McNealy, who also is chairman of the Santa Clara, Calif.-based server seller, has the option to buy five annual batches of 300,000 Sun shares at $3.85 per share beginning July 23, 2004, a filing said.
In midday trading, Sun stock declined 1.5 percent, or 6 cents, to $3.91. The company's shares were battered last week when it reported financial results that fell short of analysts' expectations for its quarter and fiscal year. The company had net income of $12 million on revenue of $2.98 billion for the quarter ended June 30.
In addition, 11 executives, most of them executive vice presidents, received 500,000 stock options, according to other filings. Three senior vice presidents received 360,000 options.
Stock options, which can prove lucrative if a company's share price increases, remain a widely used tool among technology companies to encourage executives to stay for the long term. Microsoft, however, switched earlier this month to a plan under which employees receive actual stock rather than options to purchase at a particular price.
Discuss: Sun grants McNealy 1.5 million options
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