WARRANT REGISTRATION RIGHTS AGREEMENT


                                     between


                           KMC TELECOM HOLDINGS, INC.


                                       and


                     NEWCOURT COMMERCIAL FINANCE CORPORATION

                                       and

                            LUCENT TECHNOLOGIES INC.

                                       and

                            ANY ADDITIONAL PURCHASER



                          Dated as of February 4, 1999


<PAGE>



                      WARRANT REGISTRATION RIGHTS AGREEMENT

            WARRANT REGISTRATION RIGHTS AGREEMENT,  dated as of February 4, 1999
(this  "AGREEMENT"),  among KMC TELECOM HOLDINGS,  INC., a Delaware  corporation
(the  "COMPANY"),  and  Newcourt  Commercial  Finance  Corporation,  a  Delaware
corporation  ("NEWCOURT"),  Lucent  Technologies  Inc., a Delaware  corporation,
("LUCENT") and any other Person (as defined  herein) who becomes a party to this
Agreement  after the date hereof in  accordance  with the  provisions of Section
10(m) hereof (each an  "ADDITIONAL  PURCHASER"  and together  with  Newcourt and
Lucent, the "PURCHASERS").

            WHEREAS,  in  connection  with the sale of shares  of its  preferred
stock from time to time, the Company intends to issue and sell warrants (each, a
"WARRANT" and  collectively,  the "WARRANTS") to be issued pursuant to a Warrant
Agreement of even date herewith (the "WARRANT AGREEMENT") among the Company, the
Purchasers  and the Warrant Agent (as defined  herein),  each Warrant  initially
entitling  the holder  thereof to purchase  0.471756  shares of Common Stock (as
defined  below) of the Company at an exercise price of $.01 per Common Share (as
defined below);

            WHEREAS, pursuant to the terms of a Securities Purchase Agreement of
even date herewith (the "PURCHASE AGREEMENT"),  among the Company,  Newcourt and
Lucent,  the  Company  has agreed to issue and sell to (a)  Newcourt a unit (the
"SERIES E & F UNIT"),  consisting  of 25,000  shares of the  Company's  Series E
Senior,  Redeemable,  Exchangeable  PIK Preferred Stock (the "SERIES E PREFERRED
STOCK"),   10,000  shares  of  the  Company's   Series  F  Senior,   Redeemable,
Exchangeable  PIK  Preferred  Stock (the "SERIES E PREFERRED  STOCK") and 38,636
Warrants  and (b) to Lucent a unit (the  "SERIES F UNIT" and  together  with the
Series E Unit, the "UNITS"), consisting of 30,000 shares of the Company's Series
F Preferred Stock and 13,636 Warrants;

            WHEREAS,  as described in Section 2.4 of the Warrant Agreement,  the
holders of the Series E Preferred  Stock and the Series F  Preferred  Stock have
the right to receive 227,273 Warrants, unless certain conditions are met; and

            WHEREAS,  in addition to the 38,636  Warrants that will be issued as
part of the Series E & F Unit,  the 13,636  Warrants that will be issued as part
of the Series F Unit and the  Warrants  that may be issued to the holders of the
Series F Preferred Stock pursuant to Section 2.4 of the Warrant  Agreement,  the
Company may, from time to time, issue and sell additional  Warrants  pursuant to
the Warrant  Agreement in connection  with the sale to Additional  Purchasers of
additional units, consisting of shares of the Company's Series E Preferred Stock
or Series F Preferred Stock and Warrants.

            In  consideration  of the  foregoing  and of the  mutual  agreements
contained  herein and in the Purchase  Agreement,  the Company and the Purchaser
hereby agree as follows:

            1.    DEFINITIONS.

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

            "Additional Purchasers" has the meaning specified in the recitals of
this Agreement.

            "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.

            "Closing Date" means February 4, 1999.

            "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 IPO 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.

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

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

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<PAGE>

            "Existing Warrant  Registration  Rights Agreement" means the Warrant
Registration  Rights Agreement,  dated January 26, 1998, between the Company and
Morgan Stanley & Co. Incorporated.

            "Existing  Warrants"  means the  460,800  warrants  that were issued
pursuant  to  the  Existing  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.

            "Existing  Warrant  Shares"  means the Common  Shares  issuable upon
exercise of an Existing  Holder's  Existing  Warrants,  such other securities as
shall be issuable  upon the  exercise of the  Existing  Warrants,  or the Common
Shares or such other securities received upon the exercise thereof,  pursuant to
the  Existing  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.

            "Expiration Date" means the second  anniversary of the Closing Date,
except  that in the event the  Springing  Warrants  are  issued as  provided  in
Section 2.3 of the Warrant  Agreement,  the Expiration Date, with respect to the
Springing  Warrants  only,  shall  be the  second  anniversary  from the date of
issuance of the Springing Warrants.

            "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.

            "managing  underwriter"  has the  meaning  specified  in  Section  2
hereof.

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

            "Other IPO Shares" has the meaning specified in Section 2 hereof.

            "Piggy-back  Registration  Rights"  has  the  meaning  specified  in
Section 2 hereof.

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

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

            "Registration  Statement"  has the  meaning  specified  in Section 2
hereof.

            "Resale Shelf" has the meaning specified in Section 3 hereof.

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<PAGE>

            "Securities Act" means the United States  Securities Act of 1933, as
amended.

            "Series E Preferred Stock" has the meaning specified in the recitals
to this Agreement.

            "Series E & F Unit" has the  meaning  specified  in the  recitals to
this Agreement.

            "Series F Preferred Stock" has the meaning specified in the recitals
to this Agreement.


            "Series F Unit" has the meaning  specified  in the  recitals to this
Agreement.

            "Springing  Warrants"  has the  meaning  set  forth  in the  Warrant
Agreement.

            "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.

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

            "Warrants"  has  the  meaning  specified  in the  recitals  to  this
Agreement, including the Springing Warrants.

            "Warrant  Agent" means The Chase  Manhattan Bank, in its capacity as
Warrant Agent under the Warrant Agreement.

            "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.


                                       4
<PAGE>

            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 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
included,  unless the  underwriter  for the public  offering or the  underwriter
managing  the public  offering  (in either  case,  the  "MANAGING  UNDERWRITER")
delivers a 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  IPO 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) Existing  Warrant  Shares to be sold
by any Existing  Holders and (b) 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 IPO SHARES"),
plus the number of  Existing  Warrant  Shares  that the  Existing  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 IPO 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 IPO Shares.  Such maximum number of shares that may
be so sold, excluding the Company IPO Shares, are referred to as the "INCLUDIBLE
SHARES."

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<PAGE>

            If the managing  underwriter  delivers such Cutback Notice,  (i) the
Company shall be entitled to include all of the Company IPO Shares in the public
offering,  (ii) each  stockholder  who has  requested the inclusion of Other IPO
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 IPO Shares and each
Existing  Holder who has requested the inclusion of its Existing  Warrant Shares
shall be entitled to include all of its Existing  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 IPO
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 Existing Warrant Shares, Warrant Shares and Other IPO 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 the Common Shares being  distributed.  If the managing
underwriter delivers such Cutback Notice, (i) each stockholder who has requested
the inclusion of Other IPO 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 IPO Shares and each Existing Holder who has requested the inclusion of its
Existing Warrant Shares shall be entitled to include all of its Existing 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 IPO 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


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<PAGE>

appropriate form (the "WARRANT REGISTRATION STATEMENT") 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  (1) in no  event  may the  Warrant
Registration  Statement be declared  effective prior to the first anniversary of
the  Closing  Date and (2) 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, in the case of clause (2),  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 the Purchaser 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
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)(2) 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


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      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,  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, 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");

            (v) cause to be provided to Holders and beneficial owners of Warrant
      Shares an Opinion  and Comfort  Letter with  respect to each Form 10-K and
      Form 10-Q,  including any  amendments  thereto,  that is  incorporated  by
      reference in such Resale Shelf; and

            (vi) 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
      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


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<PAGE>

      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  privilege to suspend
availability of the Warrant  Registration  Statement and the related  prospectus
for (i) up to two 30-consecutive-day periods, 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,  (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
and (C) the Expiration Date;  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.

            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 the Warrant
Registration  Statement  has  been  suspended,   (i)  the  Warrant  Registration


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<PAGE>

Statement 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 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.

            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,  damages or liabilities  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  the  Warrant
Registration  Statement,  of  the  representations,   warranties  or  agreements
contained in Section 6 hereof.  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.

            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


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<PAGE>

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 (vi)  the fees and  disbursements,  if any,  of the  Auditors;  but
excluding  any and all fees,  expenses  and  disbursements  of the Holders  (not
specifically  included  above),  including,  without  limitation,  (x)  fees and
disbursements  of counsel  retained  by the  participating  Holders  and (y) 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.

            (c) The Company  shall not grant to any Person  (other than a Holder
of Warrant  Shares) any  registration  rights with respect to  securities of the
Company,  or enter  into any  agreement,  that  would be  inconsistent  with the
registration rights granted to Holders of Warrants herein.

            10.   MISCELLANEOUS.

            (a)  NO  INCONSISTENT  AGREEMENTS.  Each  of  the  Company  and  the
Purchaser  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


                                       11
<PAGE>

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.

            (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);  (ii) if to the Company,  initially at the Company's  address set
forth in the Purchase Agreement and thereafter at such other address,  notice of
which is given in  accordance  with the  provisions of this Section  10(c);  and
(iii) if to the Purchaser, initially at the Purchaser's address set forth in the
Purchase  Agreement  and  thereafter at such other  address,  notice of which is
given in accordance with the provisions of this Section 10(c).

            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.

                                       12
<PAGE>

            (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 Purchase  Agreement or
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  shall be third  party
beneficiaries  to the  agreements  made  hereunder  between  the Company and the
Purchaser,  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
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 judgement,


                                       13
<PAGE>

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.

            (m) ADDITIONAL  PURCHASERS.  From time to time the Company may issue
and sell additional Warrants to be issued under the Warrant 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  Agreement,
such  action  to  be  evidenced  by  such  Additional  Purchaser  executing  and
delivering to the Company a counterpart  to the signature page of this Agreement
(in the form  attached  hereto as Exhibit A) and the Warrant  Agreement  (in the
form set forth therein).  Other than such Additional Purchaser,  the Company and
the Warrant  Agent with  respect to the Warrant  Agreement,  and the Company and
such Additional  Purchaser with respect to this  Agreement,  no other party need
execute such counterparts in order for them to be effective.

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



                                    KMC TELECOM HOLDINGS, INC.


                                    By /s/ Cynthia Worthman
                                       --------------------------------------
                                       Name:  Cynthia Worthman
                                       Title: Vice President, Chief Financial 
                                              Officer



                                       14
<PAGE>

                                    NEWCOURT COMMERCIAL FINANCE
                                    CORPORATION


                                    By /s/ John P. Sirico, III
                                       --------------------------------------
                                       Name:
                                       Title:


                                    LUCENT TECHNOLOGIES INC.


                                    By /s/ Leslie L. Rogers
                                       --------------------------------------
                                       Name:
                                       Title:


                                       15
<PAGE>

                                                                     EXHIBIT A



            IN WITNESS WHEREOF,  the undersigned  hereby agrees to the terms and
conditions  of,  and  agrees  to be  bound by the  provisions  of,  the  Warrant
Registration  Rights  Agreement  dated  as of  February  __,  1999,  as  if  the
undersigned  was a party thereto as of such date,  and has caused this signature
page thereto to be duly executed as of the day and year set forth below.

Date:__________________       [   NAME OF  ADDITIONAL OF PURCHASER   ]



                              By:______________________________
                                   Name:
                                   Title:


                        Acknowledged and consented to:


                              KMC TELECOM HOLDINGS, INC.


                              By:______________________________
                                   Name:
                                   Title: