SUN MICROSYSTEMS, INC.

                 DIRECTOR LEVEL CHANGE OF CONTROL SEVERANCE PLAN

             Amended and Restated Effective as of November 13, 1996


Introduction

         The  Board  of  Directors  of  Sun   Microsystems,   Inc.,  a  Delaware
corporation ("Company"), has evaluated the economic and social impact of certain
acquisitions or change of control events on its employees.  The Board recognized
that it will no longer  have the power to  protect  interests  of the  employees
after an acquisition or other change of control. As a result, the Board believes
that it is in the Company's  interest to provide its employees with the right to
compensation  and  assurance  of  economic  security  in  certain  circumstances
following  an  acquisition  or other change of control.  Furthermore,  the Board
believes  a  severance  compensation  plan of this kind will aid the  Company in
attracting and retaining the highly qualified,  high performing  individuals who
are essential to its success. The plan's assurance of fair treatment will ensure
organizational  stability  during any period of significant  uncertainty that is
inherent to an acquisition or other change of control.

         Accordingly,  the  following  plan has  been  developed  and is  hereby
adopted.


                                   SECTION I.

                              ESTABLISHMENT OF PLAN

         1.1      Establishment of Plan

         As of the Effective  Date, the Company  hereby  establishes a severance
plan to be known as the "Director  Level Change of Control  Severance Plan" (the
"Plan"),  as set forth in this document.  The purposes of the Plan are set forth
in the Introduction.

         1.2      Applicability of Plan

         The benefits  provided by this Plan shall be available to all Employees
of the  Company  who,  at or after  the  Effective  Date,  meet the  eligibility
requirements of Section III.

         1.3      Contractual Right to Benefits

         This Plan establishes and vests in each Participant a contractual right
to the  benefits to which he or she is entitled  hereunder,  enforceable  by the
Participant against his or her Employer or the Company, or both.



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                                   SECTION II.

                          DEFINITIONS AND CONSTRUCTION

         2.1      Definitions

         Whenever used in the Plan, the following  terms shall have the meanings
set forth below and,  when the meaning is  intended,  the initial  letter of the
term is capitalized.

                  (a) "Annual  Compensation"  means the total of (i) one year of
base  salary,  at the highest base salary rate that you were paid by the Company
in the 12-month period prior to the date of your  termination of employment (the
"Look-Back  Period"),  (ii) 100% of the  greatest  "On Target"  annual bonus for
which you were  eligible  within  the  Look-Back  Period,  and (iii) 100% of the
greatest "On Target" Commission for which you were eligible within the Look-Back
Period.

                  (b) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 of the General  Rules and  Regulations  under the  Securities
Exchange Act of 1934, as amended (the "Exchange Act").

                  (c) "Change of Control" of the Company means and includes each
and all of the following occurrences:

                           (i) The  stockholders of the Company approve a merger
                  or consolidation,  other than a merger or consolidation  which
                  would  result  in  the  voting   securities   of  the  Company
                  outstanding  immediately prior thereto continuing to represent
                  (either by remaining  outstanding  or by being  converted into
                  voting  securities  of the  surviving  entity) at least  fifty
                  percent  (50%) of the total  voting power  represented  by the
                  voting  securities  of the  Company or such  surviving  entity
                  outstanding immediately after such merger or consolidation, or
                  the  stockholders  of the  Company  approve a plan of complete
                  liquidation  of the  Company or an  agreement  for the sale or
                  disposition  by the  Company of all or  substantially  all the
                  Company's assets.

                           (ii) The  acquisition  by any  Person  as  Beneficial
                  Owner,  directly or  indirectly,  or securities of the Company
                  representing  fifty  percent (50%) or more of the total voting
                  power  represented  by the Company's then  outstanding  voting
                  securities except pursuant to a negotiated  agreement with the
                  Company and pursuant to which such  securities  are  purchased
                  for the Company.

