EXHIBIT 4.2

                                                                       EXECUTION

                      WARRANT REGISTRATION RIGHTS AGREEMENT

            WARRANT  REGISTRATION  RIGHTS AGREEMENT,  dated as of April 12, 2001
(this  "AGREEMENT"),  among KMC TELECOM HOLDINGS,  INC., a Delaware  corporation
(the  "COMPANY"),  the  "Lenders"  party hereto  (each a "LENDER" or,  together,
"LENDERS"),  and FIRST UNION  NATIONAL  BANK,  as  administrative  agent for the
Lenders (the "AGENT").

            WHEREAS, KMC Telecom Inc., a Delaware  corporation,  KMC Telecom II,
Inc., a Delaware corporation, KMC Telecom III, Inc., a Delaware corporation, and
the other borrowers party thereto  (collectively,  the "BORROWERS"),  the Agent,
and the Lenders  are  parties to that  certain  Amended  and  Restated  Loan and
Security  Agreement dated as of February 15, 2000, as amended by Amendment No. 1
thereto dated as of March 28, 2000, Amendment No. 2 thereto dated as of July 28,
2000,  Amendment No. 3 and Limited  Waiver thereto dated as of February 23, 2001
and Amendment No. 4 and Limited  Waiver  thereto dated as of April 12, 2001 (the
"FOURTH Amendment") (as so amended, the "LOAN AGREEMENT";  capitalized terms not
otherwise  defined  herein shall have the meanings  assigned to them in the Loan
Agreement),  pursuant to which the Lenders have agreed to make  certain  "Loans"
and other financial accommodations to the Borrowers; and

            WHEREAS,  pursuant  to the  terms  of the  Fourth  Amendment,  and a
Warrant  Agreement of even date  herewith (the  "WARRANT  AGREEMENT")  among the
Company,  Agent,  the  Lenders and the Warrant  Agent,  Lenders are  entitled to
receive  certain  warrants  to  purchase  shares of common  stock of the Company
("WARRANTS"), unless certain conditions are satisfied; and

            WHEREAS, the Company, the Lenders and the Agent desire to enter into
this Agreement to provide for, among other things,  the  registration  under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), of the disposition of
the shares received upon exercise of the Warrants.

            In  consideration  of the  foregoing  and of the  mutual  agreements
contained herein and in the Warrant  Agreement,  the Company,  the Agent and the
Lenders hereby agree as follows:

            1. DEFINITIONS.

            As used in this Agreement,  the following  capitalized defined terms
shall have the following meanings:

            "AGENT" has the meaning specified in the recitals to this Agreement.

            "APRIL 1999 WARRANT  HOLDER"  means the record  holders of the April
1999  Warrants and the holders of Common Shares (or other  securities)  received
upon exercise thereof.
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            "APRIL 1999 WARRANTS"  means the warrants that were issued  pursuant
to the April 1999 Warrant Agreement.

            "APRIL 1999 WARRANT  AGREEMENT" means the Warrant Agreement dated as
of April 30,  1999 among the Company and The Chase  Manhattan  Bank,  as warrant
agent, and First Union Investors, Inc. relating to the April 1999 Warrants.

            "APRIL 1999 WARRANT  SHARES" means the Common  Shares  issuable upon
exercise  of an April 1999  Warrant  Holder's  April 1999  Warrants,  such other
securities as shall be issuable upon the exercise of the April 1999 Warrants, or
the Common Shares or such other securities  received upon the exercise  thereof,
pursuant to the April 1999  Warrant  Agreement,  in each case to the extent that
such Common Shares or other  securities  would be (upon issuance) or are, as the
case may be, subject to restrictions on transfer.

            "AUDITORS"  means,  at any time,  the  independent  auditors  of the
Company at such time.

            "BOARD"  means the board of  directors  of the Company  from time to
time.

            "BORROWERS"  has  the  meaning  specified  in the  recitals  to this
Agreement.

            "COMFORT LETTER" has the meaning specified in Section 3 hereof.

            "COMMISSION"   means  the  United  States  Securities  and  Exchange
Commission.

            "COMMON SHARES" means the shares of the Common Stock of the Company.

            "COMMON STOCK" means the common stock,  par value $.01 per share, of
the Company.

            "COMPANY"  has  the  meaning  specified  in  the  recitals  to  this
Agreement.

            "COMPANY  OFFERED  SHARES"  has the meaning  specified  in Section 2
hereof.

            "CUTBACK NOTICE" has the meaning specified in Section 2 hereof.

            "EXCHANGE  ACT"  means  the  Securities  Exchange  Act of  1934,  as
amended.

            "EXPIRATION  DATE" means,  with  respect to any  Warrant,  the tenth
anniversary of the date such Warrant is countersigned by the Warrant Agent.

            "FEBRUARY  1999  WARRANT  HOLDER"  means the  record  holders of the
February 1999  Warrants and the holders of Common  Shares (or other  securities)
received upon exercise thereof.

            "FEBRUARY  1999  WARRANTS"  means  the  warrants  that  were  issued
pursuant  to the  February  1999  Warrant  Agreement,  including  any  Springing
Warrants (as defined in the February 1999 Warrant Agreement).

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            "FEBRUARY 1999 WARRANT AGREEMENT"  means the Warrant Agreement dated
as of February 4, 1999 among the Company and the Purchasers (as defined therein)
relating to the February 1999 Warrants.

            "FEBRUARY 1999 WARRANT SHARES" means the Common Shares issuable upon
exercise of a February 1999 Warrant Holder's February 1999 Warrants,  such other
securities as shall be issuable upon the exercise of the February 1999 Warrants,
or the  Common  Shares  or such  other  securities  received  upon the  exercise
thereof,  pursuant to the February 1999 Warrant  Agreement,  in each case to the
extent that such Common Shares or other  securities  would be (upon issuance) or
are, as the case may be, subject to restrictions on transfer.

            "HOLDERS"  means the record  holders of the Warrants and the holders
of Common Shares (or other securities) received upon exercise thereof.

            "INCLUDIBLE SECONDARY SHARES" has the meaning specified in Section 2
hereof.

            "JANUARY  1998  WARRANT  HOLDER"  means the  record  holders  of the
January  1998  Warrants and the holders of Common  Shares (or other  securities)
received upon exercise thereof.

            "JANUARY 1998 WARRANT  AGREEMENT" means the Warrant  Agreement dated
January 29, 1998 between the Company and The Chase  Manhattan  Bank  relating to
the January 1998 Warrants.

            "JANUARY 1998 WARRANTS" means the 460,800  warrants that were issued
pursuant to the January 1998  Warrant  Agreement,  each such  warrant  initially
entitling the holder  thereof to purchase  0.21785 shares of Common Stock of the
Company at an exercise price of $.01 per Common Share.

            "JANUARY 1998 WARRANT  SHARES" means the Common Shares issuable upon
exercise of a January 1998 Warrant  Holder's  January 1998 Warrants,  such other
securities as shall be issuable upon the exercise of the January 1998  Warrants,
or the  Common  Shares  or such  other  securities  received  upon the  exercise
thereof,  pursuant to the January  1998 Warrant  Agreement,  in each case to the
extent that such Common Shares or other  securities  would be (upon issuance) or
are, as the case may be, subject to restrictions on transfer.

            "LENDERS"  has  the  meaning  specified  in  the  recitals  to  this
Agreement.

            "LOAN  AGREEMENT" has the meaning  specified in the recitals to this
Agreement.

            "MANAGING  UNDERWRITER"  has the  meaning  specified  in  Section  2
hereof.

            "OPINION" has the meaning specified in Section 3 hereof.

            "OTHER  OFFERED  SHARES"  has the  meaning  specified  in  Section 2
hereof.

            "PIGGY-BACK  REGISTRATION  RIGHTS"  has  the  meaning  specified  in
Section 2 hereof.

            "LENDERS"  has  the  meaning  specified  in  the  recitals  to  this
Agreement.
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<PAGE>

            "REGISTRATION  STATEMENT"  has the  meaning  specified  in Section 2
hereof.

            "RESALE SHELF" has the meaning specified in Section 3 hereof.

            "STOCKHOLDERS AGREEMENT" means the Amended and Restated Stockholders
Agreement,  dated as of October 31,  1997,  among the  Company,  Nassau  Capital
Partners L.P., NAS Partners I L.L.C.,  Harold N. Kamine, KMC  Telecommunications
L.P., AT&T Credit Corporation, General Electric Capital Corporation,  CoreStates
Bank, N.A. and CoreStates Holdings,  Inc., as amended and supplemented from time
to time.

            "UNDERLYING  SECURITIES"  means  the  Common  Shares  issuable  upon
exercise of the Warrants or such other  securities as shall be issuable upon the
exercise of the Warrants, pursuant to the Warrant Agreement.

            "WARRANTS"  has  the  meaning  specified  in the  recitals  to  this
Agreement.

            "WARRANT  AGENT" means First Union  National Bank in its capacity as
Warrant  Agent under the  Warrant  Agreement  or any  replacement  or  successor
Warrant Agent appointed pursuant to the terms thereof.

            "WARRANT  AGREEMENT"  has the meaning  specified  in the recitals to
this Agreement.

            "WARRANT  REGISTRATION  STATEMENT"  has  the  meaning  specified  in
Section 3 hereof.

            "WARRANT SHARES" has the meaning specified in Section 2 hereof.

            2. PIGGY-BACK REGISTRATION RIGHTS.

            (a) If, prior to the Expiration Date, the Company proposes to file a
Registration  Statement with the Commission respecting an offering of any shares
of Common Stock (or other  securities  issuable  upon  exercise of the Warrants)
(other  than  (i)  an  offering  registered  solely  on  Form  S-4 or S-8 or any
successor form thereto,  or (ii) the initial public offering of shares of Common
Stock (or  other  securities  issuable  upon  exercise  of the  Warrants)  if no
shareholder of the Company participates  therein), the Company shall give prompt
written  notice (which  notice shall  specify the intended  method or methods of
disposition)  to all the  Holders  of  Warrants  or Common  Shares or such other
securities received upon exercise of Warrants,  to the extent such Common Shares
or other securities would be (upon issuance) or are, as the case may be, subject
to restrictions on transfer, at least 30 days prior to the initial filing of the
registration statement relating to such offering (the "REGISTRATION STATEMENT").
Each such  Holder  shall have the right,  within 20 days after  delivery of such
notice,  to request in writing that the Company include all or a portion of such
of the Common Shares  issuable upon  exercise of such  Holder's  Warrants,  such
other securities as shall be issuable upon the exercise of the Warrants,  or the
Common  Shares or such other  securities  received  upon the  exercise  thereof,
pursuant to the Warrant  Agreement,  in each case to the extent that such Common
Shares or other  securities would be (upon issuance) or are, as the case may be,
subject to restrictions  on transfer,  ("WARRANT  SHARES") in such  Registration
Statement  ("PIGGY-BACK  REGISTRATION RIGHTS"). The Company shall include in the
public  offering  all of the  Warrant  Shares  that a Holder  has  requested  be

