Exhibit 10.11

SUN MICROSYSTEMS, INC.

SECTION 162(M) EXECUTIVE OFFICER

PERFORMANCE-BASED BONUS PLAN

SECTION 1

BACKGROUND, PURPOSE AND DURATION

1.1 Effective Date.

Sun Microsystems, Inc., having established the Plan effective as of August 9,
1995 and amended and restated the Plan effective as of July 1, 2001, hereby
amends and restates the Plan, effective as of July 1, 2006, subject to
ratification by an affirmative vote of the holders of a majority of the Shares
that are present in person or by proxy and entitled to vote at the 2006 Annual
Meeting of Stockholders of the Company.

1.2 Purpose of the Plan.

The Plan is intended to increase shareholder value and the success of the
Company by motivating key executives (1) to perform to the best of their
abilities, and (2) to achieve the Company’s objectives. The Plan’s goals are to
be achieved by providing such executives with incentive awards based on the
achievement of goals relating to the performance of the Company. The Plan is
intended to permit the grant of awards that qualify as performance-based
compensation under section 162(m) of the Code.

SECTION 2

DEFINITIONS

The following words and phrases shall have the following meanings unless a
different meaning is plainly required by the context:

2.1 “1934 Act”

means the Securities Exchange Act of 1934, as amended. Reference to a specific
section of the 1934 Act or regulation thereunder shall include such section or
regulation, any valid regulation promulgated under such section, and any
comparable provision of any future legislation or regulation amending,
supplementing or superseding such section or regulation.

2.2 “Actual Award”

means as to any Performance Period, the actual award (if any) payable to a
Participant for the Performance Period. Each Actual Award is determined by the
Payout Formula for the Performance Period, subject to the Committee’s authority
under Section 3.7 to eliminate or reduce the award otherwise determined by the
Payout Formula.

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2.3 “Affiliate”

means any corporation or other entity (including, but not limited to,
partnerships and joint ventures) controlled by the Company.

2.4 “Board”

means the Board of Directors of the Company.

2.5 “Code”

means the Internal Revenue Code of 1986, as amended. Reference to a specific
section of the Code or regulation thereunder shall include such section or
regulation, any valid regulation promulgated thereunder, and any comparable
provision of any future legislation or regulation amending, supplementing or
superseding such section or regulation.

2.6 “Committee”

means the committee appointed by the Board (pursuant to Section 5.1) to
administer the Plan.

2.7 “Company”

means Sun Microsystems, Inc., a Delaware corporation, or any successor thereto.

2.8 “Disability”

means a permanent and total disability determined in accordance with uniform and
nondiscriminatory standards adopted by the Committee from time to time.

2.9 “Employee”

means any employee of the Company or of an Affiliate, whether such employee is
so employed at the time the Plan is adopted or becomes so employed subsequent to
the adoption of the Plan.

2.10 “Participant”

means as to any Performance Period, an Employee who has been selected by the
Committee for participation in the Plan for that Performance Period.

2.11 “Payout Formula”

means as to any Performance Period, the formula or payout matrix established by
the Committee pursuant to Section 3.5 in order to determine the Actual Awards
(if any) to be paid to Participants. The formula or matrix may differ from
Participant to Participant.

2.12 “Performance Period”

means the period of time established by the Committee in its sole discretion.

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2.13 “Performance Goals”

means the goal(s) (or combined goal(s)) determined by the Committee (in its
discretion) to be applicable to a Participant for a Target Award for a
Performance Period. As determined by the Committee, the Performance Goals for
any Target Award applicable to a Participant may provide for a targeted level or
levels of achievement using one or more of the following measures: (a) earnings
(or loss) per share, (b) individual objectives that are measurable and
consistent with Section 162(m) of the Code, (c) net income (or loss) before or
after taxes and before or after allocation or corporate overhead and bonus,
(d) cash flow, operating cash flow, or cash flow or operating cash flow per
share (before or after dividends), (e) operating income, (or loss) before or
after taxes (f) return on assets or net assets, (g) return on equity, (h) return
on sales or net sales, (i) revenue, revenue growth or product revenue growth,
(j) total shareholder return, (k) earnings or loss per share; (l) attainment of
strategic and operational initiatives, (m) appreciation in and/or maintenance of
the price of the Shares or any other publicly traded securities of the Company,
(n) market shares, (o) gross profits, (p) earnings (or losses), including
earnings or losses before taxes, earnings or losses before interest and taxes,
earnings or losses before interest, taxes and depreciation or earnings or losses
before interest, taxes depreciation and amortization, (q) economic value-added
models (or equivalent metrics), (r) comparisons with various stock market
indices, (s) reduction in costs, (t) return on capital, including return on
total capital or return on invested capital, (u) cash flow return on investment,
(v) improvement in or attainment of expense levels or working capital levels,
(w) operating margin or gross margin, (x) year-end cash, (y) cash margin,
(z) debt reduction, (aa) stockholders’ equity, (bb) market share; (cc) research
progress, including the development or programs, and (dd) recruiting and
maintaining personnel. Such performance goals also may be based solely by
reference to the Company’s performance or the performance of an Affiliate,
division, business segment or business unit of the Company, or based upon the
relative performance of other companies or upon comparisons of any of the
indicators of performance relative to other companies.

2.14 “Plan”

means the Sun Microsystems, Inc. Section 162(m) Executive Officer
Performance-Based Bonus Plan, as set forth in this instrument and as hereafter
amended from time to time.

2.15 “Retirement”

means, with respect to any Participant, a Termination of Service after attaining
at least (a) age 65, (b) age 60 and 5 years of service with the Company or an
Affiliate, or (c) age 55 and 10 years of service with the Company or an
Affiliate.

2.16 “Shares”

means shares of the Company’s common stock.

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2.17 “Target Award”

means the target award payable under the Plan to a Participant for the
Performance Period as determined by the Committee in accordance with
Section 3.4.

2.18 “Termination of Service”

means a cessation of the employee-employer relationship between a Participant
and the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability,
Retirement, or the disaffiliation of an Affiliate, but excluding any such
termination where there is a simultaneous reemployment by the Company or an
Affiliate.

SECTION 3

SELECTION OF PARTICIPANTS AND DETERMINATION OF AWARDS

3.1 Selection of Participants.

The Committee, in its sole discretion, shall select the Employees who are
executive officers of the Company (within the meaning of Rule 3b-7 under the
1934 Act) and who shall be Participants for any Performance Period.
Participation in the Plan is in the sole discretion of the Committee, and on a
Performance Period by Performance Period basis. Accordingly, an Employee who is
a Participant for a given Performance Period in no way is guaranteed or assured
of being selected for participation in any subsequent Performance Period.

3.2 Determination of Performance Period.

The Committee, in its sole discretion, shall establish in writing whether the
Performance period shall be the Company’s fiscal year or such other period of
time.

3.3 Determination of Performance Goals.

The Committee, in its sole discretion, shall establish the Performance Goals for
each Participant for the Performance Period. Such Performance Goals shall be set
forth in writing. The Performance Goals may differ from Participant to
Participant and from award to award. The Committee shall also determine and set
forth in writing whether any significant elements shall be included in or
excluded from the calculation of any Performance Goal with respect to any
Participants, including (a) restructurings, discontinued operations,
extraordinary items, and other unusual or non-recurring charges, (b) an event
either not directly related to the operations of the Company or not within the
reasonable control of the Company’s management, or (c) the cumulative effects of
tax or accounting changes in accordance with U.S. generally accepted accounting
principles.

3.4 Determination of Target Awards.

The Committee, in its sole discretions, shall establish a Target Award for each
Participant. Each Participant’s Target Award shall be determined by the
Committee in its sole discretion, and each Target Award shall be set forth in
writing. The Target Award may be denominated by reference to a number of Shares
or an amount of cash.

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3.5 Determination of Payout Formula or Formulae.

The Committee, in its sole discretion, shall establish a Payout Formula or
Formulae for purposes of determining the Actual Award (if any) payable to each
Participant. Each Payout Formula shall (a) be in writing, (b) be based on a
comparison of actual performance to the Performance Goals, (c) provide for the
payment of a Participant’s Target Award if the Performance Goals for the
Performance Period are achieved, and (d) provide for an Actual Award greater
than or less than the Participant’s Target Award, depending upon the extent to
which actual performance exceeds or falls below the Performance Goals.
Notwithstanding the preceding, in no event shall a Participant’s Actual Award
for any Performance Period exceed $10,000,000 or 1,500,000 Shares for each 12
months in a Performance Period (proportionately adjusted for periods of less
than 12 months).

3.6 Date for Determinations.

The Committee shall make all determinations under Sections 3.1 through 3.5 on or
before the earlier of (i) 90 days after the commencement of each Performance
Period or (ii) the expiration of 25% of the Performance Period.

3.7 Determination of Actual Awards.

After the end of each Performance Period, the Committee shall certify in writing
the extent to which the Performance Goals applicable to each Participant for the
Performance Period were achieved or exceeded. The Actual Award for each
Participant shall be determined by applying the Payout Formula to the level of
actual performance that has been certified by the Committee. Notwithstanding any
contrary provision of the Plan, the Committee, in its sole discretion, may
(a) eliminate or reduce the Actual Award payable to any Participant below that
which otherwise would be payable under the Payout Formula, and (b) determine
what Actual Award, if any, will be paid in the event of a Termination of Service
prior to the end of the Performance Period.

SECTION 4

PAYMENT OF AWARDS

4.1 Right to Receive Payment.

Each Actual Award that may become payable under the Plan shall be paid solely
from the general assets of the Company. Nothing in this Plan shall be construed
to create a trust or to establish or other than as an unsecured general creditor
with respect to any payment to which he or she may be entitled.

4.2 Timing of Payment.

Payment of each Actual Award shall be made as soon as practicable after the end
of the Performance Period during which the Award was earned and the
certification of the Committee provided for in Section 3.7.

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4.3 Form of Payment.

Each Actual Award shall be paid in cash (or its equivalent) or Shares in a
single lump sum, except as otherwise determined by the Committee. To the extent
an Actual Award is paid in whole or in part in Shares, such Shares shall be
granted under the Company’s 1990 Long-Term Equity Incentive Plan or such other
shareholder approved plan of the Company providing for payment of Shares. If
(i) a Target Award denominated in cash is paid in Shares or (ii) a Target Award
denominated in Shares is paid in cash, the amount of cash or Shares shall be
determined based on the closing per share selling price for Shares as quoted on
the NASDAQ Stock Market on the date payment of the Actual Award would otherwise
have been made.

4.4 Payment in the Event of Death.

If a Participant dies prior to the payment of an Actual Award earned by him or
her prior to death for a prior Performance Period, the Award shall be paid to
his or her estate, except as provided in Section 6.6.

SECTION 5

ADMINISTRATION

5.1 Committee is the Administrator.

The Plan shall be administered by the Committee. The Committee shall consist of
not less than two (2) members of the Board. The members of the Committee shall
be appointed from time to time by, and serve at the pleasure of, the Board. Each
member of the Committee shall qualify as an “outside director” under section
162(m) of the Code. If it is later determined that one or more members of the
Committee do not so qualify, actions taken by the Committee prior to such
determination shall be valid despite such failure to qualify.

5.2 Committee Authority.

It shall be the duty of the Committee to administer the Plan in accordance with
the Plan’s provisions. The Committee shall have all powers and discretion
necessary or appropriate to administer the Plan and to control its operation,
including, but not limited to, the power to (a) determine which Employees who
are executive officers shall be granted awards, (b) prescribe the terms and
conditions of awards, (c) interpret the Plan and the awards, (d) adopt such
procedures and sub plans as are necessary or appropriate to permit participation
in the Plan by Employees who are foreign nationals or employed outside of the
United States, (e) adopt rules for the administration, interpretation and
application of the Plan as are consistent therewith, and (f) interpret, amend or
revoke any such rules.

5.3 Decisions Binding.

All determinations and decisions made by the Committee, the Board, and any
delegate of the Committee pursuant to the provisions of the Plan shall be final,
conclusive, and binding on all persons, and shall be given the maximum deference
permitted by law.

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5.4 Delegation by the Committee.

The Committee, in its sole discretion and on such terms and conditions as it may
provide, may delegate all or part of its authority and powers under the Plan to
one or more directors and/or officers of the Company; provided, however, that
the Committee may delegate its authority and powers only to the extent
consistent with applicable laws (including the provisions of Section 162(m) of
the Code) and the rules and regulations of the principal securities market on
which the Company’s securities are listed or qualified for trading.

SECTION 6

GENERAL PROVISIONS

6.1 Tax Withholding.

The Company shall withhold all applicable taxes from any Actual Award, including
any federal, state and local taxes (including, but not limited to, the
Participant’s FICA and SDI obligations).

6.2 No Effect on Employment.

Nothing in the Plan shall interfere with or limit in any way the right of the
Company to terminate any Participant’s employment at any time, with or without
cause. For purposes of the Plan, transfer of employment of a Participant between
the Company and any one of its Affiliates (or between Affiliates) shall not be
deemed a Termination of Service. Employment with the Company and its Affiliates
is on an at-will basis only. The Company expressly reserves the right, which may
be exercised at any time and without regard to when during a Performance Period
such exercise occurs, to terminate any individual’s employment with or without
cause, and to treat him or her without regard to the effect which such treatment
might have upon him or her as a Participant.

6.3 Participation.

No Employee shall have the right to be selected to receive an award under this
Plan, or, having been so selected, to be selected to receive a future award.

6.4 Indemnification.

Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
(a) any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan or
any award, and (b) from any and all amounts paid by him or her in settlement
thereof, with the Company’s approval, or paid by him or her in satisfaction of
any judgment in any such claim, action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company’s Certificate of Incorporation or Bylaws, by
contract, as a matter of law, or otherwise, or under any power that the Company
may have to indemnify them or hold them harmless.

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6.5 Successors.

All obligations of the Company under the Plan, with respect to awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
or assets of the Company.

6.6 Beneficiary Designations.

If permitted by the Committee, a Participant under the Plan may name a
beneficiary or beneficiaries to whom an Actual Award which the Participant has
earned shall be paid in the event of the Participant’s death. Each such
designation shall revoke all prior designations by the Participant and shall be
effective only if given in a form and manner acceptable to the Committee. In the
absence of any such designation, any such Actual Award remaining unpaid at the
Participant’s death shall be paid to the Participant’s estate.

6.7 Nontransferability of Awards.

No award granted under the Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will, by the laws of descent
and distribution, or to the limited extent provided in Section 6.6. All rights
with respect to an award granted to a Participant shall be available during his
or her lifetime only to the Participant.

6.8 Deferrals.

The Committee, in its sole discretion, may permit a Participant to defer receipt
of the payment of cash or Shares that would otherwise be delivered to a
Participant under the Plan. Any such deferral elections shall be made under a
plan or arrangement consistent with the requirements of section 409A of the
Code.

SECTION 7

AMENDMENT, TERMINATION AND DURATION

7.1 Amendment, Suspension or Termination.

The Board, in its sole discretion, may amend or terminate the Plan, or any part
thereof, at any time and for any reason. The amendment, suspension or
termination of the Plan shall not, without the consent of the Participant, alter
or impair any rights or obligations under any Target Award theretofore granted
to such Participant. No award may be granted during any period of suspension or
after termination of the Plan.

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7.2 Duration of the Plan.

The Plan shall commence on the date specified herein, and subject to Section 7.1
(regarding the Board’s right to amend or terminate the Plan), shall remain in
effect thereafter.

SECTION 8

LEGAL CONSTRUCTION

8.1 Gender and Number.

Except where otherwise indicated by the context, any masculine term used herein
also shall include the feminine; the plural shall include the singular and the
singular shall include the plural.

8.2 Severability.

In the event any provision of the Plan shall be held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining parts of the
Plan, and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.

8.3 Requirements of Law.

The granting of awards under the Plan shall be subject to all applicable laws,
rules and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.

8.4 Governing Law.

The Plan and all awards shall be construed in accordance with and governed by
the laws of the State of California, but without regard to its conflict of law
provision.

8.5 Captions.

Captions are provided herein for convenience only, and shall not serve as a
basis for interpretation or construction of the Plan.

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EXECUTION

IN WITNESS WHEREOF, Sun Microsystems, Inc., by its duly authorized officer, has
executed the Plan on the date indicated below.

 

 

SUN MICROSYSTEMS, INC.

Date:                                                      , 2006   By:  

 

    Michael A. Dillon     Executive Vice President,     General Counsel and
Secretary     Sun Microsystems, Inc.