SUN CO INC
S-3, 1996-03-07
PETROLEUM REFINING
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<PAGE>
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 7, 1996
 
                                                         REGISTRATION NO. 33-
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                --------------
                                    FORM S-3
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                                --------------
                               SUN COMPANY, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                                --------------
         PENNSYLVANIA                                          23-1743282
(STATE OR OTHER JURISDICTION OF                             (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                             IDENTIFICATION NO.)
 
                      TEN PENN CENTER, 1801 MARKET STREET,
                   PHILADELPHIA, PA 19103-1699 (215) 977-3000
         (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
            AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                                --------------
                         THOMAS W. HOFMANN, COMPTROLLER
       SUN COMPANY, INC., 1801 MARKET STREET, PHILADELPHIA, PA 19103-1699
                                 (215) 977-3000
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                                   COPIES TO:
 
JAMES D. EPSTEIN, ESQUIRE   VETA T. RICHARDSON, ESQUIRE  JAMES D. PHYFE, ESQUIRE
PEPPER, HAMILTON & SCHEETZ       SUN COMPANY, INC.        DAVIS POLK & WARDWELL
  3000 TWO LOGAN SQUARE         1801 MARKET STREET        450 LEXINGTON AVENUE
PHILADELPHIA, PA 19103-2799 PHILADELPHIA, PA 19103-1699  NEW YORK, NY 10017-3954
      (215) 981-4000              (215) 977-3000              (212) 450-4000
                                --------------
  APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
 
  If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
 
  If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [_]
 
  If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
 
  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
 
  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
 
                        CALCULATION OF REGISTRATION FEE
<TABLE> 
<CAPTION> 
==========================================================================================
                                                                 PROPOSED
                                                  PROPOSED        MAXIMUM
 TITLE OF EACH CLASS OF         AMOUNT            MAXIMUM        AGGREGATE     AMOUNT OF
    SECURITIES TO BE             TO BE         OFFERING PRICE    OFFERING     REGISTRATION
       REGISTERED             REGISTERED         PER UNIT*        PRICE*          FEE
- ------------------------------------------------------------------------------------------
<S>                       <C>                  <C>             <C>            <C>
Depositary Shares**.....  11,748,591 shares       $29.1875     $342,912,000     $118,246
==========================================================================================
</TABLE> 

 * Estimated in accordance with Rule 457(c) solely for the purpose of
   calculating the registration fee.
** Each Depositary Share represents one-half of a share of Series A Cumulative
   Preference Stock, No Par Value.
                                --------------
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
 
================================================================================
<PAGE>
 
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A        +
+ REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE  +
+ SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+ OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT       +
+ BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR  +
+ THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE     +
+ SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE   +
+ UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ ANY SUCH STATE.                                                              +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PROSPECTUS (Subject to Completion)
Issued March 7, 1996
                               11,748,591 Shares
 
                               Sun Company, Inc.
 
                            $1.80 DEPOSITARY SHARES
                    EACH REPRESENTING ONE-HALF OF A SHARE OF
               SERIES A CUMULATIVE PREFERENCE STOCK, NO PAR VALUE
        Subject to Redemption into Shares of Common Stock, $1 Par Value
 
                                  ----------
 
  All of the Depositary Shares offered hereby are being sold by the Selling
Shareholders. See "Selling Shareholders." The Company will not receive any
proceeds from the sale of the Depositary Shares being offered hereby. Each
Depositary Share represents ownership of one-half of a share of Series A
Cumulative Preference Stock deposited with First Chicago Trust Company of New
York, as Preference Stock Depositary, and entitles the owner to all of the
proportionate rights, preferences, privileges and obligations of the Series A
Cumulative Preference Stock represented thereby. Dividends on the Series A
Cumulative Preference Stock are cumulative and accrue at a rate of $3.60 per
annum, payable quarterly in arrears in cash on or before the 13th day of each
March, June, September and December, the most recent payment having occurred on
December 13, 1995. The proportionate annual dividend rate for each Depositary
Share is $1.80, and dividends will be payable on the Depositary Shares as, when
and if paid on the Series A Cumulative Preference Stock. Each share of Series A
Cumulative Preference Stock has a liquidation preference equal to $60, plus
accrued and unpaid dividends. The proportionate liquidation preference of each
Depositary Share is half of this amount.

  At any time and from time to time, the Company may call the outstanding
shares of Series A Cumulative Preference Stock (and thereby the Depositary
Shares), in whole or in part, for redemption. On any Redemption Date, the
Company shall cause to be delivered to the holders of Depositary Shares, in
exchange for each such Depositary Share, the following consideration:

  (1) in the event such Redemption Date is prior to June 12, 1998 (the
"Specified Date"), (i) shares of Common Stock having a value equal to $42.39976
on June 12, 1995, declining by $.002222 on each day following to $40.13332 on
April 12, 1998, and equal to $40 thereafter through June 11, 1998 (the
"Depositary Share Call Price"), plus (ii) a cash amount equal to all
proportionate accrued but unpaid dividends thereon; and

  (2) in the event such Redemption Date is on or after the Specified Date, (i)
one share of Common Stock, subject to adjustment in certain events, and (ii) a
cash amount equal to all proportionate accrued but unpaid dividends thereon.

  The Company currently intends to redeem all the outstanding Series A
Cumulative Preference Stock (and thereby the Depositary Shares) on the
Specified Date if not theretofore redeemed. For a more detailed description of
the Series A Cumulative Preference Stock and the Depositary Shares, see
"Capital Stock."

  The opportunity for equity appreciation afforded by an investment in the
Depositary Shares is limited because the Company may, at its option, call the
Series A Cumulative Preference Stock (and thereby the Depositary Shares) for
redemption at any time prior to the Specified Date at the Preference Stock Call
Price, and may be expected to do so prior to the Specified Date if, among other
things, the market price of the Common Stock has theretofore exceeded the
Depositary Share Call Price.

  The Depositary Shares and the Common Stock are traded on the New York Stock
Exchange under the symbols "SUN pfA" and "SUN", respectively. On March 6, 1996,
the last sale prices of the Depositary Shares and the Common Stock as reported
on the New York Stock Exchange were $29.25 and $28.875 per share, respectively.
 
                                  ----------
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES 
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED 
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY 
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                                  ----------
 
                               PRICE $    A SHARE
 
                                  ----------

<TABLE>
<CAPTION>
                                                   UNDERWRITING    PROCEEDS TO
                                       PRICE TO   DISCOUNTS AND      SELLING
                                        PUBLIC    COMMISSIONS(1) SHAREHOLDERS(2)
                                     ------------ -------------- ---------------
<S>                                  <C>          <C>            <C>
Per Share...........................    $             $              $
Total............................... $             $              $
</TABLE>

- -----
 (1) The Glenmede Trust Company and the Company have agreed to indemnify the
     Underwriters against certain liabilities, including civil liabilities
     under the Securities Act of 1933, as amended.
 (2) Before deducting expenses payable by the Selling Shareholders estimated
     at $156,623.
                                  ----------
 
  The Depositary Shares are offered subject to prior sale, when, as and if
accepted by the Underwriters named herein, and subject to the approval of
certain legal matters by Davis Polk & Wardwell, counsel for the Underwriters.
It is expected that delivery of the Depositary Shares will be made on or about
     , 1996 at the office of Morgan Stanley & Co. Incorporated, New York, N.Y.,
against payment therefor in immediately available funds.
 
                                  ----------
MORGAN STANLEY & CO.
           Incorporated
                                CS FIRST BOSTON
 
                                                               SMITH BARNEY INC.
      , 1996
<PAGE>
 
The map titled "Sun's Refining and Marketing System" has been included on the 
inside front cover of the Prospectus. The map is a geographic representation of 
the following states: Connecticut; Delaware; Indiana; Kentucky; Maine; Maryland;
Massachusetts; Michigan; New Hampshire; New Jersey; New York; Ohio; Oklahoma; 
Pennsylvania; Rhode Island; Texas; Vermont; Virginia; and West Virginia; and the
Commonwealth of Puerto Rico. All the states except for Oklahoma and Texas and 
the Commonwealth of Puerto Rico have been shaded to indicate Sun's retail 
marketing presence. The number of retail gasoline outlets in each of the shaded 
states has also been noted. Other assets identified on the map consist of Sun's 
five refineries located in: Philadelphia, Pennsylvania; Marcus Hook,
Pennsylvania; Toledo, Ohio; Tulsa, Oklahoma; and Yabucoa, Puerto Rico, as well
as wholly and jointly-owned crude and refined product pipelines, chemical
facilities in Mont Belvieu, Texas and Brandenburg, Kentucky and a terminal in
Nederland, Texas.
<PAGE>
 
  NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE,
ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, BY ANY SELLING SHAREHOLDER OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL, UNDER
ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
 
                               ----------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>                                                                       <C>
Available Information....................................................   2
Incorporation of Certain Documents by Reference..........................   2
Prospectus Summary.......................................................   3
The Company..............................................................   6
Use of Proceeds..........................................................   8
Capitalization...........................................................   8
Selected Financial Data..................................................   9
Management's Discussion and Analysis of Financial Condition and Results
 of Operations...........................................................  10
Price Range and Dividends................................................  24
Selling Shareholders.....................................................  25
Capital Stock............................................................  26
Certain United States Federal Income Tax Considerations..................  34
Underwriters.............................................................  36
Legal Matters............................................................  37
Experts..................................................................  37
</TABLE>
 
  IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEPOSITARY
SHARES AND THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
  DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN COMPANY COMMON STOCK AND DEPOSITARY SHARES PURSUANT
TO EXEMPTIONS FROM RULES 10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE
ACT OF 1934.
<PAGE>
 
                             AVAILABLE INFORMATION
 
  Sun Company, Inc. (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
Regional Offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained at prescribed rates from
the Commission's Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549. Reports, proxy material and other information concerning the
Company also may be inspected at the offices of the New York Stock Exchange,
Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005 and the
Philadelphia Stock Exchange, Inc., 1900 Market Street, Philadelphia,
Pennsylvania 19103.
 
  The Company has filed with the Commission a registration statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby (together with all amendments and
exhibits, the "Registration Statement"). This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
  The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
 
    1. The Company's Annual Report on Form 10-K for the fiscal year ended
  December 31, 1995.
 
    2. The Company's Current Report on Form 8-K dated February 2, 1996.
 
  All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereunder shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. The Company will furnish without charge to each
person, including any beneficial owner, to whom this Prospectus is delivered,
upon written or oral request, a copy of any or all of the documents
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to: Sun Company, Inc., Ten Penn Center, 1801
Market Street, Philadelphia, Pennsylvania 19103-1699, Attention: Investor
Relations, Telephone: (215) 977-6440.
 
  Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
 
                                       2
<PAGE>
 
                               PROSPECTUS SUMMARY
 
  The following Summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus or
incorporated herein by reference. Hereafter, the term "Sun" means the Company
and its subsidiaries.
 
                                  THE COMPANY
 
  Sun is the largest independent refining and marketing company in the United
States. Headquartered in Philadelphia, Pennsylvania, Sun operates five domestic
refineries, markets gasoline under the Sunoco(R) brand through approximately
4,000 service stations in 17 states, sells lubricants and petrochemicals
worldwide and operates domestic pipelines and terminals. These refining and
marketing activities represented approximately 85 percent of Sun's assets as of
December 31, 1995. Sun also conducts coal mining and cokemaking operations in
Virginia and Kentucky and produces crude oil and natural gas in the U.K. North
Sea.
 
  Sun's strategy is focused on improving financial and operating results by
increasing sales volumes, upgrading its product slate, and improving the
reliability and efficiency of production facilities, while reducing operating
and administrative costs. As a result of Sun's logistically advantaged
refining, chemical and distribution assets and its strong and well-known
branded marketing presence in the northeastern United States, Sun believes that
it is well-positioned to continue competing effectively.
 
  Pursuant to its focused strategy, in 1995 Sun implemented an extensive
operational and financial restructuring. As part of this program, Sun divested
its 55-percent interest in Suncor Inc., its former Canadian petroleum
subsidiary, for net proceeds of $770 million. The divestment enabled Sun to
repurchase more than $200 million of Company Common Stock and reduce debt by
more than $500 million through the use of a significant portion of the proceeds
to repay debt and the elimination of approximately $165 million of Suncor's
debt. The operational restructuring organized the Company into eight distinct
business units, a holding company and a services organization. The operational
restructuring, combined with additional cost reduction actions taken in 1995,
is expected to result in pretax savings of approximately $110 million per year.
 
                                  THE OFFERING
 
<TABLE>
<S>                                           <C>
Depositary Shares offered.................... 11,748,591 shares
Depositary Shares outstanding................ 25,000,000 shares
Selling Shareholders......................... The Pew Memorial Trust
                                              The J. Howard Pew Freedom Trust
                                              The Mabel Pew Myrin Trust
                                              The J.N. Pew, Jr. Charitable Trust
                                              The Medical Trust
NYSE symbol.................................. SUN pfA
</TABLE>
 
                    SUMMARY DESCRIPTION OF DEPOSITARY SHARES
 
GENERAL
 
  Each Depositary Share represents ownership of one-half of a share of Series A
Cumulative Preference Stock, no par value of the Company (the "Series A
Cumulative Preference Stock"). Each owner of a Depositary Share is entitled,
proportionately, to all the rights, preferences, privileges and obligations of
the Series A Cumulative Preference Stock represented thereby (including
dividend, voting, redemption and liquidation rights). The Series A Cumulative
Preference Stock (and thereby the Depositary Shares) ranks prior to the
Company's Common Stock, $1 par value (the "Common Stock") with respect to
dividend rights and rights upon liquidation, dissolution and winding up of the
Company. For a more detailed description of the Series A Cumulative Preference
Stock and the Depositary Shares, see "Capital Stock."
 
                                       3
<PAGE>
 
 
REDEMPTION
 
  At any time and from time to time, the Company may call the outstanding
shares of Series A Cumulative Preference Stock (and thereby the Depositary
Shares), in whole or in part, for redemption (the "Redemption Date"). On any
Redemption Date, the Company shall cause to be delivered to the holders of
Depositary Shares representing such Series A Cumulative Preference Stock, in
exchange for each such Depositary Share, the following consideration:
 
    (1) in the event such Redemption Date is prior to June 12, 1998 (the
  "Specified Date"), (i) shares of Common Stock having a value equal to
  $42.39976 on June 12, 1995 (the "Accrual Date"), declining by $.002222 on
  each day following the Accrual Date (computed on the basis of a 360-day
  year of twelve 30-day months) to $40.13332 on April 12, 1998, and equal to
  $40 thereafter through June 11, 1998 (the "Depositary Share Call Price"),
  plus (ii) a cash amount equal to all proportionate accrued but unpaid
  dividends thereon; and
 
    (2) in the event such Redemption Date is on or after the Specified Date,
  (i) one share of Common Stock, subject to adjustment in certain events, and
  (ii) a cash amount equal to all proportionate accrued but unpaid dividends
  thereon.
 
  The Company currently intends to redeem all the outstanding Series A
Cumulative Preference Stock (and thereby the Depositary Shares) on the
Specified Date if not theretofore redeemed.
 
  Upon certain mergers, consolidations or other extraordinary transactions of
the Company at any time, each outstanding Depositary Share will be entitled to
receive consideration of the same type as is received by holders of the Common
Stock in such transaction and having a fair value equal to the value of the
Common Stock that such Depositary Share would receive if it were redeemed by
the Company at such time.
 
LIQUIDATION PREFERENCE
 
  Each share of Series A Cumulative Preference Stock has a liquidation
preference equal to $60, plus accrued and unpaid dividends. The proportionate
liquidation preference of each Depositary Share will be half of this amount.
 
DIVIDENDS
 
  Dividends on the Series A Cumulative Preference Stock are cumulative and
accrue at the rate of $3.60 per share per annum payable quarterly in arrears in
cash on or before the 13th day of each March, June, September and December, the
most recent payment having occurred on December 13, 1995. The proportionate
annual dividend rate on the Depositary Shares is $1.80 per share and dividends
will be payable on the Depositary Shares as, when and if paid on the Series A
Cumulative Preference Stock.
 
VOTING RIGHTS
 
  A holder of Depositary Shares is entitled to instruct the Preference Stock
Depositary as to the exercise of voting rights with respect to the number of
shares of Series A Cumulative Preference Stock represented by such holder's
Depositary Shares. The holders of Series A Cumulative Preference Stock are
entitled to one vote per share (and therefore a holder of Depositary Shares
will effectively exercise one vote for each two Depositary Shares owned by such
holder), subject to certain adjustments, on all matters to be voted upon by the
shareholders of the Company, voting together with the Common Stock as a single
class, except as provided by law.
 
                                       4
<PAGE>
 
                         SUMMARY FINANCIAL INFORMATION
 
  The following table represents summary financial information of Sun for each
of the five years in the period ended December 31, 1995. Reference is made to
the detailed information and financial statements available in the documents
described above under "Incorporation of Certain Documents by Reference."
 
<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31
                          ----------------------------------------------------------------------------
                             1995                1994            1993       1992              1991
                          -----------         -----------     ----------------------       -----------
                          (MILLIONS OF DOLLARS EXCEPT PER SHARE AND RATIO AMOUNTS)
<S>                       <C>                 <C>             <C>        <C>               <C>
Sales and other
 operating revenue
 (including consumer
 excise taxes)..........  $    10,121         $    9,818      $    9,180 $    10,445       $    11,493
Income (loss) from
 continuing operations
 before cumulative
 effect of change in
 accounting
 principle (/1/)(/2/)...  $       227         $       97      $      283 $      (317)(/3/) $      (130)(/4/)
Net income (loss)
 (/1/)(/2/)(/5/)........  $       140         $       90      $      288 $      (559)(/3/) $      (387)(/4/)(/6/)
Income (loss) per common
 share from continuing
 operations before
 cumulative effect of
 change in accounting
 principle (/7/)........  $      2.24         $      .91      $     2.65 $     (2.98)      $     (1.23)
Net income (loss) per
 common share (/7/).....  $      1.29         $      .84      $     2.70 $     (5.26)      $     (3.65)
Capital expenditures....  $       545         $      848(/8/) $      612 $       530       $       615
Ratio of earnings to
 combined fixed charges
 and preference stock
 dividends (/9/)........        2.68x              2.12x           4.90x         N/A               N/A
<CAPTION>
                                               AT DECEMBER 31
                          ----------------------------------------------------------------------------
                             1995                1994            1993       1992              1991
                          -----------         -----------     ----------------------       -----------
                               (MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S>                       <C>                 <C>             <C>        <C>               <C>
Total assets............  $     5,184         $    6,465      $    5,900 $     6,071       $     7,017
Long-term debt..........  $       888         $    1,073      $      726 $       792       $       852
Stockholders' equity....  $     1,699         $    1,863      $    1,984 $     1,896       $     2,696
Stockholders' equity per
 common share...........  $     17.16(/10/)   $    17.42      $    18.60 $     17.82       $     25.41
</TABLE>
- --------
(1)  Includes after-tax gains on divestments of $159 million in 1995, $39
     million in 1994 and $121 million in 1993.
(2)  Includes after-tax provisions for write-down of assets and other matters of
     $61 million in 1995, $32 million in 1994, $12 million in 1993, $456 million
     in 1992 and $103 million in 1991.
(3)  Includes after-tax gain on Iranian litigation settlement of $117 million.
(4)  Includes after-tax provision for environmental remediation work at various
     domestic refining and marketing sites of $78 million.
(5)  Includes impact of the cumulative effect of a change: in the method of
     accounting for impairment of long-lived assets in 1995 ($87 million after
     tax charge); in the method of accounting for postemployment benefits in
     1994 ($7 million after-tax charge); in the method of accounting for income
     taxes in 1993 ($5 million tax benefit); and in the method of accounting for
     postretirement health care and life insurance benefits in 1992 ($261
     million after-tax charge).
(6)  Includes after-tax loss from real estate operations held for sale of $255
     million. Prior to the fourth quarter of 1993, real estate operations had
     been classified as discontinued operations in the consolidated financial
     statements.
(7)  Amounts represent both primary and fully diluted earnings per share.
(8)  Excludes $164 million attributable to the purchase of the Girard Point
     refinery in Philadelphia and related assets.
(9)  The ratio of earnings to combined fixed charges and preference stock
     dividends has been computed using principally pretax earnings from
     continuing operations before the cumulative effect of change in accounting
     principles and before deducting fixed charges. Fixed charges are comprised
     of interest cost and debt expense of continuing operations (including
     amounts capitalized) and one-third of rental expense applicable to
     operating leases (which is that portion deemed to be interest). The Company
     began paying quarterly dividends on its Series A Cumulative Preference
     Stock in the third quarter of 1995. For 1992 and 1991, earnings were
     inadequate to cover fixed charges by $454 million and $76 million,
     respectively, as a result of $745 million and $156 million pretax
     provisions for write-down of assets and other matters.
(10) Assumes redemption of Series A Cumulative Preference Stock for Common
     Stock.
 
