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                                                                     EXHIBIT 4.7

                            MGC COMMUNICATIONS, INC.

                      SERIES B CONVERTIBLE PREFERRED STOCK
                              AMENDED AND RESTATED
                           CERTIFICATE OF DESIGNATION

                             ______________________

                Pursuant to [SECTIONS 78.195 AND 78.1955] of the
                 General Corporation Law of the State of Nevada

                             ______________________

     MGC Communications, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Nevada, does hereby
certify that pursuant to the authority vested in the Board of Directors of the
Corporation by its Articles of Incorporation, as amended, and pursuant to the
provisions of [SECTIONS 78.195 AND 78.1955] of the General Corporation Law of
the State of Nevada, said Board of Directors, by unanimous written consent or
at a meeting duly called and held, adopted the following resolution which
remains in full force and effect as of the date hereof:

     RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") by its Articles of Incorporation,
as amended (hereinafter referred to as the "Articles of Incorporation") and
having obtained the consent of the holders of a majority of the outstanding
shares of Series B Preferred (as defined below), the Board of Directors does
hereby amend and restate in its entirety its resolution providing for the
creation and issuance of Series B Convertible Preferred Stock, par value $.001
per share, consisting of 5,278,000 shares, which shares shall have the following
designations, preferences and relative and other special rights, qualifications,
limitations and restrictions:

     1. Designation. The designation of such series is "Series B Convertible
Preferred Stock" (hereinafter in this Certificate of Designation called the
"Series B Preferred") and the number of shares constituting such series shall
be 5,278,000, which number may be decreased (but not increased) by the Board of
Directors without a vote of stockholders; provided, however, that such number
may not be decreased below the number of then currently outstanding shares of
Series B Preferred, plus shares issuable upon the exercise of any then
outstanding options, warrants or rights to acquire Series B Preferred. All
capitalized terms used in this Certificate of Designation and not otherwise
defined shall have the meaning given to such terms in Section 12 hereof.
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      2.    Dividend Rights.

            (a) Holders of Series B Preferred, prior to and in preference to the
holders of Junior Securities, will be entitled to receive, out of funds legally
available for such purpose, cumulative dividends as provided in this Section 2.
Dividends on each share of Series B Preferred shall accrue at the rate of 10%
per annum on the sum of (i) the Series B Liquidation Value and (ii) all accrued
and unpaid dividends on such share of Series B Preferred from the date of
issuance. Such dividends will be calculated and compounded annually on December
31 of each year (each a "dividend date") in respect of the prior twelve month
period (the initial such calculation to be made at the same rate for the number
of days elapsed from the date of issue of Series B Preferred to and including
the 31st day of December, 1999). Such dividends shall commence to accrue on each
share of Series B Preferred from the date of issuance thereof whether or not
declared by the Board of Directors, and whether or not there are profits,
surplus or other funds of the Corporation legally available for the payment of
dividends, and shall continue to accrue thereon until the earlier of (x) the
date the Series B Liquidation Value of such share (plus all accrued and unpaid
dividends thereon) is paid in full and (y) a proper election of the Board of
Directors pursuant to Section 2(b) below. For purposes of determining the amount
of dividends accrued on the Series B Preferred pursuant to this Section 2(a) in
connection with the sale, conversion, redemption or repurchase of any Series B
Preferred which may occur between two dividend dates, the applicable dividend
rate for such period shall be multiplied by a fraction, the numerator of which
is the actual number of days elapsed in the then current annual period and the
denominator of which is the total number of days comprising such annual period.
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 Series C
Preferred and Series B Preferred, such payment shall be distributed ratably
among the holders of Series C Preferred, Series B Preferred and such other class
or series of the Corporation's Preferred Stock which by its terms is then
entitled to receive dividends on a parity with the Series B Preferred and Series
C Preferred in proportion to the full dividend amount each such holder would be
entitled to receive upon payment of all accrued dividends on  the Series C
Preferred, Series B Preferred and such other Preferred Stock.

            (b) At any time on or after November 21, 1999, upon the written
election of the Board of Directors through delivery of the Threshold Notice to
each holder of Series B Preferred within two (2) business days after the date of
such election, dividends will no longer accrue on the Series B Preferred (but
those dividends which had accumulated to the date of such election will be
preserved) if the Market Threshold has been reached. In the Threshold Notice,
the Board shall certify its calculation of the Market Threshold, and provide
each holder with such supporting documentation as such holder may reasonably
request.

      3.    Voting Rights.

            (a) Voting Generally. Except as otherwise required by law or as
provided in this Section 3, the Series B Preferred will vote together with the
Common Stock, and not as a separate class, at any annual or special meeting of
stockholders, and may act by written consent in the same manner as the Common
Stock. In either case, each holder of shares of Series B Preferred will be
entitled to such number of votes as will be equal to the number of whole shares

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of Common Stock into which such holder's aggregate number of shares of Series B
Preferred are convertible pursuant to Section 5 hereof (assuming only for
purposes of this calculation that accrued and unpaid dividends on such shares
are not subject to conversion) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.

         (b) Separate Vote of Series B Preferred. So long as (i) not less than
one-third of the number of shares of Series B Preferred initially issued remain
outstanding or (ii) the number of shares of Series B Preferred outstanding
represents not less than five percent (5%) of the outstanding Common Stock,
assuming conversion of all outstanding shares of Series B Preferred, the vote or
written consent of a Majority of the Series B Holders shall be necessary for
effecting or validating the following actions (each a "Restricted Action"):

                  (i) increase or decrease (other than by redemption or
                      conversion) the total number of authorized shares of, or
                      issue any series of, Preferred Stock which is senior in
                      respect of dividends, liquidation or otherwise to or on a
                      pari passu basis with the Series B Preferred;

                 (ii) permit the Corporation or any Subsidiary to sell, convey
                      or otherwise dispose of assets having a value in excess of
                      $5,000,000; or merge into or consolidate with any other
                      Person (other than the Corporation or a Subsidiary); or
                      effect a Sale of the Company;

                (iii) voluntarily liquidate, dissolve or wind up the
                      Corporation;

                 (iv) alter or change the rights, preferences or privileges of
                      the shares of Series B Preferred so as to affect adversely
                      such shares;

                  (v) declare or pay any dividends or make other distribution on
                      any Junior Securities except for (x) the repurchase of any
                      Common Stock subject to a repurchase right for terminated
                      employees or independent contractors and (y) issuances of
                      Common Stock in satisfaction of accrued and unpaid
                      dividends on Junior Securities; provided, such issuances
                      shall not affect the antidilution rights of the holders of
                      Series B Preferred provided for in Section 5 hereof;

                 (vi) permit the Corporation or any Subsidiary to enter into any
                      transaction or series of related transactions with any
                      Affiliate of the Corporation, other than those directly
                      related to (1) pay or benefits (including stock options)
                      provided to Affiliates who are employees or Directors in
                      accordance with existing agreements or past practices or
                      approved with Required Board Approval; (2) the lease of
                      additional office space in the Las Vegas metropolitan area
                      on terms consistent with the existing leases to which the
                      Corporation is a party, and as approved by the Required
                      Board Approval; or (3) any other arms-length, commercially

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                  reasonable transactions approved by the disinterested
                  Directors in an amount not to exceed $100,000 in any year;

         (vii)    permit the Corporation or any Subsidiary to acquire the assets
                  or securities of any Person except for acquisitions involving
                  cash, securities or other property with an aggregate Fair
                  Market Value of less than (x) $10 million for any single
                  acquisition and (y) $20 million in the aggregate for all such
                  acquisitions during any 12-month period;

         (viii)   permit the Corporation or any Subsidiary to incur additional
                  Indebtedness (other than Indebtedness incurred as a result of
                  the refinancing of existing Indebtedness, provided the total
                  outstanding Indebtedness does not increase as a result of such
                  refinancing) in excess of (x) an aggregate at any one time
                  outstanding for the Corporation and its Subsidiaries of up to
                  $100,000,000 until May 5, 2000 plus accrued and unpaid
                  interest on such Indebtedness, and (y) thereafter any
                  Indebtedness in addition to the highest amount outstanding
                  during the 12 month period ending May 5, 2000 of an aggregate
                  at any one time outstanding in excess of $20,000,000 (plus
                  accrued and unpaid interest thereon) for the Corporation and
                  its Subsidiaries, provided that for the purposes of this
                  Section 3(b)(viii), Indebtedness shall not be deemed to
                  include purchase money financing for capital expenditures in a
                  budget approved by the Required Board Approval;

         (ix)     make any material changes to the Corporation's then current
                  business plan;

         (x)      hire a chief executive officer of the Corporation;

         (xi)     organize any new direct or indirect Subsidiaries of the
                  Corporation other than wholly-owned Subsidiaries or any joint
                  ventures between the Corporation and a third party that
                  involve the diversion of assets or business of the Corporation
                  to the joint venture entity, amend or modify any such joint
                  venture or partnership agreement to which the Corporation or
                  any Subsidiary is a party or restructure any Subsidiary,
                  partnership or such joint venture involving the Corporation or
                  any Subsidiary; or

         (xii)    issue Additional Shares of Common Stock (or issue other rights
                  that, pursuant to Section 5(k), are deemed to constitute
                  Additional Shares of Common Stock) to the extent that as a
                  result of such issuance (or deemed issuance) the Series B
                  Conversion Price would be reduced to a price less than the
                  Series B Liquidation Value.

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          (c)  The holders of the requisite percentage of Series B Preferred
shall either approve or reject a Restricted Action described in Section
3(b)(vii)-(xii) (a "Special Restricted Action") within twenty (20) business
days of receipt by the holders of Series B Preferred of written notice and a
reasonably detailed description of the proposed Restricted Action; provided
that the failure of the holders of Series B Preferred to approve or reject the
Special Restricted Action within such time period shall not be deemed to be an
approval thereof.

          (d)  In the event the Series B Holders shall reject a Special
Restricted Action, the Corporation shall have the right, at the written
election of the Board, notice of which (the "Company Redemption Notice") shall
be promptly sent to the Series B Holders, to initiate an Optional Redemption,
which will be subject to the terms and conditions contained in Section 6. In
the Company Redemption Notice, the Corporation shall specify the Optional
Redemption Date for purposes of Section 6, which Optional Redemption Date shall
not be more than sixty (60) days from the date of the Company Redemption
Notice. Within ten (10) business days of the receipt of the Company Redemption
Notice by the Series B Holders, a Majority of the Series B Holders shall either
(i) acknowledge and agree in writing to the Optional Redemption or (ii) approve
the Special Restricted Action that is subject of the Optional Redemption, in
which event the Optional Redemption shall be terminated. In the event the
Special Restricted Action is rejected by the Series B Holders but such Special
Restricted Action is not effected by the Corporation within ninety (90) days of
the delivery of the Company Redemption Notice, and the Optional Redemption has
not yet been consummated, a Majority of the Series B Holders may elect in
writing to void the Optional Redemption and return to the status quo ante.

          (e)  In the event the Corporation takes any Restricted Action without
obtaining the approval of the holders of the Series B Preferred as required by
Section 3(b) (an "Event of Non-Compliance") and a Majority of the Series B
Holders gives written notice to the Board of Directors of the Corporation of
such an Event of Non-Compliance, the Corporation shall then have thirty (30)
days to take such action as is necessary to cure such default to the
satisfaction of a Majority of the Series B Holders. If the Corporation is unable
to cure the Event of Non-Compliance, a Majority of the Series B Holders may then
elect to initiate a Sale of the Company by submitting written notice of that
election to the Board of Directors of the Corporation (a "Sale Notice"). The
Board of Directors will then have an obligation to use its best efforts to
effect a Sale of the Company; provided that within twenty (20) business days of
its receipt of a Sale Notice electing a Sale of the Company, the Board may elect
to initiate an Optional Redemption pursuant to and subject to the terms and
conditions of Section 6 hereof in lieu of a Sale of the Company by providing a
Company Redemption Notice to the Series B Holders. In the Company Redemption
Notice, the Corporation shall specify the Optional Redemption Date for purposes
of Section 6, which Optional Redemption Date shall not be more than sixty (60)
days from the date of the Company Redemption Notice.

          (f)  In the event a Sale of the Company has not been consummated
within six (6) months of a Sale Notice electing a Sale of the Company (and the
Corporation had not elected to initiate an Optional Redemption in lieu of a
Sale of the Company within the time period set forth in Section 3(e)), the
Series B Holders, voting as a separate class, will then have the right to elect
that number of the Directors of the Corporation as shall constitute a majority
of the total number

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of Directors of the Corporation as shall from time to time constitute the Board;
provided, however, in the event a Majority of Series C Holders has also
initiated a Sale of the Company pursuant to Section 3(e) of the Series C
Certificate, then the Series B Holders and Series C Holders, voting together as
a single class, will have the right to elect that number of Directors of the
Corporation as shall constitute a majority of the total number of Directors as
shall from time to time constitute the Board. A special meeting of the
stockholders shall be called by the Corporation from time to time at the written
instruction of a Majority of the Series B Holders or a Majority of the Series C
Holders for the purpose of electing such Directors.

