Document:

<PAGE>

                                                                 Exhibit 10.2

                   CYPRESS COMMUNICATIONS, INC.

               2000 STOCK OPTION AND INCENTIVE PLAN

SECTION 1.  GENERAL PURPOSE OF THE PLAN; DEFINITIONS
            ----------------------------------------

     The name of the plan is the Cypress Communications, Inc. 2000 Stock Option
and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees, Independent Directors and other key persons
(including consultants) of Cypress Communications, Inc. (the "Company") and its
Subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. It is anticipated that providing such persons with a
direct stake in the Company's welfare will assure a closer identification of
their interests with those of the Company, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.

     The following terms shall be defined as set forth below:

     "Act" means the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

     "Administrator" is defined in Section 2(a).

     "Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Deferred Stock Awards, Restricted Stock Awards, Unrestricted Stock
Awards and Performance Share Awards.

     "Board" means the Board of Directors of the Company.

     "Change of Control" is defined in Section 15.

     "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

     "Committee" means the Compensation Committee of the Board.

     "Covered Employee" means an employee who is a "Covered Employee" within the
meaning of Section 162(m) of the Code.

     "Deferred Stock Award" means Awards granted pursuant to Section 7.

     "Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 17.
<PAGE>

     "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.

     "Fair Market Value" of the Stock on any given date means the fair market
value of the Stock determined in good faith by the Administrator; provided,
however, that if the Stock is admitted to quotation on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), NASDAQ National
System or a national securities exchange, the determination shall be made by
reference to market quotations. If there are no market quotations for such date,
the determination shall be made by reference to the last date preceding such
date for which there are market quotations; provided further, however, that if
the date for which Fair Market Value is determined is the first day when trading
prices for the Stock are reported on NASDAQ or on a national securities
exchange, the Fair Market Value shall be the "Price to the Public" (or
equivalent) set forth on the cover page for the final prospectus relating to the
Company's Initial Public Offering.

     "Incentive Stock Option" means any Stock Option designated and qualified as
an "incentive stock option" as defined in Section 422 of the Code.

     "Independent Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.

     "Initial Public Offering" means the consummation of the first fully
underwritten, firm commitment public offering pursuant to an effective
registration statement under the Act, other than on Forms S-4 or S-8 or their
then equivalents, covering the offer and sale by the Company of its equity
securities, or such other event as a result of or following which the Stock
shall be publicly held.

     "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

     "Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.

     "Performance Share Award" means Awards granted pursuant to Section 9.

     "Performance Cycle" means one or more periods of time, which may be of
varying and overlapping durations, as the Administrator may select, over which
the attainment of one or more performance criteria will be measured for the
purpose of determining a grantee's right to and the payment of a Performance
Share Award, Restricted Stock Award or Deferred Stock Award.

     "Restricted Stock Award" means Awards granted pursuant to Section 6.

                                       2
<PAGE>

     "Stock" means the Common Stock, par value $.001 per share, of the Company,
subject to adjustments pursuant to Section 3.

     "Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities beginning with the
Company if each of the corporations or entities (other than the last corporation
or entity in the unbroken chain) owns stock or other interests possessing 50
percent or more of the economic interest or the total combined voting power of
all classes of stock or other interests in one of the other corporations or
entities in the chain.

     "Unrestricted Stock Award" means any Award granted pursuant to Section 8.

SECTION 2.  ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES
            ------------------------------------------------------------------
            AND DETERMINE AWARDS
            --------------------

     (a)  Committee.  The Plan shall be administered by either the Board or the
          ---------
Committee (in either case, the "Administrator").

     (b)  Powers of Administrator.  The Administrator shall have the power and
          -----------------------
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

               (i)     to select the individuals to whom Awards may from time to
     time be granted;

               (ii)    to determine the time or times of grant, and the extent,
     if any, of Incentive Stock Options, Non-Qualified Stock Options, Restricted
     Stock Awards, Deferred Stock Awards, Unrestricted Stock Awards and
     Performance Share Awards, or any combination of the foregoing, granted to
     any one or more grantees;

               (iii)   to determine the number of shares of Stock to be covered
     by any Award;

               (iv)    to determine and modify from time to time the terms and
     conditions, including restrictions, not inconsistent with the terms of the
     Plan, of any Award, which terms and conditions may differ among individual
     Awards and grantees, and to approve the form of written instruments
     evidencing the Awards;

               (v)     to accelerate at any time the exercisability or vesting
     of all or any portion of any Award;

               (vi)    subject to the provisions of Section 5(a)(ii), to extend
     at any time the period in which Stock Options may be exercised;

               (vii)   to determine at any time whether, to what extent, and
     under what circumstances distribution or the receipt of Stock and other
     amounts payable with respect to an Award shall be deferred either
     automatically or at the election of the grantee and whether and to what
     extent the Company shall pay or credit amounts constituting interest (at
     rates determined by the Administrator) or dividends or deemed dividends on
     such deferrals; and

                                       3
<PAGE>

               (viii)  at any time to adopt, alter and repeal such rules,
     guidelines and practices for administration of the Plan and for its own
     acts and proceedings as it shall deem advisable; to interpret the terms and
     provisions of the Plan and any Award (including related written
     instruments); to make all determinations it deems advisable for the
     administration of the Plan; to decide all disputes arising in connection
     with the Plan; and to otherwise supervise the administration of the Plan.

     All decisions and interpretations of the Administrator shall be binding on
all persons, including the Company and Plan grantees.

     (c)  Delegation of Authority to Grant Awards. The Administrator, in its
          ---------------------------------------
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Administrator's authority and duties with respect to the granting of
Awards at Fair Market Value, to individuals who are not subject to the reporting
and other provisions of Section 16 of the Exchange Act or "covered employees"
within the meaning of Section 162(m) of the Code. The Chief Executive Officer
shall be deemed a one-person committee of the Board. Any such delegation by the
Administrator shall include a limitation as to the amount of Awards that may be
granted during the period of the delegation and shall contain guidelines as to
the determination of the exercise price of any Stock Option or Stock
Appreciation Right, the conversion ratio or price of other Awards and the
vesting criteria. The Administrator may revoke or amend the terms of a
delegation at any time but such action shall not invalidate any prior actions of
the Administrator's delegate or delegates that were consistent with the terms of
the Plan.

     (d)  Indemnification.  Neither the Board nor the Committee, nor any member
          ---------------
of either or any delegatee thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection
with the Plan, and the members of the Board and the Committee (and any delegatee
thereof) shall be entitled in all cases to indemnification and reimbursement by
the Company in respect of any claim, loss, damage or expense (including, without
limitation, reasonable attorneys' fees) arising or resulting therefrom to the
fullest extent permitted by law and/or under any directors' and officers'
liability insurance coverage which may be in effect from time to time.

SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
           ----------------------------------------------------

     (a)  Stock Issuable.  The maximum number of shares of Stock reserved and
          --------------
available for issuance under the Plan shall be 5,439,804 shares, subject to
adjustment as provided in this Section 3(a) and Section 3(b). For purposes of
this limitation, the shares of Stock underlying any Awards under this Plan which
are forfeited, canceled, reacquired by the Company,

                                       4
<PAGE>

satisfied without the issuance of Stock or otherwise terminated (other than by
exercise) shall be added back to the shares of Stock available for issuance
under the Plan. In addition, the shares of Stock underlying any awards under the
Company's 1997 Management Option Plan which are forfeited, canceled, reacquired
by the Company, satisfied without the issuance of Stock or otherwise terminated
(other than by exercise) shall be added to the shares of Stock available for
issuance under the Plan, thereby increasing the maximum number of shares of
Stock reserved and available for issuance under the Plan set forth above.
Subject to such overall limitation, shares of Stock may be issued up to such
maximum number pursuant to any type or types of Award; provided, however, that
from and after the date grants under this Plan become subject to Section 162(m)
of the Code, Stock Options with respect to no more than 1,500,000 shares of
Stock may be granted to any one individual grantee during any one calendar year
period. The shares available for issuance under the Plan may be authorized but
unissued shares of Stock or shares of Stock reacquired by the Company and held
in its treasury.