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included,  unless the  underwriter  for the public  offering or the  underwriter
managing  the public  offering  (in either  case,  the  "MANAGING  UNDERWRITER")
delivers a written notice (a "CUTBACK  NOTICE") pursuant to Section 2(b) or 2(c)
hereof. The managing  underwriter may deliver one or more Cutback Notices at any
time  prior  to the  execution  of the  underwriting  agreement  for the  public
offering.

            (b) If a proposed  public  offering  includes both  securities to be
offered for the account of the Company  ("COMPANY OFFERED SHARES") and shares to
be sold by stockholders, the provisions of this Section 2(b) shall be applicable
if the managing  underwriter  delivers a Cutback  Notice  stating  that,  in its
opinion, the number of Common Shares (other than (a) January 1998 Warrant Shares
to be sold by any January 1998 Warrant Holders, (b) February 1999 Warrant Shares
to be sold by any February 1999 Warrant  Holders,  (c) April 1999 Warrant Shares
to be sold by any April 1999 Warrant Holders,  and (d) Warrant Shares to be sold
by any Holders) that selling  stockholders  propose to sell therein,  whether or
not such  selling  stockholders  have the right to include  shares  therein (the
"OTHER OFFERED SHARES"), plus the number of January 1998 Warrant Shares that the
January 1998 Warrant Holders have requested to be sold therein,  plus the number
of February  1999  Warrant  Shares that the February  1999 Warrant  Holders have
requested to be sold therein,  plus the number of April 1999 Warrant Shares that
the April 1999 Warrant  Holders  have  requested  to be sold  therein,  plus the
number of Warrant  Shares that the Holders have  requested  to be sold  therein,
plus the Company Offered Shares,  exceeds the maximum number of shares specified
by the  managing  underwriter  in such  Cutback  Notice that may be  distributed
without  adversely  affecting the price,  timing or  distribution of the Company
Offered Shares. Such maximum number of shares that may be so sold, excluding the
Company Offered Shares, are referred to as the "INCLUDIBLE SHARES."

            If the managing  underwriter  delivers such Cutback Notice,  (i) the
Company  shall be entitled to include all of the Company  Offered  Shares in the
public offering,  (ii) each stockholder who has requested the inclusion of Other
Offered  Shares in the public  offering  pursuant  to Section  6.1 or 6.2 of the
Stockholders  Agreement  shall be entitled  to include all of its Other  Offered
Shares and each January 1998 Warrant  Holder who has  requested the inclusion of
its January 1998 Warrant  Shares shall be entitled to include all of its January
1998 Warrant  Shares,  each February  1999 Warrant  Holder who has requested the
inclusion of its February  1999 Warrant  Shares shall be entitled to include all
of its February 1999 Warrant Shares,  and each April 1999 Warrant Holder who has
requested  the  inclusion of its April 1999 Warrant  Shares shall be entitled to
include all of its April 1999 Warrant  Shares,  in each case, in priority to the
inclusion of any Warrant Shares  requested to be included by Holders,  and (iii)
except as  otherwise  provided in the  preceding  clause (ii),  each  requesting
Holder  shall be entitled  to include in the public  offering up to its pro rata
portion of the  Includible  Shares,  in  priority  to the  inclusion  (except as
otherwise  provided in the preceding  clause (ii)) of any Other  Offered  Shares
that are proposed to be sold in such public offering.

            (c) If a proposed public offering is entirely a secondary  offering,
the  provisions  of this  Section  2(c)  shall  be  applicable  if the  managing
underwriter  delivers  a  Cutback  Notice  stating  that,  in its  opinion,  the
aggregate  number of January 1998 Warrant Shares,  February 1999 Warrant Shares,
April 1999 Warrant  Shares,  Warrant Shares and Other Offered Shares proposed to
be sold therein exceeds the maximum number of shares (the "INCLUDIBLE  SECONDARY
SHARES")  specified by the managing  underwriter in such Cutback Notice that may
be distributed  without adversely affecting the price, timing or distribution of

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<PAGE>

the Common Shares being distributed.  If the managing  underwriter delivers such
Cutback  Notice,  (i) each  stockholder who has requested the inclusion of Other
Offered  Shares in the public  offering  pursuant  to Section  6.1 or 6.2 of the
Stockholders  Agreement  shall be entitled  to include all of its Other  Offered
Shares and each January 1998 Warrant  Holder who has  requested the inclusion of
its January 1998 Warrant  Shares shall be entitled to include all of its January
1998 Warrant  Shares,  each February  1999 Warrant  Holder who has requested the
inclusion of its February  1999 Warrant  Shares shall be entitled to include all
of its February 1999 Warrant Shares,  and each April 1999 Warrant Holder who has
requested  the  inclusion of its April 1999 Warrant  Shares shall be entitled to
include all of its April 1999 Warrant  Shares,  in each case, in priority to the
inclusion  of any Warrant  Shares  requested  to be included by Holders and (ii)
except as otherwise provided in the preceding clause (i), each requesting Holder
shall be entitled to include in the public  offering up to its pro rata  portion
of the Includible  Secondary Shares, in priority to the inclusion (except as set
forth in the preceding clause (i)) of any Other Offered Shares that are proposed
to be sold in such public offering.

            (d) The  underwriting  agreement  for  such  public  offering  shall
provide  that each  requesting  Holder  shall have the right to sell its Warrant
Shares (other than Warrant Shares excluded from such public offering pursuant to
a Cutback Notice and the terms of Section 2(b) or 2(c)) to the  underwriters and
that the underwriters shall purchase the Warrant Shares at the price paid by the
underwriters  for the Common  Shares sold by the Company  and/or  other  selling
stockholders, as the case may be.

            3. SHELF REGISTRATION.

            (a) If only the Company  sells  Common  Shares in an initial  public
offering or all of the Warrant  Shares have not been sold in a public  offering,
the Company shall use its reasonable  best efforts to cause to be filed pursuant
to Rule 415 under  the  Securities  Act a shelf  registration  statement  on the
appropriate form (the "WARRANT REGISTRATION STATEMENT", which term shall include
any preliminary prospectus,  prospectus or notification or offering circular (as
amended or  supplemented  if the Company shall have  furnished any amendments or
supplements  thereto)) covering the issuance of the Warrant Shares upon exercise
of the Warrants and shall use its  reasonable  best efforts to cause the Warrant
Registration  Statement to become  effective under the Securities Act within 180
days after the closing date of the initial public offering;  PROVIDED,  HOWEVER,
that if the Commission shall request that the Company register the resale of the
Warrant  Shares  instead  of the  issuance  thereof,  the  Warrant  Registration
Statement  shall register such resale as opposed to such  issuance.  The Company
shall use  reasonable  best efforts to keep the Warrant  Registration  Statement
continuously  effective  until the earlier of (i) such time as all Warrants have
been exercised or, if the Commission shall request that the Company register the
resale of the Warrant Shares instead of the issuance thereof, until such time as
all Warrant Shares have been resold or (ii) the Expiration Date. Prior to filing
the Warrant  Registration  Statement or any amendment thereto, the Company shall
provide  a copy  thereof  to each  Holder  and its  counsel  and  afford  them a
reasonable time to comment thereon.

            If the Company is unable to file or cause to be filed,  or is unable
to   maintain   the   effectiveness   of  a  Warrant   Registration   Statement,
notwithstanding  its  reasonable  best efforts to do so, the Company shall cause

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such filing to take place, or shall cause such Warrant Registration Statement to
again become  effective,  after removal of the impediment to file or to maintain
the effectiveness of such Warrant Registration Statement.

            (b) If the Warrant Registration  Statement shall register the resale
of the Warrant Shares (a "RESALE SHELF") as provided in Section 3(a) above,  the
Company agrees to:

            (i) make available for inspection by representatives of the Holders,
      any underwriter  participating in any disposition  pursuant to such Resale
      Shelf  and  attorneys  and  accountants  designated  by  the  Holders,  at
      reasonable times and in a reasonable manner,  financial and other records,
      documents and  properties of the Company that are pertinent to the conduct
      of due diligence  customary for an  underwritten  offering,  and cause the
      officers, directors and employees of the Company to supply all information
      reasonably requested by any such representative,  underwriter, attorney or
      accountant in connection with a Resale Shelf; PROVIDED, HOWEVER, that such
      persons  shall  first  agree  in  writing  with  the  Company  to use such
      information  only in  connection  with  the  transaction  for  which  such
      information was obtained and that any  information  that is reasonably and
      in good faith  designated by the Company in writing as confidential at the
      time of delivery of such  information  shall be kept  confidential by such
      persons,  unless and to the extent that disclosure of such  information is
      required by law or such  information  becomes  generally  available to the
      public other than as a result of a disclosure or failure to safeguard such
      information by such person;

            (ii) use its  reasonable  best  efforts to cause all Warrant  Shares
      sold under a Resale Shelf to be listed on any  securities  exchange or any
      automated quotation system on which securities of the same class issued by
      the Company are then listed if requested by the Holders of Warrant  Shares
      representing a majority of the Warrants  originally  issued, to the extent
      such Warrant Shares satisfy applicable listing requirements;

            (iii) provide as soon as practicable,  without charge,  a reasonable
      number of copies of the Warrant Registration Statement,  any pre-effective
      or post-effective  amendment thereto,  and the prospectus  (including each
      preliminary  prospectus and any amendment or supplements thereto) included
      in such Resale Shelf to Holders that are selling  Warrant Shares  pursuant
      to such Resale Shelf;

            (iv) cause to be  provided to the  Warrant  Agent,  on behalf of the
      Holders and  beneficial  owners of Warrant  Shares  (with  copies  thereof
      provided to the Holders and beneficial owners of Warrant Shares), upon the
      effectiveness  of such  Resale  Shelf,  a  customary  "10b-5"  opinion  of
      independent  counsel (an "OPINION") and a customary  "cold comfort" letter
      of independent auditors (a "COMFORT LETTER"); and

