EXHIBIT 10.1

                                                      EXECUTION COPY


                                 AMENDMENT NO. 2
                                       TO
               AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

            AMENDMENT NO. 2 TO AMENDED AND RESTATED LOAN AND SECURITY  AGREEMENT
("AMENDMENT"),  dated as of July 28, 2000, is among KMC TELECOM INC., a Delaware
corporation  ("KMC"),  KMC TELECOM II, INC., a Delaware  corporation ("KMC II"),
KMC TELECOM  III,  INC.,  a Delaware  corporation  ("KMC  III"),  KMC TELECOM OF
VIRGINIA, INC., a Virginia public service company ("KMC VIRGINIA"),  KMC TELECOM
LEASING I LLC, a Delaware limited  liability  company ("LEASING I"), KMC TELECOM
LEASING II LLC, a Delaware limited liability company ("LEASING II"), KMC TELECOM
LEASING III LLC, a Delaware  limited  liability  company  ("LEASING  III"),  KMC
TELECOM.COM, INC., a Delaware corporation ("TELECOM.COM"); KMC III SERVICES LLC,
a Delaware  limited  liability  company  ("SERVICES";  KMC, KMC II, KMC III, KMC
Virginia,  Leasing I , Leasing II, Leasing III,  Telecom.com  and Services being
hereinafter  collectively  referred  to  hereinafter  as the  "BORROWERS"),  the
"Lenders" party hereto,  FIRST UNION NATIONAL BANK, as administrative  agent for
the Lenders (the "AGENT") and CIT LENDING SERVICES  CORPORATION  (f/k/a NEWCOURT
COMMERCIAL  FINANCE  CORPORATION),  as  collateral  agent for the  Lenders  (the
"COLLATERAL  AGENT"; the Agent together with the Collateral Agent being referred
to as the "AGENTS").

            WHEREAS,  the  Borrowers,  the Agents and the Lenders are parties to
that  certain  Amended and  Restated  Loan and  Security  Agreement  dated as of
February 15, 2000,  as amended by Amendment  No. 1 thereto dated as of March 28,
2000 (as so amended,  the "LOAN  AGREEMENT";  undefined  capitalized  terms used
herein shall have the meanings assigned thereto in the Loan Agreement), pursuant
to which the Lenders  have agreed to make  certain  "Loans" and other  financial
accommodations to the Borrowers;

            WHEREAS, pursuant to an equity closing on June 30, 2000, KMC Telecom
Holdings,  Inc. ("KMC  HOLDINGS")  raised  $150,000,000  for contribution to the
Borrowers as cash equity,  thereby  reducing the unfunded portion of the minimum
Required Contribution to $35,000,000;

            WHEREAS,  the  Borrowers  have  requested  that the  Agents  and the
Lenders amend the Loan Agreement in the manner set forth herein,  and the Agents
and the Lenders have agreed to such request;

             NOW,  THEREFORE,  in consideration of the premises set forth above,
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged,  the Borrowers,  the Agents and the Lenders agree
as follows:


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            1.    AMENDMENT TO THE LOAN AGREEMENT. Effective as of the date
first above written and subject to the satisfaction of the conditions set
forth in SECTION 2 below, the Loan Agreement shall be and hereby is amended as
follows:

            1.1  SECTION  1.02 is hereby  amended  to delete the  definition  of
"REQUIRED CONTRIBUTION" in its entirety and to substitute therefor the following
definition:

                  "REQUIRED  CONTRIBUTION" shall mean cash capital contributions
            to the Borrowers from KMC Holdings in such amount as is necessary to
            fully  fund  the  Milestone   Plan,   but  in  any  event  at  least
            $35,000,000.

            1.2 SECTION 5.18 is hereby deleted in its entirety and the following
language is substituted therefor:

                  "SECTION 5.18. REQUIRED CONTRIBUTION. The Borrowers shall
            obtain the Required Contribution on or prior to August 31, 2001."

