Document:

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                                                                    Exhibit 10.4

                               SYMMETRICOM, INC.

                          DEFERRED COMPENSATION PLAN

                        Effective as of October 1, 1999
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                               TABLE OF CONTENTS

                                                                          Page
                                                                          ----
ARTICLE I       TITLE AND DEFINITIONS..................................    2
ARTICLE II      PARTICIPATION..........................................    4
ARTICLE III     DEFERRAL ELECTIONS.....................................    5
ARTICLE IV      ACCOUNTS...............................................    8
ARTICLE V       VESTING................................................    9
ARTICLE VI      GENERAL DUTIES.........................................    9
ARTICLE VII     DISTRIBUTIONS................................... ......   10
ARTICLE VIII    ADMINISTRATION.........................................   14
ARTICLE IX      MISCELLANEOUS..........................................   16

                                      -i-
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                 SYMMETRICOM, INC. DEFERRED COMPENSATION PLAN

     This Plan, effective as of October 1, 1999 (the "Effective Date"), is
adopted by Symmetricom, Inc. (the "Company"), acting on behalf of itself and its
designated subsidiaries. Throughout, the term "Company" shall include wherever
relevant any entity that is directly or indirectly controlled by the Company,
any entity in which the Company has a significant equity or investment interest,
or any subsidiary of the Company, as determined by the Committee.

                                   RECITALS

     1.  The Company wishes to establish a supplemental retirement plan for the
benefit of the non-employee members of the Company's Board of Directors, and for
a select group of management or highly compensated employees of the Company.

     2.  The Company wishes to provide that the supplemental retirement plan to
be established shall be designated the Symmetricom, Inc. Deferred Compensation
Plan (the "Plan").

     3.  The Company wishes to provide under the Plan for the payment of accrued
vested benefits to Plan participants and their beneficiaries.

     4.  Under the Plan, the Company is obligated to pay vested accrued benefits
to the Plan participants and their beneficiaries from the Company's general
assets.

     5.  The Company intends to enter into an agreement (the "Trust Agreement!)
with to be appointed as trustee (the "Trustee") under an irrevocable trust (the
"Trust") to be used in connection with the Plan.

     6.  The Company intends to make contributions to the Trust so that such
contributions will be held by the Trustee and invested, reinvested and
distributed, all in accordance with the provisions of this Plan and the Trust
Agreement.

     7.  The Company intends that amounts contributed to the Trust and the
earnings thereon shall be used by the Trustee to satisfy the liabilities of the
Company under the Plan with respect to each Plan participant for whom an Account
has been established and such utilization shall be in accordance with the
procedures set forth herein.

     8.  The Company intends that the Trust be a "grantor trust" with the
principal and income of the Trust treated as assets and income of the Company
for federal and state income tax purposes.

     9.  The Company intends that the assets of the Trust shall at all times be
subject to the claims of the general creditors of the Company as provided in the
Trust Agreement.

     10.  The Company intends that the existence of the Trust shall not alter
the characterization of the Plan as "unfunded" for purposes of the Employee
Retirement Income Security Act of 1974,
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as amended ("ERISA"), and shall not be construed to provide income to Plan
participants under the Plan prior to actual payment of the vested accrued
benefits thereunder.

     NOW THEREFORE, the Company hereby establishes the Plan as follows:

                                   ARTICLE I

                             TITLE AND DEFINITIONS

I.1  Title.
     -----

     This Plan shall be known as the Symmetricom, Inc. Deferred Compensation
Plan.

I.2  Definitions.
     -----------

     Whenever the following words and phrases are used in this Plan, with the
first letter capitalized, they shall have the meanings specified below:

     "Account" means, for each Participant, the bookkeeping account maintained
by the Committee that is credited with amounts equal to (a) the portion of the
Participant's Salary that he or she elects to defer, (b) the portion of the
Participant's Commissions that he or she elects to defer, (c) the portion of the
Participant's Bonus that he or she elects to defer, (d) Company Contributions,
if any, made to the Plan for the Participant's benefit, and (e) adjustments to
reflect deemed earnings pursuant to Section 4.1 (d).

     "Beneficiary" or "Beneficiaries" means the beneficiary last designated in
writing by a Participant in accordance with procedures established by the
Committee from time to time to receive the benefits specified hereunder in the
event of the Participant's death. No Beneficiary designation shall become
effective until it is filed with the Committee during the Participant's
lifetime.

     "Board of Directors"' or "Board" means the Board of Directors of the
Company.

     "Bonus" means any cash-based incentive compensation payable (other than
Commissions) to a Participant in addition to the Participant's Salary,

     "Code" means the Internal Revenue Code of 1986, as amended. Reference to a
section of the Code includes such section and any comparable section or sections
of any future legislation that amends, supplements or supersedes such section.

     "Commissions" means any cash-based commission compensation payable to a
Participant.

     "Committee" means the Committee appointed by the Board to administer the
Plan in accordance with Article VIII.

                                       2
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     "Company" means Symmetricom, Inc. ("Symmetricom"), any successor
corporation, any entity that is directly or indirectly controlled by the
Company, or any entity in which the Company has a significant equity or
investment interest, as determined by the Committee.

     "Company Contributions" is defined in Section 3.2

     "Compensation" means the Bonus, Commissions, Salary and/or Directors Fees
that the Participant earns for services rendered to the Company.

     "Director" means a non-employee member of the Board of Directors.

     "Directors Fees" means the annual cash fees paid by the Company, including
retainer fees, committee fees and meeting fees, paid by the Company to non-
employee members of the Board as compensation for serving on the Board.

     "Disability" means total and permanent disability within the meaning of the
Company's long-term disability plan.

     "Distributable Amount" means the amount credited to a Participant's
Account. Such amount shall be valued on the first day of the month following the
calendar quarter in which the Participant is to receive a distribution under
Article VII or as soon as administratively practicable thereafter, as determined
in the sole and absolute discretion of the Committee.

     "Distribution Event" means, with respect to each Participant, (a) the
Participant's termination of employment with the Company (or service on the
Board, in the case of a Director) for any reason, including Retirement, death or
Disability, or (b) a specific date, if specified by the Participant pursuant to
Article VII. A Participant's Distribution Event election shall be made in
writing at such time, on such form and subject to such procedures as the
Committee may, in its sole and absolute discretion, specify from time to time.

     "Eligible Employee" means an Employee who is in a select group of
management or highly-compensated Employees as determined by the Committee.

     "Employee" means a common law employee of the Company regularly-performing
services in the United States.

     "Fund" or "Funds" means one or more of the investment funds selected by the
Committee pursuant to Section 3.3.

     "Initial Election Period" means (a) for Employees who are Eligible
Employees or Directors as of October 1, 1999, the period ending September 15,
1999; otherwise (b) the 30-day period following the Eligible Employee's date of
hire (or appointment to the Board, as applicable) or, if later, upon first
becoming an Eligible Employee or Director.

                                       3
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     "Investment Return" means, for each Fund, an amount equal to the pre-tax
rate of gain or loss on the assets of such Fund (net of applicable fund and
investment charges) during each valuation period, but not less frequently than
monthly.

     "Participant" means any Eligible Employee or Director who elects to defer
Compensation in accordance with Section 3.1.

     "Payment Commencement Date" means as soon as administratively possible
after the first day of the month following the end of the calendar quarter in
which the Participant has a Distribution Event.

     "Plan" means the Symmetricom, Inc. Deferred Compensation Plan set forth
herein, now in effect, or as amended from time to time.

     "Plan Year" means the calendar year; provided, however, for the first short
Plan Year only, "Plan Year" means the period beginning October 1, 1999 and
ending December 31, 1999.

     "Retirement" means the Participant's resignation if, at such time, the
Participant has attained age fifty (50) and completed five (5) Years of Service.

     "Salary" means the Employee's base salary for the Plan Year. Salary
excludes any other form of compensation such as restricted stock, proceeds from
stock options or stock appreciation rights, severance payments, moving expenses,
car or other special allowance, or any other amounts included in an Eligible
Employee's taxable income that is not compensation for services.

     "Years of Service" means the Employee's consecutive years of employment
with the Company and any predecessor employer, as designated by the Committee.
Such years of employment will be measured from the Employee's most recent hire
date.

                                  ARTICLE II

                                 PARTICIPATION

II.1  Participation.
      -------------

     An Eligible Employee or Director shall become a Participant in the Plan by
electing to defer a portion of his or her Compensation in accordance with
Section 3.1.

                                       4
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                                  ARTICLE III

                              DEFERRAL ELECTIONS

III.1  Elections to Defer Compensation.
       -------------------------------

     (a) Initial Election Period.  Each Eligible Employee or Director may elect
         -----------------------
to defer Compensation by filing an election with the Committee that conforms to
the requirements of this Section, on a form approved by the Committee, no later
than the last day of his or her Initial Election Period.

     (b) General Rule.  The amount of Compensation that an Eligible Employee or
         ------------
Director may elect to defer is as follows:

          (1)  Any whole percentage of Salary up to one hundred percent (100%);
               and/or

          (2)  Any whole percentage of Bonus up to one hundred percent (100%);
               and/or

          (3)  Any whole percentage of Commissions up to one hundred percent
               (100%); or

          (4)  Any whole percentage of Directors Fees up to one hundred percent
               (100%);

provided, however, that no election shall be effective to reduce the
Compensation paid to an Eligible Employee for a calendar year to an amount that
is less than the amount necessary to pay (i) applicable employment taxes (e.g.,
FICA, hospital insurance) payable with respect to amounts deferred hereunder,
(ii) amounts necessary to satisfy any other benefit plan withholding
obligations, (iii) any resulting income taxes payable with respect to
Compensation that cannot be so deferred, and (iv) any amounts necessary to
satisfy any wage garnishment or similar type obligations.

     (c)  Minimum Deferrals.  For each Plan Year during which the Eligible
          -----------------
Employee or Director is a Participant, the minimum Compensation that may be
deferred under this Section shall be Five Thousand Dollars ($5,000) (One
Thousand Dollars ($1,000) in the case of Directors); provided, however, that for
the short first Plan Year, the minimum Compensation amount that may be deferred
by Eligible Employees shall be One Thousand Two Hundred Fifty Dollars ($1,250).

     (d)  Effect of Initial Election to Defer Salary and/or Commission.  An
          ------------------------------------------------------------
election to defer Salary and/or Commissions and/or Directors Fees made during an
Initial Election Period shall be effective as to Salary and/or Commissions
and/or Directors Fees earned beginning (in the case of Salary and/or
Commissions) with the first pay period beginning after the Initial Election
Period and beginning (in the case of Directors Fees) with any services performed
as a Director after the Initial Election Period.

     (e)  Effect of Initial Election to Defer Bonus.  An election made on or
          -----------------------------------------
before September 15, 1999, to defer a Bonus shall be effective as to any Bonus
paid for the period ending

                                       5
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June 30, 2000. An election to defer any subsequent Bonus made during an Initial
Election Period shall be effective as to any Bonus paid in the Plan Year
following the Plan Year during which the election is made, provided such
election is filed with the Committee on or before December 15 of the immediately
preceding year.

     (f)  Duration of Salary and/or Commissions and/or Directors Fees Deferral
          --------------------------------------------------------------------
Election.  A deferral election made under subsection (a) or (h) of this Section
--------
shall remain in effect, notwithstanding any change in the Participant's Salary
or Commissions or Directors Fees for the Plan Year for which that election is
made. Subject to the minimum deferral requirement of subsection (c) of this
Section, the percentage of Salary and/or Commissions and/or Directors Fees
designated by the Participant for deferral must be restated, increased, or
decreased by filing a new election, in accordance with the terms of this
Section, with the Committee no later than December 15 of the year immediately
preceding the beginning of the Plan Year for which the election shall be in
effect. A Participant's deferral election shall terminate with respect to future
Salary and/or Commissions and/or Directors Fees upon the earliest of (i) the
Participant ceasing to be an Eligible Employee or Director; (ii) the
Participant's election to discontinue all Salary and/or Commissions and/or
Directors Fees deferrals for the remainder of that Plan Year; in such case, the
election to discontinue contributions shall be irrevocable for that Plan Year
and shall become effective as soon as administratively practicable after it is
filed with the Committee; or (iii) the end of the Plan Year for which the
Participant has a valid election.

     (g)  Duration of Bonus Deferral Election.  A Bonus deferral election made
          -----------------------------------
under subsection (a) or (h) of this Section shall remain in effect for the Plan
Year for which that election is made. Subject to the minimum deferral
requirement of subsection (c) of this Section, the percentage of Bonus
designated by the Participant for deferral must be restated, increased or
decreased by filing a new election, in accordance with the terms of this
Section, with the Committee no later than December 15 of the year immediately
preceding the beginning of the Plan Year for which the election shall be in
effect. A Participant's Bonus deferral election shall terminate with respect to
future Bonuses upon the Participant ceasing to be an Eligible Employee.

     (h)  Elections Other Than Elections During the Initial Election Period. Any
          -----------------------------------------------------------------
Eligible Employee or Director who fails to elect to defer Compensation during
his or her Initial Election Period may subsequently become a Participant, and
any Eligible Employee or Director who has terminated a prior deferral election
may again elect to defer Compensation, by filing an election, on a form approved
by the Committee, to defer Compensation as described in subsection (b) above. An
election to defer Compensation must be filed no later than December 15 (or such
other date as the Committee may establish from time to time) and will be
effective for Salary and/or Commissions and/or Directors Fees earned beginning
(in the case of Salary and/or Commissions) with the first pay period beginning
on and after the beginning of the next succeeding Plan Year and as to any
Directors Fees or Bonus paid for the fiscal year after the election is made.

     (i)  Termination of Deferral Election. Notwithstanding the foregoing, a
          --------------------------------
Participant may, at any time, terminate his or her deferral election with
respect to Compensation not yet earned or

                                       6
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payable. A Participant who so terminates his or her deferral election may again
defer Compensation by timely filing an election for a subsequent Plan Year,
provided that a Participant may not so terminate his or her deferral election
more than twice during the period of his or her Plan participation; and provided
further, that a Participant who terminates his or her deferral election for a
Plan Year and who has not, with respect to such Plan Year, met the minimum
deferral requirement of subsection (c) of this Section, shall be refunded any
amounts deferred for such Plan Year, together with any earnings credited
thereon, promptly following termination of his or her deferral election

III.2  Company Contributions.
       ---------------------

     The Company may, in its sole and absolute discretion, make discretionary
contributions to the Accounts of one or more Participants at such times and in
such amounts as the Board may determine.

III.3  Investment Elections.
       --------------------

     The Committee may, in its sole and absolute discretion, provide each
Participant with a list of investment Funds available for hypothetical
investment, and the Participant may designate, in a manner specified by the
Committee, one or more Funds that his or her Account will be deemed to be
invested in for purposes of determining the amount of earnings to be credited to
that Account. The Committee may, from time to time, in its sole and absolute
discretion, select a commercially-available fund to constitute the Fund actually
selected. The Investment Return of each such commercially-available fund shall
be used to determine the amount of earnings to be credited to Participants'
Accounts under subsection 4.1 (d).

     In making the designation pursuant to this Section, the Participant may
specify that all or any one percent (1%) multiple of his or her Account be
deemed to be invested in one or more of the Funds offered by the Committee.
Subject to such limitations and conditions as the Committee may specify, a
Participant may change the designation made under this Section in such manner
and at such time or times as the Committee shall specify. If a Participant fails
to elect a Fund under this Section or if the Committee shall not provide such
Participant with a list of Funds pursuant to this Section, then the Participant
shall be deemed to have elected a money market or similar fund.

     The Company may, but need not, acquire investments corresponding to those
designated by the Participants hereunder, and it is not under any obligation to
maintain any investment it may make. Any such investments, if made, shall be
Company property in which no Participant shall have any interest.

                                       7
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                                  ARTICLE IV

                                   ACCOUNTS

IV.1  Participant Accounts.
      --------------------

     The Committee shall establish and maintain an Account for each Participant
under the Plan. Each Participant's Account may be further divided into separate
subaccounts ("investment fund subaccounts"), corresponding to investment Funds
elected by the Participant pursuant to Section 3.3 or as otherwise determined by
the Committee to be necessary or appropriate for proper Plan administration. A
Participant's Account shall be credited as follows:

     (a)  As soon as administratively practicable after the last day of the
month during which a payroll withholding is made for a Participant, the
Committee shall credit the investment fund subaccounts of that Participant's
Account with an amount equal to Salary and/or Commissions and/or Directors Fees
deferred by the Participant during each pay period falling in that month in
accordance with the Participant's election; that is, the portion of the
Participant's deferred Salary and/or Commissions and/or Directors Fees that the
Participant has elected to be deemed to be invested in a certain type of
investment Fund shall be credited to the investment fund subaccount
corresponding to that investment Fund.

     (b)  At the end of the month after each Bonus or partial Bonus would have
been paid, or as soon as administratively practicable thereafter, the Committee
shall credit the investment fund subaccounts of the Participant's Account with
an amount equal to the portion of the Bonus deferred by the Participant's
election; that is, the portion of the Participant's deferred Bonus that the
Participant has elected to be deemed to be invested in a certain type of
investment Fund shall be credited to the investment fund subaccount
corresponding to that investment Fund.

     (c)  As soon as administratively practicable after the last day of the Plan
Year or such earlier time or times as the Committee may determine, the Committee
shall credit the investment fund subaccounts of the Participant's Account with
an amount equal to the portion, if any, of any Company Contribution made to or
for the Participant's benefit in accordance with Section 3.3; that is, the
portion of the Participant's Company Contribution, if any, that the Participant
has elected to be deemed to be invested in a certain type of investment Fund
shall be credited to the investment fund subaccount corresponding to that
investment Fund.

     (d)  At such time or times as the Committee may determine, but not less
frequently than monthly, each investment fund subaccount of a Participant's
Account shall be credited with earnings in an amount equal to that determined by
multiplying the balance credited to such investment fund subaccount as of the
last day of the preceding valuation period by the Investment Return for the
corresponding Fund selected by the Company.

                                       8
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                                   ARTICLE V

                                    VESTING

V.1  Account.
     -------

     (a) Compensation Deferrals.  A Participant's Account attributable to
         ----------------------
Compensation deferred by a Participant pursuant to the terms of this Plan,
together with any amounts credited to the Participant's Account under Section
4.1(d) with respect to such deferrals, shall be one hundred percent (100%)
vested at all times.

     (b) Company Contributions.  The value of a Participant's Account
         ---------------------
attributable to any Company Contributions pursuant to Section 3.2 shall vest at
such time or times as the Board shall specify in connection with any such
contributions. Unless otherwise specified by the Board, Participants shall be
one hundred percent (100%) vested in such amounts together with any amounts
credited to the Participant's Account under Section 4.1(d) with respect to such
amounts.

                                  ARTICLE VI

                                GENERAL DUTIES

VI.1 Trustee Duties.
     --------------

     The Trustee shall manage, invest and reinvest the Trust Fund as provided in
the Trust Agreement. The Trustee shall collect the income on the Trust Fund, and
make distributions therefrom, all as provided in this Plan and in the Trust
Agreement.

VI.2 Company Contributions.
     ---------------------

          While the Plan remains in effect, the Company shall make contributions
     to the Trust Fund at least once each quarter. As soon as administratively
     practicable after the close of each Plan quarter, the Company shall make an
     additional contribution to the Trust Fund to the extent that previous
     contributions to the Trust Fund for the current Plan quarter are less than
     the total of the Compensation deferrals made by each Participant plus
     Company Contributions, if any, accrued as of the close of the current Plan
     quarter.

VI.3 Department of Labor Determination.
     ---------------------------------

     In the event that any Participants are found to be ineligible, that is, not
members of a select group of management or highly compensated employees,
according to a determination made by the Department of Labor, the Committee may
take whatever steps it deems necessary, in its sole and absolute discretion, to
equitably protect the interests of the affected Participants.

                                       9
<PAGE>

                                  ARTICLE VII

                                 DISTRIBUTIONS

VII.1  Distribution of Deferred Compensation - Termination of Employment.
       ------------------------------------------------------------------

       (a) Automatic Form of Distribution.  Subject to Section 7.2(b) below, in
           ------------------------------
the event that a Participant's employment terminates for any reason, then the
Participant's Distributable Amount shall automatically be paid to the
Participant (and after the Participant's death to his or her Beneficiary) in a
cash lump sum payment payable on his or her Payment Commencement Date.

       (b) Optional Forms of Distribution.
           ------------------------------

          (1) An eligible Participant may, in lieu of a lump sum distribution
specified in Section 7.1(a) above, elect any of the following optional forms of
distribution based on his or her Years of Service (subject to Section 7.1(c)
below):

                  Years of Service              Form(s) of Distribution
             -------------------------          -----------------------

             More than 4 but less than 7        20 quarterly installments
             More than 6 but less than 10       20 or 40 quarterly installments
             10 years or more                   20, 40, or 60 Quarterly
                                                installments

In addition, a Participant whose employment terminates due to Disability shall
be eligible for the same optional forms of distribution as a Participant with
ten (10) or more Years of Service. If a Participant is eligible for and elects
installment payments, then the substantially-equal quarterly installments shall
begin on the Participant's Payment Commencement Date.

          (2) Upon a Participant's termination of employment for any reason, all
of his or her Plan Year's distribution elections will be cancelled in favor of
the most recent termination distribution election, provided that such election
was made at least one (1) year prior to the Participant's termination;
otherwise, the most recent distribution election made by the Participant one (1)
or more years prior to the date of his or her termination shall govern.

     (c)  Distribution Elections.
          ----------------------

          (1) A Participant may make such distribution election by completing a
form approved by and filed with the Committee within thirty (30) days (or such
other period as the Committee may establish from time to time) of the date the
Eligible Employee first becomes a Participant. A Participant may change his or
her form of distribution under this Section provided that he or she files the
change with the Committee at least one (1) year prior to his or her Payment
Commencement Date.

                                       10
<PAGE>

            (2) Notwithstanding the foregoing, if the Participant's
Distributable Amount is Fifty Thousand Dollars ($50,000) or less, the
Distributable Amount shall automatically be distributed in the form of a cash
lump sum on the Participant's Payment Commencement Date.

            (3) If the Participant's Distributable Amount is paid in
installments, the Participant's Account shall continue to be credited monthly
with earnings pursuant to Section 4.1(d) and the installment amount shall be
adjusted annually to reflect gains and losses until all amounts credited to his
or her Account under the Plan have been distributed.

            (4) Amounts payable pursuant to this Section shall be subject to the
limitation on payout under Section 7.4.

       (d) Death While Receiving Benefits. If the Participant is receiving
           ------------------------------
installment payments at the time of his or her death, then the Participant's
Beneficiary shall be paid the remaining quarterly installments as they come due.
Under all other circumstances, if the Participant dies prior to receiving any of
his or her Account, such Participant's Distributable Amount shall be paid to his
or her Beneficiary in a cash lump sum payment.

VII.2  Scheduled and Unscheduled In-Service Withdrawals.
       ------------------------------------------------

       (a) Scheduled In-Service Withdrawal. A Participant may, in connection
           -------------------------------
with his or her Compensation deferral election for a Plan Year, specify a
withdrawal (a "Scheduled In-Service Withdrawal") of all of his or her Account
attributable to Compensation deferred for such Plan Year, including any amounts
credited with respect to such deferrals pursuant to Section 4.1(d), subject to
the following restrictions:

              (1) A Participant's Scheduled In-Service Withdrawal election must
specify a Scheduled In-Service Withdrawal date that is at least two (2) years
(or such longer period) from the date the election is received by the Company. A
Participant may revoke his or her scheduled withdrawal election or may amend
such election consistent with the preceding sentence with at least one year's
advance notice thereof, provided that a Participant may not revoke or amend a
scheduled withdrawal election (whether or not relating to the same Distributable
Amount) more than twice during his or her period of Plan participation.

              (2) The election to take a Scheduled In-Service Withdrawal shall
be made by completing a form approved by and filed with the Committee.

              (3) The amount payable to a Participant in connection with a
Scheduled In-Service Withdrawal shall in all cases be one hundred percent (100%)
of the Compensation deferred for the Plan Year with respect to which the
election applies, together with any earnings credited to such amount pursuant to
Section 4.1(d), determined as of the end of the calendar month preceding the
month of the Scheduled In-Service Withdrawal date.

                                       11
<PAGE>

              (4) Subject to Section 7.4, payment of a Scheduled In-Service
Withdrawal shall be made in either a single lump sum or in quarterly
installments over a two (2), three (3), four (4) or five (5)-year period (as
elected by the Participant). Lump sum distributions shall be paid in January of
the year specified on the election form. Quarterly distributions shall commence
in January of the year specified on the election form, and shall continue to be
paid as soon as practicable following the end of the calendar quarter, for the
duration elected on the election form.

              (5) A Participant's Scheduled In-Service Withdrawal election shall
become void and of no effect upon termination of the Participant's employment
with the Company for any reason before the Participant's scheduled withdrawal
date. In such event, the distribution provisions of Section 7.1 shall apply.

        (b)   Unscheduled In-Service Withdrawals.  Participants may request to
              ----------------------------------
withdraw amounts from their Accounts attributable to Compensation deferrals
prior to termination of employment with the Company (an "Unscheduled In-Service
Withdrawal"). Upon receiving an Unscheduled In-Service Withdrawal request, the
Committee shall authorize such Unscheduled In-Service Withdrawal subject to the
following restrictions:

              (1)  The election to take an Unscheduled In-Service Withdrawal
shall be made by completing a form approved by and filed with the Committee.

              (2)  The amount payable to a Participant in connection with an
Unscheduled In-Service Withdrawal shall equal ninety percent (90%) of the
Distributable Amount. Notwithstanding the foregoing, if more than ten percent
(10%) of the Distributable Amount consists of Company Contributions (and
earnings thereon), then the Unscheduled In-Service Withdrawal amount (the "In-
Service Withdrawal Amount") shall not include any amounts attributable to
Company Contributions (and earnings thereon). The In-Service Withdrawal Amount
shall be calculated as of the end of the calendar month immediately preceding
the month in which the Unscheduled In-Service Withdrawal is made. The In-Service
Withdrawal Amount (and not the forfeited amount) shall be subject to all
applicable Federal and state income taxes.

              (3)  If a Participant receives an Unscheduled In-Service
Withdrawal, the remaining portion of the Distributable Amount, as applicable
(i.e., ten percent (10%) of such amount), shall be permanently forfeited and the
Company shall have no obligation to the Participant or his or her Beneficiary
with respect to such forfeited amount.

              (4)  If a Participant receives an Unscheduled In-Service
Withdrawal, the Participant shall be ineligible to participate in the Plan for
the balance of the Plan Year in which the Unscheduled In-Service Withdrawal
occurs and all of the following Plan Year.

              (5)  An Unscheduled In-Service Withdrawal of the Participant's
Distributable Amount pursuant to this Section shall be made pro rata from his or
her assumed investments according to the balances in such investments. Subject
to the foregoing and subject to the

                                     -12-
<PAGE>

Committee's approval payment of any amount with respect to which a Participant
has filed a request under this Section shall be made in a single cash lump sum
as soon as administratively practicable after the Unscheduled In-Service
Withdrawal election is approved.

VII.3  Unforeseeable Emergency Withdrawal.
       ----------------------------------

        (a)   Triggering an Unforeseeable Emergency Hardship Withdrawal.  The
              ----------------------------------------------------------
Committee may, in its sole and absolute discretion, accelerate the date of
distribution of a Participant's Account because of an Unforeseeable Emergency at
any time. "Unforeseeable Emergency" shall mean an unforeseeable, severe
financial condition resulting from (1) a sudden and unexpected illness or
accident of the Participant or his or her dependent (as defined in Section
152(a) of the Code); (2) loss of the Participant's property due to casualty; or
(3) other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, but which may not be
relieved through other available resources of the Participant, as determined by
the Committee. If a Participant receives a distribution pursuant to this
Section, the Participant shall be ineligible to  participate in the Plan for the
balance of the Plan Year in which the distribution occurs and all of the
following Plan Year.

       (b)   Distribution Attributable to an Unforeseeable Emergency. Unless the
             -------------------------------------------------------
Committee, in its sole and absolute discretion, determines otherwise,
distribution pursuant to this Section of less than the Participant's entire
interest in the Plan shall be made pro rata from his or her assumed investments
according to the balances in such investments. Subject to the foregoing, payment
of any amount with respect to which a Participant has filed a request under this
Section shall be made in a single cash lump sum as soon as administratively
practicable after the Committee approves the Participant's request.

VII.4  Section 162(m) Limitation.
       -------------------------

       If the Committee determines in good faith that there is a reasonable
likelihood that all or any portion of any payment of benefits under this Article
VII to a Participant would not be deductible for federal income tax purposes by
the Company because of a limitation on the total amount of the Participant's
deductible compensation from the Company, including any other such compensation
already paid to the Participant earlier in the same fiscal year of the Company,
the following shall apply:

       (a) Payment of the non-deductible amount shall be deferred until the
first day of the following fiscal year of the Company;

       (b) If the amount deferred under subsection (a) above would exceed the
limitation of the total amount of the Participant's deductible compensation from
the Company for the following fiscal year, the excess shall be deferred to the
first day of the succeeding fiscal year in which the deductibility of
compensation paid or payable to the Participant will not be so limited, subject
to subsection (c) below;

                                  -13-
<PAGE>

       (c) In no event shall any payment be deferred under this Section more
than three (3) years from the date scheduled for payment under this Article VII;
and

       (d) Adjustment for earning shall continue to be applied under Section
4.1(d) duri ng the period of deferral under this Section.

VII.5  Inability To Locate Participant.
       -------------------------------

       In the event that the Committee is unable to locate a Participant or
Beneficiary within two (2) years following the Participant's Distribution Event,
the amount allocated to the Participant's Deferral Account shall be forfeited.
If, after such forfeiture, the Participant or Beneficiary later claims such
benefit, such benefit (calculated immediately prior to the forfeiture) shall be
reinstated without interest or earnings.

                                 ARTICLE VIII

                                ADMINISTRATION

VIII.1  Committee.
        ---------

        A Committee shall be appointed by, and serve at the pleasure of, the
Board. The number of members comprising the Committee shall be determined by the
Board, which may from time to time vary the number of members. A member of the
Committee may resign by delivering a written notice of resignation to the Board.
The Board may remove any member by delivering a certified copy of its resolution
of removal to such member. Vacancies in the membership of the Committee shall be
filled promptly by the Board.

VIII.2  Committee Action.
        ----------------

        The Committee shall act at meetings by affirmative vote of a majority of
the members of the Committee. Any action permitted to be taken at a meeting may
be taken without a meeting if a written consent to the action is signed by all
members of the Committee and such written consent is filed with the minutes of
the proceedings of the Committee. A member of the Committee shall not vote or
act upon any matter that relates solely to himself or herself as a Participant.
The chairman or any other member or members of the Committee designated by the
chairman may execute any certificate or other written direction on behalf of the
Committee.

VIII.3  Powers and Duties of the Committee.
        ----------------------------------

        (a) The Committee, on behalf of the Participants and their
Beneficiaries, shall enforce the Plan in accordance with its terms, shall be
charged with the general administration of the Plan and shall have all powers
necessary to accomplish its purposes, including, but not by way of limitation,
the following:

                                       14
<PAGE>

          (1)  To select the funds to be the Funds in accordance with Section
               3.3 hereof;

          (2)  To construe and interpret the terms and provisions of this Plan;

          (3)  To amend, modify, suspend or terminate the Plan in accordance
               with Section 9.4;

          (4)  To compute and certify the amount and kind of benefits payable to
               Participants and their Beneficiaries and to direct the Trustee as
               to the distribution of Plan assets;

          (5)  To maintain all records that may be necessary for the
               administration of the Plan;

          (6)  To provide for the disclosure of all information and the filing
               or provision of all reports and statements to Participants,
               Beneficiaries or governmental agencies as shall be required by
               law;

          (7)  To make and publish such rules for the regulation of the Plan and
               procedures for the administration of the Plan as are not
               inconsistent with the terms hereof;

          (8)  To appoint a plan administrator or any other agent, and to
               delegate to them such powers and duties in connection with the
               administration of the Plan as the Committee may from time to time
               prescribe;

          (9)  To designate the subsidiaries that will participate in the Plan;
               and

          (10) To determine the entities that constitute predecessor employers
               for purposes of determining Years of Service.

VIII.4 Construction and Interpretation.
       -------------------------------

       The Committee shall have full discretion to construe and interpret the
terms and provisions of this Plan, which interpretation or construction shall be
final and binding on all parties, including but not limited to the Company and
any Participant or Beneficiary.

VIII.5 Information.
       -----------

       To enable the Committee to perform its functions, the Company shall
supply full and timely information to the Committee on all matters relating to
the Compensation of all Participants, their death or other cause of termination,
and such other pertinent facts as the Committee may reasonably require.

                                       15
<PAGE>

VIII.6  Compensation, Expenses and Indemnity.
        ------------------------------------

     (a) The members of the Committee shall serve without compensation for their
services hereunder.

     (b) The Committee is authorized at the expense of the Company to employ
such legal counsel as it may deem advisable to assist in the performance of its
duties hereunder. Expenses and fees in connection with the administration of the
Plan shall be paid by the Company.

     (c) To the extent permitted by applicable state law, the Company shall
indemnify and save harmless the Committee and each member thereof, the Board and
any delegate of the Committee who is an employee of the Company against any and
all expenses, liabilities and claims, including legal fees to defend against
such liabilities and claims arising out of their discharge in good faith of
responsibilities under or incident to the Plan, other than expenses and
liabilities arising out of willful misconduct or gross negligence. This
indemnity shall not preclude such further indemnities as may be available under
insurance purchased by the Company or provided by the Company under any bylaw,
agreement or otherwise, as such indemnities are permitted under state law.

VIII.7  Quarterly Statements.
        --------------------

     Under procedures established by the Committee, a Participant shall receive
a statement with respect to such Participant's Account on a quarterly basis.

                                  ARTICLE IX

                                 MISCELLANEOUS

IX.1  Unsecured General Creditor.
      --------------------------

     Participants and their Beneficiaries, heirs, successors, and assigns shall
have no legal or equitable rights, claims, or interests in any specific property
or assets of the Company. No assets of the Company shall be held in any way as
collateral security for the fulfilling of the obligations of the Company under
this Plan. Any and all of the Company's assets shall be, and remain, the general
unpledged, unrestricted assets of the Company. The Company's obligation under
the Plan shall be merely that of an unfunded and unsecured promise of the
Company to pay money in the future, and the rights of the Participants and
Beneficiaries shall be no greater than those of unsecured general creditors.

IX.2  Restriction Against Assignment.
      ------------------------------

     The Company shall pay all amounts payable hereunder only to the person or
persons designated by the Plan and not to any other person or corporation. No
part of a Participant's Account shall be liable for the debts, contracts, or
engagements of any Participant, his or her Beneficiary, or successors in
interest, nor shall a Participant's Account be subject to execution by

                                       16
<PAGE>

levy, attachment, or garnishment or by any other legal or equitable proceeding,
nor shall any such person have any right to alienate, anticipate, commute,
pledge, encumber, or assign any benefits or payments hereunder in any manner
whatsoever.  If any Participant, Beneficiary or successor in interest is
adjudicated bankrupt or purports to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge any distribution or payment from the Plan,
voluntarily or involuntarily, the Committee, in its sole and absolute
discretion, may cancel such distribution or payment (or any part thereof) to or
for the benefit of such Participant, Beneficiary or successor in interest in
such manner as the Committee shall direct.

IX.3  Withholding.
      -----------

     There shall be deducted from each payment made under the Plan, all taxes
that are required to be withheld by the Company in respect to such payment. The
Company shall have the right to reduce any payment by the amount of cash
sufficient to provide the amount of said taxes.

IX.4  Amendment, Modification, Suspension or Termination.
      --------------------------------------------------

     The Committee may amend, modify, suspend or terminate the Plan in whole or
in part, except that no amendment, modification, suspension or termination shall
have any retroactive effect to reduce any amounts allocated to a Participant's
Account, provided that a termination or suspension of the Plan or any Plan
amendment or modification that will significantly increase costs to the Company
shall be approved by the Board. In the event that this Plan is terminated, the
timing of the disposition of the amounts credited to a Participant's Account
shall occur in accordance with Section 7.1, subject to earlier distribution at
the discretion of the Committee.

IX.5  Governing Law.
      -------------

     This Plan shall be construed, governed and administered in accordance with
the laws of the State of California.

IX.6  Receipt or Release.
      ------------------

     Any payment to a Participant or the Participant's Beneficiary in accordance
with the provisions of the Plan shall, to the extent thereof, be in full
satisfaction of all claims against the Committee and the Company. The Committee
may require such Participant or Beneficiary, as a condition precedent to such
payment, to execute a receipt and release to such effect.

IX.7  Payments on Behalf of Persons Under Incapacity.
      ----------------------------------------------

     In the event that any amount becomes payable under the Plan to a person
who, in the sole judgment of the Committee, is considered by reason of physical
or mental condition to be unable to give a valid receipt therefore, the
Committee may direct that such payment be made to any person found by the
Committee, in its sole judgment, to have assumed the care of such person. Any
payment

                                       17
<PAGE>

made pursuant to such determination shall constitute a full release and
discharge of the Committee and the Company.

IX.8  No Employment Rights.
      --------------------

     Participation in this Plan shall not confer upon any person any right to be
employed by the Company or any other right not expressly provided hereunder.

IX.9  Headings, etc. Not Part of Agreement.
      ------------------------------------

     Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.

     IN WITNESS WHEREOF, the Company has caused this document to be executed by
its duly authorized officer on this _____ day of _____________, 1999.

                                    SYMMETRICOM INC.

                                    By:   /s/
                                        ----------------------------------------

                                    Title:______________________________________

                                       18<PAGE>

                                                                    Exhibit 10.3

                              Clarent Corporation

                1999 Non-Employee Directors' Stock Option Plan

                Adopted by the Board of Directors April 8, 1999
                    Approved By Stockholders June 22, 1999
                Amended by the Board of Directors April 7, 2000
                     Approved By Stockholders June 7, 2000
             Amended by the Board of Directors on October 31, 2000
              Amended by the Board of Directors on April 12, 2001

                         Effective Date: June 30, 1999

1.   Purposes.

     (a)  Eligible Option Recipients. The persons eligible to receive Options
          are the Non-Employee Directors of the Company.

     (b)  Available Options. The purpose of the Plan is to provide a means by
          which Non-Employee Directors may be given an opportunity to benefit
          from increases in value of the Common Stock through the granting of
          Nonstatutory Stock Options.

     (c)  General Purpose. The Company, by means of the Plan, seeks to retain
          the services of its Non-Employee Directors, to secure and retain the
          services of new Non-Employee Directors and to provide incentives for
          such persons to exert maximum efforts for the success of the Company
          and its Affiliates.

2.   Definitions.

     (a)  "Affiliate" means any parent corporation or subsidiary corporation of
          the Company, whether now or hereafter existing, as those terms are
          defined in Sections 424(e) and (f), respectively, of the Code.

     (b)  "Annual Grant" means an Option granted annually to all Non-Employee
          Directors who meet the specified criteria specified in subsection 6(b)
          of the Plan.

     (c)  "Annual Meeting" means the annual meeting of the stockholders of the
          Company.

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

     (e)  "Code" means the Internal Revenue Code of 1986, as amended.

     (f)  "Common Stock" means the common stock of the Company.

                                       1.
<PAGE>

     (g)  "Company" means Clarent Corporation, a Delaware corporation.

     (h)  "Consultant" means any person, including an advisor, (i) engaged by
          the Company or an Affiliate to render consulting or advisory services
          and who is compensated for such services or (ii) who is a member of
          the Board of Directors of an Affiliate. However, the term "Consultant"
          shall not include either Directors of the Company who are not
          compensated by the Company for their services as Directors or
          Directors of the Company who are merely paid a director's fee by the
          Company for their services as Directors.

     (i)  "Continuous Service" means that the Optionholder's service with the
          Company or an Affiliate, whether as an Employee, Director or
          Consultant, is not interrupted or terminated. The Optionholder's
          Continuous Service shall not be deemed to have terminated merely
          because of a change in the capacity in which the Optionholder renders
          service to the Company or an Affiliate as an Employee, Consultant or
          Director or a change in the entity for which the Optionholder renders
          such service, provided that there is no interruption or termination of
          the Optionholder's Continuous Service. For example, a change in status
          from a Non-Employee Director of the Company to a Consultant of an
          Affiliate or an Employee of the Company will not constitute an
          interruption of Continuous Service. The Board or the chief executive
          officer of the Company, in that party's sole discretion, may determine
          whether Continuous Service shall be considered interrupted in the case
          of any leave of absence approved by that party, including sick leave,
          military leave or any other personal leave.

     (j)  "Director" means a member of the Board of Directors of the Company.

     (k)  "Disability" means the inability of a person, in the opinion of a
          qualified physician acceptable to the Company, to perform the major
          duties of that person's position with the Company or an Affiliate of
          the Company because of the sickness or injury of the person.

     (l)  "Employee" means any person employed by the Company or an Affiliate.
          Mere service as a Director or payment of a director's fee by the
          Company or an Affiliate shall not be sufficient to constitute
          "employment" by the Company or an Affiliate.

     (m)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     (n)  "Fair Market Value" means, as of any date, the value of the Common
          Stock determined as follows:

          (i)  If the Common Stock is listed on any established stock exchange
               or traded on the NASDAQ National Market System or the NASDAQ
               SmallCap Market, the Fair Market Value of a share of Common Stock
               shall be the closing sales price for such stock (or the closing
               bid, if no sales were reported) as quoted on such exchange or
               market (or the exchange or

                                       2.
<PAGE>

               market with the greatest volume of trading in the Common Stock)
               on the date of determination, or if such date is not a trading
               day, the last trading day prior to the date of determination, as
               reported in The Wall Street Journal or such other source as the
               Board deems reliable.

          (ii) In the absence of such markets for the Common Stock, the Fair
               Market Value shall be determined in good faith by the Board.

     (o)  "Initial Grant" means an Option granted to a Non-Employee Director who
          meets the specified criteria pursuant to subsection 6(a) of the Plan.

     (p)  "IPO Date" means the effective date of the initial public offering of
          the Common Stock.

     (q)  "Non-Employee Director" means a Director who is neither employed by
          the Company or an Affiliate nor a representative of a five percent
          (5%) or greater stockholder.

     (r)  "Nonstatutory Stock Option" means an Option not intended to qualify as
          an incentive stock option within the meaning of Section 422 of the
          Code and the regulations promulgated thereunder.

     (s)  "Officer" means a person who is an officer of the Company within the
          meaning of Section 16 of the Exchange Act and the rules and
          regulations promulgated thereunder.

     (t)  "Option" means a Nonstatutory Stock Option granted pursuant to the
          Plan.

     (u)  "Option Agreement" means a written agreement between the Company and
          an Optionholder evidencing the terms and conditions of an individual
          Option grant. Each Option Agreement shall be subject to the terms and
          conditions of the Plan.

     (v)  "Optionholder" means a person to whom an Option is granted pursuant to
          the Plan or, if applicable, such other person who holds an outstanding
          Option.

     (w)  "Plan" means this Clarent Corporation 1999 Non-Employee Directors'
          Stock Option Plan.

     (x)  "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
          any successor to Rule 16b-3, as in effect from time to time.

     (y)  "Securities Act" means the Securities Act of 1933, as amended.

3.   Administration.

     (a)  Administration by Board. The Board shall administer the Plan unless
          and until the Board delegates administration to a committee.

                                       3.
<PAGE>

     (b)  Powers of Board. The Board shall have the power, subject to, and
          within the limitations of, the express provisions of the Plan:

          (i)    To determine the provisions of each Option to the extent not
                 specified in the Plan.

          (ii)   To construe and interpret the Plan and Options granted under
                 it, and to establish, amend and revoke rules and regulations
                 for its administration. The Board, in the exercise of this
                 power, may correct any defect, omission or inconsistency in the
                 Plan or in any Option Agreement, in a manner and to the extent
                 it shall deem necessary or expedient to make the Plan fully
                 effective.

          (iii)  To amend the Plan or an Option as provided in Section 12.

          (iv)   Generally, to exercise such powers and to perform such acts as
                 the Board deems necessary or expedient to promote the best
                 interests of the Company which are not in conflict with the
                 provisions of the Plan.

4.   Shares Subject to the Plan.

     (a)  Share Reserve. Subject to the provisions of Section 11 relating to
          adjustments upon changes in stock, the stock that may be issued
          pursuant to Options shall not exceed in the aggregate Five Hundred
          Thousand (500,000) shares of Common Stock.

     (b)  Reversion of Shares to the Share Reserve. If any Option shall for any
          reason expire or otherwise terminate, in whole or in part, without
          having been exercised in full, the stock not acquired under such
          Option shall revert to and again become available for issuance under
          the Plan.

     (c)  Source of Shares. The stock subject to the Plan may be unissued shares
          or reacquired shares, bought on the market or otherwise.

5.   Eligibility.

     Nondiscretionary Options as set forth in section 6 shall be granted under
     the Plan to all Non-Employee Directors.

6.   Non-Discretionary Grants.

     (a)  Initial Grants. Without any further action of the Board, each Non-
          Employee Director shall be granted the following Options:

          (i)    After March 31, 2000, each person who is elected or appointed
                 for the first time to be a Non-Employee Director automatically
                 shall, upon the date of his or her initial election or
                 appointment to be a Non-Employee Director

                                       4.
<PAGE>

               by the Board or stockholders of the Company, be granted an
               Initial Grant to purchase Thirty Five Thousand (35,000) shares of
               Common stock on the terms and conditions set forth herein.

          (ii) On the day following the first Annual Meeting after the IPO Date,
               each person who is then a Non-Employee Director and who served as
               a Non-Employee Director prior to March 31, 2000, automatically
               shall be granted an Option to purchase that number of shares of
               Common Stock equal to Thirty Five Thousand (35,000) shares of
               Common Stock less the number of shares of Common Stock subject to
               Options granted to such Non-Employee Director since the IPO Date.

     (b)  Annual Grants. Without any further action of the Board, on the day
          following each Annual Meeting commencing with the first Annual Meeting
          following the IPO Date, each person who is then a Non-Employee
          Director automatically shall be granted an Annual Grant to purchase
          Fifteen Thousand (15,000) shares of Common Stock on the terms and
          conditions set forth herein; provided, however, that if the person has
          not been serving as a Non-Employee Director for the entire period
          since the preceding Annual Meeting, then the number of shares subject
          to the Annual Grant shall be reduced pro rata for each full quarter
          prior to the date of grant during which such person did not serve as a
          Non-Employee Director.

7.   Option Provisions.

     Each Option shall be in such form and shall contain such terms and
conditions as required by the Plan.  Each Option shall contain such additional
terms and conditions, not inconsistent with the Plan, as the Board shall deem
appropriate.  Each Option shall include (through incorporation of provisions
hereof by reference in the Option or otherwise) the substance of each of the
following provisions:

     (a)  Term.  No Option shall be exercisable after the expiration of ten (10)
          years from the date it was granted.

     (b)  Exercise Price. The exercise price of each Option shall be one hundred
          percent (100%) of the Fair Market Value of the stock subject to the
          Option on the date the Option is granted. Notwithstanding the
          foregoing, an Option may be granted with an exercise price lower than
          that set forth in the preceding sentence if such Option is granted
          pursuant to an assumption or substitution for another option in a
          manner satisfying the provisions of Section 424(a) of the Code.

     (c)  Consideration. The purchase price of stock acquired pursuant to an
          Option may be paid, to the extent permitted by applicable statutes and
          regulations, in any combination of (i) cash or check, (ii) delivery to
          the Company of other Common Stock, (iii) deferred payment, (iv)
          pursuant to a Regulation T Program if the Shares are publicly traded
          or (v) any other form of legal consideration that may be acceptable to
          the Board and provided in the Option Agreement; provided,

                                       5.
<PAGE>

          however, that at any time that the Company is incorporated in
          Delaware, payment of the Common Stock's "par value," as defined in the
          Delaware General Corporation Law, shall not be made by deferred
          payment.

     In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

     (d)  Transferability. An Option shall not be transferable other than to
          "family members" as defined by Rule 701 of the Securities Act of 1933,
          as amended, and by will or by the laws of descent and distribution,
          and shall be exercisable during the lifetime of the Optionholder only
          by the Optionholder or such "family members" who are also transferees.
          Notwithstanding the foregoing, the Optionholder may, by delivering
          written notice to the Company, in a form satisfactory to the Company,
          designate a third party who, in the event of the death of the
          Optionholder, shall thereafter be entitled to exercise the Option.

     (e)  Exercise Schedule. The Option shall be exercisable as the shares of
          Common Stock subject to the Option vest.

     (f)  Vesting Schedule. Options shall vest as follows: (i) one twenty-fourth
          (1/24th) of the shares of Common Stock subject to the Option shall
          vest each month after the date of the grant of the Option over a
          period of two (2) years.

     (g)  Termination of Continuous Service. In the event an Optionholder's
          Continuous Service terminates (other than upon the Optionholder's
          death or Disability), the Optionholder may exercise his or her Option
          (to the extent that the Optionholder was entitled to exercise it as of
          the date of termination) but only within such period of time ending on
          the earlier of (i) the date twelve (12) months following the
          termination of the Optionholder's Continuous Service, or (ii) the
          expiration of the term of the Option as set forth in the Option
          Agreement. If, after termination, the Optionholder does not exercise
          his or her Option within the time specified in the Option Agreement,
          the Option shall terminate. For purposes of this Section 7(f), the
          limitations upon exercise discussed herein shall also apply to
          permitted transferees under Section 7(d).

     (h)  Extension of Termination Date. If the exercise of the Option following
          the termination of the Optionholder's Continuous Service (other than
          upon the Optionholder's death) would be prohibited at any time solely
          because the issuance of shares would violate the registration
          requirements under the Securities Act, then the Option shall terminate
          on the earlier of (i) the expiration of the term of the Option set
          forth in subsection 7(a) or (ii) the expiration of a period of three
          (3) months after the termination of the Optionholder's Continuous
          Service during which the exercise of the Option would not be in
          violation of such registration requirements.

                                       6.
<PAGE>

     (i)  Disability of Optionholder. In the event an Optionholder's Continuous
          Service terminates as a result of the Optionholder's Disability, the
          Optionholder may exercise his or her Option (to the extent that the
          Optionholder was entitled to exercise it as of the date of
          termination), but only within such period of time ending on the
          earlier of (i) the date twelve (12) months following such termination
          or (ii) the expiration of the term of the Option as set forth in the
          Option Agreement. If, after termination, the Optionholder does not
          exercise his or her Option within the time specified herein, the
          Option shall terminate. For purposes of this Section 7(h), the
          limitations upon exercise discussed herein shall also apply to
          permitted transferees under Section 7(d).

     (j)  Death of Optionholder. In the event (i) an Optionholder's Continuous
          Service terminates as a result of the Optionholder's death or (ii) the
          Optionholder dies within the three-month period after the termination
          of the Optionholder's Continuous Service for a reason other than
          death, then the Option may be exercised (to the extent the
          Optionholder was entitled to exercise the Option as of the date of
          death) by the Optionholder's estate, by a person who acquired the
          right to exercise the Option by bequest or inheritance or by a person
          designated to exercise the Option upon the Optionholder's death, but
          only within the period ending on the earlier of (1) the date eighteen
          (18) months following the date of death or (2) the expiration of the
          term of such Option as set forth in the Option Agreement. If, after
          death, the Option is not exercised within the time specified herein,
          the Option shall terminate.

8.   Covenants of the Company.

     (a)  Availability of Shares. During the terms of the Options, the Company
          shall keep available at all times the number of shares of Common Stock
          required to satisfy such Options.

     (b)  Securities Law Compliance. The Company shall seek to obtain from each
          regulatory commission or agency having jurisdiction over the Plan such
          authority as may be required to grant Options and to issue and sell
          shares of Common Stock upon exercise of the Options; provided,
          however, that this undertaking shall not require the Company to
          register under the Securities Act the Plan, any Option or any stock
          issued or issuable pursuant to any such Option. If, after reasonable
          efforts, the Company is unable to obtain from any such regulatory
          commission or agency the authority which counsel for the Company deems
          necessary for the lawful issuance and sale of stock under the Plan,
          the Company shall be relieved from any liability for failure to issue
          and sell stock upon exercise of such Options unless and until such
          authority is obtained.

9.   Use of Proceeds from Stock.

     Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

                                       7.
<PAGE>

10.  Miscellaneous.

     (a)  Stockholder Rights. No Optionholder shall be deemed to be the holder
          of, or to have any of the rights of a holder with respect to, any
          shares subject to such Option unless and until such Optionholder has
          satisfied all requirements for exercise of the Option pursuant to its
          terms.

     (b)  No Service Rights. Nothing in the Plan or any instrument executed or
          Option granted pursuant thereto shall confer upon any Optionholder any
          right to continue to serve the Company as a Non-Employee Director or
          shall affect the right of the Company or an Affiliate to terminate (i)
          the employment of an Employee with or without notice and with or
          without cause, (ii) the service of a Consultant pursuant to the terms
          of such Consultant's agreement with the Company or an Affiliate or
          (iii) the service of a Director pursuant to the Bylaws of the Company
          or an Affiliate, and any applicable provisions of the corporate law of
          the state in which the Company or the Affiliate is incorporated, as
          the case may be.

     (c)  Investment Assurances. The Company may require an Optionholder, as a
          condition of exercising or acquiring stock under any Option, (i) to
          give written assurances satisfactory to the Company as to the
          Optionholder's knowledge and experience in financial and business
          matters and/or to employ a purchaser representative reasonably
          satisfactory to the Company who is knowledgeable and experienced in
          financial and business matters and that he or she is capable of
          evaluating, alone or together with the purchaser representative, the
          merits and risks of exercising the Option; and (ii) to give written
          assurances satisfactory to the Company stating that the Optionholder
          is acquiring the stock subject to the Option for the Optionholder's
          own account and not with any present intention of selling or otherwise
          distributing the stock. The foregoing requirements, and any assurances
          given pursuant to such requirements, shall be inoperative if (iii) the
          issuance of the shares upon the exercise or acquisition of stock under
          the Option has been registered under a then currently effective
          registration statement under the Securities Act or (iv) as to any
          particular requirement, a determination is made by counsel for the
          Company that such requirement need not be met in the circumstances
          under the then applicable securities laws. The Company may, upon
          advice of counsel to the Company, place legends on stock certificates
          issued under the Plan as such counsel deems necessary or appropriate
          in order to comply with applicable securities laws, including, but not
          limited to, legends restricting the transfer of the stock.

     (d)  Withholding Obligations. The Optionholder may satisfy any federal,
          state or local tax withholding obligation relating to the exercise or
          acquisition of stock under an Option by any of the following means (in
          addition to the Company's right to withhold from any compensation paid
          to the Optionholder by the Company) or by a combination of such means:
          (i) tendering a cash payment; (ii) authorizing the Company to withhold
          shares from the shares of the Common Stock otherwise issuable to the
          Optionholder as a result of the exercise or

                                       8.
<PAGE>

          acquisition of stock under the Option; or (iii) delivering to the
          Company owned and unencumbered shares of the Common Stock.

11.  Adjustments upon Changes in Stock.

     (a)  Capitalization Adjustments. If any change is made in the stock subject
          to the Plan, or subject to any Option, without the receipt of
          consideration by the Company (through merger, consolidation,
          reorganization, recapitalization, reincorporation, stock dividend,
          dividend in property other than cash, stock split, liquidating
          dividend, combination of shares, exchange of shares, change in
          corporate structure or other transaction not involving the receipt of
          consideration by the Company), the Plan will be appropriately adjusted
          in the class(es) and maximum number of securities subject both to the
          Plan pursuant to subsection 4(a) and to the nondiscretionary Options
          specified in Section 6, and the outstanding Options will be
          appropriately adjusted in the class(es) and number of securities and
          price per share of stock subject to such outstanding Options. The
          Board shall make such adjustments, and its determination shall be
          final, binding and conclusive. (The conversion of any convertible
          securities of the Company shall not be treated as a transaction
          "without receipt of consideration" by the Company.)

     (b)  Change in Control--Dissolution or Liquidation. In the event of a
          dissolution or liquidation of the Company, then all outstanding
          Options shall terminate immediately prior to such event.

     (c)  Change in Control--Asset Sale, Merger, Consolidation or Reverse
          Merger. In the event of (i) a sale of all or substantially all of the
          assets of the Company, (ii) a merger or consolidation in which the
          Company is not the surviving corporation or (iii) a reverse merger in
          which the Company is the surviving corporation but the shares of
          Common Stock outstanding immediately preceding the merger are
          converted by virtue of the merger into other property, whether in the
          form of securities, cash or otherwise, then any surviving corporation
          or acquiring corporation shall assume or continue any Options
          outstanding under the Plan or shall substitute similar Options
          (including an option to acquire the same consideration paid to the
          stockholders in the transaction described in this subsection 11(c))
          for those outstanding under the Plan. In the event any surviving
          corporation or acquiring corporation refuses to assume or continue
          such Options or to substitute similar Options for those outstanding
          under the Plan, then with respect to Options held by Optionees whose
          Continuous Service has not terminated, the vesting of such Options
          (and, if applicable, the time during which such Options may be
          exercised) shall be accelerated in full prior to such event, and the
          Options shall terminate if not exercised (if applicable) on or prior
          to such event. Notwithstanding the foregoing, in the event of (i) the
          sale of all or substantially all of the assets of the Company to a
          single purchaser or group of related purchasers, (ii) the sale,
          exchange or other disposition, in a single transaction, of more than
          50% of the Company's outstanding capital stock or (iii)

                                       9.
<PAGE>

          the merger or consolidation of the Company in a transaction following
          which the Company's stockholders receive less than 50% of the
          outstanding voting shares of the surviving entity, then with respect
          to Options held by Optionees whose Continuous Service has not
          terminated immediately prior to such transaction, the vesting of such
          Options (and, if applicable, the time during which such Options may be
          exercised) shall be accelerated in full immediately prior to the
          transaction.

     (d)  Change in Control--Securities Acquisition. In the event of an
          acquisition by any person, entity or group within the meaning of
          Section 13(d) or 14(d) of the Exchange Act, or any comparable
          successor provisions (excluding any employee benefit plan, or related
          trust, sponsored or maintained by the Company or an Affiliate) of the
          beneficial ownership (within the meaning of Rule 13d-3 promulgated
          under the Exchange Act, or comparable successor rule) of securities of
          the Company representing at least fifty percent (50%) of the combined
          voting power entitled to vote in the election of Directors, then with
          respect to Options held by Optionholders whose Continuous Service has
          not terminated immediately prior to such acquisition, the vesting and
          exerciseability of such Options shall be accelerated in full
          immediately prior to the transaction.

12.  Amendment of the Plan and Options.

     (a)  Amendment of Plan. The Board at any time, and from time to time, may
          amend the Plan. However, except as provided in Section 11 relating to
          adjustments upon changes in stock, no amendment shall be effective
          unless approved by the stockholders of the Company to the extent
          stockholder approval is necessary to satisfy the requirements of Rule
          16b-3 or any NASDAQ or securities exchange listing requirements.

     (b)  Stockholder Approval. The Board may, in its sole discretion, submit
          any other amendment to the Plan for stockholder approval.

     (c)  No Impairment of Rights. Rights under any Option granted before
          amendment of the Plan shall not be impaired by any amendment of the
          Plan unless (i) the Company requests the consent of the Optionholder
          and (ii) the Optionholder consents in writing.

     (d)  Amendment of Options. The Board at any time, and from time to time,
          may amend the terms of any one or more Options; provided, however,
          that the rights under any Option shall not be impaired by any such
          amendment unless (i) the Company requests the consent of the
          Optionholder and (ii) the Optionholder consents in writing.

                                      10.
<PAGE>

13.  Termination or Suspension of the Plan.

     (a)  Plan Term. The Board may suspend or terminate the Plan at any time. No
          Options may be granted under the Plan while the Plan is suspended or
          after it is terminated.

     (b)  No Impairment of Rights. Suspension or termination of the Plan shall
          not impair rights and obligations under any Option granted while the
          Plan is in effect except with the written consent of the Optionholder.

14.  Effective Date of Plan.

     The Plan shall become effective on the IPO Date, but no Option shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company, which approval shall be within twelve (12) months before or after the
date the Plan is adopted by the Board.

15.  Choice of Law.

     All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.

                                      11.
<PAGE>

                              CLARENT CORPORATION

                           NONSTATUTORY STOCK OPTION

               (1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN)

[Name] , Optionholder:

     Clarent Corporation (the "Company"), pursuant to its 1999 Non-Employee
Directors' Stock Option Plan (the "Plan") has on _____________, 2000 granted to
you, the optionholder named above, an option to purchase shares of the common
stock of the Company ("Common Stock").  This option is not intended to qualify
and will not be treated as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").

     The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's Non-
Employee Directors (as defined in the Plan).

     The details of your option are as follows:

1.   The total number of shares of Common Stock subject to this option is
___________ (_____).  Subject to the limitations contained herein, this option
shall be exercisable in accordance with the Plan.

2.   The exercise price of this option is ______________ Dollars ($______) per
share, being the Fair Market Value (as defined in the Plan) of the Common Stock
on the date of grant of this option.

3.   (a)  This option may be exercised, to the extent specified in the Plan, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to paragraph 6 of
the Plan.  This option may not be exercised for any number of shares which would
require the issuance of anything other than whole shares.

     (b)  By exercising this option you agree that the Company may require you
to enter an arrangement providing for the cash payment by you to the Company of
any tax withholding obligation of the Company arising by reason of the exercise
of this option or the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise.

4.   Any notices provided for in this option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you,

                                      12.
<PAGE>

five (5) days after deposit in the United States mail, postage prepaid,
addressed to you at the address specified below or at such other address as you
hereafter designate by written notice to the Company.

5.   This option is subject to all the provisions of the Plan, a copy of which
is attached hereto and its provisions are hereby made a part of this option,
including without limitation the provisions of paragraph 6 of the Plan relating
to option provisions, and is further subject to all interpretations, amendments,
rules and regulations which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of
this option and those of the Plan, the provisions of the Plan shall control.

     Dated the ___ day of__________, ____.

                                           Very truly yours,

                                           Clarent Corporation

                                           By:__________________________________
                                                    Duly authorized on behalf
                                                    of the Board of Directors

Attachments:

1999 Non-Employee Directors' Stock Option Plan

                                      13.
<PAGE>

The undersigned:

     (a)  Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan;

     (b)  Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionholder and the
Company and its affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock options plans of the Company, and (ii) the following agreements
only:

          None___________________________________________
                         (Initial)

          Other__________________________________________

               __________________________________________

               __________________________________________

                              __________________________________________________
                              Optionholder

                              __________________________________________________
                              Address

                              __________________________________________________

                              __________________________________________________

                                      14.

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