As filed with the Securities and Exchange Commission on March 6, 1996
Registration No. 33-56577
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
SUN MICROSYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2805249
(State of Incorporation) (I.R.S. Employer
Identification Number)
2550 Garcia Avenue
Mountain View, CA 94043
(415) 960-1300
(Address and telephone number of Registrant's principal executive offices)
---------------------------
1990 EMPLOYEE STOCK PURCHASE PLAN
1990 LONG-TERM EQUITY INCENTIVE PLAN
(Full Title of the Plans)
-------------------------------------
Scott G. McNealy
President
SUN MICROSYSTEMS, INC.
2550 Garcia Avenue
Mountain View, CA 94043
(415) 960-1300
(Name, address and telephone number of agent for service)
-------------------------------------
Copy to:
Judith M. O'Brien
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Amount Maximum Maximum Amount of
to be Offering Price Aggregate Registration
Title of Securities to be Registered Registered Per Share Offering Price Fee
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, $.00067 par value, to be issued: .........
- ------------------------------------------------------------------------------------------------------------------------------
Pursuant to the 1990 Employee Stock Purchase Plan ...... 7,800,000 shares $49.9375(1) $ 389,512,500.00(1) $134,314.66
- ------------------------------------------------------------------------------------------------------------------------------
Pursuant to the 1990 Long-Term Equity Incentive Plan ... 24,200,000 shares $49.9375(1) $1,208,487,500.00(1) $416,719.83
- ------------------------------------------------------------------------------------------------------------------------------
Total ....................................... 32,000,000 shares $49.9375(1) $1,598,000,000.00(1) $551,034.49
- ------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Estimated in accordance with Rule 457 (c) solely for the purpose of
calculating the registration fee on the basis of the average of the
high and low price for the Common Stock as reported on the Nasdaq
National Market System on March 1, 1996.
</FN>
</TABLE>
<PAGE>
The contents of the Registrant's Forms S-8 Registration Statements,
Registration No.'s 33-38220 and 33-56577, dated December 14, 1990 and November
23, 1994, respectively, relating to the 1990 Employee Stock Purchase Plan and
the 1990 Long-Term Equity Incentive Plan are incorporated herein by reference.
PART II: INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 8. Exhibits
Exhibit
Number Documents
------ ---------
4.1 1990 Employee Stock Purchase Plan
4.2 1990 Long-Term Equity Incentive Plan
5.1 Opinion of Counsel as to legality of securities being registered
23.1 Consent of Counsel (contained in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (see page II-3)
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Sun Microsystems, Inc., a corporation organized and existing under
the laws of the State of Delaware, certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Mountain View, State of
California, on this 5th day of March, 1996.
SUN MICROSYSTEMS, INC.
By: /s/ MICHAEL E. LEHMAN
----------------------------------------
Michael E. Lehman, Vice President
and Chief Financial Officer
II-2
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Scott G. McNealy and Michael E. Lehman,
jointly and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Registration Statement on Form S-8 and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- -----
/s/ SCOTT G. McNEALY Chairman of the Board March 5, 1996
- ----------------------------- of Directors, President
(Scott G. McNealy) and Chief Executive Officer
(Principal Executive Officer)
/s/ MICHAEL E. LEHMAN Vice President and March 5, 1996
- ----------------------------- Chief Financial Officer
(Michael E. Lehman) (Principal Financial Officer)
/s/ GEORGE REYES Vice President and March 5, 1996
- ----------------------------- Controller (Principal
(George Reyes) Accounting Officer)
/s/ L. JOHN DOERR Director March 5, 1996
- -----------------------------
(L. John Doerr)
/s/ ROBERT J. FISHER Director March 5, 1996
- -----------------------------
(Robert J. Fisher)
/s/ JUDITH L. ESTRIN Director March 5, 1996
- -----------------------------
(Judith L. Estrin)
/s/ ROBERT L. LONG Director March 5, 1996
- -----------------------------
(Robert L. Long)
/s/ M. KENNETH OSHMAN Director March 5, 1996
- -----------------------------
(M. Kenneth Oshman)
/s/ A. MICHAEL SPENCE Director March 5, 1996
- -----------------------------
(A. Michael Spence)
II-3
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
EXHIBITS
------------------------
Registration Statement on Form S-8
SUN MICROSYSTEMS, INC.
March 5, 1996
<PAGE>
SUN MICROSYSTEMS, INC.
REGISTRATION STATEMENT ON FORM S-8
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
4.1 1990 Employee Stock Purchase Plan
4.2 1990 Long-Term Equity Incentive Plan
5.1 Opinion of Counsel as to legality of securities being registered
23.1 Consent of Counsel (contained in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP, Independent Auditors
24.1 Power of Attorney (contained in page II-3)
SUN MICROSYSTEMS, INC.
1990 EMPLOYEE STOCK PURCHASE PLAN
(Last amended August 9, 1995)
The following constitute the provisions of the 1990 Employee Stock Purchase
Plan of Sun Microsystems, Inc.
1. Purpose. The purpose of the Plan is to provide Employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an Employee Stock Purchase Plan" under
Section 423 of the Code. The provisions of the Plan shall, accordingly, be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a Committee designated by the Board to
administer the Plan. If at any time no Committee shall be in office, then the
functions of the Committee specified in the Plan shall be exercised by the Board
and any references herein to the Committee shall be construed as references to
the Board.
(d) "Common Stock" shall mean the Common Stock, $0.00067 par value (as
adjusted from time to time), of the Company.
(e) "Company" shall mean Sun Microsystems, Inc., a Delaware corporation.
(f) "Compensation", unless otherwise determined by the Committee, shall
mean regular straight time gross earnings, variable compensation for field
sales personnel, certain incentive bonuses, payments for overtime, shift
premium, lead pay and automobile allowances, but shall exclude other
compensation.
(g) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Committee from time to time in its sole discretion as eligible
to participate in the Plan.
(h) "Employee" shall mean any individual whose customary employment with
the Company or any Designated Subsidiary is at least 20 hours per week and more
than five months in any calendar year. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the Company; provided that
where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
(i) "Enrollment Date" shall mean the first day of each Offering Period.
(j) "Exercise Date" shall mean the last day of each Exercise Period.
(k) "Exercise Period" shall mean a period commencing on an Enrollment
Date or on the day after an Exercise Date and which is of such duration as the
Committee shall determine.
<PAGE>
(l) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(i) the last reported sale of the Common Stock of the Company on
the NASDAQ National Market System or, if no such reported sale takes place on
any such day, the average of the closing bid and asked prices, or
(ii) if such Common Stock shall then be listed on a national
securities exchange, the last reported sale price or, if no such reported sale
takes place on any such day, the average of the closing bid and asked prices on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, or
(iii) if such Common Stock shall not be quoted on such National
Market System nor listed or admitted to trading on a national securities
exchange, then the average of the closing bid and asked prices, as reported by
The Wall Street Journal for the over-the-counter market, or
(iv) if none of the foregoing is applicable, then the fair market
value of a share of Common Stock shall be determined by the Committee in its
discretion.
(m) "Offering Period" shall mean the period beginning with the date an
option is granted under the Plan and ending with the date determined by the
Committee. During the term of the Plan, the duration of each Offering Period
shall be determined from time to time by the Committee, provided that no
Offering Period may exceed 27 months in duration. If determined by the
Committee, an Offering Period may include one or more Exercise Periods.
(n) "Plan" shall mean this 1990 Employee Stock Purchase Plan.
(o) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(p) "Reserves" shall mean the number of shares of Common Stock covered
by each option under the Plan which has not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(q) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or by a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or by a Subsidiary.
(r) "Trading Day" shall mean a day on which national stock exchanges and
the National Association of Securities Dealers Automated Quotation (NASDAQ)
System are open for trading.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the total number of shares reserved and available for issuance
pursuant to the Plan shall be 11,450,000. The shares may be either authorized
but unissued or reacquired Common Stock.
4. Eligibility.
(a) Any Employee as defined in Section 2 who shall be employed by the
Company on a given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent or more
2
<PAGE>
of the total combined voting power or value of all classes of stock of the
Company or of any Subsidiary of the Company, or (ii) which permits his or her
rights to purchase stock in any calendar year under all employee stock purchase
plans of the Company and its Subsidiaries to exceed $25,000 worth of stock
(determined at the Fair Market Value of the shares at the time such option is
granted).
5. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods, each consisting of such number of Exercise Periods as the Committee
shall determine, and shall continue until terminated in accordance with Section
20 hereof. The first Offering Period shall commence on a date to be determined
by the Committee. The Committee shall have the power to change the duration of
Offering Periods and Exercise Periods with respect to future offerings without
stockholder approval if such change is announced at least 15 days prior to the
scheduled beginning of the first Offering Period and Exercise Period to be
affected.
6. Participation.
(a) An eligible Employee may become a participant in any Offering Period
under the Plan only by completing a subscription agreement authorizing payroll
deductions in form and substance satisfactory to the Committee and filing it
with the Company during the open enrollment period prior to the applicable
Enrollment Date, unless a later time for filing the subscription agreement is
set by the Committee for all eligible Employees with respect to a given Offering
Period.
(b) Payroll deductions for a participant shall commence on the first
payday following the Enrollment Date and shall continue until terminated by the
participant as provided in Section 11.
7. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made (under this Plan and all
employee stock purchase plans of the Company) on each payday during the Offering
Period in an amount not exceeding a total of 10% (or such other percentage as
the Committee may determine) of the Compensation which he or she receives on
each payday during the Offering Period, and the aggregate of such payroll
deductions (under this Plan and all employee stock purchase plans of the
Company) during the Offering Period shall not exceed a total of 10% (or such
other percentage as the Committee may determine) of the participant's
Compensation during said Offering Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and will be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 11. A participant's subscription agreement shall remain
in effect for successive Offering Periods unless terminated as provided in
Section 11. To increase or decrease the rate of payroll deductions (within the
limitations of Section 7(a)), (i) with respect to the next Offering Period, a
participant must complete and file with the Company during the open enrollment
period prior to the Enrollment Date for such Offering Period, or (ii) with
respect to the next Exercise Period within the same Offering Period, a
participant must complete and file with the Company prior to the commencement
of the new Exercise Period within such Offering Period, a new subscription
agreement authorizing a change in payroll deduction rate. Except in the case of
authorized leaves of absence (which shall be governed by Section 11(c) below),
such change in rate shall be effective at the beginning of the next Offering
Period or Exercise Period, as the case may be, following the Company's receipt
of the new subscription agreement.
3
<PAGE>
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 4(b) herein, a participant's
payroll deductions may be decreased to 0% by the Company at such time during any
Exercise Period which is scheduled to end during the current calendar year (the
"Current Exercise Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan (and any other employee
stock purchase plans of the Company) in a prior Exercise Period which ended
during the current calendar year plus all payroll deductions accumulated with
respect to the Current Exercise Period equals $21,250. Payroll deductions shall
recommence at the rate provided in such participant's subscription agreement at
the beginning of the first Exercise Period which is scheduled to end in a
subsequent calendar year, unless terminated by the participant as provided in
Section 11.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of by the participant, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but will not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefit attributable to sale or
early disposition by the participant of Common Stock under the Plan.
8. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible participant in such Offering Period shall be granted an option to
purchase on each Exercise Date during such Offering Period (at the applicable
Purchase Price) up to the number of shares of the Company's Common Stock
determined by dividing such participant's payroll deductions accumulated prior
to or on such Exercise Date and retained in the participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
a participant be permitted to purchase during any Offering Period more than the
number of shares determined to be the maximum permissible number (the Option
Cap") by the Committee with respect to the Offering Period prior to the
Enrollment Date. In the event that the Committee does not establish an Option
Cap prior to the Enrollment Date, the Option Cap shall be the number of shares
determined by dividing $100,000 by the Fair Market Value of a share of the
Company's Common Stock on the Enrollment Date, and provided further that such
purchase shall be subject to the limitations set forth in Sections 4(b), 7(d)
and 13 hereof. Exercise of the option shall occur as provided in Section 9,
unless the participant has withdrawn pursuant to Section 11, and such option
shall expire on the last day of the Offering Period.
9. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 11 below, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased. Any payroll deductions
remaining in a participant's account after an Exercise Date shall be retained in
the participant's account until the next Exercise Date within such Offering
Period, unless an over-subscription exists (as defined in Section 13(a)) or the
Offering Period has terminated with such Exercise Date, in which event such
amount shall be returned to the participant. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by him or
her.
10. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of either
4
<PAGE>
a certificate representing the shares purchased upon exercise of his or her
option or other evidence of purchase.
11. Withdrawal; Termination of Employment.
(a) A participant may withdraw all (but not less than all) the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time prior to the close of an Exercise Period
by giving written notice to the Company in form and substance satisfactory to
the Committee. Such notice shall state whether the participant is withdrawing
only from the applicable Exercise Period or entirely from the Offering Period.
All of the participant's payroll deductions credited to his or her account will
be paid to such participant as promptly as practicable after receipt of notice
of withdrawal and such participant's option for the current Offering Period or
Exercise Period (as specified in the notice) will be automatically terminated,
and no further payroll deductions for the purchase of shares will be made during
the Offering Period or Exercise Period, as applicable. If a participant
withdraws from an Offering Period, payroll deductions will not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement during the open enrollment period
preceding the commencement of a subsequent Offering Period. If a participant
withdraws from an Exercise Period, payroll deductions will not resume at the
beginning of any succeeding Exercise Period within the same Offering Period
unless written notice is delivered to the Company in form and substance
satisfactory to the Committee within the open enrollment period preceding the
commencement of the Exercise Period directing the Company to resume payroll
deductions.
(b) Upon a participant's ceasing to be an Employee for any reason or
upon termination of a participant's employment relationship (as described in
Section 2(g)), the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option will be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15, and such participant's option will
be automatically terminated.
(c) In the event a participant fails to remain an Employee of the
Company for at least 20 hours per week during an Offering Period in which the
Employee is a participant, he or she will be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to his or her account will be
returned to such participant and such participant's option terminated; provided
that (i) if an Employee shall take an unpaid leave of absence approved by the
Company in accordance with Section 2(g) of this Plan of more than 30 days during
an Offering Period in which the Employee is a participant, he or she will be
deemed to have withdrawn from the applicable Exercise Period on the 31st day of
such leave, and (ii) if an Employee shall take a paid leave of absence approved
by the Company in accordance with Section 2(g) of this Plan of more than 90 days
during an Offering Period in which the Employee is a participant, he or she will
be deemed to have withdrawn from the applicable Exercise Period on the earlier
of (aa) the 91st day if the Employee is paid for the entire 90 day leave, or
(bb) the last day upon which the Employee is paid provided he or she is paid for
at least 30 days. On the date upon which the Employee shall be deemed to have
withdrawn from the applicable Exercise Period, the payroll deductions credited
to his or her account will be returned to him or her, but he or she shall
continue to be a participant in the applicable Offering Period during such
authorized leave of absence until and unless such authorized leave of absence
terminates without his or her returning to his or her employment with the
Company.
(d) A participant's withdrawal from an Exercise Period (but not from the
Offering Period) will not have any effect upon his or her ability to participate
in subsequent Exercise Periods during the same Offering Period. However, a
participant's withdrawal from an Offering Period
5
<PAGE>
makes him or her ineligible for future participation in that Offering Period.
Withdrawal from an Exercise Period or from an Offering Period will not have any
effect upon a participant's eligibility to participate in a succeeding Offering
Period of the Plan or in any similar plan which may hereafter be adopted by the
Company, provided that a participant may elect to participate in a succeeding
Offering Period only during the open enrollment period for such Offering Period
and may not participate concurrently in more than one Offering Period.
(e) Notwithstanding the foregoing, unless otherwise determined by the
Committee, if the Fair Market Value on the Enrollment Date of an Offering Period
in which a participant is enrolled (the "Current Offering Period") is greater
than the Fair Market Value on the Enrollment Date of a succeeding Offering
Period (the "Succeeding Offering Period"), the participant's enrollment in the
Current Offering Period automatically will be terminated immediately following
the exercise of his or her option under the Current Offering Period on the
Exercise Date that occurs immediately prior to the Enrollment Date of the
Succeeding Offering Period, and the participant automatically will be enrolled
in the Succeeding Offering Period, unless the participant elects to remain in
the former Offering Period by delivery to the Company of a written notice in
form and substance satisfactory to the Committee.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan, as set forth in Section 3
hereof, is subject to adjustment upon changes in capitalization of the Company
as provided in Section 19. If, on a given Exercise Date, the number of shares
with respect to which options are to be exercised exceeds the number of shares
then available under the Plan (an "over-subscription"), the Committee shall make
a pro rata allocation of the shares remaining available for purchase in as
uniform a manner as shall be practicable and as it shall determine to be
equitable.
(b) The participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant.
14. Administration. The Plan shall be administered by the Board or a
Committee of members of the Board appointed by the Board, as necessary to
comply with the applicable restrictions of Rule 16b-3, if any. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its Committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to an Exercise Date on
which the option is exercised but prior to delivery to such participant of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan in the event of such participant's death prior to exercise of the option.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly
6
<PAGE>
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
16. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 15 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw from an
Offering Period in accordance with Section 11.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate funds from such payroll deductions.
18. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves, as well as the price
per share of Common Stock covered by each outstanding option under the Plan
which has not yet been exercised, 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 shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that 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 Committee, 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.
In the event of the proposed dissolution or liquidation of the
Company, the Exercise Period and the Offering Period will terminate immediately
prior to the consummation of such proposed action, unless otherwise provided by
the Committee. In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into another
corporation, each option under the Plan shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period (and, if applicable, the Exercise
Period) then in progress by setting a new Exercise Date (the "New Exercise
Date"). If the Committee shortens the Offering Period (and the Exercise Period,
if applicable) then in progress in lieu of assumption or substitution in the
event of a merger or sale of assets, the Committee shall notify each participant
in writing, at least 10 days prior to the New Exercise Date, that the Exercise
Date for his or her option has been changed to the New Exercise Date and that
his or her option will be exercised automatically on the New Exercise
7
<PAGE>
Date, unless prior to such date he or she has withdrawn from the Offering Period
or the Exercise Period as provided in Section 11. For purposes of this
paragraph, an option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the option confers the right to
purchase, for each share of stock subject to the option immediately prior to the
sale of assets or merger, the consideration (whether stock, cash or other
securities or property) received in the sale of assets or merger by holders of
Common Stock for each share of Common Stock held on the effective date of the
transaction (and if such holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
shares of Common Stock); provided, however, that if such consideration received
in the sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the
Committee may, with the consent of the successor corporation and the
participant, provide for the consideration to be received upon exercise of the
option 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 sale of assets or merger.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, and in the event of the Company being consolidated with or merged into
any other corporation.
20. Amendment or Termination.
(a) The Board may at any time and for any reason amend or terminate the
Plan. Except as provided in Section 19, no such termination can affect options
previously granted, provided that the Plan (and any Offering Period thereunder)
may be terminated by the Board on any Exercise Date if the Board determines that
the termination of the Plan is in the best interests of the Company and its
stockholders. Except as provided in Section 19, no amendment may make any change
in any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary and desirable to comply with Rule 16b-3
under the Securities Exchange Act of 1934, as amended, or Section 423 of the
Code (or any successor rule or provision or any other applicable law or
regulation), the Company shall obtain stockholder approval in such a manner and
to such a degree as is required thereby.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Committee shall be entitled to change the Offering Periods, establish the
exchange ratio applicable to amounts withheld in a currency other than United
States dollars, permit payroll withholding in excess of the amount designated by
a participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the
Committee determines in its sole discretion advisable which are consistent with
the Plan.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
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22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law of the United States or other country or jurisdiction,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange or quotation
system upon which the shares may then be listed or quoted, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company 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 by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the Company.
