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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-6841
SUN COMPANY, INC.
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1743282
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
TEN PENN CENTER, 1801 MARKET STREET, PHILADELPHIA, PA 19103-1699
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(Address of principal executive offices)
(Zip Code)
(215) 977-3000
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
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At June 30, 1995, 107,113,493 shares of common stock were outstanding.
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SUN COMPANY, INC.
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INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Income
for the Six Months Ended June 30, 1995
and 1994 3
Condensed Consolidated Statements of Income
for the Three Months Ended June 30, 1995
and 1994 4
Condensed Consolidated Balance Sheets at
June 30, 1995 and December 31, 1994 5
Condensed Consolidated Statements of Cash
Flows for the Six Months Ended June 30,
1995 and 1994 6
Notes to Condensed Consolidated Financial
Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of Security
Holders 25
Item 6. Exhibits and Reports on Form 8-K 26
SIGNATURE 27
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
--------------------------------------------------------------------------
For the Six Months
Ended June 30
--------------------
1995 1994
------ ------
(UNAUDITED)
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $961 in 1995 and $1,016 in 1994) $5,234 $4,274
Gain on divestments (Note 2) 244 29
Interest income 5 7
Income (loss) from investments in operations
held for sale (Note 3) 6 (6)
Other income 14 16
------ ------
5,503 4,320
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 3,562 2,607
Selling, general and administrative expenses 344 331
Taxes, other than income taxes 1,028 1,081
Depreciation, depletion and amortization 183 178
Provision for write-down of assets and other
matters (Note 4) 138 -
Exploratory costs and leasehold impairment 15 11
Minority interest 19 13
Interest cost and debt expense 62 41
Interest capitalized (4) (5)
------ ------
5,347 4,257
------ ------
Income before provision for income taxes
and cumulative effect of change in
accounting principle 156 63
Provision for income taxes 54 17
------ ------
Income before cumulative effect of change
in accounting principle 102 46
Cumulative effect of change in accounting
principle (Note 5) -- (7)
------ ------
NET INCOME $ 102 $ 39
====== ======
Earnings per share of common stock:*
Income before cumulative effect of change in
accounting principle $ .95 $ .43
Cumulative effect of change in accounting principle -- (.07)
----- -----
Net income $ .95 $ .36
===== =====
Cash dividends paid per share of common stock $.90 $.90
==== ====
----------------
*Based on the weighted average number of shares outstanding (in thousands)
of 107,101 in 1995 and 107,119 in 1994.
(See Accompanying Notes)
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
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For the Three Months
Ended June 30
--------------------
1995 1994
------ ------
(UNAUDITED)
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $476 in 1995 and $545 in 1994) $2,656 $2,218
Gain on divestments (Note 2) 244 23
Interest income 3 4
Income (loss) from investments in operations
held for sale (Note 3) 5 (2)
Other income 7 10
------ ------
2,915 2,253
------ ------
COSTS AND EXPENSES
Cost of products sold and operating expenses 1,810 1,380
Selling, general and administrative expenses 166 165
Taxes, other than income taxes 508 576
Depreciation, depletion and amortization 86 88
Provision for write-down of assets and other
matters (Note 4) 138 --
Exploratory costs and leasehold impairment 5 5
Minority interest 9 7
Interest cost and debt expense 31 21
Interest capitalized (2) (3)
------ ------
2,751 2,239
------ ------
Income before provision for income taxes 164 14
Provision for income taxes 55 2
------ ------
NET INCOME $ 109 $ 12
====== ======
Net income per share of common stock* $1.02 $.11
===== ====
Cash dividends paid per share of common stock $.45 $.45
==== ====
----------------
*Based on the weighted average number of shares outstanding (in thousands)
of 107,150 in 1995 and 107,148 in 1994.
(See Accompanying Notes)
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CONDENSED CONSOLIDATED BALANCE SHEETS
Sun Company, Inc. and Subsidiaries
At At
June 30 December 31
1995 1994
(Millions of Dollars) (UNAUDITED)
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ASSETS
Current Assets
Cash and cash equivalents, at cost which
approximates market $ 125 $ 117
Accounts and notes receivable, net of allowances 613 655
Inventories:
Crude oil 176 193
Refined products 319 335
Materials, supplies and other 64 85
Deferred income taxes 112 123
------ ------
Total Current Assets 1,409 1,508
Investment in Coal Operations Held for Sale (Note 3) -- 51
Investment in Real Estate Operations Held
for Sale (Note 3) 128 123
Receivable from Sale of Suncor Stock (Note 2) 125 --
Other Long-Term Receivables and Investments 96 143
Properties, Plants and Equipment 6,656 8,430
Less Accumulated Depreciation, Depletion
and Amortization 3,410 4,082
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Properties, Plants and Equipment, net 3,246 4,348
Deferred Charges and Other Assets 273 292
------ ------
Total Assets $5,277 $6,465
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 664 $ 776
Accrued liabilities 562 540
Short-term borrowings 37 221
Current portion of long-term debt 49 99
Taxes payable 206 279
------ ------
Total Current Liabilities 1,518 1,915
Long-Term Debt 888 1,073
Retirement Benefit Liabilities 510 515
Deferred Income Taxes 97 301
Other Deferred Credits and Liabilities 320 429
Commitments and Contingent Liabilities (Note 6)
Minority Interest (Note 2) -- 369
Stockholders' Equity (Note 7) 1,944 1,863
------ ------
Total Liabilities and Stockholders' Equity $5,277 $6,465
====== ======
(See Accompanying Notes)
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
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For the Six Months
Ended June 30
------------------
1995 1994
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(UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 102 $ 39
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of change in accounting
principle -- 7
Provision for write-down of assets and other
matters 138 --
Gain on divestments (244) (29)
Depreciation, depletion and amortization 183 178
Dry hole costs and leasehold impairment 7 6
Deferred income taxes 16 4
Changes in working capital pertaining to
operating activities:
Accounts and notes receivable (95) (21)
Inventories (64) (23)
Accounts payable and accrued liabilities (29) (46)
Taxes payable (19) (1)
Other 10 16
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Net cash provided by operating activities 5 130
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (322) (243)
Cash provided by coal operations held for
sale (Note 3) 1 2
Cash used by real estate operations held for sale (5) (11)
Proceeds from sale of Suncor stock 635 --
Proceeds from other divestments 40 42
Other 9 (1)
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Net cash provided by (used in) investing activities 358 (211)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term
borrowings (184) 86
Proceeds from issuance of long-term debt 15 194
Repayments of long-term debt (95) (112)
Cash dividend payments (96) (96)
Other 5 5
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Net cash provided by (used in) financing activities (355) 77
----- -----
Net increase (decrease) in cash and cash equivalents 8 (4)
Cash and cash equivalents at beginning of period 117 118
----- -----
Cash and cash equivalents at end of period $ 125 $ 114
===== =====
(See Accompanying Notes)
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. General.
The accompanying condensed consolidated financial statements are
presented in accordance with the requirements of Form 10-Q and do not
include all disclosures normally required by generally accepted
accounting principles or those normally made in Form 10-K. In
management's opinion all adjustments necessary for a fair presentation
of the results of operations, financial position and cash flows for
the periods shown have been made. All such adjustments are of a
normal recurring nature except for the cumulative effect of change in
accounting principle (Note 5). Results for the three and six months
ended June 30, 1995 are not necessarily indicative of results for the
full year 1995.
2. Gain on Divestments.
Sale of Suncor Common Stock
On June 8, 1995, Sun completed the sale of its remaining 55 percent
interest in Suncor Inc., the Company's Canadian integrated oil
company, to a group of Canadian underwriters who subsequently sold the
shares publicly in Canada, and by way of private placement in the
United States. Under terms of the underwriting agreement, Sun was to
receive gross proceeds of approximately C$1,167 million (US$855
million), payable in three equal installments. In a separate
transaction, Sun subsequently sold all but one-half of the third
installment receivable. As a result, Sun will ultimately receive cash
proceeds of US$770 million, after commissions, discount and U.S.
dollar exchange, of which US$635 million were received in June 1995,
with the remainder expected to be received in June 1996.
In connection with this sale, Sun recognized a $242 million gain,
which increased results of operations by $157 million after tax, or
$1.47 per share of common stock during the second quarter of 1995.
Results of operations attributable to Sun's 55-percent interest in
Suncor totalled $23 million during the first half of 1995 prior to the
sale.
Sale of Colombian Oil Field
In June 1994, Sun sold its remaining interest in an oil field located
in Colombia. In connection with this sale, Sun recognized a $20
million gain, which increased net income by $13 million, or $.12 per
share of common stock during the second quarter of 1994.
3. Investments in Operations Held for Sale.
Sun has been pursuing disposition programs for its coal (including
cokemaking) and real estate operations since January 1993 and October
1991, respectively. These businesses have been accounted for as
investments held for sale. As a result, pretax income (loss) from
Sun's coal and real estate operations has been included as a single
amount in income from continuing operations and the net assets and
liabilities relating to these operations have been segregated on the
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condensed consolidated balance sheets to separately identify them as
operations held for sale. The following table sets forth the pretax
and after-tax income (loss) from the coal and real estate operations
for the six months ended June 30, 1995 and 1994 (in millions of
dollars):
1995 1994
--------------- ---------------
After After
Pretax Tax Pretax Tax
------ ----- ------ -----
Coal operations $ 7 $12 $(10) $2
Real estate
operations (1) -- 4 2
--- --- ---- --
$ 6 $12 $ (6) $4
=== === ==== ==
As part of a series of recently implemented operational changes,
effective June 30, 1995, the coal business is now one of the Company's
eight ongoing business units and is no longer held for sale.
Accordingly, the condensed consolidated balance sheet of Sun as of
June 30, 1995 contains the accounts of its coal operations on a fully
consolidated basis. The condensed consolidated statements of income
and cash flows for the six months ended June 30, 1995 and all prior
period consolidated financial statements of Sun have not been restated
to give effect to this change because the impact of such restatement
would not be material. There has been no change in Sun's disposition
plans for its real estate operations. Accordingly, these operations
continue to be accounted for as an investment held for sale.
The net assets and liabilities relating to real estate operations are
as follows (in millions of dollars):
June 30 December 31
1995 1994
------- -----------
Inventories $ 133 $ 144
Properties, plants and equipment 191 198
Other assets 23 21
Recourse debt (192) (204)
Other liabilities (27) (36)
----- -----
Investment in real estate operations
held for sale $ 128 $ 123
===== =====
As part of a restructuring of Radnor's recourse debt obligations
during 1992, the Company, through its wholly owned subsidiary, The
Claymont Investment Company, has provided Radnor with a $100 million
credit facility. As of June 30, 1995, $12 million was borrowed
against this facility. Amounts borrowed by Radnor under this facility
are not collateralized by any of its assets.
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Radnor's recourse debt obligations require that its stockholder's
equity, which totalled $107 million at June 30, 1995, equal at least
$100 million. If Radnor's stockholder's equity declines below this
amount, the Company has the option to make a capital contribution to
Radnor to avoid default by Radnor on these obligations or to advance
the remaining amount available under the $100 million credit facility.
4. Write-down of Assets and Other Matters.
During the second quarter of 1995, Sun recorded a write-down to net
realizable value of certain assets in the refining and marketing and
coal businesses and established accruals for employee terminations and
related costs. The following is a summary of the provision for write-
down of assets and other matters in the condensed consolidated
statements of income for the three and six months ended June 30, 1995
(in millions of dollars except per share amounts):
Provision for Write-Down After-Tax
of Assets and Other Matters Losses Per
--------------------------- Share of
Pretax After Tax Common Stock
------ --------- ------------
Refining and marketing
assets $ 43 $28 $.26
Coal assets 45 29 .27
Employee terminations
and related costs 50 33 .31
---- --- ----
$138 $90 $.84
==== === ====
The $50 million accrual for employee terminations and related costs
includes $38 million attributable to termination benefits and $12
million related to future rental payments for vacated office space.
The termination benefits are for approximately 600 employees to be
involuntarily terminated, of which 50 were terminated during the first
six months of 1995. The Company expects that, overall, approximately
800 positions, primarily staff and support personnel, will be
eliminated. The 800 position reduction is comprised of the 600
employees identified above and approximately 200 other positions,
including employees who have voluntarily terminated employment without
benefits and independent contractors. As of June 30, 1995, the amount
of actual termination benefits paid and charged against the accrual
totalled approximately $1 million.
5. Change in Accounting Principle.
Effective January 1, 1994, Sun adopted the provisions of Statement of
Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits" ("SFAS No. 112"). It required companies to
recognize the obligation to provide benefits to their former or
inactive employees after employment but before retirement. The
cumulative effect of this accounting change for years prior to 1994
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decreased net income for the six months ended June 30, 1994 by $7
million (after related income tax benefit of $4 million), or $.07 per
share of common stock. Excluding the cumulative effect, this change
did not have a significant impact on Sun's net income for the six
months ended June 30, 1994.
6. Commitments and Contingent Liabilities.
In 1992, a wholly owned subsidiary of the Company became a one-third
partner in Belvieu Environmental Fuels ("BEF"), a joint venture formed
for the purpose of constructing, owning and operating a $225 million
methyl tertiary butyl ether ("MTBE") production facility in Mont
Belvieu, Texas. The construction of the facility, which has a
designed capacity of 12,600 barrels daily of MTBE, is essentially
completed. As part of the financing of this project, BEF had borrowed
$176 million, the total amount available under a construction loan
facility, of which the Company guarantees one-third or $59 million.
The construction loan was convertible into a five-year nonrecourse
term loan with a first priority lien on all project assets if the
plant was able to produce at its designed capacity for a continuous
45-day period prior to May 31, 1995 and if certain other conditions
were met. The plant was unable to meet all of these conversion
conditions by May 31, 1995; however, BEF has obtained a waiver from
the lenders which precludes them from calling the loan prior to August
31, 1995 while discussions on restructuring the loan continue. The
Company expects that the plant will be able to meet the conversion
conditions during the second half of 1995 and that the construction
loan will be converted into the five-year nonrecourse term loan as
described above.
In order to obtain a secure supply of oxygenates for the manufacture
of reformulated fuels, Sun has entered into a 10-year off-take
agreement with BEF. Pursuant to this agreement, Sun will purchase all
of the MTBE production from the plant. The minimum per unit price to
be paid for the first 12,600 barrels daily of MTBE production while
the nonrecourse term loan is outstanding will be equal to BEF's annual
raw material and operating costs and debt service payments divided by
the plant's annual designed capacity. Notwithstanding this minimum
price, Sun has agreed to pay BEF a price during the first three years
of the off-take agreement which approximates prices included in
current MTBE long-term sales agreements in the marketplace. This
price is expected to exceed the minimum price required by the loan
agreement. Sun will negotiate a new pricing arrangement with BEF for
the remaining seven years the off-take agreement is in effect which
will be based upon the market conditions existing at such time.
Sun is subject to federal, state, local and foreign laws regulating
the discharge of materials into, or otherwise relating to the
protection of, the environment. These laws result in loss
contingencies for remediation at Sun's refineries, service stations,
terminals, pipelines and truck transportation facilities as well as
third-party or formerly owned sites at which contaminants generated by
Sun may be located.
The Comprehensive Environmental Response Compensation and Liability
Act ("CERCLA") and the Solid Waste Disposal Act as amended by the
Resource Conservation and Recovery Act ("RCRA"), and related state
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laws subject Sun to the potential obligation to remove or mitigate the
environmental effects of the disposal or release of certain pollutants
at various sites. Under CERCLA, Sun is subject to potential joint and
several liability for the costs of remediation at sites at which it
has been identified as a "potentially responsible party" ("PRP"). As
of June 30, 1995, Sun had been named as a PRP at 50 sites identified
or potentially identifiable as "Superfund" sites under CERCLA. Sun
has reviewed the nature and extent of its involvement at each site and
other relevant circumstances and, based upon the other parties
involved or Sun's negligible participation therein, believes that its
potential liability associated with such sites will not be material.
Under RCRA and related state laws, corrective remedial action has been
initiated at some of Sun's facilities and will be required to be
undertaken by Sun at various of its other facilities. The cost of
such remedial actions could be significant but is expected to be
incurred over an extended period of time.
Sun establishes accruals related to environmental remediation
activities for work at identified sites where an assessment has
indicated that cleanup costs are probable and reasonably estimable.
Such accruals are based on currently available facts, estimated timing
of remedial actions and related inflation assumptions, existing
technology and presently enacted laws and regulations. Sun's
international production operations are subject to less demanding
environmental regulatory requirements than its U.S. operations and
these less stringent requirements are considered in determining the
accruals for these operations. Sun's accruals reflect the Company's
philosophy of aggressively managing remediation costs to ensure the
most cost-effective method of protecting the health, safety and
environment of affected communities. Sun's accrued liability for
environmental remediation, which totalled $218 million at June 30,
1995 and $246 million at December 31, 1994, was classified in the
condensed consolidated balance sheets as follows (in millions of
dollars):
At At
June 30 December 31
1995 1994
------- -----------
Accrued liabilities $ 72 $ 55
Other deferred credits and
liabilities 146 191
---- ----
$218 $246*
==== ====
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*Included $10 million attributable to Suncor which was divested on
June 8, 1995.
