WINSTAR COMMUNICATIONS INC
DEFA14A, 2000-05-22
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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                                  SCHEDULE 14A
                                 (Rule 14a-101)
                     INFORMATION REQUIRED IN PROXY STATEMENT
                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                Securities Exchange Act of 1934 (Amendment No. )

     Filed by the registrant X
     Filed by a party other than the registrant ____

         Check the appropriate box:
         ____ Preliminary proxy statement       ____  Confidential, For Use of
          X   Definitive proxy statement              the Commission Only (as
         ____ Definitive additional materials         permitted by Rule
         ____ Soliciting material pursuant to         14a-6(e)(2))
              Rule 14a-12

                          WINSTAR COMMUNICATIONS, INC.
- -------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

- -------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

     X    No fee required.
     ____ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
          0-11.

     (1)  Title of each class of securities to which transaction applies:

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

     (2)  Aggregate number of securities to which transaction applies:

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

     (3)  Per unit price or other underlying value of transaction computed
          pursuant to Exchange Act Rules 14- a-6(I)(1) and 0-11 (set forth the
          amount on which the filing fee is calculated and state how it was
          determined):

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

     (4)  Proposed maximum aggregate value of transaction:

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

     (5)  Total fee paid:

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

     ____ Fee paid previously with preliminary materials:

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

     ____ Check box if any part of the fee is offset as provided by Exchange Act
          Rule 0-11(a)(2) and identify the filing for which the offsetting fee
          was paid previously. Identify the previous filing by registration
          statement number, or the form or schedule and the date of its filing.

     (1)  Amount previously paid:

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

     (2)  Form, Schedule or Registration Statement No.:

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

     (3)  Filing party:

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

     (4)  Date filed:

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

<PAGE>



                          WINSTAR COMMUNICATIONS, INC.
                                685 Third Avenue
                            New York, New York 10017

                        ---------------------------------
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                        ---------------------------------
                           To be held on June 28, 2000
                        ---------------------------------

     The annual meeting of Stockholders of Winstar Communications, Inc. will be
held at the W New York hotel, 541 Lexington Avenue, New York, NY 10022, on
Wednesday, June 28, 2000, at 10:00 a.m. The matters to be considered and voted
upon at the meeting are set forth below and more fully described in the attached
proxy statement:

     o    The election of three class III directors, to serve for the ensuing
          three-year period and until their respective successors are elected
          and qualified;

     o    A proposal to amend our certificate of incorporation to increase the
          number of shares of common stock for issuance by us from 200.0 million
          to 400.0 million;

     o    A proposal to amend our certificate of incorporation to increase the
          number of shares of preferred stock authorized for issuance by us in
          series from 15.0 million to 30.0 million, with each series to have
          such rights and preferences as are determined by our board of
          directors;

     o    A proposal to adopt our 2000 Performance Equity Plan under which stock
          options and other equity based awards will be granted to our
          directors, officers, employees and consultants; and

     o    To transact such other business as may properly come before the
          meeting and any and all adjournments thereof.

     Our board of directors has fixed the close of business on May 12, 2000 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting or any adjournment thereof.

     You will have the opportunity to vote your Winstar shares via telephone or
the Internet. We encourage you to utilize these efficient and cost-effective
voting methods. If you hold your shares in your own name (i.e., you are a
registered stockholder), you should refer to the instructions set forth on the
enclosed proxy card. If your Winstar shares are held in the name of a bank or
broker (i.e., you are a beneficial owner, but not a record holder), you will
receive separate voting instructions from that bank or broker.

                                    By Order of the Board of Directors,

                                    Timothy R. Graham
                                    Secretary

New York, New York
May 22, 2000

Whether or not you plan to attend the meeting, please complete, sign, date and
return the accompanying proxy in the enclosed envelope, or vote via the internet
or by telephone in accordance with instructions set forth on the proxy card.


<PAGE>



                          WINSTAR COMMUNICATIONS, INC.

                            ------------------------
                                 PROXY STATEMENT
                            ------------------------

                               GENERAL INFORMATION

     This proxy statement is furnished to our stockholders in connection with
the solicitation of proxies, in the accompanying form, by our board of directors
for use in voting at the annual meeting of stockholders, to be held at the W New
York hotel, 541 Lexington Avenue, New York, NY 10022, on Wednesday, June 28,
2000, at 10:00 a.m., and at any and all adjournments thereof.

     On or about May 22, 2000, this proxy statement and the accompanying form of
proxy, together with a copy of Winstar's annual report to stockholders for the
year ended December 31, 1999, including financial statements, are being mailed
to each stockholder of record at the close of business on May 12, 2000.

     Our principal executive offices are located at 685 Third Avenue, New York,
New York 10017.

What matters am I voting on?

     You are being asked to vote on the following matters:

     o    The election of three class III directors, to serve for the ensuing
          three-year period and until their respective successors are elected
          and qualified;

     o    A proposal to amend our certificate of incorporation to increase the
          number of shares of common stock authorized for issuance by us from
          200.0 million to 400.0 million;

     o    A proposal to amend our certificate of incorporation to increase the
          number of shares of preferred stock authorized for issuance by us in
          series from 15.0 million to 30.0 million, with each series to have
          such rights and preferences as are determined by our board of
          directors;

     o    A proposal to adopt our 2000 Performance Equity Plan under which
          options to purchase shares of our common stock will be granted to
          our directors, officers, employees and consultants; and

     o    To transact such other business as may properly come before the
          meeting and any and all adjournments thereof.



<PAGE>



Who is entitled to vote?

     Persons who were holders of our common stock and Series A and Series G
preferred stock as of the close of business on May 12, 2000, the record date,
are entitled to vote at the meeting. As of May 12, 2000, we had issued and
outstanding 89,293,861 shares of common stock, 4,471,240 shares of Series A
preferred stock and 900,000 shares of Series G preferred stock, comprising all
of our issued and outstanding voting stock (collectively, the "Voting Stock").

     Each holder of our common stock and Series A preferred stock is entitled to
one vote for each share held on the record date. Each holder of our Series G
preferred stock is entitled to a number of votes per share of Series G preferred
stock held on the record date equal to the number of shares of common stock into
which such share of Series G preferred stock may be converted on such date. As
of the record date, each outstanding share of Series G preferred stock was
convertible into 22.58 shares of common stock. Accordingly, the Series G
preferred stock has aggregate voting power equivalent to approximately
20,324,000 shares of common stock.

     All share amounts and prices in this proxy statement reflect our 3-for-2
common stock split, which was effected by us in March 2000 in the form of a 50%
common stock dividend.

What is the effect of giving a proxy?

     Proxies in the form enclosed are solicited by and on behalf of the board.
The persons named in the proxy have been designated as proxies by the board. If
you sign and return the proxy in accordance with the procedures set forth in
this proxy statement, the persons designated as proxies by the board will vote
your shares at the meeting as specified in your proxy.

     If you sign and return your proxy in accordance with the procedures set
forth in this proxy statement but you do not provide any instructions as to how
your shares should be voted, your shares will be voted as follows:

     o    FOR the election of the nominees listed below under Proposal I;

     o    FOR the approval of the amendment to our certificate of incorporation
          to increase our authorized common stock as described below under
          Proposal II;

     o    FOR the approval of the amendment to our certificate of incorporation
          to increase our authorized preferred stock as described below under
          Proposal III;

     o    FOR the approval of our 2000 Performance Equity Plan as described
          below under Proposal IV.

     If you give your proxy, your shares also will be voted in the discretion of
the proxies named on the proxy card with respect to any other matters properly
brought before the meeting and any adjournments thereof. In the event that any
other matters are properly presented at the meeting for action, the persons
named in the proxy will vote the proxies in accordance with their best judgment.


                                        2


<PAGE>



Can I change my vote after I return my proxy card?

     Any proxy given pursuant to this solicitation may be revoked by you at any
time before it is exercised. You may effectively revoke your proxy by:

     o    delivering written notification of your revocation to the Secretary of
          Winstar;

     o    voting in person at the meeting; or

     o    delivering another proxy bearing a later date.

     Please note that your attendance at the meeting will not alone serve to
revoke your proxy.

What is a quorum?

     The presence, in person or by proxy, of a majority of the votes entitled to
be cast at the meeting will constitute a quorum at the meeting. A proxy
submitted by a stockholder may indicate that all or a portion of the shares
represented by the proxy are not being voted ("stockholder withholding") with
respect to a particular matter. Similarly, a broker may not be permitted to vote
stock ("broker non-vote") held in street name on a particular matter in the
absence of instructions from the beneficial owner of the stock. The shares
subject to a proxy which are not being voted on a particular matter because of
either stockholder withholding or broker non-vote will not be considered shares
present and entitled to vote on that matter. These shares, however, may be
considered present and entitled to vote on other matters and will count for
purposes of determining the presence of a quorum if the shares are being voted
with respect to any matter at the meeting. If the proxy indicates that the
shares are not being voted on any matter at the meeting, the shares will not be
counted for purposes of determining the presence of a quorum. Abstentions are
voted neither "for" nor "against" a matter, but are counted in the determination
of a quorum.

What is a "broker non-vote"?

     A "broker non-vote" occurs when a broker submits a proxy that states that
the broker does not vote for some of the proposals because the broker has not
received instructions from the beneficial owners on how to vote on such
proposals and does not have discretionary authority to vote in the absence of
instructions.

How do I vote?

     You may vote your shares in one of three ways: by mail, by telephone or via
the Internet. The prompt return of the completed proxy card or telephone or
Internet vote will assist Winstar in preparing for the meeting.

                                        3


<PAGE>



     To vote by mail:
     ---------------

     Date, sign and return the accompanying proxy in the envelope enclosed for
that purpose (to which no postage need to be affixed if mailed in the United
States). You can specify your choices by marking the appropriate boxes on the
proxy card. If you attend the meeting, you may deliver your completed proxy card
in person or fill out and return a ballot that will be supplied to you.

     To vote by telephone or Internet:
     --------------------------------

     You will have the opportunity to vote your Winstar shares via telephone or
the Internet. We encourage you to utilize these efficient and cost-effective
voting methods. If you hold your shares in your own name (i.e., you are a
registered stockholder), you should refer to the instructions set forth on the
enclosed proxy card. If your Winstar shares are held in the name of a bank or
broker (i.e., you are a beneficial owner, but not a record holder), you will
receive separate voting instructions from that bank or broker.

How many votes are needed for approval of each matter?

     o    The election of directors requires a plurality vote of the Voting
          Stock voted at the meeting. "Plurality" means that the individuals who
          receive the largest number of votes cast "FOR" are elected as
          directors. Consequently, any shares not voted "FOR" a particular
          nominee (whether as a result of a direction of the securities holder
          to withhold authority, abstentions or a broker non-vote) will not be
          counted in such nominee's favor.

     o    The amendment to our certificate of incorporation to increase our
          authorized common stock must be approved by the affirmative vote of a
          majority of the outstanding shares of Voting Stock.

     o    The amendment to our certificate of incorporation to increase our
          authorized preferred stock must be approved by the affirmative vote of
          a majority of the outstanding shares of Voting Stock.

     o    The approval of the 2000 plan must be approved by the affirmative vote
          of a majority of the votes cast at the meeting.

     Abstentions from voting with respect to Proposals II, III and IV are
counted as "votes cast" with respect to such proposal and, therefore, have the
same effect as a vote against the proposal. Shares deemed present at the meeting
but not entitled to vote on Proposal II or III (because of either stockholder
withholding or broker non-vote) will have the same effect as a vote cast against
the approval of such proposal. Shares deemed present at the meeting but not
entitled to vote on Proposal IV (because of either stockholder withholding or
broker non-vote) are not deemed "votes cast" with respect to such proposal and
therefore will have no effect on such vote.


                                        4


<PAGE>



Security Ownership of Certain Beneficial Owners and Management

     The table and accompanying footnotes on the following pages set forth
certain information as of May 12, 2000 with respect to the ownership of our
common stock by: (i) those persons or groups who beneficially own more than 5%
of our common stock, (ii) each of our directors and named executive officers and
(iii) all of our directors, director-nominees and executive officers as a group
(in each case, based upon information furnished by such persons). Our
outstanding Series A and Series G preferred stock is convertible into and votes
as a single class with our common stock. Shares of common stock issuable upon
(A) exercise of options which are currently exercisable or exercisable within 60
days of the date of this proxy statement and (B) conversion of the Series A and
Series G preferred stock have been included in the following table with respect
to the beneficial ownership of the person owning such options or preferred
stock, but not with respect to any other persons listed below.

<TABLE>
                                                   Number of Shares              Percent
Name and Address of Beneficial Owner              Beneficially Owned     Beneficially Owned (%)
- ------------------------------------              ------------------     ----------------------
<S>                                                      <C>                     <C>
William J. Rouhana, Jr. (1)                               3,756,465 (2)            4.1

Nathan Kantor (1)                                         1,782,636 (3)            2.0

Timothy R. Graham (1)                                       585,378 (4)             *

Richard J. Uhl (1)                                          111,000 (5)             *

Steven B. Magyar                                            127,280 (6)             *
Two Pine Point
Lloyd Harbor, New York 11742

William J. vanden Heuvel                                     111,000(7)             *
812 Park Avenue
New York, New York 10021

Bert Wasserman                                               150,000(8)             *
126 East 56th Street
New York, New York 10022

James I. Cash
Harvard University                                            45,000(9)             *
Graduate School of Business Administration
Baker Library 187, Soldiers Field Road
Boston, Massachusetts 02163

Hartley R. Rogers                                         8,906,477(10)            9.1
c/o Credit Suisse First Boston
11 Madison Avenue
New York, NY 10010

Lawrence B. Sorrel                                        5,275,378(11)            5.6
c/o Welsh, Carson, Anderson & Stowe VIII, L.P.
320 Park Avenue, Suite 2500
New York, New York  10022
</TABLE>

                                        5


<PAGE>


<TABLE>
                                                   Number of Shares              Percent
Name and Address of Beneficial Owner              Beneficially Owned     Beneficially Owned (%)
- ------------------------------------              ------------------     ----------------------
<S>                                                      <C>                     <C>
Janus Capital Corporation                                 8,743,298(12)            9.8
100 Fillmore Street
Denver, Colorado  80206-4923

Credit Suisse First Boston Equity Partners, L.P.          8,906,477(13)            9.1
11 Madison Avenue
New York, NY 10010

FMR Corp.                                                 8,222,507(14)            9.2
82 Devonshire Drive
Boston, MA 02019

GBU Inc.
GEM Capital Management , Inc.
Gerald B. Unterman                                        7,842,518(15)            8.8
70 East 55th Street
New York, NY  10022

Putnam Investments, Inc.
One Post Office Square                                    5,992,706(16)            6.7
Boston, Massachusetts 02109

Welsh, Carson, Anderson & Stowe VIII, L.P.
320 Park Avenue, Suite 2500                               5,292,045(17)            5.6
New York, New York

All Directors and Executive
Officers as a Group (10 persons)                         20,850,614(18)           19.2
</TABLE>


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

*    Less than 1%.

(1)  The address of this person is c/o Winstar Communications, Inc., 685 Third
     Avenue, New York, New York 10017.

(2)  Includes (i) 2,347,500 shares of common stock issuable upon exercise of
     certain options and (ii) 193,125 shares of common stock issuable upon
     exercise of certain options owned by Mr. Rouhana's spouse, as to which Mr.
     Rouhana disclaims beneficial ownership. Does not include 187,500 shares of
     common stock issuable upon exercise of options which do not become
     exercisable within 60 days of the date of this proxy statement. Mr. Rouhana
     has agreed that, during the term of Nathan Kantor's employment agreement
     with Winstar, he would vote all shares of common stock he controls in favor
     of Mr. Kantor as a director of Winstar.

(3)  Includes 1,757,674 shares of common stock issuable upon exercise of certain
     options. Does not include 365,374 shares of common stock issuable upon
     exercise of options which do not become exercisable within 60 days of the
     date of this proxy statement.

(4)  Includes 166,800 shares of common stock issuable upon exercise of certain
     options. Does not include 297,200 shares of common stock issuable upon
     exercise of options which do not become exercisable and 7,200 shares of
     common stock under a restricted stock award which do not vest within 60
     days of the date of this proxy statement.


                                        6


<PAGE>



(5)  Includes 105,000 shares of common stock issuable upon exercise of certain
     options. Does not include 865,000 shares of common stock issuable upon
     exercise of options which do not become exercisable within 60 days of the
     date of this proxy statement.

(6)  Includes (i) 1,500 shares of common stock owned by Mr. Magyar's spouse, as
     to which Mr. Magyar disclaims beneficial ownership, (ii) 3,786 shares of
     common stock owned by benefit plans of which Mr. Magyar is the sole trustee
     and primary beneficiary and (iii) 105,000 shares of common stock issuable
     upon exercise of certain options.

(7)  Includes 105,000 shares of common stock issuable upon exercise of certain
     options. Also includes 750 shares of common stock owned by Mr. vanden
     Heuvel's spouse, as to which Mr. vanden Heuvel disclaims beneficial
     ownership.

(8)  Includes 135,000 shares of common stock issuable upon exercise of certain
     options.

(9)  Includes 45,000 shares of common stock issuable upon exercise of certain
     options.

(10) Represents shares of common stock issuable upon conversion of the Series G
     preferred stock beneficially owned by Credit Suisse First Boston Equity
     Partners, L.P., of which Mr. Rogers is a Managing Director, and certain
     affiliated parties. Mr. Rogers disclaims beneficial ownership of these
     shares.

(11) Includes 5,269,822 shares of common stock issuable upon conversion of the
     Series G preferred stock beneficially owned by Welsh, Carson, Anderson &
     Stowe VIII, L.P., of which Mr. Sorrel is a General Partner, and certain
     affiliates (collectively, "Welsh, Carson"). Mr. Sorrel disclaims beneficial
     ownership of the shares of common stock owned directly by Welsh, Carson and
     its affiliates. Information with respect to this stockholder was derived
     from its Schedule 13D, as filed with the SEC on February 2000.

(12) Represents shares of common stock beneficially owned by Janus Capital
     Corporation ("Janus Capital") and certain affiliated investment companies
     for which it is a registered investment adviser. As a result of its role as
     investment adviser or sub-adviser to these investment companies, Janus
     Capital may be deemed to be the beneficial owner of the shares of common
     stock held by such companies. However, Janus Capital does not have the
     right to receive any dividends from, or the proceeds from the sale of, the
     securities held by such companies and disclaims any ownership associated
     with such rights. Information with respect to this stockholder was derived
     from its Schedule 13G as filed with the SEC in January 2000.

(13) Represents shares of common stock issuable upon conversion of Series G
     preferred stock beneficially owned by Credit Suisse First Boston Equity
     Partners, L.P. and certain affiliates. Information with respect to this
     stockholder was derived from its Schedule 13D as filed with the SEC in
     February 2000.

(14) Represents shares of our common stock beneficially owned by FMR Corp, the
     parent holding company of, among others, Fidelity Management & Research
     Company ("Fidelity Management"). FMR Corp is a registered investment
     adviser which acts as investment adviser to various registered investment
     companies within the Fidelity family of investment funds. Information with
     respect to this stockholder was derived from its Schedule 13G, as amended,
     as filed with the SEC in February 2000.

(15) Represents shares or our common stock beneficially owned by GBU Inc. and
     GEM Capital Management, Inc. Each of GBU and GEM is a registered investment
     adviser which acts as investment adviser to various funds and managed
     accounts. Gerald B. Unterman is the President, a director and principal
     stockholder of GBU and GEM Capital. Mr. Unterman, GBU and GEM Capital are
     deemed to beneficially own shares of common stock held by those funds and


                                        7


<PAGE>


     managed accounts over which they exercise control. Information with respect
     to these stockholders was derived from their Schedule 13G, as amended,
     filed with the SEC in February 2000.

(16) Represents shares of common stock beneficially owned by Putnam Investments,
     Inc. and certain, affiliates. Information with respect to this stockholder
     was derived from its Schedule 13G as filed with the SEC in February 2000.

(17) Represents shares issuable upon conversion of Series G preferred stock
     beneficially owned by Welsh, Carson, including 22,223 shares issuable upon
     conversion of Series G preferred stock beneficially owned by WCAS
     Information Partners, LLP.  Information with respect to this stockholder
     was derived from its Schedule 13D, as filed with the SEC on February 2000.

(18) Includes shares referred to as being included in notes (2) through (11).
     Excludes shares referred to in such notes as being excluded.

     Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers and persons who beneficially own more than ten percent of
our common stock to file with the SEC initial reports of ownership and reports
of changes in ownership of common stock. Executive officers, directors and
greater-than-ten percent stockholders are required by SEC regulations to furnish
Winstar with copies of all such reports they file. To Winstar's knowledge, based
solely on review of the copies of such reports furnished to Winstar and written
representations that no other reports were required during the year ended
December 31, 1999, all filings under Section 16(a) were made as required.

                   Proposal I: Election of Class III Directors

     The board is divided into three classes, each of which generally serves for
a term of three years, with only one class of directors being elected in each
year. The term of office of the first class of directors (Class I), presently
consisting of Timothy R. Graham, James I. Cash and Hartley R. Rogers will expire
in 2001; the term of office of the second class of directors (Class II),
presently consisting of Bert W. Wasserman, Nathan Kantor and Lawrence B. Sorrel,
will expire in 2002; and the term of office of the third class of directors
(Class III), presently consisting of William J. Rouhana, Jr., William J. vanden
Heuvel and Steven B. Magyar, will expire at the meeting. In each case, each
director will hold office until the next annual meeting of stockholders at which
his class of directors is to be elected, or until his successor is duly
qualified and appointed.

Information Concerning Nominees

     Three persons will be elected at the meeting to serve as Class III
directors for a term of three years. The board has nominated William J. Rouhana,
Jr., William J. vanden Heuvel and Steven B. Magyar, the incumbent Class III
directors, as the candidates for election. Unless otherwise specified in the
form of proxy, the proxies solicited by the management will be voted "FOR" the
election of these candidates. In case any of these nominees becomes unavailable
for election to the board, an event which is not anticipated, the persons named
as proxies, or their substitutes, shall have full discretion and authority to
vote or refrain from voting for any other nominee in accordance with their
judgment. The following information was furnished by the nominees:


                                        8


<PAGE>



                               Class III directors

     William J. Rouhana, Jr., 47, has been a director of Winstar since its
inception, its chairman of the board since February 1991, and its chief
executive officer since May 1994. Mr. Rouhana was president and chief executive
officer of Winstar Companies, Inc., a merchant banking firm which focused on
media and telecommunications investments, and its affiliates from 1983 until
November 1995. Through Winstar Companies, he served, from August 1987 to
February 1989, as vice chairman of the board and chief operating officer of
Management Company Entertainment Group, Inc., a diversified distributor of
entertainment products, and thereafter as its Vice Chairman of the board until
May 1990. Mr. Rouhana was in private legal practice from 1977 to 1984,
specializing in the financing of entities involved in the development of
entertainment products and information services. Mr. Rouhana is a former vice
chairman of the board of governors of the United Nations Association and is a
member of the board of directors of Business Executives for National Security.
He also co-founded and is co-chairman of the Humpty Dumpty Institute and a
member of the board of trustees of Colby College. He is a Phi Beta Kappa
graduate of Colby College, a Thomas J. Watson Fellow (1972-1973) and a graduate
of Georgetown University School of Law.

     Steven B. Magyar, 51, has been a director of Winstar since June 1993. Since
May 1994, Mr. Magyar has owned and operated a private business which specializes
in financial services for high net worth individuals and business owners. From
1989 to May 1994, Mr. Magyar was a regional vice president of CIGNA Insurance
Co. and during the preceding fifteen years held various sales and sales
management positions with CIGNA. Mr. Magyar has served on CIGNA's strategic
business development committee and has been a guest lecturer at New York
University. Mr. Magyar also is a certified life underwriter and chartered
financial consultant with the American College of Insurance. Mr. Magyar is a
member of the National Association of Underwriters and the American Society of
CLU and ChFC. Mr. Magyar is a graduate of Colby College.

     William J. vanden Heuvel, 70, has been a director of Winstar since June
1995. Since 1984, he has served as senior advisor to Allen & Co., an investment
banking firm, as well as counsel to the law firm Stroock & Stroock & Lavan. He
served as a director of Time Warner from 1981 to 1993 and currently is a
director of Zemex Corp., a New York Stock Exchange listed company engaged in the
mining and exploitation of industrial minerals. Ambassador vanden Heuvel also
has been a member of the IRC Group, a Washington D.C.-based consulting group
made up of former United States ambassadors, since 1981. From 1979 to 1981,
Ambassador vanden Heuvel served as United States Deputy Permanent Representative
to the United Nations. From 1977 to 1979, he served as United States Ambassador
to the European Office of the United Nations and various other international
organizations. He was Special Assistant to United States Attorney General Robert
F. Kennedy from 1961 to 1964. Ambassador vanden Heuvel is a graduate of Deep
Springs College, Cornell University and Cornell Law School. He is chairman of
the Franklin and Eleanor Roosevelt Institute and chairman of the Council of
American Ambassadors and vice chair of the World Federation of the United
Nations Associations.

