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Exhibit 10.4
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AVICI SYSTEMS INC.
2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. This Non-Qualified Stock Option Plan, to be known as the
2000 Non-Employee Director Stock Option Plan (hereinafter, this "Plan") is
intended to promote the interests of Avici Systems Inc. (hereinafter, the
"Company") by providing an inducement to obtain and retain the services of
qualified persons who are not employees or officers of the Company to serve as
members of its Board of Directors (the "Board").
2. AVAILABLE SHARES. The total number of shares of common stock, par
value $.0001 per share, of the Company (the "Common Stock") for which options
may be granted under this Plan shall initially be 400,000 shares, subject to
adjustment in accordance with paragraph 11 of this Plan, which number shall
automatically increase on January 1 of each year, beginning with January 1,
2001, by such number of shares as is equal to the number of shares necessary to
cause the total number of shares then available to be issued pursuant to the
Plan (after deducting shares issued upon exercise of options under the Plan and
shares issuable pursuant to outstanding options under the Plan) to be 400,000.
Shares subject to this Plan are authorized but unissued shares or shares that
were once issued and subsequently reacquired by the Company. If any options
granted under this Plan are surrendered before exercise or lapse without
exercise, in whole or in part, the shares reserved therefor shall continue to be
available under this Plan.
3. ADMINISTRATION. This Plan shall become effective on the date on which
the Common Stock becomes registered under the Securities Exchange Act (the
"Initial Public Offering Date"). This Plan shall be administered by the Board
or by a committee appointed by the Board (the "Committee"). In the event the
Board fails to appoint or refrains from appointing a Committee, the Board shall
have all power and authority to administer this Plan. In such event, the word
"Committee" wherever used herein shall be deemed to mean the Board. The
Committee shall, subject to the provisions of the Plan, have the power to
construe this Plan, to determine all questions hereunder, and to adopt and amend
such rules and regulations for the administration of this Plan as it may deem
desirable. No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to this Plan or any
option granted under it.
4. AUTOMATIC GRANT OF OPTIONS. Subject to the availability of shares
under this Plan, each person who is a member of the Board and who is not an
employee or officer of the Company or any subsidiary (a "Non-Employee Director")
on the date of each annual meeting of stockholders of the Company (each, an
"Annual Meeting Date") shall be automatically granted on such date, without
further action by the Board, an option to purchase 15,000 shares of the Common
Stock (the "Annual Grant").
Subject to the availability of shares under this Plan, each Non-Employee
Director on the Initial Public Offering Date shall be automatically granted on
such date, without further action by the Board, an option to purchase 40,000
shares of Common Stock (the "Existing Director Grant"), unless such Non-Employee
Director has been granted an option to purchase at least
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40,000 shares of Common Stock in fiscal year 2000 pursuant to the Company's 1997
Stock Incentive Plan.
Subject to the availability of shares under this Plan, each Non-Employee
Director first elected to the Board following the Initial Public Offering Date
shall be automatically granted on the date such person is first elected to the
Board, without further action by the Board, an option to purchase 35,000 shares
of the Common Stock (the "Election Grant").
The options to be granted under this paragraph 4 shall be the only options
ever to be granted at any time to such member under this Plan. The number of
shares covered by options granted under this paragraph 4 shall be subject to
adjustment in accordance with the provisions of paragraph 11 of this Plan. For
purposes of clarity, in this event of a stock split, stock dividend subdivision
on the Common Stock, as a result of such event, the number of shares available
under this Plan or issuable upon exercise of options previously granted under
this Plan shall be appropriately adjusted, but the number of shares set forth in
this paragraph 4 for which options subsequently may be granted shall remain
fixed and shall not be adjusted as a result of any such event occurring prior to
the grant date.
5. OPTION PRICE. The purchase price of the stock covered by an option
granted pursuant to this Plan shall be 100% of the fair market value of such
shares on the day the option is granted; provided, however, that the purchase
price of the stock covered by an Existing Director Grant shall be equal to 100%
of the price per share at which the Common Stock is initially sold to the public
in the initial public offering of the Common Stock without regard to any
applicable underwriting discounts or commissions. The option price will be
subject to adjustment in accordance with the provisions of paragraph 11 of this
Plan. For purposes of this Plan, if, at the time an option is granted under the
Plan, the Company's Common Stock is publicly traded, "fair market value" shall
be determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such option is
granted and shall mean (i) the average (on that date) of the high and low prices
of the Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Common Stock on the Nasdaq National Market, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing bid price (or
average of bid prices) last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is not reported on
the Nasdaq National Market List.
6. PERIOD OF OPTION. Unless sooner terminated in accordance with the
provisions of paragraph 9 of this Plan, an option granted hereunder shall expire
on the date which is ten (10) years after the date of grant of the option.
7. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS. Options granted
under this Plan shall not be exercisable until they become vested. Options
granted under this Plan shall vest in the optionee and thus become exercisable
in accordance with the following schedule, provided that the optionee has
continuously served as a member of the Board through such vesting date:
Annual Grant:
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Option Shares for which
Option Will be Exercisable Date of Vesting
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5,000 Date of grant
an additional 2,500 One year from the date of grant or, if
earlier, the day immediately prior to the
first Annual Meeting Date following the
grant date
an additional 2,500 Two years from the date of grant or, if
earlier, the day immediately prior to the
second Annual Meeting Date following the
grant date
an additional 2,500 Three years from the date of grant or, if
earlier, the day immediately prior to the
third Annual Meeting Date following the
grant date
an additional 2,500 Four years from the date of grant or, if
earlier, the date immediately prior to the
fourth Annual Meeting Date following the
grant date
The foregoing number of shares for which such options will become
exercisable shall be subject to adjustment in accordance with paragraph 11.
Existing Director Grant and Election Grant:
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Percentage of Option
Shares for which
Option Will be Exercisable Date of Vesting
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25% One year from the date of grant
50% Two years from the date of grant
75% Three years from the date of grant
100% Four years from the date of grant
In the event any optionee's service as a member of the Board terminates as
of an Annual Meeting Date occurring within thirty (30) days prior to the date
any option installment would otherwise have vested had such optionee continued
to serve as a member of the Board, then notwithstanding the foregoing, such
installment shall be vested and exercisable as of such Annual Meeting Date.
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in this Plan.
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8. NON-TRANSFERABILITY. Any option granted pursuant to this Plan shall
not be assignable or transferable other than by will or the laws of descent and
distribution or pursuant to a domestic relations order and shall be exercisable
during the optionee's lifetime only by him or her.
9. TERMINATION OF OPTION RIGHTS.
(a) In the event an optionee ceases to be a member of the Board for
any reason other than death or permanent disability, any then unexercised
portion of options granted to such optionee shall, to the extent not then
vested, immediately terminate and become void; any portion of an option which is
then vested but has not been exercised at the time the optionee so ceases to be
a member of the Board may be exercised, to the extent it is then vested, by the
optionee within 180 days of the date the optionee ceased to be a member of the
Board, but not later than the scheduled expiration of the date of the option;
and all options shall terminate after such 180 days have expired.
(b) In the event that an optionee ceases to be a member of the Board
by reason of his or her death or permanent disability, any option granted to
such optionee shall be immediately and automatically accelerated and become
fully vested and all unexercised options shall be exercisable by the optionee
(or by the optionee's personal representative, heir or legatee, in the event of
death) until the scheduled expiration date of the option.
10. EXERCISE OF OPTION. Subject to the terms and conditions of this Plan
and the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail or in person addressed to Avici Systems Inc., at its principal
executive offices, stating the number of shares with respect to which the option
is being exercised, accompanied by payment in full for such shares. Payment may
be (a) in United States dollars in cash or by check, (b) in whole or in part in
shares of the Common Stock of the Company already owned by the person or persons
exercising the option or shares subject to the option being exercised (subject
to such restrictions and guidelines as the Board may adopt from time to time),
valued at fair market value determined in accordance with the provisions of
paragraph 5 or (c) consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise. There shall be no
such exercise at any one time as to fewer than one hundred (100) shares or all
of the remaining shares then purchasable by the person or persons exercising the
option, if fewer than one hundred (100) shares. The Company's transfer agent
shall, on behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the option, shall
register the optionee as the owner of such shares on the books of the Company
and shall cause the fully executed certificate(s) representing such shares to be
delivered to the optionee as soon as practicable after payment of the option
price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option, except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
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11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER EVENTS. Upon the
occurrence of any of the following events, an optionee's rights with respect to
options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of previously outstanding options shall be appropriately increased
or decreased proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination or stock
dividend.
(b) RECAPITALIZATION ADJUSTMENTS. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise, each option granted
under this plan which is outstanding but unvested as of the effective date of
such event shall become exercisable in full thirty (30) days prior to the
effective date of such event. In the event of a reorganization,
recapitalization, merger, consolidation, or any other change in the corporate
structure or shares of the Company, to the extent permitted by Rule 16b-3 under
the Securities Exchange Act of 1934, adjustments in the number and kind of
shares authorized by this Plan and in the number and kind of shares covered by,
and in the option price of outstanding options under this Plan necessary to
maintain the proportionate interest of the optionee and preserve, without
exceeding, the value of such option, shall be made. Notwithstanding the
foregoing, no such adjustment shall be made which would, within the meaning of
any applicable provisions of the Internal Revenue Code of 1986, as amended,
constitute a modification, extension or renewal of any Option or a grant of
additional benefits to the holder of an Option.
(c) ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(d) ADJUSTMENTS. Upon the happening of any of the foregoing events,
the class and aggregate number of shares set forth in paragraph 2 available
under this Plan as well as the shares, that are subject to options which
previously have been granted under this Plan shall also be appropriately
adjusted to reflect such events. The Board shall determine the specific
adjustments to be made under this paragraph 11 and its determination shall be
conclusive.
12. RESTRICTIONS ON ISSUANCE OF SHARES. Notwithstanding the provisions of
paragraphs 4 and 11 of this Plan, the Company shall have no obligation to
deliver any certificate or certificates upon exercise of an option until one of
the following conditions shall be satisfied:
(i) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares effectively registered
under applicable Federal and state securities laws as now in force or
hereafter amended; or
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(ii) Counsel for the Company shall have given an opinion that the
issuance of such shares is exempt from registration under Federal and state
securities laws as now in force or hereafter amended;
and the Company has complied with all applicable laws and regulations with
respect thereto, including without limitation all regulations required by any
stock exchange upon which the Company's outstanding Common Stock is then listed.
13. LEGEND ON CERTIFICATES. The certificates representing shares issued
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933 or any state securities laws.
14. REPRESENTATION OF OPTIONEE. If requested by the Company, the optionee
shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with a
view to their distribution (as that term is used in the Securities Act of 1933).
15. OPTION AGREEMENT. Each option granted under the provisions of this
Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions
and conditions not inconsistent with this Plan as may be determined by the
officer executing it.
16. TERMINATION AND AMENDMENT OF PLAN. The Board may at any time
terminate this Plan or make such modification or amendment thereof as it deems
advisable; provided, however, that the Board may not, without approval of the
stockholders, (a) increase the maximum number of shares for which options may be
granted under this Plan (except by adjustment pursuant to paragraphs 2 and 11),
(b) materially modify the requirements as to eligibility to participate in this
Plan or (c) materially increase benefits accruing to option holders under this
Plan. Termination or any modification or amendment of this Plan shall not,
without consent of a participant, affect his or her rights under an option
previously granted to him or her.
17. WITHHOLDING OF INCOME TAXES. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Internal Revenue Code, may
require the optionee to pay withholding taxes in respect of amounts considered
to be compensation includible in the optionee's gross income.
18. COMPLIANCE WITH REGULATIONS. It is the Company's intent that the Plan
comply in all respects with Rule 16b-3 under the Securities Exchange Act of 1934
(or any successor or amended provision thereof) and any applicable Securities
and Exchange Commission interpretations thereof. If any provision of this Plan
is deemed not to be in compliance with Rule 16b-3, the provision shall be null
and void.
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19. GOVERNING LAW. The validity and construction of this Plan and the
instruments evidencing options shall be governed by the laws of the Commonwealth
of Massachusetts, without giving effect to the principles of conflicts of law
thereof.
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