                                       5
<PAGE>
 
                                  THE COMPANY
 
  Sun is the largest independent refining and marketing company in the United
States. Headquartered in Philadelphia, Pennsylvania, Sun operates five
domestic refineries, markets gasoline under the Sunoco(R) brand through
approximately 4,000 service stations in 17 states, sells lubricants and
petrochemicals worldwide and operates domestic pipelines and terminals. These
refining and marketing activities represented approximately 85 percent of
Sun's assets as of December 31, 1995. Sun also conducts coal mining and
cokemaking operations in Virginia and Kentucky and produces crude oil and
natural gas in the U.K. North Sea.
 
  Sun's strategy is focused on improving financial and operating results by
increasing sales volumes, upgrading its product slate, and improving the
reliability and efficiency of production facilities, while reducing operating
and administrative costs. As a result of Sun's logistically advantaged
refining, chemical and distribution assets and its strong and well-known
branded marketing presence in the northeastern United States, Sun believes
that it is well-positioned to continue competing effectively.
 
  Pursuant to its focused strategy, in 1995 Sun implemented an extensive
operational and financial restructuring. As part of this program, Sun divested
its 55-percent interest in Suncor Inc., its former Canadian petroleum
subsidiary, for net proceeds of $770 million. The divestment enabled Sun to
repurchase more than $200 million of Company Common Stock and reduce debt by
more than $500 million through the use of a significant portion of the
proceeds to repay debt and the elimination of approximately $165 million of
Suncor's debt. The operational restructuring organized the Company into eight
distinct business units, which are described below, a holding company and a
services organization. The operational restructuring, combined with additional
cost reduction actions taken in 1995, is expected to result in pretax savings
of approximately $110 million per year.
 
REFINING AND MARKETING
 
 SUN NORTHEAST REFINING
 
  Sun Northeast Refining operates refineries in Pennsylvania at Marcus Hook
and Philadelphia. The Marcus Hook plant has a crude oil processing capacity of
175,000 barrels per day. The Philadelphia complex, with a capacity of 307,000
barrels per day, includes the Girard Point and Point Breeze processing
facilities. The Marcus Hook and Philadelphia refineries are interconnected by
pipeline, barge, truck and rail which permit the transfer of unfinished stocks
between the two refineries. The combined capacity (482,000 barrels per day) of
the Philadelphia and Marcus Hook refineries makes Sun the largest refiner in
the northeastern U.S., which is among the largest refined product markets in
the world.
 
  Sun Northeast Refining manufactures gasoline and a wide variety of other
petroleum products, including diesel fuel, home heating oil, residual fuel
oil, asphalt, propane and butane. The unit markets these products to wholesale
and industrial customers, and provides product to Sunoco Northeast Marketing
and Sunoco Chemicals.
 
 SUNOCO NORTHEAST MARKETING
 
  Sunoco Northeast Marketing's 2,944 retail sites sell gasoline, kerosene and
diesel fuels, motor oils and other Sunoco accessories. These operations are
located in a 12-state region from Maine through northern Virginia, with the
highest concentration of outlets in Connecticut, Massachusetts, New Jersey,
New York, Pennsylvania and Rhode Island, where Sun, in the aggregate, has the
second largest market share.
 
  Sunoco Northeast Marketing's 279 Ultra Service Centers SM offer state-of-
the-art automotive diagnosis and repair, while its 418 APlus(R) convenience
store locations are designed to support high-volume sales of gasoline and
provide a broad range of merchandise.
 
  Sunoco Northeast Marketing is the exclusive provider under long-term
contracts on several of the major limited access highway systems in the
northeastern United States, including the Pennsylvania Turnpike, the New
Jersey Turnpike, the Atlantic City Expressway and New Jersey's Palisades
Parkway. Sunoco also supplies 16 of the service stops on the New York Thruway
and two sites on U. S. Interstate 95 in Maryland.
 
                                       6
<PAGE>
 
 SUNOCO CHEMICALS
 
  Sunoco Chemicals manufactures base and intermediate commodity petrochemicals
at Sun's Marcus Hook and Philadelphia refineries and at an ethylene oxide
plant in Brandenburg, Kentucky. These chemicals are comprised principally of
olefins and their derivatives (ethylene, ethylene oxide and propylene) and
aromatics (benzene, cumene, cyclohexane, toluene and xylenes). Sunoco
Chemicals sells these products principally in the northeastern United States
where it has a competitive advantage due to the geographic proximity of its
manufacturing operations to its customers. The balance is sold in other
regions of the United States and in Canada, Europe and the Far East.
 
  Sunoco Chemicals is also a one-third partner in a Mont Belvieu, Texas joint
venture that manufactures MTBE used in the production of reformulated fuels.
All of the MTBE is purchased by Sun for use at its northeastern refineries
pursuant to an off-take agreement.
 
 SUNOCO LUBRICANTS
 
  Sunoco Lubricants is one of the largest manufacturers and marketers of
lubricating and specialty oil products in the United States. This business
unit produces lubricants and fuels at facilities in Yabucoa, Puerto Rico and
Tulsa, Oklahoma. These facilities have a combined crude oil processing
capacity of 170,000 barrels per day and a combined paraffinic lubes production
capacity of 16,800 barrels per day.
 
  Among the many products manufactured are Sunoco(R) automotive and industrial
lubricants, process oils, spray oils (including Sun-Spray(R) Ultra-Fine(R)
Horticultural Spray Oil), waxes and synthetic lubricants.
 
 SUNOCO MIDAMERICA MARKETING & REFINING
 
  Sunoco MidAmerica Marketing & Refining is an integrated business consisting
of retail gasoline and middle distillate marketing operations in the
midwestern U.S. (principally Ohio and Michigan). Sunoco MidAmerica is the
exclusive retailer of petroleum products on the Ohio Turnpike. This business
unit also manufactures and markets fuels and petrochemicals produced at Sun's
Toledo, Ohio refinery to wholesale customers.
 
  Sunoco MidAmerica's major assets are the 125,000-barrel-per-day Toledo
refinery and 917 Sunoco(R) service stations supplied by the refinery.
 
 SUNOCO LOGISTICS
 
  Sunoco Logistics' business consists of pipeline transportation of crude oil
and refined petroleum products; domestic crude oil acquisition from third-
party leases; crude oil trucking; and a marine terminal in Nederland, Texas,
with 10 million barrels of storage capacity. It also includes product
terminals and rail, tank car, transport and marine operations. Sun Pipe Line
Company oversees more than 7,000 miles of pipelines in 12 states and has
additional equity interests in nearly 3,000 miles of pipeline in three other
states.
 
  Sunoco Logistics' crude oil pipeline operations are located primarily in the
Southwest and transport crude oil to refiners (including Sun's Tulsa refinery)
or to local trade points. The refined product pipeline operations are located
primarily in the Northeast and Midwest and transport gasoline and other
petroleum products for Sun's other businesses, integrated petroleum companies
and independent marketers and distributors.
 
SUN COAL AND COKE
 
  Sun Coal and Coke, headquartered in Knoxville, Tennessee, operates coal
mines in southwestern Virginia and southeastern Kentucky and a coke producing
facility in southwestern Virginia. Using its environmentally superior non-
recovery cokemaking technology, Sun Coal and Coke converted 59 percent of its
metallurgical coal production into 660 thousand tons of high-quality coke
during 1995. Commencing in April 1996, all coke production will be sold to a
domestic steel producer under a long-term contract.
 
 
                                       7
<PAGE>
 
SUN INTERNATIONAL PRODUCTION
 
  Sun International Production, headquartered in the United Kingdom, is
engaged in the development, production and marketing of crude oil and natural
gas in the U.K. sector of the North Sea. The North Sea properties contain net
proved reserves totalling 39 million barrels of crude oil, condensate and
natural gas liquids, and 83 billion cubic feet of natural gas. In 1995, the
properties produced 27,400 barrels a day of crude oil and 36 million cubic
feet a day of natural gas. Sun is the operator and 59-percent owner of a
floating production vessel used in the successful development of the Balmoral,
Glamis and Stirling fields in Block 16/21.
 
                                USE OF PROCEEDS
 
  All the Depositary Shares offered hereby are being offered by the Selling
Shareholders. The Company will receive no proceeds from the sale of the
Depositary Shares.
 
                                CAPITALIZATION
 
  The following table sets forth the capitalization of Sun as of December 31,
1995. The capitalization table should be read in conjunction with the
consolidated financial statements of Sun, including the notes thereto,
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, which is incorporated herein by reference.
 
<TABLE>
<CAPTION>
                                                          AT DECEMBER 31, 1995
                                                          ---------------------
                                                          (MILLIONS OF DOLLARS)
<S>                                                       <C>
Short-term borrowings and current portion of long-term
 debt....................................................        $    57
                                                                 =======
Long-term debt...........................................        $   888
                                                                 -------
Stockholders' equity
  Series A Cumulative Preference Stock, no par value,
   issued and outstanding 12,500,000 shares..............            750
  Common Stock, par value $1 per share, issued
   129,709,084 shares....................................            130
  Capital in excess of par value.........................          1,310
  Earnings employed in the business......................          1,518
  Less common stock held in treasury, at cost (55,699,366
   shares)...............................................         (2,009)
                                                                 -------
  Total stockholders' equity.............................          1,699
                                                                 -------
Total stockholders' equity and long-term debt............        $ 2,587
                                                                 =======
</TABLE>
 
                                       8
<PAGE>
 
                            SELECTED FINANCIAL DATA
 
  The following table represents selected financial data of Sun for each of
the five years in the period ended December 31, 1995. Reference is made to the
detailed information and financial statements available in the documents
described above under "Incorporation of Certain Documents by Reference."
 
<TABLE>
<CAPTION>
                                           YEAR ENDED DECEMBER 31
                          ----------------------------------------------------------------------------
                             1995                1994            1993       1992              1991
                          -----------         -----------     ----------------------       -----------
                          (MILLIONS OF DOLLARS EXCEPT PER SHARE AND RATIO AMOUNTS)
<S>                       <C>                 <C>             <C>        <C>               <C>
Sales and other
 operating revenue
 (including consumer
 excise taxes)..........  $    10,121         $    9,818      $    9,180 $    10,445       $    11,493
Income (loss) from
 continuing operations
 before cumulative
 effect of change in
 accounting
 principle(/1/)(/2/)....  $       227         $       97      $      283 $      (317)(/3/) $      (130)(/4/)
Net income
 (loss)(/1/)(/2/)(/5/)..  $       140         $       90      $      288 $      (559)(/3/) $      (387)(/4/)(/6/)
Income (loss) per common
 share from continuing
 operations before
 cumulative effect of
 change in accounting
 principle(/7/).........  $      2.24         $      .91      $     2.65 $     (2.98)      $     (1.23)
Net income (loss) per
 common share(/7/)......  $      1.29         $      .84      $     2.70 $     (5.26)      $     (3.65)
Capital expenditures....  $       545         $      848(/8/) $      612 $       530       $       615
Ratio of earnings to
 combined fixed charges
 and preference stock
 dividends(/9/).........        2.68x              2.12x           4.90x         N/A               N/A
<CAPTION>
                                               AT DECEMBER 31
                          ----------------------------------------------------------------------------
                             1995                1994            1993       1992              1991
                          -----------         -----------     ----------------------       -----------
                               (MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S>                       <C>                 <C>             <C>        <C>               <C>
Total assets............  $     5,184         $    6,465      $    5,900 $     6,071       $     7,017
Long-term debt..........  $       888         $    1,073      $      726 $       792       $       852
Stockholders' equity....  $     1,699         $    1,863      $    1,984 $     1,896       $     2,696
Stockholders' equity per
 common share...........  $     17.16(/10/)   $    17.42      $    18.60 $     17.82       $     25.41
</TABLE>
- --------
(1) Includes after-tax gains on divestments of $159 million in 1995, $39
    million in 1994 and $121 million in 1993.
(2) Includes after-tax provisions for write-down of assets and other matters
    of $61 million in 1995, $32 million in 1994, $12 million in 1993, $456
    million in 1992 and $103 million in 1991.
(3) Includes after-tax gain on Iranian litigation settlement of $117 million.
(4) Includes after-tax provision for environmental remediation work at various
    domestic refining and marketing sites of $78 million.
(5) Includes impact of the cumulative effect of a change: in the method of
    accounting for impairment of long-lived assets in 1995 ($87 million after
    tax charge); in the method of accounting for postemployment benefits in
    1994 ($7 million after-tax charge); in the method of accounting for income
    taxes in 1993 ($5 million tax benefit); and in the method of accounting
    for postretirement health care and life insurance benefits in 1992 ($261
    million after-tax charge).
(6) Includes after-tax loss from real estate operations held for sale of $255
    million. Prior to the fourth quarter of 1993, real estate operations had
    been classified as discontinued operations in the consolidated financial
    statements.
(7) Amounts represent both primary and fully diluted earnings per share.
(8) Excludes $164 million attributable to the purchase of the Girard Point
    refinery in Philadelphia and related assets.
(9) The ratio of earnings to combined fixed charges and preference stock
    dividends has been computed using principally pretax earnings from
    continuing operations before the cumulative effect of change in accounting
    principles and before deducting fixed charges. Fixed charges are comprised
    of interest cost and debt expense of continuing operations (including
    amounts capitalized) and one-third of rental expense applicable to
    operating leases (which is that portion deemed to be interest). The
    Company began paying quarterly dividends on its Series A Cumulative
    Preference Stock in the third quarter of 1995. For 1992 and 1991, earnings
    were inadequate to cover fixed charges by $454 million and $76 million,
    respectively, as a result of $745 million and $156 million pretax
    provisions for write-down of assets and other matters.
(10) Assumes redemption of Series A Cumulative Preference Stock for Common
     Stock.
 
                                       9
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
OUTLOOK
 
  The petroleum industry is a highly competitive global business subject to
significant volatility. Although Sun cannot be certain that its planning
assumptions will prove accurate, these assumptions and anticipated near-term
market trends are enumerated below:
 
  . Sun's results will continue to be highly leveraged to refining margins
    which are historically difficult to predict. Although market fundamentals
    for refined petroleum products appear to be improving and offer the
    possibility for increasing margins over the next several years, the
    Company has developed a business plan which assumes margins experienced
    in the 1994-95 time period will continue into the future. This plan is
    focused on improving Sun's results by increasing sales volumes, upgrading
    products, improving reliability and efficiency of production facilities
    and reducing operating and administrative costs.
 
  . Ample supplies of light sweet crude oil will continue to be available,
    and the price differential between light sweet and heavy sour crude oils
    will remain relatively low. As Sun's domestic refineries process
    approximately 80 percent light sweet crude oil, the availability of light
    sweet crude oil and its price relative to alternative heavy sour crude
    oil are important to Sun's profitability and competitive position. The
    Company continually manages the raw material slate processed at its
    refineries in an effort to enhance refining margins.
 
  . Retail gasoline marketing in the northeastern U.S. will continue to offer
    attractive investment returns. The Company's strategy is to improve
    profitability in this mature market by increasing sales volumes and
    reducing operating and administrative costs. The Company will increase
    market share, despite a continuing rationalization of marginal accounts,
    through aggressive investments and marketing efforts. As a result of its
    logistically advantaged refining and distribution assets and its strong
    branded marketing presence in this region, the Company believes that it
    is well positioned to compete effectively.
 
  . Supply and demand for lubricants will be in balance in 1996. However, new
    lubricants supply coming onstream within the next year is expected to
    adversely impact margins. The Company is aggressively pursuing new
    contract customers, upgrading its product mix and lowering production
    costs to offset the impact of the industry's increase in supply.
 
  . Overall margins for chemicals in 1996 will decline compared to the very
    strong margins experienced during 1995.
 
  . Crude oil prices and production levels will continue to significantly
    impact the earnings of Sun's International Production business. Crude oil
    prices, on average, will approximate 1995 levels. While the Company's
    strategy is to opportunistically invest in producing properties or near-
    term development projects in the U.K. North Sea if returns on such
    investments are expected to exceed the Company's cost of capital for such
    projects, the Company will also consider other options for this business,
    including divestment. In the absence of acquisitions, the income and
    crude oil and natural gas reserves and production from this business will
    decline significantly through the end of the decade.
 
  . An oversupply of natural gas in the U.K. sector of the North Sea will
    cause downward pressure on natural gas prices in this region over the
    next several years. Although a large portion of Sun's natural gas
    production is sold under long-term contracts to British Gas Corporation,
    the timing of the liftings and the recognition of earnings associated
    with these contracts are uncertain.
 
                                      10
<PAGE>
 
FINANCIAL AND OPERATIONAL RESTRUCTURING
 
  During 1995, the Company implemented an extensive operational and financial
restructuring designed to significantly improve its competitive position and
establish a solid foundation for improved financial performance. The major
actions taken by the Company are enumerated below:
 
  . Divested the Company's 55-percent interest in Suncor Inc., its former
    Canadian petroleum subsidiary, for net cash proceeds of $770 million, of
    which $635 million was received in June 1995, with the remainder due in
    1996;
 
  . Reduced debt by more than $500 million through the use of a significant
    portion of the Suncor proceeds to repay debt and the elimination of
    Suncor's debt of approximately $165 million as part of the Suncor sale;
 
  . Reduced the quarterly Common Stock dividend from $.45 per share ($1.80
    per year) to $.25 per share ($1.00 per year);
 
  . Repurchased 6.4 million shares of Common Stock through a tender offer for
    $192 million;
 
  . Exchanged 25 million Depositary Shares in a tax-free transaction for an
    equal number of shares of Common Stock. Each Depositary Share represents
    ownership of one-half of a share of the Company's Series A Cumulative
    Preference Stock and accrues dividends quarterly at a rate of $.45 per
    Depositary Share ($1.80 per year);
 
  . Established 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. Pursuant to this program, approximately 1.7
    million shares of Common Stock were purchased by the Company during 1995
    for approximately $46 million;
 
  . Restructured the Company into eight business units plus a holding company
    and a services organization. The following "Earnings Profile of Sun
    Businesses" and related analyses reflect this new organizational
    structure; and
 
  . Reduced complement and implemented other cost reduction actions that are
    expected to result in pretax savings of approximately $110 million a
    year.
 
  For additional information regarding the elements of the financial and
operational restructuring, see Notes 2 and 15 to the Consolidated Financial
Statements in the Company's 1995 Annual Report on Form 10-K, incorporated by
reference herein.
 
                                      11
<PAGE>
 
RESULTS OF OPERATIONS
 
  The following Earnings Profile of Sun Businesses and related analyses
reflect Sun's new organizational structure established in 1995. Prior year
amounts have been restated to conform to this new presentation. The major
element of this restatement is the reclassification of Sun's midwestern U.S.
wholesale fuels, branded marketing and chemicals operations from the
predecessor Fuels and Chemicals businesses into the new Sunoco MidAmerica
Marketing & Refining business unit. In addition, the restatement reflects a
new method of allocating support costs among Sun's core refining and marketing
businesses based upon the level of services rendered.
 
 EARNINGS PROFILE OF SUN BUSINESSES (AFTER TAX)
 
<TABLE>
<CAPTION>
                                                      1995  1994(/1/) 1993(/1/)
                                                      ----  ----      ----
                                                       (MILLIONS OF
                                                         DOLLARS)
<S>                                                   <C>   <C>       <C>
Sun Northeast Refining............................... $(37) $(77)     $(22)
Sunoco Northeast Marketing...........................   45    59        80
Sunoco Chemicals.....................................   68    25        10
Sunoco Lubricants....................................  (15)   (2)        5
Sunoco MidAmerica Marketing & Refining...............   (8)   (8)        5
Sunoco Logistics.....................................   53    45        55
Sun Coal and Coke....................................   25    15         2
Sun International Production.........................   57    60        73
Corporate expenses...................................  (24)  (23)      (21)
Net financing expenses...............................  (55)  (32)      (25)
Real estate operations held for sale.................   (1)    2         1
Canada (Suncor)(/2/).................................   23    37        33
                                                      ----  ----      ----
                                                       131   101       196
Special items(/3/):
  Gain on divestment of Suncor common stock..........  157    --        19
  Gain on divestment of exploration and production
   properties........................................   --    28        80
  Provision for write-down of assets and other
   matters...........................................  (61)  (32)      (12)
  Cumulative effect of change in accounting
   principle(/4/)....................................  (87)   (7)        5
                                                      ----  ----      ----
Consolidated net income.............................. $140  $ 90      $288
                                                      ====  ====      ====
</TABLE>
- --------
(1) Restated to conform to the 1995 presentation.
(2) Sun reduced its ownership interest in Suncor from 68 percent to 55 percent
    in May 1993 and sold its remaining 55-percent interest in June 1995.
(3) For a discussion of special items, see Notes 2 and 6 to the Consolidated
    Financial Statements in the Company's 1995 Annual Report on Form 10-K,
    incorporated by reference herein.
(4) Consists of the impact of the cumulative effect of a change in the method
    of accounting for impairment of long-lived assets in 1995, postemployment
    benefits in 1994 and income taxes in 1993.
 
 ANALYSIS OF EARNINGS PROFILE OF SUN BUSINESSES
 
  In 1995, Sun Company, Inc. and its subsidiaries recorded net income of $140
million, or $1.29 per share of common stock compared to $90 million, or $.84
per share in 1994 and $288 million, or $2.70 per share in 1993. Excluding the
special items shown separately in the Earnings Profile of Sun Businesses
above, Sun's income was $131 million in 1995, compared to $101 million in 1994
and $196 million in 1993.
 
  The $30 million increase in earnings before special items in 1995 was
primarily due to higher chemical, wholesale gasoline and asphalt margins,
improved refinery operations, income associated with growth capital
expenditures and reduced expenses resulting from cost containment efforts.
Partially offsetting these positive factors were record low distillate margins
experienced in the first half of 1995, lower retail gasoline and lubricant
 
                                      12
<PAGE>
 
sales volumes, higher net financing expenses and the absence of earnings from
Suncor following its sale in June 1995. In 1994, the $95 million decline in
earnings before special items was primarily due to lower average wholesale
product margins, lower retail sales volumes and higher operating and
administrative expenses. For a more detailed discussion of the key factors
that affected Sun's income during the 1993-95 period, see the individual
business discussions below.
 
  Sun Northeast Refining--The Sun Northeast Refining business consists of the
manufacturing and wholesale marketing of fuels produced at Sun's Marcus Hook,
Pennsylvania and Philadelphia, Pennsylvania refineries.
 
<TABLE>
<CAPTION>
                                                          1995   1994   1993
                                                          -----  -----  -----
<S>                                                       <C>    <C>    <C>
Losses (millions of dollars)............................. $ (37) $ (77) $ (22)
Wholesale margin (per barrel)(/1/)....................... $2.73  $2.38  $2.84
Wholesale sales (thousands of barrels daily):
  To unaffiliated customers:
    Gasoline.............................................  98.2   41.3    6.7
    Middle distillates................................... 133.8  104.3   85.1
    Residual fuel........................................  50.6   34.1   23.7
    Asphalt..............................................  24.1   26.5   25.2
    Other................................................  39.7   38.6   18.5
                                                          -----  -----  -----
                                                          346.4  244.8  159.2
  To affiliates (primarily gasoline)..................... 184.3  197.4  202.0
                                                          -----  -----  -----
                                                          530.7  442.2  361.2
                                                          =====  =====  =====
Crude unit capacity (thousands of barrels daily) at
 December 31............................................. 482.0  482.0  305.0
Crude unit capacity utilized.............................   93%    86%    83%
</TABLE>
- --------
(1) Wholesale sales price less cost of crude oil, other feedstocks and
    purchased refined products.
 
  Sun Northeast Refining results increased $40 million in 1995 after declining
$55 million during 1994. The results in 1995 and 1994 included $17 million and
$1 million, respectively, of after-tax income from operations at the
Philadelphia refinery's 177,000 barrel-per-day Girard Point facilities
acquired on August 4, 1994. (See "Sunoco Chemicals" below for a discussion of
the income contribution to that business attributable to the Girard Point
acquisition.)
 
  Excluding activity from the Girard Point facilities, Sun Northeast Refining
results increased $24 million during 1995 primarily due to higher average
wholesale fuels product margins ($36 million), partially offset by lower sales
volumes ($15 million). The improvement in wholesale fuels margins reflects the
favorable impact of stronger market conditions for asphalt and wholesale
gasoline, partially offset by the record low margins for middle distillates
experienced in the first half of 1995.
 
  During 1994, the $55 million decline in Sun Northeast Refining results was
largely due to lower average wholesale fuels product margins ($42 million),
principally on gasoline, and higher operating and administrative expenses ($11
million), partially offset by a $5 million after-tax gain recognized in
connection with the settlement of various inventory hedging contracts.
 
  Wholesale gasoline margins were adversely impacted in both 1994 and 1995 by
the inability to fully recover the higher cost of making reformulated
gasoline.
 
                                      13
<PAGE>
 
  Sunoco Northeast Marketing--The Sunoco Northeast Marketing business consists
of the retail sale of gasoline and middle distillates in New England and the
Mid-Atlantic states and convenience-store operations in these regions. Branded
marketing operations conducted in the midwestern U.S. are included in the Su-
noco MidAmerica Marketing & Refining business discussed below.
 
<TABLE>
<CAPTION>
                                                              1995  1994  1993
                                                              ----- ----- -----
<S>                                                           <C>   <C>   <C>
Income (millions of dollars)................................. $  45 $  59 $  80
Gasoline margin (per barrel)(/1/)............................ $4.88 $4.86 $5.00
Sales (thousands of barrels daily):
  Gasoline................................................... 158.0 168.5 177.6
  Middle distillates.........................................  14.7  16.2  17.2
                                                              ----- ----- -----
                                                              172.7 184.7 194.8
                                                              ===== ===== =====
Retail gasoline outlets...................................... 2,944 3,186 3,424
</TABLE>
- --------
(1) Retail sales price less wholesale sales price. The retail sales price is
    the weighted average price received through the various branded marketing
    distribution channels.
 
  The $14 million decrease in Sunoco Northeast Marketing income in 1995 was
primarily due to a six-percent decline in sales volumes ($14 million) and
higher depreciation expense ($6 million), partially offset by lower operating
and administrative expenses ($10 million). The volume decline was due largely
to the elimination of some marginal accounts and the further rationalization
of Sun's service station portfolio in connection with a program to modernize
its retail gasoline outlets and convert them to a single brand ("Branded for
Success").
 
  Sunoco Northeast Marketing results declined $21 million in 1994 due largely
to lower sales volumes ($11 million) and higher operating and administrative
expenses ($9 million) in part due to increased expenses related to the Branded
for Success program. The adverse impact of lower retail gasoline margins in
1994 was essentially offset by higher margins on middle distillates sold at
retail. The five percent decline in branded gasoline volumes during 1994 was
caused primarily by the temporary closure of service stations during the
Branded for Success program and the elimination of some marginal accounts.
 
  Sunoco Chemicals--The Sunoco Chemicals business consists of the
manufacturing and marketing of commodity and intermediate petrochemicals
produced at the Marcus Hook and Philadelphia refineries, at an ethylene oxide
plant in Brandenburg, Kentucky and at a joint venture MTBE facility in Mont
Belvieu, Texas. Petrochemicals manufactured and sold at the Toledo, Ohio
refinery are included in the Sunoco MidAmerica Marketing & Refining business
discussed below.
 
<TABLE>
<CAPTION>
                                                            1995   1994   1993
                                                           ------ ------ ------
<S>                                                        <C>    <C>    <C>
Income (millions of dollars).............................. $   68 $   25 $   10
Chemicals margin (per barrel)(/1/)........................ $25.58 $17.63 $12.61
Petrochemical sales (thousands of barrels daily):
  Aromatics...............................................    8.5    5.2    5.3
  Propylene...............................................    8.1    8.4   10.2
  Ethylene/ethylene oxide.................................    2.3    2.3    2.4
  Other...................................................    2.0    2.6    1.6
                                                           ------ ------ ------
                                                             20.9   18.5   19.5
                                                           ====== ====== ======
</TABLE>
- --------
(1) Wholesale sales price less the cost of feedstocks and product purchases.
 
  Income from Sunoco Chemicals increased $43 million in 1995 due to
significantly higher margins ($32 million), higher sales volumes ($2 million)
and higher aromatics production from the Girard Point facilities acquired from
Chevron in August 1994 ($11 million). The addition of cyclohexane production
from a new plant completed at the Marcus Hook refinery in the first quarter of
1995 contributed to the higher margins and volumes.
 
                                      14
<PAGE>
 
  Sunoco Chemicals income increased $15 million in 1994 due to higher margins
($17 million) and a $10 million contribution from the sale of petrochemicals
produced at the Girard Point facilities. A strengthening in the worldwide
economy and a cyclical upturn in most petrochemical product markets in the
second half of 1994 led to the improved product margins, which continued
through most of 1995. Partially offsetting these positive factors were lower
sales volumes ($10 million) resulting from production curtailments during the
first half of 1994 and higher operating expenses ($5 million).
 
  Sunoco Lubricants--The Sunoco Lubricants business is comprised of the
manufacturing, packaging and marketing of a broad line of lubricating and
specialty oils produced at Sun's Tulsa, Oklahoma and Puerto Rico refineries as
well as the related manufacturing and wholesale marketing of fuels produced at
these facilities.
 
<TABLE>
<CAPTION>
                                                            1995   1994   1993
                                                            -----  -----  -----
<S>                                                         <C>    <C>    <C>
Income (loss) (millions of dollars)........................ $ (15) $  (2) $   5
Wholesale margin (per barrel)(/1/)......................... $4.12  $4.56  $4.79
Wholesale sales (thousands of barrels daily):
  To unaffiliated customers:
    Specialty oils.........................................   8.6    9.8    9.5
    Base oils..............................................   6.9    8.9    6.6
    Waxes and other lubricants.............................   4.5    3.6    3.4
                                                            -----  -----  -----
                                                             20.0   22.3   19.5
    Gasoline...............................................  25.9   31.2   26.8
    Middle distillates.....................................  44.9   47.4   41.5
    Residual fuel..........................................  19.5   13.3   13.7
    Other..................................................  11.1    6.1    9.8
                                                            -----  -----  -----
                                                            121.4  120.3  111.3
  To affiliates(/2/).......................................  27.0   33.9   34.6
                                                            -----  -----  -----
                                                            148.4  154.2  145.9
                                                            =====  =====  =====
</TABLE>
- --------
(1) Wholesale sales price less cost of crude oil, other feedstocks and
    purchased refined products.
(2) Primarily "lubes-extracted" feedstocks which are transported to the Toledo
    refinery for further processing.
 
  The $13 million decline in Sunoco Lubricants results in 1995 was due
primarily to lower margins on wholesale fuels products ($15 million),
principally distillates, and lower lubricants sales volumes ($15 million),
partially offset by higher average margins for both base oil and specialty oil
products ($9 million) and lower operating and administrative expenses ($9
million). The decline in sales volumes and operating expenses was in part due
to a major planned maintenance turnaround at the Tulsa refinery during 1995.
 
  Income from Sunoco Lubricants declined $7 million in 1994 due largely to
lower margins ($18 million), principally for base oils and wholesale fuels
products, and higher operating and administrative expenses ($15 million)
resulting primarily from increased refinery production levels. Partially
offsetting these negative factors were higher lubricants ($16 million) and
wholesale fuels ($3 million) sales volumes and a lower effective tax rate ($6
million).
 
                                      15
<PAGE>
 
  Sunoco MidAmerica Marketing & Refining--The Sunoco MidAmerica Marketing &
Refining business consists of the retail sale of gasoline and middle
distillates and convenience-store operations in the midwestern U.S. (primarily
Ohio and Michigan) as well as the manufacturing and wholesale marketing of
fuels and petrochemicals produced at Sun's Toledo, Ohio refinery.
 
<TABLE>
<CAPTION>
                                                           1995   1994   1993
                                                           -----  -----  -----
<S>                                                        <C>    <C>    <C>
Income (loss) (millions of dollars)....................... $  (8) $  (8) $   5
Retail Marketing:
  Gasoline margin (per barrel)(/1/)....................... $3.86  $3.83  $3.68
  Sales (thousands of barrels daily):
    Gasoline..............................................  46.6   46.4   46.0
    Middle distillates....................................   4.2    4.3    4.2
                                                           -----  -----  -----
                                                            50.8   50.7   50.2
                                                           =====  =====  =====
  Retail gasoline outlets.................................   917    929  1,018
Refining and Wholesale Marketing:
  Wholesale margin (per barrel)(/2/):
    Fuels................................................. $2.98  $3.75  $3.96
    Petrochemicals........................................ $9.06  $9.88  $6.10
  Wholesale sales (thousands of barrels daily):
    To unaffiliated customers:
      Gasoline............................................  29.9   22.6   23.2
      Middle distillates..................................  13.3   14.4   13.8
      Residual fuel.......................................   3.8    4.1    3.4
      Petrochemicals......................................  10.2    9.0    9.3
      Asphalt.............................................   2.6    2.8    2.9
      Other...............................................   5.8    5.6    8.0
                                                           -----  -----  -----
                                                            65.6   58.5   60.6
    To affiliates and Sunoco MidAmerica Retail Marketing..  54.8   53.8   55.5
                                                           -----  -----  -----
                                                           120.4  112.3  116.1
                                                           =====  =====  =====
Crude unit capacity (thousands of barrels daily) at
 December 31.............................................. 125.0  125.0  125.0
Crude unit capacity utilized..............................   89%    90%    94%
</TABLE>
- --------
(1) Retail sales price less wholesale sales price. The retail sales price is
    the weighted average price received through the various branded marketing
    distribution channels.
(2) Wholesale sales price of fuels and petrochemicals less cost of crude oil,
    other feedstocks and purchased refined products.
 
  Sunoco MidAmerica Marketing & Refining results were unchanged in 1995 as
lower average wholesale fuels product margins ($21 million) were essentially
offset by higher wholesale fuels ($6 million) and petrochemicals ($3 million)
sales volumes and lower refinery operating expenses ($10 million). The decline
in operating expenses was largely attributable to a major planned maintenance
turnaround at the Toledo refinery during 1995.
 
  Sunoco MidAmerica Marketing & Refining results declined $13 million in 1994
primarily due to lower average wholesale fuels margins ($6 million), lower
wholesale fuels sales volumes ($3 million) and higher operating and
administrative expenses ($10 million). Partially offsetting these negative
factors were higher petrochemicals margins ($8 million).
 
                                      16
<PAGE>
 
  Sunoco Logistics--The Sunoco Logistics business consists of pipeline
transportation of crude oil and refined petroleum products, domestic crude oil
acquisition from third-party leases, crude oil trucking and the Nederland,
Texas crude oil terminalling operation.
 
<TABLE>
<CAPTION>
                                                               1995  1994  1993
                                                               ----- ----- -----
<S>                                                            <C>   <C>   <C>
Income (millions of dollars)..................................   $53   $45   $55
Pipeline throughput (thousands of barrels daily):
  Unaffiliated customers......................................   557   565   567
  Affiliated customers........................................   776   715   687
                                                               ----- ----- -----
                                                               1,333 1,280 1,254
                                                               ===== ===== =====
</TABLE>
 
  Sunoco Logistics income increased $8 million in 1995 in part due to higher
earnings from Sun's joint venture operations, the Marysville, Michigan crude
oil pipeline system and expanded crude oil pipeline operations in Texas.
Income from Sun's new inter-refinery pipeline connecting the Philadelphia and
Marcus Hook refineries and from a new pipeline delivering jet fuel to the
Philadelphia airport also contributed to the improvement in earnings.
 
  Income from Sunoco Logistics decreased $10 million in 1994 due to the
absence of a $10 million after-tax gain recognized in 1993 on the sale of
Sun's refined products pipeline system operating in Oklahoma and Arkansas.
 
  Sun Coal and Coke--The Sun Coal and Coke business consists of coal
production from mines in Virginia and Kentucky and coke manufacturing at the
Company's facility in Vansant, Virginia.
 
<TABLE>
<CAPTION>
                                                      1995   1994   1993
                                                     ------ ------ ------
<S>                                                  <C>    <C>    <C>
Income (millions of dollars)........................ $   25 $   15 $    2
Average sales price of coal and coke (per ton)...... $37.65 $34.00 $21.49(/1/)
Proven and probable coal reserves (millions of
 tons)..............................................    139    187    251
Production (thousands of tons):
  Coal..............................................  5,121  6,595 12,858
  Coke..............................................    638    678    642
</TABLE>
- --------
(1) Includes the impact of lower-value subbituminous coal sales prior to the
    divestment of Sun's western U.S. coal operations during 1993.
 
  Income from Sun Coal and Coke increased $10 million during 1995 primarily
due to higher margins for coke and improved mining operations. During 1994,
Sun Coal and Coke earnings increased $13 million primarily due to the
exclusion of income of this business from consolidated net income during the
first nine months of 1993 when Sun Coal and Coke was accounted for as a
discontinued operation. (See Note 2 to the Consolidated Financial Statements
in the Company's 1995 Annual Report on Form 10-K, incorporated by reference
herein.)
 
                                      17
<PAGE>
 
  Sun International Production--The Sun International Production business
consists of the development, production and marketing of crude oil,
condensate, natural gas liquids and natural gas located in the United Kingdom
sector of the North Sea.
 
<TABLE>
<CAPTION>
                                                            1995   1994   1993
                                                           ------ ------ ------
<S>                                                        <C>    <C>    <C>
Income (millions of dollars).............................. $   57 $   60 $   73
Crude oil, condensate and natural gas liquids:
  Proved reserves (millions of barrels) at December 31....     39     38     31
  Net production (thousands of barrels daily).............   27.4   29.0   28.0
  Average price (per barrel).............................. $16.82 $15.73 $16.75
Natural gas:
  Proved reserves (billions of cubic feet) at December
   31.....................................................     83     96    109
  Net production (millions of cubic feet daily)...........     36     46     56
  Average price (per thousand cubic feet)................. $ 2.99 $ 2.96 $ 2.93
</TABLE>
 
  Sun International Production earnings decreased $3 million in 1995 due
largely to lower crude oil ($5 million) and natural gas ($7 million)
production volumes, and higher operating and administrative expenses ($5
million) attributable to operating activities at the Ninian/Columba fields in
the U.K. North Sea, which were acquired in the third quarter of 1994. Also
contributing to the decrease in earnings was the absence of a $2 million
after-tax gain recognized in 1994 on the redetermination of the Pickerill
field in the U.K. North Sea. Partially offsetting these negative factors were
higher crude oil prices ($7 million), a gain from the settlement of litigation
surrounding previously expropriated assets outside the U.K. North Sea ($4
million) and a decrease in after-tax foreign exchange translation losses ($5
million). The decrease in crude oil volumes was attributable to natural
production declines at mature fields in the U.K. North Sea, partially offset
by the increased operating activities at the Ninian/Columba fields. The
decline in natural gas volumes reflects lower nominations by British Gas
Corporation.
 
  Income declined $13 million in 1994 due largely to lower crude oil prices
($7 million) and natural gas volumes ($8 million) and an increase in after-tax
foreign exchange translation losses ($7 million). Partially offsetting these
negative factors were the $2 million after-tax gain recognized in 1994 on the
redetermination of the Pickerill field and $6 million of after-tax income
attributable to crude oil production from the Ninian/Columba fields.
 
  Net Financing Expenses--Net financing expenses (excluding Suncor) increased
$23 million in 1995 primarily due to higher long-term debt expense ($13
million) and lower capitalized interest ($6 million). The increase in long-
term debt expense was due largely to the high level of growth capital
expenditures in 1994 which was partially offset by the substantial reduction
in Company debt that occurred in the second half of 1995 in connection with
the financial restructuring. Net financing expenses increased $7 million in
1994 due primarily to the absence of a gain on the sale of an equity
investment recognized in 1993 ($3 million) and a higher average borrowing
position ($9 million), partially offset by higher earnings from leasing
operations ($5 million). The higher average borrowing position in 1994 was due
in part to the high level of growth capital spending in that year.
 
  Real Estate Operations Held for Sale--For a discussion of Sun's real estate
operations held for sale, see Note 2 to the Consolidated Financial Statements
in the Company's 1995 Annual Report on Form 10-K, incorporated by reference
herein.
 
  Canada (Suncor)--Suncor's operating income decreased $14 million in 1995
primarily due to the absence of earnings subsequent to the June 8, 1995
divestment of Sun's remaining 55-percent interest in this former Canadian
petroleum subsidiary. In 1994, operating income at Suncor increased $4 million
primarily as a result of higher earnings from Canadian exploration and
production and oil sands operations.
 
  Special Items--For a discussion of the special items shown separately in the
Earnings Profile of Sun Businesses, see Notes 2 and 6 to the Consolidated
Financial Statements in the Company's Annual Report on Form 10-K, incorporated
by reference herein.
 
                                      18
<PAGE>
 
 ANALYSIS OF CONSOLIDATED STATEMENTS OF INCOME
 
  1995 vs. 1994--Sales and other operating revenue increased $303 million, or
three percent, principally due to higher domestic refined product sales
volumes ($677 million) and prices ($442 million), partially offset by lower
domestic consumer excise taxes ($57 million) and lower sales and other
operating revenue attributable to Suncor ($733 million, including Canadian
consumer excise taxes of $308 million) reflecting its divestment on June 8,
1995. The higher domestic refined product sales volumes were largely
attributable to the Girard Point refining facilities acquired on August 4,
1994. For a discussion of the $242 million pretax gain on divestment of Suncor
common stock recorded in 1995, see Note 2 to the Consolidated Financial
Statements in the Company's Annual Report on Form 10-K, incorporated by
reference herein. The $48 million decrease in gain on other divestments is
primarily due to the absence of $35 million of gains recognized during 1994 on
the divestment of oil and gas properties located in Colombia and the U.K.
North Sea. Other income increased $16 million, principally due to higher
income from operations held for sale ($6 million), lower foreign exchange
losses ($5 million) and higher equity in earnings of affiliated companies ($4
million).
 
  Cost of products sold and operating expenses increased $753 million, or 12
percent, primarily due to higher domestic crude oil and refined product
acquisition costs ($907 million) and higher domestic refinery operating
expenses ($72 million), partially offset by lower cost and operating expenses
attributable to Suncor ($281 million). The increase in product acquisition
costs and refinery operating expenses was largely attributable to the Girard
Point refining facilities acquisition. Selling, general and administrative
expenses decreased $79 million, or 11 percent, primarily due to lower expenses
as a result of the Suncor divestment and cost containment efforts implemented
during 1995. Taxes, other than income taxes decreased $375 million, or 17
percent, due to a decline in consumer excise taxes ($365 million) largely
attributable to the Suncor divestment. Depreciation, depletion and
amortization decreased $18 million, or five percent, primarily as a result of
the Suncor divestment ($52 million), partially offset by an increased
depreciable asset base in Sun's domestic refining and marketing operations
resulting from the high level of 1994 capital spending. For a discussion of
the $93 and $54 million pretax provisions for write-down of assets and other
matters recorded in 1995 and 1994, respectively, see Note 2 to the
Consolidated Financial Statements in the Company's Annual Report on Form 10-K,
incorporated by reference herein. The $9 million decrease in exploratory costs
and leasehold impairment and the $16 million decrease in minority interest are
due to the Suncor divestment. Interest cost and debt expense increased $8
million, or eight percent, due principally to higher long-term debt expense
associated with the high level of 1994 growth capital expenditures, partially
offset by the substantial reduction in Company debt that occurred in the
second half of 1995 in connection with the financial restructuring. For a
discussion of the cumulative effect of the changes in accounting principles,
see Note 6 to the Consolidated Financial Statements in the Company's Annual
Report on Form 10-K, incorporated by reference herein.
 
  1994 vs. 1993--Sales and other operating revenue increased $638 million, or
seven percent, principally due to higher refined product sales volumes ($644
million) and an increase in consumer excise taxes ($233 million), partially
offset by lower refined product sales prices ($158 million) and lower revenues
from resales of purchased crude oil and refined products ($90 million). The
higher refined product sales volumes were primarily due to the acquisition of
the Girard Point refining facilities on August 4, 1994. For a discussion of
the $30 million pretax gain on divestment of Suncor common stock recorded in
1993, see Note 2 to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K, incorporated by reference herein. The $93 million
decrease in gain on other divestments is primarily due to the absence of gains
recognized in 1993 on the divestment of a products pipeline system ($17
million) and oil and gas properties located in Dubai, Canada and the U.K.
North Sea ($109 million), partially offset by gains recognized in 1994 on the
divestment of oil and gas properties located in Colombia and the U.K. North
Sea ($40 million). Interest income decreased $2 million, or 11 percent,
primarily due to lower average investment balances. Other income decreased $22
million primarily as a result of the absence of a $17 million gain
attributable to the 1993 settlement of claims arising from a 1987 fire at
Suncor's oil sands plant and lower foreign exchange gains ($6 million).
 
  Cost of products sold and operating expenses increased $455 million, or
eight percent, primarily due to higher domestic crude oil and refined product
acquisition costs ($463 million) and higher refinery operating
 
                                      19
<PAGE>
 
expenses ($95 million), partially offset by lower resales of purchased crude
oil and refined products ($90 million). The increase in acquisition costs and
refinery operating expenses was primarily due to the acquisition of the Girard
Point refining facilities on August 4, 1994. Selling, general and
administrative expenses increased $56 million, or nine percent, primarily due
to higher expenses in Sun's domestic refining and marketing operations. This
increase was due in part to higher employee-related expenses and to increased
expenses associated with the Branded for Success program. Taxes, other than
income taxes increased $229 million, or 11 percent, due to higher consumer
excise taxes ($233 million). Depreciation, depletion and amortization
increased $5 million, or one percent, primarily as a result of a higher
depreciable asset base in Sun's domestic refining and marketing operations.
For a discussion of the $54 and $23 million pretax provisions for write-down
of assets and other matters recorded in 1994 and 1993, respectively, see Note
2 to the Consolidated Financial Statements in the Company's Annual Report on
Form 10-K, incorporated by reference herein. Interest cost and debt expense
increased $16 million, or 20 percent, due largely to higher average corporate
borrowings. For a discussion of the cumulative effect of the changes in
accounting principles, see Note 6 to the Consolidated Financial statements in
the Company's Annual Report on Form 10-K, incorporated by reference herein.
 
FINANCIAL CONDITION
 
 CAPITAL RESOURCES AND LIQUIDITY
 
  Cash and Working Capital--At December 31, 1995, Sun had cash and cash
equivalents of $14 million compared to $117 million at December 31, 1994 and
had a working capital deficit of $70 million versus 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 for most of the inventories
reflected in the consolidated balance sheet. The current replacement cost of
all such inventories exceeds the carrying value at December 31, 1995 by $528
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 Flows and Financial Capacity--In 1995, Sun's net cash provided by
operating activities ("cash generation") was $352 million compared to $481
million in 1994 and $413 million in 1993. The fluctuations in cash generation
during the 1993-95 period were primarily due to changes in income before
special items and in working capital pertaining to operating activities. Cash
generation was significantly greater than net income during the 1993-95 period
primarily due to the significant amounts of noncash charges which result from
the capital intensive nature of Sun's businesses.
 
  Divestment activities have also been a source of cash and have enhanced
liquidity. During the 1993-95 period, proceeds from divestments totalled
$1,202 million, including $804 million received in the 1993-95 period from the
sale of Suncor common stock and $141 million received in the 1993-94 period
from the sale of certain exploration and production properties located in
Dubai, Colombia, Canada and the U.K. North Sea. In addition, coal operations
held for sale provided $129 million in 1993 from the sale of Sun's western
U.S. coal operations.
 
  Management believes that future cash generation will be sufficient to
satisfy Sun's capital requirements and to pay the current cash dividends on
Common Stock and Series A Cumulative Preference Stock. 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 oil 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. In the event that cash
generation and divestment proceeds are insufficient to satisfy near-term cash
requirements, the Company has access to $600 million of short-term financing
for operations in the form of commercial paper and revolving credit agreements
from commercial banks. The Company also has access to short-term financing
under non-committed money market facilities.
 
                                      20
<PAGE>
 
  The following table sets forth amounts outstanding related to the above
short-term borrowing arrangements as well as to Sun's other borrowings at:
<TABLE>
<CAPTION>
                                                               DECEMBER 31
                                                          ---------------------
                                                            1995       1994
                                                          ---------------------
                                                          (MILLIONS OF DOLLARS)
<S>                                                       <C>       <C>
Short-term borrowings:
  Commercial paper....................................... $       4 $       216
  Non-committed money market facilities..................        50           5
                                                          --------- -----------
                                                                 54         221
Current portion of long-term debt........................         3          99
Long-term debt...........................................       888       1,073
                                                          --------- -----------
Total borrowings.........................................      $945 $     1,393
                                                          ========= ===========
</TABLE>
 
  The Company has been able to substantially reduce its debt as a result of
the Suncor sale and the financial restructuring completed during 1995. The
Company also repurchased approximately 8.1 million shares of Common Stock
during 1995 through a tender offer and open market purchases. As a result of
these actions, Sun's debt-to-capital ratio declined from 42.8 percent at
December 31, 1994 to 35.7 percent at December 31, 1995.
 
  Management believes there is sufficient borrowing capacity available to
provide for Sun's future cash requirements. In addition, the Company has the
option of issuing additional Common Stock as a means of increasing its equity
base; however, there are no current plans to do so. Furthermore, no
commitments have been made with respect to any investment opportunity which
would require the use of a significant portion of Sun's unused financial
capacity.
 
 CAPITAL EXPENDITURES
 
<TABLE>
<CAPTION>
                                          1996 PLAN 1995 1994(/1/)    1993(/1/)
                                          --------- ---- ---------    ---------
                                                (MILLIONS OF DOLLARS)
<S>                                       <C>       <C>  <C>          <C>
Sun Northeast Refining...................   $137    $103   $163         $112
Sunoco Northeast Marketing...............    104     102    146          101
Sunoco Chemicals.........................     59      55     61           23
Sunoco Lubricants........................     28      52     25           54
Sunoco MidAmerica Marketing & Refining...     44      48     52           38
Sunoco Logistics.........................     40      42     81           31
Sun Coal and Coke(/2/)...................     18       7     --           --
Sun International Production.............     30      30    100           51
Canada (Suncor)..........................     --     106    220          202
                                            ----    ----   ----         ----
Consolidated capital expenditures........   $460    $545   $848(/3/)    $612
                                            ====    ====   ====         ====
</TABLE>
- --------
(1) Restated to conform to the new organizational structure established in
    1995.
(2) Excludes capital expenditures of Sun Coal and Coke prior to June 30, 1995
    while such operations were accounted for as an investment held for sale.
(3) Excludes $164 million attributable to the purchase of the Girard Point
    refining facilities, related inventory and pipeline interests.
 
  Capital expenditures for 1995 totalled $545 million compared to $848 million
in 1994 and $612 million in 1993. The 36-percent decrease in 1995 was largely
due to significantly lower spending on growth projects in Sun's core domestic
refining and marketing and international production businesses as the Company
focused on fully integrating the acquisitions and growth projects completed
during 1994. Also contributing to the decline in 1995 capital spending was a
reduction in outlays in Canada as a result of the divestment of Suncor on June
8, 1995.
 
                                      21
<PAGE>
 
  Capital expenditures in 1995 included the following major outlays: $61
million related to the Branded for Success service station conversion and
modernization program; $26 million at the Marcus Hook refinery to begin
expansion of a propylene unit and complete expansion of an ethylene oxide
unit; $18 million to complete a new cyclohexane plant and expand benzene
extraction capacity at the Marcus Hook refinery (the "Northeast Aromatics and
Cyclohexane Project"); $13 million to complete the construction of a pipeline
connecting the Philadelphia and Marcus Hook facilities; and $12 million to
develop the Columba field in the U.K. North Sea. In 1994, in addition to the
acquisition of the Girard Point refining facilities and related assets, major
capital expenditures included: $64 million related to the Branded for Success
program; $58 million related to the Northeast Aromatics and Cyclohexane
Project; $43 million related to the inter-refinery pipeline construction; and
$78 million to acquire an interest in the Ninian and Columba fields in the
U.K. North Sea. In addition, $58 million was spent in 1994 to substantially
complete a $110 million project to upgrade the wastewater treatment processing
facilities at the Marcus Hook refinery.
 
  The 1996 planned capital expenditures include $140 million for growth
projects. Significant projects include: ongoing expansion of the propylene
unit at the Marcus Hook refinery; continued investment in Sunoco branded
marketing outlets; expansion of Sun's pipeline and terminalling capacity; and
further development of Sun's existing reserves in the U.K. North Sea. An
additional $320 million is designated for legally required and base
infrastructure spending in 1996. A significant portion of the $320 million
relates to projects that will enhance the reliability of the Company's
operations or maintain the high quality image of Sunoco(R) retail outlets.
 
  See "Environmental Matters" below for further discussion of Sun's capital
expenditures in connection with pollution abatement activities.
 
 ENVIRONMENTAL MATTERS
 
  Sun is subject to numerous federal, state, local and foreign laws which
regulate the discharge of materials into, or otherwise relate to the
protection of, the environment. These laws have required, and are expected to
continue to require, Sun to make significant expenditures of both a capital
and expense nature. Several of the more significant federal laws applicable to
the Company's operations include the Clean Air Act, 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").
 
  The following table summarizes Sun's expenditures for environmental projects
and compliance activities:
 
<TABLE>
<CAPTION>
                                               1995    1994         1993
                                              ------- -------      -------
                                               (MILLIONS OF DOLLARS)
<S>                                           <C>     <C>          <C>
Pollution abatement capital(/1/)............. $    78 $   245      $   123
Remediation and reclamation..................      49      60           53
Operations, maintenance and administration...     244     224(/2/)     142(/2/)
                                              ------- -------      -------
                                                 $371 $   529      $   318
                                              ======= =======      =======
</TABLE>
- --------
(1) Capital expenditures for pollution abatement are expected to approximate
    $33 and $46 million in 1996 and 1997, respectively.
(2)Restated to conform to the 1995 presentation.
 
  The increase in pollution abatement capital expenditures during 1994 was
primarily due to outlays relating to the wastewater treatment and Northeast
Aromatics and Cyclohexane projects at the Marcus Hook refinery and to
enhancements to the steam and electricity generating facilities at Suncor's
oil sands plant.
 
  The Clean Air Act establishes stringent criteria for regulating air toxics
at operating facilities by mandating major reductions in allowable emissions
and establishing a more comprehensive list of substances deemed to be air
toxics. The Clean Air Act requires refiners to market cleaner-burning gasoline
that reduces emissions of certain toxic and conventional pollutants.
Compliance with Clean Air Act requirements necessitates significant
 
                                      22
<PAGE>
 
alterations to the composition of gasoline sold in Sun's northeastern U.S.
marketing area by reducing the maximum allowable benzene content, reducing
summertime Reid Vapor Pressure ("RVP") and increasing the minimum oxygenate
content for certain non-attainment areas. Despite uncertainties regarding the
impact on the future profitability of Sun's domestic petroleum businesses of
the Clean Air Act, as amended by additional regulations, management of Sun
believes these businesses are well positioned to meet the air toxics and
reformulated fuel requirements under present regulations as they continue to
be phased in over the next few years.
 
  CERCLA and RCRA, and related state laws subject Sun to the potential
obligation to remove or mitigate the environmental effects of the disposal or
release of certain pollutants at Sun's facilities and at third-party or
formerly-owned sites at which contaminants generated by Sun may be located.
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 December 31, 1995, Sun had been
named as a PRP at 45 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
significant. 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. In addition, 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.
 
  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. Sun also accrues estimated
dismantlement, restoration and abandonment costs at its international oil and
gas production operations. For a discussion of the accrued liabilities and
charges against income related to these activities, see Note 14 to the
Consolidated Financial Statements in the Company's Annual Report on Form 10-K,
incorporated by reference herein.
 
  Total future costs for environmental remediation and dismantlement,
restoration and abandonment activities will depend upon, among other things,
the identification of additional sites, the determination of the extent of the
contamination of each site, the timing and nature of required remedial
actions, the technology available and needed to meet the various existing
legal 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 level and financial viability of
other parties.
 
  Management believes that the overall expenditures for environmental
activities are likely to be significant but are expected to be incurred over
an extended period of time and to be funded from Sun's net cash provided by
operating activities. Although potentially significant with respect to results
of operations or cash flows for any one year, management believes that such
costs will not have a material impact on Sun's consolidated financial position
or, over an extended period of time, on Sun's cash flows or liquidity.
 
 COMMODITY AND FOREIGN CURRENCY CONTRACTS
 
  Sun uses futures, options, forwards, swaps and other similar contracts to
hedge the impact of fluctuations in oil and natural gas prices, foreign
currency exchange rates and interest rates. Significant hedging strategies are
reviewed and approved by the Board of Directors before being implemented.
Policy controls limit the aggregate commodity and foreign currency price
exposure as well as the maximum volume and/or dollar amount of hedging
positions.
 
  In Sun's domestic refining and marketing operations, hedging strategies are
used to achieve ratable pricing of crude oil purchases and refined product
sales. These hedging activities have not been significant. In 1995, Sun also
has entered into foreign currency forward contracts to hedge the impact of
exchange rate changes on the Canadian dollar-denominated installment note
receivable due in 1996 from the divestment of Suncor. Gains and losses from
the above hedging activities have not been material.
 
                                      23
<PAGE>
 
 STOCK-BASED COMPENSATION
 
  In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued. It encourages, but does
not require, an alternative method of accounting for employee stock
compensation plans to the method currently prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No.
25"). The new accounting standard will have no impact on Sun's net income or
financial position as the Company intends to continue to utilize the
accounting guidance set forth in APB No. 25.
 
                           PRICE RANGE AND DIVIDENDS
 
  The Company's Common Stock is principally traded on the New York Stock
Exchange under the symbol "SUN." The Depositary Shares are traded on the New
York Stock Exchange under the symbol "SUN pfA." The following table shows the
high and low sale prices for the periods indicated, as reported in the New
York Stock Exchange Composite Transactions quotations, as well as the cash
dividends paid per share for the periods indicated.
 
<TABLE>
<CAPTION>
                                        COMMON STOCK      DEPOSITARY SHARES(/1/)
                                   ---------------------- ----------------------
                                    HIGH   LOW   DIVIDEND  HIGH   LOW   DIVIDEND
                                   ------ ------ -------- ------ ------ --------
<S>                                <C>    <C>    <C>      <C>    <C>    <C>
1995
Fourth Quarter.................... 29 3/4 24 3/4   .25    30 1/8   26     .45
Third Quarter..................... 29 3/4 25 3/4   .25    30 1/8 27 1/8   .45
Second Quarter.................... 32 7/8 27 1/4   .45
First Quarter..................... 30 1/4 27 1/8   .45
1994
Fourth Quarter.................... 32 1/2 26 3/8   .45
Third Quarter..................... 29 1/4 25 7/8   .45
Second Quarter.................... 34 3/8 25 1/8   .45
First Quarter..................... 35 1/4 29 3/8   .45
</TABLE>
- --------
(1) The Depositary Shares commenced trading on a "when issued" basis in July
    1995 and on a regular basis in August 1995.
 
  On March 6, 1996, the last sale price as reported in the New York Stock
Exchange Composite Transactions quotations was $28.875 per share of Common
Stock and $29.25 per Depositary Share.
 
  The Company has paid quarterly cash dividends on Common Stock on a regular
basis since 1904. In June 1995, the Company announced the reduction of its
quarterly Common Stock cash dividend from $.45 per share ($1.80 per year) to
$.25 per share ($1.00 per year), commencing with the third quarter dividend
paid in September 1995. The Company expects to continue to sustain the
quarterly Common Stock cash dividend at its current level.
 
  In August 1995, the Company completed the exchange of 25,000,000 Depositary
Shares, each Depositary Share representing ownership of one-half of a share of
the Company's Series A Cumulative Preference Stock for an equal number of
shares of Common Stock. The Depositary Shares accrue dividends quarterly at a
rate of $.45 per share ($1.80 per year).
 
  On January 4, 1996, the Company declared a cash dividend of $.25 per share
payable on March 10, 1996 to holders of record of Common Stock on February 9,
1996 and a cash dividend of $.45 per share payable on March 13, 1996 to
holders of record of Depositary Shares on February 9, 1996.
 
                                      24
<PAGE>
 
                             SELLING SHAREHOLDERS
 
  The following table sets forth (a) the number and percentage of outstanding
Depositary Shares (i) owned by each of the Selling Shareholders immediately
prior to this offering, and (ii) to be owned by the Selling Shareholders
assuming completion of this offering, and (b) the number of Depositary Shares
to be sold by the Selling Shareholders pursuant to this offering:
 
<TABLE>
<CAPTION>
                                   BENEFICIAL                  BENEFICIAL
                                 OWNERSHIP PRIOR SHARES TO  OWNERSHIP AFTER
                                   TO OFFERING    BE SOLD    OFFERING (/2/)
                                 --------------- ---------- -----------------
      NAME AND ADDRESS OF
     BENEFICIAL OWNER (/1/)        SHARES    %               SHARES     %
     ----------------------      ---------- ----            -----------------
<S>                              <C>        <C>  <C>        <C>       <C>
The Pew Memorial Trust..........  7,623,958 30.5  7,623,958        0        0
The J. Howard Pew Freedom
 Trust..........................  1,796,351  7.2  1,796,351        0        0
The Mabel Pew Myrin Trust.......  1,023,509  4.1  1,023,509        0        0
The J. N. Pew, Jr. Charitable
 Trust..........................    908,597  3.6    908,597        0        0
The Medical Trust(/3/)..........    396,176  1.6    396,176        0        0
                                 ---------- ---- ----------  -------  -------
    Total....................... 11,748,591 47.0 11,748,591        0        0
                                 ========== ==== ==========  =======  =======
</TABLE>
- --------
(1) The Depositary Shares being sold by the Selling Shareholders are
    beneficially owned by The Glenmede Trust Company, a Pennsylvania trust
    company without banking powers, which is located at One Liberty Place,
    Suite 1200, 1650 Market Street, Philadelphia, Pennsylvania 19103
    ("Glenmede"). These shares are held by Glenmede in its fiduciary capacity
    as trustee or co-trustee of the Selling Shareholders, each of which is a
    charitable trust. Glenmede owns no Depositary Shares or other shares of
    the Company for its own account. As of February 29, 1996, Glenmede, in its
    fiduciary capacity for customer accounts other than the Selling
    Shareholders, was the beneficial owner of 195,854 additional Depositary
    Shares, constituting .78% of the outstanding Depositary Shares, none of
    which are being sold in this offering. As to these additional Depositary
    Shares, Glenmede has sole voting power as to 108,991 shares (.44% of the
    outstanding Depositary Shares), shared voting power as to 85,756 shares
    (.34% of the outstanding Depositary Shares), sole investment power as to
    7,146 shares (.03% of the outstanding Depositary Shares), and shared
    investment power as to 169,890 shares (.68% of the outstanding Depositary
    Shares). In addition, Glenmede, as fiduciary for various client accounts,
    including the Selling Shareholders, is the beneficial owner of 4,174,025
    shares of the Company's Common Stock (5.66% of the outstanding shares of
    Common Stock). None of these shares of Common Stock are being sold in this
    offering.
(2) Upon the completion of the offering, the Selling Shareholders will no
    longer own any Depositary Shares but will own 3,869,148 shares of Common
    Stock (5.24% of the outstanding Common Stock).
(3) Voting and investment power is shared between Glenmede and Francis M.
    Richards, Jr., co-trustee with Glenmede of The Medical Trust.
 
  Effective February 1, 1996, the Company entered into an agreement (the
"Registration Rights Agreement") with Glenmede, as trustee or co-trustee of
the Selling Shareholders. The Registration Rights Agreement provides that
Glenmede has the right to require the Company to complete a maximum of two
registrations under the Securities Act of Depositary Shares, Common Stock
and/or other voting stock of the Company held by the Selling Shareholders
("Demand Registrations"). The expenses of Demand Registrations (other than
fees and expenses of the parties' legal counsel and the parties' internal
costs) are to be divided equally between the Company and Glenmede. Glenmede
also has the right to request that the Company register shares of Common Stock
held by the Selling Shareholders if the Company proposes to register any
shares of Common Stock under the Securities Act for sale to the public in an
underwritten offering ("Incidental Registrations"). The expenses of Incidental
Registrations (other than the fees and expenses of Glenmede's legal counsel
and Glenmede's internal costs) are to be paid by the Company. The Registration
Rights Agreement prohibits the sale or transfer of the Selling Shareholders'
interests in the Company during the term of the Registration Rights Agreement
except (i) in a registered public offering, (ii) to the Company, (iii) in
response to a public tender offer or exchange offer made to all shareholders
of the Company, (iv) in accordance with the terms of the capital stock of the
Company held by the charitable trusts, (v) in connection with a merger or
other extraordinary corporate
 
                                      25
<PAGE>
 
transaction, (vi) by charitable gift, or (vii) after June 30, 1996, in
accordance with Rule 144 promulgated by the Commission.
 
  If all of the Depositary Shares being offered are sold, Glenmede's rights to
both Demand Registrations and Incidental Registrations will terminate.
 
                                 CAPITAL STOCK
 
  The authorized capital stock of the Company consists of 200,000,000 shares
of Common Stock, of which 73,807,207 shares were outstanding on February 29,
1996, and 15,000,000 shares of cumulative preference stock without par value
("Preference Stock"), of which 12,500,000 shares of Series A Cumulative
Preference Stock were outstanding on February 29, 1996.
 
  During August 1995, the Company completed the exchange of 25,000,000
Depositary Shares in a tax-free transaction for an equal number of shares of
its Common Stock. Each Depositary Share represents ownership of one-half of a
share of the Series A Cumulative Preference Stock.
 
COMMON STOCK
 
  All shares of Common Stock presently outstanding are duly authorized, fully
paid and nonassessable. Holders of the Common Stock are entitled to one vote
per share on any matter submitted to the stockholders and do not have
cumulative voting rights. The Common Stock is not redeemable or convertible
and the holders of Common Stock do not have any preemptive right to purchase
securities of the Company. Upon dissolution of the Company, the holders of
Common Stock are entitled to receive ratably all of the assets, if any, which
remain legally available for distribution to the Company's stockholders after
the liquidation preferences of the Company's Preference Stock, if any, have
been satisfied in full. Subject to the prior dividend rights of the holders of
any Preference Stock, the holders of the Common Stock outstanding from time to
time are entitled to receive dividends as and when declared by the Board of
Directors of the Company out of funds legally available therefor.
 
PREFERENCE STOCK
 
  The Board of Directors of the Company is authorized without further
stockholder action to provide for the issuance of up to 15,000,000 shares of
Preference Stock in one or more series and to determine the designations,
preferences, dividend rates, liquidation rights, voting rights, conversion
rights, redemption rights, sinking funds, stated value and such other
provisions as may be determined by the Board of Directors pursuant to
Pennsylvania law. On June 12, 1995, the Board of Directors designated
12,500,000 shares of the Preference Stock as Series A Cumulative Preference
Stock with the rights discussed below under "Series A Cumulative Preference
Stock."
 
  In addition, on February 1, 1996, the Board of Directors designated an
additional 1,743,019 shares of Preference Stock as Series B Participating
Cumulative Preference Stock and reserved such shares for issuance pursuant to
a Shareholder Rights Agreement dated February 1, 1996 between the Company and
First Chicago Trust Company of New York, as the rights agent. For additional
information, see "Shareholder Rights Plan" below.
 
 SERIES A CUMULATIVE PREFERENCE STOCK
 
  Rank--The Series A Cumulative Preference Stock ranks, with respect to
dividend rights and rights upon liquidation, dissolution or winding up, prior
to the Common Stock and to any other capital stock of the Company
(collectively, the "Junior Stock"), other than capital stock which shall by
its terms rank prior to or on a parity with ("Parity Stock") Series A
Cumulative Preference Stock and which shall be authorized by a vote of the
holders of at least two-thirds of the then-outstanding Preference Stock of all
series voting separately as a class without regard to series.
 
  Dividend Rights--Holders of Series A Cumulative Preference Stock are
entitled to receive when and as declared by the Board of Directors of the
Company, cumulative cash dividends accruing at the rate per share
 
                                      26
<PAGE>
 
(the "Dividend Rate") of $3.60 per annum and no more, payable in cash
quarterly, each such quarterly payment to be in respect of the quarterly
period ending on the day next preceding the date such payment to holders of
Series A Cumulative Preference Stock of record on the respective dates, not
exceeding 40 days preceding such quarterly dividend payment dates, fixed for
that purpose by the Board of Directors. Such dividends are cumulative from
June 12, 1995 (the "Accrual Date") and accrue daily. Accruals of dividends do
not bear interest. Dividends are 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).
 
  Dividends will cease to accrue in respect of any shares of Series A
Cumulative Preference Stock redeemed on the redemption date with respect to
such redemption. See "Redemption" below.
 
  Dividends on the Series A Cumulative Preference Stock accrue whether or not
such dividends are declared and accumulate to the extent they are not paid on
the dividend payment date for the quarter for which they accrue. Holders of
Series A Cumulative Preference Stock are not entitled to any dividends,
whether payable in cash, property or stock, in excess of full cumulative
accrued dividends as described herein.
 
  Before any dividends (other than dividends payable in Junior Stock) on any
Junior Stock shall be declared and set apart for payment or paid, the holders
of shares of Series A Cumulative Preference Stock are 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 Cumulative 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.
 
  So long as any shares of Series A Cumulative Preference Stock are
outstanding, the Company shall not declare or set apart for payment or pay any
dividends (other than stock dividends payable upon shares of Junior Stock) or
make any distribution on any Junior Stock and shall not redeem, purchase or
otherwise acquire, or permit any subsidiary to purchase or otherwise acquire,
any shares of such Junior Stock if at the time of making such declaration,
payment, distribution, redemption, purchase or acquisition the Company shall
be in default with respect to any dividend payable on, or any obligation to
purchase, shares of Series A Cumulative Preference Stock; provided, however,
that, notwithstanding the foregoing, the Company may at any time redeem,
purchase or otherwise acquire shares of stock of any such Junior Stock in
exchange for, or out of net cash proceeds from the sale of, other shares of
stock of any Junior Stock.
 
  Liquidation Preference--Upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, the shares of Series A Cumulative
Preference Stock shall be preferred as to assets over Junior Stock so that the
holder of each share of the Series A Cumulative 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 any Junior Stock, a
liquidation preference equal to $60, plus an amount equal to all dividends
accrued and unpaid up to and including the date fixed for payment, and such
holder of a share of Series A Cumulative Preference Stock shall not be
entitled to any other payment. If upon any such liquidation, dissolution or
winding up of the Company, 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 Cumulative Preference Stock and any
outstanding Preference Stock that is Parity Stock are entitled, the entire
remaining net assets of the Company shall be distributed among the holders of
the Series A Cumulative 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.
 
  The voluntary sale, lease, exchange or transfer of cash, shares of stock
(securities or other consideration) of all or substantially all the Company'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 Company.
 
                                      27
<PAGE>
 
  The liquidation preference of the Series A Cumulative Preference Stock is
not indicative of the price at which the Depositary Shares may actually trade.
 
  Voting Rights--The holders of shares of Series A Cumulative Preference Stock
are 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 Company entitled to vote
together with the Common Stock) as one class. Each share of Series A
Cumulative Preference Stock is entitled to one vote.
 
  In addition, if the Company shall have failed to pay, or declare and set
apart for payment, dividends on Preference Stock in an aggregate amount
equivalent to six full quarterly dividends on all shares of Preference Stock
at the time outstanding, the number of Directors of the Company shall be
increased by two at the first annual meeting of the shareholders of the
Company 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
of each series shall have, in addition to any other voting rights which they
may otherwise 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 vote per share, to elect two additional members of the
Board of Directors to hold office for a term of one year; provided, however,
that the right to vote as a class upon the election of such two additional
Directors shall not limit the right of holders of the Series A Cumulative
Preference Stock to vote upon the election of all other Directors and upon
such other matters set forth in the immediately preceding paragraph above.
Upon such payment, or declaration and setting apart for payment, in full, the
terms of the two additional Directors so elected shall forthwith terminate,
and the number of Directors of the Company shall be reduced by two and such
special voting right of the holders of shares of Series A Cumulative
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 full quarterly dividends as aforesaid.
 
  The Company shall not, without the affirmative vote or consent of the
holders of at least 66 2/3 percent of the number of shares of Preference Stock
of all series 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 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 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;
 
    (iii) increase the number of shares of Preference Stock which the Company
  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 Cumulative Preference Stock.
 
  Redemption--At any time and from time to time, the Company shall have the
right to call, in whole or in part, the outstanding shares of Series A
Cumulative Preference Stock for redemption (the "Redemption Date"). On any
Redemption Date, the Company 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 Preference Stock
    Call Price (as defined below) in effect on the Redemption Date divided
    by the Current Market Price (as defined below) of the Common Stock as
    of the end of the second trading day immediately preceding the date on
    which the Company commences the mailing of notice regarding the
    redemption to the holders of the Series A Cumulative Preference Stock;
    and
 
 
                                      28
<PAGE>
 
      (ii) an amount in cash equal to all accrued and unpaid dividends on
    such share of Series A Cumulative 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
 
    (2) in the event such Redemption Date is on or after the Specified Date,
 
      (i) shares of Common Stock at the Common Equivalent Rate (as defined
    below) in effect on the Redemption Date; and
 
      (ii) an amount in cash equal to all accrued and unpaid dividends on
    each such share of Series A Cumulative 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).
 
  The Company currently intends to redeem all of the outstanding shares of
Series A Cumulative Preference Stock (and Depositary Shares represented
thereby) on the Specified Date if not theretofore redeemed.
 
  If at any time less than all of the shares of Series A Cumulative 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 Company in its discretion may determine.
 
  The opportunity for equity appreciation afforded by an investment in Series
A Cumulative Preference Stock (and the Depositary Shares) is limited because
the Company may, at its option, call the Series A Cumulative Preference Stock
(and thereby the Depositary Shares) for redemption at any time prior to the
Specified Date at the Preference Stock Call Price, and may be expected to do
so prior to the Specified Date if, among other things, the market price of the
Common Stock has theretofore exceeded the Depositary Share Call Price. Because
the price of the Common Stock is subject to market fluctuations, the value of
the Common Stock received by a holder of Depositary Shares upon redemption
thereof on or after the Specified Date may be more or less than the value of
the Common Stock as of the date of this offering.
 
  The shares of Series A Cumulative Preference Stock are not redeemable for
Common Stock or cash at the option of the holders thereof.
 
  Upon the effectiveness at any time of a merger, consolidation or similar
extraordinary transaction involving the Company that results in the conversion
or exchange of the Common Stock into, or results in the holders of Common
Stock having the right to receive, other securities or other property (a
"Fundamental Transaction"), the holder of each share of Series A Cumulative
Preference Stock will be entitled to receive consideration in such transaction
of the same type as is received by holders of Common Stock in such transaction
and having a fair value equal to the value of the Common Stock that the holder
of such share of Series A Cumulative Preference Stock would receive if such
share of Series A Cumulative Preference Stock were redeemed by the Company at
such time.
 
  The "Common Equivalent Rate" initially will be two shares of Common Stock
for each share of Series A Cumulative Preference Stock, subject to adjustment
in the event of certain stock dividends or distributions, subdivisions,
splits, combinations, issuances of certain rights or warrants, distributions
of certain assets, or certain other dilutive events with respect to the Common
Stock.
 
  The term "Current Market Price" on any date of determination means the
average closing price of a share of Common Stock on the NYSE for the five
consecutive trading days ending on and including such date of determination;
provided, however, that if the closing price of the Common Stock on the NYSE
on the trading day next following such five-day period (the "next-day closing
price") is less than 95 percent 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; and provided further that, with respect to
any redemption of the Series A Cumulative
 
                                      29
<PAGE>
 
Preference Stock, if any adjustment of the Common Equivalent Rate becomes
effective during the period beginning on the first day of such five-day period
and ending on the applicable redemption date, the Current Market Price as
determined pursuant to the foregoing will be appropriately adjusted to reflect
such adjustment.
 
  The "Preference Stock Call Price" was $84.79952 for each share of Series A
Cumulative Preference Stock on the Accrual Date (June 12, 1995), declining by
$.004444 on each day thereafter (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 per
share thereafter through June 11, 1998. The Preference Stock Call Price in
effect at any time is equal to the sum of (i) $80 plus (ii) the Dividend
Premium (as defined below) then in effect. The term "Dividend Premium" with
respect to a share of the Series A Cumulative Preference Stock means an amount
equal to $4.79952 for each share of Series A Cumulative Preference Stock on
the Accrual Date, declining by $.004444 on each day thereafter to $.26664 on
April 12, 1998, and equal to $0 per share thereafter through June 11, 1998.
 
  Notice of a redemption must be given to the holders of Series A Cumulative
Preference Stock at least 30 but not more than 60 days prior to the Redemption
Date.
 
  No fractional shares of Common Stock or scrip representing fractional shares
of Common Stock shall be issued upon the redemption of any shares of Series A
Cumulative 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 Cumulative Preference Stock, the Company 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 day immediately preceding the relevant notice date.
 
  Miscellaneous--The Series A Cumulative Preference Stock has no rights to
convert into Common Stock. The Series A Cumulative Preference Stock has no
preemptive rights.
 
 DEPOSITARY SHARES
 
  Each Depositary Share represents ownership of one-half of a share of Series
A Cumulative Preference Stock deposited under the Deposit Agreement dated as
of June 13, 1995 (the "Deposit Agreement") between the Company and First
Chicago Trust Company of New York, as depositary (the "Preference Stock
Depositary"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share is entitled, proportionately, to all the rights, preferences,
privileges and obligations of the Series A Cumulative Preference Stock
represented thereby (including dividend, voting, redemption and liquidation
rights).
 
  The Depositary Shares are evidenced by depositary receipts issued pursuant
to the Deposit Agreement (the "Depositary Receipts"). The Depositary Shares
are subject to the terms and conditions of the Deposit Agreement.
 
  Withdrawal of Preference Stock--Upon surrender of Depositary Receipts at the
principal office of the Preference Stock Depositary, upon payment of a sum
sufficient for the payment of any tax or other governmental charge with
respect thereto, and subject to the terms of the Deposit Agreement, the owner
of the Depositary Shares evidenced thereby is entitled to delivery of the
number of whole shares of Series A Cumulative Preference Stock represented by
such Depositary Shares. Fractional shares of Series A Cumulative Preference
Stock will not be issued. However, the Preference Stock Depositary may, with
the Company's consent, sell such shares of Series A Cumulative Preference
Stock representing in the aggregate such fractional interests, and the net
proceeds of such sale shall be distributed to the record holders of the
fractional interests. If the Depositary Receipts delivered by the holder
evidence a number of Depositary Shares in excess of the number of Depositary
Shares representing the number of whole shares of Series A Cumulative
Preference Stock to be withdrawn, the Preference Stock Depositary will deliver
to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares. Holders of Series A Cumulative Preference
Stock thus withdrawn will not thereafter be entitled to deposit such shares
under the Deposit Agreement or to receive Depositary Receipts evidencing
Depositary Shares therefor. There is currently no market for Series A
Cumulative Preference Stock and it is not expected that an active trading
market for Series A Cumulative Preference Stock will develop.
 
                                      30
<PAGE>
 
  Call or Redemption of Depositary Shares--As described under "Series A
Cumulative Preference Stock--Redemption," the Series A Cumulative Preference
Stock is subject to the right of the Company to call the Series A Cumulative
Preference Stock (and thereby the Depositary Shares) at any time, at the
Company's option, for redemption. The Depositary Shares are subject to call or
redemption upon the same terms and conditions (including as to notice to the
owners of Depositary Shares and as to selection of Depositary Shares to be
called if fewer than all the outstanding Depositary Shares are to be called)
as the Series A Cumulative Preference Stock held by the Preference Stock
Depositary in exchange for Common Stock delivered by the Company to the
Preference Stock Depositary, except that the number of shares of Common Stock
received upon call or redemption of each Depositary Share will be equal to
one-half of the number of shares of Common Stock received upon call or
redemption of each share of Series A Cumulative Preference Stock. To the
extent that Depositary Shares are redeemed for Common Stock and all of such
Common Stock cannot be distributed to the record holders of Depositary
Receipts without creating fractional interests in such shares, the Preference
Stock Depositary may, with the consent of the Company, adopt such method as it
deems equitable and practicable for the purpose of effecting such
distribution, including the public or private sale of such shares representing
in the aggregate such fractional interests at such places and upon such terms
as it may deem proper, and the net proceeds of any such sale shall be
distributed or made available for distribution to such record holders that
would otherwise have received fractional interests in such shares. The amount
distributed in the foregoing cases may be reduced by any amounts required to
be withheld by the Company or the Preference Stock Depositary on account of
taxes or otherwise required pursuant to law, regulation or court process.
 
  Dividends and Other Distributions--The Company, on behalf of the Preference
Stock Depositary (or, if the Company determines otherwise, the Preference
Stock Depositary), will distribute all cash dividends or other cash
distributions in respect of the Series A Cumulative Preference Stock
represented by the Depositary Shares to the record holders of Depositary
Receipts in proportion to the number of Depositary Shares owned by such
holders on the relevant record date, which will be the same date as the
relevant record date fixed by the Company for the Series A Cumulative
Preference Stock. In each case where a holder of Depositary Shares would
otherwise be entitled to receive a fraction of a cent, the Company, on behalf
of the Preference Stock Depositary (or, if the Company determines otherwise,
the Preference Stock Depositary), will round the amount of the distribution up
to the next whole cent.
 
  In the event of a distribution other than in cash, the Company, on behalf of
the Preference Stock Depositary (or, if the Company determines otherwise, the
Preference Stock Depositary), will distribute property to the record holders
of Depositary Receipts entitled thereto, in proportion, as nearly as may be
practicable, to the number of Depositary Shares owned by such holders on the
relevant record date, unless the Company determines that it is not feasible to
make such distribution, in which case the Company on behalf of the Preference
Stock Depositary (or, if the Company determines otherwise, the Preference
Stock Depositary), may adopt any other method for such distribution as it
deems appropriate, including the sale of such property and distribution of the
net proceeds from such sale to such holders.
 
  Procedures for Voting--Upon receipt of notice of any meeting at which the
holders of Series A Cumulative Preference Stock represented by such holders'
Depositary Shares are entitled to vote, the Preference Stock Depositary
(unless another arrangement for allowing holders of Depositary Shares to
exercise the voting rights associated with the Depositary Shares is agreed by
the Company and the Preference Stock Depositary) will, as soon as practicable
thereafter, cause the information contained in such notice of meeting to be
mailed to the record holders of Depositary Receipts as of the record date for
such meeting. Each such record holder of Depositary Receipts will be entitled
to instruct the Preference Stock Depositary as to the exercise of voting
rights with respect to the number of shares of Series A Cumulative Preference
Stock represented by such holder's Depositary Shares. The Preference Stock
Depositary will endeavor, insofar as practicable, to vote with respect to the
number of shares of Series A Cumulative Preference Stock represented by such
Depositary Shares in accordance with such instructions, and the Company
intends to take all action which may be deemed necessary by the Preference
Stock Depositary in order to enable the Preference Stock Depositary to do so.
The Preference Stock Depositary will abstain from voting with respect to the
Series A Cumulative Preference Stock to the extent that it does not receive
specific written instructions from the holders of Depositary Receipts.
 
                                      31
<PAGE>
 
  Amendment and Termination of Deposit Agreement--The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time and from time to time be amended by agreement
between the Company and the Preference Stock Depositary. However, any
amendment which imposes or increases any fees, taxes, or charges upon holders
of Depositary Shares (other than fees and other charges payable by such
holders as provided for in the Deposit Agreement or Depositary Receipt and as
stated under "Charges of Preference Stock Depositary"), or which otherwise
prejudices any substantial existing right of holders of Depositary Shares,
will not take effect as to outstanding Depositary Shares until the expiration
of 30 days after notice of such amendment has been mailed to the record
holders of outstanding Depositary Shares. Every holder of an outstanding
Depositary Share at the time any such amendment becomes effective will be
deemed, by continuing to hold such Depositary Share, to consent and agree to
such amendment and to be bound by the Deposit Agreement as amended thereby. No
such amendment may impair the right, subject to the terms of the Deposit
Agreement, of any owner of any Depositary Shares to surrender the Depositary
Receipt evidencing such Depositary Shares with instructions to the Preference
Stock Depositary to deliver to the holder of the Series A Cumulative
Preference Stock represented thereby, except in order to comply with mandatory
provisions of applicable law.
 
  The Deposit Agreement may be terminated by the Company or the Preference
Stock Depositary only if (a) (i) all outstanding Depositary Shares have been
redeemed or (ii) there has been a final distribution in respect of the Series
A Cumulative Preference Stock in connection with any liquidation, dissolution
or winding up of the Company and such distribution has been made to all the
holders of Depositary Shares; and (b) reasonable notice has been given to any
remaining holders of Depositary Shares. In the event the Deposit Agreement is
terminated, the Company will use its best efforts to list the Series A
Cumulative Preference Stock on the NYSE or any other national securities
exchange on which the Common Stock is listed.
 
  Charges of Preference Stock Depositary--The Company will pay all transfer
and other taxes and governmental charges arising solely from the existence of
the depositary arrangements. The Company will pay charges of the Preference
Stock Depositary for any redemption of the Series A Cumulative Preference
Stock and all withdrawals of the Series A Cumulative Preference Stock by
owners of Depositary Shares. Holders of Depositary Shares will pay transfer,
income and other taxes and governmental charges and charges incurred by the
Preference Stock Depositary at the election of the holder, as provided in the
Deposit Agreement to be for their accounts. In certain circumstances, the
Preference Stock Depositary and the Company may refuse to transfer Depositary
Shares, may withhold dividends and distributions and may sell Depositary
Shares if such charges are not paid.
 
  Other Rights--As to any alleged breach of fiduciary or contractual duty owed
to a holder of Depositary Shares by either the Company or its directors, such
holder has the same right to bring a cause of action as would any owner of
Series A Cumulative Preference Stock whose shares were held of record by a
nominee, including so-called "street name" shares. Such a cause of action
could be brought either directly or derivatively on behalf of the Company,
depending on the nature of the underlying claim; provided that in bringing any
such cause of action, a holder of Depositary Shares must otherwise comply with
applicable statutory or common law requirements. In addition, holders of
Depositary Shares may request the Preference Stock Depositary to bring such
causes of action provided indemnities satisfactory to the Preference Stock
Depositary are given.
 
  Miscellaneous--The Company will deliver to the Preference Stock Depositary
all reports to shareholders and other communications which the Company is
required to furnish to the holders of the Series A Cumulative Preference Stock
by law, by the rules of the NYSE or by the Articles of Incorporation of the
Company or Statement of Designation relating to the Series A Cumulative
Preference Stock. The Preference Stock Depositary will forward, at the
Company's expense, to the holders of Depositary Shares and will make available
for inspection by holders of such Depositary Shares at the principal office of
the Preference Stock Depositary, and at such other places as it may from time
to time deem advisable, any reports and communications received from the
Company.
 
                                      32
<PAGE>
 
  Neither the Preference Stock Depositary nor the Company will be subject to
any liability under the Deposit Agreement to holders of Depositary Receipts
other than for negligence, bad faith or willful misconduct. Neither the
Preference Stock Depositary nor the Company will be liable if it is prevented
or delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Preference Stock Depositary under the Deposit Agreement will be limited to
performance in good faith of their duties thereunder, and they will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or shares of Series A Cumulative Preference Stock unless
satisfactory indemnity is furnished. The Company and Preference Stock
Depositary may rely upon written advice of counsel or accountants, on
information provided by holders of Depositary Shares or other persons believed
in good faith to be competent to give such information and on documents
believed to be genuine and to have been signed or presented by the proper
party or parties.
 
  Resignation and Removal of Preference Stock Depositary--The Preference Stock
Depositary may resign at any time by delivering to the Company notice of its
election to do so. The Company may at any time, by notice, remove the
Preference Stock Depositary or may terminate the engagement of the Preference
Stock Depositary with respect to any or all of its duties and obligations
under the Deposit Agreement. Any such resignation, removal or termination will
take effect upon the appointment of a successor Preference Stock Depositary
and such successor's acceptance of such appointment with respect to all the
predecessor's duties and obligations so terminated. Such successor Preference
Stock Depositary must be appointed within 45 days after delivery of the notice
for resignation, removal or termination, or the predecessor Preference Stock
Depositary may petition a court of competent jurisdiction to appoint a
successor. If the successor Preference Stock Depositary is to acquire title to
Series A Cumulative Preference Stock, such successor must be a bank or trust
company having its principal office in the United States of America and having
a combined capital and surplus of at least $50,000,000.
 
PROCEDURES WITH RESPECT TO CERTAIN BUSINESS COMBINATIONS
 
  Under the Company's Articles of Incorporation, a business combination or
other specified transaction entered into with a holder (with certain
exceptions) of more than 10 percent of the voting stock of the Company (a
"Related Person") must either (i) be approved by a vote of the holders of not
less than 75 percent of the outstanding shares of the Company's voting stock
held by stockholders other than the Related Person; (ii) be approved by two-
thirds of the members of the Board of Directors not affiliated with the
Related Person; or (iii) satisfy certain minimum price criteria and procedural
requirements with respect to the remaining stockholders.
 
RIGHT OF 10 PERCENT SHAREHOLDER TO CALL SPECIAL MEETING
 
  Glenmede, as a beneficial owner of 10 percent of the voting stock of the
Company, has the right to call a special meeting of the Company's shareholders
and the right to propose amendments to the Company's Articles of
Incorporation. Upon the completion of this offering, Glenmede will no longer
hold beneficial ownership of 10 percent or more of the Company's voting stock,
and as a result, will no longer have the right to call a special meeting of
the Company, pursuant to the Company's Articles of Incorporation and Bylaws.
The Company is not aware of any other holder of 10 percent of the voting stock
of the Company.
 
SHAREHOLDER RIGHTS PLAN
 
  On February 1, 1996, the Company adopted a Shareholder Rights Plan (the
"Plan") and designated 1,743,019 shares of its remaining 2,500,000 authorized
cumulative preference stock as the "Series B Participating Cumulative
Preference Stock." Pursuant to the Plan, the Company declared a dividend of
one stock purchase right ("Right") for each share of Common Stock and two
Rights for each share of Series A Cumulative Preference Stock (equivalent to
one Right for each Depositary Share) outstanding at the close of business on
February 12, 1996. A Right will be granted for each share of Common Stock
issued after such date and prior to the expiration of the Plan.
 
                                      33
<PAGE>
 
  Generally, the Rights become exercisable a specified period after a party
acquires 15 percent or more of the voting stock or announces a tender offer
for 15 percent or more of the voting stock. Each Right initially entitles a
holder to purchase one one-hundredth of a share of the Series B Participating
Cumulative Preference Stock for $100. After a party has acquired 15 percent or
more of the voting stock, each Right will entitle a holder to pay $100 for the
number of shares of Common Stock (or in certain situations, common stock of
the acquiring party) having a then current market value of $200.
Alternatively, the Company has the option to exchange one share of Common
Stock for each Right at any time after a party has acquired at least 15
percent but less than 50 percent of the voting stock. The Company may redeem
each Right for $.01 per Right at any time until the end of a specified period
after a party has acquired 15 percent or more of the voting stock. In general,
none of the benefits of the Rights will be available to a holder of 15 percent
or more of the voting stock. The Rights will expire on February 12, 2006,
unless earlier exchanged or redeemed.
 
            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
 
  The following summary describes certain United States federal income tax
consequences of the purchase and disposition or exchange of Depositary Shares
and Series A Cumulative Preference Stock. The discussion contained in this
summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations, judicial decisions and
administrative pronouncements, changes to which could materially affect the
tax consequences described herein and could be made on a retroactive basis. In
addition, stock having terms closely resembling those of the Series A
Cumulative Preference Stock have not been the subject of any regulation,
ruling or judicial decision currently in effect and there can be no assurance
that the Internal Revenue Service will take the positions set forth below.
 
  The summary discusses only Depositary Shares and Series A Cumulative
Preference Stock held as capital assets within the meaning of Section 1221 of
the Code and addresses only holders who are "United States" persons for
purposes of the Code. The summary also does not deal with all tax consequences
that may be relevant in the particular circumstances of all holders, some of
which (such as dealers in securities or commodities, insurance companies, tax
exempt organizations, foreign persons and persons who hold Depositary Shares
or Series A Cumulative Preference Stock as a position in a straddle) may be
subject to certain special rules. The summary does not address state or local
tax consequences. Prospective investors should consult their tax advisors as
to the particular consequences to them of acquiring Depositary Shares or
Series A Cumulative Preference Stock and subsequently disposing of the same in
a sale or exchanging them for Company Common Stock.
 
  The following summary does not take account of proposed legislation that is
currently under consideration which, if enacted, would change certain tax
consequences described herein (including the dividends-received deduction
available to corporate shareholders and the rules with respect to
"extraordinary dividends"). Prospective investors are urged to consult their
tax advisors with respect to the status and effects of this legislation.
 
DEPOSITARY SHARES
 
  The tax treatment of Depositary Shares will be the same as the tax treatment
of holders of Series A Cumulative Preference Stock as described below. In
addition, a holder will recognize no gain or loss on the withdrawal of Series
A Cumulative Preference Stock in exchange for Depositary Shares pursuant to
the Deposit Agreement; the holder's tax basis in the withdrawn Series A
Cumulative Preference Stock will be the same as such holder's tax basis in the
Depositary Shares surrendered therefor; and the holder's holding period for
the withdrawn Series A Cumulative Preference Stock will include the period
during which such holder held the surrendered Depositary Shares.
 
DIVIDENDS
 
  Dividends paid on the Series A Cumulative Preference Stock out of the
Company's current or accumulated earnings and profits will be taxable as
ordinary income and will qualify for the 70 percent intercorporate dividends-
received deduction, subject to the minimum holding period requirement
(generally at least 46 days)
 
                                      34
<PAGE>
 
and other applicable requirements. The dividends-received deduction will not
be allowed for purposes of calculating a corporate holder's adjusted current
earnings under the alternative minimum tax rules.
 
  Under certain circumstances, a corporation that receives an "extraordinary
dividend," as defined in Section 1059(c) of the Code, is required to reduce
the tax basis of its stock by the non-taxed portion of such dividend. A
corporate holder must consider its holding period for, its tax basis in, and
the fair market value of, the Series A Cumulative Preference Stock in
determining whether dividends paid on the Series A Cumulative Preference Stock
will constitute "extraordinary dividends." In addition, under Section 1059(f),
any dividend with respect to "disqualified preferred stock" is treated as an
"extraordinary dividend." However, while the issue is not free from doubt due
to the lack of authority directly on point, the Series A Cumulative Preference
Stock should not constitute "disqualified preferred stock."
 
REDEMPTION PREMIUM
 
  Under certain circumstances, Section 305(c) of the Code requires that any
excess of the redemption price of preferred stock over its issue price be
includable in income, prior to receipt, as a constructive dividend.
Regulations recently promulgated under Section 305(c) do not apply to
preferred stock, such as the Series A Cumulative Preference Stock, that was
issued prior to the effective date of the regulations. In addition, a call of
the Series A Cumulative Preference Stock for Common Stock does not constitute
a redemption for purposes of Section 305(c). Therefore, these provisions of
Section 305(c) relating to redemption premiums do not currently apply to stock
with terms such as those of the Series A Cumulative Preference Stock.
 
CALL OF SERIES A CUMULATIVE PREFERENCE STOCK FOR COMMON STOCK
 
  Gain or loss generally will not be recognized by a holder upon the call of
the Series A Cumulative Preference Stock for Common Stock. Cash received in
payment of dividends in arrears is likely to be treated as dividend income. In
addition, a holder that receives cash in lieu of a fractional share will be
treated as having received such fractional share and having exchanged it for
cash in a transaction generally giving rise to capital gain or loss. A
holder's tax basis in the Common Stock, including any fractional share,
received on the call of the Series A Cumulative Preference Stock will equal
the tax basis of the Series A Cumulative Preference Stock that was called. The
holding period of such Common Stock will include the holding period of the
Series A Cumulative Preference Stock that was called.
 
OTHER DISPOSITIONS OF SERIES A CUMULATIVE PREFERENCE STOCK
 
  A holder will generally recognize gain or loss on a sale, exchange or other
disposition of Series A Cumulative Preference Stock in an amount equal to the
difference between the amount realized on the disposition and such holder's
tax basis in the Series A Cumulative Preference Stock. Any such gain or loss
will be capital gain or loss and will be long-term capital gain or loss if the
holding period of the Series A Cumulative Preference Stock exceeds one year as
of the date of the disposition.
 
ADJUSTMENT OF COMMON EQUIVALENT RATE
 
  Certain adjustments to the Common Equivalent Rate to reflect the Company's
issuance of certain rights, warrants, evidence of indebtedness, securities or
other assets to holders of Common Stock may result in constructive
distributions taxable as dividends to the holders of the Series A Cumulative
Preference Stock. Any such constructive dividend may constitute, and may cause
other dividends to constitute, "extraordinary dividends" to corporate holders.
See "Dividends" above.
 
BACKUP WITHHOLDING
 
  Certain noncorporate holders may be subject to backup withholding at a rate
of 31 percent on dividends received on the Series A Cumulative Preference
Stock, on certain consideration received on a call of the Series
 
                                      35
<PAGE>
 
A Cumulative Preference Stock and on cash or other property received on the
disposition of Series A Cumulative Preference Stock. Generally, backup
withholding applies only when the taxpayer fails to furnish or certify a proper
taxpayer identification number or when the taxpayer is notified by the Internal
Revenue Service that the taxpayer has failed to report payments of interest and
dividends property. Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining any applicable exemption.
 
                                  UNDERWRITERS
 
  Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Selling Shareholders have agreed to sell to them,
severally, the respective number of Depositary Shares set forth opposite the
names of such Underwriters below:
 
<TABLE>
<CAPTION>
                                                                      NUMBER OF
         NAME                                                           SHARES
         ----                                                         ----------
   <S>                                                                <C>
   Morgan Stanley & Co. Incorporated.................................
   CS First Boston Corporation.......................................
   Smith Barney Inc. ................................................
                                                                      ----------
       Total......................................................... 11,748,591
                                                                      ==========
</TABLE>
 
  The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Depositary Shares offered
hereby are subject to the approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters are obligated to take and pay
for all of the Depositary Shares offered hereby if any such shares are taken.
 
  The Underwriters initially propose to offer part of the Depositary Shares
directly to the public at the offering price set forth on the cover page hereof
and part to certain dealers at a price that represents a concession not in
excess of $    a share under the public offering price. Any Underwriter may
allow, and such dealers may reallow, a concession not in excess of $    a share
to other Underwriters or to certain other dealers. After the initial offering
of the Depositary Shares, the offering price and other selling terms may from
time to time be varied by the Underwriters.
 
  The Underwriters have informed the Company and the Selling Shareholders that
they do not intend to confirm sales to any accounts over which they exercise
discretionary authority.
 
  The Company has agreed in the Underwriting Agreement not to offer, sell,
contract to sell or otherwise dispose of any Depositary Shares or shares of
Common Stock or any securities convertible into, or exercisable or exchangeable
for, Depositary Shares or Common Stock for a period of 90 days after the date
of this Prospectus, without the prior written consent of Morgan Stanley & Co.
Incorporated ("Morgan Stanley"), as representative of the several Underwriters,
provided that the Company may issue shares under its stock option, dividend
reinvestment and shareholder rights plans during such 90-day period. The
Selling Shareholders have agreed in the Underwriting Agreement not to offer,
sell, contract to sell or otherwise dispose of any Depositary Shares or shares
of Common Stock or any securities convertible into, or exercisable for,
Depositary Shares or Common Stock for a period of 90 days after the date of
this Prospectus, without the prior written consent of Morgan Stanley, as
representative of the several Underwriters.
 
  From time to time, each of Morgan Stanley, CS First Boston Corporation and
Smith Barney Inc. has provided, and continues to provide, investment banking
services to the Company.
 
  The Company, Glenmede and the Underwriters have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.
 
                                       36
<PAGE>
 
                                 LEGAL MATTERS
 
  The validity of the Depositary Shares offered hereby will be passed upon for
the Company by Jack L. Foltz, Esq., Vice President and General Counsel of the
Company or Jonathan C. Waller, Esq., Assistant General Counsel of the Company;
certain legal matters will be passed on for the Selling Shareholders by
Pepper, Hamilton & Scheetz, Philadelphia, Pennsylvania; and certain matters
will be passed on for the Underwriters by Davis Polk & Wardwell, New York, New
York. Davis Polk & Wardwell may rely upon the opinion of Mr. Foltz or Mr.
Waller, as the case may be, and Pepper, Hamilton & Scheetz as to all matters
of Pennsylvania law. Mr. Foltz and Mr. Waller, in their respective capacities
as Vice President and General Counsel and Assistant General Counsel of the
Company, participate in various employee benefit plans offered by the Company
and in connection with certain of such benefit plans receive Common Stock and
options to purchase Common Stock.
 
                                    EXPERTS
 
  The consolidated balance sheets of Sun at December 31, 1995 and 1994, the
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995, and
the financial statement schedule included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, incorporated by
reference in this Prospectus, have been incorporated herein in reliance upon
the reports (which include an explanatory paragraph regarding the Company's
change in method of accounting for the impairment of long-lived assets in
1995, the Company's change in method of accounting for postemployment benefits
in 1994 and the Company's change in method of accounting for income taxes in
1993) of Coopers & Lybrand, L.L.P., independent accountants, given on the
authority of that firm as experts in auditing and accounting.
 
                                      37
<PAGE>
 
 
 
 
                   [LOGO OF SUN COMPANY, INC. APPEARS HERE]
 
 
 
<PAGE>
 
                                    PART II
 
                  INFORMATION NOT REQUIRED IN THE PROSPECTUS
 
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
  The Registrant estimates that the expenses of the distribution of the
securities being registered, other than underwriting discounts and
commissions, will be:
 
<TABLE>
   <S>                                                                    <C>
   Registration Fee--Securities and Exchange Commission.................  $118,246
   Legal Fees and Expenses of Outside Counsel to Selling Shareholders...    40,000
   Accounting Fees and Expenses.........................................    10,000
   Printing Expenses....................................................    70,000
   Blue Sky Fees and Expenses (including Counsel Fees)..................    20,000
   Miscellaneous........................................................    15,000
                                                                          --------
     Total..............................................................  $273,246
                                                                          ========
</TABLE>
 
  The Selling Shareholders have agreed to reimburse the Registrant for 50
percent of the fees and expenses incurred by the Registrant in connection with
the offering other than legal fees and expenses of the Registrant's legal
counsel and the Registrant's internal costs for which the Registrant shall be
solely responsible, and legal fees and expenses of outside counsel to the
Selling Shareholders and the internal costs of Glenmede as trustee or co-
trustee for the Selling Shareholders, as to which the Selling Shareholders
shall be solely responsible.
 
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
  The Pennsylvania Business Corporation Law variously empowers or requires Sun
Company, Inc. ("Corporation") under specified circumstances, to indemnify
officers, directors and other persons against expenses incurred in connection
with any action, suit or proceeding, civil or criminal, to which such person
is a party or is threatened to be made a party.
 
  Article VII of the Corporation's Bylaws provides as follows:
 
  ARTICLE VII: INDEMNIFICATION
 
  GENERAL
 
    Section 1. The Corporation shall pay on behalf of any individual who is
  or was a Director, officer, employee or agent of the Corporation or who is
  or was serving at the request of the Corporation as Director, officer,
  trustee, fiduciary, employee or agent of any other domestic or foreign
  corporation or partnership, joint venture, sole proprietorship, trust or
  other enterprise, or who is or was serving as a fiduciary with respect to
  any employee benefit plan as a result of his employment by, or service as a
  Director of, the Corporation ("Indemnified Person") all expenses, including
  attorneys' fees and disbursements, incurred by such person in the defense
  or settlement of any civil, criminal, administrative or arbitrative
  proceeding pending, threatened or completed against such person by reason
  of his being or having been such Indemnified Person, and shall indemnify
  such person against amounts paid or incurred by him in satisfaction of
  settlements, judgments, fines, and penalties in connection with any such
  proceeding, including any proceeding by or in the right of the Corporation,
  except where such indemnification is expressly prohibited by applicable law
  or where the acts or failures to act of the Indemnified Person constitute
  willful misconduct, self-dealing or recklessness. The foregoing right to
  payment and to indemnification shall not be exclusive of other rights to
  which such person may be entitled as a matter of law or otherwise.
 
  AGREEMENTS FOR INDEMNIFICATION AND FUNDING
 
    Section 2. The Corporation is authorized, but not required, to enter into
  agreements for indemnification with any Indemnified Person, however,
  failure to enter into such agreements shall not in
 
                                     II-1
<PAGE>
 
  any way limit the rights of such Indemnified Persons hereunder. The
  Corporation may, in addition to the foregoing, create a fund of any nature,
  which may, but need not be, under the control of a trustee, or otherwise
  secure or insure in any manner its indemnification obligations.
 
  EXPENSES
 
    Section 3. Expenses incurred by a Director, officer, employee or agent in
  defending a civil or criminal action, suit or proceeding shall be paid by
  the Corporation in advance of the final disposition of such action, suit or
  proceeding upon receipt of an undertaking by or on behalf of such person to
  repay such amount if it shall ultimately be determined that he is not
  entitled to be indemnified by the Corporation.
 
  DISPUTES
 
    Section 4. Any dispute related to the right to indemnification of or
  advancement of expenses to Indemnified Persons as provided under this
  Article, except with respect to indemnification for liabilities arising
  under the Securities Act of 1933 which the Corporation has undertaken to
  submit to a court for adjudication, shall be decided only by arbitration in
  accordance with the commercial arbitration rules then in effect of the
  American Arbitration Association.
 
  The Corporation has obtained Executive Liability Coverage and Executive
Indemnification Coverage covering all claims during the policy period in an
aggregate amount up to $100,000,000. The Executive Liability portion of this
policy protects all directors and officers of the Corporation and its
subsidiaries. This section of the policy provides protection for losses
arising from any error, misstatement, misleading statement, act, omission,
neglect, or breach of duty committed, attempted or allegedly committed or
attempted by such persons in the discharge of their duties as directors and
officers for which the director or officer is not indemnified by the
Corporation. The Executive Indemnification portion of the policy protects the
Corporation (subject to several limitations and exceptions) against losses for
which it grants indemnification as permitted or required by law. The terms of
the policy provide for the payment of an insurance deductible in the amount of
$5,000,000 on a per occurrence basis, on all claims for which coverage under
the policy has been provided. In February 1996, the Board of Directors
approved and authorized the Corporation to enter into Agreements of
Indemnification with each officer and director of the Corporation to provide
for the Corporation's payment of the deductible for any claims for which
coverage has been provided.
 
ITEM 16. EXHIBITS
 
<TABLE>
 <C>  <S>
  1   Underwriting Agreement (to be filed by amendment).

  4.1 Articles of Incorporation of Sun Company, Inc., as restated and amended,
      effective as of February 1, 1996 (incorporated by reference to Exhibit
      3.(i) to the Registrant's Annual Report on Form 10-K for the fiscal year
      ended December 31, 1995).

  4.2 Sun Company, Inc. Bylaws, as restated and amended, effective as of
      February 1, 1996 (incorporated by reference to Exhibit 3.(ii) to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended
      December 31, 1995).

  4.3 Rights Agreement between Sun Company, Inc. and First Chicago Trust
      Company of New York dated as of February 1, 1996 (incorporated by
      reference to Exhibit 99(b) of Registrant's Current Report on Form 8-K
      dated February 2, 1996).

  4.4 Deposit Agreement for Series A Cumulative Preference Stock (incorporated
      by reference to Exhibit 99(g)(4) of the Sun Company, Inc. Schedule 13E-4
      filed June 13, 1995).

  5   Opinion of Jack L. Foltz, Esq., Vice President and General Counsel of the
      Company or Jonathan C. Waller, Esq., Assistant General Counsel of the
      Company (to be filed by amendment).
</TABLE>
 
 
                                     II-2
<PAGE>
 
<TABLE>
 <C>  <S>
 11   Statements re Sun Company, Inc. and Subsidiaries Computation of Per Share
      Earnings for the Years Ended December 31, 1995, 1994, 1993, 1992 and 1991
      (incorporated by reference to Exhibit 11 to Registrant's Annual Report on
      Form 10-K for the fiscal years ended December 31, 1995 and 1993).

 12   Statements re Sun Company, Inc. and Subsidiaries Computation of Ratio of
      Earnings to Combined Fixed Charges and Preference Stock Dividends for the
      Years Ended December 31, 1995, 1994, 1993, 1992 and 1991.

 23.1 Consent of Jack L. Foltz, Esq., Vice President and General Counsel of the
      Company.

 23.2 Consent of Jonathan C. Waller, Esq., Assistant General Counsel of the
      Company.

 23.3 Consent of Independent Accountants.

 24   Power of Attorney.

 99   Registration Rights Agreement by and among Sun Company, Inc. and The
      Glenmede Trust Company (in its corporate capacity and as trustee or co-
      trustee of The Pew Memorial Trust, The J. Howard Pew Freedom Trust, The
      Mabel Pew Myrin Trust, The J.N. Pew, Jr. Charitable Trust and The Medical
      Trust), dated as of February 1, 1996.
</TABLE>
 
ITEM 17. UNDERTAKINGS
 
  (b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
 
  (h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
 
  (i) The undersigned registrant hereby undertakes that:
 
    (1) For purposes of determining any liability under the Securities Act of
  1933, the information omitted from the form of prospectus filed as part of
  a registration statement in reliance upon Rule 430A and contained in the
  form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
  (4) or 497(h) under the Securities Act shall be deemed to be part of the
  registration statement as of the time it was declared effective.
 
    (2) For the purpose of determining any liability under the Securities Act
  of 1933, each post-effective amendment that contains a form of prospectus
  shall be deemed to be a new registration statement relating to the
  securities offered therein, and the offering of such securities at that
  time shall be deemed to be the initial bona fide offering thereof.
 
                                     II-3
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PHILADELPHIA AND COMMONWEALTH OF PENNSYLVANIA ON
THIS 7TH DAY OF MARCH, 1996.
 
                                          Sun Company, Inc.
 
                                                 
                                          By:    /s/ ROBERT M. AIKEN, JR.
                                             ---------------------------------
                                                   Robert M. Aiken, Jr.
                                              SENIOR VICE PRESIDENT AND CHIEF
                                                     FINANCIAL OFFICER
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY OR ON BEHALF OF THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON THIS 7TH DAY OF MARCH, 1996.
 
             SIGNATURES                                  TITLES
             ----------                                  ------
 
        ROBERT M. AIKEN, JR.*             Senior Vice President and Chief
- -------------------------------------      Financial Officer (Principal
        Robert M. Aiken, Jr.               Financial Officer)
 
         ROBERT H. CAMPBELL*              Chairman, Chief Executive Officer,
- -------------------------------------      President and Director (Principal
         Robert H. Campbell                Executive Officer)
 
        RAYMOND E. CARTLEDGE*             Director
- -------------------------------------
        Raymond E. Cartledge
 
         ROBERT E. CAWTHORN*              Director
- -------------------------------------
         Robert E. Cawthorn
 
           MARY J. EVANS*                 Director
- -------------------------------------
            Mary J. Evans
 
         THOMAS P. GERRITY*               Director
- -------------------------------------
          Thomas P. Gerrity
 
         THOMAS W. HOFMANN*               Comptroller (Principal Accounting
- -------------------------------------      Officer)
          Thomas W. Hofmann
 
          JAMES G. KAISER*                Director
- -------------------------------------
           James G. Kaiser
 
         THOMAS W. LANGFITT*              Director
- -------------------------------------
         Thomas W. Langfitt
 
          R. ANDERSON PEW*                Director
- -------------------------------------
           R. Anderson Pew
 
         ALBERT E. PISCOPO*               Director
- -------------------------------------
          Albert E. Piscopo
 
         WILLIAM F. POUNDS*               Director
- -------------------------------------
          William F. Pounds
 
      ALEXANDER B. TROWBRIDGE*            Director
- -------------------------------------
       Alexander B. Trowbridge
 
*By:  /s/ ROBERT M. AIKEN, JR.            Individually and as Attorney-in-Fact
    ---------------------------------
        Robert M. Aiken, Jr.
 
                                     II-4
<PAGE>
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                  EXHIBIT
 -------                                 -------
 <C>     <S>
   1     Underwriting Agreement (to be filed by amendment).

   4.1   Articles of Incorporation of Sun Company, Inc., as restated and
         amended, effective as of February 1, 1996 (incorporated by reference
         to Exhibit 3.(i) to the Registrant's Annual Report on Form 10-K for
         the fiscal year ended December 31, 1995).

   4.2   Sun Company, Inc. Bylaws, as restated and amended, effective as of
         February 1, 1996 (incorporated by reference to Exhibit 3.(ii) to the
         Registrant's Annual Report on Form 10-K for the fiscal year ended
         December 31, 1995).

   4.3   Rights Agreement between Sun Company, Inc. and First Chicago Trust
         Company of New York dated as of February 1, 1996 (incorporated by
         reference to Exhibit 99(b) of Registrant's Current Report on Form 8-K
         dated February 2, 1996).

   4.4   Deposit Agreement for Series A Cumulative Preference Stock
         (incorporated by reference to Exhibit 99(g)(4) of the Sun Company,
         Inc. Schedule 13E-4 filed June 13, 1995).

   5     Opinion of Jack L. Foltz, Esq., Vice President and General Counsel of
         the Company or Jonathan C. Waller, Esq., Assistant General Counsel of
         the Company (to be filed by amendment).

  11     Statements re Sun Company, Inc. and Subsidiaries Computation of Per
         Share Earnings for the Years Ended December 31, 1995, 1994, 1993, 1992
         and 1991 (incorporated by reference to Exhibit 11 to Registrant's
         Annual Report on Form 10-K for the fiscal years ended December 31,
         1995 and 1993).

  12     Statements re Sun Company, Inc. and Subsidiaries Computation of Ratio
         of Earnings to Combined Fixed Charges and Preference Stock Dividends
         for the Years Ended December 31, 1995, 1994, 1993, 1992 and 1991.

  23.1   Consent of Jack L. Foltz, Esq., Vice President and General Counsel of
         the Company.

  23.2   Consent of Jonathan C. Waller, Esq., Assistant General Counsel of the
         Company.

  23.3   Consent of Independent Accountants.

  24     Power of Attorney.

  99     Registration Rights Agreement by and among Sun Company, Inc. and The
         Glenmede Trust Company (in its corporate capacity and as trustee or
         co-trustee of The Pew Memorial Trust, The J. Howard Pew Freedom Trust,
         The Mabel Pew Myrin Trust, The J.N. Pew, Jr. Charitable Trust and The
         Medical Trust), dated as of February 1, 1996.
</TABLE>

<PAGE>
 
                                                                      EXHIBIT 12


STATEMENTS RE COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND 
PREFERENCE STOCK DIVIDENDS--UNAUDITED(a)
Sun Company, Inc. and Subsidiaries

<TABLE> 
<CAPTION> 

(Millions of Dollars Except Ratios)
- --------------------------------------------------------------------------------

                                               For the Years Ended December 31
                                           -------------------------------------
                                            1995    1994  1993  1992    1991
                                            ----    ----  ----  ----    ----
<S>                                        <C>      <C>   <C>  <C>   <C>  
Fixed Charges and Preference Stock
 Dividends:
  Consolidated interest cost and
   debt expense.........................    $105    $ 97  $ 81 $  97  $ 112
  Interest cost and debt expense of
   operations held for sale.............      16      22     8    --     --
  Interest allocable to rental
   expense(b)...........................      34      35    29    29     29
                                            ----    ----  ---- -----  -----
  Total Fixed Charges...................     155     154   118   126    141
  Preference Stock Dividends(c).........      32      --    --    --     --
                                            ----    ----  ---- -----  -----
       Total Fixed Charges and
        Preference Stock Dividends......    $187    $154  $118 $ 126  $ 141
                                            ====    ====  ==== =====  =====

Earnings:
  Consolidated income (loss) from
   continuing operations before
   provision (credit) for income
   taxes and cumulative effect of
   change in accounting principle.......    $319    $120  $426 $(432) $(108)
  Minority interest in net income
   (loss) of subsidiaries having
   fixed charges........................      19      35    25   (59)    16
  Proportionate share of provision
   for income taxes of 50 percent
   owned but not controlled
   affiliated companies.................       4       3     3     2      3
  Equity in income of less than 50
   percent owned affiliated companies...     (10)     (7)   (6)   (5)    (4)
  Dividends received from less than 
   50 percent owned affiliated
   companies............................       5       5     5     4      4
  Fixed charges.........................     155     154   118   126    141
  Interest capitalized..................      (6)    (15)   (9)   (6)    (5)
  Amortization of previously
   capitalized interest.................      16      31    16    42     18
                                            ----    ----  ---- -----  -----
       Total Earnings...................    $502    $326  $578 $(328) $  65
                                            ====    ====  ==== =====  =====
Ratio of Earnings to Combined Fixed
  Charges and Preference Stock
  Dividends.............................    2.68    2.12  4.90 N/A(d) N/A(d)
                                            ====    ====  ==== ===    ===  
</TABLE> 
<PAGE>
 
- -----------------
(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 accounted for as investments held
     for sale or discontinued operations. Prior to the fourth quarter of 1993,
     coal and real estate operations were accounted for as discontinued
     operations and, accordingly, were excluded from the computation of the
     ratio of earnings to combined fixed charges and preference stock dividends.
     Effective in the fourth quarter of 1993, coal and real estate operations
     and their results of operations are now included in continuing operations,
     Accordingly, beginning October 1, 1993, coal and real estate operations are
     included in the computation of the ratio of earnings to combined fixed
     charges and preference stock dividends. (See Note 2 to the consolidated
     financial statements in the Company's 1995 Annual Report on Form 10-K,
     incorporated by reference herein.) 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.

(c)  Represents the amount of pretax earnings which would be required to cover
     the dividend requirements of the Company's Cumulative Preference Stock -
     Series A, no par value, subsequent to its issuance in August 1995.

(d)  Earnings are inadequate to cover fixed charges by $454 and $76 million in
     1992 and 1991, respectively, as a result of $745 and $156 million pretax
     provisions for write-down of assets and other matters.


<PAGE>
                                                                    EXHIBIT 23.1
 
                               CONSENT OF COUNSEL


     I hereby consent to the use of my name under the caption "Legal Matters"
in a Prospectus included in the Registration Statement on Form S-3 of Sun
Company, Inc. filed with the Securities and Exchange Commission on the date
hereof.


                                                    /s/ JACK L. FOLTZ
                                                    --------------------------
                                                    Jack L. Foltz



Philadelphia, Pennsylvania
March 7, 1996

<PAGE>
                                                                    EXHIBIT 23.2
 
                               CONSENT OF COUNSEL



     I hereby consent to the use of my name under the caption "Legal Matters"
in a Prospectus included in the Registration Statement on Form S-3 of Sun
Company, Inc. filed with the Securities and Exchange Commission on the date
hereof.


                                         /s/ JONATHAN C. WALLER
                                         -----------------------------
                                         Jonathan C. Waller



Philadelphia, Pennsylvania
March 7, 1996

<PAGE>
 
                                                                    EXHIBIT 23.3


                       CONSENT OF INDEPENDENT ACCOUNTANTS

     We consent to the incorporation by reference in this Registration Statement
on Form S-3 of our reports dated February 13, 1996 (which include an explanatory
paragraph regarding the Company's change in method of accounting for the
impairment of long-lived assets in 1995, the Company's change in method of
accounting for postemployment benefits in 1994 and the Company's change in
method of accounting for income taxes in 1993) on our audits of the consolidated
financial statements and financial statement schedule of Sun Company, Inc. and
subsidiaries as of December 31, 1995 and 1994, and for each of the three years
in the period ended December 31, 1995, which reports are included or
incorporated by reference in the Sun Company, Inc. Annual Report on Form 10-K
for the year ended December 31, 1995.

     We also consent to the reference to our firm set forth under the caption
"Experts" in this Registration Statement.


                                               /s/ COOPERS & LYBRAND L.L.P.
                                               ----------------------------
                                                Coopers & Lybrand L.L.P.


2400 Eleven Penn Center
Philadelphia, PA  19103
March 6, 1996

<PAGE>
                                                                      EXHIBIT 24
 
                               POWER OF ATTORNEY



     KNOW ALL MEN BY THESE PRESENTS, That the undersigned officers and/or
directors of Sun Company, Inc., a Pennsylvania corporation ("Company"), which
intends to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1933, as amended, a Registration Statement
on Form S-3 with respect to registration under said Act of the Company's
Depositary Shares beneficially owned by The Glenmede Trust Company, each hereby
constitutes and appoints the Senior Vice President and Chief Financial Officer,
the Corporate Secretary, and the Comptroller, and each of them, his or her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her to act in his or her name, place and stead, in
any and all capacities, to sign said Registration Statement and any related
documents, including any and all future amendments thereto, and to file such
Registration Statement and any amendments, with all exhibits thereto, and any
and all documents in connection therewith, with the Securities and Exchange
Commission, hereby granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform any and all acts and things
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or either of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
<PAGE>
 
     IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
this 7th day of March, 1996.


