BIRCH TELECOM, INC.

RECAPITALIZATION AGREEMENT

THIS RECAPITALIZATION AGREEMENT (the "AGREEMENT") is entered into as of April 16, 2001 by and among BIRCH TELECOM, INC., a Delaware corporation (the "COMPANY"), and the holders of Series B Preferred Stock and/or Series D Preferred Stock that are signatories hereto, together with such affiliates that such holders shall designate (collectively, "PURCHASERS").

RECITALS

WHEREAS, the Company has authorized the sale and issuance of an aggregate of up to 329,000,000 shares of its Series G Preferred Stock;

WHEREAS, on March 26, 2001, BTI Ventures L.L.C. ("BTI") entered into a purchase agreement with the Company (the "SERIES G PURCHASE AGREEMENT"), pursuant to which BTI will purchase up to an aggregate of 300,000,000 shares of Series G Preferred Stock for a purchase price of$0.35 per share, subject to the terms and conditions set forth therein;

WHEREAS, Section 5.11 of the Series G Purchase Agreement contemplates are capitalization agreement substantially in the form of this Agreement;

WHEREAS, Purchasers desire to purchase an aggregate of 12,810,001 shares of Series G Preferred Stock from the Company on the terms and conditions set forth herein;

WHEREAS, Purchasers desire to exchange an aggregate of 986,844 shares of Series B Preferred Stock for the same number of shares of Series H Preferred Stock of the Company and to exchange an aggregate of 663,001 shares of Series D Preferred Stock for the same number of shares of Series I Preferred Stock of the Company, as calculated on Annex B and on the terms and conditions set forth herein; and

WHEREAS, the Company desires to issue and sell to Purchasers such shares of Series G Preferred Stock and to issue to Purchasers such shares of Series HP referred Stock and Series I Preferred Stock in exchange for such shares of Series B Preferred Stock and Series D Preferred Stock on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows: