EXHIBIT 10.9

                                                                         7/31/00
                                                               EXECUTION VERSION



                               AGREEMENT OF LEASE

                                     BETWEEN

                         A-K BEDMINSTER ASSOCIATES, L.P.

                                   AS LANDLORD

                                       AND

                KMC TELECOM HOLDINGS, INC. and KMC TELECOM, INC.

                                    AS TENANT

                              Date: August 18, 2000




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     The  foregoing  Lease Summary is  incorporated  into and made a part of the
Lease.

               [THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]


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                                  LEASE SUMMARY

Gross Rentable Area of             Kamine Premises:   20,856 square feet on
 Leased Premises:                                     the 3rd
                                   Advance Premises:  8,941 square feet on the
                                                      1st  floor (office)
                                   Sprint Premises:   12,037 square feet on
                                                      the 2nd floor (office)
                                   SAS Premises:      8,236 square feet on the
                                                      2nd floor (office)
                                   Storage Space:     750 square feet on the
                                                      1st floor (storage)

Gross Rentable Area of             50,070 square feet of office space
 Building:
Term:                              Twelve (12) years

Renewal Term:                      One ten (10) year period

Commencement Date:                 The date on which the Lease is fully-executed
                                   by the Landlord and Tenant.

Expiration Date:                   11:59 p.m. on the last day of the one hundred
                                   forty-fourth (144th) calendar month following
                                   the Commencement Date.

Base Rent:                         See Schedule "D" attached hereto and made a
                                   part hereof.

Tenant's Proportionate Share:      100% upon the delivery of the entire Leased
                                   Premises to Tenant. As the portions of the
                                   Leased Premises are delivered to Tenant,
                                   Tenant's Proportionate Share will be
                                   determined as follows:
                                   41.65% with respect to the Kamine Premises;
                                   17.86% with respect to the Advance Premises;
                                   24.04% with respect to the Sprint Premises;
                                   and 16.45% with respect to the SAS Premises.

Security Deposit                   On the Commencement Date, Tenant shall
                                   deliver $759,750.00 in cash or an
                                   unconditional, irrevocable commercial letter
                                   of credit in accordance with Subsection 56.2,
                                   thereafter, as the portions of the Leased

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                                   Premises are delivered to Tenant, Tenant's
                                   Security Deposit will be increased by
                                   separate letters of credit in the amounts
                                   as follows:
                                   $246,750.00 upon delivery of the Advance
                                   Premises;
                                   $246,750.00 upon delivery of the Sprint
                                   Premises; and
                                   $246,750.00 upon delivery of the SAS
                                   Premises.

Broker:                            None.



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         THIS  AGREEMENT  made the 18th day of August,  2000 by and  between A-K
Bedminster   Associates,   L.P.,  having  an  office  1545  State  Highway  206,
Bedminster,  New  Jersey  07921  ("Landlord")  and KMC  Telecom  Holdings,  Inc.
("Holdings") and KMC Telecom, Inc.  ("Telecom"),  having an office at 1545 State
Highway 206, Bedminster, New Jersey 07921 (Holdings and Telecom are collectively
referred to herein as, "Tenant").

                              W I T N E S S E T H:

         WHEREAS,  Landlord owns Unit II (the "Building") of Executive  Quarters
at Bedminster,  A Condominium (the "Condominium")  located at 1545 State Highway
206, Bedminster, New Jersey, which Condominium has been created pursuant to that
certain  Master  Deed  and  By-Laws  of  Executive  Quarters  at  Bedminster,  A
Condominium,  dated November 14, 1994 and recorded in the Office of the Clerk at
Somerset  County on November  14, 1994 in Deed Book 1984 at Page 080, as amended
by First  Amendment  to  Master  Deed  recorded  in the  Office  of the Clerk at
Somerset County in Deed Book 2082 at Page 562 (the "Master Deed").

         WHEREAS,  the Building is a three-story  building  consisting of 50,070
square feet of office space;  and

         WHEREAS,  Landlord  intends to lease to Tenant the Leased  Premises (as
defined in the Lease  Summary),  more  particularly  described on Schedule  "B",
attached  hereto,  together  with a  non-exclusive  easement  to use the  Common
Elements of the  Condominium,  as defined in the Master  Deed (the  "Condominium
Common Elements");

         NOW,  THEREFORE,  KNOW ALL MEN BY THESE  PRESENTS,  that for the  rents
reserved,  the mutual considerations herein and the Landlord and Tenant mutually
intending to be legally bound hereby,  Landlord does demise,  lease and let unto
Tenant and Tenant does rent and take from Landlord the Leased  Premises upon and

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subject to the terms  hereinafter  expressed,  and Landlord and Tenant do hereby
mutually covenant and agree as follows:

    1.   LEASED PREMISES

         1.1  The Leased Premises shall consist of (a) the Kamine  Premises, (b)
the Advance  Premises,  the Sprint  Premises,  the SAS  Premises and the Storage
Space (together with the Kamine  Premises,  sometimes  collectively  referred to
herein as the "Entire  Leased  Premises"),  as, if and when such portions of the
Leased Premises are delivered to Tenant, (c) together in common with and subject
to the  existing  rights and those  other  rights  granted  from time to time by
Landlord to others, the non-exclusive right to use the Common Areas (hereinafter
defined)  and (d)  together  in common  with  other  tenants  of  Landlord,  all
easements,  appurtenances,  hereditaments,  fixtures  and rights and  privileges
appurtenant thereto including, without limitation, those set forth in the Master
Deed.  Notwithstanding anything herein to the contrary, the Leased Premises does
not include, and Landlord excludes therefrom, the exterior walls and roof of the
Building, as well as the land beneath the Building.  Upon the delivery, if ever,
of the Entire  Leased  Premises  to Tenant and for so long as Tenant  leases the
Entire Leased Premises, Area A and Area B (each as hereinafter defined) shall be
deemed to be a part of the Leased  Premises and,  Tenant shall have the right to
modify the existing use of Area A and Area B, so long as (i) such  modifications
comply with all  Governmental  Requirements  and the  provisions of Paragraph 19
herein,  and do not result in such areas being  deemed  permanently  occupied or
tenanted (e.g. no employees of Tenant may  permanently  occupy such space),  and
(ii) at Landlord's sole option,  Tenant,  at its sole cost and expense,  returns
Area A and Area B to substantially the same condition as they are in on the date
of this Lease, prior to the earliest of the following:  (x) the Expiration Date,
(y) any termination of this Lease in accordance with the terms hereof or (z) the
date on which any portion of the Entire  Leased  Premises is no longer leased by


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Tenant. In no event shall Tenant have the right to modify the remaining portions
of the Common Areas.  The areas within the Building that are  designated for use
in common by all tenants of the Building and their respective employees, agents,
customers,  invitees  and others,  including  but not  limited to, the  lobbies,
corridors, and subject to the provisions of this Subsection 1.1, the first floor
training  room ("Area A") and workout room ("Area B"),  depicted on Schedule "C"
hereof,  as and when such areas are  designated  and improved for common use are
collectively referred to herein as the "Common Areas".

         1.2  Tenant  shall have the further  right in common with other tenants
and occupants of space at the Condominium to use the access  driveways to public
streets and in common with other  tenants and occupants of the Building to park,
in accordance with Tenant's  Proportionate Share, in the designated parking area
for the Building.

         1.3  Tenant shall not permit or cause the access driveways in, over and
through the parking  areas and to the public  streets to be blocked or otherwise
hindered,  so as to  restrict  or deny the free flow of  vehicular  traffic  in,
through and over said access driveways and parking area.

         1.4  Tenant  covenants  and agrees that it shall accept each portion of
the Leased Premises in its then "as-is"  condition as of the time of delivery to
Tenant,  and  Landlord  shall have no  obligation  to perform  any work  therein
(including, without limitation,  demolition of any improvements existing therein
or construction of any tenant finish-work or other improvements therein), except
as expressly  provided herein, and shall not be obligated to reimburse Tenant or
provide an allowance for any costs related to the demolition or  construction of
improvements  therein.  Prior to the earlier of (i) Tenant's commencement of any
alterations  that would  affect a damaged  area within any portion of the Leased
Premises delivered by Landlord to Tenant, or (ii) within fifteen (15) days after


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the delivery of any portion of the Leased  Premises,  time being of the essence,
Tenant shall provide Landlord with a written list of any existing damage to such
portion of the Leased  Premises  and  provided  such  damaged  area would not be
replaced or demolished in any alterations then planned by Tenant, Landlord shall
promptly repair the same at its sole cost and expense.

    2.   TERM OF LEASE

         2.1  Landlord  leases unto Tenant and Tenant hires the Leased  Premises
for a term of twelve (12) years (the  "Term") to  commence  on the  commencement
Date.  Landlord shall deliver the Kamine  Premises as provided for in Subsection
1.4 to Tenant upon the  complete  execution  of this Lease.  Landlord  shall use
reasonable  efforts to deliver the remaining  portions of the Leased Premises as
provided  for in  Subsection  1.4 to  Tenant on or before  September  15,  2000.
Failure by Landlord to so deliver the remaining  portions of the Leased Premises
to Tenant on or before  September  15,  2000 shall not result in any  penalty to
Landlord,  nor shall result in the granting of any  additional  rights to Tenant
under the terms and conditions of this Lease. Landlord shall provide Tenant with
fifteen (15) days prior  written  notice of the date Landlord  anticipates  that
each portion of the Leased  Premises  will be delivered to Tenant.  The Term, if
not sooner  terminated  pursuant  to the terms of this  Lease,  shall end on the
Expiration  Date.  Tenant's  acceptance of any of the remaining  portions of the
Leased  Premises not delivered as provided for herein by February 28, 2001 shall
be governed by Paragraph 41 hereof.

         2.2  Tenant  named herein may renew this Lease for the Renewal Term, by
delivering  written notice of the exercise  thereof to Landlord not earlier than
twenty (20) months nor later than eighteen (1 8) months before the expiration of
the Term ("Tenant's  Renewal Notice").  The Base Rent payable for the first year
during such extended Term shall be  ninety-five  percent (95%) of the prevailing
annual market Base Rent as of the date of the Rent Notice (hereinafter  defined)


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(the  "Prevailing  Rental Rate"),  for renewals of space of equivalent  quality,
size, age,  fit-out,  utility and location,  with the length of the Renewal Term
and the then  "as-is"  nature of the Leased  Premises  and the  satisfaction  of
Tenant's Net Worth  requirement,  as set forth in this  Paragraph 2, to be taken
into account. Notwithstanding anything to the contrary herein, in no event shall
the  Prevailing  Rental  Rate  or  the  determination   thereof  as  hereinafter
contemplated  be less than the Base Rent in effect  during  the last year of the
Term ("Prevailing Rental Rate Minimum").  It is acknowledged that since the Base
Rent cannot be  calculated  as provided  for in Schedule  "D" at the time of the
Rent  Notice  because  the  comparison  Index  information  will not  have  been
determined  as of the Rent Notice,  the Landlord and Tenant hereto shall use the
prior year's annual  percentage change to determine the Base Rent solely for the
purpose of determining the Prevailing Rental Rate Minimum.

         The Renewal Term shall be upon the same terms, covenants and conditions
of this Lease as shall be in effect  immediately  prior to the  renewal,  except
that:  (a) Base Rent shall be  adjusted  to the  Prevailing  Rental Rate for the
first year of the  Renewal  Term and  adjusted  annually  thereafter  by the CPI
Formula as  defined in  Schedule  D; (b)  Tenant  shall have no further  renewal
option unless expressly granted by Landlord in writing; (c) Landlord shall lease
to Tenant the Leased Premises in its  then-current  condition;  and (d) Landlord
shall not provide to Tenant any allowances (e.g. moving allowance,  construction
allowance, and the like) or other tenant inducements.



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         For the  purposes  of  determining  the  Prevailing  Rental  Rate,  the
following procedures shall apply:

              (i)   Landlord  shall give Tenant  notice (the "Rent  Notice") not
later than sixty (60) days after receipt of Tenant's Renewal Notice,  which Rent
Notice shall set forth Landlord's  determination  of the Prevailing  Rental Rate
("Landlord's Determination").

              (ii)  Tenant  shall  give  Landlord  notice  ("Tenant's  Notice"),
within  thirty (30) days after  delivery  of the Rent  Notice,  stating  whether
Tenant accepts or disputes the Landlord's Determination,  or whether Tenant will
rescind  Tenant's  Renewal  Notice.  Time is hereby  made of the  essence or the
failure  of Tenant to timely  exercise  its  option  shall be deemed a waiver by
Tenant  of  the  recission  option.   If  Tenant's  Notice  accepts   Landlord's
Determination or Tenant fails or refuses to give Tenant's  Notice,  Tenant shall
be deemed to have accepted Landlord's Determination. If Tenant's Notice disputes
Landlord's  Determination,  Tenant's Notice shall specify Tenant's determination
of the Prevailing  Rental Rate  ("Tenant's  Determination")  as determined by an
independent  real  estate  appraiser,  but in no event less than the  Prevailing
Rental Rate Minimum.  If Tenant's Notice rescinds Tenant's Renewal Notice,  then
Tenant's  Notice  shall  be  irrevocable  and  the  Lease  shall  expire  on the
Expiration Date as provided for hereunder.

              (iii) Provided  Tenant's Notice does not rescind Tenant's Renewal
Notice,  Landlord  shall give Tenant notice of  Landlord's  response to Tenant's
Notice ("Landlord's Notice"), within thirty (30) days after delivery of Tenant's
Notice, stating whether Landlord accepts or disputes Tenant's Determination.  If
Landlord's Notice accepts Tenant's Determination or if Landlord fails or refuses
to give Landlord's  Notice,  Landlord shall be deemed to have accepted  Tenant's
Determination. If Landlord's Notice disputes Tenant's Determination,  Landlord's


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Notice shall specify  Landlord's  determination  of the  Prevailing  Rental Rate
("Landlord's Second Determination"), as determined by an independent real estate
appraiser,  but in no event less than the  Prevailing  Rental Rate  Minimum.  If
Landlord's Second Determination  exceeds Tenant's  Determination by five percent
(5%)  or  less,  the  Base  Rent  shall  be the  average  of  Landlord's  Second
Determination and Tenant's  Determination.  If Landlord's  Second  Determination
exceeds  Tenant's  Determination  by more than five  percent  (5%),  Landlord or
Tenant shall apply to the American  Arbitration  Association  (or any  successor
organization) to designate a third independent real estate appraiser (the "Third
Appraiser") in accordance with the  then-prevailing  rules,  regulations  and/or
procedures  of  the  American  Arbitration  Association,  and  if  the  American
Arbitration  Association  (or any  successor  organization)  shall be  unable or
unwilling to designate the Third Appraiser, then Landlord or Tenant may commence
a legal proceeding to have the Third Appraiser appointed.

              (iv)  The  Third   Appraiser  shall  conduct  such  hearings   and
investigations  as he may deem  appropriate  and shall,  within thirty (30) days
after the date of designation of the Third Appraiser,  choose either  Landlord's
Second  Determination  or  Tenant's  Determination,  and  such  choice  shall be
conclusive  and binding upon Landlord and Tenant.  Landlord and Tenant shall pay
their  own  counsel  fees  and  expenses  in  connection  with  any  arbitration
hereunder,  including the expenses and fees of any  appraiser  selected by it in
accordance with the terms hereof.  The  unsuccessful  party shall bear the costs
and expenses of the Third Appraiser.  Any appraiser appointed hereunder shall be
an independent  real estate  appraiser with a MAI  designation for at least five
(5) years employed by a firm with at least ten (10) years experience  appraising
properties located in New Jersey which are similar in character to the Building.


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The appraisers  and/or the American  Arbitration  Association  (or any successor
organization)  shall not have the power to add to,  modify or change  any of the
provisions of this Lease.

              (v)   If the final determination  of the  Prevailing  Rental  Rate
shall not be made on or before the first day of the Renewal  Term,  pending such
final  determination,  Tenant  shall  continue  to pay, as the Base Rent for the
Renewal Term, an amount equal to Landlord's Determination (or, if Landlord shall
have given Landlord's Second  Determination,  Landlord's Second  Determination),
which amount shall in all events be in addition to all  Additional  Rent payable
under the terms of this Lease. If, based upon the final determination  hereunder
of the Base Rent,  the payments  made by Tenant on account of Base Rent for such
portion of the  Renewal  Term were  greater  than the Base Rent  payable for the
Renewal  Term,  the amount of such excess,  plus  interest at the federal  funds
rate,  shall be refunded by Landlord  to Tenant  within ten (10)  business  days
following the final determination of Base Rent.

              (vi)  Landlord and Tenant shall  promptly  execute an amendment to
this Lease evidencing any extension of the Term pursuant to this Subsection 2.2,
but no such amendment shall be necessary in order to make the provisions of this
Subsection 2.2 effective.

         Tenant's right to provide  Tenant's Renewal Notice for the Renewal Term
shall  terminate if (1) this Lease or Tenant's right to possession of the Leased
Premises is  terminated,  (2) Tenant fails to timely  exercise its option,  time
being of the essence  with  respect to Tenant's  exercise  thereof,  (3) the Net
Worth of  Holdings  is less than the  annual  Base Rent in effect at the time of
Tenant's  Renewal  Notice or (4) a default exists at the time of exercise of the
option or on the date the Renewal Term would commence.  As used herein, the term
"Net Worth" shall be deemed to mean Holdings' stockholder's equity determined in
accordance with GAAP, as set forth in Tenant's latest annual audit, consolidated
financial  statement or interim unaudited  financial statement except that "good


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will" will be excluded  therefrom as an asset, and after deducting the aggregate
amount  of any  dividend,  distributions  or  other  charges  against  Holdings'
stockholder's  equity made during the current  fiscal  period of Tenant from the
commencement of such fiscal period to the date in question.

