EXECUTION COPY

                               AMENDMENT NO. 9 TO
               THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT


            AMENDMENT  NO.  9 dated  as of June  30,  2000  to the  Amended  and
Restated  Stockholders  Agreement,  dated as of October 31, 1997 (as  heretofore
amended, the "STOCKHOLDERS  AGREEMENT") among KMC Telecom Holdings, Inc., Nassau
Capital  Partners  L.P.,  NAS  Partners  I L.L.C.,  Harold N.  Kamine,  Newcourt
Commercial  Finance  Corporation  (as  successor  to AT&T  Credit  Corporation),
General Electric Capital Corporation, First Union National Bank (as successor to
CoreStates Bank, N.A.), and CoreStates Holdings,  Inc., and the Series G Holders
listed on Schedule A attached hereto (collectively, the "SERIES G HOLDERS").

                               W I T N E S S E T H

            WHEREAS, the Series G Holders shall acquire certain shares of Series
G  Convertible  Preferred  Stock  pursuant  to the Series G  Purchase  Agreement
(hereinafter  defined) and each Series G Holder desires to become a party to the
Stockholders  Agreement  as a  condition  to its  purchase of shares of Series G
Preferred Stock;

            WHEREAS,  the parties hereto desire to make certain  amendments to
the Stockholders Agreement;

            NOW, THEREFORE,  in consideration of the premises and for other good
and  valuable  consideration  the  receipt and  sufficiency  of which are hereby
acknowledged, the parties hereto hereby agree as follows:

            1. DEFINED TERMS.  Unless otherwise defined herein,  all capitalized
terms  defined in the  Stockholders  Agreement  and used  herein  shall have the
meanings set forth in the Stockholders  Agreement.  In addition, the definitions
section  of the  Stockholders  Agreement  is hereby  amended  by adding  thereto
certain additional  definitions and by amending certain existing  definitions as
follows:

            "APPROVED  SALE"  means  either  (i)  the  sale,  lease,   transfer,
conveyance or other disposition, in one or a series of related transactions,  of
all or  substantially  all of the assets of the  Company  and its  Subsidiaries,
taken as a whole, or (ii) a transaction or series of transactions  (including by
way of merger, consolidation, or sale of equity) the result of which is that the
holders of the Company's outstanding voting securities immediately prior to such
transactions  are after giving  effect to such  transactions  no longer,  in the
aggregate,  the "beneficial  owners") (as such term is defined in Rule 13d-3 and
Rule  13d-5  promulgated  under  the  Securities   Exchange  Act),  directly  or
indirectly  through one or more  intermediaries,  of more than 50% of the voting
power of the outstanding voting securities of the Company, which in either case,
has been  approved by both the Board of Directors  and the holders of a majority
of the  Shares  (the  "APPROVING  STOCKHOLDERS");  PROVIDED  that the  Approving
Stockholders  must include the consent of the Requisite  Series G Holders if the
aggregate  Fair  Market  Value  of the  consideration  per  share  of  Series  G
Convertible  Preferred  Stock  received  in such  transaction  by the holders of
Series G Convertible Preferred Stock is less than the greater of (1) 125% of the


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Deemed Issuance Price or (2) the sum of the Liquidation  Preference of one share
of  Series G  Convertible  Preferred  Stock  plus  all  accumulated  but  unpaid
dividends thereon.

            "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.

            "CONVERTIBLE  PREFERRED  STOCK"  means  the  Series A  Convertible
Preferred Stock,  Series B  Convertible  Preferred Stock, Series C Convertible
Preferred  Stock,  Series  D  Convertible  Preferred  Stock  and the  Series G
Convertible Preferred Stock.

            "DEEMED ISSUANCE PRICE" shall be the lowest price per share at which
shares of Series G Convertible Preferred Stock are issued pursuant to the Series
G Purchase Agreement.

            "DEMAND RIGHTS  COMMENCEMENT DATE" means the earlier to occur of (i)
the date  which is 180 days  after the date on which the  Company  completes  an
initial Public Offering and (ii) June 30, 2002.

            "DRESDNER"  shall mean Dresdner  Kleinwort  Benson  Private Equity
Partners, L.P.

            "DRESDNER DIRECTOR" has the meaning set forth in Section 4.3.1.

            "FAIR MARKET  VALUE" of any  property as of a  particular  date (the
"Determination Date") shall mean: (i) if the property is a security, the average
of the last 30 "daily sales prices" of such  security on the principal  national
securities  exchange on which such security 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 such security 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 such security at
the end of each day),  or (ii) if such  security 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 the price  (determined on a per share
basis,  if  applicable)  that would be paid for the entire  common equity of the
Company in an orderly  sale  transaction  between a willing  buyer and a willing
seller,  without  taking into  account the lack of  liquidity  of the  Company's
securities, using customary valuation techniques and assuming full disclosure of
all relevant information, as reasonably determined by an investment banking firm
of recognized national standing selected in good faith by the 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 G Convertible  Preferred  Stock) or (iii) if the property in question
is not a security,  then the Fair Market Value of the property in question shall
be the fair value  thereof  determined  jointly by the Company and the Requisite
Series G  Holders.  If such  parties  are  unable  to reach  agreement  within a
reasonable period of time, such fair value shall be determined by an independent
appraiser  experienced  in valuing the type of property in question  selected by
the Company and approved by the Requisite Series G Holders (which approval shall
not be  unreasonably  withheld or delayed).  The Company  shall pay the fees and
expenses of any investment  banking firm and/or appraiser  retained to determine


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Fair  Market  Value  hereunder.  The  determination  of  such  appraiser  and/or
investment banking firm shall be final and binding on all Persons.

            "KAMINE DIRECTOR" has the meaning set forth in Section 4.3.1.

            "LIQUIDATION  PREFERENCE"  has the meaning set forth in the Series
G Certificate of Designations.

            "LUCENT" means Lucent Technologies Inc.

            "MAJORITY  SERIES G  HOLDERS"  means the  Persons  from time to time
holding at least 50% of the outstanding shares of Series G Convertible Preferred
Stock.

            "NASSAU DIRECTOR" has the meaning set forth in Section 4.3.1.

