================================================================================
                           KMC TELECOM HOLDINGS, INC.,
                                   as Issuer,



                           KMC TELECOM FINANCING, INC.
                                  as Guarantor,


                                       and


                            THE CHASE MANHATTAN BANK,
                                   as Trustee




                          First Supplemental Indenture

                            Dated as of May 24, 1999





                     12 1/2% Senior Discount Notes due 2008


================================================================================



<PAGE>

          THIS FIRST SUPPLEMENTAL INDENTURE, dated as of May 24, 1999, among KMC
TELECOM HOLDINGS, INC., a Delaware corporation,  as issuer (the "COMPANY"),  KMC
TELECOM FINANCING,  INC., a Delaware corporation and a Restricted  Subsidiary of
the Company,  as guarantor (the  "GUARANTOR"),  and THE CHASE MANHATTAN BANK, as
trustee (the "TRUSTEE").


                             RECITALS OF THE COMPANY

          WHEREAS,  the Company and the Trustee  have  entered into that certain
indenture dated as of January 29, 1998 (the "SENIOR DISCOUNT NOTES  INDENTURE"),
pursuant to which the Company issued in the original aggregate  principal amount
at maturity of  $460,800,000 12 1/2% Senior Discount Notes due 2008 (thE "SENIOR
DISCOUNT NOtes");

          WHEREAS,  the Company  covenanted and agreed  pursuant to the terms of
the Senior Discount Notes Indenture not to permit any Restricted  Subsidiary (as
defined in the Senior  Discount Notes  Indenture),  directly or  indirectly,  to
guarantee any indebtedness of the Company which is equal or subordinate in right
of payment  with the Senior  Discount  Notes unless such  Restricted  Subsidiary
simultaneously  executes  and  delivers a  supplemental  indenture to the Senior
Discount Notes Indenture to provide for a Guarantee of the payment of the Senior
Discount Notes by such Restricted Subsidiary;

          WHEREAS, the Guarantor is a Restricted Subsidiary of the Company;

          WHEREAS,  the Company, the Guarantor and the Trustee have entered into
that  certain  indenture  dated as of the date  hereof  (as  amended,  restated,
supplemented or otherwise modified from time to time, the "INDENTURE"), pursuant
to which the Company is issuing on the date  hereof  $275,000,000  in  aggregate
principal  amount of 13 1/2% Senior Notes due 2009 (thE "NOtes") which are equal
in right of payment with the Senior Discount Notes; and

          WHEREAS,  the Notes are  guaranteed by the  Guarantor  pursuant to the
terms of the Indenture.

          NOW,  THEREFORE,  for and in  consideration  of the  premises  and the
mutual covenants and agreements hereinafter set forth, the parties hereto agree,
for the equal and  proportionate  benefit of all Holders of the Senior  Discount
Notes, as follows:


<PAGE>
                                       2


                                    ARTICLE I

                            RATIFICATION; DEFINITIONS

          SECTION 1.01. FIRST  SUPPLEMENTAL  INDENTURE.  This First Supplemental
Indenture is  supplemental  to, and is entered into in  accordance  with Section
9.01 of the Senior Discount Notes Indenture, and except as modified, amended and
supplemented by this First Supplemental Indenture,  the provisions of the Senior
Discount  Notes  Indenture are in all respects  ratified and confirmed and shall
remain in full force and effect; and

          SECTION 1.02. DEFINITIONS. Unless the context shall otherwise require,
all terms  which are  defined  in  Section  1.01 of the  Senior  Discount  Notes
Indenture shall have the same meanings, respectively, in this First Supplemental
Indenture as such terms are given in said  Section  1.01 of the Senior  Discount
Notes Indenture.


