Document:

EXECUTION COPY

                               AMENDMENT NO. 9 TO
               THE AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

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

                               W I T N E S S E T H

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

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

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

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

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

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

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

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

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

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

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

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

            "FAIR MARKET  VALUE" of any  property as of a  particular  date (the
"Determination Date") shall mean: (i) if the property is a security, the average
of the last 30 "daily sales prices" of such  security on the principal  national
securities  exchange on which such security is listed or admitted for trading on
the last 30 Business Days prior to the  Determination  Date, or if not listed or
traded on any such exchange,  then the Fair Market Value shall be the average of
the last 30 "daily sales prices" of such security on the Nasdaq  National Market
on the last 30 Business Days prior to the  Determination  Date (the "daily sales
price" shall be the closing price for bona fide transactions of such security at
the end of each day),  or (ii) if such  security is not so listed or admitted to
unlisted  trading  privileges  or if no such sale is made on at least 25 of such
days,  then the Fair Market Value shall be the price  (determined on a per share
basis,  if  applicable)  that would be paid for the entire  common equity of the
Company in an orderly  sale  transaction  between a willing  buyer and a willing
seller,  without  taking into  account the lack of  liquidity  of the  Company's
securities, using customary valuation techniques and assuming full disclosure of
all relevant information, as reasonably determined by an investment banking firm
of recognized national standing selected in good faith by the Board of Directors
or a duly  appointed  committee of the Board of Directors  (which  determination
shall be reasonably  described in the written notice delivered to the holders of
the Series G Convertible  Preferred  Stock) or (iii) if the property in question
is not a security,  then the Fair Market Value of the property in question shall
be the fair value  thereof  determined  jointly by the Company and the Requisite
Series G  Holders.  If such  parties  are  unable  to reach  agreement  within a
reasonable period of time, such fair value shall be determined by an independent
appraiser  experienced  in valuing the type of property in question  selected by
the Company and approved by the Requisite Series G Holders (which approval shall
not be  unreasonably  withheld or delayed).  The Company  shall pay the fees and
expenses of any investment  banking firm and/or appraiser  retained to determine

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

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

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

            "LUCENT" means Lucent Technologies Inc.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

               2.5.     SALE OF THE COMPANY.

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

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

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

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

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

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

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

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

               4.3.     ELECTION OF DIRECTORS.

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

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

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

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

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

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

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

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

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

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

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

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

                                       8
<PAGE>

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

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

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

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

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

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

                                       9
<PAGE>

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

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

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

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

                        (g)   appoint the Company's independent auditors;

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

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

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

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

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

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

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

                                       10
<PAGE>

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

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

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

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

                 6.1.   DEMAND REGISTRATIONS.

                                       11
<PAGE>

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

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

                                       12
<PAGE>

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

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

                6.3.    HOLDBACK AGREEMENTS.

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

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

                                       13
<PAGE>

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

                 6.9.  ASSIGNMENT OF REGISTRATION RIGHTS.

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

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

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

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

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

                                       14
<PAGE>

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

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

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

                                  * * * * *

                                       15
<PAGE>

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

                                    KMC TELECOM HOLDINGS, INC.

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

                                    NASSAU CAPITAL PARTNERS IV, L.P.

                                    By:  Nassau Capital LLC, its General Partner

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

                                    NAS PARTNERS I L.L.C.

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

                                    HAROLD N. KAMINE
                                    in his individual capacity

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

<PAGE>

                                    FIRST UNION NATIONAL BANK

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

                                    CORESTATES HOLDINGS, INC.

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

                                    GENERAL ELECTRIC CAPITAL
                                       CORPORATION

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

<PAGE>

                                    DRESDNER KLEINWORT BENSON  PRIVATE
                                    EQUITY PARTNERS LP

                                    By:Dresdner Kleinwort Benson Private Equity
                                       LLC

                                    Its:General Partner

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

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

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

                                    Its:Attorney-in-Fact

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

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

<PAGE>

                                    LUCENT TECHNOLOGIES INC.

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

<PAGE>

                                    CIT LENDING SERVICES
                                    CORPORATION FORMERLY KNOWN AS
                                    NEWCOURT COMMERICIAL FINANCE
                                    CORPORATION

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

                          SECURITIES PURCHASE AGREEMENT

                                   dated as of

                                  June 30, 2000

                                      among

                           KMC TELECOM HOLDINGS, INC.,

                                       and

                        THE PURCHASERS REFERRED TO HEREIN

<PAGE>

                                TABLE OF CONTENTS

ARTICLE I DEFINITIONS..........................................................1
     SECTION 1.01. Definitions.................................................1

ARTICLE II PURCHASE AND SALE OF SECURITIES.....................................6
     SECTION 2.01. Authorization of the Series G Preferred.....................6
     SECTION 2.02. Commitment to Purchase......................................7
     SECTION 2.03. The Closing.................................................7
     SECTION 2.04. Subsequent Purchase and Sale of Preferred Shares............7
     SECTION 2.05. The Subsequent Closings.....................................7
     SECTION 2.06. Use of Proceeds.............................................7

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER.......................8
     SECTION 3.01. Organization, Standing, etc.................................8
     SECTION 3.02. Capitalization..............................................8
     SECTION 3.03. Authorization; Non-Contravention............................9
     SECTION 3.04. Binding Effect.............................................10
     SECTION 3.05. Governmental Regulation....................................10
     SECTION 3.06. Solicitation...............................................11
     SECTION 3.07. Authorization to Do Business...............................11
     SECTION 3.08. Compliance with Laws.......................................11
     SECTION 3.09. Litigation.................................................11
     SECTION 3.10. Properties.................................................12
     SECTION 3.11. Tax Matters................................................12
     SECTION 3.12. Patents and Trademarks.....................................12
     SECTION 3.13. Labor Matters..............................................12
     SECTION 3.14. Environmental Matters......................................13
     SECTION 3.15. Insurance..................................................13
     SECTION 3.16. Financial Information......................................13
     SECTION 3.17. Disclosure.................................................14
     SECTION 3.18. Investment Company Act.....................................14
     SECTION 3.19. Brokers....................................................14
     SECTION 3.20. Affiliated Transactions....................................14
     SECTION 3.21. Employee Benefit Plans.....................................14
     SECTION 3.22. Material Contracts.........................................15

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...................15
     SECTION 4.01. Organization...............................................15
     SECTION 4.02. Authority; No Other Action.................................15
     SECTION 4.03. No Conflict................................................15
     SECTION 4.04. Binding Effect.............................................15
     SECTION 4.05. No Defaults................................................16
     SECTION 4.06. Private Placement..........................................16

ARTICLE V CONDITIONS PRECEDENT TO CLOSING.....................................17

                                       i
<PAGE>

     SECTION 5.01. Conditions to the Purchasers' Obligations..................17
     SECTION 5.02. Conditions to Issuer's Obligations.........................18
     SECTION 5.03. Subsequent Conditions of Each Purchaser's Obligations at a
          Subsequent Closing..................................................19

ARTICLE VI COVENANTS..........................................................19
     SECTION 6.01. Covenants of the Issuer....................................19

ARTICLE VII MISCELLANEOUS.....................................................25
     SECTION 7.01. Notices....................................................25
     SECTION 7.02. No Waivers.................................................26
     SECTION 7.03. Successors and Assigns.....................................26
     SECTION 7.04. Choice of Law..............................................26
     SECTION 7.05. Counterparts; Effectiveness................................26
     SECTION 7.06. Entire Agreement...........................................26
     SECTION 7.07. Expenses...................................................26
     SECTION 7.08. Announcements..............................................27
     SECTION 7.09. Consents to Amendment......................................27
     SECTION 7.10. Subsequent Sales...........................................27

EXHIBITS

Exhibit A      -  Charter Amendment

Exhibit B      -  Series G Certificate of Designations

Exhibit C      -  Year 2000 Budget

SCHEDULES

Schedule 3.01  -  Organization; Capital Stock; Subsidiaries

Schedule 3.02  -  Capitalization of Issuer

Schedule 3.08  -  Compliance with Laws

Schedule 3.09  -  Litigation

Schedule 3.10  -  Liens on Property

Schedule 3.14  -  Environmental Matters

Schedule 3.19  -  Brokers

Schedule 3.20  -  Affiliated Transactions

Schedule 3.22  -  Material Contracts

                                       ii
<PAGE>

                          SECURITIES PURCHASE AGREEMENT

      This SECURITIES  PURCHASE AGREEMENT (this "Agreement") is dated as of June
30,  2000  among  KMC  Telecom  Holdings,  Inc.,  a  Delaware  corporation  (the
"Issuer"),  and the Persons named on the attached  Schedule 2.02  (collectively,
the "Purchasers").

      NOW,  THEREFORE,  in  consideration of the mutual promises made herein and
other good and valuable consideration,  the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

      SECTION 1.01. Definitions.  The following terms, as used herein, have
the following meanings:

      "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.

      "Benefit  Plan"  shall mean a defined  benefit  plan as defined in Section
3(35) of ERISA (other than a Multiemployer  Plan) in respect of which the Issuer
or any ERISA Affiliate is, or within the immediately preceding six (6) year was,
an "employer" as defined in Section 3(5) of ERISA.

      "Charter" means the Amended and Restated  Certificate of  Incorporation of
the Issuer, as amended as of the Closing Date.

      "Charter  Amendment' means the Certificate of Amendment of the Charter, in
the form of Exhibit A attached hereto.

      "Closing" has the meaning set forth in Section 2.03.

      "Closing Date" has the meaning set forth in Section 2.03.

      "Common Stock" means the Common Stock, par value $.01 per share, of the
Issuer.

      "E&F Warrant  Agreement"  means the Warrant  Agreement  dated  February 4,
1999,  as amended on April 29,  1999 and on June 1, 1999 among the  Issuer,  The
Chase Manhattan Bank, as warrant agent, Newcourt Commercial Finance Corporation,
Lucent Technologies Inc. and any additional  purchasers and Harold N. Kamine and
Nassau Capital Partners L.P., relating to the E&F
Warrants.

                                       1
<PAGE>

      "E & F Warrants"  means the  warrants to purchase  shares of Common  Stock
issued pursuant to the E & F Warrant Agreement;  each such warrant entitling the
holder thereof to purchase 0.471756 shares of Common Stock.

      "Environmental  Laws" shall mean any applicable  law  concerning  releases
into any part of the natural  environment,  or protection of natural  resources,
the  environment and public and employee  health and safety  including,  without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. ss. 1801 et seq.), the Resource  Conservation and Recovery Act (42 U.S.C.
ss. 6901 et seq.),  the Clean Water Act (33 U.S.C.  ss. 1251 et seq.), the Clean
Air Act (33 U.S.C.  ss.  7401 et seq.),  the Toxic  Substances  Control  Act (15
U.S.C. ss. 7401 et seq.), and the Occupational  Safety and Health Act (29 U.S.C.
ss.  651 et seq.),  as such laws have been and may be  amended  or  supplemented
through the Closing Date, and the regulations  promulgated pursuant thereto, and
any applicable state or local statutes, and the regulations promulgated pursuant
thereto.

