Document:

WINSTAR COMMUNICATIONS, INC.

                      WARRANT FOR THE PURCHASE OF SHARES OF
                  COMMON STOCK OF WINSTAR COMMUNICATIONS, INC.

No. [     ]                                              Warrant to Purchase

                                                            [       ] Shares

         THIS WARRANT AND THE SHARES OF COMMON STOCK PURCHASABLE HEREUNDER HAVE
         NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
         ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
         COMPLIANCE THEREWITH. THIS WARRANT AND THE SHARES OF COMMON STOCK
         PURCHASABLE HEREUNDER ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
         TRANSFER, VOTING AND OTHER MATTERS AS SET FORTH IN THE AMENDED AND
         RESTATED SHAREHOLDERS AGREEMENT, DATED AS OF [o], 2000 AMONG THE
         COMPANY, THE HOLDER AND THE OTHER PARTIES THERETO, A COPY OF WHICH MAY
         BE OBTAINED UPON REQUEST FROM THE COMPANY.

         FOR VALUE RECEIVED, WINSTAR COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), hereby certifies that [HOLDER], its successor or
permitted assigns (the "Holder"), is entitled, subject to the provisions of this
Warrant, to purchase from the Company, at the times specified herein, [o] fully
paid and non-assessable shares of Common Stock of the Company, par value $.01
per share (the "Warrant Shares"), at a purchase price per share equal to the
Exercise Price (as hereinafter defined). The number of Warrant Shares to be
received upon the exercise of this Warrant and the price to be paid for a
Warrant Share are subject to adjustment from time to time as hereinafter set
forth.

          1. Definitions. The following terms, as used herein, have the
following meanings:

         "Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.

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         "Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.

         "Change of Control" means: (i) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all the assets of the
Company and its subsidiaries, taken as a whole, to any Person, (ii) the
consummation of any transaction or series of related transactions (including any
merger or consolidation) the result of which is that any Person, other than
William J. Rouhana, Jr., becomes the beneficial owner (as determined in
accordance with Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person will be deemed to have beneficial ownership of all shares that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than 50% of
the Voting Securities of the Company, (iii) the first day on which a majority of
the members of the board of directors are not Continuing Directors, or (iv) any
transaction or series of related transactions with or involving any Person if,
immediately following such transaction or series of related transactions,
holders of the Common Stock outstanding immediately prior to such transaction or
series of related transactions own 50% or less of the outstanding voting
securities of the surviving or transferee corporation (or its parent
corporation).

         "Common Stock" means the Common Stock, par value $.01 per share, of the
Company or other capital stock of the Company that is not preferred as to
liquidation or dividends or any other security for which this Warrant may be
exercised pursuant to paragraph 9 hereof after the occurrence of any of the
transactions described in such paragraph.

         "Continuing Directors" means individuals who constituted the Board of
Directors of the Company on the date hereof (the "Incumbent Directors");
provided that any individual becoming a director during any year shall be
considered to be an Incumbent Director if such individual's election,
appointment or nomination was recommended or approved by at least two-thirds of
the other Incumbent Directors continuing in office following such election,
appointment or nomination present, in person or by telephone, at any meeting of
the Board of Directors of the Company, after the giving of a sufficient notice
to each Incumbent Director so as to provide a reasonable opportunity for such
Incumbent Directors to be present at such meeting.

         "Equity-Linked Securities" shall mean any rights, options, warrants, or
other securities convertible into or exchangeable for shares of Common Stock.

         "Exercise Price" means $25.00 per Warrant Share, such Exercise Price to
be adjusted from time to time as provided herein.

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<PAGE>

         "Expiration Date" means [o], 2005 at 5:00 p.m. New York City time.

         "Fair Market Value" means, with respect to one share of Common Stock on
any date, the Current Market Price Per Common Share as defined in paragraph
8(f).

         "Person" means an individual, partnership, corporation, trust, joint
stock company, association, joint venture, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

         "Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of November 7, 2000 among the Company and the investors party thereto.

         "Senior G Preferred Stock" means the Company's Series G Senior
Cumulative Participating Convertible Preferred Stock, $.01 par value per share.

         "Senior H Preferred Stock" means the Company's Series H Senior
Cumulative Participating Convertible Preferred Stock, $.01 par value per share.

         "Shareholders Agreement" means the Amended and Restated Shareholders
Agreement dated as of the date hereof among the Company, the Holder and the
other parties listed on the signature pages thereto.

         "Subsidiary" means, with respect to any Person, any entity of which
Voting Securities having ordinary voting power to elect a majority of the board
of directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.

         "Voting Securities" means securities of the Company ordinarily having
the power to vote for the election of directors of the Company; provided that
when the term "Voting Securities" is used with respect to any other Person it
means the capital stock or other equity interests of any class or kind
ordinarily having the power to vote for the election of directors or other
members of the governing body of such Person.

         "Warrants" means the Warrants issued to the subscribers pursuant to the
Securities Purchase Agreement.

           2.   Exercise of Warrant.

                    (a) The Holder is entitled to exercise this Warrant in whole
          or in part at any time and from time to time during the period
          commencing on the earlier of (i) the date which is 180 days from the

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<PAGE>

          date hereof and (ii) the date on which a Change of Control occurs and
          ending on the Expiration Date or, if such day is not a Business Day,
          then on the next succeeding day that shall be a Business Day. To
          exercise this Warrant, the Holder shall execute and deliver to the
          Company a Warrant Exercise Notice substantially in the form annexed
          hereto, this Warrant Certificate duly executed by the Holder and
          payment of the applicable Exercise Price. Upon such delivery and
          payment, the Holder shall be deemed to be the holder of record of the
          Warrant Shares subject to such exercise, notwithstanding that the
          stock transfer books of the Company shall then be closed or that
          certificates representing such Warrant Shares shall not then be
          actually delivered to the Holder. Notwithstanding anything herein to
          the contrary, in lieu of payment in cash of the applicable Exercise
          Price, the Holder may elect to exchange this Warrant in whole or in
          part (A) for a number of shares of Common Stock equal to the number of
          Warrant Shares evidenced by the portion of the Warrant Shares so
          exchanged (the "Exchange Warrant Shares") minus a number of shares of
          Common Stock having the aggregate Fair Market Value equal to the
          aggregate Exercise Price for the Exchange Warrant Shares or (B) upon
          delivery by the Holder of a number of securities of the Company having
          the aggregate Fair Market Value equal to the aggregate Exercise Price
          for the Exchange Warrant Shares, for a number of shares of Common
          Stock equal to the Exchange Warrant Shares.

                    (b) The Exercise Price may be paid in cash or by certified
          or official bank check or bank cashier's check payable to the order of
          the Company or by any combination of such cash or check. The Company
          shall pay any and all documentary, stamp or similar issue or transfer
          taxes payable in respect of the issue or delivery of the Warrant
          Shares.

                    (c) If the Holder exercises this Warrant in part, this
          Warrant Certificate shall be surrendered by the Holder to the Company
          and a new Warrant Certificate of the same tenor and for the
          unexercised number of Warrant Shares shall be executed by the Company.
          The Company shall register the new Warrant Certificate in the name of
          the Holder or in such name or names of its transferee pursuant to
          paragraph 6 hereof as may be directed in writing by the Holder and
          deliver the new Warrant Certificate to the Person or Persons entitled
          to receive the same.

                    (d) Upon surrender of this Warrant Certificate in conformity
          with the foregoing provisions, the Company shall transfer to the
          Holder of this Warrant Certificate appropriate evidence of ownership
          of the shares of Common Stock or other securities or property
          (including any money) to which the Holder is entitled, registered or
          otherwise placed in, or payable to the order of, the name or names of

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<PAGE>

          the Holder or such transferee as may be directed in writing by the
          Holder, and shall deliver such evidence of ownership and any other
          securities or property (including any money) to the Person or Persons
          entitled to receive the same, together with an amount in cash in lieu
          of any fraction of a share as provided in paragraph 5 below.

           3. Restrictive Legend. Certificates representing shares of Common
Stock issued pursuant to this Warrant shall bear a legend substantially in the
form of the legend set forth on the first page of this Warrant Certificate to
the extent that and for so long as such legend is required pursuant to the
Shareholders Agreement.

           4. Reservation of Shares. The Company hereby agrees that at all times
there shall be reserved for issuance and delivery upon exercise of this Warrant
such number of its authorized but unissued shares of Common Stock or other
securities of the Company from time to time issuable upon exercise of this
Warrant as will be sufficient to permit the exercise in full of this Warrant.
All such shares shall be duly authorized and, when issued upon such exercise,
shall be validly issued, fully paid and non-assessable, free and clear of all
liens, security interests, charges and other encumbrances or restrictions on
sale and free and clear of all preemptive rights, except to the extent set forth
in the Shareholders Agreement.

           5. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant and in lieu
of delivery of any such fractional share upon any exercise hereof, the Company
shall pay to the Holder an amount in cash equal to such fraction multiplied by
the Current Market Price Per Common Share (as defined in paragraph 8(f)) at the
date of such exercise.

           6.   Exchange, Transfer or Assignment of Warrant.

                    (a) This Warrant and the Warrant Shares are subject to the
          provisions of the Shareholders Agreement, including the restrictions
          on transfer. Each holder of this Warrant Certificate by holding the
          same, consents and agrees that the registered holder hereof may be
          treated by the Company and all other Persons dealing with this Warrant
          Certificate as the absolute owner hereof for any purpose and as the
          Person entitled to exercise the rights represented hereby. The Holder,
          by its acceptance of this Warrant, will be subject to the provisions
          of, and will have the benefits of, the Shareholders Agreement to the
          extent set forth therein, including the transfer restrictions therein.

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<PAGE>

                    (b) Subject to compliance with the transfer restrictions set
          forth in the Shareholders Agreement, upon surrender of this Warrant to
          the Company, together with the attached Warrant Assignment Form duly
          executed, the Company shall, without charge, execute and deliver a new
          Warrant in the name of any transferee named in such instrument of
          assignment and, if the Holder's entire interest is not being assigned,
          in the name of the Holder and this Warrant shall promptly be canceled.

           7. Loss or Destruction of Warrant. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant Certificate, and (in
the case of loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company shall execute and deliver a new Warrant
Certificate of like tenor and date.

           8.   Anti-dilution Provisions.

                    (a) In case the Company shall at any time after the date
          hereof (i) declare a dividend or make a distribution on Common Stock
          payable in Common Stock, (ii) subdivide or split the outstanding
          Common Stock, (iii) combine or reclassify the outstanding Common Stock
          into a smaller number of shares, or (iv) issue any shares of its
          capital stock in a reclassification of Common Stock (including any
          such reclassification in connection with a consolidation or merger in
          which the Company is the surviving or continuing corporation), the
          Exercise Price in effect at the time of the record date for such
          dividend or distribution or of the effective date of such subdivision,
          split, combination or reclassification shall be proportionately
          adjusted so that, giving effect to paragraph 8(j), the exercise of
          this Warrant after such time shall entitle the holder to receive the
          aggregate number of shares of Common Stock or other securities of the
          Company (or shares of any security into which such shares of Common
          Stock have been reclassified pursuant to clause 8(a)(iii) or 8(a)(iv)
          above) which, if this Warrant had been exercised immediately prior to
          such time, such holder would have owned upon such exercise and been
          entitled to receive by virtue of such dividend, distribution,
          subdivision, split, combination or reclassification. Such adjustment
          shall be made successively whenever any event listed above shall
          occur.

                    (b) In case the Company shall issue or sell any Common Stock
          (other than Common Stock issued (i) upon exercise of the Warrants,
          (ii) pursuant to the Company's stock option plans or pursuant to any
          similar Common Stock-related compensation plan or arrangement for
          employees, directors and/or individual consultants of the Company and
          its Subsidiaries approved by the Company's Board of Directors, (iii)

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<PAGE>

          upon exercise or conversion of any security the issuance of which
          caused an adjustment under paragraphs 8(c) or 8(d) hereof, (iv)
          pursuant to the securities and agreements of the Company existing as
          of the date hereof and set forth in Section 3.21 of the Disclosure
          Schedule to the Securities Purchase Agreement, (v) after the second
          anniversary of the date hereof, as a dividend payment on any series of
          preferred stock of the Company that has not been authorized and issued
          as of the date hereof to the extent that such Common Stock has been
          valued for purposes of such dividend at no less than 97% of the
          Current Market Price Per Common Share on the date the number of shares
          to be issued is fixed, (vi) upon exercise of warrants granted to the
          lenders, lessors and other financing parties of the Company and its
          Subsidiaries as additional consideration in connection with bona fide
          financing arrangements which do not in the aggregate, on a cumulative
          basis, exceed 0.333% of the outstanding Common Stock or (vii) in a
          transaction which results in an adjustment pursuant to paragraph 8(a)
          above) without consideration or for a consideration per share less
          than the (A) the Exercise Price on the date of such issuance if such
          issuance occurs on or before the second anniversary of the date hereof
          and (B) the Current Market Price Per Common Share on the date on which
          the price of such securities is fixed if such issuance occurs after
          the second anniversary of the date hereof (the applicable price for
          such issuance being referred to herein as the "Applicable Price"), the
          Exercise Price to be in effect after such issuance or sale shall be
          determined by multiplying the Exercise Price in effect immediately
          prior to such issuance or sale by a fraction, the numerator of which
          shall be the sum of (x) the number of shares of Common Stock
          outstanding immediately prior to the time of such issuance or sale
          multiplied by the Applicable Price immediately prior to such issuance
          or sale and (y) the aggregate consideration, if any, to be received by
          the Company upon such issuance or sale, and the denominator of which
          shall be the product of the aggregate number of shares of Common Stock
          outstanding immediately after such issuance or sale and the Applicable
          Price immediately prior to such issuance or sale, but in no event will
          such fraction exceed 1. In case any portion of the consideration to be
          received by the Company shall be in a form other than cash, the fair
          market value of such noncash consideration shall be utilized in the
          foregoing computation. Such fair market value shall be determined by
          the Board of Directors of the Company; provided that if the holders of
          the Warrants representing a majority of the Common Stock then issuable
          under the Warrants shall object to any such determination, the Board
          of Directors shall retain an independent appraiser reasonably
          satisfactory to such holders to determine such fair market value. The
          Holder shall be notified promptly of any consideration other than cash
          received by the Company and furnished with a description of the
          consideration and the fair market value thereof, as determined by the
          Board of Directors.

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<PAGE>

                    (c) In case the Company shall fix a record date for the
          issuance of any Equity-Linked Securities (other than the Company's
          Series B Preferred Stock) to the holders of its Common Stock or other
          securities entitling such holders to subscribe for or purchase shares
          of Common Stock (or securities convertible into or exchangeable for
          shares of Common Stock) at a price per share of Common Stock (or
          having a conversion price or exchange price per share of Common Stock,
          if it is a security convertible into or exchangeable for shares of
          Common Stock) less than the Applicable Price on such record date, the
          maximum number of shares of Common Stock issuable upon exercise,
          conversion or exchange of such Equity-Linked Securities shall be
          deemed to have been issued and outstanding as of such record date and
          the Exercise Price shall be adjusted pursuant to paragraph 8(b)
          hereof, as though such maximum number of shares of Common Stock had
          been so issued for an aggregate consideration payable by the holders
          of such Equity-Linked Securities prior to their receipt of such shares
          of Common Stock. In case any portion of such consideration shall be in
          a form other than cash, the fair market value of such noncash
          consideration shall be determined as set forth in paragraph 8(b)
          hereof. Such adjustment shall be made successively whenever such
          record date is fixed; and in the event (i) that such Equity-Linked
          Securities are not so issued or expire unexercised, or (ii) of a
          change in the number of shares of Common Stock to which the holders of
          such Equity-Linked Securities are entitled (other than pursuant to
          adjustment provisions therein which are comparable to those contained
          in this paragraph 8), the Exercise Price shall again be adjusted to be
          the Exercise Price which would then be in effect in the case of clause
          (i), if such record date had not been fixed, or in the case of clause
          (ii), if such holder had initially been entitled to such changed
          number of shares of Common Stock.

                    (d) In case the Company shall sell or issue any
          Equity-Linked Securities (other than pursuant to the securities and
          agreements of the Company existing as of the date hereof and set forth
          on Section 3.21 of the Disclosure Schedule to the Series H
          Subscription Agreement or options or other securities issued pursuant
          to a plan or arrangement described in clause 8(b)(ii)), and the price
          per share of Common Stock of such Equity- Linked Securities
          (including, if applicable, the price at which they may be exercised)
          is less than the Applicable Price, the maximum number of shares of
          Common Stock issuable upon exercise, conversion or exchange of such
          Equity-Linked Securities shall be deemed to have been issued and
          outstanding as of the date of such sale or issuance, and the Exercise
          Price shall be adjusted pursuant to paragraph 8(b) hereof as though
          such maximum number of shares of Common Stock had been so issued for

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<PAGE>

          an aggregate consideration equal to the aggregate consideration paid
          for such Equity-Linked Securities and the aggregate consideration
          payable by the holders of such Equity-Linked Securities prior to their
          receipt of such shares of Common Stock. In case any portion of such
          consideration shall be in a form other than cash, the fair market
          value of such noncash consideration shall be determined as set forth
          in paragraph 8(b) hereof. Such adjustment shall be made successively
          whenever such Equity-Linked Securities are issued; and in the event
          (i) that such Equity-Linked Securities expire unexercised, or (ii) of
          a change in the number of shares of Common Stock to which the holders
          of such Equity-Linked Securities are entitled (other than pursuant to
          adjustment provisions therein comparable to those contained in this
          paragraph 8 as they may be amended pursuant to paragraph 8(b)), the
          Exercise Price shall again be adjusted to be the Exercise Price which
          would then be in effect in the case of clause (i), if such
          Equity-Linked Securities had not been issued, or in the case of clause
          (ii), if such holders had initially been entitled to such changed
          number of shares of Common Stock. No adjustment of the Exercise Price
          shall be made pursuant to this paragraph 8(d) to the extent that the
          Exercise Price shall have been adjusted pursuant to paragraph 8(c)
          upon the setting of any record date relating to such Equity-Linked
          Securities and such adjustment fully reflects the number of shares of
          Common Stock to which the holders of such Equity-Linked Securities are
          entitled and the price payable therefor.

                    (e) In case the Company shall fix a record date for the
          making of a distribution to holders of Common Stock (including any
          such distribution made in connection with a consolidation or merger in
          which the Company is the surviving or continuing corporation) of
          evidences of indebtedness, cash, assets or other property (other than
          dividends payable in Common Stock or rights, options or warrants
          referred to in, and for which an adjustment is made pursuant to,
          paragraph 8(c) hereof), the Exercise Price to be in effect after such
          record date shall be determined by multiplying the Exercise Price in
          effect immediately prior to such record date by a fraction, the
          numerator of which shall be the Applicable Price on such record date,
          less the fair market value (determined as set forth in paragraph 8(b)
          hereof) of the portion of the assets, cash, other property or evidence
          of indebtedness so to be distributed which is applicable to one share
          of Common Stock, and the denominator of which shall be such Applicable
          Price. Such adjustments shall be made successively whenever such a
          record date is fixed; and in the event that such distribution is not
          so made, the Exercise Price shall again be adjusted to be the Exercise
          Price which would then be in effect if such record date had not been
          fixed.

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<PAGE>

                    (f) For the purpose of any computation under paragraph 5 or
          paragraph 8(b), 8(c), 8(d) or 8(e) hereof, on any determination date,
          the "Current Market Price Per Common Share" shall mean the average
          (weighted by daily trading volume) of the Daily Prices (as defined
          below) per share of the Common Stock for the 20 consecutive trading
          days ending five days prior to such date. "Daily Price" means (A) if
          the shares of Common Stock then are listed and traded on the New York
          Stock Exchange, Inc. ("NYSE"), the closing price on such day as
          reported on the NYSE Composite Transactions Tape; (B) if the shares of
          Common Stock then are not listed and traded on the NYSE, the closing
          price on such day as reported by the principal national securities
          exchange on which the shares are listed and traded; (C) if the shares
          of Common Stock then are not listed and traded on any such securities
          exchange, the last reported sale price on such day on the National
          Market of the National Association of Securities Dealers, Inc.
          Automated Quotation System ("NASDAQ"); or (D) if the shares of Common
          Stock then are not listed and traded on any such securities exchange
          and not traded on the NASDAQ National Market, the average of the
          highest reported bid and lowest reported asked price on such day as
          reported by NASDAQ.

                    (g) No adjustment in the Exercise Price shall be required
          unless such adjustment would require an increase or decrease of at
          least two percent in such price; provided that any adjustments which
          by reason of this paragraph 8(g) are not required to be made shall be
          carried forward and taken into account at such time when such
          adjustments would in the aggregate require an increase or decrease of
          at least two percent in such price. All calculations under this
          paragraph 8 shall be made to the nearest four decimal points.

                    (h) Notwithstanding anything contained herein to the
          contrary, in the event the Company issues securities to another Person
          containing anti- dilution provisions that are materially more
          favorable to holders of such securities than the provisions set forth
          in this paragraph 8, such more favorable provisions shall apply to
          this Warrant with respect to adjustments to the Exercise Price and/or
          number of Warrant Shares to be made in connection with any future
          issuance of securities by the Company if the holders of a majority of
          the outstanding shares of the Series H Preferred Stock shall have
          elected to have such provisions apply to the Series H Preferred Stock
          pursuant to the terms thereof. Materially more favorable provisions
          shall include, without limitation, any full-ratchet provision. In
          addition, if the Company issues any securities with a re-set
          provision, any applicable adjustments to the Exercise Price and/or
          number of Warrant Shares shall be made both at the time of the
          issuance of such securities and at the time of the re-set, provided

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<PAGE>

          that if the initial issuance occurs on or prior to the second
          anniversary of the date hereof, the "Applicable Price" for purposes of
          any adjustments made at the time of the re-set shall be the Exercise
          Price at the time of the re-set, irrespective of when the re-set
          occurs.

                    (i) In the event that, at any time as a result of the
          provisions of this paragraph 8, the holder of this Warrant upon
          subsequent exercise shall become entitled to receive any shares of
          capital stock or other securities of the Company other than Common
          Stock, the number of such other shares so receivable upon exercise of
          this Warrant shall thereafter be subject to adjustment from time to
          time in a manner and on terms as nearly equivalent as practicable to
          the provisions contained herein.

                    (j) Upon each adjustment of the Exercise Price as a result
          of the calculations made in paragraphs 8(a), 8(b), 8(c), 8(d) or 8(e)
          hereof, the number of shares for which this Warrant is exercisable
          immediately prior to the making of such adjustment shall thereafter
          evidence the right to purchase, at the adjusted Exercise Price, that
          number of shares of Common Stock obtained by (i) multiplying the
          number of shares covered by this Warrant immediately prior to this
          adjustment of the number of shares by the Exercise Price in effect
          immediately prior to such adjustment of the Exercise Price and (ii)
          dividing the product so obtained by the Exercise Price in effect
          immediately after such adjustment of the Exercise Price.

                    (k) The Company shall notify all Holders of the fixing of a
          record date for the purpose of payment of a cash dividend to holders
          of Common Stock as soon as reasonably practicable, but in no event
          less than 20 days prior to any such record date.

                    (l) Not less than 10 nor more than 30 days prior to the
          record date or effective date, as the case may be, of any action which
          requires or might require an adjustment or readjustment pursuant to
          this paragraph 8, the Company shall forthwith file in the custody of
          the secretary or any assistant secretary at its principal executive
          office and with its stock transfer agent or its warrant agent, if any,
          an officers' certificate showing the adjusted Exercise Price
          determined as herein provided, setting forth in reasonable detail the
          facts requiring such adjustment and the manner of computing such
          adjustment. Each such officers' certificate shall be signed by the
          chairman, president or chief financial officer of the Company and by
          the secretary or any assistant secretary of the Company. Each such
          officers' certificate shall be made available at all reasonable times
          for inspection by the Holder or any holder of a Warrant executed and
          delivered pursuant to paragraph 6 and the Company shall, forthwith

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<PAGE>

          after each such adjustment, mail a copy, by first-class mail, of such
          certificate to the Holder.

                    (m) The Holder shall, at its option, be entitled to receive,
          in lieu of the adjustment pursuant to paragraph 8(e) otherwise
          required thereof, on the date of exercise of this Warrant, the
          evidences of indebtedness, other securities, cash, property or other
          assets which such Holder would have been entitled to receive if it had
          exercised its Warrant for shares of Common Stock immediately prior to
          the record date with respect to such distribution. The Holder may
          exercise its option under this paragraph 8(m) by delivering to the
          Company a written notice of such exercise within 21 days after the
          effectiveness (determined pursuant to paragraph 11) of the delivery by
          the Company of the certificate of adjustment required pursuant to
          paragraph 8(l) to be delivered by the Company in connection with such
          distribution.

                    (n) Notwithstanding any provision herein to the contrary, in
          connection with any issuance or distribution of Warrant Shares (and/or
          any other securities of the Company) as to which the Hart-Scott-Rodino
          Antitrust Improvements Act of 1976, as amended (the "HSR Act"), would,
          but for this paragraph, be applicable, such Warrant Shares (and/or
          other securities of the Company) shall carry no right to vote for
          directors of the Company until the person or entity (as defined under
          the HSR Act) acquiring such Warrant Shares has complied with the
          filing and waiting period requirements of the HSR Act.

                    (o) If on the first anniversary of the date hereof, the
          Current Market Price Per Common Share is less than $25, the Exercise
          Price shall be reduced to such Current Market Price Per Common Share.

                    (p) The Company shall not take any action that would cause
          an adjustment of the Exercise Price pursuant to this paragraph 8
          unless it has complied with all statutes, rules and regulations
          applicable thereto at that time, including any and all regulations or
          the principal trading market on which the Common Stock is then
          trading, including, if necessary, any shareholder approval requirement
          under NASD Rule 4460(i), as it may be amended from time to time.

           9. Consolidation, Merger, or Sale of Assets. In case of any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (other than a merger which
does not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock) or any sale or transfer of all or
substantially all of the assets of the Company or of the Person formed by such

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<PAGE>

consolidation or resulting from such merger or which acquires such assets, as
the case may be, the Holder shall have the right thereafter to exercise this
Warrant for the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock for which this Warrant may have been exercised
immediately prior to such consolidation, merger, sale or transfer, assuming (i)
such holder of Common Stock is not a Person with which the Company consolidated
or into which the Company merged or which merged into the Company or to which
such sale or transfer was made, as the case may be ("constituent Person"), or an
Affiliate of a constituent Person and (ii) in the case of a consolidation,
merger, sale or transfer which includes an election as to the consideration to
be received by the holders, such holder of Common Stock failed to exercise its
rights of election, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer is not the same for each share
of Common Stock held immediately prior to such consolidation, merger, sale or
transfer by other than a constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this paragraph 9 the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Adjustments for events subsequent to the effective date of
such a consolidation, merger and sale of assets shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Warrant. In any such
event, effective provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving or continuing corporation, in any
contract of sale, conveyance, lease or transfer, or otherwise so that the
provisions set forth herein for the protection of the rights of the Holder shall
thereafter continue to be applicable; and any such resulting or surviving or
continuing corporation shall expressly assume the obligation to deliver, upon
exercise, such shares of stock, other securities, cash and property. The
provisions of this paragraph 9 shall similarly apply to successive
consolidations, mergers, sales, leases or transfers.