                                   ARTICLE II
                       GUARANTEE OF SENIOR DISCOUNT NOTES

          SECTION  2.01.  GUARANTEE.  (a)  Subject  to the  provisions  of  this
Supplemental  Indenture,   the  Guarantor  hereby  fully,   unconditionally  and
irrevocably guarantees  (hereinafter referred to as the "SUBSIDIARY  GUARANTEE")
to each holder of the Senior Discount Notes (each, a "HOLDER" and  collectively,
the "HOLDERS") and to the Trustee on behalf of itself and such Holders:

          (i) the due and punctual  payment of the  Accreted  Value or principal
     amount at maturity  of,  premium,  if any,  on and  interest on each Senior
     Discount Note outstanding as of the date hereof, when and as the same shall
     become due and payable,  whether at maturity, by acceleration or otherwise,
     the due and  punctual  payment of interest on the overdue  principal of and
     interest,  if any, on such Senior Discount Notes, to the extent lawful, and
     the due and punctual performance of all other obligations of the Company to
     the Holders or the Trustee, all in accordance with the terms of such Senior
     Discount Note and the Senior Discount Note Indenture; and

          (ii) in the case of any extension of time of payment or renewal of any
     such Senior Discount Note or any of such other  obligations,  that the same
     will be promptly paid in full when due or performed in accordance  with the
     terms of the extension or renewal,  at Stated Maturity,  by acceleration or
     otherwise.


<PAGE>
                                       3


          (b) The Guarantor  hereby  waives  diligence,  presentment,  demand of
payment,  filing of claims with a court in the event of merger or  bankruptcy of
the Company,  any right to require a proceeding  first against the Company,  the
benefit  of  discussion,  protest  or notice  with  respect  to any such  Senior
Discount  Note or the debt  evidenced  thereby and all demands  whatsoever,  and
covenants that this  Subsidiary  Guarantee will not be discharged as to any such
Senior  Discount  Note  except  by  payment  in full of the  Accreted  Value  or
principal  amount  at  maturity  thereof  and  interest  thereon  in the  manner
contemplated  by the  terms of the  Senior  Discount  Notes  Indenture.  For the
purposes of this First Supplemental  Indenture,  the maturity of the obligations
guaranteed  hereby may be  accelerated  as set forth  under  Article  Six of the
Senior Discount Notes Indenture  (hereinafter  referred to as "ARTICLE SIX"). In
the event of any declaration of acceleration of such  obligations as provided in
such  Article  Six,  such  obligations  (whether or not due and  payable)  shall
forthwith  become due and payable by the Guarantor for the purpose of this First
Supplemental Indenture. In addition,  without limiting the foregoing provisions,
upon the  effectiveness  of an  acceleration  under Article Six, the Trustee may
make a demand for payment on the Senior  Discount  Notes  under this  Subsidiary
Guarantee.  Notwithstanding  the  foregoing,  this  Subsidiary  Guarantee by the
Guarantor shall  automatically  terminate upon the earlier of (i) the payment in
full of the Accreted Value or principal amount at maturity of, premium,  if any,
and interest on all  outstanding  Senior Discount Notes and (ii) the termination
of the guarantee of the Notes by the Guarantor in accordance  with Section 11.01
of the Indenture,  unless such termination  under Section 11.01 of the Indenture
results from a payment by the Guarantor under the Note Guarantee. If the Trustee
or the Holder is required by any court or  otherwise to return to the Company or
the Guarantor, or any custodian, receiver, liquidator,  trustee, sequestrator or
other similar  official acting in relation to the Company or the Guarantor,  any
amount paid to the Trustee or such Holder in respect of a Senior  Discount Note,
this  Subsidiary  Guarantee,  to the  extent  theretofore  discharged,  shall be
reinstated  in full force and  effect.  The  Guarantor  further  agrees,  to the
fullest extent that it may lawfully do so, that, as between it, on the one hand,
and the  Holders  and the  Trustee,  on the  other  hand,  the  maturity  of the
obligations  guaranteed hereby may be accelerated as provided in Article Six for
the purposes of this Subsidiary Guarantee,  notwithstanding any stay, injunction
or other prohibition extant under any applicable  bankruptcy law preventing such
acceleration in respect of the obligations guaranteed hereby.


