Document:

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                                                                   Exhibit 10.7B

             CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
                  WITH THE SECURITIES AND EXCHANGE COMMISSION.
                      ASTERISKS (*) DENOTE SUCH OMISSIONS

                  AGREEMENT ON PLEDGE OF GOODS IN CIRCULATION

Entered into as of the 12th day of March, 2001, between:

1)  Closed Joint-Stock Company "Forest-Starma", a closed joint stock company
    registered in accordance with Russian legislation in force (hereafter the
    "Company"), and

2)  Rayonier Inc., a corporation organized in accordance with the laws of the
    State of North Carolina, USA (hereafter "Rayonier").

The Company and Rayonier hereby agree as follows:

Article 1.  Definitions

1.1.  For the purposes of this Agreement, the terms and concepts used in this
      Agreement shall have the same meanings as in the Log Sales Contract, as
      well as in Addendum No. 1 thereto. The terms indicated below shall have
      the following meanings:

Addendum No. 1 to the Contract - means Addendum No. 1 to Log Sales Contract No.
11-21-01, dated November 27, 2000, entered into between the Company and Rayonier
on March 12, 2001, including all amendments and addendums thereto.

Law on Pledges - means the Law of the Russian Federation "On Pledges" No. 2872
of May 29, 1992.

Pledge - means a pledge of goods in circulation created under this Agreement in
accordance with the Law on Pledges and the Civil Code of the Russian Federation
of October 21, 1994.

Pledged Property - means logs (the subject of the Pledge) owned by the Company
and stored at the Company's lower landing in Siziman Bay, Vanino Region,
Khabarovsk Territory, Russian Federation, with a (pledged) value of not less
than the Secured Amounts, but not to exceed US $***, based on prevailing market
prices as mutually agreed upon by the Company and Rayonier.

Log Sales Contract - means Log Sales Contract No. 11-21-01,dated November 27,
2000, between the Company and Rayonier, including all amendments and addendums
thereto.

Moment of Sale - means the moment of transfer (alienation) of ownership of the
Pledged Property by the Company to Rayonier.

Means of Securing Obligations - means any method of securing the performance by
the Company of its obligations with respect to the sale to Rayonier of the
Pledged Property that is provided for by law or by agreement of the Parties.

Parties - means the Company and Rayonier under this Agreement

Secured Amounts - means all monetary obligations that must be paid by the
Company to Rayonier under the Log Sales Contract in the form of repayment of two
advance payments of  $*** each, totaling US $*** in the aggregate, provided by
Rayonier to the Company in accordance with Article 1 of Addendum No. 1 to the
Contract, or any unpaid portion of such advances.

Article 2.  Payment of Secured Amount

2.1   The Company is well aware of all the conditions, under the Log Sales
      Contract and Addendum No. 1 to the Contract, of the Company's obligation
      to repay the Secured Amounts, which are secured by this Pledge, including
      the following:

a)    The aggregate amount of the two advances is $***.

b)    The Final Repayment Date - 10 days after receipt by the Company of
      Rayonier's written notice after July 31, 2001.

2.2   The Pledge secures Rayonier's demand for repayment by the Company the
      Secured Amounts in such amount as is outstanding at the moment of actual
      satisfaction.
<PAGE>

Article 3.  Pledge

3.1  As a Means of Securing Obligations with respect to repayment of the Secured
     Amounts, the Company, in accordance with the Civil Code of the Russian
     Federation and the Law on Pledges, shall create a Pledge of the Pledged
     Property in favor of Rayonier.

3.2  The Company shall maintain the right to possess, use and dispose of the
     Pledged Property, provided that it fulfills the provisions of Article 357
     of the Civil Code of the Russian Federation and Article 3 of the Law on
     Pledges, as well as corresponding provisions of this Agreement.

     The Pledged Property, alienated by the Company, shall cease to be the
     subject of the Pledge at the Moment of Sale.

3.3  This Pledge shall be created without prejudice to any other rights in
     accordance with any Means of Securing Obligations that the Parties may use
     and is in addition to any rights arising out of any Means of Securing
     Obligations that Rayonier may have or that may be provided to Rayonier by
     the Company or another party with respect to all or a part of the Secured
     Amounts. The obligations and conditions provided for under this Agreement
     shall remain in effect as continuing obligations in favor of Rayonier until
     such time as the Secured Amounts are repaid in full, subject to the
     provisions of Section 3.6 of this Agreement.

3.4  All expenses connected with preparing this Pledge and all expense
     associated with maintaining this Pledge shall be borne by the Company.
     Other fees and overhead expenses connected with executing against the
     Secured Property and/or selling the Secured Property shall be borne by
     Rayonier.

3.5  The Company, in addition to its other obligations under this Agreement,
     shall be obligated:

     a)  to maintain a record of this Pledge as required by Article 375, Item 3
         of the Civil Code of the Russian Federation and Section 18 of the Law
         on Pledges, and within 10 days after the Pledge is created to make a
         notation in the Pledge Register containing information on the form and
         subject of the Pledge, as well as the amount of obligations secured by
         the Pledge;

     b)  to immediately provide Rayonier, at its request, with extracts from
         such Register, containing necessary information regarding the Pledge,
         as well as to provide Rayonier, at its first request, with the Pledge
         Register for review.

3.6  In the event of partial performance by the Company of the obligations
     secured by the Pledge to repay the Secured Amounts, the amount of the
     Pledged Property shall be reduced proportionately to the obligations
     performed by the Company such that the total (pledged) value of the Pledged
     Property is reduced proportionately to the actual part of the advance
     payments repaid by the Company.

3.7  A change in the composition and natural form of the Pledged Property shall
     be permitted, provided that its total (pledged) value does not become less
     than that which is provided for under this Agreement. A change in the
     composition and value of the Pledged Property may at any time be monitored
     by Rayonier. In addition, the Company shall be obligated, at Rayonier's
     first request, to provide Rayonier with necessary assistance in conducting
     such monitoring, including by providing necessary documents.

3.8  The Pledge shall be created without transferring the Pledged Property to
     Rayonier. No subsequent pledges of the Pledged Property by the Company
     shall be permitted.

3.9  In the event the Pledged Property is lost or damaged, or if the Company
     ceases to own the Pledged Property on grounds provided for by law, the
     Company shall be obligated, within a reasonable period of time, to replace
     the Pledged Property with other logs or logging equipment of equivalent
     value. In the event it is impossible to replace the lost or damaged Pledged
     Property, the Company shall be obligated to immediately inform Rayonier of
     this in writing and, within a reasonable period of time, to replace this
     Pledge with another Means of Securing Obligations that is acceptable to
     Rayonier.

3.10 Rayonier shall be obligated, upon receipt of a request from the Company
     after final payment by the Company of the Secured Amount, to fully and
     unconditionally release the Company from its obligations under this Pledge,
     and to notify the Company of such release within 3 days.
<PAGE>

Article 4.  Execution Against the Pledged Property

4.1  In the event the Company, within the established time frame, does not repay
     the Pledged Amount or a part thereof in accordance with Addendum No. 1 to
     the Contract and Article 2 of this Agreement, or if through the Company's
     fault the Pledged Property is irreplaceably lost or damaged, Rayonier
     shall, in accordance with the provisions of the law and the terms of this
     Agreement, have a priority right over other creditors of the pledgor to
     obtain satisfaction against the value of the Pledged Property.

4.2  Under the circumstances set forth in Section 4.1 of this Article, Rayonier
     shall have the right to exercise its rights as pledgee under this
     Agreement, including with out limitation, the right:

     a)  to satisfy its demands for repayment of the Secured Amounts against the
         value of the Pledged Property in full;

     b)  to exercise any other rights and authority with respect to all or a
         part of the Pledged Property, including the right to execute against
         the Pledged Property and to sell it;

     c)  to assume management of the Pledged Property and to conduct any
         transactions or to demand the conduct of any transactions with respect
         to the Pledged Property as if Rayonier were the owner of the Pledged
         Property;

     d)  to sell, at its discretion, the Pledged Property and to use the
         proceeds from such sale to repay the debt to Rayonier with respect to
         repayment of the Secured Amounts.

4.3  Rayonier may sell the Pledged Property independently or, according to its
     directive, through specialized organizations. The base sale price for the
     sale of the Pledged Property shall not be lower than its Pledged value,
     indicated in Article 1 of this Agreement.

4.4  After the sale of the Pledged Property, Rayonier shall be obligated to
     provide the Company with the difference, in monetary form, remaining at
     Rayonier's disposal after the full repayment of all indebtedness of the
     Company with respect to repayment of the Secured Amounts, within 10 days
     after the date of receipt of the proceeds by means of a transfer of the
     amount of the difference to the Company's bank account.

4.5  In the event that part of the Pledged Property is not sold, but the
     indebtedness of the Company with respect to the Secured Amounts is not
     fully repaid, Rayonier shall be obligated, within 10 days after the full
     repayment of the Company's indebtedness with respect to the Secured
     Amounts, to return such unsold part of the Pledged Property to the Company.

4.6  The Company shall have the right at any time before the sale of the Pledged
     Property to stop execution against the Pledged Property by repayment of the
     Secured Amount in full.

Article 5.  Representations and Warranties of the Parties

5.1  The Company hereby represents and warrants that:

     a)  The Company has all requisite rights, power and authority to enter into
         this Agreement and to perform its obligations hereunder;

     b)  The execution of this Agreement does not contradict the provisions of
         any agreements or contracts to which the Company is a party, and the
         Company is not aware of any facts or circumstances, both financial and
         otherwise, about which it has not informed Rayonier, and which might
         affect the readiness of Rayonier to enter into this Agreement;

     c)  The Company owns the Pledged Property, free of any Means of Securing
         Obligations, arrests, encumbrances or rights of third parties, and will
         maintain such ownership until the Moment of Sale;

     d)  This Pledge is not a major transaction within the sense of Article 78
         of the Federal Law of the Russian Federation "On Joint Stock
         Companies", and the decision regarding the granting of this Pledge was
         properly adopted by the competent management bodies of the Company.
<PAGE>

5.2  Rayonier hereby represents and warrants that:

     a)  Rayonier has all requisite rights, power and authority to enter into
         this Agreement and to perform its obligations hereunder;

     b)  The execution of this Agreement does not contradict the provisions of
         any agreements or contracts to which Rayonier is a party, and Rayonier
         is not aware of any facts or circumstances, both financial and
         otherwise, about which it has not informed the Company, and which might
         affect the readiness of the Company to enter into this Agreement.

Article 6    Dispute Resolution

6.1  Any dispute, controversy or claim arising out of, or relating to this
     Agreement, including the breach or termination thereof, which cannot be
     resolved through amicable good faith negotiations between the Parties
     within one month, shall be referred for arbitration to the International
     Commercial Arbitration Court under the Chamber of Commerce and Industry of
     the Russian Federation in accordance with its current  Regulations, the
     rules of which are incorporated herein by reference.

6.2  This Agreement shall be governed  in accordance with Russian law.

6.3  The Parties shall be liable for their failure to perform or improper
     performance of their obligations under this Agreement in accordance with
     Russian law.

Article 7    Miscellaneous

7.1  This Agreement shall enter into force from the date that Addendum No. 1 to
     the Contract enters into force and shall terminate upon proper performance
     by the Company of its obligations with respect to repayment of the Secured
     Amounts.

7.2  If any of the provisions of this Agreement shall be deemed to be invalid or
     not to conform with laws now or subsequently in effect, such provisions
     shall be voided and this Agreement shall be construed and performed as if
     such nonconforming with the law, invalid or unperformable provision had
     never been part of this Agreement. The remaining provisions of this
     Agreement shall retain their full legal force and shall not be affected by
     any provision of this Agreement that are invalid, do not conform with the
     law or cannot be performed, or by the voiding of such provision.

7.3  This Agreement shall be binding and valid for the legal successors of the
     Parties throughout the term of this Agreement.

7.4  Neither of the Parties shall have the right to assign its rights and
     obligations under this Agreement in full or in part to third parties
     without the prior written consent of the other party.

7.5  Any amendments or addendums to this Agreement shall be valid only if they
     are executed in writing and signed by properly authorized representatives
     of the Parties.

7.6  The headings in this Agreement are included solely for convenience and do
     not affect the interpretation of the provisions of this Agreement.

This Agreement has been executed in 3 copies in Russian and 3 copies in English,
2 copies in each language for the Company and 1 copy --- for Rayonier.  All
original copies of this Agreement shall have equal legal force.  In case of
inconsistency with regard to the text between copies in English and in Russian,
the copy in English shall have the priority.

Signatures of the Parties

On behalf of the Company            On behalf of Rayonier

/s/ David Daggett                   /s/ Robert J. Cartano
-----------------                   ---------------------
                                    Robert J. Cartano
                                    Director, Operations
                                    International Forest Products
/s/ N. Obukhova
---------------
Chief Accountant<PAGE>

                                                                    EXHIBIT 4.3
                                                                    -----------
                              AVICI SYSTEMS INC.

                     2000 STOCK OPTION AND INCENTIVE PLAN
                     ------------------------------------

1.   Purpose and Eligibility
     -----------------------

     The purpose of this 2000 Stock Option and Incentive Plan (the "Plan") of
Avici Systems Inc. (the "Company") is to provide stock options and other equity
interests in the Company (each an "Award") to employees, officers, directors,
consultants and advisors of the Company and its Subsidiaries, all of whom are
eligible to receive Awards under the Plan. Any person to whom an Award has been
granted under the Plan is called a "Participant". Additional definitions are
contained in Section 8.

2.   Administration
     --------------

     a.  Administration by Board of Directors.  The Plan will be administered by
         -------------------------------------
the Board of Directors of the Company (the "Board"). The Board, in its sole
discretion, shall have the authority to grant and amend Awards, to adopt, amend
and repeal rules relating to the Plan and to interpret and correct the
provisions of the Plan and any Award. All decisions by the Board shall be final
and binding on all interested persons. Neither the Company nor any member of the
Board shall be liable for any action or determination relating to the Plan.

     b.  Appointment of Committees.  To the extent permitted by applicable law,
         --------------------------
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). All references in the
Plan to the "Board" shall mean such Committee or the Board.

     c.  Delegation to Executive Officers.  To the extent permitted by
         ---------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of Awards to be granted and the maximum number of shares issuable to any one
Participant pursuant to Awards granted by such executive officers.

3.   Stock Available for Awards
     --------------------------

     a.  Number of Shares.  Subject to adjustment under Section 3(c), the
         -----------------
aggregate number of shares of Common Stock of the Company (the "Common Stock")
that may be issued pursuant to the Plan is equal to 8,158,793 shares (the
"Available Shares").  If any Award expires, or is terminated, surrendered or
forfeited, in whole or in part, the unissued Common Stock covered by such Award
shall again be available for the grant of Awards under the Plan.  If shares of
Common Stock issued pursuant to the Plan are repurchased by, or are surrendered
or forfeited to, the Company at no more than cost, such shares of Common Stock
shall again be available for the grant of Awards under the Plan; provided,
however, that the cumulative number of such shares that may be so reissued under
the Plan will not exceed the Available Shares.  Shares
<PAGE>

issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.

     b.  Per-Participant Limit.  Subject to adjustment under Section 3(c), no
         ----------------------
Participant may be granted Awards during any one fiscal year to purchase more
than 500,000 shares of Common Stock.

     c.  Adjustment to Common Stock.  In the event of any stock split, stock
         ---------------------------
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off, split-up,
or other similar change in capitalization or event, (i) the number and class of
securities available for Awards under the Plan and the per-Participant share
limit, (ii) the number and class of securities, vesting schedule and exercise
price per share subject to each outstanding Option, (iii) the repurchase price
per security subject to repurchase, and (iv) the terms of each other outstanding
stock-based Award shall be adjusted by the Company (or substituted Awards may be
made) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is appropriate. If Section 7(e)(i) applies for any
event, this Section 3(c) shall not be applicable.

4.   Stock Options
     -------------

     a.  General.  The Board may grant options to purchase Common Stock (each,
         --------
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option and the Common Stock
issued upon the exercise of each Option, including vesting provisions,
repurchase provisions and restrictions relating to applicable federal or state
securities laws, as it considers advisable.

     b.  Incentive Stock Options.  An Option that the Board intends to be an
         ------------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall be granted only to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Board and the Company shall have no liability if an Option
or any part thereof that is intended to be an Incentive Stock Option does not
qualify as such. An Option or any part thereof that does not qualify as an
Incentive Stock Option is referred to herein as a "Nonstatutory Stock Option."

     c.  Exercise Price.  The Board shall establish the exercise price (or
         ---------------
determine the method by which the exercise price shall be determined) at the
time each Option is granted and specify it in the applicable option agreement.

     d.  Duration of Options.  Each Option shall be exercisable at such times
         --------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.

     e.  Exercise of Option.  Options may be exercised only by delivery to the
         -------------------
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 4(f) for the number of shares for
which the Option is exercised.

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<PAGE>

     f.  Payment Upon Exercise.  Common Stock purchased upon the exercise of an
         ----------------------
Option shall be paid for by one or any combination of the following forms of
payment:

         (i)    by check payable to the order of the Company;

         (ii)   except as otherwise explicitly provided in the applicable option
agreement, and only if the Common Stock is then publicly traded, delivery of an
irrevocable and unconditional undertaking by a creditworthy broker to deliver
promptly to the Company sufficient funds to pay the exercise price, or delivery
by the Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price; or

         (iii)  to the extent explicitly provided in the applicable option
agreement, by (x) delivery of shares of Common Stock owned by the Participant
valued at  fair market value (as determined by the Board or as determined
pursuant to the applicable option agreement), (y) delivery of a promissory note
of the Participant to the Company (and delivery to the Company by the
Participant of a check in an amount equal to the par value of the shares
purchased), or (z) payment of such other lawful consideration as the Board may
determine.

5.   Restricted Stock
     ----------------

     a.  Grants.  The Board may grant Awards entitling recipients to acquire
         -------
shares of Common Stock, subject to (i) delivery to the Company by the
Participant of a check in an amount at least equal to the par value of the
shares purchased, and (ii) the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price from the
Participant in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each, a
"Restricted Stock Award").

     b.  Terms and Conditions.  The Board shall determine the terms and
         ---------------------
conditions of any such Restricted Stock Award. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). After the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or, if the Participant has died, to the
beneficiary designated by a Participant, in a manner determined by the Board, to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.

6.   Other Stock-Based Awards
     ------------------------

     The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including, without limitation, the grant of shares based upon certain
conditions, the grant of securities convertible into Common Stock and the grant
of stock appreciation rights, phantom stock awards or stock units.

                                       3
<PAGE>

7.   General Provisions Applicable to Awards
     ---------------------------------------

     a.  Transferability of Awards.  Except as the Board may otherwise determine
         --------------------------
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.

     b.  Documentation.  Each Award under the Plan shall be evidenced by a
         --------------
written instrument in such form as the Board shall determine or as executed by
an officer of the Company pursuant to authority delegated by the Board.  Each
Award may contain terms and conditions in addition to those set forth in the
Plan provided that such terms and conditions do not contravene the provisions of
the Plan.

     c.  Board Discretion.  The terms of each type of Award need not be
         -----------------
identical, and the Board need not treat Participants uniformly.

     d.  Termination of Status.  The Board shall determine the effect on an
         ----------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, or the Participant's legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award.

     e.  Acquisition of the Company
         --------------------------

         (i)    Consequences of an Acquisition.
                ------------------------------

                (A)  Upon the consummation of an Acquisition, the Board shall
take any one or more of the following actions with respect to then outstanding
Awards: (a) provide that outstanding Options shall be assumed, or equivalent
Options shall be substituted, by the acquiring or succeeding corporation (or an
affiliate thereof), provided that any such Options substituted for Incentive
Stock Options shall satisfy, in the determination of the Board, the requirements
of Section 424(a) of the Code; (b) upon written notice to the Participants,
provide that all or a portion of then unexercised Options will become
exercisable in full or in part as of a specified time (the "Acceleration Time")
prior to the Acquisition and will terminate immediately prior to the
consummation of such Acquisition, except to the extent exercised by the
Participants between the Acceleration Time and the consummation of such
Acquisition; (c) in the event of an Acquisition under the terms of which holders
of Common Stock will receive upon consummation thereof a cash payment for each
share of Common Stock surrendered pursuant to such Acquisition (the "Acquisition
Price"), provide that all outstanding Options shall terminate upon consummation
of such Acquisition and each Participant shall receive, in exchange therefor, a
cash payment equal to the amount (if any) by which (x) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (y) the aggregate exercise
price of such Options; (d) provide that all or any

                                       4
<PAGE>

portion of the Restricted Stock Awards then outstanding shall become free of all
or certain restrictions prior to the consummation of the Acquisition; and (e)
provide that any other stock-based Awards outstanding (x) shall become
exercisable, realizable or vested in full or in part, or shall be free of all or
certain conditions or restrictions, as applicable to each such Award, prior to
the consummation of the Acquisition, or (y), if applicable, shall be assumed, or
equivalent Awards shall be substituted, by the acquiring or succeeding
corporation (or an affiliate thereof); provided that in no event shall the Board
accelerate the vesting of any Option, Restricted Stock Award or other Award by a
period of more than one year.

                (B)  Acquisition Defined.  An "Acquisition" shall mean: (x) the
                     --------------------
sale of the Company by merger in which the shareholders of the Company in their
capacity as such no longer own a majority of the outstanding equity securities
of the Company (or its successor); or (y) any sale of all or substantially all
of the assets or capital stock of the Company (other than in a spin-off or
similar transaction) or (z) any other acquisition of the business of the
Company, as determined by the Board.

         (ii)   Assumption of Options Upon Certain Events.  In connection with a
                ------------------------------------------
merger or consolidation of an entity with the Company or the acquisition by the
Company of property or stock of an entity, the Board may grant Awards under the
Plan in substitution for stock and stock-based awards issued by such entity or
an affiliate thereof.  The substitute Awards shall be granted on such terms and
conditions as the Board considers appropriate in the circumstances.

          (iii)  Pooling-of Interests-Accounting.  If the Company proposes to
                 --------------------------------
engage in an Acquisition intended to be accounted for as a pooling-of-interests,
and in the event that the provisions of this Plan or of any Award hereunder, or
any actions of the Board taken in connection with such Acquisition, are
determined by the Company's or the acquiring company's independent public
accountants to cause such Acquisition to fail to be accounted for as a pooling-
of-interests, then such provisions or actions shall be amended or rescinded by
the Board, without the consent of any Participant, to be consistent with
pooling-of-interests accounting treatment for such Acquisition.

         (iv)   Parachute Awards.  Notwithstanding the provisions of Section
                -----------------
7(e)(i)(A), if, in connection with an Acquisition described therein, a tax under
Section 4999 of the Code would be imposed on the Participant (after taking into
account the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of the
Code), then the number of Awards which shall become exercisable, realizable or
vested as provided in such section shall be reduced (or delayed), to the minimum
extent necessary, so that no such tax would be imposed on the Participant (the
Awards not becoming so accelerated, realizable or vested, the "Parachute
Awards"); provided, however, that if the "aggregate present value" of the
Parachute Awards would exceed the tax that, but for this sentence, would be
imposed on the Participant under Section 4999 of the Code in connection with the
Acquisition, then the Awards shall become immediately exercisable, realizable
and vested without regard to the provisions of this sentence.  For purposes of
the preceding sentence, the "aggregate present value" of an Award shall be
calculated on an after-tax basis (other than taxes imposed by Section 4999 of
the Code) and shall be based on economic principles rather than the principles
set forth under Section 280G of the

                                       5
<PAGE>

Code and the regulations promulgated thereunder. All determinations required to
be made under this Section 7(e)(iv) shall be made by the Company.

         f.  Withholding.  Each Participant shall pay to the Company, or make
             ------------
provisions satisfactory to the Company for payment of, any taxes required by law
to be withheld in connection with Awards to such Participant no later than the
date of the event creating the tax liability.  The Board may allow Participants
to satisfy such tax obligations in whole or in part by transferring shares of
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their fair market value (as determined by the Board or as
determined pursuant to the applicable option agreement).  The Company may, to
the extent permitted by law, deduct any such tax obligations from any payment of
any kind otherwise due to a Participant.

         g.  Amendment of Awards.  The Board may amend, modify or terminate any
             --------------------
outstanding Award including, but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that, except as otherwise provided in Section 7(e)(iii), the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

         h.  Conditions on Delivery of Stock.  The Company will not be
             --------------------------------
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously delivered under the Plan until (i)
all conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.

         i.  Acceleration.  The Board may at any time provide that any Options
             -------------
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of some or all restrictions, or that any other stock-
based Awards may become exercisable in full or in part or free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be, despite the fact that the foregoing actions may (i) cause the
application of Sections 280G and 4999 of the Code if a change in control of the
Company occurs, or (ii) disqualify all or part of the Option as an Incentive
Stock Option.

8.   Miscellaneous
     -------------

     a.  Definitions.
         ------------

         (i)     "Company," for purposes of eligibility under the Plan, shall
                  -------
include any present or future subsidiary corporations of Avici Systems Inc., as
defined in Section 424(f) of the Code (a "Subsidiary"), and any present or
future parent corporation of Avici Systems Inc., as defined in Section 424(e) of
the Code.  For purposes of Awards other than Incentive Stock

                                       6
<PAGE>

Options, the term "Company" shall include any other business venture in which
the Company has a direct or indirect significant interest, as determined by the
Board in its sole discretion.

         (ii)   "Code" means the Internal Revenue Code of 1986, as amended,
                 ----
and any regulations promulgated thereunder.

         (iii)  "employee" for purposes of eligibility under the Plan (but not
                 --------
for purposes of Section 4(b)) shall include a person to whom an offer of
employment has been extended by the Company.

     b.  No Right To Employment or Other Status.  No person shall have any
         ---------------------------------------
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company.  The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan.

     c.  No Rights As Stockholder.  Subject to the provisions of the applicable
         -------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder thereof.

     d.  Effective Date and Term of Plan.  The Plan shall become effective
         --------------------------------
on the date on which it is adopted by the Board.  No Awards shall be granted
under the Plan after the completion of ten years from the date on which the Plan
was adopted by the Board, but Awards previously granted may extend beyond that
date.

     e.  Amendment of Plan.  The Board may amend, suspend or terminate the Plan
         ------------------
or any portion thereof at any time.

     f.  Governing Law.  The provisions of the Plan and all Awards made
         --------------
hereunder shall be governed by and interpreted in accordance with the laws of
Delaware, without regard to any applicable conflicts of law.

                                       7

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