     4. Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Corporation, voluntary or involuntary:

         (a) The holders of Series B Preferred will be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of the Junior Securities by reason of
their ownership thereof, but subsequent to the repurchase or payment in full or
other satisfaction of the Senior Secured Notes, an amount per share of Series B
Preferred equal to the greater of (A) the Series B Liquidation Value plus
accrued but unpaid dividends on each share of Series B Preferred then held by
such holder or (B) the amount such holder would have received in such
liquidation, dissolution, winding up, merger or Sale of the Company if each
share of Series B Preferred had been converted to Common Stock pursuant to
Section 5 immediately prior to such event. For the avoidance of doubt, in
determining the amount a holder of Series B Preferred would have received in any
liquidation, dissolution, winding up, merger or Sale of the Company under clause
(B) of the preceding sentence, except as set forth in the immediately succeeding
sentence hereof, all accrued dividends on the Series B Preferred shall be
assumed to have been paid to the holders thereof immediately prior to such event
in the manner provided for in Section 5(e) hereof. Notwithstanding the
foregoing, all or a portion of accrued but unpaid dividends shall be
extinguished and shall not be payable upon any liquidation, dissolution or
winding up if, and to the extent that, (i) such liquidation, dissolution or
winding up occurs on or before May 4, 2002, and (ii) the payment of dividends
would result in each holder of Series B Preferred receiving cash and or Freely
Tradeable Securities with a Fair Market Value in an amount that exceeds on a per
share basis 2.5 times the Series B Liquidation Value (a "Qualified Return").

     If the assets of the Corporation are insufficient to make payment in full
to all holders of Series B Preferred, Series C Preferred and any other class or
series of the Corporation's Preferred Stock which by its terms is on a parity
upon a liquidation, dissolution or winding up with the Series B Preferred and
Series C Preferred ("Parity Preferred") of the full preferential amounts to
which they may be entitled upon any liquidation, dissolution or winding up
(including a Sale of the Company deemed a liquidation pursuant to Section 4(b)
hereof and Section 4(b) of the Series C Certificate), such assets shall be
distributed ratably (A) first, to satisfy all accrued and unpaid dividends on
the Series B Preferred, Series C Preferred and Parity Preferred (the "Accrued
Dividend Amounts"), and if such assets are insufficient to satisfy the Accrued
Dividend Amounts in full, then said assets shall be distributed among holders of
Series B Preferred, Series C Preferred and Parity Preferred Stock in proportion
to the full amount each such holder would otherwise be entitled to receive in
respect of the Accrued Dividend Amounts

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and (B) after the payment or satisfaction in full of the Accrued Dividend
Amounts, the balance of such assets shall be distributed ratably among the
holders of Series B Preferred, Series C Preferred and Parity Preferred in
proportion to the full preferential amounts (exclusive of accrued dividends)
each such holder would otherwise be entitled to receive. In any distribution of
assets of the Corporation in connection with any liquidation, dissolution,
winding up, merger or Sale of the Company, the preferential amounts
distributable to the holders of Series B Preferred and Series C Preferred
shall, unless a Majority of the Series B Holders and a Majority to the Series C
Holders agree otherwise, be satisfied to the maximum extent possible with cash,
or to the extent there is insufficient cash available, cash to the maximum
extent available and the balance in Freely Tradeable Securities.

     (b) At the written election of the holders of a Majority of the Series B
Preferred, a Sale of the Company shall be deemed to be a liquidation,
dissolution or winding up of the Corporation, as those terms are used in this
Section 4. In the event a Majority of the Series B Holders elect to treat such
Sale of the Company as a liquidation, dissolution or winding up of the
Corporation, the holders of shares of Series B Preferred shall have the right
to preference (on a pari passu basis with holders of Series C Preferred) upon
the distribution of assets or the proceeds to be received as provided in this
Section 4.

     (c) After setting apart or paying in full the preferential amounts due to
the holders of Series B Preferred, Series C Preferred and Parity Preferred
pursuant to subparagraph (a) of this Section 4, the remaining assets of the
Corporation available for distribution to shareholders, if any, shall be
distributed to the other stockholders of the Corporation as their respective
interests may appear.

     (d) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the Corporation shall, within ten (10) days
after the date the Board of Directors approves such action, or twenty (20) days
prior to any shareholders' meeting called to approve such action, or twenty (20)
days after the commencement of an involuntary proceeding, whichever is earlier,
give each holder of shares of Series B Preferred initial written notice of the
proposed action, including a description of the stock, cash and property to be
received by the holders of shares of Series B Preferred upon consummation of the
proposed action and the date of delivery thereof.

     (e) The Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation before the expiration
of thirty (30) days after the mailing of the initial notice or ten (10) days
after the mailing of any subsequent written notice, whichever is later.

     (f) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation (other than a deemed liquidation upon a Sale
of the Company pursuant to Section 4(b)) which will involve the distribution of
assets other than cash and Freely Tradeable Securities, the Corporation shall
promptly determine the Fair Market Value of such other assets to be distributed
to the holders of shares of Series B Preferred, Series C Preferred and the
holders of shares of Common Stock.

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5. Conversion Rights.

     The holders of the Series B Preferred will have the following rights with
respect to the conversion of the Series B Preferred into shares of Common Stock:

     (a) Optional Conversion. Subject to and in compliance with the provisions
of this Section 5, any shares of Series B Preferred may, at the option of the
holder, be converted at any time into fully-paid and nonassessable shares of
Common Stock (an "Optional Conversion"). The number of shares of Common Stock to
which a holder of Series B Preferred will be entitled upon conversion will be
the product obtained by multiplying the "Series B Conversion Rate" then in
effect (determined as provided in Section 5(c)), by the number of shares of
Series B Preferred being converted.

     (b) Mandatory Conversion.

          (1) At any time commencing on the earlier of (i) May 24, 2000, or (ii)
the date on which either the Series B Holders or Series C Holders exercise
demand registration rights under Section 2.1(a) of that certain Amended and
Registration Rights Agreement dated the date hereof, as such agreement may be
amended from time to time, upon the written election of the Board of Directors
of the Corporation, each share of Series B Preferred shall be automatically
converted into shares of Common Stock at the then-effective Series B Conversion
Rate if the Market Threshold has been achieved, and the Board makes this
election and provides the Threshold Notice to the Series B Holders within 60
days of the first day as of which the Market Threshold had been achieved (a
"Mandatory Conversion"). In the Threshold Notice, the Board shall certify its
calculation of the Market Threshold, and provide each holder with such
supporting documentation as such holder may reasonably request.

          (2) Upon the occurrence of the events specified in paragraph (1)
above, the outstanding shares of Series B Preferred will be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, however, that the Corporation will
not be obligated to issue certificates evidencing such shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series B Preferred are either delivered to the Corporation or its transfer agent
as provided in Section 5(e) below.

     (c) Conversion Rate. The conversion rate in effect at any time for
conversion of the Series B Preferred (the "Series B Conversion Rate") will be
the quotient obtained by dividing Nine Dollars ($9.00) by the "Series B
Conversion Price," calculated as provide in Section 5(d).

     (d) Series B Conversion Price. (i) The conversion price for the Series B
Preferred will initially be Nine Dollars ($9.00)(the "Series B Conversion
Price"). Such initial Series B Conversion Price will be adjusted from time to
time in accordance with this Section 5. All references to the Series B
Conversion Price herein will mean the Series B Conversion Price, as so adjusted.

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         (e) Mechanics of Conversion. Each holder of Series B Preferred who
desires or is  obligated to convert the same into shares of Common Stock
pursuant to this Section 5 will surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any transfer agent
for the Series B Preferred and will give written notice to the Corporation at
such office that such holder elects or is obligated to convert the same. Such
notice will state the number of shares of Series B Preferred being converted.
Thereupon, the Corporation will promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common
Stock which equals the number of shares of Common Stock to which such holder is
entitled under the then-effective Series B Conversion Rate. In addition, upon
any such conversion the holder of the shares of Series B Preferred being
converted shall be issued that number of shares of Common Stock as is equal to
the greater of (i) the number of shares of Common Stock whose Fair Market Value
equals the amount of all accrued but unpaid dividends on the shares of Series B
Preferred being converted and (ii) the number of shares of Common Stock obtained
by dividing the aggregate amount of accrued but unpaid dividends on the shares
of Series B Preferred being converted by the Series B Conversion Price then in
effect; provided, however, that (A) all of the accrued but unpaid dividends
shall be extinguished and shall not be payable with respect to shares of Series
B Preferred in the event such shares are being converted on or before May 4,
2002 pursuant to (x) a Mandatory Conversion or (y) an Optional Conversion within
60 days of the first day as of which the Market Threshold had been achieved: and
(B) the accrued but unpaid dividends shall be extinguished and shall not be
payable in an Optional Conversion that takes place on or before May 4, 2002 as
part of a Sale of the Company if, and to the extent that, the payment of
dividends would result in each holder receiving an amount of cash and or Freely
Tradeable Securities with a Fair Market Value that exceeds a Qualified Return.
In addition, the Corporation shall promptly deliver to the holder of Series B
Preferred being converted a certificate representing those shares of Series B
Preferred, if any, that were not converted. Such conversion will be deemed to
have been made at the close of business on the date of such surrender of the
certificates representing the shares of Series B Preferred to be converted in
the event of a conversion pursuant to Section 5(a) hereof or, in the case of a
Mandatory Conversion, upon the occurrence of the events specified in Section
5(b)(1) hereof, and the Person entitled to receive the shares of Common Stock
issuable upon such conversion will be treated for all purposes as the record
holder of such shares of Common Stock on such date.

         (f) Adjustment for Stock Splits and Combinations. If the Corporation
at any time or from time to time after the Original Issue Date effects a
subdivision of the outstanding Common Stock, the Series B Conversion Price, in
effect immediately before that subdivision will be proportionately decreased.
Conversely, if the Corporation at any time or from time to time after the
Original Issue Date combines the outstanding shares of Common Stock into a
smaller number of shares, the Series B Conversion Price in effect immediately
before the combination will be proportionately increased. Any adjustment under
this Section 5(f) will become effective at the close of business on the record
date as of which subdivision or combination becomes effective.

         (g) Adjustment for Common Stock Dividends and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the

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determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, in each such
event the Series B Conversion Price that is then in effect will be decreased as
of the time of such issuance or, in the event such record date is fixed, as of
the close of business on such record date, by multiplying the Series B
Conversion Price then in effect by a fraction (1) the numerator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record
date, and (2) the denominator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution; provided, however,
that if such record date is fixed and such dividend is not fully paid or if
such distribution is not fully made on the date fixed therefor, the Series B
Conversion Price will be recomputed accordingly as of the close of business on
such record date and thereafter the Series B Conversion Price will be adjusted
pursuant to this Section 5(g) to reflect the actual payment of such dividend or
distribution.

          (h) Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
will be made so that the holders of the Series B Preferred will receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of the other securities of the Corporation
which they would have received had their Series B Preferred been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 5 with respect to the rights of the holders of the Series B Preferred or
with respect to such other securities by their terms.

          (i) Adjustment for Reclassification, Exchange and Substitution. If at
any time or from time to time after the Original Issue Date the Common Stock
issuable upon the conversion of the Series B Preferred is changed into the same
or a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 5), in
any such event each holder of Series B Preferred will have the right thereafter
to convert such stock into the kind and amount of stock and other securities and
property receivable upon such recapitalization, reclassification or the change
by holders of the maximum number of shares of Common Stock into which such
shares of Series B Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.

          (j) Reorganizations, Mergers, Consolidations or Sales of Assets. If
at any time or from time to time after the Original Issue Date there is a
merger, consolidation, recapitalization, reclassification, sale of all or
substantially all of the Corporation's assets or reorganization

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involving the Common Stock (collectively, a "capital reorganization") (other
than a Sale of the Company provided for in Section 4(b) or a merger,
consolidation, sale of assets, recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 5), as a part of such capital reorganization, provision will be
made so that the holders of the Series B Preferred will thereafter be entitled
to receive upon conversion of the Series B Preferred the number of shares of
stock or other securities or property of the Corporation to which a holder of
the number of shares of Common Stock deliverable upon conversion would have been
entitled on such capital reorganization, subject to adjustment in respect of
such stock or securities by the terms thereof. In any such case, appropriate
adjustment will be made in the application of the provisions of this Section 5
with respect to the rights of the holders of Series B Preferred after the
capital reorganization to the end that the provisions of this Section 5
(including adjustment of the Series B Conversion Price then in effect and the
number of shares issuable upon conversion of the Series B Preferred) will be
applicable after that event and be as nearly equivalent as practicable.

              (k) Sale of Shares Below Series B Conversion Price.

