SYCAMORE NETWORKS, INC. 1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

Exhibit 10.4

SYCAMORE NETWORKS, INC.

1999 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

1. Purpose . This Non-Qualified Stock Option Plan, to be known as the 1999 Non-Employee Director Stock Option Plan (hereinafter, this “Plan” ) is intended to promote the interests of Sycamore Networks, 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; Annual Increase in Shares . (a) The total number of shares of Common Stock, par value $.001 per share, of the Company (the “Common Stock” ) for which options may be granted under this Plan shall not exceed 1,500,000 shares (after giving effect to the three-for-one stock split approved by the Board of Directors on August 17, 1999 and the three-for-one stock split effective February 11, 2000), subject to adjustment in accordance with paragraph 13 of this Plan. 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.

(b) As of August 1 of each year, commencing with the year 2000, the aggregate number of Common Shares available for the grant of options under the Plan shall automatically be increased by the number to cause the total number of Common Shares then available to be restored to 1,500,000.

3. Administration . 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 Option s . Subject to the availability of shares under this Plan,

(a) each person who is or becomes a member of the Board and who is not an employee or officer of the Company (a “Non-Employee Director”) shall be automatically granted on the latest of (i) the date such person is first elected to the Board, or (ii) August 17, 1999 (the “Approval Date”), (such later date being referred to herein as the “Grant Date”), without further action by

the Board, an option to purchase 90,000 shares of the Common Stock (after giving effect to the three-for-one stock split approved by the Board of Directors on August 17, 1999 and the three-for-one stock split effective February 11, 2000), and

(b) beginning on the date of the Company’s annual meeting of shareholders for fiscal year 2000, each person receiving an option pursuant to clause (a) hereof who is a Non-Employee Director immediately following each successive annual meeting of stockholders occurring after such person’s Grant Date during the term of this Plan shall be automatically granted on each such annual meeting date an option to purchase 30,000 shares of the Common Stock (after giving effect to the three-for-one stock split approved by the Board of Directors on August 17, 1999 and the three-for-one stock split effective February 11, 2000).

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. Notwithstanding anything to the contrary set forth herein, if this Plan is not approved by a majority of the Company’s stockholders present, or represented, and entitled to vote at the first meeting of Stockholders of the Company following the Approval Date, then the Plan and the options granted pursuant to this Section 4 shall terminate and become void, and no further options shall be granted under this Plan.

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. The Option Price will be subject to adjustment in accordance with the provisions of paragraph 13 of this Plan. The Fair Market Value of the Company’s Common Stock shall be determined as follows: (i) if the Company’s Common Stock is listed on any established stock exchange or a national market system, including without limitation The Nasdaq Global Market or The Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price of such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the date the Option is granted; (ii) if the Company’s Common Stock is regularly quoted by an established quotation service for over-the-counter securities but selling prices are not reported, its Fair Market Value shall be the closing bid price (or average of bid prices) as quoted on such service for the date the Option is granted; (iii) if the Common Stock is not publicly traded at the time an Option is granted under the Plan, its Fair Market Value shall be the fair value of the Common Stock as determined by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

6. Period of Option . Unless sooner terminated in accordance with the provisions of paragraph 8 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. (a) Vesting of Shares and Non-Transferability of Options . Options granted under this Plan shall be fully exercisable on the date of grant, subject to such restrictions or repurchase rights as defined below in paragraph 10. Options granted under clause (a) of paragraph 4 of this Plan shall vest in the optionee in accordance with the following schedule, provided that the optionee has continuously served as a member of the Board through such vesting date:

provided , that , in the event that an optionee’s term as a director expires at the date of an annual meeting of stockholders within the 90-day period preceding any vesting date, the installment of such option corresponding to such vesting date shall vest on the date of such meeting.

Options granted under clause (b) of paragraph 4 of the Plan shall vest in the optionee on the earlier of one year from the date of grant or the date of the next meeting of stockholders, provided that the optionee has continuously served as a member of the Board through such vesting date.

Notwithstanding the foregoing provisions of this part (a) to paragraph 7, an option installment shall not vest with respect to any of the vesting periods described above in the event the optionee fails to attend at least 75% of the meetings of the Board of Directors during such period.

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.

(b) 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.

8. Termination of Option Rights .

(a) Except as otherwise specified in the agreement relating to an option, in the event an optionee ceases to be a member of the Board for any reason other than death or permanent disability, any then unvested and unexercised portion of options granted to such optionee shall 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 by the optionee within ninety (90) days of the date the optionee ceased to be a member of the Board; and all options shall terminate after such ninety (90) 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, all unexercised options shall be fully vested and 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.

9. Exercise of Option . Subject to the terms and conditions of this Plan and the option agreements, an option granted hereunder shall be exercisable in whole or in part by giving written notice to the Company by mail or in person addressed to Sycamore Networks, 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 tha