Document:

Chairman of the Board Bonus Terms for FY09

 Exhibit 10.18 
 Chairman of the Board Bonus Terms for FY09 Under the Section 162(m) 
 Executive Officer
Performance–Based Bonus Plan 
  

 Plan Objective 
 The Chairman of the Board Bonus Terms for fiscal year 2009 under the Sun Microsystems, Inc. (“Sun” or the “Company”) Section 162(m) Executive Officer Performance-Based Bonus Plan (the “Plan”) are designed
to compensate the Chairman of the Board (the “Chairman”) for contributions to Sun during the Company’s fiscal year 2009. The Plan provides for annual cash bonus compensation based on achievement of objectively determinable performance
goals against the Plan measures. The Plan is intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code (the “Code”). 
 Plan Year/Performance Period 
 The Plan year is the
Company’s fiscal year 2009. The performance period is the Company’s fiscal year 2009. 
 Eligibility 
 These terms apply to the person serving as Sun’s Chairman as of July 1, 2008. In order to receive a bonus payment with respect to the plan year, the participant
must be serving as Sun’s Chairman as of the last business day of the fiscal year, except as provided below. 
 If the Chairman retires, terminates
employment due to disability, or dies during the performance period, the Chairman may receive a prorated bonus (subject to the sole discretion of the Leadership Development and Compensation Committee (the “LDCC”)) for the achievement of
the performance goals for the portion of the performance period that the Chairman provided services to Sun. If the Chairman leaves Sun prior to the end of a fiscal year for any other reason, including but not limited to a reduction in force,
voluntary resignation, or termination by Sun the Chairman will be ineligible for a bonus payment with respect to the performance period. 
 Annual
Bonus Target Percentage 
 The annual bonus target percentage under the Plan is 150% of the Chairman’s Annual Base Salary (as defined below) for
fiscal year 2009, as set forth below (the “Annual Bonus Target Percentage”). 
  

			
	 Fiscal Year
	 	 Annual Bonus Target Percentage

	 FY09
	 	150%

 Company Performance Measures 
 The Plan is based on the Company’s performance against the following measures (the “Company Performance Measures”): 
  

	 	1.	Fiscal Year 2009 Annual Revenue (weighted 50%); and 

  

	 	2.	Fiscal Year 2009 Annual Operating Income (weighted 50%). 

 Additional
funding shall be allocated to the annual bonus payment if the Annual Strategic Goals are met. 
  

					
	Sun Confidential: Internal Use Only	  	Page 1 of 3	  	July 2008

 Chairman of the Board Bonus Terms for FY09 Under the Section 162(m) 
 Executive Officer Performance–Based Bonus Plan 
  

 Company Performance Measure Definitions 
 Revenue: For purposes of calculating the bonus payment under the fiscal year 2009 Plan, “Revenue” is defined as net revenue as reported in the Company’s consolidated operations analysis,
adjusted to exclude certain items set forth in a schedule approved by the LDCC, as applicable. 
 Operating Income: For purposes of calculating
the bonus payment under the fiscal year 2009 Plan, “Operating Income” is defined as operating income, calculated on a GAAP basis, adjusted to exclude certain items set forth in a schedule approved by the LDCC, as applicable. 
 Annual Strategic Goals for FY09: The annual strategic goals for FY09 are set forth in a schedule approved by the LDCC. 
 Bonus Plan Funding Percentage 
 The Company uses a schedule,
which provides percentages based upon the Company’s actual performance against the Company’s goals with respect to the Company Performance Measures for fiscal year 2009 (the “Bonus Plan Funding Percentage”). The Bonus Plan
Funding Percentage is determined for fiscal year 2009 as follows: 
  

	 	1.	Fiscal Year 2009: By funding based on actual performance against goals with respect to annual Revenue and annual Operating Income, each weighted equally; 

 

	 	2.	Evaluating and funding each performance measure independently; 

  

	 	3.	Additionally, there may be an additional bonus funding based on the achievement of the Annual Strategic Goals; and 

  

	 	4.	The total bonus funding under the Plan is capped at 200% of the Annual Bonus Target Percentage plus the funding for the Annual Strategic Goals. 

 Note: The Chairman’s Annual Bonus Plan Funding Percentage may not exceed the quarterly weighted average Bonus Plan Funding Percentage of the FY09 Quarterly SMI
Bonus Plan for both Operating Income and Revenue. 
 Annual Base Salary 
 Annual Base Salary with respect to fiscal year 2009 (“Annual Base Salary”) will be the gross annual base salary as approved by the LDCC during the first fiscal quarter of the fiscal year relating to the
Plan. 
 Annual Base Salary exclude expense reimbursements, car/transportation allowances, expatriate allowances, or other commissions and bonuses paid
during fiscal year 2009. 
 Actual Bonus Calculation 
 FY09 
 The Chairman’s annual bonus payment for fiscal year 2009 will be calculated as follows: 
  

			
		  	Annual Bonus Target Percentage
	 ×
	  	Bonus Plan Funding Percentage (Company Performance Measures plus Annual Strategic Goals, if applicable)
	 ×
	  	Annual Base Salary
	=	  	Actual Annual Bonus Payment

  

					
	Sun Confidential: Internal Use Only	  	Page 2 of 3	  	July 2008

 Chairman of the Board Bonus Terms for FY09 Under the Section 162(m) 
 Executive Officer Performance–Based Bonus Plan 
  

 Example: In fiscal year 2009, if the Company achieves 100% of its annual Revenue goal, 100% of its
annual Operating Income goal and 100% of the Annual Strategic Goals, actual annual bonus payment will be calculated as follows: 
 For
purposes of this calculation, assume the 100% achievement of the Annual Strategic Goals leads to a 5% increase in the Bonus Plan Funding Percentage. As a result the Bonus Plan Funding Percentage is assumed to be 105%. 
  

							
	 Annual Bonus Target Percentage
	  		  	 	150	%
	 Bonus Plan Funding Percentage
	  	X	  	 	105	%
	 Eligible Wages
	  	X	  	$	1,000,000	 
	 Actual Annual Bonus Payment for FY09
	  	=	  	$	1,575,000	 

 Bonus Payment 
 The plan is measured and paid on an annual basis. In the U.S., bonus awards are taxable income, and will generally be paid within two and one-half (2.5) months after the close of the fiscal year, and, in any case, within the qualifying
Short-term Deferral Period pursuant to Code Section 409A. Bonuses are paid in accordance with local payroll schedules in countries outside the U.S and are subject to local and regional tax provisions. 
 Communication of Results 
 With respect to the performance
period during fiscal year 2009, results will be communicated as soon as administratively feasible after the Company’s fiscal year financial results are publicly announced. 
 Administration of the Plan 
 The LDCC administers the Plan. Members of the LDCC must qualify as outside
directors under Section 162(m) of the Code. The LDCC determines the performance goals that must be achieved before the actual bonus awards are paid. After the end of the performance period, the LDCC certifies in writing the extent to which the
pre-established performance goals actually were achieved. 
 General Provisions and Plan Governance 
 This Plan is in all respects subject to the terms, definitions and provisions of Sun’s Section 162(m) Executive Officer Performance-Based Bonus Plan, which is
incorporated herein by reference. 
  

					
	Sun Confidential: Internal Use Only	  	Page 3 of 3	  	July 2008Chief Executive's (Dr Reynolds) Employment Agreement dated 27 June 2007

 “EXHIBIT 4.1” 
  

	
	

 Telecom Corporation of New Zealand Limited 
 Telecom House 8 Hereford Street 
 Auckland 
 Phone: +64 9 358 6018 
 Fax: +64 9 357 0798 
 Email: wayne@teawatea.net.nz 
 12 August 2008 
 Paul Reynolds 
 Chief Executive Officer 
 Telecom Corporation of New Zealand Limited 
 Private Bag 92028 
 AUCKLAND 
 Dear Paul 
 VARIATION TO TERMS AND
CONDITIONS 
 I am writing to formally confirm the following changes to your terms and conditions
as set out in your individual employment agreement with Telecom dated 28th June 2007. 
 Your Total Base Remuneration and Annual Performance Incentive will be maintained as per Schedule A of your employment agreement. Your Long-term Incentive annual target
value will increase to $2,100,100 per annum. 
 Your LTI will be delivered for 08/09 through the Performance Rights Scheme. The 2008/09 grant of share rights
under the Performance Rights Scheme will only be able to be exercised if Telecom’s Total Shareholder Return (TSR) meets or exceeds specific performance hurdles. For 2008/09 the performance hurdle will have two components to it. It will have a
relative return component, which will compare Telecom’s TSR to 20 global integrated telecommunications companies. It will also have an absolute return component, which will compare Telecom’s TSR to targets set by the Board based on
independent external advice. 
 All other terms and conditions as set out in your employment contract and subsequently varied remain unchanged and in force
and effect. 
 Yours sincerely 
 Wayne Boyd 
 Chairman 
 I, Paul Reynolds, understand and accept the conditions of
employment set out in this variation to my contract and I confirm my acceptance of these terms and conditions. 
 Paul Reynolds 
 Date:Chief Executive Officer Performance Incentive Scheme 2007.

 “EXHIBIT 4.2” 
  
  
 PERFORMANCE INCENTIVE SCHEME 
  
  

 PERFORMANCE INCENTIVE SCHEME 
 TABLE OF CONTENTS 
  

					
	1	  	Name	  	1
	2	  	Glossary	  	1
	3	  	Term of Scheme	  	1
	4	  	Target value	  	1
		  	Annual target	  	1
		  	Determination	  	1
	5	  	Target performance levels	  	1
		  	Notice	  	1
	6	  	Evaluation	  	1
		  	Timing	  	1
		  	Actual value	  	1
	7	  	Payment of Actual Value	  	1
		  	Blend	  	1
		  	Number of Shares	  	2
	8	  	Modified agreement	  	2
		  	Substitution	  	2
		  	Issue of Shares	  	2
		  	Withdrawal of consent	  	2
	9	  	Shares	  	3
		  	Issue dates	  	3
		  	Shares rank equally	  	3
		  	Request form	  	3
		  	Breach	  	3
		  	Telecom notice	  	3
		  	Further request form	  	3
		  	Continuous Breach	  	3
		  	Payment	  	3
	10	  	Restrictions	  	4
		  	No divestment	  	4
		  	Termination of Employment without notice	  	4
		  	Termination of Employment for other reason	  	4
	11	  	Amendment	  	4
	12	  	Miscellaneous	  	4
		  	Telecom	  	4
		  	Delegation	  	5
		  	Fractions	  	5
		  	Entire agreement	  	5
		  	Delay	  	5
		  	Disputes	  	5
		  	Notices	  	5
		  	Construction	  	5
	GLOSSARY	  	7

 PERFORMANCE INCENTIVE SCHEME 
 Date:                      2007 
  

	1	Name 

  

	1.1	This is the Performance Incentive Scheme (the Scheme) of Dr Paul Reynolds, the Telecom chief executive officer (Chief Executive Officer).

  

	2	Glossary 

  

	2.1	A glossary of defined terms is included on page 7. 

  

	3	Term of Scheme 

  

	3.1	The Scheme will operate until termination by Telecom. 

  

	4	Target value 

 Annual target

  

	4.1	There will be a target incentive award value under the Scheme (the Target Value) for each relevant financial year. 

 Determination 
  

	4.2	Telecom will determine the Target Value for each financial year. 

  

	5	Target performance levels 

 Notice

  

	5.1	Telecom will prescribe, in consultation with the Chief Executive Officer, target performance levels under the Scheme (the Target Performance Levels) for each financial year.

  

	6	Evaluation 

 Timing 
  

	6.1	Telecom will evaluate and determine the Chief Executive Officer’s actual performance for each financial year (measured against the Target Performance Levels), shortly after the
end of that financial year. 

 Actual value 
  

	6.2	The actual incentive award value under the Scheme for a financial year less the amount of any contribution to KiwiSaver by Telecom (the Actual Value) will be equal to a
percentage of the Target Value for the financial year. 

  

	7	Payment of Actual Value 

 Blend

  

	7.1	Subject to clause 7.2 and subject also to the issue of ordinary shares in Telecom (Shares) being approved by an ordinary resolution of shareholders of Telecom (Shareholder
Approval), the Actual Value will be received by the Chief Executive Officer 60% in cash (less tax at the highest marginal tax rate applying to the Chief Executive Officer and less the amount of any contribution to Kiwisaver by the Chief
Executive Officer), and 40% in Shares on the basis described in clause 7.4 or 8.2 (as the case may be). 

  

	7.2	Telecom may, in its sole discretion, determine that 100% of the Actual Value in any financial year (less tax at the highest marginal tax rate applying to the Chief Executive Officer
and less the amount of any contribution to KiwiSaver by the Chief Executive Officer) will be received by the Chief Executive Officer in cash. 

  

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 PERFORMANCE INCENTIVE SCHEME 
  

	7.3	Where Shareholder Approval to the issue of Shares is not obtained, 100% of the Actual Value in each financial year (less tax at the highest marginal tax rate applying to the Chief
Executive Officer and less the amount of any contribution to KiwiSaver by the Chief Executive Officer) will be received by the Chief Executive Officer in cash. 

 Number of Shares 
  

	7.4	Subject to clause 8, for the purpose of clause 7.1, Telecom will issue to the Chief Executive Officer the number of Shares determined by this formula: 

  

			
	 n =
	 	a
		 	b

 where: 
 n = number of Shares to be issued 
 a = 40% of the Actual Value 
 b = the volume weighted average market price of Shares reported on New Zealand Exchange Limited’s NZSX (the Exchange) for the 20 days on which
the Exchange is open for trading (Business Days) immediately preceding the effective date of issue of the Shares. 
  

	8	Modified agreement 

 Substitution

  

	8.1	Unless the Chief Executive Officer notifies Telecom under clause 8.3, clause 8.2 will apply instead of clause 7.4. 

 Issue of Shares 
  

	8.2	Subject to clause 8.3 and subject also to Shareholder Approval, for the purpose of clause 7.1, Telecom will pay the Chief Executive Officer 40% of the Actual Value (less tax at the
highest marginal tax rate applying to the Chief Executive Officer and less the amount of any contribution to Kiwisaver by the Chief Executive Officer (Net Amount)) and apply that Net Amount (at the Chief Executive Officer’s deemed
direction) directly to the subscription for Shares by the Chief Executive Officer (discharging fully the Chief Executive Officer’s obligation to pay for the Shares). Telecom will determine the number of Shares to be issued by dividing the Net
Amount by the volume weighted average market price of Shares reported on the Exchange for the 20 Business Days immediately preceding the effective date of issue of the Shares. 

 Withdrawal of consent 
  

	8.3	The Chief Executive Officer may withdraw his consent to the arrangements under clause 8.2 by giving notice of withdrawal to Telecom at least 10 Business Days before the (most likely
August) meeting of Telecom’s board of directors (the Board) at which the relevant Actual Value is to be determined. On withdrawal of consent, clause 7.4 will apply. 

  

 2 

 PERFORMANCE INCENTIVE SCHEME 
  

	9	Shares 

 Issue dates 
  

	9.1	Subject to Shareholder Approval, Shares will be issued as soon as practicable after determination of the Actual Value, subject to the other provisions of this clause 9.

 Shares rank equally 
  

	9.2	Shares issued to the Chief Executive Officer under the Scheme will be credited as fully paid and will rank equally in all respects with all Shares at the effective date of issue,
except for any dividend declared on Shares where the record date occurs before the effective date of issue. 

 Request
form 
  

	9.3	On request from Telecom from time to time, the Chief Executive Officer will submit to Telecom a form requesting consent to acquire Shares under the Scheme, in terms of
Telecom’s internal procedures for insiders. 

 Breach 
  

	9.4	Notwithstanding any other provision of the Scheme, Shares will not be issued under the Scheme (and this clause 9 will apply) where Telecom considers that the issue would give rise
to a breach of Telecom’s constitution, the listing and/or other rules governing the Exchange or any other stock exchange on which Shares are quoted, and/or any statute, regulation or Telecom’s internal procedures for insiders
(Breach). Telecom will notify the Chief Executive Officer if this clause 9.4 applies. 

 Telecom notice

  

	9.5	Telecom will give a further notice to the Chief Executive Officer where it has given a notice under clause 9.4, as soon as it considers that the issue of Shares under the Scheme
would no longer give rise to a Breach. 

 Further request form 
  

	9.6	Where Telecom gives notice under clause 9.5, the Chief Executive Officer will submit to Telecom immediately a form requesting consent to acquire Shares under the Scheme, in terms of
Telecom’s internal procedures for insiders. On receipt of the form, Telecom will issue the Shares, subject to clause 9.7. 

 Continuous Breach 
  

	9.7	If the issue of Shares under clause 9.6 would give rise to a Breach, Telecom will give notice once again under clause 9.4. 

 Payment 
  

	9.8	If, after the period of six months from the date on which it first gives notice under clause 9.4, Telecom considers that it is still unable to give notice under clause 9.5 and/or
the issue of Shares under clause 9.6 would give rise to a Breach Telecom will pay the Chief Executive Officer the remaining 40% of the Actual Value of the relevant incentive award not already received by him (less tax at the highest marginal tax
rate applying to the Chief Executive Officer and less the amount of any contribution to Kiwisaver) in cash. 

  

 3 

 PERFORMANCE INCENTIVE SCHEME 
  

	10	Restrictions 

 No divestment

  

	10.1	The Chief Executive Officer may not transfer, assign, or otherwise dispose of or create any interest (including any security, legal or equitable interest) in a Share issued under
the Scheme during the period of three years after the date of issue, subject to clauses 10.2 and 10.3. 

 Termination of
Employment without notice 
  

	10.2	If the Chief Executive Officer ceases to be employed by Telecom or one of its subsidiaries (Employment) due to termination of his employment agreement by Telecom without
notice in accordance with that employment agreement, all Shares issued under the Scheme to the Chief Executive Officer in the three years immediately preceding the date on which the Chief Executive Officer ceases Employment will be transferred
immediately by the Chief Executive Officer to Telecom or its nominee (at Telecom’s direction) for nil cash consideration, and the Chief Executive Officer will cease to be entitled to any Shares that would have been issued under the Scheme but
for the operation of clause 9.4. 

 Termination of Employment for other reason 
  

	10.3	If the Chief Executive Officer ceases Employment due to termination of his employment agreement either by Telecom on notice or by the Chief Executive Officer following the
occurrence of a Fundamental Change in accordance with that employment agreement, the restrictions in clause 10.1 shall cease to apply with effect from the date of termination of the Chief Executive Officer’s Employment. If the Chief Executive
Officer ceases Employment due to any other reason, Telecom may waive the restrictions under clause 10.1. If the Chief Executive Officer ceases Employment due to reasons specified in this clause 10.3, any entitlement to Shares that have not been
issued because of the operation of clause 9.4 will be dealt with in the manner set out in clause 9.8. 

  

	11	Amendment 

  

	11.1	Telecom and the Chief Executive Officer may from time to time agree in writing any variation to the application of the Scheme and/or any amendment to the Scheme, if the variation
and/or amendment (as the case may be) would not give rise to a Breach and would not (in Telecom’s view) adversely affect the interests of holders of Shares. 

  

	12	Miscellaneous 

 Telecom 
  

	12.1	The Board will administer all aspects of the Scheme. Any matter to be determined by Telecom will be determined as the Board sees fit in its sole discretion (in particular, without
any obligation whatever to exercise any discretion in favour of the Chief Executive Officer), subject to the Scheme. 

  

 4 

 PERFORMANCE INCENTIVE SCHEME 
  
 Delegation 
  

	12.2	The Board may delegate (to the extent permitted by law) to any person (and revoke any delegation of) any or all of its powers, discretions, rights and obligations under the Scheme
from time to time as it sees fit, and references to Telecom and the Board will be construed accordingly. 

 Fractions 
  

	12.3	If a calculation (excluding any calculation concerning performance) under the Scheme produces a fraction of a cent or Share, the product will be rounded to the nearest whole number
favourable to the Chief Executive Officer. 

 Entire agreement 
  

	12.4	The Scheme represents all of the terms on which cash is paid and Shares are issued under the Scheme, except those which Telecom reasonably implies to give effect to the Scheme.

 Delay 
  

	12.5	No failure, delay or indulgence by Telecom in exercising any power or right conferred on it under the Scheme will operate as a waiver of that power or right; nor will a single
exercise of a power or right preclude further exercises, or the exercise of any other power or right under the Scheme. 

 Disputes 
  

	12.6	Any dispute which arises under the Scheme will be determined by Telecom. Telecom’s decision will be final. 

 Notices 
  

	12.7	All notices and communications required to be given or made under the Scheme will be in writing and addressed to the recipient at the address or facsimile number from time to time
designated by the recipient. Unless any other designations are given, the addresses and facsimile numbers of Telecom and the Chief Executive Officer are those which apply under the Performance Rights Scheme. Any notice or communication will be
deemed to have been received: 

  

	 	(a)	at the time of delivery, if delivered by hand; 

  

	 	(b)	on the second Business Day after the date of mailing, if sent by post or airmail with postage prepaid; or 

  

	 	(c)	on the day on which confirmation of proper transmission is received (on transmission), if sent by facsimile. 

 Construction 
  

	12.8	Unless the context requires otherwise: 

  

	 	(a)	the singular includes the plural and visa versa, and words importing any gender include the other gender; 

  

 5 

 PERFORMANCE INCENTIVE SCHEME 
  

	 	(b)	a reference to a person includes any individual, partnership, committee and incorporated or unincorporated body (whether or not having a separate legal personality);

  

	 	(c)	where a word or expression is defined in the Scheme, other parts of speech and grammatical forms of that word or expression have a corresponding meaning; and

  

	 	(d)	a reference to a person includes that person’s successors and permitted assigns. 

  

 6 

 PERFORMANCE INCENTIVE SCHEME 
  
 GLOSSARY 
 Actual Value means the actual incentive award value
under the Scheme (clause 6) 
 Board means the board of directors of Telecom from time to time 
 Breach means a breach of Telecom’s constitution, the listing and/or other rules governing the Exchange or any other stock exchange on which Shares are
quoted, and/or any statute, regulation or Telecom’s internal procedures for insiders 
 Business Day means a day on which the Exchange is
open for trading 
 Employment means employment by Telecom or one of its subsidiaries 
 Exchange means New Zealand Exchange Limited’s NZSX 
 Fundamental Change has the same meaning as in the employment agreement dated 27 June 2007 between the Chief Executive Officer and Telecom 
 Net Amount has the meaning given in clause 8.2 
 Scheme means the Performance Incentive Scheme
recorded in this document as amended from time to time 
 Share means an ordinary share in Telecom 
 Shareholder Approval means approval by an ordinary resolution of shareholders of Telecom (clause 7) 
 Target Performance Levels means the target performance levels prescribed under the Scheme (clause 5) 
 Target Value means the target incentive award value prescribed under the Scheme (clause 4) 
 Telecom means Telecom Corporation of New Zealand Limited. 
  

 7

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