AMENDMENT NO. 1 TO
                              THE WARRANT AGREEMENT

          AMENDMENT  NO. 1 dated as of April 30, 1999 to the Warrant  Agreement,
dated as of  February  4,  1999 (the  "Warrant  Agreement")  among  KMC  Telecom
Holdings,  Inc., The Chase Manhattan Bank, as Warrant Agent, Newcourt Commercial
Finance Corporation, Lucent Technologies, Inc. and First Union Investors, Inc.

                               W I T N E S S E T H

          WHEREAS,  the parties hereto desire to make certain  amendments to the
Warrant 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  Warrant  Agreement  and  used  herein  are so used as so
defined.  In  addition,  the  following  terms shall have the meanings set forth
below:

          "PREFERRED  STOCK  WARRANT  AGREEMENT  2" means the Warrant  Agreement
dated as of April 30,  1999 among the  Company,  The Chase  Manhattan  Bank,  as
Warrant Agent and First Union  Investors,  Inc.,  which  Preferred Stock Warrant
Agreement 2 is being entered into in connection  with the execution and delivery
of the Purchase Agreement 2.

          "PREFERRED  STOCK  WARRANTS  2" means  Warrants  issued to  holders of
Series E Preferred  Stock pursuant to the Preferred  Stock Warrant  Agreement 2,
each such Warrant  initially  entitling the holder thereof to purchase  0.471756
shares of Common Stock at an exercise price of $.01 per share.

          "PURCHASE  AGREEMENT 2" means the Securities  Purchase Agreement dated
as of April 30, 1999 between the Company and First Union Investors, Inc.

          2. AMENDMENT TO SECTION 2.4(B) OF THE WARRANT AGREEMENT.

          Paragraph  (b) of Section 2.4 of the Warrant  Agreement  is amended to
read as follows:

          "(b) If the  Company  fails to redeem all shares of Series F Preferred
Stock prior to the date (the  "Springing  Warrant Date") which is the earlier of
(i) the date that is sixty  days after the date on which the  Company  closes an
underwritten  primary  offering  of at least $200  million  of its Common  Stock
pursuant to an effective registration statement under the Securities Act or (ii)
February  4, 2001,  then the  holders of  Eligible  Shares  shall be entitled to
receive the Springing Warrants. Each holder of Eligible Shares shall be entitled

<PAGE>

to receive a number of  Springing  Warrants  equal to (1) 227,273 plus the total
number of  Warrants  and  Preferred  Stock  Warrants  2 held by the  holders  of
Eligible Shares as of the date hereof,  multiplied by a fraction,  the numerator
of which shall be the aggregate liquidation preference of such holder's Eligible
Shares  and  the  denominator  of  which  shall  be  the  aggregate  liquidation
preference of all outstanding  Eligible Shares,  LESS (2) the number of Warrants
and Preferred  Stock Warrants 2 held by such holder of Eligible Shares as of the
date hereof.  On or after the Springing  Warrant Date, a holder or holders of at
least 10% or more of the  aggregate  outstanding  Eligible  Shares may deliver a
notice  to the  Warrant  Agent in the form set forth in  Exhibit  C hereto  (the
"Springing  Notice"),  accompanied  by a  certificate  of  the  Transfer  Agent,
certifying  as to the  number of shares of  Series F  Preferred  Stock  that are
outstanding as of such date."

          Paragraph  (c) of Section 2.4 of the Warrant  Agreement  is amended to
add the following sentence at the end thereof.

          "Upon receipt of a certificate for the number of Springing Warrants to
which it is entitled  under this Section  2.4(c),  First Union  Investors,  Inc.
shall deliver such  certificate  to the Company,  and the Company shall issue or
shall  cause  the  Warrant  Agent to issue to First  Union  Investors,  Inc.  in
exchange  therefor a  certificate  in the same form as for the  Preferred  Stock
Warrants 2. The Springing  Warrants issued to First Union Investors,  Inc. shall
be subject to the terms and conditions of the Preferred Stock Warrant  Agreement
2 and shall not be subject to the terms and conditions of this Agreement."

          3. AMENDMENTS TO SECTION 2.5 OF THE WARRANT AGREEMENT.

          The  first  sentence  of  Section  2.5 is  hereby  amended  to read as
follows:

          "From time to time, the Company may issue and sell additional Warrants
under this Agreement, or additional Warrants under this Agreement, together with
shares of Series E Preferred  Stock or Series F Preferred  Stock,  to Additional
Purchasers;  provided that, any such Additional  Purchaser shall agree to all of
the terms and conditions  of, and assume all of the rights and  obligations of a
"Purchaser" under this Agreement and the Warrant  Registration Rights Agreement,
such  action  to  be  evidenced  by  such  Additional  Purchaser  executing  and
delivering to the Company and the Warrant  Agent a counterpart  to the signature
page of this  Agreement  (in the form  attached  hereto  as  Exhibit  D) and the
Warrant   Registration   Rights  Agreement  (in  the  form  set  forth  herein);
notwithstanding the foregoing,  it is agreed that the Preferred Stock Warrants 2
issued to First Union Investors,  Inc. shall not be subject to this Agreement or
the Warrant Registration Rights Agreement and that any Springing Warrants issued
to First Union Investors,  Inc. pursuant to Section 2.4 of this Agreement shall,
upon issuance,  no longer be subject to the terms of this Agreement (as provided
in Section  2.4(c) of this  Agreement) or the terms of the Warrant  Registration
Rights Agreement."

          4. AMENDMENT TO EXHIBIT C TO THE WARRANT AGREEMENT.

          Exhibit C to the Warrant  Agreement is deleted and replaced by Exhibit
C hereto.


<PAGE>

          5. 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.

          6. 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.

          7. 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.



<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/ Michael Sternberg
                                        _______________________________
                                        Name:   Michael A. Sternberg
                                        Title:  President


                                     THE CHASE MANHATTAN BANK, as Warrant Agent


                                      By: /s/ P. Kelly
                                         ______________________________
                                         Name:  Patricia Kelly
                                         Title: Vice President


                                     NEWCOURT COMMERCIAL FINANCE CORPORATION


                                     By:/s/ John P. Sirico
                                        ______________________________
                                        Name:   John P. Sirico, II
                                        Title:  Vice President





<PAGE>



                                     LUCENT TECHNOLOGIES INC.


                                     By: /s/ Leslie L. Rogers
                                        ______________________________
                                        Name:  Leslie L. Rogers
                                        Title: Managing Director


                                     FIRST UNION INVESTORS, INC.


                                     By:/s/ Pearce Landry
                                        ____________________________
                                        Name:   Pearce A. Landry
                                        Title:  Vice President




<PAGE>



                                                                       EXHIBIT C


                                       [Date]


KMC Telecom Holdings, Inc.
1545 Route 206, Suite 300
Bedminster, NJ  07921


The Chase Manhattan Bank
450 West 33rd St., 15th Floor
New York, NY  10001-2697
Attention:  Capital Markets Fiduciary Services

Re:     Warrants (the "WARRANTS") to Purchase
        Common Shares of
        KMC Telecom Holdings, Inc. (the "COMPANY")


Ladies and Gentlemen:

          This notice is being  provided  pursuant to Section 2.4 of the Warrant
Agreement  dated as of February 4, 1999, as amended (the  "WARRANT  AGREEMENT"),
among  The Chase  Manhattan  Bank,  as  Warrant  Agent,  the  Company,  Newcourt
Commercial  Finance  Corporation,  Lucent  Technologies,  Inc.  and First  Union
Investors, Inc. and any Additional Purchaser (as described therein). Capitalized
terms not  otherwise  defined  herein  shall have the  meaning  set forth in the
Warrant Agreement.

          The  undersigned  hereby  certifies  that  (i)  [it  is][we  are]  the
holder[s] of at least 10% of the aggregate  outstanding Eligible Shares and that
(ii) as of the date of this  notice,  the Company has failed to redeem all share
of Series F Preferred Stock by the earlier of:

                                   (check one)

        (a)     |_|      the date that is sixty days after the date on which
                         the Company closes an underwritten  primary offering of
                         at least $200 million of its Common  Stock  pursuant to
                         an   effective   registration   statement   under   the
                         Securities Act;
                                       or
        (b)     |_|      February 4, 2001

          As a result in  accordance  with the  provisions of Section 2.4 of the
Warrant  Agreement,  each holder of Eligible Shares (or their transferees) shall
be entitled to receive a number of Springing  Warrants equal to (i) 227,273 plus
the total number of Warrants and Preferred  Stock Warrants 2 held by the holders
of Eligible Shares on April 30, 1999, multiplied by a fraction, the numerator of
which shall be the aggregate  liquidation  preference of such holder's  Eligible
Shares  and  the  denominator  of  which  shall  be  the  aggregate  liquidation
preference of all outstanding  Eligible Shares,  LESS (2) the number of Warrants

                                       C-1

<PAGE>

and Preferred  Stock Warrants 2 held by such holder of Eligible  Shares on April
30, 1999. The Warrant Agent is hereby authorized and directed to countersign and
deliver to each registered  holder of Eligible  Shares,  the number of Springing
Warrants each such holder is entitled to receive at such holder's address as set
forth on the records of the Transfer Agent for the Series E Preferred  Stock and
the Series F Preferred Stock.

                       [NAME OF HOLDER OF SERIES [E][F] PREFERRED STOCK

                       By:________________________
                       Name:
                       Title:

                       Number of shares of Series [E][F] preferred Stock:_______



                       [NAME OF HOLDER OF SERIES [E][F] PREFERRED STOCK

                       By:________________________
                       Name:
                       Title:

                       Number of shares of Series [E][F] preferred Stock:_______










                                      C-2