            "QUALIFIED  PUBLIC  OFFERING"  or  "QPO"  means  the  sale in a firm
commitment   underwritten  public  offering  of  Common  Stock,  in  any  single
transaction  or  series  of  related  transactions,  pursuant  to  an  effective
registration  statement filed by the Company under the 1933 Act in which (i) the
Company  receives  aggregate  gross proceeds  (before  deduction of underwriting
discounts and expenses of sale) of at least $80,000,000,  and (ii) the price per
share at which  such  shares  are sold to the  public in such  offering  (before
deduction of  underwriting  discounts and expenses of sale) is not less than the
Liquidation  Preference (as adjusted for any stock split,  stock  combination or
other similar transaction).

            "REGISTRABLE  SECURITIES"  means  (i) the  Common  Stock  issued  or
issuable upon the conversion of the Convertible  Preferred Stock or the exercise
of the AT&T Company Warrant or the GECC Warrant,  (ii) any Common Stock acquired
after October 31, 1997 by Nassau, Kamine, AT&T, GECC, CoreStates, any Accredited
Investor  that it a permitted  transferee  of Common  Stock  pursuant to Section
3.1.6 or any of their respective Affiliates,  (iii) the Common Stock held, as of
October 31, 1997, by Kamine,  Nassau,  AT&T and CoreStates and their  respective
Affiliates and by KMC  Telecommunications  L.P., a Delaware limited partnership,
(iv) any Common Stock  acquired after the date hereof by any Series G Holder and
(v) any shares of capital  stock of the Company  issued or issuable with respect
to the  securities  referred to in clauses  (i)  through  (iv) by way of a stock
dividend  or  stock  split  or in  connection  with  a  combination  of  shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever  such  Person  has the right to acquire  directly  or  indirectly  such
Registrable  Securities  (including,  without  limitation,  upon  conversion  or
exercise  in  connection  with  a  transfer  of  securities  or  otherwise,  but
disregarding  any  restrictions or limitations upon the exercise of such right),
whether or not such acquisition has actually been effected. As to any particular
Registrable   Securities,   once  issued  such  securities  shall  cease  to  be
Registrable Securities when (i) such securities shall have been registered under
the Securities Act, and the  registration  statement with respect to the sale of
such  securities  shall have become  effective  under the Securities Act or such
securities  shall have been sold  under  circumstances  in which all  applicable
conditions  of Rule 144 (or any  similar  provision  then in  force)  under  the
Securities  Act are met or may be  sold  pursuant  to  Rule  144(k),  (ii)  such
securities shall have been otherwise transferred,  new certificates for them not
bearing a legend  restricting  further transfer shall have been delivered by the


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Company  and  subsequent  disposition  of  such  securities  shall  not  require
registration or qualification of such securities under the Securities Act or any
state securities or blue sky laws then in force in a preponderance of states, or
(iii) such securities shall cease to be outstanding.

            "REORGANIZATION" means the reorganization  effected pursuant to that
certain  Amendment  and  Assignment  of Amended and Restated  Note  Purchase and
Investment  Agreement,  dated as of September 22, 1997, by and among KMC Telecom
Inc., Nassau Capital Partners L.P., NAS Partners I L.L.C.,  Harold N. Kamine and
KMC Telecom  Holdings,  Inc.,  of the Amended and  Restated  Note  Purchase  and
Investment  Agreement,  dated as of October 22, 1996,  by and among KMC Telecom,
Inc., Nassau Capital Partners L.P., NAS Partners I L.L.C. and Harold N. Kamine.

            "REQUISITE  SERIES G  HOLDERS"  means (i) the  holders of at least a
majority of the  outstanding  shares of Series G Convertible  Preferred Stock if
the Company has received  aggregate gross cash proceeds of at least $250,000,000
from the issuance of Series G Convertible Preferred Stock pursuant to the Series
G  Purchase  Agreement  or  (ii)  the  holders  of at  least  two-thirds  of the
outstanding  shares of Series G Convertible  Preferred  Stock if the Company has
not received  aggregate  gross cash proceeds of at least  $250,000,000  from the
issuance  of Series G  Convertible  Preferred  Stock  pursuant  to the  Series G
Purchase Agreement.

            "SERIES G CERTIFICATE OF DESIGNATIONS"  means the certificate of the
Powers, Designations Preferences and Rights of the Series G-1 Voting Convertible
Preferred Stock and the Series G-2 Non-Voting  Convertible Preferred Stock filed
with the Secretary of State of Delaware on July 7, 2000.

            "SENIOR MANAGER" means the Chief Executive Officer,  the President
or the Chief Financial Officer of the Corporation.

            "SERIES G  CONVERTIBLE  PREFERRED  STOCK" means,  collectively,  the
Company's  Series G-1 Voting  Convertible  Preferred  Stock,  par value $.01 per
share and the Company's Series G-2 Non-Voting  Convertible  Preferred Stock, par
value $.01 per share.

            "SERIES  G  PURCHASE   AGREEMENT"  means  the  Securities   Purchase
Agreement  dated as of the date  hereof by and among the  Company,  the Series G
Holders and the other parties, if any, named therein.

            "STOCKHOLDERS" shall mean Nassau,  Kamine,  AT&T, GECC,  CoreStates,
the Series G Holders  and any  transferee  thereof who has agreed to be bound by
the terms and conditions of this  Agreement in accordance  with Section 2.4, and
the term "Stockholder" shall mean any such Person.

            2.  AGREEMENT TO BE BOUND.  Each Series G Holder  hereby agrees that
upon execution of this  Amendment,  it shall become a party to the  Stockholders
Agreement  and shall be fully bound by, and  subject  to, all of the  covenants,
terms and conditions of the  Stockholders  Agreement as though an original party
thereto and shall be deemed a Stockholder for all purposes thereof.  The parties
agree that all Common Stock and Convertible  Preferred Stock held or acquired by
such Series G Holder shall be deemed Shares for all purposes of the Stockholders
Agreement.


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            3. AMENDMENT OF SECTION 2.2.1 OF THE STOCKHOLDERS AGREEMENT. Section
2.2.1 of the Stockholders Agreement is hereby amended to read in its entirety as
follows:

                        2.2.1 TRANSFERS BY NASSAU,  AT&T,  GECC,  CORESTATES AND
      THE SERIES G HOLDERS. At any time, each of Nassau, AT&T, GECC, CoreStates,
      each of the Series G Holders and any Permitted  Transferees  thereof which
      are Accredited Investors may (a) subject to Sections 2.3 and 2.4, transfer
      Shares to any  Affiliate  and with  respect to Dresdner,  transfer  Shares
      having an aggregate  initial  purchase price of not more than  $25,000,000
      pursuant  to the terms of the  Letter  Agreement  dated as of July 6, 2000
      among  Dresdner,  one of its Affiliates and the Company and (b) subject to
      Sections  2.3,  2.4,  3.1  and  4.5,   transfer   Shares  to  any  Person.
      Notwithstanding the foregoing, Lucent shall not, without the prior consent
      of the  Company  (which  consent  shall not be  unreasonably  withheld  or
      delayed),  be  permitted  to  transfer  any  Shares  to any  Person if (i)
      following  such  transfer  such Person would be eligible to designate  the
      Lucent  Director  pursuant to Section 4.5(d) hereof or (ii) such Person is
      deemed to be a competitor  of the Company,  in each case, as determined in
      good faith by the Board of Directors.

            4. ADDITION  OF  SECTION  2.5 TO THE  STOCKHOLDERS  AGREEMENT.  The
following Section 2.5 shall be inserted immediately following Section 2.4 of the
Stockholders Agreement:

               2.5.     SALE OF THE COMPANY.

                        2.5.1.   In  the  event  of  an  Approved   Sale,   each
      Stockholder will (i) consent to, vote for, and raise no objections against
      the Approved  Sale or the process  pursuant to which the Approved Sale was
      arranged,  (ii) waive any dissenter's rights and other similar rights with
      regard to such Approved Sale, and (iii) if the Approved Sale is structured
      as a sale of stock,  each Stockholder will agree to sell its Shares on the
      terms and conditions of the Approved Sale. Each  Stockholder will take all
      necessary  and desirable  actions as reasonably  requested by the Board of
      Directors  in  connection  with the  consummation  of any  Approved  Sale,
      including without limitation  executing the applicable purchase agreement;
      PROVIDED that each  Stockholder  will be required to make  representations
      and warranties only with respect to such  Stockholder and the Shares to be
      sold by it or him as may be set  forth in any  agreement  approved  by the
      Board of Directors.

                        2.5.2.  The obligations of each  Stockholder  under this
      Section 2.5 are subject to the  satisfaction of the following  conditions:
      (i) in connection with an Approved Sale, each Stockholder shall receive in
      consideration  for the Shares held by such Stockholder the net amount that
      such Stockholder would have received if all in-the-money equity securities
      had been fully exercised, converted and exchanged for or into Common Stock
      immediately  prior to such Approved  Sale and the aggregate  consideration
      from such  Approved  Sale  (plus an amount  equal to the cash  payable  in
      connection  with such exercise,  conversion  and exchange of  in-the-money
      equity  securities)  had  been  distributed  by the  Company  in  complete
      liquidation  pursuant  to the  rights  and  preferences  set  forth in the
      Company's  certificate of incorporation as in effect  immediately prior to
      such  Approved  Sale (and the  obligation of each Series G Holder shall be
      subject to its receipt of the Redemption Price (as defined in the Series G



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      Certificate of Designations)),  (ii) if the holders of Common Stock and/or
      then outstanding Convertible Preferred Stock are given an option as to the
      form and  consideration  to be  received,  all holders of Common Stock and
      then  outstanding  Convertible  Preferred  Stock  shall be given  the same
      option,  and (iii) each  holder of then  currently  exercisable  rights to
      acquire Shares shall be given an opportunity to exercise such rights prior
      to the consummation of the Approved Sale and participate in such sale as a
      holder of such Shares.

                        2.5.3.  If the Company or the  holders of the  Company's
      securities  enter into any  negotiation or transaction  for which Rule 506
      (or any  similar  rule then in  effect)  under the  Securities  Act may be
      available  with respect to such  negotiation  or  transaction  (including,
      without limitation, a merger, consolidation or other reorganization),  the
      Stockholders who are not accredited  investors (as that term is defined in
      Rule 501 under the  Securities  Act) will,  at the request of the Company,
      appoint a  purchaser  representative  (as such term is defined in Rule 501
      under the Securities  Act)  reasonably  acceptable to the Company.  If any
      such  Stockholder  appoints a purchaser  representative  designated by the
      Company,  the  Company  will  pay the  reasonable  fees of such  purchaser
      representative,  but if any  such  Stockholder  declines  to  appoint  the
      purchaser  representative  designated  by the  Company  such  holder  will
      appoint another  purchaser  representative  (reasonably  acceptable to the
      Company),  and  such  holder  will  be  responsible  for  the  fees of the
      purchaser representative so appointed.

                        2.5.4.  All  Stockholders  will  bear  their  respective
      portions (as determined pursuant to Section 2.5.5) of the reasonable costs
      of any sale of Shares  pursuant  to an  Approved  Sale to the extent  such
      costs are approved by the  Approving  Stockholders  and are not  otherwise
      paid by the Company or the acquiring party;  including the reasonable fees
      and  disbursements  of  one  law  firm  designated  by a  majority  of the
      Approving  Stockholders in connection  with an Approved Sale.  Other costs
      incurred by any Stockholder on its own behalf will not be considered costs
      of the transaction hereunder.

                        2.5.5. A Stockholder's  portion of any cost described in
      Section  2.5.4 will equal the amount by which the portion of the aggregate
      consideration  from the Approved Sale received by such  Stockholder  would
      have  been  reduced  had the  amount  of such  cost  been paid out of such
      aggregate  proceeds  of such  Approved  Sale  prior  to  their  allocation
      pursuant to Section 2.5.2.

                        2.5.6.   The   provisions  of  this  Section  2.5  shall
      terminate upon the consummation of a Qualified Public Offering.