                 The Board of Directors recommends voting "FOR"
                           each of the above nominees.


                                        9


<PAGE>



Information Concerning Other Directors and Executive Officers

                                Class I Directors

     James I. Cash, 52, has been a director of Winstar since January 1997.
Professor Cash has been a member of the faculty of Harvard Business School since
1976, having taught in its Masters of Business Administration, Management
Development, Global Leadership and Advanced Management programs. Professor Cash
currently serves as a trustee for Massachusetts General Hospital and Partners
Healthcare, overseer for the Boston Museum of Science, and is a member of the
board of directors of Cambridge Technology Partners, The Chubb Corporation,
General Electric Company, Knight-Ridder, Inc. and State Street Bank and Trust
Company. Professor Cash has authored numerous articles and several books on
topics related to information technology and corporate management and structure.
Professor Cash is a graduate of Texas Christian University, Purdue University's
Graduate School of Mathematical Sciences and Purdue University's Krannert
Graduate School of Management.

     Timothy R. Graham, 50, has served as executive vice president, general
counsel and secretary of Winstar since October 1994 and has been a director of
Winstar since January 1999. Prior to 1994, Mr. Graham was engaged in the
practice of law, specializing in corporate finance, regulatory and business law.
Mr. Graham is a member of the board of advisors of the Instructional Television
Station of the Archdiocese of New York and a director of the American
Electronics Association. Mr. Graham is a graduate of Fordham Law School and the
Georgetown University School of Foreign Service.

     Hartley R. Rogers, 40, has been a director of Winstar since February 2000.
Mr. Rogers has been managing director and co-head of Credit Suisse First Boston
Equity Partners, L.P., a $2.75 billion private equity fund based in New York
City, since its inception in 1998. Prior to that time, Mr. Rogers was managing
director and head of the private investment department at Morgan Stanley Dean
Witter & Co. where he managed the Princes Gate Investors private equity funds
and the Morgan Stanley Bridge Fund, LLC, a high-yield bridge lending entity.
Prior to that time, Mr. Rogers was president of J.G. Fogg & Co. Incorporated, a
venture capital firm, and an investment banker at Morgan Stanley & Co.
Incorporated. He received an A.B. from Harvard College and an M.B.A. from the
Harvard Business School.

                               Class II Directors

     Nathan Kantor, 57, has been a director of Winstar since October 1994 and
president and chief operating officer of Winstar since September 1995. From 1991
to September 1995, Mr. Kantor was president of ITC Group, Inc., a company that
specialized in the development of emerging competitive telecommunications
companies. Through ITC, Mr. Kantor coordinated all of Winstar's communications
operations from June 1994 to September 1995. From January 1985 to December 1990,
he was president of MCI Telecommunications Corporation (Northeast Division). Mr.
Kantor was a founder of MCI International, Inc., and served as its president and
chief operating officer from its founding in July 1982 to December 1984. From
1972 to 1982, Mr. Kantor held a number of senior management positions with MCI
Communications, including vice president of National Operations. Mr. Kantor also
is currently the chairman of the board and chief executive officer of Image


                                       10


<PAGE>



Telecommunications Corp., a company involved in the development of information
and video servers. Mr. Kantor is a graduate of Florida State University and the
United States Military Academy at West Point.

     Lawrence B. Sorrel, 41, has been a director of Winstar since February 2000.
Mr. Sorrel has been a general partner at Welsh, Carson, Anderson & Stowe VIII,
L.P., a New York City-based private equity investment firm, since joining that
firm in 1998. For the previous twelve years, he worked in the private equity
business at Morgan Stanley Dean Witter & Co. where he was a managing director
and one of the senior executives responsible for the firm's private equity
investment activities. He is chairman of the board of directors of SpectraSite
Holdings, and a member of the board of directors of Emmis Communications, Valor
Telecommunications, Westminster Healthcare, and Select Medical Corporation. He
holds a B.A. from Brown University and J.D. and M.B.A. degrees from Harvard
University.

     Bert Wasserman, 67, has been a director of Winstar since June 1995. Mr.
Wasserman served as executive vice president and chief financial officer of Time
Warner, Inc. from 1990 until his retirement in 1995 and served on the board of
directors of Time Warner, Inc. and its predecessor company, Warner
Communications, Inc. from 1981 to 1995. He joined Warner Communications, Inc. in
1966 and had been an officer of that company since 1970. Mr. Wasserman is
director of several investment companies in the Dreyfus Family of Funds. He is a
director of Malibu Entertainment, Inc., Lillian Vernon Corporation and PSC Inc.
He is a graduate of Baruch College and Brooklyn Law School.

                             Other Executive Officer

     Richard J. Uhl, 59, has been the president and chief operating officer of
Winstar for Buildings since joining Winstar in December 1997. In November, 1999,
Mr. Uhl was also appointed group executive and chief financial officer. Before
joining Winstar, Mr. Uhl was a member of the board of directors of Frontier
Corporation, a position he assumed when ALC Communications Corporation merged
with Frontier Corporation in 1995. Mr. Uhl previously served on ALC's board for
four years, and was vice president, controller and treasurer of MCI
Communications Corporation for seven years. Mr. Uhl served as president and
board member of Chicago Holdings, Inc., a privately-owned investment banking
firm, for 12 years. Mr. Uhl holds a masters degree from the New York University
Graduate School of Business Administration and a bachelor's degree from
Muhlenberg College.

Board Meetings, Committees and Compensation

     Our board met nine times during the year ended December 31, 1999. Each
director attended all of these meetings, except for Mr. Cash who attended six
meetings.


                                       11


<PAGE>



     The board currently maintains a standing audit committee, compensation
committee and nominating and corporate governance committee. Additionally, from
time to time, the board establishes special committees for specific purposes.
The membership of the standing committees is as follows, with the committee
chairman listed first:

<TABLE>
                                                                                          Nominating and
                                                                                       Corporate Governance
          Audit Committee                     Compensation Committee                        Committee
- ------------------------------------    -----------------------------------    ------------------------------------
<S>                                             <C>                                   <C>
           Bert Wasserman                        Steven B. Magyar                    William J. vanden Heuvel
          Steven B. Magyar                   William J. vanden Heuvel                    Steven B. Magyar
           James I. Cash                           James I. Cash                        Timothy R. Graham
         Hartley R. Rogers                      Lawrence B. Sorrel
</TABLE>


     The board's audit committee met three times during the year ended December
31, 1999. All members of the audit committee attended all of these meetings. The
responsibilities of the audit committee include, in addition to such other
duties as the board may specify, (i) recommending to the board the appointment
of independent accountants; (ii) reviewing the timing, scope and results of the
independent accountants' audit examination and the related fees; (iii) reviewing
periodic comments and recommendations by our independent accountants and our
response thereto; (iv) reviewing the scope and adequacy of internal accounting
controls and internal auditing activities; and (v) making recommendations to the
board with respect to significant changes in accounting policies and procedures.

     The board's compensation committee met four times during the year ended
December 31, 1999. All members of the compensation committee attended all of
these meetings, except Mr. vanden Heuvel, who attended three. The
responsibilities of the compensation committee include, in addition to such
other duties as the board may specify, (i) reviewing and recommending to the
board the policies relating to salaries, compensation and benefits of the
executive officers and key employees of Winstar, and setting the salary,
benefits and other compensation of the Chief Executive Officer, (ii) reviewing
any related party transactions on an ongoing basis for potential conflicts of
interest and (iii) administering Winstar's stock option, stock purchase and
other employee compensation plans.

     The board's nominating and corporate governance committee met once during
the year ended December 31, 1999. All members of this committee attended the
meeting. The responsibilities of the nominating and governance committee
include, in addition to such other duties as the board may specify, considering
and recommending to the board nominees for directors, succession planning and
corporate governance matters.

     We pay each outside director $500 for his attendance at each meeting of a
board committee of which he is a member and $1,000 for his attendance at each
meeting of our board as well as annual compensation in an amount of $10,000. In
addition, on January 13th of each year during the term of our 1992 performance
equity plan, assuming there are enough shares then available for grant under
this plan, we award each person who is then a member of our board stock options
to purchase 15,000 shares of our common stock with an exercise price equal to



                                       12


<PAGE>


the market price of our common stock at that time (as determined in accordance
with the 1992 plan). These options are immediately exercisable as of the date of
grant and have a term of ten years.

Executive Compensation

     The following table shows the compensation for the years ended December 31,
1999, 1998 and 1997 earned by (i) William J. Rouhana, Jr., our chairman and
chief executive officer, (ii) Nathan Kantor, Timothy R. Graham and Richard J.
Uhl, our other executive officers and (iii) Charles T. Dickson, our former
executive vice president and chief financial officer who resigned in October
1999 (all of these executive officers are referred to collectively as the "named
executive officers").

<TABLE>
                                            SUMMARY COMPENSATION TABLE

                                                    Annual Compensation                  Long Term Compensation
                                             ------------------------------------       -----------------------------
                                                                     Other Annual       Restricted         Securities
                                             Salary       Bonus      Compensation      Stock Awards        Underlying
Name and principal position        Year        ($)       ($)(1)           ($)              ($)             Options (#)
- ---------------------------        ----      ------       -----     ------------       ------------       ----------------
<S>                                <C>         <C>         <C>        <C>    <C>                           <C>     <C> <C>
William J. Rouhana, Jr.            1999        537,002     858,587    67,543 (2)            -              165,000 (1) (4)
 Chairman of the board and         1998        554,387     750,000         -                -             1,365,000 (3)(4)
 chief executive officer           1997        483,658     500,000         -                -                   15,000 (4)

Nathan Kantor                      1999        524,363     645,000         -                -               115,000 (1)(4)
 President and chief operating     1998        519,237     625,000         -                -               765,000 (3)(4)
 officer                           1997        448,085     450,000         -                -                   15,000 (4)

Timothy R. Graham                  1999        316,820     300,000         -             312,900            200,000 (1)(4)
 Executive vice president,         1998        284,416     220,000         -                -                  121,500 (1)
 general counsel and secretary     1997        225,000     225,000         -                -                          -0-

Richard J. Uhl                     1999        332,043     300,000         -              74,000               602,500 (1)
Group executive and chief          1998        311,526     190,000         -                -                    75,000(1)
 financial officer                 1997         11,538      30,000         -                -                  337,500 (5)

Charles T. Dickson                 1999        306,455         -0-         -                -                            -
 Former executive vice             1998        321,921     150,000         -                -                        1,500
 president and chief financial     1997         11,923      30,000         -                -                   375,000(5)
 officer (6)
</TABLE>


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

(1)  Represents or includes bonuses paid or stock options granted as
     compensation for the year indicated, the payment or grant of which was made
     in the subsequent calendar year.

(2)  Includes company paid insurance premiums, aircraft usage ($55,439) and the
     company matching contribution under its 401(k) plan, payable in Winstar
     common stock.

(3)  Includes options to purchase shares of common stock granted pursuant to the
     terms of the executive's employment agreement entered into in such year.
     See "Employment Agreements."

(4)  Includes or represents options to purchase 15,000 shares of common stock
     granted annually to directors of Winstar under the 1992 Equity Plan. See
     "Stock Option Plans."

(5)  Granted in connection with the commencement of the named executive's
     employment with Winstar.

(6)  Mr. Dickson resigned as Executive Vice President and Chief Financial
     Officer of Winstar in October 1999.


                                       13


<PAGE>




     Except where indicated, Winstar cannot determine, without unreasonable
effort or expense, the specific amount of certain personal benefits afforded to
its employees, or the extent to which benefits are personal rather than
business. Winstar has concluded that the aggregate amounts of such personal
benefits which cannot be specifically or precisely ascertained do not in any
event exceed, as to each individual named in the preceding table, the lesser of
$50,000 or 10% of the compensation reported in the preceding table for such
individual, and that such information set forth in the preceding table is not
rendered materially misleading by virtue of the omission of the value of such
personal benefits.

             COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

General

     This report is made by our compensation committee (as used in this report,
the "Committee"). Mr. Rouhana resigned from the Committee during 1999 and the
Committee currently consists of four non-employee directors. The
responsibilities of the Committee include:

     o    reviewing and recommending to the board the policies relating to
          salaries, compensation and benefits of the executive officers and key
          employees of Winstar, and setting the salary, benefits and other
          compensation of the Chief Executive Officer;

     o    reviewing any related party transactions on an ongoing basis for
          potential conflicts of interest; and

     o    administering Winstar's stock option, stock purchase and other
          employee compensation plans.

Executive Compensation Policies and Objectives

     The Committee evaluates the compensation levels of senior management and
evaluates the various factors affecting compensation of Winstar's highest paid
officers. The Committee believes that compensation to Winstar's executive
officers should be designed to encourage and reward management's efforts to
establish and strengthen Winstar's business and to create added value for
stockholders. Such a compensation program helps to achieve Winstar's business
and financial objectives and also provides incentives needed to attract and
retain the highly qualified executives and other personnel needed for Winstar to
achieve its goal of rapidly developing and expanding its telecommunications and
other businesses and to successfully operate in a competitive marketplace. The
Committee also attributes a substantial portion of each executive officer's
compensation to Winstar's performance and the particular contribution made to
Winstar by such officer and his business unit.


                                       14


<PAGE>



     The Committee's executive compensation objectives are:

     o    to ensure competitive levels of compensation that enable Winstar to
          attract, retain and motivate executives of outstanding ability and
          character to lead Winstar successfully in its highly competitive
          industry characterized by rapid technological change, innovation and
          significant capital investment requirements;

     o    to tie a meaningful portion of compensation to the achievement of
          improved long term stockholder value and other business objectives;
          and

     o    to provide equity-based long term incentives that directly link the
          compensation of executives to appreciation in Winstar's common stock
          and align the financial interests of the executives with those of
          Winstar's stockholders.

     The Committee reviewed many operational and strategic factors in evaluating
Winstar's performance in 1999. Key factors considered were:

     o    achievement of performance targets fixed by the board, including its
          specific financial and operational targets such as revenue growth,
          EBITDA and capital expenditure goals in Winstar's core businesses.

     o    the quality of revenues generated, including the development of
          recurrent high-margin revenue streams through customer growth and
          network and product development.

     o    the continued development of Winstar's integrated broadband services
          business, including such critical elements as:

          o    the rapid expansion of Winstar's local broadband networks and the
               interconnection of those networks to further develop its national
               end-to-end broadband network, including the acquisition of
               indefeasible rights of use (IRUs) for intercity fiber,
               acquisition of substantial additional building access rights,
               acquisition of additional spectrum rights, the successful
               integration into Winstar's network of additional switches and
               other assets, including the integration of Winstar's voice and
               data networks increasing the value of the network, the deployment
               of point-to-multipoint service and the deployment of OC-3
               point-to-point service;

          o    the rapid growth and development of Winstar's data and Internet
               business, including the launch of Office.com, the sale of a 33
               1/3% interest in Office.com to CBS, the expansion of Winstar's
               web hosting business, the development of Winstar's business as an
               application service provider including Winstar's participation in
               Microsoft's Office Online pilot program and the provisioning of
               data services in Winstar's top 60 data markets;


                                       15


<PAGE>



          o    the continued growth of Winstar's international business,
               including the acquisition of key spectrum rights overseas, the
               consummation of International acquisitions and the commencement
               of service in Europe and in Japan;

          o    the further development of Winstar's network and management
               systems;

          o    the growth of Winstar's workforce from approximately 2,800 to
               3,900 employees in 1999; and

          o    the successful planning for Winstar's future growth through the
               consummation of several key financing arrangements, including a
               common stock offering and a preferred stock offering.

     The Committee believes that Winstar appropriately awarded its executive
officers for their short and long term efforts throughout 1999.

Executive Compensation Policy and Structure

     The compensation of each of Winstar's executive officers during the prior
year consisted of three principal parts - a base salary, an incentive bonus and
equity compensation, typically in the form of a stock option grant which vests
over a period of several years. As more fully described below, the bonus and
equity components are discretionary, meaning that the total compensation of
these executives depends upon several factors, including individual
contribution, attainment of individual and business unit performance objectives,
and company-wide performance; however, there is no specific weight given to each
criterion and Winstar is not obligated to provide equity incentives, bonuses or
increased cash compensation at any time. In addition, executive officers are
entitled to various benefits, including medical and other insurance coverage and
a 401(k) plan generally available to all employees of Winstar.

         Base Salary

     Base salaries are intended to compensate executives for their ongoing
leadership skills and management responsibility and depend upon factors such as
the executive's experience, capabilities and unique talents and strengths. The
Chief Executive Officer and the Chief Operating Officer have employment
agreements with Winstar under which their base salaries are set, subject to
periodic review and adjustment to reflect among other things, changes in the
duties and responsibilities of such officer, his contribution to Winstar's
achievements during the prior year and the salaries paid to executives
performing similar functions at companies of similar size and complexity to
Winstar. The salaries of each of Winstar's executive officers was increased in
1999 based upon the terms of their respective employment agreements and/or the
Committee's review of the factors relating to executive compensation levels
described elsewhere in this report. Base salaries of Winstar's other officers
are reviewed annually by Winstar's senior executive officers based on the same
policies and objectives applied by the Committee to senior management. The
Committee reviews, but does not approve, the decisions regarding the salaries of
such other officers.


                                       16


<PAGE>



     Bonus

     The incentive bonuses are dependent upon individual, business unit or
division, and overall company performance. For purposes of determining annual
bonuses, the Committee evaluates the achievement of goals set at the start of
the year and compares Winstar's performance in that year to the prior year. The
1999 bonus amounts awarded to Winstar's executives were based upon these
criteria. These accomplishments included the continued development and expansion
in 1999 of Winstar's voice and data businesses and its information services
business, including the identification and negotiation of key strategic
commercial, acquisition and financing transactions, each of which helped to
significantly accelerate Winstar's development and the growth of its network and
business.

     Stock Options and Restricted Stock Awards

     The third principal component of compensation arises from Winstar's grant
of stock options and restricted stock awards. The Committee believes that stock
options and restricted stock awards serve as important long-term incentives for
employees by encouraging their continued employment and commitment to Winstar's
performance. Accordingly, stock options and restricted stock awards become
exercisable over a period of years, based on continued employment with Winstar.
Stock options, once vested, generally remain exercisable for a period of up to
10 years after vesting. The Committee believes that stock options and restricted
stock awards are an excellent means to align the interests of Winstar's
employees with those of its stockholders.

     The number of stock options and restricted stock awards granted to
executive officers is determined by the Committee and generally is based upon
the same factors considered with respect to that officer's bonus, as described
above. In addition, the Committee strives to grant options at a level sufficient
to provide a strong incentive for executives to work for the long-term success
of the business.

     Stock option grants to other officers and employees are determined by
senior management pursuant to an option grant program approved by the Committee.
Under that program, employees are eligible for annual option grants, based once
again upon their individual performance and the performance of their business
unit and Winstar during the prior year, within a fixed range which varies
depending upon the aggregate number of options approved by the Committee and the
employee's level within the company.

     The Committee has reviewed the compensation of Winstar's executive officers
and has concluded that their compensation was reasonable in view of Winstar's
performance and the contribution of those officers to that performance.

Compensation of the Chief Executive Officer

     As stated above, Mr. Rouhana's base salary for 1999 was determined in
accordance with his employment agreement in effect for that year. His salary
increased from the 1998 level based on the Committee's review of his
performance, and that of Winstar, in 1999 and the level of compensation paid to
chief executives of similarly situated companies. As a portion of his 1999



                                       17


<PAGE>


compensation, the Committee awarded Mr. Rouhana an incentive bonus of $858,587.
This award consisted of a cash bonus of $805,500 (paid in 2000) and
reimbursement of $53,087 in taxes payable in connection with other benefits
provided to him. The latter amount resulted in Mr. Rouhana's bonus for 1999
exceeding 150% of his salary and was approved by the Committee. This award was
based on the Committee's evaluation of his performance and Winstar's
achievements in 1999, which included, among other things, that Winstar:

     o    secured significant additional funding by entering into an agreement
          for a $900 million private equity financing with Microsoft, Welsh,
          Carson, Anderson & Stowe and Credit Suisse First Boston Equity
          Partners;

     o    expanded the reach of its broadband network to 60 domestic and 10
          international markets and more than doubled its building access rights
          to more than 8,000 buildings;

     o    increased total revenue by 82.3%; while increasing overall gross
          margins to 29%;

     o    increased its online content, including the launch of Office.com,
          ranked the number one online business center by Cahner's In Stat as of
          November, 1999;

     o    accelerated the roll out of its broadband network by adding record
          number of hub sites, switches and lit fiber;

     o    positioned Winstar to strengthen its balance sheet though the
          refinancing of its debt and certain preferred equity; and

     o    experienced significant appreciation in enterprise value and common
          stock market price from the prior year.

     In January 1998, Winstar and Mr. Rouhana entered into a three year
employment agreement, the terms of which were approved by the Committee. See
"Employment Agreements" for a more detailed discussion of the terms of this
agreement. The employment agreement provides for a minimum annual base salary,
with annual increases as agreed upon by Winstar and Mr. Rouhana, a discretionary
annual cash bonus and a grant of stock options which vest over time and are
exercisable at prices at or substantially above the market price of Winstar's
stock on the date of the agreement. In making the decision regarding the grant
of stock options, the Committee also evaluated Mr. Rouhana's performance
relative to the guidelines described above, Winstar's achievements during the
term of his prior contract, equity awards to chief executives of comparable
companies, his critical leadership role in Winstar's future success and the
degree to which other companies have linked compensation of their chief
executives to stockholder returns. In addition, the Committee used subjective
criteria that it deemed relevant in its reasonable business discretion, such as
its opinions about the business environment and the particular challenges for
Winstar as well as the potential market for Mr. Rouhana's services. The
Committee believes that the compensation package is in line with industry and
market standards and appropriate in light of his past performance and Winstar's
aggressive plans for growth.


                                       18


<PAGE>



     Notwithstanding anything to the contrary set forth in any of our previous
filings under the Securities Act of 1933 or the Securities Exchange Act of 1934,
that might incorporate future filings made by us under those statutes, the
preceding report on executive compensation and our stock performance graph (set
forth below) will not be incorporated by reference into any of those prior
filings, nor will such report or graph be incorporated by reference into any
future filings made by us under those statutes.

                    The members of the compensation committee
                    -----------------------------------------

                           Steven B. Magyar, Chairman
                            William J. vanden Heuvel
                                  James I. Cash
                               Lawrence B. Sorrel





                                       19


<PAGE>



                              OPTION GRANTS IN 1999

     The following table sets forth certain information concerning individual
grants of stock options during 1999 to each of the named executive officers.

                                   Individual Grants

<TABLE>
                                                                                                  Potential Realizable
                                                                                                  Value At Assumed
                                                                                                  Annual Rates of Stock
                                                                                                  Price Appreciation
                                                                                                  for Option Term
                                                                                                  ----------------------
                               Number of        Percent of
                               Securities      Total Options
                               Underlying       Granted to       Exercise or
                                Options        Employees in       Base Price    Expiration
            Name              Granted (#)     Fiscal Year (%)        ($)           Date             5% ($)        10% ($)
- ------------------------    -------------     ---------------    -----------    ----------         --------       --------
<S>                                  <C>                 <C>       <C>            <C>  <C>          <C>            <C>
William J. Rouhana, Jr.
 Chairman of the board and           15,000              .1310     27.1667        1/13/09           256,274        649,450
 chief executive officer

Nathan Kantor
 President and chief                 15,000              .1310     27.1667        1/13/09           256,274        649,450
 operating officer

Timothy R. Graham                    15,000              .1310     27.1667        1/13/09           256,274        649,450
 Executive vice president,          120,000             1.0477     28.0000          (2)             606,688      1,883,827
 general counsel and                150,000             1.3097     41.3330          (3)           2,108,591      4,783,674
 secretary(5)                       -------             ------                                    ---------      ---------
                                    285,000             2.4884                                    2,971,554      7,316,952

Richard J. Uhl                       75,000              .6548     28.0000          (2)             379,180      1,177,392
 Group executive and chief          225,000             1.9645     41.3333          (3)           3,162,886      7,175,511
 financial officer(5)               337,500             2.9467     24.6667          (4)           2,300,047      5,082,502
                                    -------             ------                                    ---------      ---------
                                    637,500             5.5661                                    5,842,114     13,435,406

Charles T. Dickson
 Former executive vice                  -0-                -0-       N/A            N/A                 N/A            N/A
 president and chief
 financial officer (1)
</TABLE>


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

(1)  Mr. Dickson resigned as executive vice president and chief financial
     officer of Winstar in October 1999.

(2)  These options vest in equal annual installments over five years and expire
     five years after vesting.

(3)  These options vest in varying installments over ten years and expire five
     years after vesting.

(4)  These options vest in equal annual installments over three years and expire
     five years after vesting.

(5)  The grants reflected in this table do not include grants of 3,000 shares of
     common stock and 1,800 shares of common stock, respectively, to Messrs. Uhl
     and Graham made under our 1995 plan in October 1999. They also do not
     reflect a grant of 7,200 shares of restricted common stock to Mr. Graham
     made under our 1995 plan in December 1999, which shares vest in equal
     annual installments of 1,800 shares on each of the first through fourth
     anniversaries of the date of grant.


                                       20


<PAGE>



                     AGGREGATED OPTION EXERCISES IN 1999 AND
                          FISCAL YEAR-END OPTION VALUES

     The following table sets forth certain information concerning exercises of
stock options during 1999 by each of the named executive officers and the fiscal
year-end value of unexercised options held by such persons.

<TABLE>
                                    Shares        Value          Number of Securities          Value of Unexercised
                                   Acquired     Realized        Underlying Unexercised        In-The-Money Options at
                                      on         ($'s in              Options At                Fiscal Year-End (1)
             Name                  Exercise    thousands)        Fiscal Year-End (#)            ($'s in thousands)
                                     (#)
- -------------------------------  ------------ ------------- ------------------------------ -----------------------------
                                                              Exercisable    Unexercisable    Exercisable   Unexercisable
<S>                              <C>            <C>             <C>          <C>              <C>
William J. Rouhana, Jr.
 Chairman of the board and                --             --       2,070,000         525,000         74,631          12,081
 chief executive officer

Nathan Kantor
 President and chief                  450,000         9,042       1,727,674         280,374         63,849           6,246
 operating officer

Timothy R. Graham
 Executive vice president,                 --            --         120,300         293,700          4,709           4,611
 general counsel and secretary

Richard J. Uhl
 Group executive and chief             45,000         1,124          90,000         840,000          3,203          18,665
 financial officer

Charles T. Dickson                     75,000           975          75,300             -0-         2,829               -0-
 Former executive vice
 president and chief financial
 officer (2)
</TABLE>


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

(1)  Represents the difference between the aggregate market value at December
     30, 1999 of the common stock underlying the options, based on a last sale
     price of $48.9167 on that date, and the options' aggregate exercise prices.

(2)  Mr. Dickson resigned as executive vice president and chief financial
     officer of Winstar in October 1999.


                                PERFORMANCE GRAPH

     The following graph and table compare the five-year stockholder returns
(from January 1995 through December 1999) of an investment in: (i) the common
stock of Winstar, (ii) the Nasdaq Telecommunications Index and (iii) the Nasdaq
Stock Market - US Index. The comparison assumes that $100 was invested on
December 31, 1994 in Winstar's common stock and in each of the comparison groups
and assumes reinvestment of dividends (though Winstar paid no dividends on its
common stock during such period).


                                       21


<PAGE>

<TABLE>
                                            1994           1995         1996         1997       1998           1999
                                         --------        --------     --------     --------   --------      ---------
<S>                                      <C>              <C>         <C>          <C>        <C>           <C>
WCII                                     100.0000         189.8701    232.7273     276.3636   432.2078      834.0260

Nasdaq Stock Market Index - US Index     100.0000         141.3350    173.8981     213.0671   300.4315      555.9882

Nasdaq Telecommunications Index          100.0000         130.9130    133.8602     195.4000   323.5145      572.4319
</TABLE>

Employment Agreements

     In January 1998, Mr. Rouhana and Winstar entered into a three-year
employment agreement, effective March 1, 1998, pursuant to which Mr. Rouhana
continues to serve as Winstar's chairman of the board and chief executive
officer. The employment agreement provides for a minimum annual base salary of
$537,500, with annual increases as agreed upon by Winstar and Mr. Rouhana. The
employment agreement also provides that Mr. Rouhana is eligible for an annual
cash bonus, payable at the discretion of the board, not to exceed 150% of his
base salary then in effect. At the time of execution of this employment
agreement, Mr. Rouhana was granted: (i) immediately exercisable options to
purchase 450,000 shares of common stock for $17.33 per share, the closing sale
price of the common stock on the day immediately preceding the agreement date;
(ii) options to purchase 450,000 shares of common stock which vested on January
6, 1999, of which 150,000 are exercisable at a price of $17.33 per share and
300,000 are exercisable at a price of $26 per share; and (iii) options to
purchase 450,000 shares of common stock which vested on January 6, 2000, of
which 150,000 are exercisable at a price of $17.33 per share and 300,000 are
exercisable at a price of $34.67 per share.

     In September 1998, Mr. Kantor entered into a three-year employment
agreement with Winstar. The employment agreement provides for a minimum annual
base salary of $518,350, with annual increases as agreed upon by Winstar and Mr.
Kantor. The employment agreement also provides that Mr. Kantor is eligible for



                                       22


<PAGE>


an annual cash bonus, payable at the discretion of the chief executive officer
and the board, not to exceed 125% of his base salary then in effect. At the time
of execution of this employment agreement, Mr. Kantor was granted: (i)
immediately exercisable options to purchase 250,000 shares of common stock for
$17.33 per share, which is greater than the $14.33 closing sale price of the
common stock on the business day immediately preceding the agreement date; (ii)
options to purchase 250,376 shares of common stock which vested on September 6,
1999, of which 83,709 are exercisable at a price of $17.33 per share and 166,667
are exercisable at a price of $26 per share; and (iii) options to purchase
166,667 shares of common stock which vest on September 6, 2000, of which 83,709
are exercisable at a price of $17.33 per share and 166,665 are exercisable at a
price of $34.67 per share.

     In April 1997, Winstar entered into Executive Severance Agreements (each a
"Severance Agreement") with each of the named executive officers and certain
other senior officers of Winstar and its subsidiaries. The Severance Agreement
generally provides that, if during the two years following a Change of Control
or potential Change of Control of Winstar (each as defined in the Severance
Agreement), either (A) the covered executive's employment is terminated by
Winstar (other than due to the executive's death or Disability or for Cause, as
defined in the Severance Agreement) or (B) the covered executive terminates his
or her employment with Winstar for Good Reason (as defined in the Severance
Agreement), then such executive will be entitled to receive certain severance
benefits, including a cash severance payment equal to one and one-half times the
aggregate of (i) such executive's annual base salary then in effect plus (ii)
such executive's average full-year bonus over the prior two years. Additional
benefits to which a covered executive would be entitled include continued
medical and other insurance benefits for one and one-half years following
termination and career outplacement services.

     As defined in the Severance Agreement, "Change of Control of Winstar"
generally means that a third party has acquired 35% or more of Winstar's voting
stock (whether through a stock purchase, exchange, tender offer or merger) or
substantially all of Winstar's assets. A "potential Change of Control" of
Winstar would occur if: (w) an agreement is entered into, the consummation of
which would result in a Change of Control; (x) a third party makes a public
announcement of an intention to take action that, if consummated, would result
in a Change of Control of Winstar; (y) Winstar's Stockholder Rights Plan is
triggered; or (z) the board makes a good faith determination that a potential
Change of Control has occurred. The Severance Agreement has an initial term of
three years and renews automatically for successive one-year terms unless
Winstar notifies the covered executive within six months prior to the end of the
then current term that the Severance Agreement will terminate at the end of such
term.

Certain Relationships and Related Transactions

     Winstar leases office space located in Westport, Connecticut from KKJ
Properties, LLC, an entity controlled by Nathan Kantor, president and chief
operating officer of Winstar. This is a month-to-month lease under which Winstar
pays monthly rent of $6,600, which Winstar believes to be a fair market rate.

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<PAGE>



Equity Compensation Plans

     Winstar maintains the 1992 plan, under which a total of 3.0 million shares
of common stock were made available for grants to Winstar's key employees,
officers, directors and consultants. Awards consist of stock options (both
non-qualified options and options intended to qualify as "Incentive" stock
options under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code")), restricted stock awards, deferred stock awards, stock appreciation
rights and other stock-based awards, as described in the 1992 plan. On January
13th of each calendar year during the term of the 1992 plan, assuming there are
enough shares then available for grant under the 1992 plan, each person who is
then a director of Winstar is awarded a stock option to purchase 15,000 shares
of Winstar's common stock at the fair market value thereof (as determined in the
accordance with the 1992 plan), all of which options are immediately exercisable
as of the date of grant and have a term of ten years. These are the only awards
which may be granted to a director of Winstar under the 1992 plan. As of May 12,
2000, options to purchase 732,699 shares of common stock were outstanding under
the 1992 plan and there were 412,076 shares available for future grant under the
1992 plan.

     Winstar also maintains the 1995 plan, under which a total of 22.5 million
shares of common stock were made available for grants to Winstar's key
employees, officers, directors and consultants. Awards may consist of stock
options (both non-qualified options and options intended to qualify as
"Incentive" stock options under Section 422 of the Code), restricted stock
awards, deferred stock awards, stock appreciation rights and other stock-based
awards, as described in the 1995 plan. As of May 12, 2000, options to purchase
18,384,256 shares of common stock were outstanding under the 1995 plan and there
were 572,382 shares available for future grant under the 1995 plan.

     In March 2000, our board of directors approved the 2000 performance equity
plan, under which a total of 10.0 million shares of common stock will be made
available for grants to Winstar's key employees, officers, directors and
consultants, upon stockholder approval as contemplated by Proposal IV below.
Awards may consist of stock options (both non-qualified options and options
intended to qualify as "Incentive" stock options under Section 422 of the Code),
restricted stock awards, deferred stock awards, stock appreciation rights and
other stock-based awards, as described in the 2000 plan. There are currently no
options outstanding under the 2000 plan.

    We also maintain a qualified employee stock purchase plan which covers 1.125
million shares of common stock. Under this stock purchase plan, as currently
administered by the board, employees other than senior management may use a
portion of their salary to acquire shares of common stock on a monthly basis at
a 15% discount to the market price of common stock at the date of purchase. As
of May 12, 2000, a total of 543,801 shares of common stock have been issued and
581,199 shares remain available for issuance under this stock purchase plan.

     Winstar maintains a 401(k) employee savings plan under which employees of
Winstar and its subsidiaries may make voluntary contributions through payroll
deductions. Winstar makes matching contributions, credited as of the date of a
payroll deduction, equal to 25% of the first 6% of compensation contributed by
an employee. Winstar's matching contribution is made by the issuance of common
stock to such plan for the accounts of participating employees.

                                       24


<PAGE>



     Each of the 1992, 1995 and 2000 plans is administered by the compensation
committee, which determines the persons to whom awards will be granted, the
number of awards to be granted and the specific terms of each grant, including
the vesting thereof, subject to the provisions of those plans. The stock
purchase plan is also administered by the compensation committee which defines,
prescribes, amends and rescinds rules, regulations, procedures, terms and
conditions relating to the plan, including the fixing of purchase price
discounts and option periods in effect from time to time, and interprets,
administers and construes the plan and makes all other determinations necessary
or advisable for the administration of the plan.

Compensation Committee Interlocks and Insider Participation

     The compensation committee is composed of Mr. Magyar, Mr. vanden Heuvel,
Professor Cash and Mr. Sorrel. No executive officer of Winstar sits on the
compensation committee of another entity, one of whose executive officers serves
as a director of Winstar or on Winstar's board, nor does any executive officer
of Winstar serve as a director of another entity, one of whose executive
officers serves on Winstar's board.

  Proposal II: Approval of an amendment to our certificate of incorporation to
               increase the number of authorized shares of common stock

     Our certificate of incorporation currently authorizes the issuance by us of
up to 215.0 million shares of capital stock, consisting of 200.0 million shares
of common stock and 15.0 million shares of preferred stock, the rights, powers
and preferences of which may be fixed by the board. In March 2000, the board
approved an amendment to the certificate of incorporation, pursuant to which,
subject to approval by our stockholders at the meeting, the number of shares of
common stock authorized for issuance by us thereunder will be increased.

     As of May 12, 2000, we had issued and outstanding approximately 89,293,861
shares of common stock. In addition, as of May 12, 2000, we had issued and
outstanding securities, including options, warrants and convertible preferred
stock exercisable into an aggregate of approximately 70,000,000 shares of common
stock. We may also issue common stock in payment of the all or a portion of the
purchase price in pending and future acquisitions of assets or businesses by us
(each an "Acquisition").

     Accordingly, the board believes that the increase in our authorized shares
of common stock is necessary in order to ensure the availability of a sufficient
number of shares of common stock:

     o    to allow for future stock splits and stock dividends payable in shares
          of common stock;

     o    for issuance upon the exercise or conversion of the options, warrants
          and convertible securities issued or granted by us including to
          employees and others under the 1992, 1995 and 2000 plans and/or other
          possible future plans; and

     o    to provide us with the ability to raise additional capital through the
          future sale of common stock and/or securities exercisable for or
          convertible into common stock.


                                       25


<PAGE>



     o    to pay all or a portion of the purchase price in pending and future
          acquisitions;

     The board believes that Winstar's inability to issue additional common
stock under the above circumstances could materially adversely affect us in the
future by limiting our ability to raise capital if needed and/or requiring us
to make cash payments, in lieu of payments in common stock under circumstances
where it would otherwise be advantageous to make such payments in common stock.

           The Board of Directors recommends voting "FOR" Proposal II.

   Proposal III: Approval of an amendment to our certificate of incorporation
         to increase the number of authorized shares of preferred stock


    Currently, our certificate of incorporation allows our board to authorize
the creation and issuance of such preferred stock in one or more series with
such rights, limitations and restrictions as may be determined in the board's
sole discretion, without the expense and delay of a special shareholders'
meeting, except as may be required by our by-laws, applicable law or stock
market or exchange requirements. In March 2000, our board approved an amendment
to our certificate of incorporation to increase the number of such shares of
authorized preferred stock from 15.0 million to 30.0 million. The board of
directors believes that the increase in the number of our authorized shares of
preferred stock is in the best interests of Winstar and its stockholders.
Although it has no present plans or commitments to issue any additional shares
of preferred stock, the board believes that the availability of such additional
securities will improve the flexibility Winstar has in addressing its future
financing requirements. Similar to the provision for the increase in the
authorized number of shares of common stock, the flexibility vested in the board
by an increase in the authorized preferred stock would also enhance Winstar's
ability to consider and, if in the best interests of the stockholders, take
advantage of acquisition opportunities.

     The authorization of additional shares of preferred stock will not, by
itself, have any effect on the rights of the holders of shares of common stock.
Nonetheless, the issuance of one or more series of preferred stock could,
depending upon the board's determination of the rights and preferences of the
series of preferred stock, (i) restrict the payment of dividends to holders of
shares of common stock; (ii) dilute voting power of the holders of common stock
to the extent that the holders of shares of preferred stock are given voting
rights; (iii) dilute the equity interests and voting power of the holders of
common stock if the preferred stock is convertible into common stock; and (iv)
restrict the distribution of assets to the holders of the common stock upon
liquidation or dissolution and until the satisfaction of any liquidation
preference granted to the holders of preferred stock.

           The board of directors recommends voting "FOR" Proposal III




                                       26


<PAGE>




                                  Proposal IV:

                  Approval of the 2000 performance equity plan

     In March 2000, our  board adopted the 2000 plan,  subject to  stockholder
approval at the annual meeting. Winstar is a very rapidly growing company that
operates in an intensely competitive industry. A particularly competitive area
of Winstar's business is attracting and retaining talented employees (including
executives, engineers, sales and support personnel and others), many of whom are
regularly solicited by other companies offering attractive cash and equity
compensation packages. To date, Winstar has been very successful in competing
for this talent pool and has amassed an outstanding group of employees. In 1999,
Winstar expanded its workforce from approximately 2,800 to over 3,900 employees.
It has been Winstar's policy to compensate employees with stock options in order
to incentivize them and align their interests with those of the stockholders.
During 1999, Winstar granted a total of 11,427,237 options to employees, with
the average option grant being for 3,206 shares.

     We anticipate significant additional growth in the next several years, with
our total  workforce  reaching  over 5,500 by the end of 2000.  It has been this
growth,  and  Winstar's  ability  to  attract  and  retain  talented,  dedicated
employees,  that has fueled the rapid expansion of our business and the creation
of substantial stockholder value in recent years.

     It is imperative that Winstar continue to attract and retain the quality
and quantity of employees that it has in the past in order to continue its
growth and effect its business plan. If unable to do this, Winstar will be at a
significant competitive disadvantage in the marketplace and stockholder value
could be adversely impacted. There are only approximately 980,000 shares still
available for grant under the 1992 and 1995 plans. The ability to continue to
compensate employees with equity-based grants such as stock options is key to
competing for talent. For these reasons, we are requesting that the stockholders
approve the 2000 plan.

           The board of directors recommends voting "FOR" Proposal IV.

Summary of the 2000 plan

         Administration

     The 2000 plan is  administered by the  compensation  committee of the board
(as used in this summary,  the  "Committee").  The Committee has full authority,
subject to the  provisions  of the 2000 plan, to award (i) Stock  Options,  (ii)
Stock  Appreciation  Rights,  (iii) Restricted  Stock,  (iv) Deferred Stock, (v)
Stock  Reload  Options  and/or  (vi)  Other  Stock-Based  Awards  (collectively,
"Awards"). Subject to the provisions of the 2000 plan, the Committee determines,
among other things,  the persons to whom from time to time Awards may be granted
("Holders"),  the specific type of Awards to be granted  (e.g.,  Stock  Options,
Restricted Stock), the number of shares subject to each Award, share prices, any
restrictions or limitations on such Awards (e.g.,  the "Deferral  Period" in the
grant of Deferred Stock and the  "Restriction  Period" when Restricted  Stock is
subject  to  forfeiture),  and  any  vesting,  exchange,  deferral,   surrender,
cancellation,  acceleration,  termination,  exercise  or  forfeiture  provisions
related to such Awards.


                                       27


<PAGE>



         Stock Subject to the 2000 Plan

     The 2000 plan  authorizes the granting of Awards whose exercise would allow
up to an  aggregate of  10,000,000  shares of common stock to be acquired by the
Holders of such Awards.  In order to prevent the dilution or  enlargement of the
rights of  Holders  under the 2000 plan,  the  number of shares of common  stock
authorized  by the 2000 plan is subject to  adjustment by the board in the event
of any  dividend on shares of common  stock  payable in shares of common  stock,
common stock split, reverse common stock split or other extraordinary or unusual
event which  results in a change in the shares of common  stock as a whole.  The
board, in the event of any of the foregoing,  will make equitable adjustments in
the terms of any awards and the aggregate number of shares reserved for issuance
under the 2000 plan.

     If any Award granted  under the 2000 plan is forfeited or terminated  prior
to  exercise,  the shares of common stock that were  available  pursuant to such
Award  shall again be  available  for  distribution  in  connection  with Awards
subsequently granted under the 2000 plan. If a Holder pays the exercise price of
a Stock Option by  surrendering  any previously  owned shares and/or arranges to
have the appropriate  number of shares otherwise issuable upon exercise withheld
to  cover  the  withholding  tax  liability  associated  with the  Stock  Option
exercise,  then the  number  of  shares  available  under  the 2000 plan will be
increased by the lesser of (i) the number of such surrendered  shares and shares
used to pay  taxes;  and (ii) the  number of shares  purchased  under such Stock
Option.

         Eligibility

     Subject  to the  provisions  of the 2000  plan,  Awards  may be  granted to
employees,  officers,  directors and consultants who are deemed to have rendered
or to be able to render  significant  services  to Winstar and who are deemed to
have  contributed  or to have the potential to contribute to Winstar's  success.
Incentive Stock Options, as hereinafter  defined, may be awarded only to persons
who,  at the  time of grant of such  awards,  are,  or have  agreed  to  become,
employees of Winstar or its wholly- or majority-owned subsidiaries.

     There are limits on the number of shares of common stock underlying  Awards
to be granted under the 2000 plan to any one participant in any calendar year.

         Types of Awards

     Options.  The  2000  plan  provides  both  for  "Incentive"  stock  options
("Incentive  Stock  Options") as defined in Section 422 of the Internal  Revenue
Code of 1986,  as amended  (the  "Code"),  and for  options  not  qualifying  as
Incentive Options ("Non-Qualified Stock Options"),  both of which may be granted
with any other stock-based  award under the 2000 plan. The Committee  determines
the exercise price per share of common stock  purchasable  under an Incentive or
Non-Qualified Stock Option (collectively,  "Stock Options").  The exercise price
of Stock  Options may not be less than 100% of the fair market  value on the day
of the  grant  (or,  if  greater,  the par  value of a share of  common  stock).
However, (i) the exercise price of an Incentive Stock Option granted to a person
possessing  more than 10% of the total  combined  voting power of all classes of
Winstar stock may not be less than 110% of such fair market value on the date of
grant and (ii) if the Stock Option is


                                       28


<PAGE>



granted in connection with the recipient's  hiring,  promotion or similar event,
the  exercise  price may not be less than the fair  market  value of the  common
stock on the date on which the recipient is hired or promoted (or similar event)
if the grant of the Stock Option  occurs not more than 90 days after the date of
such hiring, promotion or other event. In the case of an Incentive Stock Option,
the aggregate  fair market value (on the date of grant of the Stock Option) with
respect to which Incentive  Stock Options become  exercisable for the first time
by a Holder  during any calendar  year shall not exceed  $100,000.  An Incentive
Stock Option may only be granted within a ten-year period from the date the 2000
plan is adopted and approved and may only be exercised within ten years from the
date of the grant (or within five years in the case of an Incentive Stock Option
granted to a person who, at the time of the grant,  owns common stock possessing
more than 10% of the total  combined  voting  power of all  classes  of  Winstar
stock). Subject to any limitations or conditions the Committee may impose, Stock
Options may be  exercised,  in whole or in part,  at any time during the term of
the Stock Option by giving written notice of exercise to Winstar  specifying the
number  of  shares  of  common  stock  to be  purchased.  Such  notice  must  be
accompanied  by payment  in full of the  purchase  price,  either in cash or, if
provided in the agreement, in securities of Winstar or in combination thereof.

     Generally, Stock Options granted under the 2000 plan may not be transferred
other  than by will or by the  laws of  descent  and  distribution.  However,  a
Holder,  with the approval of the Committee,  may transfer a Non-Qualified Stock
Option by gift to a family member of the Holder, by domestic  relations order to
a family  member of the  Holder or by  transfer  to an entity in which more than
fifty percent of the voting  interests are owned by family members of the Holder
or the Holder, in exchange for an interest in that entity.

     Generally,  if the Holder is an employee,  no Stock Options, or any portion
thereof, granted under the 2000 plan may be exercised by the Holder unless he or
she is employed by Winstar or a  subsidiary  at the time of the exercise and has
been so employed  continuously  from the time the Stock  Options  were  granted.
However,  in the event the Holder's employment with Winstar is terminated due to
disability,  the Holder may still exercise his or her Stock Options for a period
of 24 months  (or such  other  greater  or lesser  period as the  Committee  may
specify  at the time of grant)  from the date of such  termination  or until the
expiration of the stated term of the Stock Option,  whichever period is shorter.
Similarly,  should  a  Holder  die  while  in the  employment  of  Winstar  or a
subsidiary, his or her legal representative or legatee under his or her will may
exercise the decedent  Holder's Stock Options for a period of 18 months from the
date of his or her  death  (or  such  other  greater  or  lesser  period  as the
Committee  specifies at the time of grant) or until the expiration of the stated
term  of the  Stock  Option,  whichever  period  is  shorter.  If  the  Holder's
employment with Winstar is terminated due to normal retirement (upon such age as
designated by the Committee,  and if no age is  designated,  then upon attaining
the age of 62), the Holder may still  exercise  his or her vested Stock  Options
for a period  of 18  months  (or such  other  greater  or  lesser  period as the
Committee may specify at the time of grant) from the date of such termination or
until the expiration of the stated term of the Stock Option, whichever period is
shorter.  If the Holder's  employment  is  terminated  for any reason other than
death,  disability or normal  retirement,  the Stock Option shall  automatically
terminate,  except that if the  Holder's  employment  is  terminated  by Winstar
without  cause or if the Holder  voluntarily  terminates  his or her  employment
without breaching any employment agreement between Winstar or any subsidiary and
the Holder, then the portion of any Stock Option that has


                                       29


<PAGE>



vested  on the date of  termination  may be  exercised  for the  lesser of three
months  after  termination  or the balance of the Stock  Option's  term,  unless
otherwise determined by the Committee.

     Stock Appreciation Rights. The Committee may grant Stock Appreciation
Rights ("SARs" or singularly "SAR") to participants who have been, or are being,
granted Stock Options under the 2000 plan as a means of allowing such
participants to exercise their Stock Options without the need to pay the
exercise price in cash. In conjunction with Non-Qualified Stock Options, SARs
may be granted either at or after the time of the grant of such Non-Qualified
Stock Options. In conjunction with Incentive Stock Options, SARs may be granted
only at the time of the grant of such Incentive Stock Options. A SAR entitles
the Holder to receive a number of shares of common stock having a fair market
value equal to the excess fair market value of one share of common stock over
the exercise price of the related Stock Option, multiplied by the number of
shares subject to the SAR. The granting of a SAR will not affect the number of
shares of common stock available for awards under the 2000 plan. The number of
shares available for awards under the 2000 plan will, however, be reduced by the
number of shares of common stock acquirable upon exercise of the Stock Option to
which the SAR relates.

     Restricted  Stock.  The  Committee  may award  shares of  restricted  stock
("Restricted  Stock")  either alone or in addition to other Awards granted under
the 2000 plan. The Committee determines the persons to whom grants of Restricted
Stock are made,  the  number of shares to be  awarded,  the price (if any) to be
paid for the Restricted  Stock by the person  receiving such stock from Winstar,
the time or times  within  which  awards of  Restricted  Stock may be subject to
forfeiture  (the  "Restriction  Period"),  the  vesting  schedule  and rights to
acceleration thereof, and all other terms and conditions of the Restricted Stock
awards.

     Restricted  Stock awarded  under the 2000 plan may not be sold,  exchanged,
assigned,  transferred,  pledged, encumbered or otherwise disposed of other than
to Winstar during the  applicable  Restriction  Period.  Other than regular cash
dividends  and  other  cash  equivalent   distributions  as  the  Committee  may
designate,  pay or distribute,  Winstar will retain custody of all distributions
("Retained Distributions") made or declared with respect to the Restricted Stock
during  the  Restriction  Period.  A breach  of any  restriction  regarding  the
Restricted  Stock  will  cause a  forfeiture  of such  Restricted  Stock and any
Retained   Distributions   with  respect  thereto.   Except  for  the  foregoing
restrictions,  the Holder will, even during the Restriction  Period, have all of
the  rights of a  stockholder,  including  the right to  receive  and retain all
regular cash dividends and other cash equivalent  distributions as the Committee
may designate,  pay or distribute on such Restricted Stock and the right to vote
such shares.

     In order to enforce the foregoing restrictions, the 2000 plan requires that
all shares of  Restricted  Stock  awarded to the Holder  remain in the  physical
custody of Winstar until the restrictions on such shares have terminated and all
vesting requirements with respect to the Restricted Stock have been fulfilled.

     Deferred Stock. The Committee may award shares of deferred stock ("Deferred
Stock") either alone or in addition to other Awards granted under the 2000 plan.
The Committee  determines the eligible persons to whom, and the time or times at
which, Deferred Stock will be awarded, the number of shares of Deferred Stock to
be awarded to any person, the duration of the period (the


                                       30


<PAGE>



"Deferral Period") during which, and the conditions under which,  receipt of the
stock will be deferred,  and all the other terms and conditions of such Deferred
Stock Awards.

     Deferred  Stock  awards  granted  under  the  2000  plan  may not be  sold,
exchanged, assigned,  transferred,  pledged, encumbered or otherwise disposed of
other than to Winstar during the applicable  Deferral  Period.  The Holder shall
not have any rights of a  stockholder  until the  expiration  of the  applicable
Deferral Period and the issuance and delivery of the  certificates  representing
such  common  stock.  The Holder may  request to defer the receipt of a Deferred
Stock award for an additional  specified period or until a specified event. Such
request must  generally be made at least one year prior to the expiration of the
Deferral Period for such Deferred Stock award.

     Stock Reload  Options.  The Committee  may grant Stock Reload  Options to a
Holder who tenders  shares of common stock to pay the exercise  price of a Stock
Option  ("Underlying  Option")  and/or arranges to have a portion of the shares
otherwise  issuable upon  exercise  withheld to pay the  applicable  withholding
taxes.  A Stock Reload  Option  permits a Holder who exercises a Stock Option by
delivering stock owned by the Holder for a minimum of six months to receive back
from  Winstar a new Stock  Option  (at the  current  market  price) for the same
number of shares delivered to exercise the Option. The Committee  determines the
terms, conditions, restrictions and limitations of the Stock Reload Options. The
exercise  price of Stock Reload Options shall be the fair market value as of the
date of exercise  of the  Underlying  Option.  Unless the  Committee  determines
otherwise,  a Stock Reload Option may be exercised  commencing one year after it
is granted and expires on the expiration date of the Underlying Option.

     Other Stock-Based Awards. The Committee may grant Other Stock-Based Awards,
subject to limitations under applicable law, that are denominated or payable in,
valued in whole or in part by reference  to, or  otherwise  based on, or related
to, shares of common stock, as deemed by the Committee to be consistent with the
purposes of the 2000 plan,  including  purchase  rights,  shares of common stock
awarded which are not subject to any restrictions or conditions,  convertible or
exchangeable  debentures or other rights convertible into shares of common stock
and awards valued by reference to the value of securities of or the  performance
of specified subsidiaries.  Subject to the terms of the 2000 plan, the Committee
has complete  discretion  to determine  the terms and  conditions  applicable to
Other Stock-Based  Awards.  Other Stock-Based Awards may be awarded either alone
or in addition to or in tandem with any other  awards under the 2000 plan or any
other plan of Winstar.

         Competition   with  Winstar;   Solicitation  of  Customers  and
Employees; Disclosure of Confidential Information

     If a Holder's employment with Winstar or a subsidiary is terminated for any
reason  whatsoever,  and  within 12 months  after the date of  termination  such
Holder  either (i)  accepts  employment  with any  competitor  of, or  otherwise
engages in competition with,  Winstar,  (ii) solicits any customers or employees
of Winstar to do business with or render  services to the Holder or any business
with which the Holder becomes affiliated or to which the Holder renders services
or  (iii)  discloses  to  anyone  outside  Winstar  or  uses  any   confidential
information  or material of Winstar in violation  of  Winstar's  policies or any
agreement between the Holder and Winstar, the Committee, in its sole discretion,
may require such Holder to return to Winstar the economic value of any Award


                                       31


<PAGE>



that was  realized  or  obtained  by such  Holder at any time  during the period
beginning  on that  date  that is 12  months  prior  to the date  such  Holder's
employment with Winstar is terminated.

         Withholding Taxes

     Upon the exercise of any Award granted under the 2000 plan,  the Holder may
be required  to remit to Winstar an amount  sufficient  to satisfy all  federal,
state  and  local  withholding  tax  requirements   prior  to  delivery  of  any
certificate  or  certificates  for  shares of common  stock.  Subject to certain
stringent  limitations under the 2000 plan and at the discretion of Winstar, the
Holder may satisfy  these  requirements  by electing to have Winstar  withhold a
portion of the shares to be received  upon the  exercise  of the Award  having a
value equal to the amount of the withholding tax due under  applicable  federal,
state and local laws.

         Agreements

     Stock options,  restricted  stock,  deferred  stock,  stock reload options,
other stock-based  awards and SARs granted under the 2000 plan will be evidenced
by  agreements  consistent  with the 2000  plan in such  form  and  having  such
additional  terms (not  contrary  to the  requirements  of the 2000 plan) as the
Committee may prescribe.  Neither the 2000 plan nor agreements thereunder confer
any right to continued employment upon any holder of a stock option,  restricted
stock, deferred stock, stock reload options, other stock-based award or SAR.

         Term and Amendments

     Unless  terminated  by the board,  the 2000 plan shall  continue  to remain
effective  until  such time as no further  Awards may be granted  and all Awards
granted  under  the 2000  plan are no longer  outstanding.  Notwithstanding  the
foregoing,  grants  of  incentive  stock  options  may be made only  during  the
ten-year period  following the date the 2000 plan becomes  effective.  The board
may at any time,  and from time to time,  amend the 2000 plan,  provided that no
amendment  will be made that  would  impair  the  rights  of a holder  under any
agreement entered into pursuant to the 2000 plan without the holder's consent.

         Change in Control

     The 2000 plan contains  certain  change in control  provisions  which could
cause  Stock  Options and other  Awards to become  immediately  exercisable  and
restrictions and deferral limitations applicable to other awards to lapse in the
event:

     o    any  "person" as such term is used in Sections  13(d) and 14(d) of the
          Exchange  Act,  including a "group" as defined in Section  13(d),  but
          excluding  certain   stockholders  of  Winstar,   acquires  beneficial
          ownership  of common  stock of Winstar  having 35% (and 25% in certain
          cases)  or  more  of the  total  voting  power  of  all  of  Winstar's
          outstanding voting capital stock;

     o    of a merger or consolidation  of Winstar,  other than one resulting in
          Winstar's  voting  securities  outstanding  immediately  prior thereto
          continuing to represent at least 50%


                                       32


<PAGE>



          of the combined  voting power of the voting  securities of Winstar or
          the surviving entity outstanding immediately  after such  merger  or
          consolidation;

     o    of a sale  of all or  substantially  all of  Winstar's  assets  or the
          approval of a plan of liquidation of Winstar; or

     o    members of the board on the effective  date of the 2000 plan (together
          with any directors  elected after the effective date whose election by
          the board or whose  nomination  for  election by the  stockholders  of
          Winstar was approved by a vote of a majority of the directors  then in
          office who were either  directors  on the  effective  date of the 2000
          plan or whose  election or nomination  for election was  previously so
          approved)  cease for any  reason  other than  death or  disability  to
          constitute a majority of the board of directors then in office.

Federal Income Tax Consequences

     The  following  discussion  of  the  federal  income  tax  consequences  of
participation in the 2000 plan is only a summary of the general rules applicable
to the grant and  exercise of Stock  Options and other  Awards and does not give
specific  details or cover,  among other  things,  state,  local and foreign tax
treatment of participation  in the 2000 plan. The information  contained in this
section  is based on present  law and  regulations,  which are  subject to being
changed prospectively or retroactively.

         Incentive Stock Options

     The Holder will  recognize no taxable income upon the grant of an Incentive
Stock Option. The Holder will realize no taxable income when the Incentive Stock
Option is  exercised  if the  Holder  has been an  employee  of  Winstar  or its
subsidiaries  at all times from the date of the grant until three months  before
the date of  exercise  (one year if the Holder is  disabled).  Winstar  will not
qualify for any deduction in connection  with the grant or exercise of Incentive
Stock  Options.  Upon a  disposition  of the shares after the later of two years
from the date of grant or one year  after  the  transfer  of the  shares  to the
Holder,  the Holder will recognize the  difference,  if any,  between the amount
realized and the exercise price as long-term  capital gain or long-term  capital
loss (as the case may be) if the shares are capital assets.  The excess, if any,
of the fair market  value of the shares on the date of exercise of an  Incentive
Stock  Option over the exercise  price will be treated as an item of  adjustment
for a Holder's  taxable year in which the  exercise  occurs and may result in an
alternative minimum tax liability for the Holder.

     If common stock acquired upon the exercise of an Incentive  Stock Option is
disposed of prior to the expiration of the holding periods  described above, (i)
the Holder will recognize  ordinary  compensation  income in the taxable year of
disposition in an amount equal to the excess,  if any, of the lesser of the fair
market value of the shares on the date of exercise or the amount realized on the
disposition of the shares, over the exercise price paid for such shares and (ii)
Winstar  will  qualify  for a  deduction  equal to any such  amount  recognized,
subject to the limitation that the compensation be reasonable.  In the case of a
disposition  of shares  earlier  than two years from the date of the grant or in
the  same  taxable  year as the  exercise,  where  the  amount  realized  on the
disposition is less than


                                       33


<PAGE>



the fair market  value of the shares on the date of  exercise,  there will be no
adjustment  since the amount treated as an item of adjustment,  for  alternative
minimum tax  purposes,  is limited to the excess of the amount  realized on such
disposition  over the  exercise  price,  which is the same  amount  included  in
regular taxable income.

         Non-Qualified Stock Options

     With  respect to  Non-Qualified  Stock  Options (i) upon grant of the Stock
Option,  the Holder will  recognize no income,  (ii) upon  exercise of the Stock
Option (if the shares of common stock are not subject to a  substantial  risk of
forfeiture), the Holder will recognize ordinary compensation income in an amount
equal to the excess,  if any, of the fair market value of the shares on the date
of exercise over the exercise price, and Winstar will qualify for a deduction in
the same amount,  subject to the requirement that the compensation be reasonable
and (iii) Winstar will be required to comply with applicable  federal income tax
withholding  requirements  with  respect to the amount of ordinary  compensation
income recognized by the Holder. On a disposition of the shares, the Holder will
recognize gain or loss equal to the difference  between the amount  realized and
the sum of the exercise price and the ordinary  compensation  income recognized.
Such gain or loss will be  treated  as  capital  gain or loss if the  shares are
capital  assets and as short-term or long-term  capital gain or loss,  depending
upon the length of time that the Holder held the shares.

     If the shares  acquired upon exercise of a  Non-Qualified  Stock Option are
subject to a substantial risk of forfeiture,  the Holder will recognize ordinary
income at the time when the  substantial  risk of forfeiture is removed,  unless
such Holder  timely files under Code  Section  83(b) to elect to be taxed on the
receipt of shares,  and Winstar  will qualify for a  corresponding  deduction at
such time. The amount of ordinary income will be equal to the excess of the fair
market value of the shares at the time the income is recognized  over the amount
(if any) paid for the shares.

         Stock Appreciation Rights

     Upon the grant of a SAR,  the  Holder  recognizes  no  taxable  income  and
Winstar receives no deduction. The Holder recognizes ordinary income and Winstar
receives a deduction  at the time of exercise  equal to the cash and fair market
value of common stock payable upon such exercise.

         Restricted Stock

     A Holder who  receives  Restricted  Stock will  recognize  no income on the
grant of the Restricted Stock and Winstar will not qualify for any deduction. At
the time the  Restricted  Stock is no longer  subject to a  substantial  risk of
forfeiture,  a Holder will recognize ordinary  compensation  income in an amount
equal to the excess, if any, of the fair market value of the Restricted Stock at
the time the restriction  lapses over the consideration  paid for the Restricted
Stock. A Holder's  shares are treated as being subject to a substantial  risk of
forfeiture  so long as his or her sale of the shares at a profit  could  subject
him or her to a suit  under  Section 16 (b) of the  Exchange  Act.  The  holding
period to determine whether the Holder has long-term or short-term  capital gain
or loss begins when the Restriction  Period  expires,  and the tax basis for the
shares will generally be the fair market value of the shares on such date.


                                       34


<PAGE>



     A Holder may elect,  under Section 83(b) of the Code, within 30 days of the
transfer of the Restricted Stock, to recognize ordinary  compensation  income on
the date of  transfer  in an amount  equal to the  excess,  if any,  of the fair
market  value on the date of such  transfer  of the shares of  Restricted  Stock
(determined  without regard to the restrictions) over the consideration paid for
the Restricted  Stock.  If a Holder makes such election and thereafter  forfeits
the shares, no ordinary loss deduction will be allowed.  Such forfeiture will be
treated as a sale or exchange  upon which  there is  realized  loss equal to the
excess,  if any,  of the  consideration  paid for the  shares  over  the  amount
realized on such forfeiture.  Such loss will be a capital loss if the shares are
capital assets.  If a Holder makes an election under Section 83(b),  the holding
period will  commence  on the day after the date of  transfer  and the tax basis
will equal the fair market  value of shares  (determined  without  regard to the
restrictions) on the date of transfer.

     On a disposition of the shares,  a Holder will recognize gain or loss equal
to the difference between the amount realized and the tax basis for the shares.

     Whether or not the Holder makes an election  under Section  83(b),  Winstar
generally  will  qualify  for a  deduction  (subject  to the  reasonableness  of
compensation  limitation) equal to the amount that is taxable as ordinary income
to the  Holder,  in its  taxable  year in which such  income is  included in the
Holder's  gross income.  The income  recognized by the Holder will be subject to
applicable withholding tax requirements.

     Dividends paid on Restricted  Stock which is subject to a substantial  risk
of  forfeiture  generally  will be  treated as  compensation  that is taxable as
ordinary  compensation  income to the Holder and will be  deductible  by Winstar
subject to the  reasonableness  limitation.  If,  however,  the  Holder  makes a
Section 83(b)  election,  the dividends will be treated as dividends and taxable
as ordinary income to the Holder, but will not be deductible by Winstar.

         Deferred Stock

     A Holder who receives an award of Deferred  Stock will  recognize no income
on the  grant  of  such  award.  However,  he or  she  will  recognize  ordinary
compensation income on the transfer of the Deferred Stock (or the later lapse of
a substantial risk of forfeiture to which the Deferred Stock is subject,  if the
Holder does not make a Section  83(b)  election),  in  accordance  with the same
rules as discussed above under the caption "Restricted Stock."

                              INDEPENDENT AUDITORS

     Grant  Thornton  LLP  served  as  Winstar's  independent  certified  public
accountants  for the year ended  December 31, 1999. The board has selected Grant
Thornton LLP as  Winstar's  independent  certified  public  accountants  for the
fiscal year ending  December 31, 2000. A  representative  of Grant  Thornton LLP
will have the  opportunity to address the  stockholders  if he so desires and is
expected to be present at the meeting.  The representative  will be available to
answer appropriate questions from stockholders.


                                       35


<PAGE>


                           2000 STOCKHOLDER PROPOSALS

     In  order  for  stockholder  proposals  for  the  2001  annual  meeting  of
Stockholders to be eligible for inclusion in Winstar's Proxy Statement, they
must be received  by Winstar at its  principal  office in New York,  New York by
January 26, 2001. A stockholder  must have been a continuously registered or
beneficial owner of at least 1% of Winstar's outstanding stock or stock with a
market value of at least $2,000 for at least one year prior to  submitting  the
proposal,  and the stockholder  must  continue to own such stock through the
date on which the 2001 annual meeting of stockholders is held.

                                  OTHER MATTERS

     The board knows of no matter that will be presented  for  consideration  at
the meeting other than the matters referred to in this proxy  statement.  Should
any other matter  properly  come before the meeting,  it is the intention of the
persons named in the  accompanying  proxy to vote such proxy in accordance  with
their best judgment.

                             SOLICITATION OF PROXIES

     The cost of proxy  solicitations  will be borne by Winstar.  In addition to
solicitations  of proxies by use of the mails,  some  officers or  employees  of
Winstar, without additional  remuneration,  may solicit proxies personally or by
telephone.  Winstar may also request brokers,  dealers, banks and their nominees
to solicit proxies from their clients, where appropriate, and may reimburse them
for reasonable expenses related thereto.  Additional solicitation of proxies may
be made by an independent proxy solicitation firm or other entity possessing the
facilities to engage in such solicitation. If any independent entity is used for
such solicitation, Winstar has engaged Georgeson Shareholder Communications Inc.
to assist in the solicitation  of proxies and will be required to  pay such firm
reasonable fees and reimburse expenses  incurred by such firm in  the  rendering
of  such solicitation services.

                                            Timothy R. Graham
                                            Secretary

New York, New York
May 22, 2000


                                       36

<PAGE>
                          WINSTAR COMMUNICATIONS, INC.



     Instructions for Voting Your Proxy

     Winstar Communications, Inc. is now offering stockholders of record three
alternative ways of voting your proxies:

   o  By Telephone                                         o  Via the Internet
(using a touch-tone phone)                                   (using a browser)
                                    o By Mail
                              (traditional method)

Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you had returned your proxy card. We encourage you to
use these cost-effective and convenient ways of voting, 24 hours a day, 7 days a
week.

TO VOTE BY PHONE  Available only until 5:00 p.m. Eastern time on June 26, 2000
    o  This method of voting is available for residents of the U.S. and Canada.
    o  On a touch-tone phone, call TOLL-FREE 1-800-850-5356, 24 hours a day,
       7 days a week.
    o  You will be asked to enter ONLY the CONTROL NUMBER shown below.
    o  Have your proxy card ready, then follow the simple recorded instructions.
    o  Your vote will be confirmed and cast as you direct.

TO VOTE BY INTERNET Available only until 5:00 p.m. Eastern time on June 26, 2000
    o  Visit our Internet voting Website at http://www.proxy.georgeson.com.
    o  Enter both the COMPANY NUMBER AND CONTROL NUMBER shown below.
    o  Follow the simple instructions on the screen.
    o  You will incur only your usual Internet charges.

TO VOTE BY MAIL

    o  Mark, sign and date the attached proxy card and return it in the
       postage-paid envelope enclosed.

    o  If you are voting by telephone or the Internet, please do not mail
       your proxy card.

                COMPANY NUMBER                 CONTROL NUMBER


               TO VOTE BY MAIL, PLEASE DETACH THE PROXY CARD HERE.

  [X]  Votes must be indicated as in example to the left, in Black or Blue ink.


<PAGE>

                          WINSTAR COMMUNICATIONS, INC.
                       Solicited By The Board of Directors
               for the Annual Meeting To Be Held on June 28, 2000

          The undersigned Stockholder(s) of Winstar Communications, Inc., a
P    Delaware corporation ("Company"), hereby appoints William J. Rouhana, Jr.
     and Timothy R. Graham, or either of them, with full power of substitution
     and to act without the other, as the agents, attorneys and proxies of the
     undersigned, to vote the shares standing in the name of the undersigned at
     the Annual Meeting of Stockholders of the Company to be held on June 28,
R    2000 and at all adjournments thereof. This proxy will be voted in
     accordance with the instructions given below. If no instructions are given,
     this proxy will be voted FOR all of the following proposals.

O     1.  Election of the following Class III Directors:

          FOR all nominees listed below except    WITHHOLD AUTHORITY to vote for
X         as marked to the contrary below  |_|    all nominees listed below |_|

         William J. Rouhana, Jr., William J. vanden Heuvel and Steven B. Magyar
Y

     INSTRUCTIONS: To withhold authority to vote for any individual nominee,
     write that nominee's name in the space below.


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

    2. FOR approval of amendment to certificate   WITHHOLD AUTHORITY to vote for
       of incorporation to increase the number    amendment to certificate of
       of authorized shares of common             incorporation to increase the
       stock                 |_|                  number of authorized shares of
                                                  common stock              |_|

    3. FOR approval of amendment to certificate   WITHHOLD AUTHORITY to vote for
       of incorporation to increase the number    amendment to certificate of
       of authorized shares of preferred          incorporation to increase the
       stock                 |_|                  number of authorized shares of
                                                  preferred stock          |_|

    4. FOR approval of 2000 Performance Equity    WITHHOLD AUTHORITY to vote for
       Plan     |_|                               2000 Performance Equity Plan
                                                                        |_|

    5. In their discretion, the proxies are authorized to vote upon such
       other business as may come before the meeting or any adjournment
       thereof.

      |_|      I plan on attending the Annual Meeting.


                                    Date _____________________________, 2000


                                    ----------------------------------------
                                    Signature

                                    ----------------------------------------
                                    Signature if held jointly

                                    Please sign exactly as name appears above.
                                    When shares are held by joint tenants, both
                                    should sign.  When signing as attorney,
                                    executor, administrator, trustee or
                                    guardian, please give full title as
                                    such.  If a corporation, please sign in full
                                    corporate name by President or other
                                    authorized officer.  If a partnership,
                                    please sign in partnership name by
                                    authorized person.


Has your address changed:_______________________________________________________

________________________________________________________________________________



Do you have any comments:_______________________________________________________

________________________________________________________________________________






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




                          Winstar Communications, Inc.
                                (Name of Company)

                          2000 Performance Equity Plan

Section 1.      Purpose; Definitions.

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

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

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

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

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

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

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

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

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

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

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



<PAGE>


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

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

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

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

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

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

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

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

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

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

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

                                       2
<PAGE>

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

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

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

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

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


Section 2.       Administration.

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

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

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

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

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

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

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

                                       3

<PAGE>

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

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

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

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

2.3    Interpretation of Plan.

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

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

Section 3.     Stock Subject to Plan.

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

                                       4
<PAGE>

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

Section 4.       Eligibility.

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

Section 5.      Stock Options.

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

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

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

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

                                       5
<PAGE>

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

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

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

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


                                       6

<PAGE>

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

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

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

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

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

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

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

                                       7

<PAGE>


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

Section 6.      Stock Appreciation Rights.

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

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

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

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

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

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

Section 7.       Restricted Stock.

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

                                       8

<PAGE>

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

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

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

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

Section 8.      Deferred Stock.

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

                                       9

<PAGE>

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

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

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

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

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

Section 9.      Other Stock-Based Awards.

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

Section 10.      Accelerated Vesting and Exercisability.

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

                                       10

<PAGE>


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

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

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

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

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

Section 11.     Amendment and Termination.

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

Section 12.     Term of Plan.

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

                                       11

<PAGE>


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

Section 13.  General Provisions.

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

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

13.3    Employees.

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

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

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

                                       12
<PAGE>


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

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

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

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

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

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

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

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

                                       13

<PAGE>


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

                                       14
<PAGE>


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