KMC TELECOM HOLDINGS, INC.




                  $275,000,000 OF 13 1/2% SENIOR NOTES DUE 2009




                               PURCHASE AGREEMENT



                                  May 19, 1999


                           KMC TELECOM HOLDINGS, INC.

                               PURCHASE AGREEMENT


                                                                    May 19, 1999


Morgan Stanley & Co.  Incorporated
Credit Suisse First Boston Corporation
First Union Capital Markets Corp.
CIBC World Markets Corp.
BancBoston Robertson Stephens Inc.
Wasserstein Perella Securities, Inc.
c/o Morgan Stanley & Co.  Incorporated
1585 Broadway
New York, New York  10036-8293

Dear Sirs and Mesdames:

          KMC Telecom  Holdings,  Inc., a Delaware  corporation (the "Company"),
proposes to issue and sell to the initial  purchasers named in Schedule I hereto
(the "Initial  Purchasers") an aggregate of $275,000,000 of 13 1/2% Senior Notes
Due 2009 of the Company (the "Notes") to be issued pursuant to the provisions of
an indenture (the "Indenture") between the Company and The Chase Manhattan Bank,
as trustee (in such capacity, the "Trustee"), to be dated as of the Closing Date
(as defined below).

          The  Indenture  will provide that on the Closing Date the Company will
cause its wholly-owned restricted subsidiary,  KMC Telecom Financing,  Inc. (the
"Guarantor"),  to  purchase  and pledge to the  Trustee  for the  benefit of the
registered holders of the Notes (collectively,  the "Note Holders"), pursuant to
the  terms  of  a  Collateral   Pledge  and  Security   Agreement  (the  "Pledge
Agreement"),  a portfolio of United States Treasury  securities  and/or security
entitlements relating thereto in an amount sufficient, upon receipt of scheduled
interest and principal  payments on such securities,  to provide for the payment
in full of the first six scheduled  interest payments on the Notes (the "Pledged
Securities").

          The  Notes  will  be  offered  without  being   registered  under  the
Securities  Act of  1933,  as  amended  (the  "Securities  Act"),  to  qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act and in offshore  transactions  in reliance
on Regulation S under the Securities Act ("Regulation S").



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                                        2

          The Initial Purchasers and their direct and indirect  transferees will
be entitled to the benefits of a Registration  Rights Agreement  relating to the
Notes, to be dated the date hereof, and to be substantially in the form attached
hereto as Exhibit A (the "Registration Rights Agreement").

          In connection  with the sale of the Notes,  the Company has prepared a
preliminary  private  placement  memorandum dated May 6, 1999 (the  "Preliminary
Memorandum") and will prepare a final private  placement  memorandum  (including
any  supplements  thereto,  the "Final  Memorandum"  and,  with the  Preliminary
Memorandum, each a "Memorandum") setting forth or including a description of the
terms of the Notes,  the terms of the offering and a description  of the Company
and its business.

          1. Representations and Warranties. The Company represents and warrants
to, and agrees with, you that as of the date hereof:

                  (a) The Preliminary  Memorandum as of the date hereof does not
         contain  and the  Final  Memorandum,  in the form  used by the  Initial
         Purchasers to confirm  sales and on the Closing Date,  will not contain
         any untrue  statement  of a  material  fact or omit to state a material
         fact  necessary  to make the  statements  therein,  in the light of the
         circumstances  under which they were made, not misleading,  except that
         the  representations  and warranties set forth in this paragraph do not
         apply to  statements  or  omissions  in either  Memorandum  based  upon
         information relating to the Initial Purchasers furnished to the Company
         in writing by the Initial Purchasers expressly for use therein.

                  (b)  The  Company  has  been  duly  incorporated,  is  validly
         existing as a corporation  in good standing under the laws of the State
         of Delaware,  has the corporate power and authority to own its property
         and to conduct its business as described in each Memorandum and is duly
         qualified  to  transact  business  and  is in  good  standing  in  each
         jurisdiction  in which the conduct of its business or its  ownership or
         leasing of property requires such  qualification,  except to the extent
         that the failure to be so  qualified or be in good  standing  would not
         have a material  adverse  effect on the Company  and its  subsidiaries,
         taken as a whole.

                  (c) Each  subsidiary  of the  Company  is listed on  Exhibit B
         hereto (each a "Subsidiary" and, collectively,  the "Subsidiaries") and
         has been duly incorporated or otherwise organized,  is validly existing
         as a corporation or limited liability  company,  as the case may be, in
         good standing under the laws of the  jurisdiction of its  incorporation
         or  organization,  has the corporate and/or limited  liability  company
         power and authority, as appropriate, to own its property and to conduct
         its business as described in each  Memorandum  and is duly qualified to
         transact business and is in good standing in each jurisdiction in which

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                                      3

         the  conduct of its  business or its  ownership  or leasing of property
         requires such  qualification,  except to the extent that the failure to
         be so  qualified  or be in good  standing  would  not  have a  material
         adverse effect on the Company and the  Subsidiaries,  taken as a whole;
         all of the issued shares of capital  stock or  membership  interests of
         each  Subsidiary  of the Company have been duly and validly  authorized
         and issued, are fully paid and  non-assessable and are owned,  directly
         or  indirectly,   by  the  Company,   free  and  clear  of  all  liens,
         encumbrances,  equities or claims, other than those indicated in either
         Memorandum.

                  (d)  This  Purchase  Agreement  has  been  duly  authorized,
          executed and delivered by the Company.

                  (e) The Notes have been duly  authorized  by the Company  and,
         when executed and  authenticated in accordance with the Indenture,  and
         delivered to and paid for by the Initial  Purchasers in accordance with
         the terms of this  Purchase  Agreement,  will (x) be valid and  binding
         obligations of the Company  enforceable in accordance with their terms,
         except as (A) the enforceability  thereof may be limited by bankruptcy,
         insolvency,  moratorium  or similar laws  affecting  creditors'  rights
         generally  and (B)  rights  of  acceleration,  if  applicable,  and the
         availability  of  equitable   remedies  may  be  limited  by  equitable
         principles of general applicability and (y) be entitled to the benefits
         of the  Indenture  pursuant  to which such Notes are to be issued,  the
         Registration Rights Agreement and the Pledge Agreement.

                  (f)  Each  of  the  Indenture  and  the  Registration   Rights
         Agreement  has been duly  authorized  by the Company and, when executed
         and delivered by the Company, will be a valid and binding agreement of,
         the Company,  enforceable in accordance  with its terms except that (w)
         the  enforceability  thereof may be limited by bankruptcy,  insolvency,
         moratorium or similar laws affecting  creditors' rights generally,  (x)
         rights  of  acceleration,   if  applicable,  and  the  availability  of
         equitable  remedies may be limited by equitable  principles  of general
         applicability,  (y) rights to  indemnification  and contribution may be
         limited by public policy and (z) provisions of the  Indenture,  if any,
         requiring any waiver of stay or extension laws, diligent performance or
         other  acts  on the  part of the  Trustee  may be  unenforceable  under
         principles of public policy.

                  (g) The  Pledge  Agreement  has been  duly  authorized  by the
         Guarantor and, when executed and delivered by the Guarantor,  will be a
         valid and binding agreement of the Guarantor  enforceable in accordance
         with its terms, except as (x) the enforceability thereof may be limited
         by  bankruptcy,  insolvency,  fraudulent  conveyance,   reorganization,
         moratorium or other  similar laws  relating to or affecting  creditors'
         rights generally and subject to general  equitable  principles  whether
         considered in a proceeding in equity or at law.


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                                       4

                  (h) Upon the  delivery to the Trustee of the  certificates  or
         instruments, if any, representing the Pledged Securities, the pledge of
         and grant of a security  interest  in the  Pledged  Securities  for the
         benefit of the Trustee and the Note  Holders,  as the case may be, will
         constitute  a  first   priority   security   interest  in  the  Pledged
         Securities, enforceable against all creditors of the Guarantor (and any
         persons  purporting to purchase any of the Pledged  Securities from the
         Guarantor).

                  (i) The  execution  and  delivery  by the  Company of, and the
         performance  by the Company of its  obligations  under,  this  Purchase
         Agreement,  the Indenture,  the  Registration  Rights Agreement and the
         Notes  (collectively,  the  "Transaction  Documents") and the issuance,
         sale and  delivery of the Notes by the Company in  accordance  with the
         terms  of the  Notes  and the  Indenture  will not  contravene  (i) any
         provision of applicable law, (ii) the certificate of  incorporation  or
         bylaws of the Company,  (iii) any agreement or other instrument binding
         upon the  Company  or any of its  Subsidiaries,  or (iv) any  judgment,
         order or  decree  of any  governmental  body,  agency  or court  having
         jurisdiction over the Company or any Subsidiary, except with respect to
         clauses  (i) and (iii) to the extent that any  contravention  would not
         have a material  adverse  effect on the Company  and its  Subsidiaries,
         taken as a whole, and no consent, approval,  authorization or order of,
         or qualification  with, any governmental body or agency is required for
         the performance by the Company of its obligations under the Transaction
         Documents, except (x) such as may be required by the securities or Blue
         Sky laws of the various states in connection with the offer and sale of
         the Notes,  (y) such as may be required by Federal and state securities
         laws with respect to the Company's  obligations  under the Registration
         Rights Agreement and (z) for any consents,  approvals,  authorizations,
         orders or qualifications,  the failure to obtain which would not have a
         material  adverse  effect on the  ability of the Company to perform its
         obligations under the Transaction Documents.