            5. AMENDMENTS  TO  SECTION  4.3.1  OF  THE  STOCKHOLDERS  AGREEMENT.
Section 4.3 of the Stockholders Agreement is amended to read as follows:

               4.3.     ELECTION OF DIRECTORS.

                        4.3.1. NUMBER AND COMPOSITION. Subject to Section 4.3.2,
      each Stockholder agrees that the number of directors shall be ten (10) and
      each Stockholder shall vote its or his Shares at any Stockholders Meeting,
      or act by Written Consent with respect to such Shares,  and take all other



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      actions necessary to ensure that the number of directors  constituting the
      entire Board of Directors  shall be ten (10), as provided for below.  Each
      Stockholder  shall  vote its or his  Shares  at any  Stockholders  Meeting
      called for the purpose of filling the positions on the Board of Directors,
      or in any Written Consent executed for such purpose, and to take all other
      actions necessary to ensure, including,  without limitation,  using its or
      his best  efforts to cause the Board of  Directors to take such actions to
      ensure:  (i) the  election  to the Board of  Directors  of (A)  subject to
      paragraph (a) of Section 4.5, three individuals  designated by Nassau (the
      "Nassau  Directors"),  (B) subject to  paragraph  (b) of Section  4.5, two
      individuals  designated  by  Kamine  (the  "Kamine  Directors"),  (C)  one
      independent  director who shall be mutually  acceptable to Nassau,  Kamine
      and either  AT&T or the  Majority  Series C Holders,  provided  that it is
      agreed  that  Gary  E.  Lasher  shall  serve  as an  independent  director
      beginning  November 1, 1997,  (D) subject to paragraph (c) of Section 4.5,
      one director designated by Dresdner (the "Dresdner Director"), (E) subject
      to paragraph (d) of Section 4.5, and further  subject to the approval of a
      majority of the other  members of the Board of Directors  (which  approval
      may not be unreasonably withheld) one director designated by Lucent or its
      transferee as contemplated by Section 4.5(d) (the "Lucent Director"),  (F)
      the President of the Company from time to time elected pursuant to Article
      IV of the By-Laws and who shall initially be Roscoe C. Young,  II, and (G)
      the Chief  Executive  Officer  of the  Company  from time to time  elected
      pursuant to Article IV of the By-Laws and who shall  initially  be William
      F. Lenahan;  (ii) the election to each committee of the Board of Directors
      of one Nassau Director and one Kamine  Director;  (iii) the election of an
      independent  director  to  the  compensation  committee  of the  Board  of
      Directors,  (iv) the  election  of one  representative  designated  by the
      Requisite  Series  G  Holders  (who  shall  be a  member  of the  Board of
      Directors)  to all  committees  of the Board of  Directors  other than the
      executive  committee;   PROVIDED  that  the  Dresdner  Director  shall  be
      designated  to serve on at least one  committee of the Board of Directors,
      and (vi) the election of three directors to the executive committee of the
      Board of Directors,  one of whom shall be a Nassau  Director,  one of whom
      shall be a Kamine Director,  and a third director (who is neither a Kamine
      Director nor a Nassau  Director)  designated by a majority of the Board of
      Directors.

            6. AMENDMENT  OF SECTION  4.4(B) AND ADDITION OF SECTION  4.4(C) AND
SECTION 4.4(D) TO THE STOCKHOLDERS AGREEMENT. Section 4.4(b) of the Stockholders
Agreement  shall be hereby  amended in its entirety as follows and the following
Section  4.4(c) and  Section  4.4(d)  shall be  inserted  immediately  following
Section 4.4(b) of the Stockholders Agreement:

               (b) Kamine  shall be  entitled  at any time and for any reason
      (or for no reason) to  designate  any or all of the Kamine  Directors  for
      removal.  Subject to Section  4.5, if at any time, a vacancy is created on
      the Board of Directors by reason of death,  removal or  resignation of any
      Kamine Director, then each Stockholder shall, as soon as practicable after
      the  date  such  vacancy  first  occurs,  and in any  event  prior  to the
      transaction  of any other  business  by the  Stockholders  or the Board of
      Directors, take any action, including the voting of its Shares, to elect a
      director  or  directors  designated  by  Kamine to fill  such  vacancy  or
      vacancies.

               (c) Dresdner shall be entitled at any time and for any reason (or
      for no reason) to designate the Dresdner Director for removal.  Subject to
      Section 4.5, if at any time, a vacancy is created on the Board of


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      Directors by reason of the death,  removal or  resignation of the Dresdner
      Director,  then each Stockholder  shall, as soon as practicable  after the
      date such vacancy first occurs,  and in any event prior to the transaction
      of any other business by the Stockholders or the Board of Directors,  take
      action, including the voting of its Shares, to elect a director designated
      by Dresdner to fill such vacancy.

               (d) Lucent (or its transferee as  contemplated by Section 4.5(d))
      shall be  entitled  at any time and for any  reason  (or for no reason) to
      designate the Lucent  Director for removal.  Subject to Section 4.5, if at
      any time,  a vacancy is created on the Board of Directors by reason of the
      death,   removal  or  resignation  of  the  Lucent  Director,   then  each
      Stockholder  shall,  as soon as  practicable  after the date such  vacancy
      first  occurs,  and in any  event  prior to the  transaction  of any other
      business  by the  Stockholders  or the Board of  Directors,  take  action,
      including  the voting of its  Shares,  to elect a director  designated  by
      Lucent (or its transferee as  contemplated by Section 4.5(d)) to fill such
      vacancy.

            7.  AMENDMENT  TO  SECTION  4.5(B)  TO THE  STOCKHOLDERS  AGREEMENT.
Section  4.5(b) of the  Stockholders  Agreement  shall be hereby  amended in its
entirety as follows:

                        (b) Notwithstanding anything herein to the contrary, (i)
      from  and  after  the  date  that  Kamine  and his  Affiliates  own in the
      aggregate Shares  representing less than one-third of the Shares (on an as
      if fully  converted  basis)  owned in the  aggregate  by them  immediately
      following  the  Reorganization,  Kamine  shall have the right to designate
      only one (1) director for election or removal pursuant to Section 4.3.1 or
      4.4 (and shall cause such number of Kamine  Directors  to resign such that
      one Kamine  Director  remains on the Board of Directors)  and (ii) at such
      time as Kamine  and his  Affiliates  own less  than 5% of the  Shares on a
      Fully  Diluted  Basis,  Kamine  shall not be  entitled  to  designate  any
      director  for  election or removal  pursuant to Section  4.3.1 or 4.4 (and
      shall cause all Kamine Directors to resign).

            8. ADDITION  OF  SECTIONS  4.5(C)  AND  4.5(D) TO THE  STOCKHOLDERS
AGREEMENT.   The  following   Sections  4.5(c)  and  4.5(d)  shall  be  inserted
immediately following Section 4.5(b) of the Stockholders Agreement:

                        (c) Notwithstanding  anything herein to the contrary, at
      such time as Dresdner and its  Affiliates  own less than 30% of the shares
      of Series G Convertible  Preferred Stock (or shares of Common Stock issued
      upon  conversion  thereof)  originally   purchased  by  Dresdner  and  its
      Affiliates pursuant to the Series G Purchase Agreement, Dresdner shall not
      be entitled to designate any person to serve as a director on the Board of
      Directors,  and shall cause the Dresdner Director to resign from the Board
      of Directors).

                        (d)  Notwithstanding  anything  herein to the  contrary,
      Lucent  shall have no right to  designate  an  individual  to serve as the
      Lucent  Director  at any time prior to March 31,  2001;  provided  that if
      prior to March 31, 2001,  Lucent  transfers (in a transaction or series of
      related  transactions  subject to the provisions of Section 3.1) shares of
      Series G  Convertible  Preferred  Stock  having an  aggregate  Liquidation
      Preference of at least  $50,000,000 to an  unaffiliated  third party,  the


                                       8
<PAGE>


      transferee of such shares may  thereafter  designate the Lucent  Director.
      Lucent may (but has no  obligation  to) assign its right to designate  the
      Lucent  Director to an  unaffiliated  third party  transferee of shares of
      Series G  Convertible  Preferred  Stock  having an  aggregate  Liquidation
      Preference of at least  $50,000,000.  The right of Lucent to designate the
      Lucent  Director  shall  terminate  upon the  consummation  of a Qualified
      Public Offering.  The right of any unaffiliated  third party transferee of
      Lucent who has purchased  shares of Series G Convertible  Preferred  Stock
      having an aggregate Liquidation Preference of at least $50,000,000 and has
      been assigned the right to designate the Lucent  Director  shall survive a
      Qualified  Public  Offering.  The  right of Lucent  or its  transferee  to
      designate the Lucent  Director shall  terminate at such time as the holder
      of the right to  designate  the Lucent  Director  holds shares of Series G
      Convertible  Preferred  Stock (or  shares of Common  Stock  issuable  upon
      conversion  thereof)  having an aggregate  Liquidation  Preference of less
      than $15,000,000.

            9. ADDITION OF SECTION 4.6 AND 4.7 TO THE  STOCKHOLDERS  AGREEMENT.
The  following  Sections  4.6 and 4.7 shall be  inserted  immediately  following
Section 4.5 of the Stockholders Agreement:

               4.6      ACTIONS  REQUIRING  APPROVAL OF  MAJORITY OF BOARD.  The
      Company  shall not,  without the prior  approval of at least a majority of
      the Board of Directors:

                        (a) directly or indirectly  declare or pay any dividends
      or make any  distributions  upon any of its capital  stock or other equity
      securities other than those required of the Company pursuant to agreements
      in existence on the date hereof;

                        (b) directly or indirectly redeem, purchase or otherwise
      acquire,  or permit  any  Subsidiary  to  redeem,  purchase  or  otherwise
      acquire,  any of the Company's or any Subsidiary's  capital stock or other
      equity securities (including,  without limitation,  warrants,  options and
      other  rights to acquire such  capital  stock or other equity  securities)
      other than (a) pursuant to the terms of any of the  Convertible  Preferred
      Stock,  the Series E Preferred  Stock, the Series F Preferred Stock or any
      series of preferred  stock the  issuance of which is approved  pursuant to
      this Section 4.6, (b) pursuant to repurchase  of equity  securities by the
      Corporation  pursuant  to the  exercise  of its  right of  first  offer as
      provided in Section 3 of this  Stockholders  Agreement and (c) repurchases
      of Common Stock or other equity securities including warrants, options and
      other  rights  to  acquire  Common  Stock or  equity  securities  or stock
      appreciation rights,  phantom stock plans or similar rights or plans, from
      former employees of the Company and its  Subsidiaries  upon termination of
      employment pursuant to arrangements approved by the Board of Directors;

                        (c)  authorize,   issue  or  enter  into  any  agreement
      providing for the  authorization,  creation,  or issuance  (contingent  or
      otherwise) of, (a) any notes or debt securities containing equity features
      (including,  without limitation,  any notes or debt securities convertible
      into or exchangeable for capital stock or other equity securities,  issued
      in  connection  with  the  issuance  of  capital  stock  or  other  equity
      securities or containing profit participation  features),  (b) any capital
      stock or other equity  securities (or any securities  convertible  into or
      exchangeable for any capital stock or other equity  securities)  which are


                                       9
<PAGE>


      senior to or on a parity  with the Series G  Convertible  Preferred  Stock
      with respect to the payment of  dividends,  redemptions  or  distributions
      upon liquidation or otherwise;

                        (d) authorize or enter into any  agreement  leading to a
      registered offering after which the Company's common equity securities are
      first  traded or quoted on a national or regional  securities  exchange or
      the NASDAQ Stock Market;

                        (e) sell,  lease or otherwise  dispose of, or permit any
      Subsidiary  to sell,  lease or  otherwise  dispose  of,  any assets of the
      Company or its Subsidiaries involving an aggregate consideration in excess
      of $1,000,000 in any twelve-month  period (other than any sale or lease of
      assets made in the  ordinary  course of business  in  connection  with any
      capitalized  leases entered into by the Company or any of its Subsidiaries
      as lessor in the  ordinary  course of business and other than any Liens to
      lending  institutions  incurred  or granted  by the  Company or any of its
      Subsidiaries in the ordinary course of business in connection therewith);

                        (f) enter into any  partnership,  joint venture or other
      similar  joint  business  undertaking  not  contemplated  by the  existing
      business plan;