It shall continue in effect for a term of 20 years unless sooner terminated
under Section 20.
9
SUN MICROSYSTEMS, INC.
1990 LONG-TERM EQUITY INCENTIVE PLAN
(Last amended on August 9, 1995)
1. Purpose of the Plan. The purpose of the Sun Microsystems, Inc. 1990
Long-Term Equity Incentive Plan is to enable Sun Microsystems, Inc. to provide
an incentive to eligible employees, consultants and Officers whose present and
potential contributions are important to the continued success of the Company,
to afford them an opportunity to acquire a proprietary interest in the Company,
and to enable the Company to enlist and retain in its employ the best available
talent for the successful conduct of its business. It is intended that this
purpose will be effected through the granting of (a) stock options, (b) stock
purchase rights, (c) stock appreciation rights, and (d) long-term performance
awards.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Committee or Committees referred to in Section
5 of the Plan. If at any time no Committee shall be in office, then the
functions of the Committee specified in the Plan shall be exercised by the
Board.
(d) "Common Stock" means the Common Stock, $0.00067 par value (as
adjusted from time to time), of the Company.
(e) "Company" means Sun Microsystems, Inc., a corporation organized
under the laws of the state of Delaware, or any successor corporation.
(f) "Director" means a member of the Board.
(g) "Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) the last reported sale price of the Common Stock of the Company
on the NASDAQ National Market System or, if no such reported sale takes place on
any such day, the average of the closing bid and asked prices, or
(ii) if such Common Stock shall then be listed on a national
securities exchange, the last reported sale price or, if no such reported sale
takes place on any such day, the average of the closing bid and asked prices on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, or
(iii) if such Common Stock shall not be quoted on such National
Market System nor listed or admitted to trading on a national securities
exchange, then the average of the closing bid and asked prices, as reported by
The Wall Street Journal for the over-the-counter market, or
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(iv) if none of the foregoing is applicable, then the Fair Market
Value of a share of Common Stock shall be determined by the Board in its
discretion.
(j) "Incentive Stock Option" means an Option intended to be and
designated as an Incentive Stock Option" within the meaning of Section 422 of
the Code.
(k) "Long-Term Performance Award" means an award under Section 10 below.
A Long-Term Performance Award shall permit the recipient to receive a cash or
stock bonus (as determined by the Committee) upon satisfaction of such
performance factors as are set out in the recipient's individual grant.
Long-Term Performance Awards will be based upon the achievement of Company,
Subsidiary and/or individual performance factors or upon such other criteria as
the Committee may deem appropriate.
(l) "Nonstatutory Stock Option" means any Option that is not an
Incentive Stock Option.
(m) "Officer" means an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
(n) "Option" means any option to purchase shares of Common Stock granted
pursuant to Section 7 below.
(o) "Outside Director" means a Director who is not an employee of the
Company.
(p) "Plan" means this 1990 Long-Term Equity Incentive Plan, as
hereinafter amended from time to time.
(q) "Restricted Stock" means shares of Common Stock acquired pursuant to
a grant of Stock Purchase Rights under Section 9 below.
(r) "Right" means and includes Stock Appreciation Rights and Stock
Purchase Rights granted pursuant to the Plan.
(s) "Special Reserve" means a number of shares reserved and available
for issuance under the terms of the Plan equal to 3% of the total shares
reserved under the Plan as determined by and set forth under Section 4 below as
such section may be amended from time to time in accordance with the terms of
this Plan.
(t) "Stock Appreciation Right" means an award made pursuant to Section 8
below, which right permits the recipient to receive an amount of Common Stock or
cash equal in value to the difference between the Fair Market Value of Common
Stock on the date of grant of the Option and the Fair Market Value of Common
Stock on the date of exercise of the Stock Appreciation Right.
(u) "Stock Purchase Right" means the right to purchase Common Stock
pursuant to a restricted stock purchase agreement entered into between the
Company and the purchaser under Section 9 below.
(v) "Subsidiary" means a corporation, domestic or foreign, of which not
less than 50% of the voting shares are held by the Company or by a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or by a Subsidiary.
In addition, the term "Rule 16b-3", the term "Performance Period" and the
terms "Tax Date" and "Insiders" shall have meanings set forth in Section 5(a),
Section 10 and Section 11, respectively.
3. Eligible Participants. Any Officer, consultant, or other employee of the
Company or of a Subsidiary whom the Committee deems to have the potential to
contribute to the future success
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of the Company shall be eligible to receive awards under the Plan; provided,
however, that any Options intended to qualify as Incentive Stock Options shall
be granted only to employees of the Company or its Subsidiaries.
4. Stock Subject to the Plan. Subject to Sections 12 and 13, the total
number of shares of Common Stock reserved and available for distribution
pursuant to the Plan shall be 25,350,000 shares. Subject to Sections 12 and 13
below, if any shares of Common Stock that have been optioned under an Option
cease to be subject to such Option (other than through exercise of the Option),
or if any Right, Option or Long-Term Performance Award granted hereunder is
forfeited or any such award otherwise terminates prior to the issuance to the
participant of Common Stock, the shares (if any) that were reserved for issuance
pursuant to such Right, Option or Long-Term Performance Award shall again be
available for distribution in connection with future awards or Option grants
under the Plan; provided, however, that shares of Common Stock that have
actually been issued under the Plan, whether upon exercise of an Option or Right
or in satisfaction of a Long-Term Performance Award, shall not in any event be
returned to the Plan and shall not become available for future distribution
under the Plan.
5. Administration.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3
promulgated under the Exchange Act or any successor rule thereto, as in effect
at the time that discretion is being exercised with respect to the Plan (Rule
16b-3"), and by the legal requirements relating to the administration of stock
plans such as the Plan, if any, of applicable securities laws, Delaware
corporate law and the Code (collectively, the "Applicable Laws"), the Plan may
(but need not) be administered by different administrative bodies with respect
to (A) Directors who are not employees, (B) Directors who are employees, (C)
Officers who are not Directors and (D) Employees who are neither Directors nor
Officers.
(ii) Administration with respect to Directors and Officers. With
respect to grants of Options, Rights and Long-Term Performance Awards to
eligible participants who are Officers or Directors of the Company, the Plan
shall be administered by (A) the Board, if the Board may administer the Plan in
compliance with Rule 16b-3 as it applies to a plan intended to qualify
thereunder as a discretionary grant or award plan, or (B) a Committee designated
by the Board to administer the Plan, which Committee shall be constituted (I) in
such a manner as to permit the Plan to comply with Rule 16b-3 as it applies to a
plan intended to qualify thereunder as a discretionary grant or award plan and
(II) in such a manner as to satisfy the Applicable Laws.
(iii) Administration with respect to Other Persons. With respect to
grants of Options to eligible participants who are neither Directors nor
Officers of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws.
(iv) General. Once a Committee has been appointed pursuant to
subsection (ii) or (iii) of this Section 5(a), such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of any Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies (however caused) and remove
all members of a Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws and, in the case of a Committee
appointed under subsection (ii), to the extent permitted by Rule 16b-3 as it
applies to a plan intended to qualify thereunder as a discretionary grant or
award plan.
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<PAGE>
(b) Authority. A Committee, if there be one, shall have full power to
implement and carry out the Plan, subject to the general purposes, terms, and
conditions of the Plan and to the direction of the Board (including the
specific duties delegated by the Board to such Committee), which power shall
include, but not be limited to, the following:
(i) to select the Officers, consultants and other employees of the
Company and/or its Subsidiaries to whom Options, Rights and/or Long-Term
Performance Awards may from time to time be granted hereunder;
(ii) to determine whether and to what extent Options, Rights and/or
Long-Term Performance Awards, or any combination thereof, are granted hereunder;
(iii) to determine the number of shares of Common Stock 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, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Common Stock relating thereto, based in each case on
such factors as the Committee shall determine, in its sole discretion);
(vi) to determine whether and under what circumstances an Option
may be settled in cash or Restricted Stock under Section 7(j) instead of Common
Stock;
(vii) to determine the form of payment that will be acceptable
consideration for exercise of an Option or Right granted under the Plan;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount (if any) of any
deemed earnings on any deferred amount during any deferral period);
(ix) to reduce the exercise price of any Option or Right;
(x) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Rights.
The Committee shall have the authority to construe and interpret the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, and to make all other determinations necessary or advisable for the
administration of the Plan.
6. Duration of the Plan. The Plan shall remain in effect until terminated
by the Board under the terms of the Plan, provided that in no event may
Incentive Stock Options be granted under the Plan later than October 15, 2000,
10 years from the date the Plan was adopted by the Board.
7. Stock Options. The Committee, in its discretion, may grant Options to
eligible participants and shall determine whether such Options shall be
Incentive Stock Options or Nonstatutory Stock Options. Each Option shall be
evidenced by a written Option agreement which shall expressly identify the
Option as an Incentive Stock Option or as a Nonstatutory Stock Option, and be in
such form and contain such provisions as the Committee shall from time to time
deem appropriate. Without limiting the foregoing, the Committee may, at any
time, or from time to time, authorize the Company, with the consent of the
respective recipients, to issue new Options including Options in exchange for
the surrender and cancellation of any or all outstanding Options or Rights.
Option agreements shall contain the following terms and conditions:
4
<PAGE>
(a) Exercise Price; Number of Shares. The exercise price of the Option,
which shall be approved by the Committee, must be equal to or greater than the
Fair Market Value of the Common Stock at the time the Option is granted;
provided, however, that in the case of a Nonstatutory Stock Option, the price
may be less than (but no less than 85%) of the Fair Market Value of the Common
Stock on the date the Option is granted, if such Option is granted, in the
discretion of the Board or Committee, as the case may be, expressly in lieu of a
reasonable amount of salary or compensation due the recipient of the Option. In
addition, Nonstatutory Stock Options may be granted at an exercise price less
than Fair Market Value of the Common Stock at the time the Option is granted,
provided that such grant is out of and subject to the limitations of the
Special Reserve and, provided further, that in the case of an Insider, (as
defined in Section 11 hereof), the exercise price shall be no less than 50% of
the Fair Market Value of the Common Stock on the date the Option is granted.
The Option agreement shall specify the exercise price and the number of
shares of Common Stock to which it pertains.
(b) Waiting Period; Exercise Dates; Term. At the time an Option is
granted, the Committee will determine the terms and conditions to be satisfied
before shares may be purchased, including the dates on which shares subject to
the Option may first be purchased. The Committee may specify that an Option may
not be exercised until the completion of the waiting period specified at the
time of grant. (Any such period is referred to herein as the "waiting period.")
At the time an Option is granted, the Committee shall fix the period within
which such Option may be exercised, which shall not be less than the waiting
period, if any, nor, in the case of an Incentive Stock Option, more than 10
years from the date of grant.
(c) Form of Payment. The consideration to be paid for the shares of
Common Stock to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Committee (and, in the case of an Incentive
Stock Option, shall be determined at the time of grant) and may consist entirely
of (i) cash, (ii) certified or cashier's check, (iii) promissory note, (iv)
other shares of Common Stock (including, in the discretion of the Committee,
Restricted Stock) which (x) either have been owned by the optionee for more than
six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the shares as to which said
Option shall be exercised, (v) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds required to pay the exercise price,
(vi) delivery of an irrevocable subscription agreement for the shares which
obligates the option holder to take and pay for the shares not more than 12
months after the date of delivery of the subscription agreement or (vii) any
combination of the foregoing methods of payment.
(d) Effect of Termination of Employment or Death of Employee
Participants. In the event that an optionee during his or her lifetime ceases to
be an employee of the Company or of any Subsidiary for any reason, including
retirement, any Option, including any unexercised portion thereof, which was
otherwise exercisable on the date of termination of employment, shall expire
within such time period as is determined by the Committee; provided, however,
that in the case of an Incentive Stock Option the Option shall expire unless
exercised within a period of 90 days from the date on which the optionee ceased
to be an employee, but in no event after the expiration of the term of such
Option as set forth in the Option agreement. If in any case the Committee shall
determine that an employee shall have been discharged for Just Cause (as
defined below) such employee shall not thereafter have any rights under the Plan
or any Option that shall have been granted to him
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<PAGE>
or her under the Plan. For purposes of this Section, "Just Cause" means the
termination of employment of an employee shall have taken place as a result of
(i) willful breach or neglect of duty; (ii) failure or refusal to work or to
comply with the Company's rules, policies, and practices; (iii) dishonesty;
(iv) insubordination; (v) being under the influence of drugs (except to the
extent medically prescribed) or alcohol while on duty or on Company premises;
(vi) conduct endangering, or likely to endanger, the health or safety of another
employee; or (vii) conviction of a felony. In the event of the death of an
employee optionee, that portion of the Option which had become exercisable on
the date of death shall be exercisable by his or her personal representatives,
heirs, or legatees within six months or such time period as is determined by the
Committee (but in the case of an Incentive Stock Option, in no event after the
expiration of the term of such Option as set forth in the Option agreement.) In
the event of the death of an optionee within one month after termination of
employment or service, that portion of the Option which had become exercisable
on the date of termination shall be exercisable by his or her personal
representatives, heirs, or legatees within six months or such time period as is
determined by the Committee (but in the case of an Incentive Stock Option, in no
event after the expiration of the term of such Option as set forth in the Option
agreement.) In the event that an optionee ceases to be an employee of the
Company or of any Subsidiary for any reason, including death or retirement,
prior to the lapse of the waiting period, if any, his or her Option shall
terminate and be null and void.
(e) Leave of Absence. The employment relationship shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Committee, provided that such
leave is for a period of not more than 90 days (or not more than 30 days for
unpaid leave), unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing; or (iv) in the case of transfer between
locations of the Company or between the Company, its Subsidiaries or its
successor. In the case of any employee on an approved leave of absence, the
Committee may make such provisions respecting suspension of vesting of the
Option while on leave from the employ of the Company or a Subsidiary as it may
deem appropriate, except that in no event shall an Option be exercised after the
expiration of the term set forth in the Option agreement.
(f) Acceleration of Exercisability or Waiting Period. The Committee may
accelerate the earliest date on which outstanding Options (or any installments
thereof) are exercisable.
(g) Special Incentive Stock Option Provisions. In addition to the
foregoing, Options granted under the Plan which are intended to be Incentive
Stock Options under Section 422 of the Code shall be subject to the following
terms and conditions:
(i) Dollar Limitation. To the extent that the aggregate Fair Market
Value of the shares of Common Stock with respect to which Options designated as
Incentive Stock Options become exercisable for the first time by any individual
during any calendar year (under all plans of the Company) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of the
preceding sentence, (i) Options shall be taken into account in the order in
which they were granted and (ii) the Fair Market Value of the shares shall be
determined as of the time the Option with respect to such shares is granted.
(ii) 10% Stockholder. If any person to whom an Incentive Stock
Option is to be granted pursuant to the provisions of the Plan is, on the date
of grant, the owner of Common Stock (as determined under Section 424(d) of the
Code) possessing more than 10% of the total combined
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voting power of all classes of stock of the Company or of any Subsidiary, then
the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(A) The exercise price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the Fair Market
Value of the Common Stock on the date of grant; and
(B) The Option shall not have a term in excess of five years
from the date of grant.
Except as modified by the preceding provisions of this Subsection 7(g)
and except as otherwise required by Section 422 of the Code, all of the
provisions of the Plan shall be applicable to the Incentive Stock Options
granted hereunder.
(h) Other Provisions. Each Option granted under the Plan may contain
such other terms, provisions, and conditions not inconsistent with the Plan as
may be determined by the Committee.
(i) Options to Consultants. Options granted to consultants shall not be
subject to Sections 7(b) and 7(d) of the Plan, but shall have such terms and
conditions pertaining to waiting period (if any), exercise date, and effect of
termination of the consulting relationship as the Committee shall determine in
each case.
(j) Buyout Provisions. The Committee may at any time offer to buy out,
for a payment in cash or Common Stock (including Restricted Stock), an Option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the optionee at the time that such offer is made.
Any such offer made to an Officer or Director shall comply with the applicable
provisions of Rule 16b-3. This provision is intended only to clarify the powers
of the Committee and shall not in any way be deemed to create any rights on the
part of optionees to receive buyout offers or payments.
(k) Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions, if any, as may be required by Rule 16b-3 to be in
the written Option agreement in order to qualify for the maximum exemption from
Section 16 of the Exchange Act with respect to Plan transactions.
(l) Limitations on Grants to Employees. Notwithstanding anything to the
contrary herein, the following limitations shall apply to grants of Options:
(i) No eligible participant shall be granted, in any fiscal year of
the Company, Options to purchase more than 150,000 shares.
(ii) In connection with his or her initial employment, an eligible
participant may be granted Options to purchase up to an additional 200,000
shares which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.
(iv) If an Option is cancelled (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limit set forth in this paragraph 1. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
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8. Stock Appreciation Rights. Stock Appreciation Rights may be granted only
in connection with an Option, either concurrently with the grant of the Option
or at any time thereafter during the term of the Option. The following
provisions apply to such Stock Appreciation Rights.
(a) Exercise of Right. The Stock Appreciation Right shall entitle the
optionee to exercise the Right by surrendering to the Company unexercised a
portion of the underlying Option as to which Optionee has a right to exercise.
The Optionee shall receive in exchange from the Company an amount in cash or
Common Stock equal in value to the excess of (x) the Fair Market Value on the
date of exercise of the Right of the Common Stock covered by the surrendered
portion of the underlying Option over (y) the exercise price of the Common Stock
covered by the surrendered portion of the underlying Option, as determined in
accordance with Section 7(a) above. Notwithstanding the foregoing, the
Committee may place limits on the amount that may be paid upon exercise of a
Stock Appreciation Right; provided, however, that such limit shall not restrict
the exercisability of the underlying Option.
(b) Option Cancelled. When a Stock Appreciation Right is exercised, the
underlying Option, to the extent surrendered, shall no longer be exercisable.
(c) Exercisability Requirement. A Stock Appreciation Right shall be
exercisable only when and to the extent that the underlying Option is
exercisable and shall expire no later than the date on which the underlying
Option expires.
(d) In-the-Money Requirement. A Stock Appreciation Right may only be
exercised at a time when the Fair Market Value of the Common Stock covered by
the underlying Option exceeds the exercise price of the Common Stock covered by
the underlying Option.
(e) Incentive Stock Option Requirements. In the event that a Stock
Appreciation Right is granted that relates to an Incentive Stock Option, such
Right shall contain such additional or different terms as may be necessary under
applicable regulations to preserve treatment of the Incentive Stock Option as
such under Section 422 of the Code.
(f) Form of Payment. The Company's obligation arising upon the exercise
of a Stock Appreciation Right may be paid currently or on a deferred basis (with
such interest or earnings equivalent as may be determined by the Committee), and
may be paid in Common Stock or in cash, or in any combination of Common Stock
and cash, as the Committee in its sole discretion may determine. Shares of
Common Stock issued upon the exercise of a Stock Appreciation Right shall be
valued at the Fair Market Value of the Common Stock as of the date of exercise.
(g) Rule 16b-3. Stock Appreciation Rights granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions, if any, as may be required by Rule
16b-3 to be in the written Right agreement in order to qualify for the maximum
exemption from Section 16 of the Exchange Act with respect to Plan transactions.
Such a person may only make an election to receive cash in full or partial
settlement of the Stock Appreciation Right or exercise a Stock Appreciation
Right during such time or times as are permitted by paragraph (e) of Rule 16b-3
or any successor provision.
9. 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 Committee determines that
it will offer Stock Purchase Rights under the Plan, it shall advise the offeree
in writing of the terms, conditions and restrictions related to the offer,
including
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the number of shares of Common Stock that such person shall be entitled to
purchase, the price to be paid, which price in the case of Insiders (as defined
in Section 11) shall not be more than $0.00067 per share (the par value of the
Company's Common Stock, as adjusted from time to time, and the minimum price
permitted by the Delaware General Corporation Law), and the time within which
such person must accept such offer, which shall in no event exceed 60 days from
the date the Stock Purchase Right was granted. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Committee. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. The Restricted Stock purchase agreement shall
grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment 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
as to not more than 50% of such shares at a date not earlier than 2-1/2 years
from the date of grant of the Restricted Stock and as to the remaining shares at
a date not earlier than 5 years from the date of grant of the Restricted Stock.
The Committee shall exercise its repurchase option in accordance with the above.
Notwithstanding the foregoing, with respect to Restricted Stock granted out of
and subject to the restrictions of the Special Reserve, the Committee may in its
discretion exercise its repurchase option and such repurchase option shall lapse
as to such shares at such a rate as the Committee may, in its discretion,
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 Committee in its sole discretion. In addition,
the provisions of Restricted Stock purchase agreements need not be the same
with respect to each purchaser.
10. Long-Term Performance Awards.
(a) Awards. Long-Term Performance Awards are cash or stock bonus awards
that may be granted either alone, in addition to or in tandem with other awards
granted under the Plan and/or awards made outside of the Plan. Long-Term
Performance Awards shall not require payment by the recipient of any
consideration for the Long-Term Performance Award or for the shares of Common
Stock covered by such award. The Committee shall determine the nature, length
and starting date of any performance period (the "Performance Period") for each
Long-Term Performance Award and shall determine the performance and/or
employment factors to be used in the determination of the value of Long-Term
Performance Awards and the extent to which such Long-Term Performance Awards
have been earned. Shares issued pursuant to a Long-Term Performance Award may be
made subject to various conditions, including vesting or forfeiture provisions.
Long-Term Performance Awards may vary from participant to participant and
between groups of participants and shall be based upon the achievement of
Company, Subsidiary and/or individual performance factors or upon such other
criteria as the Committee may deem appropriate. Performance Periods may overlap
and participants may participate simultaneously with respect to Long-Term
Performance Awards that are subject to different Performance Periods and
different performance factors and criteria. Long-Term Performance Awards shall
be confirmed by, and be subject to the terms of, a written Long-Term Performance
Award agreement.
(b) Value of Awards. At the beginning of each Performance Period, the
Committee may determine for each Long-Term Performance Award subject to such
Performance Period the range of dollar values and/or numbers of shares of Common
Stock to be issued to the participant at the end of the Performance Period if
and to the extent that the relevant measures of performance for
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such Long-Term Performance Award are met. Such dollar values or numbers of
shares of Common Stock may be fixed or may vary in accordance with such
performance or other criteria as may be determined by the Committee.
(c) Adjustment of Awards. Notwithstanding the provisions of Section 20
hereof, the Committee may, after the grant of Long-Term Performance Awards,
adjust the performance factors applicable to such Long-Term Performance Awards
to take into account changes in the law or in accounting or tax rules and to
make such adjustments as the Committee deems necessary or appropriate to reflect
the inclusion or exclusion of the impact of extraordinary or unusual items,
events or circumstances in order to avoid windfalls or hardships.
(d) Termination. Unless otherwise provided in the applicable Long-Term
Performance Award agreement, if a participant terminates his or her employment
or his or her consultancy during a Performance Period because of death or
Disability, the Committee may in its discretion provide for an earlier payment
in settlement of such award, which payment may be in such amount and under such
terms and conditions as the Committee deems appropriate.
Unless otherwise provided in the applicable Long-Term Performance
Award agreement, if a participant terminates employment or his or her
consultancy during a Performance Period for any reason other than death or
Disability, then such a participant shall not be entitled to any payment with
respect to the Long-Term Performance Award subject to such Performance Period,
unless the Committee shall otherwise determine in its discretion.
(e) Form of Payment. The earned portion of a Long-Term Performance Award
may be paid currently or on a deferred basis (with such interest or earnings
equivalent as may be determined by the Committee). Payment shall be made in the
form of cash or whole shares of Common Stock, including Restricted Stock, or a
combination thereof, either in a lump sum payment or in installments, all as
the Committee shall determine.
(f) Reservation of Shares. In the event that the Committee grants a
Long-Term Performance Award that is payable in cash or Common Stock, the
Committee may (but need not) reserve an appropriate number of shares of Common
Stock under the Plan at the time of grant of the Long-Term Performance Award. If
and to the extent that the full amount reserved is not actually paid in Common
Stock, the shares of Common Stock representing the portion of the reserve for
that Long-Term Performance Award that is not actually issued in satisfaction of
such Long-Term Performance Award shall again become available for award under
the Plan. If shares of Common Stock are not reserved by the Committee at the
time of grant, then (i) no shares shall be deducted from the number of shares
available for grant under the Plan at that time and (ii) at the time of payment
of the Long-Term Performance Award, only the number of shares actually issued to
the participant shall be so deducted. If there are not a sufficient number of
shares available under the Plan for issuance to a participant at the time of
payment of a Long-Term Performance Award, any shortfall shall be paid by the
Company in cash.
(g) Rule 16b-3. Grants of Long-Term Performance Awards to Directors and
Officers must comply with the applicable provisions of Rule 16b-3 and such
Long-Term Performance Awards shall contain such additional conditions or
restrictions, if any, as may be required by Rule 16b-3 to be in the written
agreement relating to such LongTerm Performance Awards in order to qualify for
the maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
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11. Stock Withholding to Satisfy Withholding Tax Obligations.
(a) Ability to Use Stock for Withholding. When a participant incurs tax
liability in connection with the exercise or vesting of any Option, Right or
Long-Term Performance Award, which tax liability is subject to tax withholding
under applicable tax laws, and the participant is obligated to pay the Company
an amount required to be withheld under applicable tax laws, the participant may
satisfy the withholding tax obligation by electing to have the Company withhold
from the shares to be issued 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 (the "Tax Date").
(b) Elections to Have Stock Withheld. All elections by participants to
have shares withheld for this purpose shall be made in writing in a form
acceptable to the Committee and shall be subject to the following restrictions:
(i) the election must be made on or prior to the applicable Tax
Date;
(ii) once made, the election shall be irrevocable as to the
particular shares as to which the election is made (unless otherwise permitted
by applicable tax regulations under the Code);
(iii) all elections shall be subject to the consent or disapproval
of the Committee; and
(iv) if the participant is an Officer or Director of the Company or
other person whose transactions in Common Stock are subject to Section 16(b) of
the Exchange Act (collectively "Insiders"), the election must comply with the
applicable provisions of Rule 16b-3 and shall be subject to such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(c) Section 83(b) Election. In the event the election to have shares
withheld is made by a participant, no election is filed under Section 83(b) of
the Code and the Tax Date is deferred under Section 83 of the Code, the
participant shall receive the full number of shares with respect to which the
exercise occurs, but such participant shall be unconditionally obligated to
tender back to the Company the proper number of shares on the Tax Date.
12. Recapitalization. In the event that dividends are payable in Common
Stock or in the event there are splits, subdivisions, or combinations of shares
of Common Stock, the number of shares available under the Plan shall be
increased or decreased proportionately, as the case may be, and the number of
shares of Common Stock deliverable in connection with any Option, Right or
LongTerm Performance Award theretofore granted shall be increased or decreased
proportionately, as the case may be, without change in the aggregate purchase
price (where applicable).
13. Reorganization. In case the Company is merged or consolidated with
another corporation and the Company is not the surviving corporation, or in case
the property or stock of the Company is acquired by another corporation, or in
case of separation, reorganization, or liquidation of the Company, the
Committee, or the board of directors of any corporation assuming the obligations
of the Company hereunder, shall, as to outstanding Options, Rights or Long-Term
Performance Awards either (a) make appropriate provision for the protection of
any such outstanding Options, Rights or Long-Term Performance Awards by the
assumption or substitution on an equitable basis of appropriate stock of the
Company or of the merged, consolidated, or otherwise reorganized corporation
which will be issuable in respect to the shares of Common Stock, provided that
in the case
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of Incentive Stock Options, such assumption or substitution comply with Section
424(a) of the Code, or (b) upon written notice to the participant, provide that
the Option or Right must be exercised within 30 days of the date of such notice
or it will be terminated. In any such case, the Committee may, in its
discretion, advance the lapse of vesting periods, waiting periods, and exercise
dates.
14. Employment or Consulting Relationship. Nothing in the Plan or any award
made hereunder shall interfere with or limit in any way the right of the Company
or of any Subsidiary to terminate any recipient's employment or consulting
relationship at any time, with or without cause, nor confer upon any recipient
any right to continue in the employ or service of the Company or any Subsidiary.
15. General Restriction. Each award shall be subject to the requirement
that, if, at any time, the Committee shall determine, in its discretion, that
the listing, quotation, registration, or qualification of the shares subject to
such award upon any securities exchange or quotation system or under any state
or federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, such award or
the issue or purchase of shares thereunder, such award may not be exercised in
whole or in part unless such listing, quotation, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
16. Rights as a Stockholder. The holder of an Option, Right or Long-Term
Performance Award shall have no rights as a stockholder with respect to any
shares covered by such Option, Right or Long-Term Performance Award until the
date of exercise. Once an Option, Right or Long-Term Performance Award is
exercised by the holder thereof, the participant shall have the rights
equivalent to those of a stockholder, and shall be a stockholder when his or her
holding is entered upon the records of the duly authorized transfer agent of the
Company. Except as otherwise expressly provided in the Plan, no adjustment shall
be made for dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
17. Nonassignability of Awards. No awards made hereunder, including
Options, Rights and Long-Term Performance Awards, shall be assignable or
transferable by the recipient other than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder, and in no event shall such awards be assigned or transferred in a
manner that is inconsistent with the specific Plan provisions relating thereto.
The designation of a beneficiary by a participant does not constitute a
transfer. During the life of the recipient, an Option, Right or Long-Term
Performance Award shall be exercisable only by him or her or by a transferee
permitted by this Section 17.
18. Withholding Taxes. Whenever, under the Plan, shares are to be issued in
satisfaction of Options, Rights or Long-Term Performance Awards granted
hereunder, the Company shall have the right to require the recipient to remit to
the Company an amount sufficient to satisfy federal, state, and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such shares. Whenever, under the Plan, payments are to be made
to participants in cash, such payments shall be net of an amount sufficient to
satisfy federal, state, and local withholding tax requirements.
19. Nonexclusivity of the Plan. Neither the adoption or amendment of the
Plan by the Board, the submission of the Plan or any amendments thereto to the
stockholders of the Company for approval, nor any provision of the Plan shall be
construed as creating any limitations on the power of the Board or the Committee
to adopt and implement such additional compensation arrangements as it may deem
desirable, including, without limitation, the awarding of cash or the granting
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of stock options, stock appreciation rights, stock purchase rights or long-term
performance awards outside of the Plan, and such arrangements may be either
generally applicable to a class of employees or consultants or applicable only
in specified cases.
20. Amendment, Suspension, or Termination of the Plan. The Board may at any
time amend, alter, suspend, or terminate the Plan, but no amendment, alteration,
suspension, or termination shall be made which would impair the rights of any
grantee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or under Section 422 of the Code (or any other Applicable Law),
the Company shall obtain stockholder approval of any Plan amendment in such a
manner and to such a degree as is required by such Applicable Law.
21. Effective Date of the Plan. The Plan shall become effective upon
approval of the Board and shall be subject to stockholder approval within 12
months of adoption by the Board. Options, Rights and Long-Term Performance
Awards may be granted and exercised under the Plan only after there has been
compliance with all applicable federal and state securities laws.
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EXHIBIT 5.1
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
(415) 493-9300
March 5, 1996
Sun Microsystems, Inc.
2550 Garcia Avenue
Mountain View, CA 94043
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by
you with the Securities and Exchange Commission on or about March 5, 1996, in
connection with the registration under the Securities Act of 1933, as amended,
of 7,800,000 additional shares of your Common Stock reserved for issuance under
the 1990 Employee Stock Purchase Plan and 24,200,000 additional shares of your
Common Stock reserved for issuance under the 1990 Long-Term Equity Incentive
Plan (collectively, the "Plans").
As your legal counsel, we have examined the proceedings taken and are
familiar with the proceedings proposed to be taken by you in connection with the
sale and issuance of said shares under the Plans. It is our opinion that the
additional shares, when issued and sold in the manner referred to in the Plans
and pursuant to the agreements which accompany the Plans, will be legally and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to said Registration
Statement and further consent to the use of our name wherever appearing in said
Registration Statement and any amendments thereto.
Sincerely,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/s/ WILSON, SONSINI, GOODRICH & ROSATI
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement on Form S-8 pertaining to the 1990 Employee Stock Purchase Plan and
the 1990 Long-Term Equity Incentive Plan of Sun Microsystems, Inc., of our
reports dated July 17, 1995, with respect to the consolidated financial
statements of Sun Microsystems, Inc. incorporated by reference in its Annual
Report (Form 10-K) for the year ended June 30, 1995 and the related financial
statement schedule included therein, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
March 5, 1996
San Jose, California
