Sun Microsystems, Inc. Stock Ownership Guidelines For Executive Officers and Directors
Stock Ownership Guidelines for Executive Officers
Sun's Stock Ownership Guidelines for its Executive Officers are determined as a multiple of each Executive Officer's annual base salary, which is then converted to a fixed number of shares of Sun common stock. The guideline for Sun's Chief Executive Officer is five times his or her annual base salary. The guideline for each of Sunâs other Executive Officers is two times his or her annual base salary. The guidelines are initially calculated using the Executive Officer's annual base salary as of the date the guidelines were adopted or the date a person became an Executive Officer, whichever is later. Executive Officers are required to achieve the guideline within five years of becoming an Executive Officer, or, in the case of persons who were Executive Officers at the time the guidelines were adopted, within five years of the date of adoption of the guidelines.
Stock Ownership Guidelines for Directors
Directors who are not Executive Officers are required to achieve ownership of 10,000 shares of Sun common stock by July 28, 2010, or, in the case of new directors, within five years of obtaining such position. Thereafter, Directors are required to hold a number of Sun common stock having a value of at least $150,000 by August 1, 2012, or, in the case of directors elected after August 1, 2007, within five years of obtaining such position.
Recalculation of Guidelines
The guidelines are re-calculated whenever an Executive Officer changes pay grade, as well as from time to time when the Board determines that there has been a material change in Sun's stock price.
Compliance with Guidelines
Shares that count towards satisfaction of the guidelines include:
- Shares owned outright by the Executive Officer or Director or his or her immediate family members residing in the same household; and
- Shares held in trust for the benefit of the Executive Officer or Director or his or her family.
Equity instruments that do not count towards satisfaction of the guidelines include:
- Unvested restricted stock or restricted stock units; and
- Unexercised stock options.
Implications of Non-Compliance
In the event the applicable guideline is not achieved with respect to any Executive Officer or Director by the applicable deadline, the Executive Officer or Director will be required to retain an amount equal to twenty-five percent of the net shares received as a result of the exercise of Sun stock options or the vesting of restricted stock, restricted stock units or performance restricted stock units until the applicable guideline has been achieved. "Net shares" are those shares that remain after shares are sold or netted to pay the exercise price of stock options and withholding taxes.
Exceptions
The guidelines may be waived, at the discretion of Sun's Corporate Governance and Nominating Committee, for Directors joining the Board from government, academia, or similar professions. The guidelines may also be waived for Executive Officers or Directors, at the discretion of the Corporate Governance and Nominating Committee, if compliance would create severe hardship or prevent an Executive Officer or Director from complying with a court order, as in the case of a divorce settlement. It is expected that these instances will be rare.
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