<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1998
Registration No. ___________
- --------------------------------------------------------------------------------
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)
901 San Antonio Road
Palo Alto, CA 94303
(650) 960-1300
(Address and telephone number of Registrant's principal executive offices)
-------------------------
Sun Microsystems, Inc.
Equity Compensation Acquisition Plan
1990 Long-Term Equity Incentive Plan
(Full Title of the Plans)
-------------------------
Scott G. McNealy
President
SUN MICROSYSTEMS, INC.
901 San Antonio Road
Palo Alto, CA 94303
(650) 960-1300
(Name, address and telephone number of agent for service)
-------------------------
COPY TO:
David J. Segre, Esq.
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Maximum Proposed
Amount Offering Maximum Amount of
to be Price Aggregate Registration
Title of Securities to be Registered Registered Per Share(1) Offering Price Fee
- ------------------------------------ ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Common Stock, $0.00067
Pursuant to the Equity Compensation Acquisition Plan 1,500,000 shares $59.9690 $ 89,954 $ 25,007
Pursuant to the 1990 Long-Term Equity Incentive Plan 18,000,000 shares $59.9690 $1,079,442 $300,085
</TABLE>
(1) The Proposed Maximum Offering Price Per Share was estimated pursuant to
Rule 457(h) under the Securities Act of 1933, as amended (the "Securities
Act") solely for the purpose of calculating the registration fee. The
average of the high and the low price on November 6, 1998, was $59.9690.
<PAGE> 3
The contents of the Registrant's Forms S-8 Registration Statements,
Registration No. 33-38220, 33-56577, 333-01459, 333-09867 and 333-34543, dated
December 14, 1990, November 23, 1994, March 6, 1996, August 9, 1996 and August
28, 1997, respectively, relating to the Equity Compensation Acquisition Plan and
the 1990 Long-Term Equity Incentive Plan are incorporated herein by reference.
PART II: INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Documents
- ------ ---------
<S> <C>
4.1 Equity Compensation Acquisition 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)
</TABLE>
II-1
<PAGE> 4
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 Palo Alto, State of
California, on this 12th day of November, 1998.
SUN MICROSYSTEMS, INC.
By: /s/ Michael E. Lehman
---------------------------------
Michael E. Lehman, Vice President,
Corporate Resources and Chief
Financial Officer
II-2
<PAGE> 5
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Scott G. McNealy Chairman of the Board of Directors, November 12, 1998
- ------------------------- President and Chief Executive Officer
Scott G. McNealy (Principal Executive Officer)
/s/ Michael E. Lehman Vice President, Corporate Resources November 12, 1998
- ------------------------- and Chief Financial Officer
Michael E. Lehman (Principal Financial Officer)
/s/ George Reyes Vice President and Corporate November 12, 1998
- ------------------------- Controller
George Reyes (Principal Accounting Officer)
/s/ L. John Doerr Director November 12, 1998
- -------------------------
L. John Doerr
/s/ Robert J. Fisher Director November 12, 1998
- -------------------------
Robert J. Fisher
Director November 12, 1998
- -------------------------
Judith L. Estrin
/s/ Robert L. Long Director November 12, 1998
- -------------------------
Robert L. Long
/s/ M. Kenneth Oshman Director November 12, 1998
- -------------------------
M. Kenneth Oshman
/s/ A. Michael Spence Director November 12, 1998
- -------------------------
A. Michael Spence
</TABLE>
II-3
<PAGE> 6
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
EXHIBITS
------------------------
REGISTRATION STATEMENT ON FORM S-8
SUN MICROSYSTEMS, INC.
NOVEMBER 12, 1998
II-4
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Documents
- ------ ---------
<S> <C>
4.1 Equity Compensation Acquisition 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)
</TABLE>
II-5
<PAGE> 1
EXHIBIT 4.1
SUN MICROSYSTEMS, INC.
EQUITY COMPENSATION ACQUISITION PLAN
(AMENDED AS OF NOVEMBER 11, 1998)
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 eligible Employees and
Consultants, and
- to promote the success of the Company's business.
Nonstatutory Stock Options and Stock Purchase Rights may 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 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options or Stock Purchase Rights are, or
will be, 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 appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Sun Microsystems, Inc., and any entity that is
directly or indirectly controlled by the Company, or any entity in which the
Company has a significant equity interest, as determined by the Administrator.
(h) "Consultant" means any person, including an advisor, engaged
by the Company to render services and who is compensated for such services,
provided that the term "Consultant" shall not include any person who is also an
officer or Director of Sun Microsystems, Inc.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "Employee" means any person employed by the Company other than
any person who is an officer or Director of Sun Microsystems, Inc.
<PAGE> 2
(l) "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
(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.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(n) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option or Stock Purchase Right grant. The
Notice of Grant is part of the Option Agreement or of the Restricted Stock
Purchase Agreement.
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Option Agreement" means a written 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) "Optioned Stock" means the Common Stock subject to an Option
or Stock Purchase Right.
(r) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Stock Purchase Right.
(s) "Plan" means this Equity Compensation Acquisition Plan.
(t) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(u) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(w) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 3,620,000 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, the unpurchased Shares
which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated). In addition, if
2
<PAGE> 3
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) Administration. The Plan shall be administered by (i) the
Board or (ii) a Committee designated by the Board, which Committee shall be
constituted to satisfy Applicable Laws. Once appointed, such Committee shall
serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award 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 or the shares of Common Stock relating thereto, based in each
case on such factors as the Administrator, in its sole discretion, shall
determine;
(vii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(viii) 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;
(ix) to modify or amend each Option or Stock Purchase Right
(subject to Section 15(b) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options;
3
<PAGE> 4
(x) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xi) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. If otherwise eligible, an Employee or
Consultant who has been granted an Option or Stock Purchase Right may be granted
additional Options or Stock Purchase Rights. Notwithstanding anything to the
contrary contained in the Plan, Option and Stock Purchase Rights may not be
granted to officers or Directors under this Plan.
6. Limitations. Neither the Plan nor any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's employment or consulting relationship with the Company, nor shall
they interfere in any way with the Optionee's right or the Company's right to
terminate such employment or consulting relationship at any time, with or
without cause.
7. Term of Plan. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect until terminated under Section 15 of the
Plan.
8. Term of Option. The term of each Option shall be stated in the Notice of
Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) 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,
4
<PAGE> 5
and (B) 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 such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws; or
(viii) any combination of the foregoing methods of payment.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written 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 stock
certificate evidencing such Shares is 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 Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate 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 stock certificate is issued, except as provided in Section 13 of the
Plan.
Exercising an Option in any manner shall decrease 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 Employment. Upon termination of an Optionee's
status as an Employee or Consultant (other than as a result of the Optionee's
death or Disability), the Optionee may exercise his or her Option, but only
within such period of time from the date of such termination as is determined by
the Administrator and, unless determined otherwise by the Administrator, only
5
<PAGE> 6
to the extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). To the extent that Optionee was
not entitled to exercise an Option at the date of such termination, and to the
extent that the Optionee does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's change in
status from Consultant to Employee or Employee to Consultant, the Optionee's
status as an Employee or Consultant shall not automatically terminate solely as
a result of such change in status.
(c) Disability of Optionee. Upon termination of an Optionee's
status as an Employee or Consultant as a result of the Optionee's Disability,
the Optionee may exercise his or her Option, but only within six (6) months or
such time period as the Administrator shall specify from the date of such
termination, and, unless determined otherwise by the Administrator, only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). To the extent that Optionee was
not entitled to exercise an Option at the date of such termination, and to the
extent that the Optionee does not exercise such Option (to the extent otherwise
so entitled) 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. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the deceased
Optionee's Option by bequest or inheritance may exercise the Option, but only
within six (6) months or such time period as the Administrator shall specify
following the date of death, and, unless determined otherwise by the
Administrator, only to the extent that the Optionee was entitled to exercise it
at the date of death (but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement). To the extent that Optionee
was not entitled to exercise an Option at the date of death, and to the extent
that the Optionee's estate or a person who acquired the right to exercise such
Option does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
11. 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, by means of a Notice of Grant, of the terms, conditions and
restrictions related to the offer, including the number of Shares that the
offeree shall be entitled to purchase, the price to be paid (which price shall
not be less than 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 the offeree must accept such offer.
The offer
6
<PAGE> 7
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 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 at a rate determined by the
Administrator.
(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. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the 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
will 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 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. An Option or
Stock Purchase Right 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.
13. Adjustments Upon Changes in Capitalization, Dissolution, 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 and 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; 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 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
7
<PAGE> 8
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 ten (10) 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 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 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 will be assumed
or an equivalent option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation (the "Successor Corporation"),
unless the Successor Corporation refuses to assume or substitute for the Option
or Stock Purchase Right, in which case the Optionee shall 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 exercisable. If an Option
or Stock Purchase Right is exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee that the Option or Stock Purchase Right shall be fully exercisable for
a period of thirty (30) 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 was not solely
Common Stock of the Successor Corporation, 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 equal in fair market value to the per
share consideration received by holders of Common Stock in the merger or sale of
assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase Right
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the
8
<PAGE> 9
determination shall be provided to each Optionee within a reasonable time after
the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) 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.
16. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, Applicable Laws, 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.
(b) Investment Representations. As a condition to the exercise of
an Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right 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.
17. Liability of Company. 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.
18. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
9
<PAGE> 1
EXHIBIT 4.2
SUN MICROSYSTEMS, INC.
1990 LONG-TERM EQUITY INCENTIVE PLAN
(AMENDED AS OF AUGUST 12, 1998)
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) "Plan" means this 1990 Long-Term Equity Incentive Plan, as
hereinafter amended from time to time.
(p) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 9 below.
(q) "Right" means and includes Stock Appreciation Rights and Stock
Purchase Rights granted pursuant to the Plan.
(r) "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.
(s) "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.
(t) "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.
(u) "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", and the term "Performance
Period" shall have the meanings set forth in Section 5(a), and Section 10,
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 of the Company shall be eligible to receive
awards under the Plan; provided, however, that any
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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 11 and 12, the total
number of shares of Common Stock reserved and available for distribution
pursuant to the Plan shall be 119,400,000 shares. The shares may be authorized,
but unissued, or reacquired Common Stock. Subject to Sections 11 and 12 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) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of service
providers.
(ii) Section 162(m). To the extent that a Committee determines
it to be desirable to qualify awards granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee consisting solely of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3 promulgated under the Exchange
Act ("Rule 16b-3"), the transactions contemplated hereunder shall be structured
to satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided above, the
Plan shall be administered by (A) the Board, or (B) a Committee, which committee
shall be constituted to satisfy applicable securities laws, Delaware corporate
law and the Code.
(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;
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(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; and
(xi) to allow participants to satisfy withholding tax
obligations by electing to have the Company withhold from the shares of Common
Stock to be issued upon exercise of an award 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 a participant to have
shares withheld for this purpose shall be made in such form and under such
conditions as the Committee may deem necessary or advisable and shall be subject
to the consent or disapproval of the Committee.
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:
(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
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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 individual subject to Section 16 of the Exchange Act, 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, Retirement 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. Notwithstanding the foregoing,
in the case of an optionee who is not in a job classification of director-level
or above and who ceases to serve as an employee of the Company or any Subsidiary
by reason of retirement (as defined below), then any Option held by such
optionee shall remain outstanding and shall be exercisable as though the
optionee had remained an employee for twelve (12) months after the date
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of retirement, but in no event shall the Option remain outstanding and
exercisable after the expiration of the term of the Option as set forth in the
Option agreement. Subject to earlier termination, such optionee may, but only
within ninety (90) days after the end of such twelve (12) month period, exercise
his or her Option to the extent that he or she was entitled to exercise it at
the end of such twelve (12) month period. To the extent that he or she was not
entitled to exercise the Option at the end of such twelve (12) month period, or
if he or she does not exercise the Option within the time specified herein, the
Option shall terminate. The term "retirement" shall mean the Optionee's
voluntary resignation from the Company (i) at or after attaining age sixty-five
(65), (ii) at or after attaining age sixty (60) with five (5) or more years of
service with the Company, or (iii) at or after attaining age fifty-five (55)
with ten (10) or more years of service with the Company. 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 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 to the extent unvested.
(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.
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(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 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) 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 600,000 shares.
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(ii) In connection with his or her initial employment, an
eligible participant may be granted Options to purchase up to an additional
800,000 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 11.
(iv) If an Option is cancelled (other than in connection with
a transaction described in Section 12), the cancelled Option will be counted
against the limit set forth in this paragraph k. 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.
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.
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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 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
individuals subject to Section 16 of the Exchange Act 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.
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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 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 19 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
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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.
11. 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
Long-Term Performance Award theretofore granted shall be increased or decreased
proportionately, as the case may be, without change in the aggregate purchase
price (where applicable).
12. 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 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.
13. 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.
14. 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.
15. 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.
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16. 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 16.
17. 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.
18. 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 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.
19. 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.
20. 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
(650) 493-9300
November 12, 1998
Sun Microsystems, Inc.
901 San Antonio Road
Palo Alto, CA 94303
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Sun Microsystems, Inc., a Delaware
corporation (the "Company" or "You") and have examined the Registration
Statement on Form S-8 (the "Registration Statement") to be filed by the Company
with the Securities and Exchange Commission on or about November 12, 1998 in
connection with the registration under the Securities Act of 1933, as amended,
of (i) 1,500,000 additional shares of your Common Stock, par value $0.00067 per
share (the "Shares"), reserved for issuance under the Equity Compensation
Acquisition Plan and (ii) 18,000,000 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 to be taken 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, the Shares will be legally and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement and any amendments thereto.
Sincerely,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
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EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the Equity Compensation Acquisition Plan and
1990 Long-Term Equity Incentive Plan of Sun Microsystems, Inc., of our reports
dated July 15, 1998, with respect to the consolidated financial statements of
Sun Microsystems, Inc., incorporated by reference in its Annual Report (Form
10-K) for the years ended June 30, 1998 and 1997 and the related financial
statement schedule included therein, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
Palo Alto, California
November 10, 1998