    3.   RENT

         3.1  During each year of the Term,  Tenant  covenants and agrees to pay
base rent  ("Base  Rent") at the  respective  rates  set forth on  Schedule  "D"
hereof,  which  shall be payable in equal  monthly  installments,  promptly,  in
advance on the first day of each and every month  during the Term of this Lease,
without demand and without offset or deduction. Tenant shall pay such additional
rent and other  charges  ("Additional  Rent")  required to be paid in connection
with this  Lease at the times  herein  provided  for the  payment  thereof  (for
default in payment of which  Landlord shall have the same rights and remedies as
for a default in the payment of Base Rent).  All Base Rent and  Additional  Rent
shall be paid to  Landlord  c/o The  Advance  Group,  1545  State  Highway  206,
Bedminster,  New Jersey 07921 or such other  location  designated by Landlord in
writing to Tenant.  Tenant  shall pay Landlord a sum equal to the pro rata share
of one (1) month's rent,  including all Additional Rent charges, for any partial
month of occupancy.

         3.2  In the event Tenant is delinquent  more than three (3) days in the
payment of any Base Rent due  hereunder or any  Additional  Rent which Tenant is
required to pay under any other term of this  Lease,  it shall pay to Landlord a
late  charge  equal to five  ($0.05)  cents per dollar per each  thirty (30) day
period,  or part thereof,  for each dollar of Base Rent or Additional Rent which
is  delinquent  in order to cover the extra  expense  involved in handling  such
delinquent  payment.  Tenant shall be allowed such delinquency no more than once
per each twelve (12) month period during the Term commencing on the Commencement
Date.



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    4.   USE

         4.1  Tenant  covenants and agrees to use and occupy the Leased Premises
solely for office and storage  purposes,  which use by Tenant,  however,  is and
shall be  expressly  subject  to all  applicable  zoning  ordinances,  rules and
regulations  of any  governmental  instrumentalities,  boards or bureaus  having
jurisdiction thereof Under no circumstances shall Tenant use the Leased Premises
for any unlawful  purpose,  or in violation of any  Government  Requirements  or
Insurance  Requirement  covering or affecting the use of the Leased  Premises or
any part thereof or so as to exceed the floor load capacity,  create a nuisance,
affect  adversely  the  sprinkler  system or in any other way impose a cost upon
Landlord.  Tenant shall not do or suffer any waste or damage,  disfigurement  or
injury to the Leased Premises.

    5.   REPAIRS AND MAINTENANCE

         5.1  Tenant shall notify Landlord as soon as reasonably possible of any
defective  conditions or needed repair,  maintenance  or replacement  work in or
about the Leased  Premises when and as the same arises (or  immediately  if said
defective  condition  poses  an  imminent  threat  to the  value  of the  Leased
Premises)  in order to keep and  maintain  in good  repair the  interior  of the
Leased  Premises  including,  but not limited to, all  necessary  repairs to the
electrical,   plumbing,   fire  safety,  and  mechanical  (i.e.,  HVAC)  systems
(collectively,  "Systems") located in, servicing,  or passing through the Leased
Premises. Landlord or Landlord's agents shall enter the Leased Premises within a
reasonable  period of time  after  receipt of notice  from  Tenant  (except  for
emergency  repairs which shall be made immediately) and make said repairs at the
cost and expense of Tenant.  In case of Tenant's  failure to pay therefore,  the
said  reasonable  cost and  expense  of the  repairs  shall be added to the next
month's  payment of Additional Rent and be due and payable as such. In addition,
Landlord shall, at Tenant's sole cost and expense,  maintain  service  contracts
with reliable  contractors to perform regular monthly or other required services


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and  maintenance to the Systems.  Tenant shall upon delivery to it of an invoice
from Landlord,  pay Tenant's  Proportionate Share of the reasonable cost of said
service  contracts  for the  Systems.  Tenant's  Proportionate  Share  shall  be
adjusted at the time of  completion of any additions or reductions in the square
footage of the Building.  Tenant covenants and agrees that it shall not cause or
permit  any  waste,  damage or  disfigurement  to the  Leased  Premises,  or any
overloading  of the floors of the  Building of which the Leased  Premises  are a
part. Tenant shall remain liable to Landlord at all times for any and all damage
or injury to the Leased Premises,  whether requiring structural or nonstructural
repairs caused by or resulting from carelessness,  omission, neglect or improper
conduct of any party,  except for the willful  misconduct or gross negligence of
Landlord, its agents,  employees and contractors.  Notwithstanding  anything set
forth herein to the contrary,  the Landlord and Tenant  acknowledge  that, until
(if ever) the  delivery  of the  Entire  Leased  Premises  to  Tenant,  Tenant's
Proportionate  Share shall be  calculated  based upon that portion of the Leased
Premises which has been delivered to Tenant using the  percentages  set forth in
the Lease Summary.

         5.2  Tenant shall also pay, in advance,  upon delivery to it of written
demand from Landlord itemizing its expenses, (i) Tenant's Proportionate Share of
the  reasonable  costs of maintaining  all exterior  areas of the Building,  the
Condominium  Common Elements,  the Common Areas, the roof and those systems such
as plumbing,  sprinkler  and sewers which impact all tenants of the Building and
(ii) Tenant's  Proportionate Share of all dues,  assessments and charges imposed
upon  Landlord  by  the  Executive  Quarters  at  Bedminster   Association  (the
"Association"),  or any association  hereafter  established,  including  charges
allocated  or  assessments  imposed  to  finance  capital  improvements  to  the
Condominium Common Elements.  Notwithstanding the foregoing,  Landlord shall, at
its own cost, (1) maintain  foundations  and steel structure of the Building and


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(2) repair or replace any defects in the original  construction  of the Building
and/or the  Leased  Premises  during the  applicable  contractor's  or  vendor's
warranty periods; provided, however that Tenant shall, subject to the provisions
of  Subsection  7.6  hereof,  be  solely  responsible  for  damage to any of the
aforesaid areas occasioned by the fault or negligence of Tenant,  its employees,
agents,  contractors,  or invitees. Tenant shall pay for its Proportionate Share
of capital expenditures made by Landlord,  for the replacement of all or part of
the roof,  electrical,  plumbing,  fire safety and mechanical  systems ("Capital
Items").  Tenant shall pay for its  Proportionate  Share of Capital  Items on an
amortized basis utilizing an estimated life of the Capital Items.

         5.3 Upon  receipt  from  Landlord  of a written  demand  itemizing  the
expenses incurred by Landlord,  Tenant shall pay Tenant's Proportionate Share of
all expenses  incurred by Landlord in connection with the ownership,  operation,
maintenance,  repair  and  cleaning  of the  Building,  the  Condominium  Common
Elements and the Common  Areas (some of which  expenses are or shall be assessed
against Landlord by the Association), excluding debt service and (subject to the
provisions of Paragraphs 23 and 31)  environmental  remediation  costs including
but not  limited to, the  following:  (i)  maintenance  and repair of the lawns,
shrubbery, underground sprinkler systems, sidewalks, curbs, access driveways and
parking areas;  (ii) keeping the parking areas,  access  driveways and sidewalks
reasonably  free and clear of snow,  ice and debris;  (iii)  providing  exterior
lighting including utility service and bulbs in connection therewith, and repair
and  maintenance of all lights and lighting  serving the parking  areas,  access
driveways and the Common Areas; (iv) maintenance and repairs  (including garbage
removal,  pest control and security service including ADT or other alarm service
if available);  (v) providing water,  sewer, and standing sprinkler capacity not
separately metered and billed to Tenant; (vi) providing exterior window washing;


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(vii)  management  fee equal to four percent (4%) of (a) Tenant's  Base Rent and
(b)  Tenant's  Proportionate  Share of costs  (other than such four percent (4%)
management fee) provided for in Subsection  5.4;  (viii)  personnel costs of not
greater  than  those  levels of wages and  salaries  of all  employees  directly
engaged  in  the  operation,  maintenance  and  security  of  the  Building  and
Condominium Common Elements,  including but not limited to taxes,  insurance and
benefits  relating thereto;  (ix) depreciation for capital  expenditures made by
Landlord to reduce operating expenses or to comply with Government  Requirements
or Insurance Requirements after the date hereof, such capital expenditures to be
amortized over such reasonable period as Landlord shall determine, together with
interest at a rate paid by Landlord on any funds borrowed for such expenditures;
(x) charges for  janitorial,  trash removal and cleaning  services and supplies;
and (xi)  reasonable  reserves  for  replacements,  repairs  and  contingencies.
Notwithstanding  the foregoing,  if usage or requirements of Tenant or any other
tenant for any of the foregoing  services is  disproportionate  to that of other
tenants in the Building,  said party shall pay such  additional  amount as shall
make equitable the division between tenants of any said expense.

         5.4  With respect to Tenant's  obligations  under this  Paragraph 5 and
Paragraphs 6 and 7 hereinafter,  Landlord shall estimate and bill Tenant monthly
for Tenant's  Proportionate Share of the costs thereof,  which sums Tenant shall
pay as Additional  Rent together with the monthly Base Rent due hereunder.  Said
estimates  may be  revised  upward  or  downward  from  time to time to  reflect
increased or decreased costs. At the end of each calendar year (or at the end of
the Term, if other than December 31),  Landlord shall determine the actual costs
incurred  and bill  Tenant for any  balance due or pay Tenant any monies due it.
The actual  cost in each year shall  serve as the base rate for  estimating  the
billing for the  following  calendar  year,  but Landlord  may increase  monthly


                                       13
<PAGE>

charges during the year based upon increased  costs,  and in addition,  Landlord
may bill any  extraordinary  expense as a  supplemental  charge during the year.
Actual invoices and receipts shall be sufficient proof of any operating expenses
or tax increase. In the event Tenant fails to request in writing a review of the
aforesaid  expenses or copies of invoices  within two hundred seventy (270) days
of the receipt of a statement or the  invoices for actual  charges and costs for
the subject year,  then Tenant shall waive all rights against  Landlord and will
be responsible  for the sum  requested.

         5.5   Landlord  agrees  to  provide,  or to cause  the  Association  to
provide,  the services listed above (except for security which shall be optional
with Landlord) so as to maintain the Building,  the Common Areas and Condominium
Common  Elements in good  condition.  Landlord shall not be liable to Tenant nor
shall the Base Rent or Additional  Rent be  diminished or abated  because of any
inconvenience,  annoyance,  interruption  or injury  to  business  arising  from
Landlord,  the  Association  and/or any owner of another Unit in the Condominium
providing  the services  listed  above or making  repairs,  storing  material or
performing any work in the Leased  Premises,  the Building,  the Common Areas or
the  Condominium  Common Elements and the same shall not constitute an eviction.
Landlord shall make such repairs and perform such work with reasonable diligence
and shall use reasonable  efforts to minimize  interference with Tenant's use of
the Leased Premises.

         5.6  Landlord represents, warrants and covenants to Tenant that no cost
for which  Landlord  seeks  reimbursement  from Tenant (either in whole or based
upon Tenant's  Proportionate  Share) pursuant to this Lease shall be included in
more than one charge payable under this Lease.



                                       14
<PAGE>

    6.   TAXES

         6.1   Tenant  shall,  during  the Term of the  Lease,  promptly  pay to
Landlord  together  with Base Rent,  on the first day of each month of the Term,
1/12th of Tenant's  Proportionate Share of all real estate and personal property
taxes,  inclusive  of  municipal  sewer and water  rents  and  charges,  if any,
assessed  against  the  Building  and/or  Condominium  Common  Elements  by  the
applicable governmental taxing authority, said obligations to be pro rated as of
the Commencement Date and as of the Expiration Date, as applicable.  In addition
to the obligation to pay taxes as hereinabove  set forth,  Tenant shall,  during
the Term of this Lease,  pay to Landlord,  Tenant's  Proportionate  Share of any
levy for the  installation of local  improvements  affecting the Building and/or
Condominium  Common  Elements as may be assessed by any  governmental  boards or
bureaus having jurisdiction  thereof.  Any assessment or impositions for capital
or public improvements which may be payable by law at the option of the taxpayer
in  installments,  may be so paid by Tenant in  installments,  together with any
required  interest.  Tenant shall have no obligation to pay any such installment
due or attributable  to a period  following the Expiration Date or any extension
thereof Notwithstanding anything contained herein to the contrary,  Tenant shall
not have any obligation to pay as Additional Rent the cost of any assessments or
impositions related to the initial development of the Building or Condominium as
contemplated by Landlord.  (All of the foregoing  taxes and special  assessments
are hereinafter  collectively called "Real Estate Taxes"). The aforesaid payment
of Real Estate  Taxes by Tenant  shall be deemed  Additional  Rent and  Tenant's
failure to pay same shall  subject it to the  remedies  available to Landlord in
Paragraphs 15 and 16 hereof.

         6.2  In the event that  Landlord  obtains a  reduction  in Real  Estate
Taxes with respect to Real Estate Taxes paid or payable  during the Term of this


                                       15
<PAGE>

Lease,  Landlord  shall  pass on to Tenant  its  Proportionate  Share of the net
reduction,  after  reimbursing  itself  for all  reasonable  costs and  expenses
actually incurred in connection with its tax appeal.

         6.3  If, at any time during the Term of this Lease, the method or scope
of taxation  prevailing on the Commencement  Date shall be altered,  modified or
enlarged so as to cause the method of  taxation  to be  changed,  in whole or in
part, so that in  substitution  for the Real Estate Taxes now assessed there may
be, in whole or in part, a capital levy or other  imposition  based on the value
of the Leased Premises,  or the rents received therefrom,  or some other form of
assessment  based in whole or in part on some other valuation of Landlord's real
property  comprising the complex in which the Leased Premises are located,  then
such  substituted tax or imposition shall be payable and discharged by Tenant as
if it were Real  Estate  Taxes,  in the  manner  required  pursuant  to such law
promulgated  which shall authorize such change in the scope of taxation,  and as
required by the terms and conditions of the within Lease.

         6.4  Nothing in the Lease  contained  shall  require  Tenant to pay any
franchise,  estate,  inheritance  succession,  capital  levy or transfer  tax of
Landlord,  or Federal Income Tax, State Income Tax, or excess profits or revenue
tax, unless such taxes are in substitution for the Real Estate Taxes as a result
of such change in the manner and scope of taxation.

         6.5  In the event Real Estate  Taxes are  increased  as a result of any
improvement  made by or on account of Tenant,  Tenant shall pay to Landlord,  as
Additional  Rent, the amount of said increase in Real Estate Taxes  attributable
to said  improvement  made by or on  account  of  Tenant.  Tenant  shall have no
obligation  to pay Tenant's  Proportionate  Share of any increase in Real Estate
Taxes attributable solely to any improvements made by or on account of any other
tenant(s).



                                       16
<PAGE>

         6.6  In the  event of any  dispute  concerning  the  interpretation  of
Paragraph  6,  Tenant  shall pay the amount  reasonably  assessed  by  Landlord,
subject to a credit in the event of a determination by a judge or arbitrator, or
a settlement in which Tenant's position is upheld in whole or in part.

    7.   INSURANCE

         7.1  Tenant shall not violate, or permit the violation of any provision
of any insurance policy covering the Building or the Condominium Common Elements
and shall not take or permit any action which would increase any insurance rates
applicable  to the Building or the  Condominium  Common  Elements or which would
result in the  refusal  of  insurance  carriers  to insure the  Building  or the
Condominium Common Elements in amounts reasonably  satisfactory to Landlord.

         7.2 Tenant will pay to Landlord, upon written demand therefor, Tenant's
Proportionate Share of the premium cost for comprehensive  insurance,  including
liability insurance, fire insurance with customary all risk conditions, insuring
the  Building  and  improvements  of which the Leased  Premises are a part in an
amount and value equivalent to the full  replacement  value of said Building and
all the insurable  improvements,  exclusive of footings and  foundations,  which
insurance shall include,  at Landlord's  election,  any customary  extensions of
coverages  or  additional  policy  coverages,  including  but  not  limited  to,
vandalism,  malicious  mischief  sprinkler damage,  flood insurance,  broad form
boiler and machinery  coverage  (inclusive of air conditioning  system, if any),
glass insurance,  and rent/business  interruption  insurance  (inclusive of Real
Estate Taxes, maintenance items described in Subsections 5.1, 5.2 and 5.3 hereof
and applicable insurance  premiums).  Said fire and extended coverage insurance,
in any event,  shall not be less than the amount of any  mortgages  which may be
placed on the Building and improvements by Landlord and shall be in such form as


                                       17
<PAGE>

any such  mortgagees may reasonably  require.  The insurance shall be contracted
with insurance companies  authorized and licensed to do business in the State of
New Jersey  having a Best rating of at least A. From time to time,  but not more
often than every three (3) years,  full  replacement  value shall be determined,
whenever reasonably  determined by Landlord,  by an independent appraiser chosen
by Landlord  who may be a  representative  of the fire  insurance  carrier  then
writing fire  insurance on the Building and  improvements,  and Tenant shall pay
Tenant's Proportionate Share of the cost of such appraisal.

         7.3  Tenant  covenants  and agrees  that it will,  at its sole cost and
expense, carry general public liability insurance,  wherein Holdings and Telecom
are  named  insureds,  insuring  against  any and all  liability  or  claims  of
liability  arising out of or  occasioned  by or  resulting  from any accident or
otherwise  in or about the  Leased  Premises  for  limits of not less than Three
Million  ($3,000,000.00)  Dollars  bodily  injury and property  damage  combined
single limit, and Tenant further  covenants and agrees that it will add Landlord
as an  additional  insured  under such policy and will furnish  Landlord  with a
certificate of said liability insurance.

         7.4  Tenant  covenants  and agrees  that it will,  at its sole cost and
expense,  maintain all risk insurance coverage on the trade fixtures of Holdings
and Telecom and other  personal  property  located at the Leased  Premises in an
amount equal to the full replacement cost thereof.  Said insurance shall include
the same  extensions of coverage  described in Subsection 7.2 hereof  (excepting
rent insurance) and shall be contracted for with a company licensed in the State
of New  Jersey  having a Best  rating  of at least A.  Landlord  will not  carry
insurance  on Tenant's  property and shall not be obligated to repair any damage
thereto or to replace the same.



                                       18
<PAGE>

         7.5  It is  expressly  understood  and  agreed  that  all  policies  of
insurance  shall contain a clause that the same shall not be canceled  except on
thirty  (30) days  written  notice to any and all parties in  interest.

