AMENDMENT NO. 2
                              TO WARRANT AGREEMENT


          This Amendment No. 2 to Warrant Agreement dated as of February 4, 1999
(as heretofore  amended,  the  "Agreement"),  is made as of June 1, 1999, by KMC
Telecom  Holdings,  Inc. (the  "Company"),  The Chase  Manhattan  Bank ("Warrant
Agent"),   Newcourt  Commercial  Finance  Corporation  ("Newcourt')  and  Lucent
Technologies Inc. ("Lucent").

                                       W I T N E S S E T H

          WHEREAS,  Newcourt and Lucent own  warrants to purchase  shares of the
Company's Common Stock ("Warrants");

          WHEREAS,  the  Company has issued  Warrants to First Union  Investors,
Inc, ("First Union") pursuant to a warrant  agreement dated as of April 30, 1999
(the "First Union Warrant Agreement");

          WHEREAS,  under the First  Union  Warrant  Agreement,  First Union is,
under certain circumstances,  entitled to and obligated to sell shares of Common
Stock for which it Warrants may be exercised;

          WHEREAS, Harold N. Kamine ("Kamine") and Nassau Capital Partners L. P.
("Nassau")  are  parties  to the  First  Union  Warrant  Agreement  for  limited
purposes;

          WHEREAS,  Newcourt and Lucent wish to have the rights and  obligations
to sell shares of Common  Stock for which their  Warrants  may be  exercised  as
First Union has under the First Union Warrant  Agreement,  and Kamine and Nassau
are  willing to agree to,  the  extension  of such  rights  and  obligations  to
Newcourt and Lucent.

          NOW, THEREFORE,  in consideration of the premises,  the parties hereto
agree as follows:

          1. DEFINED TERMS.  Unless  otherwise  defined herein,  all capitalized
terms  defined  in the  Agreement  and used  herein are used as so  defined.  In
addition, the following terms shall have the meanings set forth below:

          "Buyout Notice" has the meaning ascribed to such term in Section 8.6.

          "Capital  Stock" means capital stock or share capital of, and/or other
equity participations in, the Company, including, without limitation partnership
interests,  and/or conversion privileges,  warrants, options and/or other rights
to acquire such capital stock, share capital and/or other equity participations.



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          "Common Stock  Equivalents"  means any security or obligation which is
by its terms convertible into shares of Common Stock and any option,  warrant or
other subscription or purchase right with respect to Common Stock.

          "Existing  Stockholders" means those stockholders who are from time to
time parties to the  Stockholders  Agreement  dated as of October 31,  1997,  as
amended.

          "Fully  Diluted" or "Fully  Diluted  Basis"  means,  at any date as of
which the number of shares of Common Stock is to be  determined,  such number of
shares  determined  on  a  basis  that  includes  all  shares  of  Common  Stock
outstanding  at such date and the  maximum  shares of Common  Stock  issuable in
respect  of  Common  Stock  Equivalents  (giving  effect  to  the  then  current
respective  conversion  prices)  and  other  rights  to  purchase  (directly  or
indirectly) shares of Common Stock or Common Stock  Equivalents,  outstanding on
such  date,  whether  or not  such  rights  to  convert,  exchange  or  exercise
thereunder are presently exercisable,

          "Principal  Holders" means each of the following two groups (i) Nassau
Capital  Partners L. P. and its general and limited  partners and any Affiliates
of the  foregoing and (ii) Harold N. Kamine and his parents,  siblings,  spouse,
descendants,  heirs and devices,  and any trust or Person the sole beneficiaries
or equity holders of which are the foregoing Persons.

          "Tag-Along  Notice" has the  meaning  ascribed to such term in Section
8.5.

          "Tag-Along Purchaser" has the meaning ascribed to such term in Section
8.5.

          "Tag-Along  Shares" has the  meaning  ascribed to such term in Section
8.5.

          "Third  Party  Purchaser"  has the  meaning  ascribed  to such term in
Section 8.6.

          2.  ADDITION  OF  SECTION  8.5.  A new  Section  8.5 is  added  to the
Agreement to read in its entirety as follows:

          SECTION 8.5.  TAG-ALONG  RIGHT. (a) If any Principal Holder intends to
transfer to any Person  (other than another  Person that is included  within the
defined group of such Principal Holder,  provided that such transferee agrees in
writing to be bound by the terms of this Section 8.5 and new stock  certificates
containing a restrictive  legend referring to the transfer  restrictions of this
Section 8.5 are issued to such transferee) (the "TAG-ALONG  PURCHASER"),  in one
transaction or a series of related transactions  (excluding securities offerings
registered under the Securities Act), shares of Capital Stock  constituting,  in
the aggregate,  more than 20% of the total number of shares of Common Stock on a
Fully Diluted Basis owned by such  Principal  Holder as of April 30, 1999,  then
such Principal  Holder shall permit each of the Purchasers,  at such Purchaser's
option,  to  transfer,  for the same  consideration,  and on the same  terms and
conditions,  if any,  upon which the Principal  Holder  intends to transfer such
shares,  a number of shares of Common Stock  (including  shares  subject to then
exercisable  Warrants and Warrants that will become  exercisable  as a result of
such  transaction  or  series  of  transactions)  then  owned by such  Purchaser
determined in accordance with this Section 8.5(a) (the "TAG-ALONG SHARES"). Such
Purchaser  shall  have the  right,  pursuant  to this  Section  8.5(a),  to sell



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pursuant to the offer by the Tag-Along Purchaser,  a percentage of the shares of
Common Stock  (including  shares subject to then  exercisable  Warrants) held by
such Purchaser equal to the Applicable Percentage.