     (1)  If at any time or from time to time after the Original Issue Date, the
Corporation issues or sells, or is deemed by the provisions of this Section 5(k)
to have issued or sold, Additional Shares of Common Stock (as hereinafter
defined), other than as a dividend or other distribution on any class of stock
as provided in Section 5(g) above, and other than a subdivision or combination
of shares of Common Stock as provided in Section 5(f) above for an Effective
Price (as hereinafter defined) less than the then effective Series B Conversion
Price, then and in each such case, the then existing Series B Conversion Price
will be reduced, as of the opening of business on the date of such issue or
sale, to a price (but in no event to a price less than the Series B Liquidation
Value) determined by dividing (a) the sum of (1) the product derived by
multiplying (i) the Series B Conversion Price in effect immediately prior to
such issue or sale times (ii) the number of shares of Common Stock deemed
outstanding (as defined below) immediately prior to such issue or sale, plus (2)
the consideration, if any, received (or deemed received pursuant to subsection
(k)(2)) by the Corporation upon such issue or sale, by (b) the number of shares
of Common Stock deemed outstanding (as defined below) immediately after such
issue or sale. For the purposes of the preceding sentence, the number of shares
of Common Stock deemed to be outstanding as of a given date will be the sum of
(a) the number of shares of Common Stock actually outstanding, (b) the number of
shares of Common Stock into which the then outstanding Series B Preferred could
be converted if fully converted on the day immediately preceding the given date,
and (c) the number of shares of Common Stock that could be obtained through the
exercise or conversion in full of all other rights, options, warrants and
convertible securities on the day immediately preceding the given date,
regardless of whether or not such securities are fully exercisable for or
convertible into Common Stock at such time.

     (2)  For the purpose of making any adjustment required under this Section
5(k), the consideration received by the Corporation for any issue or sale of
securities will (a) to the extent it consists of cash, be computed at the net
amount of cash received by the Corporation after deduction of any underwriting
or similar commissions, compensation or concessions paid or allowed by the
Corporation in connection with such issue or sale but without

                                      -11-
<PAGE>   12
deduction of any expenses payable by the Corporation, (b) to the extent it
consists of property other than cash, be computed at the Fair Market Value of
that property, and (c) if Additional Shares of Common Stock, Convertible
Securities (as hereinafter defined) or rights or options to purchase either
Additional Shares of Common Stock or Convertible Securities are issued or sold
together with other stock or securities or other assets of the Corporation for a
consideration that covers both, be computed as the portion of the consideration
so received that may be reasonably determined in good faith by the Board of
Directors with Required Board Approval to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.

                  (3) For the purpose of the adjustment required under this
Section 5(k), if the Corporation issues or sells any rights or options for the
purchase of, or stock or other securities exchangeable for or convertible into,
Additional Shares of Common Stock (such exchangeable or convertible stock or
securities being herein referred to as "Convertible Securities") and if the
Effective Price of such Additional Shares of Common Stock is less than the
Series B Conversion Price in effect, the Corporation will be deemed to have
issued at the time of the issuance of such rights or options or Convertible
Securities the maximum number of Additional Shares of Common Stock issuable upon
exercise or conversion or exchange thereof and to have received consideration
for the issuance of such shares an amount equal to the total amount of
consideration, if any, received by the Corporation for the issuance of such
rights or options or Convertible Securities, plus, in the case of such rights or
options, the minimum amounts of consideration, if any, payable to the
Corporation upon the exercise of such rights or options, plus in the case of
Convertible Securities, the minimum amounts of consideration, if any, payable to
the Corporation (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities) upon the conversion or exchange
thereof; provided that if in the case of Convertible Securities the minimum
amount of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation shall be deemed to
have received the minimum amounts of consideration without references to such
clauses; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events, including by reason of antidilution
adjustments, the Effective Price will be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price will be again recalculated using the increased
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities. No further
adjustment of the Series B Conversion Price, as adjusted in each case upon the
issuance of such rights, options or Convertible Securities, will be made as a
result of the actual issuance of Additional Shares of Common Stock on the
exercise of any such rights or options or the exchange or conversion of any such
Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Series B Conversion Price, as adjusted upon the
issuance of such rights, options or Convertible Securities, will be readjusted
to the Series B Conversion Price that would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the

                                      -12-
<PAGE>   13

exercise of such rights or options or upon such conversion and that such
Additional Shares of Common Stock, if any, were issued or sold for the
consideration, if any, actually received by the Corporation for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Corporation (other
than by cancellation of liabilities or obligations evidenced by such
Convertible Securities) on the conversion of such Convertible Securities,
provided that such readjustment shall not apply to prior conversions of Series
B Preferred.

          (4) "Additional Shares of Common Stock" means all shares of Common
Stock issued by the Corporation or deemed to be issued pursuant to this Section
5(k) whether or not subsequently reacquired or retired by the Corporation other
than (A) shares of Common Stock issued upon conversion of Series B Preferred
and Series C Preferred, (B) options to purchase up to Two Million Six Hundred
Forty Thousand (2,640,000) shares of Common Stock granted to employees,
officers or directors of or consultants or advisors to the Corporation or any
Subsidiary pursuant to the Stock Option Plan and the shares of Common Stock
issuable upon exercise of such options, or such increased number of shares of
Common Stock as has been approved by the Required Board Approval, (C)
Convertible Securities outstanding as of the Original Issue Date and the shares
of Common Stock issuable upon exercise or conversion of such Convertible
Securities and (D) Common Stock issued in satisfaction of accrued and unpaid
dividends on the Series B Preferred, Series C Preferred and any other class or
series of the Corporation's Preferred Stock the rights, privileges and other
terms of which have been approved in writing by the Majority of the Series B
Holders. The "Effective Price" of Additional Shares of Common Stock means the
quotient determined by dividing (i) the aggregate consideration received, or
deemed to have been received by the Corporation under this Section 5(k), for
the issuance of such Additional Shares of Common Stock, by (ii) the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold, by the Corporation under this Section 5(k).

     (l)  Accountants' Certificate of Adjustment. In each case of an adjustment
or readjustment of the Series B Conversion Price for the number of shares of
Common Stock or other securities issuable upon conversion of the Series B
Preferred, the Corporation, at its expense, will compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and will mail such certificate, by
first class mail, postage prepared, to each registered holder of Series B
Preferred at the holder's address as shown in the Corporation's books. The
certificate will set forth such adjustment or readjustment, showing in detail
the facts upon which such adjustment or readjustment is based, including a
statement of (1) the Series B Conversion Price at the time in effect, and (2)
the type and amount, if any, of other property that at the time would be
received upon conversion of the Series B Preferred.

     (m)  Notices of Record Date. Upon (1) any taking by the Corporation of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution (other than in connection with the declaration and payment or
regular quarterly dividends in Common Stock on the Corporation's

                                      -13-
<PAGE>   14
Series D Convertible Preferred Stock), or (2) any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into any
other corporation, or any other Sale of the Company, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation will mail to each holder of Series B Preferred at least twenty (20)
days prior to the record date specified therein a notice specifying (1) the date
on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, Sale of the Company, dissolution, liquidation or winding up is expected
to become effective, and (3) the date, if any, that is to fixed as to when the
holders of record of Common Stock (or other securities) will be entitled to
exchange their shares of Common stock (or other securities) for securities or
other property deliverable upon such reorganization, reclassification, transfer,
consolidation, merger, Sale of the Company, dissolution, liquidation or winding
up.

     (n) Fractional Shares. No fractional shares of Common Stock will be issued
upon conversion of Series B Preferred. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of Series B
Preferred by a holder thereof will be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional shares.
If, after the aforementioned aggregation, the conversion would result in the
issuance of any fractional share, the Corporation will, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by
the Common Stock's Fair Market Value on the date of conversion.

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

     (p) Notices. Any notice required by the provisions of this Certificate of
Designation to be given to the holders of shares of the Series B Preferred will
be deemed given upon the earlier to actual receipt or seventy-two (72) hours
after the same has been deposited in the United States mail, by certified or
registered mail, return receipt requested, postage prepaid, and addressed to
each holder of record at the address of such holder appearing on the books of
the Corporation.

     (q) Payment of Taxes. The Corporation will pay all taxes (other than taxes
based upon income) and other governmental charges that my be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series B Preferred excluding any tax or other charge imposed in
connection with any transfer involved in the issue and

                                      -14-
<PAGE>   15
delivery of shares of Common Stock in a name other than that in which the shares
of Series B Preferred so converted were registered.

  6. Optional Redemption.

         (a) At any time after May 4, 2005, or upon a Sale of the Company (but
in no event prior to the Corporation's repurchase or payment or satisfaction in
full of the Senior Secured Notes), a Majority of the Series B Holders may
require the Corporation to redeem all, but not less than all, of the outstanding
shares of Series B Preferred (an "Optional Redemption") by notifying the
Corporation in writing of their intent to exercise the rights afforded by this
Section 6(a) and specifying a date not less than 90 nor more than 120 days from
the date of such notice on which the outstanding shares of Series B Preferred
shall be redeemed (the "Optional Redemption Date"). Upon receipt of such notice,
the Corporation shall promptly notify the remaining holders of Series B
Preferred of the Optional Redemption Date. The recipients of such notice shall
be required to participate in the Optional Redemption. The Corporation shall
redeem on the Optional Redemption Date all the shares of Series B Preferred.
Each share of Series B Preferred to be redeemed shall be redeemed for an amount
in cash and/or Freely Tradeable Securities with a Fair Market Value equal to,
the greater of (A) the sum of the Series B Liquidation Value and all accrued
dividends (provided that all or a portion of the accrued but unpaid dividends
shall be extinguished and shall not be payable if, and to the extent that (x)
the redemption occurs on or before May 4, 2002 and (y) the payment of dividends
would result in each holder of Series B Preferred receiving in cash an amount
that exceeds a Qualified Return), and (B) the Fair Market Value of the Common
Stock into which the Series B Preferred is then convertible pursuant to Section
5 hereof, including shares of Common Stock issuable upon conversion in respect
of accrued dividends to the extent provided in Section 5(e) hereof (the
"Optional Redemption Price").

         (b) In the event the Optional Redemption is occurring pursuant to
Section 3(d) or Section 3(e), each share of Series B Preferred to be redeemed
shall be redeemed for an amount in cash and/or Freely Tradeable Securities with
a Fair Market Value equal to, the greater of (i) the Optional Redemption Price
and (ii) the price per share set forth in the table below, based on the year
during which the redemption occurs (the year number being the time period prior
to an anniversary of the Original Issue Date) and calculated as a multiple of
the Series B Liquidation Value:
<TABLE>
<CAPTION>
                  Year                       Price
                  ----                       -----
                  <S>                        <C>
                   1                          2.5
                   2                          2.5
                   3                            3
                   4                          3.5
                   5                            4
                   6                          4.5
</TABLE>

         Notwithstanding anything herein to the contrary, an Optional Redemption
pursuant to Section 3(d) or Section 3(e) shall not take place prior to the
Corporation's repurchase or payment

                                      -15-
<PAGE>   16
or satisfaction in full of the Senior Secured Notes, or the Corporation's
compliance with, or its receipt of the requisite consent from the holders of
the Senior Secured Notes under, the indenture.

         (c)  If the funds of the Corporation legally available for redemption
of shares of Series B Preferred on an Optional Redemption Date and, if
applicable, the shares of Series C Preferred entitled to redemption as of such
date pursuant to Section 6 of the Series C Certificate and/or shares of Parity
Preferred then entitled to redemption are insufficient to redeem the total
number of outstanding shares of Series B Preferred and, if applicable, the
shares of Series C Preferred and Parity Preferred entitled to redemption, the
holders of shares of Series B Preferred and, if applicable, the shares of Series
C Preferred and Parity Preferred entitled to redemption shall share ratably in
any funds legally available for redemption of such shares according to the
respective amounts that would be payable with respect to the full number of
shares owned by them if all such outstanding shares were redeemed in full. At
any time thereafter when additional funds of the Corporation are legally
available for the redemption of such shares of Series B Preferred and, if
applicable, the shares of Series C Preferred and Parity Preferred, such funds
will be used at the earliest permissible time, to redeem the balance of such
shares, or such portion thereof for which funds are then legally available. The
Corporation shall be obligated to use its best efforts to take such actions as
may be necessary (including, without limitation, the issuance of additional
equity securities, the revaluation or recapitalization of the Corporation or the
consummation of a Sale of the Company) in order to permit the full and timely
redemption of the shares of Series B Preferred and Series C Preferred entitled
to redemption.

         (d)  If, for any reason, the Corporation fails to redeem all shares of
Series B Preferred entitled to redemption on an Optional Redemption Date, and
such failure continues for a period of six (6) months from the Optional
Redemption Date, then the Series B Holders, voting as a separate class, shall
have the right to elect that number of Directors of the Corporation as shall
constitute a majority of the total number of Directors of the Corporation as
shall from time to time constitute the Board; provided, if the Corporation has
also failed to redeem shares of Series C Preferred in accordance with Section 6
of the Series C Certificate and the holders of Series C Preferred would
otherwise have the right to elect a majority of the Corporation's Directors,
then the Series B Holders and Series C Holders, voting together as a single
class, shall have the right to elect that number of Directors of the Corporation
as shall constitute a majority of the total number of Directors of the
Corporation as shall from time to time constitute the Board. A special meeting
of the stockholders shall be called by the Corporation from time to time at the
written instruction of a Majority of the Series B Holders or a Majority of the
Series C Holders for the purpose of electing such Directors.

         (e)  Shares of Series B Preferred that have been issued and reacquired
in any manner, including shares purchased or redeemed or exchanged or
converted, shall (upon compliance with any applicable provisions of the General
Corporation Law of the State of Nevada) have the status of authorized but
unissued shares of Preferred Stock of the Corporation undesignated as to series
and may, subject to the requirements of Section 3(b), be designated or
redesignated and issued or reissued, as the case may, as part of any series of
Preferred Stock of the Corporation, other than as Series B Preferred.