            1.3 CLAUSE (II) of SECTION 6.08(7) is hereby deleted in its entirety
and the following new CLAUSE (II) is substituted therefor:

             "(ii)  that,  if  such  acquisition  is  made  after  the  Required
             Contribution  has been  obtained  or after  August  31,  2001,  the
             Milestone  Plan remains fully funded and that, if such  acquisition
             is made before the Required  Contribution  has been  obtained,  the
             acquisition  does not result in the  Milestone  Plan  becoming less
             fully   funded  than  it  was  prior  to  giving   effect  to  such
             acquisition;"

            1.4 CLAUSE (D) of SECTION 7.01 is hereby deleted in its entirety and
the following new CLAUSE (D) shall be substituted therefor:

                  (d)  CAPITAL  EXPENDITURES.  As of the last day of each fiscal
            quarter,  the Borrowers  shall not permit capital  expenditures on a
            combined,  cumulative  basis beginning on the Closing Date to exceed
            the amount  projected  for each such date in the  Milestone  Plan by
            more than (x)  $75,000,000  for the last two fiscal quarters of 2000
            and for each  fiscal  quarter  of 2001 and (y)  $25,000,000  for any
            other fiscal quarter thereafter, which amount is set forth in ITEM 4
            on ANNEX B attached  hereto,  unless any such  excess is funded with
            cash capital contributions or Qualified  Intercompany Loans from KMC
            Holdings that are not part of the Required Contribution.

            2.    CONDITIONS PRECEDENT. This Amendment shall become effective
as of the date above written, if, and only if, the Agents have received on or
prior to the date hereof:

            (a)   duly executed originals of this Amendment from the
            Borrowers, the Requisite Lenders and the Agents,

            (b)   duly executed originals of Amendment No. 3 to the KMC
            Holdings Guaranty, dated as of the date hereof, between KMC
            Holdings and the Collateral Agent (the "GUARANTY AMENDMENT"), and


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<PAGE>


            (c)   evidence that KMC Holdings shall have contributed $150,000,000
            to the Borrowers as cash equity.

            3.    REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. The
Borrowers hereby represent and warrant as follows:

            (a)  This  Amendment  and the Loan  Agreement,  as  amended  hereby,
constitute  legal,  valid  and  binding  obligations  of the  Borrowers  and are
enforceable against the Borrowers in accordance with their terms.

            (b) Upon the  effectiveness of this Amendment,  the Borrowers hereby
reaffirm all representations  and warranties made in the Loan Agreement,  and to
the extent the same are not amended hereby,  agree that all such representations
and warranties shall be deemed to have been remade as of the date of delivery of
this  Amendment,  unless  and to the  extent  that any such  representation  and
warranty  is stated to relate  solely to an  earlier  date,  in which  case such
representation and warranty shall be true and correct as of such earlier date.

            (c)  As of  the  date  hereof,  and  after  giving  effect  to  this
Amendment,  each  Borrower  shall  be in  compliance  with  all  the  terms  and
provisions set forth in the Loan Agreement, as amended hereby, on its part to be
observed or  performed,  and no Event of Default or Default  shall have occurred
and be continuing.

            4.    REFERENCE TO AND EFFECT ON THE LOAN AGREEMENT.

            (a) Upon the  effectiveness  of  SECTION 1 hereof,  on and after the
date  hereof,  each  reference in the Loan  Agreement to "this Loan  Agreement,"
"hereunder,"  "hereof,"  "herein"  or words of like  import  shall mean and be a
reference to the Loan  Agreement as amended  hereby,  and each  reference to the
Loan Agreement in any other document,  instrument or agreement shall mean and be
a reference to the Loan Agreement as modified hereby.

            (b) The Loan Agreement,  as amended hereby, and all other documents,
instruments and agreements  executed and/or  delivered in connection  therewith,
shall remain in full force and effect, and are hereby ratified and confirmed.

            (c) Except as expressly provided herein, the execution, delivery and
effectiveness  of this  Amendment  shall not  operate  as a waiver of any right,
power or remedy of the Agents or the  Lenders,  nor  constitute  a waiver of any
provision  of  the  Loan  Agreement  or any  other  documents,  instruments  and
agreements executed and/or delivered in connection therewith.

            5. GOVERNING LAW. THIS AMENDMENT  SHALL BE GOVERNED BY AND CONSTRUED
IN  ACCORDANCE  WITH THE OTHER  REMAINING  TERMS OF THE LOAN  AGREEMENT  AND THE
INTERNAL  LAWS (AS OPPOSED TO CONFLICT  OF LAW  PROVISIONS)  OF THE STATE OF NEW
YORK.


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<PAGE>


            6.    PARAGRAPH HEADINGS. The paragraph headings contained in
this Amendment are and shall be without substance, meaning or content of any
kind whatsoever and are not a part of the agreement among the parties thereto.

            7.    COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

            8.    LENDERS' CONSENT TO GUARANTY  AMENDMENT.   By   its  execution
below,  each  Lender  signatory  hereto  hereby (a)  confirms that a copy of the
proposed  Guaranty  Amendment has  been  furnished to such Lender for review and
(b)  authorizes  and  directs  the Collateral  Agent to execute and deliver such
Guaranty  Amendment on its behalf.



