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                                                                    EXHIBIT 10.4

                                  PSINET INC.
                        STRATEGIC STOCK INCENTIVE PLAN
                      (As Amended on September 28, 1999)


1.       BACKGROUND AND PURPOSE
         ----------------------

         PSINet Inc. (the "Company") hereby establishes the PSINet Inc.
Strategic Stock Incentive Plan (the "Plan").  The purpose of this Plan is to
enable the Company and its subsidiaries, in connection with acquisitions,
mergers, strategic alliances, joint ventures and other business combinations and
transactions, to attract and retain employees and consultants and provide them
with an incentive to maintain and enhance the Company's and its subsidiaries'
long-term performance record.  It is intended that this purpose will best be
achieved by granting eligible employees and, subject to the terms of this Plan,
consultants incentive stock options ("ISOs"), non-qualified stock options
("NQSOs"), stock appreciation rights ("SARs") and restricted stock grants,
individually or in combination, under this Plan pursuant to the rules set forth
in Sections 83, 162(m), 421 and 422 of the Internal Revenue Code of 1986, as
amended (the "Code").  It is intended that ISOs, SARs, NQSOs and restricted
stock grants will be awarded under this Plan in connection with acquisitions,
mergers, strategic alliances and other business combinations and transactions
effected or to be effected by the Company and/or one or more of its
subsidiaries.

2.       ADMINISTRATION
         --------------

         The Plan shall be administered by a Committee of the Company's Board of
Directors (the "Committee").  This Committee shall consist of at least three
members of the Company's Board of Directors each of whom shall, unless the Board
determines otherwise, be "outside directors" as this term is defined in Code
Section 162(m) and regulations thereunder and none of whom during the one-year
period prior to commencement of service on the Committee, or during such
service, has been granted or awarded any equity security or derivative security
of the Company pursuant to the Plan or, except as permitted by Rule 16b-3
(c)(2)(i), or any successor provision, promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), any other plan of the
Company or any of its affiliates. Subject to the provisions of the Plan, the
Committee shall possess the authority, in its discretion, (a) to determine the
employees or consultants of the Company or a subsidiary to whom, and the time or
times at which, ISOs and/or NQSOs (ISOs and NQSOs are collectively referred to
as "options"), SARs and restricted stock grants (all four types of grants are
collectively referred to as "awards") shall be granted; (b) to determine at the
time of grant whether an award will be an ISO, a NQSO, a restricted stock grant
or a combination of these awards and the number of shares to be subject to each
award; (c) if options are granted to a participant, whether SARs related to such
options shall be granted to such participant; (d) to prescribe the form of the
award agreements and any appropriate terms and conditions applicable to the
awards and to make any amendments to such agreements or awards; (e) to interpret
the Plan; (f) to make and amend rules and regulations relating to

                                       1
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the Plan; and (g) to make all other determinations necessary or advisable for
the administration of the Plan. The Committee's determinations shall be
conclusive and binding. No member of the Committee shall be liable for any
action taken or decision made in good faith relating to the Plan or any award
granted hereunder.

3.       ELIGIBLE EMPLOYEES
         ------------------

         Awards may be granted under the Plan only to employees and consultants
of the Company and its subsidiaries (which shall include all corporations of
which at least fifty percent of the voting stock is owned by the Company
directly or through one or more corporations at least fifty percent of the
voting stock of which is so owned) who have the capability of making a
substantial contribution to the success of the Company or any or more of its
subsidiaries.  Employees may be awarded any type of award offered under the
Plan.  Consultants may be awarded any type of award except ISOs.

4.       SHARES AVAILABLE
         ----------------

         The total number of shares of the Company's Common Stock (par value of
$0.01 per share) available in the aggregate for awards under this Plan shall not
exceed eight million (8,000,000) shares.  Shares to be granted may be authorized
and unissued shares or may be treasury shares.

         The total number of shares with respect to which restricted stock
awards may be granted to any one participant shall not exceed 10,000 per
calendar year (subject to substitution or adjustment as provided in Section 11).

         If an award expires, terminates or is cancelled without being exercised
or becoming vested, new awards may thereafter be granted under the Plan covering
such shares unless Rule 16b-3 provides otherwise.  No award may be granted more
than 10 years after the effective date of the Plan.