                                      -16-
<PAGE>   17
         7. Exclusion of Other Rights. Except as may otherwise be required by
law, the shares of Series B Preferred shall not have any preferences or
relative, participating, optional or other special rights, other than those
specifically set forth in this Certificate of Designation. The shares of Series
B Preferred shall have no preemptive or subscription rights pursuant to this
Certificate of Designation.

         8. Rank. The Series B Preferred shall rank senior in right as to
dividends and upon liquidation, dissolution or winding up to all Junior
Securities, whenever issued.

         9. Identical Rights. Each share of the Series B Preferred shall have
the same relative rights and preferences as, and shall be identical in all
respects with, all other shares of the Series B Preferred.

         10. Certificates. So long as any shares of the Series B Preferred are
outstanding, there shall be set forth on the face or back of each stock
certificate issued by the Corporation a statement that the Corporation shall
furnish without charge to each shareholder who so requests, a full statement of
the designation and relative rights, preferences and limitations of each class
of stock or series thereof that the Corporation is authorized to issue and of
the authority of the Board of Directors to designate and fix the relative
rights, preferences and limitations of each series.

         11. Amendments. Any provision of these terms of the Series B Preferred
Stock may be amended, modified or waived if and only if a Majority of the
Series B Holders have consented in writing or by an affirmative vote to such
amendment, modification or waiver of any such provision of this Certificate of
Designation and upon receipt of such written consent or the obtaining of such
affirmative vote, such amendment, modification or waiver shall be binding on
all holders of Series B Preferred.

         12. Definitions.

             "Additional Shares of Common Stock" shall have the meaning given
such term in Section 5(k)(4) of this Certificate of Designation.

             "Affiliate" or "Affiliates" shall mean with respect to any Person,
any other Person that would be considered to be an affiliate of such Person
under Rule 144(a) of the Rules of Regulations of the Securities and Exchange
Commission, as in effect on the date hereof, if the Corporation were issuing
securities.

             "Articles of Incorporation" shall have the meaning given such term
on the cover page of this Certificate of Designation.

             "Board" or "Board of Directors" means the Board of Directors of
the Corporation.

             "Company Redemption Notice" shall have the meaning given to such
term in Section 3(d) of this Certificate of Designation.

                                      -17-
<PAGE>   18
         "Convertible Securities" shall have the meaning given such term in
Section 5(k)(3) of this Certificate of Designation.

         "Corporation" means MGC Communications, Inc., a Nevada corporation.

         "Common Stock" means the Corporation's Common Stock, $.001 par value.

         "Effective Price" shall have the meaning given such term in Section
5(k)(4) of this Certificate of Designation.

         "Event of Non-Compliance" shall have the meaning given such term in
Section 3(e) of this Certificate of Designation.

         "Fair Market Value" of the assets or shares of capital stock at issue
shall mean the price that would be paid by a willing buyer of all of the assets
or shares of capital stock of the Corporation, as applicable, in a sale process
designed to attract all possible participants and to maximize value in an arm's
length transaction, such price to include a control premium and to exclude any
minority, illiquidity or other discounts. The determination of Fair Market Value
shall be made by (i) the Board of Directors of the Corporation, or (ii) if at
the written election of a Majority of the Series B Holders after presentation of
the Board's determination of Fair Market Value, by a nationally recognized
investment banking firm mutually agreeable to the Corporation and a Majority of
the Series B Holders, provided, however, in the event a firm cannot be agreed
upon such amount shall be determined by a nationally recognized investment
banking firm selected by two other such firms, one selected by the Corporation
and the other by a Majority of the Series B Holders. The determination of Fair
Market Value by such investment banking firm shall be final and binding on the
parties. The fees and expenses of such firm shall be paid for by the
Corporation. In the event a determination of Fair Market Value is being made
under this Certificate of Designation and contemporaneously under the Series C
Certificate for a substantially similar purpose, the investment banking firm to
be approved or selected hereunder by a Majority of the Series B Holders shall
instead be approved of or selected, as applicable, by the holders of a majority
of the outstanding Series C Preferred and Series B Preferred.

         "Freely Tradeable Securities" shall mean shares of a common stock of a
public company listed for trading on the New York Stock Exchange or Nasdaq
National Market that are free of any and all restrictions on sale, including
under Rule 144 or 145 under the Securities Act of 1933, as amended.

         "GAAP" shall mean generally accepted accounting principles applied on a
consistent basis.

         "Indebtedness" shall mean all obligations, contingent (to the extent
required to be reflected in financial statements prepared in accordance with
GAAP) and otherwise, which in accordance with GAAP should be classified on the
obligor's balance sheet as liabilities, including, without limitation, in any
event and whether or not so classified: (i) all debt and

                                     - 18 -

<PAGE>   19
similar monetary obligations, whether direct or indirect; (ii) all liabilities
secured by any mortgage, pledge, security interest, lien, charge or other
encumbrance existing on property owned or acquired subject thereto, whether or
not the liability secured thereby shall have been assumed; (iii) all
guarantees, endorsements and other contingent obligations whether direct or
indirect in respect of Indebtedness or performance of others, including any
obligation to supply funds to or in any manner to invest in, directly or
indirectly, the debtor, to purchase Indebtedness, or to assure the owner of
Indebtedness against loss, through an agreement to purchase goods, supplies or
services for the purpose of enabling the debtor to make payment of the
Indebtedness held by such owner or otherwise; (iv) obligations to reimburse
issuers of any letters of credit; and (v) purchase money financing for capital
expenditures.

     "Indenture" shall mean that Indenture dated as of September 29, 1997
pursuant to which the Senior Secured Notes have been issued.

     "Junior Securities" shall mean any of the Corporation's Common Stock and
all other equity securities of the Corporation other than (x) the Series B
Preferred, (y) the Series C Preferred, and (z) any other shares of the
Corporation's preferred stock which (a) by their terms, state that they are not
Junior Securities or provide the holders thereof with rights pari passu with or
senior to those of the holders of Series B Preferred and (b) are approved for
issuance in accordance with Section 3 hereof.

     "Majority of the Series B Holders" shall mean the holders of more than
fifty percent (50%) of the then outstanding Series B Preferred.

     "Majority of the Series C Holders" shall mean the holders of more than
fifty percent (50%) of the then outstanding Series C Preferred.

     "Mandatory Conversion" shall have the meaning given such term in Section
5(b) of this Certificate of Designation.

     "Market Threshold" shall mean when the average closing sales price of the
Common Stock on the Nasdaq Stock Market or the New York Stock Exchange for the
twenty (20) trading days during the sixty (60) day period preceding the
Threshold Notice has exceeded the amount which equals 3.0 times the Series B
Liquidation Value (as adjusted from time to time to take into account stock
splits, stock dividends and similar events).

     "Optional Conversion" shall have the meaning given such term in Section
5(a) of this Certificate of Designation.

     "Optional Redemption" shall have the meaning given such term in Section
6(a) of this Certificate of Designation.

     "Optional Redemption Date" shall have the meaning given such term in
Section 6(a) of this Certificate of Designation.

                                      -19-
<PAGE>   20
     "Optional Redemption Price" shall have the meaning given such term in
Section 6(a) of this Certificate of Designation.

     "Original Issue Date" means May 4, 1999.

     "Person" shall mean an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization and any government,
governmental department or agency or political subdivision thereof.

     "Qualified Return" shall have the meaning given to such term in Section
4(a).

     "Required Board Approval" shall have the meaning given to such term in the
Securityholders Agreement.

     "Restricted Action" shall have the meaning given such term in Section 3(b)
of this Certificate of Designation.

     "Sale Notice" shall have the meaning given such term in Section 3(e) of the
Certificate of Designation.

     "Sale of the Company" shall mean a single transaction or series of
transactions between the Corporation and/or its stockholders and any Person or
group of Persons (as such term is used in Sections 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) pursuant to which such Person or
group of Persons will (i) acquire shares of capital stock of the Corporation
possessing more than 50% of the voting power of the Corporation, including by
the way of merger or consolidation or otherwise, or (ii) acquire all or
substantially all of the assets of the Corporation and its Subsidiaries
(determined on a consolidated basis), notwithstanding the foregoing definition,
a single transaction or series of transactions shall not be deemed a Sale of the
Company unless such transaction or series of transactions is also deemed a
"Change of Control", as defined in the Indenture.

     "Securityholders Agreement" shall mean that certain Amended and Restated
Securityholders Agreement of even date herewith among the Corporation, the
Series B Holders, the Series C Holders and certain other parties, as amended
from time to time.

     "Senior Secured Notes" means the $160,000,000 principal amount of 13%
Senior Secured Notes due 2004 that have been issued pursuant to the Indenture.

     "Series B Conversion Price" shall have the meaning given such term in
Section 5(d) of this Certificate of Designation.

     "Series B Conversion Rate" shall have the meaning given such term in
Section 5(c) of this Certificate of Designation.

     "Series B Holders" shall mean the holders of Series B Preferred.

                                      -20-
<PAGE>   21

          "Series B Liquidation Value" means Nine Dollars ($9.00), provided if
the Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) the Series B Preferred into a greater number of
shares or if the Corporation at any time combines (by reverse stock split or
otherwise) the outstanding shares of the Series B Preferred into a smaller
number of shares, then the Series B Liquidation Value in effect immediately
prior to such subdivision or combination shall be proportionately adjusted.

          "Series B Preferred" shall have the meaning given such term in
Section 1 of this Certificate of Designation.

          "Series C Certificate" shall mean the Certificate of Designation
establishing the designation, preferences and relative and other special rights,
qualifications, limitations and restrictions of the Series C Preferred.

          "Series C Holders" means the holders of Series C Preferred.

          "Series C Preferred" shall mean the Corporation's Series C
Convertible Preferred Stock, par value $.001 per share.

          "Special Restricted Action" shall have the meaning given such term in
Section 3(c) of this Certificate of Designation.

          "Stock Option Plan" shall mean the Corporation's Stock Option Plan, as
adopted by the Board of Directors on June 30, 1996, and as amended to date.

          "Subsidiary" shall mean any Person as to which the Corporation owns,
directly or indirectly, either (a) 50% or more of such Person's stock (or
similar voting interests) entitled to vote generally in the election of
directors (or other governing body) or (b) 50% or more of the capital or profits
interest of such Person.

          "Threshold Notice" shall mean a written notice from the Corporation to
the holders of Series B Preferred stating that the Market Threshold has been
achieved and providing reasonable evidence thereof.

13. Severability of Provisions. If any right, preference or limitation of the
Series B Preferred set forth in this Certificate of Designation (as such
Certificate of Designation may be amended from time to time) in invalid,
unlawful or incapable of being enforced by reason of any rule, law or public
policy, all other rights preferences and limitations set forth in this
Certificate of Designation (as so amended) which can be given effect without
implicating the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed dependent upon any
other right, preference or limitation unless so expressed herein.

                    [Signatures are on the following page.]

                                      -21-

<PAGE>   22
            IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its President, and attested to by its Secretary, on
December 27, 1999.

                                        MGC COMMUNICATIONS, INC.

                                        By  /s/ Rolla Huff
                                            --------------------------
                                            Name:   Rolla Huff
                                            Title:  President

Attest:

/s/ Kent F. Heyman
--------------------------
Name:   Kent F. Heyman
Title:  Secretary

STATE OF NEVADA    )
ss.:               )
COUNTY OF CLARK    )

            On the 27 day of December, 1999, before me personally came Rolla
Huff to me known, who, being by me duly sworn, did depose and say he resides at
14 Moraine Point, Victor, NY 14564 and that he is the President of MGC
Communications, Inc., the corporation described in and which executed the above
instrument; and that he acknowledged said instrument to be the free act and deed
of said corporation.

/s/ Molly J. Pace
--------------------------
Notary Public
My Commission Expires: April 1, 2001

[NOTARY PUBLIC - NEVADA SEAL]

                                       22<PAGE>   1
                                                                     EXHIBIT 4.8

                            MGC COMMUNICATIONS, INC.

                      SERIES C CONVERTIBLE PREFERRED STOCK
                           CERTIFICATE OF DESIGNATION

                             ______________________

                 Pursuant to Sections 78.195 and 78.1955 of the
                 General Corporation Law of the State of Nevada

                             ______________________

     MGC Communications, Inc. (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Nevada, does hereby
certify that pursuant to the authority vested in the Board of Directors of the
Corporation by its Articles of Incorporation, as amended, and pursuant to the
provisions of Sections 78.195 and 78.1955 of the General Corporation Law of
the State of Nevada, said Board of Directors, by unanimous written consent or
at a meeting duly called and held, adopted the following resolution which
remains in full force and effect as of the date hereof:

     RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") by its Articles of Incorporation,
as amended (hereinafter referred to as the "Articles of Incorporation"), the
Board of Directors does hereby create, authorize and provide for the issuance of
Series C Convertible Preferred Stock, par value $.001 per share, consisting of
1,250,000 shares, have the following designations, preferences and relative and
other special rights, qualifications, limitations and restrictions:

     1.   Designation. The designation of such series is "Series C Convertible
Preferred Stock" (hereinafter in this Certificate of Designation called the
"Series C Preferred") and the number of shares constituting such series shall be
1,250,000, which number may be decreased (but not increased) by the Board of
Directors without a vote of stockholders; provided, however, that such number
may not be decreased below the number of then currently outstanding shares of
Series C Preferred, plus shares issuable upon the exercise of any then
outstanding options, warrants or rights to acquire Series C Preferred. All
capitalized terms used in this Certificate of Designation and not otherwise
defined shall have the meaning given to such terms in Section 12 hereof.

     2.   Dividend Rights.

          Holders of Series C Preferred, prior to and in preference to the
holders of Junior Securities, will be entitled to receive, out of funds legally
available for such purpose, cumulative dividends as provided in this Section 2.
Dividends on each share of Series C Preferred shall
<PAGE>   2
accrue at the rate 10% per annum on the sum of (i) the Series C Liquidation
Value and (ii) all accrued and unpaid dividends on such share of Series C
Preferred from the date of issuance. Such dividends will be calculated and
compounded annually on December 31 of each year (each a "dividend date") in
respect of the prior twelve month period (the initial such calculation to be
made at the same rate for the number of days elapsed from the date of issue of
Series C Preferred to and including the 31st day of December, 1999). Such
dividends shall commence to accrue on each share of Series C Preferred from the
date of issuance thereof whether or not declared by the Board of Directors, and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends, and shall continue to accrue
thereon until the date the Series C Liquidation Value of such share (plus all
accrued and unpaid dividends thereon) is paid in full. For purposes of
determining the amount of dividends accrued on the Series C Preferred pursuant
to this Section 2 in connection with the sale, conversion, redemption or
repurchase of any Series C Preferred which may occur between two dividend dates,
the applicable dividend rate for such period shall be multiplied by a fraction,
the numerator of which is the actual number of days elapsed in the then current
annual period and the denominator of which is the total number of days
comprising such annual period. All dividends shall be payable only as, when and
in the manner provided for in, Sections 4 and 5 hereof. 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 Series C Preferred and Series B
Preferred, such payment shall be distributed ratably among the holders of Series
C Preferred, Series B Preferred and such other class or series of the
Corporation's Preferred Stock which by its terms is then entitled to receive
dividends on a parity with the Series B Preferred and Series C Preferred in
proportion to the full dividend amount each such holder would be entitled to
receive upon payment of all accrued dividends on the Series C Preferred, Series
B Preferred and such other Preferred Stock.

     3. Voting Rights.

        (a) Voting Generally. Except as otherwise required by law or as provided
in this Section 3, the Series C Preferred will vote together with the Common
Stock, and not as a separate class, at any annual or special meeting of
stockholders, and may act by written consent in the same manner as the Common
Stock. In either case, each holder of shares of Series C Preferred will be
entitled to such number of votes as will be equal to the number of whole shares
of Common Stock into which such holder's aggregate number of shares of Series C
Preferred are convertible pursuant to Section 5 hereof (assuming only for
purposes of this calculation that accrued and unpaid dividends on such shares
are not subject to conversion as described in Section 5(e)) immediately after
the close of business on the record date fixed for such meeting or the effective
date of such written consent.

       (b) Separate Vote of Series C Preferred. So long as not less than
one-third of the number of shares of Series C Preferred initially issued remain
outstanding, the vote or written consent of a Majority of the Series C Holders
shall be necessary for effecting or validating the following actions (each a
"Restricted Action"):

           (i)  increase or decrease (other than by redemption or conversion)
                the total number of authorized shares of, or issue any series
                of, Preferred Stock

                                      -2-
<PAGE>   3
          which is senior in respect of dividends, liquidation or otherwise to
          or on a pari passu basis with the Series C Preferred ("Restricted
          Preferred Stock");

  (ii)    permit the Corporation or any Subsidiary to sell, convey or otherwise
          dispose of assets having a value in excess of $5,000,000; or merge
          into or consolidate with any other Person (other than the Corporation
          or a Subsidiary); or effect a Sale of the Company;

 (iii)    voluntarily liquidate, dissolve or wind up the Corporation;

  (iv)    alter or change the rights, preferences or privileges of the shares of
          Series C Preferred so as to affect adversely such shares;

   (v)    declare or pay any dividends or make other distribution on any Junior
          Securities except for (x) the repurchase of any Common Stock subject
          to a repurchase right for terminated employees or independent
          contractors and (y) issuances of Common Stock in satisfaction of
          accrued and unpaid dividends on Junior Securities; provided such
          issuances shall not affect the antidilution rights of the holders of
          Series C Preferred provided for in Section 5 hereof;

  (vi)    permit the Corporation or any Subsidiary to enter into any transaction
          or series of related transactions with any Affiliate of the
          Corporation, other than those directly related to (1) pay or benefits
          (including stock options) provided to Affiliates who are employees or
          Directors in accordance with existing agreements or past practices or
          approved with Required Board Approval; (2) the lease of additional
          office space in the Las Vegas metropolitan area on terms consistent
          with the existing leases to which the Corporation is a party, and as
          approved by the Required Board Approval; or (3) any other arms-length,
          commercially reasonable transactions approved by the disinterested
          Directors in an amount not to exceed $100,000 in any year;

 (vii)    permit the Corporation or any Subsidiary to acquire the assets or
          securities of any Person except for acquisitions involving cash,
          securities or other property with an aggregate Fair Market Value of
          less than (x) $50 million for any single acquisition and (y) $100
          million in the aggregate for all such acquisitions during any 12-month
          period;

(viii)    permit the Corporation or any Subsidiary to incur additional
          Indebtedness (other than Indebtedness incurred as a result of the
          refinancing of existing Indebtedness, provided the total outstanding
          Indebtedness does not increase as a result of such refinancing) in
          excess of (x) an aggregate at any one time outstanding for the
          Corporation and

                                      -3-
<PAGE>   4

                 its Subsidiaries of up to $100,000,000 until May 5, 2000 plus
                 accrued and unpaid interest on such Indebtedness, (y) after May
                 5, 2000 until May 5, 2001 an aggregate at any one time
                 outstanding for the Corporation and its subsidiaries of up to
                 $200,000,000 plus accrued and unpaid interest on such
                 Indebtedness and (z) thereafter an aggregate at any one time
                 outstanding for the Corporation and its subsidiaries of
                 $250,000,000 plus accrued and unpaid interest thereon provided
                 that for the purposes of this Section 3(b)(viii), (A) the
                 amount of additional Indebtedness otherwise permitted by this
                 Section 3(b)(viii) shall be reduced by the aggregate
                 liquidation value of all outstanding Restricted Preferred Stock
                 other than up to $200 million of the Corporation's Series D
                 Convertible Preferred Stock ("Series D Preferred") and (B)
                 Indebtedness shall not be deemed to include purchase money
                 financing for capital expenditures in a budget approved by the
                 Required Board Approval;

           (ix)  make any material changes to the Corporation's then current
                 business plan;

            (x)  hire a chief executive officer of the Corporation;

           (xi)  organize any new direct or indirect Subsidiaries of the
                 Corporation other than wholly-owned Subsidiaries or any joint
                 ventures between the Corporation and a third party that involve
                 the diversion of assets or business of the Corporation to the
                 joint venture entity, amend or modify any such joint venture or
                 partnership agreement to which the Corporation or any
                 Subsidiary is a party or restructure any Subsidiary,
                 partnership or such joint venture involving the Corporation or
                 any Subsidiary; or

          (xii)  issue Additional Shares of Common Stock (or issue other rights
                 that, pursuant to Section 5(k), are deemed to constitute
                 Additional Shares of Common Stock) to the extent that as a
                 result of such issuance (or deemed issuance) the Series C
                 Conversion Price would be reduced to a price less than the
                 Series C Liquidation Value.

     (c)  The holders of the requisite percentage of Series C Preferred shall
either approve or reject a Restricted Action described in Section
3(b)(vii)-(xi) (a "Special Restricted Action") within twenty (20) business days
of receipt by the holders of Series C Preferred of written notice and a
reasonably detailed description of the proposed Restricted Action; provided
that the failure of the holders of Series C Preferred to approve or reject the
Special Restricted Action within such time period shall not be deemed to be an
approval thereof.

     (d)  In the event the Series C Holders shall reject a Special Restricted
Action, the Corporation shall have the right, at the written election of the
Board, notice of which (the

                                      -4-
<PAGE>   5
"Company Redemption Notice") shall be promptly sent to the Series C Holders, to
initiate an Optional Redemption, which will be subject to the terms and
conditions contained in Section 6. In the Company Redemption Notice, the
Corporation shall specify the Optional Redemption Date for purposes of Section
6, which Optional Redemption Date shall not be more than sixty (60) days from
the date of the Company Redemption Notice. Within ten (10) business days of the
receipt of the Company Redemption Notice by the Series C Holders, a Majority of
the Series C Holders shall either (i) acknowledge and agree in writing to the
Optional Redemption or (ii) approve the Special Restricted Action that is the
subject of the Optional Redemption, in which event the Optional Redemption shall
be terminated. In the event the Special Restricted Action is rejected by the
Series C Holders but such Special Restricted Action is not effected by the
Corporation within ninety (90) days of the delivery of the Company Redemption
Notice, and the Optional Redemption has not yet been consummated, a Majority of
the Series C Holders may elect in writing to void the Optional Redemption and
return to the status quo ante.

         (e) In the event the Corporation takes any Restricted Action without
obtaining the approval of the holders of the Series C Preferred as required by
Section 3(b) (an "Event of Non-Compliance") and a Majority of the Series C
Holders gives written notice to the Board of Directors of the Corporation of
such an Event of Non-Compliance, the Corporation shall then have thirty (30)
days to take such action as is necessary to cure such default to the
satisfaction of a Majority of the Series C Holders. If the Corporation is unable
to cure the Event of Non-Compliance, a Majority of the Series C Holders may then
elect to initiate a Sale of the Company by submitting written notice of that
election to the Board of Directors of the Corporation (a "Sale Notice"). The
Board of Directors will then have an obligation to use its best efforts to
effect a Sale of the Company; provided that within twenty (20) business days of
its receipt of a Sale Notice electing a Sale of the Company, the Board may elect
to initiate an Optional Redemption pursuant to and subject to the terms and
conditions of Section 6 hereof in lieu of a Sale of the Company by providing a
Company Redemption Notice to the Series C Holders. In the Company Redemption
Notice, the Corporation shall specify the Optional Redemption Date for purposes
of Section 6, which Optional Redemption Date shall not be more than sixty (60)
days from the date of the Company Redemption Notice.

         (f) In the event a Sale of the Company has not been consummated within
six (6) months of a Sale Notice electing a Sale of the Company (and the
Corporation had not elected to initiate an Optional Redemption in lieu of a Sale
of the Company within the time period set forth in Section 3(c)), the Series C
Holders, voting as a separate class, will then have the right to elect that
number of the Directors of the Corporation as shall constitute a majority of the
total number of Directors of the Corporation as shall from time to time
constitute the Board; provided, however, in the event a Majority of Series B
Holders has also initiated a Sale of the Company pursuant to Section 3(c) of the
Series B Certificate, then the Series B Holders and Series C Holders, voting
together as a single class, will have the right to elect that number of
Directors of the Corporation as shall constitute a majority of the total number
of Directors as shall from time to time constitute the Board. A special meeting
of the stockholders shall be called by the Corporation from time to time at the
written instruction of a Majority of the Series B Holders or a Majority of the
Series C Holders for the purpose of electing such Directors.

                                      -5-
<PAGE>   6
     4. Liquidation Rights. Upon any liquidation, dissolution or winding up of
the Corporation, voluntary or involuntary:

          (a) The holders of Series C Preferred will be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of the Junior Securities by reason of
their ownership thereof, but subsequent to the repurchase or payment in full or
other satisfaction of the Senior Secured Notes, an amount per share of Series C
Preferred equal to the greater of (i) the Series C Liquidation Value plus the
greater of (x) the Minimum Dividend Amount and (y) all accrued but unpaid
dividends on such share of Series C Preferred at the rate of 10% per annum,
compounding annually, from the Original Issue Date and (ii) the amount the
holder of one share of Series C Preferred would have received in such
liquidation, dissolution, winding up, merger or Sale of the Company if such
share of Series C Preferred had been converted to Common Stock pursuant to
Section 5 immediately prior to such event; provided if such event occurs prior
to the first anniversary of the Original Issue Date, such conversion shall be
deemed to have occurred on such first anniversary of the Original Issue Date.
For the avoidance of doubt, in determining the amount a holder of Series C
Preferred would have received in any liquidation, dissolution, winding up,
merger or Sale of the Company under clause (ii) of the preceding sentence,
except as set forth in the immediately succeeding sentence hereof, all accrued
dividends on the Series C Preferred shall be assumed to have been paid to the
holders thereof immediately prior to such event in the manner provided for in
Section 5(e) hereof. Notwithstanding the foregoing, all or a portion of accrued
but unpaid dividends shall be extinguished and shall not be payable or deemed
payable upon any liquidation, dissolution or winding up (or Sale of the Company
deemed a liquidation pursuant to Section 4(b) hereof) if, and only to the extent
that, (i) such liquidation, dissolution or winding up occurs on or before the
thirty (30) month anniversary of the Original Issue Date and (ii) the payment of
dividends would result in each holder of Series C Preferred receiving cash
and/or Freely Tradeable Securities with a Fair Market Value in an amount that
exceeds on a per share basis the sum of (x) 2.0 times the Series C Liquidation
Value and (y) the Minimum Dividend Amount (a "Qualified Return").

     If the assets of the Corporation are insufficient to make payment in full
to all holders of Series B Preferred, Series C Preferred and any other class or
series of the Corporation's Preferred Stock which by its terms is on a parity
upon a liquidation, dissolution or winding up with the Series C Preferred and
Series B Preferred ("Parity Preferred") of the full preferential amounts to
which they may be entitled upon any liquidation, dissolution or winding up
(including a Sale of the Company deemed a liquidation pursuant to Section 4(b)
hereof and Section 4(b) of the Series B Certificate), such assets shall be
distributed (A) first to satisfy all accrued and unpaid dividends on the Series
C Preferred, Series B Preferred and Parity Preferred (the "Accrued Dividend
Amounts"), and if such assets are insufficient to satisfy the Accrued Dividend
Amounts in full, then such assets shall be distributed ratably among the holders
of Series B Preferred, Series C Preferred and Parity Preferred in proportion to
the full amount each such holder would otherwise be entitled to receive in
respect of the Accrued Dividend Amounts and (B) after the payment or
satisfaction in full of the Accrued Dividend Amounts, the balance of such assets
shall be distributed ratably among the holders of Series B Preferred, Series C
Preferred and Parity Preferred in proportion to the full preferential amounts
(exclusive of accrued

                                       6
<PAGE>   7
dividends) each such holder would otherwise be entitled to receive. In any
distribution of assets of the Corporation in connection with any liquidation,
dissolution, winding up, merger or Sale of the Company, the preferential amounts
distributable to the holders of Series B Preferred and Series C Preferred shall,
unless the Majority of the Series B Holders and the Majority of the Series C
Holders agree otherwise, be satisfied to the maximum extent possible with cash,
or to the extent there is insufficient cash available, cash to the maximum
extent available and the balance in Freely Tradeable Securities.

         (b) At the written election of the holders of a Majority of the Series
C Preferred, a Sale of the Company shall be deemed to be a liquidation,
dissolution or winding up of the Corporation, as those terms are used in this
Section 1. In the event a Majority of the Series C Holders elect to treat such
Sale of the Company as a liquidation, dissolution or winding up of the
Corporation, the holders of shares of Series C Preferred shall have the right to
preference (on a pari passu basis with holders of Series B Preferred) upon the
distribution of assets or the proceeds to be received as provided in this
Section 4.

         (c) After setting apart or paying in full the preferential amounts due
the holders of Series B Preferred, Series C Preferred and Parity Preferred
pursuant to subparagraph (a) of this Section 4, the remaining assets of the
Corporation available for distribution to shareholders, if any, shall be
distributed to the other stockholders of the Corporation as their respective
interests may appear.

         (d) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the Corporation shall, within ten
(10) days after the date the Board of Directors approves such action, or twenty
(20) days prior to any shareholders' meeting called to approve such action, or
twenty (20) days after the commencement of an involuntary proceeding, whichever
is earlier, give each holder of shares of Series C Preferred initial written
notice of the proposed action, including a description of the stock, cash and
property to be received by the holders of shares of Series C Preferred upon
consummation of the proposed action and the date of delivery thereof.

         (e) The Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation before the expiration
of thirty (30) days after the mailing of the initial notice or ten (10) after
the mailing of any subsequent written notice, whichever is later.

         (f) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation (other than a deemed liquidation
upon a Sale of the Company pursuant to Section 4(b)) which will involve the
distribution of assets other than cash and Freely Tradeable Securities, the
Corporation shall promptly determine the Fair Market Value of such other assets
to be distributed to the holders of shares of Series B Preferred, Series C
Preferred and the holders of shares of Common Stock.

                                      -7-

<PAGE>   8
     5. Conversion Rights.

          The holders of the Series C Preferred will have the following rights
with respect to the conversion of the Series C Preferred into shares of Common
Stock:

          (a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 5, any shares of Series C Preferred may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock (an "Optional Conversion"). The number of shares of
Common Stock to which a holder of Series C Preferred will be entitled upon
conversion (other than in respect to accrued dividends thereon, which shall be
payable as provided in Section 5(e) hereof) will be the product obtained by
multiplying the "Series C Conversion Rate" then in effect (determined as
provided in Section 5(c)), by the number of shares of Series C Preferred being
converted.

          (b) Mandatory Conversion.

               (1) At any time commencing on the earlier of (i) the date that is
386 days after the Original Issue Date or (ii) the date on which either the
Series B Holders or the Series C Holders exercise demand registration rights
under Section 2.1(a) of that certain Amended and Restated Registration Rights
Agreement dated the Original Issue Date, upon the written election of the Board
of Directors of the Corporation given after such earlier date, each share of
Series C Preferred shall be automatically converted into shares of Common Stock
at the then-effective Series C Conversion Rate if the Market Threshold has been
achieved and the Board makes this election and provides the Threshold Notice to
the Series C Holders within 60 days of the first day as of which the Market
Threshold had been achieved (a "Mandatory Conversion"). Payment of accrued
dividends on the Series C Preferred being converted pursuant to a Mandatory
Conversion shall be made as provided in Section 5(c) hereof. In the Threshold
Notice, the Board shall certify its calculation of the Market Threshold, and
provide each holder with such supporting documentation as such holder may
reasonably request.

               (2) Upon the occurrence of the events specified in paragraph (1)
above, the outstanding shares of Series C Preferred will be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, however, that the Corporation will
not be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Series C Preferred are either delivered to the Corporation or its transfer agent
as provided in Section 5(e) below.

          (c) Conversion Rate. The conversion rate in effect at any time for
conversion of the Series C Preferred (the "Series C Conversion Rate") will be
the quotient obtained by dividing Twenty-eight Dollars ($28.00) by the "Series C
Conversion Price," calculated as provided in Section 5(d).

          (d) Series C Conversion Price. (i) The conversion price for the Series
C Preferred will initially be Twenty-eight Dollars ($28.00) (the "Series C
Conversion Price"). Such initial

                                      -8-
<PAGE>   9
Series C Conversion Price will be adjusted from time to time in accordance with
this Section 5. All references to the Series C Conversion Price herein will
mean the Series C Conversion Price, as so adjusted.

          (e)  Mechanics of Conversion.  Each holder of Series C Preferred who
desires or is obligated to convert the same into shares of Common Stock
pursuant to this Section 5 will surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any transfer agent
for the Series C Preferred and will give written notice to the Corporation at
such office that such holder elects or is obligated to convert the same. Such
notice will state the number of shares of Series C Preferred being converted.
Thereupon, the Corporation will promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common
Stock which equals the number of shares of Common Stock to which such holder is
entitled under the then-effective Series C Conversion Rate. In addition, upon
any such conversion the holder of the shares of Series C Preferred being
converted shall be issued, in satisfaction of the accrued dividends on the
Series C Preferred being converted, that number of shares of Common Stock as is
equal to the greater of (i) the number of shares of Common Stock whose Fair
Market Value equals the amount of all accrued but unpaid dividends (calculated
at the rate of 10% per annum, compounded annually, from the Original Issue
Date, but in no event less than the Minimum Dividend Amount) on the shares of
Series C Preferred being converted and (ii) the number of shares of Common
Stock obtained by dividing the aggregate amount of accrued but unpaid dividends
on the shares of Series C Preferred being converted (but not less than the
Minimum Dividend Amount) by the Series C Conversion Price then in effect;
provided, however, that (A) all of the accrued but unpaid dividends in excess
of the Minimum Dividend Amount shall be extinguished and shall not be payable
with respect to shares of Series C Preferred in the event such shares are being
converted on or before the thirty (30) month anniversary of the Original Issue
Date pursuant to (x) a Mandatory Conversion or (y) an Optional Conversion
within 60 days of the first day as of which the Market Threshold had been
achieved; and (B) the accrued but unpaid dividends shall be extinguished and
shall not be payable in an Optional Conversion that takes place on or before the
thirty (30) month anniversary of the Original Issued Date as part of a Sale of
the Company if, and to the extent that, the payment of dividends in connection
with such Sale of the Company would result in each holder receiving an amount
of cash and/or Freely Tradeable Securities with a Fair Market Value that
exceeds a Qualified Return. In addition, the Corporation shall promptly deliver
to the holder of Series C Preferred being converted a certificate representing
those shares of Series C Preferred, if any, that were not converted. Such
conversion will be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Series C
Preferred to be converted in the event of a conversion pursuant to Section 5(a)
hereof or, in the case of a Mandatory Conversion, upon the occurrence of the
events specified in Section 5(b)(1) hereof, and the Person entitled to receive
the shares of Common Stock issuable upon such conversion will be treated for
all purposes as the record holder of such shares of Common Stock on such date.

          (f)  Adjustment for Stock Splits and Combinations.  If the
Corporation at any time or from time to time after the date that the Original
Issue Date effects a subdivision of the outstanding Common Stock, the Series C
Conversion Price, in effect immediately before that

                                      -9-

<PAGE>   10
subdivision will be proportionately decreased. Conversely, if the Corporation at
any time or from time to time after the Original Issue Date combines the
outstanding shares of Common Stock into a smaller number of shares, the Series C
Conversion Price in effect immediately before the combination will be
proportionately increased. Any adjustment under this Section 5(f) will become
effective at the close of business on the record date as of which the
subdivision or combination will become effective.

         (g) Adjustment for Common Stock Dividends and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series C Conversion Price that is
then in effect will be decreased as of the time of such issuance or, in the
event such record date is fixed, as of the close of business on such record
date, by multiplying the Series C Conversion Price then in effect by a fraction
(1) the numerator of which is the total number of shares of Common Stock issued
and outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (2) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series C Conversion Price will be recomputed accordingly as
of the close of business on such record date and thereafter the Series C
Conversion Price will be adjusted pursuant to this Section 5(g) to reflect the
actual payment of such dividend or distribution.

         (h) Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
will be made so that the holders of the Series C Preferred will receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of the other securities of the Corporation
which they would have received had their Series C Preferred been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 5 with respect to the rights of the holders of the Series C Preferred or
with respect to such other securities by their terms.

         (i) Adjustment for Reclassification, Exchange and Substitution. If at
any time or from time to time after the Original Issue Date the Common Stock
issuable upon the conversion of the Series C Preferred is changed into the same
or a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 5), in
any such event each holder of Series C Preferred will have the right thereafter
to convert such stock into the kind and amount of stock

                                     - 10 -
<PAGE>   11
and other securities and property receivable upon such recapitalization,
reclassification or the change by holders of the maximum number of shares of
Common Stock into which such shares of Series C Preferred could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.

     (j) Reorganizations, Mergers, Consolidations or Sales of Assets. If at any
time or from time to time after the Original Issue Date there is a merger,
consolidation, recapitalization, reclassification, sale of all or substantially
all of the Corporation's assets or reorganization involving the Common Stock
(collectively, a "capital reorganization") (other than a Sale of the Company
provided for in Section 4(b) or a merger, consolidation, sale of assets,
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 5), as a part of
such capital reorganization, provision will be made so that the holders of the
Series C Preferred will thereafter be entitled to receive upon conversion of
the Series C Preferred the number of shares of stock or other securities or
property of the Corporation to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment will be made in the
application of the provisions of this Section 5 with respect to the rights of
the holders of Series C Preferred after the capital reorganization to the end
that the provisions of this Section 5 (including adjustment of the Series C
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series C Preferred) will be applicable after that event and
be as nearly equivalent as practicable.

     (k) Sale of Shares Below Series C Conversion Price.

           (1) If at any time or from time to time after the Original Issue
Date, the Corporation issues or sells, or is deemed by the provisions of this
Section 5(k) to have issued or sold, Additional Shares of Common Stock (as
hereinafter defined), other than as a dividend or other distribution on any
class of stock as provided in Section 5(g) above, and other than a subdivision
or combination of shares of Common Stock as provided in Section 5(f) above or
in connection with the antidilution provisions set forth in subsection 5(k)(5)
hereof, for an Effective Price (as hereinafter defined) less than the then
effective Series C Conversion Price, then and in each such case, the then
existing Series C Conversion Price will be reduced, as of the opening of
business on the date of such issue or sale, to a price (but in no event to a
price less than the Series C Liquidation Value) determined by dividing (a) the
sum of (1) the product derived by multiplying (i) the Series C Conversion Price
in effect immediately prior to such issue or sale times (ii) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale, plus (2) the consideration, if any, received (or deemed
received pursuant to subsection (k)(2)) by the Corporation upon such issue or
sale, by (b) the number of shares of Common Stock deemed outstanding (as
defined below) immediately after such issue or sale. For the purposes of the
preceding sentence, the number of shares of Common Stock deemed to be
outstanding as of a given date will be the sum of (a) the number of shares of
Common Stock actually outstanding, (b) the number of shares of Common Stock
into which the then outstanding Series C Preferred could be converted if fully
converted on the day immediately

                                      -11-
<PAGE>   12
preceding the given date, and (c) the number of shares of Common Stock that
could be obtained through the exercise or conversion in full of all other
rights, options, warrants and convertible securities on the day immediately
preceding the given date, regardless of whether or not such securities are fully
exercisable for or convertible into Common Stock at such time.