         7.6  The  Landlord and Tenant hereto  mutually  covenant and agree that
each party,  in connection with insurance  policies  required to be furnished in
accordance with the terms and conditions of this Lease and actually in effect or
in connection with insurance  policies which they obtain insuring such insurable
interest as Landlord or Tenant may have in its own properties,  whether personal
or real,  shall  expressly  waive  any right or  subrogation  on the part of the
insurer against Landlord or Tenant as the same may be applicable, which right to
the  extent not  prohibited  or  violative  of such  policy is hereby  expressly
waived,  and  Landlord  and Tenant  each  mutually  waive all right or  recovery
against each other, their agents, or employees for any loss, damage or injury of
any nature  whatsoever to property or person to the extent the proceeds are made
available and actually received to compensate the claim being waived.

         7.7  In the event the insurance  carrier of the  insurance  provided by
Tenant  shall be  reasonably  objectionable  to any bona fide  mortgagee  of the
Leased Premises,  Tenant shall provide the required  insurance with a carrier or
carriers reasonably acceptable to such mortgagee.

         7.8  In the  event  that  any  use to  which  Tenant  puts  the  Leased
Premises, whether or not said use is specifically permitted hereunder, causes an
increase in the insurance  premiums being charged  Landlord,  Tenant agrees upon
demand by Landlord to pay to Landlord the  additional  amount of said  insurance
premium, which shall be deemed Additional Rent.

    8.   SIGNS

         8.1  Tenant  shall have the  non-exclusive  right and  privilege at its
sole cost and expense of erecting (i) at the Leased  Premises only such signs as
are  required  by Tenant for the purpose of  identifying  Tenant and (ii) on the
exterior of the Building only such signage as required for the identification of


                                       19
<PAGE>

a singular business entity, logo or concept,  provided that Tenant obtains prior
written approval (which approval shall not be unreasonably  withheld or delayed)
of Landlord as to location, size, material and design of such signs, which signs
shall be consistent  aesthetically  with both the approved  signage plan for the
Building  and with the signs  erected  or to be erected  on or  adjacent  to the
Building.  Further,  Tenant  shall,  at its  expense,  apply  for any such  sign
approvals  from the  applicable  governing  body and shall maintain the signs in
good  repair and  condition.  The said signs shall  comply  with the  applicable
governmental  boards and bureaus having  jurisdiction  thereof.  The erection of
such signs shall not cause any damage to the Building or its  improvements,  and
in any event Tenant shall be  responsible at its cost and expense for the repair
of any damage or liability  caused by such signage.  It is expressly  understood
and  agreed  that  Tenant  shall not erect roof  signs.  At the  termination  of
Tenant's occupancy hereunder,  Tenant shall, at its expense, promptly remove all
signs  erected  by Tenant and repair  all  damage  occasioned  by said  removal.
Subject to Subsection  14.1,  Landlord shall not permit any exterior or interior
signs at the Building other than (a) sign(s)  identifying  tenants in occupancy,
(b) a sign(s)  identifying the Building,  Building  Manager and/or Leasing Agent
and (c) such other  signs as may be  required  by law,  the safety of Tenant and
visitors and  otherwise in keeping  with the  practice of other  similar  office
buildings.

         8.2   Until  such date (if ever) that the Entire  Leased  Premises  are
delivered  to Tenant,  Landlord  shall  maintain a directory  in the first floor
lobby identifying all tenants in the Building.

    9.   FIXTURES

         9.1  Provided it is not in default beyond any applicable  notice and/or
cure period,  if any,  Tenant is given the right and privilege of installing and
removing  its  personal  property,  equipment  and trade  fixtures in the Leased


                                       20
<PAGE>

Premises during the Term of the Lease.  However,  if Tenant is in default beyond
any  applicable  notice  and/or  cure  period,  if any,  and  moves  out,  or is
dispossessed,  and  fails to  remove  any  equipment,  trade  fixtures  or other
personal  property  within  ten (10)  days  after  such  default  and  vacation,
dispossess  or  removal,  then  and in that  event,  the said  equipment,  trade
fixtures or other personal property shall be deemed at the option of Landlord to
be abandoned; or in lieu thereof, at Landlord's option, Landlord may remove such
property  and charge the  reasonable  cost and expense of removal and storage to
Tenant.

         9.2  Anything to the contrary contained herein  notwithstanding,  it is
expressly  understood  and agreed that Tenant may  install,  connect and operate
equipment as may be deemed necessary by Tenant for its business,  subject to the
capacity of the electrical and mechanical systems to accommodate said equipment,
and subject to compliance with applicable  rules and regulations of governmental
boards  and  bureaus  having  jurisdiction  thereof.  Subject  to the  terms and
conditions of this Lease, the machinery,  trade fixtures and equipment belonging
to Tenant (exclusive of Tenant  improvements to the Leased Premises installed by
Landlord or Tenant) shall at all times be considered and intended to be personal
property  of  Tenant,  and not part of the  realty,  and  subject  to removal by
Tenant,  provided  at the time of such  removal,  that  Tenant is not in default
pursuant to the terms and conditions of this Lease, and that Tenant,  at its own
cost and  expense,  pays for any  damage to the Leased  Premises  caused by such
removal.

    10.  GLASS

         If  Landlord  elects  not to  obtain  plate  glass  insurance  coverage
pursuant to  Subsection  7.2 hereof  Tenant  expressly  covenants  and agrees to
replace,  at its cost and  expense,  any  broken  glass in the  windows or other
apertures  of the Leased  Premises  which may become  damaged or  destroyed.  If
Landlord  elects  not to obtain  plate  glass  insurance  coverage  pursuant  to


                                       21
<PAGE>

Subsection  7.2 hereof,  Tenant  covenants  and agrees that it will either carry
plate glass insurance,  or in lieu thereof, Tenant will self-insure and will, at
its own cost and expense,  replace the said plate glass hereinabove referred to.
If Tenant  obtains  such  insurance  coverage,  it shall  furnish to  Landlord a
certificate of insurance evidencing such coverage.

    11.  ASSIGNMENT AND SUBLETTING

         11.1 Tenant may  not assign  this Lease or sublease  all or any part of
the  Leased  Premises  in any  event if  Tenant  is in  default  (at the time of
Tenant's  request  or at the  time  of the  effective  date of the  sublease  or
assignment) and without Landlord's prior written consent,  which Landlord agrees
shall not be  unreasonably  withheld  or  delayed.  Any  request  by Tenant  for
Landlord's  consent to an assignment or sublease  shall be in writing,  shall be
sent by certified mail,  return receipt  requested,  and shall contain  detailed
information concerning:  the names and business address of the proposed assignee
or subtenant  (and if a corporation,  the names and percentage  ownership of all
stockholders); a financial statement of said proposed assignee or subtenant; and
detailed  description of the nature of the business of the proposed  assignee or
subtenant;  and a  detailed  description  of all  terms  and  conditions  of the
proposed  assignment or  subletting.  Landlord  shall then have thirty (30) days
within  which to elect to  recapture  the  Leased  Premises  (or the  applicable
portion  thereof  if the  proposed  sublease  is  for a  portion  of the  Leased
Premises) and to release  Tenant from its  obligations  hereunder  (which in the
case of a proposed sublease of a portion of the Leased Premises shall be limited
to the portion of the Leased Premises  proposed to be sublet in which event Base
Rent and  Tenant's  Proportionate  Share  shall be  reduced  proportionately  to
reflect the decrease in the square  footage  constituting  the  remainder of the
Leased  Premises).  If  Landlord  shall  elect to  terminate  the Lease as above
provided  Landlord  shall advise  Tenant of its election in writing by certified
mail, return receipt requested, prior to the expiration of thirty (30) days from


                                       22
<PAGE>

the date of receipt of Tenant's notice. If Landlord shall elect to terminate the
Lease with respect to all or a portion of the Leased  Premises,  the Lease shall
terminate  (with respect to all or such portion,  as applicable) on the last day
of the forty-fifth  (45th) day succeeding  such notice of  termination.  In such
event,  Base Rent and  Additional  Rent due shall be paid by Tenant to  Landlord
effective up to and  including  the date of  termination.  Tenant agrees that it
will vacate and  surrender  possession  and  deliver the Leased  Premises or the
applicable  portion  thereof to Landlord on the date of termination  hereinabove
provided.

         11.2 In the  event  Landlord  does not elect to  recapture  the  Leased
Premises  or  the  applicable   portion  thereof  and  terminate  the  Lease  as
hereinabove   provided  and  Landlord  consents  in  writing  to  such  proposed
assignment  or  sublease  then in that event  Tenant  may  assign  this Lease or
sublease  all or any  portion or part of the Leased  Premises  to the entity set
forth in Tenant's  notice to Landlord but only strictly in  accordance  with the
terms and conditions contained in said notice,  provided:  (a) any assignees (or
sublessees)  undertake  in writing to assume  the terms and  conditions  of this
Lease;  (b) that with respect to any said  assignment,  Landlord  shall  receive
one-half of the consideration for such assignment (net of any brokerage fees and
the reasonable  costs of such  assignment),  if any, to be paid to Tenant by the
assignee in connection with the assignment;  and with respect to any subletting,
Landlord shall receive one-half of the amount of any Base Rent and/or Additional
Rent to be paid to Tenant  by its  subtenant  in excess of the Base Rent  and/or
Additional  Rent due from Tenant to Landlord (net of any brokerage  fees and the
reasonable costs of such subletting);  and (c) in any event, Tenant shall remain
directly and primarily liable for the performance of the terms and conditions of
this Lease.  Notwithstanding  anything  to the  contrary  contained  within this


                                       23
<PAGE>

Lease,  Landlord  shall,  at all times,  require  and demand that Tenant pay and
perform the terms and conditions of the Lease  notwithstanding any assignment or
sublease.

         11.3  Notwithstanding  anything hereinabove  to the contrary,  Landlord
may withhold its consent and no such  assignment or subletting  shall be made to
any tenant which shall: (a) occupy all or any portion of the Leased Premises for
any  non-permitted  use or any use which would  create a greater  likelihood  of
damage, wear or tear to the Building or Leased Premises than that of Tenant; (b)
adversely  affect the  character  of the  Building;  (c) in any way  violate the
applicable ordinances,  rules and regulations of applicable  governmental boards
and bureaus having jurisdiction thereof, or of the carrier of the fire insurance
or other insurance to be provided under this Lease or the Master Deed; (d) which
would  increase  the  cost  of  insurance  to  the  Leased  Premises,  Building,
Condominium  Common Elements or personal  property or contents of other tenants;
(e)  be  classified  as  an  "Industrial  Establishment"  under  ISRA  or  other
Environmental  Laws (as  defined  in  Paragraph  31) or  regulation  promulgated
pursuant  thereto;  (f) cause a density of traffic or make  demands on  building
systems,  services,  maintenance,  infrastructure or facilities  unreasonably in
excess of those related to Tenant's occupancy;  (g) be an existing tenant of and
is vacating  premises in the Building,  and/or 2345 Lamington Road,  Bedminster,
New Jersey, and/or 1410, 1420 or 1430 State Highway 206, Bedminster, New Jersey,
if then owned by Landlord or an affiliate  of  Landlord;  or (h) be a party with
whom Landlord has negotiated within the period of six months preceding  Tenant's
request for consent.

         11.4 Landlord's consent to any  sublease or assignment  hereunder shall
not be deemed a consent to any further proposed  assignment or sublease.  In the
event  Tenant,  its  assignee or  subtenant  desires to further or  subsequently
assign  or  sublet,  Tenant  or its  successor  shall  be  subject  to the  same
requirements  as provided in Subsections  11.1 through 11.3 hereof.



                                       24
<PAGE>

         11.5 Tenant  shall  reimburse  Landlord for its  reasonable  expenses,
including  but not limited to reasonable  legal  expenses,  if any,  incurred by
Landlord in  connection  with  Tenant's  request to assign or sublet  hereunder.
Furthermore,  if required  by law,  Tenant,  at its  expense,  shall  notify the
appropriate  governmental authorities of any proposed assignment or sublease and
shall obtain all necessary  approvals as well as a new  Certificate of Occupancy
if required.

         11.6 Notwithstanding  the  provisions  of  this  Paragraph  11 to the
contrary,  and provided that (a) Tenant is not in default  beyond any applicable
notice and grace period (at the time of Tenant's  request or at .the time of the
effective  date of the sublease or  assignment),  and (b) the  Security  Deposit
shall  continue to be  maintained as required in Paragraph 56, Tenant shall have
the  right to  assign  this  Lease  or  sublease  all or any part of the  Leased
Premises as to any  Permitted  Transfer (as defined  herein)  without  obtaining
Landlord's consent and without being subject to the recapture provisions of this
Lease, in each case subject only to the provisions of Subparagraph  11.2(c), the
restrictions  set forth in  Subparagraphs  11 .3(a)-(g) and Subsections 11.4 and
11.5.  As used herein the terms sublet  and/or assign shall include the transfer
by Tenant or its  stockholders  of more than fifty  (50%)  percent of the voting
stock.  A Permitted  Transfer  shall be (i) to an entity which is a successor to
either Holdings or Telecom by a merger, or consolidation  involving such entity,
(ii) to a purchaser of all or substantially all of either Holdings' or Telecom's
assets,  (iii)  relating to a sale,  issuance or transfer of any voting  capital
stock of either  Holdings or Telecom or voting  capital  stock of any  corporate
entity which directly or indirectly  controls such entity; or (iv) relating to a
transfer of Tenant's  leasehold  interest to a parent or an  affiliate of either
Holdings  or Telecom;  provided,  however,  that the  following  conditions  are
satisfied:  (a) the  surviving or successor  entity shall  satisfy the Net Worth


                                       25
<PAGE>

Requirement  (hereinafter defined); (b) the surviving or successor entity agrees
in writing to assume all the terms and conditions  contained in this Lease;  and
(c) no later than thirty (30) days prior to the date of the proposed transaction
Tenant provides Landlord with (i) notice of the proposed merger,  consolidation,
sale of substantially  all of the applicable  entity's assets or other transfer,
and (ii) if available,  a copy of the  financial  statements of the entity which
will carry on the business of the applicable  entity. As used in this Subsection
11.6, the "Net Worth  Requirement"  shall mean that the Net Worth (as defined in
Subsection 2.2) of the surviving or successor  entity shall not be less than the
Net Worth of Holdings as of December 31, 1999.

         11.7 Tenant  (Holdings  and Telecom in the  aggregate)  shall have the
right to sublease  no greater  than  one-third  of the Leased  Premises  without
obtaining  Landlord's  consent  and  without  being  subject  to  the  recapture
provisions of this Lease;  provided  however,  that any such subletting shall be
subject to all other provisions of this Paragraph 11.

         11.8 The right to assign or sublet may be passed on by any  assignee or
subtenant of Tenant  subject to all the  provisions of this Lease  including but
not limited to those contained in this Paragraph 11.

    12.  FIRE AND CASUALTY

         12.1  In  case  of any  damage  to or  destruction  of any  part of the
Building  or Leased  Premises  by fire or other  insured  casualty  ("Casualty")
occurring during the Term of this Lease,  which shall render the Leased Premises
untenantable  or unfit for  occupancy,  and which damage  cannot  reasonably  be
repaired within three hundred  sixty-five (365) days following the adjustment of
the loss in connection with such Casualty then, and in any such event,  the Term
hereby created shall, at the option of Landlord or Tenant upon written notice to
the other by certified mail, return receipt  requested,  within thirty (30) days
of the insurance adjustment being finally determined,  cease and become null and
void from the date of such  Casualty.  In such event  Tenant  shall  immediately



                                       26
<PAGE>

surrender the Leased  Premises and Tenant's  interest in said Lease to Landlord,
and Tenant  shall only pay rent to the time of such  Casualty,  and Landlord may
reenter and re-possess the Leased  Premises thus  discharged from this Lease and
may remove Tenant therefrom.  However,  in the event of Casualty as hereinbefore
defined,  if neither Landlord nor Tenant shall elect to cancel this Lease within
the aforesaid allowable time period, Landlord shall, subject to the prior rights
of its mortgagee to refuse to make available to Landlord the insurance  proceeds
for rebuilding, thereupon repair and restore the Leased Premises and/or Building
with reasonable speed and dispatch following receipt of insurance proceeds,  and
the Base Rent and Additional Rent shall not be accrued after said Casualty while
the repairs and restorations  are being made, but shall  recommence  immediately
after the Leased Premises are restored and delivered back to Tenant.

         12.2 In the  event  of any  other  insured  Casualty,  which  shall  be
repairable  within  three  hundred  sixty-five  (365)  days  from the  insurance
adjustment in connection  with such  Casualty,  Landlord  shall,  subject to the
rights of its mortgagee to refuse to make the insurance  proceeds  available for
reconstruction, repair and restore the Leased Premises with reasonable speed and
dispatch, and the rent shall abate or be equitably apportioned,  as the case may
be, as to any portion of the Leased  Premises which shall be unfit for occupancy
by Tenant.  The Base Rent and all Additional  Rent,  however,  shall  recommence
immediately  upon  restoration of the Leased  Premises and redelivery of same to
Tenant.

         12.3 Nothing  hereinabove  contained  with respect to Tenant's right to
abate  rent  under  proper  conditions  shall be  construed  to limit or  affect
Landlord's  right to  payment  under any claim for  damages  covered by the rent
insurance policy the premiums for which Tenant is to pay Tenant's  Proportionate
Share  pursuant to Paragraph 7 of this Lease.  If the Casualty  results from the


                                       27
<PAGE>

fault of Tenant, its agents,  contractors,  employees or invitees,  Tenant shall
not be entitled to any abatement or reduction of rent, except to the extent that
Landlord  receives  the proceeds of said rent  insurance  policy in lieu of such
rent.  Landlord warrants that it will maintain such rent insurance policy during
the Term.

         12.4  For the  purposes  of this  Paragraph  12,  in  determining  what
constitutes  reasonable  speed and  dispatch,  consideration  shall be given for
delays which would be excuses for non-performance as in Paragraph 25 hereinafter
provided (Force  Majeure).