Sun also accrues estimated dismantlement, restoration, reclamation and
abandonment costs at its international oil and gas production
operations through a charge against income primarily on a units of
production basis. The accrued liability for these activities was
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classified in the condensed consolidated balance sheets as follows (in
millions of dollars):
At At
June 30 December 31
1995 1994
------- -----------
Properties, plants and equipment, net $52 $ 45
Other deferred credits and
liabilities -- 81*
--- ----
$52 $126
=== ====
----------
*Relates to Sun's recently divested oil sands mining and oil and gas
exploration and production operations in Canada.
Sun estimates that the total cost for reclamation at its international
oil and gas production operations will be approximately $145 million.
Pretax charges against income for environmental remediation and
reclamation totalled $15 and $6 million for the six months ended June
30, 1995 and 1994, respectively. Claims for recovery of environmental
liabilities that are probable of realization totalled $9 million at
June 30, 1995 and are included in deferred charges and other assets in
the condensed consolidated balance sheets.
Total future cost for environmental remediation activities will depend
upon, among other things, the identification of additional sites, the
determination of the extent of contamination of each site, the timing
and nature of required remedial actions, the technology available and
needed to meet the various existing requirements, the nature and
extent of future environmental laws, inflation rates and the
determination of Sun's liability at multi-party sites, if any, in
light of the number, participation levels and financial viability of
other parties.
Sun is currently involved in litigation with a private party to
determine responsibility for remediation at a formerly owned refinery
in Oklahoma. Management believes that Sun is fully indemnified for
this potential liability.
Many other legal and administrative proceedings are pending against
Sun. The ultimate outcome of these proceedings and the matters
discussed above cannot be ascertained at this time; however, it is
reasonably possible that some of them could be resolved unfavorably to
Sun. Management believes that any expenditures attributable to these
matters will be incurred over an extended period of time and be funded
from Sun's net cash flow from operating activities. Although the
ultimate impact of these matters could have a significant impact on
results of operations or cash flow for any one quarter or year,
management believes that any liabilities which may arise pertaining to
such matters would not be material in relation to the consolidated
financial position of Sun at June 30, 1995. Furthermore, management
believes that the overall costs for environmental activities will not
have a material impact, over an extended period of time, on Sun's cash
flow or liquidity.
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7. Stockholders' Equity.
At At
June 30 December 31
1995 1994
------- -----------
(Millions of Dollars)
Common stock, par value $1 per share $ 130 $ 130
Capital in excess of par value 1,315 1,309
Cumulative foreign currency translation
adjustment -- (89)
Earnings employed in the business 1,520 1,534
------ ------
2,965 2,884
Less common stock held in treasury,
at cost 1,021 1,021
------ ------
Total $1,944 $1,863
====== ======
8. Supplemental Cash Flow Information.
On June 8, 1995, Sun completed the sale of its remaining 55 percent
interest in Suncor (Note 2). The following is a summary of the
effects of this transaction on Sun's consolidated financial position
(in millions of dollars):
(Increase) decrease in:
Accounts and notes receivable $ 165
Inventories 123
Receivable from sale of Suncor stock (125)
Properties, plants and equipment, net 1,328
Other noncurrent assets 41
Increase (decrease) in:
Accounts payable and accrued liabilities (230)
Current portion of long-term debt (4)
Taxes payable (47)
Long-term debt (160)
Retirement benefit liabilities (45)
Deferred income taxes (146)
Other deferred credits and liabilities (109)
Minority interest (392)
Cumulative foreign currency translation
adjustment 79
Earnings employed in the business 157
------
Net increase in cash and cash equivalents $ 635
======
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - SIX MONTHS
Earnings Profile of Sun Businesses (after tax)
----------------------------------------------
Six Months Ended
June 30
-----------------
1995 1994 Variance
---- ---- --------
(Millions of Dollars)
Fuels:
Wholesale fuels $(64) $(33) $(31)
Branded marketing 8 13 (5)
Lubricants:
Lubes 31 31 --
Related fuels (40) (15) (25)
Chemicals 49 (1) 50
Logistics 26 23 3
International production 32 22 10
Coal 12 2 10
Canada (Suncor):
Exploration and production -- 3 (3)
Oil sands 26 9 17
Refining and marketing 2 4 (2)
Corporate expenses (4) (2) (2)
Net financing expenses (1) (2) 1
---- ---- ----
Total Canada (Suncor) 23 12 11
Corporate:
Corporate expenses (10) (9) (1)
Net financing expenses (32) (14) (18)
Real estate operations held for sale -- 2 (2)
---- ---- ----
35 33 2
Gain on sale of Suncor stock 157 -- 157
Gain on divestment of exploration
and production properties -- 13 (13)
Provision for write-down of
assets and other matters (90) -- (90)
Cumulative effect of change in
accounting principle* -- (7) 7
---- ---- ----
Consolidated net income $102 $ 39 $ 63
==== ==== ====
----------------
*Consists of the impact of the cumulative effect of a change in the
method of accounting for postemployment benefits.
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Analysis of Earnings Profile of Sun Businesses
----------------------------------------------
In the six-month period ended June 30, 1995, Sun earned $102 million, or
$.95 per share of common stock, compared with earnings of $39 million, or
$.36 per share of common stock, for the first half of 1994. Excluding the
special items shown separately in the Earnings Profile of Sun Businesses,
Sun earned $35 million during the first six months of 1995 compared to $33
million during the first six months of 1994.
Fuels -- Sun's domestic Fuels businesses, comprised primarily of the
manufacturing of fuels at Sun's Marcus Hook, PA, Philadelphia, PA and
Toledo, OH refineries and the sale of fuels from these refineries, had
losses of $56 million in the first six months of 1995 compared to losses of
$20 million in the first six months of 1994. The decline in results was
primarily in Sun's Wholesale Fuels operations where losses increased to $64
million in the first half of 1995 from $33 million in the first six months
of 1994. Income from Branded Marketing operations decreased to $8 million
in the first half of 1995 from $13 million in the year-ago half.
Wholesale Fuels results for the first six months of 1995 included $10
million of after-tax income from operations at Sun's Girard Point facility
acquired from Chevron on August 4, 1994. (See also "Chemicals" below).
Excluding activity from the Girard Point facility, Wholesale Fuels results
declined $41 million due primarily to lower average wholesale fuels product
margins ($44 million), particularly for distillates, and lower sales
volumes ($9 million), partially offset by lower refinery operating expenses
($13 million). The decline in distillate margins was largely attributable
to the unusually mild winter.
In Branded Marketing, the $5 million decline in earnings was caused
primarily by lower retail distillate and lubricants sales volumes and
margins and higher depreciation expense. Income from Sun's branded
gasoline operations was essentially flat compared to the year ago first
half as higher average margins were offset by 5 percent lower sales
volumes. The decrease in retail gasoline volumes was due largely to the
elimination of some marginal distributor and retail accounts as Sun
continues to consolidate into a single Sunoco brand service station
network.
Lubricants -- Results from Sun's Lubricants business, comprised of the
manufacturing, packaging and marketing of lubricant products produced at
Sun's Tulsa and Puerto Rico refineries, as well as the related
manufacturing and wholesale marketing of fuels produced at these
facilities, decreased $25 million compared with the first six months of
1994. Income from sales of lubricant products was $31 million in both six
month periods, as higher average margins both for base oil and specialty
lubricant products were offset by 7 percent lower sales volumes. The
decline in sales volumes was due largely to a scheduled second quarter
maintenance turnaround at the Tulsa refinery. Losses from Related Fuels
operations totalled $40 million during the first half of 1995, representing
a $25 million decline in results from 1994 first half losses of $15
million. The decline was primarily due to lower margins on wholesale fuels
products ($21 million), principally distillates produced at these
refineries.
<PAGE>
<PAGE> 16
Chemicals -- Income from Sun's domestic Chemicals business was $49 million
in the first six months of 1995, compared with a loss of $1 million in the
prior year period. This improvement was due to higher margins ($32
million) and sales volumes ($4 million) resulting from stronger
petrochemicals demand and prices. The addition of aromatics production
from the Girard Point facility also contributed $14 million to the improved
earnings.
Logistics -- Logistics (pipeline transportation and petroleum terminalling
operations) income was $26 million, an increase of $3 million versus the
year-ago period. Higher throughput on Sun's eastern products system,
resulting primarily from Sun's acquisition of the Girard Point facility,
and income from Sun's new inter-refinery pipeline connecting the
Philadelphia and Marcus Hook refineries were largely responsible for the
increase in earnings. The inter-refinery pipeline commenced operations in
April 1995.
International Production -- International Production earnings were $32
million in the 1995 first half versus $22 million in the first half of
1994. The $10 million increase was due largely to 18 percent higher crude
oil prices ($8 million), a $4 million after-tax gain from the settlement of
litigation surrounding previously expropriated assets and $6 million of
after-tax income attributable to crude oil production from the
Ninian/Columba fields in the U.K. North Sea, which were acquired in the
third quarter of 1994. Partially offsetting these positive factors were
lower crude oil and natural gas volumes in Sun's other North Sea producing
properties.
Coal -- Coal operations earned $12 million during the first half of 1995,
an increase of $10 million from the year-ago period. The improved results
were primarily due to higher prices and margins for coal and coke and
improved mining operations.
Canada (Suncor) -- Suncor's results for the first six months of 1995
exclude a $157 million after-tax gain on the June 8 sale of Sun's remaining
55-percent interest in Suncor, which is reported separately in the Earnings
Profile of Sun Businesses. Income from Suncor increased $11 million
primarily due to higher income at the oil sands operation ($17 million)
resulting from higher synthetic crude oil prices and lower operating and
administrative expenses. Partially offsetting this increase was lower
earnings from Canadian exploration and production ($3 million) resulting
from lower natural gas prices.
Corporate -- Net financing expenses were up $18 million versus the year-ago
half due to higher average borrowings resulting in part from the high level
of 1994 growth capital expenditures. Net financing expenses should be
lower in the second half of 1995, as a significant portion of the proceeds
received from the sale of Suncor stock are being used to reduce debt. (See
Note 2 to the condensed consolidated financial statements.)
Real Estate Operations Held for Sale -- Real estate operations held for
sale broke even in the first six months of 1995 versus income of $2 million
in the first six months of 1994. The decline was primarily due to the
absence of income associated with three office projects located in
Pennsylvania that were divested in June 1994. For a further discussion of
<PAGE>
<PAGE> 17
Sun's real estate operations held for sale, see Note 3 to the condensed
consolidated financial statements.
Special Items -- For a discussion of the special items shown separately in
the Earnings Profile of Sun Businesses, see Notes 2, 4 and 5 to the
condensed consolidated financial statements.
Analysis of Consolidated Statements of Income
---------------------------------------------
Sales and other operating revenue increased $960 million, or 22 percent,
principally due to higher domestic refined product sales volumes ($575
million) and prices ($357 million) and higher revenues from resales of
purchased oil and refined products ($79 million), partially offset by a
decrease in consumer excise taxes ($55 million). The $215 million increase
in gain on divestments is primarily due to the $242 million gain resulting
from the sale of Sun's remaining interest in Suncor recognized in the
second quarter of 1995, partially offset by the absence of a $20 million
gain on the sale of Sun's remaining interest in a Colombian oil field
recognized during the second quarter of 1994. Cost of products sold and
operating expenses increased $955 million, or 37 percent, primarily due to
higher domestic crude oil and refined product acquisition costs ($857
million), higher resales of purchased oil and refined products ($77
million) and an increase in refinery expenses ($49 million). The higher
sales volumes, product acquisition costs and refinery expenses are largely
attributable to the Girard Point facility acquired on August 4, 1994.
Selling, general and administrative expenses increased $13 million, or 4
percent, primarily due to higher expenses in Sun's domestic refining and
marketing operations. Taxes, other than income taxes decreased $53
million, or 5 percent, due to lower consumer excise taxes ($55 million).
Depreciation, depletion and amortization increased $5 million, or 3
percent, primarily as a result of an increased depreciable asset base
resulting from the high level of 1994 capital spending. For a discussion
of the provision for write-down of assets and other matters recorded in the
second quarter of 1995, see Note 4 to the condensed consolidated financial
statements. The $6 million increase in minority interest is due to
increased earnings at Suncor, the Company's recently divested Canadian
subsidiary. Interest cost and debt expense increased $21 million, or 51
percent, due to higher average corporate borrowings. For a discussion of
the income from operations held for sale and the cumulative effect of
change in accounting principle, see Notes 3 and 5, respectively, to the
condensed consolidated financial statements.
<PAGE>
<PAGE> 18
RESULTS OF OPERATIONS - THREE MONTHS
Earnings Profile of Sun Businesses (after tax)
----------------------------------------------
Three Months Ended
June 30
------------------
1995 1994 Variance
---- ---- --------
(Millions of Dollars)
Fuels:
Wholesale fuels $ (6) $(22) $ 16
Branded marketing 1 5 (4)
Lubricants:
Lubes 17 17 --
Related fuels (18) (19) 1
Chemicals 24 2 22
Logistics 13 12 1
International production 13 8 5
Coal 8 2 6
Canada (Suncor):
Exploration and production -- 2 (2)
Oil sands 12 7 5
Refining and marketing 1 (1) 2
Corporate expenses (1) (1) --
Net financing expenses -- (1) 1
---- ---- ----
Total Canada (Suncor) 12 6 6
Corporate:
Corporate expenses (5) (4) (1)
Net financing expenses (17) (8) (9)
Real estate operations held for sale -- -- --
---- ---- ----
42 (1) 43
Gain on sale of Suncor stock 157 -- 157
Gain on divestment of exploration
and production properties -- 13 (13)
Provision for write-down of
assets and other matters (90) -- (90)
---- ---- ----
Consolidated net income $109 $ 12 $ 97
==== ==== ====
<PAGE>
<PAGE> 19
Analysis of Earnings Profile of Sun Businesses
----------------------------------------------
In the three-month period ended June 30, 1995, Sun earned $109 million, or
$1.02 per share of common stock, compared with earnings of $12 million, or
$.11 per share of common stock, for the second quarter of 1994. Excluding
the special items shown separately in the Earnings Profile of Sun
Businesses, Sun earned $42 million during the second quarter of 1995
compared to a loss of $1 million during the second quarter of 1994.
Fuels -- Sun's domestic Fuels businesses had losses of $5 million in the
second quarter of 1995 compared to losses of $17 million in the second
quarter of 1994. The improvement was primarily in Sun's Wholesale Fuels
operations where losses decreased to $6 million in the second quarter of
1995 from $22 million in the second quarter of 1994. Income from Branded
Marketing operations decreased to $1 million in the second quarter of 1995
from $5 million in the year-ago quarter.
Wholesale Fuels results for the current quarter included $7 million of
after-tax income from operations at Sun's Girard Point facility. (See also
"Chemicals" below). Excluding activity from the Girard Point facility,
Wholesale Fuels results improved $9 million due primarily to higher average
margins for wholesale gasoline and asphalt and lower refinery fuel costs,
partially offset by continued low distillate margins for most of the
quarter.
In Branded Marketing, the $4 million decline in earnings was caused
primarily by higher expenses, including increased depreciation expense due
to expenditures associated with the Company's service station modernization
and conversion program. Higher gasoline margins were largely offset by a 5
percent decline in retail gasoline sales volumes resulting principally from
the elimination of some marginal distributor and retail accounts.
Lubricants -- Results from Sun's Lubricants business increased $1 million
compared with the 1994 second quarter. Income from sales of lubricant
products was $17 million in both second quarter periods, as higher average
margins for both base oil and specialty lube oil products ($5 million) were
offset by 8 percent lower sales volumes ($4 million). The decline in sales
volumes was due largely to the scheduled second quarter maintenance
turnaround at the Tulsa refinery. Losses from Related Fuels operations
totalled $18 million during the second quarter of 1995, representing a $1
million improvement from the 1994 second quarter loss of $19 million.
Improved margins for wholesale gasoline and residual fuels and lower
expenses were largely offset by continued lower distillate margins
throughout most of the quarter.
Chemicals -- Income from Sun's domestic Chemicals business was $24 million
in the 1995 second quarter, compared with income of $2 million in the prior
year period. This improvement was due to higher margins ($18 million)
resulting from continued strong petrochemicals markets across most
products, particularly propylene. The addition of aromatics production
from the Girard Point facility ($6 million) and cyclohexane production from
a new plant at the Marcus Hook refinery also contributed to the improved
earnings.
<PAGE>
<PAGE> 20
Logistics -- Logistics income was $13 million, an increase of $1 million
versus the year-ago quarter. Higher tariff revenues and income from Sun's
new inter-refinery pipeline were largely responsible for the increase in
earnings.
International Production -- International Production earnings were $13
million in the 1995 second quarter versus $8 million in the second quarter
of 1994. The $5 million increase was due largely to 17 percent higher
crude oil prices ($4 million), an after-tax foreign exchange gain of $1
million in the current quarter versus an after-tax loss of $2 million in
the second quarter of 1994 and $3 million of after-tax income attributable
to crude oil production from the Ninian/Columba fields in the U.K. North
Sea. Partially offsetting these positive factors were lower crude oil and
natural gas volumes in Sun's other North Sea producing properties.
Coal -- Sun's coal operations earned $8 million during the second quarter
of 1995, an increase of $6 million from the year-ago period. The improved
results were primarily due to higher prices and margins for coal and coke
and improved mining operations.
Canada (Suncor) -- Income from Suncor increased $6 million compared to the
second quarter of 1994 primarily due to higher income at the oil sands
operation which benefitted from higher synthetic crude oil production
volumes and prices.
Corporate -- Net financing expenses were up $9 million versus the year-ago
quarter due to higher average borrowings resulting in part from the high
level of 1994 growth capital expenditures.
Real Estate Operations Held for Sale -- Real estate operations held for
sale broke even in both second quarter periods. For a discussion of Sun's
real estate operations held for sale, see Note 3 to the condensed
consolidated financial statements.
Special Items -- For a discussion of the special items shown separately in
the Earnings Profile of Sun Businesses, see Notes 2 and 4 to the condensed
consolidated financial statements.
Analysis of Consolidated Statements of Income
---------------------------------------------
Sales and other operating revenue increased $438 million, or 20 percent,
principally due to higher domestic refined product sales volumes ($264
million) and prices ($232 million) and higher revenues from resales of
purchased oil and refined products ($51 million), partially offset by a
decrease in consumer excise taxes ($69 million). The $221 million increase
in gain on divestments is primarily due to the $242 million gain resulting
from the sale of Sun's remaining interest in Suncor recognized in the
second quarter of 1995, partially offset by the absence of the $20 million
gain on the sale of Sun's remaining interest in a Colombian oil field
recognized in the second quarter of 1994. Cost of products sold and
operating expenses increased $430 million, or 31 percent, primarily due to
higher domestic crude oil and refined product acquisition costs ($378
million), higher resales of purchased oil and refined products ($51
million) and an increase in refinery expenses ($35 million). The higher
sales volumes, product acquisition costs and refinery expenses are largely
attributable to the Girard Point facility acquired on August 4, 1994.
Taxes, other than income taxes decreased $68 million, or 12 percent, due to
<PAGE> 21
higher consumer excise taxes ($69 million). Depreciation, depletion and
amortization decreased $2 million, or 2 percent, primarily as a result of
lower depreciation at Suncor ($8 million) resulting from its divestment on
June 8, 1995, partially offset by an increased depreciable asset base in
the Company's refining and marketing businesses resulting from the high
level of 1994 capital spending. For a discussion of the provision for
write-down of assets and other matters recorded in the second quarter of
1995, see Note 4 to the condensed consolidated financial statements. The
$2 million increase in minority interest is due to increased earnings at
Suncor prior to its divestment. Interest cost and debt expense increased
$10 million, or 48 percent, due to higher average corporate borrowings.
For a discussion of the income from operations held for sale, see Note 3 to
the condensed consolidated financial statements.
FINANCIAL CONDITION
Cash and Working Capital
------------------------
At June 30, 1995, Sun had cash and cash equivalents of $125 million
compared to $117 million at December 31, 1994, and had a working capital
deficit of $109 million compared to a working capital deficit of $407
million at December 31, 1994. Sun's working capital position is
considerably stronger than indicated because of the relatively low
historical costs assigned under the LIFO method of accounting to a
significant portion of the inventories reflected in the condensed
consolidated balance sheet. The current replacement cost of all such
inventories exceeds the carrying value at June 30, 1995 by $514 million.
Inventories valued at LIFO, which consist of crude oil and refined
products, are readily marketable at their current replacement values.
Management believes that the current levels of Sun's cash and working
capital provide adequate support for its ongoing operations.
Cash Generation and Financial Capacity
--------------------------------------
In the first six months of 1995, Sun's net cash provided by operating
activities ("cash generation") was $5 million compared to $130 million in
the first half of 1994. The $125 decline in cash generation is largely due
to an increase in working capital uses pertaining to operating activities
($116 million).
Management believes that future cash generation will be sufficient to
satisfy Sun's base infrastructure and legally required capital
requirements, and to sustain the current cash dividend. However, from time
to time, the Company's short-term cash requirements may exceed its cash
generation due to various factors including volatility in crude and refined
product markets and increases in capital spending and working capital
levels. During those periods, the Company may supplement its cash
generation with proceeds from divestment and financing activities. Growth
capital outlays will be funded with excess cash generation and proceeds
from the ongoing divestment of non-strategic/non-core assets.
In the event that cash generation is insufficient to satisfy near-term cash
requirements, the Company has access to $500 million of short-term
financing for operations in the form of commercial paper and revolving
<PAGE> 22
credit agreements from commercial banks. The Company also has access to
short-term financing under non-committed money market facilities and $150
million of confirmed lines of credit.
The following table sets forth Sun's total borrowings at:
June 30 December 31
1995 1994
-------- -----------
(Millions of Dollars)
Short-term borrowings
Commercial paper $ 22 $ 216
Non-committed money market
facilities 15 5
---- ------
37 221
Current portion of long-term debt 49 99
Long-term debt 888 1,073
---- ------
Total borrowings $974 $1,393
==== ======
As of June 30, 1995, Sun's long-term debt to long-term capitalization ratio
was 31.4 percent. Management believes there is sufficient borrowing
capacity available to provide for cash requirements.
Impairment of Long-Lived Assets
-------------------------------
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS No. 121") was issued. It establishes
accounting standards for the impairment of long-lived assets, certain
identifiable intangible assets and goodwill. The Company cannot reasonably
estimate the potential impact on net income of adopting SFAS No. 121 at
this time. Implementation of the new accounting standard, which must occur
by 1996, may take place in 1995. Any impact on net income would be
recognized in the period of adoption. Implementation of SFAS No. 121 will
not affect Sun's cash flow or liquidity.
Recent Developments
-------------------
Financial and Operational Restructuring
---------------------------------------
On June 13, 1995, the Company announced the details of an extensive
operational and financial restructuring which include the following major
elements:
- cost reductions of $110 million a year, principally by a reduction of
800 primarily staff and support positions (see Note 4 to the
condensed consolidated financial statements);
- the restructuring of Sun Company into eight "separate and discrete,
but not autonomous, business units" plus a holding company and a
service organization;
<PAGE>
<PAGE 23
- the sale of Suncor for net cash proceeds of $770 million, of which
$635 million was received in June 1995, with the remainder expected
to be received in June 1996 (see Note 2 to the condensed consolidated
financial statements);
- the reduction of Sun's debt by more than $500 million through the use
of a significant portion of the Suncor proceeds to repay debt and the
elimination of approximately $165 million of debt as part of the
Suncor sale;
- the reduction of Sun's quarterly common stock dividend from $.45 per
share ($1.80 per year) to $.25 per share ($1.00 per year);
- a cash tender offer for up to 6.4 million shares of Sun common stock
via a "Dutch auction". Approximately 18.17 percent, or 6.4 million
shares, of the shares validly tendered in the cash offer at the
$30.00 per share cash purchase price were acquired on substantially a
pro rata basis on August 9 for $192 million;
- an offer to shareholders to exchange up to 25 million shares of Sun
common stock tax free for an equal number of "depositary shares" that
will be entitled to an annual dividend of $1.80 per share. Each
depositary share represents one-half of the Company's newly issued
Series A Cumulative Preference Stock. The value of each depositary
share is capped for a three-year period at $40 per share plus any
remaining "excess" dividend, and is subject to redemption for common
stock. Approximately 75.23 percent, or 25 million shares, of the
shares validly tendered in the exchange offer were accepted for
exchange on a pro rata basis on August 9.
Sun also announced on June 13, 1995 that the Company's Board of Directors
has authorized a program to purchase up to $100 million of common stock in
the open market from time to time depending on prevailing market conditions
and opportunities.
Transfer of Interest in Cokemaking Operations
---------------------------------------------
On July 14, 1995, Sun transferred to a third party an interest in its
cokemaking operations in exchange for $95 million in cash. The third
party's interest entitles it to a preferential return from the cash flows
of the cokemaking operation until certain cumulative return targets have
been met. No gain or loss will be recognized by Sun as a result of this
transaction which is not expected to have a significant impact on Sun's
future results of operations or cash generation.
<PAGE>
<PAGE> 24
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
In April 1995, Tosco Corporation ("Tosco") filed an action in the
United States District Court for the Western District of Oklahoma,
seeking a declaration of its rights and obligations under a November
1, 1980 agreement with Sun Company, Inc. (R&M) ("Sun R&M") for the
sale to Tosco of Sun R&M's formerly-owned Duncan, OK refinery. On
June 19, 1995, Sun R&M answered the complaint by raising a number of
affirmative defenses and making counterclaims, including a citizen
suit under RCRA. Tosco filed its first amended complaint on July 19,
1995, and added claims under CERCLA, RCRA and the Oil Pollution Act of
1990 in addition to its request for declaratory relief. (See Note 6
to the condensed consolidated financial statements.)
On December 27, 1995, Region II of the United States Environmental
Protection Agency (the "EPA") filed an Administrative Complaint
against Sun Company, Inc. (R&M), alleging certain violations of SARA
Section 313 annual reporting requirements in connection with Form "R"
filings during the years 1989 through 1992. A settlement in principle
has been reached with the EPA whereby Sun R&M expects to pay civil
fines amounting to more than $100,000; however, the negotiated Consent
Order has not yet been signed by the government.
Sun paid $200,000 in civil fines and agreed to undertake certain
corrective and preventive maintenance actions pursuant to a Consent
Order entered on May 2, 1995 by the Court of Common Pleas of Lucas
County Ohio. This agreement between Sun and the State of Ohio,
regarding excessive emissions at Sun's Toledo, OH refinery, stems from
a lawsuit filed April 18, 1995, by the environmental enforcement
section of the Ohio Attorney General's office, citing violations
during the period from June 19, 1988 through October 12, 1993.
Many other legal and administrative proceedings are pending against
Sun. Although the ultimate outcome of these proceedings cannot be
ascertained at this time, it is reasonably possible that some of them
could be resolved unfavorably to Sun. Management of Sun believes that
any liabilities which may arise from such proceedings, including those
discussed above, would not be material in relation to the consolidated
financial position of Sun at June 30, 1995.
<PAGE>
<PAGE> 25
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of the Company's shareholders was held on May 4,
1995. Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities Exchange Act of 1934 and there was no solicitation
in opposition to the Company's solicitations. At this meeting, the
shareholders were requested (1) to act upon the appointment of
independent accountants, (2) to act upon certain proposed amendments
to both the Company's Articles of Incorporation and its Bylaws to
permit any record holder of at least ten percent (10%) of the
outstanding shares of the Company's Voting Stock to call a special
meeting of the shareholders and (3) to elect a Board of Directors. The
following action was taken by the Company's shareholders with respect
to each of the above items:
1. Concerning the motion to appoint Coopers & Lybrand as the
Company's independent accountants, there was a total of
90,968,713 votes cast, with an aggregate of 90,017,387 votes cast
in favor of such appointment, 951,326 against and 448,613
withheld (abstentions). There were no broker non-votes.
2. Concerning the proposal to amend both the Company's Articles of
Incorporation and its Bylaws, there was a total of 80,818,033
votes cast, with an aggregate of 74,964,532 votes cast in favor
of such proposed amendments, 5,853,501 against and 1,161,155
withheld (abstentions). There were 9,438,138 broker non-votes.
3. Concerning the election of a Board of Directors of the Company,
there was a total of 91,416,474 votes cast. Each of the following
individuals continued his or her term of office as a director of
the Company and was re-elected to the Board of Directors. The
tabulation below sets forth the number of votes cast for, against
or withheld (abstentions) for each director. There were no broker
non-votes.
Number
Number Number "WITHHELD"
NAME "FOR" "AGAINST" (ABSTENTIONS)
---- ------ --------- -------------
R. H. Campbell 90,068,669 1,347,694 963
R. E. Cartledge 90,203,867 1,212,607 852
R. E. Cawthorn 90,228,498 1,187,976 852
M. J. Evans 90,115,151 1,301,313 862
T. P. Gerrity 90,216,102 1,200,320 904
J. G. Kaiser 90,170,133 1,245,369 1,824
R. D. Kennedy 90,194,354 1,222,120 852
T. W. Langfitt 89,863,029 1,552,926 1,371
R. A. Pew 90,081,012 1,335,045 1,269
A. E. Piscopo 89,915,362 1,500,695 1,269
W. F. Pounds 90,157,064 1,259,358 904
A. B. Trowbridge 90,098,360 1,318,114 852
<PAGE>
<PAGE> 26
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
3.(i) - Articles of Incorporation of Sun Company, Inc., as amended
June 13, 1995.
4 - Statement of Designation relating to the Series A Cumulative
Preference Stock (incorporated by reference to Exhibit 4.3
to the Company's Current Report on Form 8-K dated June 13,
1995).
10.1 - Termination Agreement and General Release and Waiver between
Harwood S. Roe, Jr. and Sun Company, Inc.
10.2 - Sun Company, Inc. Retainer Stock Plan for Outside Directors,
as amended and restated effective May 5, 1994.
11 - Statements re Sun Company, Inc. and Subsidiaries Computation
of Per Share Earnings for the Six-Month and Three-Month
Periods Ended June 30, 1995 and 1994.
12 - Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Six-Month
Period Ended June 30, 1995.
27 - Article 5 of Regulation S-X, Financial Data Schedule.
Reports on Form 8-K:
A report on Form 8-K dated June 13, 1995 was filed to disclose under
Item 2 -- "Acquisition or Disposition of Assets" and Item 7 --
"Financial Statements and Exhibits," the disposition of the Company's
remaining 55-percent interest in Suncor Inc., Sun's Canadian
integrated oil company and to disclose under Item 5 -- "Other Events,"
the Company's press release dated June 13, 1995 announcing the details
of an extensive operational and financial restructuring.
*****************************
We are pleased to furnish this report to shareholders who request it by
writing to:
Sun Company, Inc.
Shareholder Relations
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
<PAGE>
<PAGE> 27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SUN COMPANY, INC.
BY s/ THOMAS W. HOFMANN
--------------------
Thomas W. Hofmann
Comptroller
(Principal Accounting Officer)
DATE August 10, 1995
<PAGE>
<PAGE> 1
EXHIBIT INDEX
Exhibit
Number Exhibit
------- -----------------------------------------
3.(i) Articles of Incorporation of Sun Company, Inc., as amended
June 13, 1995.
4 Statement of Designation relating to the Series A Cumulative
Preference Stock (incorporated by reference to Exhibit 4.3
to the Company's Current Report on Form 8-K dated June 13,
1995).
10.1 Termination Agreement and General Release and Waiver between
Harwood S. Roe, Jr. and Sun Company, Inc.
10.2 Sun Company, Inc. Retainer Stock Plan for Outside Directors,
as amended and restated effective May 5, 1994.
11 Statements re Sun Company, Inc. and Subsidiaries Computation
of Per Share Earnings for the Six-Month and Three-Month
Periods Ended June 30, 1995 and 1994.
12 Statement re Sun Company, Inc. and Subsidiaries Computation
of Ratio of Earnings to Fixed Charges for the Six-Month
Period Ended June 30, 1995.
27 Article 5 of Regulation S-X, Financial Data Schedule.
<PAGE>
<PAGE> 1
EXHIBIT 3.(i)
Articles of Incorporation
of Sun Company, Inc.
<PAGE>
<PAGE> 2
Articles of Incorporation of Sun Company, Inc.
First: The name of the Corporation is "Sun Company, Inc."
Second: The location and post office address of its registered office in
this Commonwealth is 1801 Market Street, Philadelphia, Pennsylvania 19103.
Third: The Corporation shall have unlimited power to engage in and to do
any lawful act concerning any or all lawful business for which corporations
may be incorporated under the provisions of the Act of May 5, 1933 (P.L.
364, as amended). The Corporation is incorporated under the provisions of
said Act.
Fourth: The total number of shares of capital stock which this
Corporation shall have authority to issue is Two Hundred Fifteen Million
(215,000,000) to be divided into two classes consisting of Fifteen Million
(15,000,000) shares designated as "Cumulative Preference Stock"
(hereinafter called "Preference Stock"), without par value, and Two Hundred
Million (200,000,000) shares designated as "Common Stock," (hereinafter
called "Common Stock"), $1 par value.
The following is a description of each class of capital stock and a
statement of the preferences, qualifications, privileges, limitations,
restrictions, and other special or relative rights granted to or imposed
upon the shares of each class:
Preference Stock
1. Authority of Board of Directors. Authority is hereby vested in the
Board of Directors, by resolution, to divide any or all of the authorized
shares of Preference Stock into series and, within the limitations provided
by law and this Article Fourth, to fix and determine the designations,
preferences, qualifications, privileges, limitations, options, conversion
rights, and other special rights of each such series, including but not
limited to the right to fix and determine:
(a) the designation of and the number of shares issuable in each such
series;
(b) the annual dividend rate, expressed in a dollar amount per share, for
each such series;
(c) the right, if any, of the Corporation to redeem shares of any such
series, and the terms and conditions on which shares of each such series
may be redeemed;
(d) the amounts payable upon shares of each such series in the event of
the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(e) the sinking fund provisions, if any, for the redemption or purchase
of shares of each such series;
(f) the voting rights, if any, for the shares of each such series;
provided, however, that the number of votes per share of Preference Stock
shall in no event exceed one (1);
(g) the terms and conditions, if any, on which shares of each such series
may be converted into shares of stock of this Corporation; provided,
however, that shares of Preference Stock shall not be convertible into
shares of any class of stock of the Corporation other than Common Stock and
shall not be convertible into more than one share of Common Stock, or such
greater or lesser number as will reflect the effect of stock dividends,
stock splits or stock combinations affecting Common Stock and occurring
after May 9, 1980, subject to such terms and conditions, including
provision for fractional shares, as the Board of Directors shall authorize;
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<PAGE> 3
(h) the stated value per share for each such series; and
(i) any and all such other provisions as may be fixed or determined by
the Board of Directors of the Corporation pursuant to Pennsylvania law.
2. Parity of Series of Preference Stock and Shares Within Series;
Priority of Preference Stock. All shares of the same series of Preference
Stock shall be identical with each other share of such series in all
respects, except that shares of any one series issued at different times
may differ as to the dates from which dividends thereon shall be
cumulative. Except as determined by the Board of Directors as permitted by
the provisions of paragraph 1 hereof, all series of Preference Stock shall
rank equally with and be identical in all respects to each other series.
Preference Stock shall rank, as to dividends and upon liquidation,
dissolution or winding up, prior to Common Stock and to any other capital
stock of the Corporation hereafter authorized, other than capital stock
which shall by its terms rank prior to or on a parity with Preference Stock
and which shall be authorized pursuant to subparagraph 9(a) hereof.
3. Dividends. Before any dividends (other than dividends payable in
stock ranking junior to Preference Stock) on any class or classes of stock
of the Corporation ranking junior to Preference Stock as to dividends or
upon liquidation shall be declared and set apart for payment or paid, the
holders of shares of Preference Stock of each series shall be entitled to
receive cash dividends, when and as declared by the Board of Directors at
the annual rate, and no more, fixed in the resolution adopted by the Board
of Directors providing for the issue of such series. Such dividends shall
be payable in cash quarterly, each such quarterly payment to be in respect
of the quarterly period ending with the day next preceding the date of such
payment (except in the case of the first dividend which shall be in respect
of the period beginning with the initial date of issue of such shares and
ending with the day next preceding the date of such payment), to holders of
Preference Stock of record on the respective dates, not exceeding forty
(40) days preceding such quarterly dividend payment dates, fixed for that
purpose by the Board of Directors. With respect to each series of
Preference Stock, such dividends shall be cumulative from the date or dates
of issue of such series, which date or dates may be set by the Board of
Directors pursuant to the provisions of paragraph 1 hereof. No dividends
shall be declared or paid or set apart for payment on any series of
Preference Stock in respect of any quarterly dividend period unless there
shall likewise be or have been declared and paid or set apart for payment
on all shares of Preference Stock of each other series at the time
outstanding like dividends in proportion to the respective annual dividend
rates fixed therefor as hereinbefore provided for all quarterly dividend
periods coinciding with or ending before such quarterly dividend period.
Accruals of dividends shall not bear interest.
4. Redemption. The Corporation, at the option of the Board of Directors,
may, at any time permitted by the resolution adopted by the Board of
Directors providing for the issue of any series of Preference Stock and at
the redemption price or prices stated in said resolution, redeem the whole
or any part of the shares of such series at the time outstanding. If at
any time less than all of the shares of Preference Stock then outstanding
are to be called for redemption, the shares to be redeemed may be selected
by lot or by such other equitable method as the Board of Directors in its
discretion may determine. Notice of every redemption, stating the
redemption date, the redemption price, and the placement of payment
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<PAGE> 4
thereof, shall be given by mailing a copy of such notice at least thirty
(30) days and not more than sixty (60) days prior to the date fixed for
redemption to the holders of record of the shares of Preference Stock to be
redeemed at their addresses as the same shall appear on the books of the
Corporation. The Corporation, upon mailing notice of redemption as
aforesaid or upon irrevocably authorizing the bank or trust company
hereinafter mentioned to mail such notice, may deposit or cause to be
deposited in trust with a bank or trust company in the City of
Philadelphia, Commonwealth of Pennsylvania, or in the Borough of Manhattan,
City and State of New York, an amount equal to the redemption price of the
shares to be redeemed plus any accrued and unpaid dividends thereon, which
amount shall be payable to the holders of the shares to be redeemed upon
surrender of certificates therefor on or after the date fixed for
redemption or prior thereto if so directed by the Board of Directors. Upon
such deposit, or if no such deposit is made, then from and after the date
fixed for redemption unless the Board of Directors shall default in making
payment of the redemption price plus accrued and unpaid dividends upon
surrender of certificates as aforesaid, the shares called for redemption
shall cease to be outstanding and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no interest in or
claim against the Corporation with respect to such shares other than the
right to receive the redemption price plus accrued and unpaid dividends
from such bank or trust company or from the Corporation, as the case may
be, without interest thereon, upon surrender of certificates as aforesaid;
provided, that conversion rights, if any, of shares called for redemption
shall terminate at the close of business on the business day prior to the
date fixed for redemption. Any funds so deposited which shall not be
required for such redemption because of the exercise of conversion rights
subsequent to the date of such deposit shall be returned to the
Corporation. In case any holder of shares of Preference Stock which have
been called for redemption shall not, within six (6) years after the date
of such deposit, have claimed the amount deposited with respect to the
redemption thereof, such bank or trust company, upon demand, shall pay over
to the Corporation such unclaimed amount and shall thereupon be relieved of
all responsibility in respect thereof to such holder, and thereafter such
holder shall look only to the Corporation for payment thereof. Any
interest which may accrue on funds so deposited shall be paid to the
Corporation from time to time.
5. Status of Shares of Preference Stock Redeemed or Acquired. Unless
otherwise specifically provided in the resolutions of the Board of
Directors authorizing the issue of any series of Preference Stock, shares
of any series of Preference Stock which have been redeemed, purchased or
acquired by the Corporation by means other than conversion (whether through
the operation of a sinking fund or otherwise) shall have the status of
authorized and unissued shares of Preference Stock and may be reissued as a
part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preference Stock to be
created by resolution of the Board of Directors or as part of any other
series of Preference Stock. Shares of any series of Preference Stock
converted shall not be reissued and the Board of Directors shall take
appropriate actions to reflect the conversion of Preference Stock from time
to time by effecting reductions in the number of shares of Preference Stock
which the Corporation is authorized to issue.
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<PAGE> 5
6. Redemption or Acquisition of Preference Stock During Default in
Payment of Dividends. If at any time the Corporation shall have failed to
pay dividends in full on Preference Stock, thereafter and until dividends
in full including all accrued and unpaid dividends on shares of all series
of Preference Stock at the time outstanding, shall have been declared and
set apart for payment or paid, (i) the Corporation, without the affirmative
vote or consent of the holders of at least a majority of the shares of
Preference Stock at the time outstanding, voting or consenting separately
as a class without regard to series, given in person or by proxy, either in
writing or by resolution adopted at a meeting, shall not redeem less than
all the shares of Preference Stock at such time outstanding, regardless of
series, other than in accordance with paragraph 8 hereof and (ii) neither
the Corporation nor any subsidiary shall purchase any shares of Preference
Stock except in accordance with a purchase offer made in writing or by
publication, as determined by the Board of Directors, in their sole
discretion after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series, shall
determine (which determination shall be final and conclusive) will result
in fair and equitable treatment among the respective series; provided,
however, that (iii) unless prohibited by the provisions applicable to any
series, the Corporation, to meet the requirements of any sinking fund
provision with respect to any series, may use shares of such series
acquired by it prior to such failure and then held by it as treasury stock,
and (iv) nothing shall prevent the Corporation from completing the purchase
or redemption of shares of Preference Stock for which a purchase contract
was entered into for any sinking fund purposes or the notice of redemption
of which was mailed to the holders thereof, prior to such default.
7. Dividends and Distributions on and Redemption and Acquisition of
Junior Classes of Stock. So long as any shares of Preference Stock are
outstanding, the Corporation shall not declare or set apart for payment or
pay any dividends (other than stock dividends payable on shares of stock
ranking junior to Preference Stock) or make any distribution on any other
class or classes of stock of the Corporation ranking junior to Preference
Stock as to dividends or upon liquidation and shall not redeem, purchase or
otherwise acquire, or permit any subsidiary to purchase or otherwise
acquire, any shares of any such junior class if at the time of making such
declaration, payment, distribution, redemption, purchase or acquisition the
Corporation shall be in default with respect to any dividend payable on, or
any obligation to purchase, shares of any series of Preference Stock;
provided, however, that, notwithstanding the foregoing, the Corporation may
at any time redeem, purchase or otherwise acquire shares of stock of any
such junior class in exchange for, or out of the net cash proceeds from the
sale of, other shares of stock of any junior class.
8. Retirement of Shares. If in any case the amounts payable with respect
to any obligations to retire shares of Preference Stock are not paid in
full in the case of all series with respect to which such obligations
exist, the number of shares of the various series to be retired shall be in
proportion to the respective amounts which would be payable on account of
such obligations if all amounts payable were discharged in full.
9. Action by Corporation Requiring Approval of Preference Stock. The
Corporation shall not, without the affirmative vote or consent of the
holders of at least 66 2/3% of the number of shares of Preference Stock at
the time outstanding, voting or consenting (as the case may be) separately
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<PAGE> 6
as a class without regard to series, given in person or by proxy, either in
writing or by resolution adopted at a meeting:
(a) create any class of stock ranking prior to or on a parity with
Preference Stock as to dividends or upon liquidation or increase the
authorized number of shares of any such previously authorized class of
stock;
(b) alter or change any of the provisions hereof so as adversely to
affect the preferences, special rights or powers given to the Preference
Stock;
(c) increase the number of shares of Preference Stock which the
Corporation is authorized to issue; or
(d) alter or change any of the provisions hereof or of the resolution
adopted by the Board of Directors providing for the issue of such series so
as adversely to affect the preferences, special rights or powers given to
such series.
10. Special Voting Rights. If the Corporation shall have failed to pay,
or declare and set apart for payment, dividends on Preference Stock in an
aggregate amount equivalent to six (6) full quarterly dividends on all
shares of Preference Stock at the time outstanding, the number of Directors
of the Corporation shall be increased by two (2) at the first annual
meeting of the shareholders of the Corporation held thereafter, and at such
meeting and at each subsequent annual meeting until dividends payable for
all past quarterly dividend periods on all outstanding shares of Preference
Stock shall have been paid, or declared and set apart for payment, in full,
the holders of the shares of Preference Stock shall have, in addition to
any other voting rights which they otherwise may have, the exclusive and
special right, voting separately as a class without regard to series, each
share of Preference Stock entitling the holder thereof to one (1) vote per
share, to elect two (2) additional members of the Board of Directors to
hold office for a term of one (1) year; provided, that the right to vote as
a class upon the election of such two (2) additional Directors shall not
limit the right of holders of any series of Preference Stock to vote upon
the election of all other Directors and upon other matters if and to the
extent that such holders are entitled to vote pursuant to the resolution
adopted by the Board of Directors pursuant to paragraph 1 hereof, providing
for the issue of such series. Upon such payment, or declaration and
setting apart for payment, in full, the terms of the two (2) additional
Directors so elected shall forthwith terminate, and the number of Directors
of the Corporation shall be reduced by two (2) and such voting right of the
holders of shares of Preference Stock shall cease, subject to increase in
the number of Directors as aforesaid and to revesting of such voting right
in the event of each and every additional failure in the payment of
dividends in an aggregate amount equivalent to six (6) full quarterly
dividends as aforesaid.
11. Liquidation of the Corporation. Upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, Preference Stock
shall be preferred as to assets over Common Stock and any other class or
classes of stock ranking junior to Preference Stock so that the holders of
shares of Preference Stock of each series shall be entitled to be paid or
to have set apart for payment, before any distribution is made to the
holders of Common Stock and any other class or classes of stock ranking
junior to Preference Stock, the amount fixed in accordance with paragraph 1
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<PAGE> 7
hereof plus an amount equal to all dividends accrued and unpaid up to and
including the date fixed for such payment and the holders of Preference
Stock shall not be entitled to any other payment.
If upon any such liquidation, dissolution or winding up of the
Corporation, its net assets shall be insufficient to permit the payment in
full of the respective amounts to which the holders of all outstanding
shares of Preference Stock are entitled as above provided, the entire
remaining net assets of the Corporation shall be distributed among the
holders of Preference Stock in amounts proportionate to the full
preferential amounts to which they are respectively entitled.
For the purposes of this paragraph 11, the voluntary sale, lease,
exchange or transfer for cash, shares of stock (securities or other
consideration) of all or substantially all the Corporation's property or
assets to, or its consolidation or merger with, one or more corporations
shall not be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.
12. Voting Rights. Except as otherwise provided by the provisions of
this Article Fourth or by statute or when fixed in accordance with the
provisions of paragraph 1 hereof, the holders of shares of Preference Stock
shall not be entitled to any voting rights.
13. Definitions. For the purposes of this Article Fourth and of any
resolution of the Board of Directors providing for the issue of any series
of Preference Stock or of any statement filed with the Secretary of State
of the Commonwealth of Pennsylvania (unless otherwise provided in any such
resolution or statement):
(a) The term "outstanding," when used in reference to shares of stock,
shall mean issued shares excluding:
(i) shares held by the Corporation or a subsidiary; and
(ii) shares called for redemption if funds for the redemption
thereof have been deposited in trust.
(b) Any class or classes of stock of the Corporation shall be deemed to
rank:
(i) prior to Preference Stock, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to
the receipt of dividends or amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of Preference Stock;
(ii) on a parity with Preference Stock, either as to dividends or upon
liquidation, whether or not the dividend rates or dividend payment dates or
the redemption or liquidation prices per share thereof be different from
those of Preference Stock, if the holders of such class or classes shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in proportion
to their respective dividend rates or liquidation prices, without
preference or priority one (1) over the other as between the holders of
such class or classes and the holders of Preference Stock; and
(iii) junior to Preference Stock, either as to dividends or upon
liquidation, if the rights of the holders of such class or classes shall be
subject or subordinate to the rights of the holders of Preference Stock in
respect of the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be.
(c) The term "subsidiary" as used herein shall mean any corporation 51%
or more of the outstanding stock having voting rights of which is at the
time owned or controlled directly or indirectly by the Corporation.
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<PAGE> 8
SERIES A CUMULATIVE PREFERENCE STOCK
1. Designation. The designation of the series of Preference
Stock authorized by this resolution shall be Series A Cumulative Preference
Stock (the "Series A Preference Stock") consisting of 12,500,000 shares.
2. Rank. The Series A Preference Stock shall rank, as to
dividends and upon liquidation, dissolution or winding up, prior to the
Common Stock and to any other capital stock of the Corporation hereafter
authorized, other than capital stock which shall by its terms rank prior to
or on a parity with the Series A Preference Stock and which shall be
authorized pursuant to paragraph 6(d) hereof. Any class or classes of stock
of the Corporation shall be deemed to rank:
(i) prior to Series A Preference Stock, either as to
dividends or upon liquidation, if the holders of such class or classes
shall be entitled to the receipt of dividends or amounts distributable
upon liquidation, dissolution or winding up, as the case may be, in
preference or priority to the holders of Series A Preference Stock;
(ii) on a parity with Series A Preference Stock, either as
to dividends or upon liquidation, whether or not the dividend rates or
dividend payment dates or the redemption or liquidation prices per
share thereof be different from those of Series A Preference Stock, if
the holders of such class or classes shall be entitled to the receipt
of dividends or of amounts distributable upon liquidation, dissolution
or winding up, as the case may be, in proportion to their respective
dividend rates or liquidation prices, without preference or priority
one (1) over the other as between the holder of such class or classes
and the holders of Series A Preference Stock ("Parity Stock"); and
(iii) junior to Series A Preference Stock, either as to
dividends or upon liquidation, if the rights of the holders of such
class or classes shall be subject or subordinate to the rights of the
holders of Series A Preference Stock in respect of the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be ("Junior Stock").
3. Dividends.
(a) The holders of outstanding shares of the Series A Preference
Stock shall be entitled to receive, when and as declared by the Board of
Directors, cash dividends accruing at the per share rate of $3.60 per annum
(the "Dividend Rate") and no more, payable in cash quarterly, each such
quarterly payment to be in respect of the quarterly period ending with the
day next preceding the date of such payment (except in the case of the
first dividend which shall be in respect of the period beginning with June
12, 1995 and ending with the day next preceding the date of such payment),
to holders of Series A Preference Stock of record on the respective dates,
not exceeding forty (40) days preceding such quarterly dividend payment
dates, fixed for that purpose by the Board of Directors. Such dividends
shall be cumulative from June 12, 1995 and shall accrue daily. Accruals of
dividends shall not bear interest. Dividends will be payable on or before
each March 13, June 13, September 13 and December 13 (or, if any such day
is not a business day, on the next succeeding business day).
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<PAGE> 9
(b) Before any dividends (other than dividends payable in Junior
Stock) on any class or classes of stock of the Corporation ranking junior
to Series A Preference Stock as to dividends or upon liquidation shall be
declared and set apart for payments or paid, the holders of shares of
Series A Preference Stock shall be entitled to receive cash dividends, when
and as declared by the Board of Directors at the Dividend Rate, and no
more. No dividends shall be declared or paid or set apart for payment on
the Series A Preference Stock in respect of any quarterly dividend period
unless there shall likewise be or have been declared and paid or set apart
for payment on all shares of Preference Stock of each other series at the
time outstanding like dividends in proportion to the respective annual
dividend rates fixed therefor for all quarterly dividend periods coinciding
with or ending before such quarterly dividend period.
(c) So long as any shares of Series A Preference Stock are
outstanding, the Corporation shall not declare or set apart for payment or
pay any dividends (other than stock dividends payable on shares of Junior
Stock) or make any distribution on any other class or classes of stock of
the Corporation ranking junior to Series A Preference Stock as to dividends
or upon liquidation and shall not redeem, purchase or otherwise acquire, or
permit any subsidiary to purchase or otherwise acquire, any shares of any
such Junior Stock if at the time of making such declaration, payment,
distribution, redemption, purchase or acquisition the Corporation shall be
in default with respect to any dividend payable on, or any obligation to
purchase, shares of Series A Preference Stock; provided, however, that,
notwithstanding the foregoing, the Corporation may at any time redeem,
purchase or otherwise acquire shares of stock of any such Junior Stock in
exchange for, or out of the net cash proceeds from the sale of, other
shares of stock of any Junior Stock.
4. Redemptions.
(a) Right to Call for Redemption. At any time and from time to
time, the Corporation shall have the right to call, in whole or in part,
the outstanding shares of the Series A Preference Stock for redemption,
subject to the notice provisions set forth in paragraph (4)(h). On the
redemption date (the "Redemption Date") with respect to any such
redemption, the Corporation shall deliver to the holders thereof, in
exchange for each such share called for redemption, the following
consideration:
(1) in the event such Redemption Date is prior to June 12, 1998
(the "Specified Date"),
(i) a number of shares of Common Stock equal to the
Call Price (as defined in paragraph (4)(g)(ii)) in effect on
the Redemption Date divided by the Current Market Price of
the Common Stock determined as of the second Trading Date
immediately preceding the Notice Date, plus
(ii) an amount in cash equal to all accrued and unpaid
dividends on such share of Series A Preference Stock to and
including the Redemption Date, whether or not declared, out
of funds legally available therefor (and dividends shall
cease to accrue on such share as of such Redemption Date);
and
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<PAGE> 10
(2) in the event such Redemption Date is on or after the
Specified Date,
(i) shares of Common Stock at the Common Equivalent
Rate (determined as provided in this paragraph (4)) in
effect on the Redemption Date; plus
(ii) an amount in cash equal to all accrued and unpaid
dividends on such share of Series A Preference Stock to and
including the Redemption Date, whether or not declared, out
of funds legally available for the payment of dividends (and
dividends shall cease to accrue on such share as of such
Redemption Date).
If at any time less than all of the shares of Series A Preference Stock
then outstanding are to be called for redemption, the shares to be redeemed
may be selected by lot or such other equitable method as the Board of
Directors of the Corporation in its discretion may determine.
(b) Redemption or Acquisition of Series A Preference Stock
During Default in Payment of Dividends. If at any time the Corporation
shall have failed to pay dividends in full on Preference Stock, thereafter
and until dividends in full including all accrued and unpaid dividends on
shares of all series of Preference Stock at the time outstanding, shall
have been declared and set apart for payment or paid, (i) the Corporation,
without the affirmative vote or consent of the holders of at least a
majority of the shares of Preference Stock at the time outstanding, voting
or consenting separately as a class without regard to series, given in
person or by proxy, either in writing or by resolution adopted at a
meeting, shall not redeem less than all the shares of Preference Stock at
such time outstanding, regardless of series, other than in accordance with
paragraph 4(f) hereof and (ii) neither the Corporation nor any subsidiary
shall purchase any shares of Preference Stock except in accordance with a
purchase offer made in writing or by publication, as determined by the
Board of Directors, in their sole discretion after consideration of the
respective annual dividend rates and other relative rights and preferences
of the respective series, shall determine (which determination shall be
final and conclusive) will result in fair and equitable treatment among the
respective series; provided, however, that (iii) unless prohibited by the
provisions applicable to any series, the Corporation, to meet the
requirements of any sinking fund provision with respect to any series, may
use shares of such series acquired by it prior to such failure and then
held by it as treasury stock, and (iv) nothing shall prevent the
Corporation from completing the purchase or redemption of shares of
Preference Stock for which a purchase contract was entered into for any
sinking fund purposes or the notice of redemption of which was mailed to
the holders thereof, prior to such default.
(c) Common Equivalent Rate; Adjustments. The Common Equivalent
Rate to be used to determine the number of shares of Common Stock to be
delivered on the redemption of the Series A Preference Stock in exchange
for shares of Common Stock pursuant to paragraph (4)(a)(2) (a "Specified
Redemption") shall be initially two shares of Common Stock for each share
of Series A Preference Stock; provided, however, that such Common
Equivalent Rate shall be subject to adjustment from time to time as
provided below in this paragraph (4)(c). All adjustments to the Common
Equivalent Rate shall be calculated to the nearest 1/100th of a share of
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Common Stock. Such rate as adjusted and in effect at any time is herein
called the "Common Equivalent Rate."
(i) If the Corporation shall do any of the following (an
"Adjustment Event"):
(A) pay a dividend or make a distribution with respect to
Common Stock in shares of Common Stock,
(B) subdivide, reclassify or split its outstanding shares
of Common Stock into a greater number of shares,
(C) combine or reclassify its outstanding shares of Common
Stock into a smaller number of shares, or
(D) issue by reclassification of its shares of Common Stock
any shares of Common Stock other than in a Fundamental
Transaction (as defined in paragraph 4(g)(iv)),
then the Common Equivalent Rate in effect immediately prior to such
Adjustment Event shall be adjusted so that the holder of a share of
the Series A Preference Stock shall be entitled to receive on the
redemption of such share of the Series A Preference Stock, the number
of shares of Common Stock that such holder would have owned or been
entitled to receive after the happening of the Adjustment Event had
such share of the Series A Preference Stock been redeemed pursuant to
paragraph 4(a) immediately prior to the record date for such
Adjustment Event, if any, or such Adjustment Event. Where the
Adjustment Event is a dividend or distribution, the adjustment to the
Common Equivalent Rate shall become effective as of the close of
business on the record date for determination of stockholders entitled
to receive such dividend or distribution; where the Adjustment Event
is a subdivision, split, combination or reclassification, the
adjustment to the Common Equivalent Rate shall become effective
immediately after the effective date of such subdivision, split,
combination or reclassification; and any shares of Common Stock
issuable in payment of a dividend shall be deemed to have been issued
immediately prior to the close of business on the record date for such
dividend for purposes of calculating the number of outstanding shares
of Common Stock under clauses (ii) and (iii) below. Such adjustment
shall be made successively.
(ii) If the Corporation shall, after the date hereof, issue
rights or warrants to all holders of its Common Stock entitling them
(for a period not exceeding 45 days from the date of such issuance) to
subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price of the Common Stock (determined
pursuant to paragraph (4)(c)(v)), on the record date for the
determination of stockholders entitled to receive such rights or
warrants, then in each case the Common Equivalent Rate shall be
adjusted by multiplying the Common Equivalent Rate in effect
immediately prior to the date of issuance of such rights or warrants
by a fraction (A) the numerator of which shall be the number of shares
of Common Stock outstanding on the date of issuance of such rights or
warrants, immediately prior to such issuance, plus the number of
additional shares of Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and (B) the denominator of which
shall be the number of shares of Common Stock outstanding on the date
<PAGE 12>
of issuance of such rights or warrants, immediately prior to such
issuance, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock
so offered for subscription or purchase pursuant to such rights or
warrants would purchase at such Current Market Price (determined by
multiplying such total number of shares by the exercise price of such
rights or warrants and dividing the product so obtained by such
Current Market Price). Such adjustment shall become effective as of
the close of business on the record date for the determination of
stockholders entitled to receive such rights or warrants. To the
extent that shares of Common Stock are not delivered after the
expiration of such rights or warrants, the Common Equivalent Rate
shall be readjusted to the Common Equivalent Rate which would then be
in effect had the adjustments made upon the issuance of such rights or
warrants been made upon the basis of delivery of only the number of
shares of Common Stock actually delivered. Such adjustment shall be
made successively.
(iii) If the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock of evidences of its
indebtedness or other assets (including shares of capital stock of the
Corporation (other than Common Stock) but excluding any distributions
and dividends referred to in clause (i) above or any cash dividends),
or shall issue to all holders of its Common Stock rights or warrants
to subscribe for or purchase any of its securities (other than those
referred to in clause (ii) above), then in each such case, the Common
Equivalent Rate shall be adjusted by multiplying the Common Equivalent
Rate in effect on the record date mentioned below by a fraction (A)
the numerator of which shall be the Current Market Price of the Common
Stock (determined pursuant to paragraph (4)(c)(v)) on the record date
for the determination of stockholders entitled to receive such
dividend or distribution, and (B) the denominator of which shall be
such Current Market Price per share of Common Stock less the fair
market value (as determined by the Board of Directors of the
Corporation, whose determination shall be conclusive) as of such
record date of the portion of the assets or evidences of indebtedness
so distributed, or of such subscription rights or warrants, applicable
to one share of Common Stock. Such adjustment shall become effective
on the opening of business on the business day next following the
record date for the determination of stockholders entitled to receive
such dividend or distribution.
(iv) Anything in this paragraph (4) notwithstanding, the
Corporation shall be entitled to make such upward adjustment in the
Common Equivalent Rate, in addition to those required by this
paragraph (4), as the Corporation in its sole discretion may determine
to be advisable, in order that any stock dividends, subdivision of
shares, distribution of rights to purchase stock or securities, or a
distribution of securities convertible into or exchangeable for stock
(or any transaction that could be treated as any of the foregoing
transactions pursuant to Section 305 of the Internal Revenue Code of
1986, as amended) hereafter made by the Corporation to its
stockholders shall not be taxable. If the Corporation determines that
an adjustment to the Common Equivalent Rate should be made pursuant to
this paragraph (4)(c)(iv), such adjustment shall be made effective as
of such date as the Board of Directors of the Corporation determines.
The determination of the Board of Directors of the Corporation as to
whether an adjustment to the Common Equivalent Rate should be made
<PAGE 13>
pursuant to the foregoing provisions of this paragraph (4)(c)(iv),
and, if so, as to what adjustment should be made and when, shall be
conclusive, final and binding on the Corporation and all stockholders
of the Corporation.
(v) As used in this paragraph (4), the "Current Market
Price" of a share of Common Stock on any date shall be, except as
otherwise specifically provided, the average of the daily Closing
Prices (as defined in paragraph (4)(g)(iii)) for the five consecutive
Trading Dates ending on and including the date of determination of the
Current Market Price; provided that if the Closing Price of the Common
Stock on the Trading Date next following such five-day period (the
"next-day closing price") is less than 95% of such average Closing
Price, then the Current Market Price per share of Common Stock on such
date of determination will be the next-day closing price; provided,
further, that, with respect to any redemption or antidilution
adjustment, if any event that results in an adjustment of the Common
Equivalent Rate occurs during the period beginning on the first day of
the applicable determination period and ending on the applicable
redemption date, the Current Market Price as determined pursuant to
the foregoing will be appropriately adjusted to reflect the occurrence
of such event.
(vi) In any case in which paragraph (4)(c) shall require
that an adjustment as a result of any event become effective as of the
close of business on the record date and the date fixed for Specified
Redemption pursuant to paragraph (4)(a)(2) occurs after such record
date, but before the occurrence of such event, the Corporation may in
its sole discretion elect to defer the following until after the
occurrence of such event: (A) issuing to the holder of any redeemed
shares of the Series A Preference Stock the additional shares of
Common Stock issuable upon such redemption as a result of such
adjustment and (B) paying to such holder any amount in cash in lieu of
a fractional share of Common Stock pursuant to paragraph (4)(e).
(vii) Before taking any action which would cause an
adjustment to the Common Equivalent Rate that would cause the
Corporation to issue shares of Common Stock for consideration below
the then par value (if any) of the Common Stock upon redemption of the
Series A Preference Stock, the Corporation will take any corporate
action that may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and
nonassessable shares of such Common Stock at such adjusted Common
Equivalent Rate.
(d) Notice of Adjustments. Whenever the Common Equivalent Rate
is adjusted as herein provided, the Corporation shall:
(i) forthwith compute the adjusted Common Equivalent Rate
in accordance with this paragraph (4) and prepare a certificate signed
by the Chief Executive Officer, the Chief Financial Officer, any Vice
President, or the Treasurer of the Corporation setting forth the
adjusted Common Equivalent Rate, the method of calculation thereof in
reasonable detail and the facts requiring such adjustment and upon
which such adjustment is based, which certificate shall be conclusive,
final and binding evidence of the correctness of the adjustment, and
file such certificate forthwith with the transfer agent or agents for
the Series A Preference Stock and the Common Stock; and
<PAGE> 14
(ii) mail a notice stating that the Common Equivalent Rate
has been adjusted, the facts requiring such adjustment and upon which
such adjustment is based and setting forth the adjusted Common
Equivalent Rate to the holders of record of the outstanding shares of
the Series A Preference Stock at or prior to the time the Corporation
mails an interim statement to its stockholders covering the fiscal
quarter during which the facts requiring such adjustment occurred, but
in any event within 45 days of the end of such fiscal quarter.
(e) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon the
redemption of any shares of Series A Preference Stock. Instead of any
fractional interest in a share of Common Stock which would otherwise be
deliverable upon the redemption of a share of Series A Preference Stock,
the Corporation shall pay to the holder of such share an amount in cash
(computed to the nearest cent) equal to the same fraction of the Current
Market Price of the Common Stock determined as of the second Trading Date
immediately preceding the relevant Notice Date. If more than one share
shall be surrendered for redemption at one time by the same holder, the
number of full shares of Common Stock issuable upon redemption thereof
shall be computed on the basis of the aggregate number of shares of Series
A Preference Stock so surrendered.
(f) Retirement. Shares of Series A Preference Stock which have
been redeemed, purchased or acquired by the Corporation (whether through
the operation of a sinking fund or otherwise) shall have the status of
authorized and unissued shares of Preference Stock and may be reissued as a
part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preference Stock to be
created by resolution of the Board of Directors or as part of any other
series of Preference Stock. If in any case the amounts payable with
respect to any obligations to retire shares of Series A Preference Stock
and any other series of Preference Stock are not paid in full in the case
of all series with respect to which such obligations exist, the number of
shares of the various series to be retired shall be in proportion to the
respective amounts which would be payable on account of such obligations if
all amounts payable were discharged in full.
(g) Definitions. As used in this paragraph 4 or elsewhere
herein:
(i) the term "business day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the State
of New York or the Commonwealth of Pennsylvania are authorized or
obligated by law or executive order to close or are closed because of
a banking moratorium or otherwise;
(ii) the term "Call Price" shall mean the per share price
(payable in shares of Common Stock) at which the Corporation may
redeem shares of Series A Preference Stock pursuant to paragraph
4(a)(1)), which shall be initially equal to $84.79952, declining by
$.004444 on each day following June 12, 1995 (computed on the basis of
a 360-day year of twelve 30-day months) to $80.26664 on April 12, 1998
and equal to $80 thereafter through June 11, 1998, if not sooner
redeemed;
(iii) the term "Closing Price" on any day shall mean the
closing sale price regular way (with any relevant due bills attached)
<PAGE> 15
on such day, or in case no such sale takes place on such day, the
average of the reported closing bid and asked prices regular way (with
any relevant due bills attached), in each case on the New York Stock
Exchange Consolidated Tape (or any successor composite tape reporting
transactions on national securities exchanges), or, if the Common
Stock is not listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Common Stock is
listed or admitted to trading (which shall be the national securities
exchange on which the greatest number of shares of Common Stock has
been traded during the five consecutive Trading Dates ending on and
including the date of determination of the Current Market Price), or,
if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices regular way
(with any relevant due bills attached) of the Common Stock on the
over-the-counter market on the day in question as reported by the
National Association of Securities Dealers Automated Quotation System,
or a similarly generally accepted reporting service, or if not so
available, as determined in good faith by the Board of Directors on
the basis of such relevant factors as the Board of Directors in good
faith considers appropriate;
(iv) the term "Fundamental Transaction" shall mean a merger
or consolidation of the Corporation, a share exchange, division or
conversion of the Corporation's capital stock or an amendment of the
Corporation's Articles of Incorporation that results in the conversion
or exchange of Common Stock into, or the right of the holders thereof
to receive, in lieu of or in addition to their shares of Common Stock,
other securities or other property (whether of the Corporation or any
other entity);
(v) the term "Notice Date" with respect to any notice given
by the Corporation in connection with a redemption of any of the
Series A Preference Stock shall be the commencement of the mailing of
such notice to the holders of the Series A Preference Stock in
accordance with paragraph (4)(h);
(vi) the term "outstanding," when used in reference to
shares of stock, shall mean issued shares excluding:
(A) shares held by the Corporation or a subsidiary; and
(B) shares called for redemption if funds for the
redemption thereof have been deposited in trust;
(vii) the term "subsidiary" as used herein shall mean any
corporation 51% or more of the outstanding stock having voting rights
of which is at the time owned or controlled directly or indirectly by
the Corporation; and
(viii) the term "Trading Date" shall mean a date on which
the New York Stock Exchange (or any successor to such Exchange) is
open for the transaction of business.