            (2) For the purpose of making any adjustment required under this
Section 5(k), the consideration received by the Corporation for any issue or
sale of securities will (a) to the extent it consists of cash, be computed at
the net amount of cash received by the Corporation after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Corporation in connection with such issue or sale but without deduction
of any expenses payable by the Corporation, (b) to the extent it consists of
property other than cash, be computed at the Fair Market Value of that property,
and (c) if Additional Shares of Common Stock, Convertible Securities (as
hereinafter defined) or rights or options to purchase either Additional Shares
of Common Stock or Convertible Securities are issued or sold together with other
stock or securities or other assets of the Corporation for a consideration that
covers both, be computed as the portion of the consideration so received that
may be reasonably determined in good faith by the Board of Directors with
Required Board Approval to be allocable to such Additional Shares of Common
Stock, Convertible Securities or rights or options.

            (3) For the purpose of the adjustment required under this Section
5(k), if the Corporation issues or sells any rights or options for the purchase
of, or stock or other securities exchangeable for or convertible into,
Additional Shares of Common Stock (such exchangeable or convertible stock or
securities being herein referred to as "Convertible Securities") and if the
Effective Price of such Additional Shares of Common Stock is less than the
Series C Conversion Price in effect, the Corporation will be deemed to have
issued at the time of the issuance of such rights or options or Convertible
Securities the maximum number of Additional Shares of Common Stock issuable upon
exercise or conversion or exchange thereof and to have received consideration
for the issuable upon exercise or conversion or exchange thereof and to have
received consideration for the issuance of such shares an amount equal to the
total amount of consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or options, plus in the case
of Convertible Securities, the minimum amounts of consideration, if any, payable
to the Corporation (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities) upon the conversion or exchange
thereof; provided that if in the case of Convertible Securities the minimum
amount of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation shall be deemed to
have received the minimum amounts of consideration without references to such
clauses; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events, including by reason of antidilution
adjustments, the Effective Price will be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price will be again recalculated using the increased
minimum amount of consideration payable to the Corporation upon the

                                       12

<PAGE>   13
exercise or conversion of such rights, options or Convertible Securities. No
further adjustment of the Series C Conversion Price, as adjusted in each case
upon the issuance of such rights, options or Convertible Securities, will be
made as a result of the actual issuance of Additional Shares of Common Stock on
the exercise of any such rights or options or the exchange or conversion of any
such Convertible Securities. If any such rights or options or the conversion
privilege represented by any such Convertible Securities shall expire without
having been exercised, the Series C Conversion Price, as adjusted upon the
issuance of such rights, options or Convertible Securities, will be readjusted
to the Series C Conversion Price that would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or upon such conversion
and that such Additional Shares of Common Stock, if any, were issued or sold for
the consideration, if any, actually received by the Corporation for the granting
of all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted,
plus the consideration, if any, actually received by the Corporation (other than
by cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities, provided that such
readjustment shall not apply to prior conversions of Series C Preferred.

         (4) "Additional Shares of Common Stock" means all shares of Common
Stock issued by the Corporation or deemed to be issued pursuant to this Section
5(k) whether or not subsequently reacquired or retired by the Corporation other
than (A) shares of Common Stock issued upon conversion of Series B Preferred and
Series C Preferred, (B) options to purchase up to Four Million Six Hundred Forty
Thousand (4,640,000) shares of Common Stock granted to employees, officers or
directors of or consultants or advisors to the Corporation or any Subsidiary
pursuant to the Stock Option Plan and the shares of Common Stock issuable upon
exercise of such options, or such increased number of shares of Common Stock as
has been approved by the Required Board Approval, (C) Convertible Securities
outstanding as of the Original Issue Date and the shares of Common Stock
issuable upon exercise or conversion of such Convertible Securities, (D) Common
Stock issued in satisfaction of accrued and unpaid dividends on the Series B
Preferred, Series C Preferred and any other class or series of Preferred Stock
the rights, privileges and other terms of which have been approved in writing by
the majority of the Series C Holders, and (E) for purposes of Section 5(k)(5),
shares of Common Stock and options to purchase Common Stock issued prior to the
eighteen (18) month anniversary of the Original Issue Date to the extent that
the aggregate Fair Market Value of such shares of Common Stock issued and as to
which options are granted, valued as of the issuance of such shares and options,
do not exceed a total of $5.0 million. The "Effective Price" of Additional
Shares of Common Stock means the quotient determined by dividing (i) the
aggregate consideration received, or deemed to have been received by the
Corporation under this Section 5(k), for the issuance of such Additional Shares
of Common Stock, by (ii) the total number of Additional Shares of Common Stock
issued or sold, or deemed to have been issued or sold, by the Corporation under
this Section 5(k).

         (5) Notwithstanding the adjustments to the Series C Conversion Price
otherwise provided for in this Section 5(k), in the event the Corporation at any
time or from time

                                      -13-
<PAGE>   14
to time issues or sells, or is deemed by the provisions of this Section 5(k) to
have issued or sold, Additional Shares of Common Stock prior to the eighteen
(18) month anniversary of the Original Issue Date (other than as a dividend or
other distribution on any class of stock as provided in Section 5(g) above and
other than a subdivision or combination of shares of Common Stock as provided
in Section 5(f) above) for an Effective Price that is less than the Series C
Conversion Price in effect immediately prior to such issuance or sale (or
deemed issuance or sale), then and in each such event the Series C Conversion
Price shall be reduced (but in no event below the Series C Liquidation Value),
concurrently with such issuance or sale or deemed issuance or sale, as
applicable, of such Additional Shares of Common Stock, to such Effective Price
(but in no event shall the then effective Series C Conversion Price be
increased).

                  (6)  Notwithstanding any provision of this Section 5 to the
contrary, in no event shall the aggregate number of shares of Common Stock
issuable upon conversion of the Series C Preferred exceed twenty percent (20%)
of the voting power of the Corporation's outstanding capital stock as of the
Original Issue Date, determined in accordance with Rule 4310(H) of the National
Association of Securities Dealers, Inc.

         (l)  Accountants' Certificate of Adjustment.  In each case of an
adjustment or readjustment of the Series C Conversion Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series C Preferred, the Corporation, at its expense, will compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and will mail such
certificate, by first class mail, postage prepared, to each registered holder
of Series C Preferred at the holder's address as shown in the Corporation's
books. The certificate will set forth such adjustment or readjustment, showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (1) the Series C Conversion Price at the time in
effect, and (2) the type and amount, if any, of other property that at the time
would be received upon conversion of the Series C Preferred.

         (m)  Notices of Record Date.  Upon (1) any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution (other than in connection with the declaration and payment
of regular quarterly dividends in Common Stock on the Series D Preferred), or
(2) any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, or any
other Sale of the Company, or any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation will mail to each
holder of Series C Preferred at least twenty (20) days prior to the record date
specified therein a notice specifying (1) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description
of such dividend or distribution, (2) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, Sale of the
Company, dissolution, liquidation or winding up is expected to become
effective, and (3) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) will be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such reorganization,

                                      -14-
<PAGE>   15
reclassification, transfer, consolidation, merger, Sale of the Company,
dissolution, liquidation or winding up.

     (n)  Fractional Shares.  No fractional shares of Common Stock will be
issued upon conversion of Series C Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series C Preferred by a holder thereof will be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional shares. If, after the aforementioned aggregation, the conversion
would result in the issuance of any fractional share, the Corporation will, in
lieu of issuing any fractional share, pay cash equal to the product of such
fraction multiplied by the Common Stock's Fair Market Value on the date of
conversion.

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

     (p)  Notices.  Any notice required by the provisions of this Certificate
of Designation to be given to the holders of shares of the Series C Preferred
will be deemed given upon the earlier of actual receipt or seventy-two (72)
hours after the same has been deposited in the United States mail, be certified
or registered mail, return receipt requested, postage prepaid, and addressed to
each holder of record at the address of such holder appearing on the books of
the Corporation.

     (q)  Payment of Taxes.  The Corporation will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series C Preferred excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series C Preferred
so converted were registered.

     (r)  No Implied Approval.  Notwithstanding any other provision hereof to
the contrary, the provisions of this Section 5, including those providing for
adjustments to the Series C Conversion Price, shall not be construed as a waiver
of the requirements of Section 3(b), and any issuance of Additional Shares of
Common Stock (or deemed issuance thereof) which would reduce the Series C
Conversion Price to an amount less than the Series C Liquidation Value shall
require the prior approval of the Majority of the Series C Holders pursuant to
Section 4(b)(xii).

                                      -15-

<PAGE>   16
          6. Optional Redemption.

          (a) At any time after the sixth anniversary of the Original Issue
Date, or upon a Sale of the Company (but in no event prior to the Corporation's
repurchase or payment or satisfaction in full of the Senior Secured Notes), a
Majority of the Series C Holders may require the Corporation to redeem all, but
not less than all, of the outstanding shares of Series C Preferred (an "Optional
Redemption") by notifying the Corporation in writing of their intent to exercise
the rights afforded by this Section 6(a) and specifying a date not less than 90
nor more than 120 days from the date of such notice on which the outstanding
shares of Series C Preferred shall be redeemed (the "Optional Redemption Date").
Upon receipt of such notice, the Corporation shall promptly notify the remaining
holders of Series C Preferred of the Optional Redemption Date. The recipients of
such notice shall be required to participate in the Optional Redemption. The
Corporation shall redeem on the Optional Redemption Date all the shares of
Series C Preferred. Each share of Series C Preferred to be redeemed shall be
redeemed for an amount in cash and/or Freely Tradeable Securities with a Fair
Market Value equal to the greater of (A) the sum of the Series C Liquidation
Value and the greater of the Minimum Dividend Amount and all accrued dividends
on such share of Series C Preferred (provided that all or a portion of the
accrued but unpaid dividends shall be extinguished and shall not be payable if,
and to the extent that (x) the redemption occurs on or before the thirty (30)
month anniversary of the Original Issue Date and (y) the payment of dividends
would result in each holder of Series C Preferred receiving in cash an amount
that exceeds a Qualified Return), and (B) the Fair Market Value of the Common
Stock into which the Series C Preferred is then convertible pursuant to Section
5 hereof, including shares of Common Stock issuable upon conversion in respect
of accrued dividends to the extent provided in Section 5(e) hereof (the
"Optional Redemption Price").

          (b) In the event the Optional Redemption is occurring pursuant to
Section 3(d) or Section 3(e), each share of Series C preferred to be redeemed
shall be redeemed for an amount in cash and/or Freely Tradeable Securities with
a Fair Market Value equal to, the greater of (i) the Optional Redemption Price
and (ii) the price per share set forth in the table below based on the year
during which the redemption occurs (the year number being the time period prior
to an anniversary of the Original Issue Date) and calculated as a multiple of
the Series C Liquidation Value:

<TABLE>
<CAPTION>
                              Year                Price
                              ----                -----
<S>                           <C>                 <C>
                               1                   2.5
                               2                   2.5
                               3                     3
                               4                   3.5
                               5                     4
                               6                   4.5
</TABLE>

          Notwithstanding anything herein to the contrary, an Optional
Redemption pursuant to Section 3(d) or Section 3(e) shall not take place prior
to the Corporation's repurchase or payment or satisfaction in full of the Senior
Secured Notes, or the Corporation's compliance with, or its

                                      -16-
<PAGE>   17
receipt of the requisite consent from the holders of the Senior Secured Notes
under, the Indenture.

         (c) If the funds of the Corporation legally available for redemption
of shares of Series C Preferred on an Optional Redemption Date and, if
applicable, the shares of Series B Preferred entitled to redemption as of such
date pursuant to Section 6 of the Series B Certificate and/or shares of Parity
Preferred then entitled to redemption are insufficient to redeem the total
number of outstanding shares of Series C Preferred and, if applicable, the
shares of Series B Preferred and Parity Preferred entitled to redemption, the
holders of shares of Series C Preferred and, if applicable, the shares of
Series B Preferred and Parity Preferred entitled to redemption shall share
ratably in any funds legally available for redemption of such shares according
to the respective amounts that would be payable with respect to the full number
of shares owned by them if all such outstanding shares were redeemed in full.
At any time thereafter when additional funds of the Corporation are legally
available for the redemption of such shares of Series C Preferred and, if
applicable, the shares of Series B Preferred and Parity Preferred, such funds
will be used at the earliest permissible time, to redeem the balance of such
shares, or such portion thereof for which funds are then legally available.
The Corporation shall be obligated to use its best efforts to take such actions
as may be necessary (including, without limitation, the issuance of additional
equity securities, the revaluation or recapitalization of the Corporation or
the consummation of a Sale of the Company) in order to permit the full and
timely redemption of the shares of Series C Preferred and Series B Preferred
entitled to redemption.

         (d) If, for any reason, the Corporation fails to redeem all shares of
Series C Preferred entitled to redemption on an Optional Redemption Date, and
such failure continues for a period of six (6) months from the Optional
Redemption Date, then the Series C Holders, voting as a separate class, shall
have the right to elect that number of Directors of the Corporation as shall
constitute a majority of the total number of Directors of the Corporation as
shall from time to time constitute the Board; provided, if the Corporation has
also failed to redeem shares of Series B Preferred in accordance with Section 6
of the Series B Certificate and the holders of Series B Preferred would
otherwise have the right to elect a majority of the Corporation's Directors,
then the Series B Holders and Series C Holders, voting together as a single
class, shall have the right to elect that number of Directors of the
Corporation as shall from time to time constitute the Board. A special meeting
of the stockholders shall be called by the Corporation from time to time at the
written instruction of a Majority of the Series C Holders for the purpose of
electing such Directors.