      "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

      "ERISA  Affiliate" shall mean (i) any corporation which is a member of the
same controlled  group of corporations  (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Issuer, (ii) any partnership or other trade or
business (whether or not incorporated)  under common control (within the meaning
of Section  414(c) of the Internal  Revenue  Code) with the Issuer and (iii) any
member of the same  affiliated  service  group  (within  the  meaning of Section
414(m) of the Internal Revenue Code) as the Issuer, any corporation described in
clause (i) above or any  partnership  or trade or business  described  in clause
(ii) above.

      "Event of Noncompliance" has the meaning set forth in the Series G
Certificate of Designations.

      "Exchange Act" means the Securities  Exchange Act of 1934, as amended from
time to time, or any successor statute.

      "First Union Warrant Agreement" means the warrant agreement dated as of
April 30, 1999 among the Issuer, First Union Investors, Inc., Harold N.
Kamine and Nassau Capital Partners L.P. and The Chase Manhattan Bank, as
warrant agent, relating to the First Union Warrants.

      "First Union  Warrants"  means the  warrants to purchase  shares of Common
Stock issued  pursuant to the First Union Warrant  Agreement;  each such warrant
entitling the holder thereof to purchase 0.471756 shares of Common Stock.

      "GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the 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.

                                       2
<PAGE>

      "Governmental  Authority"  shall mean any federal,  state,  local or other
political subdivision thereof and any entity exercising executive,  legislative,
judicial, regulatory or administrative functions of or pertaining to government.

      "HSR Act" means the Hart-Scott-Rodino  Antitrust Improvements Act of 1976,
as amended, and the regulations promulgated thereunder.

      "HY Warrant Agreement" means the warrant agreement dated as of January 29,
1998,  between  the  Issuer and The Chase  Manhattan  Bank,  as  warrant  agent,
relating to the HY Warrants.

      "HY Warrants" means the warrants to purchase shares of Common Stock issued
pursuant to the HY Warrant  Agreement;  each such warrant  entitling  the holder
thereof to purchase 0.21785 shares of Common Stock.

      "IRS" shall mean the Internal Revenue Service or any successor agency.

      "Lien" means any lien, claim, charge, pledge, mortgage,  security interest
or other encumbrance.

      "Material  Adverse Effect" means a material adverse effect,  or any event,
occurrence,   state  of  circumstances  or  facts  or  development  involving  a
prospective  material  adverse  effect,  on the  business,  operations,  assets,
condition (financial or otherwise), results of operations, properties, assets or
value of the Issuer and its Subsidiaries taken as a whole.

      "Multiemployer  Plan"  shall  mean a  "multiemployer  plan" as  defined in
Section  4001(a)(3) of ERISA which is, or within the  immediately  preceding six
(6) years was, contributed to by the Issuer or any ERISA Affiliate.

      "Person" means an individual,  general  partnership,  limited partnership,
corporation, limited liability company, trust, joint stock company, association,
joint  venture  or any other  entity  or  organization,  whether  or not a legal
entity,  including  a  government  or  political  subdivision  or an  agency  or
instrumentality thereof.

      "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

      "Plan" shall mean any employee  benefit plan as defined in Section 3(3) of
ERISA  (other than a  Multiemployer  Plan) in respect of which the Issuer or any
ERISA  Affiliate is, or within the  immediately  preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.

      "Regulation D" means Regulation D under the Securities Act.

      "Reportable  Event" shall mean any reportable  event as defined in Section
4043 of ERISA unless the reporting  requirement  with respect to such reportable
event has been waived by the PBGC or other appropriate Governmental Authority.

                                       3
<PAGE>

      "Qualified  Public Offering" shall mean the sale in a firmly  underwritten
public offering of Common Stock pursuant to an effective  registration statement
filed by the Issuer  under the  Securities  Act,  in any single  transaction  or
series of related transactions,  in which (i) the Corporation receives aggregate
gross proceeds (before deduction of underwriting discounts and expenses of sale)
of at least  $80,000,000  and (ii) the price per share at which  Common Stock is
offered to the  public in such  offering  is not less than the lowest  price per
share at which Series G Preferred Shares are sold pursuant to this Agreement (as
adjusted for any stock split, stock dividend, share combination, share exchange,
recapitalization,  merger,  conversion,  consolidation,  reorganization or other
similar transaction).

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

      "Series A Preferred Stock" has the meaning set forth in Section 3.02.

      "Series C Preferred Stock" has the meaning set forth in Section 3.02.

      "Series D Preferred Stock" has the meaning set forth in Section 3.02.

      "Series E Certificate  of  Designations"  means the  Certificate of Voting
Powers, Designations,  Preferences and Relative Participating, Optional or Other
Special Rights and Qualifications,  Limitations and Restrictions with respect to
the Series E Preferred Stock as previously  filed with the Secretary of State of
Delaware on February 4, 1999 as amended by the  Certificate of Correction  dated
February 19, 1999 and filed with the  Secretary of State of Delaware on March 3,
1999, as further  amended by the  Certificate  of Amendment  with respect to the
Series E Preferred  Stock filed with the  Secretary  of the State of Delaware on
April 30, 1999.

      "Series E Preferred Stock" has the meaning set forth in Section 3.02.

      "Series F Certificate  of  Designations"  means the  Certificate of Voting
Powers, Designations,  Preferences and Relative Participating, Optional or Other
Special Rights and Qualifications,  Limitations and Restrictions with respect to
the Series F Preferred Stock as previously  filed with the Secretary of State of
Delaware on February 4, 1999 as amended by the  Certificate of Correction  dated
February 19, 1999 and filed with the  Secretary of State of Delaware on March 3,
1999, as further  amended by the  Certificate  of Amendment  with respect to the
Series F Preferred  Stock filed with the Secretary of State of Delaware on April
30, 1999.

      "Series F Preferred Stock" has the meaning set forth in Section 3.02.

      "Series G Certificate of Designations" has the meaning set forth in
Section 2.01.

      "Series G Preferred Shares" has the meaning set forth in Section 2.01.

      "Springing  Warrants"  means  the  227,273  warrants  which  may be issued
pursuant to Section 2.4 of the E&F Warrant Agreement.

      "Stockholders  Agreement"  means the  Amended  and  Restated  Stockholders
Agreement among KMC Telecom  Holdings,  Inc.,  Nassau Capital Partners L.P., NAS

                                       4
<PAGE>

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,
Amendment No. 6 dated as of June 1, 1999 to be Amended and Restated Stockholders
Agreement dated October 31, 1997, Amendment No. 7 dated as of January 1, 2000 to
the Amended and Restated Stockholders Agreement dated October 3, 1997, Amendment
No. 8 dated  as of  April  1,  2000 to the  Amended  and  Restated  Stockholders
Agreement  dated  October 31, 1997 and Amendment No. 9 dated as of June 30, 2000
to the Amended and Restated Stockholders Agreement dated October 31, 1997.

      "Subsequent Closing" has the meaning set forth in Section 2.05.

      "Subsequent Closing Date" has the meaning set forth in Section 2.05.

      "Subsequent Purchaser" has the meaning set forth in Section 2.04.

      "Subsidiary"   means,  with  respect  to  any  Person,   any  corporation,
association or other  business  entity of which more than fifty percent (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, or at least a majority of the ownership interests,
and the power to direct the policies,  management and affairs thereof, is at the
time owned or controlled,  directly or indirectly, by such Person or one or more
of the other Subsidiaries of such Person or a combination thereof.

      "Taxes" shall mean all taxes, charges,  fees, levies or other assessments,
including,  without limitation, all net income, gross receipts,  capital, sales,
use, ad valorem, value added, transfer,  franchise,  profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise,  severance,  stamp,  occupation,  property and estimated taxes, customs,
duties, fees, assessments and charges of any kind whatsoever,  together with any
interest  and any  penalties,  fines,  additions  to tax or  additional  amounts
imposed by any public or governmental taxing authority (domestic or foreign) and
shall include any transferee liability in respect of Taxes.

      "Tax Returns" shall mean all returns,  declarations,  reports,  estimates,
information returns and statements required to be filed in respect of any Taxes.

      "Termination  Event" shall mean (i) a  Reportable  Event with respect to a
Benefit Plan;  (ii) the  withdrawal of the Issuer or any ERISA  Affiliate from a
Benefit Plan during a plan year in which the Issuer or such ERISA  Affiliate was
a "substantial  employer" as defined in Section  4001(a)(2) of ERISA;  (iii) the
imposition of an obligation on the Issuer or any ERISA  Affiliate  under Section
4041 of ERISA to provide  affected parties written notice of intent to terminate

                                       5
<PAGE>

a Benefit Plan in a distress termination  described in Section 4041(c) of ERISA;
(iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v)
any event or condition  which might  constitute  grounds  under  Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Benefit  Plan;  or (vi) the partial or complete  withdrawal of the Issuer or any
ERISA Affiliate from a Multiemployer Plan.

      "Underlying  Common  Stock"  means (i) the Common Stock issued or issuable
upon  conversion  of the Series G  Preferred  Shares  and (ii) any Common  Stock
issued or  issuable  with  respect to the  securities  referred to in clause (i)
above  by way of a  stock  dividend  or  stock  split  or in  connection  with a
combination  of  shares,   recapitalization,   merger,  consolidation  or  other
reorganization.  For purposes of this  Agreement,  any Person who holds Series G
Preferred Shares shall be deemed to be the holder of the Underlying Common Stock
obtainable upon  conversion of the Series G Preferred  Shares in connection with
the transfer  thereof or otherwise,  regardless of any restriction or limitation
on the conversion of the Series G Preferred Shares, such Underlying Common Stock
shall be  deemed  to be in  existence,  and such  Person  shall be  entitled  to
exercise the rights of a holder of Underlying Common Stock hereunder.  As to any
particular  shares of  Underlying  Common  Stock,  such shares shall cease to be
Underlying Common Stock when they have been (a) effectively registered under the
Securities  Act and disposed of in accordance  with the  registration  statement
covering them, (b) distributed to the public through a broker,  dealer or market
maker pursuant to Rule 144 under the  Securities  Act (or any similar  provision
then in force) or (c) repurchased by the Issuer or any Subsidiary.

                                   ARTICLE II
                         PURCHASE AND SALE OF SECURITIES

      SECTION  2.01.  Authorization  of the Series G  Preferred.  The Issuer has
authorized the issuance and sale to the Purchasers of up to 1,250,000  shares in
the aggregate of (a) the Issuer's Series G-1 Voting Convertible Preferred Stock,
par  value  $.01 per share  (the  "Series  G-1  Preferred  Shares")  and (b) the
Issuer's Series G-2 Non-Voting  Convertible  Preferred Stock, par value $.01 per
share (the  "Series G-2  Preferred  Shares"  and,  together  with the Series G-1
Preferred  Shares,  the  "Series G  Preferred  Shares").  The Series G Preferred
Shares have the rights and  preferences set forth in the Series G Certificate of
Designations,  in  the  form  of  Exhibit  B  attached  hereto  (the  "Series  G
Certificate of Designations").

      SECTION 2.02. Commitment to Purchase.  Subject to the terms and conditions
hereinafter  stated, upon the basis of the representations and warranties of the
Purchasers herein contained,  the Issuer agrees to issue and sell to each of the
Purchasers  and,  upon the basis of the  representations  and  warranties of the
Issuer  herein  contained,  each of the  Purchasers  agrees to purchase from the
Issuer the type and number of Series G Preferred  Shares set forth opposite such
Purchaser's name on the attached Schedule 2.02, as such schedule may be amended,
modified  or  supplemented  ("Schedule  2.02")  under  the  headings  "Series  G
Sub-Class"  and  "Number  of  Shares,"  respectively,  at a price  per  share of
$337.9697,  for an  aggregate  purchase  price  equal to the  amount  set  forth
opposite such Purchaser's  name on the attached  Schedule 2.02 under the heading
"Closing Amount."

                                       6
<PAGE>

      SECTION 2.03.  The Closing.  Subject to the  fulfillment  or waiver of the
conditions set forth in Article V hereof,  the purchase and sale of the Series G
Preferred Shares, as set forth in Section 2.02 (the "Closing"), shall take place
at the offices of Kelley Drye & Warren LLP, 101 Park Avenue,  New York, New York
10178,  at 10:00 a.m. on the date hereof or on such other date and at such other
location as the Issuer and the Purchasers  shall agree. The date and time of the
Closing are referred to herein as the "Closing Date."

            (a) At the  Closing,  each of the  Purchasers  shall  deliver to the
Issuer,  by  wire  transfer  (of  immediately  available  funds)  to an  account
designated by the Issuer in writing delivered to each Purchaser,  the applicable
consideration set forth on Schedule 2.02.

            (b) At the  Closing,  the Issuer  shall  deliver to each  Purchaser,
against  payment of the  applicable  consideration  set forth on Schedule  2.02,
certificates  evidencing  the  Series  G  Preferred  Shares  purchased  by  such
Purchaser registered in the name of such Purchaser.

      SECTION 2.04.  Subsequent  Purchase and Sale of Preferred  Shares.  At any
time and from time to time after the  Closing  Date (but in no event  later than
120 days  after the  Closing  Date),  the Issuer  may sell  additional  Series G
Preferred  Shares that have been  authorized  for sale  pursuant to Section 2.01
hereof,  but which have not been sold  pursuant to Section  2.02 or this Section
2.04, to subsequent purchasers (the "Subsequent Purchasers").  As a condition to
the purchase and sale of such additional shares, any such Subsequent  Purchasers
who are not already  parties to this  Agreement  shall (i) execute a counterpart
signature  page to this  Agreement and for all purposes  herein such  Subsequent
Purchaser  shall  thereafter  be deemed to be a  Purchaser  hereunder,  and (ii)
execute a joinder to the Stockholders  Agreement in the form attached thereto as
Exhibit A.  Schedule  2.02 shall be amended  to  reflect  the  purchase  of such
additional Series G Preferred Shares by such Subsequent Purchaser.

      SECTION 2.05. The Subsequent Closings.  The closing(s) of the purchase and
sale of any additional Series G Preferred Shares pursuant to Section 2.04 (each,
a "Subsequent  Closing")  shall take place at the offices of Kelley Dye & Warren
LLP,  at 10:00  a.m.  local  time on the  date(s)  agreed to by the  Issuer  and
applicable  Subsequent  Purchaser(s)  (the "Subsequent  Closing Date").  At each
Subsequent  Closing,  the Issuer shall  deliver to such  Subsequent  Purchaser a
stock  certificate  evidencing the Series G Preferred  Shares to be purchased by
such  Subsequent  Purchaser  at  the  Subsequent  Closing,  registered  in  such
Subsequent  Purchaser's  name,  upon payment of the  applicable  purchase  price
thereof by wire transfer of immediately available funds to the Issuer's account.

      SECTION  2.06.  Use of  Proceeds.  The  proceeds  from the issuance of the
Series G  Preferred  Shares  will be used for (i)  general  working  capital and
capital  expenditures in the continued  development of the Issuer's  competitive
local exchange carrier, port wholesale and national footprint  strategies,  (ii)
notwithstanding  any provision in the Series G Certificate of  Designations,  to
redeem 2,861.995 shares of Series F Preferred Stock pursuant to Section VI(B) of
the Series F  Certificate  of  Designations,  and (iii) to pay fees and expenses
relating to the transactions contemplated by this Agreement.

                                       7
<PAGE>

                                   ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE ISSUER

      The Issuer represents and warrants to each of the Purchasers as follows as
of the Closing Date:

      SECTION 3.01. Organization, Standing, etc. (a) The Issuer is a corporation
duly  incorporated,  validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority under such
laws to own or lease and operate its  properties and to carry on its business as
now  conducted.  The Issuer is duly  qualified  or  licensed to do business as a
foreign corporation in good standing in each jurisdiction in which the nature of
the business transacted by it or the character of the properties owned or leased
by it requires it to so qualify or be  licensed,  except where the failure to so
qualify or be licensed or be in good standing would not have a Material  Adverse
Effect.  The copies of the  Issuer's  Charter,  bylaws and other  organizational
documents and instruments (in each case, as amended and/or restated  through the
Closing Date),  heretofore made available to each of the  Purchasers,  are true,
complete and correct copies thereof.

            (b) Each  Subsidiary  of the Issuer is duly  organized  and  validly
existing  under  the  laws of the  jurisdiction  of its  formation,  and has all
corporate  or other power and  authority to own its  properties  and conduct its
business as now conducted.  All the outstanding  shares of capital stock of each
corporate  Subsidiary of the Issuer have been duly authorized and validly issued
and are fully paid and  nonassessable  and, except as disclosed on Schedule 3.01
hereto,  are owned  directly or  indirectly  by the Issuer free and clear of all
liens, security interests, charges and encumbrances. The Issuer does not own any
interest in any other Person or entity other than the  Subsidiaries set forth on
Schedule  3.01.  Except  as set  forth on  Schedule  3.01  hereto,  there are no
outstanding options,  warrants,  rights,  agreements or commitments to any third
party to subscribe for or purchase any equity  security of any  Subsidiary or to
cause any Subsidiary to issue any such equity security.

      SECTION 3.02.  Capitalization.  (a) The Issuer's  authorized capital stock
consists of 4,250,000  shares of Common Stock and 3,700,000  shares of preferred
stock. Of the 3,700,000  authorized shares of preferred stock (i) 123,800 shares
have been  designated as Series A Cumulative  Convertible  Preferred  Stock (the
"Series A Preferred Stock") all of which are currently outstanding, (ii) 350,000
shares have been designated as Series C Cumulative  Convertible  Preferred Stock
(the  "Series  C  Preferred  Stock")  of  which  175,000  shares  are  currently
outstanding,  (iii) 25,000  shares have been  designated  as Series D Cumulative
Convertible  Preferred Stock (the "Series D Preferred  Stock") of which none are
currently outstanding,  (iv) 575,000 shares have been designated as the Series E
Senior  Redeemable,  Exchangeable,  PIK Preferred Stock (the "Series E Preferred
Stock"),  of which 67,380  shares are  outstanding  and 55,000  shares have been
reserved for  issuance  upon  conversion  of the Series F Preferred  Stock,  (v)
55,000 shares have been designated as Series F Senior Redeemable,  Exchangeable,
PIK Preferred Stock (the "Series F Preferred Stock"), of which 45,792 shares are
currently outstanding,  (vi) 1,250,000 shares have been designated as Series G-1
Preferred  Shares  of which  58,881.0180  shares  will be  outstanding  upon the
consummation of the initial purchase of the Series G-1 Preferred Shares pursuant
to the  Agreement and  481,108.2176  shares have been reserved for issuance upon
conversion  of the shares of the Series G-2 Preferred  Shares to be  outstanding

                                       8
<PAGE>

upon  consummation  of the  initial  purchases  of Series G-2  Preferred  Shares
pursuant to this Agreement,  and (vii) 1,250,000  shares have been designated as
Series G-2 Preferred  Shares of which  481,108.2176  shares will be  outstanding
upon the consummation of the initial purchase of the Series G-2 Preferred Shares
pursuant to this Agreement.  Of the 4,250,000 authorized shares of Common Stock:
(i) 853,775  shares are issued and  outstanding,  (ii) 600,000  shares have been
reserved for issuance  upon  conversion of the Series A Preferred  Stock,  (iii)
414,889  shares have been reserved for issuance upon  conversion of the Series C
Preferred  Stock,  (iv)  1,250,000  shares have been  reserved for issuance upon
conversion  of the  Series G  Preferred  Shares,  (v)  10,000  shares  have been
reserved  for  issuance  upon  exercise  of a warrant  held by General  Electric
Capital  Corporation,  (vi) 99,285  shares have been  reserved for issuance upon
exercise of Warrants issued in connection  with the Issuer's  offering of its 12
1/2% Senior Discount Notes, (vii) 192,229 shares have been reserved for issuance
upon  exercise of the First Union  Warrants,  the E&F Warrants and the Springing
Warrants,  (viii)  600,000  shares have been  reserved for issuance  pursuant to
options  granted or to be granted under the 1998 Stock  Purchase and Option Plan
for Key  Employees  of KMC Telecom  Holdings,  Inc. and  Affiliates  and (ix) no
shares are held in treasury.  No other shares of capital  stock have been issued
or reserved  for  issuance for any  purpose.  All of the  outstanding  shares of
capital stock of the Issuer have been duly  authorized and validly  issued,  are
fully paid and  nonassessable,  free of preemptive  rights and have been offered
and issued without  violation of the Securities Act or any preemptive  rights of
any person.  Schedule 3.02 hereto accurately sets forth, as of the Closing Date,
the number of issued and outstanding  shares of Common Stock held by each person
known by the Issuer to own  beneficially or of record any shares of the Issuer's
capital stock.

            (b) Except as  disclosed on Schedule  3.02 hereto:  (i) there are no
issued or outstanding  securities that are convertible  into or exchangeable for
shares of the Issuer's capital stock ("Convertible Securities");  (ii) there are
no issued or  outstanding  subscriptions,  options,  warrants or other rights to
purchase  or  acquire  any  shares  of the  capital  stock of the  Issuer or any
Convertible Securities ("Option Rights"); (iii) the Issuer is not a party to any
agreement  or  understanding  pursuant to which it is  obligated  to purchase or
redeem any shares of its capital stock or any  Convertible  Securities or Option
Rights,  other than  pursuant  to the  redemption  provisions  in respect of the
Series E  Preferred  Stock  and the  Series F  Preferred  Stock set forth in the
Series  E  Certificate  of   Designations   and  the  Series  F  Certificate  of
Designations,  respectively,  and is  not  otherwise  under  any  obligation  to
repurchase,  redeem or otherwise  acquire any shares of its capital stock or any
Convertible  Securities or Option Rights;  (iv) the Issuer is not a party to any
agreement  or  understanding  pursuant to which it is  obligated to register any
shares of its capital stock or other  securities under the Securities Act or any
state  securities  law; and (v) the Issuer is not, and to the best  knowledge of
the  Issuer,  no  securities  holder  of the  Issuer  is a party  to any  voting
agreement,  voting trust,  irrevocable  proxy or other  agreement  affecting the
voting  rights of any  shares of the  Issuer's  capital  stock or any  agreement
providing  for any call or put option,  right of first refusal or offer or other
right to acquire or dispose of any shares of the Issuer's  capital  stock or any
Convertible  Securities or Option Rights. Except as described in Section 3.02(a)
or Schedule  3.02,  no shares of Common Stock are issuable  upon the exercise of
any outstanding Convertible Securities or Option Rights of the Issuer.