     (b)  Changes in Stock.  Subject to Section 3(c) hereof, if, as a result of
          ----------------
any reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change in the Company's capital
stock, the outstanding shares of Stock are increased or decreased or are
exchanged for a different number or kind of shares or other securities of the
Company, or additional shares or new or different shares or other securities of
the Company or other non-cash assets are distributed with respect to such shares
of Stock or other securities, or, if, as a result of any merger or
consolidation, sale of all or substantially all of the assets of the Company,
the outstanding shares of Stock are converted into or exchanged for a different
number or kind of securities of the Company or any successor entity (or a parent
or subsidiary thereof), the Administrator shall make an appropriate or
proportionate adjustment in (i) the maximum number of shares reserved for
issuance under the Plan, (ii) the number of Stock Options that can be granted to
any one individual grantee and the maximum number of shares that may be granted
under a Performance-based Award, (iii) the number and kind of shares or other
securities subject to any then outstanding Awards under the Plan, (iv) the
repurchase price per share subject to each outstanding Restricted Stock Award,
and (v) the price for each share subject to any then outstanding Stock Options
under the Plan, without changing the aggregate exercise price (i.e., the
exercise price multiplied by the number of Stock Options) as to which such Stock
Options remain exercisable. The adjustment by the Administrator shall be final,
binding and conclusive. No fractional shares of Stock shall be issued under the
Plan resulting from any such adjustment, but the Administrator in its discretion
may make a cash payment in lieu of fractional shares.

     The Administrator may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Administrator that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the grantee, if it would constitute a modification, extension or
renewal of the Option within the meaning of Section 424(h) of the Code.

                                       5
<PAGE>

     (c)  Mergers and Other Transactions. In the case of and subject to the
          ------------------------------
consummation of (i) the dissolution or liquidation of the Company, (ii) the sale
of all or substantially all of the assets of the Company on a consolidated basis
to an unrelated person or entity, (iii) a merger, reorganization or
consolidation in which the outstanding shares of Stock are converted into or
exchanged for a different kind of securities of the successor entity and the
holders of the Company's outstanding voting power immediately prior to such
transaction do not own a majority of the outstanding voting power of the
successor entity immediately upon completion of such transaction, or (iv) the
sale of all of the Stock of the Company to an unrelated person or entity (in
each case, a "Sale Event"), all Options that are not exercisable immediately
prior to the effective time of the Sale Event shall become fully exercisable as
of the effective time of the Sale Event and all other Awards with conditions and
restrictions relating solely to the passage of time and continued employment
shall become fully vested and nonforfeitable as of the effective time of the
Sale Event, except as the Administrator may otherwise specify with respect to
particular Awards. Upon the effective time of the Sale Event, the Plan and all
outstanding Awards granted hereunder shall terminate, unless provision is made
in connection with the Sale Event in the sole discretion of the parties thereto
for the assumption or continuation of Awards theretofore granted by the
successor entity, or the substitution of such Awards with new Awards of the
successor entity or parent thereof, with appropriate adjustment as to the number
and kind of shares and, if appropriate, the per share exercise prices, as such
parties shall agree (after taking into account any acceleration hereunder). In
the event of such termination, each grantee shall be permitted, within a
specified period of time prior to the consummation of the Sale Event as
determined by the Administrator, to exercise all outstanding Options held by
such grantee, including those that will become exercisable upon the consummation
of the Sale Event; provided, however, that the exercise of Options not
exercisable prior to the Sale Event shall be subject to the consummation of the
Sale Event.

     Notwithstanding anything to the contrary in this Section 3.2(c), in the
event of a Sale Event pursuant to which holders of the Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the Sale Event, the Company shall have the right, but not the obligation, to
make or provide for a cash payment to the grantees holding Options, in exchange
for the cancellation thereof, in an amount equal to the difference between (A)
the value as determined by the Administrator of the consideration payable per
share of Stock pursuant to the Sale Event (the "Sale Price") times the number of
shares of Stock subject to outstanding Options (to the extent then exercisable
at prices not in excess of the Sale Price) and (B) the aggregate exercise price
of all such outstanding Options.

     (d)  Substitute Awards.  The Administrator may grant Awards under the Plan
          -----------------
in substitution for stock and stock based awards held by employees, directors or
other key persons of another corporation in connection with the merger or
consolidation of the employing corporation with the Company or a Subsidiary or
the acquisition by the Company or a Subsidiary of property or stock of the
employing corporation. The Administrator may direct that the substitute awards
be granted on such terms and conditions as the Administrator

                                       6
<PAGE>

considers appropriate in the circumstances. Any substitute Awards granted under
the Plan shall not count against the share limitation set forth in Section 3(a).

SECTION 4.  ELIGIBILITY
            -----------

     Grantees under the Plan will be such full or part-time officers and other
employees, Independent Directors and key persons (including consultants and
prospective employees) of the Company and its Subsidiaries as are selected from
time to time by the Administrator in its sole discretion.

SECTION 5.  STOCK OPTIONS
            -------------

     Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.

     Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any Option
does not qualify as an Incentive Stock Option, it shall be deemed a Non-
Qualified Stock Option.

     No Incentive Stock Option shall be granted under the Plan after December
20, 2009.

     (a)  Stock Options.  The Administrator in its discretion may grant Stock
          -------------
Options to eligible employees, Independent Directors and key persons of the
Company or any Subsidiary. Stock Options granted pursuant to this Section 5(a)
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Administrator shall deem desirable. If the Administrator so determines,
Stock Options may be granted in lieu of cash compensation at the optionee's
election, subject to such terms and conditions as the Administrator may
establish.

          (i)  Exercise Price.  The exercise price per share for the Stock
               --------------
     covered by a Stock Option granted pursuant to this Section 5(a) shall be
     determined by the Administrator at the time of grant but shall not be less
     than 100 percent of the Fair Market Value on the date of grant in the case
     of Incentive Stock Options, or 85 percent of the Fair Market Value on the
     date of grant, in the case of Non-Qualified Stock Options (other than
     options granted in lieu of cash compensation). If an employee owns or is
     deemed to own (by reason of the attribution rules of Section 424(d) of the
     Code) more than 10 percent of the combined voting power of all classes of
     stock of the Company or any parent or subsidiary corporation and an
     Incentive Stock Option is granted to such employee, the option price of
     such Incentive Stock Option shall be not less than 110 percent of the Fair
     Market Value on the grant date.

                                       7
<PAGE>

               (ii)   Option Term.  The term of each Stock Option shall be fixed
                      -----------
     by the Administrator, but no Stock Option shall be exercisable more than 10
     years after the date the Stock Option is granted. If an employee owns or is
     deemed to own (by reason of the attribution rules of Section 424(d) of the
     Code) more than 10 percent of the combined voting power of all classes of
     stock of the Company or any parent or subsidiary corporation and an
     Incentive Stock Option is granted to such employee, the term of such Stock
     Option shall be no more than five years from the date of grant.

               (iii)  Exercisability; Rights of a Stockholder.  Stock Options
                      ---------------------------------------
     shall become exercisable at such time or times, whether or not in
     installments, as shall be determined by the Administrator at or after the
     grant date. The Administrator may at any time accelerate the exercisability
     of all or any portion of any Stock Option. An optionee shall have the
     rights of a stockholder only as to shares acquired upon the exercise of a
     Stock Option and not as to unexercised Stock Options.

               (iv)   Method of Exercise.  Stock Options may be exercised in
                      ------------------
     whole or in part, by giving written notice of exercise to the Company,
     specifying the number of shares to be purchased. Payment of the purchase
     price may be made by one or more of the following methods to the extent
     provided in the Option Award agreement:

                      (A)  In cash, by certified or bank check or other
          instrument acceptable to the Administrator;

                      (B)  Through the delivery (or attestation to the
          ownership) of shares of Stock that have been purchased by the optionee
          on the open market or that have been beneficially owned by the
          optionee for at least six months and are not then subject to
          restrictions under any Company plan. Such surrendered shares shall be
          valued at Fair Market Value on the exercise date;

                      (C)  By the optionee delivering to the Company a properly
          executed exercise notice together with irrevocable instructions to a
          broker to promptly deliver to the Company cash or a check payable and
          acceptable to the Company for the purchase price; provided that in the
          event the optionee chooses to pay the purchase price as so provided,
          the optionee and the broker shall comply with such procedures and
          enter into such agreements of indemnity and other agreements as the
          Administrator shall prescribe as a condition of such payment
          procedure; or

                      (D)  By the optionee delivering to the Company a
          promissory note if the Board has expressly authorized the loan of
          funds to the optionee for the purpose of enabling or assisting the
          optionee to effect the exercise of his Stock Option; provided that at
          least so much of the exercise price as represents the par value of the
          Stock shall be paid other than with a promissory note if otherwise
          required by state law.

                                       8
<PAGE>

     Payment instruments will be received subject to collection. The delivery of
     certificates representing the shares of Stock to be purchased pursuant to
     the exercise of a Stock Option will be contingent upon receipt from the
     optionee (or a purchaser acting in his stead in accordance with the
     provisions of the Stock Option) by the Company of the full purchase price
     for such shares and the fulfillment of any other requirements contained in
     the Option Award agreement or applicable provisions of laws. In the event
     an optionee chooses to pay the purchase price by previously-owned shares of
     Stock through the attestation method, the number of shares of Stock
     transferred to the optionee upon the exercise of the Stock Option shall be
     net of the number of shares attested to.

          (v)  Annual Limit on Incentive Stock Options.  To the extent required
               ---------------------------------------
     for "incentive stock option" treatment under Section 422 of the Code, the
     aggregate Fair Market Value (determined as of the time of grant) of the
     shares of Stock with respect to which Incentive Stock Options granted under
     this Plan and any other plan of the Company or its parent and subsidiary
     corporations become exercisable for the first time by an optionee during
     any calendar year shall not exceed $100,000. To the extent that any Stock
     Option exceeds this limit, it shall constitute a Non-Qualified Stock
     Option.

     (b)  Reload Options.  At the discretion of the Administrator, Options
          --------------
granted under the Plan may include a "reload" feature pursuant to which an
optionee exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with such other terms as
the Administrator may provide) to purchase that number of shares of Stock equal
to the sum of (i) the number delivered to exercise the original Option and (ii)
the number withheld to satisfy tax liabilities, with an Option term equal to the
remainder of the original Option term unless the Administrator otherwise
determines in the Award agreement for the original Option grant.

     (c)  Non-transferability of Options. No Stock Option shall be transferable
          ------------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee, or by the optionee's legal representative or
guardian in the event of the optionee's incapacity. Notwithstanding the
foregoing, the Administrator, in its sole discretion, may provide in the Award
agreement regarding a given Option that the optionee may transfer his Non-
Qualified Stock Options to members of his immediate family, to trusts for the
benefit of such family members, or to partnerships in which such family members
are the only partners, provided that the transferee agrees in writing with the
Company to be bound by all of the terms and conditions of this Plan and the
applicable Option.

                                       9
<PAGE>

SECTION 6. RESTRICTED STOCK AWARDS
           -----------------------

     (a)  Nature of Restricted Stock Awards. A Restricted Stock Award is an
          ---------------------------------
Award entitling the recipient to acquire, at such purchase price as determined
by the Administrator, shares of Stock subject to such restrictions and
conditions as the Administrator may determine at the time of grant ("Restricted
Stock"). Conditions may be based on continuing employment (or other service
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of a Restricted Stock Award is contingent on the grantee
executing the Restricted Stock Award agreement. The terms and conditions of each
such agreement shall be determined by the Administrator, and such terms and
conditions may differ among individual Awards and grantees.

     (b)  Rights as a Stockholder. Upon execution of a written instrument
          -----------------------
setting forth the Restricted Stock Award and payment of any applicable purchase
price, a grantee shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the
Administrator shall otherwise determine, certificates evidencing the Restricted
Stock shall remain in the possession of the Company until such Restricted Stock
is vested as provided in Section 6(d) below, and the grantee shall be required,
as a condition of the grant, to deliver to the Company a stock power endorsed in
blank.

     (c)  Restrictions. Restricted Stock may not be sold, assigned, transferred,
          ------------
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the Restricted Stock Award agreement. If a grantee's employment (or
other service relationship) with the Company and its Subsidiaries terminates for
any reason, the Company shall have the right to repurchase Restricted Stock that
has not vested at the time of termination at its original purchase price, from
the grantee or the grantee's legal representative.

     (d)  Vesting of Restricted Stock. The Administrator at the time of grant
          ---------------------------
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-
transferability of the Restricted Stock and the Company's right of repurchase or
forfeiture shall lapse. Subsequent to such date or dates and/or the attainment
of such pre-established performance goals, objectives and other conditions, the
shares on which all restrictions have lapsed shall no longer be Restricted Stock
and shall be deemed "vested." Except as may otherwise be provided by the
Administrator either in the Award agreement or, subject to Section 13 below, in
writing after the Award agreement is issued, a grantee's rights in any shares of
Restricted Stock that have not vested shall automatically terminate upon the
grantee's termination of employment (or other service relationship) with the
Company and its Subsidiaries and such shares shall be subject to the Company's
right of repurchase as provided in Section 6(c) above.

     (e)  Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
          ----------------------------------------------
Award agreement may require or permit the immediate payment, waiver, deferral or
investment of dividends paid on the Restricted Stock.

                                       10
<PAGE>

SECTION 7. DEFERRED STOCK AWARDS
           ---------------------

     (a)  Nature of Deferred Stock Awards. A Deferred Stock Award is an Award of
          -------------------------------
phantom stock units to a grantee, subject to restrictions and conditions as the
Administrator may determine at the time of grant. Conditions may be based on
continuing employment (or other service relationship) and/or achievement of pre-
established performance goals and objectives. The grant of a Deferred Stock
Award is contingent on the grantee executing the Deferred Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and grantees. At the end of the deferral period, the Deferred Stock Award, to
the extent vested, shall be paid to the grantee in the form of shares of Stock.

     (b)  Election to Receive Deferred Stock Awards in Lieu of Compensation. The
          -----------------------------------------------------------------
Administrator may, in its sole discretion, permit a grantee to elect to receive
a portion of the cash compensation or Restricted Stock Award otherwise due to
such grantee in the form of a Deferred Stock Award. Any such election shall be
made in writing and shall be delivered to the Company no later than the date
specified by the Administrator and in accordance with rules and procedures
established by the Administrator. The Administrator shall have the sole right to
determine whether and under what circumstances to permit such elections and to
impose such limitations and other terms and conditions thereon as the
Administrator deems appropriate.

     (c)  Rights as a Stockholder. During the deferral period, a grantee shall
          -----------------------
have no rights as a stockholder; provided, however, that the grantee may be
credited with Dividend Equivalent Rights with respect to the phantom stock units
underlying his Deferred Stock Award, subject to such terms and conditions as the
Administrator may determine.