         (e) Shares of Series C Preferred that have been issued and reacquired
in any manner, including shares purchased or redeemed or exchanged or
converted, shall (upon compliance with any applicable provisions of the General
Corporation Law of the State of Nevada) have the status of authorized but
unissued shares of Preferred Stock of the Corporation undesignated as to series
and may, subject to the requirements of Section 3(b), be designated or
redesignated and issued or reissued, as the case may, as part of any series of
Preferred Stock of the Corporation, other than as Series C Preferred.

                                      -17-
<PAGE>   18
     7. Exclusion of Other Rights. Except as may otherwise be required by law,
the shares of Series C Preferred shall not have any preferences or relative,
participating, optional or other special rights, other than those specifically
set forth in this Certificate of Designation. The shares of Series C Preferred
shall have no preemptive or subscription rights pursuant to this Certificate of
Designation.

     8. Rank. The Series C Preferred shall rank senior in right as to dividends
and upon liquidation, dissolution or winding up to all Junior Securities,
whenever issued.

     9. Identical Rights. Each share of the Series C Preferred shall have the
same relative rights and preferences as, and shall be identical in all respects
with, all other shares of the Series C Preferred.

     10. Certificates. So long as any shares of the Series C Preferred are
outstanding, there shall be set forth on the face or back of each stock
certificate issued by the Corporation a statement that the Corporation shall
furnish without charge to each shareholder who so requests, a full statement of
the designation and relative rights, preferences and limitations of each class
of stock or series thereof that the Corporation is authorized to issue and of
the authority of the Board of Directors to designate and fix the relative
rights, preferences and limitations of each series.

     11. Amendments. Any provision of these terms of the Series C Preferred
Stock may be amended, modified or waived if and only if a Majority of the Series
C Holders have consented in writing or by an affirmative vote to such amendment,
modification or waiver of any such provision of this Certificate of Designation,
and upon receipt of such written consent or the obtaining of such affirmative
vote, such amendment, modification or waiver shall be binding on all holders of
Series C Preferred.

     12. Definitions.

         "Additional Shares of Common Stock" shall have the meaning given such
term in Section 5(k)(4) of this Certificate of Designation.

         "Affiliate" or "Affiliates" shall mean with respect to any Person, any
other Person that would be considered to be an affiliate of such Person under
Rule 144(a) of the Rules of Regulations of the Securities and Exchange
Commission, as in effect on the date hereof, if the Corporation were issuing
securities.

         "Articles of Incorporation" shall have the meaning given such term on
the cover page of this Certificate of Designation.

         "Board" or "Board of Directors" means the Board of Directors of the
Corporation.

         "Company Redemption Notice" shall have the meaning given to such term
in Section 3(d) of this Certificate of Designation.

                                       18
<PAGE>   19
         "Convertible Securities" shall have the meaning given such term in
Section 5(k)(3) of this Certificate of Designation.

         "Corporation" means MGC Communications, Inc., a Nevada corporation.

         "Common Stock" means the Corporation's Common Stock, $.001 par value.

         "Effective Price" shall have the meaning given such term in Section
5(k)(4) of this Certificate of Designation.

         "Event of Non-Compliance" shall have the meaning given such term in
Section 3(e) of this Certificate of Designation.

         "Fair Market Value" of the assets or shares of capital stock at issue
shall mean the price that would be paid by a willing buyer of all of the
assets or shares of capital stock of the Corporation, as applicable, in a sale
process designed to attract all possible participants and to maximize value in
an arm's length transaction, such price to include a control premium and to
exclude any minority, illiquidity or other discounts. The determination of Fair
Market Value shall be made by (i) the Board of Directors of the Corporation, or
(ii) if at the written election of a Majority of the Series C Holders after
presentation of the Board's determination of Fair Market Value, by a nationally
recognized investment banking firm mutually agreeable to the Corporation and a
Majority of the Series C Holders after presentation of the Board's
determination of Fair Market Value, by a nationally recognized investment
banking firm mutually agreeable to the Corporation and a Majority of the Series
C Holders, provided, however, in the event a firm cannot be agreed upon such
amount shall be determined by a nationally recognized investment banking firm
selected by two other such firms, one selected by the Corporation and the other
by a Majority of the Series C Holders. The determination of Fair Market Value
by such investment banking firm shall be final and binding on the parties. The
fees and expenses of such firm shall be paid for by the Corporation. In the
event a determination of Fair Market Value is being made under this Certificate
of Designation and contemporaneously under the Series B Certificate for a
substantially similar purpose, the investment banking firm to be approved or
selected hereunder by a Majority of the Series C Holders shall instead be
approved of or selected, as applicable, by the holders of a majority of the
outstanding Series B Preferred and Series C Preferred.

         "Freely Tradeable Securities" shall mean shares of a common stock of a
public company listed for trading on the New York Stock Exchange or Nasdaq
National Market that are free of any and all restrictions on sale, including
under Rule 144 or 145 under the Securities Act of 1933, as amended.

         "GAAP" shall mean generally accepted accounting principles applied on
a consistent basis.

         "Indebtedness" shall mean all obligations, contingent (to the extent
required to be reflected in financial statements prepared in accordance with
GAAP) and otherwise, which in accordance with GAAP should be classified on the
obligor's balance sheet as liabilities, including, without limitation, in any
event and whether or not so classified: (i) all debt and similar monetary
obligations, whether direct or indirect; (ii) all liabilities secured by any

                                      -19-
<PAGE>   20
mortgage, pledge, security interest, lien, charge or other encumbrance existing
on property owned or acquired subject thereto, whether or not the liability
secured thereby shall have been assumed; (iii) all guarantees, endorsements and
other contingent obligations whether direct or indirect in respect of
Indebtedness or performance of others, including any obligation to supply
funds to or in any manner to invest in, directly or indirectly, the debtor, to
purchase Indebtedness, or to assure the owner of Indebtedness against loss,
through an agreement to purchase goods, supplies or services for the purpose of
enabling the debtor to make payment of the Indebtedness held by such owner or
otherwise; (iv) obligations to reimburse issuers of any letters of credit; and
(v) purchase money financing for capital expenditures.

    "Indenture" shall mean that Indenture dated as of September 29, 1997
pursuant to which the Senior Secured Notes have been issued.

    "Junior Securities" shall mean any of the Corporation's Common Stock and
all other equity securities of the Corporation other than (x) the Series B
Preferred, (y) the Series C Preferred and (z) any other shares of the
Corporation's preferred stock which (a) by their terms state that they are not
Junior Securities or provide the holders thereof with rights pari passu with or
senior to those of the holders of Series C Preferred and (b) are approved for
issuance in accordance with Section 3 hereof.

    "Majority of the Series B Holders" shall mean the holders of more than
fifty percent (50%) of the then outstanding Series B Preferred.

    "Majority of the Series C Holders" shall mean the holders of more than
fifty percent (50%) of the then outstanding Series C Preferred.

    "Mandatory Conversion" shall have the meaning given such term in Section
5(b) of this Certificate of Designation.

    "Market Threshold" shall mean when the closing sales price of the Common
Stock on the Nasdaq Stock Market or the New York Stock Exchange for twenty (20)
consecutive trading days ending within the sixty (60) day period preceding the
Threshold Notice has exceeded the amount which equals 2.0 times the Series C
Liquidation Value (as adjusted from time to time to take into account stock
splits, stock dividends and similar events).

    "Minimum Dividend Amount" means in respect of each share of Series C
Preferred, $2.80; provided if the Corporation at any time subdivides (by stock
split, stock dividend, recapitalization or otherwise) the Series C Preferred
into a greater number of shares or if the Corporation at any time combines (by
reverse stock split or otherwise) the outstanding shares of Series C Preferred
into a smaller number of shares, then the Minimum Dividend Amount in effect
immediately prior to such subdivision or combination shall be proportionately
adjusted. In determining the Minimum Dividend Amount as of any given date, the
amount dividends actually paid, if any, prior to such date on such share of
Series C Preferred shall reduce the Minimum Dividend Amount.

                                      -20-

<PAGE>   21
     "Optional Conversion" shall have the meaning given such term in Section
5(a) of this Certificate of Designation.

     "Optional Redemption" shall have the meaning given such term in Section
6(a) of this Certificate of Designation.

     "Optional Redemption Date" shall have the meaning given such term in
Section 6(a) of this Certificate of Designation.

     "Optional Redemption Price" shall have the meaning given such term in
Section 6(a) of this Certificate of Designation.

     "Original Issue Date" means _______________, 1999.

     "Person" shall mean an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization and any government,
governmental department or agency or political subdivision thereof.

     "Qualified Return" shall have the meaning given to such term in Section
4(a).

     "Required Board Approval" shall have the meaning given to such term in the
Securityholders Agreement.

     "Restricted Action" shall have the meaning given such term in Section 3(b)
of this Certificate of Designation.

     "Sale Notice" shall have the meaning given such term in Section 3(e) of
the Certificate of Designation.

     "Sale of the Company" shall mean a single transaction or series of
transactions between the Corporation and/or its stockholders and any Person or
group of Persons (as such term is used in Sections 13(d)(3) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) pursuant to which such Person or
group of Persons will (i) acquire shares of capital stock of the Corporation
possessing more than 50% of the voting power of the Corporation, including by
way of merger or consolidation or otherwise, or (ii) acquire all or
substantially all of the assets of the Corporation and its Subsidiaries
(determined on a consolidated basis); notwithstanding the foregoing definition,
a single transaction or series of transactions shall not be deemed a Sale of
the Company unless such transaction or series of transactions is also deemed a
"Change of Control", as defined in the Indenture.

     "Securityholders Agreement" shall mean that certain Amended and Restated
Securityholders Agreement of even date herewith among the Corporation, the
Series B Holders, the Series C Holders and certain other parties, as amended
from time to time.

                                      -21-

<PAGE>   22
     "Senior Secured Notes" means the $160,000,000 principal amount of 13%
Senior Secured Notes due 2004 that have been issued pursuant to the Indenture.

     "Series B Certificate" means the Certificate of Designation of the Series
B Preferred as amended.

     "Series B Holders" shall mean the holders of Series B Preferred.

     "Series B Preferred" shall mean the Corporation's Series B Convertible
Preferred Stock, par value $.001 per share.

     "Series C Conversion Price" shall have the meaning given such term in
Section 5(d) of this Certificate of Designation.

     "Series C Conversion Rate" shall have the meaning given such term in
Section 5(c) of this Certificate of Designation.

     "Series C Holders" shall mean the holders of Series C Preferred.

     "Series C Liquidation Value" means Twenty-Eight Dollars ($28.00), provided
if the Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) the Series C Preferred into a greater number of
shares or if the Corporation at any time combines (by reverse stock split or
otherwise) the outstanding shares of the Series C Preferred into a smaller
number of shares, then the Series C Liquidation Value in effect immediately
prior to such subdivision or combination shall be proportionately adjusted.

     "Series C Preferred" shall have the meaning given such term in Section 1
of this Certificate of Designation.

     "Special Restricted Action" shall have the meaning given such term in
Section 3(c) of this Certificate of Designation.

     "Stock Option Plan" shall mean the Corporation's Stock Option Plan, as
adopted by the Board of Directors on June 30, 1996, and as amended to date.

     "Subsidiary" shall mean any Person as to which the Corporation owns,
directly or indirectly, either (a) 50% or more of such Person's stock (or
similar voting interests) entitled to vote generally in the election of
directors (or other governing body) or (b) 50% or more of the capital or
profits interest of such Person.

     "Threshold Notice" shall mean a written notice from the Corporation to the
holders of Series C Preferred stating that the Market Threshold has been
achieved and providing reasonable evidence thereof.

                                      -22-
<PAGE>   23
         13. Severability of Provisions. If any right, preference or limitation
of the Series C Preferred set forth in this Certificate of Designation (as such
Certificate of Designation may be amended from time to time) is invalid,
unlawful or incapable of being enforced by reason of any rule, law or public
policy, all other rights, preferences and limitations set forth in this
Certificate of Designation (as so amended) which can be given effect without
implicating the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed dependent upon any
other right, preference or limitation unless so expressed herein.

                    [SIGNATURES ARE ON THE FOLLOWING PAGE.]

                                      -23-
<PAGE>   24
         IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its President, and attested to by its Secretary, on
12/27, 1999.

                                        MGC COMMUNICATIONS, INC.

                                        By /s/ Rolla Huff
                                           ----------------
                                           Name: Rolla Huff
                                           Title: President

Attest:

/s/ Kent F. Heyman
--------------------
Name: Kent F. Heyman
Title: Secretary

STATE OF NEVADA   )
ss.:              )
COUNTY OF CLARK   )

         On the 27 day of December, 1999, before me personally came Rolla Huff
to me known, who, being by me duly sworn, did depose and say he resides at 14
Moraine Point, Victor, NY 14564 and that he is the President of MGC
Communications, Inc., the corporation described in and which executed the above
instrument; and that he acknowledged said instrument to be the free act and
deed of said corporation.

/s/ Molly J. Pace
------------------------------------
Notary Public
My Commission Expires: April 1, 2001

[Notary Public Logo]

                                      -24-

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