                  (j) The  execution  and delivery by the  Guarantor of, and the
         performance by the Guarantor of its obligations  under,  the Indenture,
         the First Supplemental Indenture,  the Pledge Agreement and the Control
         Agreement  (collectively,  the "Guarantor Transaction  Documents") will
         not  contravene   (i)  any  provision  of  applicable   law,  (ii)  the
         certificate  of  incorporation  or bylaws of the  Guarantor,  (iii) any
         agreement or other instrument  binding upon the Guarantor,  or (iv) any
         judgment,  order or decree of any  governmental  body,  agency or court
         having jurisdiction over the Guarantor,  except with respect to clauses
         (i) and (iii) to the  extent  that any  contravention  would not have a
         material  adverse  effect on the Guarantor,  and no consent,  approval,
         authorization or order of, or qualification with, any governmental body
         or agency is  required  for the  performance  by the  Guarantor  of its
         obligations under the Guarantor Transaction Documents,  except (x) such
         as may be  required by the  securities  or Blue Sky laws of the various
         states in  connection  with the offer and sale of the Notes and (y) for

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                                       5

         any consents, approvals, authorizations,  orders or qualifications, the
         failure to obtain which would not have a material adverse effect on the
         ability of the Guarantor to perform its obligations under the Guarantor
         Transaction Documents.

                  (k) There has not occurred any material adverse change, or any
         development  involving a prospective  material  adverse change,  in the
         condition,  financial or  otherwise,  or in the  earnings,  business or
         operations of the Company and its Subsidiaries,  taken as a whole, from
         that set  forth in the  Preliminary  Memorandum.  Furthermore,  (1) the
         Company and its Subsidiaries  have not incurred any material  liability
         or  obligation,  direct or  contingent,  nor entered  into any material
         transaction not in the ordinary course of business; (2) the Company has
         not purchased  (except for the repurchase of shares of its common stock
         from  employees,  officers,  directors,  consultants  or other  persons
         providing  services to the Company or any of its Subsidiaries  pursuant
         to agreements under which the Company has the option to repurchase such
         shares of its  common  stock at cost  upon the  occurrence  of  certain
         events such as the termination of employment or other service-providing
         relationship) any of its outstanding capital stock, nor declared,  paid
         or  otherwise  made any  dividend  or  distribution  of any kind on its
         capital  stock other than  ordinary and  customary  dividends;  and (3)
         there has not been any material change in the capital stock, short-term
         debt or long-term debt of the Company and its consolidated Subsidiaries
         taken  as a  whole,  except  in each  case as  described  in the  Final
         Memorandum.

                  (l) There are no legal or governmental proceedings pending or,
         to the knowledge of the Company, threatened to which the Company or any
         of its Subsidiaries is a party or to which any of the properties of the
         Company or any of its  Subsidiaries  is subject other than  proceedings
         accurately  described in all material  respects in each  Memorandum and
         proceedings  that are not reasonably  likely to have a material adverse
         effect on the Company and its Subsidiaries, taken as a whole, or on the
         power or ability of the Company to perform its obligations under any of
         the   Transaction   Documents  or  to   consummate   the   transactions
         contemplated by the Final Memorandum.

                  (m) Neither the Company nor any  affiliate (as defined in Rule
         501(b) of Regulation D under the Securities Act, an "Affiliate") of the
         Company has directly, or through any agent, (i) sold, offered for sale,
         solicited  offers to buy or  otherwise  negotiated  in respect  of, any
         security  (as  defined  in the  Securities  Act)  which  is or  will be
         integrated  with the sale of the Notes in a manner  that would  require
         the registration  under the Securities Act of the Notes or (ii) engaged
         in any form of general  solicitation  or general  advertising (as those
         terms are used in Regulation D under the Securities  Act) in connection
         with the  offering  of the Notes or in any  manner  involving  a public
         offering within the meaning of Section 4(2) of the Securities Act.

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                                       6


                  (n) The  Company  is  not,  and  after  giving  effect  to the
         offering  and sale of the Notes  and the  application  of the  proceeds
         thereof  as  described  in  the  Final  Memorandum,   will  not  be  an
         "investment  company" as such term is defined in the Investment Company
         Act of 1940, as amended.

                  (o) It is not necessary in connection with the offer, sale and
         delivery  of  the  Notes  to  the  Initial  Purchasers  in  the  manner
         contemplated by this Purchase Agreement to register the Notes under the
         Securities  Act or to qualify the Indenture  under the Trust  Indenture
         Act of 1939, as amended.

                  (p) The Company  and its  Subsidiaries  (i) are in  compliance
         with any and all applicable foreign,  federal, state and local laws and
         regulations  relating to the protection of human health and safety, the
         environment or hazardous or toxic  substances or wastes,  pollutants or
         contaminants  ("Environmental  Laws"),  (ii) have received all permits,
         licenses  or  other  approvals   required  of  them  under   applicable
         Environmental Laws to conduct their respective businesses and (iii) are
         in compliance with all terms and conditions of any such permit, license
         or approval,  except where such noncompliance with Environmental  Laws,
         failure to receive  required  permits,  licenses or other  approvals or
         failure  to  comply  with the  terms and  conditions  of such  permits,
         licenses or approvals  would not,  singly or in the  aggregate,  have a
         material adverse effect on the Company and its Subsidiaries, taken as a
         whole.

                  (q)  There  are  no  costs  and  liabilities  associated  with
         Environmental  Laws  (including,  without  limitation,  any  capital or
         operating expenditures required for clean-up,  closure of properties or
         compliance with Environmental Laws or any permit,  license or approval,
         any related  constraints  on  operating  activities  and any  potential
         liabilities to third parties) which would,  singly or in the aggregate,
         have a material  adverse  effect on the Company  and its  Subsidiaries,
         taken as a whole.

                  (r) The  Notes  satisfy  the  requirements  set forth  in Rule
          144A(d)(3) under the Securities Act.

                  (s) None of the Company,  its  Affiliates or any person acting
         on its or their behalf (other than the Initial  Purchasers) has engaged
         in any directed  selling efforts (as that term is defined in Regulation
         S under the Securities Act) with respect to the Notes,  and the Company
         and its  Affiliates and any person acting on its or their behalf (other
         than  the  Initial   Purchasers)   have   complied  with  the  offering
         restrictions requirement of Regulation S.

                  (t) Except as  described in each  Memorandum,  the Company and
         its  Subsidiaries  (i) have  all  necessary  consents,  authorizations,
         approvals,  orders, certificates and permits of and from, and have made
         all declarations and filings with, all federal,  state, local and other
         governmental,    administrative   or   regulatory   authorities,    all
         self-regulatory  organizations  and all courts and other tribunals,  to
         own, lease,  license and use their properties and assets and to conduct

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                                       7

         their business in the manner  described in each  Memorandum,  except to
         the extent that the failure to obtain  such  consents,  authorizations,
         approvals, orders, certificates or permits or make such declarations or
         filings would not have a material adverse effect on the Company and its
         Subsidiaries, taken as a whole; and (ii) has not received any notice of
         proceedings  relating to the violation,  revocation or  modification of
         any such license, consent, authorization,  approval, order, certificate
         or permit  which,  singly or in the  aggregate,  if the  subject  of an
         unfavorable decision,  ruling or finding,  would reasonably be expected
         to result in a material  adverse change in the condition,  financial or
         otherwise,  in the earnings,  business or operations of the Company and
         its Subsidiaries, taken as a whole.

                  (u) The Company and its Subsidiaries  have good and marketable
         title in fee simple to all real property and good and marketable  title
         to all  personal  property  owned  by them  which  is  material  to the
         business of the Company and its Subsidiaries, taken as a whole, in each
         case free and clear of all liens,  encumbrances  and defects except (i)
         such  as  are  described  in  each  Memorandum,  (ii)  such  as do  not
         materially  affect the value of such property and do not interfere with
         the use made and  proposed  to be made of such  property by the Company
         and its  Subsidiaries;  or (iii) such as do not have a material adverse
         effect on the Company and its  Subsidiaries  taken as a whole;  and any
         real  property  and  buildings  held under lease by the Company and its
         Subsidiaries  are held by them under valid,  subsisting and enforceable
         leases with such  exceptions as are not material and do not  materially
         interfere  with the use made and  proposed to be made of such  property
         and buildings by the Company and its Subsidiaries,  in each case except
         as described in or contemplated by each Memorandum.

                  (v) The Company and its  Subsidiaries  own or possess,  or can
         acquire on  reasonable  terms,  all material  patents,  patent  rights,
         licenses, inventions, copyrights, know-how (including trade secrets and
         other  unpatented  and/or  unpatentable   proprietary  or  confidential
         information,  systems or  procedures),  trademarks,  service  marks and
         trade names currently  employed by them in connection with the business
         now  operated  by them,  and,  except as set forth in each  Memorandum,
         neither the Company nor any of its Subsidiaries has received any notice
         of  infringement  of or conflict  with  asserted  rights of others with
         respect to any of the foregoing which,  singly or in the aggregate,  if
         the subject of an  unfavorable  decision,  ruling or finding,  would be
         reasonably  likely  to  result in any  material  adverse  change in the
         condition,  financial or  otherwise,  or in the  earnings,  business or
         operations of the Company and its Subsidiaries, taken as a whole.

                  (w) No  material  labor  dispute  with  the  employees  of the
         Company or any of its  Subsidiaries  exists,  except as described in or
         contemplated by each  Memorandum,  or, to the knowledge of the Company,
         is imminent;  and the Company is not aware of any existing,  threatened
         or imminent labor  disturbance by the employees of any of its principal
         suppliers,  manufacturers  or  contractors  that  might  reasonably  be
         expected to result in any  material  adverse  change in the  condition,
         financial or otherwise,  or in the earnings,  business or operations of
         the Company and its Subsidiaries, taken as a whole.


