BIRCH TELECOM, INC.

RECAPITALIZATION AGREEMENT

THIS RECAPITALIZATION AGREEMENT (the "AGREEMENT") is entered into as of May 8, 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;