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<PAGE>




            IN WITNESS WHEREOF,  this Amendment has been duly executed as of the
day and year first above written.

             THE BORROWERS:


                                    KMC TELECOM INC.

                                    KMC TELECOM II, INC.

                                    KMC TELECOM III, INC.

                                    KMC TELECOM OF VIRGINIA, INC.

                                    KMC TELECOM.COM, INC.

                                    In each case:

                                    By:/S/ WILLIAM H. STEWART
                                       ----------------------
                                    Name:
                                    Title: CFO

                                    KMC TELECOM LEASING I LLC
                                    By:  KMC TELECOM INC., as its Sole Member

                                    By:/S/ WILLIAM H. STEWART
                                       -----------------------
                                    Name:
                                    Title: CFO

                                    KMC TELECOM LEASING II LLC
                                    By:  KMC TELECOM INC., as its Sole Member

                                    By:/S/ WILLIAM H. STEWART
                                       -----------------------
                                    Name:
                                    Title: CFO



<PAGE>




                                    KMC TELECOM LEASING III LLC

                                    KMC III SERVICES LLC

                                    In each case:

                                    By: KMC TELECOM III, INC., as its Sole
                                    Member

                                    By:/S/ WILLIAM H. STEWART
                                       -----------------------
                                    Name:
                                    Title: CFO

                                    FIRST UNION NATIONAL BANK, as the Agent
                                    and as a Lender

                                    By:/S/ MARK L. COOK
                                       ----------------
                                    Name: Mark L. Cook
                                    Title:  Senior Vice President

                                    CIT  LENDING  SERVICES   CORPORATION
                                    (f/k/a NEWCOURT COMMERCIAL FINANCE
                                    CORPORATION), as the Collateral Agent and as
                                    a Lender

                                    By:/S/ MICHAEL V. MONAHAN
                                       ----------------------
                                    Name: Michael V. Monahan
                                    Title: Vice President

                                    CANADIAN IMPERIAL BANK OF COMMERCE, as a
                                     Lender

                                    By:---------------------------------------
                                    Name:
                                    Title:

<PAGE>



                                    GENERAL ELECTRIC CAPITAL CORPORATION, as
                                    a Lender

                                    By:/S/ BRIAN P. WARD
                                       -----------------
                                    Name:  Brian P. Ward
                                    Title:  Manager - Operations

                                    LUCENT TECHNOLOGIES INC., as a Lender

                                    By: /S/ DINA FEDE
                                        -------------
                                    Name: Dina Fede
                                    Title:  Director - NA Customer Finance

                                    CREDIT SUISSE FIRST BOSTON, as a Lender

                                    By:---------------------------------------
                                    Name:
                                    Title:

                                    DRESDNER BANK AG NEW YORK AND GRAND
                                    CAYMAN BRANCHES, as a Lender

                                    By:/S/ CONSTANCE LOOSEMORE
                                       -----------------------
                                    Name: Constance Loosemore
                                    Title:  Assistant Vice President

                                    By:/S/ LAURA G. FAZIO
                                       ------------------
                                    Name: Laura G. Fazio
                                    Title: First Vice President



<PAGE>




                                    MORGAN STANLEY SENIOR FUNDING, INC.,
                                    as a Lender

                                    By:---------------------------------------
                                    Name:
                                    Title:

                                    By:---------------------------------------
                                    Name:
                                    Title:

                                    MORGAN STANLEY DEAN WITTER PRIME INCOME
                                    TRUST, as a Lender

                                    By:---------------------------------------
                                    Name:
                                    Title:

                                    UNION BANK OF CALIFORNIA, N.A., as a
                                     Lender

                                    By:---------------------------------------
                                    Name:
                                    Title:

                                    KEYPORT LIFE INSURANCE COMPANY, as a
                                     Lender

                                    By:/S/ JAMES R. FELLOWS
                                       --------------------
                                    Name:  James R. Fellows
                                    Title: Sr. Vice President & Portfolio
                                           Manager

                                    STEIN ROE FLOATING RATE LIMITED LIABILITY
                                    COMPANY, as a Lender

                                    By:/S/ JAMES R. FELLOWS
                                       --------------------
                                    Name:  James R. Fellows
                                    Title: Senior Vice President



<PAGE>

                                    IBM CREDIT CORPORATION, as a Lender

                                    By:/S/ THOMAS S. CURCIO
                                       --------------------
                                    Name:  Thomas S. Curcio
                                    Title: Manager of Credit