          (b)  For  purposes  hereof,  the  "APPLICABLE   PERCENTAGE"  shall  be
determined as follows:

               (i)  if  such  transaction  or  series  of  related  transactions
constitutes  the first  instance in which the rights under Section 8.5(a) apply,
the  Applicable  Percentage  shall be equal to the percentage of the holdings of
Capital Stock (on a Fully Diluted Basis) then owned by the applicable  Principal
Holder being  transferred in such transaction or series of related  transactions
by such Principal Holder (the "APPLICABLE HOLDER" for such transaction(s));

               (ii) if such transaction or series of related  transactions  does
not  constitute  the first  instance in which the rights  under  Section  8.5(a)
apply,  the  Applicable  Percentage  shall  be equal  to the  percentage  of the
holdings  of  Capital  Stock  (on a  Fully  Diluted  Basis)  then  owned  by the
Applicable  Holder being  transferred  in such  transaction or series of related
transactions by the Applicable Holder;  provided that the Applicable  Percentage
shall be zero if the  percentage  of the  holdings of Capital  Stock (on a Fully
Diluted  Basis) then owned by the  Applicable  Holder being  transferred in such
transaction or series of related  transactions  by the Applicable  Holder is not
greater than five percent.

          (c) Not less than 15  Business  Days  prior to any  proposed  transfer
pursuant to this Section 8.5, the Principal Holders shall deliver to each of the
Purchasers written notice thereof (the "TAG-ALONG  Notice"),  which notice shall
set forth the consideration to be paid by the Tag-Along  Purchaser and the other
terms and conditions,  if any, of such  transaction.  If any Purchaser elects to
transfer some or all of the Tag-Along  Shares pursuant to this Section 8.5, then
(i) such Purchaser shall so notify the Principal Holders within 10 Business Days
after the date of such Purchaser's receipt of Tag-Along Notice, and, (ii) at the
Principal Holders' request not less than two Business Days prior to the proposed
transfer,  such Purchaser shall deliver to counsel to the Principal Holders,  to
be held in escrow, certificates representing such Tag-Along Shares (and/or other
appropriate  documentation to permit the exercise of Warrants), duly endorsed or
with duly  completed  and  executed  stock powers  attached,  in proper form for
transfer,  together with a limited  power-of-attorney  authorizing the Principal
Holders  to  transfer  the  Tag-Along  Shares  to the  Tag-Along  Purchaser  (in
accordance with the terms and conditions set forth in the Tag-Along  Notice) and
to execute all other  documents  required to be executed in connection with such
transaction.

          (d) If,  within 30  Business  Days after any  Purchaser  notifies  the
Principal  Holder of such  Purchaser's  election to transfer  some or all of its
Tag-Along  Shares,  no  transfer  of shares  held by the  Principal  Holders and
Tag-Along  Shares in  accordance  with the  provisions of this Section 8.5 shall
have  been  completed,  then  such  Purchaser  shall  have the right at any time
thereafter to revoke its prior election relating to the Tag--Along Shares.  Upon
any such  revocation,  or earlier if the Principal Holder shall determine not to
proceed with such transfer,  then the Principal  Holder's counsel shall promptly
return to such  Purchaser,  in proper form, all  certificates  representing  the
Tag-Along Shares and the limited power-of-attorney  previously delivered by such
Purchaser  to the  Principal  Holders.  If,  within 30 Business  Days after such



<PAGE>

Purchaser  notifies the  Principal  Holder of such  Purchaser's  decision not to
transfer any Tag--Along  Shares (or, if no such notice is given,  the expiration
of the 10 Business  Day period for notice of an election to transfer  Tag--Along
Shares),  no transfer of shares held by the  Principal  Holders  shall have been
completed in accordance with the Tag--Along  Notice,  then the Principal Holders
must comply again with all of the  provisions  of this  Section  8.5,  including
without  limitation a new Tag--Along Notice and another  opportunity for each of
the Purchasers to elect to transfer Tag--Along Shares.

          (e)  Concurrently  with  the  consummation  of  the  transfer  of  the
Tag-Along Shares pursuant to this Section 8.5, the Principal Holders shall remit
or cause to be remitted to such Purchaser the consideration  with respect to the
Tag-Along  Shares so  transferred  and shall furnish such other  evidence of the
completion of such transfer and the terms and conditions (if any) thereof as may
reasonably be requested by such Purchaser.

          (f) The  provisions  of this  Section  8.5  shall  remain  in  effect,
notwithstanding  any return to any  Purchaser  of  Tag-Along  Shares as provided
herein.

          (g) Notwithstanding the exercise date described in Section 3.2, in the
event that such  Purchaser  holds Warrants that are not then  exercisable  under
Section 3.2 and such Purchaser would be entitled to tag-along rights pursuant to
this Section 8.5 if such Warrants  were  exercisable,  then such Warrants  shall
become exercisable,  at the election of such Purchaser,  to the extent necessary
to permit such Purchaser to utilize all of such tag-along rights. Alternatively,
such  Purchaser  shall be entitled to transfer to the Tag-Along  Purchaser  such
portion of its Warrants  representing the number of Tag-Along Shares which would
be transferred to the Tag-Along Purchaser if such Warrants were exercisable,  in
exchange  for the  consideration  which  would be payable  with  respect to such
Tag-Along Shares, less the Exercise Price for such Warrants.

          3.  ADDITION  OF  SECTION  8.6.  A new  Section  8.6 is  added  to the
Agreement to read in its entirety as follows:

          SECTION 8.6.  BRING ALONG RIGHT.  If the Company or one or more of the
Existing  Stockholders  receives a bona fide offer from a person or persons  not
then an Affiliate or Affiliates of the Company or such Existing  Stockholders (a
"Third Party Purchaser") to purchase Capital Stock representing more than 50% of
the total number of shares of Common Stock then  outstanding  on a Fully Diluted
Basis,  then the  Company  shall have the right to  deliver a written  notice (a
"Buyout  Notice")  to each of the  Purchasers  which  shall  state  (i) that the
Company or such Existing  Stockholders propose to effect such transaction,  (ii)
the proposed  purchase  price per share of Capital Stock to be paid by the Third
Party Purchaser,  and (iii) the name or names of the Third Party Purchaser,  and
which  attaches a copy of all  writings  between  the  Company or such  Existing
Stockholders  and the other parties to such  transaction  necessary to establish
the terms of such transaction.  Each of the Purchasers agrees that, upon receipt
of a Buyout Notice,  it shall be obligated to sell a percentage of its shares of
Common  Stock equal to the Bring Along  Percentage  (as defined  below) upon the
terms and  conditions  of such  transaction  (and  otherwise  take all necessary
action to cause consummation of the proposed  transaction);  PROVIDED,  HOWEVER,
that each such  Purchaser  shall only be  obligated  as  provided  above in this



<PAGE>

Section 8.6 if (i) more than 50% of the total  number of shares of Common  Stock
then  outstanding  on a Fully Diluted Basis  actually is sold to the Third Party
Purchaser  pursuant to the terms contained in the Buyout Notice,  (ii) each such
Purchaser receives the same per share (or per share equivalent) consideration as
the Company or such Existing  Stockholders  receive in the transaction and (iii)
the  consideration  received  by  such  Purchaser  is in the  form  of cash or a
combination  of cash and  securities  that will  become  freely  tradable in the
public  securities  markets within 180 days of receipt of such  consideration by
such Purchaser.  The Bring Along Percentage shall be the percentage of the total
number of shares of Common Stock  outstanding  an a Fully  Diluted Basis that is
actually sold to the Third Party  Purchaser  pursuant to the terms  contained in
the Buyout  Notice;  PROVIDED  THAT if,  after giving  effect to such sale,  the
Existing   Stockholders   would  own  not  more  than  twenty   percent  of  the
fully-diluted common equity interests in the Company, the Bring Along Percentage
shall be one hundred percent.

          4. Except as expressly  amended  hereby,  all of the provisions of the
Agreement  are hereby  affirmed  and shall  continue in full force and effect in
accordance their terms.

          5. This Amendment  shall be governed and construed in accordance  with
the laws of the  state  of New  York  applicable  to  agreements  made and to be
performed  entirely  within,  such state,  without  regard to the  principles of
conflicts of laws thereof.

          6. 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 have caused to
be executed, this Agreement on the date first written above.

                                         KMC TELECOM HOLDINGS, INC.


                                         By:  /s/ James D. Grenfell
                                              ----------------------------------
                                              Name:  James D. Grenfell
                                              Title.  Chief Financial Officer

                                         THE CHASE MANHATTAN BANK


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

                                         NEWCOURT COMMERCIAL FINANCE
                                         CORPORATION


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


                                         LUCENT TECHNOLOGIES INC,


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














Signature page to
Amendment
No. 2 to existing Warrant
Agreement



<PAGE>


                                     CONSENT

          Harold N. Kamine and Nassau Capital Partners,  L. P. hereby consent to
the foregoing Amendment No. 1 for the purpose of being bound by Sections 8.5 and
8.6 added to the Warrant Agreement by the Amendment.



                                         -------------------------------
                                         Harold N. Kamine


                                         NASSAU CAPITAL PARTNERS, L.P.
                                         By:      Nassau Capital L.L.C.,
                                                    its General Partner


                                                  By:  /s/ John G. Quigley
                                                       -------------------------
                                                       Name:  John G. Quigley
                                                       Title.  Member





























Signature page to
Amendment
No. 2 to existing Warrant
Agreement