CERTIFICATE OF VOTING POWERS, DESIGNATIONS, PREFERENCES
              AND RELATIVE PARTICIPATING, OPTIONAL OR OTHER SPECIAL
                     RIGHTS AND QUALIFICATIONS, LIMITATIONS
                         AND RESTRICTIONS THEREOF OF THE
          SERIES F SENIOR REDEEMABLE, EXCHANGEABLE, PIK PREFERRED STOCK
                          OF KMC TELECOM HOLDINGS, INC.


                        _________________________________

                         Pursuant to Section 151 of the
                General Corporation Law of the State of Delaware

                        _________________________________


           As  contemplated  by Sections 141 and 242 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 June 1,
1999:

          WHEREAS,  pursuant to authority  conferred upon the Board of Directors
by the  Certificate  of  Incorporation,  as amended,  of said  Corporation  (the
"Certificate  of  Incorporation"),  said Board of  Directors,  at a meeting duly
called and held on  February 1, 1999,  adopted a  resolution  providing  for the
issuance   of  55,000   authorized   shares  of  Series  F  Senior   Redeemable,
Exchangeable,  PIK  Preferred  Stock (the  "Series F  Preferred  Stock"),  which
resolution is as follows:

          WHEREAS, the Board of Directors is authorized,  within the limitations
and restrictions stated in the Certificate of Incorporation,  as amended, to fix
by resolution or resolutions  the  designation of each series of preferred stock
and the powers, designations,  preferences and relative participating,  optional
or other rights,  if any, or the  qualifications,  limitations  or  restrictions
thereof,  including,  without  limiting the  generality of the  foregoing,  such
provisions  as  may  be  desired  concerning  voting,   redemption,   dividends,
dissolution  or the  distribution  of assets,  conversion or exchange,  and such
other  subjects or matters as may be fixed by resolution or  resolutions  of the
Board of Directors under the General Corporation Law of Delaware; and

          WHEREAS,  it is the desire of the Board of Directors,  pursuant to its
authority as aforesaid,  to authorize and fix the terms of a series of preferred
stock and the number of shares constituting such series;

          NOW, THEREFORE,  BE IT RESOLVED,  that there is hereby authorized such
series of preferred stock on the terms and with the provisions herein set forth:



<PAGE>
                                       2

I.   CERTAIN DEFINITIONS.

          As used herein,  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:

          "Acquired Indebtedness" means Indebtedness of a Person existing at the
     time such Person  becomes a Restricted  Subsidiary or assumed in connection
     with an Asset Acquisition by the Corporation or a Restricted Subsidiary and
     not  Incurred  in  connection  with,  or in  anticipation  of,  such Person
     becoming a Restricted  Subsidiary or such Asset Acquisition;  PROVIDED that
     Indebtedness  of such  Person  which  is  redeemed,  defeased,  retired  or
     otherwise  repaid at the time of or immediately  upon  consummation  of the
     transactions  by which such Person becomes a Restricted  Subsidiary or upon
     consummation of such Asset Acquisition shall not be Acquired Indebtedness.

          "Adjusted   Consolidated  Net  Income"  means,  for  any  period,  the
     aggregate  net  income  (or  loss) of the  Corporation  and its  Restricted
     Subsidiaries for such period  determined in conformity with GAAP;  PROVIDED
     that  the  following   items  shall  be  excluded  in  computing   Adjusted
     Consolidated Net Income (without duplication): (i) the net income (or loss)
     of any Person that is not a Restricted  Subsidiary  (or is an  Unrestricted
     Subsidiary),  except to the  extent of the  amount  of  dividends  or other
     distributions  actually paid to the  Corporation  or any of its  Restricted
     Subsidiaries  by such  Person or an  Unrestricted  Subsidiary  during  such
     period;  (ii)  solely  for  the  purposes  of  calculating  the  amount  of
     Restricted  Payments  that may be made  pursuant to clause  (iii)(B) of the
     first  paragraph of Section  XI(B) (and in such case,  except to the extent
     includable  pursuant to clause (i) above),  the net income (or loss) of any
     Person  accrued prior to the date it becomes a Restricted  Subsidiary or is
     merged into or  consolidated  with the Corporation or any of its Restricted
     Subsidiaries or all or substantially all of the property and assets of such
     Person  are  acquired  by  the   Corporation   or  any  of  its  Restricted
     Subsidiaries;  (iii) the net  income of any  Restricted  Subsidiary  to the
     extent  that  the   declaration   or  payment  of   dividends   or  similar
     distributions  by such  Restricted  Subsidiary of such net income is not at
     the time  permitted  by the  operation  of the terms of its  charter or any
     agreement,   instrument,   judgment,   decree,   order,  statute,  rule  or
     governmental regulation applicable to such Restricted Subsidiary (except to
     the extent such  restriction  has been legally  waived);  (iv) any gains or
     losses (on an after-tax  basis)  attributable  to Asset Sales including for
     purposes  hereof the items  referred to in clauses  (b), (c) and (e) of the
     definition of "Asset Sale" or the termination of  discontinued  operations;
     (v) except for purposes of  calculating  the amount of Restricted  Payments
     that may be made  pursuant  to clause  (iii)(B) of the first  paragraph  of
     Section XI(B),  any amount paid or accrued as dividends on Preferred  Stock
     (including  the  Series  F  Preferred  Stock)  of  the  Corporation  or any
     Restricted  Subsidiary  owned by Persons other than the Corporation and any
     of  its  Restricted   Subsidiaries;   (vi)  all  extraordinary   gains  and
     extraordinary losses; (vii) the cumulative effect of a change in accounting
     principles since the High Yield Closing Date; and (viii) at the irrevocable
     election of the Corporation for each  occurrence,  any net after-tax income
     (loss) from  discontinued  operations;  PROVIDED  that for  purposes of any

<PAGE>
                                       3


     subsequent Investment in the entity conducting such discontinued operations
     pursuant to Section XI(B),  such entity shall be treated as an Unrestricted
     Subsidiary until such  discontinued  operations have actually been disposed
     of.

          "Adjusted  Consolidated Net Tangible Assets" means the total amount of
     assets of the Corporation and its Restricted  Subsidiaries (less applicable
     depreciation,  amortization  and other valuation  reserves),  except to the
     extent resulting from write-ups of capital assets  (excluding  write-ups in
     connection with accounting for acquisitions in conformity with GAAP), after
     deducting  therefrom (i) all current liabilities of the Corporation and its
     Restricted   Subsidiaries  (excluding  intercompany  items)  and  (ii)  all
     goodwill, trade names, trademarks,  patents,  unamortized debt discount and
     expense  and other like  intangibles,  all as set forth on the most  recent
     quarterly or annual  consolidated  balance sheet of the Corporation and its
     Restricted Subsidiaries, prepared in conformity with GAAP.

          "Affiliate" means, as applied to any Person, any other Person directly
     or  indirectly  controlling,  controlled  by, or under  direct or  indirect
     common  control  with,  such  Person.  For  purposes  of  this  definition,
     "control" (including,  with correlative meanings,  the terms "controlling,"
     "controlled by" and "under common control with"), as applied to any Person,
     means the  possession,  directly or  indirectly,  of the power to direct or
     cause the direction of the management and policies of such Person,  whether
     through the ownership of voting securities, by contract or otherwise.

          "Asset  Acquisition" means (i) an investment by the Corporation or any
     of its Restricted  Subsidiaries  in any other Person pursuant to which such
     Person  shall  become a  Restricted  Subsidiary  or shall be merged into or
     consolidated with the Corporation or any of its Restricted  Subsidiaries or
     (ii)  an  acquisition   by  the   Corporation  or  any  of  its  Restricted
     Subsidiaries  of the  property  and  assets of any  Person  other  than the
     Corporation  or  any  of  its  Restricted   Subsidiaries   that  constitute
     substantially all of a division or line of business of such Person.

          "Asset Sale" means any sale, transfer or other disposition  (including
     by way of  merger,  consolidation  or  sale-leaseback  transaction)  in one
     transaction or a series of related  transactions  by the Corporation or any
     of its Restricted  Subsidiaries to any Person other than the Corporation or
     any of its Restricted  Subsidiaries  of (i) all or any of the Capital Stock
     of any Restricted Subsidiary, (ii) all or substantially all of the property
     and assets of an operating  unit or business of the  Corporation  or any of
     its Restricted  Subsidiaries  or (iii) any other property and assets (other
     than the Capital Stock or other  Investment in an Unrestricted  Subsidiary)
     of  the  Corporation  or any of its  Restricted  Subsidiaries  outside  the
     ordinary   course  of  business  of  the  Corporation  or  such  Restricted
     Subsidiary  and, in each case, that is not governed by Section IX; PROVIDED
     that "Asset  Sale" shall not  include  (a) sales or other  dispositions  of
     inventory,  receivables  and  other  current  assets,  (b)  sales  or other
     dispositions of assets for  consideration at least equal to the fair market
     value  of  the  assets  sold  or  disposed  of,  to  the  extent  that  the
     consideration  received  would  constitute  property  or assets of the kind
     described in clause (i)(B) of Section  XI(F),  (c) a disposition of cash or
     Temporary Cash Investments, (d) any Restricted Payment that is permitted to
     be made, and is made, in accordance with Section XI(B),  (e) sales or other

<PAGE>
                                       4


     dispositions  of  assets  with a fair  market  value  (as  certified  in an
     Officers'  Certificate)  not in excess  of $2  million  (PROVIDED  that any
     series of related  sales or  dispositions  in excess of $2 million shall be
     considered  "Asset  Sales"),  (f)  the  lease,  assignment  of a  lease  or
     sub-lease  of any real or  personal  property  in the  ordinary  course  of
     business, (g) foreclosures on assets, (h) pledges of assets or stock by the
     Corporation or any of its Restricted Subsidiaries otherwise permitted under
     this   Certificate  of   Designations,   including  such  pledges  securing
     Indebtedness under the Newcourt Facility or under the Lucent Facility,  (i)
     the  issuance  of the  Warrants  to  Newcourt  Finance  and  Lucent  by the
     Corporation  and (j) the exercise of the  Warrants by Newcourt  Finance and
     Lucent and the  exercise of common  stock  warrants by Newcourt  Finance in
     respect of KMC Telecom, (k) the issuance of the Preferred Stock Warrants to
     First Union by the Corporation, and (l) the exercise of the Preferred Stock
     Warrants by First Union.

          "Average Life" means, at any date of determination with respect to any
     debt  security,  the  quotient  obtained  by  dividing  (i)  the sum of the
     products of (a) the number of years from such date of  determination to the
     dates of each successive  scheduled principal payment of such debt security
     and (b) the  amount of such  principal  payment by (ii) the sum of all such
     principal payments.

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

          "Board  Resolution"  means a copy of a  resolution,  certified  by the
     Secretary or  Assistant  Secretary  of the  Corporation  as required by the
     context to have been duly  adopted by the Board of  Directors  and to be in
     full force and effect on the date of such  certification,  and delivered to
     the Transfer Agent.

          "Business Day" means a day other than a Saturday,  Sunday or other day
     on which  commercial  banks in New York City are  authorized or required by
     law to close.

          "Capital Stock" means, with respect to any Person, any and all shares,
     interests, participations or other equivalents (however designated, whether
     voting or non-voting) in equity of such Person,  whether outstanding on the
     Closing  Date or issued  thereafter,  including,  without  limitation,  all
     Common Stock,  Preferred  Stock  (including the Series F Preferred  Stock),
     partnership or membership  interests and any other right to receive a share
     of the  profits and losses of, or  distributions  of assets of, the issuing
     Person.

          "Capitalized  Lease" means, as applied to any Person, any lease of any
     property (whether real,  personal or mixed) of which the discounted present
     value of the rental  obligations  of such Person as lessee,  in  conformity
     with GAAP,  is required  to be  capitalized  on the  balance  sheet of such
     Person.

          "Capitalized  Lease  Obligations" means the amount of the liability in
     respect of a  Capitalized  Lease that would at such time be  required to be
     capitalized  and  reflected as a liability on a balance  sheet  prepared in
     accordance with GAAP.


<PAGE>
                                       5


          "Change  of  Control"  means  such time as (i) a  "person"  or "group"
     (within the meaning of Sections  13(d) and  14(d)(2) of the  Exchange  Act)
     becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under the
     Exchange  Act) of more than 50% of the  total  voting  power of the  Voting
     Stock of the  Corporation  on a fully  diluted  basis  and  such  ownership
     represents  a greater  percentage  of the total  voting power of the Voting
     Stock of the  Corporation,  on a fully diluted  basis,  than is held by the
     Existing  Stockholders on such date; or (ii) individuals who on the Closing
     Date  constitute  the Board of Directors  (together  with any new directors
     whose  election by the Board of Directors or whose  nomination by the Board
     of Directors for election by the Corporation's stockholders was approved by
     a vote of at least a majority of the members of the Board of Directors then
     in office who either were  members of the Board of Directors on the Closing
     Date or  whose  election  or  nomination  for  election  was so  previously
     approved)  cease for any reason to  constitute a majority of the members of
     the Board of Directors then in office.

          "Closing Date" means February 4, 1999.

          "Commission"  means the  Securities  and Exchange  Commission  and any
     successor agency having similar powers.

          "Common  Stock" means the Common Stock,  par value $.01 per share,  of
     the Corporation and any other class of common stock hereafter authorized by
     the Corporation from time to time.

          "Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
     Income for such period  plus,  to the extent  such  amount was  deducted in
     calculating  such  Adjusted   Consolidated  Net  Income,  (i)  Consolidated
     Interest  Expense,  (ii) income  taxes  (other than  income  taxes  (either
     positive or negative) attributable to extraordinary and non-recurring gains
     or  losses  or  sales  of  assets),   (iii)  depreciation   expense,   (iv)
     amortization  expense and (v) all other non-cash  items  reducing  Adjusted
     Consolidated  Net Income  (other than items that will require cash payments
     and for which an  accrual  or  reserve  is, or is  required  by GAAP to be,
     made),  less all  non-cash  items  increasing  (or,  in the case of a loss,
     decreasing) Adjusted Consolidated Net Income,  determined,  with respect to
     clauses (ii),  (iii) and (iv), on a consolidated  basis for the Corporation
     and its Restricted  Subsidiaries in conformity with GAAP; PROVIDED that, if
     any  Restricted  Subsidiary  is not a Wholly Owned  Restricted  Subsidiary,
     Consolidated  EBITDA shall be reduced (to the extent not otherwise  reduced
     in  accordance  with  GAAP) by an  amount  equal to (A) the  amount  of the
     Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
     multiplied by (B) the percentage  ownership  interest in the income of such
     Restricted  Subsidiary  not  owned on the last  day of such  period  by the
     Corporation or any of its Restricted Subsidiaries.

          "Consolidated  Interest Expense" means, for any period,  the aggregate
     amount  (without  duplication)  of  interest  in  respect  of  Indebtedness
     (including, without limitation,  amortization of original issue discount on
     any   Indebtedness  and  the  interest  portion  of  any  deferred  payment
     obligation,  calculated in accordance with the effective interest method of

<PAGE>
                                       6


     accounting; all commissions, discounts and other fees and charges owed with
     respect to letters of credit and  bankers'  acceptance  financing;  the net
     costs  associated with Interest Rate Agreements;  and Indebtedness  that is
     Guaranteed  or  secured  by  the  Corporation  or  any  of  its  Restricted
     Subsidiaries)  and the interest  component of Capitalized Lease Obligations
     paid,  accrued or scheduled to be paid or to be accrued by the  Corporation
     and its Restricted Subsidiaries during such period; EXCLUDING, HOWEVER, (i)
     any amount of such interest of any Restricted  Subsidiary if the net income
     of such  Restricted  Subsidiary is excluded in the  calculation of Adjusted
     Consolidated Net Income pursuant to clause (iii) of the definition  thereof
     (but  only in the same  proportion  as the net  income  of such  Restricted
     Subsidiary is excluded from the  calculation of Adjusted  Consolidated  Net
     Income  pursuant to clause  (iii) of the  definition  thereof) and (ii) any
     premiums,  fees and  expenses  (and any  amortization  thereof)  payable in
     connection with the Lucent Facility, the Newcourt Facility and the offering
     of the  Series E  Preferred  Stock,  the Series F  Preferred  Stock and the
     Senior Discount Notes,  all as determined on a consolidated  basis (without
     taking into account Unrestricted Subsidiaries) in conformity with GAAP.