          10. Mandatory Exercise or Exchange. If on any date after the date
which is 180 days from the date hereof, the Current Market Price Per Common
Share equals or exceeds 155% of the "conversion price" (as defined in the
Certificate of Designations, Preferences and Rights of the Series G Preferred
Stock) of the Series G Preferred Stock, on such date, the Company may elect, by
written notice delivered to the Holder no later than five business days after
such date, to require that this Warrant be exercised or exchanged within 30 days
after the delivery of such notice. If the Company does not receive notice from

                                       13
<PAGE>

the Holder during such 30-day period regarding the election for an exercise or
exchange, the Holder shall be deemed to have elected to exchange this Warrant.

          11. Notices. Any notice, demand or delivery authorized by this Warrant
Certificate shall be in writing and shall be given to the Holder or the Company
as the case may be, at its address (or telecopier number) set forth on the
signature page hereof, or such other address (or telecopier number) as shall
have been furnished to the party giving or making such notice, demand or
delivery. Each such notice, demand or delivery shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the appropriate confirmation is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this paragraph 11.

          12. Rights of the Holder. Prior to the exercise of any Warrant, the
Holder shall not, by virtue hereof, be entitled to any rights of a shareholder
of the Company, including, without limitation, the right to vote, to receive
dividends or other distributions or to receive any notice of meetings of
shareholders or any notice of any proceedings of the Company except as may be
specifically provided for herein.

          13. GOVERNING LAW. THIS WARRANT CERTIFICATE AND ALL RIGHTS ARISING
HEREUNDER SHALL BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND
ENFORCED IN ACCORDANCE WITH SUCH LAWS.

          14. Jurisdiction. The parties hereto agree that any suit, action or
proceeding seeking to enforce or interpret any provision of this Warrant may
only be brought in the United States District Court for the Southern District of
New York or any New York State court sitting in New York City, and each party
hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in paragraph 11 shall be deemed
effective service of process on such party. WITH RESPECT TO A PROCEEDING IN ANY

                                       14
<PAGE>

SUCH COURT, EACH PARTY IRREVOCABLY WAIVES AND RELEASES TO THE OTHERS ITS RIGHT
TO A TRIAL BY JURY, AND AGREES THAT IT WILL NOT SEEK A TRIAL BY JURY IN ANY SUCH
PROCEEDING.

          15. Amendments; Waivers. Any provision of this Warrant Certificate may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed by the Company and the holders of the Warrants representing a majority of
the Common Stock then issuable under the Warrants. No failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

                                       15
<PAGE>

         IN WITNESS WHEREOF, the Company has duly caused this Warrant
Certificate to be signed by its duly authorized officer and to be dated as of
[o], 2000.

                                            WINSTAR COMMUNICATIONS, INC.

                                            By: ___________________________

                                                 Name:
                                                 Title:

                                            Address for notices:
                                            -------------------

                                                 685 Third Avenue
                                                 New York, NY 10017
                                                 Facsimile: (212) 792-9348
                                                 Attention: Timothy R. Graham

Acknowledged and Agreed:

[HOLDER]

By: ___________________________
     Name:
     Title:

Address for notices:
-------------------

<PAGE>

WARRANT EXERCISE OR EXCHANGE NOTICE

To:      Winstar Communications, Inc.

         The undersigned irrevocably exercises the Warrant for the purchase of
[  ] shares of Common Stock (the "Shares"), par value $.01 per share, of Winstar
Communications, Inc. (the "Company") at the Exercise Price currently in effect
pursuant to the Warrant and herewith makes payment of $[ ] (such payment being
made in cash or by certified or official bank or bank cashier's check payable to
the order of the Company or by any permitted combination of such cash or check),
all on the terms and conditions specified in the within Warrant Certificate,
surrenders this Warrant Certificate and all right, title and interest therein to
the Company and directs that the Shares deliverable upon the exercise of this
Warrant be registered or placed in the name and at the address specified below
and delivered thereto.

                                      -OR-

         The undersigned irrevocably exchanges the Warrant for [ ] shares of
Common Stock (the "Shares"), par value $.01 per share, of Winstar
Communications, Inc. (the "Company"), all on the terms and conditions specified
in the within Warrant Certificate, surrenders this Warrant Certificate and all
right, title and interest therein to the Company and directs that the Shares
deliverable upon the exchange of this Warrant be registered or placed in the
name and at the address specified below and delivered thereto.

         Date:[                          ].

                                    --------------------------------
                                            (Signature of Owner)

                                    --------------------------------
                                            (Address)

                                    --------------------------------

<PAGE>

Securities and/or check to be issued to: ______________________________________

Please insert social security or identifying number:___________________________

Name: _________________________________________________________________________

Street Address: _______________________________________________________________

City, State and Zip Code: _____________________________________________________

Any unexercised portion of the Warrant evidenced by the within Warrant
Certificate to be issued to:

Please insert social security or identifying number: __________________________

Name: _________________________________________________________________________

Street Address: _______________________________________________________________

City, State and Zip Code: _____________________________________________________

                                       2

<PAGE>

                             WARRANT ASSIGNMENT FORM

                                                  Dated [                  ]

         FOR VALUE RECEIVED, [                                   ] hereby sells,

 assigns and transfers unto [                                ] (the "Assignee"),
                          (please type or print in block letters)

                                (insert address)

its right to purchase up to [       ] shares of Common Stock represented by

this Warrant and does hereby irrevocably constitute and appoint

[                                      ] Attorney, to transfer the same on the

books of the Company, with full power of substitution in the premises.

                                    Signature:<PAGE>   1
                                                                     EXHIBIT 4.1

                                  INTEVAC, INC.
                      1995 STOCK OPTION/STOCK ISSUANCE PLAN

                            AS AMENDED FEBRUARY 2000

                                   ARTICLE ONE

                               GENERAL PROVISIONS

        I. PURPOSE OF THE PLAN

        This 1995 Stock Option/Stock Issuance Plan is intended to promote the
interests of Intevac, Inc., a California corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.

        Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.

        II. STRUCTURE OF THE PLAN

            A. The Plan shall be divided into two separate equity programs:

                (i) the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,

                (ii) the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued shares of Common
Stock directly, either through the immediate purchase of such shares or as a
bonus for services rendered the Corporation (or any Parent or Subsidiary), and

            B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.

        III. ADMINISTRATION OF THE PLAN

            A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders.

            B. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the

<PAGE>   2

Board's discretion, be vested in the Primary Committee or a Secondary Committee,
or the Board may retain the power to administer those programs with respect to
all such persons. The members of the Secondary Committee may be Board members
who are Employees eligible to receive discretionary option grants or direct
stock issuances under the Plan or any other stock option, stock appreciation,
stock bonus or other stock plan of the Corporation (or any Parent or
Subsidiary).

            C. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.

            D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant and Stock Issuance Programs and
to make such determinations under, and issue such interpretations of, the
provisions of such programs and any outstanding options or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any stock option or stock issuance thereunder.

            E. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

        IV. ELIGIBILITY

            A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:

                (i) Employees,

                (ii) non-employee members of the Board (other than those serving
as members of the Primary Committee) or the Board of Directors of any Parent or
Subsidiary, and

                (iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).

            B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to

                                      -2-
<PAGE>   3

determine, (i) with respect to the option grants under the Discretionary Option
Grant Program, which eligible persons are to receive option grants, the time or
times when such option grants are to be made, the number of shares to be covered
by each such grant, the status of the granted option as either an Incentive
Option or a Non-Statutory Option, the time or times at which each option is to
become exercisable, the vesting schedule (if any) applicable to the option
shares and the maximum term for which the option is to remain outstanding and
(ii) with respect to stock issuances under the Stock Issuance Program, which
eligible persons are to receive stock issuances, the time or times when such
issuances are to be made, the number of shares to be issued to each Participant,
the vesting schedule (if any) applicable to the issued shares and the
consideration to be paid for such shares.

            C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.

        V. STOCK SUBJECT TO THE PLAN

            A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 2,383,667 shares.

            B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 200,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1995 calendar year; provided, however, that for the calendar
year in which such person first commences Service, the limit shall be increased
to 350,000 shares.

            C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
All shares issued under the Plan (including shares issued upon exercise of
options incorporated from the Predecessor Plan), whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan. In addition,
should the exercise price of an option under the Plan (including any option
incorporated from the Predecessor Plan) be paid with shares of Common Stock,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.

            D. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change

                                      -3-
<PAGE>   4

affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
maximum number and/or class of securities issuable under the Plan, (ii) the
maximum number and/or class of securities for which any one person may be
granted options, separately exercisable stock appreciation rights and direct
stock issuances per calendar year, and (iii) the number and/or class of
securities and the exercise price per share in effect under each outstanding
option (including any option incorporated from the Predecessor Plan) in order to
prevent the dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and conclusive.

                                      -4-
<PAGE>   5

                                   ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM

        I. OPTION TERMS

                Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

            A. Exercise Price.

                1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.

                2. The exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Five
and the documents evidencing the option, be payable in one or more of the forms
specified below:

                    (i) cash or check made payable to the Corporation,

                    (ii) shares of Common Stock held for the requisite period
        necessary to avoid a charge to the Corporation's earnings for financial
        reporting purposes and valued at Fair Market Value on the Exercise Date,
        or

                    (iii) to the extent the option is exercised for vested
        shares, through a special sale and remittance procedure pursuant to
        which the Optionee shall concurrently provide irrevocable written
        instructions to (a) a Corporation-designated brokerage firm to effect
        the immediate sale of the purchased shares and remit to the Corporation,
        out of the sale proceeds available on the settlement date, sufficient
        funds to cover the aggregate exercise price payable for the purchased
        shares plus all applicable Federal, state and local income and
        employment taxes required to be withheld by the Corporation by reason of
        such exercise and (b) the Corporation to deliver the certificates for
        the purchased shares directly to such brokerage firm in order to
        complete the sale transaction.

            Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

            B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan

                                      -5-
<PAGE>   6

Administrator and set forth in the documents evidencing the option. However, no
option shall have a term in excess of ten (10) years measured from the option
grant date.

            C. Effect of Termination of Service.

                1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

                    (i) Any option outstanding at the time of the Optionee's
        cessation of Service for any reason shall remain exercisable for such
        period of time thereafter as shall be determined by the Plan
        Administrator and set forth in the documents evidencing the option, but
        no such option shall be exercisable after the expiration of the option
        term.

                    (ii) Any option exercisable in whole or in part by the
        Optionee at the time of death may be subsequently exercised by the
        personal representative of the Optionee's estate or by the person or
        persons to whom the option is transferred pursuant to the Optionee's
        will or in accordance with the laws of descent and distribution.

                    (iii) During the applicable post-Service exercise period,
        the option may not be exercised in the aggregate for more than the
        number of vested shares for which the option is exercisable on the date
        of the Optionee's cessation of Service. Upon the expiration of the
        applicable exercise period or (if earlier) upon the expiration of the
        option term, the option shall terminate and cease to be outstanding for
        any vested shares for which the option has not been exercised. However,
        the option shall, immediately upon the Optionee's cessation of Service,
        terminate and cease to be outstanding to the extent the option is not
        otherwise at that time exercisable for vested shares.

                    (iv) Should the Optionee's Service be terminated for
        Misconduct, then all outstanding options held by the Optionee shall
        terminate immediately and cease to be outstanding

                2. The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                    (i) extend the period of time for which the option is to
        remain exercisable following the Optionee's cessation of Service from
        the period otherwise in effect for that option to such greater period of
        time as the Plan Administrator shall deem appropriate, but in no event
        beyond the expiration of the option term, and/or

                    (ii) permit the option to be exercised, during the
        applicable post-Service exercise period, not only with respect to the
        number of vested shares of Common Stock for which such option is
        exercisable at the time of the Optionee's

                                      -6-
<PAGE>   7

        cessation of Service but also with respect to one or more additional
        installments in which the Optionee would have vested under the option
        had the Optionee continued in Service.

            D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

            E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.

            F. Limited Transferability of Options. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in whole or in part during Optionee's lifetime in accordance with
the terms of a Qualified Domestic Relations Order. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to such Qualified Domestic Relations Order. The terms applicable
to the assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.

        II. INCENTIVE OPTIONS

        The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Five shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.

            A. Eligibility. Incentive Options may only be granted to Employees.

            B. Exercise Price. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.

            C. Dollar Limitation. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the

                                      -7-
<PAGE>   8

first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

            D. 10% Stockholder. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

        III. CORPORATE TRANSACTION/CHANGE IN CONTROL

            A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall NOT so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.

            B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.

            C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

            D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same, and (iii) the maximum

                                      -8-
<PAGE>   9

number of securities and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under the Plan per calendar year.

            E. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within twelve (12) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.

            F. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent Involuntary Termination of the Optionee's
Service within a specified period following the effective date of such Change in
Control. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term.

            G. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the Federal tax laws.

            H. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

        IV. CANCELLATION AND REGRANT OF OPTIONS

        The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.

                                      -9-
<PAGE>   10

        V. STOCK APPRECIATION RIGHTS

            A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.

            B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:

                    (i) One or more Optionees may be granted the right,
        exercisable upon such terms as the Plan Administrator may establish, to
        elect between the exercise of the underlying option for shares of Common
        Stock and the surrender of that option in exchange for a distribution
        from the Corporation in an amount equal to the excess of (a) the Fair
        Market Value (on the option surrender date) of the number of shares in
        which the Optionee is at the time vested under the surrendered option
        (or surrendered portion thereof) over (b) the aggregate exercise price
        payable for such shares.

                    (ii) No such option surrender shall be effective unless it
        is approved by the Plan Administrator. If the surrender is so approved,
        then the distribution to which the Optionee shall be entitled may be
        made in shares of Common Stock valued at Fair Market Value on the option
        surrender date, in cash, or partly in shares and partly in cash, as the
        Plan Administrator shall in its sole discretion deem appropriate.

                    (iii) If the surrender of an option is rejected by the Plan
        Administrator, then the Optionee shall retain whatever rights the
        Optionee had under the surrendered option (or surrendered portion
        thereof) on the option surrender date and may exercise such rights at
        any time prior to the later of (a) five (5) business days after the
        receipt of the rejection notice or (b) the last day on which the option
        is otherwise exercisable in accordance with the terms of the documents
        evidencing such option, but in no event may such rights be exercised
        more than ten (10) years after the option grant date.

            C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:

                    (i) One or more Section 16 Insiders may be granted limited
        stock appreciation rights with respect to their outstanding options.

                    (ii) Upon the occurrence of a Hostile Take-Over, each
        individual holding one or more options with such a limited stock
        appreciation right in effect for at least six (6) months shall have the
        unconditional right (exercisable for a thirty (30)-day period following
        such Hostile Take-Over) to surrender each such option to the
        Corporation, to the extent the option is at the time exercisable for
        vested shares of Common Stock. In return for the surrendered option, the
        Optionee shall receive a cash distribution from the Corporation in an
        amount equal to the excess of (A) the Take-Over Price of the shares of
        Common Stock which are at the time vested under each surrendered option
        (or surrendered portion thereof) over (B) the aggregate exercise price
        payable for

                                      -10-
<PAGE>   11

        such shares. Such cash distribution shall be paid within five (5) days
        following the option surrender date.

                    (iii) Neither the approval of the Plan Administrator nor the
        consent of the Board shall be required in connection with such option
        surrender and cash distribution.

                    (iv) The balance of the option (if any) shall continue in
        full force and effect in accordance with the documents evidencing such
        option.

                                      -11-
<PAGE>   12

                                  ARTICLE THREE

                             STOCK ISSUANCE PROGRAM

        I. STOCK ISSUANCE TERMS

        Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

            A. Purchase Price.

                1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the issuance date.

                2. Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

                    (i) cash or check made payable to the Corporation, or

                    (ii) past services rendered to the Corporation (or any
        Parent or Subsidiary).

            B. Vesting Provisions.

                1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:

                    (i) the Service period to be completed by the Participant or
        the performance objectives to be attained,

                    (ii) the number of installments in which the shares are to
        vest,

                    (iii) the interval or intervals (if any) which are to lapse
        between installments, and

                    (iv) the effect which death, Permanent Disability or other
        event designated by the Plan Administrator is to have upon the vesting
        schedule, shall be

                                      -12-
<PAGE>   13

        determined by the Plan Administrator and incorporated into the Stock
        Issuance Agreement.

                2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

                3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.

                4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.

                5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
cessation of the Participant's Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at any time, whether before or
after the Participant's cessation of Service or the attainment or non-attainment
of the applicable performance objectives.

        II. CORPORATE TRANSACTION/CHANGE IN CONTROL

            A. All of the outstanding repurchase/cancellation rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to those terminated rights shall immediately vest in full,
in the event of any Corporate Transaction, except to the extent (i) those
repurchase/cancellation rights are assigned to the successor corporation (or

                                      -13-
<PAGE>   14

parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed in the Stock
Issuance Agreement.

            B. To the extent any repurchase/cancellation rights applicable to
the Participant's outstanding shares under the Stock Issuance Program are
assigned in the Corporate Transaction, those rights shall automatically
terminate, and the shares subject to those terminated rights shall immediately
vest in full, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within twelve (12) months
following the effective date of such Corporate Transaction.

            C. The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's repurchase rights remain outstanding, to (i) provide for the
automatic termination of one or more outstanding repurchase/cancellation rights
and the immediate vesting of the shares of Common Stock subject to those rights
upon the occurrence of a Change in Control or (ii) condition any such
accelerated vesting upon the subsequent Involuntary Termination of the
Participant's Service within a specified period following the effective date of
such Change in Control.

        III. SHARE ESCROW/LEGENDS

        Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

                                      -14-
<PAGE>   15

                                  ARTICLE FOUR

                                  MISCELLANEOUS

        I. FINANCING

            A. The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program or
the purchase price for shares issued under the Stock Issuance Program by
delivering a promissory note payable in one or more installments. The terms of
any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.

            B. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.

        II. TAX WITHHOLDING

        The Corporation's obligation to deliver shares of Common Stock upon the
exercise of stock options or stock appreciation rights or upon the issuance or
vesting of such shares under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements.

        III. EFFECTIVE DATE AND TERM OF THE PLAN

            A. The Discretionary Option Grant and Stock Issuance Programs shall
become effective on the Plan Effective Date. Options may be granted under the
Discretionary Option Grant Program at any time on or after the Plan Effective
Date. However, no options granted under the Plan may be exercised, and no shares
shall be issued under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within twelve (12)
months after the date the Plan is adopted by the Board, then all options
previously granted under this Plan shall terminate and cease to be outstanding,
and no further options shall be granted and no shares shall be issued under the
Plan.

            B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants shall be made under the Predecessor Plan after the
Plan Effective Date. All options outstanding under the Predecessor Plan as of
such date shall be incorporated into the Plan at that time and shall be treated
as outstanding options under the Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option, and no provision of the Plan shall be deemed to affect
or otherwise

                                      -15-
<PAGE>   16

modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.

            C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise contain such provisions.

            D. The Plan shall terminate upon the earliest of (i) September 30,
2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the issuance
of shares (whether vested or unvested) under the Plan or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all outstanding stock options and unvested stock issuances
shall continue to have force and effect in accordance with the provisions of the
documents evidencing such options or issuances.

        IV. AMENDMENT OF THE PLAN

            A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to options, stock appreciation rights or unvested stock issuances at the time
outstanding under the Plan unless the Optionee or the Participant consents to
such amendment or modification. In addition, the Board shall not, without the
approval of the Corporation's stockholders, (i) materially increase the maximum
number of shares issuable under the Plan, the number of shares for which options
may be granted under the Automatic Option Grant Program or the maximum number of
shares for which any one person may be granted options, separately exercisable
stock appreciation rights and direct stock issuances per calendar year, except
for permissible adjustments in the event of certain changes in the Corporation's
capitalization, (ii) materially modify the eligibility requirements for Plan
participation or (iii) materially increase the benefits accruing to Plan
participants.

            B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs are held in escrow until there is
obtained stockholder approval of an amendment sufficiently increasing the number
of shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess grant or issuances are made, then (i) any unexercised
options granted on the basis of such excess shares shall terminate and cease to
be outstanding and (ii) the Corporation shall promptly refund to the Optionees
and the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.

                                      -16-
<PAGE>   17

        V. USE OF PROCEEDS

        Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.

        VI. REGULATORY APPROVALS

            A. The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan and the issuance of any shares of Common
Stock (i) upon the exercise of any option or stock appreciation right or (ii)
under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it.

            B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.

        VII. NO EMPLOYMENT/SERVICE RIGHTS

        Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

                                      -17-
<PAGE>   18

                                    APPENDIX

        The following definitions shall be in effect under the Plan:

            A. BOARD shall mean the Corporation's Board of Directors.

            B. CHANGE IN CONTROL shall mean a change in ownership or control of
the Corporation effected through either of the following transactions:

                    (i) the acquisition, directly or indirectly, by any person
        or related group of persons (other than the Corporation or a person that
        directly or indirectly controls, is controlled by, or is under common
        control with, the Corporation), of beneficial ownership (within the
        meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
        than fifty percent (50%) of the total combined voting power of the
        Corporation's outstanding securities pursuant to a tender or exchange
        offer made directly to the Corporation's stockholders which the Board
        does not recommend such stockholders to accept, or

                    (ii) a change in the composition of the Board over a period
        of thirty-six (36) consecutive months or less such that a majority of
        the Board members ceases, by reason of one or more contested elections
        for Board membership, to be comprised of individuals who either (A) have
        been Board members continuously since the beginning of such period or
        (B) have been elected or nominated for election as Board members during
        such period by at least a majority of the Board members described in
        clause (A) who were still in office at the time the Board approved such
        election or nomination.

            C. CODE shall mean the Internal Revenue Code of 1986, as amended.

            D. COMMON STOCK shall mean the Corporation's common stock.

            E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

                    (i) a merger or consolidation in which securities possessing
        more than fifty percent (50%) of the total combined voting power of the
        Corporation's outstanding securities are transferred to a person or
        persons different from the persons holding those securities immediately
        prior to such transaction; or

                    (ii) the sale, transfer or other disposition of all or
        substantially all of the Corporation's assets in complete liquidation or
        dissolution of the Corporation.

            F. CORPORATION shall mean Intevac, Inc., a California corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of Intevac, Inc. which shall by appropriate action adopt the Plan.

                                      -18-
<PAGE>   19

            G. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.

            H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.

            I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible
to participate in the Discretionary Option Grant Program in accordance with the
eligibility provisions of Article One.

            J. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

            K. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.

            L. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:

                    (i) If the Common Stock is at the time traded on the Nasdaq
        National Market, then the Fair Market Value shall be the closing selling
        price per share of Common Stock on the date in question, as such price
        is reported by the National Association of Securities Dealers on the
        Nasdaq National Market or any successor system. If there is no closing
        selling price for the Common Stock on the date in question, then the
        Fair Market Value shall be the closing selling price on the last
        preceding date for which such quotation exists.

                    (ii) If the Common Stock is at the time listed on any Stock
        Exchange, then the Fair Market Value shall be the closing selling price
        per share of Common Stock on the date in question on the Stock Exchange
        determined by the Plan Administrator to be the primary market for the
        Common Stock, as such price is officially quoted in the composite tape
        of transactions on such exchange. If there is no closing selling price
        for the Common Stock on the date in question, then the Fair Market Value
        shall be the closing selling price on the last preceding date for which
        such quotation exists.

                    (iii) For purposes of any option grants made on the Plan
        Effective Date, the Fair Market Value shall be deemed to be equal to the
        price per share at which the Common Stock is sold in the initial public
        offering pursuant to the Underwriting Agreement.

                                      -19-
<PAGE>   20

            M. HOSTILE TAKE-OVER shall mean a change in ownership of the
Corporation effected through the following transaction:

                    (i) the acquisition, directly or indirectly, by any person
        or related group of persons (other than the Corporation or a person that
        directly or indirectly controls, is controlled by, or is under common
        control with, the Corporation) of beneficial ownership (within the
        meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
        than fifty percent (50%) of the total combined voting power of the
        Corporation's outstanding securities pursuant to a tender or exchange
        offer made directly to the Corporation's stockholders which the Board
        does not recommend such stockholders to accept, and

                    (ii) more than fifty percent (50%) of the securities so
        acquired are accepted from persons other than Section 16 Insiders.

            N. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

            O. INVOLUNTARY TERMINATION shall mean the termination of the Service
of any individual which occurs by reason of:

                    (i) such individual's involuntary dismissal or discharge by
        the Corporation for reasons other than Misconduct, or

                    (ii) such individual's voluntary resignation following (A) a
        change in his or her position with the Corporation which materially
        reduces his or her level of responsibility, (B) a reduction in his or
        her level of compensation (including base salary, fringe benefits and
        participation in corporate-performance based bonus or incentive
        programs) by more than fifteen percent (15%) or (C) a relocation of such
        individual's place of employment by more than fifty (50) miles, provided
        and only if such change, reduction or relocation is effected by the
        Corporation without the individual's consent.

            P. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

            Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

                                      -20-
<PAGE>   21

            R. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.

            S. OPTIONEE shall mean any person to whom an option is granted under
the Discretionary Option Grant or Automatic Option Grant Program.

            T. PARENT shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain; provided, however, that neither Kaiser Aerospace and Electronics
Corporation ("Kaiser"), a New York corporation, nor KSI, a California
corporation, shall be considered a Parent of the Corporation unless either
Kaiser or KSI (as the case may be) owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock of the
Corporation at any time after November 30, 1995.

            U. PARTICIPANT shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.

            V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for the purposes of the Automatic Option
Grant Program, Permanent Disability or Permanently Disabled shall mean the
inability of the non-employee Board member to perform his or her usual duties as
a Board member by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.

            W. PLAN shall mean the Corporation's 1995 Stock Option/Stock
Issuance Plan, as set forth in this document.

            X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

            Y. PLAN EFFECTIVE DATE shall mean the date on which the Underwriting
Agreement is executed and the initial public offering price of the Common Stock
is established.

            Z. PREDECESSOR PLAN shall mean the Corporation's existing 1991 Stock
Option Plan.

                                      -21-
<PAGE>   22

            AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.

            BB. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic
Relations Order which substantially complies with the requirements of Code
Section 414(p). The Plan Administrator shall have the sole discretion to
determine whether a Domestic Relations Order is a Qualified Domestic Relations
Order.

            CC. SECONDARY COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.

            DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

            EE. SECTION 12(g) REGISTRATION DATE shall mean the first date on
which the Common Stock is registered under Section 12(g) of the 1934 Act.

            FF. SERVICE shall mean the provision of services to the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the Board of Directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.

            GG. STOCK EXCHANGE shall mean either the American Stock Exchange or
the New York Stock Exchange.

            HH. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into
by the Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.

            II. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in
effect under the Plan.

            JJ. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

            KK. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.

                                      -22-
<PAGE>   23

            LL. TAXES shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.

            MM. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

            NN. UNDERWRITING Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

                                      -23-

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