KMC TELECOM HOLDINGS, INC.

                           CERTIFICATE OF THE POWERS,
                   DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
                SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK,
                            PAR VALUE $.0l PER SHARE

                     Pursuant to Sections 141 and 151 of the
                General Corporation Law of the State of Delaware

          As contemplated  by Section 141 of the General  Corporation Law of the
State of Delaware (the "DGCL"), the following resolution was duly adopted by the
Board of Directors of KMC Telecom  Holdings,  Inc., a Delaware  corporation (the
"Corporation"), by unanimous written consent, dated April 30, 1999;

          WHEREAS,  the Board of Directors  of the  Corporation  is  authorized,
within the  limitations  and  restrictions  stated in the Amended  and  Restated
Certificate of  Incorporation  of the  Corporation,  to provide by resolution or
resolutions  for the issuance of shares of preferred  stock,  par value $.0l per
share, of the Corporation,  in one or more series with such voting powers,  full
or limited,  or without voting powers,  and such  designations,  preferences and
relative,  participating,  optional or other special rights, and qualifications,
limitations or  restrictions  as shall be stated and expressed in the resolution
or  resolutions  providing  for the  issuance  thereof  adopted  by the Board of
Directors,   and  as  are  not  stated  and  expressed  in  the  Certificate  of
Incorporation,  or any amendment  thereto,  including (but without  limiting the
generality  of the  foregoing)  such  provisions  as may be  desired  concerning
voting,  redemption,  dividends,  dissolution or the  distribution of assets and
such other  subjects or matters as may be fixed by resolution or  resolutions of
the Board of Directors under the DGCL;

<PAGE>

          WHEREAS,  the Board of Directors of the  Corporation,  pursuant to its
authority under Section 151 of the DGCL,  desires to authorize and fix the terms
of its Series C Cumulative Convertible Preferred Stock; and

          WHEREAS, the Board of Directors of the Corporation has determined that
such Series C Cumulative  Convertible  Preferred Stock shall constitute  "Parity
Preferred  Stock"  within  the  meaning  of  the  Certificates  of  the  Powers,
Designations,  Preferences and Rights of the  Corporation's  Series A Cumulative
Convertible Preferred Stock, Series B Cumulative Convertible Preferred Stock and
Series D Cumulative Convertible Preferred Stock;


          NOW, THEREFORE, BE IT RESOLVED:

          1. DESIGNATION AND NUMBER OF SHARES. There shall be hereby established
a series of  preferred  stock  designated  as "Series C  Cumulative  Convertible
Preferred  Stock" (such Series  being  hereinafter  referred to as the "Series C
Preferred  Stock").  The authorized number of shares of Series C Preferred Stock
shall be 350,000.  The  liquidation  preference of the Series C Preferred  Stock
shall be $100 per share (the "Liquidation Preference").

          2. RANK. The Series C Preferred Stock shall,  with respect to dividend
distributions  and   distributions   upon  the  liquidation,   winding-up,   and
dissolution of the  Corporation,  rank (i) senior to the Common Stock, par value
$.0l per share, of the Corporation (the "Common  Stock");  (ii) on a parity with
(A) each class or series of Capital  Stock,  other than the Common Stock and the
Senior  Preferred Stock, and (B) the Parity Preferred Stock; and (iii) junior to
the Senior  Preferred  Stock (the  Common  Stock and the  classes  and series of
Capital Stock described in clause (ii) of this Section are collectively referred
to as the "Junior Stock"). The Series C Preferred Stock shall also, with respect
to any redemption or repurchase by the  Corporation  of its Capital Stock,  rank
junior with respect to the Senior Preferred Stock, except as provided in Section
3 of the Shareholders Agreement.

          3. DIVIDENDS.

          (a) Beginning on the date of issuance of the Series C Preferred Stock,
the  holders of the  outstanding  shares of Series C  Preferred  Stock  shall be
entitled to receive,  when,  as and if declared by the Board of Directors of the
Corporation,  out of funds legally  available  therefor,  cash dividends on each
share  of  Series  C  Preferred  Stock at an  annual  rate  equal to 7.0% of the
Liquidation Preference,  payable quarterly in arrears on the applicable Dividend
Payment Date or the next  succeeding  Business Day, if the  applicable  Dividend
Payment Date is not a Business Day.  Notwithstanding the foregoing, the dividend
payable on each share of Series C  Preferred  Stock with  respect to the Initial


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<PAGE>

Dividend  Period  shall  be  equal  to (i)  7.0% of the  Liquidation  Preference
multiplied  by (ii) a  fraction  equal  to (A) the  number  of  days  from  (and
including)  the  Series C  Preferred  Stock  Issue Date to (but  excluding)  the
Dividend Payment Date with respect to the Initial Dividend Period divided by (B)
365. All dividends shall be cumulative,  whether or not earned or declared, from
the date of  issuance  of the  Series C  Preferred  Stock and  shall be  payable
quarterly in arrears on each  Dividend  Payment  Date,  commencing  on the first
Dividend  Payment  Date after the date of  issuance  of the  Series C  Preferred
Stock. If any dividend (or portion thereof) payable on any Dividend Payment Date
is not declared or paid in full on such  Dividend  Payment  Date,  the amount of
such dividend  payable that is not paid on such date shall  increase at the rate
of 7.0% per annum  (compounded  quarterly on each  subsequent  Dividend  Payment
Date) from such Dividend  Payment Date until paid in full. Each  distribution on
the  Series C  Preferred  Stock  shall be  payable  to holders of record as they
appear on the stock books of the Corporation on such record dates, not less than
ten (10) nor more than sixty (60) days  preceding the related  Dividend  Payment
Date, as shall be fixed by the Board of Directors of the Corporation.