         12.5 In the event of such Casualty as above provided  wherein  Landlord
shall rebuild,  Tenant agrees, at its cost and expense,  to forthwith remove any
and all of its  equipment,  trade  fixtures,  stock  and  personal  property  as
required by Landlord to permit Landlord to expedite rebuilding and/or repair. In
any event, Tenant shall assume at its sole risk the responsibility for damage or
security with respect to such trade fixtures, equipment and personal property in
the event the  building  area  where the same may be located  has been  damaged,
until the Building shall be restored and made secure. It is expressly understood
and agreed that in the event Landlord's  mortgagee refuses to make the insurance
proceeds available for restoration, alteration or repair, Landlord shall have no
obligation to restore the Building and/or  improvements.  In such event,  Tenant
shall have the right to terminate  this Lease within thirty (30) days of receipt
of notification from Landlord that the Building will not be restored.

         12.6 It is expressly understood and agreed that wherever reconstruction
shall be undertaken,  in the event of Casualty as in this Paragraph 12 provided,
Landlord shall prosecute such reconstruction with reasonable speed and dispatch.
In the event,  however,  such  reconstruction  or repair  shall not be completed
within  one (1) year  from  the date  following  the  adjustment  of the loss in
connection  with such Casualty  (such time period of one (1) year to be extended


                                       28
<PAGE>

for such reasonable period of time as is required by reasons of Force Majeure or
if occasioned by default on the part of Tenant) then in that event, Tenant shall
have the option exercisable within fifteen (15) days following the expiration of
the last day of the  year  period  following  the  Casualty  (as the same may be
extended as provided for  hereinabove)  to terminate the Lease.  In the event of
such termination, Landlord and Tenant shall thereafter have no further liability
one to the other in accordance with the terms and conditions of the Lease except
for obligations which accrued prior to the Casualty and except that the security
deposit held by Landlord shall then be returned to Tenant  forthwith.  Landlord,
during such period of reconstruction,  shall give Tenant reasonable notice as of
the  date on  which  the  Building  and  Leased  Premises  shall  be  ready  for
re-occupancy.

         12.7  Anything in this  Paragraph 12 to the  contrary  notwithstanding,
Landlord  shall have no  obligation  to  restore  the  Leased  Premises,  if (a)
Landlord's  mortgagee  refuses  to make  available  to  Landlord  the  insurance
proceeds for  rebuilding or (b) a Casualty  occurs within the last eighteen (18)
months of the Term or the Renewal Term (if exercised by Tenant); in either event
Tenant may terminate  this Lease within thirty (30) days from receipt of written
notification from Landlord that the Building will not be restored.

         12.8 Anything in this Paragraph 12  notwithstanding,  Tenant shall have
the right to cancel this Lease in the event that (a)  Landlord's  mortgagee does
not make  available to Landlord the insurance  proceeds for  rebuilding,  unless
Landlord has obtained a funding  commitment  from  another  qualified  financial
institution  within one hundred eighty (180) days from the date that Landlord is
in receipt of a notice from  Landlord's  mortgagee  regarding the same, or (b) a
casualty  occurs within the last eighteen (18) months of the Term or the Renewal
Term (if exercised by Tenant).



                                       29
<PAGE>

    13.  COMPLIANCE WITH LAWS, RULES AND REGULATIONS

         13.1 (i)Tenant  covenants and agrees that upon acceptance and occupancy
of the Leased Premises, it will, during the Term, promptly, at Tenant's cost and
expense, comply with all statutes,  ordinances,  rules, orders,  regulations and
requirements of the Federal,  State and City Government and of any and all their
departments   and   because   (hereinafter   collectively   called   "Government
Requirements"),  applicable to the Leased  Premises  arising from or relating to
(a) the  manner in which  Tenant  conducts  its  business  or uses its  property
therein,  or (b) the breach of any of  Tenant's  obligations  hereunder.  Tenant
shall give  prompt  written  notice to Landlord of any notice it receives of the
violation of any Government  Requirements.  Subject to Tenant's  obligations set
forth in Subsection 5.2 hereof,  Landlord will, during the Term, comply with all
Government  Requirements  excepting only those Government  Requirements that (a)
Tenant is responsible  for complying with pursuant to the first sentence of this
Subparagraph 13.1 (i) or (b) any other tenant in the Building is responsible for
complying  with  pursuant to its lease.  To the extent any costs are  associated
therewith,  Tenant shall pay Tenant's  Proportionate  Share of such costs to the
extent  that such  costs  are  otherwise  proper  expenses  for which  Tenant is
responsible pursuant to Paragraph 5 hereof.

              (ii) Tenant  covenants and agrees,  at its own cost and expense to
comply  with such  regulations  or  requests  as may be  required by the fire or
liability  insurance carriers providing insurance for the Building and/or Leased
Premises,  and will  further  comply  with such other  requirements  that may be
promulgated by the Board of Fire Underwriters  (hereinafter  collectively called
"Insurance  Requirements") in connection with the use and occupancy by Tenant of
the Leased Premises in the conduct of its business.

              (iii)  Tenant  covenants  and  agrees  that it will not commit any
nuisance,  nor permit the emission of any  objectionable  sound,  noise or odors


                                       30
<PAGE>

which would be violative of any applicable  governmental  rule or regulations or
would per se create a nuisance. Tenant further covenants and agrees that it will
handle and dispose of all rubbish, garbage and waste in connection with Tenant's
operations in the Leased  Premises in  accordance  with  reasonable  regulations
established by Landlord from time to time and reasonably  applied by Landlord to
all tenants on an evenhanded  basis in order to avoid  unreasonable  emission of
dirt, fumes,  odors or debris which may constitute a nuisance or induce pests or
vermin.

         13.2 In case  Tenant  shall fail or  neglect to comply  with any of the
aforesaid Governmental Requirements or Insurance Requirements; or in case Tenant
shall neglect or fail to make any necessary repairs, required of Tenant pursuant
to Paragraph 5, Landlord or Landlord's  agents may (but shall not be required so
to do) after twenty (20) days  written  notice to Tenant  (except for  emergency
repairs,  which may be made immediately) enter the Leased Premises and make said
repairs and comply with any and all of the said Governmental Requirements and/or
Insurance  Requirements,  at the cost and expense of Tenant. In case of Tenant's
failure  to pay  therefor,  the  said  cost and  expense  shall be added to next
month's  payment  of  Additional  Rent  and be due and  payable  as  such.  This
provision  is in addition to the right of  Landlord to  terminate  this Lease by
reason of any default on the part of Tenant.

    14.  INSPECTION BY LANDLORD

         14.1  Tenant  agrees  that  Landlord  and  Landlord's  agents and other
representatives shall have the right to enter into and upon the Leased Premises,
or any part thereof,  at all  reasonable  hours for the purpose of examining the
same or for the purpose of performing  repairs to or installations in the Leased
Premises  or for the  purpose  of  showing  same to  prospective  purchasers  or
mortgagees  and putting  upon the Leased  Premises a suitable  "For Sale" or "To
Let" sign,  upon  reasonable  advance notice of not less than  twenty-four  (24)


                                       31
<PAGE>

hours (except in the event of emergency).  Landlord  shall make its  inspections
and  conduct  any repair or  installation  work to the Leased  Premises  in such
manner as to minimize the disturbance of the operations of Tenant.  For eighteen
(18) months prior to the Expiration  Date,  Landlord or its agents may similarly
exhibit the Leased  Premises to prospective  tenants and may place the usual "To
Let" signs thereon.

    15.  DEFAULT BY TENANT

         15.1 Each of the  following  shall be deemed a default  by Tenant and a
breach  of  this  Lease  regardless  of  whether  Holdings  and/or  Telecom  are
individually or jointly in default (it being  acknowledged by Tenant that (i) no
additional notice,  grace and/or cure period beyond that specified in this Lease
shall be afforded to either Holdings or Telecom in the event of a default of the
other,  and (ii)  whenever  the words  "beyond any  applicable  notice and grace
period", or "beyond the applicable notice and grace period", or similar language
appears in this Lease, it shall not be deemed to increase the original period of
time  specified  in this Lease that  notice and a grace  period is  afforded  to
Tenant.


              (a)  (i) filing of a  petition  by the then tenant in  possession,
Holdings or Telecom, for adjudication as a bankrupt,  or for reorganization,  or
for an arrangement under any Federal or State statute;

                   (ii)  dissolution  or  liquidation  of  the  then  tenant  in
possession, Holdings or Telecom;

                   (iii)  appointment  of a  permanent  receiver  or a permanent
trustee  of all  or  substantially  all  the  property  of the  then  tenant  in
possession, Holdings or Telecom, if such appointment shall not be vacated within
sixty (60) days;

                   (iv)  taking  possession  of  property  of the then tenant in
possession, Holdings or Telecom, by a governmental officer or agency pursuant to


                                       32
<PAGE>

statutory   authority  for   dissolution   rehabilitation,   reorganization   or
liquidation of the then tenant in possession if such taking of possession  shall
not be vacated within sixty (60) days;

                   (v)  making by the then  tenant in  possession,  Holdings  or
Telecom, of an assignment for the benefit of creditors.

         If any event mentioned in this  subparagraph (a) shall occur,  Landlord
may thereupon, or at any time thereafter, elect to cancel this Lease by ten (10)
days written notice to Tenant,  and if not the original Tenant,  the then tenant
in  possession,  and  this  Lease  shall  terminate  on the day in  such  notice
specified  with the same force and  effect as if that date were the date  herein
fixed for the expiration of the Term of the Lease.

              (b)  (i) Default in the due and  punctual payment of the Base Rent
or  Additional  Rent herein  reserved or any part  thereof  when and as the same
shall become due and payable, and such default shall continue for a period often
(10) days after the date of written notice to Tenant.

                   (ii) A default in the  performance  of any other  covenant or
condition of this Lease on the part of Tenant to be  performed  and such default
continues for a period of thirty (30) days (or appropriate shorter period in the
event of an emergency) after written notice.  For purposes of this  Subparagraph
15.1(b) (ii)  hereof,  no default on the part of Tenant in  performance  of work
required to be performed or acts to be done or conditions  to be modified  shall
be deemed to exist if steps  shall have been  commenced  within said thirty (30)
day (or,  in the event of an  emergency,  shorter)  period by Tenant  diligently
after  notice to rectify the same and shall be  prosecuted  to  completion  with
reasonable diligence.

         15.2 In case of any such default  under  Subparagraph  15.1 (b), and at
any time  within six (6)  months  thereafter  following  the  expiration  of the


                                       33
<PAGE>

respective  grace  periods  above  mentioned,  Landlord  may serve a notice upon
Tenant electing to terminate this Lease,  and the Lease shall then expire on the
date so specified as if that date had been  originally  fixed as the  Expiration
Date of the Term herein granted.

         15.3 In case this Lease shall be terminated as  hereinbefore  provided,
or by summary proceedings or otherwise,  Landlord or its agents may, immediately
or at any time thereafter, re-enter and resume possession of the Leased Premises
or any part thereof,  and remove all persons and property  therefrom,  including
Tenant's  trade  fixtures,  without  being liable for any damages  therefor.  No
re-entry by Landlord shall be deemed an acceptance of a surrender of this Lease.

         15.4 Tenant  hereby  expressly  waives any and all rights of redemption
granted  by or under any  present  or future  laws in the event of Tenant  being
evicted or  dispossessed  for any cause,  or in the event of Landlord  obtaining
possession of the Leased  Premises,  by reason of the violation by Tenant of any
of the covenants or conditions of the Lease, or otherwise.

         15.5 In case this Lease shall be terminated as  hereinbefore  provided,
or by summary proceedings or otherwise, Landlord may, in its own name and in its
own  behalf,  relet the whole or any  portion  of the Leased  Premises,  for any
period equal to or greater or less than the  remainder of the Term,  for any sum
which it may deem  reasonable,  to any  tenant  which it may deem  suitable  and
satisfactory,  and for any  use and  purpose  which  it may  deem  suitable  and
satisfactory,  and for any use and purpose which it may deem appropriate, and in
connection  with any such lease  Landlord may make such changes in the character
of the  improvements  on the Leased  Premises as Landlord  may  determine  to be
appropriate or helpful in effecting such lease and may grant concessions or free
rent.  Landlord agrees to use reasonable efforts to relet the Leased Premises in
order to mitigate its damages;  however, nothing herein contained shall limit or


                                       34
<PAGE>

be  construed  as limiting  Landlord's  right in its sole  discretion  to either
approve or disapprove  any tenant and to determine  the terms and  conditions of
any lease. Under no circumstances shall Landlord's refusal to accept an offer to
lease  the  Leased  Premises  be  deemed  unreasonable  if any of the  following
conditions are present:

    (1) The rent offered is less than the rent reserved in this Lease;

    (2) The net  worth of the  prospective  tenant  is less  than that of Tenant
hereunder as of the original date of this Lease;

    (3) The duration of the proposed term is less than the term remaining  under
this  Lease or less than  five (5)  years  (if  there  are less than five  years
remaining under this Lease);

    (4) The  proposed use is (a)  prohibited  by  applicable  zoning laws or (b)
conflicts  with or  violates  either  (i) the lease or any  other  rights of any
tenant in the Building, or (ii) the Rules and Regulations of the Building or (c)
is  otherwise  of a  different  character  or  nature  to the  uses or  business
activities previously permitted by Landlord in the Building; or

    (5) The proposed  lease is for a prospective  tenant to which Landlord would
be entitled to withhold its consent were it requested by Tenant to consent to an
assignment  or  sublease  of the  Leased  Premises  to such  prospective  tenant
pursuant to Subsection 11.3. In the event the Leased Premises are relet, the net
rents received by Landlord from any reletting, after deducting from the proceeds
therefrom all reasonable  costs incurred in connection with such termination and
reletting  (including,  but not limited to, any and all legal,  brokerage and/or
finder's fees payable by Landlord in connection with such  reletting),  shall be
credited  against  the sum owed by Tenant to  Landlord  up to the  amount  owed.
Landlord shall not under any circumstances be required to pay Tenant any surplus
of any sums received by Landlord on a reletting of the Leased Premises in excess
of the  rent  reserved  in this  Lease.



                                       35
<PAGE>

         15.6 (a) In the case this Lease is terminated  by summary  proceedings,
or  otherwise,  as provided in this  Paragraph 15, and whether or not the Leased
Premises  be relet,  Landlord  shall be  entitled to recover  from  Tenant,  the
following:

                   (i) A sum equal to all expenses, if any, including reasonable
counsel  fees,  incurred  by  Landlord in  recovering  possession  of the Leased
Premises,  and all  reasonable  costs  and  charges  for the care of the  Leased
Premises  while  vacant,  which  damages  shall be due and  payable by Tenant to
Landlord at such time or times as such  expenses have been incurred by Landlord;
and

                   (ii) A sum equal to all damages  set forth in this  Paragraph
15 and in Paragraph 16 hereinafter referred to.

              (b) Without any previous notice or demand, separate actions may be
maintained by Landlord  against  Tenant from time to time to recover any damages
which, at the commencement of any such action,  have then or theretofore  become
due and payable to Landlord under  Paragraphs 15 and 16 hereof  without  waiting
until the end of the then current term.

              (c) All sums which  Tenant has agreed to pay by way of Real Estate
Taxes, sewer charges,  water rents or water meter charges,  insurance  premiums,
maintenance  items  described in  Subsections  5.1, 5.2 and 5.3 hereof and other
similar  items  becoming  due from time to time  under the terms of this  Lease,
shall be deemed  Additional  Rent  reserved in this Lease  within the meaning of
Paragraphs 15 and 16 hereof.

    16.  LIABILITY OF TENANT FOR DEFICIENCY

         16.1 In the event that the relation of Landlord and Tenant may cease or
terminate  by reason of the  default by Tenant and the  re-entry  of Landlord as
permitted  by the  terms  and  conditions  contained  in  this  Lease  or by the


                                       36
<PAGE>

ejectment of Tenant by summary  proceedings  or other  judicial  proceedings  or
after the abandonment of the Leased Premises by Tenant, it is hereby agreed that
Tenant  shall  remain  liable  to pay in  monthly  payments  the  Base  Rent and
Additional  Rent which has accrued prior to Landlord's  re-entry and which shall
accrue  subsequent to the re-entry by Landlord;  and Tenant  expressly agrees to
pay as damages for the breach of the covenants  herein  contained the difference
between the Base Rent and Additional  Rent reserved and such rents collected and
received,  if any, by Landlord,  during the remainder of the unexpired  Term, as
the  amount  of  such  difference  or  deficiency  shall  from  time  to time be
ascertained. Anything herein contained to the contrary notwithstanding, the rent
referred to shall include the Base Rent together  with all  Additional  Rent and
charges required to be paid by Tenant under the Lease including, but not limited
to,  Tenant's  Proportionate  Share  of Real  Estate  Taxes,  maintenance  items
described in Subsections  5.1, 5.2 and 5.3 hereof and insurance costs; the costs
of  brokerage,  redecorating  and  rerenting;  and  reasonable  legal  fees  and
accounting fees incurred by Landlord in connection with claims against Tenant or
in  connection  with the rerenting of the Leased  Premises.

         16.2 Waiver of Jury Trial, Counterclaims, and Removal. The Landlord and
Tenant (whether Holdings or Telecom) hereby shall and they hereby do waive trial
by jury in any action or  proceeding  brought by either the  Landlord  or Tenant
(whether Holdings or Telecom) hereto against the other on any matters whatsoever
arising out of or in any way  connected  with this Lease,  the  relationship  of
Landlord and Tenant, Tenant's use or occupancy of the Leased Premises, any claim
of injury or  damage.  In the  event  Landlord  commences  any  proceedings  for
non-payment of Base Rent or Additional  Rent,  Tenant waives its right to file a
counterclaim  or remove such action to the Superior Court from the Special Civil
Part.  This shall not,  however,  be construed as a waiver of Tenant's rights to
assert such claims in any special action or actions.