     (d)  Restrictions. A Deferred Stock Award may not be sold, assigned,
          ------------
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.

     (e)  Termination. Except as may otherwise be provided by the Administrator
          -----------
either in the Award agreement or, subject to Section 13 below, in writing after
the Award agreement is issued, a grantee's right in all Deferred Stock Awards
that have not vested shall automatically terminate upon the grantee's
termination of employment (or cessation of service relationship) with the
Company and its Subsidiaries for any reason.

SECTION 8. UNRESTRICTED STOCK AWARDS
           -------------------------

     Grant or Sale of Unrestricted Stock. The Administrator may, in its sole
     -----------------------------------
discretion, grant (or sell at par value or such higher purchase price determined
by the Administrator) an Unrestricted Stock Award to any grantee pursuant to
which such grantee may receive shares of Stock free of any restrictions
("Unrestricted Stock") under the Plan. Unrestricted Stock Awards may be granted
in respect of past services or other valid consideration, or in lieu of cash
compensation due to such grantee.

                                       11
<PAGE>

SECTION 9. PERFORMANCE SHARE AWARDS
           ------------------------

     (a)  Nature of Performance Share Awards. A Performance Share Award is an
          ----------------------------------
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Administrator may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. The Administrator in its sole discretion shall determine whether and to
whom Performance Share Awards shall be made, the performance goals, the periods
during which performance is to be measured, and all other limitations and
conditions.

     (b)  Rights as a Stockholder. A grantee receiving a Performance Share Award
          -----------------------
shall have the rights of a stockholder only as to shares actually received by
the grantee under the Plan and not with respect to shares subject to the Award
but not actually received by the grantee. A grantee shall be entitled to receive
a stock certificate evidencing the acquisition of shares of Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the Performance Share Award agreement (or in a performance plan adopted by the
Administrator).

     (c)  Termination. Except as may otherwise be provided by the Administrator
          -----------
either in the Award agreement or, subject to Section 13 below, in writing after
the Award agreement is issued, a grantee's rights in all Performance Share
Awards shall automatically terminate upon the grantee's termination of
employment (or cessation of service relationship) with the Company and its
Subsidiaries for any reason.

     (d)  Acceleration, Waiver, Etc. At any time prior to the grantee's
          -------------------------
termination of employment (or other service relationship) by the Company and its
Subsidiaries, the Administrator may in its sole discretion accelerate, waive or,
subject to Section 13, amend any or all of the goals, restrictions or conditions
applicable to a Performance Share Award.

SECTION 10. PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
            ---------------------------------------------

     Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award granted
to a Covered Employee is intended to qualify as "Performance-based Compensation"
under Section 162(m) of the Code and the regulations promulgated thereunder (a
"Performance-based Award"), such Award shall comply with the provisions set
forth below:

     (a)  Performance Criteria. The performance criteria used in performance
          --------------------
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following: (i) the Company's return on equity, assets,
capital or investment, (ii) pre-tax or after-tax profit levels of the Company or
any Subsidiary, a division, an operating unit or a business segment of the
Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total shareholder return; (v) changes in the
market price of the Stock; (vi) sales or market share; or (vii) earnings per
share.

                                       12
<PAGE>

     (b)  Grant of Performance-based Awards. With respect to each Performance-
          ---------------------------------
based Award granted to a Covered Employee, the Committee shall select, within
the first 90 days of a Performance Cycle (or, if shorter, within the maximum
period allowed under Section 162(m) of the Code) the performance criteria for
such grant, and the achievement targets with respect to each performance
criterion (including a threshold level of performance below which no amount will
become payable with respect to such Award). Each Performance-based Award will
specify the amount payable, or the formula for determining the amount payable,
upon achievement of the various applicable performance targets. The performance
criteria established by the Committee may be (but need not be) different for
each Performance Cycle and different goals may be applicable to Performance-
based Awards to different Covered Employees.

     (c)  Payment of Performance-based Awards. Following the completion of a
          -----------------------------------
Performance Cycle, the Committee shall meet to review and certify in writing
whether, and to what extent, the performance criteria for the Performance Cycle
have been achieved and, if so, to also calculate and certify in writing the
amount of the Performance-based Awards earned for the Performance Cycle. The
Committee shall then determine the actual size of each Covered Employee's
Performance-based Award, and, in doing so, may reduce or eliminate the amount of
the Performance-based Award for a Covered Employee if, in its sole judgment,
such reduction or elimination is appropriate.

     (d)  Maximum Award Payable. The maximum Performance-based Award payable to
          ---------------------
any one Covered Employee under the Plan for a Performance Cycle is 200,000
Shares (subject to adjustment as provided in Section 3(b) hereof).

SECTION 11. TAX WITHHOLDING
            ---------------

     (a)  Payment by Grantee. Each grantee shall, no later than the date as of
          ------------------
which the value of an Award or of any Stock or other amounts received thereunder
first becomes includable in the gross income of the grantee for Federal income
tax purposes, pay to the Company, or make arrangements satisfactory to the
Administrator regarding payment of, any Federal, state, or local taxes of any
kind required by law to be withheld with respect to such income. The Company and
its Subsidiaries shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the grantee. The
Company's obligation to deliver stock certificates to any grantee is subject to
and conditioned on tax obligations being satisfied by the grantee.

     (b)  Payment in Stock. Subject to approval by the Administrator, a grantee
may elect to have the minimum required tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the grantee with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.

                                       13
<PAGE>

SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC.
            -------------------------------

     For purposes of the Plan, the following events shall not be deemed a
termination of employment:

     (a)  a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or

     (b)  an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to re-
employment is guaranteed either by a statute or by contract or under the policy
pursuant to which the leave of absence was granted or if the Administrator
otherwise so provides in writing.

SECTION 13. AMENDMENTS AND TERMINATION
            --------------------------

     The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder's consent. If and to the extent determined by the Administrator to be
required by the Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code or to ensure that compensation
earned under Awards qualifies as performance-based compensation under Section
162(m) of the Code, if and to the extent intended to so qualify, Plan amendments
shall be subject to approval by the Company stockholders entitled to vote at a
meeting of stockholders. Nothing in this Section 13 shall limit the
Administrator's authority to take any action permitted pursuant to Section 3(c).

SECTION 14. STATUS OF PLAN
            --------------

     With respect to the portion of any Award that has not been exercised and
any payments in cash, Stock or other consideration not received by a grantee, a
grantee shall have no rights greater than those of a general creditor of the
Company unless the Administrator shall otherwise expressly determine in
connection with any Award or Awards. In its sole discretion, the Administrator
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.

SECTION 15. CHANGE OF CONTROL PROVISIONS
            ----------------------------

     Upon the occurrence of a Change of Control as defined in this Section 15:

     (a)  Except as otherwise provided in the applicable Award agreement, each
outstanding Stock Option shall automatically become fully exercisable.

                                       14
<PAGE>

     (b)  Except as otherwise provided in the applicable Award Agreement,
conditions and restrictions on each outstanding Restricted Stock Award, Deferred
Stock Award and Performance Share Award which relate solely to the passage of
time and continued employment will be removed. Performance or other conditions
(other than conditions and restrictions relating solely to the passage of time
and continued employment) will continue to apply unless otherwise provided in
the applicable Award agreement.

     (c)  "Change of Control" shall mean the occurrence of any one of the
following events:

          (i)    any "Person," as such term is used in Sections 13(d) and 14(d)
     of the Act (other than the Company, any of its Subsidiaries, or any
     trustee, fiduciary or other person or entity holding securities under any
     employee benefit plan or trust of the Company or any of its Subsidiaries),
     together with all "affiliates" and "associates" (as such terms are defined
     in Rule 12b-2 under the Act) of such person, shall become the "beneficial
     owner" (as such term is defined in Rule 13d-3 under the Act), directly or
     indirectly, of securities of the Company representing 25 percent or more of
     the combined voting power of the Company's then outstanding securities
     having the right to vote in an election of the Company's Board of Directors
     ("Voting Securities") (in such case other than as a result of an
     acquisition of securities directly from the Company); or

          (ii)   persons who, as of the Effective Date, constitute the Company's
     Board of Directors (the "Incumbent Directors") cease for any reason,
     including, without limitation, as a result of a tender offer, proxy
     contest, merger or similar transaction, to constitute at least a majority
     of the Board, provided that any person becoming a director of the Company
     subsequent to the Effective Date shall be considered an Incumbent Director
     if such person's election was approved by or such person was nominated for
     election by either (A) a vote of at least a majority of the Incumbent
     Directors or (B) a vote of at least a majority of the Incumbent Directors
     who are members of a nominating committee comprised, in the majority, of
     Incumbent Directors; but provided further, that any such person whose
     initial assumption of office is in connection with an actual or threatened
     election contest relating to the election of members of the Board of
     Directors or other actual or threatened solicitation of proxies or consents
     by or on behalf of a Person other than the Board, including by reason of
     agreement intended to avoid or settle any such actual or threatened contest
     or solicitation, shall not be considered an Incumbent Director; or

          (iii)  the approval by the stockholders of the Company of a
     consolidation, merger or consolidation or sale or other disposition of all
     or substantially all of the assets of the Company (a "Corporate
     Transaction") or if consummation of such Corporate Transaction is subject,
     at the time of such approval by stockholders, to the consent of any
     government or governmental agency, obtaining of such consent (either
     explicitly or implicitly by consummation); excluding, however, a Corporate

                                       15
<PAGE>

     Transaction in which the stockholders of the Company immediately prior to
     the Corporate Transaction, would, immediately after the Corporate
     Transaction, beneficially own (as such term is defined in Rule 13d-3 under
     the Act), directly or indirectly, shares representing in the aggregate more
     than 50 percent of the voting shares of the corporation issuing cash or
     securities in the Corporate Transaction (or of its ultimate parent
     corporation, if any); or

          (iv)   the approval by the stockholders of any plan or proposal for
     the liquidation or dissolution of the Company.

     Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person to 25 percent or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in this sentence shall
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the
Company) and immediately thereafter beneficially owns 25 percent or more of the
combined voting power of all then outstanding Voting Securities, then a "Change
of Control" shall be deemed to have occurred for purposes of the foregoing
clause (i).

SECTION 16. GENERAL PROVISIONS
            ------------------

     (a)  No Distribution; Compliance with Legal Requirements. The Administrator
          ---------------------------------------------------
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

     No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Administrator may require the placing of
such stop-orders and restrictive legends on certificates for Stock and Awards as
it deems appropriate.

     (b)  Delivery of Stock Certificates. Stock certificates to grantees under
this Plan shall be deemed delivered for all purposes when the Company or a stock
transfer agent of the Company shall have mailed such certificates in the United
States mail, addressed to the grantee, at the grantee's last known address on
file with the Company.

     (c)  Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not

                                       16
<PAGE>

confer upon any employee any right to continued employment with the Company or
any Subsidiary.

     (d)  Trading Policy Restrictions. Option exercises and other Awards under
          ---------------------------
the Plan shall be subject to such Company's insider trading policy, as in effect
from time to time.

     (e)  Loans to Grantees. The Company shall have the authority to make loans
          -----------------
to grantees of Awards hereunder (including to facilitate the purchase of shares)
and shall further have the authority to issue shares for promissory notes
hereunder.

     (f)  Designation of Beneficiary. Each grantee to whom an Award has been
          --------------------------
made under the Plan may designate a beneficiary or beneficiaries to exercise any
Award or receive any payment under any Award payable on or after the grantee's
death. Any such designation shall be on a form provided for that purpose by the
Administrator and shall not be effective until received by the Administrator. If
no beneficiary has been designated by a deceased grantee, or if the designated
beneficiaries have predeceased the grantee, the beneficiary shall be the
grantee's estate.

SECTION 17. EFFECTIVE DATE OF PLAN
            ----------------------

     This Plan shall become effective upon approval by the holders of a majority
of the votes cast at a meeting of stockholders at which a quorum is present or
by written consent of stockholders. Subject to such approval by the stockholders
and to the requirement that no Stock may be issued hereunder prior to such
approval, Stock Options and other Awards may be granted hereunder on and after
adoption of this Plan by the Board.

SECTION 18. GOVERNING LAW
            -------------

     This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.

DATE APPROVED BY BOARD OF DIRECTORS:  December 21, 1999

DATE APPROVED BY STOCKHOLDERS: December 23, 1999

                                       17<PAGE>

                                                                    Exhibit 10.3

                         CYPRESS COMMUNICATIONS, INC.

                         EMPLOYEE STOCK PURCHASE PLAN

     The purpose of the Cypress Communications, Inc. Employee Stock Purchase
Plan (the "Plan") is to provide eligible employees of Cypress Communications,
Inc. (the "Company") and certain of its subsidiaries with opportunities to
purchase shares of the Company's common stock, par value $0.001 per share (the
"Common Stock"). 900,000 shares of Common Stock in the aggregate have been
approved and reserved for this purpose. The Plan is intended to constitute an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), and shall be interpreted
in accordance with that intent.

     1.   Administration.  The Plan will be administered by the person or
          --------------
persons (the "Administrator") appointed by the Company's Board of Directors (the
"Board") for such purpose.  The Administrator has authority to make rules and
regulations for the administration of the Plan, and its interpretations and
decisions with regard thereto shall be final and conclusive. No member of the
Board or individual exercising administrative authority with respect to the Plan
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted hereunder.

     2.   Offerings.  The Company will make one or more offerings to eligible
          ---------
employees to purchase Common Stock under the Plan ("Offerings").  The initial
Offering will begin on the first day of the Company's Initial Public Offering
and will end on the following
<PAGE>

October 31, 2000 (the "Initial Offering"). Thereafter, unless otherwise
determined by the Administrator, an Offering will begin on the first business
day occurring on or after each November 1 and May 1 and will end on the last
business day occurring on or before the following April 30 and October 31,
respectively. The Administrator may, in its discretion, designate a different
period for any Offering, provided that no Offering shall exceed six months in
duration or overlap any other Offering.

     3.   Eligibility.  All employees of the Company (including employees who
          -----------
are also directors of the Company) and all employees of each Designated
Subsidiary (as defined in Section 11) are eligible to participate in any one or
more of the Offerings under the Plan, provided that as of the first day of the
applicable Offering (the "Offering Date") they are customarily employed by the
Company or a Designated Subsidiary for more than 20 hours a week.

     4.   Participation.  An employee eligible on any Offering Date may
          -------------
participate in such Offering by submitting an enrollment form to his appropriate
payroll location at least 15 business days before the Offering Date (or by such
other deadline as shall be established for the Offering). The form will (a)
state a whole percentage to be deducted from his Compensation (as defined in
Section 11) per pay period, (b) authorize the purchase of Common Stock for him
in each Offering in accordance with the terms of the Plan and (c) specify the
exact name or names in which shares of Common Stock purchased for him are to be
issued pursuant to Section 10.  An employee who does not enroll in accordance
with these procedures will be deemed to have waived his right to participate.
Unless an employee files a new

                                       2
<PAGE>

enrollment form or withdraws from the Plan, his deductions and purchases will
continue at the same percentage of Compensation for future Offerings, provided
he remains eligible. Notwithstanding the foregoing, participation in the Plan
will neither be permitted nor be denied contrary to the requirements of the
Code.