          (b) All  accumulated  and unpaid  dividends  on the Series C Preferred
Stock shall be paid by the  Corporation  upon the  occurrence  of a  Realization
Event,  without  reference to any regular  Dividend  Payment Date, to holders of
record on such date. The Corporation shall send by first class,  postage prepaid
mail a notice of the  Realization  Event to all  holders  of Series C  Preferred
Stock that are entitled to receive such dividends.  In the case of a Realization
Event which is an initial  public  offering,  if any such holder  gives  written
notice to the  Corporation  that such holder wishes to receive such  accumulated
unpaid  dividends  in the form of shares of  Common  Stock in lieu of cash,  the
Corporation,  in lieu of a cash  payment,  shall  issue to such  holder  on such
Dividend  Payment Date, a number of shares of Common Stock equal to the quotient
obtained by dividing (x) the aggregate  accumulated and unpaid  dividends on the
shares of Series C Preferred Stock held by such holder by (y) the price at which
shares  of  Common  Stock  are  sold  in  such  offering  (before  deduction  of
underwriting discounts and expenses of sale).

          (c) All  dividends  paid with  respect to shares of Series C Preferred
Stock  pursuant to Section 3(a) shall be paid pro rata and in like manner to all
of the holders entitled thereto.

          (d) Except as  otherwise  provided  in  paragraph  (b) above,  nothing
herein  contained  shall in any way or under any  circumstances  be construed or
deemed to require the Board of Directors of the  Corporation to declare,  or the
Corporation  to pay or set apart for  payment,  any  dividends  on shares of the
Series C Preferred  Stock at any time,  nor to permit the Board of  Directors of
the Corporation to declare,  or the Corporation to pay or set apart for payment,
any dividends on shares of the Series C Preferred  Stock prior to the payment of
any dividends accrued on shares of the Senior Preferred Stock.

          (e)  Whenever  the  provisions  hereof  require  that  the  amount  of
dividends  with respect to the Series C Preferred  Stock be determined  for less
than a full  quarterly  period ending on a Dividend  Payment Date, the amount of
dividends for such period shall be equal to 7.0% of the  Liquidation  Preference


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<PAGE>

multiplied  by a fraction  equal to (i) the number of days from (and  including)
the most recent  Dividend  Payment Date to (but  excluding)  the last day of the
period in respect of which such determination is being made divided by (ii) 365.


          4. LIQUIDATION PREFERENCE.

          (a)  In  the  event  of  any  voluntary  or  involuntary  liquidation,
dissolution  or  winding-up  of the affairs of the  Corporation,  the holders of
shares of Parity  Preferred Stock  (including the Series C Preferred Stock) then
outstanding shall be entitled to be paid for each share held thereby, out of the
assets of the Corporation  available for  distribution to its  stockholders,  an
amount in cash equal to the Liquidation  Preference plus an amount in cash equal
to  all  accumulated  and  unpaid  dividends  thereon  (calculated  pursuant  to
Paragraph  3(a)) to the date fixed for  liquidation,  dissolution  or winding-up
(including  an amount equal to a prorated  dividend for the period from the last
Dividend  Payment  Date  to the  date  fixed  for  liquidation,  dissolution  or
winding-up),  before any payment shall be made or any assets  distributed to the
holders of any shares of Junior Stock,  but after all liquidation  payments have
been made tot he  holders  of all shares of Senior  Preferred  Stock.  Except as
provided  in the  preceding  sentence,  holders  of the Parity  Preferred  Stock
(including  the  Series  C  Preferred  Stock)  shall  not  be  entitled  to  any
distribution in the event of any  liquidation,  dissolution or winding-up of the
affairs of the Corporation.  If the assets of the Corporation are not sufficient
to pay in full the  foregoing  liquidation  payments  payable to the  holders of
outstanding  shares  of the  Parity  Preferred  Stock  (including  the  Series C
Preferred  Stock),  then the  holders  of all shares of Parity  Preferred  Stock
(including   the  Series  C  Preferred   Stock)  shall  share  ratably  in  such
distribution  of assets in  accordance  with the amount that would be payable on
such  distribution if the amounts to which the holders of outstanding  shares of
Parity  Preferred  Stock  (including the Series C Preferred  Stock) are entitled
were paid in full. If all of the foregoing  liquidation payments with respect to
any share of Series C  Preferred  Stock  have been  made,  such share may not be
converted into Common Stock pursuant to Section 5.

          (b) For the purposes of this Section 4,  neither the  voluntary  sale,
conveyance,  exchange or transfer  (for cash,  shares of stocks,  securities  or
other  consideration)  of all or  substantially  all or part of the  property or
assets of the  Corporation  nor the  consolidation  or merger of the Corporation
with  one or more  other  corporations  shall  be  deemed  to be a  liquidation,
dissolution  or  winding-up,  voluntary  or  involuntary,  of the affairs of the
Corporation (unless such sale, conveyance, exchange or transfer is in connection
with  a   liquidation,   dissolution   or  winding-up  of  the  affairs  of  the
Corporation).

          5. CONVERSION.

          (a)  CONVERSION  PRICE.  Shares  of  Series  C  Preferred-Stock  to be
converted  into shares of Common  Stock shall be so  converted  at a  conversion
price  (which  price shall be adjusted to the nearest  fourth  decimal  place as
hereinafter  provided  and, as so adjusted,  is  hereinafter  referred to as the
"Conversion Price") equal to: (i) from the date of initial issuance of shares of
Series C Preferred  Stock to but  excluding  the  30-month  anniversary  of such
issuance,  $52.50  per  share of  Common  Stock,  with  each  share of  Series C


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<PAGE>

Preferred  Stock being valued at $100.00 for such  purpose;  PROVIDED,  HOWEVER,
that if a  Realization  Event  shall  occur  during  such  30-month  period  the
Conversion  Price shall equal to a fraction,  the  numerator of which is (A) the
consideration  per share of Common Stock (on a Fully Diluted basis)  received in
connection with such Realization Event, and the denominator of which is (B) 1.30
raised to a number equal to the number of years (or fraction  thereof)  from the
date of initial issuance of shares of Series C Preferred Stock until the date of
such Realization

Event, but in no case shall be greater than $52.50 per share of Common Stock nor
less  than  $42.18  per  share of  Common  Stock;  and (ii)  from and  after the
thirty-month  anniversary of the date of initial  issuance of shares of Series C
Preferred  Stock  (subject to paragraph  (b) below),  $42.18 per share of Common
Stock,  with each share of Series C Preferred  Stock being valued at $100.00 for
such purpose; provided,  however, that in no event shall the Conversion Price be
less than the par value, if any, of the Common Stock.

          (b) AUTOMATIC  CONVERSION  UPON A QUALIFIED  PUBLIC  OFFERING.  Upon a
Qualified  Public  Offering,  each  share of  Series  C  Preferred  Stock  shall
automatically  convert,  without  any action on the part of the holder  thereof,
into shares of Common Stock at the Conversion Price in effect at such time, plus
the right to receive an amount of cash equal to the accumulated unpaid dividends
on such share of Series C  Preferred  Stock to and  including  such date (or the
right to receive  additional  shares of Common  Stock in lieu of cash  dividends
pursuant to Section 3(b)).

          (c) CONVERSION AT THE OPTION OF THE HOLDER.  At any time and from time
to time prior to a Qualified Public Offering,  each holder of Series C Preferred
Stock shall have the right to convert such holder's shares of Series C Preferred
Stock, in whole or in part, into shares of Common Stock at the Conversion  Price
in effect at such time, plus the right to receive an amount of cash equal to the
accumulated  unpaid  dividends  on the  shares  of Series C  Preferred  Stock so
converted to and  including the  Conversion  Date (as defined  below);  provided
that, if such Conversion Date is prior to a Realization  Event,  the Corporation
may, in lieu of making a payment in cash equal to such amount,  deliver a number
of shares of Common Stock equal to such amount  divided by the Fair Market Value
of one share of Common Stock.  In order to convert  shares of Series C Preferred
Stock  pursuant to this Section 5(c) the holder  thereof shall  surrender at the
office  of the  Corporation  the  certificate  or  certificates  therefor,  duty
endorsed to the Corporation in blank, and give written notice to the Corporation
that such  holder  elects to  convert  such  shares  and shall  state in writing
therein  the name or names  (with  addresses)  in which such  holder  wishes the
certificate  or  certificates  of Common Stock to be issued.  Shares of Series C
Preferred  Stock shall be deemed to have been converted on the date of surrender
of such certificate or certificates as provided above (the  "Conversion  Date"),
and the  person or  persons  entitled  to  receive  the  shares of Common  Stock
issuable  upon such  conversion  shall be treated for all purposes as the record
holder or holders of such Common Stock on such date. As soon as  practicable  on
or after  the  Conversion  Date,  the  Corporation  shall  issue  and  deliver a
certificate  or  certificates  for the number of shares of Common Stock issuable
upon conversion.

          (d) FRACTIONAL SHARES; PARTIAL CONVERSION.  No fractional shares shall
be issued  upon  conversion  of shares of Series C  Preferred  stock into Common
Stock. In case the number of shares of Series C Preferred  Stock  represented by


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<PAGE>

the certificate or certificates  surrendered  pursuant to this Section 5 exceeds
the number of shares  converted,  the Corporation  shall,  upon such conversion,
execute  and deliver to the holder,  at the  expense of the  Corporation,  a new
certificate or certificates for the number of shares of Series C Preferred Stock
represented by the certificate or certificates  surrendered  which are not to be
converted.  If any  fractional  share of  Common  Stock  would,  except  for the
provisions of the first  sentence of this Section  5(d), be delivered  upon such
conversion, the Corporation, in lieu

of delivering such fractional  share,  shall pay to the holder  surrendering the
Series C Preferred  Stock for  conversion an amount in cash equal to the current
market price of such  fractional  share as determined in good faith by the Board
of Directors.

          (e)  ADJUSTMENT  OF  CONVERSION  PRICE UPON  ISSUANCE OF COMMON STOCK.
Except as  provided in Section  5(f),  if and  whenever  the  Corporation  shall
hereafter issue or sell, or is, in accordance  with  subsection  5(e)(1) through
5(e)(6),  deemed to have  issued  or sold,  any  shares  of  Common  Stock for a
consideration  per share less than the  Conversion  Price in effect  immediately
prior to the time of such  issue or sale,  then,  forthwith  upon such  issue or
sale, the Conversion  Price shall be reduced to the price determined by dividing
(i) an amount  equal to the sum of (a) the  number  of  shares  of Common  Stock
outstanding  immediately  prior  to such  issue or sale  (determined  on a Fully
Diluted  basis)  multiplied  by the then existing  Conversion  Price and (b) the
consideration,  if any,  received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock  outstanding  immediately  after
such issue or sale (determined on a Fully Diluted basis).

          For purposes of this Section 5(e), the following  subsections  5(e)(1)
to 5(e)(6) shall also be applicable:

          5(e)(1)  ISSUANCE OF RIGHTS OR OPTIONS.  In case at any time hereafter
the Corporation  shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any Options to purchase  Common Stock or any  Convertible
Securities,  whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such  Convertible  Securities  (determined by dividing
(i) the total  amount,  if any,  received or receivable  by the  Corporation  as
consideration  for the  granting of such  Options,  plus the  minimum  aggregate
amount of additional  consideration payable to the Corporation upon the exercise
of all  such  Options,  plus,  in the  case  of such  Options  which  relate  to
Convertible   Securities,   the   minimum   aggregate   amount   of   additional
consideration,  if any,  payable  upon  the  issue  or sale of such  Convertible
Securities  and upon the  conversion  or  exchange  thereof,  by (ii) the  total
maximum  number of shares of Common  Stock  issuable  upon the  exercise of such
Options or upon the  conversion or exchange of all such  Convertible  Securities
issuable  upon the exercise of such Options)  shall be less than the  Conversion
Price in effect  immediately  prior to the time of the granting of such Options,
then the total  maximum  number of shares  of  Common  Stock  issuable  upon the
exercise of such  Options or upon  conversion  or exchange of the total  maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been  issued  for such price per share as of the date of
granting of such  Options or the  issuance of such  Convertible  Securities  and


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<PAGE>

thereafter  shall be deemed to be outstanding.  Except as otherwise  provided in
subsection 5(e)(3), no adjustment of the Conversion Price shall be made upon the
actual  issue  of such  Common  Stock  or of such  Convertible  Securities  upon
exercise  of such  Options or upon the actual  issue of such  Common  Stock upon
conversion or exchange of such Convertible Securities.