                           (iii) A  majority  of the Board of  Directors  of the
                  Company  in office at the  beginning  of any  thirty-six  (36)
                  month period is replaced  during the course of such thirty-six
                  (36) month  period  (other than by  voluntary  resignation  of
                  individual  directors in the ordinary  course of business) and
                  such  replacement  was not initiated by the Board of Directors
                  of the  Company  as  constituted  at  the  beginning  of  such
                  thirty-six (36) month period.

                                       -2-

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         Any other provision of this Section  notwithstanding,  the term "Change
of Control" shall not include either of the following  events  undertaken at the
election of the Company:

                           (i) Any transaction,  the sole purpose of which is to
                  change the state of the Company's incorporation.

                           (ii) A  transaction,  the  result of which is to sell
                  all or substantially  all the assets of the Company to another
                  corporation (the "surviving  corporation");  provided that the
                  surviving  corporation  is owned directly or indirectly by the
                  stockholders  of  the  Company   immediately   following  such
                  transaction  in  substantially  the same  proportions as their
                  ownership of the Company's common stock immediately  preceding
                  such transaction;  and provided,  further,  that the surviving
                  corporation expressly assumes this Agreement.

                  (d) "Change of Control Date" means, for purposes of this Plan,
the date as of which a Change of Control shall have occurred.

                  (e) "COBRA" means Title X of the  Consolidated  Omnibus Budget
Reconciliation Act of 1985, as amended.

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

                  (g)  "Company"  means  Sun  Microsystems,   Inc.,  a  Delaware
corporation, and any successor as provided in Section VII hereof.

                  (h) "Effective  Date" as to Employees of an Employer means the
date the Plan is approved by the Board of  Directors of that  Employer,  or such
other date as the Board shall designate in its resolution approving the Plan.

                  (i)  "Eligible  Employee"  means a common law  employee  of an
Employer whose official Company title is Director (other than an employee who is
a party to an individual  agreement with the Company which provides severance or
severance-type  benefits),  and  whose  customary  employment  as of a Change of
Control is 20 hours or more per week.  For  purposes  of this plan,  an Employee
shall be  considered  to  continue  to be  employed  in the case of sick  leave,
military leave, or any other leave of absence  approved  pursuant to the regular
leave policy of the Company.

                  (j)  "Employer"  means  the  Company  or a  subsidiary  of the
Company which has adopted the Plan pursuant to Section VI hereof.

                  (k) "Hours of Work" means the  Employee's  customary  hours of
employment  per week. For purposes of this Plan,  customary  Hours of Work shall
not include overtime or other extraordinary hours.

                  (l) "Just Cause" means the  termination  of  employment  of an
Employee shall have

                                       -3-

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taken  place as a result of (i) theft or damage of Company  property;  (ii) use,
possession,  sale or  distribution  of  illegal  drugs,  (iii)  being  under the
influence of alcohol or drugs (except to the extent medically  prescribed) while
on duty or on Company  premises,  (iv)  involvement  in activities  representing
conflicts of interest, (v) improper disclosure of confidential information, (vi)
conduct  endangering,  or likely to  endanger,  the  health or safety of another
employee;  (vii) conviction of a felony, or (viii) falsifying or misrepresenting
information on Company records.

                  (m) "Participant"  means an Employee who meets the eligibility
requirements of Section III.

                  (n) "Person"  shall have the meaning  ascribed to such term in
Section  3(a)(9) of the  Exchange  Act and as used in  Sections  13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) of the Exchange Act but
excluding the Company and any subsidiary and any employee benefit plan sponsored
or maintained by the Company or any  subsidiary  (including  any trustee of such
plan acting as Trustee).

                  (o) "Plan" means the Sun  Microsystems,  Inc.  Director  Level
Change of Control Severance Plan.

                  (p)  "Severance   Payment"  means  the  payment  of  severance
compensation as provided in Section IV hereof.

         2.2      Applicable Law

                  To the extent not preempted by the laws of the United  States,
the laws of the State of California  shall be the controlling law in all matters
relating to the Plan.

         2.3      Severability

                  If a provision  of this Plan shall be held illegal or invalid,
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.


                                  SECTION III.

                                   ELIGIBILITY

         3.1      Participation in Plan

                  Any Eligible  Employee shall become a Participant in the Plan.
A Participant  shall cease to be a Participant in the Plan when he or she ceases
to be an Employee of an Employer,  unless such  Participant  is then entitled to
payment of a Severance  Payment as provided in the Plan. A Participant  entitled
to payment of a Severance Payment shall remain a Participant in the Plan until

                                       -4-

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the full amount of the Severance Payment has been paid to the Participant.

         3.2      Re-entry into Plan

                  For purposes of Section 4.3, an individual who ceases to be an
Eligible  Employee  due to a  reduction  in Hours of Work below 20 hours and who
again becomes an Eligible Employee prior to an Change of Control shall be deemed
to have been "continuously employed" for his or her entire period of employee as
an Eligible Employee.


                                   SECTION IV.

                               SEVERANCE PAYMENTS

         4.1      Right to Severance Payment

                  A Participant  shall be entitled to receive from the Company a
Severance Payment and certain benefits in the amount provided in this Section IV
if there has been a Change of Control of the Company and if,  within twelve (12)
months thereafter,  the Participant's  employment by an Employer shall terminate
for any reason specified in Section 4.2, whether the termination is voluntary or
involuntary.  A  Participant  shall not be entitled  to a  Severance  Payment or
benefits  if  termination  occurs for  reasons  not  specified  in Section  4.2,
including  death,  voluntary  retirement at or after age 65, total and permanent
disability, or for Just Cause.

         4.2      Good Reasons for Termination

                  Following a Change of Control, a Participant shall be entitled
to a Severance  Payment and to the benefits  described in Section 4.5  following
termination of employment,  whether voluntary or involuntary, for one or more of
the following reasons:

                  (a) The  Employer  reduces  by 15% or more  the  Participant's
Annual Compensation.

                  (b) The  Employer  reduces  by 20% or more  the  Participant's
Hours of Work as in effect immediately prior to the Change of Control.

                  (c) Without the  Participant's  express written  consent,  the
Employer  requires the  Participant  to change the location of his or her job or
office, so that he or she will be based at a location more than fifty (50) miles
from the  location  of his job or  office  immediately  prior to the  Change  of
Control.

                  (d)  The  cost of  Employer-provided  benefits,  under  plans,
arrangements,  policies and  procedures,  taken as a whole,  decreases by 25% or
more of the Employer-provided cost immediately prior to the Change of Control or
the cost of such benefits to the Participant increases

                                       -5-

<PAGE>



by 25% or more of the  Participant's  cost  immediately  prior to the  Change of
Control;  provided,  however,  that if such increase results from the Employer's
good faith  exercise  of better  judgment  in  response to changes in federal or
state law, such decrease increase shall not be a Good Reason for Termination.

                  (e) The Participant  incurs a Significant  Reduction in Duties
and  Responsibilities  as  determined  by the  "Review  Committee".  Such review
Committee  shall be composed of seven (7)  Employees,  appointed by the Board of
Directors for this purpose, of which no less than four (4) are Participants. The
Review  Committee  may establish  such  procedures  as it deems  appropriate  to
facilitate  a  fair  and  objective  review  process  to  determine   whether  a
Participant has incurred a Significant Reduction in Duties and Responsibilities.

                  (f) A  successor  company  fails  or  refuses  to  assume  the
Company's obligations under this Plan, as required by Section VII.

                  (g) The Company or any successor  company  breaches any of the
provisions of this Plan.

                  (h) The Employer terminates the employment of a Participant at
or after a Change of Control other than for Just Cause.

         4.3      Amount of Severance Payment

                  (a) Subject to Section 4.3(b), each Participant  entitled to a
Severance  Payment  under  this Plan who is  employed  by the  Company as of the
Change of Control Date shall receive from the Company a lump sum cash payment in
an amount equal to one and one-half (1 1/2) times Annual Compensation.

                  (b) In the case of a  Participant  who is not a citizen of the
United States, the Company may, in its discretion,  reduce the Severance Payment
otherwise  calculated  under  Section  4.3(a) by the  amount  of  severance-type
benefits  to which  such  Participant  is then  entitled  under  the laws of the
country in which the Participant resides.

                  (c) A Participant shall not be required to mitigate damages or
the  amount of his or her  Severance  payment  by seeking  other  employment  or
otherwise,  nor shall the amount of such payment be reduced by any  compensation
earned by the Participant as a result of employment after his or her termination
of employment by an Employer.

         4.4      Time of Severance Payment

                  The Severance Payment to which a Participant is entitled shall
be paid by the Company to the  Participant,  in cash and in full,  no later than
ten (10) calendar days after the termination of the Participant's employment. If
such a Participant should die before all amounts payable to him or her have been
paid, such unpaid amounts shall be paid to the Participant's  spouse, if living,
otherwise to

                                       -6-

<PAGE>



the personal representative of the Participant's estate.

         4.5      Other Severance Provisions

                  (a) Subject to the requirements of the Code, Participants will
receive,  in  addition  to  the  Severance  Payment,   the  same  percentage  of
Company-Paid  health and  group-term  life  insurance  in the same plans as were
provided to such Participant immediately prior to the Participant's  termination
(the "Company-Paid  Coverage").  If a Participant's  Company-Paid  Coverage also
included the  Participant's  dependents  immediately  prior to the Participant's
termination, such dependents shall continue to be covered at the same percentage
rate after such termination.

                  (b)  Company-Paid  Coverage  shall  continue for eighteen (18)
months beginning at the Participant's termination date.

                  (c) For purposes of COBRA, the date of the "qualifying  event"
for Participants  and their covered  dependents shall be the date upon which the
Company-Paid Coverage terminates.

         4.6      Parachute Payments

                  (a) In the event that any payment or benefit received or to be
received by a Participant in connection with a termination of the  Participant's
employment with an Employer (collectively, the "Termination Payments") would (i)
constitute an "excess  parachute  payment" within the meaning of Section 280G of
the Code or any similar or successor  provision to Section 280G and (ii) but for
this Section 4.6(a), be subject to the excise tax imposed by section 4999 of the
Code or any similar or successor  provision to section 4999 (the "Excise  Tax"),
then,  subject to the provisions of (c) below, such Termination  Payments (which
Termination   Payments  shall   collectively   be  referred  to  herein  as  the
"Termination  Parachute  Payments") shall be reduced to the largest amount which
would result in no portion of the Termination  Parachute  Payments being subject
to the Excise Tax. Any determination as to whether a reduction is required under
this  Section  4.6.  and as to the  amount  of such  reduction  shall be made in
writing by the Company's  independent  public accountants prior to the Change of
Control  (the  "Accountants"),  whose  determinations  shall be  conclusive  and
binding upon the Participant  and the Company for all purposes.  For purposes of
making the  calculations  required by this Section 4.6, the Accountants may make
reasonable  assumptions and approximations  concerning  applicable taxes and may
rely on reasonable,  good faith  interpretations  concerning the  application of
Sections  280G and 4999 of the  Code.  The  Company  and the  Participant  shall
furnish to the Accountants such information and documents as the Accountants may
reasonably  request in order to make a  determination  under this  Section.  The
Company shall bear all costs the Accountants may reasonably  incur in connection
with any calculations contemplated by this Section 4.6.

                  (b) If the Internal  Revenue  Service  (the "IRS")  determines
that a  Termination  Parachute  Payment is subject to the Excise  Tax,  then the
Company or any related  corporation,  as their exclusive  remedy,  shall seek to
enforce the provisions of (c) below. Such enforcement of

                                       -7-

<PAGE>



Section  4.6(c)  hereof shall be the only remedy,  under any and all  applicable
state and federal laws or otherwise,  for the failure to reduce the  Termination
Parachute Payments so that no portion thereof is subject to the Excise Tax.

                  (c) If,  notwithstanding the reduction described in (a) above,
the IRS  determines  that a Participant is liable for the Excise Tax as a result
of the receipt of a Termination  Parachute Payment, then such Participant shall,
subject to the  provisions of this Plan, be obligated to pay to the Company (the
"Repayment  Obligation") an amount of money equal to the "Repayment Amount". The
Repayment  Amount with respect to a Termination  Parachute  Payment shall be the
smallest such amount,  if any, as shall be required to be paid to the Company so
that such  Participant's net proceeds with respect to any Termination  Parachute
Payment (after taking into account the payment of the Excise Tax imposed on such
Termination   Parachute  Payment)  shall  be  maximized.   Notwithstanding   the
foregoing,  the Repayment Amount with respect to a Termination Parachute Payment
shall be zero if a Repayment  Amount of more than zero would not  eliminate  the
Excise Tax imposed on such Termination  Parachute Payment.  If the Excise Tax is
not  eliminated  through  the  performance  of  the  Repayment  Obligation,  the
participant  shall  pay the  Excise  Tax.  The  Repayment  Obligation  shall  be
performed  within 30 days of either (i) the Participant  entering into a binding
agreement  with the IRS as to the amount of his or her Excise Tax  liability  or
(ii)  a  final  determination  by the  IRS or a  court  decision  requiring  the
Participant  to pay the Excise Tax with respect to such a Termination  Parachute
Payment from which no appeal is available or is timely taken.


                                   SECTION V.

                     OTHER RIGHTS AND BENEFITS NOT AFFECTED

         5.1      Other Benefits

                  Neither the provisions of this Plan nor the Severance  Payment
provided for hereunder shall reduce any amounts otherwise payable, or in any way
diminish  the  Participant's  rights  as an  Employee  of an  Employer,  whether
existing now or  hereafter,  under any  benefit,  incentive,  retirement,  stock
option,  stock bonus, stock purchase plan, or any employment  agreement or other
plan or arrangement.

         5.2      Employment Status

                  THIS PLAN DOES NOT  CONSTITUTE  A CONTRACT  OF  EMPLOYMENT  OR
IMPOSE ON THE PARTICIPANT OR THE PARTICIPANT'S EMPLOYER ANY OBLIGATION TO RETAIN
THE  PARTICIPANT AS AN EMPLOYEE,  TO CHANGE THE STATUS OF THE  PARTICIPANT AS AN
AT-WILL EMPLOYEE,  OR TO CHANGE THE COMPANY'S POLICIES REGARDING  TERMINATION OF
EMPLOYMENT.




                                       -8-

<PAGE>



                                   SECTION VI.

                             PARTICIPATING EMPLOYERS

         6.1 Upon  approval by the Board of Directors of the Company,  this Plan
may be  adopted  by any  Subsidiary  of the  Company.  Upon such  adoption,  the
Subsidiary  shall become an Employer  hereunder  and the  provisions of the Plan
shall  be  fully  applicable  to the  Employees  of that  Subsidiary.  The  term
"Subsidiary" means any corporation in which the Company,  directly or indirectly
holds a majority of the voting power of its outstanding shares of capital stock.


                                  SECTION VII.

                              SUCCESSOR TO COMPANY

         7.1 The Company shall require any successor or assignee, whether direct
or  indirect,  by  purchase,  merger,  consolidation  or  otherwise,  to  all or
substantially  all  the  business  or  assets  of  the  Company,  expressly  and
unconditionally  to assume and agree to perform the Company's  obligations under
this Plan,  in the same manner and to the same extent that the Company  would be
required to perform if no such succession or assignment had taken place. In such
event,  the term  "Company,"  as used in this Plan,  shall  mean the  Company as
hereinbefore  defined and any  successor  or assignee to the  business or assets
which by reason hereof becomes bound by the terms and provisions of this Plan.


                                  SECTION VIII.

                       DURATION, AMENDMENT AND TERMINATION

         8.1      Duration

                  If a Change of  Control  has not  occurred,  this  Plan  shall
expire on November 13, 2001,  unless  sooner  terminated  as provided in Section
8.2,  or unless  extended  for an  additional  period or periods  by  resolution
adopted by the Board of Directors of the Company.

                  If a Change of Control  occurs,  this Plan shall  continue  in
full  force and  effect,  and  shall not  terminate  or expire  until  after all
Participants  who become  entitled to Severance  Payments  hereunder  shall have
received such payments in full.

         8.2      Amendment and Termination

                  The  Plan may be  terminated  or  amended  in any  respect  by
resolution  adopted by  two-thirds  of the Board of  Directors  of the  Company,
unless a Change of  Control  has  previously  occurred.  If a Change of  Control
occurs, the Plan no longer shall be subject to amendment, change,

                                       -9-

<PAGE>



substitution, deletion, revocation or termination in any respect whatsoever.

         8.3      Form of Amendment

                  The form of any proper  amendment or  termination  of the Plan
shall be a written instrument signed by a duly authorized officer or officers of
the Company,  certifying  that the amendment or termination has been approved by
the Board of  Directors.  A proper  amendment  of the Plan  automatically  shall
effect a corresponding amendment to all Participants' rights hereunder. A proper
termination  of  the  Plan  automatically  shall  effect  a  termination  of all
Participants' rights and benefits hereunder.


                                   SECTION IX.

                               PLAN ADMINISTRATION

         9.1      Discretionary Authority.

                  Prior  to  a  Change  of  Control,  the  Employer  shall  have
discretionary  authority to construe  and  interpret  the terms of the Plan,  to
determine eligibility and to make all other determinations under the Plan. On or
after the date a Change of Control,  the Employer  shall not have  discretionary
authority to construe and interpret the Plan,  and any decisions of the Employer
with  respect to the Plan during such period  shall be subject to de novo review
if and when the such decisions are reviewed by a court or in arbitration.

         9.2      Initial Appeal Procedure

                  An employee or former  employee of an Employer  who  disagrees
with their  allotment of benefits under this Plan may file a written appeal with
the designated Human Resources  representative.  Any claim relating to this Plan
shall be subject to this appeal process. The written appeal must be filed within
sixty (60) days of the employee's termination date.

                  The  appeal  must state the  reasons  the  employee  or former
employee  believes he or she is entitled to different  benefits  under the Plan.
The designated  Human  Resources  representative  shall review the claim. If the
claim  is  wholly  or  partially   denied,   the  designated   Human   Resources
representative  shall  provide  the  employee  a written  notice of the  denial,
specifying  the  reasons the claim was  denied.  Such  notice  shall be provided
within ninety (90) days of receiving the written appeal.

         9.3      Review of Appeal Procedure

                  If the appeal of an employee or former employee of an Employer
appeal is denied,  such  employee  or former  employee  shall have the right and
option  to  elect  review  of  such  denial  by  either  a  court  of  competent
jurisdiction or by arbitration as set forth in Section 11 hereof.

                                      -10-

<PAGE>



                                   SECTION X.

                             LEGAL FEES AND EXPENSES

         10.1 The Company shall pay all legal fees,  costs of litigation  and/or
arbitration,  and other expenses incurred in good faith by each Participant as a
result of the  Company's  refusal  to make the  Severance  payment  to which the
Participant  becomes  entitled  under this Plan, or as a result of the Company's
contesting the validity, enforceability or interpretation of the Plan.


                                   SECTION XI.

                                   ARBITRATION

         11.1 Each Participant shall have the right and option to elect (in lieu
of litigation) to have any dispute or controversy arising under or in connection
with  the  Plan  settled  by  arbitration,  conducted  before  a panel  of three
arbitrators  sitting in a location selected by the Participant within fifty (50)
miles from the location of his or her job with an Employer,  in accordance  with
rules of the American  Arbitration  Association then in effect.  Judgment may be
entered on the award of the  arbitrator  in any court having  jurisdiction.  All
expenses of such arbitration, including the fees and expenses of the counsel for
the Participant, shall be borne by the Company.

                                  SECTION XII.

                                     FUNDING


         12.1      The Plan shall be funded from the Company's general assets.


                                      -11-