                                       37
<PAGE>

    17.  NOTICES

         17.1 All notices  required or  permitted  to be given shall be given by
certified mail,  return receipt  requested,  postage  prepaid,  to the following
addresses:

    IF TO LANDLORD;                          WITH A COPY TO:
    --------------                           --------------

    A-K Bedminster Associates, L.P.          Windels Marx Lane & Mittendorf, LLP
    c/o The Advance Group, Inc.              120 Albany Street
    1545 State Highway 206                   New Brunswick, New Jersey 08901
    Bedminster, New Jersey 07921             Ann: Howard P. Lakind, Esq.
    Attn: Kurt Padavano

    IF TO TENANT:                            WITH A COPY TO:
    -------------                            --------------

    KMC Telecom Holdings, Inc.               Kelley Drye & Warren, LLP
    1545 State Highway 206                   101 Park Avenue
    Bedminster, New Jersey 07921             New York. NY 10178
    Attn: Chief Financial Officer            Attn: Alan M. Epstein, Esq.

    KMC Telecom, Inc.
    1545 State Highway 206
    Bedminster, New Jersey 07921
    Attn: Chief Financial Officer

    WITH AN ADDITIONAL COPY TO:
    --------------------------

    KMC Telecom Holdings, Inc.
    1545 State Highway 206
    Bedminster, New Jersey 07921
    Attention: Director of Human Resources

         17.2 Tenant shall promptly notify Landlord of:

              (a)  any accident in or about the Leased Premises;

              (b)  any Casualty occurring in or about the Leased Premises;

              (c)  all damage  to or  defects  in the  Leased Premises  for  the
                   repair of which Landlord is responsible;

              (d)  all damage to or defects in any  building  system or facility
                   in or about the Leased Premises; and



                                       38
<PAGE>

              (e)  any  other  matter  of which  Tenant is  obligated  to notify
                   Landlord  pursuant  to  the  terms  of  this  Lease.

         17.3 Any  (i)  notice or   communication  received  by   Landlord  from
              Holdings or Telecom and/or (ii) right or option  that is  provided
              for in this  Lease  and  exercised  by  Holdings  or Telecom shall
              be  deemed  given by Tenant and  binding  on Holdings and Telecom.

         17.4 Any action  taken by holdings or  Telecom pursuant  to this  Lease
              shall be deemed acceptable to the other.

    18.  NON-WAIVER BY LANDLORD OR TENANT

         The failure of Landlord or Tenant to insist upon strict  performance of
any of the  covenants  or  conditions  of this Lease,  or to exercise  any right
herein  conferred  in any one or more  instances,  shall not be  construed  as a
waiver  of any of their  rights  or  remedies  in this  Lease,  and shall not be
construed  as a  waiver,  relinquishment  or  failure  of  any  such  covenants,
conditions,  or  rights,  but the same  shall be and  remain  in full  force and
effect.

    19.  RIGHT OF TENANT TO MAKE ALTERATIONS AND IMPROVEMENTS

         Tenant   may  not   make   alterations,   additions   or   improvements
("alterations")  to the Leased  Premises  without the consent of Landlord  which
shall not be unreasonably withheld or delayed.  Landlord's approval of any plans
and  specifications  shall  not be a  representation  that such  alterations  or
improvements comply with any Government  Requirements or Insurance Requirements.
Landlord  may  condition  its  consent  to  any  requested  alterations  on  the
following:  (a) Landlord  shall perform the  alterations  at a competitive  cost
(herein  defined to mean not more than five (5%)  percent  greater  than any bid
obtained  by Tenant  from a  responsible  contractor  reasonably  acceptable  to
Landlord) to be borne by Tenant,  inclusive  of  architectural  and  engineering
drawings and Landlord's  reasonable  profit and overhead;  (b) such  alterations


                                       39
<PAGE>

will not require structural changes in the Building or the Leased Premises, will
not affect the  appearance  of the Building and will not lessen the value of the
Building or the Leased  Premises;  and (c) at  Landlord's  election  made within
ninety (90) days prior to the  termination of the Term,  Tenant at its sole cost
and expense will,  prior to the termination of the Term,  remove the alterations
required to be removed by Landlord and repair any and all damage  occasioned  by
said removal.  During the period of such removal, until the Leased Premises have
been restored,  Tenant shall have the obligation to pay Base Rent and Additional
Rent, whether or not the Term of the Lease has expired. Notwithstanding anything
to the contrary  contained herein,  Landlord's  consent shall not be required in
connection with the erection of nonstructural  internal partitions in connection
with a permitted sublease per the provisions of Subsection 11.7 hereinabove. All
such   alterations   shall  be  in  conformity  with   applicable   Governmental
Requirements  and Insurance  Requirements and shall not interfere with occupancy
by any other tenant in the Building.

    20.  NON-LIABILITY OF LANDLORD

         It is expressly  understood  and agreed by and between the Landlord and
Tenant that Tenant  shall assume all risk of damage to its  property,  equipment
and trade fixtures occurring in or about the Leased Premises, whatever the cause
of such damage or casualty.

    21.  UTILITIES

         Tenant  shall,  at  its  own  cost  and  expense,   pay  utility  meter
installation  and  maintenance  charges  as  applicable  per the  design  of the
Building as well as all service and usage charges for gas, electric,  sprinkler,
or any other  utility  which is  separately  metered and billed to Tenant.  With
respect  to any  utility  which is not  separately  metered,  Tenant  shall  pay
Tenant's Proportionate Share of same as Additional Rent when billed by Landlord.
Notwithstanding the foregoing, Landlord may, at its election, allocate the costs


                                       40
<PAGE>

of non-separately  metered utility usage among the tenants of the Building based
upon submetering or utility survey performed by a qualified expert.

    22.  RESERVATION OF EASEMENT

         Landlord  reserves the right,  easement  and  privilege to enter on the
Leased  Premises,  the Building and the Condominium  Common Elements in order to
install  any storm  drains  and sewers  and/or  utility  lines and  distribution
facilities  in  connection  therewith  as may be  required  by  Landlord.  It is
understood and agreed that if such work does not service the Building, then: (i)
such  installation  shall be at Landlord's sole cost and expense,  (ii) Landlord
shall, at its sole cost and expense,  restore any displaced paving, lawn, seeded
area or shrubs,  (iii)  Landlord  covenants  that the  foregoing  work shall not
unreasonably  interfere with the normal operation of Tenant's business, and (iv)
Landlord  shall  indemnify  and save  Tenant  harmless in  connection  with such
installations.

    23.  AIR AND WATER POLLUTION

         Tenant expressly  covenants and agrees to indemnify,  defend,  and save
Landlord  harmless against any claim,  damage,  liability,  costs,  penalties or
fines which  Landlord  may suffer as a result of air,  water,  or  environmental
pollution  (collectively  "Pollution") caused by Tenant in its use of the Leased
Premises.  Tenant  covenants and agrees to notify  Landlord  immediately  of any
claim or notice  served  upon it with  respect to any such claim that  Tenant is
causing Pollution;  and Tenant, in any event, will take immediate steps to halt,
remedy or cure any such Pollution caused by Tenant.

    24.  STATEMENT OF ACCEPTANCE

         Upon  delivery  of each  portion  of the  Leased  Premises  to  Tenant,
pursuant to the terms and conditions of this Lease,  Tenant covenants and agrees
that it will furnish to Landlord a statement that it accepts such portion of the


                                       41
<PAGE>

Leased  Premises and agrees to pay Base Rent and Additional Rent with respect to
such portion of the Leased Premises from the date of delivery of such portion of
the Leased Premises to Tenant,  subject to the terms and conditions of the Lease
as herein  contained.  Upon the  delivery  of the first  portion  of the  Leased
Premises,  such  statement  shall  set  forth  the  Commencement  Date  and  the
Expiration Date of the Term.

    25.  FORCE MAJEURE

         Except  for the  obligation  of Tenant to pay Base Rent and  Additional
Rent as in this Lease  provided,  the period of time  during  which  Landlord or
Tenant is prevented from  performing any act required to be performed under this
Lease by reason of fire, catastrophe,  strikes,  lockouts, civil commotion, acts
of God or the public enemy, governmental prohibitions or preemptions, embargoes,
inability to obtain material or labor by reason of  governmental  regulations or
prohibitions,  the  act or  default  of the  other  party,  holding  over by any
existing  tenant of the Leased  Premises or other events  beyond the  reasonable
control  of  Landlord  or  Tenant,  as  the  case  may be  (collectively  "Force
Majeure"),  shall  be  added  to the  time  for  performance  of such  act.

    26.  STATEMENTS BY LANDLORD AND TENANT

         Landlord  and  Tenant  agree at any time and from time to time upon not
less than ten (10) days prior notice from the other to execute,  acknowledge and
deliver to the party  requesting  same, a statement in writing,  certifying  (a)
that this  Lease is  unmodified  and in full  force and effect (or if there have
been  modifications,  that the same is in full force and effect as modified  and
stating the  modifications),  (b) that it is not in default (or if claimed to be
in default,  stating the exact nature of the default),  (c) specifying the dates
to which the Base Rent and Additional Rent have been paid in advance, if any and
(d) whether any security has been  deposited by Tenant with Landlord and, if so,


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<PAGE>

the amount thereof; it being intended that any such statement delivered pursuant
to this  paragraph  may be relied upon as to the facts  contained  therein.

    27.  CONDEMNATION

         27.1 If due to  condemnation  or taking  or  seizure  by any  authority
having the right of eminent  domain (or  transfer in lieu of such  condemnation,
taking or seizure),  (i) more than twenty-five (25%) percent in aggregate of the
total space in the Leased  Premises is actually taken, or (ii) in the event that
more than thirty (30%) percent of the total parking area is actually  taken,  or
(iii) if access to the Leased Premises be denied,  then in the event of any such
takings as  hereinabove  provided,  at the option of  Landlord  or Tenant,  upon
written notice  delivered within thirty (30) days of the date when the authority
exercising the power of eminent  domain takes or interferes  with the use of the
Building or the Leased  Premises,  parking  area or area of access to the Leased
Premises as hereinabove  provided,  the Lease shall terminate,  cease and become
null and void.  In the event of any such taking of the  parking  area and access
driveways as hereinabove described,  the same shall not be cause for termination
of the Lease if Landlord (either directly or acting through the Association) can
substantially  replace and restore the parking  areas and/or  provide  alternate
access driveways,  substantially equivalent to those taken and convenient to the
Leased Premises,  which said  substitution as above provided shall be made so as
not to unduly  interfere with or interrupt  Tenant's  conduct of its business at
the Leased  Premises.  Tenant shall only be responsible  for the payment of rent
until the time of  surrender.  In any event,  Landlord  shall be entitled to all
condemnation proceeds. Under no circumstances shall any part of any condemnation
award  belong to or be claimed by Tenant.  Tenant shall have the right to make a
claim against the condemning  authority for such independent  claim which it may
have and as may be  allowed by law,  for costs and  damages  due to  relocating,


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<PAGE>

moving and other  similar  costs and  charges  directly  incurred  by Tenant and
resulting from such condemnation  provided the same does not in any way diminish
Landlord's  award.

         27.2 In the event of any  partial  taking  which would not be cause for
termination  of the within Lease or in the event of any partial taking in excess
of the percentages  provided in Subsection  27.1 but where neither  Landlord nor
Tenant shall elect to terminate this Lease within the aforesaid  thirty (30) day
period,  then and in either event, the Base Rent and Additional Rent shall abate
in an amount mutually to be agreed upon between Landlord and Tenant based (i) on
the  relationship  that the character and quantum of the property taken bears to
the property  which shall remain after such  condemnation,  and (ii) the cost to
Landlord of restoration of the property if applicable,  as hereinafter provided,
in excess of the net condemnation  award received by Landlord.  In any event, no
part of Landlord's  condemnation  award shall belong to or be claimed by Tenant.
However,  Landlord shall,  to the extent  permitted by applicable law and as the
same  may be  practicable  on the  site of the  Leased  Premises,  and  provided
Landlord's mortgagee makes the condemnation  proceeds available for restoration,
alteration or repair,  at Landlord's  sole cost and expense,  promptly make such
repairs and alterations in order to restore the Building and/or  improvements so
as to make the same tenantable and secure. It is expressly understood and agreed
that in the event Landlord's mortgagee refuses to make the condemnation proceeds
available  for  restoration,  alteration  or  repair,  Landlord  shall  have  no
obligation to restore the Building and/or  improvements.  In such event,  Tenant
shall have the right In terminate  this Lease within thirty (30) days of receipt
of notification from Landlord that the Building will not be restored.

         27.3 Anything in this Paragraph 27  notwithstanding,  Tenant shall have
the right to cancel this Lease in the event that (a)  Landlord's  mortgagee does


                                       44
<PAGE>

not make available to Landlord the condemnation proceeds for rebuilding,  unless
Landlord has obtained a funding  commitment  from  another  qualified  financial
institution  within One hundred eighty (180) days from the data that Landlord is
in receipt of a notice from  Landlord's  mortgagee  regarding the same, or (b) a
condemnation  occurs within the last eighteen  months of the Tent or the Renewal
Term (if exercised by Tenant).

    28.  QUIET ENJOYMENT

         Landlord  further  covenants  that  Tenant,  on paying  the  rental and
performing the covenants and conditions  contained in this Lease, shall and may,
subject to the  provisions of this Lease and Paragraph 49 hereof in  particular,
peaceably  and quietly  have,  hold and enjoy the Leased  Premises  for the term
aforesaid.

    29.  SURRENDER OF LEASED PREMISES

         On the Expiration Date, or earlier  permitted  termination of the Term,
Tenant  shall  quit and  surrender  the  Leased  Premises  in good  and  orderly
condition and repair  (reasonable  wear and tear excepted) and shall deliver and
surrender  the  Leased  Premises  to  Landlord  peaceably,   together  with  all
alterations, additions and improvements in, to or on the Leased Premises made by
Tenant which Landlord elects to retain in accordance herewith. Landlord reserves
the right,  as  hereinbefore  set forth, to require Tenant at Tenant's sole cast
and expense to remove any alterations  installed by Tenant, which covenant shall
survive  the  surrender  and the  delivery  of the Leased  Premises  as provided
hereunder. Prior to the Expiration Date, or earlier permitted termination of the
Term, Tenant shall remove all of its personal property,  including equipment and
trade fixtures,  from the Leased Premises.  All personal property not removed by
Tenant shall be deemed abandoned by Tenant,  and Landlord  reserves the right to
charge the reasonable cost of such removal to Tenant,  which  obligations  shall
survive the Lease termination and surrender  hereinabove provided. If the Leased
Premises are not  surrendered  at the end of the Term,  Tenant  shall  indemnify


                                       45
<PAGE>

Landlord   against  loss  or  liability   resulting  from  delay  by  Tenant  In
surrendering the Leased Premises. In addition, unless Landlord agrees in writing
to  Tenant's  holding  over after the Lease is  terminated,  Tenant's  continued
occupancy  thereafter shall be as a  month-to-month  Tenant upon all of the same
terms and conditions as set forth herein, except that the Base Rent shall be two
(2) times  the Base  Rent  payable  during  the month the Lease was  terminated.
Provided  Tenant is not in default,  Landlord  will inspect the Leased  Premises
with an authorized agent of Tenant prior to the Expiration Date to advise Tenant
as to the  condition  of the Leased  Premises and the  alterations  and personal
property to be removed.

    30.  INDEMNITY

         30.1  Anything  in this  Lease  to the  contrary  notwithstanding,  and
without limiting Tenant's obligation to provide, pay for, and maintain insurance
pursuant to  Paragraph 7  hereunder,  Tenant  covenants  and agrees that it will
indemnify,  defend and save harmless  Landlord against and from all liabilities,
obligations,  damages,  penalties,  claims, costs, losses, charges and expenses,
including without  limitation  reasonable  attorney's fees, which may be imposed
upon or  incurred  by  Landlord  by reason of any of the  following  occurrences
during the term of this  Lease:

              (i) Any  matter,  cause  or thing  arising  out of  Tenant's  use;
occupancy, control or management of the Leased Premises or any part thereof,

              (ii) Any negligence, or acts of omission or commission on the part
of Tenant or any of its agents, contractors, servants, employees, or invitees;

              (iii) Any  failure on the part of Tenant to perform or comply with
any of the covenants, agreements, terms or conditions contained in this Lease on
its part to be performed or complied with; or



                                       46
<PAGE>

              (iv) Any injury or damage to any person or property  occurring  in
or about the  Leased  Premises  which is not due to the fault of  Landlord,  its
agents or contractors.  The indemnity,  defense and hold harmless obligations of
Tenant in this Subsection 30.1 shall extend to the Common Areas of a floor(s) of
the Building or the Building, as the case may be, during any period of time that
Tenant leases all leaseable  portions of a floor(s) or the entire  Building,  as
the case may be.

         30.2 Landlord shall  promptly  notify Tenant of any such claim asserted
against  it and  shall  promptly  send to Tenant  copies of all  papers or legal
process  served  upon it in  connection  with an  action or  proceeding  brought
against  Landlord by reason of any such claim.  Nothing  herein  shall impose on
Tenant any obligation to indemnify Landlord for Landlord's  negligence or in any
way affect  the rights and  obligations  of the  Landlord  and Tenant  hereto in
connection with any waiver of subrogation provision contained herein.

    31.  ENVIRONMENTAL PROVISIONS

         31.1 Unless  otherwise  specified  herein,  the following terms used in
Paragraph 31 shall have the meanings set forth herein, as follows:

         DEP:  New  Jersey  Department  of  Environmental   Protection  and  any
successor agency.

         ENVIRONMENT: Any soil, land, land surface or subsurface strata, surface
waters (including  navigable waters and ocean waters),  ground waters,  drinking
water supply, stream sediment, air and any other environmental medium.

         ENVIRONMENTAL CLAIM: Any complaint,  order,  directive,  claim, action,
investigation,  lawsuit,  demand,  citation,  notice,  proceeding  or  lien,  or
threatened complaint, order, directive, claim, action,  investigation,  lawsuit,
demand,  citation,  notice,  proceeding or lien,  by an federal,  state or local
governments, entity or any other person or entity which is related to or arising


                                       47
<PAGE>

from an Environmental  Discharge,  Environmental  Condition, or any other matter
involving a violation of an Environmental Law by Tenant which affects the Leased
Premises,  the Building,  the Condominium  Common Elements,  or any improvements
located thereon, or the business therein conducted.