<PAGE>
                                       4


          (c) Until such time as the Senior Discount Notes outstanding as of the
date  hereof  are fully and  finally  paid,  including  all  interest,  premium,
principal and  liquidated  damages with respect  thereto,  the Guarantor  hereby
irrevocably  waives  any  claim or other  rights  which it may now or  hereafter
acquire against the Company that arise from the existence,  payment, performance
or  enforcement  of its  obligations  under this  Subsidiary  Guarantee and this
Supplemental Indenture, including, without limitation, any right of subrogation,
reimbursement,   exoneration,   contribution,   indemnification,  any  right  to
participate  in any claim or remedy of the  Holders  against  the Company or any
collateral  which any such  Holder  or the  Trustee  on  behalf  of such  Holder
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract,  statute or common law, including,  without  limitation,  the
right to take or receive from the Company,  directly or  indirectly,  in cash or
other  property  or by set-off or in any other  manner,  payment or  security on
account  of such  claim  or other  rights.  If any  amount  shall be paid to the
Guarantor  in  violation of the  preceding  sentence  and the Accreted  Value or
principal  amount at maturity of, premium,  if any, and accrued  interest on the
Senior  Discount  Notes or any other  amounts  payable by the Company  under the
Senior  Discount Notes  Indenture  shall not have been paid in full, such amount
shall be deemed to have been paid to the  Guarantor for the benefit of, and held
in trust for the benefit of, the Holders and the Trustee, and shall forthwith be
paid to the Trustee for the benefit of itself and the Holders to be credited and
applied upon the  principal  of,  premium,  if any, and accrued  interest on the
Senior Discount Notes.

          (d) This Subsidiary  Guarantee shall not be valid or become obligatory
for any purpose with respect to a Senior  Discount Note until the certificate of
authentication on the Note shall have been signed by or on behalf of the Trustee
pursuant to the terms of the Indenture.

          SECTION 2.02. OBLIGATIONS UNCONDITIONAL.  (a) Subject to Section 2.05,
nothing contained in this First Supplemental Indenture or in the Senior Discount
Notes is intended to or shall impair,  as among the  Guarantor,  the Trustee and
the  Holders,   the  obligation  of  the   Guarantor,   which  is  absolute  and
unconditional,  upon failure by the Company,  to pay to the Holders the Accreted
Value or principal  amount at maturity of, premium,  if any, and interest on the
Senior  Discount  Notes  outstanding  as of the date hereof as and when the same
shall become due and payable in accordance with their terms or any other amounts
payable by the Company under the Senior Discount Notes Indenture, or is intended
to or shall affect the relative rights of the Holders, the Trustee and creditors
of the Guarantor,  nor shall anything  herein or therein  prevent the Holders of
such Senior  Discount  Notes or the Trustee on their behalf from  exercising all
remedies  otherwise   permitted  by  applicable  law  upon  default  under  this
Indenture.

          (b) Without  limiting the foregoing,  nothing  contained in this First
Supplemental  Indenture will restrict the right of the Trustee or the Holders to
take any action to declare this Subsidiary Guarantee to be due and payable prior
to the Stated  Maturity of the Senior  Discount Notes or to pursue any rights or
remedies hereunder.

          SECTION  2.03.  NOTICE TO  TRUSTEE.  The  Guarantor  shall give prompt
written  notice to the  Trustee of any fact known to the  Guarantor  which would
prohibit  the  making of any  payment  to or by the  Trustee  in respect of this
Subsidiary  Guarantee  pursuant  to the  provisions  of this First  Supplemental
Indenture.


<PAGE>
                                       5


          SECTION  2.04.  THIS  ARTICLE NOT TO PREVENT  EVENTS OF  DEFAULT.  The
failure to make a payment on account of the Accreted  Value or principal  amount
at maturity of,  premium,  if any, or interest on the Senior  Discount  Notes by
reason  of any  provision  of this  First  Supplemental  Indenture  will  not be
construed as preventing the occurrence of an Event of Default.