/s/ ROBERT M. AIKEN, JR.                         /s/ JAMES G. KAISER
- -----------------------------                    ------------------------------
Robert M. Aiken, Jr.                             James G. Kaiser              
Senior Vice President and                        Director                     
Chief Financial Officer                                                       
(Principal Financial Officer)                                                 
                                                 /s/ ROBERT D. KENNEDY        
                                                 ------------------------------
/s/ ROBERT H. CAMPBELL                           Robert D. Kennedy            
- -----------------------------                    Director                     
Robert H. Campbell                                                            
Chairman of the Board, Chief                                                  
Executive Officer, President                     /s/ THOMAS W. LANGFITT       
and Director                                     ------------------------------
(Principal Executive Officer)                    Thomas W. Langfitt           
                                                 Director                     
                                                                              
/s/ RAYMOND E. CARTLEDGE                                       ,               
- -----------------------------                    /s/ ANN C. MULE
Raymond E. Cartledge                             ------------------------------
Director                                                   ,
                                                 Ann C. Mule                  
                                                 Corporate Secretary          
                                                                              
/s/ ROBERT E. CAWTHORN                                                        
- -----------------------------                    /s/ R. ANDERSON PEW          
Robert E. Cawthorn                               ------------------------------
Director                                         R. Anderson Pew              
                                                 Director                     
                                                                              
/s/ MARY J. EVANS                                                             
- -----------------------------                    /s/ ALBERT E. PISCOPO
Mary J. Evans                                    ------------------------------
Director                                         Albert E. Piscopo            
                                                 Director                     
                                                                              
/s/ THOMAS P. GERRITY                                                         
- -----------------------------                    /s/ WILLIAM F. POUNDS        
Thomas P. Gerrity                                ------------------------------
Director                                         William F. Pounds            
                                                 Director                     
                                                                              
/s/ THOMAS W. HOFMANN                                                         
- -----------------------------                    /s/ ALEXANDER B. TROWBRIDGE  
Thomas W. Hofmann                                ------------------------------
Comptroller                                      Alexander B. Trowbridge
(Principal Accounting Officer)                   Director

<PAGE>
 
                                                               Exhibit 99

                         REGISTRATION RIGHTS AGREEMENT

          THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of
February 1, 1996 and is entered into by and between Sun Company, Inc., a
Pennsylvania corporation (the "Company"), and The Glenmede Trust Company, a
Pennsylvania trust company ("Glenmede"), in its corporate capacity and as
trustee or co-trustee of The Pew Memorial Trust, The J. Howard Pew Freedom
Trust, The Mabel Pew Myrin Trust, The J. N. Pew, Jr. Charitable Trust and The
Medical Trust (the "Charitable Trusts").

          WHEREAS, Glenmede, as trustee or co-trustee of Charitable Trusts,
holds 3,869,148 shares of the Company's common stock, par value $1.00 per share
("Common Stock") and 11,748,491 shares of the Company's depositary shares
("Depositary Shares"), each representing one-half of a share of the Company's
Series A Cumulative Preference Stock, no par value ("Series A Stock"); and

          WHEREAS, the Company has the right to call outstanding shares of
Series A Stock by delivering shares of Common Stock to the holders of Depositary
Shares; and

          WHEREAS, the Company is willing to grant to Glenmede the registration
rights set forth in this Agreement, in consideration of the undertakings of
Glenmede set forth in this Agreement.

          NOW, THEREFORE, in consideration of the covenants contained herein and
other good and valuable consideration, and intending to be legally bound hereby,
the parties agree as follows:

     1.  Definitions.  As used herein, the following terms shall have the
         -----------                                                     
following meanings:

     "Exchange Act" means the Securities Exchange Act of 1934, and the rules and
     --------------                                                             
regulations of the SEC thereunder, as in effect from time to time.

     "NASD" means the National Association of Securities Dealers, Inc.
     ------                                                           

     "Prospectus" means the prospectus included in any Registration Statement
     ------------                                                            
with respect to the terms of any public offering of any portion of the
Registrable Shares, including any preliminary prospectus, final prospectus, and
post-effective amendment.

     "Registrable Shares" means all shares of the Company's Common Stock and
     --------------------                                                   
Depositary Shares now held by Glenmede as trustee or co-trustee of the
Charitable Trusts, and any other shares of the same or any other classes of the
Company's Voting Stock which may be hereafter acquired from the Company by 
<PAGE>
 
Glenmede, as trustee or co-trustee of the Charitable Trusts, in any redemption
of the Company's Series A Stock or by way of any stock split, stock dividend,
exchange, combination, reclassification, merger, consolidation, reorganization
or recapitalization involving the Common Stock or Depositary Shares now held by
Glenmede for the account of the Charitable Trusts.

     "Registration Statement" means any registration statement which covers any
     ------------------------                                                  
of the Registrable Shares pursuant to the provisions of this Agreement,
including the Prospectus, and all amendments, supplements and exhibits to a
Registration Statement.

     "Registration Expenses" means all costs, fees and expenses incurred by the
     -----------------------                                                   
Company or Glenmede in connection with any public offering pursuant to a
Registration Statement, including, without limitation, (i) all filing fees
charged by the SEC, the NASD, and any foreign or state securities commissions
(including fees and disbursements of counsel incurred in connection with such
filings with foreign or state securities commissions), (ii) the fees and
disbursements charged by any firm of independent public accountants (including,
without limitation, those fees and disbursements incurred in connection with the
preparation of a comfort letter), (iii) all costs and expenses incurred in
connection with the printing and distribution of Registration Statements, and
the certificates representing Registrable Shares, (iv) all transfer agent fees,
and (v) any fees payable or expenses incurred in connection with the listing of
the Registrable Shares on the New York Stock Exchange or any regional or other
national securities exchange.

     "SEC" means the Securities and Exchange Commission.
     -----                                              

     "Securities Act" means the Securities Act of 1933, and the rules and
     ----------------                                                    
regulations of the SEC thereunder, as in effect from time to time.

     "Shares to be Registered" means the number(s) and class(es) of Registrable
     -------------------------                                                 
Shares which Glenmede request to be registered, as set forth in a Demand
Registration Notice, as defined in Section 2(a), or an Incidental Registration
Notice, as defined in Section 3(a).

     "Termination Date" means the date which is the earlier of (i) July 31, 1997
     ------------------                                                         
or (ii) the date on which Glenmede, as trustee or co-trustee of the Charitable
Trusts, ceases to have beneficial ownership of five percent (5%) or more of the
issued and outstanding shares of Company's Voting Stock, unless extended
pursuant to Section 2(d) hereof.  For purposes of the foregoing provision,
"beneficial ownership" shall be determined in the manner specified in Rule 13d-3
of the Exchange Act.

     "Voting Stock" means Common Stock and any shares of any class or series
     --------------                                        
of stock of the Company having preference over Common Stock as to dividends or
as to liquidation and entitled to vote on each matter on which the holders of
Common Stock shall be entitled to vote.
<PAGE>
 
     2.  Demand Registration Rights.
         -------------------------- 

         (a) At any time after the date hereof and prior to the Termination
Date, Glenmede may, by written notice (a "Demand Registration Notice"), request
the Company to register under the Securities Act Registrable Shares in such
numbers and of such classes (which may be Common Stock, Depositary Shares, any
other class of Voting Stock, or any combination thereof), as may be determined
by Glenmede in its sole discretion, so as to permit the public offering and sale
thereof.

         (b) The Company, as soon as reasonably practicable following its
receipt of a Demand Registration Notice, will prepare and file with the SEC a
Registration Statement on such form as the Company, in consultation with
Glenmede and the managing underwriter, shall determine to be appropriate in
conformance with applicable SEC rules and regulations, so as to permit Glenmede
to complete a public offering of the Shares to be Registered. The Company will
use its best efforts to cause each Registration Statement to become effective as
soon as practicable following the Company's receipt of a Demand Registration
Notice and to remain effective, and the Prospectus included therein to remain
current and meet the requirements of the Securities Act, until the earlier of
(i) the 90th calendar day following the day upon which the SEC declares the
Registration Statement effective and (ii) the first day on which all of the
Shares to be Registered have been sold ("Closing"); provided, however, that the
Company may postpone the filing of a Registration Statement with respect to
such a public offering,for up to 45 calendar days after receipt of a Demand
Registration Notice, if the Company's Board of Directors determines in the good
faith exercise of its reasonable judgment that, due to a pending or contemplated
acquisition, disposition or securities offering by the Company, the registration
of the Shares to be Registered within such period would be detrimental to the
Company and its shareholders.

         (c) Glenmede shall have the right to require the Company to complete
and have declared effective by the SEC a maximum of two (2) Registration
Statements pursuant to this Section 2 between the date hereof and the
Termination Date; provided, however, that the Company shall not be required to
complete and file with the SEC a second Registration Statement within 90
calendar days after the Closing of the first public offering under this Section
2 or within 90 calendar days after the Closing of a public offering in which
Registrable Shares have been sold pursuant to Section 3 hereof.

         (d) If, on the Termination Date, Glenmede, as trustee or co-trustee of
the Charitable Trusts, continues to hold any combination of Registrable Shares
representing 5% or more of the outstanding shares of the Company's Voting Stock,
and fewer than two public offerings have been completed under this Section 2 due
to the exercise by the Company of its right under Section 2(b) hereof to
postpone a public offering, or because the Closing of the first public offering
occurred within 90 calendar days of the Termination Date, then the Termination
Date shall be extended for
<PAGE>
 
180 days or until a total of two public offerings have been completed, whichever
first occurs.

         (e) No shares other than Registrable Shares shall be covered by any
Registration Statement filed under this Section 2.


     3.  Incidental Registration Rights.  If at any time between the date hereof
         ------------------------------                                         
and the Termination Date (as the same may be extended pursuant to Section 2(d)
hereof), the Company proposes to register any shares of its Common Stock under
the Securities Act for sale to the public, whether for its own account or for
the account of persons other than Glenmede ("Other Securities"), in an
underwritten offering, on a form and in a manner which would permit the
registration of Registrable Shares which are shares of Common Stock, the Company
shall give Glenmede prompt written notice of the Company's intention, specifying
the number of shares of Other Securities to be registered and the intended
method of disposition.  Glenmede, by written notice (an "Incidental Registration
Notice") delivered to the Company within fourteen (14) business days after
Glenmede's receipt of the Company's notice, may request that the Company
register that number of Registrable Shares which are shares of Common Stock set
forth in the Incidental Registration Notice.  On receipt of an Incidental
Registration Notice, the Company will use its reasonable efforts to effect the
registration of the Shares to be Registered in conjunction with the registration
of such Other Securities.

         (a) Glenmede shall be required to sell the Shares to be Registered
pursuant to this Section 3 to the underwriters at the same price and on the same
terms applicable to the Other Securities.

         (b) The Company may withdraw any registration statement filed as
provided in this Section 3, at any time before it becomes effective, without
liability or obligation to Glenmede.

         (c) The number of Shares to be Registered in a registration under this
Section 3 may be reduced to the extent that the managing underwriter shall
advise the Company and Glenmede in writing that the inclusion of the total
number of Shares to be Registered would adversely affect the orderly sale and
distribution, or the price of, the Other Securities.

         (d) No registration of Registrable Shares effected under this Section 3
shall relieve the Company of its obligations to effect registrations of
Registrable Shares pursuant to Section 2 hereof.

         (e) The Company shall have no obligation under this Section 3 to
register Registrable Shares which are not shares of Common Stock.


     4.  Registration Procedures.  In connection with each 
         -----------------------
<PAGE>
 
registration under Section 2 or Section 3:

         (a) Glenmede will furnish to the Company in writing such information
with respect to Glenmede and the Charitable Trusts and the proposed distribution
of Registrable Shares as shall be requested by the Company and reasonably
necessary in order to assure compliance with federal and applicable state
securities laws.

         (b)  the Company will:

              (i) give Glenmede and the underwriters the opportunity to
participate in the preparation of the Registration Statement and Prospectus and,
as to any registration under Section 2, not file any Registration Statement to
which Glenmede or the underwriters reasonably object;

              (ii) furnish to Glenmede and to each underwriter such number of
copies of the Registration Statement and the Prospectus as such persons may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Shares covered by such Registration Statement;

              (iii) use its reasonable efforts to register or qualify the Shares
to be Registered under the securities or blue sky laws of such jurisdictions as
Glenmede shall reasonably request; provided, however, that the Company shall not
be required to qualify to do business in any jurisdiction where it is not
qualified or to take any action which would subject it to taxation or service of
process in any jurisdiction where it is not otherwise subject to taxation or
service of process;

              (iv) at any time when a Prospectus relating to a registration of
Registrable Shares is required to be delivered under the Securities Act,
immediately notify Glenmede of the happening of any event as a result of which
the Prospectus, as then in effect, includes an untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing and, as expeditiously as possible, amend or
supplement such Prospectus to eliminate the untrue statement or the omission;

              (v) use its reasonable efforts to furnish, on the date that
Registrable Shares are delivered to the underwriters for sale: (i) an opinion
letter, dated such date, from counsel representing the Company, addressed to the
underwriters and to Glenmede, stating that such Registration Statement has
become effective under the Securities Act and that (A) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been issued
and no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the Registration Statement and the
related Prospectus comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need express no
opinion as to financial statements and financial and statistical data contained
therein) and (C) to such 
<PAGE>
 
other effects as may reasonably be requested by the underwriters or Glenmede or
their respective counsel, and (ii) a letter, dated such date, from the
independent public accountants retained by the Company, addressed to the
underwriters and to Glenmede, stating that they are independent public
accountants within the meaning of the Securities Act and that, in their opinion,
the financial statements of the Company included in the Registration Statement
or the Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and covering such other financial
matters (including information as to the period ending no more than five
business days prior to the date of such letter) as such underwriters or Glenmede
may reasonable request; and

              (vi) make available for inspection by any underwriter
participating in any distribution pursuant to such Registration Statement, and
any attorney retained by Glenmede or such underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by such underwriter or attorney, in connection with such
Registration Statement.


     5.  Expenses.
         -------- 

         (a) In the case of a Registration under Section 2 hereof, the Company
and Glenmede will each pay fifty percent (50%) of all Registration Expenses. In
the case of a Registration under Section 3 hereof, The Company will pay all
Registration Expenses.

         (b) In all cases, Glenmede shall be solely responsible for (i) all
underwriting discounts and commissions with respect to Registrable Shares, (ii)
the fees and disbursements of its outside legal counsel, and (iii) the internal
costs of Glenmede and the Charitable Trusts (including, without limitation, the
costs of inside counsel and inside auditors, if any); and

         (c) In all cases, the Company shall be solely responsible for (i) all
underwriting discounts and commissions with respect to Other Securities, (ii)
the fees and disbursements of its outside legal counsel, and (iii) the Company's
internal costs (including, without limitation, the costs of inside counsel and
inside auditors, if any).

     6.  Indemnification.  In connection with any registration of Registrable
         ---------------                                                     
Shares:

         (a) the Company will indemnify and hold harmless Glenmede and each
Charitable Trust, each co-trustee of a Charitable Trust, each underwriter, and
each other person, if any, who controls Glenmede or such Charitable Trust or
underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities 
<PAGE>
 
(including without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such claim), to which Glenmede
or such co-trustee, trust, or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement or any Prospectus contained therein, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except (i) with respect to Glenmede or the Charitable Trusts,
insofar as any such losses, claims, damages or liabilities (or actions in
respect thereof) are caused by any such untrue statement or omission or alleged
untrue statement or omission based on information relating to Glenmede or the
Charitable Trusts and furnished by Glenmede to the Company in writing expressly
for use in such Registration Statement or Prospectus; and (ii) with respect to
the underwriters, insofar as any such losses, claims, damages or liabilities (or
actions in respect thereof) are caused by any such untrue statement or omission
or alleged untrue statement or omission based on information relating to the
underwriters and furnished to the Company in writing by or in behalf of any
underwriter expressly for use in such Registration Statement or Prospectus.

         (b) Glenmede, in its individual corporate capacity, will indemnify and
hold harmless the Company and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, each officer of the Company who signs the Registration
Statement, each director of the Company, each underwriter and each person who
controls any underwriter within the meaning of either such Section, from and
against any and all losses, claims, damages and liabilities (including without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or Prospectus or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only insofar as the same is based on
information relating to Glenmede or the Charitable Trusts furnished in writing
to the Company by Glenmede expressly for use in such Registration Statement or
Prospectus.

         (c) The indemnification of underwriters provided for in this Section 7
shall be limited to such terms and conditions as are at the time customary and
reasonably required by the underwriters in light of industry practice.

     7.  Certain Covenants.  Glenmede covenants and agrees
         -----------------                                

that it will not, directly or indirectly, between the date hereof and July 31,
1997 (except as provided in subsection (c)(vii) below), for its own corporate
account or on behalf of and as trustee or co-trustee of the Charitable Trusts:
<PAGE>
 
         (a) acquire beneficial ownership of any additional shares of Voting
Stock of the Company; provided, however, that nothing contained herein shall
prohibit the acquisition of Voting Stock (x) as a result of a stock split, stock
dividend, exchange or recapitalization by the Company, or in a transaction
referred to in subsection (c)(iii) or (c)(v) below, (y) pursuant to the exercise
in accordance with its terms of any warrant, option or other right to receive
Voting Stock ("Rights") that it now holds or hereafter receives from the Company
pursuant to any distribution by the Company to its shareholders, or (z)
otherwise directly from the Company; or

         (b) solicit any person or group of persons to make any public tender or
exchange offer for a majority of the Company's outstanding Voting Stock or to
propose a merger or consolidation of the Company or to acquire all or
substantially all of the assets of the Company.

         (c) Sell, transfer or otherwise dispose of, or agree to sell, transfer
or otherwise dispose of, any Registrable Shares, except:

              (i) in a registered public offering;

              (ii)  to the Company;

              (iii) in response to a public tender or exchange offer made to all
shareholders of the Company, or all holders a class of the Company's securities;

              (iv) in accordance with the terms of any Registrable Shares or
Rights;

              (v) in connection with a merger, consolidation, reorganization,
recapitalization or dissolution of the Company not solicited by Glenmede;

              (vi)  by charitable gift; or

              (vii)  after June 30, 1996, in accordance with SEC Rule 144.

     8.   Scope of Agreement.  Nothing in this Agreement shall apply in any way
          ------------------                                                   
to any securities of the Company held by Glenmede for the account of any
customer other than the Charitable Trusts.


     9.   Representations and Warranties.  Each of the Company and Glenmede
          ------------------------------                                   
represents and warrants to the other as follows:

         (b) its execution and delivery of this Agreement have been duly
authorized by all requisite corporate action and do not violate any provision of
law, its Certificate of Incorporation or Bylaws, or any provision of any
indenture, agreement or other instrument to which it or any of its properties or
assets is 
<PAGE>
 
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument.

         (c) It has duly executed and delivered this Agreement, which
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.

     10.  Miscellaneous.
          ------------- 

          (a) All notices, requests, demands or other communications required or
contemplated by this Agreement to be effective shall be in writing addressed to
the parties as specified herein and shall be delivered, at the election of the
sender thereof, by facsimile, by overnight courier or by first class certified
mail for which the postage has been prepaid and a return receipt requested, and
shall be deemed to have been duly given, made and received by the recipient
thereof when confirmation of receipt is obtained in the case of transmission by
facsimile, or one business day after being properly sent in the case of delivery
by overnight courier, or four business days after being deposited with the U.S.
Postal Service in the case of first class certified mail.  Such notices,
requests, demands or other communications shall be addressed and directed to the
parties listed below or to such other address or recipient as may hereafter be
designated by a party pursuant to this section:

     
          To Company:                                                  
                                                                  
          Sun Company, Inc.                                       
          1801 Market Street                                      
          Philadelphia, PA  19103                                 
          Attention: Robert M. Aiken, Jr.                         
          fax: (215) 977-3559                                     
                                                                  
          With a  copy  to:                                       
                                                                  
          Jack L. Foltz                                           
          Sun Company, Inc.                                       
          1801 Market Street Philadelphia, PA 19103               
          fax: (215) 977-3559                                     
                                                                  
          To Glenmede:                                            
                                                                  
          The Glenmede Trust Company                              
          One Liberty Place                                       
          1650 Market Street                                      
          Philadelphia, PA 19103                                  
          Attention: A. E. Piscopo                                
          fax: (215) 419-6197                                     
                                                                  
          With a copy to:                                         
                                                                  
          Franklin B.  Holland                                    
          Pepper, Hamilton & Scheetz                              
          3000 Two Logan Square                                    
<PAGE>
 
          18th and Arch Streets  
          Philadelphia, PA 19103 
          fax: (215) 981-4750     


          (b) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania,without regard to
its conflict-of-laws rules.

          (c) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except in a writing signed on behalf of the Company and Glenmede which shall be
duly authorized by all necessary action, corporate or otherwise, of each party.


                         SUN COMPANY, INC.                           
                                                                     
                                                                     
                         By: s/ ROBERT M. AIKEN, JR.                    
                             -----------------------                    
                                Robert M. Aiken, Jr.                        
                         Title: Senior Vice President                
                                 and Chief Financial Officer       
                                                                     
                                                                     
                                                                     
                         THE GLENMEDE TRUST COMPANY                  
                                                                     
                         By: s/ JAMES L. KERMES                    
                             --------------------                    
                                James L. Kermes                    
                         Title: President                           
                                                                     
                                                                     
                         THE GLENMEDE TRUST COMPANY,                  
                         as trustee or co-trustee of The Pew Memorial Trust, The
                         J. Howard Pew Freedom Trust, The Mabel Pew Myrin Trust,
                         The J. N. Pew, Jr. Charitable Trust and The Medical
                         Trust:


                         By:  s/ JAMES L. KERMES
                              -------------------
                                 James L. Kermes
                         Title:  President



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