          5(e)(2)  ISSUANCE OF CONVERTIBLE  SECURITIES.  In case the Corporation
shall  hereafter in any manner issue  (whether  directly or by  assumption  in a
merger or otherwise) or

sell any  Convertible  Securities,  whether  or not the  rights to  exchange  or
convert any such  Convertible  Securities are immediately  exercisable,  and the
price per share for which  Common  Stock is  issuable  upon such  conversion  or
exchange  (determined by dividing (i) the total amount received or receivable by
the  Corporation  as  consideration  for the  issue or sale of such  Convertible
Securities,  plus the minimum aggregate amount of additional  consideration,  if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum  number of shares of Common Stock issuable upon the conversion
or  exchange  of all  such  Convertible  Securities)  shall  be  less  than  the
Conversion Price in effect  immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common Stock issuable upon conversion
or  exchange  of all such  Convertible  Securities  shall be deemed to have been
issued  for such  price  per  share as of the date of the  issue or sale of such
Convertible  Securities  and  thereafter  shall  be  deemed  to be  outstanding,
provided  that (a) except as  otherwise  provided in  subparagraph  5(e)(3),  no
adjustment of the  Conversion  Price shall be made upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible  Securities and (b)
if any such issue or sale of such  Convertible  Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which adjustments
of the Conversion Price have been or are to be made pursuant to other provisions
of this Section 5(e), no further  adjustment  of the  Conversion  Price shall be
made by reason of such issue or sale.

          5(e)(3) CHANGE IN OPTION PRICE-OR  CONVERSION RATE. Upon the happening
of any of the following  events,  namely,  if the purchase price provided for in
any Option referred to in subsection 5(e)(1), the additional  consideration,  if
any,  payable  upon the  conversion  or exchange of any  Convertible  Securities
referred to in  subsection  5(e)(1) or 5(e)(2) or the rate at which  Convertible
Securities  referred to in subsection 5(e)(1) or 5(e)(2) are convertible into or
exchangeable  for Common  Stock  shall  change at any time  (including,  but not
limited to, changes under or by reason of provisions designed to protect against
dilution),  the  Conversion  Price in  effect  at the time of such  event  shall
forthwith be readjusted to the Conversion  Price which would have been in effect
at such  time had such  Options  or  Convertible  Securities  still  outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time  initially  granted,  issued or sold,  but
only if as a result  of such  adjustment  the  Conversion  Price  then in effect
hereunder is thereby  reduced;  and on the termination of any such Option or any
such right to convert or exchange such  Convertible  Securities,  the Conversion
Price then in effect  hereunder  shall  forthwith be increased to the Conversion
Price which would have been in effect at the time of such  termination  had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such termination, never been issued.

          5(e)(4)  CONSIDERATION  FOR STOCK. In case any shares of Common Stock,


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Options  or  Convertible  Securities  shall  be  issued  or sold for  cash,  the
consideration received therefor shall be deemed to be the amount received by the
Corporation  therefor,  without deduction  therefrom of any expenses incurred or
any  underwriting  commissions or concessions paid or allowed by the Corporation
in  connection  therewith.  In case any  shares  of  Common  Stock,  Options  or
Convertible  Securities  shall be issued or sold for a consideration  other than
cash,  the  amount  of  the  consideration  other  than  cash  received  by  the
Corporation  shall be  deemed  to be the fair  value  of such  consideration  as
determined in good

faith by the Board of Directors,  without  deduction of any expenses incurred or
any  underwriting  commissions or concessions paid or allowed by the Corporation
in connection therewith.  In case any Options shall be issued in connection with
the issue and sale of other securities of the Corporation,  together  comprising
one integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
for such  consideration as determined in good faith by the Board of Directors of
the Corporation.

          5(e)(5)  RECORD DATE. In case the  Corporation  shall take a record of
the holders of its Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, Options or Convertible
Securities  or (ii) to  subscribe  for or  purchase  Common  Stock,  options  or
Convertible Securities,  then such record date shall be deemed to be the date of
the issue or sale of the shares of Common  Stock  deemed to have been  issued or
sold  upon  the  declaration  of such  dividend  or the  making  of  such  other
distribution  or the  date of the  granting  of such  right of  subscription  or
purchase, as the case may be.

          5(e)(6)  TREASURY  SHARES.  The  number  of  shares  of  Common  Stock
outstanding  at any given time shall not include  shares owned or held by or for
the account of the Corporation,  and the disposition of any such shares shall be
considered  an issue or sale of Common  Stock for the  purpose  of this  Section
5(e).

          (f) EXCEPTIONS TO CONVERSION  PRICE  ADJUSTMENT.  Notwithstanding  the
foregoing,  no adjustment to the Conversion Price shall be made pursuant to this
Section 5 in  connection  with the  grant,  issuance  or sale of  Common  Stock,
Convertible  Securities,  warrants,  options or other rights to subscribe for or
purchase Common Stock or Convertible Securities:  (i) pursuant to employee stock
purchase  or  stock  option  ownership  plans  adopted  by the  Corporation  for
employees,  consultants  and/or directors of the Corporation and its affiliates;
(ii) pursuant to the terms of any Convertible Securities,  warrants,  options or
other rights to subscribe  for or purchase  granted,  issued or sold pursuant to
clause (ii) above; (iii) pursuant to the High Yield Debt and Equity Offering (as
defined in a Subordinated Loan and Security Agreement, dated as of September 22,
1997,  among  KMC  Telecom  Inc.  ("KMC")  and KMC  Telecom  II,  Inc.  and AT&T
Commercial  Finance  Corporation,  as in effect on the Series C Preferred  Stock
Issue Date) or a subsequent debt offering  occurring prior to December 31, 1998;
(iv) pursuant to the terms of any Convertible Securities,  warrants,  options or
other rights to subscribe  for or purchase  granted,  issued or sold pursuant to
clause (iii)  above;  or (v) pursuant to Section 10C of the Amended and Restated
Note  Purchase  and  Investment  Agreement,  dated as of October  22,  1996,  as
amended,  by and  among the  Corporation,  Nassau  Capital  Partners  L.P.,  NAS
Partners I L.L.C.  and Harold N. Kamine;  PROVIDED that the aggregate  number of


