Exhibit 10.5

SUN MICROSYSTEMS, INC.

PERFORMANCE RESTRICTED STOCK UNIT AGREEMENT

NOTICE OF GRANT

Sun Microsystems, Inc. (“Sun”) is pleased to inform you that you,
[                    ], have been granted the number of Performance Restricted
Stock Units (“Performance Restricted Stock Units”) indicated below under Sun’s
1990 Long-Term Equity Incentive Plan (the “Plan”) and the terms of this
Performance Restricted Stock Unit agreement (including the Notice of Grant and
Appendices A and B, all of which are the “Agreement”). Subject to the provisions
of the Agreement and the Plan, the principal features of this grant are as
follows:

 

Grant Date:

  [Date]

Total Number of Performance Restricted Stock Units:

  [To come]

Scheduled Vesting:

  [To come]

Purchase Price per Share:

  $0.00067 USD payable in services rendered by you (no cash payment required)

Acceptance Deadline:

  You must accept this grant of Performance Restricted Stock Units prior to the
Acceptance Deadline, which is sixty (60) days from the Grant Date.

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* Except as otherwise provided in the Agreement or by the terms of the Plan, you
will not vest in the Performance Restricted Stock Units unless you remain
employed by Sun or one of its Subsidiaries through the applicable vesting date.

Your acceptance of this grant either by signature below or by electronic
acceptance indicates your understanding that this grant is subject to all of the
terms described in this Agreement, including Appendices A and B, and the Plan.
Important additional information on vesting and forfeiture of the Performance
Restricted Stock Units covered by this grant is contained in paragraphs 4
through 5 and paragraph 7 of Appendix A. PLEASE BE SURE TO READ ALL OF
APPENDIX A, WHICH CONTAINS THE SPECIFIC TERMS OF THIS GRANT.

THIS AGREEMENT MUST BE ACCEPTED BY YOU BY THE ACCEPTANCE DEADLINE, OR THIS GRANT
OF PERFORMANCE RESTRICTED STOCK UNITS WILL AUTOMATICALLY BE CANCELED.

 

SUN MICROSYSTEMS, INC.

   GRANTEE

By:

  

/s/ Michael A. Dillon

  

 

Title:

   Executive VP, General Counsel and Secretary    [Name]

April 2007

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APPENDIX A

TERMS OF Performance Restricted Stock Units

 

1. Grant. Sun hereby grants to you under the Plan at the per share price of
$0.00067 USD (the “Purchase Price”), the number of Performance Restricted Stock
Units indicated in the Notice of Grant, subject to all of the terms in this
Agreement and the Plan.

 

2. Payment of Purchase Price. When Shares are issued to you in payment for the
Performance Restricted Stock Units, the Purchase Price will be deemed paid
through services rendered by you (not in cash), and will be subject to the
appropriate tax withholdings.

 

3. Sun’s Obligation to Pay. Unless and until the Performance Restricted Stock
Units have vested in the manner set forth in paragraphs 4 or 5, you will have no
right to payment of the Performance Restricted Stock Units. Until any vested
Performance Restricted Stock Units actually are paid, the Performance Restricted
Stock Units will be an unsecured obligation of Sun. Any vested Performance
Restricted Stock Units will be paid in Shares. Only whole Shares will be issued.

 

4. Vesting Schedule.

 

  (a) General. Except as otherwise provided in this paragraph 4 and paragraph 5
of this Agreement, and subject to paragraph 7, the Performance Restricted Stock
Units are scheduled to vest in accordance with the vesting schedule shown in the
Notice of Grant. Performance Restricted Stock Units scheduled to vest on any
date actually will vest only if you continue to be employed by Sun or one of its
Subsidiaries through the applicable vesting date, except to the extent otherwise
provided in this Agreement, by Sun in a written agreement between you and an
authorized officer of Sun or in accordance with the then-applicable written
policies of Sun. In all instances in which Performance Restricted Stock Units
continue to vest after you cease to be employed by Sun or one of its
Subsidiaries, the payment of such accelerated Performance Restricted Stock Units
nevertheless will be made at the same time or times such Performance Restricted
Stock Units would have been paid had they vested in accordance with the vesting
schedule shown in the Notice of Grant.

 

 

(b)

Leave of Absence. Notwithstanding the above, vesting of the Performance
Restricted Stock Units will be suspended if you take an authorized unpaid leave
of absence (including a leave of absence for military, educational, disability
or personal purposes, but except as may be required by law) of more than thirty
(30) days or an authorized paid leave of absence of more than ninety (90) days.
The vesting schedule shown in the Notice of Grant will be delayed for the number
of days that the authorized unpaid leave of absence or authorized paid leave of
absence extends beyond the periods set forth above. The suspension of vesting
will commence on the thirty-first (31st) day of an authorized unpaid leave of
absence of more than thirty (30) days or, in the case of an authorized paid
leave of absence of more than ninety (90) days, on the ninety-first (91st) day
of the leave and the suspension will end on the earlier of: (i) the last
business day preceding the date on

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which your leave of absence terminates; or (ii) a date twelve (12) months after
the beginning of the leave of absence. These vesting suspension provisions will
be applied in compliance with local law. Sun policies on leave of absence may
vary outside the United States, in accordance with local law. The preceding two
sentences will apply only to those employees who are not subject to United
States taxes.