      SECTION 3.03. Authorization;  Non-Contravention.  The execution,  delivery
and performance by the Issuer of this Agreement, the Stockholders Agreement, the

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<PAGE>

issuance,  sale and delivery by the Issuer of the Series G Preferred Shares, and
the  amendments to the Charter  effected by the filing of the Charter  Amendment
and the  Series G  Certificate  of  Designations  (a) are  within  the  Issuer's
corporate  powers,  (b) have been duly  authorized  by all  necessary  corporate
action,  (c)  require  no  action by or in  respect  of,  or  filing  with,  any
Governmental Authority, agency or official (other than the filing of the Charter
Amendment and the Series G  Certificate  of  Designations  with the Secretary of
State of Delaware),  and (d) do not (i) contravene or constitute a default under
any provision of applicable law or regulation,  judgment,  injunction,  order or
decree binding upon or applicable to the Issuer, (ii) contravene or constitute a
default  under the Charter or bylaws,  (iii)  require any  consent,  approval or
other  action  by any other  Person  (other  than the  holders  of the  Series A
Preferred  Stock,  the  Series  C  Preferred  Stock,  the  outstanding  Series E
Preferred  Stock,  the Series F Preferred  Stock,  and the other  parties to the
Stockholders  Agreement,  which  consents shall be obtained prior to the Closing
Date) or (iv)  constitute a default under or contravene any material  agreement,
judgment,  injunction, order, decree or other instrument binding upon the Issuer
or any of its Subsidiaries.

      SECTION  3.04.  Binding  Effect.   This  Agreement  and  the  Stockholders
Agreement  have been duly  authorized,  executed and delivered by the Issuer and
constitute valid and legally binding  obligations of the Issuer,  enforceable in
accordance with their respective terms,  except as enforceability may be limited
by applicable  bankruptcy,  insolvency,  reorganization,  moratorium and similar
laws  affecting the  enforcement of creditors'  rights  generally and by general
principles of equity (whether  enforcement is sought by proceedings in equity or
at law). The Issuer has duly  authorized the issuance,  sale and delivery of the
Series G Preferred  Shares to each of the  Purchasers set forth on Schedule 2.02
and, when issued and delivered by the Issuer pursuant to this Agreement  against
payment of the  applicable  consideration  set forth herein,  Series G Preferred
Shares will be validly issued,  fully paid and non-assessable  free and clear of
all Liens and without violation of any preemptive  rights.  All of the shares of
Common Stock to be issued upon conversion of the Series G Preferred  Shares have
been duly and validly  authorized and reserved for issuance upon such conversion
and, when issued and delivered,  upon such conversion,  will be duly and validly
issued,  fully paid and  non-assessable  free and clear of all Liens and without
violation of any preemptive rights.

      SECTION 3.05. Governmental Regulation.  Except for the Securities Act, the
Exchange Act and state securities laws, the Issuer is not subject to any federal
or state or foreign law or regulation limiting its ability to issue the Series G
Preferred  Shares  or to  perform  its  obligations  under  the  terms  of  this
Agreement,   the  Stockholders   Agreement  and  the  Series  G  Certificate  of
Designations. Except as described in Section 3.03 or as may be required pursuant
to "blue  sky  laws"  or as may be  required  under  the  Securities  Act or the
Exchange Act in connection  with the  registration of the shares of Common Stock
issuable  upon  conversion  of the Series G  Preferred  Shares  pursuant  to the
Stockholders Agreement, no notices,  reports or other filings are required to be
made by the Issuer or any Subsidiary with, nor are any consents,  registrations,
applications,  approvals,  permits,  licenses or  authorizations  required to be
obtained  by the  Issuer or any  Subsidiary  from,  any  public or  governmental
authority or other third party in connection  with the execution and delivery of
this  Agreement,  the  Stockholders  Agreement and the Series G  Certificate  of
Designations, or the consummation by the Issuer of the transactions contemplated
hereby or thereby,  or the exercise by each  Purchaser of its rights  hereunder,
except  for (i) any of the  foregoing,  the  failure  of which to make or obtain
would not have a Material  Adverse  Effect or adversely  affect any  Purchasers'

                                       10
<PAGE>

rights hereunder,  or (ii) the consent, with respect to the Series G Certificate
of  Designations,  of the holders of the Series A Preferred  Stock, the Series C
Preferred  Stock,  the  outstanding  Series E  Preferred  Stock and the Series F
Preferred Stock, which consents shall be obtained prior to the Closing Date.

      SECTION 3.06. Solicitation. Assuming the representations and warranties of
the  Purchasers  set forth in Section  4.06  hereof are true and  correct in all
material respects,  the offer and sale of the Series G Preferred Shares pursuant
to this Agreement and the issuance of the shares of Common Stock upon conversion
of such  Series  G  Preferred  Shares,  will be  exempt  from  the  registration
requirements of the Securities  Act. No form of general  solicitation or general
advertising  was used by the Issuer or, to the best of its knowledge,  any other
Person acting on its behalf,  in respect of the Series G Preferred  Shares or in
connection with the offer and sale of the Series G Preferred Shares. Neither the
Issuer nor any Person  acting on behalf of the Issuer  has,  either  directly or
indirectly, sold or offered for sale to any Person any of the Series G Preferred
Shares or any other  similar  security of the Issuer except as  contemplated  by
this  Agreement.  Neither the Issuer nor any Person acting on its behalf has, in
connection  with the offering of the Series G Preferred  Shares,  engaged in any
action  that would  require the  registration  under the  Securities  Act of the
offering and sale of the Series G Preferred Shares pursuant to this Agreement.

      SECTION  3.07.   Authorization   to  Do  Business.   The  Issuer  and  its
Subsidiaries (i) possess all licenses, certificates,  authorizations,  approvals
and  permits  issued  by  the  appropriate  federal,  state,  local  or  foreign
regulatory  authorities  necessary to conduct their  respective  businesses,  as
presently conducted, excepting any license, certificate, authorization, approval
or permit, the failure to possess which,  singly or in the aggregate,  could not
reasonably be expected to result in a Material  Adverse Effect and (ii) have not
received any notice of proceedings relating to revocation or modification of any
such license, certificate,  authorization, approval or permit, nor is the Issuer
or any of its  Subsidiaries  in  violation  of, or in  default  under,  any such
license,  authorization,  approval  or permit  or any  decree,  order,  judgment
applicable to the Issuer or its Subsidiaries  the effect of which,  singly or in
the  aggregate,  could  reasonably  be expected to result in a Material  Adverse
Effect.

      SECTION 3.08.  Compliance with Laws.  Except as set forth on Schedule 3.08
hereto and except as would not have a Material  Adverse Effect,  the business of
the  Issuer  and  each of the  Subsidiaries  has  been  and is  presently  being
conducted in compliance  with all applicable  federal,  state,  county and local
ordinances, statutes, rules, regulations and laws (collectively "Laws").

      SECTION  3.09.  Litigation.  Except as set forth on Schedule  3.09 hereto,
there are no pending actions, suits, proceedings, arbitrations or investigations
against  or  affecting  the  Issuer or any of its  Subsidiaries  or any of their
respective properties, assets or operations, or with respect to which the Issuer
or any such  Subsidiary  is  responsible  by way of  indemnity  or  otherwise (a
"Material Claim") that, if there is an adverse decision, could singly, or in the
aggregate,  with all such other actions,  suits,  investigations or proceedings,
have a Material  Adverse  Effect,  and, to the knowledge of the Issuer,  no such
actions, suits, proceedings or investigations are threatened.

                                       11
<PAGE>

      SECTION 3.10. Properties. Except as described in Schedule 3.10 hereto, the
Issuer and its Subsidiaries have good and marketable title to all their material
property  and  assets,  free and clear of all Liens  except  (a)  materialmen's,
mechanics',  carriers',  workmen's,  warehousemen's,  repairmen's, or other like
Liens arising in the ordinary  course of business with respect to moneys not yet
due and  payable;  (b) Liens for current  Taxes not yet due and payable or which
are being  contested  in good  faith and by proper  procedures;  or (c) Liens or
minor  imperfections  of title that do not materially  interfere with the use or
materially detract from the value of such property.

      SECTION 3.11. Tax Matters.  The Issuer and its Subsidiaries have filed all
Tax  Returns  required  to be filed and are not in default in the payment of any
Taxes which were payable  pursuant to such returns or any assessments in respect
thereof, other than any which the Issuer or any such Subsidiary is contesting in
good faith by proper procedures.

      SECTION  3.12.  Patents  and  Trademarks.  Each  of  the  Issuer  and  its
Subsidiaries  has  sufficient  right,   title  and  ownership  of  all  patents,
trademarks, service marks, trade names, copyrights, licenses with respect to the
foregoing,  information,  proprietary rights and processes,  or shall be able to
obtain all such licenses and other authority  necessary or useful for the lawful
conduct of its business as it is contemplated to be conducted, without any known
conflicts  with the rights of  others.  No  stockholder,  officer,  director  or
employee  of the  Issuer or any  Subsidiary  owns any rights  therein  which are
competitive  with those to be owned or used by the Issuer and any  Subsidiaries.
Neither  the  Issuer  nor any  Subsidiary  has  been  sued or  charged  with any
infringement of any patent,  license or permit or has knowledge of any basis for
any such claim.

      SECTION 3.13. Labor Matters.

            (a) Neither the Issuer nor any  Subsidiary  is party to any labor or
collective  bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Issuer or any Subsidiary.

            (b) No employees of the Issuer or any Subsidiary are  represented by
any labor  organization.  No labor  organization  or group of  employees  of the
Issuer or any Subsidiary has made a demand for recognition or certification, and
there are no representation or certification  proceedings or petitions seeking a
representation  proceeding presently pending or, to the knowledge of the Issuer,
threatened  to be brought or filed,  with the NLRB or any other labor  relations
tribunal or authority.  To the knowledge of the Issuer,  there are no organizing
activities  involving the Issuer or any  Subsidiary  pending with, or threatened
by, any labor organization.

            (c) There  are no  strikes,  work  stoppages,  slowdowns,  lockouts,
material  arbitrations  or material  grievances or other material labor disputes
pending or, to the knowledge of the Issuer,  threatened against or involving the
Issuer or any  Subsidiary.  Except as would not result in any  Material  Adverse
Effect,  there are no unfair labor  practice  charges,  grievances or complaints
pending or, to the  knowledge of the Issuer,  threatened  by or on behalf of any
employee or group of employees of the Issuer or any Subsidiary.

                                       12
<PAGE>

      SECTION 3.14. Environmental Matters.

            (a) Except as set forth in Schedule 3.14, (i) each of the Issuer and
the Subsidiaries is in material  compliance with all Environmental Laws and (ii)
neither the Issuer nor any  Subsidiary  has received  any written  communication
from a  governmental  authority  with respect to such  compliance or the failure
thereof.

            (b)  Except as set forth in  Schedule  3.14,  (i) there is no civil,
criminal  or  administrative  action,  claim,  demand,  investigation  or notice
relating to a  violation  of an  Environmental  Law (an  "Environmental  Claim")
pending or, to the knowledge of the Issuer, threatened and (ii) to the knowledge
of the Issuer, there are no past or present actions, activities,  circumstances,
conditions,  events or incidents,  including,  without limitation,  the release,
emission, discharge or disposal of any chemical, pollutant,  contaminant, waste,
toxic substance,  petroleum or petroleum  product,  that would form the basis of
any  Environmental  Claim,  in  either  case  (A)  against  the  Issuer  or  any
Subsidiary,   (B)  against  any  person  or  entity  whose   liability  for  any
Environmental  Claim the Issuer or any  Subsidiary  has or may have  retained or
assumed either  contractually  or by operation of law, or (C) involving any real
or personal  property which the Issuer or any Subsidiary owns, leases or manages
except, in each case, as would not have a Material Adverse Effect.

      SECTION  3.15.  Insurance.  The  Issuer  and  its  Subsidiaries,   in  the
reasonable  determination of the Issuer's management,  maintain with financially
sound  and  reputable  insurers  insurance  against  loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or a similar business and similarly situated,  and of such types and in
such amounts as is customarily carried under similar circumstances by such other
corporations.

      SECTION 3.16. Financial Information.

            (a)  The  Issuer  has   furnished  to  the   Purchaser  the  audited
consolidated  financial  statements  of the Issuer dated as of December 31, 1999
and for the year then ended, and the unaudited consolidated financial statements
for the fiscal quarter ended March 31, 2000  (collectively,  the  "Financials").
The  Financials  have been prepared in  accordance  with GAAP applied on a basis
consistent  with that of  preceding  periods and are complete and correct in all
material  respects.  The Financials  fairly represent the Issuer's  consolidated
financial  position  as of the  dates  of the  balance  sheets  included  in the
Financials and its consolidated  results of operations for the periods indicated
therein.  There are no  omissions  from the  Financials  or any  other  facts or
circumstances  not  reflected  in the  Financials  which are or may be  material
according to GAAP.

            (b)  Except  as  and  to  the  extent  expressly  set  forth  in the
Financials,  or the notes, schedules or exhibits thereto, or as disclosed in the
documents filed by the Issuer with the Securities and Exchange  Commission,  (i)
as of March 31,  2000 (the  "Balance  Sheet  Date"),  neither the Issuer nor its
Subsidiaries  had any material  liabilities  or obligations  (whether  absolute,
contingent,  accrued or  otherwise)  that would be  required to be included on a
balance  sheet or in the  notes,  schedules  or  exhibits  thereto  prepared  in

                                       13
<PAGE>

accordance  with GAAP,  (ii) since the Balance  Sheet  Date,  the Issuer and its
Subsidiaries  have not incurred any such  material  liabilities  or  obligations
other than in the normal  course of business and (iii) since  December 31, 1999,
no event has occurred that has resulted in or is reasonably  likely to result in
a Material Adverse Effect.

      SECTION  3.17.  Disclosure.  The Issuer has  provided the  Purchaser  with
disclosure  about its and its  Subsidiaries'  business that in the aggregate did
not contain an untrue  statement of a material  fact or omit to state a material
fact necessary to make the statements in such disclosure not misleading.

      SECTION 3.18.  Investment Company Act. The Issuer is not, and after giving
effect  to the  offering  and sale of the  Series  G  Preferred  Shares  and the
application of the proceeds thereof will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.

      SECTION 3.19.  Brokers.  Except for fees,  commissions and expenses as set
forth on  Schedule  3.19 all of which will be paid by the Issuer on the  Closing
Date,  no brokerage or finder's  commissions  or fees are payable in  connection
with the  transactions  contemplated  by this  Agreement,  and the Issuer  shall
defend,  indemnify  and  hold  the  Purchaser  harmless  from  and  against  any
liability, loss or expense (including, without limitation,  reasonable attorneys
fees) arising in connection with any claim for any such commissions.

      SECTION  3.20.  Affiliated  Transactions.  Set forth on Schedule 3.20 is a
list of all arrangements, agreements and contracts entered into by the Issuer or
any of its Subsidiaries with any Person who is an officer, director or Affiliate
of the Issuer or any of its Subsidiaries,  or, to the Issuer's  knowledge,  with
any immediate  family  member or with any relative of such officer,  director or
Affiliate or with any entity of which any of the foregoing is an Affiliate.

      SECTION 3.21.  Employee  Benefit  Plans.  Neither the Issuer nor any ERISA
Affiliates of the Issuer  maintains or contributes to any Plan other than a Plan
listed on Schedule  3.21  hereto.  Each Plan which is  intended to be  qualified
under Section 401(a) of the Internal Revenue Code has been determined by the IRS
to be so qualified,  and each trust related to any such Plan has been determined
to be exempt  from  federal  income  tax under  Section  501(a) of the  Internal
Revenue Code.  Except as disclosed on Schedule 3.21,  neither the Issuer nor any
ERISA  Affiliate  maintains or contributes to any employee  welfare benefit plan
within the meaning of Section 3(l) of ERISA which provides benefits to employees
after  termination of employment other than as required by Section 601 of ERISA.
Neither  the  Issuer  nor  any  ERISA   Affiliate   has   breached  any  of  the
responsibilities,  obligations  or duties  imposed on it by ERISA or regulations
promulgated  thereunder  with respect to any Plan which breach could result in a
Material Adverse Effect. No Plan has incurred any accumulated funding deficiency
(as defined in Section  302(a)(2)  of ERISA and Section  412(a) of the  Internal
Revenue Code),  whether  waived or not waived.  Neither the Issuer nor any ERISA
Affiliate  nor any fiduciary of any Plan which is not a  Multiemployer  Plan (i)
has engaged in a nonexempt "prohibited  transaction" described in Section 406 of
ERISA or Section 4975 of the  Internal  Revenue Code or (ii) has taken or failed
to take any action  which would  constitute  or result in a  Termination  Event.
Neither the Issuer nor any ERISA  Affiliate  has incurred  any  liability to the
PBGC which  remains  outstanding  and which could  result in a Material  Adverse
Effect,  other than the payment of premiums,  and there are no premium  payments
which have  become due which are unpaid.  Schedule B to the most  recent  annual

                                       14
<PAGE>

report filed with the IRS with  respect to each Plan is complete  and  accurate.
Since the date of each such Schedule B, there has been no adverse  change in the
funding  status or financial  condition of the Plan relating to such Schedule B.
Neither  the  Issuer nor any ERISA  Affiliate  has (i) failed to make a required
contribution  or payment  to a  Multiemployer  Plan or (ii) made a  complete  or
partial  withdrawal  under  Sections 4203 or 4205 of ERISA from a  Multiemployer
Plan.  Neither the Issuer nor any ERISA  Affiliate has failed to make a required
installment  or any other  required  payment  under  Section 412 of the Internal
Revenue Code on or before the due date for such  installment  or other  payment.
Neither the Issuer nor any ERISA Affiliate is required to provide  security to a
Plan  under  Section  401 (a) (29) of the  Internal  Revenue  Code due to a Plan
amendment that results in an increase in current liability for the plan year.

      SECTION 3.22.  Material Contracts.  The agreements,  set forth on Schedule
3.22  hereto  are all of the  agreements  that  are  material  to the  financial
condition, business or results of operations of the Issuer and its Subsidiaries,
taken as a whole. All the foregoing agreements are valid, subsisting and in full
force and  effect and  neither  the  Issuer,  nor,  to the best of the  Issuer's
knowledge and belief, any other parties, are in material default thereunder.

                                   ARTICLE IV
                REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

      Each Purchaser represents and warrants to the Issuer as follows:

      SECTION 4.01. Organization. It is duly organized and existing under the
laws of its jurisdiction of organization.

      SECTION 4.02. Authority; No Other Action.  (a) The execution, delivery
and performance of this Agreement and the Stockholders Agreement are within
its powers and have been duly authorized on its part by all requisite
corporate, partnership or company action.

            (b) No action by or in respect of, or filing with, any  governmental
authority,  agency or official  is  required  for the  execution,  delivery  and
performance by such Purchaser of this Agreement and the Stockholders Agreement.

      SECTION 4.03. No Conflict. The execution, delivery and performance by such
Purchaser of this Agreement and the Stockholders  Agreement and the consummation
of the  transactions  contemplated  hereby  and  thereby do not and will not (i)
violate its charter, bylaws or similar organizational  documents or (ii) violate
any applicable law, rule,  regulation,  judgment,  injunction,  order or decree,
which  violation  would  (a)  affect  the  validity  of  this  Agreement  or the
Stockholders  Agreement  or (b)  individually  or in the  aggregate  impair  the
ability of such  Purchaser  to perform in any material  respect the  obligations
which it has under this Agreement or the Stockholders Agreement.

      SECTION  4.04.  Binding  Effect.   This  Agreement  and  the  Stockholders
Agreement have been duly authorized, executed and delivered by it and, except as
limited by applicable  bankruptcy,  insolvency,  reorganization,  moratorium and
similar laws  affecting the  enforcement of creditors'  rights  generally and by
general  principles of equity  (whether  enforcement is sought by proceedings in

                                       15
<PAGE>

equity or at law),  constitute  valid and binding  agreements of such  Purchaser
enforceable in accordance with their respective terms.

      SECTION  4.05.  No  Defaults.  Such  Purchaser  is not in violation of its
charter,  bylaws or similar  organizational  documents  or in default  under any
provision  of  applicable  law  or  regulation  or of any  agreement,  judgment,
injunction,  order,  decree or other instrument binding upon it, which violation
or default (i) would affect the validity of this  Agreement or the  Stockholders
Agreement or (ii) would (individually or in the aggregate) impair the ability of
such Purchaser to perform in any material  respect the obligations  which it has
under this Agreement or the Stockholders Agreement.

      SECTION 4.06. Private Placement.  (a) Such Purchaser  understands that (i)
the offering and sale of the Series G Preferred  Shares is intended to be exempt
from  registration  under the  Securities  Act  pursuant to Section  4(2) of the
Securities  Act and (ii) there is no existing  public or other market for any of
the  Series G  Preferred  Shares or the  shares of Common  Stock  issuable  upon
conversion thereof and there can be no assurance that it will be able to sell or
dispose of such  Series G  Preferred  Shares  purchased  by it  pursuant to this
Agreement or any shares of Common Stock issuable upon conversion thereof.

            (b) It is an  "Accredited  Investor"  as  such  term is  defined  in
Regulation D.

            (c) It has  sufficient  knowledge  and  experience  in financial and
business  matters so as to be capable of evaluating  the merits and risks of its
investment in the  Securities and it is capable of bearing the economic risks of
such  investment,  including a complete  loss of its  investment in the Series G
Preferred Shares.

            (d) It has had access to the  management  and  records of the Issuer
and has been furnished with all the  information  that it has requested from the
Issuer for determining whether to purchase the Series G Preferred Shares and has
been given the  opportunity  to ask  questions  of, and  receive  answers  from,
management of the Issuer  regarding its business and affairs and  concerning the
terms and conditions of the Series G Preferred Shares and other related matters.

            (e) It understands that the Series G Preferred Shares and the shares
of Common Stock  issuable upon  conversion of the Series G Preferred  Shares are
characterized  as  "restricted  securities"  under the federal  securities  laws
inasmuch  as they are  being  acquired  from the  Issuer  in a  transaction  not
involving a public offering and that under such laws and applicable  regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.  In this connection,  it represents that it is
familiar  with SEC Rules 144 and 144A, as presently in effect,  and  understands
the resale limitations imposed thereby and by the Securities Act.