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<PAGE>

shares of Common Stock issued or issuable pursuant to clauses (i) and (ii) above
shall not exceed 15% of the Common Stock (on a Fully Diluted basis)  outstanding
from time to time and the  aggregate  number of shares of Common Stock issued or
issuable  pursuant  to clauses  (iii) and (iv) above shall not exceed 11% of the
Common  Stock (on a Fully  Diluted  basis)  outstanding  from time to time;  and
FURTHER  PROVIDED that for the purposes of this Section 5(f): (a) 221,500 shares
of Common  Stock  initially  allocated  under the 1997 Stock Option Plan will be
deemed  outstanding  regardless  of the number of shares  actually  granted  and
exercisable  thereunder  and (b) shares of Common Stock issued or issuable  upon
exercise of options not among the 221,500 shares initially allocated pursuant to
the 1997 Stock Option Plan and which,  when issued,  were subject to clauses (i)
or (ii) above, will not be deemed outstanding, regardless of whether or not they
have been granted or are exercisable.

          (g)   SUBDIVISION  OR  COMBINATION  OF  COMMON  STOCK.   In  case  the
Corporation  shall at any time subdivide (by any stock split,  stock dividend or
otherwise)  its  outstanding  shares of Common  Stock  into a greater  number of
shares,  the Conversion  Price in effect  immediately  prior to such subdivision
shall be  proportionately  reduced,  and,  conversely,  in case the  outstanding
shares of Common Stock shall be combined  into a smaller  number of shares,  the
Conversion  Price  in  effect  immediately  prior to such  combination  shall be
proportionately increased.

          (h) REORGANIZATION OR RECLASSIFICATION.  If any capital reorganization
or reclassification of the capital stock of the Corporation shall be effected in
such a way that  holders of Common  Stock shall be  entitled  to receive  stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification (but subject to Section 7),
lawful and adequate  provisions  shall be made whereby each holder of a share or
shares of Series C Preferred  Stock shall  thereupon  have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the  shares  of  Common  Stock  immediately   theretofore  receivable  upon  the
conversion of such share or shares of Series C Preferred  Stock,  such shares of
stock,  securities  or assets as may be issued or payable  with respect to or in
exchange  for a number of  outstanding  shares of such Common Stock equal to the
number of shares of such Common Stock  immediately  theretofore  receivable upon
such conversion had such reorganization or reclassification not taken place, and
in any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions  hereof  (including,
without  limitation,  provisions for adjustments of the Conversion  Price) shall
thereafter  be  applicable,  as nearly as may be, in  relation  to any shares of
stock,  securities or assets  thereafter  deliverable  upon the exercise of such
conversion rights.

          (i) CARRYOVER. Notwithstanding any other provisions of this Section 5,
the  Corporation  shall not be required to make any adjustment to the Conversion
Price unless such  adjustment  would require an increase or decrease of at least
one percent (1%) in the Conversion Price. Any lesser adjustment shall be carried
forward and shall be made no later than the time of, and together with, the next
subsequent  adjustment  which,  together with any  adjustment or  adjustments so
carried forward, shall amount to an increase or decrease of at least one percent
(1%) in the Conversion Price.



                                       9
<PAGE>

          (j)  OTHER  EVENTS.   If  the  Corporation  shall  make  any  dividend
(excluding  cash dividends  payable out of accumulated  earnings and profits) or
distribution on the Common Stock or issue any Common Stock,  other capital stock
or other  security of the  Corporation  or any rights or warrants to purchase or
acquire any such security, which transaction does not result in an adjustment to
the Conversion Price pursuant to the foregoing provisions of this Section 5, the
Board of Directors may consider  whether such action is of such a nature that an
adjustment to the Conversion  Price should  equitably be made in respect of such
transaction.  If the Board of Directors of the  Corporation  determines  that an
adjustment to the Conversion  Price should be made, an adjustment  shall be made
effective  as of such  date,  as  determined  by the Board of  Directors  of the
Corporation.  The  determination of the Board of Directors of the Corporation as
to whether such an adjustment to the  Conversion  Price should be made,  and, if
so, as to what adjustment should be made and when, shall be final and binding on
the Corporation and all stockholders of the Corporation.  The Corporation  shall
be entitled to make such  additional  adjustments  in the Conversion  Price,  in
addition to those  required by the  foregoing  provisions  of this Section 5, as
shall be  necessary  in order that any  dividend  or  distribution  in shares of
capital stock of the Corporation,  subdivision,  reclassification or combination
of shares of stock of the Corporation or any recapitalization of the Corporation
shall not be taxable to the holders of the Common Stock.

          (k) NOTICE OF ADJUSTMENT. Upon any adjustment of the Conversion Price,
then and in each such case the Corporation shall give written notice thereof, by
delivery in person,  certified or registered mail, return receipt requested,  or
facsimile  addressed  to each  holder  of shares  of  Series C  Preferred  Stock
affected by such  adjustment at the address of such holder as shown on the books
of the Corporation, which notice shall state the Conversion Price resulting from
such adjustment,  setting forth in reasonable  detail the method upon which such
calculation is based.

          6. VOTING RIGHTS.

          (a) The  holders  of Series C  Preferred  Stock,  except as  otherwise
required  under  Delaware law or as set forth below in this Section 6, shall not
be entitled or permitted to vote on any matter required or permitted to be voted
upon by the stockholders of the Corporation.

          (b) So long as the Series C Preferred Stock is outstanding, each share
of Series C Preferred  Stock shall entitle the holder thereof to vote, in person
or by proxy,  at a special  or annual  meeting  of  stockholders  or by  written
consent, on all matters voted on by holders of Common Stock voting together as a
single  class with other  shares  entitled to vote  thereon  except as otherwise
provided in Articles EIGHTH and NINTH of the Corporation's  Amended and Restated
Certificate  of  Incorporation.  With  respect to any such  vote,  each share of
Series C Preferred  Stock shall  entitle the holder  thereof to cast a number of
votes  equal to the number of votes  entitled to be cast by such holder had such
holder  converted such share of Series C Preferred Stock into Common Stock prior
to such vote (or, if earlier, the record date with respect to such vote).

          (c) Subject to Section 7, without the prior  consent of the holders of
two-thirds  of the shares of the  Series C  Preferred  Stock  then  outstanding,
voting as a separate class, the Corporation shall not:



                                       10
<PAGE>

          (i)  increase  the  number  of  shares  of  Series C  Preferred  Stock
outstanding  at any  time to more  than  $35,000,000  of  aggregate  Liquidation
Preference;

          (ii)  increase  the number of shares of  Preferred  Stock (of whatever
series) authorized for issuance;

          (iii)merge or consolidate  with or into any other  company,  person or
entity,  unless  holders  of each  share of  Series C  Preferred  Stock  receive
consideration  in an amount  equal to at least the greater of (A) the product of
(x) the  number of shares of Common  Stock  into  which  such  share of Series C
Preferred Stock is then convertible and (y) the  consideration to be received by
holders of each share of Common Stock  pursuant to such merger or  consolidation
and (B) the  Liquidation  Preference  of such share of Series C Preferred  Stock
plus all accumulated but unpaid dividends thereon (whether or not declared);

          (iv) amend,  modify or repeal the powers,  preferences or rights of or
the  restrictions  provided for the benefit of holders of the Series C Preferred
Stock or the Common  Stock if such  action  would  affect the Series C Preferred
Stock or the Common Stock adversely;

          (v)  sell or  otherwise  dispose  of all or  substantially  all of the
assets of the  Corporation  in any  single  transaction  or  series  of  related
transactions  unless  the  holders  of each  share of Series C  Preferred  Stock
receive consideration in an amount equal to at least the Liquidation  Preference
of such  share of Series C  Preferred  Stock  plus all  accumulated  but  unpaid
dividends thereon (whether or not declared);

          (vi)  declare or pay any  dividend on shares of Common  Stock or other
equity  securities of the  Corporation  ranking  junior to the Parity  Preferred
Stock  (excluding  dividends  payable  solely in shares of Common Stock or other
equity  securities of the  Corporation  ranking  junior to the Parity  Preferred
Stock);

          (vii)   authorize  or  enter  into  any   transaction   or  series  of
transactions  (excluding  transactions  authorized  by  the  Corporation  or its
subsidiaries prior to the Series C Preferred Stock Issue Date and any amendments
thereto  that do not alter the  economic  value of such  transactions)  with any
director  or  executive  officer of the  Corporation  or any Person  directly or
indirectly  controlling the  Corporation (or any affiliate  thereof other than a
subsidiary  of the  Corporation)  if  the  aggregate  amount  involved  in  such
transaction  or  series  of  transactions  involves  the  payment  by or to  the
Corporation or its  subsidiaries of more than $100,000 in any one fiscal year of
the Corporation; or

          (viii) issue Common Stock or Convertible  Securities as  consideration
for  assets  comprising  a business  that is not  within  the lines of  business
conducted  by  the  Corporation  or  any  of  its  subsidiaries  (or  operations
reasonably ancillary thereto) on the Series C Preferred Stock Issue Date.

          (d) Without  the  consent of each  holder of Series C Preferred  Stock
affected thereby, the Corporation shall not reduce the Liquidation Preference of
the Series C Preferred Stock or the rate at which dividends  accumulate thereon,
or modify the dividend cumulation  provisions of the Series C Preferred Stock or


                                       11
<PAGE>

the times and prices at which the Series C Prefer-red Stock may be redeemed in a
manner that would be adverse to the holders of Series C Preferred Stock.

          (e) In the event  that a Default  (as such term is defined in the Loan
Agreement  (as defined  below) as in effect as of the date  hereof)  relating to
payment  obligations  of  principal  and  interest  thereunder  has occurred and
continued  for a period  of 90 days  under the  Amended  and  Restated  Loan and
Security Agreement,  dated as of September 22, 1997, among KMC Telecom Inc., KMC
Telecom II, Inc. and AT&T Commercial Finance Corporation (the "Loan Agreement"),
the number of directors  constituting  the entire  Board of  Directors  shall be
increased by two individuals and the persons holding, from time to time, greater
than 50% of the  combined  voting  power of the  outstanding  shares of Series C
Preferred Stock and the outstanding  shares of Common Stock into which shares of
Series C Preferred Stock theretofore have been converted (the "Majority Series C
Holders") (for  themselves and on behalf of all  stockholders  holding shares of
Common  Stock into which  shares of Series C  Convertible  Preferred  Stock have
been,  or may be,  converted)  shall be entitled to elect two  individuals  (the
"Series C Directors")  to the Board of Directors.  Immediately  upon the cure of
such Default, the number of directors constituting the entire Board of Directors
shall be  reduced  by two  individuals  and the two  individuals  elected by the
Majority  Series C Holders  shall  resign or  automatically  be removed from the
Board of Directors.

          7.  OPTIONAL  REDEMPTION.  (a) The  outstanding  shares  of  Series  C
Preferred Stock shall be subject to redemption,  as hereinafter provided, at the
option of the  Corporation,  in whole  but not in part,  in  connection  with an
Acquisition  Event.  For  purposes  hereof,  "Acquisition  Event" shall mean any
merger or  consolidation  of the Corporation  with any other company,  person or
entity  (whether  or  not  the  Corporation  is the  entity  surviving  in  such
transaction)  as a result  of which  the  holders  of  shares  of  Common  Stock
(determined  on a fully  diluted  basis)  will hold less than a majority  of the
outstanding  shares of common  stock or other  equity  interests of the company,
person or entity resulting from such transaction (or any parent of such entity).

          (b) For each share of Series C Preferred  Stock  redeemed  pursuant to
this  Section 7, the  Corporation  shall be obligated on the date fixed for such
redemption  (the  "Redemption  Date"),  which date shall not be earlier than the
date of consummation of the applicable  Acquisition  Event, to pay to the holder
thereof (upon surrender by such holder at the Corporation's  principal office of
the certificate representing such share duty endorsed in blank or accompanied by
an appropriate form of assignment) an amount (the  "Redemption  Price") equal to
the greater of (A) the product of (x) the number of shares of Common  Stock into
which such share of Series C  Preferred  Stock is then  convertible  and (y) the
consideration  to be received by holders of each share of Common Stock  pursuant
to such  Acquisition  Event and (B) the Liquidation  Preference of such share of
Series C  Preferred  Stock plus all  accumulated  but unpaid  dividends  thereon
(whether or not declared).

          (c) Notice of any redemption of the Series C Preferred  Stock pursuant
to this Section 7 (specifying  the time and place of redemption,  the Redemption
Price,  the Conversion  Price and the date on and after which shares of Series C
Preferred  Stock may no longer be  converted)  shall be mailed by  certified  or
registered mail, return receipt requested,  to each holder of Series C Preferred


                                       12
<PAGE>

Stock,  at the address of such holder shown on the  Corporation's  records,  not
less than 30 nor more than 45 days prior to the Redemption Date.

          (d) If the  Corporation  holds and sets aside money  sufficient to Pay
the Redemption  Price of the Series C Preferred  Stock on the  Redemption  Date,
then on and after the  Redemption  Date:  (i) the  shares of Series C  Preferred
Stock  shall no longer be  convertible  into  shares of Common  Stock;  (ii) the
shares of Series C Preferred Stock will cease to be outstanding and dividends on
the Series C Preferred Stock will cease to be declared and paid,  whether or not
certificates  representing  the Series C Preferred  Stock have been delivered to
the  Corporation;  and (iii) all other  rights of the holder in respect  thereof
shall  terminate  (other  than the right to receive  the  Redemption  Price upon
delivery of such Series C Preferred Stock).

          8.  REISSUANCE  OF  SERIES  C  PREFERRED  STOCK.  Shares  of  Series C
Preferred  Stock 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 laws of  Delaware)  have the  status of
authorized and unissued shares of preferred stock  undesignated as to series and
may be redesignated and reissued as part of any series of preferred stock (other
than Series C Preferred Stock).

          9. BUSINESS DAY. If any payment or conversion shall be required by the
terms  hereof  to made on a day that is not a  Business  Day,  such  payment  or
conversion shall be made on the immediately succeeding Business Day.

          10.  DEFINITIONS.  As used in this  Certificate  of  Designation,  the
following  terms shall have the  following  meanings  (with terms defined in the
singular  having  comparable  meanings  when used in the  plural  and vice versa
unless the context otherwise requires:

          "1997 Stock Option Plan" shall mean the 1997 Stock Purchase and Option
Plan for Key Employees of KMC Telecom Holdings, Inc. and Affiliates, as the same
may be amended from time to time.

          "Board of  Directors"  shall have the  meaning  ascribed  to it in the
first paragraph of this Resolution.

          "Business Day" means any day except a Saturday, a Sunday, or other day
on which  commercial banks in the State of New York or New Jersey are authorized
or required by law or executive order to close.

     "Capital  Stock"  means,  with  respect to any Person,  any and all shares,
interests,  participations,  rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock (but excluding
any debt  security that is  exchangeable  for or  convertible  into such capital
stock).

     "Common Stock" shall have the meaning ascribed to it in Section 2 hereof.

     "Convertible  Securities" shall mean any evidences of indebtedness,  shares
or securities convertible into or exchangeable for Common Stock.



                                       13
<PAGE>

     "Corporation"  shall have the meaning ascribed to it in the first paragraph
of this Resolution.

     "Dividend  Payment Date" means March 31, June 30, September 30 and December
31 of each year.

     "Dividend Period" means the Initial Dividend Period and,  thereafter,  each
Quarterly Dividend Period.

     "Fair Market Value" per share of Common Stock as of a particular  date (the
"Determination  Date") shall mean: (i) if the Common Stock is listed or admitted
for trading on a national securities exchange,  then the Fair Market Value shall
be the average of the last 30 "daily  sales  prices" of the Common  Stock on the
principal  national  securities  exchange on which the Common Stock is listed or
admitted  for  trading on the last 30 Business  Days prior to the  Determination
Date,  or if not  listed or traded on any such  exchange,  then the Fair  Market
Value  shall be the  average of the last 30 "daily  sales  prices" of the Common
Stock on the Nasdaq  National  Market on the last 30 Business  Days prior to the
Determination  Date (the "daily sales price" shall be the closing price for bona
fide  transactions  of the Common Stock at the end of each day);  or (ii) if the
Common Stock is not so listed or admitted to unlisted  trading  privileges or if
no such sale is made on at least 25 of such  days,  then the Fair  Market  Value
shall be as reasonably  determined  by an investment  banking firm of recognized
national  standing selected in good faith by the Company's Board of Directors or
a duly appointed committee of the Board of Directors (which  determination shall
be reasonably  described in the written  notice  delivered to the holders of the
Series C Preferred Stock).

     "Fully  Diluted" shall mean at any date as of which the number of shares of
Common Stock is to be determined, all shares of Common Stock outstanding at such
date and the  maximum  number of shares of Common  Stock  issuable in respect of
Convertible  Securities  and  warrants,  options  and other  rights to  purchase
(directly  or  indirectly)  shares of  Common  Stock or  Convertible  Securities
(giving effect to the then current respective  conversion prices) outstanding on
such date (to the extent the fights to convert,  exchange or exercise thereunder
are presently exercisable).

     "High Yield Debt and Equity Offering" shall have the meaning ascribed to it
in Section 5 hereof

     "Initial  Dividend  Period" means the dividend  period  commencing  on, and
including, the Series C Preferred Stock Issue Date and ending on, and excluding,
the first Dividend Payment Date to occur thereafter.

     "Junior Stock" shall have the meaning ascribed to it in Section 2 hereof.

     "Liquidation Preference" shall have the meaning ascribed to it in Section 1
hereof.

     "Loan Agreement" shall have the meaning ascribed to it in Section 6 hereof.



                                       14
<PAGE>

     "Majority Series C Holders" shall have the meaning ascribed to in Section 6
hereof.

     "Option" shall mean rights,  options, or warrants to subscribe for purchase
or otherwise acquire Convertible Securities or Common Stock.

     "Parity Preferred Stock" means, collectively,  the Series A Preferred Stock
the  Corporation's  Series B Cumulative  Convertible  Preferred Stock, par value
$.0l per  share,  the  Series C  Preferred  Stock,  the  Corporation's  Series D
Cumulative  Convertible Preferred Stock, par value $.0l per share, and any other
series of preferred stock which is determined to be "Parity  Preferred Stock" by
the Board of Directors.

     "Person" means any  individual,  firm,  corporation,  partnership,  limited
liability  company,  trust,  incorporated or unincorporated  association,  joint
venture, joint stock company, governmental body or other entity of any kind.

     "Qualified  Public  Offering" shall mean the offer for sale of Common Stock
pursuant to an effective  registration  statement filed by the Corporation under
the Securities Act of 1933, as amended,  in any single  transaction or series of
related transactions, in which the Corporation receives aggregate gross proceeds
(before  deduction of  underwriting  discounts and expenses of sale) of at least
$40,000,000  in the  aggregate;  provided that the per share price at which such
shares are sold in the offering (before deduction of underwriting  discounts and
expenses  of sale) is at least four times the  conversion  price of the Series A
Preferred  Stock  which  would then be in effect if  determined  pursuant to the
terms of the Series A Preferred Stock in effect on the initial  issuance date of
the Series C  Preferred  Stock  (whether or not any shares of Series A Preferred
Stock are then outstanding).

     "Quarterly" shall mean the quarterly periods  commencing on, and including,
each  Dividend  Payment Date and ending on, and  excluding,  each next  Dividend
Payment Date occurring immediately thereafter, respectively.


                                       15
<PAGE>


     "Realization  Event"  shall mean the  occurrence  of (i) the sale of all or
substantially  all of the  Common  Stock or  assets  of the  Corporation  or the
consolidation or merger of the Corporation with one or more other  corporations,
in any single transaction or series of related transactions, or (ii) the closing
of one or more  public  offerings  of  Common  Stock  in which  the  Corporation
receives  aggregate gross proceeds (before  deduction of underwriting  discounts
and expenses of sale) of at least $40,000,000.

     "Senior Preferred Stock" means, collectively, the Series E Preferred Stock,
and the Series F Preferred  Stock and any other series of preferred  stock which
is determined to be "Senior Preferred Stock" by the Directors, provided that, no
Capital Stock shall be designated as such without the consent of the majority of
the holders of Series C Preferred Stock.

     "Series A Preferred  Stock"  means the  Corporation's  Series A  Cumulative
Convertible Preferred Stock, par value, $.0l per share.

     "Series C  Directors"  shall have the  meaning  ascribed to it in Section 6
hereof.

     "Series C Preferred Stock" shall have the meaning ascribed to it in Section
1 hereof.

     "Series C  Preferred  Stock  Issue  Date" means the first date on which the
Series C Preferred Stock is issued by the Corporation.

     "Series D Preferred  Stock"  means the  Corporation's  Series D  Cumulative
Convertible Preferred Stock, par value, $.01 per share.

     "Series  E  Preferred   Stock"  means  the  Series  E  Senior   Redeemable,
Exchangeable, PIK Preferred Stock.

     "Series  F  Preferred   Stock"  means  the  Series  F  Senior   Redeemable,
Exchangeable, PIK Preferred Stock.

     "Shareholders  Agreement"  means  the  Amended  and  Restated  Stockholders
Agreement among KMC Telecom  Holdings,  Inc.,  Nassau Capital Partners L.P., NAS
Partners I L.L.C.,  Harold N. Kamine, KMC  Telecommunications  L.P., AT&T Credit
Corporation,  General  Electric Capital  Corporation,  Corestates Bank, N.A. and
Corestates Holdings, Inc., dated as of October 31, 1997, as amended by Amendment
No.1,  dated as of January 7, 1998,  to the  Amended and  Restated  Stockholders
Agreement,  dated as of October 31, 1997,  Amendment  No. 2, dated as of January
26,  1998,  to the  Amended and  Restated  Stockholders  Agreement,  dated as of
October 31, 1997, Amendment No. 3, dated as of February 25, 1998, to the Amended
and Restated Stockholders Agreement, dated as of October 31, 1997, Amendment No.
4, dated as of  February  4, 1999,  to the  Amended  and  Restated  Stockholders
Agreement,  dated as of October 31, 1997, Amendment No. 5, dated as of April 30,
1999, to the Amended and Restated  Stockholders  Agreement,  dated as of October
31, 1997.




                                       16
<PAGE>







































                                       17
<PAGE>




          IN WITNESS  WHEREOF,  KMC  TELECOM  HOLDINGS,  INC.  has  caused  this
certificate to be duly  executed  by its Chief  Financial  Officer this 30th day
of April, 1999.

                                                KMC TELECOM HOLDINGS. INC.


                                                By:  s/  James D. Grenfell
                                                    ------------------------
                                                Name:    James D. Grenfell
                                                Title:   Chief Financial Officer




                                       18