(but in any event within five business days in the case of subparagraph (a)
below), the Corporation shall deliver to the converting holder:

                     (a)    a certificate or certificates representing the
       number of shares of Conversion Stock issuable by reason of such
       conversion in such name or names and such denomination or denominations
       as the converting holder has specified; and

                     (b)    a certificate representing any Shares of Preferred
       Stock which were represented by the certificate or certificates
       delivered to the Corporation in connection with such conversion but
       which were not converted.

              (v)    The issuance of certificates for shares of Conversion
Stock upon conversion of Preferred Stock shall be made without charge to the
holders of such Preferred Stock for any issuance tax in respect thereof or
other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Conversion Stock.  Upon conversion of each
Share of Preferred Stock, the Corporation shall take all such actions as are
necessary in order to insure that the Conversion Stock issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable, free and
clear of all taxes, liens, charges and encumbrances with respect to the
issuance thereof.

              (vi)   The Corporation shall not close its books against the
transfer of Preferred Stock or of Conversion Stock issued or issuable upon
conversion of Preferred Stock in any manner which interferes with the timely
conversion of the Preferred Stock.  The Corporation shall assist and cooperate
with any holder of Shares required to make any governmental filings or obtain
any governmental approval prior to or in connection with any conversion of
Shares hereunder (including, without limitation, making any filings required to
be made by the Corporation).





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              (vii)  The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Conversion Stock, solely
for the purpose of issuance upon the conversion of the Preferred Stock, such
number of shares of Conversion Stock issuable upon the conversion of all
outstanding Preferred Stock.  All shares of Conversion Stock which are so
issuable shall, when issued, be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges.  The Corporation
shall take all such actions as may be necessary to assure that all such shares
of Conversion Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic securities exchange
upon which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Corporation upon each
such issuance).  The Corporation shall not take any action which would cause
the number of authorized but unissued shares of Conversion Stock to be less
than the number of such shares required to be reserved hereunder for issuance
upon conversion of the Preferred Stock.

              5B.    Conversion Price.

              (i)    The initial Conversion Price shall be $52.63.  In order to
prevent dilution of the conversion rights granted under this Section 5, the
Conversion Price shall be subject to adjustment from time to time pursuant to
this paragraph 5B.

              (ii)   If and whenever the Corporation issues or sells, or in
accordance with paragraph 5C is deemed to have issued or sold, any share of
Common Stock for a consideration per share less than the Current Price in
effect as of the date of such issue or sale, then immediately upon such issue
or sale or deemed issue or sale the Conversion Price shall be reduced to a new
Conversion Price determined by multiplying (a) the Conversion Price in effect
immediately prior to such issue or sale, times (b) a fraction, the numerator of
which shall be the sum of (1) the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale multiplied by the Current
Price in effect as of the date of such issue or sale, plus (2) the
consideration, if any, received by the Corporation upon such issue or sale, and
the denominator of which shall be the product of the Current Price in effect as
of the date of such issue or sale multiplied by the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale.

              (iii)  If at any time the Current Price is increased as a result
of a Subsequent Contribution (as defined in the Stock Purchase Agreement), such
higher Current Price shall be retroactively effective as of the date of the
Stock Purchase Agreement for all purposes of this Section 5, and the Conversion
Price then in effect shall be recalculated and adjusted to the Conversion Price
that would have been determined pursuant to this Section 5 (including, without
limitation, in connection with issuances and deemed issuances of Common Stock
from the date of the Stock Purchase Agreement until and including the date of
such Subsequent Contribution) had the Current Price been such amount from the
date of the Stock Purchase Agreement until and including the date of such
Subsequent Contribution (as such amount shall be equitably adjusted to reflect
any stock splits, stock dividends, stock combinations, or recapitalizations
during such period).





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              (iv)   Notwithstanding the foregoing, there shall be no
adjustment to the Conversion Price hereunder with respect to the granting of
stock options to employees of the Corporation and its Subsidiaries or the
issuance of Common Stock upon exercise thereof for an aggregate of up to 5,000
shares of Common Stock (as such number of shares is equitably adjusted for
subsequent stock splits, stock dividends, stock combinations and
recapitalizations, and such number shall include all stock options outstanding
as of the date of the Stock Purchase Agreement) pursuant to the Corporation's
Permitted Stock Option Plan (as defined in the Stock Purchase Agreement).

              5C.    Effect on Conversion Price of Certain Events.  For
purposes of determining the adjusted Conversion Price under paragraph 5B, the
following shall be applicable:

              (i)    Issuance of Rights or Options.  If the Corporation in any
manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of any Convertible Securities issuable upon exercise of such Options,
is less than the Conversion Price in effect immediately prior to the time of
the granting or sale of such Options, then the total maximum number of shares
of Common Stock issuable upon the exercise of such Options or upon conversion
or exchange of the total maximum amount of such Convertible Securities issuable
upon the exercise of such Options shall be deemed to be outstanding and to have
been issued and sold by the Corporation at the time of the granting or sale of
such Options for such price per share.  For purposes of this paragraph, the
"price per share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount, if any, received or receivable by the
Corporation as consideration for the granting or sale of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon exercise of all such Options, plus in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options.  No further adjustment
of the Conversion Price shall be made when Convertible Securities are actually
issued upon the exercise of such Options or when Common Stock is actually
issued upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.

              (ii)   Issuance of Convertible Securities.  If the Corporation in
any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is less
than the Conversion Price in effect immediately prior to the time of such issue
or sale, then the maximum number of shares of Common Stock issuable upon
conversion or exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Corporation at the time of
the issuance or sale of such Convertible Securities for such price per share.
For the purposes of this paragraph, the "price per share for which Common Stock
is issuable" shall be determined by dividing (A) the total amount received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation





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upon the conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities.  No further adjustment of the Conversion Price shall be
made when Common Stock is actually issued upon the conversion or exchange of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustments of the
Conversion Price had been or are to be made pursuant to other provisions of
this Section 5, no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.

              (iii)  Change in Option Price or Conversion Rate.  If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be immediately adjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold; provided that if such adjustment would
result in an increase of the Conversion Price then in effect, such adjustment
shall not be effective until 30 days after written notice thereof has been
given by the Corporation to all holders of the Preferred Stock.  For purposes
of paragraph 5C, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of the  Preferred Stock are changed in
the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of the
date of such change; provided that no such change shall at any time cause the
Conversion Price hereunder to be increased.

              (iv)   Treatment of Expired Options and Unexercised Convertible
Securities.  Upon the expiration of any Option or the termination of any right
to convert or exchange any Convertible Security without the exercise of any
such Option or right, the Conversion Price then in effect hereunder shall be
adjusted immediately to the Conversion Price which would have been in effect at
the time of such expiration or termination had such Option or Convertible
Security, to the extent outstanding immediately prior to such expiration or
termination, never been issued; provided that if such expiration or termination
would result in an increase in the Conversion Price then in effect, such
increase shall not be effective until 30 days after written notice thereof has
been given to all holders of the Preferred Stock.  For purposes of this
paragraph 5C, the expiration or termination of any Option or Convertible
Security which was outstanding as of the date of issuance of the Preferred
Stock shall not cause the conversion Price hereunder to be adjusted unless, and
only to the extent that, a change in the terms of such Option or Convertible
Security caused it to be deemed to have been issued after the date of issuance
of the Preferred Stock.

              (v)    Calculation of Consideration Received.  If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor (net of discounts,
commissions and related expenses).  If any Common Stock, Option or





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Convertible Security is issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Corporation shall
be the fair value of such consideration, except where such consideration
consists of securities, in which case the amount of consideration received by
the Corporation shall be the Market Price thereof as of the date of receipt.
If any Common Stock, Option or Convertible Security is issued to the owners of
the non-surviving entity in connection with any merger in which the Corporation
is the surviving corporation, the amount of consideration therefor shall be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving entity as is attributable to such Common Stock, Option or
Convertible Security, as the case may be.  The fair value of any consideration
other than cash and securities shall be determined jointly by the Corporation
and the holders of a majority of the outstanding Preferred Stock.  If such
parties are unable to reach agreement within a reasonable period of time, the
fair value of such consideration shall be determined by an independent
appraiser experienced in valuing such type of consideration jointly selected by
the Corporation and the holders of a majority of the outstanding Preferred
Stock.  The determination of such appraiser shall be final and binding upon the
parties, and the fees and expenses of such appraiser shall be borne by the
Corporation.

              (vi)   Integrated Transactions.  In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued without consideration.

              (vii)  Treasury Shares.  The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.

              (viii) Record Date.  If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or upon the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

              5D.    Subdivision or Combination of Common Stock.  If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Conversion Price in effect
immediately prior to such subdivision shall be proportionately reduced, and if
the Corporation at any time combines (by reverse stock split, stock combination
or otherwise) one or more classes of its outstanding shares of Common Stock
into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.





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              5E.    Reorganization, Reclassification, Consolidation, Merger or
Sale.  Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Corporation's assets or other
transaction, in each case which is effected in such a manner that the holders
of Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock, is referred to herein as an "Organic Change".  Prior to the
consummation of any Organic Change, the Corporation shall make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Preferred Stock then outstanding) to insure that each of the holders of
Preferred Stock shall thereafter have the right to acquire and receive, in lieu
of or in addition to (as the case may be) the shares of Conversion Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Preferred Stock, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such
holder had converted its Preferred Stock immediately prior to such Organic
Change.  In each such case, the Corporation shall also make appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Preferred Stock then outstanding) to insure that the provisions of this
Section 5 and Sections 6 and 7 hereof shall thereafter be applicable to the
Preferred Stock (including, in the case of any such consolidation, merger or
sale in which the successor entity or purchasing entity is other than the
Corporation, an immediate adjustment of the Conversion Price to the value for
the Common Stock reflected by the terms of such consolidation, merger or sale,
and a corresponding immediate adjustment in the number of shares of Conversion
Stock acquirable and receivable upon conversion of Preferred Stock, if the
value so reflected is less than the Conversion Price in effect immediately
prior to such consolidation, merger or sale).  The Corporation shall not effect
any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance satisfactory to the holders of a majority of
the Preferred Stock then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to acquire.

              5F.    Certain Events.  If any event occurs of the type
contemplated by the provisions of this Section 5 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Corporation's Board of Directors shall make an appropriate
adjustment in the Conversion Price so as to protect the rights of the holders
of Preferred Stock; provided that no such adjustment shall increase the
Conversion Price as otherwise determined pursuant to this Section 5 or decrease
the number of shares of Conversion Stock issuable upon conversion of each Share
of Preferred Stock.

              5G.    Notices.

              (i)    Immediately upon any adjustment of the Conversion Price,
the Corporation shall give written notice thereof to all holders of Preferred
Stock, setting forth in reasonable detail and certifying the calculation of
such adjustment.





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              (ii)   The Corporation shall give written notice to all holders
of Preferred Stock at least 20 days prior to the date on which the Corporation
closes its books or takes a record (a) with respect to any dividend or
distribution upon Common Stock, (b) with respect to any pro rata subscription
offer to holders of Common Stock or (c) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.

              (iii)  The Corporation shall also give written notice to the
holders of Preferred Stock at least 20 days prior to the date on which any
Organic Change shall take place.

              5H.    No Avoidance.  In the event the Corporation shall enter
into any transaction for the purpose of avoiding the application of the
provisions of this Section 5, the benefits provided by such provisions shall
nevertheless apply and be preserved.

              5I.    Mandatory Conversion.        If, at any time in connection
with a public offering of the Corporation's Common Stock, the holders of a
majority of the shares of Preferred Stock elect to convert all of their
Preferred Stock hereunder, all of the holders of Preferred Stock shall be
required contemporaneously with such public offering to convert all of their
Preferred Stock under this paragraph 5.  Any such mandatory conversion shall
only be effected at the time of and subject to the closing of the sale of such
shares pursuant to such public offering and upon written notice of such
mandatory conversion delivered to all holders of Preferred Stock at least seven
days prior to such closing.

              Section 6.    Liquidating Dividends.

              If the Corporation declares or pays a dividend upon the Common
Stock payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of Common
Stock (a "Liquidating Dividend"), then the Corporation shall pay to the holders
of Preferred Stock at the time of payment thereof the Liquidating Dividends
which would have been paid on the shares of Conversion Stock had such Preferred
Stock been converted immediately prior to the date on which a record is taken
for such Liquidating Dividend, or, if no record is taken, the date as of which
the record holders of Common Stock entitled to such dividends are to be
determined.

              Section 7.    Purchase Rights.

              If at any time the Corporation grants, issues, distributes or
sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then each holder of Preferred
Stock shall be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of shares of Conversion Stock acquirable upon
conversion of such holder's Preferred Stock immediately before the date on
which a record is taken for the grant, issuance or sale of such





                                    -  11 -
<PAGE>   12
Purchase Rights, or if no such record is taken, the date as of which the record
holders of Common Stock are to be determined for the grant, issue or sale of
such Purchase Rights.

              Section 8.    Acceleration upon Occurrence of Certain
Proceedings.

              The Preferred Stock shall not be redeemable, except as set forth
in this Section 8.  If at any time the Corporation makes an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Corporation bankrupt or insolvent; or any order for relief
with respect to the Corporation is entered under the Federal Bankruptcy Code;
or the Corporation petitions or applies to any tribunal for the appointment of
a custodian, trustee, receiver or liquidator of the Corporation or of any
substantial part of the assets of the Corporation, or commences any proceeding
(other than a proceeding for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Corporation under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law
of any jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Corporation and either (a) the Corporation
or any such Subsidiary by any act indicates its approval thereof, consent
thereto or acquiescence therein or (b) such petition, application or proceeding
is not dismissed within 60 days (any of the foregoing, a "Proceeding"), then
the holders of a majority of the Preferred Stock then outstanding may demand
(by written notice delivered to the Corporation) immediate redemption of all or
any portion of the Preferred Stock owned by such holders at a price per Share
equal to the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon).

              Section 9.    Registration of Transfer.

              The Corporation shall keep at its principal office a register for
the registration of Preferred Stock.  Upon the surrender of any certificate
representing Preferred Stock at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of Shares represented by the
surrendered certificate.  Each such new certificate shall be registered in such
name and shall represent such number of Shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such Preferred Stock represented by the surrendered certificate.

              Section 10.  Replacement.

              Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Shares of Preferred Stock, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided





                                    -  12 -
<PAGE>   13
that if the holder is an Investor Member (as defined in the Stock Purchase
Agreement) or a partner thereof or a financial institution or other
institutional investor, its own agreement shall be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Corporation
shall (at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of Shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate, and
dividends shall accrue on the Preferred Stock represented by such new
certificate from the date to which dividends have been fully paid on such lost,
stolen, destroyed or mutilated certificate.

              Section 11.   Definitions.

              "Common Stock" means, collectively, the Corporation's Common
Stock and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or stated
value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.

              "Common Stock Deemed Outstanding" means, at any given time, the
number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock deemed to be outstanding pursuant to
subparagraphs 5C(i) and 5C(ii) hereof whether or not the Options or Convertible
Securities are actually exercisable at such time, in each case, without
duplication.

              "Conversion Stock" means shares of the Corporation's Common
Stock, par value $.01 per share; provided that if there is a change such that
the securities issuable upon conversion of the Preferred Stock are issued by an
entity other than the Corporation or there is a change in the type or class of
securities so issuable, then the term "Conversion Stock" shall mean one share
of the security issuable upon conversion of the Preferred Stock if such
security is issuable in shares, or shall mean the smallest unit in which such
security is issuable if such security is not issuable in shares.

              "Convertible Securities" means any stock or securities directly
or indirectly convertible into or exchangeable for Common Stock.

              "Current Price" means, as of any given date, the product of (i)
the initial Conversion Price of $52.63 (as such number is equitably adjusted to
reflect any stock splits, stock dividends, stock combinations, or
recapitalizations, in the manner that the actual Conversion Price is adjusted
under Section 5D), multiplied by (ii) a fraction, the numerator of which shall
be the highest Liquidation Value of any Share of Preferred Stock outstanding as
of such date, and the denominator of which shall be $52.63.

              "Executive Purchase Agreements" means the Executive Purchase
Agreements as defined in the Stock Purchase Agreement.





                                    -  13 -
<PAGE>   14
              "Junior Securities" means any capital stock or other equity
securities of the Corporation, except for the Preferred Stock.

              "Liquidation Value" of any Share as of any particular date (the
"Relevant Date") shall equal the sum of (i) the initial price paid to the
Corporation for such Share on its date of issuance plus (ii) the aggregate
contributions to the capital of the Corporation made (pursuant to the
provisions of the Stock Purchase Agreement) with respect to such Share after
its date of issuance until and including the Relevant Date.

              "Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there has been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day such security is
not so listed, the average of the representative bid and asked prices quoted in
the Nasdaq System as of 4:00 P.M., New York time, or, if on any day such
security is not quoted in the Nasdaq System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which "Market Price" is being determined and the 20
consecutive business days prior to such day.  If at any time such security is
not listed on any securities exchange or quoted in the Nasdaq System or the
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Corporation and the holders of a majority of the
Preferred Stock.  If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by the
Corporation and the holders of a majority of the Preferred Stock.  The
determination of such appraiser shall be final and binding upon the parties,
and the Corporation shall pay the fees and expenses of such appraiser.

              "Options" means any rights, warrants or options to subscribe for
or purchase Common Stock or Convertible Securities.

              "Person" means an individual, a partnership, a corporation, a
limited liability company, a limited liability, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a
governmental entity or any department, agency or political subdivision thereof.

              "Registration Agreement" means the Registration Agreement as
defined in the Stock Purchase Agreement.

              "Securityholders Agreement" means the Securityholders Agreement
as defined in the Stock Purchase Agreement.





                                    -  14 -
<PAGE>   15
              "Stock Purchase Agreement" means that stock purchase agreement,
dated as of August 13, 1997, by and between the Corporation and Transcend
Telecom, L.L.C., a Delaware limited liability company, as amended from time to
time in accordance with its terms.

              "Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a
majority of the partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that person or a combination thereof.  For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing general partner of such
limited liability company, partnership, association or other business entity.

              Section 12.  Amendment and Waiver.

              No amendment, modification or waiver shall be binding or
effective with respect to any provision of this Part B without the prior
written consent of the holders of a majority of the Preferred Stock outstanding
at the time such action is taken; provided that no such action shall change (a)
the rate at which or the manner in which dividends on the Preferred Stock
accrue or the times at which such dividends become payable, or the percentage
required to approve any change described in this clause (a), without the prior
written consent of the holders of at least 96% of the shares of Preferred Stock
then outstanding, or (b) the Conversion Price or the number of shares or class
of stock into which the Preferred Stock is convertible (other than changes
pursuant to the antidilution and other provisions of Section 5), or the
percentage required to approve any change described in this clause (b), without
the prior written consent of the holders of at least 96% of the shares of
Preferred Stock then outstanding; and provided further that no change in the
terms hereof may be accomplished by merger or consolidation of the Corporation
with another corporation or entity unless the Corporation has obtained the
prior written consent of the holders of the appropriate percentage of the
Preferred Stock then outstanding.

              Section 13.  Notices.

              Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing, shall be delivered personally or sent
by reputable overnight courier (charges prepaid), and shall be deemed to have
been given when so delivered or one business day after being so sent (i) to the
Corporation, at its principal executive offices and (ii) to any stockholder at
such holder's address as it appears in the stock records of the Corporation
(unless otherwise indicated by any such holder).





                                    -  15 -
<PAGE>   16
                                C.  COMMON STOCK

              Section 1.    Voting Rights.

              Except as otherwise provided in this Part C or in Section 5A(ii)
of Part B above or as otherwise required by applicable law, and subject to
Section 4 of Part B above, the holders of Common Stock shall be entitled to one
vote per share on all matters to be voted on by the Corporation's stockholders.

              Section 2.    Dividends.

              As and when dividends are declared or paid with respect to shares
of Common Stock, whether in cash, property or securities of the Corporation,
the holders of Common Stock shall be entitled to receive such dividends pro
rata at the same rate per share of Common Stock.  The rights of the holders of
Common Stock to receive dividends are subject to the provisions of the
Preferred Stock.

              Section 3.    Liquidation.

              Subject to the provisions of the Preferred Stock, the holders of
the Common Stock shall be entitled to participate pro rata at the same rate per
share of Common Stock in all distributions to the holders of the Common Stock
in any liquidation, dissolution or winding up of the Corporation.

              Section 4.    Registration of Transfer.

              The Corporation shall keep at its principal office (or such other
place as the Corporation reasonably designates) a register for the registration
of shares of Common Stock.  Upon the surrender of any certificate representing
shares of any class of Common Stock at such place, the Corporation shall, at
the request of the registered holder of such certificate, execute and deliver a
new certificate or certificates in exchange therefor representing in the
aggregate the number of shares of such class represented by the surrendered
certificate, and the Corporation forthwith shall cancel such surrendered
certificate.  Each such new certificate shall be registered in such name and
shall represent such number of shares of such class as is requested by the
holder of the surrendered certificate and shall be substantially identical in
form to the surrendered certificate.  The issuance of new certificates shall be
made without charge to the holders of the surrendered certificates for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such issuance.





                                    -  16 -
<PAGE>   17
              Section 5.    Replacement.

              Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any class of Common Stock, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is an Investor
Member (as defined in the Stock Purchase Agreement) or a partner thereof or a
financial institution or other institutional investor, its own agreement shall
be satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.

              Section 6.    Notices.

              All notices referred to herein shall be in writing, shall be
delivered personally or sent by reputable overnight courier (charges prepaid),
and shall be deemed to have been given when so delivered or one business day
after being so sent (i) to the Corporation, at its principal executive offices
and (ii) to any stockholder at such holder's address as it appears in the stock
records of the Corporation (unless otherwise indicated by any such holder).

              Section 7.    Amendment and Waiver.

              No amendment or waiver of any provision of this Part C shall be
effective without the prior approval of the holders of a majority of the then
outstanding Common Stock.

                                  ARTICLE FIVE


                The corporation is to have perpetual existence.


                                  ARTICLE SIX


              In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the by-laws of the corporation.





                                    -  17 -
<PAGE>   18
                                 ARTICLE SEVEN


              Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws of the corporation may provide.  The books of the
corporation may be kept outside the State of Delaware at such place or places
as may be designated from time to time by the board of directors or in the by-
laws of the corporation.  Election of directors need not be by written ballot
unless the by-laws of the corporation so provide.


                                 ARTICLE EIGHT


              To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended, a
director of this corporation shall not be liable to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a director.
Any repeal or modification of this ARTICLE EIGHT shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification.


                                  ARTICLE NINE


              The corporation expressly elects not to be governed by Section
203 of the General Corporation Law of the State of Delaware.


                                  ARTICLE TEN


              The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed herein and by the laws of the State of
Delaware, and all rights conferred upon stockholders herein are granted subject
to this reservation.

                                  * * * * * *





                                   -  18 -