            (f) Such Purchaser  understands that any  certificates  representing
Series G Preferred  Shares which it may purchase  pursuant to this Agreement and
any shares of Common Stock which may be issued upon conversion thereof will bear
a legend in substantially the following form:

                                       16
<PAGE>

      THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED
      UNDER THE  SECURITIES ACT OF 1933, AS AMENDED,  OR THE SECURITIES  LAWS OF
      ANY STATE.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,  SOLD OR OTHERWISE
      TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER
      SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
      EXEMPTION FROM THE REGISTRATION  REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR
      PURSUANT TO A WRITTEN OPINION OF COUNSEL FOR THE COMPANY THAT REGISTRATION
      IS NOT REQUIRED.

      THE  SALE,  ASSIGNMENT,   HYPOTHECATION,   PLEDGE,  ENCUMBRANCE  OR  OTHER
      DISPOSITION  (EACH  A  `TRANSFER')  AND  VOTING  OF ANY OF THE  SECURITIES
      REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE AMENDED
      AND  RESTATED  STOCKHOLDERS  AGREEMENT,  DATED AS OF OCTOBER 31, 1997 (THE
      "STOCKHOLDERS  AGREEMENT"),  AMONG  KMC  TELECOM  HOLDINGS,  INC.,  NASSAU
      CAPITAL  PARTNERS  L.P.,  NAS  PARTNERS I L.L.C.,  HAROLD N.  KAMINE,  KMC
      TELECOMMUNCATIONS  L.P., GENERAL ELECTRIC CAPITAL CORPORATION,  CORESTATES
      HOLDINGS,  INC.  AND AT&T  CREDIT  CORPORATION,  AS THE SAME HAS BEEN,  OR
      SUBSEQUENT TO THE DATE HEREOF MAY BE, AMENDED FROM TIME TO TIME, A COPY OF
      WHICH MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL
      NOT REGISTER A TRANSFER OF THE SECURITIES  REPRESENTED BY THIS CERTIFICATE
      ON THE BOOKS OF THE COMPANY  UNLESS AND UNTIL SUCH  TRANSFER HAS BEEN MADE
      IN COMPLIANCE WITH THE TERMS OF SUCH STOCKHOLDERS AGREEMENT.

                                    ARTICLE V
                         CONDITIONS PRECEDENT TO CLOSING

      SECTION 5.01. Conditions to the Purchasers' Obligations. The obligation of
each of the Purchasers to purchase the Series G Preferred Shares to be purchased
by it hereunder is subject to the satisfaction, on or prior to the Closing Date,
of the following conditions:

            (a)  each  of the  representations  and  warranties  of  the  Issuer
contained herein shall be true and correct in all material respects on and as of
such Closing Date and the Purchasers shall have received a certificate attesting
thereto signed by the Chief Executive Officer, the President or a Vice President
of the Issuer;

            (b) there  shall not have  occurred  and there  shall not  otherwise
exist any  condition,  event or  development  having,  or likely to have (in the
reasonable judgment of the Purchasers), a Material Adverse Effect;

            (c) the Purchasers shall have received an opinion from Kelley,  Drye
& Warren LLP, counsel to the Issuer,  dated the Closing Date, in form reasonably
satisfactory to the Purchasers;

                                       17
<PAGE>

            (d) the Secretary or an Assistant Secretary of the Issuer shall have
delivered to the  Purchasers at the Closing Date a  Certificate  dated as of the
Closing Date  certifying:  (i) that attached thereto is a true and complete copy
of the  by-laws  of the  Issuer as in effect on the date of such  certification;
(ii)  that  attached  thereto  is a true and  complete  copy of all  resolutions
adopted by the Board of  Directors  of the  Issuer  authorizing  the  execution,
delivery and performance of this Agreement and the Stockholders  Agreement,  the
issuance,  sale and delivery of the Series G Preferred Shares, and that all such
resolutions are in full force and effect and are all the resolutions  adopted in
connection  with  the  transactions  contemplated  by  this  Agreement  and  the
Stockholders Agreement,  (iii) that attached thereto is a true and complete copy
of the Charter as in effect on the date of such  certification;  and (iv) to the
incumbency and specimen signature of certain officers of the Issuer;

            (e) all corporate and other proceedings to be taken by the Issuer in
connection  with  the  transactions  contemplated  by  this  Agreement  and  the
Stockholders  Agreement,   and  all  documents  reflecting  or  evidencing  such
proceedings shall be reasonably satisfactory in scope, form and substance to the
Purchasers and its legal counsel, and the Purchasers and its legal counsel shall
have received all such duly executed counterpart originals or certified or other
copies of such documents and instruments as they may reasonably request.

            (f) each of the  Purchasers  shall have  received  duly executed and
authenticated  certificates  representing  the Series G Preferred  Shares  being
purchased by it pursuant hereto;

            (g) the Series G Certificate  of  Designations  shall have been duly
filed with the  Secretary  of State of  Delaware  and shall be in full force and
effect;

            (h) the  Purchaser  shall have received the  Stockholders  Agreement
duly executed by the Issuer;

            (i) the Issuer shall have paid to the Purchasers all fees,  expenses
and  reimbursements  required  to be so paid on or  prior  to the  Closing  Date
pursuant to the terms of this Agreement; and

            (j) the  aggregate  proceeds  to be  received  by the  Issuer at the
Closing  from the sale of Series G  Preferred  Shares  shall be at least  $182.5
million.

      SECTION 5.02. Conditions to Issuer's  Obligations.  The obligations of the
Issuer to issue and sell the Series G Preferred Shares to each of the Purchasers
pursuant to this Agreement are subject to the  satisfaction,  at or prior to the
Closing Date, of the following conditions:

            (a) the  representations  and  warranties of each of the  Purchasers
contained herein shall be true and correct in all material respects on and as of
the Closing Date;

            (b) the Issuer shall have  received  from each of the  Purchasers by
wire transfer (of immediately  available funds) to an account  designated by the
Issuer in writing delivered to each Purchaser,  the consideration referred to on
Schedule 2.02;

                                       18
<PAGE>

            (c) the  Charter  Amendment  shall  have  been duly  filed  with the
Secretary of State of Delaware and shall be in full force and effect;

            (d) the Series G Certificate  of  Designations  shall have been duly
filed with the  Secretary  of State of  Delaware  and shall be in full force and
effect; and

            (e) the  aggregate  proceeds  to be  received  by the  Issuer at the
Closing  from the sale of Series G  Preferred  Shares  shall be at least  $182.5
million.

      SECTION 5.03. Subsequent  Conditions of Each Purchaser's  Obligations at a
Subsequent Closing.  The obligation of each Subsequent Purchaser to purchase and
pay for the Series G Preferred Shares to be purchased at any Subsequent  Closing
is subject to the  satisfaction  as of the Subsequent  Closing of the conditions
specified in Section 5.01 hereof and all references to "Closing"  "Closing Date"
contained  in Section  5.01 shall be replaced  with  references  to  "Subsequent
Closing" or "Subsequent Closing Date."

                                   ARTICLE VI
                                    COVENANTS

      SECTION 6.01. Covenants of the Issuer.

            (a) Securities.  The Issuer hereby covenants that from and after the
Closing Date and so long as any  Purchaser  owns any Series G Preferred  Shares,
the Issuer shall:

                  (i) Exchange of Certificates.  Upon surrender by the holder of
      any  certificates  representing  Series G Preferred  Shares (or securities
      issued upon  exchange,  conversion  or exercise  thereof)  for exchange or
      reissuance  at the office of the  Issuer,  cause to be issued in  exchange
      therefor new certificates in such  denomination or denominations as may be
      requested for the same aggregate  number of Series G Preferred  Shares (or
      securities   issued  upon  exchange,   conversion  or  exercise   thereof)
      represented  by the  certificates  so  surrendered  and registered as such
      holder may request, subject to the provisions thereof.

                  (ii) Replacement of  Certificates.  Upon receipt by the Issuer
      of evidence reasonably  satisfactory to it of loss, theft,  destruction or
      mutilation  of any  certificate  evidencing  any of the Series G Preferred
      Shares  (or  securities  issued  upon  exchange,  conversion  or  exercise
      thereof),  and (in  case of  loss,  theft  or  destruction)  of  indemnity
      reasonably  satisfactory  to  the  Issuer,  and  upon  the  surrender  and
      cancellation of such certificate,  if mutilated, the Issuer shall make and
      deliver in lieu of such  certificate a new  certificate  for the number of
      Series G Preferred Shares (or securities issued upon exchange,  conversion
      or exercise thereof),  as the case may be, evidenced by such lost, stolen,
      destroyed  or  mutilated  certificate  which  remains  outstanding.   Such
      Purchaser's (which term does not include any successors or assigns of such
      Purchaser) agreement of indemnity shall constitute indemnity  satisfactory
      to the Issuer for the purposes of this Section 6.01(a) without the need of
      any further surety or bond.

                                       19
<PAGE>

                  (iii) Government and Other Approvals. Promptly prepare, submit
      and file with all public and governmental  authorities,  all applications,
      notices,   registrations,   certificates,   statements   and  such   other
      information,  documents and instruments as may be required pursuant to any
      federal,  state  or  local  law or  rule  or  regulation  of the  National
      Association of Securities  Dealers,  Inc. or any securities  exchange,  in
      connection with the consummation of the transactions  contemplated by this
      Agreement,  including the preparation and filing of all documents required
      to be filed by the Issuer  pursuant to the HSR Act in connection  with the
      purchase of Series G Preferred  Shares  hereunder by  Dresdner,  Kleinwort
      Benson  Private  Equity  Partners  L.P.  ("Dresdner"),  the  effect of any
      dividends,  exchange or  conversion  rights,  anti-dilution  provisions or
      Board control  contemplated by the terms of the Series G Preferred  Shares
      or other  securities  of the Issuer which may be acquired by any Purchaser
      pursuant  to this  Agreement.  The  Issuer  shall use its best  efforts to
      obtain  any  necessary   consents  or  approvals  from  any  authority  in
      connection with the consummation of the transactions  contemplated by this
      Agreement,  including the effect of any dividends,  exchange or conversion
      rights,  anti-dilution  provisions  or Board control  contemplated  by the
      terms of the Series G Preferred Shares.

            (b) Access  and  Confidentiality.  Prior to the  Closing  Date,  the
Issuer shall (and shall cause each of its Subsidiaries to) afford each Purchaser
and its  representatives  reasonable  access during normal business hours to its
properties,  books,  contracts  and records and  personnel  and advisors and the
Issuer shall (and shall cause each of the  Subsidiaries  to) furnish promptly to
each Purchaser all information  concerning its business properties and personnel
as each Purchaser or its representatives  may reasonably request,  provided that
any review will be conducted in a way that will not interfere  unreasonably with
the conduct of the Issuer's business.

            (c)  Reports  to  Holders.  At all  times,  upon the  request of any
Purchaser so long as such Purchaser  (together with its, his or her  Affiliates)
owns Shares of Underlying  Common Stock having an initial  purchase  price of at
least $25 million,  the Issuer shall supply to such Purchaser such financial and
other information as such Purchaser may reasonably  determine to be necessary in
order to  permit  compliance  with Rule  144A in  connection  with a resale or a
proposed resale of any of the Series G Preferred Shares.

            (d)   Inspection   of   Property.   The  Issuer   shall  permit  any
representatives  designated by a Purchaser  that  (together with its, his or her
Affiliates) continues to hold at least 5% of the authorized shares of Underlying
Common Stock,  upon  reasonable  notice and during normal business hours, to (i)
visit and inspect any of the properties of the Issuer and its Subsidiaries, (ii)
examine the corporate and financial  records of the Issuer and its  Subsidiaries
and make copies  thereof or extracts  therefrom  and (iii)  discuss the affairs,
finances and accounts of any such corporations with the directors,  officers and
independent accountants of the Issuer and its Subsidiaries.  Any Person not then
subject to the terms of an effective  confidentiality  agreement with the Issuer
may be required to execute such an  agreement  with the Issuer as a condition of
being provided access to the properties,  books and records of the Issuer and an
opportunity  to discuss the Issuer's  affairs with the  officers,  directors and
independent  accountants of the Issuer.  The presentation of an executed copy of
this Agreement by any Purchaser to the Issuer's  independent  accountants  shall
constitute the Issuer's permission to its independent accountants to participate
in discussions  with such Persons.  Any Person entitled to exercise rights under

                                       20
<PAGE>

this  Section  6(e) shall be entitled to exercise  such rights not more than one
time per calendar  quarter.  The rights granted under this Section 6.01(d) shall
terminate upon the consummation of a Qualified Public Offering.

            (e)   Limited Rights of First Refusal

                  (i) Except for  issuances  of Common Stock (a) to the Issuer's
      employees or other service  providers  pursuant to the 1998 Stock Purchase
      and Option  Plan for Key  Employees  of KMC  Telecom  Holdings,  Inc.  and
      Affiliates, as amended, or any other board-approved equity issuance to the
      employees or service providers, (b) upon the exercise or conversion of any
      securities  outstanding on the Closing Date, (c) for  consideration  other
      than  cash,  (d)  to  lessors  of the  Issuer  (e) to  providers  of  debt
      financing,  or (f)  pursuant  to a public  offering  registered  under the
      Securities  Act,  and except for  issuances  of Series G Preferred  Shares
      pursuant to Section 2.04, if the Issuer authorizes the issuance or sale of
      any shares of Common Stock or any securities  containing options or rights
      to acquire  any shares of Common  Stock  (other  than as a dividend on the
      outstanding  Common  Stock),  the Issuer shall first offer to sell to each
      holder of  Underlying  Common Stock a portion of such stock or  securities
      equal to the quotient  determined  by dividing (1) the number of shares of
      Underlying  Common  Stock held by such  holder by (2) the sum of the total
      number of shares of  Underlying  Common  Stock and the number of shares of
      Common Stock  outstanding on a fully diluted basis which are not shares of
      Underlying  Common Stock.  Each holder of Underlying Common Stock shall be
      entitled to purchase such stock or securities at the most favorable  price
      and on the most  favorable  terms as such  stock or  securities  are to be
      offered to any other Persons;  provided that, at the request of any holder
      of Underlying Common Stock, the Issuer shall offer to such holder stock or
      securities  which  have  no  voting  rights  (other  than as  required  by
      applicable  law) and which are convertible  into voting  securities at the
      option of the holder  but which are  otherwise  identical  to the stock or
      securities being offered.  The purchase price for all stock and securities
      offered to the holders of the Underlying  Common Stock shall be payable in
      cash.

                  (ii) In order to exercise its  purchase  rights  hereunder,  a
      holder of  Underlying  Common  Stock must within 15 days after  receipt of
      written notice from the Issuer  describing in reasonable  detail the stock
      or securities being offered, the purchase price thereof, the payment terms
      and such holder's  percentage  allotment  deliver a written  notice to the
      Issuer  describing  its  election  hereunder.  If  all of  the  stock  and
      securities  offered to the holders of Underlying Common Stock is not fully
      subscribed by such holders,  the remaining  stock and securities  shall be
      reoffered  by the Issuer to the holders  purchasing  their full  allotment
      upon the terms set forth in this paragraph,  except that such holders must
      exercise  their  purchase  rights  within five days after  receipt of such
      reoffer.

                  (iii) Upon the  expiration of the offering  periods  described
      above, the Issuer shall be entitled to sell such stock or securities which
      the holders of Underlying Common Stock have not elected to purchase during
      the 90 days  following  such  expiration  on terms and  conditions no more
      favorable to the  purchasers  thereof than those  offered to such holders.
      Any stock or  securities  offered or sold by the Issuer  after such 90-day
      period  must be  reoffered  to the  holders  of  Underlying  Common  Stock
      pursuant to the terms of this paragraph 6.01(f).

                                       21
<PAGE>

                  (iv) The rights of the  holders  of  Underlying  Common  Stock
      under this  Section  6.01(e)  not apply to, and shall  terminate  upon the
      consummation of, a Qualified Public Offering.

            (f)   Directed Shares upon the Initial Public Offering.

                  (i)  Notwithstanding  the provisions of Section  6.01(e),  the
      Issuer hereby grants to each of the Purchasers,  a right of first offer to
      purchase  shares of Common Stock in the Issuer's  initial public  offering
      (the "IPO") of shares of its Common Stock  registered under the Securities
      Act (the "IPO  Purchase  Option") at a price equal to the public  offering
      price of such shares.  In connection with its exercise of the IPO Purchase
      Option,  the Purchasers may, on a pro-rata basis,  purchase up to a number
      of shares equal to ten percent (10%) of all shares of Common Stock offered
      by the Issuer in the IPO (the "Maximum  Number").  The IPO Purchase Option
      shall not  extend,  however,  to any shares of Common  Stock  which may be
      subject  to any  over-allotment  option  granted  to the  underwriters  in
      connection with such IPO.

                  (ii) The Issuer shall  deliver  notice of the IPO,  within ten
      (15) days following the filing of a registration statement relating to the
      IPO. Within five (5) days following  delivery of such notice,  each of the
      Purchasers may exercise the IPO Purchase  Option (by delivery of notice to
      such  effect to the  Issuer)  for a number of shares up to its  respective
      Maximum  Number.  For purposes of this  Section  6.01(f),  the  Purchasers
      include  any  Permitted   Transferees  (as  defined  in  the  Stockholders
      Agreement) of the Purchasers.

                  (iii)  The  exercise  of  the  IPO  Purchase  Option  by  each
      Purchaser  shall be deemed an expression of interest in receiving an offer
      by the Issuer to purchase the number of shares of Common  Stock  indicated
      by such Purchaser pursuant to subsection (ii) above. The Issuer's offer to
      sell  such  shares of Common  Stock to such  Purchaser  shall be deemed to
      occur automatically upon the completion of each of the earlier to occur of
      (A)  the  Issuer's  providing  such  Purchaser  with a copy  of the  final
      prospectus filed with the Securities and Exchange  Commission with respect
      to the shares of Common  Stock and (B) two hours after the latest to occur
      of (x) the  effectiveness  of the IPO  registration  statement and (y) the
      Issuer's  determination  of the offering  price for shares  offered to the
      public in the IPO (the  completion of the last to occur of the  foregoing,
      the "Offer  Commencement").  Each  Purchaser  shall have an  unconditional
      right to terminate its IPO Purchase Option and revoke its exercise thereof
      by written notice to the Issuer on or before the Offer Commencement.  Once
      revoked by a Purchaser, the IPO Purchase Option shall become null and void
      with  respect to such  Purchaser.  Each  Purchaser's  exercise  of the IPO
      Purchase  Option shall,  unless so revoked by such  Purchaser on or before
      the Offer Commencement, automatically be deemed to be a binding commitment
      to  purchase  the  shares  of Common  Stock  indicated  by such  Purchaser
      pursuant to  subsection  (ii) above when each of the actions  specified in
      the  immediately  preceding  sentence have  occurred.  The purchase of the

                                       22
<PAGE>

      shares of Common Stock by any Purchaser  shall occur  simultaneously  with
      the closing of the purchase and sale of the other  shares  distributed  in
      the IPO. It is the intent of the parties  that the shares of Common  Stock
      issued to the Purchasers shall be fully registered  shares for sale in the
      IPO.

                  (iv) The IPO Purchase Option set forth in this Section 6.01(f)
      may not be assigned or  transferred,  except that such right is assignable
      by a  Purchaser  to any of its  Permitted  Transferees  (as defined in the
      Stockholders Agreement) or any other Purchaser.

            (g) Financial  Statements  and Other  Information.  The Issuer shall
deliver  to each  Purchaser  who  (together  with  its,  his or her  Affiliates)
continues  to hold at least 5% of the  authorized  shares of  Underlying  Common
Stock:

                  (i) within 45 days after the end of each month (or  equivalent
      fiscal  period  of the  Company),  a copy  of the  unaudited  consolidated
      balance  sheets of the Issuer as of the end of such  month (or  equivalent
      fiscal  period of the Issuer) and the related  consolidated  statements of
      income and statements of cash flows and changes in stockholders equity for
      such month (or equivalent fiscal period of the Issuer) and for the portion
      of the  fiscal  year  ending as of the end of such  month  (or  equivalent
      fiscal  period of the Issuer),  all in  reasonable  detail and prepared in
      accordance  with GAAP,  consistently  applied  (subject to normal year-end
      adjustments  and the  exclusion  of such  footnotes  as may be required in
      accordance with GAAP, consistently applied), accompanied by comparisons to
      the Issuer's annual budget for such month and for year to date results and
      to the  corresponding  periods  in the  preceding  fiscal  year (if  any),
      including  a  management   discussion   and  analysis  of  such  financial
      statements and  comparisons  and an explanation of any material  deviation
      from the budget;

                  (ii)  accompanying  the  financial  statements  referred to in
      subparagraph  (i), a certificate from the Issuer's chief financial officer
      stating that there is no Event of  Noncompliance  in existence  or, if any
      Event of Noncompliance exists, specifying the nature thereof;

                  (iii)  within 120 days after the close of each fiscal  year, a
      copy of the  audited  consolidated  financial  statements  of the  Issuer,
      consisting  of  consolidated  balance  sheets as of the end of such fiscal
      year and  consolidated  statements of income and  statements of cash flows
      and changes in stockholders' equity for such fiscal year, setting forth in
      comparative  form in each case the  consolidated  figures set forth in the
      annual  budget for such fiscal year and the  consolidated  figures for the
      previous fiscal year-end,  which financial statements shall be prepared in
      accordance   with   GAAP,   consistently   applied,    certified   without
      qualification  by a  "big-five"  accounting  firm  selected by the Issuer,
      accompanied by (a) a management  discussion and analysis of such financial
      statements and  comparisons  and an explanation of any material  deviation
      from the annual  budget,  (b) a  certificate  from such  accounting  firm,
      addressed  to the Board,  stating  that in the  course of its  examination
      nothing came to its attention  that caused it to believe that there was an
      Event of  Noncompliance  in existence or that there was any other material
      default  by  the  Issuer  or  any  Subsidiary  in  the  fulfillment  of or
      compliance with any of the terms,  covenants,  provisions or conditions of
      this Agreement and any other material agreement to which the Issuer or any
      Subsidiary is a party or, if such  accountants  have reason to believe any