            (v) notify the Warrant Agent, for  distribution to the Holders,  (A)
      when the Resale  Shelf has become  effective  and when any  post-effective
      amendment thereto has been filed and becomes effective, (B) of any request
      by the  Commission or any state  securities  authority for  amendments and
      supplements  to  the  Resale  Shelf  or of  any  material  request  by the
      Commission or any state  securities  authority for additional  information
      after the Resale  Shelf has become  effective,  (C) of the issuance by the
      Commission or any state securities  authority of any stop order suspending

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      the effectiveness of the Resale Shelf or the initiation of any proceedings
      for that purpose,  (D) if,  between the effective date of the Resale Shelf
      and the  closing  of any  sale of  Warrant  Shares  covered  thereby,  the
      representations   and   warranties   of  the  Company   contained  in  any
      underwriting  agreement,  securities  sales  agreement  or  other  similar
      agreement,  including this Agreement,  relating to disclosure  cease to be
      true and correct in any  material  respect or if the Company  receives any
      notification  with respect to the suspension of the  qualification  of the
      Warrant  Shares  for sale in any  jurisdiction  or the  initiation  of any
      proceeding for such purpose,  (E) of the happening of any event during the
      period the Resale  Shelf is  effective  such that such Resale Shelf or the
      related  prospectus  contains an untrue  statement  of a material  fact or
      omits to state a material fact required to be stated  therein or necessary
      to make statements  therein not misleading and (F) of any determination by
      the Company that a  post-effective  amendment to a Registration  Statement
      would be  appropriate.  The Holders hereby agree to suspend the use of the
      prospectus contained in any Resale Shelf upon receipt of such notice under
      clause (C), (E) or (F) above until,  in the case of clause (C),  such stop
      order is removed or rescinded  or, in the case of clauses (E) and (F), the
      Company  has  amended or  supplemented  such  prospectus  to correct  such
      misstatement or omission.

            4. SUSPENSION.

            Notwithstanding  the  foregoing,   in  addition  to  any  suspension
contemplated  by  clauses  (C),  (E) or  (F) of  Section  3(b)(vi),  during  any
consecutive  365-day  period,  the  Company  shall  have the  right  to  suspend
availability of the Warrant  Registration  Statement and the related  prospectus
for a  reasonable  period of time not to exceed two  30-consecutive-day  periods
(which  period  may  not be  extended  or  renewed),  except  for  the  30  days
immediately  prior to the Expiration Date, if the Board determines in good faith
that there is a valid  purpose  for such  suspension  and (ii) five  additional,
non-consecutive  three-day periods,  except for the 30 days immediately prior to
the  Expiration  Date,  if the Board  determines  in good faith that the Company
cannot  provide  adequate  disclosure  during such  period due to  circumstances
beyond its control.  Notice of such  suspension  shall be given  promptly to the
Warrant Agent.

            5. BLUE SKY.

            The Company  shall use its  reasonable  best  efforts to register or
qualify the Underlying  Securities proposed to be sold or issued pursuant to the
Registration   Statement  or  the  Warrant  Registration   Statement  under  all
applicable  securities  or "blue  sky" laws of all  jurisdictions  in the United
States  in which  any  Holder  of  Warrants  may or may be  deemed  to  purchase
Underlying  Securities  upon the  exercise  of Warrants or resale of the Warrant
Shares,  as the case may be,  and  shall  use its  reasonable  best  efforts  to
maintain such  registration or  qualification  through the earlier of (A) in the
case of a Registration Statement,  the date upon which all of the Warrant Shares
have been sold or such other sale as shall be required by applicable  law or (B)
the date upon which all Warrants have been  exercised or all Warrant Shares have
been resold, as the case may be, under the Warrant Shelf Registration Statement;
PROVIDED,  HOWEVER,  that the Company  shall not be required to (i) qualify as a
foreign corporation or as a broker or a dealer in securities in any jurisdiction
where it would not otherwise be required to qualify but for this Section 5, (ii)
file any  general  consent to service  of  process  or (iii)  subject  itself to
taxation in any jurisdiction if it is not otherwise so subject.

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<PAGE>


            6. ACCURACY OF DISCLOSURE.

            The Company  (and its  successors)  represents  and warrants to each
Holder (and each beneficial  owner of a Warrant or Warrant Share) and agrees for
the benefit of each Holder  (and each  beneficial  owner of a Warrant or Warrant
Share)  that,  except  during  any  period  in  which  the  availability  of any
Registration  Statement or the Warrant  Registration  Statement (as the case may
be)  has  been  suspended,  (i)  such  Registration  Statement  or  the  Warrant
Registration  Statement (as the case may be) and the documents  incorporated  by
reference  therein will not contain any untrue  statement of a material  fact or
omit to state a material  fact  necessary  to make the  statements  therein  not
misleading;  and (ii) the prospectus  delivered to such Holder upon its exercise
of Warrants or pursuant to which such Holder  sells its Warrant  Shares,  as the
case may be,  and the  documents  incorporated  by  reference  therein  will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements  therein,  in light of the circumstances  under
which they were made, not misleading;  PROVIDED,  HOWEVER, that representations,
warranties and agreements set forth in this Section 6 do not apply to statements
or omissions in any Registration  Statement,  the Warrant Registration Statement
or any such prospectus based upon  information  relating to any Holder furnished
to the Company (or its  successors) in writing by such Holder  expressly for use
therein.

            7. INDEMNITY.

            (a) The Company hereby agrees to indemnify each beneficial  owner of
a Warrant and each  person,  if any,  who  controls  any  beneficial  owner of a
Warrant within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act, or is under common  control  with, or is controlled  by,
any  beneficial  owner  of a  Warrant  (whether  or not it is,  at the  time the
indemnity  provided for in this Section 7 is sought,  such a beneficial  owner),
from and  against  all  losses,  damage,  liabilities  and  expenses  (including
reasonable  costs of  investigation  and the costs,  fees and  expenses of legal
counsel)  which such  beneficial  owner or any such  controlling  or  affiliated
person  suffers  as a result of any  breach,  on the date of any  exercise  of a
Warrant  by such  beneficial  owner or the resale of any  Warrant  Share by such
Holder,  in either case  pursuant to any  Registration  Statement or the Warrant
Registration Statement (as the case may be), of the representations,  warranties
or  agreements  contained  in  Section  6 hereof  or any  violation  or  alleged
violation by the Company of the  Securities  Act, any blue sky laws,  securities
laws or other  applicable  laws of any state or country in which the  securities
are  offered  and  relating  to action or  inaction  required  by the Company in
connection  with such offering.  Each  beneficial  owner of a Warrant Share sold
pursuant to a Resale Shelf, by accepting its beneficial  ownership of a Warrant,
hereby (i) agrees to provide the Company  with  information  with  respect to it
that the Company  reasonably  requests in  connection  with any Resale Shelf and
(ii) agrees,  severally and not jointly, to indemnify the Company, its directors
and  officers and each  person,  if any,  who  controls  the Company  within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act against any liability  incurred by it or such controlling person as a result
of any  misstatement  of information  provided by such  beneficial  owner to the
Company in writing  expressly  for inclusion in the Resale Shelf or any omission
of a material fact from any such  information  provided by such beneficial owner
to the Company.

                                       9
<PAGE>

            (b) The indemnifying  party shall be entitled to participate in and,
to the extent it may wish, jointly with any other indemnifying  party, to assume
the defense of such action at its own  expense,  with  counsel  chosen by it and
satisfactory to such  indemnified  party.  The indemnified  party shall have the
right to employ  separate  counsel  in any such  action and  participate  in the
defense  thereof,  but the  fees  and  expenses  of  such  counsel  (other  than
reasonable costs of investigation) shall be paid by the indemnified party unless
(i) the indemnifying  party agrees to pay the same, (ii) the indemnifying  party
fails to assume the defense of such action with counsel reasonably  satisfactory
to the  indemnified  party  or  (iii)  the  named  parties  to any  such  action
(including  any  impleaded  parties)  have been  advised  by such  counsel  that
representation of such indemnified party and the indemnifying  party by the same
counsel  would be  inappropriate  under  applicable  standards  of  professional
conduct (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of such indemnified party). No indemnifying
party shall be liable for any settlement entered into without its consent, which
consent shall not be withheld unreasonably.

            (c)  If  the  indemnification  provided  for in  this  Section  7 is
unavailable or insufficient to hold harmless an indemnified  party in respect of
any losses, claims, damages, liabilities, expenses or actions in respect thereof
referred to herein,  then each indemnifying  party shall in lieu of indemnifying
such  indemnified  party  contribute  to the  amount  paid  or  payable  by such
indemnified  party as a result of such  losses,  claims,  damages,  liabilities,
expenses or actions in such proportion as is appropriate to reflect the relative
fault of the Company,  on the one hand, and the sellers of such Warrant  Shares,
on the other,  in connection  with the statements or omissions which resulted in
such losses, claims,  damages,  liabilities,  expenses or actions as well as any
other relevant equitable  considerations.  The Company and the Holder agree that
it would not be just and equitable if contribution pursuant to this Section were
determined  by any  method  of  allocation  which  did not take  account  of the
equitable  considerations  referred to above.  Notwithstanding the provisions of
this Section,  in no event shall the amount contributed by any seller of Warrant
Shares exceed the net proceeds  received by such seller from the sale of Warrant
Shares to which such contribution claim relates.  No person guilty of fraudulent
misrepresentations  (within the meaning of Section 11(f) of the Securities  Act)
shall be  entitled  to  contribution  from any  person who is not guilty of such
fraudulent misrepresentation.

            8. EXPENSES.

            All expenses incident to the Company's  performance of or compliance
with  its  obligations  under  this  Agreement  will be  borne  by the  Company,
regardless of whether a Registration Statement or Warrant Registration Statement
becomes  effective,  including without limitation (i) all Commission or National
Association of Securities Dealers,  Inc.  registration and filing fees, (ii) all
reasonable  fees and expenses  incurred in connection with compliance with state
securities  or "blue sky" laws,  (iii) all  reasonable  expenses  of any persons
incurred by or on behalf of the Company in preparing or assisting in  preparing,
word  processing,  printing and distributing  any  registration  statement,  any
prospectus,  any amendments or supplements  thereto and other documents relating
to the performance of and compliance  with this  Agreement,  (iv) the reasonable
fees (including  reasonable  legal fees and expenses) and  disbursements  of the
Warrant Agent,  (v) the  reasonable  fees and  disbursements  of counsel for the
Company and one counsel to the Holders and (vi) the fees and  disbursements,  if

                                       10
<PAGE>

any, of the Auditors; but excluding any and all fees, expenses and disbursements
of the Holders (not specifically included above), including,  without limitation
the Holder's share of underwriting discounts and commissions.

            9. COVENANTS OF THE COMPANY.

            The Company hereby agrees and covenants as follows:

            (a) After any initial public offering of its equity securities,  the
Company  shall  file as and when  applicable,  on a timely  basis,  all  reports
required  to be  filed by it under  the  Exchange  Act,  and take  such  further
reasonable  action as may be required from time to time and as may be within the
reasonable control of the Company, to enable the Holders to transfer the Warrant
Shares  without  registration  under the Securities Act within the limitation of
the exemptions provided by Rule 144 under the Securities Act or any similar rule
or regulation hereafter adopted by the Commission.

            (b) The Company shall not,  directly or  indirectly,  (i) enter into
any merger,  consolidation or  reorganization  in which the Company shall not be
the  surviving  corporation  or  (ii)  transfer  or  agree  to  transfer  all or
substantially   all  the  Company's   assets,   unless  prior  to  such  merger,
consolidation,  reorganization or asset transfer,  the surviving  corporation or
the  transferee,  respectively,  shall  have  agreed in  writing  to assume  the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Warrant  Shares" shall be deemed to include the  securities  which
the Holders of Warrant  Shares  would be  entitled  to receive in  exchange  for
Warrant Shares pursuant to any such merger, consolidation or reorganization.

            10. MISCELLANEOUS.

            (a) NO INCONSISTENT AGREEMENTS.  Each of the Company and the Lenders
represent to the other that it has not entered into, and agrees that on or after
the date of this  Agreement  it will not  enter  into,  any  agreement  which is
materially  inconsistent  with the rights  granted to the Holders of Warrants or
Warrant  Shares in this  Agreement or otherwise  materially  conflicts  with the
provisions hereof. The Company represents that the rights granted to the Holders
hereunder  do not in any  material  way  conflict  with  and are not  materially
inconsistent  with the rights  granted to the  holders  of the  Company's  other
issued and outstanding securities under any agreements.

            (b)  AMENDMENTS  AND  WAIVERS.  The  provisions  of this  Agreement,
including  the  provisions  of this  sentence,  may not be amended,  modified or
supplemented,  and waivers or consents to departures from the provisions  hereof
may not be given  unless the  Company and the Warrant  Agent have  obtained  the
written  consent of Holders of at least a majority of the  outstanding  Warrants
affected  by  such  amendment,  modification,  supplement,  waiver  or  consent;
provided that (i) any  amendment,  modification  or supplement to this Agreement
which,  in the good faith opinion of the Board (and evidenced by a resolution of
such board), does not adversely affect any Holder,  shall not be subject to such
requirement for written  consent;  and (ii) any amendment shall not be effective
unless the Warrant Agent shall have  received an opinion of counsel,  reasonably
satisfactory to it, that such amendment complies with the requirements hereof.

                                       11
<PAGE>

            (c) NOTICES.  All notices and other  communications  provided for or
permitted  hereunder  shall  be made in  writing  by  hand-delivery,  registered
first-class  mail,  telex,  telecopier,  or any courier  guaranteeing  overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section  10(c);  or (ii) if to the Company,  at the address  provided for in the
Warrant Agreement.  All such notices and communications  shall be deemed to have
been duly given:  at the time delivered by hand, if personally  delivered;  five
business days after being  deposited in the mail,  postage  prepaid,  if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next  business  day if timely  delivered  to an air courier  guaranteeing
overnight delivery.

            (d)  SUCCESSORS  AND  ASSIGNS.  This  Agreement  shall  inure to the
benefit of and be binding upon the  successors,  assigns and transferees of each
of the parties, including, without limitation, subsequent Holders; provided that
nothing  herein  shall be deemed to permit  any  assignment,  transfer  or other
disposition of Warrants in violation of the terms of the Warrant  Agreement.  If
any transferee of any Holder shall acquire Warrants,  in any manner,  whether by
operation of law or otherwise, such Warrants shall be held subject to all of the
terms of this  Agreement  and the Warrant  Agreement,  and by taking and holding
such  Warrants  such person  shall be  conclusively  deemed to have agreed to be
bound by and to perform all of the terms and  provisions  of this  Agreement and
the Warrant  Agreement and such person shall be entitled to receive the benefits
hereof.

            (e)  PURCHASES  AND SALES OF  WARRANTS.  The Company  shall not, and
shall use its  reasonable  best efforts to cause its  affiliates  (as defined in
Rule 405 under the Securities Act) not to, purchase and then resell or otherwise
transfer any Warrants other than Warrants acquired and cancelled.

            (f) THIRD PARTY  BENEFICIARY.  The  Holders  (other than the Holders
that  are  signatories  hereto)  shall  be  third  party  beneficiaries  to  the
agreements made hereunder  between the Company and the Lenders,  and each Holder
shall have the right to enforce such agreements  directly to the extent it deems
such  enforcement  necessary or advisable to protect its rights or the rights of
Holders hereunder.

            (g)  COUNTERPARTS.  This  Agreement may be executed in any number of
counterparts and by the parties hereto in separate  counterparts,  each of which
when so  executed  shall be  deemed  to be an  original  and all of which  taken
together shall constitute one and the same agreement.

            (h) HEADINGS.  The headings in this Agreement are for convenience of
reference  only and shall not limit or otherwise  affect the  meaning
hereof.

            (i) GOVERNING LAW. This  Agreement  shall be governed by the laws of
the State of New York.