 

  (c) Disability. Notwithstanding the above, if your employment with Sun (or the
employing Subsidiary) terminates as a result of your Disability, during the
twelve (12) months following your termination, you will continue to vest as to
the number of Performance Restricted Stock Units that would have vested if you
had remained an employee of Sun (or the employing Subsidiary) during that
period. For purposes of this Agreement, “Disability” means your total and
permanent disability as defined in Section 22(e)(3) of the Code.

 

  (d) Death. Notwithstanding the above, if your employment with Sun (or the
employing Subsidiary) terminates as a result of your death, the Performance
Restricted Stock Units granted under this Agreement will continue to vest during
the twelve (12) months following your death as to the number of Performance
Restricted Stock Units that would have vested had you remained an employee of
Sun (or the employing Subsidiary) during that period.

 

  (e) Performance Target. The “Performance Target” shall be achieved if Sun has
Operating Income of at least 4% for the fiscal quarter ended June 30, 2006 and
Revenue of at least $13.4 billion for the fiscal year ended June 30, 2007, as
such terms are defined under the Section 162(m) Executive Officer
Performance-Based Bonus Plan. The determination of whether or not the
Performance Target is achieved shall be made by the Leadership Development and
Compensation Committee of the Board of Directors in its sole discretion as soon
as practicable after the end of the fiscal year, and no Shares will be issued
until such determination is made.

 

5. Committee Discretion. The Committee, in its discretion, may accelerate the
vesting of some or all of the Performance Restricted Stock Units at any time,
subject to the terms of the Plan. If so accelerated, the Performance Restricted
Stock Units will be considered as having vested as of the date specified by the
Committee. If the Committee, in its discretion, accelerates the vesting of any
Performance Restricted Stock Units, the payment of the accelerated Performance
Restricted Stock Units nevertheless will be made at the same time or times as if
the Performance Restricted Stock Units had vested in accordance with the vesting
schedule shown on the Notice of Grant (whether or not you remain employed by Sun
or one of its Subsidiaries).

 

6. Payment after Vesting. Any Performance Restricted Stock Units that vest while
you remain employed by Sun or one of its Subsidiaries in accordance with
paragraph 4 will be paid to you (or in the event of your death, to your estate)
in Shares as soon as administratively practicable following the date of vesting,
subject to paragraph 9. Any Performance Restricted Stock Units that continue to
vest after you cease to be employed by Sun or one of its Subsidiaries as
provided in paragraph 4 or that vest in accordance with paragraph 5 will be paid
to you (or in the event of your death, to your estate) in Shares in accordance
with the provision of such paragraphs, subject to paragraph 9. For each
Performance Restricted Stock Unit that vests, you will receive one Share.

April 2007

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7. Forfeiture. Except as expressly provided herein, any Performance Restricted
Stock Units that have not vested at the time you cease to be employed by Sun or
one of its Subsidiaries will be forfeited and automatically transferred to and
reacquired by Sun at no cost to Sun.

 

8. Death. Any distribution or delivery to be made to you under this Agreement
will, if you are then deceased, be made to the administrator or executor of your
estate. The administrator or executor must furnish Sun with (a) written notice
of his or her status as transferee, and (b) evidence satisfactory to Sun to
establish the validity of the transfer and compliance with any applicable laws
or regulations.

 

9. Withholding of Taxes. Regardless of any action Sun or the company that
employs you (the “Employer”) takes with respect to any or all income tax, social
insurance, payroll tax, payment on account or other tax-related withholding
(“Tax-Related Items”), you acknowledge that the ultimate liability for all
Tax-Related Items legally due by you is and remains your responsibility and that
Sun and/or the Employer (1) make no representations or undertakings regarding
the treatment of any Tax-Related Items in connection with any aspect of the
grant of Performance Restricted Stock Units, including the grant, vesting and
lapse of repurchase rights, the subsequent sale of Shares and/or the receipt of
any dividends; and (2) do not commit to structure the terms of the grant or any
aspect of the grant of Performance Restricted Stock Units to reduce or eliminate
your liability for Tax-Related Items. When the Shares are issued as payment for
vested Performance Restricted Stock Units, you will recognize immediate U.S.
taxable income if you are a U.S. taxpayer. If you are a non-U.S. taxpayer, you
will be subject to applicable taxes in your jurisdiction. Sun or the Employer is
required to withhold from you an amount that is sufficient to pay the minimum
federal, state and local income, employment and any other applicable taxes
required to be withheld by Sun or the Employer with respect to the Shares. Sun
or the Employer may, in its discretion, meet this withholding requirement in any
one or more of the following ways:

 

  (a) by withholding or selling a portion of the Shares that otherwise would be
paid out for your vested Performance Restricted Stock Units;

 

  (b) by withholding the amount necessary to pay the applicable taxes from your
paycheck, with no withholding of Shares;

 

  (c) by requiring you to make alternate arrangements to meet the withholding
obligation; or

 

  (d) such other method as Sun or the Committee may elect in compliance with
local law.

No payment of Shares will be made to you (or your estate) for Performance
Restricted Stock Units unless and until satisfactory arrangements (as determined
by Sun) have been made by you to fulfill Sun’s (or the Employer’s) obligation to
withhold or collect any income and other taxes with respect to the Performance
Restricted Stock Units. By accepting this grant, you expressly consent to the
withholding of Shares and to any additional (or alternative) cash withholding as
provided for in this paragraph 9. All income and other taxes related to the
Performance Restricted Stock Unit award and any Shares delivered in payment
thereof are your sole responsibility.

April 2007

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10. Rights as Stockholder. Neither you nor any person claiming under or through
you will have any of the rights or privileges of a stockholder of Sun in respect
of any Shares deliverable hereunder unless and until certificates representing
the Shares (which may be in book entry form) have been issued, recorded on the
records of Sun or its transfer agents or registrars, and delivered to you
(including through electronic delivery to a brokerage account). Notwithstanding
any other part of this Agreement, any quarterly or other regular, periodic
dividends or distributions (as determined by Sun) will not affect unvested
Performance Restricted Stock Units, and no dividends or other distributions will
be paid on unvested Performance Restricted Stock Units. Notwithstanding any
other part of this Agreement, any quarterly or other regular, periodic dividends
or distributions (as determined by Sun) paid on Shares will accrue with respect
to Performance Restricted Stock Units that are vested but unpaid pursuant to
paragraph 4 or 5, and will be paid out at the same time or time(s) as the
underlying Shares on which such dividends or other distributions have accrued.
After the issuance, recordation and delivery of any shares, you will have all
the rights of a stockholder of Sun with respect to voting the Shares and
receiving dividends and distributions on the Shares.

 

11. Nature of Grant. In accepting the offer to acquire Shares, you acknowledge
that: (a) the Plan is established voluntarily by Sun, it is discretionary in
nature and it may be modified, amended, suspended or terminated by Sun at any
time, unless otherwise provided in the Plan and this Agreement; (b) the grant of
Performance Restricted Stock Units is voluntary and occasional and does not
create any contractual or other right to receive future grants of Performance
Restricted Stock Units, or benefits in lieu of such grants even if Performance
Restricted Stock Units have been granted repeatedly in the past; (c) all
decisions with respect to future Performance Restricted Stock Unit grants, if
any, will be at the sole discretion of Sun; (d) you are voluntarily
participating in the Plan; (e) the grant of Performance Restricted Stock Units
is an extraordinary item that does not constitute compensation of any kind for
services of any kind rendered to Sun or the Employer, and which is outside the
scope of your employment contract, if any; (f) the Performance Restricted Stock
Units are not part of normal or expected compensation or salary for any
purposes, including, but not limited to, calculating any severance, resignation,
termination, redundancy, end of service payments, bonuses, long-service awards,
pension or retirement benefits or similar payments; (g) the future value of the
Shares is unknown and cannot be predicted with certainty; (h) in consideration
of the grant of Performance Restricted Stock Units, no claim or entitlement to
compensation or damages will arise from the termination of vesting or diminution
in value of the Shares resulting from termination of your active employment by
Sun or the Employer (for any reason whatsoever and whether or not in breach of
contract or local labor laws) and you irrevocably release Sun and the Employer
from any such claim that may arise; if, notwithstanding the foregoing, any such
claim is found by a court of competent jurisdiction to have arisen, then, by
signing this Agreement, you will be deemed irrevocably to have waived your
entitlement to pursue such claim; and (i) notwithstanding any terms or
conditions of the Plan to the contrary, in the event of involuntary termination
of your active employment (whether or not in breach of contract or local labor
laws), your right to continued vesting, if any, will terminate effective as of
the date that you are no longer actively employed and will not be extended by
any notice period mandated under local law (e.g., active employment would not
include a period of “garden leave” or similar period pursuant to local law),
except as expressly provided herein, and that Sun will have the exclusive
discretion to determine when you are no longer actively employed for purposes of
administering your grant of Performance Restricted Stock Units.