          "Consolidated  Leverage  Ratio" means,  on any  Transaction  Date, the
     ratio of (i) the aggregate  amount of  Indebtedness  of the Corporation and
     its Restricted  Subsidiaries  on a consolidated  basis  outstanding on such
     Transaction  Date to (ii) the aggregate  amount of Consolidated  EBITDA for
     the then most recent four fiscal quarters for which financial statements of
     the Corporation  have been provided to the Transfer Agent (such four fiscal
     quarter period being the "Four Quarter  Period");  PROVIDED that, in making
     the foregoing calculation, PRO FONNA effect shall be given to the following
     events which occur from the  beginning of the Four Quarter  Period  through
     the Transaction  Date (the "Reference  Period"):  (i) the Incurrence of the
     Indebtedness  with respect to which the  computation  is being made and (if
     applicable)  the  application of the net proceeds  therefrom,  including to
     refinance other Indebtedness, as if such Indebtedness was incurred, and the
     application of such proceeds occurred, at the beginning of the Four Quarter
     Period;  (ii)  the  Incurrence,   repayment  or  retirement  of  any  other
     Indebtedness by the Corporation and its Restricted  Subsidiaries  since the
     first day of the Four Quarter Period as if such  Indebtedness was incurred,
     repaid or retired at the beginning of the Four Quarter Period; (iii) in the
     case  of  Acquired  Indebtedness,  the  related  acquisition,  as  if  such
     acquisition  occurred at the beginning of the Four Quarter Period; (iv) any
     acquisition  or  disposition   by  the   Corporation   and  its  Restricted
     Subsidiaries  of any  corporation  or any business or any assets out of the
     ordinary course of business,  whether by merger,  stock purchase or sale or
     asset purchase or sale or any related  repayment of  Indebtedness,  in each
     case  since  the  first  day of the  Four  Quarter  Period,  assuming  such
     acquisition  or  disposition  had been  consummated on the first day of the
     Four  Quarter  Period and after giving PRO FORMA effect to net cost savings
     that the  Corporation  reasonably  believes  in good faith  could have been
     achieved during the Four Quarter Period as a result of such  acquisition or
     disposition  (PROVIDED that both (A) such cost savings were  identified and
     quantified in an Officers'  Certificate  delivered to the Transfer Agent at
     the time of the consummation of the acquisition or disposition and (B) with
     respect to each acquisition or disposition  completed prior to the 90th day
     preceding such date of  determination,  actions were commenced or initiated
     by the  Corporation  within 90 days of such  acquisition  or disposition to

<PAGE>
                                       7


     effect such cost savings identified in such Officers'  Certificate and with
     respect to any other acquisition or disposition, such Officers' Certificate
     sets  forth the  specific  steps to be taken  within the 90 days after such
     acquisition or disposition to accomplish  such cost savings);  and PROVIDED
     FURTHER  that (x) in making such  computation,  the  Consolidated  Interest
     Expense  attributable  to  interest on any  Indebtedness  computed on a PRO
     FORMA basis and (A) bearing a floating  interest  rate shall be computed as
     if the rate in effect on the date of  computation  had been the  applicable
     rate for the  entire  period and (B) which was not  outstanding  during the
     period  for which the  computation  is being made but which  bears,  at the
     option of the  Corporation,  a fixed or floating rate of interest  shall be
     computed by applying, at the option of the Corporation, either the fixed or
     floating  rate,  and  (y) in  making  such  computation,  the  Consolidated
     Interest  Expense  of  the  Corporation  attributable  to  interest  on any
     Indebtedness  under a  revolving  credit  facility  computed on a PRO FORMA
     basis shall be computed  based upon the PRO FORMA  average daily balance of
     such Indebtedness  during the applicable  period; and (v) the occurrence of
     any of the events  described in clauses  (i)-(iv)  above by any Person that
     has become a  Restricted  Subsidiary  or has been  merged  with or into the
     Corporation or any Restricted Subsidiary during such Reference Period.

          "Consolidated   Net  Worth"  means,  at  any  date  of  determination,
     stockholders'  equity as set forth on the most recently available quarterly
     or annual consolidated  balance sheet of the Corporation and its Restricted
     Subsidiaries  (which  shall be as of a date not more than 90 days  prior to
     the  date of such  computation,  and  which  shall  not take  into  account
     Unrestricted  Subsidiaries),  less any amounts attributable to Disqualified
     Stock  or  any  equity  security   convertible  into  or  exchangeable  for
     Indebtedness,  the cost of treasury  stock and the principal  amount of any
     promissory  notes  receivable  from  the sale of the  Capital  Stock of the
     Corporation  or  any  of  its  Restricted  Subsidiaries,  each  item  to be
     determined  in  conformity  with GAAP  (excluding  the  effects  of foreign
     currency exchange  adjustments under Financial  Accounting  Standards Board
     Statement of Financial Accounting Standards No. 52).

          "Corporation"   means  KMC   Telecom   Holdings,   Inc.,   a  Delaware
     corporation.

          "Currency  Agreement"  means any foreign exchange  contract,  currency
     swap agreement or other similar agreement or arrangement.

          "Disqualified Stock" means any class or series of Capital Stock of any
     Person that by its terms or otherwise is (i) required to be redeemed  prior
     to the  Mandatory  Redemption  Date,  (ii)  redeemable at the option of the
     holder of such  class or series of  Capital  Stock at any time prior to the
     Mandatory  Redemption Date or (iii)  convertible  into or exchangeable  for
     Capital  Stock  referred  to in clause  (i) or (ii)  above or  Indebtedness
     having  a  scheduled  maturity  prior  to the  Mandatory  Redemption  Date;
     PROVIDED  that any  Capital  Stock that would not  constitute  Disqualified
     Stock  but for  provisions  thereof  giving  holders  thereof  the right to
     require  such Person to  repurchase  or redeem such  Capital  Stock (or the
     security for which such Capital Stock is convertible  into or  exchangeable
     for)  upon the  occurrence  of an  "asset  sale"  or  "change  of  control"
     occurring  prior to the  Mandatory  Redemption  Date  shall not  constitute

<PAGE>
                                       8


     Disqualified  Stock if the "asset  sale" or "change of control"  provisions
     applicable  to such  Capital  Stock (or the security for which such Capital
     Stock is convertible into or exchangeable for) are no more favorable to the
     holders of such Capital Stock (or the security for which such Capital Stock
     is convertible into or exchangeable  for) than the provisions  contained in
     Section  XI(F)  and  Article  VIII  below  and such  Capital  Stock (or the
     security for which such Capital Stock is convertible  into or  exchangeable
     for)  specifically  provides that such Person will not repurchase or redeem
     any such  stock  pursuant  to such  provision  prior  to the  Corporation's
     repurchase  of  such  Series  F  Preferred  Stock  as  are  required  to be
     repurchased pursuant to Section XI(F) and Article VIII below.

          "Dividend  Payment Date" means any Redemption Date,  January 15, April
     15,  July 15 and  October  15 and any  other  date on which  dividends  are
     payable or may be paid, as determined by the Board of Directors.

          "Dividend  Record Date" means,  with respect to each Dividend  Payment
     Date,  the close of  business  on the date set forth next to such  Dividend
     Payment Date below:

          DIVIDEND PAYMENT DATE                       DIVIDEND RECORD DATE
               January 15                                  January 1
               April 15                                    April 1
               July 15                                     July 1
               October 15                                  October 1

     or such other  record date as may be  designated  by the Board of Directors
     with  respect to dividends  payable on such other  Dividend  Payment  Date;
     PROVIDED,  HOWEVER,  that such  record date may not be more than 60 days or
     less than ten days prior to such  Dividend  Payment  Date. If any scheduled
     Dividend  Record Date is not a Business Day, then such Dividend Record Date
     shall be the Business Day  immediately  preceding such  scheduled  Dividend
     Record Date.

          "Exchange  Act" shall mean the  Securities  Exchange  Act of 1934,  as
     amended.

          "Existing  Stockholders"  means Harold N. Kamine,  his  Affiliates and
     Nassau.

          "fair  market  value"  means the price  that  would be paid in an arm'
     s-length  transaction  between an  informed  and  willing  seller  under no
     compulsion to sell and an informed and willing buyer under no compulsion to
     buy,  as  determined  in  good  faith  by the  Board  of  Directors,  whose
     determination  shall be  conclusive  if  evidenced  by a Board  Resolution;
     PROVIDED  that for  purposes  of clause  (vii) of the second  paragraph  of
     Section XI(A),  (x) the fair market value of any security  registered under
     the Exchange Act shall be the average of the closing  prices,  regular way,
     of such security for the 20 consecutive trading days immediately  preceding
     the sale of Capital Stock and (jy) in the event the  aggregate  fair market
     value of any other property (other than cash or cash equivalents)  received
     by the  Corporation  exceeds  $100  million,  the fair market value of such
     property shall be determined by a nationally  recognized investment banking
     firm or a nationally  recognized firm having expertise in the specific area

<PAGE>
                                       9


     which is the subject of such  determination  and set forth in their written
     opinion which shall be delivered to the Transfer Agent.

          "First  Union" means First Union  Investors,  Inc.,  a North  Carolina
     corporation.

          "GAAP" means generally  accepted  accounting  principles in the United
     States  of  America  as in  effect  as of  the  High  Yield  Closing  Date,
     including,  without  limitation,  those  set  forth  in  the  opinions  and
     pronouncements of the Accounting Principles Board of the American Institute
     of Certified Public  Accountants and statements and  pronouncements  of the
     Financial  Accounting  Standards Board or in such other  statements by such
     other  entity  as  approved  by a  significant  segment  of the  accounting
     profession.  All ratios and  computations  contained or referred to in this
     Certificate  of  Designations  shall be  computed in  conformity  with GAAP
     applied on a consistent  basis,  except that calculations made for purposes
     of  determining  compliance  with the terms of the covenants and with other
     provisions of this Certificate of Designations shall be made without giving
     effect to (i) the amortization of any expenses  incurred in connection with
     the Lucent  Facility,  the  Newcourt  Facility,  the offering of the Senior
     Discount  Notes,  the Series E  Preferred  Stock and the Series F Preferred
     Stock and (ii)  except  as  otherwise  provided,  the  amortization  of any
     amounts  required or permitted by Accounting  Principles Board Opinion Nos.
     16 and 17.

          "Guarantee"  means any  obligation,  contingent or  otherwise,  of any
     Person directly or indirectly  guaranteeing  any  Indebtedness of any other
     Person  and,  without  limiting  the  generality  of  the  foregoing,   any
     obligation, direct or indirect, contingent or otherwise, of such Person (i)
     to purchase or pay (or advance or supply  funds for the purchase or payment
     of) such  Indebtedness of such other Person  (whether  arising by virtue of
     partnership  arrangements,  or by  agreements  to  keep-well,  to  purchase
     assets,  goods,  securities or services (unless such purchase  arrangements
     are on  arm's-length  terms and are entered into in the ordinary  course of
     business), to take-or-pay, or to maintain financial statement conditions or
     otherwise)  or (ii)  entered  into for  purposes  of  assuring in any other
     manner  the  obligee  of such  Indebtedness  of the  payment  thereof or to
     protect such obligee against loss in respect thereof (in whole or in part);
     PROVIDED  that the term  "Guarantee"  shall not  include  endorsements  for
     collection  or  deposit  in the  ordinary  course  of  business.  The  term
     "Guarantee" used as a verb has a corresponding meaning.

          "High Yield Closing Date" means January 29, 1998.

          "Holder"  means a  registered  holder of shares of Series F  Preferred
     Stock.

          "Incur" means,  with respect to any  Indebtedness,  to incur,  create,
     issue, assume, Guarantee or otherwise become liable for or with respect to,
     or become responsible for, the payment of, contingently or otherwise,  such
     Indebtedness,  including an "Incurrence" of Acquired Indebtedness; PROVIDED
     that  neither the accrual of interest nor the  accretion of original  issue
     discount shall be considered an Incurrence of Indebtedness.


<PAGE>
                                       10


          "Indebtedness"  means,  with  respect  to any  Person  at any  date of
     determination  (without  duplication),  (i) all indebtedness of such Person
     for borrowed money, (ii) all obligations of such Person evidenced by bonds,
     debentures,  notes or other similar  instruments,  (iii) all obligations of
     such  Person in respect of letters of credit or other  similar  instruments
     (including  reimbursement  obligations with respect thereto,  but excluding
     trade letters of credit),  (iv) all  obligations  of such Person to pay the
     deferred and unpaid purchase price of property or services,  which purchase
     price is due more than six months after the date of placing  such  property
     in service or taking  delivery and title thereto or the  completion of such
     services,  except Trade Payables and accrued current liabilities arising in
     the ordinary course of business,  (v) all Capitalized  Lease Obligations of
     such Person,  (vi) all Indebtedness  referred to in clauses (i) through (v)
     hereof of other  Persons  secured  by a Lien on any  asset of such  Person,
     whether or not such  Indebtedness is assumed by such Person;  PROVIDED that
     the amount of such Indebtedness  shall be the lesser of (A) the fair market
     value of such  asset at such date of  determination  and (B) the  amount of
     such  Indebtedness,  (vii) all Indebtedness of other Persons  Guaranteed by
     such Person to the extent such  Indebtedness  is  Guaranteed by such Person
     and  (viii)  to the  extent  not  otherwise  included  in this  definition,
     obligations  under Currency  Agreements and Interest Rate  Agreements.  The
     amount of  Indebtedness  of any Person at any date shall be the outstanding
     balance  at such  date  (or,  in the case of a  revolving  credit  or other
     similar  facility,  the total  amount of funds  outstanding  on the date of
     determination)  of all  unconditional  obligations as described  above and,
     with respect to  contingent  obligations,  the maximum  liability  upon the
     occurrence of the  contingency  giving rise to the  obligation of the types
     described  above,  PROVIDED (A) that the amount  outstanding at any time of
     any Indebtedness  issued with original issue discount is the original issue
     price of such  Indebtedness,  (B) that money  borrowed and set aside at the
     time of the Incurrence of any  Indebtedness in order to prefund the payment
     of  the  interest  on  such   Indebtedness   shall  not  be  deemed  to  be
     "Indebtedness"  and (C) that  Indebtedness  shall not include any liability
     for federal, state, local or other taxes.

          "Interest  Rate   Agreement"   means  any  interest  rate   protection
     agreement,  interest rate future agreement, interest rate option agreement,
     interest rate swap  agreement,  interest rate cap agreement,  interest rate
     collar agreement,  interest rate hedge agreement, option or future contract
     or other similar agreement or arrangement.

          "Investment"  means,  with respect to any Person,  all  investments by
     such Person in other Persons in the form of any direct or indirect advance,
     loan or other extension of credit (including, without limitation, by way of
     Guarantee or similar  arrangement;  but excluding  advances to customers in
     the ordinary course of business that are, in conformity with GAAP, recorded
     as accounts  receivable  on the  balance  sheet of the  Corporation  or its
     Restricted  Subsidiaries  and  commissions,  travel and similar advances to
     officers and employees made in the ordinary  course of business) or capital
     contribution  to (by means of any  transfer  of cash or other  property  to
     others or any  payment for  property or services  for the account or use of
     others),  or any purchase or acquisition of Capital  Stock,  bonds,  notes,
     debentures  or other similar  instruments  issued by, such other Person and
     shall  include  (i)  the  designation  of a  Restricted  Subsidiary  as  an
     Unrestricted Subsidiary and (ii) the fair market value of the Capital Stock
     (or any other Investment), held by the Corporation or any of its Restricted

<PAGE>
                                       11


     Subsidiaries,  of (or in) any  Person  that has  ceased to be a  Restricted
     Subsidiary,  including,  without  limitation,  by reason of any transaction
     permitted by clause (iii) of Section  XI(D);  PROVIDED that the fair market
     value of the  Investment  remaining  in any Person  that has ceased to be a
     Restricted  Subsidiary shall not exceed the aggregate amount of Investments
     previously  made in such Person  valued at the time such  Investments  were
     made  less the net  reduction  of such  Investments.  For  purposes  of the
     definition of "Unrestricted Subsidiary" and Section XI(B), (i) "Investment"
     shall  include  the fair  market  value of the assets  (net of  liabilities
     (other  than  liabilities  to the  Corporation  or  any  of its  Restricted
     Subsidiaries))  of  any  Restricted   Subsidiary  at  the  time  that  such
     Restricted  Subsidiary is designated an Unrestricted  Subsidiary,  (ii) the
     fair market value of the assets (net of liabilities (other than liabilities
     to  the  Corporation  or  any  of  its  Restricted  Subsidiaries))  of  any
     Unrestricted  Subsidiary at the time that such  Unrestricted  Subsidiary is
     designated  a  Restricted  Subsidiary  shall  be  considered  reduction  in
     outstanding  Investments  and (iii) any property  transferred to or from an
     Unrestricted  Subsidiary  shall be valued at its fair  market  value at the
     time of such transfer.

          "Investment  Grade Securities" means (i) securities issued or directly
     and fully  guaranteed  or insured by the United  States  government  or any
     agency or instrumentality thereof, (ii) debt securities or debt instruments
     with a rating of BBB+ or higher by S&P or Baal or higher by  Moody's or the
     equivalent of such rating by such rating organization,  or, if no rating by
     S&P or Moody's  then  exists,  the  equivalent  of such rating by any other
     nationally  recognized  securities  rating  agency,  but excluding any debt
     securities  or  instruments   constituting  loans  or  advances  among  the
     Corporation  and its  Subsidiaries,  and (iii)  investment in any fund that
     invests  exclusively in investment of the type described in clauses (i) and
     (ii) which fund may also hold cash pending investment and/or distribution.

          "Junior  Securities"  has the meaning  provided in Article III hereof.
     "KMC Telecom" means KMC Telecom Inc, a Delaware  corporation.  "KMC Telecom
     II" means KMC Telecom II, Inc., a Delaware  corporation.  "KMC Telecom III"
     means KMC Telecom III, Inc., a Delaware corporation.

          "Lien" means any mortgage,  pledge,  security  interest,  encumbrance,
     lien or charge of any kind (including,  without limitation, any conditional
     sale or other title  retention  agreement or lease in the nature thereof or
     any agreement to give any security interest).

          "Lucent" means Lucent Technologies Inc., a Delaware corporation.

          "Lucent  Facility" means the vendor financing  facility between Lucent
     and  KMC  Telecom  III and KMC  Telecom  Leasing  III  LLC,  providing  for
     aggregate  borrowings  of up to $600  million  and  maturing  on the eighth
     anniversary of the closing of such credit facility.

          "Mandatory Redemption Date" means February 1, 2011.


<PAGE>
                                       12


          "Moody's" means Moody's Investors Service, Inc. and its successors.

          "Nassau" means Nassau Capital  Partners L.P., NAS Partners I L.L.C. or
     their respective successors, and their Affiliates.

          "Net Cash  Proceeds"  means (a) with  respect to any Asset  Sale,  the
     proceeds  of  such  Asset  Sale in the  form  of cash or cash  equivalents,
     including  payments  in respect of  deferred  payment  obligations  (to the
     extent corresponding to the principal, but not interest, component thereof)
     when received in the form of cash or cash equivalents (except to the extent
     such  obligations  are financed or sold with recourse to the Corporation or
     any  Restricted  Subsidiary)  and  proceeds  from the  conversion  of other
     property  received when converted to cash or cash  equivalents,  net of (i)
     brokerage  commissions and other commissions,  fees and expenses (including
     fees and expenses of counsel,  accountants and investment  bankers) related
     to such  Asset  Sale  and any  relocation  expenses  incurred  as a  result
     thereof,  (ii)  provisions  for all taxes  (whether  or not such taxes will
     actually  be paid or are  payable)  as a result of such Asset Sale  without
     regard to the consolidated results of operations of the Corporation and its
     Restricted  Subsidiaries,  taken as a whole,  (iii)  payments made to repay
     Indebtedness or any other obligation  outstanding at the time of such Asset
     Sale that either (A) is secured by a Lien on the property or assets sold or
     (B) is  required  to be paid as a result of such sale and (iv)  appropriate
     amounts to be provided by the Corporation or any Restricted Subsidiary as a
     reserve against any liabilities associated with such Asset Sale, including,
     without limitation,  pension and other post-employment benefit liabilities,
     liabilities  related to  environmental  matters and  liabilities  under any
     indemnification  obligations  associated  with  such  Asset  Sale,  all  as
     determined in conformity  with GAAP, and (b)with respect to any issuance or
     sale of Capital Stock, the proceeds of such issuance or sale in the form of
     cash or cash equivalents, including payments in respect of deferred payment
     obligations  (to  the  extent  corresponding  to  the  principal,  but  not
     interest,  component  thereof)  when  received  in the form of cash or cash
     equivalents  (except to the extent such  obligations  are  financed or sold
     with recourse to the Corporation or any Restricted Subsidiary) and proceeds
     from the  conversion of other  property  received when converted to cash or
     cash equivalents,  net of attorney's fees, accountants' fees, underwriters'
     or  placement  agents'  fees,   discounts  or  commissions  and  brokerage,
     consultant and other fees incurred in connection with such issuance or sale
     and net of taxes paid or payable as a result thereof.

          "Newcourt  Capital"  means  Newcourt  Capital  USA,  Inc.,  a Delaware
     corporation.

          "Newcourt  Facility" means the Loan and Security Agreement dated as of
     December 22, 1998 among KMC Telecom,  KMC Telecom II, and Newcourt  Finance
     and any  other  lenders  or  borrowers  from  time to time  party  thereto,
     collateral  documents,  instruments,  and agreements executed in connection
     therewith  and  any  amendments,  supplements,  modifications,  extensions,
     renewals, restatements, refinancings or refundings thereof.


<PAGE>
                                       13


          "Newcourt  Finance" means  Newcourt  Commercial  Finance  Corporation,
     formerly  known  as  AT&T  Commercial  Finance   Corporation,   a  Delaware
     corporation, and its successors.

          "Offer to  Purchase"  means an offer to  purchase  Series F  Preferred
     Stock by the Corporation from the Holders  commenced by mailing a notice to
     the Transfer Agent and each Holder  stating:  (i) the covenant  pursuant to
     which the offer is being made and that all Series F Preferred Stock validly
     tendered  will be accepted for payment on a PRO RATA basis,  together  with
     any  other  Parity   Securities   subject  to  similar  offer  to  purchase
     provisions;  (ii) the purchase price and the date of purchase  (which shall
     be a Business  Day no earlier  than 30 days nor later than 60 days from the
     date such notice is mailed) (the "Payment  Date");  (iii) that any Series F
     Preferred Stock not tendered will continue to accrue dividends  pursuant to
     its terms; (iv) that, unless the Corporation defaults in the payment of the
     purchase price,  any Series F Preferred Stock accepted for payment pursuant
     to the Offer to Purchase  shall cease to accrue  dividends on and after the
     Payment  Date;  (v) that each  Holder  electing  to have Series F Preferred
     Stock  purchased  pursuant  to the Offer to  Purchase  will be  required to
     surrender  to the  Transfer  Agent at the address  specified  in the notice
     prior to the close of business on the  Business Day  immediately  preceding
     the  payment  date such  holder's  certificate  representing  such Series F
     Preferred  Stock,  together with the form entitled "Option of the Holder to
     Elect  Purchase"  appearing  on the reverse side of such Series F Preferred
     Stock certificate completed, (vi) that Holders will be entitled to withdraw
     their  election if the Paying Agent  receives,  not later than the close of
     business on the third Business Day immediately  preceding the Payment Date,
     a telegram, facsimile transmission or letter setting forth the name of such
     Holder,  the  liquidation  preference of Series F Preferred Stock delivered
     for purchase and a statement that such Holder is  withdrawing  its election
     to have such Series F Preferred  Stock  purchased;  and (vii) that  Holders
     whose  Series F  Preferred  Stock is being  purchased  only in part will be
     issued new Series F Preferred Stock equal in liquidation  preference to the
     unpurchased  portion of the Series F Preferred  Stock  surrendered.  On the
     Payment Date,  the  Corporation  shall (i) accept for payment on a PRO RATA
     basis Series F Preferred Stock,  together with any other Parity  Securities
     subject  to similar  offer to  purchase  provisions,  or  portions  thereof
     tendered  pursuant to an Offer to  Purchase;  (ii)  deposit with the Paying
     Agent money  sufficient to pay the purchase price of all Series F Preferred
     Stock,  together with any other Parity Securities  subject to similar offer
     to purchase provisions, or portions thereof so accepted; and (iii) deliver,
     or cause to be  delivered,  to the  Transfer  Agent all Series F  Preferred
     Stock  or  portions   thereof  so  accepted   together  with  an  Officers'
     Certificate  specifying  shares of the Series F Preferred Stock or portions
     thereof  accepted  for payment by the  Corporation.  The Paying Agent shall
     promptly  mail to the  Holders  of  Series F  Preferred  Stock so  accepted
     payment in an amount equal to the purchase  price,  and the Transfer  Agent
     shall promptly authenticate and mail to such Holders new shares of Series F
     Preferred Stock equal in liquidation  preference to any unpurchased portion
     of the Series F Preferred Stock surrendered.  The Corporation will publicly
     announce the results of an Offer to Purchase as soon as  practicable  after
     the Payment Date.  The Transfer  Agent shall act as the Paying Agent for an
     Offer to Purchase.  The  Corporation  will comply with Rule 14e-1 under the
     Exchange Act and any other  securities laws and  regulations  thereunder to
     the extent such laws and regulations are applicable,  in the event that the

<PAGE>
                                       14


     Corporation is required to repurchase  Series F Preferred Stock pursuant to
     an Offer to Purchase.

          "Officer" means with respect to the  Corporation,  (i) the Chairman of
     the  Board,  the Vice  Chairman  of the  Board,  the  President,  the Chief
     Executive  Officer,  the Chief Financial  Officer or a Vice president,  and
     (ii) the  Treasurer or any  Assistant  Treasurer,  or the  Secretary or any
     Assistant Secretary of the Corporation.

          "Officers'  Certificate"  means a  certificate  signed by one  Officer
     listed in clause (i) of the  definition  thereof and one Officer  listed in
     clause (ii) of the definition  thereof;  PROVIDED,  HOWEVER,  that any such
     certificate  may be signed by any two of the Officers  listed in clause (i)
     of the definition  thereof in lieu of being signed by one Officer listed in
     clause (i) of the definition  thereof and one Officer listed in clause (ii)
     of the definition thereof.

          "Parity Securities" has the meaning specified in Article III hereof.

          "Permitted Investment" means (i) an Investment in the Corporation or a
     Restricted  Subsidiary  or a Person  which  will,  upon the  making of such
     Investment,  become a Restricted  Subsidiary  or be merged or  consolidated
     with or into or transfer or convey all or substantially  all its assets to,
     the  Corporation  or a Restricted  Subsidiary;  PROVIDED that such person's
     primary  business is related,  ancillary or complementary to the businesses
     of the  Corporation  and its  Restricted  Subsidiaries  on the date of such
     Investment;   (ii)  Temporary  Cash   Investments   and  Investment   Grade
     Securities;  (iii)  payroll,  travel and similar  advances to cover matters
     that are expected at the time of such advances  ultimately to be treated as
     expenses  in  accordance  with  GAAP  and  reasonable   advances  to  sales
     representatives;  (iv) any Investment acquired by the Corporation or any of
     its  Restricted  Subsidiaries  (x) in exchange for any other  Investment or
     accounts  receivable  held  by  the  Corporation  or  any  such  Restricted
     Subsidiary  in  connection  with or as a result of a  bankruptcy,  workout,
     reorganization or  recapitalization  of the issuer of such other Investment
     or  accounts  receivable  or  (y)  as a  result  of a  foreclosure  by  the
     Corporation  or any of its  Restricted  Subsidiaries  with  respect  to any
     secured  Investment or other  transfer of title with respect to any secured
     Investment in default; (v) any Investment acquired in consideration for the
     issuance of Junior  Securities  or the  proceeds of the  issuance of Junior
     Securities to the extent such amounts have not been previously applied to a
     Restricted Payment pursuant to clause (iii)(B)(2) of the first paragraph of
     Section  XI(B) or clause (ii) of the second  paragraph of Section  XI(B) or
     used to support the Incurrence of Indebtedness pursuant to clause (viii) in
     accordance  with  Section  XI(A)  and  Investments  acquired  as a  capital
     contribution;  (vi) Guarantees  permitted by Section XI(A);  (vii) loans or
     advances to employees of the Corporation or any Restricted  Subsidiary that
     do not in the aggregate  exceed at any one time  outstanding  $5.0 million;
     (viii)  Currency  Agreements and Interest Rate  Agreements  permitted under
     Section XI(A); (ix) Investments in prepaid expenses, negotiable instruments
     held  for  collection  and  lease,   utility  and  workers'   compensation,
     performance and other similar deposits;  (x) Investments in debt securities
     or other evidences of Indebtedness  that are issued by companies engaged in
     the  Telecommunications   Business;  PROVIDED  that  when  each  Investment

<PAGE>
                                       15


     pursuant to this clause (x) is made,  the aggregate  amount of  Investments
     outstanding  under  this  clause  (x) does not exceed  $3.0  million;  (xi)
     Strategic  Investments  and  Investments in Permitted  Joint Ventures in an
     amount not to exceed $20.0  million at any one time  outstanding;  (xii) an
     Investment  in any  Person  the  primary  business  of  which  is  related,
     ancillary  or  complementary  to the  business of the  Corporation  and its
     Subsidiaries  on the date of such  Investment in an amount not to exceed at
     any time in  respect  of all such  Investments  outstanding  the sum of (x)
     $200.0 million plus (y) 40% of the  Corporation's  Consolidated  EBITDA, if
     positive,  for the immediately  preceding four fiscal  quarters  (valued in
     each  case  as  provided  in  the  definition  of  "Investments");   (xiii)
     securities   received  in  connection   with  Asset  Sales  to  the  extent
     constituting  non-cash  consideration  permitted  under Section XI(F);  and
     (xiv)  Investments  in an amount  not to exceed  $50.0  million at any time
     outstanding.

          "Permitted  Joint  Venture" means any  Unrestricted  Subsidiary or any
     other  Person in which the  Corporation  or a Restricted  Subsidiary  owns,
     directly or  indirectly,  an  ownership  interest  (other than a Restricted
     Subsidiary)   and  whose   primary   business  is  related,   ancillary  or
     complementary  to the  businesses  of the  Corporation  and its  Restricted
     Subsidiaries at the time of determination.

          "Person"  means any  individual,  partnership,  corporation,  business
     trust,   joint   stock   company,   limited   liability   company,   trust,
     unincorporated association,  joint venture, governmental authority or other
     entity of whatever nature.

          "Preferred Stock" means any and all shares, interests,  participations
     or other  equivalents of the Corporation's  preferred stock,  including any
     such security with any priority over Common Stock with respect to dividends
     or upon liquidation or similar events.

          "Preferred Stock Warrants" means any warrants that may be issued under
     the Preferred Stock Warrant Agreement.

          "Preferred Stock Warrant Agreement" means the Warrant Agreement, dated
     as of April 30,  1999,  among the  Corporation,  First  Union and The Chase
     Manhattan Bank as warrant agent.

          "Public Equity Offering" means an underwritten primary public offering
     of Common Stock of the  Corporation  pursuant to an effective  registration
     statement under the Securities Act.

          "Purchase  Agreement" means the Securities Purchase Agreement dated as
     of February 4, 1999 among the Corporation, Newcourt Finance and Lucent.

          "Redemption  Date",  when used with  respect to any Series F Preferred
     Stock to be  redeemed,  means  the date  fixed  for such  redemption  by or
     pursuant to the terms of this Certificate of Designations.


<PAGE>
                                       16


          "Redemption  Price"  means,  with  respect  to any  share of  Series F
     Preferred  Stock, the price at which such share of Series F Preferred Stock
     is  to  be  redeemed   pursuant  to  the  terms  of  this   Certificate  of
     Designations.

          "Restricted  Subsidiary" means any Subsidiary of the Corporation other
     than an Unrestricted Subsidiary.

          "Securities  Act" means the  Securities  Act of 1933,  as amended from
     time to time, or any successor statute.

          "Senior  Discount  Note  Indenture"  means the  Indenture  dated as of
     January 29, 1998  between the  Corporation  and The Chase  Manhattan  Bank,
     relating to the Senior  Discount  Notes,  as such Indenture may be amended,
     supplemented,  extended,  renewed, replaced or otherwise modified from time
     to time.