         ENVIRONMENTAL  CONDITION: Any contamination or threatened contamination
of any kind or  nature  whatsoever  at,  on or from  the  Building,  the  Leased
Premises, the Condominium Common Elements or any improvements located thereon or
affecting  the  Environment  if any  thereof  which is  caused  by  Tenant,  its
employees or contractors and which violates any  Environmental  Law,  including,
without limitation, the presence of Hazardous Substances or Wastes.

         ENVIRONMENTAL  DISCHARGE:  Any  event  involving  an  emission,  spill,
release  or  discharge  by  Tenant,   its  employees  or  contractors  into  the
Environment,  the Building, the Leased Premises, the Condominium Common Elements
or any improvements  located thereon;  or the sewer,  septic or waste treatment,
storage  or  disposal  systems  servicing  the Land,  the  Building,  the Leased
Premises,  the  Condominium  Common  Elements,  of any  Hazardous  Substances or
Wastes.

         ENVIRONMENTAL  LAWS:  All  present and future  federal,  state or local
laws, ordinances, rules, regulations,  opinions, orders, directives and policies
as the same, from time to time, may be amended, which relate to the Environment,
health or worker safety,  including,  without  limitation,  the Industrial  Site
Recovery Act (ISRA)  N.J.S.A.  l3:1K-6 et seq.;  the Resource  Conservation  and
Recovery Act, 42 U.S.C.  Section 6901 et seq.; the  Comprehensive  Environmental
Response  Compensation  and Liability  Act, 42 U.S.C.  Section 9601 et seq.; the
Clean  Water  Act,  33  U.S.C.  Section  1241  et  seq.;  the New  Jersey  Spill


                                       48
<PAGE>

Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq.; the New Jersey Water
Pollution  Control  Act,  N.J.S.A.  58:10A-l et seq.;  the Worker and  Community
Right-To-Know  Act,  N.J.S.A.  34:5A-1 et seq.; and the Occupational  Safety and
Health Act of 1979, 29 U.S.C. Section 651 et seq.

         EPA: United States  Environmental  Protection  Agency and any successor
agency.

         HAZARDOUS   SUBSTANCES  OR  WASTES:  Any  toxic  substance,   hazardous
substance,  contaminant,  waste, pollutant or other similar product or substance
that may pose a threat to the Environment,  health or worker safety,  or that is
regulated by Environmental Laws.

         31.2 (a)  Tenant,  its  employees,  contractors,  licensees,  invitees,
guests,  subsidiaries,  affiliates,  successors  and/or  assigns and any and all
subtenants,  assignees or occupants of all or any portion of the Leased Premises
will not introduce or store any Hazardous Substances or Wastes (other than in de
minimus amounts typical for office use in compliance  with  Environmental  Laws)
within, or cause an Environmental  Discharge with respect to, the Building,  the
Leased Premises,  and/or the Condominium Common Elements; and Tenant indemnifies
and agrees to hold Landlord  harmless from and against all costs,  liability and
damages as a result  thereof,  to the same extent that Landlord  indemnifies and
holds Tenant  harmless  pursuant to Subsection  31.12 hereof.  This warranty and
indemnity shall survive the expiration or earlier termination of this Lease, and
the  assignment or  subletting of all or part of the Leased  Premises by Tenant,
its subsidiaries, affiliates, successors and/or assigns.

              (b) If Tenant  receives any notice of the  occurrence or existence
of an Environmental  Discharge,  Environmental  Condition  and/or  Environmental
Claim,  then Tenant  shall give  immediate  oral and  written  notice of same to
Landlord, detailing all relevant facts and circumstances.



                                       49
<PAGE>

              (c)  If  Tenant fails  to  comply  with the  requirements  of this
Paragraph 31, including without  limitation the requirements of Subparagraph 31.
2(b),  Landlord shall have the option,  but shall not be obligated,  to exercise
any of its rights as provided in this Lease and Landlord or  representatives  of
Landlord may enter onto the Leased Premises, the Building and/or the Condominium
Common  Elements and take any actions  Landlord deems  necessary or advisable to
investigate,  clean up, remove,  resolve or minimize the impact of, or otherwise
deal  with,  an  Environmental  Discharge,   Environmental   Condition,   and/or
Environmental  Claim upon  Landlord's  receipt of any  notice  from any  person,
entity or other source asserting the occurrence or existence of an Environmental
Discharge,  Environmental  Condition,  and/or  Environmental  Claim on,  from or
pertaining to the Leased Premises.  All costs and expenses  incurred by Landlord
in the  exercise  of any such  rights  shall be  deemed  to be  Additional  Rent
hereunder  and shall be payable by Tenant to  Landlord  in  accordance  with the
provisions of this Lease.

              31.3 Without  limitation upon any other event which may constitute
a default on the part of Tenant under this Lease,  the  occurrence of any of the
following  events  shall  constitute  a default on the part of Tenant under this
Lease, entitling Landlord to all of the rights and remedies provided therefor:

              (a)  If  Landlord  fails  to  receive   immediate   notice  of  an
Environmental Discharge, Environmental Condition and/or Environmental Claim from
Tenant.

              (b)  If any federal, state or local governmental entity asserts an
Environmental  Claim  against  Tenant  or  Landlord;   provided,  however,  such
Environmental  Claim shall not  constitute a default if, within five (5) days of
the occurrence giving rise to the Environmental Claim:



                                       50
<PAGE>

              (1)  Tenant can prove to  Landlord's satisfaction  that Tenant has
commenced and is  diligently  pursuing  either;  (a) a cure or correction of the
event which  constitutes  the basis for the  Environmental  Claim and  continues
diligently to pursue such cure or correction to completion;  or (b)  proceedings
for an injunction,  a restraining  order or other  appropriate  emergent  relief
preventing   such   governmental   entity  or  entities  from   asserting   such
Environmental  Claim,  which  relief  is  granted  with  ten  (10)  days  of the
occurrence giving rise to the Environmental Claims and the injunction,  order or
emergent relief thereafter is not dissolved or reversed on appeal; and

              (2)  Tenant has posted a bond, letter of credit, or other security
satisfactory in form,  substance and amount to Landlord to secure the proper and
complete  cure or correction  of the event which  constitutes  the basis for the
Environmental Claim.

         31.4 In the event that a lien is filed against the Building, the Leased
Premises and/or the  Condominium  Common Elements by reason of the occurrence or
existence  of  any  Environmental  Discharge,   Environmental  Condition  and/or
Environmental Claim, then Tenant, within thirty (30) days from the date that the
lien is placed against the Building,  the Condominium Common Elements and/or the
Leased Premises,  and in any event prior to the date any federal, state or local
governmental   authority  commences  proceedings  to  sell  the  Building,   the
Condominium  Common Elements  and/or the Leased  Premises  pursuant to the lien,
shall: (a) pay the claim and remove the lien from the Building,  the Condominium
Common Elements and/or Leased Premises;  or (b) furnish to Landlord either (i) a
bond  satisfactory  to Landlord in the amount of the claim out of which the lien
arises,  (ii) a cash  deposit  in the  amount of the claim out of which the lien
arises, or (iii) other security satisfactory to Landlord in an amount sufficient
to discharge  the claim out of which the lien arises.



                                       51
<PAGE>

         31.5 Tenant shall furnish Landlord with the true and complete copies of
all sampling and test results, if any, obtained from samples taken at and around
the Building,  the Condominium Common Elements and/or the Leased Premises within
three  (3) days of  Tenant's  receipt  thereof.  Tenant,  simultaneously,  shall
provide to Landlord  (in the event of a  submission  by  Tenant),  or provide to
Landlord within three (3) days of Tenant's receipt (in the event of a receipt by
Tenant), true, accurate and complete copies of any and all documents,  including
without limitation reports, submissions,  notices, orders, directives,  findings
and  correspondence  submitted by Tenant to, or received by Tenant from the DEP,
the EPA, the United States Occupational Safety and Health  Administration or any
other federal, state or local governmental entity, pursuant to any Environmental
Laws. Tenant shall notify Landlord in advance of all meetings  scheduled between
Tenant and any federal,  state or local governmental entity which in any way are
related to any  Environmental  Laws,  Leased  Premises,  the Condominium  Common
Elements  and/or the Building and  Landlord may attend all such  meetings.

         31.6 Tenant shall  permit any  representatives  of Landlord  (including
without limitation agents,  servants,  employees,  legal counsel,  environmental
consultants and engineers)  access during normal business hours, or during other
hours  either by  agreement  of the  Landlord  and Tenant or in the event of any
emergency  related to Environmental  Laws, to: (a) permit any of such parties to
examine,  audit,  copy or make  extracts  from,  any and all books,  records and
documents in possession of Tenant,  its agents,  representatives,  environmental
consultants,  or independent  contractors  relating to Tenant's  compliance with
environmental Laws; (b) inspect the Leased Premises; and/or (c) perform any work
at the Leased Premises to assure that the Leased Premises are in compliance with
all  Environmental  Laws.  Tenant shall not  restrict  access to any part of the
Leased Premises, the Building and/or the Condominium Common Elements, and Tenant


                                       52
<PAGE>

shall not impose any conditions to access. In the event that Landlord chooses to
perform  work at the Leased  Premises to assure that the Leased  Premises are in
compliance  with all  Environmental  Laws,  Landlord  shall  use its  reasonable
efforts to avoid interfering with Tenant's use of the Leased Premises,  it being
agreed  that  Landlord  shall  not be  obligated  to cause  any such  work to be
performed  on  weekends  or on an  overtime  basis to avoid or  reduce  any such
interference,  and upon  completion  of such work shall  repair and  restore the
affected  areas of the Leased  Premises from any damage caused by such work; and
so long as Landlord  uses  reasonable  efforts and  repairs  and  restores  said
damage,  Tenant  shall waive any right it may have,  then or in the  future,  to
assert  any  claim on its  behalf  against  Landlord  or any  representative  of
Landlord  arising from or in anyway  related to  interference  with the right to
quiet use and enjoyment of the Leased  Premises,  or otherwise  relating to such
work, including without limitation loss of income, rent or profits. Tenant shall
pay to Landlord, a sum equal to those amounts due to Landlord in accordance with
the provisions of Subsection 31.13 of this Lease,  which monies shall be payable
by Tenant in accordance  with the  provisions  of  Subparagraph  31. 2(c).

         31.7  Simultaneously  or within ten (10) days from the date  hereof and
within ten (10) days after written  request from Landlord,  Tenant shall deliver
to  Landlord  a  duly  executed  and  acknowledged  affidavit  of  Tenant  or an
authorized officer or official of Tenant, certifying:

              (a)  The  Standard  Industrial  Classification  (SIC)  number,  as
defined or set forth in the Standard Industrial  Classification Manual published
by the Executive  Office of the  President,  Office of Management and Budget (or
such   successor    governmental    publications   which   define   SIC   number
classifications), of Tenant and any other occupant of the Leased Premises; and



                                       53
<PAGE>

              (b)  A detailed description of the operations and processes Tenant
or and any  other  occupant  will  undertake  or has  undertaken  at the  Leased
Premises,  organized  in the  form  of a  narrative  report,  including  without
limitation a description and  quantification of hazardous  Substances and Wastes
previously  or to be generated,  manufactured,  refined,  transported,  treated,
stored, handled or disposed of at the Leased Premises.

              In the event  that  either the SIC  number or the  operations  and
processes  undertaken  by Tenant or any  occupant of the Leased  Premises are to
change,  Tenant  shall  provide  not less than ten (10) days  notice to Landlord
prior to implementing  such change.

         31.8 Except as provided in Subsection  31.13 at no expense to Landlord,
Tenant  promptly  shall  provide all  information  requested  by Landlord or any
federal, state or local governmental entity regarding any Environmental laws and
promptly shall sign such affidavits and  submissions  when requested to do so by
Landlord or any federal,  state or local  governmental  entity.  In the event an
affidavit or submission is inaccurate or incomplete,  Tenant shall cooperate and
provide such information so that it can be made accurate and complete,  at which
time Tenant promptly shall sign same.

         31.9 As a condition  precedent to any proposed subleasing of the Leased
Premises or assignment of this Lease by Tenant, Tenant, at Tenant's own expense,
shall comply with and fulfill all of Tenant's  obligations  under this Paragraph
31  hereof.

         31.10 (a) Without limitation upon any of Tenant's  obligations pursuant
to this  Paragraph 31, and as provided in Subsection  31.13 Tenant,  at its sole
cost and expense,  shall comply with ISRA,  including but not limited to, making
all  submissions  and providing all  information to DEP and otherwise  complying
with all  requirements  of  ISRA.



                                       54
<PAGE>

              (b)  Tenant's obligations  pursuant to this Subsection 31.10 shall
arise if there is any closing,  terminating or  transferring of operations of an
"industrial  establishment"  at the Leased Premises or any other event which may
trigger the applicability of ISRA, caused by Tenant.

              (c)  Provided this Lease is not  previously canceled or terminated
by either  Landlord or Tenant or by operation of law,  Tenant shall commence its
ISRA  submission to the DEP in anticipation of the end of the Term no later than
one (1) year prior to the expiration of the Term.

              (d) Should the DEP determine that a remedial investigation plan be
prepared and that remediation be undertaken at the Leased Premises, the Building
and/or the Condominium  Common Elements,  Tenant,  at its sole cost and expense,
promptly  shall prepare and submit the required  plans and financial  assurances
and carry out the approved plans.

              (e) Tenant  shall not (a)  propose or conduct a cleanup of soil at
the Leased  Premises,  the Building  and/or the  Condominium  Common Elements to
non-residential  cleanup  standards or (b) propose or implement an  "engineering
control" or  "institutional  control" as defined by ISRA at the Leased Premises,
the Building and/or the Condominium Common Elements without obtaining Landlord's
prior written permission.

              (f)  Should  Tenant's  operations  at the Leased  Premises  not be
subject to ISRA,  Tenant, at is sole cost and expense,  shall obtain a letter of
non-applicability  or de minimus  quantity  exemption  from the DEP prior to the
expiration  or  earlier  termination  of the Term  and  promptly  shall  provide
Tenant's  submission  and the DEP's  non-applicability  determination  letter or
exemption letter to Landlord.



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<PAGE>

              (g) If Tenant  fails to  obtain  either:  (a) a  non-applicability
letter; (b) a de minimus quantity exemption; (c) a negative declaration;  or (d)
final  approval  of  the  implementation  of  a  Remedial   Investigation  plan;
(collectively  referred to as "ISRA Compliance") from the DEP; or fails to clean
up the Building,  the  Condominium  Common  Elements  and/or the Leased Premises
pursuant to Paragraph 31, prior to the expiration or earlier  termination of the
Term,  then upon the  expiration or earlier  termination  of the Term,  Landlord
shall have the option  either to consider  the Lease as having ended or to treat
Tenant as a holdover  tenant in possession of the Leased  Premises.  If Landlord
considers the Lease as having ended, then Tenant nevertheless shall be obligated
to promptly  obtain ISRA  Compliance  and fulfill the  obligations  set forth in
Subparagraph 31.10. If Landlord treats Tenant as a holdover tenant in possession
of the Leased Premises,  then Tenant shall be subject to the holdover provisions
of this Lease until such time as Tenant obtains ISRA Compliance and fulfills its
obligations under this Paragraph 31.

              (h) Tenant represents and warrants to Landlord that Tenant intends
to use the Leased  Premises for the Permitted Use, and that said operations have
the following SIC number:  8741.  Tenant's use of the Leased  Premises  shall be
restricted  to the SIC number set forth above unless Tenant  obtains  Landlord's
prior written consent to any change, which consent may be unreasonably  withheld
in Landlord's sole discretion.

         31.11 Tenant agrees that each and every  provision of this Paragraph 31
shall survive the  expiration or earlier  termination of the Term of this Lease,
regardless of the reason for such termination,  it being agreed and acknowledged
that Landlord  would not have entered into this Lease but for the  provisions of
this  Paragraph 31 and the survival  thereof.  Tenant's  failure to abide by the
terms of this Paragraph 31 shall be  restrainable  by  injunction.



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<PAGE>

         31.12 If any  Hazardous  Substances  or Wastes o are  discovered at the
Condominium Common Elements or the Building (including,  without limitation, the
Leased  Premises),  which  were  (a)  introduced  by  Landlord,  its  employees,
contractors,  licensees, invitees, guests, subsidiaries,  affiliates, successors
and/or assigns and (b) any and all subtenants,  assignees or occupants of all or
any  portion  of the  Leased  Premises  prior to  Tenant,  all costs of  removal
incurred by, all liability  imposed upon, or damages suffered by, Tenant because
of the same shall be borne by Landlord,  and  Landlord  hereby  indemnifies  and
agrees to hold Tenant  harmless  from and against all such costs,  liability and
damages,  including,  without limitation, all third-party claims (including sums
paid in  settlement  thereof,  with or without legal  proceedings)  for personal
injury or  property  damage,  actions,  administrative  proceedings,  judgments,
compensatory and punitive damages,  penalties,  fines, costs, losses, attorneys'
fees,  consultants'  or experts'  fees and all costs  incurred in enforcing  the
indemnity.  This warranty and indemnity  shall survive the expiration or earlier
termination  of this Lease,  and the  assignment or subletting of all or part of
the Leased Premises by Tenant, its subsidiaries and/or assigns.

         31.13 Notwithstanding  any  other  provision  of  this  Lease  to  the
contrary,  in the event that ISRA compliance  becomes  necessary at the Building
due to any  action or  inaction  on the part of  Landlord  then,  at  Landlord's
election:

               (a) Landlord shall comply with the  requirements of ISRA inasmuch
as and to the extent that such compliance relates to any Hazardous Substances or
Wastes released,  discharged,  stored or disposed of at the Leased Premises, the
Condominium  Common  Elements or the  Building by  Landlord,  its  employees  or
contractors  and  Tenant  shall be  responsible  for  paying  the  costs of such
compliance relating to such Hazardous Substances or Wastes released, discharged,
stored or disposed of at the Leased Premises, the Condominium Common Elements or


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<PAGE>

the Building by Tenant, its employees, contractors,  licenses, invitees, guests,
subsidiaries,  affiliates, successors and/or assigns and any and all subtenants,
assignees  or  occupants  of all or any  portion of the Leased  Premises,  which
monies  shall  be  payable  by  Tenant  in  accordance  with the  provisions  of
Subparagraph 31 .2(c), or

               (b) Subject to the provisions of Subsection  31.12,  Tenant shall
be responsible for promptly, and within the reasonable time frame established by
Landlord, complying with ISRA inasmuch as and to the extent that such compliance
relates  to  Hazardous  Substances  or Wastes  released,  discharged,  stored or
disposed  of at the Leased  Premises,  the  Condominium  Common  Elements or the
Building by Tenant,  its employees,  contractors,  licenses,  invitees,  guests,
subsidiaries,  affiliates, successors and/or assigns and any and all subtenants,
assignees or occupants of all or any portion of the Leased Premises,  and Tenant
shall be responsible for paying the costs of such ISRA compliance.

    32.  SHORT FORM LEASE

         It is  understood  between the Landlord and Tenant that this Lease will
not be recorded,  but that a short form lease,  describing the Leased  Premises,
giving  the Term of the  Lease,  and making  particular  mention of any  special
clauses as herein  contained,  may only at  Landlord's  option,  be  recorded in
accordance  with  the  laws  governing  and  regulating  the  recording  of such
documents in the State of New Jersey.

    33.  LEASE CONSTRUCTION

         This Lease shall be construed  pursuant to the laws of the State of New
Jersey.

    34.  BIND AND INURE CLAUSE

         The  terms,  covenants  and  conditions  of the within  Lease  shall be
binding  upon and  inure to the  benefit  of  Landlord  and  Tenant  and,  their
respective executors, administrators, heirs, successors and assigns, as the case
may be.



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<PAGE>

    35.  DEFINITIONS

         The neuter gender, when used herein and in the acknowledgment hereafter
set forth,  shall  include all persons and  corporations,  and words used in the
singular  shall include words in the plural where the test of the  instrument so
requires.

    36.  NET RENT

         36.1 It is the purpose and intent of Landlord and Tenant  that,  except
as  otherwise  specifically  set forth  herein,  the Base  Rent  shall be net to
Landlord,  so that the  Lease  shall  yield,  net,  to  Landlord,  the Base Rent
specified in Paragraph 3 hereof in each month during the Term of the Lease,  and
that all costs,  expenses and  obligations  of every kind and nature  whatsoever
relating to the Leased  Premises  which may arise or become due during or out of
the Term of this Lease (except as specifically  set forth in this Lease),  shall
be paid by Tenant,  in  accordance  with the terms hereof.

         36.2 Nothing  herein shall require  Tenant to undertake  obligations in
connection  with  the  sale or  mortgaging  of the  Building,  unless  otherwise
expressly provided in accordance with the terms and conditions of this Lease.

    37.  DEFINITION OF TERM "LANDLORD"

         When the term  "Landlord" is used in the Lease it shall be construed to
mean and  include  only the  owner of the fee  title of the  Building.  Upon the
transfer by Landlord of the fee title hereunder, Landlord shall advise Tenant in
writing by certified  mail,  return receipt  requested of the name of Landlord's
transferee.  In such event, the then Landlord shall be  automatically  freed and
relieved from and after the date of such transfer of title of all liability with
respect to the  performance of any of the covenants and  obligations on the part
of Landlord  herein  contained to be performed  after the date of the  transfer,
provided any such transfer and  conveyance  by Landlord is expressly  subject to
the assumption by the grantee or transferee of the obligations of Landlord to be


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<PAGE>

performed  pursuant  to the terms and  conditions  of the within  Lease from and
after the date of the transfer.

    38.  COVENANTS OF FURTHER ASSURANCES

         If  Landlord's   mortgagee  or  any  future   mortgagee  shall  request
reasonable  modifications in this Lease, Tenant will not unreasonably  withhold,
or unreasonably  delay its consent thereto,  provided that such modifications do
not increase the obligations of Tenant hereunder or materially  adversely affect
the  leasehold  interest  hereby  created or Tenant's  use and  enjoyment of the
Leased Premises.

    39.  REMEDIES

         39.1 The  rights  and  remedies  given to the  Landlord  and Tenant are
distinct,  separate and cumulative  remedies,  and none of them,  whether or not
exercised  shall be  deemed  to be in  exclusion  of any of the  other.

         39.2 In addition to any other legal remedies for violation or breach by
or on the part of Tenant,  or by anyone holding or claiming under Tenant, of the
restrictions,  agreements or covenants of this Lease on the part of Tenant to be
performed  or  fulfilled,  such  violation or breach  shall be  restrainable  by
injunction at the suit of Landlord.

         39.3 No  receipt of money by  Landlord  from any  receiver,  trustee or
custodian or debtor in possession shall  reinstate,  continue or extend the Term
of this Lease or affect any notice  theretofore  given to Tenant, or to any such
receiver,  trustee, custodian or debtor in possession, or operate as a waiver or
estoppel of the right of Landlord to recover  possession of the Leased  Premises
for any of the causes therein  enumerated by any lawful remedy;  and the failure
of  Landlord to enforce any  covenant  or  condition  by reason of its breach by
Tenant  shall not be deemed to void or affect the right of  Landlord  to enforce
the same  covenant or  condition on the  occasion of any  subsequent  default or
breach.



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<PAGE>

    40.  COVENANT AGAINST LIENS

                  Except as set forth in  Paragraph  43,  Tenant  agrees that it
shall not encumber, or suffer or permit to be encumbered, the Leased Premises or
the fee thereof by any lien,  charge or  encumbrance,  and Tenant  shall have no
authority to mortgage or hypothecate this Lease in any way whatsoever.

    41.  EXPANSION OPTION

         In the event  Landlord is unable to deliver the Advance  Premises,  the
Sprint Premises and/or the SAS Premises prior to February 28, 2001 in accordance
with the terms of this Lease,  Tenant shall have an expansion option ("Expansion
Space  Option")  which shall require  Landlord to, prior to offering the same to
any party,  first offer to lease to the Tenant  named  herein any space  located
within the Building (the "Expansion  Space") upon the same terms,  covenants and
conditions  contained  in this Lease,  for a term to  commence on the  Expansion
Space Commencement Date (hereinafter defined) and to end on the Expiration Date,
unless sooner cancelled or terminated  pursuant to any of the terms,  conditions
or covenants of this Lease or pursuant to this  Paragraph.  If and when,  during
the Term, all or any portion of the Expansion  Space first becomes,  or is first
likely  to  become  available,  Landlord  shall  give  Tenant  notice  as to the
anticipated  date that the  subject  portion  of the  Expansion  Space is, or is
likely to become,  available for occupancy by Tenant ("Option  Notice").  Tenant
may exercise the Expansion Space Option by delivering  written notice ("Exercise
Notice") to Landlord  within ten (10)  business days after receipt of the Option
Notice,  time being of the essence as to such ten (10)  business day period.  If
Tenant fails or refuses to timely  exercise  such option,  the  Expansion  Space
Option shall no longer exist and this  Paragraph 41 shall be of no further force
or effect as to the portion of the  Expansion  Space not  accepted by Tenant but
shall remain in full force and effect on any remaining  Expansion Space that has
not been included in any Option  Notice.



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<PAGE>

         In the event  Tenant  duly  exercises  the  Expansion  Space  Option in
accordance  with the  provisions of this Paragraph 41, the Lease shall be deemed
modified as of the Expansion Space Commencement Date as follows:

              (a)  The Leased Premises shall include all (but not less than all)
of the  available  Expansion  Space as  described  in the Option  Notice for all
purposes of this Lease;

              (b)  Tenant shall accept the Expansion  Space in the condition set
forth in Subsection 1.4 hereof at the then-applicable  Base Rent provided for in
Schedule "D" for such Expansion Space and subject to any CPI Formula increase as
set forth on Schedule  "D" for such  portion of the  Expansion  Space hereof and
Landlord shall not provide to Tenant any  allowances  (e.g.,  moving  allowance,
construction allowance, and the like) or other tenant inducements.

              (c)  Landlord and Tenant shall execute an amendment to this Lease,
effective as of the Expansion  Space  Commencement  Date.  The  Expansion  Space
Commencement  Date  shall  be the day on  which  the  Landlord  delivers  vacant
possession of the applicable Expansion Space to Tenant free of leases, tenancies
and  occupancies  provided,  however,  if Tenant,  or any other person or entity
claiming  by,  through or under  Tenant,  shall occupy all or any portion of the
Expansion  Space  for the  conduct  of  business  prior to the  Expansion  Space
Commencement  Date, then the Expansion Space Commencement Date shall apply as of
such earlier date and Tenant  shall pay and perform the  obligations  to be paid
and performed by Tenant,  including,  without limitation,  the obligation to pay
Basic Rent and Additional  Rent.

         Tenant's rights hereunder shall be subject to the now-existing  renewal
rights of other tenants in the Building.



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<PAGE>

         As to any  Expansion  Space  that  has not been  incorporated  into the
Leased  Premises by  amendment as provided for in this  Paragraph  41,  Tenant's
rights hereunder shall terminate if (i) the Expansion Space Option is terminated
as provided in this  Paragraph 41 or this Lease or Tenant's  right to possession
of the Leased Premises is terminated, (ii) Tenant assigns any of its interest in
this Lease or sublets any portion of the Leased  Premises other than as provided
for in Subsection  11.7 herein,  (iii) a default  exists  beyond any  applicable
notice  and  grace  period  at the time of  Tenant's  Exercise  Notice or on the
Expansion Space  Commencement  Date, and/or (iv) Tenant fails to timely exercise
its right  hereunder,  time being of the essence  with  respect to the  exercise
thereof.  In any of such  events,  Landlord  may lease  all or a portion  of the
Expansion  Space  to  third  parties  on  such  terms  as  Landlord  may  elect.

         Notwithstanding anything contained in the Lease to the contrary, Tenant
hereby waives the right to rescind this Lease in the event all or any portion of
the  Expansion  Space does not become  available  during the Term of this Lease.

         Upon request of either  Landlord or Tenant,  from time to time, the non
requesting  party  shall  execute  and  deliver  to  such  requesting  party  an
instrument  in form and substance  reasonably  satisfactory  to such  requesting
party,  stating that Tenant has or has not exercised the Expansion  Space Option
contained in this Paragraph 41.

    42.  FINANCIAL STATEMENTS

         Tenant  agrees  to  Landlord's   request  to  file  with  Landlord  and
Landlord's  mortgagee,  annually, a copy of its annual statement,  provided said
statements are treated as confidential information.

    43.  CONSTRUCTION LIEN

         Unless  otherwise  provided by law, any contract(s)  executed by Tenant
for alterations, additions or improvements to the Leased Premises which Landlord


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<PAGE>

permits  Tenant  to do  pursuant  to  Paragraph  19,  whether  in the  nature of
erection,  construction,  alteration or repair, shall not be deemed to have been
authorized  by  Landlord  merely by reason of any  consent  given by Landlord to
Tenant to improve the Leased Premises unless Landlord  specifically reviews such
contract(s) and consents in writing to such contract(s).  Landlord,  in granting
its consent to Tenant for any such alterations, additions or improvements to the
Leased  Premises,   shall  have  no  obligation  to  authorize  in  writing  any
contract(s)  executed  by Tenant for such work,  it being the  intention  of the
Landlord and Tenant that to the extent permitted by the New Jersey  Construction
Lien Law, N.J.S.A.  2A:44A-1 et seq. (the  "Construction Lien Law") any liens by
any contractor,  subcontractor or supplier who provides work, services, material
or equipment  to Tenant  pursuant to such  contract(s)  shall attach only to the
leasehold  interest of Tenant.  Tenant shall pay promptly all persons furnishing
work,  equipment,  services or materials  with respect to any work  performed by
Tenant or its  contractor  on or about  the  Leased  Premises.  In the event any
construction  or other liens or any other notices of claim,  including,  without
limitation any Notice of Unpaid  Balance and Right to File Lien ("lien"),  shall
at any time be filed  pursuant to the  Construction  Lien Law by reason of work,
services,  equipment or materials  performed or furnished to Tenant or to anyone
holding the Leased Premises  through or under Tenant,  Tenant shall  immediately
notify  Landlord of the same and shall forthwith cause the same to be discharged
by paying the claimant  and  obtaining a discharge or by filing a surety bond or
making a deposit of funds with the Clerk of the Superior  Court of New Jersey as
provided  in  N.J.S.A.  2A:44A-3  1. If  Tenant  shall  fail to cause  such lien
forthwith to be so  discharged  in  compliance  with all the  provisions  of the
Construction  Lien Law within ten (10) business days after being notified of the
filing  thereof,  then,  in addition  to any other right or remedy of  Landlord,
Landlord may discharge  the same by paying the amount  claimed to be due and the


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<PAGE>

amount so paid by Landlord  together with interest thereon at three (3%) percent
over the prime rate as published by The Wall Street Journal,  Northeast Edition,
in its listing of "Money Rates" and all costs and expenses, including reasonable
attorneys'  fees  incurred by Landlord in procuring  the discharge of such lien,
shall be due and payable by Tenant to Landlord as  Additional  Rent on the first
day of the next following month, or may, at Landlord's  election,  be subtracted
from any sums owing to Tenant.  Tenant shall provide Landlord with copies of any
contracts,   subcontracts,   supply  contracts,   equipment  leases,  consulting
agreements or similar  documents and any amendments  thereto with respect to any
work performed by Tenant or its  contractor(s)  on or about the Leased  Premises
within ten (10) days of  execution of same.  Tenant,  without  further  request,
written or oral,  is hereby  required and agrees to provide  Landlord each month
during any period work is performed by Tenant or its  contractor(s)  on or about
the Leased Premises with an accurate and full list,  verified under oath, of the
names and addresses of each  contractor,  subcontractor,  construction  manager,
design  professional,  supplier  or other  persons or entities  providing  work,
services, materials or equipment who may have a right to file a lien pursuant to
the Construction  Lien Law. Said list shall be in compliance with all provisions
of the Construction Lien Law.

    44.  BROKER'S COMMISSION

         Tenant and Landlord  represent and warrant to each other that there are
no claims or  brokerage  commissions  or finder's  fees in  connection  with the
execution  of the  Lease.  Landlord  and  Tenant  agree to  indemnify  the other
against,  and hold the other harmless from, all liabilities  arising from claims
of any  entity  (including,  without  limitation,  the cost of  counsel  fees in
connection  therewith)  arising out of acts by the warranting party in violation
of its covenant herein.



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<PAGE>

    45.  LANDLORD'S LIABILITY

         Notwithstanding  anything  hereinbefore  set  forth  to  the  contrary,
neither  Landlord nor any partner of Landlord shall have any personal  liability
in connection with its obligations  under this Lease,  and Tenant agrees to look
solely to Landlord's interest in the Building and Condominium Common Elements to
enforce any claim it may have against Landlord.

    46.  ARBITRATION

         Except as otherwise  provided in  Paragraphs  15 and 16 or elsewhere in
this Lease with respect to any summary dispossess proceedings for non-payment of
rent,  in the event of any  controversy  between  Landlord and Tenant  hereafter
arising  out of any of the  provisions  of this  Lease or out of the  refusal of
Landlord or Tenant to observe or perform any of the provisions hereof,  then, if
the Landlord and Tenant have not agreed to settle such controversy within thirty
(30) days after the same shall have arisen, either Landlord or Tenant may submit
such matter to a binding  arbitration in New Jersey before three (3) arbitrators
of the American Arbitration Association (or any successor thereto) in accordance
with its commercial Rules then obtaining.  In the event of the failure,  refusal
or inability of the American Arbitration  Association (or any successor thereto)
to act,  application  may be made for such  appointment  to a court of competent
jurisdiction.  The  determination  made by the arbitrators so appointed shall be
conclusive upon the Landlord and Tenant and judgment may be entered on the award
of the  arbitrators  in any court of  competent  jurisdiction.  The  request for
formal  arbitration may be made by either Landlord or Tenant upon written notice
to the other party which notice shall include an express statement of the matter
in dispute.  The arbitrators may only interpret and apply the terms of the Lease
and may neither change such terms nor deprive  either  Landlord or Tenant of any
rights hereunder. The expenses of arbitration shall be borne equally by Landlord


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and Tenant,  except that  Landlord and Tenant shall pay their own counsel  fees.
The existence of any dispute or the submission  thereof to arbitration shall not
affect or delay the  performance by Tenant of its  obligations  under the Lease.
Tenant  shall  continue to pay all rent and other sums owing under the Lease and
shall make any  required  deposits (as  reasonably  determined  by Landlord,  if
necessary)  without prejudice to Tenant's rights;  and, if required by reason of
the determination of the arbitrators, Landlord shall make any appropriate refund
to Tenant.

    47.  SUCCESSORS

         All rights  and  liabilities  herein  given to, or  imposed  upon,  the
Landlord and Tenant shall extend to and bind the  respective  heirs,  executors,
administrators,  successors  and  assigns of Landlord  and Tenant;  and if there
shall be more than one (1) tenant, they shall all be bound jointly and severally
by the terms,  covenants and agreements herein. No rights,  however, shall inure
to the benefit of any assignee of Tenant unless the  assignment to such assignee
has been made in accordance with Paragraph 11 hereof.

    48.  SUBORDINATION OF LEASE

         48.1  Provided  that Landlord  obtains a  non-disturbance  agreement as
provided  for in  Subsection  48.2,  this  Lease  is and  shall be  subject  and
subordinate  at all times to the lien of any mortgages or ground leases or other
such  encumbrances  now or hereafter  placed on the Building and Leased Premises
and to all renewals, modifications,  consolidations, replacements and extensions
thereof  (all  of  the  foregoing   mortgages,   ground  leases  or  other  such
encumbrances being hereafter referred to as the "Superior Mortgage") to the full
extent of the principal  amount and any other sums secured  thereby and interest
thereon,  as though  the  Superior  Mortgage  had been  executed,  acknowledged,
delivered,  recorded and properly indexed prior to the execution and delivery of
this Lease without the necessity of any further instrument or act on the part of
Tenant to  effectuate  such  subordination,  but Tenant  covenants and agrees to


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<PAGE>

execute  and  deliver  upon  demand  such  further   instrument  or  instruments
evidencing such  subordination of the Lease to the lien of any Superior Mortgage
as shall be desired by a mortgagee or proposed  mortgagee of a Superior Mortgage
(the holder of such Superior Mortgage is hereinafter  referred to as a "Superior
Mortgagee").

         48.2  Landlord shall, as a condition to the subordination  set forth in
Subsection 48.1  hereinabove  and as a condition of this Lease,  obtain from any
Superior  Mortgagee a  nondisturbance  agreement (in such  Superior  Mortgagee's
standard form)  permitting  Tenant to use and occupy the Leased Premises so long
as it is not in default  under the Lease,  provided  Tenant  attorns to any such
Superior Mortgagee and further provided that Tenant shall execute and deliver to
Landlord  concurrently  with Tenant's  execution and delivery of this Lease such
nondisturbance  agreement.  Any  and  all  costs  associated  with  obtaining  a
nondisturbance  agreement  from  any  Superior  Mortgagee  shall  be paid for by
Tenant.

    49.  ATTORNMENT

         49.1 Tenant  agrees that it will attorn to and  recognize  the Superior
Mortgagee  or (i)  any  purchaser  at a  foreclosure  sale  under  the  Superior
Mortgage;  (ii) any  transferee  who acquires  possession or title to the Leased
Premises by deed in lieu of  foreclosure  or by any other  means;  and (iii) the
successors and assigns of such purchasers  and/or  transferees,  as its Landlord
for the unexpired balance (and any extensions,  if exercised) of the Term of the
Lease upon the same terms and conditions set forth in the Lease. Such attornment
shall  automatically  become  effective,  without the need for  execution of any
further  instrument by Landlord and/or Tenant;  provided,  however,  that Tenant
will, upon request by the Superior Mortgagee, or any subsequent owner, execute a
written agreement whereunder Tenant will attorn to the Superior Mortgagee or any
subsequent owner, affirm Tenant's  obligations under the Lease, and agree to pay


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<PAGE>

all  rentals  and  charges  then due or to become due as they  become due to the
Superior  Mortgagees  or such  subsequent  owner.

         49.2 In the event  that the  Superior  Mortgagee  shall  succeed to the
interest of Landlord  under the Lease,  and/or to title to the Leased  Premises,
Tenant hereby agrees that the Superior  Mortgagee (or any other party  acquiring
the Leased  Premises  upon a  foreclosure  sale or from the Superior  Mortgagee)
shall not be (i) liable for any act or omission of any prior landlord (including
Landlord);  (ii) liable for the return of any security deposit to the extent not
paid over to the Superior  Mortgagee;  (iii)  subject to any offsets or defenses
which Tenant might have against any prior landlord  (including  Landlord);  (iv)
bound by any Base Rent or Additional  Rent which Tenant might have paid for more
than the current month to any prior landlord (including  Landlord) to the extent
not paid  over to the  Superior  Mortgagee;  or (v)  bound by any  amendment  or
modification  of the Lease made after the date of the Superior  Mortgage  unless
Tenant has obtained the prior express written consent of the Superior  Mortgagee
to such amendment or modification.

         49.3  Tenant  shall have no right to appear in any  foreclosure  action
under  the  Superior  Mortgage  unless  Tenant  is  named  as a  party  to  such
foreclosure action.

    50.  ACCEPTANCE OF ASSIGNMENT OF LEASES

         50.1 Tenant  consents to any  Assignment of Leases from Landlord to any
Superior  Mortgagee.  Tenant  agrees that,  in the event the Superior  Mortgagee
becomes a  mortgagee-in-possession  of the Building or otherwise  takes title to
the Building upon demand or notice as provided in the  Assignment,  Tenant shall
make  payment  of all  monies  due  under  the Lease  directly  to the  Superior
Mortgagee.  Any such payment shall be made  notwithstanding any right of setoff,
defense by way of  counterclaim  or  otherwise  which  Tenant  may have  against
Landlord,  or any termination or right to termination of the Lease, and any such


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payment  shall be final as against the  Superior  Mortgagee  (but not as against
Landlord).  Tenant will not seek to recover from the Superior  Mortgagee for any
reason whatsoever any monies paid by Tenant to the Superior  Mortgagee by virtue
of the Assignment of this Lease.

    51.  INTENTIONALLY OMITTED

    52.  RIGHT TO CURE DEFAULTS

         52.1 Tenant shall promptly notify any Superior  Mortgagee by registered
or certified mail, return receipt requested, of the occurrence of any default or
event of default by Landlord  under the Lease or any event which with the giving
of notice or passage of time or both could become an event of default  under the
Lease.

         52.2 If Landlord  shall have failed to cure the event of default within
the time  provided  in the  Lease,  then the  Superior  Mortgagee  shall have an
additional  thirty (30) day period  within which to cure the event of default or
if it cannot be cured within that time, such additional time as may be necessary
to effect the cure if within the thirty (30) day period the  Superior  Mortgagee
has  commenced  and is  diligently  pursuing the remedies  necessary to cure the
event of default (including, without limitation, the commencement of foreclosure
proceedings,  if necessary  to effect the cure),  in which event the Lease shall
not be terminated.

    53.  ESTOPPEL CERTIFICATES AND NOTICES

         53.1 Tenant shall deliver to the Superior  Mortgagee or Landlord within
ten  (10)  days  of a  request,  from  time  to  time,  certificates  as to  the
continuance  of the Lease in effect,  payment of rents  thereunder  and  related
matters.

         53.2  Landlord  shall  deliver  to  Tenant  within  ten (10)  days of a
request,  from time to time,  certificates as to the continuance of the Lease in
effect, payment of rents thereunder and related matters.



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         53.3 Tenant shall from the date hereof send to any Superior  Mortgagee,
upon  written  request,  a copy of any notice or  statement  required to be sent
under the Lease to  Landlord,  at the same time such notice is sent to Landlord.

    54.  MISCELLANEOUS

         54.1 Tenant  represents (a) that it is a corporation  validly  existing
and in good standing  under the laws of the State of Delaware;  and (b) that the
officer  executing and delivering  this Lease has been duly  authorized to enter
into this Lease; and (c) that the execution and delivery of this Lease by Tenant
do not and shall not violate any  provision  of any  by-law,  agreement,  order,
judgment,  governmental  regulation or any other obligation to which Tenant is a
party or is subject.

         54.2 Tenant  represents  and warrants  that it is now the sole owner of
the leasehold  estate created by the Lease and it shall not hereafter assign the
Lease,  except as permitted by the terms thereof,  and that  notwithstanding any
such  assignment  or any  sublease of the Leased  Premises,  Tenant shall remain
primarily  liable for the observance and  performance of all of its  obligations
and agreements under the Lease.

         54.3 The invalidity or  unenforceability  of any provision of the Lease
in any instance shall have no effect upon the validity or  enforceability of the
remainder of the Lease or the validity or  enforceability  of such  provision in
any other  instance.

         54.4 The Lease contains the entire  agreement  between the Landlord and
Tenant concerning the Leased Premises,  and the Landlord and Tenant  acknowledge
that its  execution  has not been induced by any  representation  or warranty by
Landlord or Tenant (or any representative or broker) not set forth herein.

         54.5 The Lease may be modified and the provisions  hereto may be waived
only by the signed  written  agreement  of the  Landlord  and  Tenant.



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         54.6 The captions  herein are for  convenience  of  reference  only and
shall not be deemed to define,  limit or describe the scope or intendment of any
provisions of this Lease.

         54.7 The  liability of Holdings and Telecom shall be joint and several.

         54.8 Any monies owed by  Landlord  to Tenant  under this Lease shall be
paid to Holdings  unless  Landlord is directed  otherwise in writing by Holdings
and Telecom prior to the applicable disbursement of monies.

    55.  CONTINGENCIES

         The delivery of the Advance  Premises,  the Sprint Premises and the SAS
Premises  to Tenant is  contingent  upon  Landlord's  ability  to  relocate  the
occupants of the Advance Premises, the Sprint Premises ("Sprint") and/or the SAS
Premises  ("SAS") to either of the buildings to be  constructed at 1420 and 1430
State Highway 206,  Bedminster,  New Jersey (the  "Relocations")  and Landlord's
inability  to  effectuate  any or all of the  Relocations  shall not  affect the
validity of the Lease or the terms hereof.  In order to make the Sprint Premises
and the SAS Premises available for Tenant, Landlord is currently negotiating the
Sprint and SAS  Relocations  at terms that  Landlord  considers  to be at market
economics. Should the final terms of the Sprint and/or SAS Relocations require a
reduction from such market  economics,  Landlord shall promptly notify Tenant of
any  required  increase  in Base Rent  applicable  to the  Sprint  Premises,  if
affected by the Sprint Relocation,  and/or the SAS Premises,  if affected by the
SAS  Relocation.  The new Base  Rents for the  Sprint  Premises  and/or  the SAS
Premises  shall be deemed  accepted by Tenant and  incorporated  into this Lease
unless  Tenant shall,  within five (5) business  days from  Tenant's  receipt of
Landlord's notification, notify Landlord of its election not to lease one or all
of the premises  specified in Landlord's  notice and,  except as provided for in
Paragraph  41,  thereafter  Tenant  shall  forfeit  any and all  rights  granted
hereunder regarding such premises.



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    56.  SECURITY DEPOSIT

         56.1  Contemporaneously  with the execution of this Lease, Tenant shall
pay to  Landlord  the  Security  Deposit  in the  amounts  and at such  times as
specified  in the  Lease  Summary,  which  shall be held by  Landlord  to secure
Tenant's  performance of its obligations  under this Lease. The Security Deposit
is not an advance  payment of Base Rent or Additional Rent or a measure or limit
of Landlord's damages upon a default.  Landlord may, from time to time following
a default beyond any applicable notice and grace period and without prejudice to
any other  remedy,  use all or a part of the  Security  Deposit to  perform  any
obligation Tenant fails to perform hereunder.  Following any such application of
the  Security  Deposit,  Tenant  shall pay to  Landlord  on demand the amount so
applied  in order to  restore  the  Security  Deposit  to its  original  amount.
Provided that Tenant has performed all of its obligations  hereunder  subject to
any applicable notice and grace period,  Landlord shall, within thirty (30) days
after the Term (and if applicable,  the Renewal Term) ends, return to Tenant the
portion of the  Security  Deposit  which was not  applied  to  satisfy  Tenant's
obligations. Any cash portion of the Security Deposit may not be commingled with
other funds,  and shall be held by Landlord in an interest  bearing account in a
New York, New York  metropolitan  area or northern New Jersey federally  insured
commercial  bank (i) organized under the laws of the United States of America or
any state thereof;  (ii) doing  business in the United States of America;  (iii)
subject  to state or  federal  banking  regulatory  authorities;  (iv)  having a
combined  capital,  surplus and undivided profits (less any undivided losses) of
not less than five hundred million dollars  ($500,000,000.00);  and (v) having a
commercial  paper  rating  of A-1 (or the  equivalent)  from  Standard  & Poor's
Corporation or P-1 (or the equivalent) from Moody's Investors Service,  Inc. and
otherwise reasonably acceptable to Landlord  (collectively "Bank Criteria").  If
Landlord  transfers  its  interest  in the Leased  Premises  and the  transferee
assumes  Landlord's  obligations  under this Lease, then Landlord may assign the


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Security Deposit to the transferee and Landlord thereafter shall have no further
liability  for the return of the  Security  Deposit.

         56.2 Tenant shall have the right to deliver to Landlord  unconditional,
irrevocable  commercial letters of credit  (individually  "Letter of Credit" and
when referring to all of the required letters of credit,  collectively  "Letters
of Credit") in  substitution  for the cash Security  Deposit (but not as a trust
fund).  Bach Letter of Credit shall (a) be in the  applicable  Security  Deposit
amount  as  provided  for in the  Lease  Summary  (b) be in form  and  substance
satisfactory to Landlord; (c) meet the Bank Criteria; (d) be immediately payable
in full or partial draws upon presentation of the Letter of Credit to the issuer
together  with a letter  on  Landlord's  letterhead  stating  that  Landlord  is
entitled to the Letter of Credit  proceeds;  (e) be made expressly  transferable
and assignable to the Landlord from time to time of the Building,  the holder or
trustee,  as applicable,  under any mortgage,  and any receiver of such Landlord
(it being  agreed that the Letter of Credit  shall be  delivered  only to any of
such persons or entities);  (f) include an "evergreen"  provision which provides
that the Letter of Credit  shall be  automatically  renewed  on an annual  basis
unless the issuer  delivers prior written notice of  cancellation to Landlord at
lease thirty (30) days prior to the (i) initial  expiration,  or (ii) expiration
of any renewal thereof, such that the Letter of Credit remains in effect through
the  thirtieth  (30th) day after the  expiration  of the Lease Term and  Renewal
Term, if  applicable;  and (g) have an initial  expiration  date of at least 365
days from the Commencement Date. Landlord shall be permitted to immediately draw
upon all or any of the  Letters of Credit (not as a trust fund) and apply all or
a portion of the  proceeds  thereof  necessary  to  compensate  Landlord for any
matter to which the Security Deposit is permitted to be applied  hereunder,  and
to retain the remaining proceeds thereof for the remainder of the Lease Term and


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Renewal Term, as applicable,  as a cash Security Deposit.  Within three (3) days
after written  notice of  Landlord's  use of all or a portion of the proceeds of
all or any of the Letters of Credit,  Tenant shall deposit with Landlord cash in
an amount  sufficient  to replace the funds so used by Landlord  and such entire
Security  Deposit shall  thereafter  be held by Landlord in cash.  Landlord also
shall have the right to draw upon all or any of the  Letters of Credit in any of
the following  circumstances,  without any further  notice of any kind except as
expressly  specified in this Subsection  56.2: (i) if Tenant fails to deliver to
Landlord a  replacement  Letter(s)  of Credit  complying  with the terms of this
Subsection  56.2  (from a  financial  institution  other  than  the  issuer,  or
successor thereto, of the then-current Letter(s) of Credit) within ten (10) days
after demand by Landlord  after the financial  condition of the issuing bank (or
the  successor  thereto)  is  reduced  below a rating  as set  forth in the Bank
Criteria;  or (ii) if Tenant fails to provide Landlord with any required renewal
or replacement Letter of Credit complying with the Bank Criteria and other terms
of this Subsection 56.2 at least  twenty-five  (25) days prior to the expiration
of the then-current Letter of Credit.  Landlord shall not be required to pay any
interest on any  proceeds  drawn under the Letters of Credit or to maintain  any
such  proceeds  in a separate  account.  Within  thirty  (30) days after (i) the
expiration of the Term or Renewal Term,  as  applicable,  of this Lease and (ii)
Tenant's  vacating the Leased  Premises,  Landlord  shall  return any  remaining
Letters of Credit and all  proceeds  thereof  being held by Landlord  (less such
portions  thereof as Landlord may have used to satisfy  Tenant's  obligations or
liabilities to Landlord and less such other sums as Landlord  reasonably expects
to be due from Tenant).  Tenant  expressly  waives any right it might  otherwise
have to prevent Landlord from drawing on all or any of the Letters of Credit and
agrees that an action for damages and not injunctive or other  equitable  relief
shall be Tenant's sole remedy in the event Tenant disputes  Landlord's  claim to


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any such amounts.  Neither the cash  Security  Deposit nor any drawing under the
Letters  of Credit  shall be deemed to be  liquidated  damages in the event of a
breach  by  Tenant of this  Lease.

         56.3  Provided  that Tenant shall not have  defaulted in the payment or
performance of its  obligations  under this Lease and no event shall exist which
but for the giving of notice and/or the passage of time would  constitute such a
default, Landlord shall permit the Security Deposit to be reduced by $246,750.00
at the end of the sixth lease year and shall permit the  Security  Deposit to be
reduced by $246,750.00  after each lease year  thereafter  through and including
the  twelfth  lease  year.  Notwithstanding  anything  contained  here in to the
contrary  a Security  Deposit in the amount of one month of the then  applicable
monthly gross rent (Base Rent and Tenant's  Proportionate  Share of all expenses
set forth in Subsection 5.3) payment shall remain as a Security  Deposit through
the Term and any extension  thereof.  No such reduction in any of the Letters of
Credit  shall be made by the  issuer  unless  Landlord  shall have  delivered  a
written request to the issuer on Landlord's  letterhead  signed by an authorized
representative of the Landlord requesting that such change be made.

         For purposes of this Subsection 56.3,  "lease year" shall mean a period
of twelve (12) consecutive  calendar  months,  the first of which shall begin on
the Commencement Date,  provided that if the Commencement Date is other than the
first day of a calendar month, the first lease year will consist of such initial
partial  month and the next  succeeding  twelve (12)  calendar  months.

         56.4 In  establishing  any bank account under this  Paragraph 56, in no
event shall Landlord be liable or responsible for the loss of funds arising from
the insolvency or financial condition of the bank. Landlord shall only be liable
to Tenant  for the loss of the funds  arising  solely  from  Landlord's  willful
misconduct.



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                  [Signatures Appear On Following Page]



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<PAGE>


         IN WITNESS  WHEREOF,  the Landlord  and Tenant have  hereunto set their
hands and seals or caused  these  presents to be signed by its proper  corporate
officers and caused its proper  corporate seal to be hereunto  affixed,  the day
and year first above written. ATTEST: LANDLORD: A-K BEDMINISTER ASSOCIATES, L.P.
BY: ADVANCE REALTY ADVISORS, INC., its Managing General Partner


/S/                                        By: /S/ PETER J. COCOZIELLO
----------------------------------             ---------------------------------
                                           Name:  Peter J. Cocoziello
                                           Title: President

ATTEST:                                    TENANT:
                                           KMC TELECOM HOLDINGS, INC.


/S/ ALAN M. EPSTEIN                        By: /S/ WILLIAM H. STEWART
----------------------------------             ---------------------------------
                                           Name:  William H. Stewart
                                           Title: CFO

ATTEST:                                    KMC TELECOM, INC.


/S/ ALAN M. EPSTEIN                        By: /S/ WILLIAM H. STEWART
----------------------------------             ---------------------------------
                                           Name:  William H. Stewart
                                           Title: CFO