SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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[ ] Preliminary Proxy Statement
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Section 240.14a-12
Sun Company, Inc.
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(Name of Registrant as Specified In Its Charter)
Donald J. Ainsworth (Sun Company, Inc.);
Tom Roch (Allen, Lane and Scott (Third Party Filer))
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(Name of Person(s) Filing Proxy Statement)
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[ ] Check box if any part of the fee is offset as provided by Exchange
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE>
SUNOCO [LOGO]
YOU ARE
CORDIALLY INVITED
TO OUR
1994
ANNUAL MEETING
####################################
# #
# ---- ---- #
# #
# THURSDAY, MAY 5, 1994 #
# in the Assembly Hall #
# of the Tulsa Convention Center #
# 100 Civic Center #
# Tulsa, OK #
# #
# ---- ---- #
# #
####################################
8:00 A.M. -- "Sun Shines in Tulsa"
9:30 A.M. -- Annual Meeting Starts
NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT
[LOGO]
RECYCLED
PAPER
<PAGE>
ROBERT H CAMPBELL
Chairman
Chief Executive Officer
President
SUNOCO [LOGO]
SUN COMPANY, INC.
Ten Penn Center
1801 Market Street
Philadelphia PA 19103-1699
April 5, 1994
Dear Shareholder:
The year 1993 was one of solid financial performance. The reason
was simple -- We embarked on a new strategic direction and asked
thousands of Sun men and women to make it reality. They became
involved, enthusiastic and worked extremely hard to insure that it would
happen -- and they did it!
With a strong financial performance behind us, with growing
credentials in environmental matters, with a new initiative underway to
elevate our customer-consciousness to the top of the industry, and with
a new refinery targeted for addition to the five domestic facilities we
already have, Sun is entering 1994 with a very positive outlook.
Perhaps even more importantly, early in 1994 we introduced to our
employees a set of values that will guide the way we conduct our
business behavior. You may have seen them in the annual report. They
deal with our commitment to profitable growth, positive change,
enthusiastic customers, involved employees, confident shareholders and
responsible citizenship.
We believe these guiding principles represent a critical balance
between business know-how and human behavior. When blended with a
strategic direction that's working, and thousands of employees who have
a sense of renewed purpose, it gives us the confidence to know we can
continue to succeed in our highly competitive world.
Sincerely,
ROBERT H. CAMPBELL
ROBERT H. CAMPBELL
<PAGE>
SUNOCO [LOGO]
SUN COMPANY, INC.
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
NOTICE OF ANNUAL MEETING
The 1994 Annual Meeting of Shareholders of Sun Company, Inc. will be
held in the Assembly Hall of the Tulsa Convention Center, 100 Civic
Center, Tulsa, OK 74103-3822 on Thursday, May 5, 1994 at 9:30 a.m.,
for the following purposes:
1. To elect a Board of Directors;
2. To act upon the appointment of independent accountants;
3. To act upon a shareholder proposal to establish a shareholders'
advisory committee; and
4. To transact such other business as may properly come before the
Annual Meeting.
Only shareholders of record at the close of business on February 10,
1994 will be entitled to vote at the Annual Meeting or any
adjournments thereof.
By Order of the Board of Directors
DONALD J. AINSWORTH
Donald J. Ainsworth
Corporate Secretary
April 5, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
----
Proxy Statement .................................................... 1
Proxy/Voting Instruction Card ...................................... 1
Voting Securities .................................................. 1
Common Stock Ownership of Principal Beneficial Owners .............. 2
Election of Directors .............................................. 2
Litigation Involving Directors .................................. 5
Information Concerning the Board of Directors ...................... 5
Board Meetings and Committees ................................... 5
Directors' Compensation ......................................... 5
Beneficial Ownership of Common Stock ............................... 7
Executive Compensation ............................................. 7
Report of the Compensation Committee ............................ 7
Compensation Committee Interlocks and Insider Participation ..... 13
Summary Compensation ............................................ 13
Option Grants ................................................... 16
Option/AAR Exercises and Year-End Values ........................ 16
Pension Plan Table .............................................. 17
Special Employee Severance Plan ................................. 17
Stock Performance Graph ............................................ 18
Relationship with Independent Accountants .......................... 19
Shareholder Proposal ............................................... 19
Position of the Board of Directors .............................. 20
Shareholder Nominations and Proposals for the 1995 Annual Meeting .. 21
Solicitation of Proxies ............................................ 21
Other Business ..................................................... 21
Map ................................................................ 22
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished to shareholders of Sun Company, Inc.
(the "Company" or "Sun") in connection with the solicitation, by the
Board of Directors (the "Board"), of proxies to be used at the 1994
Annual Meeting of Shareholders to be held on May 5, 1994, or any
adjournments thereof (the "Annual Meeting"). The approximate date of
mailing this Proxy Statement and the accompanying proxy/voting
instruction card is April 5, 1994.
PROXY/VOTING INSTRUCTION CARD
The enclosed proxy/voting instruction card appoints proxies as indicated
therein for record holders of Sun Company, Inc. common stock, $1 par
value, ("Common Stock") and also serves as a voting instruction from the
plan participants to the trustee of the Sun Company, Inc. Capital
Accumulation Plan ("SunCAP"). The trustee of the Sun Company, Inc.
Dividend Reinvestment Plan ("Dividend Reinvestment") has certified to
the independent proxy tabulation agent that certain shares of Common
Stock registered in its name are held for the accounts of specified
beneficial owners. Pursuant to the Bylaws of the Company, for purposes
of notice and voting at the Annual Meeting, the beneficial owners of the
Dividend Reinvestment shares are deemed to be the record holders of the
number of shares specified next to their name in the certification.
Such shares are included on the proxy/voting instruction card as shares
of Common Stock of which the respective beneficial owners are record
holders.
If proxy/voting instruction cards covering shares in SunCAP are not
returned or are returned signed but with no or an unclear voting
designation, according to the terms of the plan, the trustee will vote
the shares in the same proportion as the shares for which clearly
designated instructions have been received from other participants in
the plan. If a record holder of Common Stock returns the proxy/voting
instruction card signed, but with no or an unclear voting designation,
the proxies will vote for Items (1) and (2) and against Item (3), as
more fully described in this Proxy Statement.
Shareholders who return properly signed and dated proxy/voting
instruction cards ("proxy cards" or "proxies") will have the number of
shares of Common Stock represented by such proxy cards counted as
"present" for purposes of establishing a quorum. Any shareholder who
does not desire to vote and wishes to record this fact may abstain from
voting by marking the appropriate space on the proxy card. However,
proxies marked as abstaining (including proxies containing broker
non-votes) will be counted as present for purposes of establishing a
quorum. In certain cases where a shareholder fails to return a proxy
card for shares of Common Stock held in brokerage accounts, a broker is
permitted to submit this proxy card on behalf of such shareholder to
cast votes for or against director nominees or independent accountants.
A broker non-vote occurs when a broker is prohibited by law from
exercising discretionary authority on behalf of the shareholder to vote
for or against a proposal. Sun is a Pennsylvania corporation and
pursuant to Pennsylvania law and the Company's Bylaws, the terms,
"voting" or "casting a vote," do not include either the act of
abstaining or failing to vote. Thus, abstentions and broker non-votes
are not counted either in the tally of votes "for" or "against" a
director nominee or proposal. A "withheld" vote is the equivalent of an
abstention.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by providing written notice of revocation or by executing a
proxy bearing a later date. In addition, voting in person at the Annual
Meeting will be effective to revoke the original proxy.
The Company utilizes a confidential voting procedure whereby all
proxy/voting instruction cards and ballots will be returned to an
independent third party and handled in a manner that protects
shareholder voting privacy. No such vote or instruction shall be
disclosed except: to permit the independent Judge of Election to
tabulate and certify the vote; as necessary to meet any legal
requirements; and in limited circumstances such as a proxy contest in
opposition to the Board of Directors.
VOTING SECURITIES
On February 10, 1994, the record date for voting at the Annual Meeting,
the Company had outstanding 106,692,340 shares of Common Stock. Every
shareholder is entitled to one vote for each share of Common Stock
registered (or deemed registered under Dividend Reinvestment) in the
shareholder's name at the close of business on February 10, 1994.
Approval of the matters scheduled to be presented for vote by the
shareholders at the Annual Meeting will require a majority of shares
present, in person or represented by proxy, at the meeting and entitled
to vote thereon.
1
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COMMON STOCK OWNERSHIP OF PRINCIPAL BENEFICIAL OWNERS
The following shareholders were the only beneficial owners known by the
Company to hold more than 5% of its outstanding Common Stock as of
December 31, 1993:
SHARES OF PERCENT OF
COMMON COMMON STOCK
NAME, ADDRESS AND NATURE OF OWNERSHIP STOCK OUTSTANDING
- - - ------------------------------------- ---------- ------------
The Glenmede Trust Company,
Trustee of The Pew Memorial Trust ..... 16,129,992 15.1
229 South 18th Street
Philadelphia, PA 19103-6135
The Glenmede Trust Company,
Fiduciary and Co-Fiduciary for a
number of other trusts and estates .... 9,652,933 9.0
229 South 18th Street
Philadelphia, PA 19103-6135
Mellon Bank Corporation ................. 5,568,000 5.2
One Mellon Bank Center
Pittsburgh, PA 15258-0001
The Glenmede Trust Company ("Glenmede") has sole voting and investment
power with respect to all shares held as Trustee of The Pew Memorial
Trust. Voting power is shared with respect to 1,480,274 shares and
investment power is shared with respect to 1,723,766 shares held by
Glenmede as Fiduciary and Co-Fiduciary for a number of other trusts and
estates.
The information contained herein relating to Mellon Bank Corporation was
obtained from a Schedule 13G received by the Company in February 1994.
Mellon Bank Corporation has sole voting power with respect to 839,000
shares, shared voting power with respect to 62,000 shares, sole
investment power with respect to 816,000 shares, and shared investment
power with respect to 387,000 shares.
Mellon Bank, N.A., a subsidiary of Mellon Bank Corporation, is the
record holder of 4,364,508 shares of Common Stock as trustee of the
SunCAP employee savings plan. Mellon Bank Corporation has disclaimed
beneficial ownership of all shares that have been allocated to the
individual accounts of participants in SunCAP for which voting
instructions have been received and followed.
ELECTION OF DIRECTORS
The Board proposes that the proxies will be voted for the election of
the 12 nominees listed below to serve as directors until the next Annual
Meeting of Shareholders and until their successors are elected and
qualified. All nominees are currently directors and their terms will
expire when directors are elected at the 1994 Annual Meeting.
Although the Board does not expect the contingency to occur, if any
nominee is unable to stand for election, the Board may nominate and the
persons named on the proxy may vote for a substitute or, alternatively,
the Board may reduce its size.
Thomas W. Langfitt and R. Anderson Pew are directors of Glenmede. Dr.
Langfitt is also President and Chief Executive Officer, and Mr. Albert
E. Piscopo is Executive Vice President and Chief Operating Officer of
Glenmede. Dr. Langfitt and Messrs. Pew and Piscopo have advised that
they have no arrangement or understanding with respect to the manner in
which they will exercise their duties as directors of the Company, if
elected. There is no arrangement or understanding with the Company
granting to Glenmede the right to representation on the Company's Board.
NOMINEE AND
DIRECTOR SINCE PRINCIPAL OCCUPATION OR EMPLOYMENT AND OTHER INFORMATION
-------------- --------------------------------------------------------
|----------| CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND
| | PRESIDENT OF THE COMPANY. Mr. Campbell, age 56,
| | joined the Company in 1960. He was elected Chairman
| | of the Board in May 1992 and has been Chief Executive
| | Officer and President since 1991. Previously, Mr.
|----------| Campbell had been an Executive Vice President since
Robert H. Campbell 1988, and a Group Vice President since 1983. Mr.
1988 Campbell is also a director of CIGNA Corporation and
Corestates Financial Corp.
2
<PAGE>
NOMINEE AND
DIRECTOR SINCE PRINCIPAL OCCUPATION OR EMPLOYMENT AND OTHER INFORMATION
-------------- --------------------------------------------------------
|----------| CHAIRMAN AND CHIEF EXECUTIVE OFFICER, UNION CAMP
| | CORPORATION. Mr. Cartledge, age 64, has been in his
| | present position since 1986. He was President and
| | Chief Operating Officer of Union Camp Corporation
| | from 1984 to 1986 and has been one of its directors
|----------| since 1983. Mr. Cartledge is also a director of
Raymond E. Cartledge Delta Air Lines, Inc. and NationsBank Corporation.
1990
|----------| CHAIRMAN AND CHIEF EXECUTIVE OFFICER, RHONE-POULENC
| | RORER INC. Mr. Cawthorn, age 58, has been Chairman
| | and Chief Executive Officer since 1990. He held the
| | additional position of President from 1990 to
| | November 1993. Mr. Cawthorn had been Chairman,
|----------| President and Chief Executive Officer of Rorer Group
Robert E. Cawthorn Inc. (now known as Rhone-Poulenc Rorer Inc.) since
1989 1988. Mr. Cawthorn is also a director of Applied
Immune Sciences, Inc. and The Vanguard Group Inc.
|----------| DIRECTOR OF THE COMPANY. Mrs. Evans, age 64, is a
| | director of Baxter International Inc.; Delta Air
| | Lines, Inc.; Household International, Inc.;
| | Saint-Gobain Corp.; Scudder New Europe Fund; and The
| | Dun & Bradstreet Corporation. In addition, she is a
|----------| member of the advisory board of Morgan Stanley, Inc.
Mary J. Evans and a trustee of several AARP trusts. Mrs. Evans was
1980 a director of AMTRAK from 1974 to 1980, serving as
Vice Chairman from 1974 until 1979.
|----------| DEAN, THE WHARTON SCHOOL OF THE UNIVERSITY OF
| | PENNSYLVANIA. Dr. Gerrity, age 52, assumed his
| | present position in 1990. Previously, he had served
| | as President of CSC Consulting and Vice President of
| | Computer Science Corp. since 1989; and Chairman and
|----------| Chief Executive Officer of Index Group, Inc. from
Thomas P. Gerrity 1969 to 1989. From 1969 to 1986, he also served as
1990 President of Index Group, Inc. Dr. Gerrity is also
a director of Digital Equipment Corporation; Reliance
Group Holdings, Inc.; Technology Leaders L.P.; and
The Federal National Mortgage Association.
|----------| PRESIDENT AND CHIEF EXECUTIVE OFFICER, ENSECO, A UNIT
| | OF CORNING INCORPORATED. Mr. Kaiser, age 51, assumed
| | his present position in 1992. He had served as
| | Senior Vice President and General Manager of
| | Corning's Technical Products Division and Latin
|----------| America Asia Pacific Exports Group since 1984. Mr.
James G. Kaiser Kaiser is also a director of the International
1993 Association of Environmental Testing Laboratories
and Stanley Works.
|----------| CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE GLENMEDE
| | CORPORATION AND PRESIDENT AND CHIEF EXECUTIVE OFFICER
| | OF THE GLENMEDE TRUST COMPANY. Dr. Langfitt, age
| | 66, became Chairman of The Glenmede Corporation in
| | January 1994. He has been Chief Executive Officer
|----------| since 1987 and held the additional position of
Thomas W. Langfitt President from 1987 to 1994. Dr. Langfitt was also
1987 President of The Pew Charitable Trusts, a division of
Glenmede, until January 1994. He also serves as a
director of New York Life Insurance Company and
SmithKline Beecham Corporation, and is Chairman of
the Committee of Automotive Safety of General Motors
Corporation.
3
<PAGE>
NOMINEE AND
DIRECTOR SINCE PRINCIPAL OCCUPATION OR EMPLOYMENT AND OTHER INFORMATION
-------------- --------------------------------------------------------
|----------| PRESIDENT, HELIOS CAPITAL CORPORATION, A COMPANY
| | SUBSIDIARY. Mr. Pew, age 57, joined the Company in
| | 1959 and has been in his present position since 1977.
| | He served as Corporate Secretary of the Company from
| | 1974 until 1977. Mr. Pew also serves on the board of
|----------| directors of The Glenmede Corporation and its
R. Anderson Pew subsidiary, The Glenmede Trust Company.
1978
|----------| EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER
| | OF THE GLENMEDE CORPORATION AND ITS SUBSIDIARY, THE
| | GLENMEDE TRUST COMPANY. Mr. Piscopo, age 49, was
| | appointed to the position of Chief Operating Officer
| | in 1992. He has been Executive Vice President since
|----------| 1990. Previously, Mr. Piscopo was Chief Financial
Albert E. Piscopo Officer from 1987 until 1993 and a Senior Vice
1991 President from 1987 until 1990.
|----------| PROFESSOR, ALFRED P. SLOAN SCHOOL OF MANAGEMENT AT
| | MASSACHUSETTS INSTITUTE OF TECHNOLOGY. Dr. Pounds,
| | age 65, joined the faculty at the Massachusetts
| | Institute of Technology in 1961 and served as Dean of
| | the Sloan School from 1966 to 1980. He retired as
|----------| President and CEO of Rockefeller Financial Services,
William F. Pounds Inc. in May 1991, a position he had held since 1982.
1973 Dr. Pounds is also a director of EG&G, Inc.; IDEXX
Laboratories, Inc.; M/A-Com, Inc.; Perceptive
Biosystems, Inc.; and the Putnam Mutual Funds.
|----------| PRESIDENT, COLUMBIA CAPITAL. Mr. Thompson, age 65,
| | has been in his present position since 1983. He had
| | served as a member of the board of directors of Sun
| | Coal Company (formerly Elk River Resources, Inc.), a
| | Company subsidiary, since it was acquired by the
|----------| Company in 1979 until March 1993. Mr. Thompson is
B. Ray Thompson Jr. also a director of the Thompson Charitable
1992 Foundation.
|----------| PRESIDENT, TROWBRIDGE PARTNERS INC. Mr. Trowbridge,
| | age 64, assumed his present position in 1990. He
| | served as President of the National Association of
| | Manufacturers from 1980 through 1989. Mr. Trowbridge
| | also serves as a director of Harris Corporation; ICOS
|----------| Corporation; New England Mutual Life Insurance
Alexander B. Company; PHH Corporation; SunResorts International;
Trowbridge The Gillette Company; The Rouse Company; WMX
1990 Technologies, Inc.; and of several mutual funds of
Warburg, Pincus Counsellors, Inc.
4
<PAGE>
LITIGATION INVOLVING DIRECTORS
Shareholder derivative lawsuits on behalf of Corning Incorporated and The
Dow Chemical Company have been filed in the U. S. District Court for the
Southern District of New York against the directors of Dow Corning
Corporation, including James G. Kaiser. Plaintiffs in these cases allege,
among other things, misrepresentation, omission of material facts, breach
of fiduciary duties and waste of corporate assets relative to the
manufacture, marketing and sale of silicone breast implants by Dow Corning
Corporation. The defendants have denied allegations of wrong-doing.
On September 10, 1992, B. Ray Thompson, Jr. and members of his family
brought a civil action in the U.S. District Court of the Eastern District
of Pennsylvania against Glenmede and certain of its officers and directors
including Dr. Langfitt and Messrs. Pew and Piscopo, and others. Sun is
not a party to the suit and neither the plaintiffs nor the defendants have
any interest adverse to Sun in the matter. The suit alleges that the
individual defendants aided Glenmede in alleged breaches of contract and
fiduciary duty to the plaintiffs and to certain Thompson family trusts of
which Mr. Thompson is a trustee and to which Glenmede was an investment
advisor. The defendants have asserted various defenses and have denied all
liability. Certain of the plaintiffs' claims have been dismissed,
including all claims against Mr. Pew. Other claims remain pending, as does
a counterclaim by Glenmede against Mr. Thompson, asserting that he is
responsible for any losses suffered by plaintiffs. Mr. Thompson has denied
the allegations of the counterclaim.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
BOARD MEETINGS AND COMMITTEES
The Board of Directors held ten meetings in 1993. While a director, each
incumbent attended at least 75% of the aggregate of all meetings of the
Board and the committees on which the director served.
The committees of the Board, number of meetings held in 1993, current
composition and functions are:
Audit Committee (five meetings) -- Thomas P. Gerrity, Chairman; Albert E.
Piscopo; B. Ray Thompson, Jr.; and Alexander B. Trowbridge -- examines the
Company's accounting processes, financial controls and reporting systems;
and assesses the performance and recommends the appointment of independent
accountants.
Board Policy and Nominating Committee (four meetings) -- William F. Pounds,
Chairman; Robert H. Campbell; Raymond E. Cartledge; Robert E. Cawthorn; and
Thomas W. Langfitt -- recommends nominees for election to the Board;
reviews the role, composition and structure of the Board and its
committees; evaluates the performance of the Chief Executive Officer; and
reviews planning for the succession to senior executive positions.
Compensation Committee (three meetings) -- Raymond E. Cartledge, Chairman;
Robert E. Cawthorn; Mary J. Evans; James G. Kaiser; and Thomas W. Langfitt
- - - -- reviews the compensation and benefit policies and practices of the
Company and issues the Compensation Committee Report to shareholders.
Executive Committee (one meeting) -- Robert H. Campbell, Chairman; Raymond
E. Cartledge; Robert E. Cawthorn; Thomas W. Langfitt; and William F. Pounds
- - - -- exercises the authority of the Board during the intervals between
meetings of the Board.
Public Affairs Committee (three meetings) -- Mary J. Evans, Chairman;
Thomas P. Gerrity; James G. Kaiser; R. Anderson Pew; Albert E. Piscopo; B.
Ray Thompson, Jr.; and Alexander B. Trowbridge -- reviews the Company's
compliance with laws governing health, environment and safety; equal
employment opportunity; political activities; and oversees the
administration of corporate contributions and the Company's relationship
with its shareholders and all other constituencies.
DIRECTORS' COMPENSATION
Directors (other than executive officers of the Company) are compensated
for their services on the Board and its committees as follows:
o Board retainer consisting of $28,400 paid 50% in cash and 50% in
shares of Common Stock.
o Committee retainer of $500 paid in cash to the chairman of each
committee.
Directors who are not employed by the Company or its subsidiaries also
receive an attendance fee of $1,000 for each Board and committee meeting
and $1,000 per day for special assignments in their role as directors, such
as attending industry and management meetings on behalf of the Company.
Executive officers are not paid for their services as directors of the
Company; they receive only their remuneration as Company officers.
During 1993, the Company paid Mr. Trowbridge $10,000 for federal government
relations consulting to the Company's Washington, D. C. office. The
Consulting Agreement provides for services over a period of one year, with
renewal upon the mutual consent of the parties, and termination by either
party upon thirty days written notice.
Directors who have not been employed by the Company or its subsidiaries do
not receive remuneration from the Company or its subsidiaries except as set
forth in this section.
5
<PAGE>
Directors may defer all or a portion of their cash compensation. Upon
retirement from the Board, they may be eligible for a retirement benefit,
provided a minimum service requirement of five years is met. Directors
participate in the following plans:
o Retainer Stock Plan for Outside Directors
o Directors' Deferred Compensation Plan
o Non-Employee Directors' Retirement Plan
The Sun Company, Inc. Retainer Stock Plan for Outside Directors was
approved by the shareholders at the 1990 annual meeting. This plan was
amended in 1992 to provide for 50% of the annual retainer fee to be paid in
Common Stock in order to provide the directors with a greater equity
interest in the Company and to make their compensation more dependent on
the performance of Common Stock. Following each annual meeting, each
director who is not also an executive officer of the Company receives 50%
of the annual retainer in shares of Common Stock based on the closing price
of Common Stock on the fifth business day prior to the meeting. An outside
director elected by the Board between annual meetings receives a pro rata
portion of the number of shares of Common Stock awarded to each outside
director following the preceding annual meeting. The number of shares
granted annually to each participating director is limited to an amount the
fair market value of which shall not exceed $40,000 based upon the closing
price of Common Stock on the trading day prior to the applicable annual
meeting or election to the Board, as the case may be. Following the 1993
annual meeting, each outside director was awarded 570 shares of Common
Stock.
Under the Directors' Deferred Compensation Plan, a director may elect to
defer all or a portion (at least 10% and additional multiples of 5%) of his
or her compensation by filing a written election with the Compensation
Committee. Directors must convert deferred compensation to either "Cash
Units," "Share Units," or a combination of both. Amounts converted to Cash
Units will be credited quarterly with interest based on a factor determined
by the Compensation Committee after comparison with the interest rate for
U. S. Treasury Notes as of the beginning of the year. Amounts converted to
Share Units will be treated as if they were invested in shares of Common
Stock, and will be credited with quarterly dividend equivalents. Share
Units will be paid in cash, based upon the fair market value of Common
Stock at the time of payment. However, Share Units which are based on a
director's deferral of Common Stock under the Retainer Stock Plan for
Outside Directors, will be paid in Common Stock, not in cash.
Payments of compensation deferred under the Directors' Deferred
Compensation Plan are restricted in terms of the earliest and latest dates
that payments may begin. Payments may commence no earlier than the first
day of January which falls at least six months after the end of the quarter
in which compensation is earned. At the latest, payments may commence
three years following a director's attainment of age 70, the current
mandatory retirement age for directors.
Under the Non-Employee Directors' Retirement Plan, upon retirement, a
director who is not a present or former employee of the Company or its
subsidiaries and who has at least five years of service will receive cash
payments under this plan. The amount of the cash payments will be a
percentage (10% per year, up to 100% after 10 years of service) of the
annual Board cash and stock retainer in effect at retirement. These
payments will continue for the lesser of a participant's years of service
or 15 years. This retirement plan also provides for a benefit to a
director's surviving spouse. In the event of a director's death prior to
retirement, the surviving spouse shall receive 50% of the benefit the
director would have received had the director retired as of the date of
death. In the event of a director's death after commencement of benefits
under the plan, the surviving spouse shall receive 50% of the director's
remaining retirement payments.
6
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table shows, as of December 31, 1993, the number of shares of
Common Stock beneficially owned (as defined by the Securities and Exchange
Commission ("SEC")) by each director and named executive officer and by all
directors and executive officers as a group. With the exception of B. Ray
Thompson, Jr., who beneficially owns 2.1% of the Common Stock, no director
or executive officer beneficially owns more than 1% of the Common Stock.
All directors and executive officers as a group beneficially own
approximately 3.1% of the Common Stock.
SHARES OF
COMMON STOCK
BENEFICIALLY
NAME OWNED (1)
------------------------------------ ------------
Robert M. Aiken, Jr. (2) ........... 93,928
Robert H. Campbell (2) ............. 282,135
Raymond E. Cartledge ............... 2,502
Robert E. Cawthorn ................. 4,585
Mary J. Evans ...................... 2,178
Thomas P. Gerrity .................. 2,522
James G. Kaiser .................... 683
David E. Knoll (2) (3) ............. 114,789
Thomas W. Langfitt ................. 1,655
R. Anderson Pew (2)(3)(4) .......... 174,167
Albert E. Piscopo .................. 1,505
William F. Pounds .................. 2,555
Harwood S. Roe, Jr. (2) ............ 75,314
B. Ray Thompson, Jr. (3) ........... 2,291,620
Sheldon L. Thompson (2) ............ 44,256
Alexander B. Trowbridge ............ 1,555
Robert H. Writz, Jr. (2) ........... 88,816
All directors and executive officers
as a group including those named
above (2)(3)(4) .................. 3,270,507
- - - ----------
(1) As defined by the SEC, securities beneficially owned as of December 31,
1993 include: securities that the above persons have the right to acquire
at any time within 60 days of this date, such as through the exercise of
any option or right; securities directly or indirectly held by the above
persons or by certain members of their families for which the above persons
have sole or shared voting or investment power; and shares of Common Stock
held on behalf of the above persons in SunCAP and Dividend Reinvestment.
(2) The amounts shown include shares of Common Stock which the following
persons have the right to acquire within 60 days after December 31, 1993
under Sun's Long-Term Incentive Plan and Executive Long-Term Stock
Investment Plan: R. M. Aiken, Jr. -- 77,989 shares; R. H. Campbell --
259,254 shares; D. E. Knoll -- 109,730 shares; R. A. Pew -- 15,339 shares;
H. S. Roe, Jr. -- 72,489 shares; S. L. Thompson -- 39,940 shares; R. H.
Writz, Jr. -- 82,169 shares; and all directors and executive officers as a
group (including those named above) -- 725,714 shares.
(3) The individuals and group named above have sole voting and investment
power with respect to shares of Common Stock beneficially owned, except
that voting and investment power is shared as follows: D. E. Knoll -- 516
shares; R. A. Pew -- 127,180 shares; B. R. Thompson, Jr. -- 1,083,035
shares; and all directors and executive officers as a group (including
those named above) -- 1,213,608 shares.
(4) The shares of Common Stock above do not include the 418,195 shares
owned by family members of R. A. Pew of which he has disclaimed beneficial
ownership.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE
THE COMMITTEE'S RESPONSIBILITIES
The Compensation Committee of the Board of Directors ("Committee") makes
determinations regarding the compensation of the Company's executive
officers. The Committee is responsible for setting and administering the
policies which govern both executive compensation and benefit programs. No
employees of the Company serve on the Committee -- it is composed entirely
of independent non-employee directors (see page 5). Reports of the
Committee's actions and decisions by the Committee are presented to the
full Board except for awards under the Company's Executive Long-Term Stock
Investment Plan which are required by Rule 16b-3 of the Exchange Act to be
made solely by the Committee.
7
<PAGE>
The purpose of this Report is to summarize the policies, philosophies,
objectives, and other factors considered by the Committee in reaching its
determinations regarding executive compensation, particularly as these
matters affected the 1993 compensation of the Chief Executive Officer
("CEO"), Robert H. Campbell, and the other five most highly compensated
executives during 1993: David E. Knoll, Robert M. Aiken, Jr., Robert H.
Writz, Jr., Harwood S. Roe, Jr. and Sheldon L. Thompson (collectively with
the CEO, the "named executive officers").
THE COMMITTEE'S PHILOSOPHIES AND OBJECTIVES
<> THE PHILOSOPHIES
The cornerstone of the Committee's philosophy regarding executive
compensation is to reward results. Therefore, the performances of the
Company and of the individual executive are of key importance.
In recent years, the Committee has sought to reinforce the relationship
between the level of an executive officer's compensation and the
Company's performance. In furtherance of this objective, the Committee
has redesigned the total executive compensation package to more closely
align the financial rewards of the Company's executives to Company
performance and shareholder interests. A more detailed discussion of
this redesigned approach is set forth below; however, in order to
understand the approach, it is important to bear in mind that the
Company's executive compensation program consists of three basic
components: (1) base salary, which consists of a fixed cash portion plus
restricted common stock units ("RSUs"); (2) annual incentive awards
(i.e., bonuses); and (3) long-term incentive awards primarily in the
form of Common Stock options (see pages 10-12).
Thus, the value of a significant portion of the CEO's and the other
named executive officers' overall compensation -- the portion of the
base salary represented by the RSUs and the long-term incentive awards
-- correlates directly to the increase or decrease of the price of the
Company's Common Stock. In this respect, their personal portfolios or
net worth, like that of any shareholder, depends upon appreciation in
the value of the Company's Common Stock. Additionally, as further
discussed below, the amount of any annual incentive award ("bonus") is
likewise dependent upon achieving predetermined Company results
established by the Committee.
<> THE OBJECTIVES
o LINK COMPENSATION TO PERFORMANCE
The Committee has taken steps to significantly redesign various
aspects of the overall executive compensation package.
LINK BASE SALARY TO THE COMPANY'S PERFORMANCE
The components of base salary for the executive officers were
redesigned over the three-year merit period beginning in 1991-92, and
ending in 1993-94. In 1991, the Committee determined that for a
three-year transitional period, the cash portion of base salary would
remain fixed and all merit-based increases to base salary would be in
the form of RSUs. Formerly, merit-based increases were paid in cash;
starting in 1991, the increases were made in the form of RSUs. Thus,
since 1991, an executive officer's base salary has consisted of two
pieces -- a fixed cash portion plus any RSUs awarded as merit
increases.
The reason that a three-year transitional period was chosen in 1991
for this unusual and unique one-time approach to base salary was to
provide Robert H. Campbell, then the newly elected CEO, and his senior
management team, sufficient time to develop and implement an initial
Strategic Plan for the Company to accomplish a critical turnaround,
and to have the resulting value of that strategy reflected in their
merit increases. Thus, the dollar value of the RSU merit increase
varies, depending upon the Company's Common Stock price at the end of
the one, two and three-year vesting periods.
Effectively, what this program did was to change the 1991-92 through
1993-94 merit increases, which would otherwise have been cash
compensation, into variable stock-based compensation. As newer
members to the CEO's senior management team were appointed in 1992,
the Committee determined they would likewise be compensated under the
redesigned program for the remainder of the three-year period.
In fact, when the first merit increase in the form of RSUs under this
program vested in 1992, the Company's Common Stock price was lower
than it was at the time the merit increase in the form of RSUs had
been granted. Thus, the value of this merit increase had declined; it
was worth less than it would have been had the executive officer
received the merit increase in cash, rather than in RSUs.
LINK INCENTIVE BONUSES TO COMPANY PERFORMANCE
Additionally the Committee redesigned its approach to annual incentive
awards or "bonuses." The Committee determined that aside from an
executive officer's individual performance, the Company's performance
should be an even greater factor influencing whether a "bonus" should
be awarded and, if so, in what amount. Therefore, each year the
Committee considers the Company's prior year's performance measured
against the goals set for that year and sets new Company performance
criteria or goals for the following year. For example, in 1992, the
Committee set one quantitative goal for the Company to meet in
connection with any
8
<PAGE>
bonus payouts under the 1992 Executive Incentive Plan -- the
achievement of a predetermined target for net income after tax.
Because the goal was not achieved, the Committee determined that no
bonuses were to be paid to executive officers for 1992 performance,
notwithstanding how well they may have individually performed.
Considering the 1992 performance and recognizing the fact that 1993
was to be a pivotal year for the Company to realize results from the
Strategic Plan announced in October of 1992, the Committee set five
1993 Company goals, each equally weighted, to be met if the Company
performance-based portion of the 1993 Executive Incentive Plan were to
be payable. (See the Company's 1993 Annual Report for a discussion of
the October 1992 Strategic Plan and page 11 of this Proxy Statement
for a more detailed discussion of the five goals.) The Committee
decided that since Company and individual performance were key, any
bonus award should be based upon the results of these two factors. As
a result, the Committee determined that 70 percent of the Annual
Incentive Award would be predicated upon Company performance in the
case of executive officers due to their levels of responsibility and
ability to influence Company results. The remaining 30 percent would
be payable based upon the executive officer's individual performance.
LINK LONG-TERM INCENTIVE AWARDS TO COMPANY PERFORMANCE
With respect to the third component of executive compensation,
long-term incentive awards, the Committee views the award of options
in Common Stock as an effective mechanism for aligning the interests
of the Company's executives and key employees to shareholders'
interests. The Executive Long-Term Stock Investment Plan ("ELSIP"),
approved by the Company's shareholders, provides primarily for the
award of options in Common Stock (at fair market value on the date of
grant) to certain of the Company's executives and key personnel. The
value of any ELSIP award is directly tied to the price of the
Company's Common Stock. Additionally, under ELSIP, when an executive
exercises options, he or she receives Common Stock, not cash, and
during his or her employment with the Company, the executive is
required to hold the Common Stock for up to ten years after the date
that the option was granted. As a result of this feature, the
Company's executive officers hold an increased equity position in the
Company, and have an even greater incentive to direct the Company to
achieve its performance targets and longer-term objectives, one of the
most important of which is the successful implementation of the
initial Strategic Plan. This feature was viewed as one element of the
total executive compensation package during the transitional period
associated with the development and implementation of the Strategic
Plan by the CEO and the other named executive officers.
o ATTRACT AND RETAIN TALENTED EXECUTIVES
The Committee believes that the Company's overall compensation program
must be competitive in order to attract, retain and motivate the
qualified individuals necessary to lead the Company and address the
significant challenges facing the Company and the industry. In
determining the appropriate levels and type of executive compensation,
the Committee reviews and considers various data discussed in greater
detail below. Its philosophies are to pay for performance within the
relative mid-range of base salary paid by comparable companies and to
encourage superior performance by the individual to strive to improve
Company performance, through award of short- and long-term incentives.
These incentives include bonuses, the payment of which is contingent
upon the attainment of performance goals, or options, the realized
value of which is tied to the value of Common Stock. In addition,
these incentives provide executives with the opportunity to increase
their compensation through demonstrated performance.
The Committee believes that the Company's direct competition for
executive talent is not limited to the six companies included in the
peer group established for purposes of comparing shareholder returns.
Thus, the "compensation peer group" is not the same as the peer group
indexed in the Comparison of Five-Year Cumulative Total Return Graph
("Performance Graph") included in this Proxy Statement on page 18. To
assist in benchmarking the competitiveness of the Company's
compensation programs, the Company participates in executive
compensation surveys, compiled by third-party consultants, which
embrace a total of 13 other oil industry companies, three of which are
included in the Performance Graph. The other three peer companies do
not participate in this survey group. As a result, the Company does
not have access to reliable compensation data on these other three
peer companies.
The summary compilations of survey data from these sources reflect
adjustments for each company's relative revenues, asset bases,
employee populations, and capitalization, along with the scope of
managerial responsibility and reporting relationships.
THE COMMITTEE'S 1993 VIEW
In evaluating 1993 performance and establishing incentives to encourage the
future performance of the CEO and the Company's other executive officers,
the Committee has noted management's success over the last year and a half
in restructuring the Company's business. Management has achieved
turnaround results through successful implementation of the Strategic Plan,
quality consciousness programs and cost saving measures, and effectively
directing the Company's operations toward positive financial improvements.
This has been accomplished during difficult economic conditions.
9
<PAGE>
DETAILED REVIEW OF THE EXECUTIVE COMPENSATION PROGRAM
Compensation paid to the named executive officers during 1993 consisted of
base salary (which included a fixed cash portion plus the value of RSUs),
annual incentive awards ("bonuses") and amounts realized from the exercise
of long-term incentive awards in the form of alternate appreciation rights
under LTIP (see page 12). In addition, the Committee awarded long-term
incentive awards in the form of stock options along with an equal number of
limited appreciation rights and authorized equity options pursuant to the
ELSIP (see page 12).
Pursuant to the Omnibus Budget Reconciliation Act of 1993, for years
beginning after December 31, 1993, the Company may not take a tax deduction
for compensation paid to the CEO and each of the four other most highly
paid executives that is in excess of one million dollars. Certain types of
compensation will not be subject to this one-million-dollar cap, such as
compensation received upon the vesting of restricted stock units and upon
the exercise of stock options. Payments of the annual incentive award will
be subject to this cap; however, given the minimal impact to the Company
with respect to any bonuses paid to the named executive officers, the
Committee has determined not to seek shareholder approval to amend the
Executive Incentive Plan for 1994.
The CEO participates in the same programs and receives compensation based
on the same factors as the other executive officers; however, the CEO's
higher overall compensation reflects his greater degree of policy and
decision-making authority and higher level of responsibility with respect
to the strategic direction of the Company.
<> BASE SALARY
In 1991, the Committee determined that for a three-year transitional
period, any merit increases in base salary for Robert H. Campbell, the
CEO, and the following executive officers would be paid in the form of
RSUs rather than in cash, and that the cash portion of base salary would
remain at the annualized level on the date in 1991 that the RSUs were
awarded: Robert M. Aiken, Jr., David E. Knoll, and Robert H. Writz, Jr.
Further, in 1992, the Committee took the same action for a two-year
period with respect to the base salaries for Harwood S. Roe, Jr. and
Sheldon L. Thompson, upon their election to Senior Vice President
positions during 1992.
As previously discussed, the Committee chose a three-year period for
this transitional and unique program to provide the CEO and his senior
management team sufficient time to develop and implement a Strategic
Plan for the Company. However, since Messrs. Roe and Thompson were not
elected to senior management until 1992, the Committee determined that
they should be subject to the same program for the remainder of the
original period, so a two-year period applied for them.
The Committee's goal was to reward the named executive officers based
upon the ability to successfully implement the initial Strategic Plan
and maintain competitive levels through merit increases to base salary,
the value of which would vary with the price of the Company's Common
Stock. During these respective three- and two-year periods ("Restriction
Periods"), the portion of base salary, representing merit increases
earned by these named executive officers, was to be and has been in the
form of RSUs paid in Common Stock.
RSUs entitle the named executive officers to receive shares of Common
Stock, without payment to the Company, in return for their services,
provided they are continuously employed by the Company during their
respective Restriction Periods. In addition, during the Restriction
Periods, these executives will receive payment equal to the dividend the
Company would have paid to each had he been the owner of record of
shares of Common Stock equal in number to his outstanding RSUs. A
portion of the RSUs will vest at the end of each Restriction Period.
The value realized from the vested RSUs will be equal to the number of
RSUs times the market value of Common Stock at the end of the applicable
Restriction Period. Annual base salary, therefore, will vary somewhat
dependent upon the performance of Common Stock.
The number of RSUs awarded to each named executive officer was
determined by reference to his prior year's base salary and the price of
Common Stock on the date that such named executive officer assumed his
responsibilities. The projected non-cash merit increase portion of base
salary for each named executive officer was divided by the price of
Common Stock on these respective dates to arrive at the total number of
RSUs to be awarded, recognizing that the RSUs would vest annually during
the Restriction Period.
In essence, in 1991, the Committee determined the amount of Mr.
Campbell's merit increases for each of the next three years, referring
to compensation surveys, salary and merit increase assumptions and the
price of Common Stock on the date that he became CEO in order to
calculate the number of RSUs to be granted and which would vest over the
Restriction Period. However, rather than making these future merit
increases in cash, the Committee determined that the merit increase
should be payable in the form of Common Stock. The amount of the RSUs
that vest each year represents the cumulative merit increase to base
salary during the Restriction Period.
On the date on which Mr. Campbell became CEO, the price of Common Stock
was $32.625. The Common Stock price on the date the other named
executive officers assumed their reporting relationships to Mr. Campbell
was $31.625 for Messrs. Aiken, Knoll, and Writz, and $24.375 for
Messrs. Roe and Thompson, and the total number of RSUs granted to them,
which would vest in each of the following years of the Restriction
Period, was determined in the same fashion.
The following example illustrates how annual base salary may vary based
upon the Common Stock's performance: On September 6, 1993, 4,700 of Mr.
Campbell's RSUs vested and he received a cumulative merit increase in
the form of Common Stock. The price of Common Stock was $27.625 per
share on this date, so the Common Stock he received as compensation was
worth $129,838 at that
10
<PAGE>
time; whereas, his cumulative merit increase would have been worth
$153,338 had the Common Stock remained at the grant date price, $32.625.
Although the actual value realized depends upon when the Common Stock is
actually sold by the recipient, the example shows how the value of Mr.
Campbell's cumulative merit increase during his three-year restriction
period rises or falls with the Common Stock price. During this
transitional period, this unusual and unique approach to base salary
introduced an element of variability, based on the market value of
Common Stock, to what has traditionally been fixed compensation. The
Committee's goal was to provide further incentive to the named executive
officers to maximize the Company's performance and to align their
financial rewards with shareholders' interests in increasing the Common
Stock price. Information regarding the RSUs awarded to each of the
named executive officers is included in the table on page 13 of this
Proxy Statement and the accompanying footnotes.
<> ANNUAL INCENTIVE AWARDS
Annual incentive awards or "bonuses" are provided under the Sun Company,
Inc. Executive Incentive Plan (the "Executive Incentive Plan"). The
purpose of this plan is to promote the achievement of the Company's
short-term business objectives by providing bonuses to those employees
who can significantly impact the Company's performance and thereby
enhance shareholder value.
The Committee revised the Executive Incentive Plan to (1) better align
the level of bonuses to Company performance over the measurement period
and (2) recognize the executive's individual performance over the same
time period. In addition, the revised plan provides that,
notwithstanding individual performance, the Committee may determine that
the named executive officers as a group, or all plan participants as a
whole, will not receive bonuses if the Company's performance does not
meet certain minimum thresholds, as determined by the Committee on an
annual basis.
Under the Executive Incentive Plan, bonuses are determined through a
series of steps. First, a guideline incentive award ("Guideline Award")
is established for each participant. The Guideline Award is a
predetermined percentage of the participant's salary midpoint; it is
primarily dependent upon the participant's job level in the corporation,
ability to influence Company performance and analysis of competitive
data gathered from the survey compilations discussed above on page 9.
Second, the Committee determines what portion of each executive
officer's bonus will be dependent upon Company performance and what
portion will be based upon the executive's individual performance.
Through this determination, the Committee essentially divides the
Guideline Award into two parts: (1) a Company performance-based portion,
and (2) an individual performance-based portion, each of which are
subject to adjustment based upon the performance results attained. The
Committee determined that for the CEO and other named executive
officers, a significantly larger portion of the Guideline Award should
be subject to adjustment based upon the Company's performance. This
factor is decreased with respect to individuals holding lower levels of
responsibility within the organization.
Therefore, in the case of the named executive officers, the Committee
decided that 70 percent of the Guideline Award would be adjusted for
Company performance, and individual performance would be the basis for
adjusting the remaining 30 percent of the Guideline Award.
The third step is to separately assess Company performance and
individual performance and to adjust each component of the Guideline
Award -- the Company performance portion and the individual performance
portion -- based upon a factor that is determined by results attained.
These two components are assessed separately and then combined to arrive
at the amount of the bonus award.
The amount of any adjustment to the Company performance portion of the
bonus depends upon the degree to which the Company has achieved certain
annual performance targets, consisting of one or more specific goals
previously set by the Committee. In assessing the Company's results,
the Committee determines the extent to which these performance targets
have been met and then determines the appropriate factor, ranging from
0% to 200%, to apply to adjust this portion of the Guideline Award.
For the 1993 Company performance targets, the Committee established
specific goals for: (1) the Company's total net income after tax; (2)
the Company's total return on equity; (3) cost containment; (4) net
income after tax for the Company's domestic branded gasoline marketing,
lubricants, chemicals and logistics businesses; and (5) sales volume
growth in these businesses. Each of these five goals was equally
weighted in importance and each had a predetermined minimum threshold
requirement, target and maximum payout associated with its level of
attainment. In assessing the Company's 1993 performance relative to the
above targets, the Committee was, on the whole, pleased with the
Company's overall results.
The amount of the bonus is also influenced by the executive officer's
individual performance. Qualitative and quantitative factors associated
with strategic planning, achievement of operational goals,
organizational and management development, and constituency relations
are included in an assessment to arrive at the factor for purposes of
adjusting the individual performance portion of the bonus. Personal
assessment ratings can range from a factor of 0% to 150% and this factor
is used to adjust this portion of the Guideline Award. In the
Committee's view, the individual performance by the CEO and the other
named executive officers met or exceeded most of the qualitative and
quantitative performance factors.
After reviewing the Company's performance measured with respect to each
of the five goals and the performance of the individual executive
officers, the Committee approved the payment of bonus awards to the
Company's executive officers, including a $474,600 bonus to Mr. Campbell
for 1993.
11
<PAGE>
For additional information concerning the Committee's view of the
Company's 1993 performance, see the discussion under the section titled
"The Committee's 1993 View," on page 9.
<> LONG-TERM INCENTIVE AWARDS
Stock option awards currently comprise the long-term incentive component
of each executive officer's compensation. In 1991, the shareholders
approved ELSIP to replace LTIP. While no awards have been granted under
LTIP since 1991, all previous awards (some of which may be exercised
through December 31, 2000) remain in effect in accordance with the terms
of the plan. Under LTIP, certain key executives were granted alternate
appreciation rights ("AARs"). AARs are a form of stock appreciation
right granted in tandem with a stock option which permit the holder of
the option to be paid the appreciation on the option in lieu of
exercising the option.
The Committee grants awards under ELSIP to those executive officers, and
approves, based upon management's recommendations, awards to other key
employees, who, in its judgment, have the capability to make a
substantial contribution to the success of the Company. The same
criteria were used for the selection of participants and the
determination of awards under the predecessor plans. Additionally, the
Committee considered the number of options previously granted to the
named executive officer in determining the size of the current award.
The number of shares subject to each award is based on studies of
similar awards made to individuals in comparable positions at other
companies, which are viewed as competitors for purposes of executive
talent. The sources used for this comparison are the survey
compilations discussed at page 9 of this Proxy Statement.
ELSIP primarily provides for awards of stock options, along with an
equal number of limited appreciation rights. A limited appreciation
right is a form of AAR exercisable only in the event of a change in
control of the Company. Options, under this plan, provide the holders
with the opportunity to acquire Common Stock at a fixed price (the fair
market value on the date of grant) during a specified period of time (up
to ten years).
ELSIP also authorizes the issuance of equity options. Subject to
certain conditions, as defined fully in the plan, option exercises using
previously held Common Stock may result in the issuance of new options
called "equity options" or "reload options," as they are more commonly
referred to. An equity option is a new option granted for each share of
Common Stock held for a least 12 months that is used as payment for the
stock options exercised. Equity options are issued at the market price
of Common Stock at the time of exercise and for the number of shares
tendered.
This plan helps to better align management's interests with those of
shareholders in that, (1) the Common Stock price must increase for the
option to have value, and (2) upon exercise, the increase in the value
of an option is paid in the form of Common Stock having transfer and
sale restrictions, while the holder is employed, for up to ten years
after the date of grant. This feature causes management to acquire and
hold an increased equity position in the Company. Further, management
is encouraged to take an even larger equity position through the
exercise of options using previously held Common Stock. These features
were viewed as an important part of the executive compensation package
during the transitional period associated with the development and
implementation of the initial Strategic Plan by the CEO and other named
executive officers.
The Committee viewed 1993 as a pivotal year for the Company with respect
to the implementation of the Strategic Plan and achievement of improved
performance of the Company. During 1993, the Company made genuine
strides toward the successful implementation of the Strategic Plan and
performance turnaround, which led to enhanced shareholder value, as
compared to the prior year. Options were awarded under ELSIP in January
1993 and November 1993 at the fair market value of Common Stock on the
grant dates. Previously, awards under ELSIP for the current year's
performance were determined at the end of the current year, but awarded
at the beginning of the subsequent year. However, the Committee decided
to accelerate the 1993 award to November 1993 to recognize the
significant effort required by the executive officers and key employees
to achieve improved Company results. Additionally, approving and
granting the awards at the same time that a participant's performance is
measured better enabled the Committee to determine the total number of
options to be awarded and to serve as a long-term performance incentive
for future years. It is the Committee's intention that future option
awards will likewise be determined and awarded in November, rather than
in January of the following year.
CONCLUSION
The Committee believes that the overall levels of executive compensation,
including year-to-year variations, are appropriate, and reasonably reflect
the Committee's goal to attract and retain the qualified individuals
necessary to lead the Company and address the significant challenges facing
the Company and the industry.
Submitted by the 1993 members of the Compensation Committee of the Board of
Directors:
Raymond E. Cartledge, Chairman James G. Kaiser
Robert E. Cawthorn Thomas W. Langfitt
Mary J. Evans
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is composed entirely
of independent non-employee directors. No executive officer of the Company
participates in compensation decisions of the Committee. Additionally, no
executive officer of the Company has an interlocking relationship or
opportunity to influence the compensation of any member of the Committee
through service as a director of any company where a member of the
Committee is an executive officer or through service on a compensation
committee of any company whose executive officers serve as Sun directors.
SUMMARY COMPENSATION
The following table shows annual, long-term and other compensation for
services in all capacities to the Company for the CEO and the other named
executive officers. As required by SEC rules, information is shown for
those years during the previous three fiscal years in which the individuals
served as executive officers of the Company:
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
----------------- ------------
(a) (b) (c) (d) (e) (f)
--- --- --- --- --- ---
NUMBER OF
UNDERLYING
GRANTED ALL
BASE SECURITIES OTHER
NAME AND SALARY OPTIONS/ COMPENSA-
PRINCIPAL POSITION YEAR (1)($) BONUS(2)($) SARS(3)(#) TION(4)($)
- - - ------------------ ---- -------- ----------- ---------- ----------
Robert H. Campbell 1993 652,018 474,600 176,050 16,947
Chairman of the Board, 1992 652,018 0 67,250 29,648
Chief Executive Officer
and President 1991 540,042 0 14,600 --
- - - ------------------------------------------------------------------------------
David E. Knoll 1993 316,016 148,200 43,630 18,126
Senior Vice President, 1992 316,971 0 18,910 14,550
Marketing and Logistics 1991 284,847 87,600 10,400 --
- - - ------------------------------------------------------------------------------
Robert M. Aiken, Jr. 1993 299,641 137,200 44,030 17,445
Senior Vice President and 1992 300,356 0 17,500 12,582
Chief Financial Officer 1991 250,304 102,400 9,620 --
- - - ------------------------------------------------------------------------------
Robert H. Writz, Jr. 1993 276,025 137,200 40,390 17,714
Senior Vice President, 1992 264,544 0 17,500 27,536
Other Businesses 1991 227,668 62,000 6,300 --
- - - ------------------------------------------------------------------------------
Harwood S. Roe, Jr. 1993 265,411 137,200 40,070 20,234
Senior Vice President, 1992 256,937 0 16,270 11,989
Operations
- - - ------------------------------------------------------------------------------
Sheldon L. Thompson 1993 223,360 137,200 40,390 15,672
Senior Vice President and 1992 201,976 0 7,280 9,362
Chief Administrative Officer
- - - ------------------------------------------------------------------------------
NOTE: The format for presentation of the above compensation data has been
varied somewhat from the way in which it was presented in the 1993
proxy statement. The Restricted Stock Unit Awards which formerly
appeared as a column under Long-Term Compensation, are now added with
annual cash compensation and included as base salary under Annual
Compensation, and rather than reflecting the RSU amounts as one lump
sum in the year of the grant, the awards have been split into a
year-by-year presentation and valued as of the date of the award. In
the Committee's view, this revised format better reflects the
cumulative merit increase portion of annual compensation intended for
each of the named executive officers. For a more detailed discussion
of the RSU awards, please see pages 10-11 of this Proxy Statement.
- - - ----------
(1) The above figures under column (c) "Base Salary," represent the
combined amounts received by the named executive officers as the cash and
RSU components of total base salary. The following table sets forth the
amount of each of the two components, which together constitute the total
base salary received for the stated years:
13
<PAGE>
BASE SALARY
($)
------------------------
NAME YEAR CASH RSU AWARD
- - - -------------------------- ---- ---- ---------
Robert H. Campbell 1993 498,680 153,338
1992 498,680 153,338
1991 453,912 86,130
- - - -----------------------------------------------------------------------
David E. Knoll 1993 279,963 36,053
1992 280,918 36,053
1991 268,718 16,129
- - - -----------------------------------------------------------------------
Robert M. Aiken, Jr. 1993 260,426 39,215
1992 261,141 39,215
1991 250,304 --
- - - -----------------------------------------------------------------------
Robert H. Writz, Jr. 1993 235,861 40,164
1992 224,380 40,164
1991 214,385 13,283
- - - -----------------------------------------------------------------------
Harwood S. Roe, Jr. 1993 237,380 28,031
1992 228,906 28,031
- - - -----------------------------------------------------------------------
Sheldon L. Thompson 1993 199,472 23,888
1992 178,088 23,888
- - - -----------------------------------------------------------------------
The Cash Component of Base Salary
The cash component of base salary was fixed for the CEO and each
named executive officer on the date that he was awarded RSUs under the
present program. Mr. Campbell's annualized base salary on September 6,
1991 was $498,680. For the other named executive officers, annualized
base salary was: on December 4, 1991, $265,928, $240,188, $224,380,
respectively for Messrs. Knoll, Aiken and Writz; and on November 5,
1992, $237,380 and $199,472, respectively for Messrs. Roe and Thompson.
Included in the cash column of the above table are fees received for
serving on the board of directors of Suncor Inc., the Company's
Canadian-based subsidiary, which for 1993 totaled for Mr. Knoll, $14,035;
Mr. Aiken, $20,238; and Mr. Writz, $11,481. Variations in the cash
amounts reported from one year to another are attributable in part to
fluctuations in the exchange rates for Canadian versus U.S. dollars.
The RSU Component of Base Salary
The total number of RSUs awarded to each named executive officer
(Mr. Campbell, 14,260; Mr. Knoll, 3,770; Mr. Aiken, 3,420; Mr. Writz,
3,860; Mr. Roe, 3,450; and Mr. Thompson, 3,030) for the Restriction
Periods was determined by projecting the merit increases of each named
executive officer for each year of the Restriction Period and dividing
this amount by the price of Common Stock on the date Mr. Campbell became
Chief Executive Officer and the date the other named executive officers
assumed their reporting relationships to Mr. Campbell ($32.625 for Mr.
Campbell and $31.625 for Messrs. Knoll, Aiken and Writz; and $24.375
for Messrs. Roe and Thompson). The RSU figures in the above table
represent the value of the Common Stock awarded to each named executive
officer at the time of grant. The amounts actually earned are based
upon the price of the Common Stock on the date of vesting. Hence, the
value earned can rise or fall from that shown in the above table
depending upon the value of Common Stock on the date that the RSUs vest.
In fact, for Mr. Campbell, the value of the 1991 award of 2,640 RSUs,
with a grant value of $86,130, earned $65,670 when they vested one year
later in 1992; the 1992 award of 4,700 RSUs, with a grant value of
$153,338, earned $129,838 when they vested in 1993. The amount earned
for the 1993 award of 4,700 RSUs, with a grant value of $153,338, will
be determined in 1994 when these RSUs vest.
14
<PAGE>
Similarly, for the remaining named executive officers, the number of
RSUs awarded, the grant date value and the actual amount earned at the
time the RSUs vested one year later were as follows:
FMV
EARNED
GRANT RSUS GRANT ONE YEAR
NAME YEAR AWARDED (#) VALUE ($) LATER ($)
- - - --------------------- ----- ----------- --------- ---------
David E. Knoll 1993 1,140 36,053 NA
1992 1,140 36,053 36,480
1991 510 16,129 12,686
- - - ------------------------------------------------------------------------------
Robert M. Aiken, Jr. 1993 1,240 39,215 NA
1992 1,240 39,215 33,480
- - - ------------------------------------------------------------------------------
Robert H. Writz, Jr. 1993 1,270 40,164 NA
1992 1,270 40,164 36,354
1991 420 13,283 10,238
- - - ------------------------------------------------------------------------------
Harwood S. Roe, Jr. 1993 1,150 28,031 NA
1992 1,150 28,031 33,494
- - - ------------------------------------------------------------------------------
Sheldon L. Thompson 1993 980 23,888 NA
1992 980 23,888 28,543
- - - ------------------------------------------------------------------------------
NA: To be determined when RSUs vest in 1994.
As of December 31, 1993, the total number of outstanding RSUs and aggregate
RSU value (computed by multiplying the remaining RSUs outstanding by
$29.375 per share, the closing price of Common Stock on this date) for the
named executive officers were as follows: Mr. Campbell, 4,700 units valued
at $138,063; Mr. Knoll, 1,140 units valued at $33,488; Mr. Aiken, 1,240
units valued at $36,425; Mr. Writz, 1,270 units valued at $37,306; Mr. Roe,
1,150 units valued at $33,781; and Mr. Thompson, 980 units valued at
$28,788.
In recognition of the 1993 merit freeze, the named executive officers
waived the merit increment of their RSU award made in 1993 which
otherwise would have vested in 1994. The number of RSUs and associated
dollar value as of December 31, 1993 (computed by multiplying the remaining
RSUs outstanding by $29.375 per share, the closing price of Common Stock on
this date) waived by the named executive officers for this merit year was
as follows: Mr. Campbell, 2,220 units valued at $65,213; Mr. Knoll, 980
units valued at $28,788; Mr. Aiken, 940 units valued at $27,613; Mr. Writz,
900 units valued at $26,438; Mr. Roe, 1,150 units valued at $33,781; and
Mr. Thompson, 1,070 units valued at $31,431.
During the periods that the RSUs are outstanding, the named executive
officers receive "dividend equivalent" payments equal to the dividends the
Company would have paid to each if he had been the owner of record of
shares of Common Stock equal in number to his outstanding RSUs.
(2) No bonuses were paid to executive officers for services rendered during
1992. Mr. Campbell personally declined a bonus for 1991 due to the
Company's financial performance in that year.
(3) Prior to January 1, 1992, options and AARs were granted in tandem, with
the exercise of one canceling an equal number of the other. In 1992 and
1993, options were granted without AARs. A participant who has been
granted an AAR attached to an option may exercise such right in lieu of
exercising the option and receive in cash or Common Stock the difference
between the exercise price of the option and the fair market value of a
share of Common Stock on the date of exercise.
(4) This column includes for each named executive officer an aggregate
amount consisting of the following components:
(a) The Company's contributions allocated under defined contribution
plans, the Sun Company, Inc. Capital Accumulation Plan and Savings
Restoration Plans I and II, to the individual accounts of the named
executive officers were as follows: Mr. Campbell, 1993 -- $15,713, 1992 --
$28,218; Mr. Knoll, 1993 -- $7,560, 1992 -- $13,931; Mr. Aiken, 1993 --
$6,842, 1992 -- $12,009; Mr. Writz, 1993 -- $6,518, 1992 -- $11,731;
Mr. Roe, 1993 -- $6,772, 1992 -- $11,445; and Mr. Thompson, 1993 --
$5,700, 1992 -- $8,904. For 1993, the Company reduced the amount of
its SunCAP contributions by one-half; however, effective January 1,
1994, the Company's matching contributions were restored to prior
levels. Savings Restoration Plans I and II permit a SunCAP participant
to continue receiving the Company-matching contribution after the
participant reaches the limitations (i) under Section 415 of the
Internal Revenue Code ("IRC") with respect to participant and
Company-matching contributions to SunCAP and (ii) under Section 401(a)
of the IRC with respect to compensation which may be earned by SunCAP
participants.
(b) The dollar value of term life insurance premiums paid by the
Company for the benefit of the named executive officers was as follows:
Mr. Campbell, 1993 -- $1,234, 1992 -- $1,430; Mr. Knoll, 1993 -- $534,
1992 -- $619; Mr. Aiken, 1993 -- $494, 1992 -- $572; Mr. Writz, 1993 --
$467, 1992 -- $542; Mr. Roe, 1993 -- $469, 1992 -- $544; and Mr.
Thompson, 1993 -- $395, 1992 -- $458.
15
<PAGE>
(c) The following amounts were reimbursed during 1993 for the payment
of taxes associated with certain payments made to the named executive
officers to purchase their Company vehicles: Mr. Campbell, not
applicable; Mr. Knoll, $10,031; Mr. Aiken, $10,109; Mr. Writz, $10,728;
Mr. Roe, $12,993; and Mr. Thompson, $9,577. In addition, Mr. Writz
received $15,263 in 1992 for reimbursement of taxes associated with
services performed outside the United States.
OPTION GRANTS
Presented below is more information concerning the option awards shown on
the Summary Compensation Table for fiscal year 1993. These options to
purchase Common Stock were granted to the named executive officers pursuant
to the ELSIP.
OPTION GRANTS IN 1993
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM
- - - ------------------------------------------------ ----------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
--- --- --- --- --- --- --- ---
PERCENT
OF
TOTAL
OPTIONS
SECURITIES GRANTED EXER- 0% 5% 10%
UNDERLYING TO CISE (2)($) (3)($) (3)($)
OPTIONS/ EMPLOY- OR STOCK STOCK STOCK
SARS EES IN BASE EXPIRA- VALUE VALUE VALUE
GRANTED FISCAL PRICE TION $28.00/ $45.61/ $72.62/
NAME (1)(#) YEAR ($/SHARE) DATE 31.375 51.11 81.38
- - - ---- ------- ------ --------- ---- ------- -------- --------
Robert H.
Campbell 1/93 88,630 8.0 28.00 12/31/02 0 1,560,690 3,955,095
11/93 87,420 7.9 31.375 10/31/03 0 1,724,934 4,371,321
- - - -------------------------------------------------------------------------------
David E.
Knoll 1/93 23,560 2.1 28.00 12/31/02 0 414,869 1,051,360
11/93 20,070 1.8 31.375 10/31/03 0 396,013 1,003,574
- - - -------------------------------------------------------------------------------
Robert M.
Aiken, Jr. 1/93 22,800 2.1 28.00 12/31/02 0 401,486 1,017,445
11/93 21,230 1.9 31.375 10/31/03 0 418,901 1,061,578
- - - -------------------------------------------------------------------------------
Robert H.
Writz, Jr. 1/93 21,810 2.0 28.00 12/31/02 0 384,053 973,267
11/93 18,580 1.7 31.375 10/31/03 0 366,613 929,068
- - - -------------------------------------------------------------------------------
Harwood S.
Roe, Jr. 1/93 18,840 1.7 28.00 12/31/02 0 331,754 840,731
11/93 21,230 1.9 31.375 10/31/03 0 418,901 1,061,578
- - - -------------------------------------------------------------------------------
Sheldon L.
Thompson 1/93 21,810 2.0 28.00 12/31/02 0 384,053 973,267
11/93 18,580 1.7 31.375 10/31/03 0 366,613 929,068
- - - -------------------------------------------------------------------------------
The value that would be realized by all shareholders as a group (based on
106,682,910 shares of Common Stock outstanding as of December 31, 1993)
assuming stock appreciation levels of 0%, 5% and 10% and the following
Common Stock prices: $28 per share -- $0, $1,878,584,648 and
$4,760,702,336, respectively; and $31.375 per share -- $0, $2,105,021,191
and $5,334,536,993, respectively.
- - - ----------
(1) These options were granted along with an equal number of limited rights
and an authorization for equity options pursuant to the ELSIP. Limited
rights become exercisable only in the event of a change in control, as
defined in the plan. The exercise of an option using Common Stock which
has been held for at least 12 months will result in the issuance of new
options called "equity options." Equity options are issued at the market
price of Common Stock at the time of exercise and for the number of shares
tendered.
For a discussion of the awards made in November 1993, see page 12.
These options were fully exercisable six months after the date of grant.
Upon exercise, the increase in value (market price minus exercise price,
withholding taxes and applicable brokerage commission or interest charges)
will be paid in Common Stock having transfer and sale restrictions, while
the executives are employed, for up to ten years after the date of grant.
(2) The executive officers will not benefit unless the stock price
increases above $28.00 and $31.375 per share, respectively. Any gain to
the executive officers resulting from stock price appreciation will
benefit all shareholders commensurately. A zero percent stock price
appreciation (i.e., if the stock remains at or below $28.00 or $31.375,
the exercise price) will result in zero dollars for the executive officers.
(3) These amounts are the result of calculations of assumed annual rates of
return set by the SEC over the option term: 5% (i.e., assuming a stock
price of $45.61 or $51.11 per share at the end of the option term) and 10%
(i.e., assuming a stock price of $72.62 or $81.38 per share at the end of
the option term). These amounts are not intended to forecast possible
future appreciation, if any, of the Company's stock price.
OPTION/AAR EXERCISES AND YEAR-END VALUES
The following table shows information concerning: (i) exercises of AARs
during 1993 by the named executive officers and (ii) the amount and values
of unexercised options and AARs as of December 31, 1993:
16
<PAGE>
AGGREGATED OPTION/AAR EXERCISES IN 1993
AND YEAR-END OPTION/AAR VALUES
(A) (B) (C) (D) (E) (F)
--- --- --- --- --- ---
VALUE
NUMBER OF OF UNEXERCISED
SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS/ OPTIONS/AARS
AARS GRANTED (#) AT YEAR-END(3)($)
------------------ ------------------
NUMBER
OF
SHARES
ACQUIRED VALUE
ON NET REAL- UN- UN-
EXER- SHARES IZED(2) EXERCIS- EXERCIS- EXERCIS- EXERCIS-
NAME CISE(1) RECEIVED(1) ($) ABLE ABLE ABLE ABLE
- - - ---------- ------- ----------- ------- -------- -------- -------- --------
Robert H.
Campbell -- -- 0 253,249 97,075 143,743 10,950
David E.
Knoll -- -- 0 105,452 26,948 44,843 7,800
Robert M.
Aiken, Jr. -- -- 0 74,626 26,998 42,235 7,215
Robert H.
Writz, Jr. -- -- 0 79,524 22,800 39,672 4,725
Harwood S.
Roe, Jr. -- -- 0 69,634 25,820 32,383 5,205
Sheldon L.
Thompson -- -- 0 38,610 20,718 34,220 2,423
- - - ----------
(1) No stock options or AARs were exercised during 1993.
(2) The dollar value realized has been calculated by multiplying column (b)
by the difference between the exercise price and the fair market value of
Common Stock on the date of exercise.
(3) The dollar values have been calculated by multiplying the number of
in-the-money options/AARs at December 31, 1993 by the difference between
the exercise price and the fair market value of Common Stock at year-end.
An option/AAR is in-the-money if the fair market value of the underlying
Common Stock exceeds the exercise price of the option/AAR.
PENSION PLAN TABLE
The following table shows estimated annual retirement benefits payable to
executive officers and key employees based upon the final average pay
formulas of the Sun Company, Inc. Retirement Plan, Pension Restoration
Plan and Supplemental Executive Retirement Plan ("SERP"). The estimates
assume that benefits are received in the form of a single life annuity:
ESTIMATED ANNUAL BENEFITS UPON
RETIREMENT AT AGE 62 OR LATER
AFTER COMPLETION OF THE FOLLOWING
YEARS OF SERVICE
-----------------------------------------
FINAL
AVG. TOTAL
CASH COMPEN- 20 YRS.
SATION(1) OR LESS 25 YRS. 30 YRS. 35 YRS. 40 YRS.
- - - -------------- -------- -------- -------- -------- --------
$ 200,000 $ 80,000 $ 90,000 $100,000 $108,000 $115,000
400,000 160,000 180,000 200,000 215,000 230,000
600,000 240,000 270,000 300,000 323,000 345,000
800,000 320,000 360,000 400,000 430,000 460,000
1,000,000 400,000 450,000 500,000 538,000 575,000
1,200,000 480,000 540,000 600,000 645,000 690,000
1,400,000 560,000 630,000 700,000 750,000 805,000
The retirement benefits shown above for the Retirement Plan, Pension
Restoration Plan and SERP are amounts calculated prior to the Social
Security offset. The Social Security offset is equal to one and two-thirds
percent of primary Social Security benefits for each year of Retirement
Plan participation up to 30 years or a maximum offset of 50% of primary
Social Security benefits.
Credited years of service under the plans for the following named executive
officers are as follows: Mr. Campbell, 33; Mr. Knoll, 26; Mr. Aiken, 24;
Mr. Writz, 24; Mr. Roe, 27; and Mr. Thompson, 32.
- - - ----------
(1) Final Average Total Cash Compensation is the average of the base salary
(cash and RSU components) and bonus in the highest 36 consecutive months
during the last 120 months of service. The base salaries and bonuses
(subsidiary directors' fees are excluded from this computation) reported on
page 13 reflect for the year 1993, total cash compensation covered by the
Retirement Plan.
SPECIAL EMPLOYEE SEVERANCE PLAN
All eligible exempt, non-exempt and hourly employees of the Company and its
participating subsidiaries may be entitled to receive benefits under the
Special Employee Severance Benefits Plan ("Severance Benefits Plan").
Participation is not limited to only the executive officers. The Severance
Benefits Plan will provide single lump sum cash payments for eligible
employees in the event of their termination of employment within two years
of a change in control of the Company as provided in the plan(1). The amount
of the lump sum payment will be based on the employee's years of service,
current annual base salary for the year in which the change in control
occurs and the average of the employee's three highest bonus payments over
the preceding four years, if any. The formula for calculating the lump sum
payment is the same for the named executive officers as it is for all other
eligible employees. Based upon the terms of the Severance Benefits Plan,
payments received under the plan do not constitute "parachute payments" (as
defined in the IRC). The terms of
17
<PAGE>
the plan expressly limit total payments to a participant under the
plan to a maximum amount (when combined with any other payments received
by an employee under a stock option plan contingent upon a change in
control), which is less than three times the participant's average cash
compensation for the preceding five years. The severance benefit will
be payable no later than ten days after termination of employment. As
of December 31, 1993, payments under the Severance Benefits Plan to the
named executive officers would have been as follows: Mr. Campbell,
$1,689,810; Mr. Knoll, $730,840; Mr. Aiken, $626,508; Mr. Writz,
$569,582; Mr. Roe, $630,479; and Mr. Thompson, $585,284.
- - - ----------
(1) As defined in the plan, "Change in Control" means the occurrence
of any of the following events: (1) any person acquires shares of Common
Stock of the Company in a transaction or series of transactions that
result in such person directly or indirectly owning more than 50% of the
outstanding Common Stock; or (2) the present directors cease to
constitute a majority of the Board of Directors of the Company (or any
successor company) within one year of (a) any tender offer for or
acquisition of Common Stock of the Company, (b) any merger,
consolidation or sale of all or substantially all of the assets of the
Company, or (c) the submission of a nominee or nominees for a position
of director of the Company by a shareholder or shareholders in a proxy
solicitation or otherwise which in the judgment of the Board of
Directors, might result in a change in control of the Company.
STOCK PERFORMANCE GRAPH
Assuming an initial investment of $100, as of the periods indicated,and the
reinvestment of all dividends, the following graphs compare Sun's
cumulative total return (i.e., based on stock price and dividends), plotted
on a quarterly basis, with a performance indicator of the overall stock
market (the S&P 500 Stock Index) and a group of peer companies. As
required by the SEC, the first graph compares Sun's cumulative total return
for the previous five fiscal years.
The second graph has been voluntarily added by the Company. It is a
cutaway view of the Company's total return since the announcement of its
Strategic Plan in the Third Quarter, 1992. Consistent with the first
graph, it charts, on a quarterly basis, total return for the Company, the
same group of peers and the S&P 500 Stock Index. The manner in which total
return has been calculated is consistent with the first graph, and it
similarly assumes an initial $100 investment.
Since the October 1992 announcement of the Strategic Plan, the Company has
viewed itself as a "new" organization -- restructured consistent with the
Strategic Plan, and led by a CEO and senior management team charged with
responsibility for directing the Company and implementing the plan. As
discussed by the Compensation Committee in its report, management's success
in implementing the Strategic Plan is one important factor considered by
the Committee in both evaluating the performance of the Company and the
named executive officers, and determining the overall levels and types of
compensation under the Company's various programs. Additionally, on a
periodic basis, all members of the Company's Board of Directors receive
information, similar to that set forth on the second graph, about the
Company's total return to shareholders since October 1992. Therefore, the
Company believes that the second graph may be of special interest to
shareholders because it measures total return using a base line date that
corresponds to the announcement of the Strategic Plan.
FIVE-YEAR CUMULATIVE TOTAL RETURN
ID: GRAPHIC (LINE CHART)
18
<PAGE>
CUMULATIVE TOTAL RETURN
MEASURED FROM 3RD QUARTER 1992
ID: GRAPHIC (LINE CHART)
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
In the fiscal year 1993, Coopers & Lybrand served as independent
accountants for the Company. The Audit Committee has recommended and the
Board has approved the appointment of Coopers & Lybrand as independent
accountants for the fiscal year 1994, subject to the approval of the
shareholders.
Audit services provided by Coopers & Lybrand during 1993 included audits of
the Company's consolidated financial statements, audits of the separate
financial statements of certain Company affiliates, audits of employee
benefit plan financial statements and a review of the Company's Annual
Report and other filings with the SEC and other governmental agencies. The
aggregate fees for audit services amounted to $2.1 million. In addition,
Coopers & Lybrand provided tax, actuarial and various other nonaudit
services to the Company during 1993. The aggregate fees for these services
amounted to $1.2 million.
It is expected that representatives of Coopers & Lybrand will be present at
the Annual Meeting with the opportunity to make a statement if they desire
to do so and that they will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSAL
Mr. Robert M. Dowling, 503 Mountain Laurel Road, Fairfield, Connecticut
06430 has advised the Company that he is the beneficial owner of 100 shares
of Common Stock and that he intends to propose adoption of the following
resolution at the Annual Meeting:
RESOLVED, that the Company shall be requested to establish a
Shareholders' Advisory Committee. The Committee will provide
non-binding recommendations to the Board of Directors pertaining to
Shareholders' interest on policy matters relevant to the Company and
its business, such as major acquisitions, restructurings, executive
compensation issues, mergers and other matters on which the Board would
elect to consult the Committee. The Board shall insure the effective
operation of this Committee and will give consideration to its
recommendations. This resolution shall in no way limit or otherwise
restrict the ability of the Board to take any action it deems in the
Company's best interest.
Members of the Committee shall serve without compensation except for
the reimbursement of reasonable expenses. The Committee will have a
minimum of ten (10) members and the Board shall develop procedures for
the selection of members willing to serve, provided that the following
apply:
(1) Members will be the beneficial owner of at least 1,000 shares
of the Company's voting stock for the entire period of
membership.
(2) At least six (6) members shall be selected from the 500
largest beneficial owners of the Company's voting shares.
(3) Members will have no present affiliation with the Company,
other than as a Shareholder.
(4) The term of each member shall be for one (1) year and in no
instance can a member serve more than two (2) consecutive
terms.
19
<PAGE>
The following supporting statement is requested to be included in the proxy
material:
Supporting Statement
--------------------
The proposal indicated was originally presented at the last Shareholder
Meeting. Though not successful, it received 8,360,123 votes
representing 10.19 percent of those cast. This outcome indicates
significant support among shareholders, particularly when viewed within
the context of being an initial proposition and the segmentation
associated with Sun's ownership interests.
The formation of the Committee will assist the Board by developing a
formalized structure to communicate the input of Shareholders.
Accordingly, the Committee will benefit the Company by providing
directors with an information source and in strengthening the
relationship between the Board and Shareholders.
The Committee will have no authority to act on behalf of the Company,
and it will not become involved in Company Management. This Committee
would address policy considerations, significant financial subjects and
transactions that could have a fundamental impact on the value of
shareholder investments. The Committee would provide the Board with an
organized procedure for appreciating shareholder viewpoints and as such
can act as a valuable resource.
POSITION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" THIS PROPOSAL.
The proposal to establish a shareholders' advisory committee was previously
submitted to the Company's shareholders by Mr. Robert Dowling for
consideration in connection with last year's annual meeting. The vast
majority of the votes cast by the Company's shareholders -- close to 90
percent -- were cast against the proposal. Thus, by an overwhelming
percentage, Sun's shareholders rejected the creation of a shareholders'
advisory committee.
The Company continues to consider shareholder relations to be an extremely
important area and the input of all shareholders is appreciated. In the
Company's view, its relations with shareholders are quite good. These
positive relations have been fostered in part by the Company's commitment
to maintaining various functions, such as, Shareholder Relations, Corporate
Communications, Investor Relations, the Corporate Secretary and Transfer
Agent/Registrar. These functions have been set up and charged with
responsibility for addressing various shareholder concerns. In addition to
interacting with the Company through these staff functions, shareholders
have other opportunities to communicate with the Company's management.
Robert H. Campbell, the Company's Chairman, Chief Executive Officer and
President, is proactive in maintaining positive relations with the
Company's shareholders. He meets with and communicates to shareholders on
a regular basis concerning current corporate activities. Mr. Campbell has
remained accessible to those who request to meet with him, and is
responsive to concerns expressed, including questions raised by
shareholders at the annual meeting each year or presented by shareholders
during the course of the year. Therefore, the Board does not believe there
is a need for the additional bureaucracy that would result from the
formalized structure of a shareholders' advisory committee.
Aside from believing that a shareholders' advisory committee is not
necessary from a shareholder relations perspective, the Board has several
concerns regarding the potential effect of such a committee. First, an
advisory committee would result in additional and unnecessary
administrative responsibilities for the Board both in ensuring the advisory
committee's effective operation and in coordinating appropriate feedback
from the committee. Second, for an advisory committee to provide
meaningful input to the Board decision-making process, committee members
would need to receive sensitive and often confidential inside information,
thereby subjecting the committee's activities, its members and the Company
to further unnecessary restrictions and legal requirements. Third, the
necessity of convening the advisory committee to input regarding corporate
matters would likely serve to slow the decision-making process, diverting
valuable time away from the review and effort necessary to take action with
respect to corporate matters. Indeed, it is possible that when quick and
decisive measures are necessary, such a delay could only hinder exploration
of corporate opportunities, to the general detriment of shareholders'
interests.
Finally, the Board has continued to be sensitive to corporate governance
matters. Independent, unaffiliated directors are in the majority on the
Company's Board. A confidential voting process has been adopted. The
Board's executive compensation philosophies encourage alignment between
management's compensation and Company performance; such alignment being
consistent with shareholders' interests.
For the reasons discussed above, the Board views the creation of a
shareholders' advisory committee to be unnecessary and unduly burdensome.
Accordingly, the Board recommends to the Company's shareholders that they
vote AGAINST this proposal.
20
<PAGE>
SHAREHOLDER NOMINATIONS AND PROPOSALS
FOR THE 1995 ANNUAL MEETING
The Board Policy and Nominating Committee will consider shareholder
nominations for election to the Board at the 1995 Annual Meeting if such
nominations are submitted in compliance with the requirements of the
Company's Bylaws relating to shareholder nominations. Pursuant to the
Bylaws, such nominations must include the following information: name,
residence and business address of the nominating shareholder; a
representation that the shareholder is a record holder or beneficial owner
of the Company's voting shares and a statement of the number of such
shares; information regarding each nominee such as would be required to be
included in a proxy statement; a description of all arrangements or
understandings between and among the shareholder and each and every
nominee; and the written consent of each nominee to serve as a director, if
elected. These nominations must be received at the Company's principal
office no later than December 31, 1994.
Any proposal to be presented at the Company's 1995 Annual Meeting of
Shareholders must be received at the Company's principal office no later
than December 7, 1994, in order to be considered for inclusion in the 1995
proxy materials.
Nominations and proposals must be submitted in writing and addressed to the
attention of the Corporate Secretary at Ten Penn Center, 1801 Market
Street, Philadelphia, PA 19103-1699.
SOLICITATION OF PROXIES
The Company has provided proxy materials to brokers, banks, custodians,
nominees and fiduciaries and requested that such materials be promptly
forwarded to the beneficial owners of stock registered in the names of such
brokers, banks, custodians, nominees and fiduciaries. In addition,
solicitation of proxies may be made by directors, officers and employees of
the Company by personal interview, mail, telephone or telegraph. Morrow &
Co. has been retained to assist in the distribution and solicitation of
proxies to shareholders, brokers, banks, custodians and nominees. The fee
to be paid Morrow & Co., including reasonable out-of-pocket expenses, is
not expected to exceed $22,000. The cost of soliciting proxies and related
services will be borne by the Company.
OTHER BUSINESS
The Board does not know of any business to come before the Annual Meeting
other than that set forth in the Notice of Annual Meeting of Shareholders.
However, if any other business shall properly come before the Annual
Meeting, it is the intention of the proxy holders to vote upon such
business in accordance with their judgment.
The Annual Report of the Company for the year 1993 was recently mailed to
shareholders. For the benefit of those unable to attend the 1994 Annual
Meeting of Shareholders, the FIRST QUARTER REPORT of 1994 will contain
highlights of the Annual Meeting.
PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY/VOTING INSTRUCTION CARD IN
THE ENVELOPE PROVIDED, WHETHER YOUR HOLDINGS ARE LARGE OR SMALL, THUS
ASSURING YOUR REPRESENTATION AT THE ANNUAL MEETING. IF YOU PLAN TO ATTEND
THE ANNUAL MEETING, PLEASE MARK YOUR CARD IN THE SPACE PROVIDED. AN
ADMISSION CARD WILL BE MAILED TO YOU IN ADVANCE OF THE ANNUAL MEETING.
By Order of the Board of Directors,
DONALD J. AINSWORTH
Donald J. Ainsworth
Corporate Secretary
Philadelphia, PA
April 5, 1994
21
<PAGE>
Tulsa Convention Center -- Assembly Hall
100 Civic Center, Tulsa, OK 74103-3822
[MAP]
22
<PAGE>
(Corporate Logo) COMMON STOCK
Sun Company, Inc. PROXY/VOTING INSTRUCTION CARD
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SUN COMPANY,
INC. for the May 5, 1994 Annual Meeting of Shareholders or any adjournments
thereof.
The undersigned hereby appoints R. H. CAMPBELL, J. L. FOLTZ and S. L.
THOMPSON and each of them, with full power of substitution, as proxies and
attorneys-in-fact to vote as hereinafter indicated all shares of Sun Company,
Inc. Common Stock, which the undersigned is entitled to vote, and in their
discretion, to vote upon such other business as may properly come before the
Meeting. This card also provides voting instructions for shares held for the
account of the undersigned, if any, in the Sun Company, Inc. Capital
Accumulation Plan (SunCAP) as more fully described in the accompanying
Proxy Statement.
o (Indicates First Print Line) COMMON
SUNCAP
TOTAL
Please mark your card on the reverse side, sign, date and return it promptly
in the enclosed envelope.
CONTINUED ON REVERSE SIDE
Please sign exactly as your name appears hereon. When signing as attorney,
executor, administrator, trustee, guardian, etc., give full title as such.
If stock is jointly owned, each joint owner should sign.
____________________ ____________________ _______________________, 1994.
SIGNATURE SIGNATURE DATED
This Proxy when properly executed will be voted by the Proxies in the
manner designated below. If this Proxy is returned signed, with no or an
unclear voting designation, the Proxies will vote for items (1) and (2) and
against item (3), and the trustee for SunCAP will vote as described in the
accompanying Proxy Statement.
The Board of Directors recommends a vote For items (1) and (2).
------------------
(1) ELECTION OF DIRECTORS.
FOR ALL NOMINEES LISTED / / AGAINST ALL / / (1)
(EXCEPT AS INDICATED BELOW) NOMINEES LISTED
R. H. Campbell M. J. Evans T. W. Langfitt W. F. Pounds
R. E. Cartledge T. P. Gerrity R. A. Pew B. R. Thompson, Jr.
R. E. Cawthorn J. G. Kaiser A. E. Piscopo A. B. Trowbridge
INSTRUCTION: TO VOTE AGAINST ANY NOMINEE, LIST NOMINEE'S NAME.
- - - -----------------------------------------------------------------------------
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE (TO ABSTAIN),
LIST NOMINEE'S NAME.
- - - -----------------------------------------------------------------------------
(2) Appointment of Coopers & Lybrand as independent accountants for the
fiscal year 1994.
FOR AGAINST ABSTAIN
/ / / / / / (2)
The Board of Directors recommends a vote Against item (3).
-----------------
(3) Shareholder proposal to establish a shareholders' advisory committee.
FOR AGAINST ABSTAIN
/ / / / / / (3)
/ / Please check ONLY if you plan to attend the
Meeting. Admission tickets will be required.
<PAGE>
APPENDIX OF
GRAPHIC AND IMAGE MATERIAL
OMITTED FROM ELECTRONIC FORMAT DOCUMENT
PURSUANT TO RULE 304 OF REGULATION S-T
Photographs of Nominees for Director and Incumbent Directors appear on
pages 2 - 4 of the Definitive Proxy Statement.
Stock Performance Graph comparing Five-Year Cumulative Total Return of
Sun Company, Inc. Common Stock against S&P 500 Stock Index and a group
of peer companies (Amerada Hess, Ashland, Kerr McGee, Marathon/USX,
Phillips, Unocal) appears on page 18 of the Definitive Proxy Statement.
Stock Performance Graph comparing Cumulative Total Return Measured
from 3rd Quarter of 1992 of Sun Company, Inc. Common Stock against S&P
500 Stock Index and a group of peer companies (Amerada Hess, Ashland,
Kerr McGee, Marathon/USX, Phillips, Unocal) appears on page 19 of the
Definitive Proxy Statement.
Map of major streets in the general area of the Tulsa Convention Center,
Tulsa, Oklahoma, appears on page 22 of the Definitive Proxy Statement.