     5.   Employee Contributions.  Each eligible employee may authorize payroll
          ----------------------
deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%)
of his Compensation for each pay period.  The Company will maintain book
accounts showing the amount of payroll deductions made by each participating
employee for each Offering.  No interest will accrue or be paid on payroll
deductions.

     6.   Deduction Changes.  Except as may be determined by the Administrator
          -----------------
in advance of an Offering, an employee may not increase or decrease his payroll
deduction during any Offering, but may increase or decrease his payroll
deduction with respect to the next Offering (subject to the limitations of
Section 5) by filing a new enrollment form at least 15 business days before the
next Offering Date (or by such other deadline as shall be established for the
Offering). The Administrator may, in advance of any Offering, establish rules
permitting an employee to increase, decrease or terminate his payroll deduction
during an Offering.

     7.   Withdrawal.  An employee may withdraw from participation in the Plan
          ----------
by delivering a written notice of withdrawal to his appropriate payroll
location. The employee's withdrawal will be effective as of the next business
day. Following an employee's withdrawal, the Company will promptly refund to him
his entire account balance under the Plan (after

                                       3
<PAGE>

payment for any Common Stock purchased before the effective date of withdrawal).
Partial withdrawals are not permitted. The employee may not begin participation
again during the remainder of the Offering, but may enroll in a subsequent
Offering in accordance with Section 4.

     8.   Grant of Options.  On each Offering Date, the Company will grant to
          ----------------
each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, (a) a number of shares of Common
Stock, which number shall not exceed the number of whole shares which is less
than or equal to $12,500 divided by the closing price per share of Common Stock
on the Offering Date, or (b) such other lesser maximum number of shares as shall
have been established by the Administrator in advance of the Offering.
Notwithstanding the foregoing, on the Offering Date for the Initial Offering,
the Company will grant to each eligible employee who is then a participant in
the Plan an Option to purchase on the Exercise Date, at the Option Price
hereinafter provided for, a number of shares of Common Stock, which number shall
not exceed the number of whole shares which is less than or equal to $25,000
divided by the "Price to the Public" (or equivalent) set forth on the cover page
for the final prospectus relating to the Company's Initial Public Offering. The
purchase price for each share purchased under each Option (the "Option Price")
will be 85% of the Fair Market Value of the Common Stock on the Offering Date or
the Exercise Date, whichever is less.

     Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock

                                       4
<PAGE>

possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or any Parent or Subsidiary (as defined
in Section 11). For purposes of the preceding sentence, the attribution rules of
Section 424(d) of the Code shall apply in determining the stock ownership of an
employee, and all stock which the employee has a contractual right to purchase
shall be treated as stock owned by the employee. In addition, no employee may be
granted an Option which permits his rights to purchase stock under the Plan, and
any other employee stock purchase plan of the Company and its Parents and
Subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value
of such stock (determined on the option grant date or dates) for each calendar
year in which the Option is outstanding at any time. The purpose of the
limitation in the preceding sentence is to comply with Section 423(b)(8) of the
Code.

     9.   Exercise of Option and Purchase of Shares.  Each employee who
          -----------------------------------------
continues to be a participant in the Plan on the Exercise Date shall be deemed
to have exercised his Option on such date and shall acquire from the Company
such number of whole shares of Common Stock reserved for the purpose of the Plan
as his accumulated payroll deductions on such date will purchase at the Option
Price, subject to any other limitations contained in the Plan.  Any amount
remaining in an employee's account at the end of an Offering solely by reason of
the inability to purchase a fractional share will be carried forward to the next
Offering; any other balance remaining in an employee's account at the end of an
Offering will be refunded to the employee promptly.

     10.  Issuance of Certificates.  Certificates representing shares of Common
          ------------------------
Stock

                                       5
<PAGE>

purchased under the Plan may be issued only in the name of the employee, in the
name of the employee and another person of legal age as joint tenants with
rights of survivorship, or in the name of a broker authorized by the employee to
be his, or their, nominee for such purpose.

     11.  Definitions.
          -----------

     The term "Compensation" means the amount of base pay, prior to salary
reduction pursuant to either Section 125 or 401(k) of the Code, but excluding
overtime, commissions, incentive or bonus awards, allowances and reimbursements
for expenses such as relocation allowances or travel expenses, income or gains
on the exercise of Company stock options, and similar items.

     The term "Designated Subsidiary" means any present or future Subsidiary (as
defined below) that has been designated by the Board to participate in the Plan.
The Board may so designate any Subsidiary, or revoke any such designation, at
any time and from time to time, either before or after the Plan is approved by
the stockholders.

     The term "Fair Market Value of the Common Stock" on any given date means
the fair market value of the Common Stock determined in good faith by the
Administrator; provided, however, that if the Common Stock is admitted to
               --------  -------
quotation on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), NASDAQ National System or national securities exchange, the
determination shall be made by reference to market quotations. If there are no
market quotations for such date, the determination shall be made by reference to
the last date preceding such date for which there are market quotations.
Notwithstanding the foregoing, if the date for which Fair Market Value of the
Common Stock

                                       6
<PAGE>

is determined is the first day when trading prices for the Common Stock are
reported on NASDAQ or on a national securities exchange, the Fair Market Value
of the Common Stock shall be the "Price to the Public" (or equivalent) set forth
on the cover page for the final prospectus relating to the Company's Initial
Public Offering.

     The term "Initial Public Offering" means the consummation of the first
fully underwritten, firm commitment public offering pursuant to an effective
registration statement under the Securities Exchange Act of 1934, as amended,
other than on Forms S-4 or S-8 or their then equivalents, covering the offer and
sale by the Company of its Common Stock.

     The term "Parent" means a "parent corporation" with respect to the Company,
as defined in Section 424(e) of the Code.

     The term "Subsidiary" means a "subsidiary corporation" with respect to the
Company, as defined in Section 424(f) of the Code.

     12.  Rights on Termination of Employment.  If a participating employee's
          -----------------------------------
employment terminates for any reason before the Exercise Date for any Offering,
no payroll deduction will be taken from any pay due and owing to the employee
and the balance in his account will be paid to him or, in the case of his death,
to his designated beneficiary as if he had withdrawn from the Plan under Section
7.  An employee will be deemed to have terminated employment, for this purpose,
if the corporation that employs him, having been a Designated Subsidiary, ceases
to be a Subsidiary, or if the employee is transferred to any corporation other
than the Company or a Designated Subsidiary.

     13.  Special Rules.  Notwithstanding anything herein to the contrary, the
          -------------

                                       7
<PAGE>

Administrator may adopt special rules applicable to the employees of a
particular Designated Subsidiary, whenever the Administrator determines that
such rules are necessary or appropriate for the implementation of the Plan in a
jurisdiction where such Designated Subsidiary has employees; provided that such
rules are consistent with the requirements of Section 423(b) of the Code. Such
special rules may include (by way of example, but not by way of limitation) the
establishment of a method for employees of a given Designated Subsidiary to fund
the purchase of shares other than by payroll deduction, if the payroll deduction
method is prohibited by local law or is otherwise impracticable.  Any special
rules established pursuant to this Section 13 shall, to the extent possible,
result in the employees subject to such rules having substantially the same
rights as other participants in the Plan.

     14.  Optionees Not Stockholders.  Neither the granting of an Option to an
          --------------------------
employee nor the deductions from his pay shall constitute such employee a holder
of the shares of Common Stock covered by an Option under the Plan until such
shares have been purchased by and issued to him.

     15.  Rights Not Transferable.  Rights under the Plan are not transferable
          -----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.

     16.  Application of Funds.  All funds received or held by the Company under
          --------------------
the Plan may be combined with other corporate funds and may be used for any
corporate purpose.

     17.  Adjustment in Case of Changes Affecting Common Stock.  In the event of
          ----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common

                                       8
<PAGE>

Stock, the number of shares approved for the Plan, and the share limitation set
forth in Section 8, shall be increased proportionately, and such other
adjustment shall be made as may be deemed equitable by the Administrator. In the
event of any other change affecting the Common Stock, such adjustment shall be
made as may be deemed equitable by the Administrator to give proper effect to
such event.

     18.  Amendment of the Plan.  The Board may at any time, and from time to
          ---------------------
time, amend the Plan in any respect, except that without the approval, within 12
months of such Board action, by the stockholders, no amendment shall be made
increasing the number of shares approved for the Plan or making any other change
that would require stockholder approval in order for the Plan, as amended, to
qualify as an "employee stock purchase plan" under Section 423(b) of the Code.

     19.  Insufficient Shares.  If the total number of shares of Common Stock
          -------------------
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of
shares issuable under the Plan, the shares then available shall be apportioned
among participants in proportion to the amount of payroll deductions accumulated
on behalf of each participant that would otherwise be used to purchase Common
Stock on such Exercise Date.

     20.  Termination of the Plan.  The Plan may be terminated at any time by
          -----------------------
the Board. Upon termination of the Plan, all amounts in the accounts of
participating employees shall be promptly refunded.

     21.  Governmental Regulations.  The Company's obligation to sell and
          ------------------------
deliver

                                       9
<PAGE>

Common Stock under the Plan is subject to obtaining all governmental approvals
required in connection with the authorization, issuance, or sale of such stock.

     The Plan shall be governed by Delaware law except to the extent that such
law is preempted by federal law.

     22.  Issuance of Shares.  Shares may be issued upon exercise of an Option
          ------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.

     23.  Tax Withholding.  Participation in the Plan is subject to any minimum
          ---------------
required tax withholding on income of the participant in connection with the
Plan.  Each employee agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right to deduct any such taxes from any payment of
any kind otherwise due to the employee, including shares issuable under the
Plan.

     24.  Notification Upon Sale of Shares.  Each employee agrees, by entering
          --------------------------------
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.

     25.  Effective Date and Approval of Shareholders.  The Plan shall take
          -------------------------------------------
effect on the first day of the Company's Initial Public Offering, subject to
approval by the holders of a majority of the votes cast at a meeting of
stockholders at which a quorum is present or by written consent of stockholders.

                                       10
<PAGE>

                                                                       Exhibit A
                                                                       ---------

                                 TERMS OF THE
                   SERIES Z JUNIOR PARTICIPATING CUMULATIVE
                                PREFERRED STOCK

                                      of

                         CYPRESS COMMUNICATIONS, INC.

     1.   Designation and Amount. The total number of shares of Series Z
          ----------------------
Preferred Stock which the Corporation shall have authority to issue is [number
spelled out] ([number]) shares.

      2.  Dividends and Distributions.
          ---------------------------

          (a)  (i)  Subject to the rights of the holders of any shares of any
series of Undesignated Preferred Stock (or any similar stock) ranking prior and
superior to the Series Z Preferred Stock with respect to dividends, the holders
of shares of Series Z Preferred Stock, in preference to the holders of shares of
Common Stock and of any other junior stock, shall be entitled to receive, when,
as and if declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series Z Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provisions
for adjustment hereinafter set forth, 1,000 times the aggregate per share amount
of all cash dividends, and 1,000 times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series Z Preferred Stock.  The multiple
of cash and non-cash dividends declared on the Common Stock to which holders of
the Series Z Preferred Stock are entitled, which shall be 1,000 initially but
which shall be adjusted from time to time as hereinafter provided, is
hereinafter referred to as the "Dividend Multiple."  In the event the
Corporation shall at any time after __________, 2000 (the "Rights Declaration
Date") (i) declare or pay any dividend on Common Stock payable in shares of
Common Stock, or (ii) effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the Dividend Multiple
thereafter applicable to the determination of the amount of dividends which
holders of shares of Series Z

                                      A-1
<PAGE>

Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

               (ii)  Notwithstanding anything else contained in this paragraph
(a), the Corporation shall, out of funds legally available for that purpose,
declare a dividend or distribution on the Series Z Preferred Stock as provided
in this paragraph (a) immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been declared
on the Common Stock during the period between any Quarterly Dividend Payment
Date and the next subsequent Quarterly Dividend Payment Date, a dividend of
$1.00 per share on the Series Z Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.

          (b)  Dividends shall begin to accrue and be cumulative on outstanding
shares of Series Z Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series Z Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series Z Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall
not bear interest.  Dividends paid on the shares of Series Z Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.  The Board of Directors may fix
in accordance with applicable law a record date for the determination of holders
of shares of Series Z Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be not more than such
number of days prior to the date fixed for the payment thereof as may be allowed
by applicable law.

     3.   Voting Rights.  In addition to any other voting rights required by
          -------------
law, the holders of shares of Series Z Preferred Stock shall have the following
voting rights:

          (a)  Subject to the provision for adjustment hereinafter set forth,
each share of Series Z Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
The number of votes which a holder of a share of Series Z Preferred Stock is
entitled to cast, which shall initially be 1,000 but which may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple."  In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on Common Stock payable in
shares of Common Stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into

                                      A-2
<PAGE>

a greater or lesser number of shares of Common Stock, then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series Z Preferred Stock shall be
entitled shall be the Vote Multiple immediately prior to such event multiplied
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

          (b)  Except as otherwise provided herein or by law, the holders of
shares of Series Z Preferred Stock and the holders of shares of Common Stock and
the holders of shares of any other capital stock of this Corporation having
general voting rights, shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.

          (c)  Except as otherwise required by applicable law or as set forth
herein, holders of Series Z Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.

     4.   Certain Restrictions.
          --------------------

          (a)  Whenever dividends or distributions payable on the Series Z
Preferred Stock as provided in Section C.2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series Z Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:

               (i)    declare or pay dividends on, make any other distributions
                      on, or redeem or purchase or otherwise acquire for
                      consideration any shares of stock ranking junior (either
                      as to dividends or upon liquidation, dissolution or
                      winding up) to the Series Z Preferred Stock;

               (ii)   declare or pay dividends on or make any other
                      distributions on any shares of stock ranking on a parity
                      (either as to dividends or upon liquidation, dissolution
                      or winding up) with the Series Z Preferred Stock, except
                      dividends paid ratably on the Series Z Preferred Stock and
                      all such parity stock on which dividends are payable or in
                      arrears in proportion to the total amounts to which the
                      holders of all such shares are then entitled;

               (iii)  except as permitted in subsection C.4(a)(iv) below,
                      redeem, purchase or otherwise acquire for consideration
                      shares of any stock ranking on a parity (either as to
                      dividends or upon liquidation, dissolution or winding up)
                      with the Series Z Preferred Stock, provided that the
                      Corporation may at any time redeem, purchase or otherwise
                      acquire shares of any such parity stock in exchange for

                                      A-3
<PAGE>

                      shares of any stock of the Corporation ranking junior
                      (either as to dividends or upon dissolution, liquidation
                      or winding up) to the Series Z Preferred Stock; or

               (iv)   purchase or otherwise acquire for consideration any shares
                      of Series Z Preferred Stock, or any shares of any stock
                      ranking on a parity (either as to dividends or upon
                      liquidation, dissolution or winding up) with the Series Z
                      Preferred Stock, except in accordance with a purchase
                      offer made in writing or by publication (as determined by
                      the Board of Directors) to all holders of such shares upon
                      such terms as the Board of Directors, after consideration
                      of the respective annual dividend rates and other relative
                      rights and preferences of the respective series and
                      classes, shall determine in good faith will result in fair
                      and equitable treatment among the respective series or
                      classes.

          (b)  The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subsection (a) of
this Section C.4, purchase or otherwise acquire such shares at such time and in
such manner.

     5.   Reacquired Shares.  Any shares of Series Z Preferred Stock purchased
          -----------------
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof.

     6.   Liquidation, Dissolution or Winding Up.  Upon any liquidation
          --------------------------------------
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series Z Preferred Stock unless, prior thereto, the holders of shares of Series
Z Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $1,000.00 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock, or (y) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series Z Preferred Stock, except distributions made ratably
on the Series Z Preferred Stock and all other such parity stock in proportion to
the total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.  In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare or pay any dividend on
Common Stock payable in shares of Common Stock, or (ii) effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount per share to which holders of shares of Series Z
Preferred Stock were entitled immediately prior to such event under clause (x)
of the preceding

                                      A-4
<PAGE>

sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

     Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section C.6.

     7.   Consolidation, Merger, etc.  In case the Corporation shall enter into
          --------------------------
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series Z
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged, plus accrued and unpaid
dividends, if any, payable with respect to the Series Z Preferred Stock.  In the
event the Corporation shall at any time after the Rights Declaration Date (i)
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or (ii) effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series Z Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

     8.   Redemption.  The shares of Series Z Preferred Stock shall not be
          ----------
redeemable; provided, however, that the foregoing shall not limit the ability of
the Corporation to purchase or otherwise deal in such shares to the extent
otherwise permitted hereby and by law.

     9.   Ranking.  Unless otherwise expressly provided in this Certificate or a
          -------
certificate of designations relating to any other series of Undesignated
Preferred Stock, the Series Z Preferred Stock shall rank junior to every other
series of Preferred Stock previously or hereafter authorized, as to the payment
of dividends and the distribution of assets on liquidation, dissolution or
winding up and shall rank senior to the Common Stock.

     10.  Amendment.  This Certificate shall not be amended in any manner which
          ---------
would materially alter or change the powers, preferences or special rights of
the Series Z Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series Z Preferred Stock, voting separately as a class.

                                      A-5
<PAGE>

     11.  Fractional Shares.  Series Z Preferred Stock may be issued in whole
          -----------------
shares or in any fraction of a share that is one one-thousandth (1/1,000th) of a
share or any integral multiple of such fraction, which shall entitle the holder,
in proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series Z Preferred Stock.  In lieu of fractional
shares, the Corporation may elect to make a cash payment as provided in the
Shareholder Rights Agreement, dated ___________, 2000, between the Corporation
and State Street Bank & Trust Company, for fractions of a share other than one
one-thousandth (1/1,000th) of a share or any integral multiple thereof.

                                      A-6
<PAGE>

                                                                       Exhibit B
                                                                       ---------

                          [Form of Right Certificate]

Certificate No. R-                                                 ______ Rights

NOT EXERCISABLE AFTER _____________, 2010 OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF CYPRESS
COMMUNICATIONS, INC., AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE
SHAREHOLDER RIGHTS AGREEMENT BETWEEN CYPRESS COMMUNICATIONS, INC. AND STATE
STREET BANK AND TRUST COMPANY, AS RIGHTS AGENT, DATED AS OF ___________, 2000
(THE "RIGHTS AGREEMENT").  AS SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF
AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS BECOME NULL AND VOID.

Right Certificate

CYPRESS COMMUNICATIONS, INC.

This certifies that _________________________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Shareholder Rights Agreement dated as of _____________, 2000 (the "Rights
Agreement") between Cypress Communications, Inc.  (the "Company") and State
Street Bank and Trust Company, as Rights Agent (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to the close of business on
____________, 2010 at the office or offices of the Rights Agent designated for
such purpose, or its successors as Rights Agent, one one-thousandth of a fully
paid, non-assessable share of the Series Z Junior Participating Cumulative
Preferred Stock (the "Preferred Stock") of the Company, at a purchase price of
_____ per one one-thousandth of a share (the "Exercise Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase and the related Certificate duly executed.  The number of Rights
evidenced by this Right Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Exercise Price per
share set forth above, are the number and Exercise Price as of _______________,
based on the Preferred Stock as constituted at such date.

                                      B-1
<PAGE>

     Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
Person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.

     As provided in the Rights Agreement, the Exercise Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.

     This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.

     This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Certificates surrendered shall have entitled such holder to
purchase.  If this Right Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Right Certificate or
Certificates for the number of whole Rights not exercised.  If this Right
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.

     Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock or Preferred Stock at an exchange ratio (subject to
adjustment) specified in the Rights Agreement.

     Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Board of Directors of the Company at its
option at a

                                      B-2
<PAGE>

redemption price of $0.01 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors).

     The Company is not obligated to issue fractional shares of stock upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts).  If
the Company elects not to issue such fractional shares, in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

     No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock, Common Stock or any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

     This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.

     WITNESS the facsimile signature of the proper officers of the Company as a
document under seal.

Attested:                                CYPRESS COMMUNICATIONS, INC.

By:__________________________________    By: ___________________________________
  [Secretary or Assistant Secretary]         Name:
                                             Title: [Chairman, Vice Chairman,
                                                    President or Vice President]

Countersigned:

[RIGHTS AGENT]

By:____________________________________
   Name:
   Title:

                                      B-3
<PAGE>

                  [Form of Reverse Side of Right Certificate]

                              FORM OF ASSIGNMENT
                              ------------------

               (To be executed by the registered holder if such
              holder desires to transfer the Right Certificate.)

FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto ____________________________________ (Please print name and
address of transferee) ____________________________________ this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint ___________________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.

Dated: ______________, _____            ___________________________________
                                        Signature

Signature Guaranteed: _______________________

                                      B-4
<PAGE>

                                  CERTIFICATE
                                  -----------

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  the Rights evidenced by this Right Certificate ____ are ____ are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and

     (2)  after due inquiry and to the best knowledge of the undersigned, the
undersigned ____ did ____ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.

Dated: ______________, _____            ___________________________________
                                        Signature

                                      B-5
<PAGE>

                                    NOTICE
                                    ------

          The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.

                                      B-6
<PAGE>

                         FORM OF ELECTION TO PURCHASE
                         ----------------------------

                     (To be executed if holder desires to
                       exercise the Right Certificate.)

To CYPRESS COMMUNICATIONS, INC.:

     The undersigned hereby irrevocably elects to exercise _______ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:

Please insert social security
or other identifying taxpayer number:  __________________

______________________________________________________________________________
                        (Please print name and address)

______________________________________________________________________________

______________________________________________________________________________

     If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section
11(a)(ii) of the Rights Agreement, a new Right Certificate for the balance of
such Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying taxpayer number:  _____________________

______________________________________________________________________________
                        (Please print name and address)

______________________________________________________________________________

______________________________________________________________________________

Dated: ______________, _____            ___________________________________
                                        Signature

Signature Guaranteed: _______________________

                                      B-7
<PAGE>

                                  CERTIFICATE
                                  -----------

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  the Rights evidenced by this Right Certificate ____ are ____ are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement); and

     (2)  after due inquiry and to the best knowledge of the undersigned, the
undersigned ____ did ____ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person, or an Affiliate or Associate of any such Person.

Dated: __________________, ____              _______________________________
                                             Signature

                                      B-8
<PAGE>

                                    NOTICE
                                    ------

     The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.

                                      B-9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00005-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00005-of-00352.parquet"}]]