                        (g)   appoint the Company's independent auditors;

                        (h) enter into, amend,  modify or supplement,  or permit
      any Subsidiary to enter into, amend, modify or supplement,  any agreement,
      transaction, commitment or arrangement with any of its or any Subsidiary's
      officers,  directors,  employees,  stockholders  or Affiliates or with any
      individual  related by blood,  marriage or adoption to any such individual
      or with  any  entity  in  which  any  such  Person  or  individual  owns a
      beneficial interest,  except for (i) customary employment arrangements and
      benefit  programs on  reasonable  terms,  (ii)  agreements,  transactions,
      commitments  or  arrangements  entered  into  in the  ordinary  course  of
      business  and (iii)  except as otherwise  expressly  contemplated  by this
      Stockholders Agreement;

                        (i)  initiate  or settle any  lawsuit  the  judgment  or
      settlement value of which could exceed $250,000;

                        (j) amend,  modify or terminate  any material  insurance
      coverage of the Company;

                        (k) retain any investment banker or financial consultant
      whose remuneration could exceed $150,000;

                        (l)   appoint or establish  any committee of the Board
      of Directors;

                        (m) adopt the annual  budget,  any  capital  expenditure
      plan or any working capital allocation plan; and

                        (n) appoint or terminate  the  employment  of any Senior
      Manager.


                                       10
<PAGE>


                4.7  REIMBURSEMENT  OF EXPENSES.  The Company shall  reimburse
      each  director  for  the  reasonable  travel  and  out-of-pocket  expenses
      incurred in connection with attending meetings of the Board of Directors:

            10. AMENDMENTS TO SECTION 5 OF THE STOCKHOLDERS AGREEMENT. Paragraph
(a) of Section 5 of the Stockholders Agreement is hereby amended in its entirety
to read as follows:

                PUT RIGHT.  (a)  Subject  to the  covenants  contained  in the
      indentures  entered into in connection  with the Senior Discount Notes and
      2009 Senior Notes,  if no Liquidity Event shall have occurred by the later
      of October 22, 2003 or 90 days  following the final  maturity date of debt
      securities  issued in the HYDO II, then each of Nassau and its Affiliates,
      AT&T,  GECC,  CoreStates  and each of the Series G Holders  shall have the
      right, at any time thereafter,  by giving written notice to the Company (a
      "PUT  NOTICE"),  to require the Company to repurchase (a "PUT") all or any
      portion of the shares of Convertible  Preferred Stock or Common Stock held
      by such Stockholder for an amount (the "PUT AMOUNT") equal to (A) the fair
      market  value of the shares  subject to such Put as  determined  within 30
      days after the delivery of each Put Notice by an  investment  banking firm
      of national  reputation  which is mutually  acceptable  to the Company and
      holders of a majority of the voting power of Common Stock and Common Stock
      Equivalents held by all parties exercising the Put hereunder or (B) in the
      case of any shares of  Convertible  Preferred  Stock,  at the  liquidation
      preference  thereof plus all accrued and unpaid  dividends,  PROVIDED that
      AT&T, GECC, CoreStates and each of the Series G Holders shall not have the
      right to exercise a Put  hereunder  unless Nassau or its  Affiliates  have
      exercised a Put; and provided  further that the Company may not repurchase
      any shares of  Convertible  Preferred  Stock or Common Stock  hereunder so
      long as the  Series E  Preferred  Stock or the  Series F  Preferred  Stock
      remain  outstanding unless the requisite holders of the Series E Preferred
      Stock and the  holders of the  Series F  Preferred  Stock  have  waived in
      writing  their  right  to have  the  Company  repurchase  their  Series  E
      Preferred  Stock and Series F Preferred  Stock prior to the  repurchase by
      the Company of any shares of Convertible  Preferred  Stock or Common Stock
      hereunder.  The Company shall give AT&T, GECC,  CoreStates and each of the
      Series G Holders prompt notice of Nassau's  exercise of a Put. The Company
      shall give notice to Nassau and other  Stockholders of any exercise of the
      Put  right  under  Section  14 of  either of the  Subsidiary  Warrants  or
      hereunder.  The Company  shall pay to the party  exercising  a Put the Put
      Amount  within 60 days of the date of such  determination  of fair  market
      value. Any unpaid balance of a Put Amount  thereafter shall bear interest,
      which interest shall be paid together with any payment of such Put Amount,
      at the rate of 18.0% per annum (the "DEFAULT RATE"); PROVIDED that accrual
      of interest at the Default Rate shall not constitute a waiver of any party
      exercising a Put hereunder to receive immediate payment of the Put Amount.

            11.  AMENDMENTS  TO  SECTIONS  6.1(A)  AND  (B) OF THE  STOCKHOLDERS
AGREEMENT.  Sections  6.1(a) and (b) of the  Stockholders  Agreement  are hereby
amended in their entirety to read as follows:

                 6.1.   DEMAND REGISTRATIONS.


                                       11
<PAGE>


                        (a) RIGHT TO DEMAND.  Subject to Section 6.1(b),  at any
      time and from time to time following the Demand Rights  Commencement  Date
      and the  applicable  events  specified in Section  6.1(b),  the applicable
      parties set forth in Section  6.1(b) (each of which is referred to in this
      Section 6 as a "DEMAND  HOLDER") may request the Company to register their
      Registrable  Securities  in the manner set forth herein by written  notice
      (the  "REGISTRATION  NOTICE") to the Company only if a disposition  of the
      Registrable  Securities may not, in the opinion of the Demand  Holder,  be
      effected in the public  marketplace  (as opposed to a private  transaction
      under the  Securities  Act) at equally  favorable  net terms to the Demand
      Holder without  registration  of such shares under the Securities  Act. In
      the event that the Company  receives a  Registration  Notice,  the Company
      shall  effect a  registration  under the  Securities  Act of the number of
      Registrable  Securities  determined in accordance  with Section  6.1(c) on
      Form S-1 or any similar long-form registration ("LONG-FORM REGISTRATIONS")
      or on Form S-2 or S-3 or any similar short-form registration  ("SHORT-FORM
      REGISTRATIONS") if available. All registrations requested pursuant to this
      Section 6.1 are referred to herein as "DEMAND REGISTRATIONS."

                        (b) NUMBER OF DEMAND  REGISTRATIONS.  Each of Nassau and
      Kamine will be entitled  following the Demand Rights  Commencement Date to
      obtain  up to two (2)  Long-Form  Registrations  and  two  (2)  Short-Form
      Registrations.  So long as AT&T or any of its  Affiliates  shall  hold any
      Registrable Securities, then AT&T, or if AT&T and its Affiliates no longer
      hold any Registrable  Securities,  then the holders of at least 50% of the
      aggregate number of Registrable  Securities  transferred by AT&T which are
      Registrable  Securities  on the date such  request is being made,  will be
      entitled following the Demand Rights  Commencement Date to obtain up to an
      aggregate of two (2) Registrations (which may be Short-Form Registrations,
      at the Company's  option, if the Company is then eligible  therefor).  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)  will be
      entitled following the Demand Rights  Commencement Date to obtain up to an
      aggregate of two (2) Registrations (which may be Short-Form Registrations,
      at the Company's  option, if the Company is then eligible  therefor).  The
      Majority  Series G Holders  (for  themselves  and for the  benefit  of all
      Stockholders  holding shares of Common Stock into which shares of Series G
      Convertible  Preferred  Stock have  been,  or may be,  converted)  will be
      entitled  following  the  Demand  Rights  Commencement  Date  to  two  (2)
      Long-Form  Registrations  (provided  that any such  registration  involves
      shares  having  an  aggregate  gross  offering  price  of  not  less  than
      $25,000,000) and two (2) Short-Form  Registrations (provided that any such
      registration  involves  shares having an aggregate gross offering price of
      not less than $10,000,000). In addition, the holders of outstanding shares
      of  Series G  Convertible  Preferred  Stock  (for  themselves  and for the
      benefit  of all  Stockholders  holding  shares of Common  Stock into which
      shares of Series G  Convertible  Preferred  Stock  have  been,  or may be,
      converted) will be entitled following the Demand Rights  Commencement Date
      to unlimited Short Form Registrations so long as the holders participating
      in such registrations bear the entire expense thereof; PROVIDED that in no
      event will the holder of shares of Series G Preferred Stock be entitled to
      more than one such  registration in any six-month  period.  A registration
      will not count as a Long-Form Registration or Short-Form Registration,  as



                                       12
<PAGE>


      the case may be, until such Demand  Registration  has become effective and
      unless the Demand Holder is able to register and sell at least 66_% of the
      Registrable  Securities  requested  to be included  in such  registration.
      Demand Registrations will be Short-Form Registrations whenever the Company
      is  permitted  to use any  applicable  short  form.  After the Company has
      become  subject to the  reporting  requirements  of the Exchange  Act, the
      Company  will  use  its  best  efforts  to make  Short-Form  Registrations
      available for the sale of Registrable Securities. The Company shall not be
      required to pay for any  expenses  of any  registration  proceeding  begun
      pursuant to this Section 6.1(b) (including the Company's internal costs in
      proceeding  on such  request,  as  reasonable  determined by the Company's
      Board of Directors) if the registration request is subsequently withdrawn,
      unless  the  Demand  Holder  agrees to treat the  withdrawn  request  as a
      registration undertaken pursuant to this Section 6.1(b); PROVIDED, that if
      the Demand  Holder  withdraws a request as a result of a material  adverse
      change in the  condition,  business or  prospects of the Company or in the
      market for the Company's  securities  from that known to the Demand Holder
      at the time of its request,  the Company, and not the Demand Holder, shall
      be required to pay all the expenses relating to the proposed  registration
      and  such  request  shall  not be  treated  as a Demand  Registration  for
      purposes of this Section 6.1(b).

            12. AMENDMENT TO SECTION 6.3 OF THE STOCKHOLDERS AGREEMENT.  Section
6.3 of the  Stockholders  Agreement is hereby amended in its entirety to read as
follows:

                6.3.    HOLDBACK AGREEMENTS.

                        (a) Each holder of Registrable  Securities agrees not to
      effect any public sale or distribution  (including  sales pursuant to Rule
      144) of equity  securities,  including,  without  limitation,  the  Common
      Stock, of the Company, or any securities  convertible into or exchangeable
      or exercisable for such  securities,  during the seven days prior to and a
      period  reasonably  requested by the  underwriters  managing such offering
      (not to exceed 180 days)  beginning  on the  effective  date of any Demand
      Registration  or  Piggyback  Registration  for  a  public  offering  to be
      underwritten  on  a  firm  commitment   basis  (except  as  part  of  such
      underwritten registration),  unless the investment bankers or underwriters
      managing the public offering otherwise agree.

                        (b) The Company agrees (i) not to effect any public sale
      or distribution of its equity securities,  including,  without limitation,
      the Common Stock,  or any securities  convertible  into or exchangeable or
      exercisable  for Common  Stock,  during the seven days prior to and during
      the 180-day  period  beginning on the effective  date of any  underwritten
      Demand  Registration  or  Piggyback  Registration  (except as part of such
      underwritten   registration),   unless  the   underwriters   managing  the
      registered  public  offering  otherwise  agree,  and  (ii) to use its best
      efforts to cause (A) each holder of at least 5% (on a Fully Diluted Basis)
      of its equity securities,  including, without limitation, Common Stock, or
      any securities  convertible  into or  exchangeable or exercisable for such
      securities,  and (B) each  officer and  director of the Company that holds
      any such securities to agree not to effect any public sale or distribution
      (including sales pursuant to Rule 144) of any such securities  during such
      period  (except  as part of such  underwritten  registration),  unless the
      underwriters managing the public offering or distribution otherwise agree.


                                       13
<PAGE>


            13.  ADDITION  OF SECTION  6.9 TO THE  STOCKHOLDERS  AGREEMENT.  The
following Section 6.9 shall be inserted immediately following Section 6.8 of the
Stockholders Agreement:

                 6.9.  ASSIGNMENT OF REGISTRATION RIGHTS.

                       6.9.1.  The  rights to  cause  the  Company  to  register
      Registrable  Securities  under Section 6.1 and Section 6.2 may be assigned
      by a Demand Holder to a transferee or assignee (i) that is an Affiliate of
      the Demand Holder or (ii) if the aggregate  initial purchase price of such
      Registrable   Securities   transferred  or  assigned  was  not  less  than
      $10,000,000 or such lesser amount if all such Demand  Holder's  shares are
      transferred  or  assigned,  provided in each case that (a) the Company is,
      within 15 days prior to any transfer or assignment, furnished with written
      notice of the name and address of the proposed transferee or assignee; (b)
      prior to the transfer or assignment,  the transferee or assignee agrees in
      writing to be bound by all of the  provisions of this  Agreement;  (c) the
      Company is, within a reasonable  time after such transfer,  furnished with
      written notice of the name and address of such  transferee or assignee and
      the securities  with respect to which such  registration  rights are being
      assigned;  and (d) such assignment  shall be effective only if immediately
      following such transfer the further  disposition of such securities by the
      transferee or assignee is restricted under the Securities Act.

                       6.9.2.  Each  Demand Holder  covenants and agrees that it
      will not  transfer  or assign any rights to cause the  Company to register
      Registrable  Securities  pursuant to this Section 6.9 if, within five days
      prior to such  transfer or  assignment,  the Company  furnishes the Demand
      Holder with a  certificate  of the Company  stating that in the good faith
      judgment of the Board of Directors  of the Company,  it would be seriously
      detrimental  to the  Company  and its  shareholders  for such  transfer or
      assignment  to be made  because the  proposed  transferee  is an actual or
      proposed competitor of the Company. This agreement shall be enforceable in
      equity.

            14.  AMENDMENT  TO SECTION  9.2 (B) OF THE  STOCKHOLDERS  AGREEMENT.
Section 9.2(b) of the  Stockholders  Agreement is hereby amended in its entirety
to read as follows:

                        (b) Any amendment,  supplement or  modification of or to
      any  provision  of this  Agreement,  any waiver of any  provision  of this
      Agreement, and any consent to any departure by any party from the terms of
      any provision of this Agreement, shall be effective (i) only if it is made
      or given in writing and signed by Nassau,  Kamine, AT&T, GECC,  CoreStates
      and a  Majority  of the  Series G Holders  and (ii)  only in the  specific
      instance and for the specific  purpose for which made or given;  provided,
      however,  that any such  amendment,  supplement  or  modification  to this
      Agreement shall not be effective to withdraw, deny or adversely affect the
      rights  of any  Stockholder  who  has not  consented  in  writing  to such
      amendment, supplement or modification.

            15. Except as expressly amended hereby, all of the provisions of the
Stockholders  Agreement are hereby affirmed and shall continue in full force and
effect in  accordance  with their terms.  Each of the parties  hereto agree that
they will amend and  restate  the  Stockholders  Agreement  in its  entirety  in


                                       14
<PAGE>


connection  with a  Subsequent  Closing (as such term is defined in the Series G
Purchase  Agreement)  as may be  necessary  or desirable to reflect the terms of
this Agreement.

            16. This  Amendment  shall be governed and  construed in  accordance
with the laws of the state of Delaware  applicable to agreements  made and to be
performed  entirely  within  such state,  without  regard to the  principles  of
conflicts of laws thereof.

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

                                  * * * * *









                                       15
<PAGE>




            IN WITNESS WHEREOF,  the undersigned have executed,  or caused to be
executed, this Agreement as of the date first above written.

                                    KMC TELECOM HOLDINGS, INC.


                                    By:/s/ William H. Stewart
                                       ----------------------
                                       Name: William H. Stewart
                                       Title: Executive Vice President and CFO



                                    NASSAU CAPITAL PARTNERS IV, L.P.

                                    By:  Nassau Capital LLC, its General Partner


                                       By: /s/ John G. Quigley
                                           -------------------
                                           Name: John G. Quigley
                                           Title: Member


                                    NAS PARTNERS I L.L.C.


                                    By:/s/ John G. Quigley
                                       -------------------
                                       Name: John G. Quigley
                                       Title: Member


                                    HAROLD N. KAMINE
                                    in his individual capacity


                                    /s/ Harold N. Kamine
                                    --------------------
                                    Harold N. Kamine




<PAGE>



                                    FIRST UNION NATIONAL BANK


                                    By:/s/ Pearce Landry
                                       -----------------
                                       Name: Pearce Landry
                                       Title: Vice President


                                    CORESTATES HOLDINGS, INC.


                                    By:/s/ Pearce Landry
                                       -----------------
                                       Name: Pearce Landry
                                       Title: Vice President


                                    GENERAL ELECTRIC CAPITAL
                                       CORPORATION


                                    By:/s/ Brian P. Ward
                                       -----------------
                                       Name: Brian P. Ward
                                       Title: Manager - Operations




<PAGE>



                                    DRESDNER KLEINWORT BENSON  PRIVATE
                                    EQUITY PARTNERS LP


                                    By:Dresdner Kleinwort Benson Private Equity
                                       LLC

                                    Its:General Partner

                                    By:/s/ Alexander P. Coleman
                                       ------------------------
                                       Name: Alexander P. Coleman
                                       Title: Authorized Person



                                    By:/s/ I. D. Leigh
                                       ---------------
                                       Name: I. D. Leigh
                                       Title: Authorized Person


                                    75 WALL STREET ASSOCIATES, LLC
                                    By:Kleinwort Benson (USA) Inc.

                                    Its:Attorney-in-Fact


                                    By:/s/ Alexander P. Coleman
                                       ------------------------
                                       Name: Alexander P. Coleman
                                       Title: Authorized Person



                                    By:/s/ I. D. Leigh
                                       ---------------
                                       Name: I. D. Leigh
                                       Title: Authorized Person




<PAGE>



                                    LUCENT TECHNOLOGIES INC.



                                    By:/s/ Dina Fede
                                       -------------
                                       Name: Dina Fede
                                       Title: Director - NA Customer Finance






<PAGE>



                                    CIT LENDING SERVICES
                                    CORPORATION FORMERLY KNOWN AS
                                    NEWCOURT COMMERICIAL FINANCE
                                    CORPORATION



                                    By:/s/ James L. Hudak
                                       ------------------
                                       Name: James L. Hudak
                                       Title: