Document:

exv4w1

 

Exhibit 4.1

KEALIA, INC.

AMENDED AND RESTATED 2001 STOCK PLAN

(as amended on October 30, 2002 and October 1, 2003)

     1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company’s business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or any of its Committees as shall be
administering the Plan in accordance with Section 4 hereof.

          (b) “Applicable Laws” means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.

          (c) “Board” means the Board of Directors of the Company.

          (d) “Code” means the Internal Revenue Code of 1986, as amended.

          (e) “Committee” means a committee of Directors appointed by the Board in
accordance with Section 4 hereof.

          (f) “Common Stock” means the common stock of the Company.

          (g) “Company” means Kealia, Inc., a California corporation.

          (h) “Consultant” means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such entity.

          (i) “Director” means a member of the Board.

          (j) “Employee” means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If

 

 

reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, on the 181st day of such leave any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director’s fee by the
Company shall be sufficient to constitute “employment” by the Company.

          (k) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (l) “Fair Market Value” means, as of any date, the value of Common Stock
determined as follows:

               (i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;

               (ii) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock on the last
market trading day prior to the day of determination; or

               (iii) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (m) “Incentive Stock Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

          (n) “Nonstatutory Stock Option” means an Option not intended to qualify as
an Incentive Stock Option.

          (o) “Option” means a stock option granted pursuant to the Plan.

          (p) “Option Agreement” means a written or electronic agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.

          (q) “Option Exchange Program” means a program whereby outstanding Options
are exchanged for Options with a lower exercise price.

          (r) “Optioned Stock” means the Common Stock subject to an Option or a
Stock Purchase Right.

          (s) “Optionee” means the holder of an outstanding Option or Stock Purchase
Right granted under the Plan.

          (t) “Parent” means a “parent corporation,” whether now or hereafter
existing, as defined in Section 424(e) of the Code.

 

 

          (u) “Plan” means this 2001 Stock Plan.

          (v) “Restricted Stock” means shares of Common Stock acquired pursuant to a
grant of a Stock Purchase Right under Section 10 below.

          (w) “Service Provider” means an Employee, Director or Consultant.

          (x) “Share” means a share of the Common Stock, as adjusted in accordance
with Section 12 below.

          (y) “Stock Purchase Right” means a right to purchase Common Stock pursuant
to Section 10 below.

          (z) “Subsidiary” means a “subsidiary corporation,” whether now or
hereafter existing, as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares that may be subject to option
and sold under the Plan is 25,000,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.

          If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by
the Company at their original purchase price, such Shares shall become
available for future grant under the Plan.

     4. Administration of the Plan.

          (a) The Plan shall be administered by the Board or a Committee appointed
by the Board, which Committee shall be constituted to comply with Applicable
Laws.

          (b) Powers of the Administrator. Subject to the provisions of the Plan
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:

               (i) to determine the Fair Market Value;

               (ii) to select the Service Providers to whom Options and Stock Purchase
Rights may from time to time be granted hereunder;

               (iii) to determine the number of Shares to be covered by each such award
granted hereunder;

               (iv) to approve forms of agreement for use under the Plan;

 

 

               (v) to determine the terms and conditions, of any Option or Stock Purchase
Right granted hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right of the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

               (vi) to determine whether and under what circumstances an Option may be
settled in cash under subsection 9(e) instead of Common Stock;

               (vii) to reduce the exercise price of any Option to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by such
Option has declined since the date the Option was granted;

               (viii) to initiate an Option Exchange Program;

               (ix) to prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws;

               (x) to allow Optionees to satisfy withholding tax obligations by electing
to have the Company withhold from the Shares to be issued upon exercise of an
Option or Stock Purchase Right that number of Shares having a Fair Market Value
equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by Optionees to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable; and

               (xi) to construe and interpret the terms of the Plan and awards granted
pursuant to the Plan.

          (c) Effect of Administrator’s Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all
Optionees.

     5. Eligibility.

          (a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to
Service Providers. Incentive Stock Options may be granted only to Employees.

 

 

          (b) Each Option shall be designated in the Option Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

          (c) Neither the Plan nor any Option or Stock Purchase Right shall confer
upon any Optionee any right with respect to continuing the Optionee’s
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company’s right to terminate such
relationship at any time, with or without cause.

     6. Term of Plan. Subject to Section 18 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect for a
term of ten (10) years unless sooner terminated under Section 14 of the Plan.

     7. Term of Option. The term of each Option shall be stated in the Option
Agreement; provided, however, that the term shall be no more than ten (10)
years from the date of grant thereof. In the case of an Incentive Stock Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant or such shorter term as may be
provided in the Option Agreement.

     8. Option Exercise Price and Consideration.

          (a) The per share exercise price for the Shares to be issued upon exercise
of an Option shall be such price as is determined by the Administrator, but
shall be subject to the following:

               (i) In the case of an Incentive Stock Option

                    (A) granted to an Employee who, at the time of grant of such Option, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the exercise price
shall be no less than 110% of the Fair Market Value per Share on the date of
grant.

                    (B) granted to any other Employee, the per Share exercise price shall be
no less than 100% of the Fair Market Value per Share on the date of grant.

               (ii) In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be determined by the Administrator.

 

 

               (iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to a merger or other
corporate transaction.

          (b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which such Option shall be exercised, (5) consideration received by the
Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (6) any combination of the foregoing methods of
payment. In making its determination as to the type of consideration to
accept, the Administrator shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company.

     9. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms hereof at such times and
under such conditions as determined by the Administrator and set forth in the
Option Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.

               An Option shall be deemed exercised when the Company receives: (i) written
or electronic notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the
Shares with respect to which the Option is exercised. Full payment may consist
of any consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to the Shares, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.

               Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

          (b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement (of at least
thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the
Option as set forth in the Option Agreement). In the absence of a specified
time in the Option

 

 

Agreement, the Option shall remain exercisable for three (3)
months following the Optionee’s termination. If, on the date of termination,
the Optionee is not vested as to his or her entire Option, the Shares covered
by the unvested portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

          (c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee’s total and permanent disability, as
defined in Section 22(e)(3) of the Code, the Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement to
the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee’s
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

          (d) Death of Optionee. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee’s estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee’s termination. If,
at the time of death, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. The Option may be exercised by the executor or
administrator of the Optionee’s estate or, if none, by the person(s) entitled
to exercise the Option under the Optionee’s will or the laws of descent or
distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

          (e) Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to
the Optionee at the time that such offer is made.

     10. Stock Purchase Rights.

          (a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
in addition to, or in tandem with other awards granted under the Plan and/or
cash awards made outside of the Plan. After the Administrator determines that
it will offer Stock Purchase Rights under the Plan, it shall advise the offeree
in writing or electronically of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, and the time within which such person must
accept such offer. The offer shall be accepted by execution of a Restricted
Stock purchase agreement in the form determined by the Administrator.

 

 

          (b) Repurchase Option. Unless the Administrator determines otherwise, the
Restricted Stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser’s
service with the Company for any reason (including death or disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock purchase
agreement shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The
repurchase option shall lapse at such rate as the Administrator may determine.

          (c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.

          (d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
the purchaser shall have rights equivalent to those of a shareholder and shall
be a shareholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company. No adjustment shall be made for
a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 12 of the
Plan.

     11. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, Options and Stock Purchase Rights
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of
in any manner other than by will or by the laws of descent or distribution and
may be exercised, during the lifetime of the Optionee, only by the Optionee.
If the Administrator makes an Option or Stock Purchase Right transferable, such
Option or Stock Purchase Right shall contain such additional terms and
conditions as the Administrator deems appropriate.

     12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.

          (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company. The conversion of any convertible
securities of the Company shall not be deemed to have been “effected without
receipt of consideration.” Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.

 

 

          (b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Optionee to have the
right to exercise his or her Option until fifteen (15) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares
as to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.

          (c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option and Stock Purchase Right shall be assumed or
an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option or Stock
Purchase Right, the Optionee shall fully vest in and have the right to exercise
the Option or Stock Purchase Right as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an
Option or Stock Purchase Right becomes fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock
Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right, to be solely common stock of the successor corporation or its
Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

     13. Time of Granting Options and Stock Purchase Rights. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Service Provider to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.

     14. Amendment and Termination of the Plan.

 

 

          (a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan.

          (b) Shareholder Approval. The Board shall obtain shareholder approval of
any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.

          (c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Options granted
under the Plan prior to the date of such termination.

     15. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares shall not be issued pursuant to the exercise
of an Option unless the exercise of such Option and the issuance and delivery
of such Shares shall comply with Applicable Laws and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

          (b) Investment Representations. As a condition to the exercise of an
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to sell
or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

     16. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

     17. Reservation of Shares. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     18. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan
is adopted. Such shareholder approval shall be obtained in the degree and
manner required under Applicable Laws.exv4w1

 

Exhibit 4.1

SUN MICROSYSTEMS, INC.

U.S. NON-QUALIFIED DEFERRED COMPENSATION PLAN

Amended and Restated as of June 30, 2003

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page

	1.
	 	Purpose	 	 	2	 
	2.
	 	Definitions	 	 	2	 
	3.
	 	Eligibility	 	 	5	 
	4.
	 	Election to Participate in Plan	 	 	5	 
	5.
	 	Accounts	 	 	6	 
	6.
	 	Deferral Increments	 	 	6	 
	7.
	 	Earnings or Losses on Accounts	 	 	6	 
	8.
	 	Certain In-Service Account Distributions	 	 	7	 
	9.
	 	Statements	 	 	7	 
	10.
	 	Form and Time of Payment of Accounts	 	 	7	 
	11.
	 	Effect of Death of Participant	 	 	8	 
	12.
	 	General Duties of Trustee	 	 	9	 
	13.
	 	Withholding Taxes	 	 	9	 
	14.
	 	Participant’s Unsecured Rights	 	 	9	 
	15.
	 	Non-assignability of Interests	 	 	9	 
	16.
	 	Limitation of Rights	 	 	9	 
	17.
	 	Administration of the Plan	 	 	10	 
	18.
	 	Amendment or Termination of the Plan	 	 	10	 
	19.
	 	Domestic Relations Orders	 	 	10	 
	20.
	 	Incompetency	 	 	11	 
	21.
	 	Choice of Law	 	 	11	 
	22.
	 	Claims and Review Procedure	 	 	11	 
	23.
	 	Execution and Signature	 	 	12	 

 

 

SUN MICROSYSTEMS, INC.

U.S. NON-QUALIFIED DEFERRED COMPENSATION PLAN

Amended and Restated as of June 30, 2003

     Sun Microsystems, Inc. (the “Company”), acting on behalf of itself and its
U.S. subsidiaries, initially adopted the Sun Microsystems, Inc. U.S.
Non-Qualified Deferred Compensation Plan (the “Plan”), effective July 1, 1995.
The Plan is amended and restated effective as of June 30, 2003.

RECITALS

     1. The Company maintains the Plan, a deferred compensation plan for the
benefit of a select group of management or highly compensated employees of the
Company as well as members of the Company’s Board of Directors.

     2. Under the Plan, the Company is obligated to pay vested accrued benefits
to Plan Participants and their Beneficiary or Beneficiaries from the Company’s
general assets.

     3. The Company has entered into an agreement (the “Trust Agreement”) with
Wells Fargo Bank, N.A. pursuant to which Wells Fargo Bank, N.A., serves as the
trustee (the “Trustee”) under an irrevocable trust, to be used in connection
with the Plan (the “Trust”).

     4. The Company intends to make contributions to the Trust so that such
contributions will be held by the Trust and invested, reinvested and
distributed, all in accordance with this Plan and the Trust Agreement.

     5. The Company intends that amounts contributed to the Trust and the
earnings thereon shall be used by the Trustee to satisfy the liabilities of the
Company under the Plan with respect to each Plan Participant for whom an
Account (as defined below) has been established and such utilization shall be
in accordance with the procedures set forth herein.

     6. The Company intends that the Trust be a “grantor trust” with the
principal and income of the Trust treated as assets and income of the Company
for federal and state income tax purposes.

     7. The Company intends that the assets of the Trust shall at all times be
subject to the claims of the general creditors of the Company as provided in
the Trust Agreement.

     8. The Company intends that the existence of the Trust shall not alter the
characterization of the Plan as “unfunded” for purposes of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), and shall not be
construed to provide income to Plan Participants under the Plan prior to actual
payment of the vested accrued benefits hereunder.

     NOW THEREFORE, the Company does hereby adopt this amended and restated
Plan as follows and does also hereby agree that the Plan shall be structured,
held and disposed of as follows:

 

 

     1. Purpose. The Plan provides Participants an opportunity to defer
payment of a portion of Employee salary and incentive bonus/commissions (for
Sales Vice Presidents and Directors); Employee annual bonus awards; and Board
of Directors’ Director Fees.

     2. Definitions.

          (a) Account means a bookkeeping account established pursuant to Section
5(a) for Compensation that is subject to a Participant’s Deferred Compensation
Election.

          (b) Administrator means the Compensation Committee or such other person,
company or entity as may be designated from time to time by the Compensation
Committee except as otherwise provided herein.

          (c) 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”).

          (d) Beneficiary means the person or persons designated by the Participant
or by the Plan under Section 11(b) to receive payment of the Participant’s
Account in the event of the Participant’s death.

          (e) Board means the Board of Directors of the Company, as constituted from
time to time.

          (f) Change of Control 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 of the Company’s assets.

               (ii) The acquisition by any Person as Beneficial Owner, directly or
indirectly, of 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 account of the
Company.

               (iii) A majority of the Board 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 as constituted at the beginning of such thirty-six (36) month period.

     Any other provision of this Subsection 2(f) notwithstanding, the term
“Change of Control” shall not include either of the following events undertaken
at the election of the Company:

	 	•	 	Any transaction, the sole purpose of which is to change the
state of the Company’s incorporation.

 

 

               (iv) A transaction, the result of which is to sell all or substantially
all of 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.

          (g) Compensation Committee means the Leadership Development and
Compensation Committee of the Board, appointed by the Board from time to time.

          (h) Company means Sun Microsystems, Inc. and its U.S. subsidiaries, and
any successor organization thereto.

          (i) Compensation means:

               (i) amount of the Eligible Employee’s base salary paid by the Company or
one of its U.S. subsidiaries; and

               (ii) The amount paid by the Company or one of its U.S. subsidiaries to an
Eligible Employee as an annual corporate bonus award and any other
bonus/incentive award that is approved by the Administrator as earnings that
can be deferred under the Plan (some incentive/bonus awards will not be
eligible for deferral); and

               (iii) For Sales Vice Presidents and Directors, incentive
bonus/commissions; and

               (iv) In the case of an Eligible Board Member, the amount of his or her
Director Fees from the Company.

               For purposes of the foregoing, Compensation as described in clauses (i),
(ii) and (iii) shall be eligible for deferral only to the extent such amounts
are otherwise subject to U.S. payroll reporting and withholding.

          (j) Deferred Compensation Election means an election by an Eligible
Employee or Eligible Board Member to participate in the Plan in accordance with
Section 4 below.

          (k) Director Fees means any compensation payable with respect to an
Eligible Board Member’s service as a member of the Board, including, but not
limited to, meeting fees and annual retainer fees. Director Fees do not
include directors’ expense reimbursements, stock options, or other stock-based
compensation.

          (l) Election Period means:

               (i) Generally June of each year; and

               (ii) For newly hired vice presidents, at the sole discretion of the
Administrator, may be eligible to enroll within thirty (30) days of hire.

          (m) Eligible Board Member means a member of the Board (other than a member
who is also an Eligible Employee) who meets the requirements set forth in
Section 3 below.

 

 

          (n) Eligible Employee means an officer of the Company or other common-law
employee of the Company or one of its U.S. subsidiaries who meets the
requirements set forth in Section 3 below.

          (o) Investment Committee means the Administrative Committee of the Sun
Microsystems, Inc. Tax Deferred Retirement Savings Plan.

          (p) Participant means an Eligible Board Member or an Eligible Employee who
has elected to defer Compensation.

          (q) 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).

          (r) Plan means this Sun Microsystems, Inc. U.S. Non-Qualified Deferred
Compensation Plan, as amended from time to time.

          (s) Prior Plan Restatement means the amendment and restatement of the Plan
as approved by the Board on August 13, 1997.

          (t) Prior Plan Restatement Effective Date means October 1, 1997.

          (u) Retirement Date means the last day of the month coinciding with or
following the Participant’s termination of employment following the earlier of
his or her

               (i) 55th birthday, if the Participant’s full years of Service with the
Company added to Participant’s age (in full years) equals or exceeds 65; or

               (ii) 20th year anniversary of Service.

          (v) Service means:

               (i) Employment as a common-law employee of the Company or one of its
subsidiaries; or

               (ii) Period served as an elected Board Member.

               (iii) A Participant’s Service shall be determined by the Administrator in
its sole discretion. A Participant’s Service shall not be deemed to have
terminated merely because the capacity in which the Participant renders Service
to the Company changes from Eligible Employee to Eligible Board Member or
vice-versa.

          (w) Total Disability has the same meaning as “Disability” under Sun
Microsystems, Inc. Comprehensive Welfare Plan.

          (x) Unforeseeable Emergency means a severe financial hardship to the
Participant resulting from:

 

 

               (i) Sudden and unexpected illness or accident of either the Participant or
dependent of same; or

               (ii) Loss of the Participant’s property due to casualty or other similar
extraordinary and unforeseeable circumstances beyond the control of the
Participant.

               Hardship shall not constitute an unforeseeable Emergency under the Plan to
the extent that it is, or may be, relieved by:

               (i) Reimbursement or compensation, by insurance or otherwise;

               (ii) Liquidation of the Participant’s assets to the extent that the
liquidation of such assets would not itself cause severe financial hardship.
Such assets shall include but not be limited to stock options, company stock,
and 401(k) plan balances; or

               (iii) Cessation of deferrals under the Plan.

               An Unforeseeable Emergency under the Plan does not include:

               (i) Sending a child to college; or

               (ii) Purchasing a home, per Revenue Procedure 92-65.

          (y) Year means the Company’s fiscal year unless
otherwise noted.

     3. Eligibility. Participation in the Plan is limited to Eligible Board
Members, and Eligible Employees who are members of a select group of management
or highly compensated employees. Such Eligible Board Member or Eligible
Employee is eligible to participate in the Plan if:

          (a) He or she is subject to U.S. income and social security taxes and not
covered under a non-U.S. retirement plan,

          (b) He or she is an officer, or his or her position is approved as a
director level, or higher; or

          (c) He or she has been designated expressly as an Eligible Employee by the
Administrator.

          If a Participant receives a distribution described in Section 10(c), the
Participant shall be ineligible to participate in the Plan for the balance of
the Plan Year in which the distribution occurs and the following Plan Year.

     4. Election to Participate in Plan.

          (a) Deferral Election. An Eligible Employee or an Eligible Board Member
may elect to participate in the Plan by submitting a Deferred Compensation
Election in such forms as the Company may specify during any Election Period.

 

 

          (b) Election Form. All Deferred Compensation Elections under this Section
4 shall be made in a manner prescribed for this purpose by the Administrator.

     5. Accounts.

          (a) Establishment of Account. The Company shall establish an Account for
the terms of the Deferred Compensation Election.

          (b) Credits to Account. A Participant’s Account shall be credited with an
amount equal to the percentage of each Compensation payment which would have
been payable currently to the Participant but for the terms of the Deferred
Compensation Election Form. Deferred Compensation for Participants shall be
credited to the Participant’s Account as of the first day of the month in which
such deferred amounts would otherwise be paid to the Participant.

          (c) Vesting. Participants shall at all times be 100% vested in their
deferrals under the Plan and all earnings or losses allocable thereto.

     6. Deferral Increments.

          (a) The minimum deferral per year will be determined by the Administrator.

          (b) The Participant who is an Eligible Employee may elect to defer (less
any withholding requirements):

               (i) Up to 100% of any eligible annual bonus
award; and

               (ii) Up to 60% of base salary and incentive
awards/commissions.

          (c) The Participant who is an Eligible Board Member may elect to defer
(less any withholding requirements), up to 100% of their Director Fees (to be
credited to the account quarterly).

     7. Earnings or Losses on Accounts.

          (a) General Rule. Except as otherwise provided in the Plan, the amount in
a Participant’s Account shall be adjusted for gain or loss based on the
performance of the investment options selected by the Participant in accordance
with Section 7(b). Gain or loss shall be computed daily, using the closing
price on the last business day of the month. All distributions from the
Account will be withdrawn at the end of the last day of the month.

          (b) Designation of Investment Indices by the Investment Committee. The
Investment Committee shall specify two or more investment funds that shall
serve as benchmarks for the investment performance of amounts credited to the
Accounts. Accounts shall be adjusted to reflect the gain or loss, net of any
allocable costs or expenses, such accounts would experience had they actually
been invested in the specified funds at the relevant times. The Investment
Committee may vary the available investment funds from time to time, but not
more frequently than quarterly. Effective July 1, 2000, a Participant may
select his or her investment options for new deferrals and contributions, or
for amounts already credited to his or her Account, once per month effective as
of the end of the last day of the month and in such manner as the Investment
Committee may specify.

 

 

     8. Certain In-Service Account Distributions.

          (a) After Completion of Two Years of Plan Participation. Each Participant
may elect in his or her Deferred Compensation Election Form to have one or more
distributions of a specified percentage or dollar amount of his or her Account,
not more frequently than once in a calendar year, commencing in his or her
third year of participation, provided that the Participant has not terminated
his or her Service with the Company. A Participant may delay once or cancel
such distribution at any time prior to the date which is one year prior to the
calendar year in which the originally scheduled distribution would take place,
but such election is otherwise irrevocable.

          (b) Previously Scheduled In-Service Distributions. Elections in effect
prior to the Prior Plan Restatement Effective Date for in-service distributions
prior to January 1, 2000 shall remain in full force and effect.

     9. Statements. Quarterly, and/or at intervals determined by the
Administrator, the Company shall prepare and deliver to each Participant a
statement listing the amount credited to such Account as of the applicable
date.

     10. Form and Time of Payment of Accounts.

          (a) Timing and Method of Distribution of Accounts. In the event of a
Participant’s termination of Service on or after his or her Retirement Date,
distribution of the value of the Participant’s Account balance shall be made as
soon as practicable after such termination consistent with the form of
distribution specified on the Participant’s Deferred Compensation Election.
Available forms shall include either a lump sum payment or a series of
approximately equal installments over a period of five years, ten years or
fifteen years. Accounts subject to installment payouts shall continue to be
adjusted for gains or losses in the same manner as active Accounts.
Notwithstanding the foregoing, the Participant who is receiving an installment
payout on or after his or her Retirement Date may request a lump sum
distribution of such Participant’s Account. Any such lump sum distribution
shall be at the sole discretion of the Administrator, and shall be reduced by a
penalty equal to ten percent (10%) of the amount otherwise distributable, which
penalty shall be forfeited to the Company. A Participant may modify his or her
elected form of distribution (i.e., lump sum or installments) at any time prior
to the date that is one year before his or her Retirement Date. If a
Participant modifies his or her elected form of distribution but his or her
Retirement Date is less than one year following the date of the modification
election, his or her prior elected form of distribution shall apply.

          If the Participant’s Service with the Company terminates prior to his or
her Retirement Date (other than on account of death), distribution of the value
of the Participant’s Account balance shall be made as soon as practicable after
such termination in one lump sum payment. Effective August 1, 2003, if a
Participant terminates Service prior to his or her Retirement Date,
distribution of the Participant’s Account balance shall be made consistent with
the form of distribution specified on the Participant’s Deferred Compensation
Election. Effective August 1, 2003, available forms of distribution shall
include either a lump sum payment or a series of approximately equal
installments over a period of five years. Notwithstanding the preceding
sentence, distribution of the Account balance of a Participant who was a
Participant prior to August 1, 2003 who terminates Service with the Company on
or after August 1, 2003, shall be made as soon as practicable after such termination in the
form of one lump sum payment
unless the Participant’s termination of Service date is one year or more
following the date of the Deferred Compensation Election. If such
Participant’s termination of Service date is one year or more following the
date of the Deferred

 

 

Compensation Election, distribution shall be made
consistent with the elected form of distribution. The Account balance is
determined as of the last day of the month in which the Participant’s
employment terminates, based on the indexed value of his or her investment
options. A Participant may modify his or her elected form of distribution
(i.e. lump sum or installments) at any time prior to the date that is one year
before the date his or her Service with the Company terminates. If the
Participant modifies his or her elected form of distribution but the date his
or her Service with the Company terminates is less than one year following the
date of the modification election, his or her prior elected form of
distribution shall apply.

          In the absence of an effective Deferred Compensation Election as to the
timing and/or method of distribution, distribution of the value of the
Participant’s Account balance shall be made in one lump sum payment as soon as
practicable after the Participant’s termination of Service.

          If a Participant elects a distribution date prior to termination of
Service, the distribution will be paid as soon as reasonably practicable in a
lump sum after such distribution date.

          (b) Disability or Emergency. In the event of Participant’s Total
Disability or Unforeseeable Emergency, and upon application by such
Participant, the Administrator may determine at its sole discretion that
payment of all, or part, of such Participant’s Account shall be made in a
different manner, or on an earlier date than the time or times specified in
Subsection (a) above. Payments due to Participant’s Total Disability or
Unforeseeable Emergency shall be permitted only to the extent reasonably
required to satisfy the Participant’s need. The Participant’s account will be
valued on the last day of the month in which the distribution request is
approved.

          (c) Early Distribution Penalty. Upon application by a Participant, the
Administrator may determine at its sole discretion that payments from such
Participant’s Account shall be made in a different manner, or on an earlier
date than the time or times specified in Subsection (a) above. The Participant
may request the distribution only once a year and the minimum amount of
distribution is 50% of the Participant’s account balance. All distributions
under this Subsection (c) shall be reduced by a penalty equal to 10 percent
(10%) of the amount otherwise distributable. The penalty is forfeited to the
Company. A Participant who receives a distribution under this Subsection (c)
is ineligible to participate in the Plan for the balance of the Plan Year in
which the distribution occurs and the following Plan Year.

     11. Effect of Death of Participant.

          (a) Distributions. In the event of a Participant’s death while an
Eligible Employee or Eligible Board Member (except in the case of a
Participant’s suicide during the first two years of their participation in the
Plan), the Participant’s Account balance, together with an amount equal to two
times the sum of (i) the Participant’s actual deferrals under the Plan after
the Prior Plan Restatement Effective Date (exclusive of earnings), plus (ii)
the Participant’s actual deferrals under the Plan before the Prior Plan
Restatement Effective Date (exclusive of earnings) to the extent such deferrals
are scheduled to be distributed on or after January 1, 2000, shall be
distributed to the Participant’s Beneficiary. Notwithstanding the foregoing,
the amount to be determined pursuant to this paragraph (a), shall not exceed
Three Million Dollars ($3,000,000). In the event of (i) a Participant’s death
while no longer an Eligible Employee or Eligible Board Member (as applicable),
or (ii) a Participant’s suicide during the first two years of their
participation in the Plan, the Account balance, if any, shall be distributed to
the Participant’s Beneficiary. Any distributions
pursuant to this paragraph shall be made to the Beneficiary in three
annual installments or, at the request of the Beneficiary and subject to the
Administrator’s approval, in a single lump sum, commencing in either case as
soon as reasonably practicable after the Participant’s death. If installment
payments are made, the

 

 

remaining Account balance (during the period of the
installment payouts) shall cease to be credited with earnings on the investment
chosen by the deceased Participant, and instead shall be credited with earnings
based on a fixed rate of interest determined by the Administrator in its
discretion from time to time.

          (b) Beneficiary Designation. Upon enrollment in the Plan, each
Participant shall file a prescribed form with the Company naming a person or
persons as the Beneficiary who will receive distributions payable under the
Plan in the event of the Participant’s death. If the Participant does not name
a Beneficiary, or if none of the named Beneficiaries is living at the time
payment is due, then the Beneficiary shall be the Participant’s estate:

          The Participant may change the designation of a Beneficiary at any time in
accordance with procedures established by the Administrator. Designations of a
Beneficiary, or an amendment or revocation thereof, shall be effective only if
made in the prescribed manner and received by the Company prior to the
Participant’s death.

     12. General Duties of Trustee.

          (a) Trustee Duties. The Trustee shall manage, invest and reinvest the
Trust Fund as provided in the Trust Agreement. The Trustee shall collect the
income on the Trust Fund, and make distributions therefrom, all as provided in
this Plan and in the Trust Agreement

          (b) Company Contributions. While the Plan remains in effect, the Company
shall make contributions to the Trust Fund at least once each year. As soon as
practicable after the close of each Plan Year, the Company shall make an
additional contribution to the Trust Fund to the extent that previous
contributions to the Trust Fund for the current Plan Year are less than total
future liabilities (other than death benefits) created with respect to
Participants’ Accounts as of the close of the current Plan Year. Contributions
to the Trust Fund are based on liabilities created with respect to
Participants’ Accounts on and after the Prior Plan Restatement Effective Date.
The Trustee shall not be liable for any failure by the Company to provide
contributions sufficient to pay all accrued benefits under the Plan in
accordance with the terms of this Plan.

     13. Withholding Taxes. All distributions under the Plan shall be subject
to reduction in order to reflect withholding tax obligations imposed by law.

     14. Participant’s Unsecured Rights. The Account of any Participant, and
such Participant’s right to receive distributions from his or her Account,
shall be considered an unsecured claim against the general assets of the
Company; such Accounts are unfunded bookkeeping entries. The Company considers
the Plan to be unfunded for tax purposes and for purposes of Title I of ERISA.
No Participant shall have an interest in, or make claim against, any general
assets of the Company pursuant to the Plan.

     15. Non-assignability of Interests. Except as provided under Section 19,
the interest of a Participant under the Plan is not subject to option nor
assignable by either voluntary or involuntary assignment or by operation of
law, including without limitation to: bankruptcy, garnishment, attachment or
other creditor’s process. Any act in violation of this Section 15 shall make
the Plan void.

     16. Limitation of Rights.

          (a) Bonuses. Nothing in this Plan shall be construed to give any Eligible
Employee any right to be granted a bonus award.

 

 

          (b) Employment Rights. Neither the Plan nor deferral of any Compensation,
nor any other action taken pursuant to the Plan, shall constitute, or be
evidence of, any agreement or understanding, express or implied, that the
Company or any of its subsidiaries will employ an Eligible Employee for any
period of time, in any position at any particular rate of compensation. The
Company and its subsidiaries reserve the right to terminate an Eligible
Employee’s Service at any time for any reason, except as otherwise expressly
provided in a written employment agreement.

     17. Administration of the Plan. The Plan shall be administered by the
Administrator. The Administrator shall have full power and authority to
administer, construe and determine all questions that shall arise as to
interpretations of the Plan’s provisions, including determination of
eligibility, allocation of assets, method of payment, participation and
benefits under the terms of the Plan, establish procedures for administering
the Plan, prescribe forms, and take any and all necessary actions in connection
with the Plan. The Administrator’s interpretation and construction of the Plan
shall be conclusive and binding on all persons, and will be given the maximum
possible deference allowed by law. The Administrator may appoint such agents,
counsel, accountants, consultants and other persons as may be required to
assist in administering the Plan and to allocate and delegate its power and
authority described herein to one or more employees, officers or agents or to
one or more persons or organizations that it has employed to perform its
administrative responsibilities; provided, however, that the Administrator may
not delegate the power and authority to take any action that may be taken by
the Board. In the event that any Participants are found to be ineligible, that
is, not members of a select group of management or highly compensated
employees, according to a determination made by the U.S. Department of Labor,
the Administrator shall take whatever steps it deems necessary, in its sole
discretion, to equitably protect the interests of the affected Participants.

     18. Amendment or Termination of the Plan.

          (a) General Rule. The Board may amend, suspend, or terminate the Plan at
any time; provided, however, that no such action shall reduce a Participant’s
Account under the Plan without the Participant’s written consent. In the event
of termination of the Plan, the Accounts of Participants shall continue to be
credited with earnings until distributed pursuant to Section 10, unless the
Board prescribes an earlier time or different manner for the payment of such
Accounts. Without limiting the generality of the foregoing, termination of the
Plan following Change of Control shall constitute an event giving rise to
distribution of Accounts. In such event, the Company shall pay all Account
balances in a lump sum or in
annual installments over three years (with earnings), in its discretion,
to Participants and Beneficiaries of deceased Participants; and all deferrals
and payment of benefits except as provided above shall cease.

          (b) Delegation to Compensation Committee. Any power or authority of the
Board may be exercised by the Compensation Committee.

     19. Domestic Relations Orders.

          (a) In General. The procedures established by the Company for the
determination of the qualified status of domestic relations orders and for
making distributions under qualified domestic relations orders, as provided in
Section 206(d) of ERISA, shall apply to the Plan, to the extent applicable.

          (b) Distributions. Amounts awarded to an alternate payee under a
qualified domestic relations order shall be distributed in the form of a lump
sum distribution as soon as administratively feasible following the
determination of the qualified status of the domestic relations order.

 

 

     20. Incompetency. In the event a benefit is payable to a minor or person
declared incompetent or incapable of handling the disposition of his property,
the Administrator may pay such benefit to the guardian, legal representative or
person having the care or custody of such minor, incompetent or incapable
person. The Administrator may require proof of incompetency, minority or
guardianship as it may deem appropriate prior to distribution of the benefit.
Such distribution shall completely discharge the Company from all liability
with respect to such benefit.

     21. Choice of Law. The validity, interpretation, construction and
performance of the Plan shall be governed by ERISA, and, to the extent that
they are not preempted, by the laws of the State of California, excluding
California’s choice-of-law provisions.

     22. Claims and Review Procedure.

          (a) General Procedure. If the Participant or Beneficiary believes that
his or her benefits have been incorrectly determined, he or she may make a
written application for review of the determination previously made by the
Administrator.

          All such applications for review shall be submitted to the Administrator
in writing on the forms prescribed by the Administrator and must be signed by
the Participant, or in the case of a death benefit, by the Beneficiary or legal
representative of the deceased Participant. Each application shall be acted
upon and approved or disapproved within ninety (90) days following its receipt
by the Administrator, which period may be extended up to an additional ninety
(90) days upon written notice by the Administrator to the applicant. In the
event any application for benefits is denied, in whole or in part, the
Administrator shall notify the applicant in writing of such denial and of the
applicant’s right to a review by the Administrator. Said denial shall set
forth in a manner calculated to be understood by the applicant specific reasons
for such denial, specific references to Plan provisions on which the denial is
based, a description of any additional material or information necessary for
the applicant to perfect his or her application, an explanation of why such
material or information is necessary and an explanation of the Plan’s review
procedure.

          Any person, or such person’s duly authorized representative, whose
application for benefits is denied in whole or in part may appeal from such
denial to the Administrator for a review of the decision within sixty (60) days
after receiving written notice from the Administrator of the denial of the
claim. In pursuing such appeal, the claimant may:

               (i) Request in writing that the Administrator review the denial, taking
into account all comments documents, records and other information submitted by
the applicant relating to the claim, without regard to whether such information
was submitted or considered in the initial benefit determination; and

               (ii) May review and receive copies of, free of charge, all documents,
records and other information relevant to the claim.

          (b) Procedure of Administrator to Review Appeals. The Administrator shall
make a full and fair review of each such application and any written materials
submitted by the applicant in connection therewith and may require the
applicant to submit such additional facts, documents or other evidence as the
Administrator, in its sole discretion, deems necessary or advisable in making
such a review. On the basis of its review, the Administrator shall make a
determination of the applicant’s eligibility for benefits under the Plan. The
decision of the Administrator on any application for benefits shall be final
and conclusive upon all

 

 

persons if supported by substantial evidence in the
record. Such a decision on review shall ordinarily be made within sixty (60)
days after the Administrator’s receipt of an applicant’s request for review,
which period may be extended up to an additional sixty (60) days upon written
notice by the Administrator to the applicant. In the event the Administrator
denies an application in whole or in part, the Administrator shall give written
notice of its decision to the applicant setting forth in a manner calculated to
be understood by the applicant the specific reasons for such denial, the
specific references to the Plan provisions on which the Administrator’s
decision was based, and a statement that the applicant is entitled to receive,
upon request and free of charge, reasonable access to, and copies of, all
documents, records, and other information relevant to the applicant’s claim for
benefits.

     23. Execution and Signature. To record the adoption of the Plan by the
Board, the Company has caused its duly authorized officer to affix the
corporate name hereto:

	 	 	 	 	 
	 	SUN MICROSYSTEMS, INC.

 	 
	 	By:  	 /s/ 
Crawford W. Beveridge	 
	 	 	Authorized Company Officer

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