(h) Method of Redemption. Notice of every redemption, stating
the redemption date, the redemption price, and the placement of payment
thereof, shall be given by mailing a copy of such notice at least thirty
(30) days and not more than sixty (60) days prior to the date fixed for
redemption to the holders of record of the shares of Series A Preference
<PAGE> 16
Stock to be redeemed at their addresses as the same shall appear on the
books of the Corporation. The Corporation, upon mailing notice of
redemption as aforesaid or upon irrevocably authorizing the bank or trust
company hereinafter mentioned to mail such notice, may deposit or cause to
be deposited in trust with a bank or trust company in the City of
Philadelphia, Commonwealth of Pennsylvania, or in the Borough of Manhattan,
City and State of New York, an amount equal to the redemption price of the
shares to be redeemed plus any accrued and unpaid dividends thereon, which
amount shall be payable to the holders of the shares to be redeemed upon
surrender of certificates therefor on or after the date fixed for
redemption or prior thereto if so directed by the Board of Directors. Upon
such deposit, or if no such deposit is made, then from and after the date
fixed for redemption unless the Board of Directors shall default in making
payment of the redemption price plus accrued and unpaid dividends upon
surrender of certificates as aforesaid, the shares called for redemption
shall cease to be outstanding and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no interest in or
claim against the Corporation with respect to such shares other than the
right to receive the redemption price plus accrued and unpaid dividends
from such bank or trust company or from the Corporation, as the case may
be, without interest thereon, upon surrender of certificates as aforesaid.
In case any holder of shares of Series A Preference Stock which have been
called for redemption shall not, within six (6) years after the date of
such deposit, have claimed the amount deposited with respect to the
redemption thereof, such bank or trust company, upon demand, shall pay over
to the Corporation such unclaimed amount and shall thereupon be relieved of
all responsibility in respect thereof to such holder, and thereafter such
holder shall look only to the Corporation for payment thereof. Any
interest which may accrue on funds so deposited shall be paid to the
Corporation from time to time.
(i) Surrender of Certificates; Status. Each holder of shares of
Series A Preference Stock to be redeemed shall surrender the certificates
evidencing such shares (properly endorsed or assigned for transfer, if the
Board of Directors of the Corporation shall so require and the notice shall
so state) to the Corporation at the place designated in the notice of such
redemption and shall thereupon be entitled to receive certificates
evidencing shares of Common Stock and to receive any other funds payable
pursuant to this paragraph (4) following such surrender and following the
date of such redemption. In case fewer than all the shares represented by
any such surrendered certificate are called for redemption, a new
certificate shall be issued at the expense of the Corporation representing
the unredeemed shares. If such notice of redemption shall have been given,
and if on the date fixed for redemption shares of Common Stock and other
funds necessary for the redemption shall have been either set aside by the
Corporation separate and apart from its other funds or assets in trust for
the account of the holders of the shares to be redeemed (and so as to be
and continue to be available therefor) or deposited with a bank or trust
company as provided in paragraph (4)(h), then, notwithstanding that the
certificates evidencing any shares of Series A Preference Stock so called
for redemption shall not have been surrendered, the shares represented
thereby so called for redemption shall be deemed no longer outstanding,
dividends with respect to the shares so called for redemption shall cease
to accrue after the date fixed for redemption, and all rights with respect
to the shares so called for redemption shall forthwith after such date
cease and terminate, except for the right of the holders to receive the
shares of Common Stock and other funds, if any, payable pursuant to this
<PAGE>
<PAGE> 17
paragraph (4) without interest upon surrender of their certificates
therefor.
(j) Dividend Payments. The holders of shares of Series A
Preference Stock at the close of business on a dividend payment record date
shall be entitled to receive the dividend payable on such shares on the
corresponding dividend payment date notwithstanding the call for redemption
thereof (except that holders of shares called for redemption on a date
occurring between such record date and the dividend payment date or on such
dividend payment date shall not be entitled to receive such dividend on
such dividend payment date but instead will receive accrued and unpaid
dividends to such redemption date.
(k) Payment of Taxes. The Corporation will pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of shares of Common Stock on the redemption of shares
of Series A Preference Stock pursuant to this paragraph (4); provided,
however, that the Corporation shall not be required to pay any tax which
may be payable in respect of any registration of transfer involved in the
issue or delivery of shares of Common Stock in a name other than that of
the registered holder of Series A Preference Stock redeemed or to be
redeemed, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid.
5. Liquidation Preference.
(a) Upon the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the Series A Preference Stock shall be
preferred as to assets over Common Stock and any other Junior Stock so that
the holder of each share of the Series A Preference Stock shall be entitled
to be paid or to have set apart for payment in respect of each such share,
before any distribution is made to the holders of Common Stock and any
other Junior Stock, a liquidation preference equal to twice the fair market
value (as determined by the Board of Directors of the Corporation based on
advice of tax counsel in accordance with United States federal income tax
principles, which determination shall be conclusive) of a Series A
Depositary Share (as defined in the Deposit Agreement dated as of June 13,
1995 between the Corporation and First Chicago Trust Company of New York,
as Depositary) on the date of issuance thereof, plus an amount equal to all
dividends accrued and unpaid up to and including the date fixed for such
payment, and such holder of a share of the Series A Preference Stock shall
not be entitled to any other payment. If upon any such liquidation,
dissolution or winding up of the Corporation, its net assets shall be
insufficient to permit the payment in full of the respective amounts to
which the holders of all outstanding shares of the Series A Preference
Stock and any outstanding Preference Stock that is Parity Stock are
entitled, the entire remaining net assets of the Corporation shall be
distributed among the holders of the Series A Preference Stock and any
outstanding Preference Stock that is Parity Stock, in amounts proportionate
to the full preferential amounts to which they are respectively entitled.
(b) The voluntary sale, lease, exchange or transfer for cash,
shares of stock (securities or other consideration) of all or substantially
all the Corporation's property or assets to, or its consolidation or merger
with, one or more corporations shall not be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
<PAGE> 18
6. Voting Rights.
(a) The holders of record of shares of Series A Preference Stock
shall not be entitled to any voting rights except as hereinafter provided
in this paragraph (6) or as otherwise provided in the Articles of
Incorporation or by statute.
(b) The holders of shares of Series A Preference Stock shall be
entitled to vote on all matters submitted to a vote of the holders of the
Common Stock, voting together with the holders of the Common Stock (and any
other class or series of capital stock of the Corporation entitled to vote
together with the Common Stock) as one class. Each share of the Series A
Preference Stock shall be entitled to one vote.
(c) (i) If the Corporation shall have failed to pay, or declare
and set apart for payment, dividends on Preference Stock in an aggregate
amount equivalent to six (6) full quarterly dividends on all shares of
Preference Stock at the time outstanding, the number of Directors of the
Corporation shall be increased by two (2) at the first annual meeting of
the shareholders of the Corporation held thereafter, and at such meeting
and at each subsequent annual meeting until dividends payable for all past
quarterly dividend periods on all outstanding shares of Preference Stock
shall have been paid, or declared and set apart for payment, in full, the
holders of the shares of Preference Stock shall have, in addition to any
other voting rights which they otherwise may have, the exclusive and
special right, voting separately as a class without regard to series, each
share of Preference Stock entitling the holder thereof to one (1) vote per
share, to elect two (2) additional members of the Board of Directors to
hold office for a term of one (1) year; provided, that the right to vote as
a class upon the election of such two (2) additional Directors shall not
limit the right of holders of the Series A Preference Stock to vote upon
the election of all other Directors and upon other matters set forth in
paragraph 6(b) above.
(ii) Upon such payment, or declaration and setting apart for
payment, in full, the terms of the two (2) additional Directors so elected
shall forthwith terminate, and the number of Directors of the Corporation
shall be reduced by two (2) and such voting right of the holders of shares
of Preference Stock shall cease, subject to increase in the number of
Directors as aforesaid and to revesting of such voting right in the event
of each and every additional failure in the payment of dividends in an
aggregate amount equivalent to six (6) full quarterly dividends as
aforesaid.
(d) The Corporation shall not, without the affirmative vote or
consent of the holders of at least 66 2/3% of the number of shares of
Preference Stock at the time outstanding, voting or consenting (as the case
may be) separately as a class without regard to series, given in person or
by proxy, either in writing or by resolution adopted at a meeting:
(i) create any class of stock ranking prior to or on a parity
with Preference Stock as to dividends or upon liquidation or increase
the authorized number of shares of any such previously authorized
class of stock;
(ii) alter or change any of the provisions of the Articles of
Incorporation so as to adversely affect the preferences, special
rights or powers given to the Preference Stock;<PAGE>
<PAGE> 19
(iii) increase the number of shares of Preference Stock which the
Corporation is authorized to issue; or
(iv) alter or change any of the provisions of the Articles of
Incorporation or hereof so as to adversely affect the preferences,
special rights or powers given to the Series A Preference Stock.
7. Conversion. The Series A Preference Stock shall not have
any conversion rights to convert into Common Stock.
8. Fundamental Transactions. Upon the effectiveness of a
Fundamental Transaction at any time, each share of Series A Preference
Stock shall be entitled to receive consideration per share (i) of the same
type as is offered to or to be received by holders of Common Stock pursuant
to or in connection with such Fundamental Transaction and (ii) having a
fair value equal to
the fair value of the Common Stock that each share of Series A Preference
Stock would receive if such share of Series A Preference Stock were
redeemed by the Company immediately prior to such time in accordance with
paragraph 4 hereof.
<PAGE>
<PAGE> 20
Common Stock
Each holder of record of Common Stock shall have the right to one (1)
vote for each share of Common Stock standing in his name on the books of
the Corporation. Except as required by law or as otherwise specifically
provided in this Article Fourth, the holders of Preference Stock having
voting rights and holders of Common Stock shall vote together as one class.
Preemptive Rights
Neither the holders of Preference Stock nor the holders of Common Stock
shall have any preemptive rights, and the Corporation shall have the right
to issue and to sell to any person or persons any shares of its capital
stock or any option rights or any securities having conversion or option
rights, without first offering such shares, rights or securities to any
holders of Preference Stock or Common Stock.
Fifth: 1. The affirmative vote of the holders of not less than 75% of the
outstanding shares of "Voting Stock" held by shareholders other than a
"Related Person" shall be required for the approval or authorization of any
"Business Combination" of the Corporation with any Related Person;
provided, however, that the 75% voting requirement shall not be applicable
if:
(i) The "Continuing Directors" of the Corporation by at least a two-
thirds vote of such Continuing Directors have expressly approved such
Business Combination either in advance of or subsequent to such Related
Person's having become a Related Person; or
(ii) The cash or fair market value (as determined by at least two-thirds
of the Continuing Directors) of the property, securities or other
consideration to be received per share by holders of Voting Stock of the
Corporation in the Business Combination is not less than the "Highest Per
Share Price" or the "Highest Equivalent Price" paid by the Related Person
in acquiring any of its holdings of the Corporation's Voting Stock.
2. For purposes of this Article FIFTH:
(i) The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a subsidiary of the Corporation with or
into a Related Person, (b) any sale, lease, exchange, transfer or other
disposition, including without limitation a mortgage or any other security
device, of all or any "Substantial Part" of the assets either of the
Corporation (including without limitation any voting securities of a
subsidiary) or of a subsidiary of the Corporation to a Related Person, (c)
any merger or consolidation of a Related Person with or into the
Corporation or a subsidiary of the Corporation, (d) any sale, lease,
exchange, transfer or other disposition, including without limitation a
mortgage or other security device, of all or any Substantial Part of the
assets of a Related Person to the Corporation or a subsidiary of the
Corporation, (e) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a Related Person other than the issuance
on a pro rata basis to all holders of shares of the same class pursuant to
a stock split or stock dividend, or a distribution of warrants or rights,
(f) any recapitalization that would have the effect of increasing the
voting power of a Related Person, and (g) any agreement, contract or other
arrangement providing for any of the transactions described in this
definition of Business Combination.
<PAGE>
<PAGE> 21
(ii) The term "Related Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with its
"Affiliates" and "Associates" becomes the "Beneficial Owner" of an
aggregate of 10% or more of the outstanding Voting Stock of the
Corporation, and any Affiliate or Associate of any such individual,
corporation, partnership or other person or entity; provided, however, that
the term "Related Person" shall not include (1) a person or entity whose
acquisition of such aggregate percentage of Voting Stock was approved in
advance by two-thirds of the Continuing Directors or (2) any trustee or
fiduciary when acting in such capacity with respect to any employee benefit
plan of the Corporation or a wholly owned subsidiary of the Corporation.
No person who became a Related Person prior to December 31, 1983 shall be
treated as a Related Person for the purpose of voting on any amendment,
alteration, change or repeal of this Article FIFTH or voting on any
Business Combination to which such Related Person is not a party.
(iii) The term "Substantial Part" shall mean an amount equal to 10%. or
more of the fair market value as determined by two-thirds of the Continuing
Directors of the total consolidated assets of the Corporation and its
subsidiaries taken as a whole as of the end of its most recent fiscal year
ended prior to the time the determination is being made.
(iv) The term "Beneficial Owner" shall mean any person (1) who
beneficially owns shares of Voting Stock within the meaning ascribed in
Rule 13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on the date of adoption of this Article
FIFTH by the shareholders of the Corporation, or (2) who has the right to
acquire voting Shares (whether or not such right is exercisable
immediately) pursuant to any agreement, contract, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise.
(v) For purposes of subparagraph l(ii) of this Article FIFTH, the term
"other consideration to be received" shall include, without limitation, the
value per share of Common Stock or other capital stock of the Corporation
retained by its existing shareholders as adjusted to give effect to the
proposed Business Combination in the event of any Business Combination in
which the Corporation is a surviving corporation.
(vi) The term 'Voting Stock" shall mean all of the outstanding shares of
Common Stock entitled to vote on each matter on which the holders of record
of Common Stock shall be entitled to vote, and each reference to a
proportion of shares of Voting Stock shall refer to such proportion of the
votes entitled to be cast by such shares.
(vii) The term "Continuing Director" shall mean a Director who was a
member of the Board of Directors of the Corporation immediately prior to
the time that the Related Person involved in a Business Combination became
a Related Person. As to any person who became a Related Person prior to
December 31, 1983, a Continuing Director shall mean a Director who was a
member of the Board of Directors on December 31, 1983.
(viii) A Related Person shall be deemed to have acquired a share of the
Voting Stock of the Corporation at the time when such Related Person became
the Beneficial Owner thereof. With respect to the shares owned by
Affiliates, Associates or other persons whose ownership is attributed to a
<PAGE>
<PAGE> 22
Related Person under the foregoing definition of Related Person, if the
price paid by such Related Person for such shares is not determinable by
two-thirds of the Continuing Directions, the price so paid shall be deemed
to be the higher of (a) the price paid upon the acquisition thereof by the
Affiliate, Associate or other person or (b) the market price of the shares
in question at the time when the Related Person became the Beneficial Owner
thereof.
(ix) The terms "Highest Per Share Price" and "Highest Equivalent Price"
as used in this Article FIFTH shall mean the following: If there is only
one (1) class of capital stock of the Corporation issued and outstanding,
the Highest Per Share Price shall mean the highest price that can be
determined to have been paid at any time by the Related Person for any
share or shares of that class of capital stock. If there is more than one
class of capital stock of the Corporation issued and outstanding, the
Highest Equivalent Price shall mean, with respect to each class and series
of capital stock of the Corporation, the amount determined by two-thirds of
the Continuing Directors, on whatever basis they believe is appropriate, to
be the highest per share price equivalent of the highest price that can be
determined to have been paid at any time by the Related Person for any
share or shares of any class of series of capital stock of the Corporation.
In determining the Highest Per Share Price and Highest Equivalent Price,
all purchases by the Related Person shall be taken into account regardless
of whether the shares were purchased before or after the Related Person
became a Related Person. Also, the Highest Per Share Price and the Highest
Equivalent Price shall include any brokerage commissions, transfer taxes
and soliciting dealers' fees or other value paid by the Related Person with
respect to the shares of capital stock of the Corporation acquire by the
Related Person.
(x) The terms "Affiliate" and "Associate" shall have the same meaning as
in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as on the date of the adoption of this Article FIFTH
by the shareholders of the Corporation.
3. The provisions set forth in this Article FIFTH may not be amended,
altered, changed or repealed in any respect unless such action is approved
by the affirmative vote of the holders of not less than 75% of the
outstanding shares of Voting Stock of the Corporation at a meeting of the
shareholders duly called for the consideration of such amendment,
alteration, change or repeal; provided, however, that if there is a Related
Person, such action must also be approved by the affirmative vote of the
holders of not less than 75% of the outstanding shares of Voting Stock not
held by any Related Person.
Sixth: The duration of the Corporation shall be perpetual.
Seventh: The business and affairs of the Corporation shall be managed by
a Board of Directors. The number of Directors of the Corporation shall be
fixed from time to time by the Bylaws but shall not be fixed at less than
five (5). The number of the Directors may be increased or diminished (but
not to less than five (5)), as may from time to time be provided in the
Bylaws. In case of any increase in the number of Directors the additional
Directors shall be elected as may be provided in the Bylaws, either by the
Directors or by the shareholders.
<PAGE>
<PAGE> 23
The shareholders of the Corporation shall not be entitled to cumulative
voting rights in the election of Directors.
Any officer elected or appointed by the Board of Directors may be removed
at any time by affirmative vote of a majority of the whole Board of
Directors.
The Board of Directors, by the affirmative vote of a majority of the
whole Board, may appoint from the Directors an Executive Committee, of
which a majority shall constitute a quorum, and to such extent as shall be
provided in the Bylaws such Committee shall have and may exercise all or
any of the powers of the Board of Directors, including the power to cause
the seal of the Corporation to be affixed to all papers that may require
it.
The Board of Directors, by the affirmative vote of a majority of the
whole Board, may appoint any other standing committees, and such standing
committees shall have and may exercise such powers as shall be conferred or
authorized by the Bylaws.
The Board of Directors shall have power from time to time to fix and to
determine and to vary the amount of the working capital of the Corporation
and to direct and determine the use and disposition of any surplus or net
profits over and above the capital stock paid in.
Subject always to alteration and repeal by the shareholders, and to
Bylaws made by the shareholders, the Board of Directors may make Bylaws and
from time to time to time may alter, amend or repeal any Bylaws; and any
Bylaws made by the Board of Directors may be so altered or repealed by the
shareholders at any annual meeting or at any special meeting, provided
notice of such proposed alteration or repeal be included in the notice of
the special meeting.
Eighth: 1. Any direct or indirect purchase or other acquisition by the
Corporation of any "Equity Security" of any class or series from any "Five
Percent Holder", if such Five Percent Holder has been the "Beneficial
Owner" of such security for less than two years prior to the earlier of the
date of such purchase or any agreement in respect thereof at a price in
excess of the "Fair Market Value" thereof, shall, except as hereinafter
expressly provided, require the affirmative vote of the holders of at least
a majority of the "Voting Stock" excluding Voting Stock of which such Five
Percent Holder is the Beneficial Owner; provided, however, that the
foregoing majority voting requirement shall not be applicable with respect
to (i) any purchase or other acquisition of an Equity Security made as part
of a tender or exchange offer by the Corporation to purchase Equity
Securities of the same class made on the same terms to all holders of such
security, or (ii) a purchase program effected on the open market and not
the result of a privately-negotiated transaction, or (iii) any optional or
required redemption of an Equity Security pursuant to the terms of such
security.
2. For purposes of this Article EIGHTH:
(i) The term "Equity Security" means an equity security of the
Corporation within the meaning ascribed to such term in Section 3(a)(11) of
the Securities Exchange Act of 1934, as in effect on January 1, 1985.
(ii) The term "Fair Market Value" means, in the case of any Equity
Security, the closing sale price on the trading day immediately preceding
the earlier of the date of any purchase subject to Paragraph 1 of this
Article EIGHTH, or the date of any agreement in respect thereof (such
earlier date, the "Valuation Date"), of a share of such Equity Security on
<PAGE>
<PAGE> 24
the Composite Tape for New York Stock Exchange Listed Stocks, or, if such
security is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such security is not listed on such Exchange, on the
principal United States securities exchange registered under the Securities
Exchange Act of 1934 on which such security is listed, or, if such security
is not listed on any such Exchange, the closing bid quotation with respect
to such security on the trading day immediately preceding the Valuation
Date on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the Fair Market Value on the Valuation Date of such security as
determined by the Board of Directors in good faith.
(iii) The term "Person" shall mean any individual, corporation,
partnership or other entity and shall include any group comprised of any
Person and any other Person with whom such Person or any Affiliate or
Associate of such Person has any agreement, arrangement or understanding,
directly or indirectly, for the purpose of acquiring, holding, voting or
disposing of Voting Stock, and any member of such group.
(iv) The term "Five Percent Holder" shall mean and include any Person
which, together with its "Affiliates" and "Associates" becomes the
Beneficial Owner of an aggregate of five percent (5%) or more of any class
of Voting Stock of the Corporation, and any Affiliate or Associate of any
such Person; provided, however, that for purposes of this Article EIGHTH,
including, without limitation, Paragraphs 1 and 4 hereof, the term Five
Percent Holder shall not include (1) any trustee or fiduciary when acting
in such capacity with respect to any employee benefit plan of the
Corporation or a wholly owned subsidiary of the Corporation or (2) any
Person that would have been a Five Percent Holder on December 31, 1984 if
this Article EIGHTH were then in effect.
(v) The terms "Affiliate" and "Associate" shall have the meanings
ascribed to them in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on May 3, 1984.
(vi) The term "Beneficial Owner" shall mean any person (1) who
beneficially owns shares of Voting Stock within the meaning ascribed in
Rule 13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on May 3, 1984, or (2) who has the right
to acquire Voting Stock (whether or not such right is exercisable
immediately) pursuant to any agreement, contract, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise.
(vii) The term "Voting Stock" shall mean all of the outstanding shares of
Common Stock, and the outstanding shares of any class or series of stock
having a preference over the Common Stock as to dividends or upon
liquidation entitled to vote on each matter on which the holders of Common
Stock shall be entitled to vote, and each reference to a vote of a
proportion of shares of Voting Stock shall refer to such proportion of the
votes entitled to be cast by such shares.
(viii) In any determination whether a Person is a Five Percent Holder for
purposes of this Article EIGHTH, the relevant class of securities
outstanding shall be deemed to comprise all such securities deemed owned by
such Person and its Affiliates and Associates through application of
<PAGE>
<PAGE> 25
Paragraph 2(vi)(2) of this Article EIGHTH, but shall not include any other
securities of such class which may be issuable pursuant to any agreement,
contract, arrangement or understanding, or upon exercise of conversion
rights, exchange rights, warrants or options, or otherwise.
3. The Board of Directors shall have the power to interpret all the
provisions of this Article EIGHTH and their application to a particular
transaction, including, without limitation, the power to determine (a)
whether a Person is a Five Percent Holder, (b) the number of shares of
Voting Stock or other Equity Securities of which any Person and its
Affiliates and Associates are the Beneficial Owners, (c) whether a Person
is an Affiliate or Associate of another, and (d) what is Fair Market Value
and whether a price is above Fair Market Value as of a given date. Any
such determination made by the Board of Directors shall be conclusive and
binding to the fullest extent permitted by law.
4. The provisions set forth in this Article EIGHTH may not be amended,
altered, changed or repealed in any respect and no provision inconsistent
herewith shall be adopted unless such action is approved by the affirmative
vote of the holders of at least 75% of the Voting Stock of the Corporation
at any annual meeting of shareholders or at any special meeting duly called
for that purpose, provided notice of such amendment, alteration, change or
repeal or adoption be included in the notice of the special meeting;
provided, however, that if there is a Five Percent Holder such action must
also be approved by the affirmative vote of the holders of at least 75%. of
the Voting Stock excluding Voting Stock of which any Five Percent Holder is
the Beneficial Owner.
Ninth: 1. Directors and Officers as Fiduciaries. A Director or Officer
of the Corporation shall stand in a fiduciary relation to the Corporation
and shall perform his or her duties as a Director or officer, including his
or her duties as a member of any committee of the board upon which he or
she may serve, in good faith, in a manner he or she reasonably believes to
be in the best interests of the Corporation, and with such care, including
reasonable inquiry, skill and diligence, as a person of ordinary prudence
would use under similar circumstances. In performing his or her duties, a
Director or officer shall be entitled to rely in good faith on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by one or more officers
of employees of the Corporation whom the Director or officer reasonably
believes to be reliable and competent with respect to the matters
presented, counsel, public accountants or other persons as to matters that
the Director or officer reasonably believes to be within the professional
or expert competence of such person, or a committee of the Board of
Directors upon which the Director or officer does not serve, duly
designated in accordance with law, as to matters within its designated
authority, which committee the Director or officer reasonably believes to
merit confidence. A Director or officer shall not be considered to be
acting in good faith if he or she has knowledge concerning the matter in
question that would cause his or her reliance to be unwarranted. Absent
breach of fiduciary duty, lack of good faith or self-dealing, actions taken
as a Director or officer of the Corporation or any failure to take any
action shall be presumed to be in the best interests of the Corporation.
2. Personal Liability of Directors. A Director of the Corporation shall
not be personally liable, as such, for monetary damages (including without
<PAGE>
<PAGE> 26
limitation, any judgment, amount paid in settlement, penalty, punitive
damages or expense of any nature (including, without limitation, attorneys'
fees and disbursements)) for any action taken, or any failure to take any
action, unless (1) the Director has breached the duties of his or her
office or has failed to perform his or her duties as a Director in good
faith, in a manner he or she reasonably believed to be in the best
interests of the Corporation and with such care, including reasonable
inquiry, skill and diligence, as a person of ordinary prudence would use
under similar circumstances; and (2) the breach or failure to perform
constitutes self-dealing, willful misconduct or recklessness.
3. Personal Liability of Officers. An officer of the Corporation shall not
be personally liable, as such, to the Corporation or its shareholders for
monetary damages (including without limitation, any judgment, amount paid
in settlement, penalty, punitive damages or expense or any nature
(including, without limitation, attorneys' fees and disbursements)) for any
action taken, or any failure to take any action, unless (1) the officer has
breached the duties of his or her office or has failed to perform his or
her duties as an officer in good faith, in a manner he or she reasonably
believed to be in the best interests of the Corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances; and (2) the breach or
failure to perform constitutes self-dealing, willful misconduct or
recklessness.
Tenth: Any record holder of at least ten percent (10%) of the outstanding
shares of the Corporation's Voting Stock shall have the rights to:
(a) call a special meeting of the shareholders; and
(b) to propose an amendment to the articles by a petition setting forth
the proposed amendment, which petition shall be directed to, and filed
with, the Board of Directors;
subject, however, to all limitations and restrictions which are, or may
hereafter be, imposed on, or with respect to, the Corporation's Voting
Stock and/or record holders of the Corporation's Voting Stock by
Pennsylvania statutory law (other than the provisions of Section 2521(a) of
the Pennsylvania Business Corporation Law of 1988), these articles, or the
Corporation's Bylaws. For purposes of this Article TENTH, the term "Voting
Stock" shall mean all of the outstanding shares of Common Stock, and the
outstanding shares of any class or series of stock having preference over
the Common Stock as to liquidation entitled to vote on each matter on which
the holders of Common Stock shall be entitled to vote, and reference to a
percentage of shares of Voting Stock shall refer to the percentage of votes
entitled to be cast by such shares.
<PAGE>
<PAGE> 27
Approved and Filed: August 4, 1971
Amended and Restated: March 30, 1990
Amended: December 23, 1992
Amended: May 4, 1995
Amended: June 13, 1995
I, Secretary of Sun Company, Inc.
hereby certify that the foregoing is a true and correct copy of the
Articles of Incorporation of Sun Company, Inc.
Date:
Secretary
-----------------------------------
<PAGE>
<PAGE> 1
EXHIBIT 10.1
TERMINATION AGREEMENT
AND
GENERAL RELEASE AND WAIVER
This Termination Agreement and General Release and Waiver
("Agreement") is made and entered into this 15th day of March, 1995,
between Harwood S. Roe, Jr. (hereinafter "you" or "your") and Sun Company,
Inc., on behalf of itself and its subsidiaries ("Company").
WHEREAS, you are an employee of the Company who will be terminating
employment effective August 31, 1995; and
WHEREAS, the Company has agreed to offer to you enhanced termination
benefits in connection with such termination, and you have agreed to a
release and waiver of claims.
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth, this Agreement replaces and supersedes all other agreements,
oral or written, between you and the Company concerning your employment,
separation or retirement, and you and the Company agree as follows:
A. BASIC TERMS
1. Effective September 1, 1995, you will retire from the Company.
Your retirement benefit will be calculated based upon the terms
and conditions of the Sun Company, Inc. Retirement Plan (SCIRP)
2. Effective on or about April 2, 1995, you will be assigned to an
office location outside of the city of Philadelphia.
3. Effective September 1, 1995, you will be entitled to receive a
supplemental retirement benefit equal to the difference between
the benefit calculated under the Sun Executive Retirement Plan
(SERP) (which is adjusted by providing an additional five (5)
years, allocated between age and service in such a manner as
produces the maximum benefit) and the basic retirement benefit
payable under the Sun Company, Inc. Retirement Plan. Exhibit A
delineates your total retirement benefits.
4. Effective September, 1995, you (or your beneficiary in the event
of your death) will begin to receive severance payments of $6,177
per month for 131 months until you reach age 62. Alternatively,
you may elect to receive a single lump-sum payment as illustrated
in Exhibit B.
5. If first approved by the Compensation Committee of the Board of
Directors of Sun Company, Inc., you may continue to exercise any
stock options that are exercisable (which may take into account
any proration upon retirement) for up to thirty-six (36) months
following retirement. In lieu of exercising certain stock
options granted to you under the Sun Company, Inc. Long-Term
Incentive Plan, you may exercise related alternate appreciation
<PAGE>
<PAGE> 2
rights (AARs) for a period of up to six (6) months after
retirement. Exercise of these AARs will automatically cancel a
corresponding number of stock options. Limited rights associated
with each stock option will automatically be terminated six (6)
months from your retirement date, in accordance with the terms
and conditions of the Sun Company, Inc. Long-Term Incentive Plan
and Executive Long-Term Stock Investment Plan.
6. You are entitled to medical insurance in accordance with the
retiree medical program.
7. You are entitled to permanent, unreduced retiree life insurance
coverage equal to $405,000.
8. You may continue to utilize the financial counseling program
until September 1, 1995. (Your account balance available for use
through September 1, 1995 is $10,000.) Any balance remaining at
termination will be paid to you in a single lump sum.
9. You will be provided individual executive career transition
assistance through a mutually acceptable vendor.
10. Any unused vacation remaining at the time of your retirement,
will be paid to you in a single lump sum at termination.
11. The indemnification protection for which you may be eligible as a
result of your employment with the Company is set forth in
Article VII of the Sun Company, Inc. (R&M) By-Laws.
12. You will be entitled to a parking space at 11PC as currently
provided through March 31, 1995.
13. You will be entitled to keep your car phone; however, the Company
will cease reimbursement of related expenses for car phone
services after March 31, 1995.
14. You will be provided access to the Company's voicemail system
until September 1, 1995.
15. You will be provided with a letter of recommendation.
16. All questions or requests for further information should be
referred to Jim Nocito at (215) 246-8342, who will work with you
on arrangements and payments.
B. GENERAL RELEASE
1. You acknowledge that there are various local, state and federal
laws that prohibit employment discrimination based on age, sex,
race, color, national origin, citizenship, religion, disability
or veteran status and that these laws are enforced through the
Equal Employment Opportunity Commission (EEOC), Department of
Labor, and state human rights agencies.
2. In consideration of the enhanced benefits provided to you under
this Agreement, in particular with respect to Paragraphs A.3 and
A.4, you agree to completely release, relinquish, waive and<PAGE>
<PAGE> 3
discharge the Company, its subsidiaries and all other related
corporate entities, its and their employees, officers, directors,
agents and successors (hereinafter "Company") from all claims,
liabilities, demands and causes of action known or unknown, fixed
or contingent (including claims or rights arising under the Age
Discrimination in Employment Act of 1967, as amended), which you
may have or claim to have against the Company arising out of or
in any way related to your employment with Company or the
termination of that employment. This includes, but is not
limited to, a release of any rights or claims you may have under:
(a) The Age Discrimination in Employment Act, which prohibits
age discrimination in employment;
(b) Title VII of the Civil Rights Act of 1964, as amended by the
Civil Rights Act of 1991, which prohibits discrimination in
employment based on race, color, national origin, religion
or sex;
(c) Any other federal, state or local laws or regulations
prohibiting employment discrimination;
(d) Breach of any express or implied contract claims;
(e) Wrongful termination or any other tort claims, including
claims for attorney's fees, whether based on common law, or
otherwise.
Exceptions: By signing this release, you do not waive your right
to: (a) Claims arising under any applicable Worker's
Compensation laws; (b) Any claims which the law states may not
be waived; and (c) your vested rights under the regular
employment plans of the Company, in effect as of the date this
Release was given to you.
3. It is mutually understood that this release does not have any
effect on any claims that you may have that arise after the date
this Agreement is signed.
4. You promise not to file any lawsuit asserting any cause of action
or claims released in Paragraph B.2 or Exhibit C. If you violate
this release by suing the Company, you agree that you will pay
all costs and expenses of defending against the suit by the
Company, including reasonable attorneys' fees.
5. You agree to keep all the terms of this Agreement completely
confidential, and you will not disclose any information
concerning this Agreement to anyone other than your immediate
family and your personal legal and tax advisors.
6. You agree that nothing in this Agreement shall, in any way, be
construed as an admission by the Company of any acts of
impermissible discrimination against you or any other person; and
the Company specifically disclaims any liability to you or any
acts of impermissible discrimination against you or any other
person on the part of itself, its employees, or its agents.
7. This release and waiver includes, but is not limited to, any and
all claims by you for attorneys' fees and costs incurred by you
in connection with your employment termination.
<PAGE>
<PAGE> 4
8. This Agreement will be construed in accordance with the laws of
the Commonwealth of Pennsylvania.
9. You agree that you will execute the document attached to this
Agreement as Exhibit C, entitled Full and Final General Release,
at the time this Agreement is signed. The parties agree that in
the event said release is not executed at said time, this
Agreement shall be null and void and of no binding effect on
either party. In addition, you agree that at retirement, upon
the Company's request, you will execute another such release in
the same form with only the date changed.
10. You are advised to consult with an attorney prior to your signing
this Agreement.
11. You will have a period of twenty-one (21) days within which to
consider this Agreement.
12. You will be permitted to revoke this Agreement for a period of at
least seven (7) days following your execution of this Agreement,
and the Agreement shall not become effective or enforceable until
the revocation period has expired.
13. You acknowledge and agree that you have carefully read and fully
understand all the provisions of this Agreement which sets forth
the entire agreement between you and the Company on the subjects
covered herein, and you acknowledge that you have not relied upon
any representation or statement, written or oral, not set forth
in this Agreement.
In Witness Whereof, we the undersigned, either individually or on
behalf of the Company, declare that we have read the foregoing and
voluntarily agree to the conditions and obligations set forth herein.
s/ J. J. Nocito s/ Harwood S. Roe, Jr.
----------------------- ----------------------
Witness Harwood S. Roe, Jr.
Dated: 3/15/95
---------------
s/ Cynthia E. Britton s/ A. Little, Jr.
----------------------- ---------------------
Witness A. Little, Jr.
Vice President - Human Resources
Sun Company, Inc.
Dated: 3/27/95
--------------
<PAGE> 5
EXHIBIT A
HARWOOD S. ROE, JR.
ESTIMATED RETIREMENT BENEFIT*
----------------------------
SERP + 5
--------
Monthly $12,430
Lump Sum $1,695,400
Section 415 of the IRS code limits amounts that can be paid from a
qualified plan and hence subject to favorable tax treatment. Of the totals
above, the following Section 415 limits have been estimated:
Monthly $1,700
Lump Sum $232,500
Projected benefits as of 9/1/95 and based upon March, 1995 PBGC
factors. Actual retirement benefit for September 1, 1995 retirement
will be calculated on or about August 15, 1995. At this time the PBGC
factor for September, 1995 retirements will be known.
<PAGE>
<PAGE> 6
EXHIBIT B
HARWOOD S. ROE, JR.
SALARY CONTINUATION
-------------------
$ 5543 Base per Week
x 52.14
--------
$289,012 Annualized Base
x 1.40 Guideline Bonus of 40% for 3352 HP
--------
$404,616 Base Plus Bonus (1x TCC)
x 2
--------
$809,233 2x TCC
./. 131 # of Months of Age 62
--------
*$ 6,177 Per Month for 131 ** Months to Age 62
for a Total Payment Stream of $809,187
* Alternately a lump sum payment may be elected based upon the
discount factor in effect for September, 1995 retirements. To
illustrate; using 120% of the March, 1995 PBGC factor of 6.0%
yields a lump sum amount of $559,291.
** Based upon a 9/1/95 retirement.
95:09 62:00
-44:08 D.O.B. -51:01
------ ------
51:01 Age at Retirement 10:01 or 131 Months
to Age 62
<PAGE>
<PAGE> 7
EXHIBIT C
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF PHILADELPHIA
FULL AND FINAL GENERAL RELEASE
FOR AND IN CONSIDERATION of the SUM OF ONE DOLLAR AND OTHER VALUABLE
CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged,
Harwood S. Roe, Jr. ("Mr. Roe") for himself, his attorneys, his heirs,
executors, administrators, successors, and assigns, does hereby fully,
finally and forever release and discharge Sun Company, Inc., and its
related or subsidiary companies, their predecessors, successors, assigns,
partners, officers, directors, agents, representatives, attorneys, and
employees (collectively, the "Company"), of and from all claims, demands,
actions, causes of action, suits, damages, losses, expenses, and
controversies of any and every nature whatsoever arising from the beginning
of time until the date of this Release including, but not limited to, those
claims arising from or relating in any way to Mr. Roe's employment and the
termination of his employment with the Company, and any claims arising
under any federal, state, or local laws prohibiting employment
discrimination, or claims growing out of any legal restrictions on the
Company's right to terminate its employees, including, but not limited to,
the Age Discrimination in Employment Act, the Fair Labor Standards Act,
excepting only claims under applicable Workers' Compensation and
Unemployment Statutes. Also included in this release are any claims
arising under federal, state, or local laws prohibiting retaliatory
discharge or other unfavorable retaliatory employment treatment. This Full
and Final Release shall not release either Mr. Roe or the Company from
their respective obligations to each other under the Termination Agreement
and General Release and Waiver.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
24th day of March, 1995.
s/ Harwood S. Roe, Jr.
----------------------
Harwood S. Roe, Jr.
This 24th day of March, 1995, appeared before me Harwood S. Roe, Jr.,
to me personally known, and executed the foregoing document under oath as
his free act and deed.
s/ Lorelei J. Messick
---------------------
Notary Public
<PAGE>
<PAGE> 1
EXHIBIT 10.2
SUN COMPANY, INC.
RETAINER STOCK PLAN FOR OUTSIDE DIRECTORS
Amended and Restated
as of May 5, 1994
<PAGE>
<PAGE> 2
SUN COMPANY, INC.
RETAINER STOCK PLAN FOR OUTSIDE DIRECTORS
I. PURPOSE
The purpose of the Sun Company, Inc. Retainer Stock Plan for Outside
Directors (the "Plan") is to provide ownership of the Company's Common
Stock to Outside Directors of the Sun Company, Inc. Board of Directors
by paying, in shares of Common Stock, a portion of the retainer fee
paid to each Outside Director, and thereby improve the Company's
ability to attract and retain highly qualified individuals to serve as
directors of the Company; provide competitive remuneration for Board
service; enhance the breadth of Outside Director remuneration; and
strengthen the commonality of interest between directors and
shareholders.
II. EFFECTIVE DATE
This Plan shall become effective upon its approval by the shareholders
of the Company. This Plan shall be submitted to the shareholders for
their approval at the Annual Meeting to be held in 1990.
III. DEFINITIONS
In this Plan, the following definitions apply:
(1) "Annual Meeting" means the Annual Meeting of Shareholders of Sun
Company, Inc.
(2) "Award" means the annual award of an equal number of shares of
Common Stock to each Outside Director under this Plan.
(3) "Board" means Board of Directors of Sun Company, Inc.
(4) "Chairman" shall mean the Chairman of the Board of Directors of
Sun Company, Inc.
(5) "Common Stock" means Sun Company, Inc. common stock.
(6) "Company" means Sun Company, Inc., a Pennsylvania corporation.
(7) "Outside Director" means any member of the Company's Board of
Directors who is not also a principal officer of the Company.
(8) "Participant" means each Outside Director to whom an award of
Common Stock is granted under this Plan upon his or her election
or reelection to the Board.
(9) "Plan" means this Sun Company, Inc. Retainer Stock Plan for
Outside Directors, as it may be amended from time to time.
IV. ADMINISTRATION
(1) The Board shall administer this Plan. The Chairman shall have
responsibility to conclusively interpret the provisions of this
Plan and decide all questions of fact arising in its application
<PAGE> 3
and such determinations shall be final and binding on the Company
and the Outside Director.
(2) Determinations made with respect to any individual under this
Plan shall be made without the participation of such individual.
(3) This Plan and all action taken under it shall be governed, as to
construction and administration, by the laws of the Commonwealth
of Pennsylvania.
V. ELIGIBILITY AND AWARDS
(1) Eligibility. Each Outside Director shall participate in this
Plan.
(2) Grant of Awards. Commencing with the Annual Meeting in 1994,
each Participant shall be granted an Award of such number of
shares of Common Stock (rounded up to the nearest whole five
shares), the market value of which shall equal seventy percent
(70%) of the Board retainer fee then in effect. For purposes of
determining such market value, the closing price of Common Stock
on the New York Stock Exchange on the fifth business day prior to
the applicable Annual Meeting shall be used for purposes of this
calculation.
(3) Award Limitations. (a) Notwithstanding the above subsection,
the number of shares of Common Stock to be awarded to each
Participant shall be limited to an amount the fair market value
of which shall not exceed $40,000, as determined by the closing
price of Common Stock on the New York Stock Exchange on the day
prior to such Participant's election or reelection.
(b) The maximum number of shares of Common Stock which may be
issued under this Plan shall be two hundred and fifty thousand
shares (250,000), subject to adjustments pursuant to Section VII.
(c) Subject to applicable rules and regulations of the
Securities and Exchange Commission, shares of Common Stock issued
hereunder shall be freely transferrable and non-forfeitable.
(4) Pro Ration of Certain Awards. In the event that any Outside
Director is elected by the Board to fill a vacancy between Annual
Meetings, such Outside Director shall participate in this Plan
and he or she shall receive a number of shares representing a pro
rata portion of the number of shares of Common Stock awarded to
the Participants as of the Annual Meeting which immediately
preceded the election of such Outside Director; however, in no
event shall the fair market value of such shares exceed $40,000
as determined pursuant to subparagraph (3)(a).
(5) Issuance of Common Stock. As soon as practicable after the
applicable Annual Meeting or the date an Outside Director is
otherwise elected as described above, the Company shall cause to
be issued and delivered to each Outside Director a stock
certificate, registered in the name of such Outside Director,
evidencing the award of Common Stock pursuant to this Plan.
Outside Directors shall not be deemed for any purpose to be or
have any rights as shareholders of the Company with respect to
<PAGE> 4
any shares of Common Stock awarded under this Plan, except as and
when certificates therefor are issued. No adjustment shall be
made for dividends or distributions or other rights for which the
record date is prior to the date of such stock certificate.
(6) Discontinuation. The Board may at any time discontinue granting
Awards under this Plan.
VI. REGULATORY COMPLIANCE AND LISTING
The issuance or delivery of any shares of Common Stock may be
postponed by the Company for such period as may be required to comply
with any applicable requirements under the federal securities laws,
any applicable listing requirements of any national securities
exchange, or any requirements under any other law or regulation
applicable to the issuance or delivery of such shares. The Company
shall not be obligated to issue or deliver any such shares if the
issuance or delivery thereof shall constitute a violation of any
provision of any law or of any regulation of any governmental
authority or any national securities exchange.
<PAGE>
<PAGE> 5
Sun Company, Inc.
Board of Directors
May 5, 1994
BACKGROUND
This resolution (1) accepts and approves certain recommendations made
in a Report of the Board Policy and Nominating Committee presented at the
meeting of the Board of Directors held April 7, 1994, and (2) authorizes
the amendment of certain sections of the Sun Company, Inc. Retainer Stock
Plan for Outside Directors, consistent with such Report.
RESOLVED, That the Report of the Board Policy and Nominating
Committee presented at the meeting of the Board of Directors held
April 7, 1994, which recommended certain modifications to Board
compensation is hereby accepted and such recommendations are
hereby approved;
FURTHER RESOLVED, That, consistent with such Report, the Sun
Company, Inc. Retainer Stock Plan for Outside Directors
("Retainer Stock Plan") is hereby amended to provide that the
portion of the Board retainer fee payable in the form of Sun
Company, Inc. common stock ("Common Stock") shall constitute such
number of shares of Common Stock (rounded up to the nearest five
whole shares), the market value of which shall equal seventy
percent (70%) of the Board retainer fee then in effect, as such
market value is calculated and determined under the Retainer
Stock Plan;
FURTHER RESOLVED, That, consistent with the foregoing
resolutions, the Retainer Stock Plan is hereby amended and
restated in the form attached hereto as Exhibit A.
<PAGE>
<PAGE> 6
Attachment A
AMENDMENT TO THE
SUN COMPANY, INC. RETAINER STOCK PLAN FOR OUTSIDE DIRECTORS
V. ELIGIBILITY AND AWARDS
(6) Deferral of Award. Notwithstanding the provisions of subsection
(5) above, if a Participant so desires, awards of shares of
Common Stock granted hereunder may be deferred in the form of
Share Units pursuant to the Sun Company, Inc. Directors Deferred
Compensation Plan ("Deferred Plan"). Such deferral shall be
subject to the provisions of the Deferred Plan except that the
following terms shall supersede the terms of the Deferred Plan:
a) The deferral of shares of Common Stock under this Plan as
Share Units under the Deferred Plan shall be pursuant to a
one-time irrevocable election by a Participant.
b) The irrevocable election shall apply to all shares of Common
Stock granted subsequent to such election.
c) The method of payment or distribution of deferred amounts
must be irrevocably specified in a notice delivered to the
Compensation Committee. The method of payment or
distribution may be changed with respect to future awards of
shares of Common Stock by filing notice of such change with
the Compensation Committee. Any such change shall apply
only to shares of Common Stock awarded on or after the first
day of the quarter following the calendar quarter in which
the notice is received by the Compensation Committee. Such
notice shall continue, and be effective, until revoked.
<PAGE>
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EXHIBIT 11
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
Sun Company, Inc. and Subsidiaries
(Dollars in Millions Except Per Share Amounts, Shares in Thousands)
-------------------------------------------------------------------------
For the Six Months
Ended June 30
------------------
1995 1994
------ -----
(UNAUDITED)
Income before cumulative effect of
change in accounting principle (1) $102.0 $45.6
Cumulative effect of change in
accounting principle (2) -- (6.8)(a)
------ -----
Net income (3) $102.0 $38.8
====== =====
Weighted average number of shares
of common stock and common stock
equivalents outstanding (4) 107,101 107,119
======= =======
Income per share of common stock:
Income before cumulative effect of
change in accounting principle (1)/(4) $.95 $ .43
Cumulative effect of change in
accounting principle (2)/(4) -- (.07)
---- -----
Net income (3)/(4) $.95 $ .36
==== =====
Weighted average number of shares of
common stock and common stock
equivalents outstanding on a
fully diluted basis (5) 107,101 107,123
======= =======
Income per share of common stock
on a fully diluted basis:
Income before cumulative effect of
change in accounting principle (1)/(5) $.95 $ .43
Cumulative effect of change in
accounting principle (2)/(5) -- (.07)
---- -----
Net income (3)/(5) $.95 $ .36
==== =====
----------------
(a) Includes impact of the cumulative effect of a change in the method of
accounting for postemployment benefits. (See Note 5 to the condensed
consolidated financial statements.)
<PAGE>
<PAGE> 2
EXHIBIT 11
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
Sun Company, Inc. and Subsidiaries
(Dollars in Millions Except Per Share Amounts, Shares in Thousands)
-------------------------------------------------------------------------
For the Three Months
Ended June 30
--------------------
1995 1994
------ -----
(UNAUDITED)
Net income (1) $109.0 $11.7
====== =====
Weighted average number of shares
of common stock and common stock
equivalents outstanding (2) 107,150 107,148
======= =======
Income per share of common stock (1)/(2) $1.02 $.11
===== ====
Weighted average number of shares of
common stock and common stock
equivalents outstanding on a
fully diluted basis (3) 107,150 107,151
======= =======
Income per share of common stock
on a fully diluted basis (1)/(3) $1.02 $.11
===== ====
<PAGE>
<PAGE> 1
EXHIBIT 12
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(a)
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Ratio)
--------------------------------------------------------------------------
For the Six Months
Ended June 30, 1995
-------------------
(UNAUDITED)
Fixed Charges:
Consolidated interest cost and debt expense $ 62
Interest cost and debt expense of operations
held for sale 9
Interest allocable to rental expense(b) 20
----
Total $ 91
====
Earnings:
Consolidated income before provision for
income taxes and cumulative effect of
change in accounting principle $156
Minority interest in net income
of subsidiaries having fixed charges 19
Proportionate share of provision for income
taxes of 50 percent owned but not controlled
affiliated companies 1
Equity in income of less than 50 percent owned
but not controlled affiliated companies (4)
Dividends received from less than 50 percent
owned but not controlled affiliated companies 3
Fixed charges 91
Interest capitalized (5)
Amortization of previously capitalized interest 12
----
Total $273
====
Ratio of Earnings to Fixed Charges 3.00
====
----------------
(a) The consolidated financial statements of Sun Company, Inc. and
subsidiaries contain the accounts of all subsidiaries that are
controlled (generally more than 50 percent owned) except those engaged
in coal and real estate operations which were subject to a plan of
disposition during the first six months of 1995. Coal and real estate
operations were accounted for as investments in operations held for
sale during the first half of 1995. Effective June 30, 1995, Sun
decided that the coal business is no longer held for sale; accordingly,
as of that date, the financial statements contain the accounts of the
coal operations on a fully consolidated basis. (See Note 3 to the
condensed consolidated financial statements.) Affiliated companies
over which the Company has the ability to exercise significant
influence but that are not controlled (generally 20 to 50 percent
owned) are accounted for by the equity method.
(b) Represents one-third of total operating lease rental expense which is
that portion deemed to be interest.
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 125
<SECURITIES> 0
<RECEIVABLES> 630
<ALLOWANCES> 17
<INVENTORY> 559
<CURRENT-ASSETS> 1,409
<PP&E> 6,656
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<BONDS> 888
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0
0
<OTHER-SE> 1,814
<TOTAL-LIABILITY-AND-EQUITY> 5,277
<SALES> 5,234
<TOTAL-REVENUES> 5,503
<CGS> 3,562
<TOTAL-COSTS> 3,906
<OTHER-EXPENSES> 1,379
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<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 156
<INCOME-TAX> 54
<INCOME-CONTINUING> 102
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102
<EPS-PRIMARY> .95
<EPS-DILUTED> .95