                                       23
<PAGE>

      Event of  Noncompliance  or other default by the Issuer or any  Subsidiary
      exists,  a  certificate  specifying  the nature  and  period of  existence
      thereof,  and (c) a copy of such firm's  annual  management  letter to the
      Board;

                  (iv) no later than 30 days  prior to the close of each  fiscal
      year, a copy of the Issuer's annual budget for the next succeeding  fiscal
      year which shall have been duly  adopted by the Board (the first  proposed
      budget is attached hereto as Exhibit C);

                  (v)  promptly  (but in any event  within  ten days)  after the
      discovery  or  receipt  of  notice of any  Event of  Noncompliance  or any
      condition or event which is reasonably  likely to have a material  adverse
      effect on the Issuer's business prospects or financial condition or on the
      Purchasers'  investment in the Series G Preferred Shares or the Underlying
      Common Stock, written notice specifying the nature and period of existence
      thereof;

                  (vi) within ten days after transmission thereof, copies of all
      financial  statements,  proxy  statements,  reports and any other  general
      written  communications  which the Issuer  sends to its  stockholders  and
      copies of all regular,  special or periodic reports which it files, or any
      of its  officers or directors  file with  respect to the Issuer,  with the
      Securities  and Exchange  Commission  or with any  securities  exchange on
      which  any of its  securities  are then  listed,  and  copies of all press
      releases and other  statements  made available  generally by the Issuer to
      the  public  concerning  material  developments  in the  Issuer's  and its
      Subsidiaries' businesses; and

                  (vii)  notwithstanding  the  foregoing,  at the request of any
      holder of  Underlying  Common Stock,  the Issuer shall cease  providing to
      such  holder any or all such  information  that such holder is entitled to
      pursuant to this Section 6.01(g) until such holder rescinds such request;

provided,  that the obligations of the Issuer  contained in this Section 6.01(g)
shall terminate upon a Qualified Public Offering.

            (h)   Miscellaneous Covenants.

                  (i) the Issuer  will  maintain  property,  casualty,  products
      liability and other insurance  covering such risks at such levels and with
      such exclusions as is customarily  maintained by Companies of similar size
      engaged in similar lines of business;

                  (ii) the Issuer will maintain directors and officers liability
      insurance  for the  benefit of all of its  directors  and  officers  as is
      customary  for  companies  of similar  size  engaged  in similar  lines of
      business;

                  (iii) the Issuer shall perform and observe all of its material
      obligations to each holder of the Series G Preferred Shares and all of its
      obligations to each holder of the Underlying Common Stock set forth in the
      Charter, the Series G Certificate of Designations and the Issuer's bylaws;
      and

                                       24
<PAGE>

                  (iv) within 15 days  following  the Closing  Date,  the Issuer
      shall  prepare and file a report on Form D pursuant to  Regulation  D with
      the Securities and Exchange Commission describing the purchase and sale of
      the Series G Preferred Shares as contemplated herein.

                                   ARTICLE VII
                                  MISCELLANEOUS

      SECTION 7.01. Notices.  All notices,  requests and other communications to
any  party  hereunder  shall be in  writing  (including  telecopier  or  similar
writing) and shall be given to such party by  certified  first class mail at its
address with a return receipt requested, by Federal Express or similar overnight
mail  service  with  signature  required  for  receipt,  or by  telecopy  at the
telecopier  number set forth below or such other address or telecopier number as
such  party may  hereinafter  specify in  writing  for the  purpose to the party
giving such notice.  Each such notice,  request or other  communication shall be
effective  (i) if given by telecopy,  when such telecopy is  transmitted  to the
telecopy  number  specified  in  this  Section  and the  appropriate  electronic
confirmation  is received  and a copy of such notice is sent by  overnight  mail
service  or (ii) if given by mail or  overnight  courier,  72 hours  after  such
communication  is  deposited  in the mails with first class  postage  prepaid or
given to overnight courier service, addressed as aforesaid.

            Issuer:

            KMC Telecom Holdings, Inc.

            1545 Route 206, Suite 300

            Bedminster NJ 07921

            Attn: Chief Financial Officer

            Fax:  (908) 719-8775

            With a copy (which shall not constitute notice) to:

            Kelley Drye & Warren LLP

            101 Park Avenue

            New York, NY 10178

            Attn: Alan M. Epstein

            Fax:  (212) 808-7897

            To any Purchaser:

            To the address, and with the copy or copies, indicated on the
            attached Schedule 2.02

                                       25
<PAGE>

      SECTION 7.02. No Waivers.  No failure or delay on the part of any party in
exercising  any right,  power or privilege  hereunder  shall operate as a waiver
thereof,  nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.

      SECTION 7.03. Successors and Assigns. Each Purchaser may assign its rights
hereunder  without  the  consent of the Issuer to any  transferee  of any of the
Series G Preferred Shares.  Otherwise, no party to this Agreement may assign any
of its  rights or  obligations  hereunder  to any person  except  with the prior
written  consent  of  the  other  parties  hereto  (which  consent  may  not  be
unreasonably withheld). This Agreement shall be binding upon the Issuer and each
Purchaser and their respective successors and assigns.

      SECTION  7.04.  Choice of Law.  All issues and  questions  concerning  the
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules  hereto shall be governed by, and construed in accordance
with, the laws of the State of New York,  without giving effect to any choice of
law or conflict of law rules or provisions  (whether of the State of New York or
any other  jurisdiction)  that would  cause the  application  of the laws of any
jurisdiction  other than the State of New York. In furtherance of the foregoing,
the internal law of the State of New York shall control the  interpretation  and
construction  of this  Agreement (and all schedules and exhibits  hereto),  even
though under that jurisdiction's choice of law or conflict of law analysis,  the
substantive law of some other jurisdiction would ordinarily apply.

      SECTION 7.05. Counterparts;  Effectiveness. This Agreement may be executed
in any number of  counterparts  each of which shall be an original with the same
effect as if the  signatures  thereto and hereto were upon the same  instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.

      SECTION 7.06. Entire Agreement. This Agreement, the Stockholders Agreement
and the Series G Certificate of Designations constitute the entire agreement and
understanding  of the parties hereto in respect of the subject matter  contained
herein and therein,  and there are no restrictions,  promises,  representations,
warranties,  covenants,  or  undertakings  with  respect to the  subject  matter
hereof,  other than those  expressly set forth or referred to herein or therein.
This Agreement and the documents referred to in the preceding sentence supersede
all prior agreements and understandings  between the parties hereto with respect
to the subject matter hereof.

      SECTION 7.07. Expenses. Upon consummation of the transactions contemplated
by this Agreement, the Issuer shall pay the Purchasers' reasonable out-of-pocket
expenses on demand arising in connection with the execution and delivery of this
Agreement,   the  Stockholders   Agreement  and  the  Series  G  Certificate  of
Designations (collectively, the "Transaction Documents") and the purchase of the
Series G Preferred Shares,  including,  without  limitation:  (i) the reasonable
fees and expenses of legal counsel to each of the Purchasers in connection  with
the  preparation   and   negotiation  of  the  Transaction   Documents  and  the
consummation of the transactions  contemplated  therein, and (ii) the reasonable

                                       26
<PAGE>

fees and expenses  incurred in connection with the preparation and filing of all
documents  required to be filed  pursuant to the HSR Act in connection  with the
purchase of the Series G Preferred  Shares  hereunder by Dresdner.  In addition,
the Issuer shall pay the costs and expenses, including reasonable attorneys fees
and  expenses  and the fees and  expenses  of any  other  special  or  financial
advisors, incurred in connection with any bankruptcy or insolvency of the Issuer
or in connection with any workout or  restructuring  of any of the  transactions
contemplated in the Transaction  Documents.  The obligations of the Issuer under
this  Section  7.07 shall  survive any transfer of any of the Series G Preferred
Shares by any Purchaser or any subsequent holder thereof.

      SECTION 7.08. Announcements.  No party or any Affiliate,  officer or agent
of the parties hereto shall make any  announcement  concerning the  transactions
contemplated  hereby  without  the other  parties'  consent,  which  will not be
unreasonably  withheld;  provided,  however,  that any party or such  Affiliate,
officer or agent may make any  announcements  required by applicable law so long
as the text of the  announcement  shall have been provided to the parties hereto
prior to the making of such announcement.

      SECTION 7.09. Consents to Amendment.  The provisions of this Agreement may
be  amended,  modified,  or waived,  and the  Issuer may take any action  herein
prohibited,  or omit to perform any act herein  required to be  performed by it,
only if the Issuer has obtained the written consent of the holders of two thirds
of each of the Series G-1 Preferred Shares and the Series G-2 Preferred  Shares,
respectively;  provided that if any such amendment, modification or waiver would
adversely  affect  any  holder  of Series  G-1  Preferred  Shares or Series  G-2
Preferred  Shares,  as the case may be,  relative  to the  holders of Series G-1
Preferred  Shares  or  Series  G-2  Preferred  Shares  voting  in  favor of such
amendment, modification, or waiver, such amendment, modification or waiver shall
also require the written  consent of the holders of two thirds of the Series G-1
Preferred  Shares or Series G-2 Preferred  Shares,  as  applicable,  held by all
holders so adversely  affected.  No course of dealing between the Issuer and any
holder of Series G Preferred  Shares or any delay by such  holder in  exercising
any rights hereunder shall operate as a waiver of any rights of such holder.

      SECTION  7.10.  Subsequent  Sales.  In the event that the Issuer sells any
Series G Preferred  Shares  after the Closing  Date to any  purchaser at a price
and/or with other terms,  rights,  preferences or privileges more favorable than
those  offered to the  Purchasers  hereunder,  then the Issuer will  provide the
Purchasers with substantially  similar price, terms, rights,  preferences and/or
privileges.  The parties hereto agree to amend this  Agreement,  the Stockholder
Agreement, the Series G Certificate of Designations and any other instruments or
agreements  executed or  delivered  in  connection  herewith or therewith to the
extent necessary to implement the intent of this Section 7.10.

                                  * * * * *

                                       27
<PAGE>

      IN WITNESS  WHEREOF,  the parties  have caused this  Agreement  to be duly
executed, as of the day and year first above written.

                                    KMC TELECOM HOLDINGS, INC

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

                                    NASSAU CAPITAL PARTNERS IV, L.P.

                                    By:   Nassau Capital LLC

                                    Its:  General Partner

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

                                    NAS PARTNERS I L.L.C.

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

<PAGE>

                                    DRESDNER KLEINWORT BENSON PRIVATE EQUITY
                                          PARTNERS LP

                                    By:   Dresdner Kleinwort Benson Private
                                          Equity LLC

                                    Its:  General Partner

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

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

                                    75 WALL STREET ASSOCIATES, LLC

                                    By:   Kleinwort Benson (USA) Inc.

                                    Its:  Attorney-in-Fact

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

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

<PAGE>

                                    CIT LENDING SERVICES CORPORATION

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

<PAGE>

                                    LUCENT TECHNOLOGIES INC.

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

<PAGE>

                                    HAROLD N. KAMINE,
                                    in his individual capacity

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

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