          SECTION  2.05.  NET  WORTH  LIMITATION.   Notwithstanding   any  other
provision  of the Senior  Discount  Notes  Indenture,  this  First  Supplemental
Indenture or the Senior Discount Notes and this Subsidiary Guarantee, this First
Supplemental  Indenture  shall not be  enforceable  against the  Guarantor in an
amount  in  excess  of  the  net  worth  of  the  Guarantor  at  the  time  that
determination  of such net worth  is,  under  applicable  law,  relevant  to the
enforceability of the Note Guarantee  pursuant to the terms of the Indenture and
the Collateral Pledge and Security  Agreement.  Such net worth shall include any
claim or future claim of the Guarantor against the Company for reimbursement and
any claim against any grantor of a Guarantee for contribution.


                                   ARTICLE III

                                  MISCELLANEOUS

          SECTION  3.01.   NOTICES.   Any  notice  or  communication   shall  be
sufficiently  given if in  writing  and  delivered  in person or mailed by first
class mail, commercial courier service or telecopier communication, addressed as
follows:

                  IF TO THE COMPANY OR THE GUARANTOR:

                           KMC Telecom Holdings, Inc.
                           1545 Route 206, Suite 300
                           Bedminster, New Jersey  07921
                           Telecopier Number:  (908) 719-8775
                           Attention: Chief Financial Officer

                                    With a copy to:

                           Kelley Drye & Warren LLP
                           101 Park Avenue
                           New York, NY  10178
                           Attention: Alan M. Epstein, Esq.

<PAGE>
                                       6

<PAGE>
                                       7



                                    and a copy to:

                           Simpson Thacher & Bartlett
                           425 Lexington Avenue
                           New York, NY 10017 - 3954
                           Attention: Arthur D. Robinson, Esq.

                  IF TO THE TRUSTEE:

                           The Chase Manhattan Bank
                           450 West 33rd Street, 15th Floor
                           New York, New York  10001-2697
                           Telecopier Number:  (212) 946-8159/8160
                           Attention: Capital Markets Fiduciary Services

                                    With a copy to:

                           Pryor Cashman Sherman & Flynn, LLP
                           410 Park Avenue
                           New York, NY  10022
                           Attention: Eric Hellige, Esq.

          The Company,  the Guarantor or the Trustee by notice to the others may
designate   additional  or  different   addresses  for  subsequent   notices  or
communications.

          SECTION 3.02.  SUCCESSORS AND ASSIGNS. All covenants and agreements of
the Company, the Guarantor and the Trustee in this First Supplemental  Indenture
shall bind their respective successors.

          SECTION 3.03.  COUNTERPARTS.  This First Supplemental Indenture 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  First
Supplemental Indenture.

          SECTION 3.04.  GOVERNING LAW. This First Supplemental  Indenture shall
be governed by and construed in  accordance  with the internal laws of the State
of New York.

          SECTION  3.05.  SEPARABILITY.  In case  any  provision  in this  First
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining  provisions shall not in any way be
affected or impaired thereby.


<PAGE>
                                       8


          SECTION 3.06. EFFECTIVE DATE. This First Supplemental  Indenture shall
become effective as of the date hereof.

          SECTION 3.07.  INCORPORATION  INTO  INDENTURE.  All provisions of this
First  Supplemental  Indenture shall be deemed to be  incorporated  in, and made
part of, the Senior  Discount  Notes  Indenture;  and the Senior  Discount Notes
Indenture,  as amended and  supplemented by this First  Supplemental  Indenture,
shall be read, taken and construed as one and the same instrument.

          SECTION 3.08. THE TRUSTEE. The Trustee shall not be responsible for or
in respect of the validity or sufficiency of this First  Supplemental  Indenture
or for or in respect of the  recitals  contained  herein,  all of which are made
solely by the Company.


<PAGE>

                                   SIGNATURES

          IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  First
Supplemental  Indenture to be duly  executed,  all as of the date first  written
above.



                                                KMC TELECOM HOLDINGS, INC.



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



                                                KMC TELECOM FINANCING, INC.
                                                   as Guarantor



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



                                                THE CHASE MANHATTAN BANK,
                                                   as Trustee



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