April 2007

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12. Address for Notices. Any notice to be given to Sun under the terms of this
Agreement must be addressed to Sun, in care of its Secretary, at 4150 Network
Circle, Santa Clara, CA 95054, or at such other address as Sun may hereafter
designate in writing.

 

13. Grant is Not Transferable. Except to the limited extent provided in
paragraph 8 above, this grant (and the associated rights and privileges) cannot
be transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and will not be subject to sale under execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of this grant, or of any associated right or
privilege, or upon any attempted sale under any execution, attachment or similar
process, this grant and the associated rights and privileges will immediately
become null and void.

 

14. Restrictions on Sale of Securities. The Shares issued as payment for vested
Performance Restricted Stock Units will be registered under the U.S. federal
securities laws and will be freely tradable upon receipt. However, your
subsequent sale of the Shares will be subject to any market blackout-period that
may be imposed by Sun and must comply with Sun’s insider trading policies, and
any other applicable securities or other laws.

 

15. Delay in Payment. Notwithstanding any other part of this Agreement, any
Performance Restricted Stock Unit otherwise payable to you pursuant to this
Agreement will not be paid during the six-month period following your
termination of employment unless Sun determines, in its good faith judgment,
that the payment would not cause you to incur an additional tax under
Section 409A of the Code and any temporary or final Treasury Regulations and
Internal Revenue Service guidance thereunder (“Section 409A”). If the payment of
any amounts are delayed as a result of the previous sentence, any Performance
Restricted Stock Unit otherwise payable to you during the six (6) months
following your termination will accrue during such six-month period and will
become payable in Shares on the date six (6) months and one (1) day following
the date of your termination.

 

16. Binding Agreement. Subject to the limitation on the transferability of this
grant contained herein, this Agreement will be binding upon and inure to the
benefit of the heirs, legatees, legal representatives, successors and assigns of
the parties hereto.

 

17. Conditions for Issuance of Certificates for Stock. Any Shares deliverable to
you may be either previously authorized but unissued Shares or issued Shares
which have been reacquired by Sun. Sun will not be required to issue any
certificate or certificates for Shares hereunder prior to fulfillment of all the
following conditions: (a) the admission of the Shares to listing on all stock
exchanges on which the stock is listed; and (b) the completion of any
registration or other qualification of the Shares under any U.S. state or
federal law or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body, which the Committee shall,
in its absolute discretion, deem necessary or advisable; and (c) the obtaining
of any approval or other clearance from any U.S. state or federal governmental
agency or any

April 2007

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   other governmental regulatory body, which the Committee shall, in its
absolute discretion, determine to be necessary or advisable; and (d) the lapse
of a reasonable period of time following the date of vesting or other scheduled
payout of the Performance Restricted Stock Units as the Committee may establish
from time to time for reasons of administrative convenience.

 

18. Plan Governs. This Agreement is subject to all terms and provisions of the
Plan. In the event of a conflict between this Agreement and the Plan, the Plan
will govern. Capitalized terms used and not defined in this Agreement will have
the meaning set forth in the Plan.

 

19. Committee Authority. The Committee will have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret or revoke any rules (including, but not limited to, the determination
of whether or not any Performance Restricted Stock Units have vested). All
actions taken and all interpretations and determinations made by the Committee
will be final and binding upon you, Sun and all other persons. The Committee
will not be personally liable for any action, determination or interpretation
made in good faith with respect to the Plan or this Agreement.

 

20. Data Privacy. By accepting this Performance Restricted Stock Unit award or
any Shares in payment thereof, you explicitly and unambiguously consent to the
collection, use and transfer, in electronic or other form, of your personal data
as described in this document by and among, as applicable, the Employer, Sun and
its Subsidiaries and affiliates for the exclusive purpose of implementing,
administering and managing your participation in the Plan. For the purpose of
implementing, administering and managing the Plan, you understand that Sun and
the Employer hold certain personal information about you, including, but not
limited to, your name, home address and telephone number, date of birth, Tax ID
or other identification number, salary, nationality, job title, any Shares or
directorships held in Sun, details of all Performance Restricted Stock Units or
any entitlement to Shares awarded, canceled, exercised, vested, unvested or
outstanding in your favor, for the purpose of implementing, administering and
managing the Plan (“Data”). You understand that Data may be transferred to any
third parties assisting in the implementation, administration and management of
the Plan, that these recipients may be located in your country or elsewhere.
Sun, as a global company, may transfer your personal data to countries which may
not provide an adequate level of protection. Sun, however, is committed to
providing a suitable and consistent level of protection for your personal data
regardless of the country in which it resides. You understand that you may
request information regarding Sun’s stock plan administration by contacting
Global Stock Plan Services. You authorize the recipients to receive, possess,
use, retain and transfer the Data, in electronic or other form, for the purposes
of implementing, administering and managing your participation in the Plan,
including any requisite transfer of such Data as may be required to a broker or
other third party with whom you deposit any Shares issued at vesting or other
scheduled payout. You understand that Data will be held as long as is necessary
to implement, administer and manage the Plan. You understand that you may, at
any time, view Data, request additional information about the storage and
processing of Data, require any necessary amendments to Data or refuse or
withdraw the consents herein, in any case without cost, by contacting in writing
Global Stock Plan Services. You understand, however, that refusing or
withdrawing your consent may affect your ability to participate in the Plan. For
more information on the consequences of your refusal to consent or withdrawal of
consent, you understand that you may contact Global Stock Plan Services.

April 2007

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21. Country-Specific Terms. Appendix B of this Agreement contains additional
terms that apply to employees in certain countries. You should review Appendix B
to determine any additional terms that will apply to your grant of Performance
Restricted Stock Units.

 

22. Captions. Captions used in this Agreement are for convenience only and are
not to serve as a basis for interpretation or construction of this Agreement.

 

23. Agreement Severable. In the event that any provision in this Agreement is
held invalid or unenforceable, the provision will be severable from, and the
invalidity or unenforceability will not be construed to have any effect on, the
remaining provisions of this Agreement.

 

24. Entire Agreement. This Agreement constitutes the entire understanding of the
parties on the subjects covered. You expressly warrant that you are not
executing this Agreement in reliance on any promises, representations, or
inducements other than those contained in the Agreement.

 

25. Modifications to the Agreement. Modifications to this Agreement or the Plan
can be made only in an express written contract executed by a duly authorized
officer of Sun. Notwithstanding anything to the contrary in the Plan or this
Agreement, Sun reserves the right to revise this Agreement as it deems necessary
or advisable, in its sole discretion and without your consent, to comply with
Section 409A or to otherwise avoid imposition of any additional tax or income
recognition under Section 409A prior to the actual payment of Shares pursuant to
this award of Performance Restricted Stock Units.

 

26. Amendment, Suspension or Termination of the Plan. By accepting this award,
you expressly warrant that you have received a right to purchase stock under the
Plan, and has received, read and understood a description of the Plan. You
understand that the Plan is discretionary in nature and may be modified,
suspended or terminated by Sun at any time.

 

27. Electronic Delivery. Sun may, in its sole discretion, decide to deliver any
documents related to the grant of Performance Restricted Stock Units and
participation in the Plan or future Performance Restricted Stock Units that may
be granted under the Plan by electronic means or to request your consent to
participate in the Plan by electronic means. You hereby consent to receive such
documents by electronic delivery and, if requested, to agree to participate in
the Plan through an on-line or electronic system established and maintained by
Sun or another third party designated by Sun.

 

28. No Effect on Employment or Service. YOU FURTHER ACKNOWLEDGE THAT NOTHING IN
THIS AGREEMENT CONSTITUTES A CONTRACT OF EMPLOYEMENT AND THAT YOU AND SUN,
INCLUDING ITS SUBSIDIARIES AND AFFILIATES, EACH RESERVES THE RIGHT TO TERMINATE
THE EMPLOYMENT RELATIONSHIP AT ANY TIME AND FOR ANY REASON, WITH OR WITHOUT
CAUSE AND WITH OR WITHOUT NOTICE, WHEREVER ALLOWED BY LOCAL LAWS.

April 2007

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29. Notice of Governing Law. This grant of Performance Restricted Stock Units is
governed by, and will be construed in accordance with, the laws of the State of
Delaware without regard to principles of conflict of laws. For purposes of
litigating any dispute that arises directly or indirectly from the relationship
of the parties evidenced by this grant or the Agreement, the parties agree to
submit to and consent to the exclusive jurisdiction of the State of California
and agree that such litigation will be conducted only in the courts of Santa
Clara County, California, or the federal courts for the United States for the
Northern District of California, and no other courts, where this grant is made
and/or to be performed.

 

30. Solicitation of Employees. You agree that both while employed by Sun
(including its subsidiaries and affiliates) and for twelve (12) months
immediately following the termination of employment with Sun, you shall not
either directly or indirectly solicit, induce, recruit or encourage any of Sun’s
employees to leave their employment either for yourself or for any other person
or entity.

o O o

April 2007

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APPENDIX B

SUN MICROSYSTEMS, INC.

Performance Restricted Stock Unit AGREEMENT

Special Provisions for Performance Restricted Stock Units in Countries Outside
the U.S.

This Exhibit includes special terms applicable to grantees in the countries
below. These terms are in addition to those set forth in the Agreement.
Capitalized terms used but not defined herein will have the same meanings
assigned to them in the Plan and the Agreement.

Please note that the information below may relate to your exchange control
obligations. Compliance with such obligations is your responsibility and neither
Sun nor the Employer accepts any responsibility for such compliance. Also,
exchange control regulations are subject to change. As a result, you should
consult with your advisor before sending/receiving funds to the U.S. or before
selling Shares.

Argentina

The offering of the award of Performance Restricted Stock Units and Shares
issued at vesting are offered in a private transaction. This offer is not
subject to the supervision of Argentine governmental authorities.

The Performance Restricted Stock Units and Shares are being awarded by Sun on
behalf of your local employer. The Performance Restricted Stock Units do not
accrue on a monthly basis and will not be granted on a regular or monthly basis.

Canada

Consent to Receive Information in English for Employees in Quebec.

The parties acknowledge that it is their express wish that the Agreement, as
well as all documents, notices and legal proceeds entered into, given or
instituted pursuant hereto or relating directly or indirectly hereto, be drawn
up in English.

Les parties reconnaissent avoir exigé la rédaction en anglais de cette
convenzion, ainsi que de tous documents exécutés, avis donnés et procédures
judiciaries intentées, directement ou indirectement, relativement à ou suite à
la présents convenzion.

China

Please be advised of the following exchange control regulations that will apply
when you sell Shares.

A PRC national is permitted to open foreign exchange accounts in China and to
receive foreign exchange remitted from abroad or foreign exchange held in China.
There is no limit on the amount of foreign exchange that can be received and
maintained in the foreign exchange accounts. However, difficulties may arise
with the withdrawal and conversion of foreign currency from Chinese bank
accounts. For amounts between US$10,000 and US$50,000, you must produce
documentation to the bank evidencing the source of the funds. If the amount
exceeds US$50,000, local approval is required to withdraw and convert the
currency.

April 2007

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Colombia

You may be required to register any foreign investments you hold abroad,
including Shares of Sun, with the Bank of the Republic if the value of such
foreign investments exceeds the applicable threshold.

Pursuant to Article 128 of the Colombian Labor Code, the Plan and related
benefits do not constitute a component of “salary” for any legal purpose.

Denmark

If you make or receive overseas payments in excess of DKK250,000, you will be
required to file a report with the Danish National Bank. This report is required
for statistical purposes only. In addition, if you establish an account holding
cash or shares abroad, you must report the account to the Danish National Bank.

If the Danish Stock Option Act applies to your grant of Performance Restricted
Stock Units, your Performance Restricted Stock Units will not be subject to
Sun’s repurchase option upon involuntary termination of employment that is not
in breach of contract.

France

You may hold Shares acquired under the Plan outside France provided you declare
all foreign accounts, whether open, current, or closed, in your income tax
return. Furthermore, you must declare to the customs and excise authorities any
cash or securities you import or export without the use of a financial
institution when the value of the cash or securities is equal to or exceeds
€7,600.

Performance Restricted Stock Units are being granted under a French
tax-qualified plan.

Germany

Cross-border payments in excess of €12,500 must be reported monthly. If you use
a German bank to effect a cross-border payment in excess of €12,500 in
connection with the sale or securities or the payment of dividends related to
certain securities, the bank will make the report. In this case, you will not
have to report the transaction. In addition, you must report any receivables or
payables or debts in foreign currency exceeding an amount of approximately
€5,000,000 on a monthly basis. Finally, you must report on an annual basis,
Shares holding exceeding 10% of the total voting capital of Sun.

Hong Kong

The contents of the Agreement have not been reviewed by any regulatory authority
in Hong Kong. You are advised to exercise caution in relation to the offer. If
you have any doubt about any of the contents of the Agreement, you should obtain
independent professional advice.

India

Proceeds from the sale of Shares must be repatriated to India. You should obtain
a foreign inward remittance certificate from the bank for your records to
document compliance with this requirement and submit a copy of the foreign
inward remittance certificate to your employer.

By accepting this Performance Restricted Stock Unit award, you acknowledge that
you understand and agree that: (i) your decision to accept the award is
voluntary; and (ii) an award granted under the Plan does not constitute a
customary right or privilege.

April 2007

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Ireland

Performance Restricted Stock Units and Shares issued at vesting are offered in a
private transaction and not as a public offering. Only newly issued Shares will
be used for the payment of Performance Restricted Stock Units to directors of
Sun.

Directors and shadow directors of an Irish subsidiary are subject to certain
notification requirements under the Companies Act. Directors and shadow
directors must notify the Irish subsidiary in writing of their interest in Sun
and the number and class of Shares or rights to which the interest relates
within five days of receipt or knowledge of receipt of the Performance
Restricted Stock Units. Directors and shadow directors also must notify the
Irish subsidiary within five days of payment of their Performance Restricted
Stock Units or of selling Shares acquired under the Plan. This disclosure
requirement also applies to any rights or Shares acquired by director’s spouse
or children (under the age of 18).

Korea

When the Shares acquired under the Plan are sold, if the proceeds exceed
US$100,000, such proceeds must be repatriated to Korea within six months.

Luxembourg

You are obligated to report any outward and inward remittance of funds to the
Banque Central de Luxembourg and/or the Service Central de La Statisque et des
Etudes Economiques (the “STATEC”). If a Luxembourg financial institution is
involved in the transaction, it will generally fulfill the reporting obligation
on your behalf. If the transaction does not involve a Luxembourg financial
institution, you will have to report the transaction (regardless of the amount
remitted or received) yourself to the STATEC on a specific form. The report has
to be filed within 15 working days following the month during which the
transaction occurred.

Netherlands

The Performance Restricted Stock Unit award is being made to you as an incentive
for you to remain employed with your current Employer and is not remuneration
for services rendered.

Russia

If Performance Restricted Stock Units are granted to employees in Russia, the
Performance Restricted Stock Units will be paid to you in cash at vesting. You
will receive the cash equivalent of the fair market value of the Shares at
vesting. You will not be entitled to receive any Shares pursuant to the grant of
Performance Restricted Stock Units.

When you receive cash at vesting, you may be required to repatriate the funds to
Russia through an “F” type account opened at an authorized bank in Russia. After
you remit the sale proceeds back to Russia, you may transfer the funds to a
foreign bank account subject to the following limitations: (1) the foreign
account may be opened only for individuals; (2) the foreign account may not be
used for business activities; (3) you must give notice to the Russian tax
authorities about the opening/closing of each foreign account within one month
after the account opening/closing; and (4) you must notify the account balances
on your foreign accounts as of the beginning of each calendar year to the
Russian tax authorities. There may be additional restrictions if you
send/receive more than US$150,000 into/out of Russia within a calendar year.

April 2007

--------------------------------------------------------------------------------

Singapore

The offer is being made on a private basis and is, therefore, exempt from
registration in Singapore.

Directors of a Singapore subsidiary are subject to certain notification
requirements under the Singapore Companies Act Directors must notify the
Singapore subsidiary in writing of an interest (e.g., Shares) in Sun or any
related companies within two days of its acquisition or disposal. In addition,
directors must notify the Singapore subsidiary of any interest held in Sun or
any related company within two days of becoming a director.

Thailand

Any proceeds received from the sale of Shares must be repatriated into Thailand,
and they must be converted to Thai Baht within seven days of receipt. In the
event that the amount of the proceeds from the sale of Shares is US$20,000 or
more (or its equivalent amount at market rate). You also are required to
complete and submit a Foreign Exchange Transaction Form to the authorized agent
to report the inward remittance of the proceeds to Thailand.

United Kingdom

Performance Restricted Stock Units may only be settled on vesting in Shares, and
not cash.

By signing the Agreement, you agree that any withholding, deduction or payment
on account of any income tax and National Insurance Contributions (“NICs”) will
occur within 90 days after the transfer of Shares to you upon vesting of the
Performance Restricted Stock Units (the “Due Date”). If tax and NICs withholding
is not collected from or paid by you by the Due Date, the amount of any
uncollected tax and NICs shall constitute a loan owed by you to your Employer,
effective on the Due Date. You agree that the loan shall bear interest at HM
Revenue and Customs’ Official Rate, will be immediately due and payable, and Sun
or your Employer may recover it at any time thereafter by any of the means
referred to in paragraph 9 of the Agreement. The withholding and collection
provisions contained in paragraph 9 apply equally to any NICs payable by you in
respect of the Performance Restricted Stock Units.

Further to paragraph 9 of the Agreement, you may pay to Sun or your Employer the
amount of any Tax-Related Items and Sun may only withhold in Shares to the
extent that you have not already paid an amount sufficient to cover the
Tax-Related Items.

The grant of Performance Restricted Stock Units is subject to execution and
delivery by you of a joint election form, which will be provided to you by Sun
or your Employer, under which you agree to bear as your primary responsibility
all of the secondary Class 1 NICs arising in respect of the vesting of your
Performance Restricted Stock Units. You also agree to execute any such further
joint election forms as may be required between you and any successor to Sun
and/or your Employer. If you do not execute and deliver a joint election form to
Sun or your Employer prior to the first vesting of your Performance Restricted
Stock Units, the grant shall be null and void without any liability to Sun
and/or your Employer. The joint election form will not apply to dividend
equivalent payments paid in cash (if any).

Directors of any UK subsidiary and their immediate family members are required
to disclose any interest they hold in the stock of their employer company or its
parent or subsidiary companies, or in rights to acquire such stock, before the
expiration of five days from the date of receiving notice of the grant if the UK
subsidiary is not 100% owned by Sun. The director must notify the UK subsidiary
in writing of the interest and the number and class of stock or rights to which
the interest relates. The director must also notify the subsidiary when
purchasing or selling Shares.

April 2007

--------------------------------------------------------------------------------

Venezuela

This offering is personal, private, exclusive and non-transferable and is made
to you because you meet the eligibility requirements set forth in the Plan.

You agree that any modification of the Plan or its termination will not
constitute a change or impairment of the terms and conditions of your
employment.

April 2007

--------------------------------------------------------------------------------

JOINT ELECTION in respect of the SUN MICROSYSTEMS, INC.

1990 LONG-TERM EQUITY INCENTIVE PLAN

(UK Employees)

Election To Transfer the Employer’s National Insurance Liability to the Employee

 

1. Parties

This Election is between:

 

  (A) The employee (the “Employee”) who is eligible to receive Performance
Restricted Stock Units (“PRSUs”) and/or Restricted Stock granted by Sun
Microsystems, Inc. of 4150 Network Circle, Santa Clara, California 95054, USA
(the “Company”) pursuant to the terms and conditions of the Sun Microsystems,
Inc. 1990 Long-Term Equity Incentive Plan (the “Plan”), and

 

  (B) Sun Microsystems Ltd. (Company Registration No. 572 27380 07149) whose
registered officeis at Java House, Guillemont Park Minley Road, Blackwater
Camberley, Surrey GU17 9QG or Sun Microsystems Scotland Ltd. ( Company
Registration No. 572185101264 ) whose registered office is at Springfield,
Linlithgow, West Lothian EH49 7LR (the “Employer”), which employs the Employee.

 

2. Purpose of Election

 

2.1 This Election relates to the employer’s secondary Class 1 National Insurance
Contributions (the “Employer’s Liability”) which may arise on the occurrence of
a “Taxable Event” constituting relevant employment income under section 4(4)(a)
of the Social Security Contributions and Benefits Act 1992 in respect of PRSUs
and paragraph 3A(2B)(a) of Schedule 1 to that Act in respect of RS, including:

 

  (i) the acquisition of securities pursuant to the PRSUs (pursuant to section
477(3)(a) ITEPA); and/or

 

  (ii) the assignment or release of the PRSUs in return for consideration
(pursuant to section 477(3)(b) ITEPA); and/or

 

  (iii) the receipt of a benefit in connection with the PRSUs (pursuant to
section 477(3)(c) ITEPA); and/or

 

  (iv) the vesting of the Restricted Stock (pursuant to section 427(3)(a) to
(c) ITEPA).

 

2.2 In this Election, ITEPA means the Income Tax (Earnings and Pensions) Act
2003.

 

2.3 This Election applies to all PRSUs and Restricted Stock granted to the
Employee under the Plan on or after 1 January 2006 and up to the termination of
the Plan.

 

3. The Election

The Employee and the Employer jointly elect that the entire liability of the
Employer to pay the Employer’s Liability on the Taxable Event is hereby
transferred to the Employee. The Employee understands that by signing this
Election he or she will become personally liable for the Employer’s Liability
covered by this Election.

April 2007

--------------------------------------------------------------------------------

4. Payment of the Employer’s Liability

 

4.1 The Employee hereby authorises the Company and/or the Employer to collect
the Employer’s Liability from the Employee at any time after the Taxable Event:

 

  (i) by deduction from salary or any other payment payable to the Employee at
any time on or after the date of the Taxable Event; and/or

 

  (ii) directly from the Employee by payment in cash or cleared funds; and/or

 

  (iii) by arranging, on behalf of the Employee, for the sale of some of the
securities which the Employee is entitled to receive in respect of the PRSUs.

 

4.2 The Employer hereby reserves for itself and the Company the right to
withhold the transfer of any securities to the Employee until full payment of
the Employer’s Liability is received.

 

4.3 The Employer agrees to remit the Employer’s Liability to HM Revenue and
Customs on behalf of the Employee within 14 days after the end of the UK tax
month during which the Taxable Event occurs.

 

5. Duration of Election

 

5.1 The Employee and the Employer agree to be bound by the terms of this
Election regardless of whether the Employee is transferred abroad or is not
employed by the Employer on the date on which the Employer’s Liability becomes
due.

 

5.2 This Election will continue in effect until the earliest of the following:

 

  (i) the Employee and the Employer agree in writing that it should cease to
have effect;

 

  (ii) on the date the Employer serves written notice on the Employee
terminating its effect;

 

  (iii) on the date HM Revenue and Customs withdraws approval of this Election;
or

 

  (iv) the date the Election ceases to have effect in accordance with its terms.

Signed by [INSERT NAME OF EMPLOYEE]

 

[Employee]

 

 

Date

 

 

Signed for and on behalf of [INSERT NAME OF SUBSIDIARY]

 

[Subsidiary name]

 

 

Position

 

 

Date

 

 

April 2007