**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 ofAugust 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 theShares 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 tothe 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 theCompany. 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 1934Act 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 orregulation. 

*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 authorityunder Section 3.7 to eliminate or reduce the award otherwise determined by the Payout Formula. 

*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 Codeof 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 regulationamending, 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 anyemployee 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 selectedby 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 theActual Awards (if any) to be paid to Participants. The formula or matrix may differ from Participant to Participant. 

*2.12 “PerformancePeriod”*

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

*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 PerformanceGoals 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 measurableand 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 pershare (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 productrevenue 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 tradedsecurities 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 anddepreciation 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 orgross 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 companiesor 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 hereafteramended 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 ofservice with the Company or an Affiliate. 

*2.16 “Shares”*

means shares of the Company’s common stock. 

*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 acessation 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 thedisaffiliation 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 itssole 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 discretionof 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 subsequentPerformance 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.*

TheCommittee, 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 fromaward 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 theCompany’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 eachParticipant. 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 amountof cash. 

*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 eachParticipant. 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 thePerformance 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 12months). 

*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 eachParticipant 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 Serviceprior 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 beconstrued 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 PerformancePeriod during which the Award was earned and the certification of the Committee provided for in Section 3.7. 

*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, suchShares 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 Awardwould 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 thepleasure 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 theCommittee 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 anddiscretion 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 termsand 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 theUnited 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 anddecisions 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. 

*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 securitiesmarket 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 notlimited 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 orwithout 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 Affiliatesis 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 withoutcause, 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 toreceive 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 reasonablyincurred 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 orshe 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 otherrights 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 holdthem harmless. 

*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 indirectpurchase, 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 theParticipant 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. Inthe 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 otherwisealienated 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 lifetimeonly 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 orarrangement 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 forany 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 grantedduring any period of suspension or after termination of the Plan. 

*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.*

Exceptwhere 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 anyreason, 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 awardsunder 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 thelaws 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. 

**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.