            (j)  SEVERABILITY.  In  the  event  that  any  one  or  more  of the
provisions contained herein, or the application thereof in any circumstance,  is

                                       12
<PAGE>

held   invalid,   illegal  or   unenforceable,   the   validity,   legality  and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

            (k)  WAIVER OF  IMMUNITY.  To the  extent  that the  Company  has or
hereafter  may acquire any immunity from  jurisdiction  of any court or from any
legal process (whether through service of notice,  attachment prior to judgment,
attachment in aid of execution,  execution or otherwise)  with respect to itself
or its property,  it hereby  irrevocably  waives such immunity in respect of its
obligations under this Agreement to the fullest extent permitted by law.

            (l)  INITIAL  PUBLIC  OFFERING.   Notwithstanding  anything  to  the
contrary herein contained, if the Company conducts an initial public offering of
equity securities (other than nonconvertible preferred shares), the Company will
give the Holders the  opportunity  to convert  such  Warrants  into  warrants to
purchase such equity securities (other than nonconvertible preferred shares) and
such  Warrant  Shares into such  equity  securities  (other than  nonconvertible
preferred shares).  Such conversion  opportunity will be on terms and conditions
determined to be fair and reasonable by the Company's Board.


                                       13
<PAGE>

            IN WITNESS  WHEREOF,  the parties have executed this Agreement as of
the date first written above.

                                        KMC TELECOM HOLDINGS, INC.


                                        By: /S/ CONSTANCE LOOSEMORE
                                            -----------------------
                                        Name:Constance Loosemore
                                        Title: Treasurer

                                        FIRST UNION  NATIONAL BANK, as the Agent
                                        and as a Lender


                                        By:/S/ G.C. ULLRICH
                                           ----------------
                                        Name: G. C. Ullrich
                                        Title: Senior Vice President


                                        CIT LENDING SERVICES  CORPORATION (f/k/a
                                        NEWCOURT COMMERCIAL FINANCE
                                        CORPORATION), as a Lender


                                        By:/S/ MARK O'KEEFFE
                                           -----------------
                                        Name: Mark O'Keeffe
                                        Title: VP


                                        CANADIAN IMPERIAL BANK OF COMMERCE, as a
                                        Lender


                                        By: /S/ JACQUELINE STEWART
                                            ----------------------
                                        Name: Jacqueline Stewart
                                        Title: Executive Director


                                        GENERAL ELECTRIC CAPITAL CORPORATION, as
                                        a Lender


                                        By: /S/ BRIAN P. WARD
                                            -----------------
                                        Name: Brian P. Ward
                                        Title: Manager-Operations



                                       S-1
<PAGE>

                                        LUCENT TECHNOLOGIES INC., as a Lender


                                        By: /S/ DINA FEDE
                                            -------------
                                        Name: Dina Fede
                                        Title: Director-NA Customer Finance


                                        CREDIT SUISSE FIRST BOSTON, as a Lender


                                        By:/S/ DAVID L. SAWYER  /S/LALITA ADVANI
                                        ----------------------- ----------------
                                        Name: David  L.  Sawyer Lalita  Advani
                                        Title: Vice President   Assistant Vice
                                                                President


                                        DRESDNER  BANK  AG NEW  YORK  AND  GRAND
                                        CAYMAN BRANCHES, as a Lender


                                        By: /S/ BRIAN SCHNEIDER
                                            -------------------
                                        Name: Brian Schneider
                                        Title: Assistant Vice President

                                        By: /S/ MICHAEL S. GREENBERG
                                            ------------------------
                                        Name: Michael S. Greenberg
                                        Title: Assistant Vice President


                                        MORGAN STANLEY SENIOR FUNDING,  INC., as
                                        a Lender


                                        By: /S/ T. MORGAN EDWARDS II
                                            ------------------------

                                        Name: T. Morgan Edwards II
                                        Title: Vice President

                                        By:
                                            ------------------------
                                        Name:
                                        Title:



                                       S-2
<PAGE>

                                        MORGAN  STANLEY DEAN WITTER PRIME INCOME
                                        TRUST, as a Lender


                                        By: /S/ SHEILA FINNERTY
                                            -------------------
                                        Name: Sheila Finnerty
                                        Title: Sr. Vice President


                                        UNION  BANK OF  CALIFORNIA,  N.A.,  as a
                                        Lender


                                        By: /S/ STENDER E. SWEENEY II
                                            -------------------------
                                        Name: Stender E. Sweeney II
                                        Title: Vice President


                                        STEIN  ROE  &  FARNHAM  INCORPORATED  as
                                        agent   for   KEYPORT   LIFE   INSURANCE
                                        COMPANY, as a Lender


                                        By: /S/ JAMES R. FELLOWS
                                            --------------------
                                        Name: James R. Fellows
                                        Title: Sr.  Vice  President & Portfolio
                                               Manager


                                        STEIN   ROE   FLOATING    RATE   LIMITED
                                        LIABILITY COMPANY, as a Lender


                                        By: /S/ JAMES R. FELLOWS
                                            --------------------
                                        Name: James R. Fellows
                                        Title: Senior Vice President


                                        IBM CREDIT CORPORATION, as a Lender


                                        By: /S/ THOMAS S. CURCIO
                                            --------------------
                                        Name: Thomas S. Curcio
                                        Title: Manager of Credit,  Commercial &
                                               Specialty Financing

                                      S-3