5.       TERMS AND CONDITIONS OF ISOS
         ----------------------------

         Each ISO granted under the Plan shall be evidenced by an ISO option
agreement in such form as the Committee shall approve from time to time, which
agreement shall conform with this Plan and contain the following terms and
conditions:

         (a)  Exercise Price.  The exercise price under each option shall equal
              --------------
    the fair market value of the Common Stock at the time such option is
    granted.  If an option is granted to an officer or employee who at the time
    of grant owns stock possessing more than ten percent (10%) of the total
    combined voting power of all classes of stock of the Company (a "10-percent
    Shareholder"), the purchase price shall be at least 110 percent (110%) of
    the fair market value of the stock subject to the option.

         (b)  Duration of Option.  Each option by its terms shall not be
              ------------------
    exercisable after the expiration of ten years from the date such option is
    granted.  In the case of

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    an option granted to a 10-percent Shareholder, the option by its terms shall
    not be exercisable after the expiration of five years from the date such
    option is granted.

         (c)  Options Nontransferable.  Each option by its terms shall not be
              -----------------------
    transferable by the participant otherwise than (i) by will or the laws of
    descent and distribution, (ii) pursuant to a qualified domestic relations
    order, or (iii) to the extent permitted under the option agreement or
    interpretation of the Committee and under Rule 16b-3 promulgated under the
    Exchange Act, by gift to family members or entities beneficially owned by
    family members or other permitted transferees under Rule 16b-3 promulgated
    under the Exchange Act, and shall be exercisable, during the participant's
    lifetime, only by the participant, the participant's guardian or the
    participant's legal representative, the participant's transferee under a
    qualified domestic relations order or other permitted transferee under this
    section.  To the extent required for the option grant and/or exercise to be
    exempt under Rule 16b-3, options (or the shares of Common Stock underlying
    the options) must be held by the participant for at least six months
    following the date of grant.

         (d)  Exercise Terms.  Each option granted under the Plan shall become
              --------------
    exercisable on a schedule to be determined by the Committee at the time of
    grant, which schedule may vary from one grant to another.  Options may be
    partially exercised from time to time during the period extending from the
    time they first become exercisable until the tenth anniversary (fifth
    anniversary for a 10-percent Shareholder) of the date of grant.

              No outstanding option may be exercised by any person if the
    employee to whom the option is granted is, or at any time after the date of
    grant has been, in competition with the Company.  The Committee has the sole
    discretion to determine whether an employee's actions constitute competition
    with the Company or an affiliated company.  The Committee may impose such
    other terms and conditions on the exercise of options as it deems
    appropriate to serve the purposes for which this Plan has been established.

         (e)  Maximum Value of ISO Shares.  No ISO shall be granted to an
              ---------------------------
    employee under this Plan or any other ISO plan of the Company or its
    subsidiaries to purchase shares as to which the aggregate fair market value
    (determined as of the date of grant) of the Common Stock which first become
    exercisable by the employee in any calendar year exceeds $100,000.

         (f)  Payment of Exercise Price.  An option shall be exercised upon
              -------------------------
    written notice to the Company accompanied by payment in full for the shares
    being acquired.  The payment shall be made in cash, by check or, if the
    option agreement so permits, by delivery of shares of Common Stock of the
    Company beneficially owned by the participant, duly assigned to the Company
    with the assignment guaranteed by a bank, trust company or member firm of
    the New York Stock Exchange, or by a combination of the foregoing.  Any such
    shares so delivered

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    shall be deemed to have a value per share equal to the fair market value of
    the shares on such date. For this purpose, fair market value shall equal the
    closing price of the Company's Common Stock on the Nasdaq National Market
    System on the date the option is exercised, or, if there was no trading in
    such stock on the date of such exercise, the closing price on the last
    preceding day on which there was such trading.

         Subject to the approval of the Board of Directors upon recommendation
    by the Committee, in respect of the exercise of options, the Company may
    loan to the employee a sum equal to an amount which is not in excess of 100%
    of the purchase price of the shares so purchased upon exercise, such loan to
    be evidenced by the execution and delivery of a promissory note.  Interest
    shall be paid on the unpaid balance of the promissory note at such times and
    at such rate as shall be determined by the Board of Directors.  Such
    promissory note shall be secured by the pledge to the Company of shares
    having an aggregate purchase price on the date of exercise equal to or
    greater than the principal amount of such note. An optionee shall have, as
    to such pledged shares, all rights of ownership, including the right to vote
    such shares and to receive dividends paid on such shares, subject to the
    security interest of the Company.  Such shares shall not be released by the
    Company from the pledge unless the proportionate amount of the note secured
    thereby has been repaid to the Company.  All notes executed hereunder shall
    be payable at such times and in such amounts and shall contain such other
    terms as shall be specified by the Board of Directors, provided, however,
    that such terms shall conform to requirements contained in any applicable
    regulations which are issued by any governmental authority.

6.  TERMS AND CONDITIONS FOR NQSOS
    ------------------------------

         Each NQSO granted under the Plan shall be evidenced by a NQSO option
agreement in such form as the Committee shall approve from time to time, which
agreement shall conform to this Plan and contain the same terms and conditions
as the ISO option agreement except that the 10-percent Shareholder restrictions
in Sections 5(a) and 5(b) and the maximum value of share rules of Section 5(e)
shall not apply to NQSO grants.  To the extent an option initially designated as
an ISO exceeds the value limit of Section 5(e), it shall be deemed a NQSO and
shall otherwise remain in full force and effect.

7.  TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
    -------------------------------------------------

         To the extent permitted under Rule 16b-3 promulgated under the Exchange
Act, the Committee may, in its discretion, award stock appreciation rights to
any eligible employee of the Company who is subject to Section 16(b) of the
Exchange Act in conjunction with incentive stock options or nonqualified stock
options then being granted to him, or to be attached to one or more such options
theretofore granted and at the time held unexercised by such employee which
shall entitle the employee to receive payment

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from the Company in accordance with the following provisions and such other
terms and conditions as the Committee shall determine from time to time:

         (a)  An SAR granted hereunder may be made part of an option at the time
              of grant of the option or at any time thereafter up to six months
              prior to the expiration of the option.

         (b)  Such SAR will entitle the holder to elect to receive, in lieu of
              exercising the option to which it relates, an amount (in cash or
              in Common Stock, or a combination thereof, all in the sole
              discretion of the Committee) equal to 100% of the excess of:

              (1)  the fair market value per share of the Company's Common Stock
                   on the date of exercise of such right, multiplied by the
                   number of shares with respect to which the right is being
                   exercised, over

              (2)  the aggregate option exercise price for such number of
                   shares.

         (c)  Such SAR will be exercisable only to the extent that it has a
              positive value and the option to which it relates is exercisable,
              except that no SAR shall be exercisable during the first six (6)
              months after the date of its grant.

         (d)  Upon exercise of an SAR, the option (or portion thereof) with
              respect to which such right is exercised shall be surrendered and
              shall not thereafter be exercisable.

         (e)  The exercise of an SAR will reduce the number of shares
              purchasable pursuant to the related option and available under the
              Plan to the extent of the number of shares with respect to which
              the right is exercised.

8.   TERMS AND CONDITIONS OF RESTRICTED STOCK GRANTS
     -----------------------------------------------

         The Committee may, evidenced by such written agreement as the Committee
shall from time to time prescribe, grant to an eligible employee a specified
number of shares of the Company's Common Stock which shall vest only after the
attainment of the relevant restrictions described below ("restricted stock").
Such restricted stock shall have an appropriate restrictive legend affixed
thereto.  A restricted stock grant shall be neither an option nor a sale, but
shall be subject to the following conditions and restrictions:

     (a) Restricted stock may not be sold or otherwise transferred by the
         participant until ownership vests, provided however, to the extent
         required for the

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           restricted stock grant to be exempt under Rule 16b-3, the restricted
           stock must be held by the participant for at least six months
           following the date of vesting.

     (b)   Ownership shall vest only following satisfaction of one or more of
           the following criteria as the Committee may prescribe:

           (1)  the passage of three years, or such longer period of time as the
                Committee in its discretion may provide, from the date of grant.

           (2)  the attainment of performance-based goals established by the
                Committee as of the date of grant.  If the participant's
                compensation is subject to the $1 million cap of Code Section
                162(m), the Committee may establish such performance goals based
                on one or more of the following targets:

                .  total shareholder return

                .  earnings per share growth

                .  cash flow growth

                .  return on equity and/or

                If the participant's compensation is not subject to the $1
                million cap of Code Section 162(m), the Committee may establish
                the performance goal on the basis of the preceding four targets
                or any other target it may from time to time deem appropriate in
                its discretion.

           (3)  any other conditions the Committee may prescribe, including a
                non-compete requirement.

     (c)   Unless the Committee shall determine otherwise with respect to
           participants whose compensation is not governed by Code Section
           162(m), the Committee shall grant and administer all performance-
           based awards under (b)(2) above with the intent of meeting the
           criteria of Code Section 162(m) for performance-based compensation.
           To this end, the outcome of all targeted goals shall be substantially
           uncertain on the date of grant; the goals shall be established no
           later than 90 days following the commencement of service to which the
           goals relate; the minimum period for attaining each performance goal
           shall be one year; and the Committee shall certify at the conclusion
           of the performance period whether the performance-based goals have
           been attained.  Such certification may be made by noting the
           attainment of the goals in the minutes of the Committee's meetings.

                                       6
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     (d)   Except as otherwise determined by the Committee, all rights and title
           to restricted stock granted to a participant under the Plan shall
           terminate and be forfeited to the Company upon failure to fulfill all
           conditions and restrictions applicable to such restricted stock.

     (e)   Except for the restrictions set forth in this Plan and those
           specified by the Committee in any restricted stock agreement, a
           holder of restricted stock shall possess all the rights of a holder
           of the Company's Common Stock (including voting and dividend rights);
           provided, however, that prior to vesting the certificates
           representing such shares of restricted stock (and the amount of any
           dividends issued with respect thereto) shall be held by the Company
           for the benefit of the participant and the participant shall deliver
           to the Company a stock power executed in blank covering such shares.
           As the shares vest, certificates representing such shares shall be
           released to the participant.

     (f)   All other provisions of the Plan not inconsistent with this section
           shall apply to restricted stock or the holder thereof, as
           appropriate, unless otherwise determined by the Committee.

9.   GENERAL RESTRICTION ON ISSUANCE OF STOCK CERTIFICATES
     -----------------------------------------------------

           The Company shall not be required to deliver any certificate upon the
grant, vesting or exercise of any award or option until it has been furnished
with such opinion, representation or other document as it may reasonably deem
necessary to ensure compliance with any law or regulation of the Securities and
Exchange Commission or any other governmental authority having jurisdiction
under this Plan.  Certificates delivered upon such grant, vesting or exercise
may bear a legend restricting transfer absent such compliance.  Each award shall
be subject to the requirement that, if at any time the Committee shall
determine, in its discretion, that the listing, registration or qualification of
the shares subject to such award upon any securities exchange or under any state
or federal law, or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection with, the granting
of such awards or the issue or purchase of shares thereunder, such awards may
not vest or be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee in the exercise of its reasonable
judgment.

10.  IMPACT OF TERMINATION OF EMPLOYMENT
     -----------------------------------

     (a)   Options
           -------

           If the employment of an participant terminates by reason of death or
disability (as determined by the Committee), any option may be exercised by the
participant or, in the event of the participant's death, by the participant's
personal

                                       7
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representative any time prior to the earlier of the expiration date of the
option or the expiration of one year after the date of termination, but only if,
and to the extent that, the participant was entitled to exercise the option at
the date of such termination. Upon termination of the participant's employment
for any reason other than death or disability, any vested option that was
exercisable immediately preceding termination may be exercised at any time prior
to the earlier of the expiration date of the option or the expiration of three
months after the date of such termination. In the event of retirement, the three
month period specified in the preceding sentence shall be extended to one year
in the case of NQSOs. Notwithstanding the foregoing, an option may not be
exercised after termination of employment if the Committee reasonably determines
that the termination of employment of such participant resulted from willful
acts or failure to act by the participant detrimental to the Company or any of
its subsidiaries.

     (b)  Restricted Stock Grants
          -----------------------

          (i)  Passage of Time Vesting.  If a participant has been awarded
               -----------------------
restricted stock whose vesting is conditioned solely on the passage of time, any
termination of employment for any reason, shall result in the forfeiture of all
restricted stock awards that were not vested prior to the termination of
employment except as otherwise provided by the Committee.

          (ii) Performance-Based Vesting.  If a participant has been awarded
               -------------------------
restricted stock whose vesting is based solely on the attainment of performance-
based goals or partly on the attainment of performance-based goals and partly on
the passage of time, any termination of employment except death, disability or
retirement shall result in the forfeiture of all restricted stock awards that
were not vested prior to the termination of employment.  A participant who
terminates employment on account of death, disability or retirement may, if the
performance-based criteria are eventually attained, be awarded (or, in the event
of death, the participant's designated beneficiary or personal representative if
there is no designated beneficiary shall be awarded) up to a pro rata portion of
the restricted shares based on the participant's length of service as of his or
her termination of employment over the length of the award period ending on the
date the performance-based criteria are satisfied (or the passage of time would
have been satisfied, if later, for an award based in part on performance goals
and in part on the passage of time).  The Committee shall have the discretion
whether to grant a full pro rata portion of the restricted shares, a lesser
portion or no shares at all under this subsection (b)(ii).

     (c)  SARs
          ----

          If a participant terminates employment while holding an unexercised
SAR, the participant, or his designated beneficiary (or legal representative if
there is no designated beneficiary) in the event of his death, may exercise the
SAR to the same extent as the option to which it is related may be exercised
following termination of employment.

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     (d)  Miscellaneous Termination Provisions
          ------------------------------------

          Unless otherwise determined by the Committee, an authorized leave of
absence shall not constitute a termination of employment for purposes of this
Plan.

          For purposes of this section, retirement means that a participant
terminates employment at or after the date on which the participant reaches any
normal retirement age specified in any policy adopted by the Board or, in the
absence of such policy, age 65.

          If the employment of a participant terminates for any reason other
than disability, retirement or death, any unpaid balance on any promissory note
used in the purchase of stock shall become due and payable upon not less than
three months' notice from the Company, which notice may be given at any time
after such termination; provided, however, that such unpaid balance on such
promissory note shall become due and payable five years from the date of such
termination, unless the note has an earlier due date. In the case of termination
due to death, any unpaid balance remaining on such note on the date of death
shall become due and payable one year from such date.

11.  ADJUSTMENT OF SHARES
     --------------------

          In the event of any change in the Common Stock of the Company by
reason of any stock dividend, stock split, recapitalization, reorganization,
merger, consolidation, split-up, combination, or exchange of shares, or of any
similar change affecting the Common Stock, the number and kind of shares
authorized under Section 4, the number and kind of shares which thereafter are
subject to an award under the Plan and the number and kind of unexercised
options and unvested shares set forth in awards under outstanding agreements and
the price per share shall be adjusted automatically consistent with such change
to prevent substantial dilution or enlargement of the rights granted to, or
available for, participants in the Plan.

12.  WITHHOLDING TAXES
     -----------------

          All cash payable to a participant under the terms of this Plan shall
be subject to such federal, state and local income and employment tax
withholdings as payments of this type are normally subject. Whenever the Company
proposes or is required to issue or transfer shares of Common Stock under the
Plan, or whenever restricted stock vests, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
any federal, state and/or local income and employment withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares or to take any other appropriate action to satisfy such withholding
requirements. Notwithstanding the foregoing, subject to such rules as the
Committee may promulgate and compliance with any requirements under Rule 16b-3,
the recipient may satisfy such obligation in whole or in part by electing to
have the Company withhold shares of Common Stock from the shares to which the
recipient is otherwise entitled.

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13.  NO EMPLOYMENT RIGHTS
     --------------------

          The Plan and any awards granted under the Plan shall not confer upon
any participant any right with respect to continuance as an employee of the
Company or any subsidiary, nor shall they interfere in any way with the right of
the Company or any subsidiary to terminate the participant's position as an
employee at any time.

14.  RIGHTS AS A SHAREHOLDER
     -----------------------

          The recipient of any option under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for the
underlying shares of Common Stock are issued to the recipient.  The recipient of
a restricted stock grant shall have all rights of a shareholder except as
otherwise limited by the terms of this Plan.

15.  AMENDMENT AND DISCONTINUANCE
     ----------------------------

          This Plan may be amended, modified or terminated by the Committee or
by the shareholders of the Company, except that the Committee may not, without
approval of a majority of the shareholders present in person or by proxy,
materially increase the benefits accruing to participants under the Plan,
materially increase the maximum number of shares as to which awards may be
granted under the Plan, increase the number of restricted stock grants per year
per participant or change the basis for making performance-based awards for
participants whose compensation is subject to Code Section 162(m), change the
minimum exercise price of options or SARs, change the class of eligible persons,
extend the period for which awards may be granted or exercised, or withdraw the
authority to administer the Plan from the Committee or a committee of the
Committee consisting solely of outside directors unless the Board determines
that inside directors may serve on the Committee. Notwithstanding the foregoing,
to the extent permitted by law, the Committee may amend the Plan without the
approval of shareholders, to the extent it deems necessary to cause the Plan to
comply with Securities and Exchange Commission Rule 16b-3 or any successor rule,
as it may be amended from time to time or as otherwise permitted under Rule 16b-
3 promulgated under the Exchange Act and the Code. Except as required by law or
as provided in Section 17 hereof, no amendment, modification, or termination of
the Plan may, without the written consent of a participant to whom any award
shall theretofore have been granted, adversely affect the rights of such
participant under such award.

16.  CHANGE IN CONTROL
     -----------------

          (a)  Notwithstanding other provisions of the Plan, in the event of a
change in control of the Company (as defined in subsection (c) below), all of a
participant's restricted stock awards shall become immediately vested to the
same extent as if all restrictions had been satisfied and all options and SARs
shall become immediately vested and exercisable, unless directed otherwise by a
resolution of the Committee adopted prior to and specifically relating to the
occurrence of such change in control.

                                       10
<PAGE>

          (b)  In the event of a change in control each participant holding an
exercisable option (i) shall have the right at any time thereafter during the
term of such option to exercise the option in full notwithstanding any
limitation or restriction in any option agreement or in the Plan, and (ii) if no
related SAR has been granted with respect to an option, may, subject to
Committee approval and after written notice to the Company within 60 days after
the change in control, or, if the participant is an officer subject to Section
16 of the Exchange Act and to the extent required to exempt the transaction
under Rule 16b-3, during the period beginning on the third business day and
ending on the twelfth business day following the first release for publication
by the Company after such change of control of a quarterly or annual summary
statement of earnings, which release occurs at least six months following grant
of the option, whichever period is longer, receive, in exchange for the
surrender of the option or any portion thereof to the extent the option is then
exercisable in accordance with clause (i), an amount of cash equal to the
difference between the fair market value (as determined by the Committee) on the
date of surrender of the Common Stock covered by the option or portion thereof
which is so surrendered and the option price of such Common Stock under the
option.

          (c)  For purposes of this section, "change in control" means:

     1)   there shall be consummated

          i.   any consolidation or merger of the Company in which the Company
               is not the continuing or surviving corporation or pursuant to
               which any shares of the Company's common stock are to be
               converted into cash, securities or other property, provided that
               the consolidation or merger is not with a corporation which was a
               wholly-owned subsidiary of the Company immediately before the
               consolidation or merger; or

          ii.  any sale, lease, exchange or other transfer (in one transaction
               or a series of related transactions) of all, or substantially
               all, of the assets of the Company (other than to one or more
               directly or indirectly wholly-owned subsidiaries of the Company);
               or

     2)   the shareholders of the Company approve any plan or proposal for the
          liquidation or dissolution of the Company; or

     3)   any person (as such term is used in Sections 13(d) and 14(d) of the
          Exchange Act) shall become the beneficial owner (within the meaning of
          Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or
          more of the Company's then outstanding common stock, provided that
          such person shall not be a wholly-owned subsidiary of the Company
          immediately before it becomes such 30% beneficial owner; or

     4)   individuals who constitute the Company's Board of Directors on the
          date hereof (the "Incumbent Board") cease for any reason to constitute
          at least a

                                       11
<PAGE>

          majority thereof, provided that any person becoming a director
          subsequent to the date hereof whose election, or nomination for
          election by the Company's shareholders, was approved by a vote of at
          least three quarters of the directors comprising the Incumbent Board
          (either by a specific vote or by approval of the proxy statement of
          the Company in which such person is named as a nominee for director,
          without objection to such nomination) shall be, for purposes of this
          clause (d), considered as though such person were a member of the
          Incumbent Board.

17.  EFFECTIVE DATE
     --------------

          The effective date of the Plan is June 5, 1995 provided that within 12
months of this date the Plan is approved by the affirmative vote of the owners
of a majority of the Company's outstanding shares of Common Stock.  In the event
that such approval is not given within such 12-month period, all ISOs granted
under this Plan shall be deemed to be NQSOs and this Plan and all awards made
hereunder shall otherwise continue to be in full force and effect.

18.  DEFINITIONS
     -----------

          Any terms or provisions used herein which are defined in Sections 83,
162(m), 421, or 422 of the Internal Revenue Code as amended, or the regulations
thereunder or corresponding provisions of subsequent laws and regulations in
effect at the time awards are made hereunder, shall have the meanings as therein
defined.

19.  GOVERNING LAW
     -------------

          To the extent not inconsistent with the provisions of the Internal
Revenue Code that relate to awards, this Plan and any award agreement adopted
pursuant to it shall be construed under the laws of the State of New York.



Amended as of September 28, 1999   PSINET INC.


                                   By: /s/ William L. Schrader
                                       ------------------------
                                       William L. Schrader
                                       Chairman and Chief Executive Officer


Date of Shareholder Approval: September 28, 1999

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