          "Senior  Discount  Notes" means the 12 1/2 % Senior Discount Notes due
     2008 issued by the Corporation under the Senior Discount Note Indenture.

          "Senior Securities" has the meaning provided in Article III hereof.

          "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.

          "Significant  Subsidiary"  means,  any  Subsidiary  that  would  be  a
     "significant   subsidiary"  as  defined  in  17  CFR  Part  210.   1-01(w),
     promulgated pursuant to the Securities Act, as such regulation is in effect
     on the date hereof.

          "S&P" means Standard & Poor's Ratings  Services,  a Division of McGraw
     Hill, Inc., and its successors.

          "Stated  Maturity"  means (i) with respect to any debt  security,  the
     date  specified in such debt  security as the fixed date on which the final
     installment  of principal of such debt security is due and payable and (ii)
     with respect to any  scheduled  installment  of principal of or interest on
     any debt  security,  the date  specified in such debt security as the fixed
     date on which such installment is due and payable.


<PAGE>
                                       17


          "Strategic  Investments"  means  (a)  Investments  that  the  Board of
     Directors has  determined in good faith will enable the  Corporation or any
     of its Restricted  Subsidiaries to obtain additional business that it might
     not be able to obtain without making such Investment and (b) Investments in
     entities  the  principal  function  of which  is to  perform  research  and
     development  with  respect to  products  and  services  that may be used or
     useful in the Telecommunications Business; PROVIDED that the Corporation or
     one of its  Restricted  Subsidiaries  is entitled or  otherwise  reasonably
     expected to obtain  rights to such products or services as a result of such
     Investment.

          "Strategic  Subordinated   Indebtedness"  means  Indebtedness  of  the
     Corporation  Incurred to finance the acquisition of a Person engaged in the
     Telecommunications  Business  that by its  terms,  or by the  terms  of any
     agreement or instrument pursuant to which such Indebtedness is outstanding,
     (i) is  expressly  made  subordinate  in right  of  payment  to the  Senior
     Discount  Notes and (ii) provides that no payment of principal,  premium or
     interest on, or any other payment with respect to, such Indebtedness may be
     made prior to the payment in full of all of the  Corporation's  obligations
     under the Series F Preferred Stock and the Senior Discount Notes;  PROVIDED
     that such  Indebtedness  may provide for and be repaid at any time from the
     proceeds of the sale of Capital  Stock (other than  Disqualified  Stock) of
     the Corporation after the Incurrence of such Indebtedness.

          "Subsidiary"  means, with respect to any Person,  (i) any corporation,
     association,  or other business  entity (other than a partnership) of which
     more than 50% of the total voting power of shares of Capital Stock entitled
     (without  regard  to the  occurrence  of any  contingency)  to  vote in the
     election  of  directors,  managers  or  trustees  thereof is at the time of
     determination owned or controlled,  directly or indirectly,  by such Person
     or one or more of the other  Subsidiaries  of such Person or a  combination
     thereof and (ii) any partnership,  joint venture, limited liability company
     or  similar  entity  of which (x) more  than 50% of the  capital  accounts,
     distribution  rights,  total  equity  and  voting  interests  or general or
     limited  partnership  interests,  as  applicable,  are owned or controlled,
     directly  or  indirectly,  by  such  Person  or one or  more  of the  other
     Subsidiaries of such Person or a combination thereof whether in the form of
     membership,  general,  special or limited  partnership or otherwise and (y)
     such Person or any Wholly Owned  Restricted  Subsidiary of such Person is a
     general partner or otherwise controls such entity.

          "Telecommunications  Business"  means the  development,  ownership  or
     operation  of one or  more  telephone,  telecommunications  or  information
     systems or the provision of telephony,  telecommunications  or  information
     services  (including,  without  limitation,  any voice, video transmission,
     data or Internet  services)  and any related,  ancillary  or  complementary
     business.

          "Temporary  Cash  Investment"  means any of the following:  (i) direct
     obligations  of the  United  States of  America  or any  agency  thereof or
     obligations  fully and  unconditionally  guaranteed by the United States of
     America  or any  agency  or  instrumentality  thereof,  (ii)  time  deposit
     accounts,  certificates  of deposit,  eurodollar  time  deposits  and money

<PAGE>
                                       18


     market deposits maturing within 180 days or less of the date of acquisition
     thereof issued by a bank or trust company which is organized under the laws
     of the United States of America,  any state thereof or any foreign  country
     recognized by the United States of America, and which bank or trust company
     has capital,  surplus and undivided  profits  aggregating  in excess of $50
     million (or the foreign  currency  equivalent  thereof) and has outstanding
     debt which is rated "A" (or such similar equivalent rating) or higher by at
     least one nationally recognized statistical rating organization (as defined
     in Rule 436 under the Securities Act) or any money-market fund sponsored by
     a registered  broker dealer or mutual fund  distributor,  (iii)  repurchase
     obligations with a term of not more than 30 days for underlying  securities
     of the types  described  in clauses (i) and (ii) above  entered into with a
     bank  meeting the  qualifications  described  in clause  (ii)  above,  (iv)
     commercial  paper,  maturing  not  more  than 90  days  after  the  date of
     acquisition,  issued  by a  corporation  (other  than an  Affiliate  of the
     Corporation) organized and in existence under the laws of the United States
     of America,  any state  thereof or any foreign  country  recognized  by the
     United  States  of  America  with a  rating  at the  time as of  which  any
     investment  therein is made of "P-1" (or  higher)  according  to Moody's or
     "A-1" (or higher)  according to S&P, (v) securities  with maturities of six
     months  or  less  from  the  date  of  acquisition   issued  or  fully  and
     unconditionally  guaranteed by any state,  commonwealth or territory of the
     United  States  of  America,  or by any  political  subdivision  or  taxing
     authority  thereof,  and  rated at least  "A" by S&P or  Moody's,  and (vi)
     investment  funds  investing  95% of their assets in securities of the type
     described in clauses (i)-(v) above.

          "Trade  Payables"  means,  with  respect to any Person,  any  accounts
     payable or any other indebtedness or monetary obligation to trade creditors
     created,  assumed or Guaranteed  by such Person or any of its  Subsidiaries
     arising  in  the  ordinary  course  of  business  in  connection  with  the
     acquisition of goods or services.

          "Transaction  Date"  means,  with  respect  to the  Incurrence  of any
     Indebtedness by the Corporation or any of its Restricted Subsidiaries,  the
     date  such  Indebtedness  is  to be  Incurred  and,  with  respect  to  any
     Restricted Payment, the date such Restricted Payment is to be made.

          "Transfer Agent" means Chase Mellon Shareholder Services, L.L.C.

          "Unrestricted  Subsidiary" means (i) any Subsidiary of the Corporation
     that at the time of  determination  shall  be  designated  an  Unrestricted
     Subsidiary by the Board of Directors in the manner provided below; and (ii)
     any Subsidiary of an  Unrestricted  Subsidiary.  The Board of Directors may
     designate any Restricted  Subsidiary (including any newly acquired or newly
     formed  Subsidiary of the  Corporation)  to be an  Unrestricted  Subsidiary
     unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien
     on any property of, the Corporation or any Restricted Subsidiary;  PROVIDED
     that (A) any Guarantee by the  Corporation or any Restricted  Subsidiary of
     any  Indebtedness of the Subsidiary  being so designated shall be deemed an
     "Incurrence" of such Indebtedness and an "Investment" by the Corporation or
     such  Restricted  Subsidiary  (or both, if  applicable) at the time of such
     designation;  (B) either (I) the  Subsidiary to be so designated  has total

<PAGE>
                                       19


     assets of $1,000 or less or (II) if such Subsidiary has assets greater than
     $1,000,  such  designation  would be permitted in  accordance  with Section
     XI(B);  and (C) if  applicable,  the  Incurrence  of  Indebtedness  and the
     Investment  referred to in clause (A) of this proviso would be permitted in
     accordance with Section XI(A) and Section XI(B). The Board of Directors may
     designate  any  Unrestricted  Subsidiary  to  be a  Restricted  Subsidiary;
     PROVIDED that all Indebtedness of such Unrestricted  Subsidiary outstanding
     immediately  after such  designation  would, if Incurred at such time, have
     been  permitted to be Incurred (and shall be deemed to have been  Incurred)
     for all purposes of this Certificate of Designations.  Any such designation
     by the Board of  Directors  shall be  evidenced  to the  Transfer  Agent by
     promptly  filing  with the  Transfer  Agent a copy of the Board  Resolution
     giving effect to such designation and an Officers'  Certificate  certifying
     that such designation complied with the foregoing provisions.

          "Voting Stock" means, with respect to any Person, Capital Stock of any
     class or kind  ordinarily  having  the  power to vote for the  election  of
     directors,  managers or other voting  members of the governing body of such
     Person.

          "Warrant  Agreement"  means the warrant  agreement,  dated the Closing
     Date, among the Corporation,  Newcourt  Finance,  Lucent and any Additional
     Purchaser (as described  therein) and The Chase  Manhattan Bank, as warrant
     agent.

          "Warrants"  means any  warrants  that may be issued  under the Warrant
     Agreement.

          "Wholly  Owned" means,  with respect to any  Subsidiary of any Person,
     the  ownership  of 95 % or more of the  outstanding  Capital  Stock of such
     Subsidiary  (other than any director's  qualifying shares or Investments by
     foreign nationals mandated by applicable law) by such Person or one or more
     Wholly Owned Subsidiaries of such Person.


II.  DESIGNATION.

          The series of Preferred Stock authorized hereunder shall be designated
as the "Series F Senior  Redeemable,  Exchangeable,  PIK Preferred Stock" and is
referred  to herein as the  "Series F  Preferred  Stock."  The  number of shares
constituting  such  series  shall  be  55,000.  The par  value  of the  Series F
Preferred Stock shall be $.01 per share of Series F Preferred Stock.  Each share
of  Series F  Preferred  Stock  purchased  from  the  Corporation  shall  have a
liquidation  preference of $1,000.  The Corporation may from time to time in its
discretion issue fractional shares of Series F Preferred Stock.


III. RANKING.

         The  Series  F  Preferred   Stock  shall,   with  respect  to  dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the  Corporation,  rank (i) senior to (A) all classes of Common  Stock of the
Corporation,  (B) each other class of Capital Stock or series of Preferred Stock
the  terms of  which  expressly  provide  that it ranks  junior  to,  and do not

<PAGE>
                                       20


expressly  provide  that it ranks  senior  to or on a parity  with the  Series F
Preferred  Stock  as  to  dividend  distributions  and  distributions  upon  the
liquidation,   winding-up   and   dissolution  of  the   Corporation,   (C)  the
Corporation's  Series  A  Cumulative   Convertible  Preferred  Stock,  Series  C
Cumulative  Convertible  Preferred  Stock,  and Series D Cumulative  Convertible
Preferred  Stock (all  securities  described  in this  clause  (i)  collectively
referred  to as  "Junior  Securities");  (ii) on a parity  with (A) any class of
Capital Stock or series of Preferred Stock the terms of which expressly  provide
that such  class or series  will rank on a parity  with the  Series F  Preferred
Stock as to  dividend  distributions  and  distributions  upon the  liquidation,
winding-up  and   dissolution  of  the  Corporation  and  (B)  Series  E  Senior
Redeemable,  Exchangeable, PIK Preferred Stock (all securities described in this
clause (ii) collectively referred to as "Parity  Securities");  and (iii) junior
to each class of Capital  Stock or series of Preferred  Stock the terms of which
expressly  provide  that such class or series  will rank  senior to the Series F
Preferred Stock as to dividend distributions and distributions upon liquidation,
winding-up,  and  dissolution or the  Corporation.  The Series F Preferred Stock
will be  subject  to the  issuance  of series of Junior  Securities  and  Parity
Securities, PROVIDED that the Corporation may not authorize, create or issue, or
increase the authorized  amount of, any new class of Parity Securities or Senior
Securities (or any class of any security  convertible  into shares of any Parity
Security or Senior  Security)  without the approval of the Holders of at least a
majority of the shares of Series F Preferred Stock then  outstanding,  voting or
consenting,  as the case may be, separately as one class,  except that,  without
the approval of Holders of the Series F Preferred  Stock,  the  Corporation  may
issue shares of Senior Securities (or any class of any security convertible into
shares of any Senior  Security)  in exchange  for, or the  proceeds of which are
used to redeem or repurchase, (1) all (but not less than all) shares of Series E
Preferred  Stock and  Series F  Preferred  Stock  then  outstanding,  or (2) the
Indebtedness of the  Corporation.  The Series E Preferred Stock and the Series F
Preferred  Stock  (together  with any other Parity  Securities)  shall also with
respect to any redemption or repurchase by the Corporation of its Capital Stock,
rank  senior to the Junior  Securities,  except as  provided in Section 3 of the
Shareholders Agreement.

IV.  DIVIDENDS.

          (A) Holders of Series F Preferred  Stock shall be entitled to receive,
when,  as and if  declared  by the  Board of  Directors,  out of  funds  legally
available  therefor,  dividends  on the Series F  Preferred  Stock at a rate per
annum equal to 14.5% of the liquidation preference per share, payable quarterly.
All dividends will be cumulative, whether or not earned or declared, accruing on
a daily basis, whether or not there are profits,  surplus or other funds legally
available  for the payment of such  dividends,  from the date of issuance of the
Series F  Preferred  Stock and will be  payable  quarterly  in  arrears  on each
Dividend  Payment Date,  commencing on April 15, 1999. On and before January 15,
2004, the Corporation may pay dividends, at its option, in cash or in additional
fully  paid and  nonassessable  shares of  Series F  Preferred  Stock  having an
aggregate  liquidation  preference equal to the amount of such dividends rounded
to the nearest  $1.00.  After January 15, 2004,  dividends must be paid in cash,
unless the Corporation's  debt securities  prohibit such payment or there are no
funds  legally  available  therefor,  in  which  case  dividends  may be paid in
additional  fully  paid and  nonassessable  shares of Series F  Preferred  Stock
having an aggregate liquidation preference equal to the amount of such dividends
rounded to the nearest $1.00.  If any dividend (or portion  thereof)  payable on
any  Dividend  Payment  Date is not  declared  or paid in full on such  Dividend

<PAGE>
                                       21


Payment  Date,  the amount of accrued  and unpaid  dividends  will accrue at the
dividend  rate on the Series F Preferred  Stock,  compounding  quarterly,  until
declared and paid in full.

          (B) No full  dividends  may be declared or paid or funds set apart for
the payment of dividends  on any Parity  Securities  for any period  unless full
cumulative dividends shall have been or contemporaneously  shall be declared and
paid in full on the Series F Preferred Stock. If full dividends are not so paid,
the Series F  Preferred  Stock shall  share  dividends  PRO RATA with the Parity
Securities.  No  dividends  may be paid or set apart for such  payment on Junior
Securities (except dividends on Junior Securities in additional shares of Junior
Securities)  and no Junior  Securities or Parity  Securities may be repurchased,
redeemed  or  otherwise  retired  nor may funds be set apart  for  payment  with
respect  thereto if full  cumulative  dividends  shall not have been paid on the
Series F Preferred Stock.

          (C) Each  dividend  paid on the  Series  F  Preferred  Stock  shall be
payable to Holders of record as their names shall  appear in the stock ledger of
the  Corporation  on the  Dividend  Record Date for such  dividend,  except that
dividends in arrears for any past Dividend Payment Date may be declared and paid
at any time without  reference to such regular  Dividend Payment Date to Holders
of record on a later dividend record date determined by the Board of Directors.


V.   LIQUIDATION PREFERENCE.

          (A) Upon any  voluntary or  involuntary  liquidation,  dissolution  or
winding-up  of the  Corporation,  holders  of Series F  Preferred  Stock will be
entitled  to be  paid,  out  of the  assets  of the  Corporation  available  for
distribution,  $1,000  per share,  plus an amount in cash  equal to accrued  and
unpaid  dividends  thereon 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 distribution is made on any Junior Securities. If, upon
any  voluntary or  involuntary  liquidation,  dissolution  or  winding-up of the
Corporation,  the amounts  payable with respect to the Series F Preferred  Stock
and all other Parity  Securities are not paid in full, the holders of the Series
F Preferred  Stock and the Parity  Securities  will share equally and ratably in
any  distribution  of  assets  of the  Corporation  in  proportion  to the  full
liquidation  preference  and  accrued  and  unpaid  dividends  to which  each is
entitled.  After payment of the full amount of the  liquidation  preferences and
accrued and unpaid dividends to which they are entitled, the holders of Series F
Preferred  Stock  will  not be  entitled  to any  further  participation  in any
distribution of assets of the Corporation.

          (B) For the purposes of this Article V only,  neither the sale, lease,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration)  of all or  substantially  all of the  property  or assets of the
Corporation nor the  consolidation or merger of the Corporation with or into one
or more  corporations  shall  be  deemed  to be a  liquidation,  dissolution  or
winding-up of the Corporation.


VI.  REDEMPTION.


<PAGE>
                                       22


          (A)  MANDATORY  REDEMPTION.  The  Series F  Preferred  Stock  shall be
subject to  mandatory  redemption  (subject to the legal  availability  of funds
therefor and any  contractual  or other  restrictions  with respect  thereto) in
whole on the Mandatory  Redemption Date at a Redemption Price,  payable in cash,
equal to the  liquidation  preference  thereof on the  Redemption  Date plus all
accrued and unpaid dividends thereon to the Redemption Date.

          (B) OPTIONAL REDEMPTION.  The Series F Preferred Stock may be redeemed
at any time, at the  Corporation's  option, in whole or in part, at a Redemption
Price,  payable in cash, equal to 110% of the liquidation  preference thereof on
the  Redemption  Date,  plus an amount in cash equal to all  accrued  and unpaid
dividends thereon to the Redemption Date.

          No optional  redemption may be authorized or made unless prior thereto
full  unpaid  cumulative  dividends  shall have been paid or a sum set apart for
such payment on the Series F Preferred Stock.

          (C)  PROCEDURE  FOR  REDEMPTION.  (i) Not more than sixty (60) and not
less than thirty (30) days prior to the  Redemption  Date,  written  notice (the
"Redemption  Notice") shall be given by the  Corporation by first-class  mail to
each Holder at such Holder's  address as the same appears on the stock ledger of
the Corporation;  PROVIDED, HOWEVER, that no failure to give such notice nor any
deficiency therein shall affect the validity of the procedure for the redemption
of any  shares  of Series F  Preferred  Stock to be  redeemed,  except as to the
Holders to whom the  Corporation  has failed to give such notice or except as to
the Holders whose notice was defective. The Redemption Notice shall state:

          (a) the Redemption Price;

          (b) the Redemption Date;

          (c) that the Holder is to surrender to the  Corporation,  at the place
     or  places   designated  in  such  Redemption   Notice,   its  certificates
     representing the shares of Series F Preferred Stock to be redeemed; and

          (d) the  name of any  bank or  trust  company  performing  the  duties
     referred to in Section VI(C)(iv) below.

          (ii) On or  before  the  Redemption  Date,  each  Holder  of  Series F
Preferred  Stock to be redeemed shall  surrender the certificate or certificates
representing such shares of Series F Preferred Stock to the Corporation,  in the
manner  and  at  the  place  designated  in the  Redemption  Notice,  and on the
Redemption  Date the full  Redemption  Price for such shares shall be payable in
cash to the Holder whose name appears in the stock ledger of the  Corporation as
the  owner  thereof,  and each  surrendered  certificate  shall be  returned  to
authorized but unissued shares of Preferred Stock of the Corporation.

          (iii)  Unless the  Corporation  defaults in the payment in full of the
applicable  Redemption  Price,  dividends on the Series F Preferred Stock called
for redemption  shall cease to accrue on the Redemption Date, and the Holders of

<PAGE>
                                       23


such shares shall cease to have any further  rights with respect  thereto on the
Redemption Date, other than the right to receive the Redemption Price.

          (iv) If a  Redemption  Notice  shall  have been  duly  given or if the
Corporation shall have given to the bank or trust company  hereinafter  referred
to irrevocable  authorization  promptly to give such notice, and if on or before
the Redemption  Date specified  therein the funds  necessary for such redemption
shall have been irrevocably and  indefeasibly  deposited by the Corporation with
such bank or trust  company in trust for the PRO RATA  benefit of the Holders of
the Series F Preferred Stock called for redemption,  then,  notwithstanding that
any  certificate  for  shares  so  called  for  redemption  shall  not have been
surrendered  for  cancellation,  from and  after the time of such  deposit,  all
shares so called, or to be so called pursuant to such irrevocable authorization,
for redemption  shall be deemed no longer to be outstanding  and all rights with
respect to such shares shall forthwith  cease and terminate,  excepting only the
right of the Holders  thereof to receive from such bank or trust  company at any
time after the time of such deposit the funds so  deposited,  without  interest.
Any interest accrued on such funds shall be paid to the Corporation from time to
time. Any funds so set aside or deposited,  as the case may be, and unclaimed at
the end of three years from such Redemption Date shall, to the extent  permitted
by law, be  released or repaid to the  Corporation,  after which  repayment  the
Holders of the shares to be  redeemed  shall  look only to the  Corporation  for
payment thereof.

          (v) In the event of partial  redemptions of Series F Preferred  Stock,
the shares to be redeemed will be  determined  PRO RATA or by lot, as determined
by the  Corporation,  except that the Corporation may redeem such shares held by
any holder of fewer than 100 shares without  regard to such PRO RATA  redemption
requirement.  If any Series F Preferred  Stock is to be  redeemed  in part,  the
Redemption  Notice that relates to such Series F Preferred Stock shall state the
portion of the  liquidation  preference  to be redeemed.  New shares of Series F
Preferred  Stock  having  an  aggregate  liquidation  preference  equal  to  the
unredeemed  portion  shall be  issued  in the name of the  Holder  thereof  upon
cancellation of the original Series F Preferred Stock.

          (vi)  Notwithstanding  anything  herein to the contrary,  a Redemption
Notice will be revocable if (i) it states that it is revocable and provides that
a notice  of  revocation  may be given  not less  than  five  days  prior to the
Redemption  Date by the  Corporation in accordance  with Article XVII hereof and
(ii) the Board of Directors determines that the availability of funds to pay the
Redemption  Price is subject to the closing of a financing and, at the time such
Redemption Notice is given, such closing is subject to uncertainty.


VII. VOTING RIGHTS.

          (A) The  Holders  of Series F  Preferred  Stock  shall  have no voting
rights except as set forth below and as otherwise provided by law.

          (B) (i) If and whenever (I) dividends on the Series F Preferred  Stock
are in arrears and remain unpaid with respect to four quarterly periods (whether
or not  consecutive),  (2) the  Corporation  fails to discharge  any  redemption
obligation  with  respect  to the  Series F  Preferred  Stock,  (3) a breach  or
violation  by the  Corporation  of the  provisions  of Article X occurs,  or the
Corporation  fails to exchange  Exchange  Debentures  for the Series F Preferred

<PAGE>
                                       24


Stock tendered for exchange on the exchange date, whether or not the Corporation
satisfies the conditions to permit such exchange,  (4) the Corporation  fails to
make a Change of Control Offer or cash payment with respect  thereto if required
by the  provisions of Article VIII or (5) a breach or violation of any provision
of Article IX or  Article  XI occurs  and is not  remedied  within 30 days after
notice thereof to the  Corporation by Holders of 25% or more of the  liquidation
preference  of the Series F Preferred  Stock then  outstanding  (each such event
referred to as a "Voting Rights Triggering Event"), then the number of directors
then  constituting the Board of Directors of the Corporation  shall be increased
by one director and the Holders of a majority of the then outstanding  shares of
Series F Preferred Stock,  voting as a single class,  shall be entitled to elect
one additional director at any annual meeting of shareholders or special meeting
held in place  thereof,  or at a  special  meeting  of the  Holders  of Series F
Preferred Stock called as hereinafter provided.

          (ii) Whenever a Voting Rights  Triggering  Event shall have  occurred,
voting  rights of the  Holders  of  Series F  Preferred  Stock may be  exercised
initially either at a special meeting of the Holders of Series F Preferred Stock
called as hereinafter  provided,  yr at any annual meeting of shareholders  held
for the  purpose of  electing  directors,  and  thereafter  at each such  annual
meeting or by the written  consent of the  Holders of Series F Preferred  Stock,
voting as a single class,  pursuant to the Delaware General Corporation Law. The
term of office of any such  elected  director  shall  expire at the next  annual
meeting of shareholders held for the purpose of electing directors, subject to a
new election of a director by the Holders of Series F Preferred Stock, voting as
a single class,  at each successive  annual meeting,  but such voting rights and
the term of office of any such elected director shall expire at such time as (A)
all dividends  accrued on Series F Preferred  Stock shall have been paid in full
and (B)  each  failure,  breach  or  default  referred  to in  paragraph  VII(B)
(i)(A)(2), (3), (4) and (5) above is remedied.

          (iii) At any time after a Voting  Rights  Triggering  Event shall have
occurred and such voting rights shall not already have been initially exercised,
a proper  officer of the  Corporation  may, and upon the written  request of any
Holder of Series F Preferred Stock  (addressed to the Secretary at the principal
office of the  Corporation)  shall,  call a special  meeting  of the  Holders of
Series F Preferred  Stock for the  election of a director to be elected by them,
voting as a single  class,  as herein  provided,  such call to be made by notice
similar to that provided in the Bylaws for a special meeting of the shareholders
or as required by law.

          (iv) Such meeting shall be held at the earliest  practicable date upon
the notice required for annual meetings of shareholders at the place for holding
annual  meetings of  shareholders  of the  Corporation  or, if none,  at a place
designated  by the  Secretary of the  Corporation.  If such meeting shall not be
called by a proper officer of the Corporation  within 30 days after the personal
service of such written request upon the Secretary of the Corporation, or within
30 days after mailing the same within the United  States,  by  registered  mail,
addressed to the  Secretary of the  Corporation  at its  principal  office (such
mailing  to  be  evidenced  by  the  registry   receipt  issued  by  the  postal
authorities),  then the  holders  of  record  of 10% of the  shares  of Series F
Preferred Stock then outstanding,  may designate in writing a Holder of Series F
Preferred Stock to call such meeting at the expense of the Corporation, and such
meeting may be called by such person so designated  upon the notice required for
annual  meetings  of  shareholders  and  shall be held at the  same  place as is
elsewhere  provided in this  paragraph  VII(B)(iv)  or at such other place as is
selected by such person so  designated.  Any Holder of Series F Preferred  Stock

<PAGE>
                                       25


that would be  entitled  to vote at any such  meeting  shall have  access to the
stock  books  of the  Corporation  for the  purpose  of  causing  a  meeting  of
shareholders  to be  called  pursuant  to  the  provisions  of  this  paragraph.
Notwithstanding  the  provisions  of this  paragraph,  however,  no such special
meeting shall be called during a period within 90 days immediately preceding the
date fixed for the next annual meeting of shareholders.

          (v) At any meeting held for the purpose of electing directors at which
the Holders of Series F Preferred  Stock,  voting as a single class,  shall have
the right to elect a director as provided  herein,  the presence in person or by
proxy of the  Holders of a majority of the then  outstanding  shares of Series F
Preferred  Stock shall be required and be  sufficient  to constitute a quorum of
such class for the election of a director by such class.  At any such meeting or
adjournment  thereof,  (x) the  absence  of a quorum of the  Holders of Series F
Preferred  Stock  shall not prevent the  election  of  directors  other than the
director to be elected by such Holders and the absence of a quorum or quorums of
the holders of Capital Stock  entitled to elect such other  directors  shall not
prevent  the  election  of a director  to be elected by the  Holders of Series F
Preferred Stock, voting as a single class, and (y) in the absence of a quorum of
the  holders  of any  class  of  stock  entitled  to vote  for the  election  of
directors, a majority of the holders present in person or by proxy of such class
shall have the power to adjourn the meeting for the election of directors  which
the  holders of such class are  entitled  to elect,  from time to time,  without
notice (except as required by law) other than announcement at the meeting, until
a quorum shall be present.

          (vi) The term of office of the  director  elected  by the  Holders  of
Series F Preferred Stock,  pursuant to paragraph VII(B)(i) in office at any time
when the aforesaid voting rights are vested in the Holders of Series F Preferred
Stock,  shall terminate upon the election of his/her successor by the Holders of
the Series F Preferred Stock at any meeting of  shareholders  for the purpose of
electing  directors.  Upon any  termination  of the  aforesaid  voting rights in
accordance with paragraph VII(B)(ii), the term of office of the director elected
pursuant to paragraph  VII(B)(i)  then in office shall  thereupon  terminate and
upon  such  termination  the  number  of  directors  constituting  the  Board of
Directors  shall,  without further action,  be reduced by one, subject always to
the increase of the number of directors pursuant to paragraph  VII(B)(i) in case
of the  future  right of the  Holders  of  Series F  Preferred  Stock to elect a
director as provided herein.

          (vii) If the director elected  pursuant to paragraph  VII(B)(ii) shall
cease to serve as director  before  his/her  term shall  expire,  the Holders of
Series F  Preferred  Stock  then  outstanding,  voting as a single  class,  at a
special meeting called as provided  above,  may elect a successor to hold office
for the unexpired terms of the director whose place shall be vacant.


VIII.CHANGE OF CONTROL.

          Upon the occurrence of a Change of Control,  the Corporation  shall be
required (subject to any contractual and other restrictions with respect thereto
and the legal  availability of funds therefor) to make an Offer to Purchase (the
"Change  of  Control  Offer")  to each  Holder  of Series F  Preferred  Stock to
repurchase all or any part, at the Holder's  option,  of such Holder's  Series F
Preferred  Stock  at a cash  purchase  price  equal  to 101% of the  liquidation

<PAGE>
                                       26


preference  thereof,  plus an amount in cash  equal to all  accrued  and  unpaid
dividends  (including  an amount in cash  equal to a prorated  dividend  for the
period  from the  immediately  preceding  Dividend  Payment  Date to the date of
purchase) (the "Change of Control Payment"). The Change of Control Offer must be
made within 30 days following the conclusion of all change of control offers for
the Corporation's debt securities, must remain open for at least 30 and not more
than 60 days and must  comply  with the  requirements  of Rule  14e-1  under the
Exchange Act and any other  securities  laws and  regulations  thereunder to the
extent such laws and regulations are applicable.  Prior to commencing any Change
of Control Offer,  the Corporation  shall first consummate any change of control
offer to  purchase  required to be made to any holder of its  Indebtedness.  The
Corporation  shall make the Change of Control Offer within 30 days following the
consummation  of any  mandatory  offers  to  purchase  and  any  other  required
repayments of the Corporation's Indebtedness resulting from a change of control.


IX.      CONSOLIDATION. MERGER AND SALE OF ASSETS.

          The  Corporation  shall not consolidate  with,  merge with or into, or
sell, convey,  transfer,  lease or otherwise dispose of all or substantially all
of its property and assets (as an entirety or  substantially  an entirety in one
transaction  or a series of related  transactions)  to, any Person or permit any
Person to merge with or into the Corporation  unless:  (i) the Corporation shall
be the continuing  Person, or the Person (if other than the Corporation)  formed
by such  consolidation  or into which the Corporation is merged or that acquired
or leased such  property and assets of the  Corporation  shall be a  corporation
organized and validly existing under the laws of the United States of America or
any  jurisdiction  thereof and the Series F Preferred  Stock shall be  converted
into or exchanged for and shall become shares of such successor company,  having
in respect of such successor company or resulting company substantially the same
powers, preferences and relative participating, optional or other special rights
and the  qualifications,  limitations or restrictions  thereon that the Series F
Preferred  Stock had  immediately  prior to such  transaction  in respect of the
Corporation;  (ii) immediately  after giving effect to such transaction on a PRO
FORMA  basis,  (A) the  Corporation  or any Person  becoming  the  successor  or
resulting company, as the case may be, shall have a Consolidated Net Worth equal
to or greater than the  Consolidated  Net Worth of the  Corporation  immediately
prior to such  transaction  or (B) the  Corporation  or any Person  becoming the
successor or resulting  company,  as the case may be, shall have a  Consolidated
Leverage  Ratio no more than the  greater  of (I) 6:1 and (II) the  Consolidated
Leverage  Ratio  of the  Corporation  immediately  prior  to  such  transaction;
PROVIDED that this clause (ii) shall not apply to a consolidation or merger with
or into a Wholly Owned Restricted Subsidiary with a positive net worth; PROVIDED
that,  in connection  with any such merger or  consolidation,  no  consideration
(other than  Capital  Stock  (other than  Disqualified  Stock) in the  surviving
Person or the Corporation) shall be issued or distributed to the stockholders of
the  Corporation;  and (iii) the  Corporation  delivers to the Transfer Agent an
Officers'  Certificate  (attaching  the arithmetic  computations  to demonstrate
compliance  with clause (ii)) and Opinion of Counsel,  in each case stating that
such consolidation, merger or transfer complies with this provision and that all
conditions  precedent provided for herein relating to such transaction have been
complied with; PROVIDED,  HOWEVER,  that clause (ii) above does not apply if, in
the good faith determination of the Board of Directors of the Corporation, whose
determination shall be evidenced by a Board Resolution, the principal purpose of

<PAGE>
                                       27


such  transaction is to change the state of incorporation of the Corporation and
any such  transaction  shall not have as one of its  purposes the evasion of the
foregoing limitations.

X.   EXCHANGE.

          (A) The Corporation  may, at the sole option of the Board of Directors
(subject to the legal  availability  of funds  therefor),  exchange all, but not
less than all,  of the  shares of Series F  Preferred  Stock  then  outstanding,
including  any  shares  of  Series F  Preferred  Stock  issued  as  payment  for
dividends, for a new series of senior subordinated debentures of the Corporation
(the  "Exchange  Debentures")  to  be  issued  pursuant  to  an  indenture  (the
"Indenture")  qualified  under  the Trust  Indenture  Act of 1939,  as  amended,
substantially  in the form  attached as an exhibit to the Purchase  Agreement (a
copy of which  shall be  provided  to any  Holder  upon  written  request to the
Secretary  of the  Corporation),  at any time  following  the date on which such
exchange is  permitted  by the terms of the  then-existing  Indebtedness  of the
Corporation and subject to the conditions contained in paragraph X(B) below. The
Exchange  Debentures will be issued in registered form, without coupons, be duly
executed,  authenticated  as of the date on which the exchange is effective  and
dated the date of  exchange.  In the event of an  exchange,  Holders of Series F
Preferred  shall  be  entitled  to  receive  on the  date of  exchange  Exchange
Debentures  having an aggregate  principal  amount equal to (i) the total of the
liquidation preference for each share of Series F Preferred exchanged, PLUS (ii)
an amount  equal to all  accrued  but  unpaid  dividends  payable  on such share
(including  a prorated  dividend for the period from the  immediately  preceding
Dividend Payment Date to the date of exchange). In the event such exchange would
result in the  issuance of Exchange  Debentures  in a principal  amount which is
less than $1,000 or which is not an integral  multiple of $1,000 (such principal
amount less than $1,000 or the difference  between such principal amount and the
highest integral of $1,000 which is less than such principal amount, as the case
may be, is hereinafter  referred to as the "Fractional  Principal Amount"),  the
Corporation may,  subject to any restrictions in the terms of the  then-existing
Indebtedness of the  Corporation,  at the option of the Board of Directors,  pay
cash to each  Holder  of  Series F  Preferred  in lieu of  Fractional  Principal
Amounts of Exchange Debentures  otherwise issuable upon exchange of the Series F
Preferred Stock. The Person entitled to receive the Exchange Debentures issuable
upon exchange shall be treated for all purposes as the registered holder of such
Exchange  Debentures as of the date of exchange.  The  Corporation  will mail to
each Holder of Series F  Preferred  Stock  written  notice of its  intention  to
exchange no less than 20 nor more than 60 days prior to the date of exchange.

          (B) As a condition of the right of the  Corporation  to issue Exchange
Debentures  in exchange  for the Series F Preferred  Stock under  paragraph  (A)
above,  on the date of  exchange,  (A) there  shall be legally  available  funds
sufficient  therefor;  (B) a  registration  statement  relating to the  Exchange
Debentures shall have been declared  effective under the Securities Act prior to
such exchange and shall continue to be effective on the date of exchange, or the
Corporation  shall  have  obtained  a written  opinion  of its  outside  counsel
reasonably  acceptable  to  Holders  of a  majority  of the  shares  of Series F
Preferred  Stock that an exemption  from the  registration  requirements  of the
Securities  Act is  available  for such  exchange  and that upon receipt of such
Exchange  Debentures  pursuant to such an exchange made in accordance  with such
exemption,  each holder of an Exchange Debenture that is not an Affiliate of the
Corporation  will not be subject to any  restrictions  imposed by the Securities
Act upon the resale of such  Exchange  Debenture,  and such  exemption is relied

<PAGE>
                                       28


upon by the  Corporation  for such  exchange,  (C) the Indenture and the trustee
thereunder  shall have been qualified  under the Trust Indenture Act of 1939, as
amended;  (D)  immediately  after giving effect to such exchange,  no default or
event  of  default  would  exist  under  any  of  the   Corporation's   existing
Indebtedness;  and (E) the Corporation shall have delivered to the Trustee under
the  Indenture  a  written  opinion  of  counsel,  dated  the date of  exchange,
regarding the  satisfaction  of the conditions set forth in clauses (A), (B) and
(C).


XI.  COVENANTS.

          (A)  LIMITATION ON INDEBTEDNESS

          (a)  The  Corporation  shall  not,  and  will  not  permit  any of its
Restricted  Subsidiaries  to, Incur any  Indebtedness  (other than  Indebtedness
existing  on  the  Closing  Date);  PROVIDED  that  the  Corporation  may  Incur
Indebtedness if, after giving effect to the Incurrence of such  Indebtedness and
the receipt and application of the proceeds therefrom, the Consolidated Leverage
Ratio would be greater than zero and less than 6:1.

          Notwithstanding  the  foregoing,  the  Corporation  and any Restricted
Subsidiary  (except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate principal amount not to
exceed $400 million;  (ii)  Indebtedness in existence on the Closing Date; (iii)
Indebtedness of the Corporation to a Restricted Subsidiary and Indebtedness of a
Restricted  Subsidiary  to the  Corporation  or another  Restricted  Subsidiary;
PROVIDED that such Indebtedness is made pursuant to an intercompany note and any
event which results in any such Restricted Subsidiary ceasing to be a Restricted
Subsidiary or any subsequent  transfer of such  Indebtedness  (other than to the
Corporation or another Restricted  Subsidiary) shall be deemed, in each case, to
constitute  an  Incurrence  of such  Indebtedness  not  permitted by this clause
(iii);  (iv)  Indebtedness  issued in exchange for, or the net proceeds of which
are used to  refinance  or refund,  then  outstanding  Indebtedness  (other than
Indebtedness  Incurred under clause (i),  (iii),  (v) or (ix) of this paragraph)
and any refinancings thereof in an amount not to exceed the amount so refinanced
or refunded (plus premiums, accrued interest, fees and expenses);  PROVIDED that
such  new  Indebtedness,  determined  as of the date of  Incurrence  of such new
Indebtedness,  does not mature or have a mandatory redemption or repurchase date
prior to the Stated  Maturity of the  Indebtedness to be refinanced or refunded,
and the Average Life of such new Indebtedness is at least equal to the remaining
Average Life of the Indebtedness to be refinanced or refunded;  (v) Indebtedness
(A) in respect of performance,  surety,  appeal bonds and completion  guarantees
provided in the ordinary course of business;  (B) under Currency  Agreements and
Interest Rate Agreements;  PROVIDED that such agreements (a) are designed solely
to protect the Corporation or its Restricted  Subsidiaries  against fluctuations
in foreign currency exchange rates or interest rates and (b) do not increase the
Indebtedness  of the  obligor  outstanding  at any time  (except  to the  extent
Incurred under another clause hereof) other than as a result of  fluctuations in
foreign  currency  exchange  rates  or  interest  rates  or by  reason  of fees,
indemnities and compensation payable thereunder; and (C) arising from agreements
providing  for   indemnification,   adjustment  of  purchase  price  or  similar
obligations,   or  from  Guarantees  or  letters  of  credit,  surety  bonds  or
performance  bonds  securing any  obligations  of the  Corporation or any of its
Restricted  Subsidiaries  pursuant to such agreements,  in each case Incurred in
connection with the disposition of any business, assets or Restricted Subsidiary
(other than Guarantees of Indebtedness  Incurred by any Person  acquiring all or

<PAGE>
                                       29


any portion of such business, assets or Restricted Subsidiary for the purpose of
financing  such  acquisition),  in a  principal  amount  not to exceed the gross
proceeds  actually  received by the Corporation or any Restricted  Subsidiary in
connection with such disposition;  (vi) Indebtedness of the Corporation,  to the
extent the net  proceeds  thereof are promptly (A) used to purchase the Series E
Preferred Stock and/or Series F Preferred Stock tendered in an Offer to Purchase
made as a result of a Change in Control or (B)  deposited  to defease the Senior
Discount  Notes or used to redeem all the Series E  Preferred  Stock or Series F
Preferred Stock; (vii) Indebtedness  Incurred to finance the cost (including the
cost  of   design,   development,   acquisition,   construction,   installation,
improvement,  transportation or integration) to acquire equipment,  inventory or
network assets (including  acquisitions by way of acquisitions of real property,
leasehold improvements, Capitalized Leases and acquisitions of the Capital Stock
of a Person  that  becomes a  Restricted  Subsidiary  to the  extent of the fair
market value of the  equipment,  inventory or network assets so acquired) by the
Corporation  or  a  Restricted   Subsidiary  after  the  Closing  Date;   (viii)
Indebtedness of the Corporation not to exceed, at any one time outstanding,  two
times the sum of (A) the Net Cash  Proceeds  received by the  Corporation  on or
after the Closing Date from the  issuance  and sale of its Capital  Stock (other
than  Disqualified  Stock)  to  a  Person  that  is  not  a  Subsidiary  of  the
Corporation, to the extent such Net Cash Proceeds have not been used pursuant to
clause (iii)(B)(2) of the first paragraph or clause (ii) of the second paragraph
of Section XI(B) or clause (v) of the definition of "Permitted  Investments"  to
make a  Restricted  Payment  and (B) 80% of the fair  market  value of  property
(other than cash and cash  equivalents)  received by the  Corporation  after the
Closing Date from the sale of its Capital Stock (other than Disqualified  Stock)
to a Person that is not a Subsidiary of the Corporation, to the extent such sale
of  Capital  Stock has not been used  pursuant  to  clause  (iii) of the  second
paragraph of Section  XI(B) to make a  Restricted  Payment;  PROVIDED  that such
Indebtedness  does not  mature  prior to the  Mandatory  Redemption  Date;  (ix)
Indebtedness  Incurred by the Corporation or any of its Restricted  Subsidiaries
constituting  reimbursement obligations with respect to letters of credit in the
ordinary course of business, including, without limitation, letters of credit in
respect of workers' compensation claims or self insurance, or other Indebtedness
with respect to reimbursement type obligations  regarding workers'  compensation
claims;  PROVIDED,  HOWEVER,  that upon the drawing of such letters of credit or
the Incurrence of such  Indebtedness,  such obligations are reimbursed within 30
days following such drawing or Incurrence;  (x) Indebtedness of Persons that are
acquired by the Corporation or any of its Restricted Subsidiaries or merged into
a Restricted  Subsidiary in  accordance  with the terms of this  Certificate  of
Designations;  PROVIDED that such  Indebtedness is not incurred in contemplation
of such acquisition or merger;  and PROVIDED FURTHER that after giving effect to
such  acquisition or merger,  either (x) the  Corporation  would be permitted to
incur at least $1.00 of  additional  Indebtedness  pursuant to the  Consolidated
Leverage  Ratio test set forth in the first sentence of this covenant or (y) the
Consolidated  Leverage  Ratio is lower (if greater than zero) or higher (if less
than  zero)  than  immediately  prior  to  such   acquisition;   (xi)  Strategic
Subordinated Indebtedness; and (xii) Indebtedness under the Lucent Facility.

          (b)  Notwithstanding  any other  provision of this Section XI(A),  the
maximum amount of Indebtedness  that the Corporation or a Restricted  Subsidiary
may Incur  pursuant to this  Section  XI(A) shall not be deemed to be  exceeded,
with  respect  to any  outstanding  Indebtedness  due  solely  to the  result of
fluctuations  in the exchange  rates of  currencies.  Accretion on an instrument

<PAGE>
                                       30


issued  at a  discount  will  not be  deemed  to  constitute  an  Incurrence  of
Indebtedness.

          (c) For purposes of determining any particular  amount of Indebtedness
pursuant to this Section XI(A), Guarantees, Liens or obligations with respect to
letters  of  credit   supporting   Indebtedness   otherwise   included   in  the
determination  of such particular  amount shall not be treated as  Indebtedness.
For purposes of determining  compliance  with this Section  XI(A),  in the event
that an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness  described  in the  above  clauses,  the  Corporation,  in its sole
discretion,  shall classif~' such item of  Indebtedness  and only be required to
include the amount and type of such Indebtedness in one of such clauses.

          (B)  LIMITATION ON RESTRICTED PAYMENTS

          The  Corporation  shall  not,  and shall  not  permit  any  Restricted
Subsidiary to,  directly or indirectly,  (i) declare or pay any dividend or make
any  distribution  on or with respect to its Junior  Securities  (other than (x)
dividends or  distributions  payable  solely in shares of its Junior  Securities
(other  than  Disqualified  Stock) or in options,  warrants  or other  rights to
acquire  shares  of  such  Junior  Securities  and  (y) pro  rata  dividends  or
distributions  on  Common  Stock of  Restricted  Subsidiaries  held by  minority
stockholders)  held  by  Persons  other  than  the  Corporation  or  any  of its
Restricted Subsidiaries,  (ii) purchase, redeem, retire or otherwise acquire for
value any shares of Junior  Securities  of(A) the Corporation or an Unrestricted
Subsidiary  (including options,  warrants or other rights to acquire such shares
of Junior  Securities)  held by any Person or (B) a Restricted  Subsidiary other
than a Wholly Owned Restricted Subsidiary (including options,  warrants or other
rights to acquire such shares of Junior Securities) held by any Affiliate of the
Corporation (other than a Wholly Owned Restricted Subsidiary), or (iii) make any
Investment,  other than a Permitted Investment,  in any Person (such payments or
any  other   actions   described  in  clauses  (i)  through  (iii)  above  being
collectively  "Restricted Payments") if, at the time of, and after giving effect
to, the proposed  Restricted  Payment:  (A) the  Corporation  could not Incur at
least $1.00 of  Indebtedness  under the first paragraph of Section XI(A), or (B)
the aggregate  amount of all Restricted  Payments (the amount,  if other than in
cash,  to  be  determined  in  good  faith  by  the  Board  of  Directors  whose
determination  shall be  conclusive  and evidenced by a Board  Resolution)  made
after the Closing Date shall exceed the sum of(l) 50% of the aggregate amount of
the  Adjusted  Consolidated  Net Income (or, if the  Adjusted  Consolidated  Net
Income  is a  loss,  minus  100% of the  amount  of such  loss)  (determined  by
excluding  income  resulting  from  transfers of assets by the  Corporation or a
Restricted  Subsidiary to an  Unrestricted  Subsidiary)  accrued on a cumulative
basis during the period (taken as one accounting  period) beginning on the first
day of the fiscal quarter  immediately  following the Closing Date and ending on
the last day of the last fiscal quarter preceding the Transaction Date for which
reports have been provided to the Transfer  Agent plus (2) 100% of the aggregate
Net Cash Proceeds and the actual market value of marketable  securities  (on the
date the calculation  hereunder is made) received by the  Corporation  after the
Closing  Date  from the  issuance  and sale  permitted  by this  Certificate  of
Designations  of its Capital Stock (other than  Disqualified  Stock) to a Person
who is not a  Subsidiary  of the  Corporation,  including  an  issuance  or sale
permitted by this Certificate of Designations of Indebtedness of the Corporation
for cash subsequent to the Closing Date upon the conversion of such Indebtedness
into Capital Stock (other than Disqualified  Stock) of the Corporation,  or from

<PAGE>
                                       31


the  issuance  to a Person who is not a  Subsidiary  of the  Corporation  of any
options,  warrants or other rights to acquire  Capital Stock of the  Corporation
(in each case,  exclusive of any Disqualified Stock or any options,  warrants or
other rights that are redeemable at the option of the holder, or are required to
be redeemed,  prior to the Mandatory Redemption Date), and the Net Cash Proceeds
from any capital  contributions  to the Corporation  after the Closing Date from
Persons other than Subsidiaries of the Corporation,  in each case excluding such
Net Cash  Proceeds to the extent used to Incur  Indebtedness  pursuant to clause
(viii) of the second  paragraph of Section XI(A) and excluding Net Cash Proceeds
from the  issuance  of  Capital  Stock to the  extent  used to make a  Permitted
Investment in accordance  with clause (v) of such defined term, PLUS (3) amounts
received  from  Investments  (other than  Permitted  Investments)  in any Person
resulting from payments of interest on  Indebtedness,  dividends,  repayments of
loans or advances, or other transfers of assets, in each case to the Corporation
or any Restricted  Subsidiary or from the Net Cash Proceeds from the sale of any
such  Investment  (except,  in each  case,  to the  extent  any such  payment or
proceeds are included in the calculation of Adjusted  Consolidated  Net Income),
or from redesignations of Unrestricted  Subsidiaries as Restricted  Subsidiaries
(valued in each case as provided in the  definition  of  "Investments"),  not to
exceed,  in  each  case,  the  amount  of  Investments  previously  made  by the
Corporation  or  any  Restricted  Subsidiary  in  such  Person  or  Unrestricted
Subsidiary or (C) dividends on Series F Preferred Stock shall not have been paid
in full as provided in this Certificate of Designations.

          The  foregoing  provision  shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof if,
at said date of  declaration,  such  payment  would  comply  with the  foregoing
paragraph;  (ii) the  redemption,  repurchase  or other  acquisition  of  Junior
Securities of the Corporation  including premium, if any, and accrued and unpaid
dividends,  with the proceeds of, or in exchange for, Junior  Securities  (other
than Disqualified Stock) of the Corporation; (iii) payments or distributions, to
dissenting stockholders pursuant to applicable law, pursuant to or in connection
with a  consolidation,  merger or transfer of assets that  complies with Article
IX; (iv) the  declaration  or payment of  dividends  on the Common  Stock of the
Corporation following a Public Equity Offering of such Common Stock, of up to 6%
per annum of the Net Cash Proceeds  received by the  Corporation  in such Public
Equity  Offering;  (v)  the  repurchase,  retirement  or  other  acquisition  or
retirement for value of any shares of Junior  Securities of the Corporation that
are not registered  under the Exchange Act and are held by any current or former
employee,  director or consultant (or their estates or the beneficiaries of such
estates) of the Corporation or any Subsidiary, not to exceed (A) in any calendar
year $2.0  million or (B) $5.0 million in the  aggregate;  (vi)  repurchases  of
Junior Securities deemed to occur upon exercise of stock options if such Capital
Stock  represents  a  portion  of the  exercise  price  of such  options;  (vii)
repurchases  of fractional  shares of Junior  Securities in connection  with the
exercise of Warrants in  accordance  with the Warrant  Agreement  and  Preferred
Stock Warrant Agreement or other warrants to purchase the  Corporation's  Common
Stock; and (viii) other Restricted Payments in an aggregate amount not to exceed
$2.0 million.

          Each Restricted Payment permitted pursuant to the preceding  paragraph
(other than the Restricted  Payment referred to in clauses (ii) or (vi) thereof,
an  exchange  of Junior  Securities  for  Junior  Securities  and an  Investment
referred to in clause (iv) thereof) shall be included in calculating whether the
conditions of clause  (iii)(B) of the first paragraph of this Section XI(B) have

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                                       32


been met with respect to any subsequent  Restricted  Payments.  In the event the
proceeds  of an issuance of Capital  Stock of the  Corporation  are used for the
redemption,  repurchase or other acquisition of Parity Securities,  then the Net
Cash Proceeds of such issuance shall be included in clause (iii)(B) of the first
paragraph  of this Section  XI(B) only to the extent such  proceeds are not used
for such redemption, repurchase or other acquisition of securities.

          Any  Restricted  Payments  made  other than in cash shall be valued at
fair market value. The amount of any Investment  "outstanding" at any time shall
be deemed to be equal to the amount of such  Investment  on the date made,  less
the return of capital to the  Corporation and its Restricted  Subsidiaries  with
respect to such Investment by distribution,  sale or otherwise (up to the amount
of such Investment on the date made).

     (C)  LIMITATION  ON  DIVIDEND  AND  OTHER  PAYMENT  RESTRICTIONS  AFFECTING
RESTRICTED SUBSIDIARIES

          The  Corporation  shall  not,  and shall  not  permit  any  Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become  effective
any  consensual  encumbrance  or  restriction  of any kind on the ability of any
Restricted  Subsidiary  to (i) pay  dividends  or make any  other  distributions
permitted by applicable law on any Capital Stock of such  Restricted  Subsidiary
owned  by the  Corporation  or any  other  Restricted  Subsidiary,  (ii) pay any
Indebtedness owed to the Corporation or any other Restricted  Subsidiary,  (iii)
make loans or advances to the Corporation or any other Restricted  Subsidiary or
(iv)  transfer  any of its  property or assets to the  Corporation  or any other
Restricted Subsidiary.

          The  foregoing  provisions  shall not  restrict  any  encumbrances  or
restrictions:
(i) existing on the Closing Date, in the Newcourt Facility, the Lucent Facility,
this  Certificate  of  Designations  or any  other  agreements  in effect on the
Closing Date, and any extensions, refinancings, renewals or replacements of such
agreements;  PROVIDED  that  the  encumbrances  and  restrictions  in  any  such
extensions,  refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions that are
then in effect and that are being  extended,  refinanced,  renewed or  replaced;
(ii) existing under or by reason of applicable  law, rule,  regulation or order;
(iii)  existing  with  respect to any Person or the  property  or assets of such
Person acquired by the Corporation or any Restricted Subsidiary, existing at the
time of such  acquisition  and not  incurred  in  contemplation  thereof,  which
encumbrances or restrictions are not applicable to any Person or the property or
assets of any Person  other than such  Person or the  property or assets of such
Person so  acquired;  (iv) in the case of clause (iv) of the first  paragraph of
this Section  XI(C),  (A) that  restrict in a customary  maimer the  subletting,
assignment  or  transfer  of any  property  or asset  that is a lease,  license,
conveyance or contract or similar  property or asset,  (B) existing by virtue of
any transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the  Corporation or any Restricted  Subsidiary not
otherwise prohibited by this Certificate of Designations,  (C) arising or agreed
to in the ordinary  course of business,  not relating to any  Indebtedness,  and
that do not,  individually  or in the  aggregate,  detract  from  the  value  of
property or assets of the Corporation or any Restricted Subsidiary in any maimer
material to the  Corporation or any Restricted  Subsidiary or (D) purchase money
obligations for property acquired in the ordinary course of business that impose
restrictions  of the nature  discussed  in clause (iv) above on the  property so
acquired;  (v) with respect to the  Corporation  or a Restricted  Subsidiary and

<PAGE>
                                       33


imposed  pursuant to an  agreement  that has been  entered  into for the sale of
assets, including, without limitation, customary restrictions on the disposition
of all or substantially  all of the Capital Stock of, or property and assets of,
such Restricted  Subsidiary or the  Corporation;  (vi) contained in the terms of
any Indebtedness or any agreement pursuant to which such Indebtedness was issued
(in each case other than Indebtedness  incurred under the Newcourt  Facility) if
(A) the  encumbrance  or  restriction  applies  only in the  event of a  payment
default or a default  with  respect to a financial  covenant  contained  in such
Indebtedness or agreement,  (B) the encumbrance or restriction is not materially
more  disadvantageous  to the  Holders of the Series F  Preferred  Stock than is
customary in comparable  financings (as determined by the  Corporation)  and (C)
the  Corporation  determines that any such  encumbrance or restriction  will not
materially  affect the  Corporation's  ability to make  dividend  and  mandatory
redemption  payments on the Series F Preferred Stock; (vii) restrictions on cash
or other deposits or net worth imposed by customers under contracts entered into
in the ordinary course of business; (viii) customary provisions in joint venture
agreements and other similar  agreements  entered into in the ordinary course of
business;  and (ix) any  encumbrances or restrictions of the type referred to in
clauses  (i)-(iv)  of the  first  paragraph  of  this  covenant  imposed  by any
amendments,  modifications,   renewals,  restatements,  increases,  supplements,
refundings, replacements or refinancings of the contracts referred to in clauses
(i)  through  (viii)  above;  PROVIDED  that  such  amendments,   modifications,
restatements,  renewals,  increases,  supplements,  refundings,  replacements or
refinancings are, in the good faith judgment of the Corporation,  not materially
more  disadvantageous  to the Holders than those  contained  in the  restriction
prior  to  such  amendment,   modification,   restatement,   renewal,  increase,
supplement,  refunding,  replacement or refinancing.  Nothing  contained in this
Section XI(C) shall prevent the  Corporation or any Restricted  Subsidiary  from
restricting  the  sale  or  other  disposition  of  property  or  assets  of the
Corporation or any of its Restricted  Subsidiaries  that secure  Indebtedness of
the Corporation or any of its Restricted Subsidiaries.

     (D)  LIMITATION  ON THE  ISSUANCE AND SALE OF CAPITAL  STOCK OF  RESTRICTED
SUBSIDIARIES

          The  Corporation  shall not sell,  and shall not permit any Restricted
Subsidiary,  directly  or  indirectly,  to issue or sell,  any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (i) to the Corporation or a Wholly
Owned Restricted  Subsidiary;  (ii) issuances of director's qualifying shares or
sales to  foreign  nationals  of shares of Capital  Stock of foreign  Restricted
Subsidiaries,  to the extent required by applicable  law; (iii) if,  immediately
after giving effect to such issuance or sale, such Restricted  Subsidiary  would
no longer  constitute a Restricted  Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been permitted
to be made in accordance with Section XI(B) if made on the date of such issuance
or sale; or (iv) issuances or sales of common stock of a Restricted  Subsidiary,
PROVIDED that the  Corporation  or any Restricted  Subsidiary  applies an amount
equal to the Net Cash Proceeds thereof in accordance with Section XI(F).

     (E)  LIMITATION ON TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES

          The  Corporation  shall  not,  and shall  not  permit  any  Restricted
Subsidiary  to,  directly  or  indirectly,  enter  into,  renew  or  extend  any
transaction  (including,  without  limitation,  the  purchase,  sale,  lease  or
exchange  of property  or assets,  or the  rendering  of any  service)  with any

<PAGE>
                                       34


Affiliate of the Corporation or any Restricted Subsidiary,  except upon fair and
reasonable  terms  no less  favorable  to the  Corporation  or  such  Restricted
Subsidiary than could be obtained,  at the time of such  transaction or, if such
transaction is pursuant to a written agreement,  at the time of the execution of
the agreement providing therefor, in a comparable arm's-length  transaction with
a Person that is not an Affiliate.

          The foregoing  limitation  does not limit,  and shall not apply to (i)
transactions  (A)  approved  by a majority of the  disinterested  members of the
Board of Directors or (B) for which the  Corporation or a Restricted  Subsidiary
delivers to the  Transfer  Agent a written  opinion of a  nationally  recognized
investment banking firm or a nationally  recognized firm having expertise in the
specific  area  which is the  subject  of such  determination  stating  that the
transaction is fair to the  Corporation  or such  Restricted  Subsidiary  from a
financial point of view; (ii) any transaction solely between the Corporation and
any of its Restricted  Subsidiaries or solely between  Restricted  Subsidiaries;
(iii) the payment of  reasonable  and  customary  regular fees to, and indemnity
provided on behalf of,  officers,  directors,  employees or  consultants  of the
Corporation  or  its  Restricted  Subsidiaries;   (iv)  any  payments  or  other
transactions  pursuant to any tax-sharing  agreement between the Corporation and
any other Person with which the Corporation  files a consolidated  tax return or
with which the Corporation is part of a consolidated group for tax purposes; (v)
any agreement as in effect as of the Closing Date or any  amendment  thereto (so
long as any such amendment is not disadvantageous to the Holders in any material
respect); (vi) the existence of, or the performance by the Corporation or any of
its  Restricted  Subsidiaries  of  its  obligations  under  the  terms  of,  any
stockholders  agreement (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the Closing Date and any
similar  agreements  which it may  enter  into  thereafter  (so long as any such
amendment is not  disadvantageous  to the Holders in any material  respect);  or
(vii) any  Permitted  Investments  and  Restricted  Payments not  prohibited  by
Section  XI(B).  Notwithstanding  the  foregoing,  any  transaction or series of
related  transactions  covered by the first  paragraph of this Section XI(E) and
not covered by clauses (ii) through (vii) of this paragraph the aggregate amount
of which  exceeds $3.0 million in value,  must be approved or  determined  to be
fair in the manner provided for in clause (i)(A) or (B) above.

     (F)  LIMITATION ON ASSET SALES

          The  Corporation  shall  not,  and shall  not  permit  any  Restricted
Subsidiary to, consummate any Asset Sale, unless (i) the consideration  received
by the Corporation or such  Restricted  Subsidiary is at least equal to the fair
market  value of the  assets  sold or  disposed  of and (ii) at least 75% of the
consideration  received  consists of cash or  Temporary  Cash  Investments.  For
purposes  of this  covenant,  the  following  are  deemed  to be  cash:  (x) the
principal  amount or accreted value (whichever is larger) of Indebtedness of the
Corporation or any Restricted  Subsidiary  with respect to which the Corporation
or such  Restricted  Subsidiary has either (A) received a written release or (B)
been  released by operation of law, in either case,  from all  liability on such
Indebtedness in connection  with such Asset Sale and (y) securities  received by
the  Corporation  or any  Restricted  Subsidiary  from the  transferee  that are
promptly  converted by the Corporation or such Restricted  Subsidiary into cash.
In the  event  and to the  extent  that the Net Cash  Proceeds  received  by the
Corporation or any of its Restricted  Subsidiaries  from one or more Asset Sales
occurring  on or after the Closing Date in any period of 12  consecutive  months
exceed 10% of Adjusted  Consolidated  Net Tangible Assets  (determined as of the
date  closest  to  the   commencement  of  such  12-month  period  for  which  a

<PAGE>
                                       35


consolidated  balance sheet of the  Corporation  and its  Subsidiaries  has been
provided to the Transfer Agent),  then the Corporation  shall or shall cause the
relevant  Restricted  Subsidiary to (i) within 12 months after the date Net Cash
Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A)
apply an amount  equal to such  excess Net Cash  Proceeds to  permanently  repay
Indebtedness of the Corporation, repay Indebtedness of any Restricted Subsidiary
or redeem  any  Senior  Securities,  in each case owing to, or held by, a Person
other than the  Corporation or any of its Restricted  Subsidiaries or (B) invest
an equal amount,  or the amount not so applied  pursuant to clause (A) (or enter
into a definitive  agreement  committing to so invest within 12 months after the
date of such agreement),  in property or assets (other than current assets) of a
nature  or type or that are used in a  business  (or in a Person  (other  than a
natural  person) having property and assets of a nature or type, or engaged in a
business)  similar or related to the nature or type of the  property  and assets
of, or the business of, the Corporation and its Restricted Subsidiaries existing
on the date of such  investment  (as  determined  in good  faith by the Board of
Directors  whose  determination  shall be  conclusive  and  evidenced by a Board
Resolution)  and  (ii)  apply  (no  later  than the end of the  12-month  period
referred  to in clause  (i)) such  excess Net Cash  Proceeds  (to the extent not
applied  pursuant to clause (i)) as provided in the following  paragraph of this
Section  XI(F).  The amount of such  excess  Net Cash  Proceeds  required  to be
applied (or to be committed to be applied)  during such  12-month  period as set
forth in clause (i) of the preceding  sentence and not applied as so required by
the end of such period shall constitute "Excess Proceeds."

          If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section XI(F) totals at least $5 million,  the  Corporation  must commence,  not
later than the fifteenth  Business Day of such month, and consummate an Offer to
Purchase  from the  Holders on a pro rata basis,  and an offer to  purchase  any
outstanding Parity Securities with similar provisions  requiring the Corporation
to make an  offer to  purchase  such  securities,  in an  aggregate  liquidation
preference of Series F Preferred Stock and such Parity  Securities  equal to (A)
with  respect to the  Series F  Preferred  Stock,  the  product  of such  Excess
Proceeds  multiplied by a fraction,  the  numerator of which is the  liquidation
preference  of the  outstanding  shares of the Series F Preferred  Stock and the
denominator of which is the sum of the outstanding liquidation preference of the
Series F Preferred  Stock and such Parity  Securities  (the product  hereinafter
referred to as the "Series F Preferred Stock  Amount"),  and (B) with respect to
the  Parity  Securities,  the excess of the  Excess  Proceeds  over the Series F
Preferred  Stock Amount,  at a purchase  price equal to 100% of the  liquidation
preference  of the Series F Preferred  Stock or such Parity  Securities,  as the
case may be, on the  relevant  Payment  Date or such other date set forth in the
documentation  governing  the Parity  Securities,  plus,  in each case,  accrued
dividends  (if any) to the  Payment  Date or such  other  date set  forth in the
documentation  governing the Parity Securities.  If the aggregate purchase price
of the Preferred  Stock tendered  pursuant to the Offer to Purchase is less than
the Excess Proceeds,  the remaining will be available for use by the Corporation
for general corporate  purposes.  Upon the consummation of any Offer to Purchase
in accordance with the terms of this Certificate of Designations,  the amount of
Net Cash Proceeds from Asset Sales subject to any future Offer to Purchase shall
be deemed to be zero. Prior to commencing any Offer to Purchase, the Corporation
shall first  consummate any offer to purchase  required to be made to any Holder
of its Indebtedness.


<PAGE>
                                       36


     (G)  COMMISSION REPORTS AND REPORTS TO HOLDERS.

          While the Series F Preferred Stock is outstanding,  whether or not the
Corporation  is  then  required  to  file  reports  with  the  Commission,   the
Corporation  shall deliver for filing with the  Commission  all such reports and
other  information  as it would be  required  to file  with  the  Commission  by
Sections 13(a) or 15(d) under the Exchange Act if it were subject  thereto.  All
references  herein to reports  "filed"  with the  Commission  shall be deemed to
refer to the reports then most  recently  delivered  for filing,  whether or not
accepted by the Commission.


XII. MUTILATED OR MISSING SERIES F PREFERRED STOCK CERTIFICATES.

          If  any  of  the  Series  F  Preferred  Stock  certificates  shall  be
mutilated,  lost, stolen or destroyed,  the Corporation shall issue, in exchange
and in  substitution  for  and  upon  cancellation  of the  mutilated  Series  F
Preferred Stock  certificate,  or in lieu of and  substitution  for the Series F
Preferred Stock certificate lost, stolen or destroyed,  a new Series F Preferred
Stock  certificate of like tenor and representing an equivalent amount of shares
of Series F  Preferred  Stock,  but only upon  receipt of evidence of such loss,
theft or destruction of such Series F Preferred Stock certificate and indemnity,
if requested, satisfactory to the Corporation.


XIII.REISSUANCE; PREEMPTIVE RIGHTS

          (i)  Shares of Series F  Preferred  Stock  that have been  issued  and
reacquired in any manner,  including shares  purchased or redeemed,  shall (upon
compliance with any applicable  provisions of the laws of the State 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.

          (ii) No shares of Series F  Preferred  Stock  shall have any rights of
preemption whatsoever as to any securities of the Corporation,  or any warrants,
rights or options issued or granted with respect thereto, regardless of how such
securities  or such  warrants,  rights or options may be  designated,  issued or
granted.


XIV. BUSINESS DAY.

          If any payment or redemption  shall be required by the terms hereof to
be made on a day that is not a Business Day, such payment or redemption shall be
made on the immediately  succeeding  Business Day and no further dividends shall
accrued after the day payment was required.


XV.  HEADINGS OF SUBDIVISIONS.


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                                       37


          The headings of various  subdivisions  hereof are for  convenience  of
reference only and shall not affect the  interpretation of any of the provisions
hereof.


XVI. SEVERABILITY OF PROVISIONS.

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


XVII.NOTICE.

          All notices,  requests,  demands, and other  communications  hereunder
shall be in writing and shall be deemed to have been duly given if  delivered by
hand or when sent by telex or telecopier  (with receipt  confirmed),  provided a
copy is also sent by express (overnight, if possible) courier,  addressed (i) in
the case of a Holder of the Series F Preferred  Stock, to such holder's  address
of record shown on the records of the  Corporation,  and (ii) in the case of the
Corporation, to the Corporation's principal executive offices (currently located
on the date of the adoption of these resolutions at the following  address:  KMC
Telecom Holdings, Inc., 1545 Route 206, Suite 300, Bedminster, New Jersey 07921)
to the attention of the Corporation's Chief Financial Officer.


XVIII.LIMITATIONS.

          Except as may  otherwise  be required  by law,  the shares of Series F
Preferred   Stock  shall  not  have  any  powers,   preferences   or   relative,
participating,  optional or other special  rights other than those  specifically
set forth in this  Certificate of  Designations  (as may be amended from time to
time) or otherwise in the Certificate of Incorporation of the Corporation.


XIX. TRANSFER AND LEGENDING OF SHARES.

          No  transfer  of  shares  of the  Series F  Preferred  Stock  shall be
effective until such transfer is registered on the books of the Corporation. Any
shares of the Series F Preferred  Stock so  transferred  must bear the following
legend:

          THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
          OF 1933, AS AMENDED (THE  "SECURITIES  ACT"),  NOR HAS IT BEEN
          REGISTERED UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE.

<PAGE>
                                       38


          THIS  SECURITY  MAY NOT BE  OFFERED,  SOLD,  PLEDGED OR IN ANY
          OTHER  MANNER  TRANSFERRED  OR  DISPOSED  OF  UNLESS  (I) SUCH
          TRANSFER  IS IN  COMPLIANCE  WITH THE  SECURITIES  ACT AND THE
          APPLICABLE  RULES AND  REGULATIONS  THEREUNDER  AND APPLICABLE
          STATE  SECURITIES  LAWS OR BLUE SKY LAWS AND (II) PRIOR TO ANY
          SUCH TRANSFER,  THE  TRANSFEROR OR THE TRANSFEREE  DELIVERS AN
          OPINION OF COUNSEL (REASONABLY  ACCEPTABLE TO THE CORPORATION)
          TO THE TRANSFER AGENT AND THE CORPORATION,  THAT SUCH TRANSFER
          IS IN COMPLIANCE  WITH THE  SECURITIES  ACT AND THE APPLICABLE
          RULES AND REGULATIONS THEREUNDER.

          THE SHARES OF SERIES F  PREFERRED  STOCK  REPRESENTED  BY THIS
          CERTIFICATE ARE SUBJECT TO A COVENANT OF LUCENT  TECHNOLOGIES,
          INC. ("LUCENT") IN A SECURITIES PURCHASE AGREEMENT DATED AS OF
          FEBRUARY 4,1999 WHICH PROHIBITS LUCENT FROM  TRANSFERRING THIS
          SERIES OF  PREFERRED  STOCK PRIOR TO THE EARLIER OF (i) AUGUST
          4, 2000 OR (ii) ONE YEAR  AFTER A HIGH YIELD  OFFERING  BY KMC
          TELECOM HOLDINGS, INC. YIELDING GROSS PROCEEDS OF AT LEAST $50
          MILLION.  EXCEPT AS OTHERWISE  PROVIDED IN AMENDMENT  NO. 1 TO
          THE PREFERRED STOCK REGISTRATION  RIGHTS AGREEMENT DATED AS OF
          JUNE 1, 1999, BY AND AMONG THE COMPANY, FIRST UNION INVESTORS,
          INC., NEWCOURT FINANCE, AND LUCENT,

          The  Corporation  shall refuse to register any  attempted  transfer of
shares of Series F Preferred Stock not in compliance with this Article XIX.

          In the event the shares of Series F Preferred Stock are issued as part
of a unit together with Warrants, the shares of Series F Preferred Stock and the
Warrants  shall not be  separately  transferable  from each other until the next
Business  Day after the  issuance of such shares of Series F Preferred  Stock or
until such other date as may be  specified in a legend to the shares of Series F
Preferred Stock.


XX.  AMENDMENTS AND WAIVERS

     (A) Except as provided in this Article XX, any right, preference, privilege
or power of, or restriction  provided for the benefit of, the Series F Preferred
Stock set forth herein may be amended and the  observance  thereof may be waived
(either  generally  or in a  particular  instance  and either  retroactively  or
prospectively)  only  with  the  written  consent  of the  Corporation  and  the
affirmative vote or written consent of the Holders of at least a majority of the
shares of Series F Preferred Stock then outstanding (excluding any shares held

<PAGE>
                                       39


by  Affiliates of the  Corporation,  any Existing  Stockholders  or any of their
Affiliates),  and any amendment or waiver so effected  shall be binding upon the
Corporation and all Holders of the Series F Preferred Stock.

     (B)  Notwithstanding  the  foregoing,  if  any  amendment  is  made  to the
covenants  of the  Senior  Discount  Note  Indenture,  in  accordance  with  the
provisions therein, then a conforming amendment may be made to the covenants set
forth in Article XI of this  Certificate  of  Designations  by the  Corporation,
without the  consent of any  Holder;  and any  amendment  so  effected  shall be
binding upon the  Corporation  and all Holders of the Series F Preferred  Stock,
PROVIDED  HOWEVER,  that if in connection  with making any such amendment to the
Senior Discount Note Indenture,  the Corporation has paid  consideration  to the
holders  of the  Senior  Discount  Notes to obtain  their  consent  to make such
amendment,  then the Corporation shall pay each Holder  consideration per $1,000
liquidation  preference of Series F Preferred  Stock equal to the  consideration
per $1,000  principal amount of Senior Discount Notes paid to the holders of the
Senior Discount  Notes.  In connection with any such amendment,  the Corporation
shall deliver to the Transfer Agent an Opinion of Counsel, reasonably acceptable
to it, that such amendment complies with the terms hereof. The Corporation shall
provide  notice  in  accordance  with  Article  XVII  of  this   Certificate  of
Designations  of any  amendment  effected  pursuant to this Section XX(B) to the
Holders of the Series F Preferred Stock.


XXI. CONVERSION.

          Upon the  Business Day after the earlier of (i) the date that is sixty
days  after the date on which the  Corporation  closes an  underwritten  primary
offering of at least $200 million of its Common  Stock  pursuant to an effective
registration  statement  under the Securities Act or (ii) February 4, 2001 (such
Business Day hereinafter  referred to as, the "Conversion  Date"),  the Series F
Preferred  Stock will  automatically  convert into the right to receive Series E
Preferred  Stock  having  a  liquidation  preference  equal  to the  liquidation
preference  of the  Series F  Preferred  Stock).  Each  such  share of  Series E
Preferred  Stock  issued upon  conversion  of the Series F  Preferred  Stock and
surrender of the  certificates  representing  the Series F Preferred Stock shall
accrue  dividends as provided in the Series E Certificate of  Designations  from
the last date on which dividends were paid on the Series F Preferred Stock.

          On or after the  Conversion  Date,  each Holder  shall  surrender  the
certificate(s)  representing its shares of Series F Preferred Stock, accompanied
by transfer  instrument(s)  satisfactory  to the  Corporation  and sufficient to
transfer the Series F Preferred Stock being so converted to the Corporation free
of any  lien or  other  adverse  interest,  at any of the  offices  or  agencies
maintained  for  such  purpose  by  the  conversion   agent  designated  by  the
Corporation  (the  "Conversion  Agent")  and shall  give  written  notice to the
Corporation  that the  Holder  is  surrendering  its  certificates  of  Series F
Preferred  Stock for conversion into shares of Series E Preferred Stock pursuant
to this Article XXI of this Certificate of Designations.  The initial Conversion
Agent shall be the  Transfer  Agent.  Such notice  shall also state the name(s),
together with address(es),  in which the  certificate(s)  for shares of Series E
Preferred Stock shall be issued.  As promptly as practicable after the surrender
of such shares of Series F Preferred Stock as aforesaid,  the Corporation  shall
issue and deliver at the office of such Conversion  Agent to such Holder,  or on
such Holder's  written  order,  certificate(s)  representing  the number of full

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                                       40


shares of Series E Preferred  Stock  issuable upon the conversion of such shares
in accordance with the provisions  hereof.  Each  conversion  shall be deemed to
have been  effected  immediately  prior to the close of  business on the date on
which  shares  of Series F  Preferred  Stock  shall  have  been  surrendered  as
aforesaid,  and the Person(s) in whose name(s) any  certificate(s) for shares of
Series E Preferred Stock shall be issuable upon such conversion  shall be deemed
to have  become  the  holder(s)  of  record  of the  Series  E  Preferred  Stock
represented  thereby  at such  time,  unless  the  stock  transfer  books of the
Corporation  shall be closed on the date on which  shares of Series F  Preferred
Stock are so surrendered for conversion, in which event such conversion shall be
deemed to have been effected  immediately  prior to the close of business on the
next  succeeding  day on which  such  stock  transfer  books are open,  and such
person(s)  shall be deemed to have become such holder(s) of record of the Series
E Preferred Stock at the close of business on such later day.

          The  Corporation  shall at all times  reserve a  sufficient  number of
shares of Series E Preferred  Stock to be issued upon conversion of the Series F
Preferred Stock pursuant to this Article XXI.


XXII.INCREASE OF AUTHORIZED AMOUNT OF SHARES.

          Notwithstanding  any other  provision  herein,  the Board of Directors
may, from time to time, in its sole discretion, increase the number of shares of
Preferred Stock  designated as Series F Preferred Stock under Article II of this
Certificate  of  Designations,  up to the maximum  amount of shares of Preferred
Stock authorized to be issued,  without the consent of the holders of any shares
of its Capital Stock.

          The  Corporation  shall at all times  reserve a  sufficient  number of
authorized  but unissued  shares of Series F Preferred  Stock to provide for the
payment of all  dividends  that may  accrue on the shares of Series F  Preferred
Stock then outstanding in additional shares of Series F Preferred Stock.


XXIII.ISSUANCE OF ADDITIONAL SHARES OF SERIES F PREFERRED STOCK.

          Except  with  respect to the  issuance of shares of Series E Preferred
Stock to pay dividends on the Series E Preferred Stock or upon conversion of the
Series F Preferred Stock, the Corporation may not issue additional shares of the
Series E Preferred Stock to any purchaser unless (A) it has obtained the consent
of the  Holders of a majority  of the  shares of Series F  Preferred  Stock then
outstanding  and the  holders of a majority  of the shares of Series E Preferred
Stock then  outstanding  or (B)(i) the per share price paid for such  additional
shares is at least equal to the per share price paid to the  Corporation for the
shares  of  Series E  Preferred  Stock  issued  on the  Closing  Date,  (ii) the
Corporation  does not issue to such  purchaser  more than  1,136.4  Warrants per
$1,000,000 of liquidation  preference of Series E Preferred Stock, (iii) (a) the
holders of Series E  Preferred  Stock  issued on the Closing  Date retain  their
right to receive  at least  147.73  Warrants,  pursuant  to  Section  2.4 of the

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                                       41


Warrant Agreement,  per $100,000 of liquidation preference of Series E Preferred
Stock issued on the Closing Date and (b) the Holders of Series F Preferred Stock
issued on the  Closing  Date  retain  their  right to  receive  at least  147.73
Warrants,  pursuant  to Section 2.4 of the Warrant  Agreement,  per  $100,000 of
liquidation  preference  of Series F Preferred  Stock issued on the Closing Date
and (iv) the  aggregate  amount of all  shares of Series E  Preferred  Stock and
Series F Preferred  Stock issued (other than shares of Series E Preferred  Stock
and Series F Preferred Stock issued to pay dividends thereon or shares of Series
E Preferred Stock issued upon conversion of the Series F Preferred  Stock) shall
not exceed 150,000 shares.

          Except  with  respect to the  issuance of shares of Series F Preferred
Stock to pay dividends on the Series F Preferred  Stock,  the Corporation  shall
not issue in excess of 40,000 shares of Series F Preferred Stock,  unless it has
obtained  the  consent of the  Holders  of a majority  of the shares of Series F
Preferred Stock then  outstanding and the Holders of a majority of the shares of
Series E Preferred Stock then outstanding.

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                                       42


           IN WITNESS WHEREOF, this Certificate has been signed on this 1st day
of June, 1999.


                                            KMC TELECOM HOLDINGS, INC.

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