Document:

Approved by Board of Directors on March 28, 2000
                             Approved by Stockholders on _________________, 2000

                          Winstar Communications, Inc.
                                (Name of Company)

                          2000 Performance Equity Plan

Section 1.      Purpose; Definitions.

1.1   Purpose. The purpose of the Winstar Communications, Inc. 2000 Performance
Equity Plan is to enable the Company to offer to its employees, officers,
directors and consultants whose past, present and/or potential contributions to
the Company and its Subsidiaries have been, are or will be important to the
success of the Company, an opportunity to acquire a proprietary interest in the
Company. The various types of long-term incentive awards that may be provided
under the Plan will enable the Company to respond to changes in compensation
practices, tax laws, accounting regulations and the size and diversity of its
businesses.

1.2    Definitions.  For purposes of the Plan, the following terms shall be
defined as set forth below:

        (a)     "Agreement"  means the agreement  between the Company and the
                Holder,  or such other document as may be determined by the
                Committee, setting forth the terms and conditions of an award
                under the Plan.

        (b)     "Board" means the Board of Directors of the Company.

        (c)     "Code" means the Internal Revenue Code of 1986, as amended from
                time to time.

        (d)     "Committee"  means the Compensation  Committee of the Board or
                any other committee of the Board that the Board may designate to
                administer  the Plan or any portion  thereof. If no Committee is
                so  designated,  then all references in this Plan to "Committee"
                shall mean the Board.

        (e)     "Common Stock" means the Common Stock of the Company, $.01 par
                value per share.

        (f)     "Company" means Winstar  Communications,  Inc., a corporation
                organized under the laws of the State of Delaware.

        (g)     "Deferred  Stock" means Common Stock to be received  under an
                award made pursuant to Section 8 below at the end of a specified
                deferral period.

        (h)      "Disability"  means physical or mental impairment as determined
                 under procedures established by the Committee for purposes of
                 the Plan.

        (i)     "Effective Date" means the date set forth in Section 12.1,
                below.

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        (j)     "Fair  Market  Value",  unless  otherwise  required by any
                applicable  provision of the Code or any regulations  issued
                thereunder,  means,  as of any given  date:  (i) if the  Common
                Stock is  listed  on a  national securities  exchange or quoted
                on the Nasdaq  National Market or Nasdaq  SmallCap  Market,  the
                last sale price of the Common Stock in the  principal  trading
                market for the Common  Stock on the last  trading day prior to
                such date,  as reported  by the  exchange  or  Nasdaq,  as the
                case may be;  (ii) if the  Common  Stock is not  listed on a
                national securities  exchange  or  quoted  on the  Nasdaq
                National  Market or  Nasdaq  SmallCap  Market,  but is traded in
                the over-the-counter  market,  the closing bid price for the
                Common Stock on the last  trading day prior to such date,  as
                reported by the OTC  Bulletin  Board or the  National Quotation
                Bureau,  Incorporated  or similar  publisher of such quotations;
                and (iii) if the fair market  value of the Common Stock  cannot
                be  determined  pursuant to clause (i) or (ii) above, such price
                as the Committee shall determine, in good faith.

        (k)     "Holder" means a person who has received an award under the
                Plan.

        (l)     "Incentive  Stock  Option"  means any Stock Option  intended to
                be and  designated  as an "incentive stock option" within the
                meaning of Section 422 of the Code.

        (m)     "Nonqualified Stock Option" means any Stock Option that is no
                an Incentive Stock Option.

        (n)     "Normal  Retirement"  means retirement from active  employment
                with the Company or any Subsidiary on or after such age which
                may be designated by the Committee as "retirement  age" for any
                particular  Holder.  If no age is designated, it shall be 62.

        (o)     "Other  Stock-Based  Award" means an award under Section 9 beloW
                that is valued in whole or in part by reference to, or is
                otherwise based upon, Common Stock.

       (p)      "Parent" means any present or future "parent corporation" of the
                Company,  as such term is defined in Section 424(e) of the Code.

       (q)      "Plan" means the Winstar  Communications,  Inc. 2000 Performance
                Equity Plan, as hereinafter amended from time to time.

       (r)      "Repurchase  Value"  shall mean the Fair  Market  Value in the
                event the award to be  settled  under section  2.2(h) is
                comprised of shares of Common Stock and the  difference  between
                Fair Market Value and the Exercise Price (if lower than Fair
                Market  Value) in the event the award is a Stock Option or Stock
                Appreciation  Right;  in each case, multiplied by the number of
                shares subject to the award.

        (s)     "Restricted  Stock" means Common Stock received under an award
                made pursuant to Section 7 below that is subject to restrictions
                under said Section 7.

        (t)     "SAR  Value"  means the excess of the Fair Market  Value (on the
                exercise  date) over the  exercise price that the  participant
                would have  otherwise had to pay to exercise the related Stock
                Option,  multiplied by the number of shares for which the Stock
                Appreciation Right is exercised.

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        (u)     "Stock  Appreciation Right" means the right to receive from the
                Company, on surrender of all or part of the related  Stock
                Option,  without a cash payment to the Company,  a number of
                shares of Common Stock equal to the SAR Value divided by the
                Fair Market Value (on the exercise date).

        (v)     "Stock  Option" or  "Option"  means any option to purchase
                shares of Common  Stock which is granted pursuant to the Plan.

        (w)     "Stock Reload Option" means any option granted under Section 5.3
                 of the Plan.

        (x)     "Subsidiary"  means any present or future "subsidiary
                corporation" of the Company,  as such term is defined in Section
                424(f) of the Code.

        (y)     "Vest" means to become exercisable or to otherwise obtain
                ownership rights in an award.

Section 2.       Administration.

2.1      Committee Membership. The Plan shall be administered by the Board or a
Committee. Committee members shall serve for such term as the Board may in each
case determine, and shall be subject to removal at any time by the Board. The
Committee members, to the extent possible and deemed to be appropriate by the
Board, shall be "non-employee directors" as defined in Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and
"outside directors" within the meaning of Section 162(m) of the Code.

2.2     Powers of Committee. The Committee shall have full authority to award,
pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation
Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock Reload Options
and/or (vi) Other Stock-Based Awards. For purposes of illustration and not of
limitation, the Committee shall have the authority (subject to the express
provisions of this Plan):

        (a)      to select the officers,  employees,  directors and  consultants
                 of the Company or any Subsidiary to whom Stock Options,  Stock
                 Appreciation  Rights,  Restricted Stock,  Deferred Stock,
                 Reload Stock Options and/or Other Stock-Based Awards may from
                 time to time be awarded hereunder.

        (b)      to determine the terms and  conditions,  not  inconsistent
                 with the terms of the Plan, of any award granted  hereunder
                 (including,  but not limited to, number of shares,  share
                 exercise price or types of consideration paid upon exercise of
                 such options, such as other  securities of the Company or other
                 property,  any  restrictions or limitations, and any vesting,
                 exchange, surrender,  cancellation,  acceleration,
                 termination,  exercise or forfeiture provisions, as the
                 Committee shall determine);

        (c)     to determine any  specified  performance  goals or such other
                factors or criteria  which need to be attained for the vesting
                of an award granted hereunder;

        (d)     to determine  the terms and  conditions  under which awards
                granted  hereunder  are to operate on a tandem  basis and/or in
                conjunction  with or apart from other  equity  awarded  under
                this Plan and cash and non-cash awards made by the Company or
                any Subsidiary outside of this Plan;

        (e)     to permit a Holder to elect to defer a payment  under the Plan
                under such  rules and  procedures  as the Committee may
                establish,  including the payment or crediting of interest on
                deferred  amounts  denominated in cash and of dividend
                equivalents on deferred amounts denominated in Common Stock;

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        (f)     to determine the extent and  circumstances  under which Common
                Stock and other amounts  payable with respect to an award
                hereunder shall be deferred that may be either automatic or at
                the election of the Holder;

        (g)     to substitute (i) new Stock Options for previously  granted
                Stock Options,  which previously granted Stock Options have
                higher option  exercise  prices and/or contain other less
                favorable  terms,  and (ii) new awards of any other  type for
                previously  granted  awards of the same  type,  which
                previously  granted  awards  are upon less favorable terms; and

        (h)     to make payments and  distributions  with respect to awards
                (i.e., to "settle"  awards) through cash payments in an amount
                equal to the Repurchase Value.

        Notwithstanding  anything contained herein to the contrary, the
Committee shall not grant to any one Holder in any one calendar year awards for
more than 1,000,000 shares in the aggregate.

2.3    Interpretation of Plan.

        (a)      Committee  Authority.  Subject to Section 11 below, the
                 Committee shall have the authority to adopt, alter and repeal
                 such  administrative  rules,  guidelines  and  practices
                 governing the Plan as it shall from time to time deem
                 advisable to  interpret  the terms and  provisions  of the Plan
                 and any award issued under the Plan (and to determine the form
                 and substance of all Agreements  relating thereto),  and to
                 otherwise  supervise the administration of the Plan.  Subject
                 to Section 11 below,  all  decisions  made by the Committee
                 pursuant to the  provisions of the Plan shall be made in the
                 Committee's  sole discretion and shall be final and binding
                 upon all persons,  including the Company, its Subsidiaries
                 and Holders.

        (b)     Incentive  Stock  Options.  Anything  in the  Plan  to the
                contrary  notwithstanding,  no  term  or provision of the Plan
                relating to  Incentive  Stock  Options  (including  but not
                limited to Stock Reload  Options or Stock  Appreciation  rights
                granted in  conjunction  with an Incentive  Stock Option) or any
                Agreement  providing for Incentive  Stock Options  shall be
                interpreted,  amended or altered,  nor shall any  discretion or
                authority  granted under the Plan be so  exercised,  so as to
                disqualify  the Plan under Section 422 of the Code or,  without
                the consent of the Holder(s) affected, to disqualify any
                Incentive Stock Option under such Section 422.

Section 3.     Stock Subject to Plan.

3.1     Number of Shares. The total number of shares of Common Stock reserved
and available for issuance under the Plan shall be 10,000,000 shares. Shares of
Common Stock under the Plan may consist, in whole or in part, of authorized and
unissued shares or treasury shares. If any shares of Common Stock that have been
granted pursuant to a Stock Option cease to be subject to a Stock Option, or if
any shares of Common Stock that are subject to any Stock Appreciation Right,
Restricted Stock award, Deferred Stock award, Reload Stock Option or Other
Stock-Based Award granted hereunder are forfeited or any such award otherwise
terminates without a payment being made to the Holder in the form of Common
Stock, such shares shall again be available for distribution in connection with
future grants and awards under the Plan. If a Holder pays the exercise price of
a Stock Option by surrendering any previously owned shares and/or arranges to
have the appropriate number of shares otherwise issuable upon exercise withheld
to cover the withholding tax liability associated with the Stock Option
exercise, then the number of shares available under the Plan shall be increased
by the lesser of (i) the number of such surrendered shares and shares used to
pay taxes; and (ii) the number of shares purchased under such Stock Option.

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3.2    Adjustments. In the event of any dividend of shares of Common Stock
payable on shares of Common Stock, Common Stock split, reverse Common Stock
split or other extraordinary or unusual event which results in a change in the
shares of Common Stock of the Company as a whole, the Committee shall make such
equitable adjustments as it deems appropriate in the terms of any award
(including number of shares subject to the award and the exercise price) and the
aggregate number of shares reserved for issuance under the Plan. Any such
adjustments made by the Committee will be final, binding and conclusive.

Section 4.       Eligibility.

        Awards may be made or granted to employees, officers, directors and
consultants who are deemed to have rendered or to be able to render significant
services to the Company or its Subsidiaries and who are deemed to have
contributed or to have the potential to contribute to the success of the
Company. No Incentive Stock Option shall be granted to any person who is not an
employee of the Company or a Subsidiary at the time of grant. Notwithstanding
the foregoing, an award may be made or granted to a person in connection with
his hiring or retention, or at any time on or after the date he reaches an
agreement (oral or written) with the Company with respect to such hiring or
retention, even though it may be prior to the date the person first performs
services for the Company or its Subsidiaries; provided, however, that no portion
of any such award shall become vested prior to the date the person first
performs such services.

Section 5.      Stock Options.

5.1     Grant and Exercise. Stock Options granted under the Plan may be of two
types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. Any
Stock Option granted under the Plan shall contain such terms, not inconsistent
with this Plan, or with respect to Incentive Stock Options, not inconsistent
with the Plan and the Code, as the Committee may from time to time approve. The
Committee shall have the authority to grant Incentive Stock Options or
Non-Qualified Stock Options, or both types of Stock Options which may be granted
alone or in addition to other awards granted under the Plan. To the extent that
any Stock Option intended to qualify as an Incentive Stock Option does not so
qualify, it shall constitute a separate Nonqualified Stock Option.

5.2     Terms and Conditions. Stock Options granted under the Plan shall be
subject to the following terms and conditions:

        (a)     Option  Term.  The term of each Stock  Option shall be fixed by
                the  Committee;  provided,  however, that an Incentive Stock
                Option may be granted only within the ten-year  period
                commencing from the Effective Date and may only be exercised
                within ten years of the date of grant (or five years in the case
                of an  Incentive  Stock Option granted to an optionee who, at
                the time of grant,  owns Common Stock  possessing  more than 10%
                of the total  combined voting power of all classes of voting
                stock of the Company ("10% Stockholder").

        (b)     Exercise  Price.  The  exercise  price per share of Common
                Stock  purchasable  under a Stock Option shall be  determined by
                the Committee at the time of grant and may not be less than 100%
                of the Fair Market Value on the trading day  immediately
                preceding the date of grant (or, if greater,  the par value of a
                share of Common Stock); provided,  however,  that (i) the
                exercise price of an Incentive Stock Option granted to a 10%
                Stockholder  shall not be less  than  110% of the Fair  Market
                Value on the date of  grant;  and (ii) if the  Stock  Option  is
                granted  in connection  with the  recipient's  hiring,
                retention,  reaching an agreement  (oral or written) with the
                Company with respect to such hiring or retention,  promotion or
                similar event,  the option  exercise price may be not less than
                the Fair Market  Value of the Common Stock on the trading day
                immediately  preceding  the date on which the  recipient is
                hired or  retained,  reached  such  agreement  with  respect to

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                such hiring or  retention,  or is promoted (or similar event),
                if the grant of the Stock  Option  occurs  not more than 120
                days after the date of such  hiring,  retention, agreement,
                promotion or other event.

        (c)     Exercisability.  Stock Options shall be  exercisable at such
                time or times and subject to such terms and  conditions  as
                shall be  determined  by the  Committee  and as set forth in
                Section 10  below.  If the Committee provides,  in its
                discretion,  that any Stock Option is exercisable  only in
                installments,  i.e., that it vests over time,  the  Committee
                may waive such  installment  exercise  provisions  at any time
                at or after the time of grant in whole or in part, based upon
                such factors as the Committee shall determine.

        (d)     Method of Exercise.  Subject to whatever  installment,  exercise
                and waiting  period  provisions are applicable  in a particular
                case,  Stock  Options may be exercised in whole or in part at
                any time during the term of the Option by giving written  notice
                of exercise to the Company  specifying the number of shares of
                Common Stock to be purchased.  Such notice shall be accompanied
                by payment in full of the purchase  price,  which shall be in
                cash or, if provided in the Agreement,  either in shares of
                Common Stock (including  Restricted Stock and other contingent
                awards under  this  Plan) or  partly in cash and  partly in such
                Common  Stock,  or such  other  means  which the  Committee
                determines are consistent with the Plan's purpose and applicable
                law. Cash payments shall be made by wire transfer, certified or
                bank check or personal check, in each case payable to the order
                of the Company;  provided,  however, that the Company shall not
                be required to deliver  certificates  for shares of Common Stock
                with respect to which an Option is  exercised  until the Company
                has  confirmed  the receipt of good and  available  funds in
                payment of the  purchase price  thereof  (except that,  in the
                case of an exercise  arrangement  approved by the Committee and
                described in the last sentence of this  paragraph,  payment may
                be made as soon as  practicable  after the  exercise).  Payments
                in the form of  Common  Stock  shall be valued  at the Fair
                Market  Value on the date  prior to the date of  exercise.  Such
                payments shall be made by delivery of stock  certificates  in
                negotiable form that are effective to transfer good and valid
                title thereto to the Company, free of any liens or encumbrances.
                Subject to the terms of the  Agreement,  the Committee  may, in
                its sole  discretion,  at the request of the Holder,  deliver
                upon the  exercise of a  Nonqualified Stock Option a combination
                of shares of Deferred Stock and Common Stock;  provided,
                however,  that,  notwithstanding the provisions of Section 8 of
                the Plan,  such Deferred  Stock shall be fully vested and not
                subject to forfeiture.  A Holder  shall have none of the rights
                of a  Stockholder  with  respect to the shares  subject to the
                Option until such shares  shall be  transferred  to the Holder
                upon the  exercise of the Option.  The  Committee  may permit a
                Holder to elect to pay the Exercise Price upon the exercise of a
                Stock Option by  irrevocably  authorizing a third party to sell
                shares of Common Stock (or a sufficient  portion of the shares)
                acquired  upon exercise of the Stock Option and remit to the
                Company a sufficient  portion of the sale  proceeds to pay the
                entire  Exercise  Price and any tax  withholding resulting from
                such exercise.

        (e)     Transferability.  Except  as may be set  forth  in the  next
                sentence  of  this  section  or in the Agreement,  no Stock
                Option  shall be  transferable  by the Holder  other than by
                will or by the laws of descent  and distribution,  and all Stock
                Options shall be exercisable,  during the Holder's  lifetime,
                only by the Holder (or, to the extent of legal incapacity or
                incompetency,  the Holder's guardian or legal  representative).
                Notwithstanding the foregoing,  a Holder,  with the approval of
                the Committee,  may transfer a Nonqualified  Stock Option (i)
                (A) by gift, for no  consideration,  or (B) pursuant to a
                domestic  relations  order,  in either case, to or for the
                benefit of the Holder's  "Immediate  Family" (as defined below),
                or (ii) to an entity in which the Holder and/or members of
                Holder's Immediate  Family own more than fifty  percent of the

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                voting  interest,  in exchange  for an interest in that  entity,
                subject to such limits as the Committee may establish,  and the
                transferee  shall remain subject to all the terms and
                conditions  applicable to the Stock Option prior to such
                transfer.  The term "Immediate  Family" shall mean any child,
                stepchild,   grandchild,   parent,   stepparent,   grandparent,
                spouse,  former  spouse,   sibling,  niece,  nephew,
                mother-in-law,  father-in-law,  son-in-law,  daughter-in-law,
                brother-in-law  or  sister-in-law,  including  adoptive
                relationships,  any person sharing the Holder's  household
                (other than a tenant or employee),  a trust in which these
                persons have more than fifty  percent  beneficial  interest,
                and a foundation  in which these persons (or the Holder)
                control the management of the assets.

        (f)     Termination by Reason of Death. If a Holder's  employment by the
                Company or a Subsidiary  terminates by reason of death,  any
                Stock Option held by such Holder,  unless  otherwise  determined
                by the Committee at the time of grant and set forth in the
                Agreement,  shall  become  fully  vested and may  thereafter  be
                exercised by the legal representative  of the estate or by the
                legatee of the Holder  under the will of the Holder,  for a
                period of eighteen months (or such other  greater or lesser
                period as the  Committee  may specify in the Agreement at the
                time of grant) from the date of such death or until the
                expiration  of the stated  term of such Stock  Option, whichever
                period is shorter.

        (g)     Termination  by Reason of  Disability.  If a Holder's employment
                by the Company or any  Subsidiary terminates  by reason of
                Disability,  any Stock  Option  held by such  Holder,  unless
                otherwise  determined  by the Committee  at the time of grant
                and set forth in the  Agreement,  shall  become  fully  vested
                and may  thereafter  be exercised by the Holder for a period of
                twenty-four  months (or such other  greater or lesser period as
                the Committee may  specify in the  Agreement  at the time of
                grant) from the date of such  termination  of  employment  or
                until the expiration of the stated term of such Stock Option,
                whichever period is shorter.

        (h)     Termination  by Normal  Retirement.  If a  Holder's  employment
                by the  Company  or any  Subsidiary terminates by reason of
                Normal Retirement,  any Stock Option held by such Holder,
                unless otherwise  determined by the Committee at the time of
                grant and set forth in the Agreement,  shall thereupon
                automatically  terminate,  except that the  portion of such
                Stock  Option that has vested on the date of  termination  may
                thereafter  be  exercised  by the Holder for a period of
                eighteen  months (or such other  greater or lesser  period as
                the  Committee may specify in the Agreement  at the time of
                grant)  from the date of such  termination  of  employment  or
                until the  expiration  of the stated term of such Stock Option,
                whichever period is shorter.

        (i)     Other Termination.  Subject to the provisions of Section 13.3
                below and unless otherwise  determined by the  Committee at the
                time of grant and set forth in the  Agreement,  if a Holder's
                employment or retention by, or association  with,  the Company
                or any  Subsidiary  terminates  for any reason other than death,
                Disability or Normal Retirement,  the Stock Option shall
                thereupon  automatically  terminate,  except that if the
                Holder's  employment  is terminated by the Company or a
                Subsidiary  without  cause,  or if the Holder  voluntarily
                terminates  his  employment without breaching any employment
                agreement between the Company or any Subsidiary and the Holder,
                then the portion of such Stock Option that has vested on the
                date of  termination  of employment  may be exercised for the
                lesser of three months after termination of employment or the
                balance of such Stock Option's term.

        (j)     Additional  Incentive  Stock  Option  Limitation.  In the case
                of an  Incentive  Stock  Option,  the aggregate  Fair Market
                Value (on the date of grant of the  Option)  with  respect to
                which  Incentive  Stock  Options become  exercisable  for the
                first time by a Holder  during any calendar year (under all such
                plans of the Company and its Parent and Subsidiaries) shall not
                exceed $100,000.

        (k)     Buyout and Settlement  Provisions.  The Committee may at any
                time, in its sole discretion,  offer to repurchase a Stock
                Option  previously  granted,  based upon such terms and
                conditions as the Committee shall establish and communicate to
                the Holder at the time that such offer is made.

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5.3     Stock Reload Option. If a Holder tenders shares of Common Stock to pay
the exercise price of a Stock Option ("Underlying Option") and/or arranges to
have a portion of the shares otherwise issuable upon exercise withheld to pay
the applicable withholding taxes, then the Holder may receive, at the discretion
of the Committee, a new Stock Reload Option to purchase that number of shares of
Common Stock equal to the number of shares tendered to pay the exercise price
and the withholding taxes (but only if such tendered shares were held by the
Holder for at least six months). Stock Reload Options may be any type of option
permitted under the Code and will be granted subject to such terms, conditions,
restrictions and limitations as may be determined by the Committee from time to
time. Such Stock Reload Option shall have an exercise price equal to the Fair
Market Value as of the date of exercise of the Underlying Option. Unless the
Committee determines otherwise, a Stock Reload Option may be exercised
commencing one year after it is granted and shall expire on the date of
expiration of the Underlying Option to which the Reload Option is related.

Section 6.      Stock Appreciation Rights.

6.1     Grant and Exercise. The Committee may grant Stock Appreciation Rights to
participants who have been or are being granted Stock Options under the Plan as
a means of allowing such participants to exercise their Stock Options without
the need to pay the exercise price in cash. In the case of a Nonqualified Stock
Option, a Stock Appreciation Right may be granted either at or after the time of
the grant of such Nonqualified Stock Option. In the case of an Incentive Stock
Option, a Stock Appreciation Right may be granted only at the time of the grant
of such Incentive Stock Option.

6.2     Terms and Conditions. Stock Appreciation Rights shall be subject to the
following terms and conditions:

        (a)     Exercisability.  Stock  Appreciation  Rights  shall be
                exercisable  as shall be  determined  by the Committee and set
                forth in the  Agreement,  subject to the  limitations,  if any,
                imposed by the Code with respect to related Incentive Stock
                Options.

        (b)     Termination.  A Stock  Appreciation  Right shall  terminate and
                shall no longer be exercisable  upon the termination or exercise
                of the related Stock Option.

        (c)     Method of Exercise.  Stock  Appreciation  Rights shall be
                exercisable by surrendering the applicable portion of the
                related  Stock  Option.  Upon such  exercise and  surrender,
                the Holder shall be entitled to receive a number of shares  of
                Common  Stock  equal to the SAR  Value  divided  by the Fair
                Market  Value on the date the Stock Appreciation Right is
                exercised.

        (d)     Shares  Affected Upon Plan. The granting of a Stock Appreciation
                Right shall not affect the number of shares of Common Stock
                available  for awards under the Plan.  The number of shares
                available for awards under the Plan will,  however,  be reduced
                by the number of shares of Common Stock  acquirable upon
                exercise of the Stock Option to which such Stock Appreciation
                Right relates.

Section 7.       Restricted Stock.

7.1      Grant. Shares of Restricted Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom, and the time or times at which, grants of
Restricted Stock will be awarded, the number of shares to be awarded, the price
(if any) to be paid by the Holder, the time or times within which such awards
may be subject to forfeiture ("Restriction Period"), the vesting schedule and
rights to acceleration thereof and all other terms and conditions of the awards.

                                       8

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7.2     Terms and Conditions. Each Restricted Stock award shall be subject to
the following terms and conditions:

        (a)     Certificates.  Restricted  Stock,  when  issued,  will  be
                represented  by a stock  certificate  or certificates registered
                in the name of the Holder to whom such Restricted  Stock shall
                have been awarded.  During the Restriction  Period, certificates
                representing  the  Restricted  Stock  and  any  securities
                constituting  Retained Distributions  (as defined below) shall
                bear a legend to the effect that  ownership of the Restricted
                Stock (and such Retained  Distributions)  and the enjoyment of
                all rights appurtenant  thereto are subject to the restrictions,
                terms and conditions  provided in the Plan and the Agreement.
                Such  certificates  shall be deposited by the Holder with the
                Company,  together with stock powers or other  instruments  of
                assignment,  each endorsed in blank,  which will permit
                transfer  to the Company of all or any portion of the Restricted
                Stock and any  securities  constituting  Retained Distributions
                that shall be forfeited or that shall not become vested in
                accordance with the Plan and the Agreement.

        (b)     Rights of Holder.  Restricted Stock shall constitute  issued and
                outstanding  shares of Common Stock for all corporate  purposes.
                The Holder will have the right to vote such Restricted  Stock,
                to receive and retain all regular cash dividends and other cash
                equivalent  distributions  as the Board may in its sole
                discretion  designate, pay or distribute on such  Restricted
                Stock and to exercise all other  rights,  powers and
                privileges of a holder of Common Stock with respect to such
                Restricted  Stock,  with the exceptions that: (i) the Holder
                will not be entitled to delivery of the stock  certificate or
                certificates  representing  such Restricted  Stock until the
                Restriction  Period shall have expired and unless all other
                vesting  requirements  with respect  thereto shall have been
                fulfilled;  (ii) the Company will retain custody of the stock
                certificate or  certificates  representing  the Restricted
                Stock during the Restriction Period;  (iii) other than regular
                cash dividends and other cash equivalent  distributions as the
                Board may in its sole  discretion  designate,  pay or
                distribute,  the  Company  will retain  custody of all
                distributions ("Retained  Distributions")  made or declared with
                respect to the  Restricted  Stock (and such Retained
                Distributions will be subject to the same  restrictions,  terms
                and conditions as are applicable to the Restricted Stock) until
                such time, if ever, as the Restricted  Stock with respect to
                which such Retained  Distributions  shall have been made, paid
                or declared  shall have become  vested and with respect to which
                the  Restriction  Period shall have  expired;  (iv) a
                breach  of any of the  restrictions,  terms  or  conditions
                contained  in this  Plan or the  Agreement  or  otherwise
                established by the Committee with respect to any Restricted
                Stock or Retained  Distributions  will cause a forfeiture
                of such Restricted Stock and any Retained Distributions with
                respect thereto.

        (c)     Vesting;  Forfeiture.  Upon the expiration of the  Restriction
                Period with respect to each award of Restricted Stock and the
                satisfaction of any other  applicable  restrictions,  terms and
                conditions (i) all or part of such  Restricted  Stock shall
                become  vested in  accordance  with the terms of the  Agreement,
                subject to Section 10 below,  and (ii) any Retained
                Distributions  with respect to such Restricted  Stock shall
                become vested to the extent that the Restricted  Stock related
                thereto shall have become vested,  subject to Section 10 below.
                Any such Restricted Stock and  Retained  Distributions  that do
                not vest  shall be  forfeited  to the  Company  and the  Holder
                shall not thereafter have any rights with respect to such
                Restricted  Stock and Retained  Distributions  that shall have
                been so forfeited.

Section 8.      Deferred Stock.

8.1     Grant. Shares of Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the eligible persons to whom and the time or times at which grants of Deferred
Stock will be awarded, the number of shares of Deferred Stock to be awarded to
any person, the duration of the period ("Deferral Period") during which, and the
conditions under which, receipt of the shares will be deferred, and all the
other terms and conditions of the awards.

                                       9

<PAGE>

8.2     Terms and Conditions. Each Deferred Stock award shall be subject to the
following terms and conditions:

        (a)     Certificates.  At the expiration of the Deferral Period (or the
                Additional  Deferral Period referred to in Section 8.2(d) below,
                where  applicable),  share  certificates shall be issued and
                delivered to the Holder, or his legal representative,
                representing the number equal to the shares covered by the
                Deferred Stock award.

        (b)     Rights of  Holder.  A person  entitled  to  receive  Deferred
                Stock shall not have any rights of a Stockholder  by virtue of
                such award until the  expiration  of the  applicable  Deferral
                Period and the  issuance and delivery of the  certificates
                representing  such Common Stock. The shares of Common Stock
                issuable upon expiration of the Deferral  Period shall not be
                deemed  outstanding by the Company until the expiration of such
                Deferral  Period and the issuance and delivery of such Common
                Stock to the Holder.

        (c)     Vesting;  Forfeiture.  Upon the  expiration  of the  Deferral
                Period with  respect to each award of Deferred Stock and the
                satisfaction of any other  applicable  restrictions,  terms and
                conditions all or part of such Deferred  Stock shall become
                vested in accordance  with the terms of the Agreement,  subject
                to Section 10 below.  Any such  Deferred  Stock that does not
                vest shall be forfeited to the Company and the Holder  shall not
                thereafter  have any rights with respect to such Deferred Stock.

        (d)     Additional  Deferral  Period.  A Holder may request to, and the
                Committee may at any time, defer the receipt of an award (or an
                installment  of an award) for an additional  specified  period
                or until a specified  event ("Additional  Deferral Period").
                Subject to any exceptions  adopted by the Committee,  such
                request must generally be made at  least  one  year  prior  to
                expiration  of the  Deferral  Period  for such  Deferred  Stock
                award  (or such installment).

Section 9.      Other Stock-Based Awards.

        Other Stock-Based Awards may be awarded, subject to limitations under
applicable law, that are denominated or payable in, valued in whole or in part
by reference to, or otherwise based on or related to, shares of Common Stock, as
deemed by the Committee to be consistent with the purposes of the Plan,
including, without limitation, purchase rights, shares of Common Stock awarded
which are not subject to any restrictions or conditions, convertible or
exchangeable debentures, or other rights convertible into shares of Common Stock
and awards valued by reference to the value of securities of or the performance
of specified Subsidiaries. Other Stock-Based Awards may be awarded either alone
or in addition to or in tandem with any other awards under this Plan or any
other plan of the Company. Each other Stock-Based Award shall be subject to such
terms and conditions as may be determined by the Committee.

Section 10.      Accelerated Vesting and Exercisability.

        If (i) any person or entity other than the Company and/or any officer,
director or principal stockholder (i.e., a holder (beneficially or of record))
of more than ten percent of the Company's voting stock) of the Company as of the
Effective Date acquire securities of the Company (in one or more transactions)
having 25% or more of the total voting power of all the Company's securities
then outstanding and (ii) the Board of Directors of the Company does not
authorize or otherwise approve such acquisition, then the vesting periods of any
and all Stock Options and other awards granted and outstanding under the Plan
shall be accelerated and all such Stock Options and awards will immediately and
entirely vest and the respective holders thereof will have the immediate right
to purchase and/or receive any and all Common Stock subject to such Stock
Options and awards on the terms set forth in this Plan and the respective
agreements respecting such Stock Options and awards.

                                       10

<PAGE>

        Additionally, if any of the following events occur, then the vesting
periods of any and all Stock Options and other awards granted and outstanding
under the Plan shall be accelerated and all such Stock Options and awards will
immediately and entirely vest and the respective holders thereof will have the
immediate right to purchase and/or receive any and all Common Stock subject to
such Stock Options and awards on the terms set forth in this Plan and the
respective agreements respecting such Stock Options and awards:

        (a)     any "person" or "group"  (within the meaning of Section  13(d)
                and 14(d) of the Exchange Act becomes the  "beneficial  owner"
                (within the meaning of Rule 13d-3 under the Exchange Act) of
                Common Stock having  thirty-five percent  (35%)  or more of the
                total  voting  power of all the  Company's  voting  capital
                stock  then  outstanding; provided,  however,  that there shall
                be no such  acceleration  if such person is or group includes an
                individual who, as of the Effective  Date, is an executive
                officer of the Company and  beneficially  owns (within the
                meaning of Rule 13d-3 under the  Exchange  Act) in excess of
                three  percent of the  outstanding  Common  Stock of the
                Company,  or an Affiliate or Associate (within the meaning of
                Rule 12b-2 under the Exchange Act) of such individual;

        (b)     a  merger  or  consolidation  of the  Company  other  than one
                resulting  in the  Company's  voting securities  outstanding
                immediately  prior thereto  continuing to represent  (either by
                remaining  outstanding  or by being  converted into voting
                securities of the surviving  entity) at least fifty percent
                (50%) of the combined voting power of the voting  securities of
                the Company or such surviving entity  outstanding  immediately
                after such merger or consolidation;

        (c)     the sale or other  disposition of all or  substantially  all of
                the Company's assets or the approval of a plan of liquidation of
                the Company; or

        (d)     individuals  who on the  Effective  Date  constituted  the
                Board of  Directors  (together  with any directors  elected
                after the Effective Date whose election by the Board of
                Directors or whose  nomination for election by the  shareholders
                of the Company was approved by a vote of at least a majority of
                the directors then in office who were  either  directors  on the
                Effective  Date or whose  election or  nomination  for  election
                was  previously  so approved)  cease for any reason  other than
                death or  disability  to  constitute  a majority of the Board of
                Directors then in office.

Section 11.     Amendment and Termination.

       The Board may at any time, and from time to time, amend alter, suspend or
discontinue any of the provisions of the Plan, but no amendment, alteration,
suspension or discontinuance shall be made that would impair the rights of a
Holder under any Agreement theretofore entered into hereunder without the
Holder's consent.

Section 12.     Term of Plan.

12.1    Effective Date. The Plan shall be effective as of March 28, 2000,
subject to the approval of the Plan by the Company's stockholders within one
year after the Effective Date. Any awards granted under the Plan prior to such
approval shall be effective when made (unless otherwise specified by the
Committee at the time of grant), but shall be conditioned upon, and subject to,
such approval of the Plan by the Company's stockholders and no awards shall vest
or otherwise become free of restrictions prior to such approval.

                                       11

<PAGE>

12.2    Termination Date. Unless terminated by the Board, this Plan shall
continue to remain effective until such time as no further awards may be granted
and all awards granted under the Plan are no longer outstanding. Notwithstanding
the foregoing, grants of Incentive Stock Options may be made only during the ten
year period following the Effective Date.

Section 13.  General Provisions.

13.1    Written Agreements. Each award granted under the Plan shall be
confirmed by, and shall be subject to the terms of, the Agreement executed by
the Company and the Holder, or such other document as may be determined by the
Committee. The Committee may terminate any award made under the Plan if the
Agreement relating thereto is not executed and returned to the Company within 10
days after the Agreement has been delivered to the Holder for his or her
execution.

13.2    Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Holder by the Company, nothing contained herein shall
give any such Holder any rights that are greater than those of a general
creditor of the Company.

13.3    Employees.

        (a)     Engaging in Competition  With the Company;  Solicitation of
                Customers and Employees;  Disclosure of Confidential
                Information.  If a Holder's  employment  with the Company or a
                Subsidiary is  terminated  for any reason whatsoever,  and
                within  twelve  months  after the date  thereof such Holder
                either (i) accepts  employment  with any competitor of, or
                otherwise  engages in competition  with, the Company or any of
                its  Subsidiaries,  (ii) solicits any customers  or  employees
                of the  Company or any of its  Subsidiaries  to do business
                with or render  services to the Holder or any business with
                which the Holder  becomes  affiliated or to which the Holder
                renders  services,  or (iii) discloses  to anyone  outside the
                Company or uses any  confidential  information  or material of
                the Company or any of its  Subsidiaries  in violation of the
                Company's  policies or any agreement  between the Holder and the
                Company or any of its  Subsidiaries,  the  Committee,  in its
                sole  discretion,  may require such Holder to return to the
                Company the economic  value of any award that was  realized or
                obtained by such Holder at any time during the period  beginning
                on the date that is twelve months prior to the date such
                Holder's employment with the Company is terminated.

        (b)     Termination  for  Cause.  The  Committee  may,  if a  Holder's
                employment  with  the  Company  or a Subsidiary is terminated
                for cause,  annul any award granted under this Plan to such
                employee and, in such event,  the Committee,  in its sole
                discretion,  may require such Holder to return to the Company
                the economic value of any award that was  realized or obtained
                by such  Holder at any time  during the period  beginning  on
                that date that is twelve months prior to the date such Holder's
                employment with the Company is terminated.

        (c)     No Right of Employment.  Nothing  contained in the Plan or in
                any award hereunder shall be deemed to confer upon any Holder
                who is an employee of the Company or any  Subsidiary  any right
                to  continued  employment  with the Company or any  Subsidiary,
                nor shall it interfere in any way with the right of the Company
                or any  Subsidiary to terminate the employment of any Holder who
                is an employee at any time.

                                       12
<PAGE>

13.4    Company Policy. Each person acquiring shares of Common Stock pursuant to
a Stock Option or other award under the Plan shall be required to abide by all
policies of the Company in effect at the time of such acquisition and thereafter
with respect to the ownership and trading of the Company's securities.

13.5    Additional Incentive Arrangements. Nothing contained in the Plan shall
prevent the Board from adopting such other or additional incentive arrangements
as it may deem desirable, including, but not limited to, the granting of Stock
Options and the awarding of Common Stock and cash otherwise than under the Plan;
and such arrangements may be either generally applicable or applicable only in
specific cases.

13.6    Withholding Taxes. Not later than the date as of which an amount must
first be included in the gross income of the Holder for Federal income tax
purposes with respect to any Stock Option or other award under the Plan, the
Holder shall pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any Federal, state and local taxes of any
kind required by law to be withheld or paid with respect to such amount. If
permitted by the Committee, tax withholding or payment obligations may be
settled with Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the Company under
the Plan shall be conditioned upon such payment or arrangements and the Company
or the Holder's employer (if not the Company) 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 Holder from the Company or any Subsidiary.

13.7    Governing Law. The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
New York (without regard to choice of law provisions); provided, however, that
all matters relating to or involving corporate law shall be governed by the laws
of the State of Delaware.

13.8   Other Benefit Plans. Any award granted under the Plan shall not be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or any Subsidiary and shall not affect any benefits under any other
benefit plan now or subsequently in effect under which the availability or
amount of benefits is related to the level of compensation (unless required by
specific reference in any such other plan to awards under this Plan).

13.9    Non-Transferability. Except as otherwise expressly provided in this Plan
or the Agreement, no right or benefit under the Plan may be alienated, sold,
assigned, hypothecated, pledged, exchanged, transferred, encumbranced or
charged, and any attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be void.

13.10   Applicable  Laws.  The  obligations  of the Company  with  respect to
all Stock Options and awards under the Plan shall be subject to (i) all
applicable laws, rules and regulations and such approvals by any governmental
agencies as may be required, including, without limitation, the Securities Act
of 1933, as amended, and (ii) the rules and regulations of any securities
exchange on which the Common Stock may be listed.

13.11   Conflicts.  If any of the terms or provisions of the Plan or an
Agreement conflict with the requirements of Section 422 of the Code, then such
terms or provisions shall be deemed inoperative to the extent they so conflict
with such requirements. Additionally, if this Plan or any Agreement does not
contain any provision required to be included herein under Section 422 of the
Code, such provision shall be deemed to be incorporated herein and therein with
the same force and effect as if such provision had been set out at length herein
and therein. If any of the terms or provisions of any Agreement conflict with
any terms or provisions of the Plan, then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of the
Plan. Additionally, if any Agreement does not contain any provision required to
be included therein under the Plan, such provision shall be deemed to be
incorporated therein with the same force and effect as if such provision had
been set out at length therein.

                                       13

<PAGE>

13.12   Non-Registered  Stock.  The shares of Common  Stock to be  distributed
under this Plan have not been, as of the Effective Date, registered under the
Securities Act of 1933, as amended, or any applicable state or foreign
securities laws and the Company has no obligation to any Holder to register the
Common Stock or to assist the Holder in obtaining an exemption from the various
registration requirements, or to list the Common Stock on a national securities
exchange or any other trading or quotation system, including the Nasdaq National
Market and Nasdaq SmallCap Market.

                                       14
<PAGE>

                                                                   Initials of
                     Date Approved                                  Attorney
 Date Approved    by Stockholders, if  Sections   Description of   Effecting
  by Board           necessary          Amended     Amendments     Amendment
--------------    ------------------   --------   --------------   -----------Exhibit  4.1

                                      PROXY

     I,  ___________________________  a  shareholder of Prime Companies, Inc., a
Delaware corporation ("Corporation"), do hereby appoint Norbert Lima and Stephen
Goodman  to be my proxy agents, with full power of substitution, and to vote all
of  my  shares  in  the  Corporation  with  respect  to matters submitted to the
shareholders  at  all meetings of the shareholders, or any adjournments thereof,
and  in  all  consents to any actions taken without a meeting.  This appointment
shall  continue  from  this  date until January 31, 2000 and during said period,
Norbert  Lima  and Stephen Goodman shall have all the power that I would possess
with  respect  to  the  voting  of  my  shares  and  granting  my  consent.

1,  hereby  revoke  all  proxies  previously  given by me with respect to all my
shares  in  the  Corporation.

IN  WITNESS  WHEREOF,  I  have  executed  this  proxy.

Date:  ________________

                              _______________________________
                                   Shareholder

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