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                                       8


                  (x) The Company and its  Subsidiaries are insured against such
         losses and risks and in such amounts as the Company reasonably believes
         are prudent and customary in the  businesses in which they are engaged;
         neither  the  Company  nor any such  Subsidiary  has been  refused  any
         insurance  coverage  sought or applied for; and neither the Company nor
         any such  Subsidiary has any reason to believe that it will not be able
         to renew its  existing  insurance  coverage  as and when such  coverage
         expires or to obtain similar  coverage from similar  insurers as may be
         necessary to continue its business at a cost that would not  materially
         and adversely  affect the  condition,  financial or  otherwise,  or the
         earnings,  business or operations of the Company and its  Subsidiaries,
         taken  as a whole,  except  as  described  in or  contemplated  by each
         Memorandum.

                  (y) The  Company  and its  Subsidiaries  maintain  a system of
         internal accounting controls sufficient to provide reasonable assurance
         that (i)  transactions  are executed in  accordance  with  management's
         general or specific  authorizations;  (ii) transactions are recorded as
         necessary to permit  preparation of financial  statements in conformity
         with  generally  accepted  accounting  principles and to maintain asset
         accountability;  (iii) access to assets is permitted only in accordance
         with  management's  general  or  specific  authorization;  and (iv) the
         recorded accountability for assets is compared with the existing assets
         at reasonable intervals and appropriate action is taken with respect to
         any differences.

                  (z) The terms of the Notes and the  Indenture  conform  in all
         material  respects to the  description  thereof  contained in the Final
         Memorandum under the headings "Description of the Notes."

                  (aa) The Company has reviewed its  operations  and that of its
         Subsidiaries to evaluate the extent to which the business or operations
         of the Company or any of its Subsidiaries  will be affected by the Year
         2000 Problem (that is, any significant  risk that computer  hardware or
         software  applications  used by the Company and its  Subsidiaries  will
         not, in the case of dates or time periods  occurring after December 31,
         1999,  function at least as effectively as in the case of dates or time
         periods  occurring  prior to  January  1,  2000);  as a result  of such
         review, (i) the Company has no reason to believe, and does not believe,
         that (A) there are any issues related to the Company's  preparedness to
         address the Year 2000  Problem  that are of a character  required to be

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                                       9

         described  or  referred  to in each  Memorandum  which  have  not  been
         accurately  described  in each  Memorandum  and (B) with respect to the
         systems of the Company and its Subsidiaries, the Year 2000 Problem will
         have  a  material  adverse  effect  on  the  condition,   financial  or
         otherwise,  or on the  earnings,  business or operations of the Company
         and its Subsidiaries,  taken as a whole, or result in any material loss
         or interference  with the business or operations of the Company and its
         Subsidiaries,  taken  as a  whole;  and  (ii)  the  Company  reasonably
         believes, after due inquiry, that the suppliers,  vendors, customers or
         other  material  third  parties  used or served by the Company and such
         Subsidiaries  are addressing or will address the Year 2000 Problem in a
         timely manner,  except to the extent that a failure to address the Year
         2000 Problem by any supplier,  vendor, customer or material third party
         would not have a material adverse effect on the condition, financial or
         otherwise,  or on the  earnings,  business or operations of the Company
         and its Subsidiaries, taken as a whole.

                  2. Agreements to Sell and Purchase.  The Company hereby agrees
to sell to the several Initial Purchasers and each Initial  Purchaser,  upon the
basis of the representations and warranties herein contained, but subject to the
conditions   hereinafter  stated,  agrees  to  purchase  from  the  Company  the
respective principal amount of Notes set forth in Schedule I hereto opposite its
name,  at a  purchase  price of  96.5%  of the  principal  amount  thereof  (the
"Purchase Price") plus accrued interest,  if any, on the Notes from May 24, 1999
to the Closing Date.

                  The Company  hereby  agrees  that,  without the prior  written
consent  of  Morgan  Stanley  &  Co.  Incorporated  on  behalf  of  the  Initial
Purchasers,  it will not,  during the period  beginning  on the date  hereof and
continuing to and including the Closing Date, offer,  sell,  contract to sell or
otherwise dispose of any debt of the Company or warrants to purchase debt of the
Company  substantially  similar to the Notes  (other  than the sale of the Notes
under this Purchase Agreement).

                  3. Terms of  Offering.  You have  advised the Company that the
Initial  Purchasers  will make an offering of the Notes purchased by the Initial
Purchasers hereunder on the terms set forth in the Final Memorandum,  as soon as
practicable after this Purchase Agreement is entered into as in your judgment is
advisable.

                  4. Payment and  Delivery.  Payment for the Notes shall be made
to the Company in Federal or other funds immediately  available in New York City
against  delivery of the Notes at a closing  (the  "Closing")  to be held at the
office of Shearman & Sterling,  599  Lexington  Avenue,  New York,  New York, at
10:00 A.M.,  local time,  on May 24, 1999,  or at such other time on the same or

<PAGE>
                                       10


such other date,  not later than June 7, 1999, as shall be designated in writing
by you. The time and date of such payment are herein referred to as the "Closing
Date."

                  Certificates  for the  Notes  shall be in  definitive  form or
global  form,  as specified  by you,  and  registered  in such names and in such
denominations  as you shall  request in writing not later than one full business
day prior to the Closing Date.  The  certificates  evidencing the Notes shall be
delivered to you on the Closing Date for the respective  accounts of the several
Initial  Purchasers,  with any transfer  taxes  payable in  connection  with the
transfer of the Notes to the Initial  Purchasers  duly paid,  against payment of
the purchase price therefor.

                  5.  Conditions  to the Initial  Purchasers'  Obligations . The
several  obligations of the Initial Purchasers to purchase and pay for the Notes
on the Closing Date is subject to the following conditions:

                    (a)  Subsequent  to  the  execution  and  delivery  of  this
          Purchase Agreement and prior to the Closing Date,

                           (i) there shall not have  occurred  any  downgrading,
                  nor  shall  any  notice  have been  given of any  intended  or
                  potential  downgrading or of any review for a possible  change
                  that does not indicate the  direction of the possible  change,
                  in the rating accorded any of the Company's  securities by any
                  nationally  recognized  statistical  rating  organization," as
                  such term is defined for purposes of Rule 436(g)(2)  under the
                  Securities Act; and

                           (ii) there shall not have occurred any change, or any
                  development  involving a prospective change, in the condition,
                  financial  or  otherwise,  or in  the  earnings,  business  or
                  operations,  of the Company and its  subsidiaries,  taken as a
                  whole, from that set forth in the Final Memorandum  (exclusive
                  of any  amendments or  supplements  thereto  subsequent to the
                  date of this  Purchase  Agreement)  that,  in the  judgment of
                  Morgan Stanley & Co.  Incorporated,  as  representative of the
                  Initial Purchasers, is material and adverse and that makes it,
                  in the  judgment  of  Morgan  Stanley & Co.  Incorporated,  as
                  representative  of the Initial  Purchasers,  impracticable  to
                  market the Notes on the terms and in the  manner  contemplated
                  in the Final Memorandum.

                  (b) The Initial  Purchasers shall have received on the Closing
         Date a  certificate,  dated the Closing Date and signed by an executive
         officer of the Company,  to the effect set forth in Section  5(a)(i) of
         this Purchase Agreement and to the effect that the  representations and
         warranties of the Company contained in this Purchase Agreement are true
         and  correct as of the Closing  Date and that the Company has  complied
         with  all of  the  agreements  and  satisfied  all  of  the  conditions
         contained herein on its part to be performed or satisfied  hereunder on
         or before the Closing Date.

                  The officer signing and delivering  such  certificate may rely
         upon the best of his or her knowledge as to proceedings threatened.

<PAGE>
                                       11

                  (c) The Initial  Purchasers shall have received on the Closing
         Date an opinion of Kelley  Drye & Warren  LLP,  outside  counsel to the
         Company,  dated the Closing Date, to the effect set forth in Exhibit C.
         Such opinion shall be rendered to the Initial Purchasers at the request
         of the Company and shall so state therein.

                  (d) The Initial  Purchasers shall have received on the Closing
         Date an opinion of Swidler Berlin  Shereff  Friedman,  LLP,  regulatory
         counsel to the Company, dated the Closing Date, to the effect set forth
         in Exhibit D. Such opinion shall be rendered to the Initial  Purchasers
         at the request of the Company and shall so state therein.

                  (e) The Initial  Purchasers shall have received on the Closing
         Date  an  opinion  of  Shearman  &  Sterling,  counsel  to the  Initial
         Purchasers,  dated the Closing Date, in form and substance satisfactory
         to you.

                  (f) The Initial  Purchasers shall have received on each of the
         date hereof and the Closing Date a letter, dated the date hereof or the
         Closing Date, as the case may be, in form and substance satisfactory to
         the  Initial  Purchasers,  from Ernst & Young LLP,  independent  public
         accountants,   containing   statements  and  information  of  the  type
         ordinarily  included in accountants'  "comfort letters" to underwriters
         with  respect  to  the  financial   statements  and  certain  financial
         information contained in the Final Memorandum; provided that the letter
         delivered  on the Closing  Date shall use a "cut-off  date" not earlier
         than the date hereof.

                  (g) The  Transaction  Documents  shall  have been executed and
          shall be in full force and effect.

                  (h) The  Initial  Purchasers  shall have  received  payment in
         full,  no later than the Closing  Date, of all fees and expenses due in
         connection  with the  offering by the Company of the Notes  pursuant to
         the Final Memorandum.

                  (i)  You  shall  have  received   such  other   documents  and
         certificates as are reasonably requested by you or your counsel.

                  6. Covenants of the Company.  In further  consideration of the
agreements of the Initial Purchasers  contained in this Purchase Agreement,  the
Company covenants with the Initial Purchasers as follows:

                  (a) To use its  reasonable  best  efforts to furnish to you in
         New York City,  without charge,  prior to 10:00 a.m. New York City time
         on the business day next succeeding the date of this Purchase Agreement
         and during the period  mentioned in Section 6(c), as many copies of the
         Final Memorandum and any supplements and amendments  thereto as you may
         reasonably request.

                  (b) Before amending or  supplementing  either  Memorandum,  to
         furnish to you a copy of each such proposed amendment or supplement and
         not to use any such  proposed  amendment or  supplement to which Morgan
         Stanley & Co. Incorporated objects without unreasonable delay.

<PAGE>
                                       12


                  (c) If,  during such period after the date hereof and prior to
         the date on which all of the Notes  shall have been sold by the Initial
         Purchasers,  any event  shall occur or  condition  exist as a result of
         which it is necessary to amend or  supplement  the Final  Memorandum in
         order to make the statements therein, in the light of the circumstances
         when the Final Memorandum is delivered to a purchaser,  not misleading,
         or if, in the  opinion  of  counsel  to the  Initial  Purchasers  it is
         necessary to amend or  supplement  the Final  Memorandum to comply with
         applicable law,  forthwith to prepare and furnish,  at its own expense,
         to the Initial  Purchasers,  either  amendments or  supplements  to the
         Final  Memorandum so that the statements in the Final  Memorandum as so
         amended or  supplemented  will not,  in the light of the  circumstances
         when the Final Memorandum is delivered to a purchaser, be misleading or
         so that the Final  Memorandum,  as so  amended  or  supplemented,  will
         comply in all material respects with applicable law.

                  (d) To  endeavor to qualify the Notes for offer and sale under
         the  securities  or Blue Sky laws of such  jurisdictions  as you  shall
         reasonably  request;  provided  that in no event  shall the  Company be
         obligated to qualify to do business in any jurisdiction where it is not
         now so  qualified  or to take any  action  which  would  subject  it to
         taxation  in any  jurisdiction  where  it is not now so  subject  or to
         service  or  process in suits,  other  than  those  arising  out of the
         offering or sale of the Notes in any  jurisdiction  where it is not now
         so subject.

                  (e)  Whether  or not  the  transactions  contemplated  in this
         Purchase  Agreement  are  consummated  or this  Purchase  Agreement  is
         terminated,  to pay or cause to be paid all  expenses  incident  to the
         performance  of  its   obligations   under  this  Purchase   Agreement,
         including:  (i) the  preparation of each  Memorandum and all amendments
         and supplements thereto, (ii) the preparation, issuance and delivery of
         the Notes,  (iii) the fees and  disbursements of the Company's  counsel
         and accountants and the Trustee and its counsel, (iv) the qualification
         of such Notes under  securities or Blue Sky laws in accordance with the
         provisions  of Section  6(d),  including  filing  fees and the fees and
         disbursements  of one counsel for the Initial  Purchasers in connection
         therewith and in  connection  with the  preparation  of any Blue Sky or
         legal  investment  memoranda,  (v) the  printing  and  delivery  to the
         Initial Purchasers in quantities as hereinabove stated of copies of the
         Memorandum  and any amendments or  supplements  thereto,  (vi) any fees
         charged by rating agencies,  (vii) all document  production charges and
         expenses of one counsel to the Initial  Purchasers  (but not  including
         their  fees  for   professional   services)  in  connection   with  the
         preparation of this Purchase  Agreement,  (viii) the fees and expenses,
         if any,  incurred in  connection  with the  admission of such Notes for
         trading  in PORTAL or any other  appropriate  market  system,  (ix) the
         fees,  expenses and losses,  if any,  incurred in  connection  with the
         purchase of the Pledged  Securities,  (x) the costs and expenses of the
         Company   relating  to  investor   presentations  on  any  "road  show"
         undertaken  in  connection  with the  marketing  of the offering of the
         Notes,  including,  without  limitation,  expenses  associated with the
         production of road show slides and  graphics,  fees and expenses of any
         consultants engaged in connection with the road show presentations with
         the prior  approval of the Company,  travel and lodging  expense of the
         representatives  and officers of the Company and any such  consultants,
         and the cost of any aircraft chartered in connection with the road show
         with the prior  approval of the  Company,  and (xi) all other costs and
         expenses  incident to the performance of the obligations of the Company
         hereunder for which provision is not otherwise made in this Section. It
         is  understood,  however,  that  except as  provided  in this  Section,
         Section 8 and Section 11, the Initial  Purchasers will pay all of their
         costs and expenses,  including fees and disbursements of their counsel,
         transfer  taxes  payable  on resale of any of the Notes by them and any
         advertising expenses connected with any offers they may make.

                  (f) Neither the Company nor any Affiliate will sell, offer for
         sale or solicit offers to buy or otherwise  negotiate in respect of any
         security (as defined in the  Securities  Act) which could be integrated
         with  the  sale of the  Notes  in a  manner  which  would  require  the
         registration under the Securities Act of such Notes.

<PAGE>
                                       13

                  (g) Neither the Company  nor any  Affiliate  will  solicit any
         offer to buy or offer or sell the Notes by means of any form of general
         solicitation  or  general  advertising  (as  those  terms  are  used in
         Regulation  D under the  Securities  Act) or in any manner  involving a
         public  offering  within the meaning of Section 4(2) of the  Securities
         Act,  except  as  may  be  contemplated  by  the  Registration   Rights
         Agreement.

                  (h)  While  any of the Notes  remain  "restricted  securities"
         within the  meaning of the  Securities  Act,  to make  available,  upon
         request, to any seller of such Notes the information  specified in Rule
         144A(d)(4) under the Securities Act, unless the Company is then subject
         to  Section  13 or 15(d) of the  Securities  Exchange  Act of 1934 (the
         "Exchange Act").

                  (i) Except as may be contemplated by the  Registration  Rights
         Agreement,  none of the Company, its Affiliates or any person acting on
         its or their behalf (other than the Initial  Purchasers) will engage in
         any directed  selling efforts (as that term is defined in Regulation S)
         with respect to the Notes,  and the Company and its Affiliates and each
         person   acting  on  its  or  their  behalf  (other  than  the  Initial
         Purchasers) will comply with the offering restrictions of Regulation S.

                  (j) To refuse, and to cause the Trustee to refuse, to register
         any  transfer  of the  Notes  sold  pursuant  to  Regulation  S if such
         transfer is not made in accordance  with the provisions of Regulation S
         and the Indenture.

                  (k) To use its reasonable  best efforts to permit the Notes to
         be  designated  PORTAL  securities  in  accordance  with the  rules and
         regulations adopted by the National  Association of Securities Dealers,
         Inc. relating to trading in the PORTAL Market.

                  (l) The Company  shall not,  and shall use its best efforts to
         cause its  Affiliates  not to,  purchase  and then resell or  otherwise
         transfer any Notes.

                  7.  Offering  of Notes;  Restrictions  on  Transfer.  (a) Each
Initial Purchaser,  severally and not jointly, represents and warrants that such
Initial  Purchaser  is a qualified  institutional  buyer as defined in Rule 144A
under the  Securities  Act (a "QIB").  Each  Initial  Purchaser  agrees with the
Company  that (i) it will not solicit  offers for, or offer or sell the Notes by
any form of general solicitation or general advertising (as those terms are used
in Regulation D under the  Securities  Act) or in any manner  involving a public
offering  within the meaning of Section 4(2) of the  Securities  Act and (ii) it

<PAGE>
                                       14


will solicit  offers for the Notes only from, and will offer such Notes only to,
persons that it  reasonably  believes to be (A) in the case of offers inside the
United States,  QIBs and (B) in the case of offers outside the United States, to
persons other than U.S. persons ("foreign purchasers",  which term shall include
dealers  or other  professional  fiduciaries  in the United  States  acting on a
discretionary  basis for  foreign  beneficial  owners  (other  than an estate or
trust)) in reliance  upon  Regulation S under the  Securities  Act that, in each
case,  in  purchasing  such Notes are deemed to have  represented  and agreed as
provided in the Final Memorandum under the caption "Transfer Restrictions."

                  (b)  Each  Initial  Purchaser,   severally  and  not  jointly,
         represents,  warrants,  and  agrees  with  respect  to offers and sales
         outside the United States that:

                           (i) it understands that no action has been or will be
                  taken in any  jurisdiction  by the Company that would permit a
                  public offering of the Notes, or possession or distribution of
                  either Memorandum or any other offering or publicity  material
                  relating to the Notes,  in any country or  jurisdiction  where
                  action for that purpose is required;

                           (ii) such  Initial  Purchaser  will  comply  with all
                  applicable laws and regulations in each  jurisdiction in which
                  it  acquires,  offers,  sells or delivers  Notes or has in its
                  possession or distributes  either Memorandum or any such other
                  material, in all cases at its own expense;

                           (iii)  the  Notes  have  not  been  and  will  not be
                  registered  under the Securities Act and may not be offered or
                  sold  within  the United  States or to, or for the  account or
                  benefit of, U.S.  persons except in accordance  with Rule 144A
                  or  Regulation  S under  the  Securities  Act or  pursuant  to
                  another  exemption from the  registration  requirements of the
                  Securities Act;

                           (iv) such Initial Purchaser has offered the Notes and
                  will   offer   and  sell  the  Notes  (A)  as  part  of  their
                  distribution at any time and (B) otherwise until 40 days after
                  the  Closing  Date  only  in  accordance   with  Rule  903  of
                  Regulation  S or  as  otherwise  permitted  in  Section  7(a);
                  accordingly,  neither such Initial  Purchaser,  its Affiliates
                  nor any persons  acting on its or their behalf have engaged or
                  will  engage  in any  directed  selling  efforts  (within  the
                  meaning of  Regulation  S) with respect to the Notes,  and any
                  such Initial  Purchaser,  its  Affiliates and any such persons
                  have  complied and will comply with the offering  restrictions
                  requirement of Regulation S;

                           (v) such  Initial  Purchaser  has (A) not  offered or
                  sold and, prior to the date six months after the Closing Date,
                  will not  offer or sell any  Notes to  persons  in the  United
                  Kingdom  except to persons whose ordinary  activities  involve
                  them  in   acquiring,   holding,   managing  or  disposing  of
                  investments  (as principal or agent) for the purposes of their
                  businesses  or  otherwise  in  circumstances  which  have  not
                  resulted  and will not result in an offer to the public in the
                  United  Kingdom  within the  meaning  of the Public  Offers of
                  Securities Regulations 1995; (B) complied and will comply with
                  all applicable  provisions of the Financial  Services Act 1986
                  with  respect to anything  done by it in relation to the Notes
                  in, from or otherwise  involving the United  Kingdom;  and (C)
                  only issued or passed on and will only issue or pass on in the
                  United Kingdom any document  received by it in connection with
                  the issue of the Notes to a person who is of a kind  described
                  in  Article   11(3)  of  the   Financial   Services  Act  1986
                  (Investment  Advertisements)  (Exemptions)  Order 1996 or is a
                  person to whom such document may otherwise  lawfully be issued
                  or passed on;

                           (vi)  such  Initial  Purchaser  understands  that the
                  Notes  have not been and  will  not be  registered  under  the
                  Securities and Exchange Law of Japan,  and represents  that it
                  has not offered or sold,  and agrees that it will not offer or
                  sell,  any Notes,  directly or  indirectly in Japan or for the

<PAGE>
                                       15

                  account  of  any  resident  thereof  except  pursuant  to  any
                  exemption from the registration requirements of the Securities
                  and Exchange Law of Japan and  otherwise  in  compliance  with
                  applicable provisions of Japanese law; and

                           (vii) such Initial Purchaser agrees that, at or prior
                  to  confirmation  of sales of the Notes,  it will have sent to
                  each  distributor,   dealer  or  person  receiving  a  selling
                  concession,  fee or other  remuneration  that purchases  Notes
                  from it during the restricted  period a confirmation or notice
                  to substantially the following effect:

                    "The Notes covered hereby have not been registered under the
                    U.S.  Securities Act of 1933 (the "Securities  Act") and may
                    not be offered and sold  within the United  States or to, or
                    for the account or benefit  of, U.S.  persons (i) as part of
                    their  distribution  at any time or (ii) otherwise  until 40
                    days  after the  closing  date,  except  in  either  case in
                    accordance  with  Regulation  S (or Rule 144A if  available)
                    under the Securities  Act. Terms used above have the meaning
                    given to them by Regulation S."

          Terms used in this  Section  7(b) have the  meanings  given to them by
          Regulation S.

                  8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, and each person, if any, who
controls any Initial  Purchaser  within the meaning of either  Section 15 of the
Securities  Act or Section 20 of the  Exchange  Act from and against any and all
losses,  claims,  damages and liabilities  (including,  without limitation,  any
legal or other  expenses  reasonably  incurred in connection  with  defending or
investigating  any such  action or  claim)  caused by any  untrue  statement  or
alleged untrue  statement of a material fact contained in either  Memorandum (as
amended or  supplemented  if the Company shall have  furnished any amendments or
supplements  thereto),  or caused by any  omission or alleged  omission to state
therein a material fact necessary to make the statements therein in the light of
the circumstances  under which they were made not misleading,  except insofar as
such  losses,  claims,  damages or  liabilities  are  caused by any such  untrue
statement  or  omission  or alleged  untrue  statement  or  omission  based upon
information  relating  to any  Initial  Purchaser  furnished  to the  Company in
writing by such Initial Purchaser expressly for use therein.

                  (b) Each Initial Purchaser agrees,  severally and not jointly,
         to indemnify and hold harmless the Company, its directors, its 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 to the same extent as the foregoing  indemnity  from the Company to
         such Initial Purchaser, but only with reference to information relating
         to such Initial  Purchaser  furnished to the Company in writing by such
         Initial  Purchaser  expressly  for  use  in  either  Memorandum  or any
         amendments or supplements thereto.

<PAGE>
                                       16

                  (c)  In  case  any  proceeding   (including  any  governmental
         investigation)  shall be instituted  involving any person in respect of
         which  indemnity may be sought pursuant to either Section 8(a) or 8(b),
         such person (the "indemnified  party") shall promptly notify the person
         against whom such indemnity may be sought (the "indemnifying party") in
         writing and the  indemnifying  party,  upon request of the  indemnified
         party, shall retain counsel reasonably  satisfactory to the indemnified
         party  to  represent   the   indemnified   party  and  any  others  the
         indemnifying  party may designate in such  proceeding and shall pay the
         fees and  disbursements of such counsel related to such proceeding.  In
         any such  proceeding,  any  indemnified  party  shall have the right to
         retain its own counsel, but the fees and expenses of such counsel shall
         be at the expense of such indemnified party unless (i) the indemnifying
         party and the  indemnified  party  shall  have  mutually  agreed to the
         retention  of such  counsel  or (ii)  the  named  parties  to any  such
         proceeding   (including  any  impleaded   parties)   include  both  the
         indemnifying party and the indemnified party and representation of both
         parties by the same  counsel  would be  inappropriate  due to actual or
         potential  differing  interests between them. It is understood that the
         indemnifying  party shall not, in respect of the legal  expenses of any
         indemnified   party  in  connection  with  any  proceeding  or  related
         proceedings  in the  same  jurisdiction,  be  liable  for the  fees and
         expenses  of more  than one  separate  firm (in  addition  to any local
         counsel)  for all such  indemnified  parties and that all such fees and
         expenses  shall be reimbursed as they are incurred.  Such firm shall be
         designated in writing by Morgan Stanley & Co.  Incorporated in the case
         of parties  indemnified  pursuant to Section 8(a) and by the Company in
         the  case  of  parties  indemnified   pursuant  to  Section  8(b).  The
         indemnifying  party  shall  not be  liable  for any  settlement  of any
         proceeding  effected without its written  consent,  but if settled with
         such  consent or if there be a final  judgment for the  plaintiff,  the
         indemnifying  party agrees to indemnify the indemnified  party from and
         against any loss or liability by reason of such settlement or judgment.
         Notwithstanding the foregoing  sentence,  if at any time an indemnified
         party shall have  requested  an  indemnifying  party to  reimburse  the
         indemnified  party for fees and expenses of counsel as  contemplated by
         the second and third  sentences  of this  paragraph,  the  indemnifying
         party  agrees  that  it  shall  be  liable  for any  settlement  of any
         proceeding  effected without its written consent if (i) such settlement
         is entered  into more than 60 days after  receipt by such  indemnifying
         party of the aforesaid request and (ii) such  indemnifying  party shall
         not have  reimbursed  the  indemnified  party in  accordance  with such
         request prior to the date of such  settlement.  No  indemnifying  party
         shall,  without the prior  written  consent of the  indemnified  party,
         effect any  settlement  of any  pending  or  threatened  proceeding  in
         respect  of which any  indemnified  party is or could have been a party
         and  indemnity  could have been sought  hereunder  by such  indemnified
         party, unless such settlement includes an unconditional release of such
         indemnified  party from all  liability  on claims  that are the subject
         matter of such proceeding.

                  (d) To the extent the indemnification  provided for in Section
         8(a) or 8(b) is unavailable to an indemnified  party or insufficient in
         respect of any  losses,  claims,  damages or  liabilities  referred  to
         therein,  then each indemnifying  party under such section,  in lieu of
         indemnifying such indemnified party thereunder, shall contribute to the
         amount  paid or payable by such  indemnified  party as a result of such
         losses,  claims,  damages or liabilities  (i) in such  proportion as is
         appropriate to reflect the relative  benefits  received by the Company,
         on the one hand, and the Initial  Purchasers,  on the other hand,  from
         the offering of such Notes or (ii) if the allocation provided by clause
         8(d)(i) above is not permitted by applicable law, in such proportion as
         is appropriate to reflect not only the relative benefits referred to in

<PAGE>
                                       17

         clause  8(d)(i) above but also the relative fault of the Company on the
         one hand and the  Initial  Purchasers  on the other hand in  connection
         with the statements or omissions that resulted in such losses,  claims,
         damages  or  liabilities,  as  well  as any  other  relevant  equitable
         considerations.  The relative  benefits  received by the Company on the
         one hand and the  Initial  Purchasers  on the other hand in  connection
         with the  offering  of such  Notes  shall be  deemed  to be in the same
         respective  proportions  as the net proceeds  from the offering of such
         Notes (before deducting expenses) received by the Company and the total
         discounts and commissions received by the Initial Purchasers in respect
         thereof  bear  to the  aggregate  offering  price  of such  Notes.  The
         relative  fault  of the  Company  on the one  hand  and of the  Initial
         Purchasers on the other hand shall be determined by reference to, among
         other  things,  whether  the untrue or alleged  untrue  statement  of a
         material  fact or the omission or alleged  omission to state a material
         fact relates to  information  supplied by the Company or by the Initial
         Purchasers  and the  parties'  relative  intent,  knowledge,  access to
         information  and  opportunity  to correct or prevent such  statement or
         omission.

                  (e) The Company and the Initial Purchasers agree that it would
         not be just or  equitable  if  contribution  pursuant to this Section 8
         were  determined  by pro rata  allocation  or by any  other  method  of
         allocation  that does not take account of the equitable  considerations
         referred  to  in  Section  8(d).  The  amount  paid  or  payable  by an
         indemnified  party as a  result  of the  losses,  claims,  damages  and
         liabilities  referred  to in  Section  8(d)  above  shall be  deemed to
         include, subject to the limitations set forth above, any legal or other
         expenses  reasonably  incurred by such indemnified  party in connection
         with   investigating   or   defending   any  such   action   or  claim.
         Notwithstanding   the   provisions  of  this  Section  8,  the  Initial
         Purchasers  shall not be required to contribute any amount in excess of
         the amount by which the total  price at which the Notes  resold by them
         in the  initial  placement  of such  Notes were  offered  to  investors
         exceeds  the amount of any  damages  that such  Initial  Purchaser  has
         otherwise  been  required  to pay by reason of such  untrue or  alleged
         untrue statement or omission or alleged  omission.  No person guilty of
         fraudulent  misrepresentation  (within the meaning of Section  11(f) of
         the Securities Act) shall be entitled to  contribution  from any person
         who was not guilty of such fraudulent  misrepresentation.  The remedies
         provided  for in this Section 8 are not  exclusive  and shall not limit
         any  rights  or  remedies  which  may  otherwise  be  available  to any
         indemnified party at law or in equity.

                  (f) The indemnity  and  contribution  provisions  contained in
         this Section 8 and the representations, warranties and other statements
         of the  Company  contained  in this  Purchase  Agreement  shall  remain
         operative  and  in  full  force  and  effect   regardless  of  (i)  any
         termination of this Purchase Agreement,  (ii) any investigation made by
         or on behalf of any Initial  Purchaser  or any person  controlling  any
         Initial  Purchaser or by or on behalf of the  Company,  its officers or
         directors or any person controlling the Company and (iii) acceptance of
         and payment for any of the Notes.

                  9.  Termination.  This Purchase  Agreement shall be subject to
termination  by  notice  given  by  Morgan  Stanley  &  Co.   Incorporated,   as
representative  of the  Initial  Purchasers,  to the  Company,  if (a) after the
execution and delivery of this Purchase  Agreement and prior to the Closing Date
(i) trading generally shall have been suspended or materially  limited on or by,
as the case may be,  any of the New York  Stock  Exchange,  the  American  Stock
Exchange,  the National  Association  of Securities  Dealers,  Inc., the Chicago
Board of Options Exchange,  the Chicago Mercantile Exchange or the Chicago Board
of  Trade,  (ii)  trading  of any  securities  of the  Company  shall  have been

<PAGE>
                                       18


suspended on any  exchange or in any  over-the-counter  market,  (iii) a general
moratorium on commercial banking activities in New York shall have been declared
by either  Federal  or New York  State  authorities  or (iv)  there  shall  have
occurred any outbreak or  escalation of  hostilities  or any change in financial
markets or any calamity or crisis that, in the judgment of Morgan  Stanley & Co.
Incorporated,  as  representative  of the Initial  Purchasers,  is material  and
adverse and (b) in the case of any of the events  specified  in clauses  9(a)(i)
through 9(a)(iv),  such event singly or together with any other such event makes
it, in the judgment of Morgan Stanley & Co.  Incorporated,  as representative of
the Initial  Purchasers,  impracticable  to market the Notes on the terms and in
the manner contemplated in the Final Memorandum.

                  10.  Effectiveness.   This  Purchase  Agreement  shall  become
effective upon the execution and delivery hereof by the parties hereto.

                   11. Miscellaneous. If, on the Closing Date any one or more of
the Initial  Purchasers  shall fail or refuse to purchase  Notes that it or they
have agreed to purchase  hereunder  on such date,  and the amount of Notes which
such defaulting  Initial  Purchaser or Initial  Purchasers  agreed but failed or
refused to purchase is not more than one-tenth of the aggregate  amount of Notes
to be purchased on such date,  the other Initial  Purchasers  shall be obligated
severally in the  proportions  that the amount of Notes set forth opposite their
respective  names in Schedule I bears to the aggregate amount of Notes set forth
opposite the names of all such  non-defaulting  Initial  Purchasers,  or in such
other  proportions  as you  may  specify,  to  purchase  the  Notes  which  such
defaulting  Initial Purchaser or Initial Purchasers agreed but failed or refused
to  purchase on such date;  provided  that in no event shall the amount of Notes
that any  Initial  Purchaser  has agreed to  purchase  pursuant  to Section 2 be
increased  pursuant  to Section 11 by an amount in excess of  one-ninth  of such
amount of Notes without the written  consent of such Initial  Purchaser.  If, on
the Closing  Date,  any Initial  Purchaser or Initial  Purchasers  shall fail or
refuse to purchase  Notes which it or they have agreed to purchase  hereunder on
such date and the  aggregate  amount of Notes with respect to which such default
occurs is more than  one-tenth of the aggregate  amount of Notes to be purchased
on such  date  and  arrangements  satisfactory  to you and the  Company  for the
purchase  of such Notes are not made within 36 hours  after such  default,  this
Purchase  Agreement  shall  terminate  without  liability  on  the  part  of any
non-defaulting  Initial Purchaser or the Company. In any such case either you or
the Company shall have the right to postpone the Closing  Date,  but in no event
for longer than seven days, in order that the required  changes,  if any, in the
Final Memorandum or in any other documents or arrangements may be effected.  Any
action  taken under this  paragraph  shall not relieve  any  defaulting  Initial
Purchaser  from  liability in respect of any default of such  Initial  Purchaser
under this Purchase Agreement.

                  If this Purchase  Agreement shall be terminated by the Initial
Purchasers, or any of them, because of any failure or refusal on the part of the
Company to comply  with the terms or to fulfill  any of the  conditions  of this
Purchase Agreement,  or if for any reason the Company shall be unable to perform
its obligations under this Purchase  Agreement (other than by reason of a breach
of this  Purchase  Agreement  by the Initial  Purchasers,  or any of them),  the
Company will  reimburse the Initial  Purchasers or such Initial  Purchasers  who
have so  terminated  this  Purchase  Agreement  for all  out-of-pocket  expenses
(including the fees and  disbursements  of its counsel)  reasonably  incurred by
such  Initial  Purchaser  in  connection  with this  Purchase  Agreement  or the
offering contemplated hereunder.

<PAGE>
                                       19

                  12. Notices. All notices and other communications  required or
permitted  to be given  under this  Purchase  Agreement  shall be in writing and
shall be deemed to have been duly given if delivered  personally  to the parties
hereto as follows:

                    (a)   If to the Initial Purchasers:

                          Morgan Stanley & Co. Incorporated
                          1585 Broadway
                          New York, New York  10036
                          Attention: Gregory Attori

                          with a copy to:

                          Shearman & Sterling
                          599 Lexington Avenue
                          New York, New York 10022
                          Attention: James S. Scott, Sr.

                    (b)   If to the Company:

                          KMC Telecom Holdings, Inc.
                          1545 Route 206, Suite 300
                          Bedminster, NJ 07921
                          Attention:    James D. Grenfell

                          with a copy to:

                          Kelley Drye & Warren LLP
                          101 Park Ave.
                          New York, NY 10178
                          Attention: Brian J. Calvey

                  13. Counterparts. This Purchase Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.

                  14. Applicable Law. This Purchase  Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York.

                  15.  Headings.  The headings of the sections of this  Purchase
Agreement have been inserted for  convenience of reference only and shall not be
deemed a part of this Purchase Agreement.

                  Please  confirm your  agreement to the foregoing by signing in
the space  provided  below for that  purpose and  returning to us a copy hereof,
whereupon this Purchase  Agreement shall constitute a binding  agreement between
us.


                                     Very truly yours,

                                     KMC TELECOM HOLDINGS, INC.


                                     By:___________________________
                                     Name:
                                     Title:


Agreed, May 19, 1999

MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
FIRST UNION CAPITAL MARKETS CORP.
CIBC WORLD MARKETS CORP.
BANCBOSTON ROBERTSON STEPHENS INC.
WASSERSTEIN PERELLA SECURITIES, INC.

By: MORGAN STANLEY & CO. INCORPORATED

    In its individual capacity and as representative
    of the other Initial Purchasers



    By:  ______________________________
    Name:
    Title:



<PAGE>


                                   SCHEDULE I



                                                       Principal Amount of
                                                      13 1/2% Senior Notes
Initial Purchasers                                      To Be Purchased

Morgan Stanley & Co. Incorporated......................   $196,250,000

Credit Suisse First Boston Corporation.................    $33,750,000

First Union Capital Markets Corp.......................    $27,000,000

CIBC World Markets Corp................................     $9,000,000

BancBoston Robertson Stephens Inc......................     $4,500,000

Wasserstein Perella Securities, Inc. ..................     $4,500,000
                                                          ------------
  Total................................................   $275,000,000
                                                           -----------


<PAGE>


                                                                       EXHIBIT A
                                                                       ---------

                      FORM OF REGISTRATION RIGHTS AGREEMENT



<PAGE>
                                                                       EXHIBIT B
                                                                       ---------


                   SUBSIDIARIES OF KMC TELECOM HOLDINGS, INC.

Name of Subsidiary               Jurisdiction of Incorporation or Organization
------------------               ---------------------------------------------

KMC Telecom Inc.                               Delaware

KMC Telecom II, Inc.                           Delaware

KMC Telecom Leasing I LLC                      Delaware

KMC Telecom Leasing II LLC                     Delaware

KMC Telecom of Virginia, Inc.                  Virginia

KMC Telecom III, Inc.                          Delaware

KMC Telecom III Holdings, Inc.                 Delaware

KMC Telecom Leasing III LLC                    Delaware

KMC Telecom Financing, Inc.                    Delaware


<PAGE>

                                                                       EXHIBIT C

                               FORM OF OPINION OF
                            KELLEY DRYE & WARREN LLP

                  Pursuant to Section  5(c) of the  Purchase  Agreement,  Kelley
Drye & Warren shall deliver an opinion to the effect that:

                  (A)  the  Company  has  been  duly  incorporated,  is  validly
         existing as a corporation  in good standing under the laws of the State
         of Delaware,  has the corporate power and authority to own its property
         and to  conduct  its  business  as  described  in the Final  Memorandum
         (references  herein to the  Final  Memorandum  being  taken to mean the
         same, as amended or  supplemented),  and is duly  qualified to transact
         business and is in good standing in New Jersey;

                  (B) each  subsidiary of the Company listed in Exhibit B to the
         Purchase  Agreement has been duly organized,  is validly  existing as a
         corporation or limited liability  company,  as the case may be, in good
         standing under the laws of the  jurisdiction of its  organization,  has
         the corporate and/or limited liability company power and authority,  as
         appropriate,  to own  its  property  and to  conduct  its  business  as
         described in the Final  Memorandum,  except as otherwise noted therein,
         and is duly  qualified to transact  business and is in good standing in
         each jurisdiction listed opposite its name on Annex I hereto;

                  (C)  the  Purchase   Agreement  has  been  duly  authorized,
          executed and delivered by the Company;

                  (D) the Notes have been duly  authorized  and, when  executed,
         authenticated  and  delivered  to and paid for in  accordance  with the
         terms  of the  Purchase  Agreement,  will  (x)  be  valid  and  binding
         obligations of the Company  enforceable in accordance with their terms,
         except as (A) the enforceability  thereof may be limited by bankruptcy,
         insolvency,  moratorium  or similar laws  affecting  creditors'  rights
         generally,  and (B)  rights of  acceleration,  if  applicable,  and the
         availability  of  equitable   remedies  may  be  limited  by  equitable
         principles of general applicability and (y) be entitled to the benefits
         of  the  Indenture,  the  Registration  Rights  Agreement,  the  Pledge
         Agreement and the Control Agreement;



<PAGE>

                  (E) each of the Indenture,  the First  Supplemental  Indenture
         and  the  Registration  Rights  Agreement  has  been  duly  authorized,
         executed and delivered by, and is a valid and binding agreement of, the
         Company,  enforceable  in  accordance  with its terms except as (w) the
         enforceability  thereof  may  be  limited  by  bankruptcy,  insolvency,
         moratorium or similar laws affecting  creditors' rights generally,  (x)
         rights  of  acceleration,   if  applicable,  and  the  availability  of
         equitable  remedies may be limited by equitable  principles  of general
         applicability,  (y) rights to  indemnification  and contribution may be
         limited by public policy and (z) provisions of the  Indenture,  if any,
         requiring any waiver of stay or extension laws, diligent performance or
         other  acts  on the  part of the  Trustee  may be  unenforceable  under
         principles of public policy;

                  (F) each of the Pledge  Agreement  and Control  Agreement  has
         been duly  authorized,  executed and  delivered by the  Guarantor,  and
         assuming due authorization, execution and delivery by the Trustee, each
         of the Pledge  Agreement and Control  Agreement will constitute a valid
         and legally binding obligation of the Company,  enforceable against the
         Guarantor in accordance  with its terms,  except as the  enforceability
         thereof may be limited by applicable bankruptcy, insolvency, fraudulent
         conveyance, reorganization, moratorium and other similar laws affecting
         creditors'   rights   generally  and  equitable   principles   (whether
         considered in a proceeding in equity or at law);

                  (G)  upon  (i)  the  execution  and  delivery  of  the  Pledge
         Agreement and the Control Agreement, (ii) the execution and delivery of
         the Control  Agreement by The Chase Manhattan Bank in its capacity as a
         securities intermediary,  (iii) the identification by book-entry by The
         Chase  Manhattan  Bank  as a  securities  intermediary  of the  Pledged
         Securities as belonging to, or otherwise subject to a security interest
         in favor of, the Trustee,  and (iv) the filing of financing  statements
         with  the  Secretary  of  State  of the  State of New York and the City
         Register of New York City;  the  Trustee  will have in the case of each
         Pledged  Security  and the  Pledged  Account  (as defined in the Pledge
         Agreement),  a valid and perfected,  first-priority  security  interest
         therein for the benefit of the holders of the Notes as security for the
         Secured  Obligations (as defined in the Pledge  Agreement) with respect
         to the Notes;

                  (H) the  execution  and  delivery  by the  Company of, and the
         performance  by the  Company of its  obligations  under,  the  Purchase
         Agreement,   the  Indenture,  the  First  Supplemental  Indenture,  the
         Registration  Rights  Agreement  and  the  Notes   (collectively,   the
         "Transaction  Documents")  and the  issuance,  sale and delivery of the
         Notes  by  the  Company  will  not  contravene  (i)  any  provision  of

<PAGE>


         applicable law, (ii) the certificate of incorporation or by-laws of the
         Company,  (iii) to such  counsel's  knowledge,  any  agreement or other
         instrument  binding upon the Company or any of its Subsidiaries that is
         material to the Company and its Subsidiaries, taken as a whole, or (iv)
         to such  counsel's  knowledge,  any  judgment,  order or  decree of any
         governmental body, agency or court having jurisdiction over the Company
         or any Subsidiary,  except, in the case of clauses (i), (iii) and (iv),
         for such contraventions  which would not have a material adverse on the
         Company  and  its  Subsidiaries,  taken  as a  whole  and  no  consent,
         approval,  authorization  or  order  of,  or  qualification  with,  any
         governmental  body or agency is  required  for the  performance  by the
         Company or its subsidiaries of their  obligations under the Transaction
         Documents, except such as may be required by the securities or Blue Sky
         laws of the various states in connection with the offer and sale of the
         Notes;

                  (I) after inquiry of the executive officers of the Company, to
         such  counsel's  knowledge,  there is not now pending or threatened any
         legal or  governmental  proceedings  to which the Company or any of its
         subsidiaries  is a  party  or to  which  any of the  properties  of the
         Company or any of its  subsidiaries  is subject other than  proceedings
         fairly  summarized in all material respects in the Final Memorandum and
         proceedings  which such counsel  believes are not reasonably  likely to
         have a material  adverse  effect on the Company  and its  Subsidiaries,
         taken as a whole,  or on the power or ability of the Company to perform
         its obligations  under the  Transaction  Documents or to consummate the
         transactions contemplated by the Final Memorandum;

                  (J) the  Company  is  not,  and  after  giving  effect  to the
         offering  and sale of the Notes  and the  application  of the  proceeds
         thereof  as  described  in  the  Final  Memorandum,   will  not  be  an
         "investment  company" as such term is defined in the Investment Company
         Act of 1940, as amended;

                  (K) the statements in the Final  Memorandum under the captions
         "Business  - Legal and  Administrative  Proceedings",  "Description  of
         Certain Indebtedness", "Private Placement" and "Transfer Restrictions",
         in each case  insofar as such  statements  constitute  summaries of the
         legal  matters,  documents or proceedings  referred to therein,  fairly
         summarize the matters referred to therein in all material respects;

                  (L) the statements in the Final Memorandum,  under the caption
         "Certain United States Federal Income Tax  Considerations" are accurate
         in all material  respects and fairly  summarize the matters referred to
         therein; and

                  (M) based upon the representations, warranties, and agreements
         of the Company in the Purchase  Agreement and of the Initial Purchasers
         in  Section  7 of  the  Purchase  Agreement,  it is  not  necessary  in
         connection  with the  offer,  sale  and  delivery  of the  Notes to the
         Initial  Purchasers under the Purchase  Agreement or in connection with
         the  initial  resale  of  such  Notes  by  the  Initial  Purchasers  in
         accordance  with  Section 7 of the  Purchase  Agreement to register the
         Notes under the  Securities  Act of 1933, it being  understood  that no
         opinion is expressed as to any subsequent resale of any Note.


<PAGE>


                                  ATTACHMENT A
                                       TO
                    FORM OF KELLEY DRYE & WARREN LLP OPINION


                  In the course of the  preparation  by the Company of the Final
Memorandum,  we have  participated in conferences  with officers,  directors and
representatives of the Company, its independent  auditors,  your representatives
and  representatives  of your counsel at which  conferences  the contents of the
Final  Memorandum  and  related  matters  were  discussed.  Although we have not
independently  verified the accuracy or completeness  of, or otherwise  verified
the statements made in the Final  Memorandum  (other than as expressly  provided
above),  nothing has come to our  attention  that has led us to believe that the
Final  Memorandum,  as of its  date or the  date  hereof,  contained  an  untrue
statement of a material  fact or omitted to state a material  fact  necessary in
order the make the statements  therein in the light of the  circumstances  under
which they were made, not misleading.  Notwithstanding the foregoing, we are not
expressing  any opinion or belief as to the financial  statements and supporting
notes and schedules and other  financial data contained in the Final  Memorandum
nor with respect to any FCC data  contained  therein.  Nor are we expressing any
opinion  or  belief  as to any  statements  in the  Final  Memorandum  under the
captions  "Risk  Factors -  Government  Regulation"  and  "Business  Regulation"
insofar as such statements constitute a summary of the legal matters, documents,
or proceedings of the FCC and any state authority  overseeing  telecommunication
matters with respect to telecommunications regulation referred to therein.



<PAGE>




                                     ANNEX I
                                       TO
                          KELLEY DRYE & WARREN OPINION

KMC TELECOM INC.                                              Delaware
                                                              Alabama
                                                              Florida
                                                              Georgia
                                                              Indiana
                                                              Illinois
                                                              Kansas
                                                              Louisiana
                                                              Maryland
                                                              Michigan
                                                              Minnesota
                                                              Mississippi
                                                              New Hampshire
                                                              New Jersey
                                                              North Carolina
                                                              Puerto Rico
                                                              South Carolina
                                                              Texas
                                                              Wisconsin

KMC TELECOM II, INC.                                         Delaware
                                                             Florida
                                                             Georgia
                                                             Indiana
                                                             Illinois
                                                             Kansas
                                                             Maryland
                                                             Michigan
                                                             Minnesota
                                                             Mississippi
                                                             Nevada
                                                             New Hampshire
                                                             New Jersey
                                                             North Carolina
                                                             Ohio
                                                             Tennessee
                                                             Texas


<PAGE>



KMC TELECOM LEASING I LLC                                     Delaware
                                                              Alabama
                                                              Florida
                                                              Georgia
                                                              Louisiana
                                                              New Jersey
                                                              Texas
                                                              Wisconsin

KMC TELECOM LEASING II LLC                                    Delaware
                                                              Florida
                                                              Georgia
                                                              Indiana
                                                              Kansas
                                                              Maryland
                                                              Michigan
                                                              Minnesota
                                                              New Jersey
                                                              North Carolina
                                                              Texas

KMC TELECOM OF VIRGINIA, INC.                                 New Jersey
                                                              Virginia

KMC TELECOM III, INC.                                         Alabama
                                                              Delaware
                                                              Florida
                                                              Indiana
                                                              Louisiana
                                                              Maryland
                                                              Michigan
                                                              Mississippi
                                                              New Jersey
                                                              North Carolina
                                                              Ohio
                                                              South Carolina
                                                              Tennessee
                                                              Texas


<PAGE>


KMC Telecom Leasing III LLC                                    Delaware
                                                               Florida
                                                               Louisiana
                                                               Michigan
                                                               New Jersey
                                                               Ohio
                                                               South Carolina

KMC TELECOM III HOLDINGS, INC.                                 Delaware
                                                               Georgia
                                                               New Jersey

KMC TELECOM FINANCING, INC.                                    Delaware
                                                               New Jersey


<PAGE>

                                                                       EXHIBIT D

                               FORM OF OPINION OF
                      SWIDLER BERLIN SHEREFF FRIEDMAN, LLP

                  Pursuant to Section 5(d) of the Purchase Agreement,  Swidler &
Berlin, Chartered , regulatory counsel for the Company, shall furnish an opinion
to the effect that:

                  (A) (1) the execution  and delivery of the Purchase  Agreement
         by KMC Telecom Holdings,  Inc. and the consummation of the transactions
         contemplated thereby do not violate (i) the federal  Communications Act
         of 1934, as amended, and the  Telecommunications Act of 1996, any rules
         or  regulations  of  the  Federal  Communications   Commission  ("FCC")
         applicable to the Company  (collectively,  the  "Communications  Act"),
         (ii) any state  telecommunications  law, rules or  regulations  ("State
         Law")  applicable  to the  Company,  and  (iii)  to the  best  of  such
         counsel's  knowledge,  any decree  from any court,  and (2) no consent,
         approval, authorization or order of or filing with the FCC or any state
         authority overseeing telecommunications matters ("State Authority"), is
         necessary for the  execution and delivery of the Purchase  Agreement by
         KMC Telecom Holdings, Inc. and except to the extent that the failure to
         obtain such consents,  approvals,  authorizations  or orders or to make
         filings with, the FCC or any State Authority would not, individually or
         in the  aggregate,  have a material  adverse  effect on the  prospects,
         condition  (financial or  otherwise)  or in the  earnings,  business or
         operations  of KMC Telecom  Holdings,  Inc. and KMC Telecom  Inc.,  KMC
         Telecom II, Inc., KMC Telecom Leasing I LLC, KMC Telecom Leasing II LLC
         and KMC  Telecom of  Virginia,  Inc.  (the  "Subsidiaries")  taken as a
         whole;

                  (B) except as  indicated  in this  paragraph B, to the best of
         our knowledge,  based on our understanding of operations of the Company
         and its  Subsidiaries  from the Certificate  [see Attachment A] (1) the
         Company and its  Subsidiaries  have made all reports and  filings,  and
         paid all fees, required by the FCC and the State Authorities,  and have
         all certificates, orders, permits, licenses,  authorizations,  consents
         and approvals of and from, and have made all filings and registrations,
         with the FCC and the State Authorities necessary to own, lease, license
         and use  its  properties  and  assets  and to  conduct  its  respective
         business  in  the  manner   described  in  the  Preliminary  and  Final
         Memorandum,  except for those filings,  fees, and approvals the failure
         to obtain or file of which would not have  material  adverse  effect on
         the financial condition, or on the earnings, business, or operations of
         the  Company  and  its  Subsidiaries,  taken  as a  whole;  (2) has not
         received  any  notice  of   proceedings   relating  to  the  violation,
         revocation or modification of any such certificates,  orders,  permits,
         licenses, authorizations,consents or approvals, or the qualification or
         rejection  of any such  filing or  registration,  the  effect of which,
         singly or in the aggregate, would have a material adverse effect on the
         prospects,  condition,  financial  or  otherwise,  or in the  earnings,
         business  or  operations  of the  Company,  taken as a  whole;  and (3)
         neither the  Company nor its  Subsidiaries  is in  violation  of, or in
         default under the Communications Act or State Law, the effect of which,
         singly or in the aggregate, would have a material adverse effect on the
         prospects,  condition,  financial  or  otherwise,  or in the  earnings,
         business or operations of the Company and its Subsidiaries,  taken as a
         whole;



<PAGE>

                                       D-2

                  (C) to the best of such counsel's  knowledge after due inquiry
         (i) no  adverse  judgment,  decree  or  order  of the FCC or any  State
         Authority has been issued against the Company or its  Subsidiaries  and
         (ii) no  litigation,  proceeding,  inquiry  or  investigation  has been
         commenced or threatened against the Company or its Subsidiaries  before
         or by the FCC or any State Authority which, if decided adversely to the
         interests  of the  Company  or its  Subsidiaries  would have a material
         adverse effect on the Company and its  Subsidiaries,  taken as a whole;
         and

                  (D) the statements in the Final  Memorandum under the captions
         "Risk Factors - Our Industry is Extremely  Competitive  and Many of our
         Competitors Have Greater  Resources Than We Do," "Risk Factors - We Are
         Subject to  Significant  Government  Regulation  Which May Change in an
         Adverse  Manner,"  "Business  -  Industry  Overview"  and  "Business  -
         Regulation,"  insofar as such  statements  constitute  a summary of the
         legal   matters,   documents  or  proceedings  of  the  FCC  and  State
         Authorities with respect to  telecommunications  regulation referred to
         therein, fairly summarize the matters referred to therein.



<PAGE>


                                      D-3


                                  ATTACHMENT A
                                       TO
             FORM OF OPINION OF SWIDLER BERLIN SHEREFF FRIEDMAN, LLP


                             CERTIFICATE OF OFFICER


                  Except as otherwise stated herein,  all capitalized terms used
herein  shall have the  respective  meanings  ascribed  to them in the Swidler &
Berlin Opinion Letter,  dated May ___, 1999 or the documents  referred to in the
Opinion Letter.

                  The undersigned is an officer of KMC Telecom  Holdings,  Inc.,
KMC Telecom III  Holdings,  Inc.,  KMC Telecom Inc.,  KMC Telecom II, Inc.,  KMC
Telecom III, Inc., KMC Telecom Leasing I LLC, KMC Telecom Leasing II LLC and KMC
Telecom of Virginia, Inc.
(collectively, "KMC").

                  The undersigned,  in the capacity as an officer of KMC and not
in an  individual  capacity,  does  hereby  certify  to Swidler  Berlin  Shereff
Friedman, LLP, that:

                  1.  KMC  has  all  certificates,  orders,  permits,  licenses,
         authorizations,  consents,  and approvals of and from, and has made all
         filings  and  registrations  with,  the FCC and the  State  Authorities
         necessary to own, lease,  license and use its properties and assets and
         to provide the  services  authorized  by the  certifications  listed in
         Exhibit A hereto. As of the date of this Certificate, KMC Telecom Inc.,
         KMC Telecom II, Inc. and KMC Telecom III,  Inc. are not  providing  any
         services other than those authorized by the terms and conditions of the
         certificates  issued to them by the State Authorities listed in Exhibit
         A thereto.  In  addition,  KMC Telecom  Leasing I, LLC, and KMC Telecom
         Leasing II, LLC do not hold out or provide telecommunications  services
         to the public. KMC Telecom Holdings, Inc. is a holding company and does
         not hold out or provide telecommunications services to the public.

                  2. KMC has made all reports and periodic filings, and paid all
         fees, required by the FCC and the State Authorities.

                  3. KMC has not received notice of any  litigation,  complaint,
         inquiry or investigation,  formal or informal, pending or threatened by
         or  before  the  FCC or  any  State  Authority  based  on  any  alleged
         violations by the Company or its  Subsidiaries of a character which, if
         adversely determined,  is likely to impair materially the FCC or any of
         the  State  Authority   authorizations  held  by  the  Company  or  its
         Subsidiaries.  KMC  has  not  received  notice  of any  proceedings  or
         threatened  proceedings  relating to the  revocation,  restriction,  or
         modification of any of the licenses or certifications listed in Exhibit
         A hereto.

<PAGE>

                  4. To the  best of my  knowledge,  based  on a  review  of the
         Offering Memorandum,  the description in the Offering Memorandum of the
         manner  in  which  the  Company  and  its  Subsidiaries  conduct  their
         respective businesses and the factual  representations made therein are
         complete and accurate.

                  This Certificate is given with the express  understanding that
it will be relied upon by the law firm of Swidler Berlin Shereff Friedman,  LLP,
in rendering its opinion pursuant to Section 5(e) of the Purchase Agreement.


                  IN WITNESS WHEREOF,  the undersigned has set his/her hand this
___ day of May, 1999.



                                             By:      __________________________
                                             Name:
                                             Title: