<PAGE>
1995
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-6841
SUN COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
PENNSYLVANIA 23-1743282
(I.R.S. EMPLOYERIDENTIFICATION NO.)
(STATE OR OTHER JURISDICTION
OFINCORPORATION OR ORGANIZATION)
TEN PENN CENTER1801 MARKET STREET,
PHILADELPHIA, PA 19103-1699
(ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (215) 977-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH
EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
------------------- -----------------
<S> <C>
Depositary Shares, each share representing One- New York Stock Exchange
Half Share of Series A Cumulative Preference
Stock, no par value
Common Stock, $1 par value New York Stock Exchange
Philadelphia Stock
Exchange
Convertible Subordinated Debentures 6 3/4%, Due New York Stock Exchange
June 15, 2012
Sinking Fund Debentures 9 3/8%, Due June 1, 2016 New York Stock Exchange
Notes 7.95%, Due December 15, 2001 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments of this Form 10-K. [_]
At January 31, 1996, the aggregate market value of voting stock held by
nonaffiliates was $2,252 million.
At January 31, 1996, there were 73,806,307 shares of Common Stock, $1 par
value and 12,500,000 shares of Cumulative Preference Stock--Series A, no par
value, outstanding.
Selected portions of the Sun Company, Inc. Annual Report to Shareholders for
the Fiscal Year Ended December 31, 1995 are incorporated by reference in Parts
I, II and IV of this Form 10-K.
Selected portions of the Sun Company, Inc. definitive Proxy Statement, which
will be filed with the Securities and Exchange Commission within 120 days
after December 31, 1995, are incorporated by reference in Part III of this
Form 10-K.
<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
Sun Company, Inc.* was incorporated in Pennsylvania in 1971 and it or its
predecessors have been active in the petroleum industry since 1886. Its
principal executive offices are located at 1801 Market Street, Philadelphia,
PA 19103-1699. Its telephone number is (215) 977-3000.
The Company, through its subsidiaries, is principally a petroleum refiner
and marketer with interests in oil and gas production, coal mining and
cokemaking. Prior to the sale of Suncor Inc. on June 8, 1995, Sun had
interests in refining and marketing, exploration and production and oil sands
mining in Canada.
Sun's petroleum refining and marketing operations include the manufacturing
and marketing of a full range of petroleum products, including fuels,
lubricants and petrochemicals, and the transportation of crude oil and refined
products. These operations are principally conducted in the United States.
Sun's oil and gas production operations consist of development, production and
marketing of crude oil, condensate, natural gas and natural gas liquids and
are located in the United Kingdom sector of the North Sea. Sun's coal mining
and cokemaking operations are conducted in the eastern United States. Sun also
has an interest in real estate operations in the United States, which is
subject to a plan of disposition.
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. As part of
this plan, Sun restructured the Company into eight business units plus a
holding company and a services organization. The accompanying discussion of
the Company's business and properties reflects this new organizational
structure.
For additional information regarding this restructuring, see Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Financial and Operational Restructuring, and Notes 2 and 15 to the
Consolidated Financial Statements in the Company's 1995 Annual Report to
Shareholders. Additional business segment and geographic information is
presented in Note 19 to the Consolidated Financial Statements in the Company's
1995 Annual Report to Shareholders.
REFINING AND MARKETING
The Company's refining and marketing operations consist of the manufacturing
and marketing of fuels, lubricants and chemicals and the transportation of
crude oil and refined products. These operations are conducted principally
through Sun Company, Inc. (R&M), a wholly owned subsidiary of the Company, and
are classified into the following business units: Sun Northeast Refining;
Sunoco Northeast Marketing; Sunoco Chemicals; Sunoco Lubricants; Sunoco
MidAmerica Marketing & Refining; and Sunoco Logistics.
- --------
* As used in this report, the term "Company" means Sun Company, Inc., and the
term "Sun" means Sun Company, Inc. and its subsidiaries. The use of these
terms is for convenience of discussion and is not intended to be a precise
description of corporate relationships. References in this Annual Report on
Form 10-K to material in the Company's 1995 Annual Report to Shareholders
and in the Company's definitive Proxy Statement, which will be filed with
the Securities and Exchange Commission within 120 days after December 31,
1995, mean that such material is incorporated herein by reference; other
material in those documents is not deemed to be filed as part of this Annual
Report on Form 10-K.
1
<PAGE>
Sun owns and operates five domestic refineries located in Marcus Hook, PA,
Philadelphia, PA, Toledo, OH, Tulsa, OK and Yabucoa, Puerto Rico. The
refineries in Marcus Hook, Philadelphia and Toledo produce principally fuels
and chemicals while the refineries in Tulsa and Puerto Rico emphasize
lubricants production with related fuels being sold in the wholesale market.
The following table sets forth certain consolidated information concerning
Sun's domestic refining operations during 1995:
<TABLE>
<S> <C>
Crude Unit Capacity (MB/D)............................................ 777.0
=====
Input to Crude Units (MB/D)........................................... 700.4
=====
Products Manufactured (Percent):
Gasoline............................................................. 43
Middle Distillates................................................... 25
Residual Fuel........................................................ 9
Petrochemicals....................................................... 4
Lubricants........................................................... 2
Asphalt.............................................................. 3
Other................................................................ 14
---
100
===
Sun's crude oil requirements during 1995 were met largely by purchases from
various foreign national oil companies and traders. Despite periodic market
disruptions, there is an ample supply of crude oil available to meet worldwide
refining needs, and Sun has been able to supply its refineries with the proper
mix and quality of crude oils without disruption. Sun's refineries processed
approximately 80 percent light sweet crude oil during 1995. The Company
believes that ample supplies of light sweet crude oil will continue to be
available and that the price differential between sweet and sour crude oils
will remain relatively low. The following table sets forth the net sources of
crude oil for Sun's domestic refineries during 1995 (in percentages):
United States......................................................... 15
Canada................................................................ 9
Africa................................................................ 36
North Sea............................................................. 20
Arabian Gulf.......................................................... 11
South and Central America............................................. 9
---
100
===
Supplies of feedstocks and refined products also have been sufficient to
meet Sun's refining and marketing needs. The following table sets forth
summary information concerning the supply and distribution of crude oil and
refined products at Sun's domestic refineries during 1995 (in thousands of
barrels daily):
Supply:
Crude oil purchases.................................................. 682.2
Crude oil inventory change........................................... (8.3)
Refined product purchases (including feedstocks)..................... 122.4
-----
796.3
=====
Distribution:
Refined product sales................................................ 777.8
Refined product inventory change..................................... .2
Internal consumption and other....................................... 18.3
-----
796.3
=====
</TABLE>
2
<PAGE>
Sun sells fuels through retail and wholesale channels principally in the
Northeast and Midwest as well as chemicals and lubricants on a worldwide
basis. The following table sets forth Sun's consolidated domestic refined
product sales during 1995 (in thousands of barrels daily):
<TABLE>
<S> <C>
Gasoline:
Wholesale............................................................. 154.0
Retail................................................................ 204.6
Middle distillates..................................................... 210.9
Residual fuel.......................................................... 73.9
Petrochemicals......................................................... 31.1
Lubricants............................................................. 20.0
Asphalt................................................................ 26.7
Other.................................................................. 56.6
-----
777.8
=====
</TABLE>
As of December 31, 1995, branded fuels sales were made through 3,861 retail
gasoline outlets. All but 386 of these outlets were independently operated.
The following is a discussion of the six business units which comprise Sun's
domestic refining and marketing operations.
SUN NORTHEAST REFINING
The Sun Northeast Refining business consists of the manufacture of petroleum
products, including gasoline, middle distillates (including jet fuel),
residual fuel oil, asphalt and chemical feedstocks at Sun's Marcus Hook and
Philadelphia refineries and the sale of these products to other Sun business
units and to wholesale and industrial customers. (See "MidAmerica Marketing &
Refining" and "Sunoco Lubricants" below, for a discussion of operations at
Sun's Toledo, Tulsa and Puerto Rico refineries.)
The following table sets forth information concerning operations at Sun's
Marcus Hook and Philadelphia refineries during 1995:
<TABLE>
<CAPTION>
PHILADELPHIA, PA
------------------ TOTAL
MARCUS GIRARD POINT NORTHEAST
HOOK, PA POINT BREEZE REFINERIES
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Crude Unit Capacity (MB/D)............ 175.0 177.0 130.0 482.0
===== ======== ======== =====
Input to Crude Units (MB/D)........... 144.7 195.4 110.5 450.6
===== ======== ======== =====
Conversion Capacity (MB/D)............ 86.0 68.0 65.0 219.0
===== ======== ======== =====
Conversion Capacity Utilized (MB/D)... 81.1 54.6 51.9* 187.6
===== ======== ======== =====
Products Manufactured (Percent):
Gasoline............................. 50 38 45 44
Middle Distillates................... 27 29 21 26
Residual Fuel........................ 7 19 2 11
Petrochemical Feedstocks**........... 7 1 3 3
Asphalt.............................. -- -- 18 5
Other................................ 9 13 11 11
--- --- --- ---
100 100 100 100
=== === === ===
</TABLE>
- --------
* Reflects the impact of major maintenance activities.
** Petrochemical feedstocks are utilized by the Sunoco Chemicals business to
produce petrochemicals at these facilities. (See "Sunoco Chemicals" below.)
3
<PAGE>
Total third-party fuels products sold at wholesale by Sun Northeast Refining
in 1995 were 346.4 thousand barrels daily compared to 244.8 thousand barrels
daily in 1994. The 42 percent increase in 1995 was due to higher volumes
associated with the Girard Point refining facilities, which were acquired on
August 4, 1994. Production from the Girard Point facility is principally sold
to wholesale and industrial customers. Sales to other Sun business units by
Sun Northeast Refining (primarily gasoline, middle distillates and chemical
feedstocks) totalled 184.3 thousand barrels daily in 1995 versus 197.4
thousand barrels daily in 1994.
Sun's Marcus Hook refinery and the Girard Point facilities in the
Philadelphia refinery refine only light sweet crude oils, while the Point
Breeze facilities in the Philadelphia refinery can process a wide variety of
crude oils, including a large quantity of heavy sour crude. The crude oils
processed at the Marcus Hook and Philadelphia refineries were supplied from
foreign sources during 1995.
Sun's Philadelphia and Marcus Hook refineries are interconnected by
pipeline, barge, truck and rail. The inter-refinery pipeline project was
completed in late 1994 and became operational in April 1995. It allows
transfer of unfinished stocks, including butanes, naphtha, distillate
blendstocks and gasoline blendstocks. Finished products are delivered to
customers via Sun's pipeline and terminal network, third-party pipelines and
barges.
Environmental laws require Sun to make significant expenditures at its
refineries, of both a capital and expense nature. During the 1993-95 period,
approximately $236 million was spent for environmental capital projects by Sun
at its Northeast refineries, including $110 million to significantly upgrade
the wastewater treatment facilities at Sun's Marcus Hook refinery. This
project was substantially completed in 1994.
Significant alterations in the composition of gasoline sold in Sun's
northeastern U.S. marketing area are required by the Clean Air Act of 1990, as
amended (the "Clean Air Act"). The first phase of the reformulated gasoline
regulations has been implemented which requires an increase in the minimum
quantity of oxygen for certain non-attainment areas, a reduction in benzene
content, and a reduction in summertime Reid Vapor Pressure ("RVP"). Although
these requirements will become more stringent in 1998 as the phase-in of the
Clean Air Act continues, management believes the Company is well positioned to
meet these regulations in a cost-effective manner.
In response to the regulatory environment, the Company has undertaken
various initiatives. For example, in late 1994 the Company completed a project
to expand Sun's benzene extraction capacity by 60 million gallons per year at
its Marcus Hook refinery (see "Sunoco Chemicals" below). In addition, the
Company enhanced its East Coast alkylation capacity, a key refining process in
the production of reformulated fuels, through the 1994 acquisition of the
Girard Point facilities.
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. 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. (See "MidAmerica Marketing &
Refining" below for a discussion of similar operations conducted in the
midwestern U.S.)
Sunoco Northeast Marketing offers a full slate of branded retail gasoline
products, including high-octane premium gasolines represented by Sunoco's
ULTRA(R) 94 and Atlantic's OPTIMA(R) 93 grades, as well as a choice of several
lower octane gasolines. Branded fuels sales by Sunoco Northeast Marketing
averaged 172.7 thousand barrels daily in 1995 compared to 184.7 thousand
barrels daily in 1994. The 6 percent decline was caused primarily by the
elimination of some marginal accounts and
4
<PAGE>
the further rationalization of Sun's service station portfolio in connection
with the Branded for Success program (see below).
The Sunoco Northeast Marketing business owns, franchises and operates ULTRA
SERVICE CENTERSSM and APLUS (R) convenience stores. The ULTRA SERVICE CENTERSM
stations provide state-of-the-art automotive diagnosis and repair while the
convenience stores are designed to support high-volume sales of gasoline and
provide a broad range of merchandise.
In 1995, excluding environmental outlays, capital expenditures for branded
marketing activities in the Northeast totalled $81 million. Of this amount,
$61 million related to Sunoco Northeast Marketing's program ("Branded for
Success") to upgrade and modernize its retail service station network and
convert its ATLANTIC(R) gasoline outlets to SUNOCO(R) and its SUNOCO FOOD
MARKET(R) convenience stores to APLUS(R). Branded for Success capitalizes on
the individual strengths of the SUNOCO(R), APLUS(R) and ULTRA SERVICE CENTERSM
operations. Since its inception in 1993, approximately 400 service stations
and 125 convenience stores in the Northeast have been converted under this
program. At year-end 1995, all SUNOCO FOOD MARKETS(R) were converted to
APLUS(R) and approximately 35 ATLANTIC(R) stations remained to be converted to
SUNOCO(R). The conversion program is expected to be completed by mid-1996. As
part of Branded for Success, some ATLANTIC(R) locations were also converted to
ULTRA SERVICE CENTERSM stations.
Also in 1995, Sunoco Northeast Marketing continued the expansion of its pay-
at-the-pump program with the installation of CardMaticSM, its credit card
activated gasoline dispensing system, at approximately 200 additional high-
volume service stations, bringing the total number of outlets offering this
convenience to 802. Concurrent with the Branded for Success program and in
order to minimize downtime, Sunoco Northeast Marketing has accelerated the
timing of certain environmental capital expenditures, such as underground
storage tank replacements and tank top upgrades.
Sunoco Northeast Marketing is the sole service station operator on the 12
plazas on the New Jersey Turnpike, and supplies 16 outlets on the New York
Thruway, all 22 outlets on the Pennsylvania Turnpike and the only outlet on
the Atlantic City Expressway. In 1995, Sunoco Northeast Marketing expanded its
presence on limited access highways through its distributor channel, with the
addition of two outlets on U.S. Interstate 95 in Maryland. Also in 1995,
Sunoco Northeast Marketing secured a five-year lease, commencing on January 1,
1996, for two high-volume outlets on New Jersey's Palisades Interstate
Parkway. The following table sets forth Sun's retail gasoline outlets in New
England and the Mid-Atlantic states at December 31, 1995:
<TABLE>
<S> <C>
Direct outlets:
Company owned or leased:
Traditional.......................................................... 500
Ultra service centers................................................ 259
APLUS(R) convenience stores.......................................... 412
-----
1,171
Dealer owned*......................................................... 454
-----
Total direct outlet.................................................... 1,625
Distributor outlets.................................................... 1,319
-----
2,944
=====
</TABLE>
- --------
* Primarily traditional outlets.
5
<PAGE>
SUNOCO CHEMICALS
The Sunoco Chemicals business consists of the manufacturing, distribution
and marketing of base and intermediate commodity petrochemicals. 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 also produces MTBE which
is utilized by Sun Northeast Refining in manufacturing reformulated gasolines.
Petrochemicals are manufactured by Sunoco Chemicals at Sun's Marcus Hook and
Philadelphia refineries, at an ethylene/ethylene oxide facility in
Brandenburg, Kentucky and at a joint venture MTBE facility in Mont Belvieu,
Texas. (See "MidAmerica Marketing & Refining" for a discussion of the
petrochemicals produced at the Toledo refinery.)
Sun's petrochemical products are distributed and sold on a worldwide basis.
Sales of petrochemicals to third parties by Sunoco Chemicals totalled 20.9
thousand barrels daily in 1995 versus 18.5 thousand barrels daily in 1994, a
13 percent increase.
Sales volumes during 1995 were distributed through the following channels:
. Benzene and Benzene Derivatives (including Cyclohexane and Cumene)
(34%)--Customers for these products are large manufacturers of fibers and
polymers who buy a significant percentage of their requirements from
Sunoco Chemicals under long-term contracts;
. Bulk Toluene and Xylenes (3%)--Buyers generally procure large volumes for
fibers and urethane products. These sales tend to be international in
scope;
. Solvents (7%)--Customers and distributors take individually small volumes
for paints, coatings, solvents and a variety of specialty applications;
. Propylene (39%)--Sales are primarily made pursuant to long-term contracts
to large customers who manufacture polypropylene and acrylic fibers and
resins; and
. Specialty Ethylene and Ethylene Oxide (11%)--Sales are primarily to small
and intermediate size specialty chemical companies that make diverse
products such as surfactants, co-polymer resins and emulsions, and
additives.
Sunoco Chemicals also sells other products that are by-products of the
refining process such as carbon dioxide and sulfur.
At the end of 1994, Sunoco Chemicals completed a project (the "Northeast
Aromatics and Cyclohexane Project"), which included the expansion of benzene
extraction capacity by 60 million gallons per year and construction of a 34-
million-gallon-per-year cyclohexane plant at the Marcus Hook refinery. This
project was brought on-stream during 1995 and has provided significant new
volume for sale to regional customers. The additional benzene extraction
capacity also allows the cumene plant at the Girard Point refining facilities
to operate at capacity (see below).
At the end of 1995, Rhone-Poulenc Inc., a major manufacturer of surfactants,
completed the construction of a new plant on property leased from Sun at the
Marcus Hook refinery. As part of this project, Sun installed a pipeline and
utilities in order to deliver approximately 60 million pounds annually of
ethylene oxide to the manufacturer pursuant to a long-term contract.
Sunoco Chemicals has begun work to expand its polymer grade propylene
production capacity and delivery systems at the Marcus Hook refinery from 400
to 650 million pounds per year. This expansion is planned for completion in
late 1996. Most of Sunoco Chemicals' polymer grade propylene production is
currently sold pursuant to a supply agreement with Epsilon Products Co.
("Epsilon"), a polypropylene manufacturer. The incremental production from the
expanded facility will also be sold to Epsilon.
6
<PAGE>
At December 31, 1995, the Girard Point facilities of the Philadelphia
refinery had cumene production capacity of 450 million pounds per year.
Benzene is now extracted at Sun's Marcus Hook and Girard Point facilities and
combined with refinery-grade propylene to produce cumene at Girard Point. The
cumene is then sold primarily to a third-party customer. In 1995, Sunoco
Chemicals announced plans to expand its cumene capacity at the Philadelphia
refinery to approximately 850 million pounds per year. This expansion will
utilize new catalyst technology, and is intended to be operational in early
1998.
The construction of an MTBE production facility owned and operated by
Belvieu Environmental Fuels ("BEF"), a joint venture in which Sun is a one-
third partner, was completed during 1995 and the plant moved from the start-up
test phase to normal production at mid-year. The plant is currently operating
above its initial design capacity of 12,600 barrels daily, and Sun is
purchasing all of the MTBE production from the BEF facility pursuant to a 10-
year off-take agreement. For additional information concerning Sun's
participation in this joint venture and the off-take agreement, see Note 14 to
the Consolidated Financial Statements in the Company's 1995 Annual Report to
Shareholders.
SUNOCO LUBRICANTS
The Sunoco Lubricants business is comprised of the manufacturing, packaging
and marketing of a broad line of paraffinic lubricating and specialty oils
produced at the Tulsa and Puerto Rico refineries as well as the related
manufacturing and wholesale marketing of the fuels produced at these
facilities.
Sunoco Lubricants produces and markets a complete line of automotive and
industrial lubricants, waxes and aromatic extracts. These lubricants are
marketed under the SUNOCO (R) brand label directly to end-users and, through
distributors, to a wide variety of domestic and foreign customers. Sunoco
Lubricants has lube service centers located in the Marcus Hook and Tulsa
refineries. These centers, supplied with base oils from the Puerto Rico and
Tulsa refineries, blend and package lubricants for sale by Sunoco Lubricants
and for sale by other branded marketers under their labels.
Sun-manufactured base oils are also sold to domestic or international third
parties who manufacture their own finished automotive and industrial
lubricants. In addition, Sunoco Lubricants sells specialty lube products such
as horticultural and agricultural oils, aromatic and paraffinic rubber oils,
paper defoamer oils, asphalt recycling extracts, textile oils and finished
waxes. Sunoco Lubricants' newest horticultural spray oil, SUNSPRAY (R) ULTRA-
FINE (R) Year-Round Pesticide Oil was introduced to the retail market in the
spring of 1994 and has gained nationwide market recognition. In 1995, Sunoco
Lubricants introduced a full line of synthetic lubricants under the Sunoco
ChallengeTM brand to respond to a growing market for synthetic products used
in industrial and automotive markets.
7
<PAGE>
The following table sets forth information concerning operations at Sun's
Tulsa and Puerto Rico refineries during 1995:
<TABLE>
<CAPTION>
PUERTO
TULSA, OK RICO TOTAL
--------- ------ -----
<S> <C> <C> <C>
Crude Unit Capacity (MB/D)............................... 85.0 85.0 170.0
==== ==== =====
Input to Crude Units (MB/D).............................. 78.4* 60.7 139.1
==== ==== =====
Paraffinic Lubes Capacity (MB/D)......................... 7.8 9.0 16.8
==== ==== =====
Paraffinic Lubes Production (MB/D)....................... 6.6 8.2 14.8
==== ==== =====
Products Manufactured (Percent):
Lubricants.............................................. 11 18 14
Gasoline................................................ 18 17 18
Middle Distillates...................................... 32 32 32
Residual Fuel........................................... -- 22 10
Other................................................... 39** 11 26
---- ---- -----
100 100 100
==== ==== =====
</TABLE>
- --------
* Reflects impact of a 39-day planned maintenance shutdown.
** Includes approximately 25 thousand barrels daily (33 percent of products
manufactured) of "lubes-extracted" feedstocks which are transported to the
Toledo refinery for further processing or are sold to third parties.
Sales of specialty oil lubricant products totalled 8.6 thousand barrels
daily in 1995 versus 9.8 thousand barrels daily in 1994 while sales of base
oils, waxes and other lubricants totalled 11.4 thousand barrels daily in 1995
versus 12.5 thousand barrels daily in 1994. Total fuels sold to third parties
from the Tulsa and Puerto Rico refineries were 101.4 thousand barrels daily in
1995 compared to 98.0 thousand barrels daily in 1994.
Sun's Tulsa refinery runs a light, low-sulfur crude oil slate which is
supplied from domestic sources while the Puerto Rico refinery is able to
process heavier, higher sulfur crude oils which are supplied from foreign
sources.
The lubricants facilities at the Tulsa and Puerto Rico refineries, as well
as the lube service centers located in the Marcus Hook and Tulsa refineries,
are ISO certified, indicating they have passed the International Standards
Organization's standards for quality management and oversight.
SUNOCO MIDAMERICA MARKETING & REFINING
The Sunoco MidAmerica Marketing & Refining ("Sunoco MidAmerica") business
consists of the retail sale of gasoline and middle distillates, and
convenience-store operations in the Midwest as well as the manufacturing and
wholesale marketing of fuels and petrochemicals produced at Sun's Toledo
refinery.
Retail Marketing
Sunoco MidAmerica markets, through direct and distributor channels, a full
slate of retail gasoline products under the SUNOCO(R) brand in Indiana,
Kentucky, Michigan, Ohio and West Virginia. In this region, branded fuels
sales averaged 50.8 thousand barrels daily in 1995 compared to 50.7 thousand
barrels daily in 1994. During the fall of 1995, Sunoco MidAmerica developed a
strategic plan to rationalize its service station portfolio in order to
improve the regional profile and image of the SUNOCO(R) brand.
8
<PAGE>
The greatest concentration of retail gasoline outlets in the Midwest is
located in Ohio and Michigan where Sunoco MidAmerica maintains a strong
presence. Sunoco MidAmerica is also the sole supplier to all 16 gasoline
stations on the Ohio Turnpike. The following table sets forth Sun's retail
gasoline outlets in this region at December 31, 1995:
<TABLE>
<S> <C>
Direct outlets:
Company owned or leased:
Traditional.......................................................... 95
Ultra service centers................................................ 65
Sunoco Food Market (R) convenience stores............................ 115
---
275
Dealer owned*......................................................... 157
---
Total direct outlets................................................... 432
Distributor outlets.................................................... 485
---
917
===
</TABLE>
- --------
* Primarily traditional outlets.
Refining and Wholesale Marketing
The following table sets forth information concerning operations at Sun's
Toledo refinery during 1995:
<TABLE>
<S> <C>
Crude Unit Capacity (MB/D)............................................ 125.0
=====
Input to Crude Units (MB/D)........................................... 110.7*
=====
Conversion Capacity (MB/D)............................................ 86.0
=====
Conversion Capacity Utilized (MB/D)................................... 70.0*
=====
Products Manufactured (Percent):
Gasoline............................................................. 64
Middle Distillates................................................... 11
Residual Fuel........................................................ 3
Petrochemicals....................................................... 8
Asphalt.............................................................. 2
Other................................................................ 12
-----
100
=====
</TABLE>
- --------
* Reflects impact of a 41-day planned maintenance shutdown (see below).
Fuels products sold at wholesale to third parties from Sun's Toledo refinery
in 1995 averaged 55.4 thousand barrels daily compared to 49.5 thousand barrels
daily in 1994. Sales of petrochemicals to third parties by Sunoco MidAmerica
totalled 10.2 thousand barrels daily in 1995 versus 9.0 thousand barrels daily
in 1994.
Sun's Toledo refinery is a relatively complex, high conversion refinery that
refines predominantly light, low-sulfur crude oils. Feedstocks for 1995
consisted primarily of: West Texas Intermediate crude oil; Canadian sweet,
light sour and synthetic crude oils; and a "lubes-extracted" gasoil/naphtha
intermediate feedstock from Sun's Tulsa refinery. In March 1995, a 41-day
turnaround of the catalytic cracking and crude units and an expansion of the
sulfur plant at the Toledo refinery were completed. The expansion of the
sulfur plant will enable Sunoco MidAmerica to pursue its strategy of
processing a larger volume of higher-sulfur crude oils.
9
<PAGE>
Chemicals
Sunoco MidAmerica chemical operations consist of the manufacturing,
marketing and distribution of base and intermediate commodity petrochemicals.
These chemicals are comprised of aromatics (including benzene, toluene and
xylene), spirits, nonene and tetramer. Aromatics and spirits are sold under a
marketing agreement with Suncor Inc., through a joint venture partnership with
this former Canadian petroleum subsidiary of Sun. A significant portion of the
aromatics production is sold in bulk. Additionally, toluene, xylenes and
spirits are sold through a solvent channel.
In conjunction with the 41-day planned turnaround discussed above, a project
was completed at the Toledo refinery during 1995 which resulted in an increase
in nonene and tetramer production capacity from 1,400 to 2,100 barrels per
day. Much of the production from this expanded facility will be sold pursuant
to existing long-term contracts.
SUNOCO LOGISTICS
The Sunoco Logistics business consists of: crude oil and refined product
pipeline operations; domestic lease crude oil acquisition and related trucking
operations; marine shipping and tug/barge operations; and product terminalling
and transport operations. These operations are conducted primarily in the
Northeast, Midwest and Southwest regions of the United States.
The pipelines are principally common carriers and, as such, are regulated by
the Federal Energy Regulatory Commission for interstate movements and by local
regulatory agencies for intrastate movements. The tariff rates charged, while
regulated by the governing agencies, are based upon competition from other
pipelines or alternate modes of transportation.
Sunoco Logistics crude oil pipeline operations, located primarily in the
Southwest, transport crude oil produced in Oklahoma, Texas, New Mexico and
Louisiana to refiners (including Sun's Tulsa refinery) or to local trade
points. The refined product pipeline operations, located primarily in the
Northeast and Midwest, transport gasoline, jet fuel, diesel fuel, home heating
oil and other products for Sun's other businesses, integrated petroleum
companies and independent marketers and distributors.
In April 1995, the inter-refinery pipeline project, which connects Sun's
Marcus Hook refinery and Point Breeze facilities, became operational. This
project provides Sun Northeast Refining operating flexibility and lower costs
through the movement of gasoline component streams and liquified petroleum gas
between the Point Breeze facilities and the Marcus Hook refinery. As an
extension of this project, a jet fuel spur into the Philadelphia airport
became operational in August 1995. This spur, which enables Sunoco Logistics
to supply the airport directly with jet fuel, provides increased flexibility
and profitability for Sun.
A Sunoco Logistics pipeline which brings crude oil from Canada to Sun's
Toledo refinery and other area refiners was expanded by 10 percent in 1995,
bringing its capacity to 130 thousand barrels daily. Further expansion to 145
thousand barrels daily is planned for 1996 to meet rising demand.
In East Texas, a 13-mile pipeline was constructed in 1995 to transport crude
oil from the Brookeland field. This will enhance Sunoco Logistics' ability to
deliver specialty crude oils to premium markets. To complement and expand
Sunoco Logistics' East Texas crude oil gathering operations, a 150-mile
gathering system was purchased late in 1995. This acquisition will enhance
Sunoco Logistics' ability to provide crude oil transport to its customers.
At December 31, 1995, Sunoco Logistics had an equity interest in 5,264 miles
of crude oil pipelines and 4,805 miles of refined product pipelines. In 1995,
crude oil and refined product shipments, including Sun's share of shipments in
which it had an ownership interest, totalled 50.1 and 28.7 billion barrel
miles, respectively, as compared to 48.4 and 28.3 billion barrel miles in
1994.
10
<PAGE>
Sunoco Logistics' crude oil pipeline operations in the Southwest are
complemented by lease crude oil acquisition and related trucking operations in
this region. Approximately 135 thousand barrels daily of crude oil are
purchased from third-party leases. This crude oil is delivered to various
pipelines either directly from the wellhead or utilizing Sunoco Logistics'
fleet of 75 trucks.
Marine shipping and tug/barge operations include 2 ocean-going tankers and a
fleet of 16 coastal distribution tankers, tugs and barges. Product
terminalling and transport operations include 38 terminals in the Northeast
and Midwest that support Sun's branded and wholesale marketing operations in
these regions, 150 trucks that transport gasoline and distillates to Sun's
branded dealer locations and a railroad fleet of 475 owned and 1,600 leased
tank cars that primarily support the Sunoco Chemicals and Sunoco Lubricants
businesses. Sun supplements its own marine fleet with charters that accounted
for the majority of its marine transportation requirements during 1995. Sun
has implemented an extensive vessel inspection review and evaluation program
to assure the vessels chartered into Sun service are of appropriate quality.
Sunoco Logistics' Nederland, TX terminal provides in excess of ten million
barrels of storage and provides terminalling capacity exceeding one million
barrels per day of throughput. Its Gulf Coast location provides local and
midwestern refiners access to rising foreign crude oil imports. The facility
is also a key link in the distribution system for United States Government
purchases for the Strategic Petroleum Reserve storage facilities. During 1995,
a 10-year agreement with a third party was signed increasing the amount of
crude oil imported into Nederland.
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. Such operations are conducted by Sun Coal Company and its
affiliates.
In 1993, Sun decided to sell its coal mining and cokemaking operations. In
connection with this decision, Sun sold its western U.S. coal operations
during 1993 and certain of its eastern U.S. coal operations during 1994.
Effective during 1995, Sun ceased its efforts to sell its remaining coal
mining and cokemaking assets, and these operations became one of Sun's eight
ongoing business units.
At December 31, 1995, Sun Coal and Coke had 139 million tons of estimated
coal reserves classified as proven and probable compared to 187 million tons
at December 31, 1994. The 26 percent decline during 1995 was largely due to a
45 million-ton revision of previous estimates of bituminous steam coal
reserves. Of the reserves at December 31, 1995, 84 percent were metallurgical
coal located in Virginia and 16 percent were bituminous steam coal located in
Kentucky. Sun Coal and Coke's total coal production in 1995 was 5.1 million
tons, compared to 6.6 million tons in 1994.
Sun Coal and Coke's principal market for both metallurgical coal and coke is
the domestic steel industry. In 1995, 59 percent of Sun Coal and Coke's
metallurgical coal production was converted into coke at its cokemaking
facilities, 23 percent was sold under contract to a single customer and 18
percent was sold in spot transactions. During 1995, 15 percent of Sun Coal and
Coke's coke sales was made under a long-term contract to a single customer
that expired in March 1995, 73 percent was sold under one-year contracts with
two other customers and the remainder was sold in spot transactions. A new
long-term contract with a domestic steel producer became effective in January
1996. This contract provides for delivery of 42 thousand tons through March
1996, and Sun Coal and Coke's entire coke production thereafter. Coke
production totalled 638 thousand tons in 1995, compared to 678 thousand tons
in 1994.
Approximately 45 percent of Sun Coal and Coke's bituminous steam coal sales
was under long-term contracts, with the remainder sold in spot transactions.
Sun Coal and Coke's bituminous coal and
11
<PAGE>
coke sales contracts generally provide for the periodic adjustment of price to
reflect the changing costs of labor, equipment and services.
Sun Coal and Coke produces high quality coke at its cokemaking facilities,
using its non-recovery cokemaking technology and related patents. This
technology, which is environmentally superior to the by-product technology
currently used by most coke producers, is currently being marketed outside
North America through an exclusive license with Raytheon Engineers and
Constructors, Inc. As part of a program to replace and upgrade existing
facilities at the cokemaking plant, a battery of 18 new coke ovens was
constructed during 1995 and became operational in August 1995. Construction of
an additional 27 replacement ovens commenced in September 1995, and these
ovens are scheduled to become operational by December 1996. In 1995, Sun Coal
and Coke transferred an interest in its cokemaking operations to a third party
in exchange for $95 million in cash. The transferee is entitled to a
preferential return from the cash flows of the cokemaking operations until
certain cumulative return targets have been met.
Additional information concerning Sun Coal and Coke operations is set forth
on page 61 in the Company's 1995 Annual Report to Shareholders.
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. Such
operations are managed by Sun Oil Britain Limited.
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.
In the third quarter of 1994, Sun International Production increased its oil
producing interests in the U.K. North Sea through the acquisition of an
interest in Block 3/8a. The Block 3/8a acquisition provided Sun International
Production with a 12.93 percent interest in the producing Ninian field and a
45 percent interest in the adjacent Columba field. Development of the Columba
field is ongoing with net production varying from 1,800 barrels to 9,000
barrels daily. Net production from this field averaged 3,200 barrels daily in
1995 and is expected to stabilize around 4,500 barrels daily in 1996. Net
liquids production from the Ninian field averaged 7,400 barrels daily during
1995.
Sun International Production's crude oil and natural gas production levels
are not generally affected by fluctuations in the prices received for these
products. Sun International Production sells its crude oil production in the
worldwide crude oil market where prices are affected by a wide variety of
economic and political factors. A significant portion of Sun International
Production's natural gas production is sold to the British Gas Corporation.
These sales are seasonal in nature and are made pursuant to long-term
contracts which include annual price escalation clauses. The timing of the
liftings and the recognition of earnings associated with these contracts is
uncertain.
Early in 1995, Sun International Production entered into a joint venture
with Brown & Root Limited to manage and operate the 59-percent-owned floating
production vessel ("FPV"), which has been utilized in the successful
development of the Balmoral, Glamis and Stirling fields in the U.K. North Sea.
As part of the operating agreement, the joint venture provides manpower,
logistics, engineering, maintenance and safety services. Sun International
Production has retained its ownership interest in the FPV and the Balmoral,
Glamis and Stirling fields and its responsibility for reservoir management,
product movement and crude oil sales associated with this field complex.
12
<PAGE>
The following tables set forth certain information concerning Sun's
International Production activities:
AVERAGE NET OIL AND GAS PRODUCTION
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Crude Oil, Condensate and Natural Gas Liquids
(Thousands of Barrels Daily)................................. 27.4 29.0 28.0
==== ==== ====
Natural Gas (Millions of Cubic Feet Daily).................... 36 46 56
==== ==== ====
PROVED RESERVES AT DECEMBER 31
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Crude Oil, Condensate and Natural Gas Liquids
(Millions of Barrels)........................................ 39 38 31
==== ==== ====
Natural Gas (Billions of Cubic Feet).......................... 83 96 109
==== ==== ====
NET OIL AND GAS WELLS DRILLED
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net Exploratory Wells:*
Oil.......................................................... -- -- 1
Gas.......................................................... -- -- --
Dry.......................................................... -- -- 3
---- ---- ----
-- -- 4
==== ==== ====
Net Development Wells:**
Oil.......................................................... 2 1 2
Gas.......................................................... -- -- --
Dry.......................................................... -- -- --
---- ---- ----
2 1 2
==== ==== ====
</TABLE>
- --------
* The net exploratory wells drilled in 1993 essentially completed all
remaining exploration commitments related to properties subject to
disposition as part of a plan adopted by the Company in 1992 to withdraw
from exploration activities outside North America.
** As of December 31, 1995, Sun International Production was in the process of
drilling or participating in the drilling of 2 gross wells and 1 net well.
PRODUCING OIL AND GAS WELLS
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
----------------------
GROSS NET
----------- ----------
<S> <C> <C>
Oil................................................... 79 16
Gas................................................... 55 7
---------- ----------
134 23
========== ==========
</TABLE>
OIL AND GAS ACREAGE
<TABLE>
<CAPTION>
THOUSANDS OF ACRES AT DECEMBER 31
-----------------------------------
1995 1994
----------------- -----------------
GROSS NET GROSS NET
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Developed.............................. 293 73 277 65
======= ======= ========= =======
Undeveloped............................ 33 5 1,843 505
======= ======= ========= =======
</TABLE>
13
<PAGE>
Additional information concerning Sun International Production's business is
set forth on pages 57 through 60 in the Company's 1995 Annual Report to
Shareholders.
REAL ESTATE
Sun's real estate business is conducted through Radnor Corporation and its
subsidiaries (collectively "Radnor"). As of December 31, 1995, Radnor's
remaining portfolio of real estate was located in 9 states and consisted
principally of office buildings, shopping centers, a resort hotel, single-
family homes, condominiums, residential land and business parks.
As a result of Sun's decision to sell its real estate business through a
program of controlled disposition, such operations have been classified as
operations held for sale in Sun's consolidated financial statements. Since
adoption of the disposition plan in October 1991, Radnor has divested 55
commercial properties, completed 25 housing and land developments and reduced
its total assets and debt by $810 and $720 million, respectively. At December
31, 1995, Radnor's total assets and debt were $247 and $132 million,
respectively. Divestment activities in 1995 included Radnor's sale of six
office building projects located in California, Indiana and Michigan and two
commercial land parcels located in Georgia.
For additional information regarding Sun's real estate operations held for
sale, see Note 2 to the Consolidated Financial Statements in the Company's
1995 Annual Report to Shareholders.
CANADA (SUNCOR)
During 1995, Sun completed the divestment of its remaining 55-percent
interest in Suncor Inc., its former integrated Canadian petroleum subsidiary.
Information concerning this divestment is presented in Note 2 to the
Consolidated Financial Statements in the Company's 1995 Annual Report to
Shareholders.
COMPETITION
Refining and marketing continues to be very competitive due to low growth in
product demand and the increase in gasoline supply and manufacturing cost
attributable to reformulated gasoline. However, Sun believes that it is in a
position to compete effectively, since the northeastern United States, Sun's
principal geographic area for branded fuels marketing, is a net gasoline
importing market, and manufacturers, such as Sun, who are located there, do
not bear the costs of transportation into that market. Sun also believes that
as a result of strategic initiatives implemented during the 1994-95 period,
including the enhancement of its alkylation capacity through the Girard Point
acquisition and the expansion of its benzene extraction capacity at the Marcus
Hook refinery, Sun is well positioned to meet the new reformulated fuels
requirements as they continue to be phased in over the next few years. In
addition, Sun believes that its competitive position is enhanced by its
considerable distribution flexibility resulting from the location of its two
Northeast refineries and retail network, which are well integrated with its
distribution system.
Oil and gas production and coal mining operations are also highly
competitive. Many large energy companies, as well as medium to small size
independent concerns, are bidders for desirable oil, gas and coal properties,
as well as the equipment and labor required to operate such properties.
The availability of a ready market for Sun's refined products, as well as
its oil and gas and coal production, depends on numerous external factors.
Among other things, these factors include: the level of consumer demand; the
extent of industry production of oil and gas and coal, and manufacture of
refined products; the import levels of refined products; the cost and
availability of alternative fuels; the cost and proximity of refineries,
pipelines and other transportation facilities that support the retail
14
<PAGE>
gasoline marketing infrastructure; and regulations by federal, state, local
and foreign authorities including those imposed by or resulting from
compliance with applicable environmental laws.
RESEARCH AND DEVELOPMENT
In recent years, Sun's research and development activities have focused on
applied research, process and product development, and engineering and
technical services related to fuels, lubricants and chemicals. Sun spent $5,
$8 and $9 million on research and development activities in 1995, 1994 and
1993, respectively. As of December 31, 1995, approximately 125 scientists,
engineers, technicians and support personnel participated in these activities.
Sun owns or has made application for numerous patents in the U.S. and abroad.
EMPLOYEES
As of December 31, 1995, Sun had approximately 12,000 employees compared to
approximately 15,600 employees as of December 31, 1994. The 23 percent decline
was primarily due to the divestment of Suncor Inc. and the implementation of
an employee termination program. The above amounts exclude employees of real
estate operations held for sale totalling 332 in 1995 and 383 in 1994.
Approximately 28 percent of Sun's employees were covered by 44 collective
bargaining agreements as of December 31, 1995. The collective bargaining
agreements have various terms and dates of expiration. In management's
opinion, Sun's relationship with its employees is generally satisfactory.
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 (in millions of dollars):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Pollution Abatement Capital*.............................. $ 78 $245 $123
Remediation and Reclamation............................... 49 60 53
Operations, Maintenance and Administration................ 244 224** 142**
---- ---- ----
$371 $529 $318
==== ==== ====
</TABLE>
- --------
* Capital expenditures for pollution abatement are expected to approximate
$33 and $46 million in 1996 and 1997, respectively.
** Restated to conform to the 1995 presentation.
The increase in pollution abatement capital expenditures during 1994 was due
primarily to outlays for projects to upgrade wastewater treatment facilities
and expand benzene extraction capacity at the Marcus Hook refinery and for
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
15
<PAGE>
gasoline that reduces emissions of certain toxics and conventional pollutants.
Compliance with the requirements of the Clean Air Act necessitates significant
alterations to the composition of gasoline sold in Sun's northeastern U.S.
marketing area by reducing the maximum allowable benzene content, reducing
summertime 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 its 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. 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 1995 Annual Report to
Shareholders.
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.
OTHER
Sun's financial condition and business operations are affected from time to
time by domestic and foreign political developments and laws and regulations
which relate to such matters as production, taxes, property, product
specifications, imports and pricing. Sun makes no representations as to future
events and developments which could affect its operations and financial
condition. Furthermore, Sun's businesses and financial condition could be
affected by, among other things, the state of the U.S.
16
<PAGE>
economy, competition, future price changes or controls, material and labor
costs, legislation, labor conditions, new regulations, tariffs, embargoes,
armed conflicts, foreign exchange restrictions and changes in exchange rates.
ITEM 3. LEGAL PROCEEDINGS
Sun has agreed to pay civil fines in excess of $100,000 pursuant to a
Consent Assessment dated February 5, 1996. This agreement between Sun, the
Pennsylvania Department of Environmental Protection ("PaDEP") and the
Pennsylvania Fish and Boat Commission (the "Commission"), settled claims of
PaDEP and the Commission regarding certain alleged oil sheening incidents at
the Point Breeze processing area of Sun's Philadelphia refinery.
Sun Company, Inc. (R&M) ("Sun R&M") has agreed to pay civil fines in excess
of $100,000 pursuant to an Administrative Consent Order dated September 13,
1995. This agreement between Sun R&M and the United States Environmental
Protection Agency (the "EPA") stems from certain alleged violations of SARA
Section 313 annual reporting requirements during the years 1989 through 1992.
Many other legal and administrative proceedings are pending against Sun.
Although the ultimate outcome of these proceedings cannot be ascertained at
this time, it is reasonably possible that some of them could be resolved
unfavorably to Sun. Management of Sun believes that any liabilities which may
arise from such proceedings, including those discussed above, would not be
material in relation to the consolidated financial position of Sun at December
31, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF SUN COMPANY, INC.
<TABLE>
<CAPTION>
NAME, AGE AND PRESENT
POSITION WITH
SUN COMPANY, INC. BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- --------------------- ------------------------------------------
<S> <C>
Robert M. Aiken, Jr., 53 Mr. Aiken was elected to his present position in May 1992.
Senior Vice President From September 1990 until May 1992, he was Senior Vice Pres-
and Chief Financial ident, Finance.
Officer
Robert H. Campbell, 58 Mr. Campbell was elected Chairman of the Board in May 1992,
Chairman of the Board, Chief Executive Officer in September 1991 and President and
Chief Executive Officer Chief Operating Officer in February 1991. From November 1988
and President to February 1991, he was Executive Vice President. He has
been a Director since November 1988.
J. Greg Driscoll, 49 Mr. Driscoll was elected to his present position in August
Senior Vice President 1994. Previously, he served in various capacities within
Marketing Sun's domestic refining and marketing subsidiary: from May
1993 to August 1994, Vice President of Chemicals; from Octo-
ber 1992 to May 1993, Vice President, Branded Marketing &
Development; from 1989 to October 1992, Director, Business
Development and Strategic Planning in Fuels, and Director,
Planning & New Product Development.
Jack L. Foltz, 60 Mr. Foltz was elected to his present position in October
Vice President 1992, and from December 1991 to October 1992 he was Assis-
and General Counsel tant General Counsel, Refining and Marketing. From December
1989 to December 1991, he was Vice President and General
Counsel of Sun's domestic refining and marketing subsidiary.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND PRESENT
POSITION WITH
SUN COMPANY, INC. BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- --------------------- ------------------------------------------
<S> <C>
Deborah M. Fretz, 47 Ms. Fretz was elected to her present position in August
Senior Vice President 1994. In addition, she has been President of Sun Pipe Line
Logistics Company, a subsidiary, since October 1991. From 1989 to Oc-
tober 1991, she served as General Manager, Wholesale Fuels
Marketing and Distribution.
Thomas W. Hofmann, 44 Mr. Hofmann was elected to his present position in July
Comptroller 1995, a position he had previously held from September 1990
to October 1991. From October 1991 to September 1994, he
served as Director, Tax Administration, and from September
1994 to July 1995, Director, Performance Analysis.
David E. Knoll, 52 Mr. Knoll was elected to his present position in August
Senior Vice President, 1994. From October 1992 to August 1994, he was Senior Vice
Corporate Development President, Marketing and Logistics and from October 1991 to
October 1992, Group Vice President, Refining and Marketing.
From November 1988 to October 1991, he was President of
Sun's domestic refining and marketing subsidiary.
Malcolm I. Ruddock, 53 Mr. Ruddock was elected to his present position in 1989.
Treasurer
Sheldon L. Thompson, 57 Mr. Thompson was elected to his present position in October
Senior Vice President 1992. From 1991 to October 1992, he was Vice President,
and Chief Chemicals, Lubricants and Technology and from 1989 to 1991,
Administrative Officer Vice President, Chemicals and Technology for Sun's domestic
refining and marketing subsidiary.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference to
the Quarterly Financial and Stock Market Information on page 62 of the
Company's 1995 Annual Report to Shareholders. The market exchanges on which
the Company's stock is traded are listed on the cover page of this Annual
Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference to
the Selected Financial Data on page 26 of the Company's 1995 Annual Report to
Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by reference to
pages 27-35 in the Company's 1995 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information in the Company's 1995 Annual Report to
Shareholders is incorporated herein by reference: the Consolidated Financial
Statements on pages 36-39; the Notes to Consolidated Financial Statements on
pages 40-54; the Report of Independent Accountants on page 55; the
18
<PAGE>
Supplemental Financial and Operating Information on pages 57-61 (excluding the
sections on Revenues Per Unit of Oil and Gas Production and Average Net Oil
and Gas Production); and the Quarterly Financial and Stock Market Information
on page 62.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) In the fiscal year 1995, Coopers & Lybrand L.L.P. ("Coopers & Lybrand")
served as independent accountants for the Company. Based on the results of a
competitive bidding process, on September 7, 1995, the Company's management
recommended and its Board of Directors subsequently approved the appointment
of Ernst & Young LLP ("Ernst & Young") as independent accountants for the
fiscal year 1996, subject to the approval of shareholders at the Company's
1996 Annual Meeting of Shareholders. The Company previously filed a Form 8-K
dated September 11, 1995, as amended on September 26, 1995, announcing this
change.
(b) The report of Coopers & Lybrand on the Company's financial statements
for the fiscal years ended December 31, 1994 and 1995 did not contain an
adverse opinion or disclaimer of opinion, nor was it qualified or modified as
to uncertainty, audit scope, or accounting principles. During the fiscal years
ended December 31, 1994 and 1995, there were no disagreements with Coopers &
Lybrand on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreement(s),
if not resolved to the satisfaction of Coopers & Lybrand, would have caused it
to make a reference to the subject matter of the disagreement(s), in
connection with its report. In addition, during the fiscal years ended
December 31, 1994 and 1995, Coopers & Lybrand did not advise the Company:
(1) that the internal controls necessary for the Company to develop
reliable financial statements did not exist;
(2) that information had come to its attention that had led it to no
longer be able to rely on management's representations, or that had made it
unwilling to be associated with the financial statements prepared by
management;
(3) of the need to expand significantly the scope of its audit, or that
information had come to its attention during such period that, if further
investigated, might (i) materially have impacted the fairness or
reliability of either: a previously issued audit report or the underlying
financial statements, or the financial statements issued or to be issued
covering the fiscal period(s) subsequent to the date of the most recent
financial statements covered by an audit report or (ii) have caused it to
be unwilling to rely on management's representations or be associated with
the Company's financial statements; or
(4) that information had come to its attention that it had concluded
materially impacts the fairness or reliability of either: (i) a previously
issued audit report or the underlying financial statements, or (ii) the
financial statements issued or to be issued covering the fiscal period(s)
subsequent to the date of the most recent financial statements covered by
an audit report.
(c) During the fiscal years ended December 31, 1994 and 1995, neither the
Company nor anyone on its behalf consulted Ernst & Young regarding either the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements, and neither a written report nor oral
advice was provided to the Company by Ernst & Young.
(d) The Company requested that Coopers & Lybrand furnish it with a letter
addressed to the Securities and Exchange Commission stating whether or not it
agrees with the above statements. A copy of the letter dated March 7, 1996 was
filed as Exhibit 16 to this Form 10-K.
19
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information on directors required by Items 401 and 405 of Regulation S-K
is incorporated herein by reference to the Company's definitive Proxy
Statement ("Proxy Statement") which will be filed with the Securities and
Exchange Commission ("SEC") within 120 days after December 31, 1995.
Information concerning the Company's executive officers appears in Part I of
this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1995, except that the Report of the
Compensation Committee and the Stock Performance Graphs contained in the Proxy
Statement are specifically excluded from incorporation by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 404 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1.Consolidated Financial Statements:
The information appearing in the Company's 1995 Annual Report to
Shareholders as described in Item 8 is incorporated herein by
reference.
2.Financial Statement Schedules:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants................................... 25
Schedule II--Valuation Accounts..................................... 26
</TABLE>
Other schedules are omitted because the required information is shown
elsewhere in this report, is not required or is not applicable.
20
<PAGE>
3.Exhibits:
<TABLE>
<C> <S>
3.(i) --Articles of Incorporation of Sun Company, Inc., as amended and
restated effective as of February 1, 1996.
3.(ii) --Sun Company, Inc. Bylaws, as amended and restated effective as
of February 1, 1996.
4 --Instruments defining the rights of security holders of long-
term debt of the Company and its subsidiaries are not being
filed since the total amount of securities authorized under
each such instrument does not exceed 10 percent of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company will provide the SEC a copy of any
instruments defining the rights of holders of long-term debt of
the Company and its subsidiaries upon request.
10.1* --Sun Company, Inc. Long-Term Incentive Plan, as amended
effective as of February 1, 1996.
10.2* --Sun Company, Inc. Executive Retirement Plan (incorporated by
reference to Exhibit 10(d) of the Form SE filed March 13, 1992,
File No. 1-6841).
10.3* --Sun Company, Inc. Directors' Deferred Compensation Plan, as
amended effective February 1, 1996.
10.4* --Sun Company, Inc. Deferred Compensation Plan, effective as of
July 1, 1986.
10.5* --Sun Company, Inc. Pension Restoration Plan, as amended and
restated effective as of February 1, 1996.
10.6* --Sun Company, Inc. Executive Incentive Plan, as amended and
restated effective January 1, 1992 and revised November 5, 1992
(incorporated by reference to Exhibit 10.9 of the Form SE filed
March 11, 1993, File No. 1-6841).
10.7* --Sun Company, Inc. Savings Restoration Plan, as amended and
restated effective as of December 21, 1995.
10.8* --Sun Company, Inc. Non-Employee Directors Retirement Plan
(incorporated by reference to Exhibit 10(k) of the Company's
Annual Report on Form 10-K, as amended, for the fiscal year
ended December 31, 1988, File No. 1-6841). (This Plan was
terminated in February 1996.)
10.9* --Sun Company, Inc. Retainer Stock Plan for Outside Directors,
as amended and restated effective May 5, 1994.
10.10* --Sun Company, Inc. Executive Long-Term Stock Investment Plan,
as amended effective as of February 1, 1996.
10.11* --Memorandum of Agreement between Alexander B. Trowbridge and
Sun Company, Inc. (incorporated by reference to Exhibit 10.16
of the Form SE filed March 11, 1993, File No. 1-6841). (This
agreement was terminated upon mutual consent as of December 31,
1995.)
10.12* --Consulting Agreement between James G. Kaiser and Sun Company,
Inc. (incorporated by reference to Exhibit 10.14 of the
Company's Annual Report on Form 10-K, as amended, for the
fiscal year ended December 31, 1994, File No. 1-6841). (This
agreement was terminated upon mutual consent as of December 31,
1995.)
</TABLE>
21
<PAGE>
<TABLE>
<C> <S>
10.13 --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 the Company's
Current Report on Form 8-K dated February 2, 1996, File No. 1-
6841).
10.14 --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, File No. 1-
6841).
10.15* --Form of Indemnification Agreement dated as of February 1, 1996,
individually entered into between Sun Company, Inc. and various
directors and officers as set forth more fully in the schedule
attached therein.
10.16 --Underwriting Agreement dated as of May 24, 1995 (regarding the
offering of Suncor Inc. stock) (incorporated by reference to
Exhibit 99.1 of the Company's Current Report on Form 8-K dated
June 13, 1995, File No. 1-6841).
10.17 --Instalment Receipt and Pledge Agreement effective as of June 8,
1995 (regarding the offering of Suncor Inc. stock) (incorporated
by reference to Exhibit 99.2 of the Company's Current Report on
Form 8-K dated June 13, 1995, File No. 1-6841).
11 --Statements re Sun Company, Inc. and Subsidiaries Computation of
Per Share Earnings for the Years Ended December 31, 1995, 1994
and 1993.
12 --Statements re Sun Company, Inc. and Subsidiaries Computation of
Ratio of Earnings to Fixed Charges for the Years Ended December
31, 1995, 1994 and 1993.
13 --Sun Company, Inc. 1995 Annual Report to Shareholders Financial
Section.
16 --Letter from Coopers & Lybrand L.L.P. dated March 7, 1996
regarding Change in Independent Accountants.
21 --Subsidiaries of Sun Company, Inc.
23 --Consent of Independent Accountants.
24.1 --Power of Attorney executed by certain officers and directors of
Sun Company, Inc.
24.2 --Certified copy of the resolution authorizing certain officers
to sign on behalf of Sun Company, Inc.
27 --Article 5 of Regulation S-X, Financial Data Schedule.
</TABLE>
- --------
* These exhibits constitute the Executive Compensation Plans and Arrangements
of the Company.
(b) Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during the quarter ended
December 31, 1995. A report on Form 8-K dated February 2, 1996 was filed to
announce the adoption of a Shareholder Rights Plan.
Note: Copies of each Exhibit to this Form 10-K are available upon request, at
$2 per copy.
22
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Sun Company, Inc.
By s/Robert M. Aiken, Jr.
Robert M. Aiken, Jr.
Senior Vice President and Chief Financial Officer
Date March 7, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY OR ON BEHALF OF THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 7, 1996:
SIGNATURES TITLES
---------- ------
Robert M. Aiken, Jr.* Senior Vice President and Chief Financial
- -------------------------- Officer (Principal Financial Officer)
Robert M. Aiken,Jr.
Robert H. Campbell* Chairman of the Board, 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
Robert D. Kennedy* Director
- --------------------------
Robert D. Kennedy
23
<PAGE>
SIGNATURES TITLES
---------- ------
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.
24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors, Sun Company, Inc.:
Our report on the consolidated financial statements of Sun Company, Inc. and
its subsidiaries has been incorporated by reference in this Form 10-K from
page 55 of the Sun Company, Inc. 1995 Annual Report to Shareholders. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 20 of
this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
February 13, 1996
25
<PAGE>
SUN COMPANY, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONS
-------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1995:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $12 $ 8 $11(A) $13(B) $18
=== === === === ===
For the year ended
December 31, 1994:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $11 $ 2 $-- $ 1 $12
=== === === === ===
For the year ended
December 31, 1993:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $11 $ 2 $-- $ 2 $11
=== === === === ===
</TABLE>
- --------
Notes:
(A) Represents the account balance, at June 30, 1995, of Sun's coal and
cokemaking operations which previously had been accounted for as an
investment held for sale. Effective June 30, 1995, this business became
one of Sun's ongoing business units and is no longer held for sale. (See
Note 2 to the Consolidated Financial Statements in the Company's 1995
Annual Report to Shareholders.)
(B) Includes a $6 million deduction attributable to Suncor Inc., the Company's
Canadian integrated oil company, reflecting its divestment on June 8,
1995. (See Note 2 to the Consolidated Financial Statements in the
Company's 1995 Annual Report to Shareholders.)
26
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------- -------
3.(i) - Articles of Incorporation of Sun Company, Inc., as amended and
restated effective as of February 1, 1996.
3.(ii) - Sun Company, Inc. Bylaws, as amended and restated effective as
of February 1, 1996.
4 - Instruments defining the rights of security holders of long-term
debt of the Company and its subsidiaries are not being filed
since the total amount of securities authorized under each such
instrument does not exceed 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis. The
Company will provide the SEC a copy of any instruments defining
the rights of holders of long-term debt of the Company and its
subsidiaries upon request.
10.1* - Sun Company, Inc. Long-Term Incentive Plan, as amended effective
as of February 1, 1996.
10.2* - Sun Company, Inc. Executive Retirement Plan (incorporated by
reference to Exhibit 10(d) of the Form SE filed March 13, 1992,
File No. 1-6841).
10.3* - Sun Company, Inc. Directors' Deferred Compensation Plan, as
amended effective February 1, 1996.
10.4* - Sun Company, Inc. Deferred Compensation Plan, effective as of
July 1, 1986.
10.5* - Sun Company, Inc. Pension Restoration Plan, as amended and
restated effective as of February 1, 1996.
10.6* - Sun Company, Inc. Executive Incentive Plan, as amended and
restated effective January 1, 1992 and revised November 5, 1992
(incorporated by reference to Exhibit 10.9 of the Form SE filed
March 11, 1993, File No. 1-6841).
10.7* - Sun Company, Inc. Savings Restoration Plan, as amended and
restated effective as of December 21, 1995.
10.8* - Sun Company, Inc. Non-Employee Directors Retirement Plan
(incorporated by reference to Exhibit 10(k) of the Company's
Annual Report on Form 10-K, as amended, for the fiscal year
ended December 31, 1988, File No. 1-6841). (This Plan was
terminated in February 1996.)
<PAGE>
10.9* - Sun Company, Inc. Retainer Stock Plan for Outside Directors, as
amended and restated effective May 5, 1994.
10.10* - Sun Company, Inc. Executive Long-Term Stock Investment Plan,
as amended effective as of February 1, 1996.
10.11* - Memorandum of Agreement between Alexander B. Trowbridge and Sun
Company, Inc. (incorporated by reference to Exhibit 10.16 of the
Form SE filed March 11, 1993, File No. 1-6841). (This agreement
was terminated upon mutual consent as of December 31, 1995.)
10.12* - Consulting Agreement between James G. Kaiser and Sun Company,
Inc. (incorporated by reference to Exhibit 10.14 of the
Company's Annual Report on Form 10-K, as amended, for the fiscal
year ended December 31, 1994, File No. 1-6841). (This agreement
was terminated upon mutual consent as of December 31, 1995.)
10.13 - 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 the Company's
Current Report on Form 8-K dated February 2, 1996, File No.
1-6841).
10.14 - 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, File No.
1-6841).
10.15* - Form of Indemnification Agreement dated as of February 1, 1996,
individually entered into between Sun Company, Inc. and various
directors and officers as set forth more fully in the schedule
attached therein.
10.16 - Underwriting Agreement dated as of May 24, 1995 (regarding the
offering of Suncor Inc. stock) (incorporated by reference to
Exhibit 99.1 of the Company's Current Report on Form 8-K dated
June 13, 1995, File No. 1-6841).
10.17 - Instalment Receipt and Pledge Agreement effective as of June 8,
1995 (regarding the offering of Suncor Inc. stock) (incorporated
by reference to Exhibit 99.2 of the Company's Current Report on
Form 8-K dated June 13, 1995, File No. 1-6841).
11 - Statements re Sun Company, Inc. and Subsidiaries Computation of
Per Share Earnings for the Years Ended December 31, 1995, 1994
and 1993.
12 - Statements re Sun Company, Inc. and Subsidiaries Computation of
Ratio of Earnings to Fixed Charges for the Years Ended December
31, 1995, 1994 and 1993.
<PAGE>
13 - Sun Company, Inc. 1995 Annual Report to Shareholders
Financial Section.
16 - Letter from Coopers & Lybrand L.L.P. dated March 7, 1996
regarding Change in Independent Accountants.
21 - Subsidiaries of Sun Company, Inc.
23 - Consent of Independent Accountants.
24.1 - Power of Attorney executed by certain officers and directors
of Sun Company, Inc.
24.2 - Certified copy of the resolution authorizing certain officers to
sign on behalf of Sun Company, Inc.
27 - Article 5 of Regulation S-X, Financial Data Schedule.
- -----------
*These exhibits constitute the Executive Compensation Plans and
Arrangements of the Company.
<PAGE>
EXHIBIT 3.(i)
Articles of Incorporation
of Sun Company, Inc.
2/1/96
<PAGE>
Articles of Incorporation of Sun Company, Inc.
First: The name of the Corporation is "Sun Company, Inc."
Second: The location and post office address of its registered office in
this Commonwealth is 1801 Market Street, Philadelphia, Pennsylvania 19103.
Third: The Corporation shall have unlimited power to engage in and to do
any lawful act concerning any or all lawful business for which corporations may
be incorporated under the provisions of the Act of May 5, 1933 (P.L. 364, as
amended). The Corporation is incorporated under the provisions of said Act.
Fourth: The total number of shares of capital stock which this Corporation
shall have authority to issue is Two Hundred Fifteen Million (215,000,000) to be
divided into two classes consisting of Fifteen Million (15,000,000) shares
designated as "Cumulative Preference Stock" (hereinafter called "Preference
Stock"), without par value, and Two Hundred Million (200,000,000) shares
designated as "Common Stock," (hereinafter called "Common Stock"), $1 par value.
The following is a description of each class of capital stock and a
statement of the preferences, qualifications, privileges, limitations,
restrictions, and other special or relative rights granted to or imposed upon
the shares of each class:
Preference Stock
1. Authority of Board of Directors. Authority is hereby vested in the Board
of Directors, by resolution, to divide any or all of the authorized shares of
Preference Stock into series and, within the limitations provided by law and
this Article Fourth, to fix and determine the designations, preferences,
qualifications, privileges, limitations, options, conversion rights, and other
special rights of each such series, including but not limited to the right to
fix and determine:
(a) the designation of and the number of shares issuable in each such
series;
(b) the annual dividend rate, expressed in a dollar amount per share, for
each such series;
(c) the right, if any, of the Corporation to redeem shares of any such
series, and the terms and conditions on which shares of each such series may be
redeemed;
(d) the amounts payable upon shares of each such series in the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(e) the sinking fund provisions, if any, for the redemption or purchase of
shares of each such series;
(f) the voting rights, if any, for the shares of each such series;
provided, however, that the number of votes per share of Preference Stock shall
in no event exceed one (1);
(g) the terms and conditions, if any, on which shares of each such series
may be converted into shares of stock of this Corporation; provided, however,
that shares of Preference Stock shall not be convertible into shares of any
class of stock of the Corporation other than Common Stock and shall not be
convertible
<PAGE>
into more than one share of Common Stock, or such greater or lesser number as
will reflect the effect of stock dividends, stock splits or stock combinations
affecting Common Stock and occurring after May 9, 1980, subject to such terms
and conditions, including provision for fractional shares, as the Board of
Directors shall authorize;
(h) the stated value per share for each such series; and
(i) any and all such other provisions as may be fixed or determined by the
Board of Directors of the Corporation pursuant to Pennsylvania law.
2. Parity of Series of Preference Stock and Shares Within Series; Priority
of Preference Stock. All shares of the same series of Preference Stock shall be
identical with each other share of such series in all respects, except that
shares of any one series issued at different times may differ as to the dates
from which dividends thereon shall be cumulative. Except as determined by the
Board of Directors as permitted by the provisions of paragraph 1 hereof, all
series of Preference Stock shall rank equally with and be identical in all
respects to each other series.
Preference Stock shall rank, as to dividends and upon liquidation,
dissolution or winding up, prior to Common Stock and to any other capital stock
of the Corporation hereafter authorized, other than capital stock which shall by
its terms rank prior to or on a parity with Preference Stock and which shall be
authorized pursuant to subparagraph 9(a) hereof.
3. Dividends. Before any dividends (other than dividends payable in stock
ranking junior to Preference Stock) on any class or classes of stock of the
Corporation ranking junior to Preference Stock as to dividends or upon
liquidation shall be declared and set apart for payment or paid, the holders of
shares of Preference Stock of each series shall be entitled to receive cash
dividends, when and as declared by the Board of Directors at the annual rate,
and no more, fixed in the resolution adopted by the Board of Directors providing
for the issue of such series. Such dividends shall be payable in cash quarterly,
each such quarterly payment to be in respect of the quarterly period ending with
the day next preceding the date of such payment (except in the case of the first
dividend which shall be in respect of the period beginning with the initial date
of issue of such shares and ending with the day next preceding the date of such
payment), to holders of Preference Stock of record on the respective dates, not
exceeding forty (40) days preceding such quarterly dividend payment dates, fixed
for that purpose by the Board of Directors. With respect to each series of
Preference Stock, such dividends shall be cumulative from the date or dates of
issue of such series, which date or dates may be set by the Board of Directors
pursuant to the provisions of paragraph 1 hereof. No dividends shall be declared
or paid or set apart for payment on any series of Preference Stock in respect of
any quarterly dividend period unless there shall likewise be or have been
declared and paid or set apart for payment on all shares of Preference Stock of
each other series at the time outstanding like dividends in proportion
<PAGE>
to the respective annual dividend rates fixed therefor as hereinbefore provided
for all quarterly dividend periods coinciding with or ending before such
quarterly dividend period. Accruals of dividends shall not bear interest.
4. Redemption. The Corporation, at the option of the Board of Directors,
may, at any time permitted by the resolution adopted by the Board of Directors
providing for the issue of any series of Preference Stock and at the redemption
price or prices stated in said resolution, redeem the whole or any part of the
shares of such series at the time outstanding. If at any time less than all of
the shares of Preference Stock then outstanding are to be called for redemption,
the shares to be redeemed may be selected by lot or by such other equitable
method as the Board of Directors in its discretion may determine. Notice of
every redemption, stating the redemption date, the redemption price, and the
placement of payment thereof, shall be given by mailing a copy of such notice at
least thirty (30) days and not more than sixty (60) days prior to the date fixed
for redemption to the holders of record of the shares of Preference Stock to be
redeemed at their addresses as the same shall appear on the books of the
Corporation. The Corporation, upon mailing notice of redemption as aforesaid or
upon irrevocably authorizing the bank or trust company hereinafter mentioned to
mail such notice, may deposit or cause to be deposited in trust with a bank or
trust company in the City of Philadelphia, Commonwealth of Pennsylvania, or in
the Borough of Manhattan, City and State of New York, an amount equal to the
redemption price of the shares to be redeemed plus any accrued and unpaid
dividends thereon, which amount shall be payable to the holders of the shares to
be redeemed upon surrender of certificates therefor on or after the date fixed
for redemption or prior thereto if so directed by the Board of Directors. Upon
such deposit, or if no such deposit is made, then from and after the date fixed
for redemption unless the Board of Directors shall default in making payment of
the redemption price plus accrued and unpaid dividends upon surrender of
certificates as aforesaid, the shares called for redemption shall cease to be
outstanding and the holders thereof shall cease to be stockholders with respect
to such shares and shall have no interest in or claim against the Corporation
with respect to such shares other than the right to receive the redemption price
plus accrued and unpaid dividends from such bank or trust company or from the
Corporation, as the case may be, without interest thereon, upon surrender of
certificates as aforesaid; provided, that conversion rights, if any, of shares
called for redemption shall terminate at the close of business on the business
day prior to the date fixed for redemption. Any funds so deposited which shall
not be required for such redemption because of the exercise of conversion rights
subsequent to the date of such deposit shall be returned to the Corporation. In
case any holder of shares of Preference Stock which have been called for
redemption shall not, within six (6) years after the date of such deposit, have
claimed the amount deposited with respect to the redemption thereof, such bank
or trust company, upon demand, shall pay over to the Corporation such unclaimed
amount and shall
<PAGE>
thereupon be relieved of all responsibility in respect thereof to such holder,
and thereafter such holder shall look only to the Corporation for payment
thereof. Any interest which may accrue on funds so deposited shall be paid to
the Corporation from time to time.
5. Status of Shares of Preference Stock Redeemed or Acquired. Unless
otherwise specifically provided in the resolutions of the Board of Directors
authorizing the issue of any series of Preference Stock, shares of any series of
Preference Stock which have been redeemed, purchased or acquired by the
Corporation by means other than conversion (whether through the operation of a
sinking fund or otherwise) shall have the status of authorized and unissued
shares of Preference Stock and may be reissued as a part of the series of which
they were originally a part or may be reclassified and reissued as part of a new
series of Preference Stock to be created by resolution of the Board of Directors
or as part of any other series of Preference Stock. Shares of any series of
Preference Stock converted shall not be reissued and the Board of Directors
shall take appropriate actions to reflect the conversion of Preference Stock
from time to time by effecting reductions in the number of shares of Preference
Stock which the Corporation is authorized to issue.
6. Redemption or Acquisition of Preference Stock During Default in Payment
of Dividends. If at any time the Corporation shall have failed to pay dividends
in full on Preference Stock, thereafter and until dividends in full including
all accrued and unpaid dividends on shares of all series of Preference Stock at
the time outstanding, shall have been declared and set apart for payment or
paid, (i) the Corporation, without the affirmative vote or consent of the
holders of at least a majority of the shares of Preference Stock at the time
outstanding, voting or consenting separately as a class without regard to
series, given in person or by proxy, either in writing or by resolution adopted
at a meeting, shall not redeem less than all the shares of Preference Stock at
such time outstanding, regardless of series, other than in accordance with
paragraph 8 hereof and (ii) neither the Corporation nor any subsidiary shall
purchase any shares of Preference Stock except in accordance with a purchase
offer made in writing or by publication, as determined by the Board of
Directors, in their sole discretion after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series, shall determine (which determination shall be final and conclusive) will
result in fair and equitable treatment among the respective series; provided,
however, that (iii) unless prohibited by the provisions applicable to any
series, the Corporation, to meet the requirements of any sinking fund provision
with respect to any series, may use shares of such series acquired by it prior
to such failure and then held by it as treasury stock, and (iv) nothing shall
prevent the Corporation from completing the
<PAGE>
purchase or redemption of shares of Preference Stock for which a purchase
contract was entered into for any sinking fund purposes or the notice of
redemption of which was mailed to the holders thereof, prior to such default.
7. Dividends and Distributions on and Redemption and Acquisition of Junior
Classes of Stock. So long as any shares of Preference Stock are outstanding, the
Corporation shall not declare or set apart for payment or pay any dividends
(other than stock dividends payable on shares of stock ranking junior to
Preference Stock) or make any distribution on any other class or classes of
stock of the Corporation ranking junior to Preference Stock as to dividends or
upon liquidation and shall not redeem, purchase or otherwise acquire, or permit
any subsidiary to purchase or otherwise acquire, any shares of any such junior
class if at the time of making such declaration, payment, distribution,
redemption, purchase or acquisition the Corporation shall be in default with
respect to any dividend payable on, or any obligation to purchase, shares of any
series of Preference Stock; provided, however, that, notwithstanding the
foregoing, the Corporation may at any time redeem, purchase or otherwise acquire
shares of stock of any such junior class in exchange for, or out of the net cash
proceeds from the sale of, other shares of stock of any junior class.
8. Retirement of Shares. If in any case the amounts payable with respect to
any obligations to retire shares of Preference Stock are not paid in full in the
case of all series with respect to which such obligations exist, the number of
shares of the various series to be retired shall be in proportion to the
respective amounts which would be payable on account of such obligations if all
amounts payable were discharged in full.
9. Action by Corporation Requiring Approval of Preference Stock. The
Corporation shall not, without the affirmative vote or consent of the holders of
at least 66 2/3% of the number of shares of Preference Stock at the time
outstanding, voting or consenting (as the case may be) separately as a class
without regard to series, given in person or by proxy, either in writing or by
resolution adopted at a meeting:
(a) create any class of stock ranking prior to or on a parity with
Preference Stock as to dividends or upon liquidation or increase the authorized
number of shares of any such previously authorized class of stock;
(b) alter or change any of the provisions hereof so as adversely to affect
the preferences, special rights or powers given to the Preference Stock;
(c) increase the number of shares of Preference Stock which the Corporation
is authorized to issue; or
(d) alter or change any of the provisions hereof or of the resolution
adopted by the Board of Directors providing for the issue of such series so as
adversely to affect the preferences, special rights or powers given to such
series.
<PAGE>
10. Special Voting Rights. If the Corporation shall have failed to pay, or
declare and set apart for payment, dividends on Preference Stock in an aggregate
amount equivalent to six (6) full quarterly dividends on all shares of
Preference Stock at the time outstanding, the number of Directors of the
Corporation shall be increased by two (2) at the first annual meeting of the
shareholders of the Corporation held thereafter, and at such meeting and at each
subsequent annual meeting until dividends payable for all past quarterly
dividend periods on all outstanding shares of Preference Stock shall have been
paid, or declared and set apart for payment, in full, the holders of the shares
of Preference Stock shall have, in addition to any other voting rights which
they otherwise may have, the exclusive and special right, voting separately as a
class without regard to series, each share of Preference Stock entitling the
holder thereof to one (1) vote per share, to elect two (2) additional members of
the Board of Directors to hold office for a term of one (1) year; provided, that
the right to vote as a class upon the election of such two (2) additional
Directors shall not limit the right of holders of any series of Preference Stock
to vote upon the election of all other Directors and upon other matters if and
to the extent that such holders are entitled to vote pursuant to the resolution
adopted by the Board of Directors pursuant to paragraph 1 hereof, providing for
the issue of such series. Upon such payment, or declaration and setting apart
for payment, in full, the terms of the two (2) additional Directors so elected
shall forthwith terminate, and the number of Directors of the Corporation shall
be reduced by two (2) and such voting right of the holders of shares of
Preference Stock shall cease, subject to increase in the number of Directors as
aforesaid and to revesting of such voting right in the event of each and every
additional failure in the payment of dividends in an aggregate amount equivalent
to six (6) full quarterly dividends as aforesaid.
11. Liquidation of the Corporation. Upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, Preference Stock
shall be preferred as to assets over Common Stock and any other class or classes
of stock ranking junior to Preference Stock so that the holders of shares of
Preference Stock of each series shall be entitled to be paid or to have set
apart for payment, before any distribution is made to the holders of Common
Stock and any other class or classes of stock ranking junior to Preference
Stock, the amount fixed in accordance with paragraph 1 hereof plus an amount
equal to all dividends accrued and unpaid up to and including the date fixed for
such payment and the holders of Preference Stock shall not be entitled to any
other payment.
If upon any such liquidation, dissolution or winding up of the Corporation,
its net assets shall be insufficient to permit the payment in full of the
respective amounts to which the holders of all outstanding shares of Preference
Stock are entitled as above provided, the entire remaining net assets of the
Corporation shall be distributed among the holders of Preference Stock in
amounts proportionate to the full preferential amounts to which they are
respectively entitled.
<PAGE>
For the purposes of this paragraph 11, the voluntary sale, lease, exchange
or transfer for cash, shares of stock (securities or other consideration) of all
or substantially all the Corporation's property or assets to, or its
consolidation or merger with, one or more corporations shall not be deemed to be
a voluntary or involuntary liquidation, dissolution or winding up of the
Corporation.
12. Voting Rights. Except as otherwise provided by the provisions of this
Article Fourth or by statute or when fixed in accordance with the provisions of
paragraph 1 hereof, the holders of shares of Preference Stock shall not be
entitled to any voting rights.
13. Definitions. For the purposes of this Article Fourth and of any
resolution of the Board of Directors providing for the issue of any series of
Preference Stock or of any statement filed with the Secretary of State of the
Commonwealth of Pennsylvania (unless otherwise provided in any such resolution
or statement):
(a) The term "outstanding," when used in reference to shares of stock,
shall mean issued shares excluding:
(i) shares held by the Corporation or a subsidiary; and
(ii) shares called for redemption if funds for the redemption thereof
have been deposited in trust.
(b) Any class or classes of stock of the Corporation shall be deemed to
rank:
(i) prior to Preference Stock, either as to dividends or upon
liquidation, if the holders of such class or classes shall be entitled to the
receipt of dividends or amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the holders of
Preference Stock;
(ii) on a parity with Preference Stock, either as to dividends or upon
liquidation, whether or not the dividend rates or dividend payment dates or the
redemption or liquidation prices per share thereof be different from those of
Preference Stock, if the holders of such class or classes shall be entitled to
the receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in proportion to their respective
dividend rates or liquidation prices, without preference or priority one (1)
over the other as between the holders of such class or classes and the holders
of Preference Stock; and
(iii) junior to Preference Stock, either as to dividends or upon
liquidation, if the rights of the holders of such class or classes shall be
subject or subordinate to the rights of the holders of Preference Stock in
respect of the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be.
(c) The term "subsidiary" as used herein shall mean any corporation 51% or
more of the outstanding stock having voting rights of which is at the time owned
or controlled directly or indirectly by the Corporation.
<PAGE>
SERIES A CUMULATIVE PREFERENCE STOCK
1. Designation. The designation of the series of Preference Stock
authorized by this resolution shall be Series A Cumulative Preference Stock (the
"Series A Preference Stock") consisting of 12,500,000 shares.
2. Rank. The Series A Preference Stock shall rank, as to dividends and upon
liquidation, dissolution or winding up, prior to the Common Stock and to any
other capital stock of the Corporation hereafter authorized, other than capital
stock which shall by its terms rank prior to or on a parity with the Series A
Preference Stock and which shall be authorized pursuant to paragraph 6(d)
hereof. Any class or classes of stock of the Corporation shall be deemed to
rank:
(i) prior to Series A Preference Stock, either as to dividends or
upon liquidation, if the holders of such class or classes shall be entitled
to the receipt of dividends or amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or priority to
the holders of Series A Preference Stock;
(ii) on a parity with Series A Preference Stock, either as to
dividends or upon liquidation, whether or not the dividend rates or
dividend payment dates or the redemption or liquidation prices per share
thereof be different from those of Series A Preference Stock, if the
holders of such class or classes shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in proportion to their respective dividend
rates or liquidation prices, without preference or priority one (1) over
the other as between the holder of such class or classes and the holders of
Series A Preference Stock ("Parity Stock"); and
(iii) junior to Series A Preference Stock, either as to dividends
or upon liquidation, if the rights of the holders of such class or classes
shall be subject or subordinate to the rights of the holders of Series A
Preference Stock in respect of the receipt of dividends or of amounts
distributable upon liquidation, dissolution or winding up, as the case may
be ("Junior Stock").
3. Dividends.
(a) The holders of outstanding shares of the Series A Preference Stock
shall be entitled to receive, when and as declared by the Board of Directors,
cash dividends accruing at the per share rate of $3.60 per annum (the "Dividend
Rate") and no more, payable in cash quarterly, each such quarterly payment to be
in respect of the quarterly period ending with the day next preceding the date
of such payment (except in the case of the first dividend which shall be in
respect of the period beginning with June 12, 1995 and ending with the day next
preceding the
<PAGE>
date of such payment), to holders of Series A Preference Stock of record on the
respective dates, not exceeding forty (40) days preceding such quarterly
dividend payment dates, fixed for that purpose by the Board of Directors. Such
dividends shall be cumulative from June 12, 1995 and shall accrue daily.
Accruals of dividends shall not bear interest. Dividends will be payable on or
before each March 13, June 13, September 13 and December 13 (or, if any such day
is not a business day, on the next succeeding business day).
(b) Before any dividends (other than dividends payable in Junior Stock)
on any class or classes of stock of the Corporation ranking junior to Series A
Preference Stock as to dividends or upon liquidation shall be declared and set
apart for payments or paid, the holders of shares of Series A Preference Stock
shall be entitled to receive cash dividends, when and as declared by the Board
of Directors at the Dividend Rate, and no more. No dividends shall be declared
or paid or set apart for payment on the Series A Preference Stock in respect of
any quarterly dividend period unless there shall likewise be or have been
declared and paid or set apart for payment on all shares of Preference Stock of
each other series at the time outstanding like dividends in proportion to the
respective annual dividend rates fixed therefor for all quarterly dividend
periods coinciding with or ending before such quarterly dividend period.
(c) So long as any shares of Series A Preference Stock are outstanding,
the Corporation shall not declare or set apart for payment or pay any dividends
(other than stock dividends payable on shares of Junior Stock) or make any
distribution on any other class or classes of stock of the Corporation ranking
junior to Series A Preference Stock as to dividends or upon liquidation and
shall not redeem, purchase or otherwise acquire, or permit any subsidiary to
purchase or otherwise acquire, any shares of any such Junior Stock if at the
time of making such declaration, payment, distribution, redemption, purchase or
acquisition the Corporation shall be in default with respect to any dividend
payable on, or any obligation to purchase, shares of Series A Preference Stock;
provided, however, that, notwithstanding the foregoing, the Corporation may at
any time redeem, purchase or otherwise acquire shares of stock of any such
Junior Stock in exchange for, or out of the net cash proceeds from the sale of,
other shares of stock of any Junior Stock.
4. Redemptions.
(a) Right to Call for Redemption. At any time and from time to time,
the Corporation shall have the right to call, in whole or in part, the
outstanding shares of the Series A Preference Stock for redemption, subject to
the notice provisions set forth in paragraph (4)(h). On the redemption date (the
"Redemption Date") with respect to any such redemption, the
<PAGE>
Corporation shall deliver to the holders thereof, in exchange for each such
share called for redemption, the following consideration:
(1) in the event such Redemption Date is prior to June 12, 1998 (the
"Specified Date"),
(i) a number of shares of Common Stock equal to the Call Price
(as defined in paragraph (4)(g)(ii)) in effect on the Redemption
Date divided by the Current Market Price of the Common Stock
determined as of the second Trading Date immediately preceding the
Notice Date, plus
(ii) an amount in cash equal to all accrued and unpaid
dividends on such share of Series A Preference Stock to and
including the Redemption Date, whether or not declared, out of
funds legally available therefor (and dividends shall cease to
accrue on such share as of such Redemption Date); and
(2) in the event such Redemption Date is on or after the Specified
Date,
(i) shares of Common Stock at the Common Equivalent Rate
(determined as provided in this paragraph (4)) in effect on the
Redemption Date; plus
(ii) an amount in cash equal to all accrued and unpaid
dividends on such share of Series A Preference Stock to and
including the Redemption Date, whether or not declared, out of
funds legally available for the payment of dividends (and dividends
shall cease to accrue on such share as of such Redemption Date).
If at any time less than all of the shares of Series A Preference Stock then
outstanding are to be called for redemption, the shares to be redeemed may be
selected by lot or such other equitable method as the Board of Directors of the
Corporation in its discretion may determine.
(b) Redemption or Acquisition of Series A Preference Stock During
Default in Payment of Dividends. If at any time the Corporation shall have
failed to pay dividends in full on Preference Stock, thereafter and until
dividends in full including all accrued and unpaid dividends on shares of all
series of Preference Stock at the time outstanding, shall have been declared and
set apart for payment or paid, (i) the Corporation, without the affirmative vote
or consent of the holders of at least a majority of the shares of Preference
Stock at the time outstanding, voting or consenting separately as a class
without regard to series, given in person or by proxy,
<PAGE>
either in writing or by resolution adopted at a meeting, shall not redeem less
than all the shares of Preference Stock at such time outstanding, regardless of
series, other than in accordance with paragraph 4(f) hereof and (ii) neither the
Corporation nor any subsidiary shall purchase any shares of Preference Stock
except in accordance with a purchase offer made in writing or by publication, as
determined by the Board of Directors, in their sole discretion after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series, shall determine (which determination
shall be final and conclusive) will result in fair and equitable treatment among
the respective series; provided, however, that (iii) unless prohibited by the
provisions applicable to any series, the Corporation, to meet the requirements
of any sinking fund provision with respect to any series, may use shares of such
series acquired by it prior to such failure and then held by it as treasury
stock, and (iv) nothing shall prevent the Corporation from completing the
purchase or redemption of shares of Preference Stock for which a purchase
contract was entered into for any sinking fund purposes or the notice of
redemption of which was mailed to the holders thereof, prior to such default.
(c) Common Equivalent Rate; Adjustments.
The Common Equivalent Rate to be used to determine the number of shares of
Common Stock to be delivered on the redemption of the Series A Preference Stock
in exchange for shares of Common Stock pursuant to paragraph (4)(a)(2) (a
"Specified Redemption") shall be initially two shares of Common Stock for each
share of Series A Preference Stock; provided, however, that such Common
Equivalent Rate shall be subject to adjustment from time to time as provided
below in this paragraph (4)(c). All adjustments to the Common Equivalent Rate
shall be calculated to the nearest 1/100th of a share of Common Stock. Such rate
as adjusted and in effect at any time is herein called the "Common Equivalent
Rate."
(i) If the Corporation shall do any of the following (an
"Adjustment Event"):
(A) pay a dividend or make a distribution with respect to Common
Stock in shares of Common Stock,
(B) subdivide, reclassify or split its outstanding shares of Common
Stock into a greater number of shares,
(C) combine or reclassify its outstanding shares of Common Stock
into a smaller number of shares, or
(D) issue by reclassification of its shares of Common Stock any
shares of Common Stock other than in a Fundamental Transaction (as
defined in paragraph 4(g)(iv)),
then the Common Equivalent Rate in effect immediately prior to such
Adjustment Event shall be adjusted so that the holder of a share of the
Series A Preference Stock shall be
<PAGE>
entitled to receive on the redemption of such share of the Series A
Preference Stock, the number of shares of Common Stock that such holder
would have owned or been entitled to receive after the happening of the
Adjustment Event had such share of the Series A Preference Stock been
redeemed pursuant to paragraph 4(a) immediately prior to the record date
for such Adjustment Event, if any, or such Adjustment Event. Where the
Adjustment Event is a dividend or distribution, the adjustment to the
Common Equivalent Rate shall become effective as of the close of business
on the record date for determination of stockholders entitled to receive
such dividend or distribution; where the Adjustment Event is a subdivision,
split, combination or reclassification, the adjustment to the Common
Equivalent Rate shall become effective immediately after the effective date
of such subdivision, split, combination or reclassification; and any shares
of Common Stock issuable in payment of a dividend shall be deemed to have
been issued immediately prior to the close of business on the record date
for such dividend for purposes of calculating the number of outstanding
shares of Common Stock under clauses (ii) and (iii) below. Such adjustment
shall be made successively.
(ii) If the Corporation shall, after the date hereof, issue rights
or warrants to all holders of its Common Stock entitling them (for a period
not exceeding 45 days from the date of such issuance) to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price of the Common Stock (determined pursuant to paragraph
(4)(c)(v)), on the record date for the determination of stockholders
entitled to receive such rights or warrants, then in each case the Common
Equivalent Rate shall be adjusted by multiplying the Common Equivalent Rate
in effect immediately prior to the date of issuance of such rights or
warrants by a fraction (A) the numerator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights
or warrants, immediately prior to such issuance, plus the number of
additional shares of Common Stock offered for subscription or purchase
pursuant to such rights or warrants, and (B) the denominator of which shall
be the number of shares of Common Stock outstanding on the date of issuance
of such rights or warrants, immediately prior to such issuance, plus the
number of shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered for subscription or
purchase pursuant to such rights or warrants would purchase at such Current
Market Price (determined by multiplying such total number of shares by the
exercise price of such rights or warrants and dividing the product so
obtained by such Current Market Price). Such adjustment shall become
effective as of the close of business on the record date for the
determination of stockholders entitled to receive such rights or warrants.
To the extent that shares of Common Stock are not delivered after the
expiration of such rights
<PAGE>
or warrants, the Common Equivalent Rate shall be readjusted to the Common
Equivalent Rate which would then be in effect had the adjustments made upon
the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock actually delivered.
Such adjustment shall be made successively.
(iii) If the Corporation shall pay a dividend or make a
distribution to all holders of its Common Stock of evidences of its
indebtedness or other assets (including shares of capital stock of the
Corporation (other than Common Stock) but excluding any distributions and
dividends referred to in clause (i) above or any cash dividends), or shall
issue to all holders of its Common Stock rights or warrants to subscribe
for or purchase any of its securities (other than those referred to in
clause (ii) above), then in each such case, the Common Equivalent Rate
shall be adjusted by multiplying the Common Equivalent Rate in effect on
the record date mentioned below by a fraction (A) the numerator of which
shall be the Current Market Price of the Common Stock (determined pursuant
to paragraph (4)(c)(v)) on the record date for the determination of
stockholders entitled to receive such dividend or distribution, and (B) the
denominator of which shall be such Current Market Price per share of Common
Stock less the fair market value (as determined by the Board of Directors
of the Corporation, whose determination shall be conclusive) as of such
record date of the portion of the assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, applicable to one
share of Common Stock. Such adjustment shall become effective on the
opening of business on the business day next following the record date for
the determination of stockholders entitled to receive such dividend or
distribution.
(iv) Anything in this paragraph (4) notwithstanding, the
Corporation shall be entitled to make such upward adjustment in the Common
Equivalent Rate, in addition to those required by this paragraph (4), as
the Corporation in its sole discretion may determine to be advisable, in
order that any stock dividends, subdivision of shares, distribution of
rights to purchase stock or securities, or a distribution of securities
convertible into or exchangeable for stock (or any transaction that could
be treated as any of the foregoing transactions pursuant to Section 305 of
the Internal Revenue Code of 1986, as amended) hereafter made by the
Corporation to its stockholders shall not be taxable. If the Corporation
determines that an adjustment to the Common Equivalent Rate should be made
pursuant to this paragraph (4)(c)(iv), such adjustment shall be made
effective as of such date as the Board of Directors of the Corporation
determines. The determination of the Board of Directors of the Corporation
as to whether an adjustment to the Common Equivalent Rate
<PAGE>
should be made pursuant to the foregoing provisions of this paragraph
(4)(c)(iv), and, if so, as to what adjustment should be made and when,
shall be conclusive, final and binding on the Corporation and all
stockholders of the Corporation.
(v) As used in this paragraph (4), the "Current Market Price" of a
share of Common Stock on any date shall be, except as otherwise
specifically provided, the average of the daily Closing Prices (as defined
in paragraph (4)(g)(iii)) for the five consecutive Trading Dates ending on
and including the date of determination of the Current Market Price;
provided that if the Closing Price of the Common Stock on the Trading Date
next following such five-day period (the "next-day closing price") is less
than 95% of such average Closing Price, then the Current Market Price per
share of Common Stock on such date of determination will be the next-day
closing price; provided, further, that, with respect to any redemption or
antidilution adjustment, if any event that results in an adjustment of the
Common Equivalent Rate occurs during the period beginning on the first day
of the applicable determination period and ending on the applicable
redemption date, the Current Market Price as determined pursuant to the
foregoing will be appropriately adjusted to reflect the occurrence of such
event.
(vi) In any case in which paragraph (4)(c) shall require that an
adjustment as a result of any event become effective as of the close of
business on the record date and the date fixed for Specified Redemption
pursuant to paragraph (4)(a)(2) occurs after such record date, but before
the occurrence of such event, the Corporation may in its sole discretion
elect to defer the following until after the occurrence of such event: (A)
issuing to the holder of any redeemed shares of the Series A Preference
Stock the additional shares of Common Stock issuable upon such redemption
as a result of such adjustment and (B) paying to such holder any amount in
cash in lieu of a fractional share of Common Stock pursuant to paragraph
(4)(e).
(vii) Before taking any action which would cause an adjustment to
the Common Equivalent Rate that would cause the Corporation to issue shares
of Common Stock for consideration below the then par value (if any) of the
Common Stock upon redemption of the Series A Preference Stock, the
Corporation will take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of such Common Stock at such
adjusted Common Equivalent Rate.
<PAGE>
(d) Notice of Adjustments. Whenever the Common Equivalent Rate is
adjusted as herein provided, the Corporation shall:
(i) forthwith compute the adjusted Common Equivalent Rate in
accordance with this paragraph (4) and prepare a certificate signed by the
Chief Executive Officer, the Chief Financial Officer, any Vice President,
or the Treasurer of the Corporation setting forth the adjusted Common
Equivalent Rate, the method of calculation thereof in reasonable detail and
the facts requiring such adjustment and upon which such adjustment is
based, which certificate shall be conclusive, final and binding evidence of
the correctness of the adjustment, and file such certificate forthwith with
the transfer agent or agents for the Series A Preference Stock and the
Common Stock; and
(ii) mail a notice stating that the Common Equivalent Rate has been
adjusted, the facts requiring such adjustment and upon which such
adjustment is based and setting forth the adjusted Common Equivalent Rate
to the holders of record of the outstanding shares of the Series A
Preference Stock at or prior to the time the Corporation mails an interim
statement to its stockholders covering the fiscal quarter during which the
facts requiring such adjustment occurred, but in any event within 45 days
of the end of such fiscal quarter.
(e) No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon the redemption of any
shares of Series A Preference Stock. Instead of any fractional interest in a
share of Common Stock which would otherwise be deliverable upon the redemption
of a share of Series A Preference Stock, the Corporation shall pay to the holder
of such share an amount in cash (computed to the nearest cent) equal to the same
fraction of the Current Market Price of the Common Stock determined as of the
second Trading Date immediately preceding the relevant Notice Date. If more than
one share shall be surrendered for redemption at one time by the same holder,
the number of full shares of Common Stock issuable upon redemption thereof shall
be computed on the basis of the aggregate number of shares of Series A
Preference Stock so surrendered.
(f) Retirement. Shares of Series A Preference Stock which have been
redeemed, purchased or acquired by the Corporation (whether through the
operation of a sinking fund or otherwise) shall have the status of authorized
and unissued shares of Preference Stock and may be reissued as a part of the
series of which they were originally a part or may be reclassified and reissued
as part of a new series of Preference Stock to be created by resolution of the
Board of Directors or as part of any other series of Preference Stock. If in any
case the amounts payable with respect to any obligations to retire shares of
Series A Preference Stock and any other series of Preference
<PAGE>
Stock are not paid in full in the case of all series with respect to which such
obligations exist, the number of shares of the various series to be retired
shall be in proportion to the respective amounts which would be payable on
account of such obligations if all amounts payable were discharged in full.
(g) Definitions. As used in this paragraph 4 or elsewhere herein:
(i) the term "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the State of
New York or the Commonwealth of Pennsylvania are authorized or obligated by
law or executive order to close or are closed because of a banking
moratorium or otherwise;
(ii) the term "Call Price" shall mean the per share price (payable
in shares of Common Stock) at which the Corporation may redeem shares of
Series A Preference Stock pursuant to paragraph 4(a)(1)), which shall be
initially equal to $84.79952, declining by $.004444 on each day following
June 12, 1995 (computed on the basis of a 360-day year of twelve 30-day
months) to $80.26664 on April 12, 1998 and equal to $80 thereafter through
June 11, 1998, if not sooner redeemed;
(iii) the term "Closing Price" on any day shall mean the closing
sale price regular way (with any relevant due bills attached) on such day,
or in case no such sale takes place on such day, the average of the
reported closing bid and asked prices regular way (with any relevant due
bills attached), in each case on the New York Stock Exchange Consolidated
Tape (or any successor composite tape reporting transactions on national
securities exchanges), or, if the Common Stock is not listed or admitted to
trading on such Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading (which shall be the
national securities exchange on which the greatest number of shares of
Common Stock has been traded during the five consecutive Trading Dates
ending on and including the date of determination of the Current Market
Price), or, if not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices regular way (with
any relevant due bills attached) of the Common Stock on the over-the-
counter market on the day in question as reported by the National
Association of Securities Dealers Automated Quotation System, or a
similarly generally accepted reporting service, or if not so available, as
determined in good faith by the Board of Directors on the basis of such
relevant factors as the Board of Directors in good faith considers
appropriate;
(iv) the term "Fundamental Transaction" shall mean a merger or
consolidation of the Corporation, a share exchange, division or conversion
of the Corporation's capital stock or an amendment of the Corporation's
Articles
<PAGE>
of Incorporation that results in the conversion or exchange of Common Stock
into, or the right of the holders thereof to receive, in lieu of or in
addition to their shares of Common Stock, other securities or other
property (whether of the Corporation or any other entity);
(v) the term "Notice Date" with respect to any notice given by the
Corporation in connection with a redemption of any of the Series A
Preference Stock shall be the commencement of the mailing of such notice to
the holders of the Series A Preference Stock in accordance with paragraph
(4)(h);
(vi) the term "Outstanding," when used in reference to shares of
stock, shall mean issued shares excluding:
(A) shares held by the Corporation or a subsidiary; and
(B) shares called for redemption if funds for the redemption
thereof have been deposited in trust;
(vii) the term "Subsidiary" as used herein shall mean any
corporation 51% or more of the outstanding stock having voting rights of
which is at the time owned or controlled directly or indirectly by the
Corporation; and
(viii) the term "Trading Date" shall mean a date on which the New
York Stock Exchange (or any successor to such Exchange) is open for the
transaction of business.
(h) Method of Redemption. Notice of every redemption, stating the
redemption date, the redemption price, and the placement of payment thereof,
shall be given by mailing a copy of such notice at least thirty (30) days and
not more than sixty (60) days prior to the date fixed for redemption to the
holders of record of the shares of Series A Preference Stock to be redeemed at
their addresses as the same shall appear on the books of the Corporation. The
Corporation, upon mailing notice of redemption as aforesaid or upon irrevocably
authorizing the bank or trust company hereinafter mentioned to mail such notice,
may deposit or cause to be deposited in trust with a bank or trust company in
the City of Philadelphia, Commonwealth of Pennsylvania, or in the Borough of
Manhattan, City and State of New York, an amount equal to the redemption price
of the shares to be redeemed plus any accrued and unpaid dividends thereon,
which amount shall be payable to the holders of the shares to be redeemed upon
surrender of certificates therefor on or after the date fixed for redemption or
prior thereto if so directed by the Board of Directors. Upon such deposit, or if
no such deposit is made, then from and after the date fixed for redemption
unless the Board of Directors shall default in making payment of the redemption
price plus accrued and unpaid dividends upon surrender of certificates as
aforesaid, the shares called for redemption
<PAGE>
shall cease to be outstanding and the holders thereof shall cease to be
stockholders with respect to such shares and shall have no interest in or claim
against the Corporation with respect to such shares other than the right to
receive the redemption price plus accrued and unpaid dividends from such bank or
trust company or from the Corporation, as the case may be, without interest
thereon, upon surrender of certificates as aforesaid. In case any holder of
shares of Series A Preference Stock which have been called for redemption shall
not, within six (6) years after the date of such deposit, have claimed the
amount deposited with respect to the redemption thereof, such bank or trust
company, upon demand, shall pay over to the Corporation such unclaimed amount
and shall thereupon be relieved of all responsibility in respect thereof to such
holder, and thereafter such holder shall look only to the Corporation for
payment thereof. Any interest which may accrue on funds so deposited shall be
paid to the Corporation from time to time.
(i) Surrender of Certificates; Status. Each holder of shares of Series
A Preference Stock to be redeemed shall surrender the certificates evidencing
such shares (properly endorsed or assigned for transfer, if the Board of
Directors of the Corporation shall so require and the notice shall so state) to
the Corporation at the place designated in the notice of such redemption and
shall thereupon be entitled to receive certificates evidencing shares of Common
Stock and to receive any other funds payable pursuant to this paragraph (4)
following such surrender and following the date of such redemption. In case
fewer than all the shares represented by any such surrendered certificate are
called for redemption, a new certificate shall be issued at the expense of the
Corporation representing the unredeemed shares. If such notice of redemption
shall have been given, and if on the date fixed for redemption shares of Common
Stock and other funds necessary for the redemption shall have been either set
aside by the Corporation separate and apart from its other funds or assets in
trust for the account of the holders of the shares to be redeemed (and so as to
be and continue to be available therefor) or deposited with a bank or trust
company as provided in paragraph (4)(h), then, notwithstanding that the
certificates evidencing any shares of Series A Preference Stock so called for
redemption shall not have been surrendered, the shares represented thereby so
called for redemption shall be deemed no longer outstanding, dividends with
respect to the shares so called for redemption shall cease to accrue after the
date fixed for redemption, and all rights with respect to the shares so called
for redemption shall forthwith after such date cease and terminate, except for
the right of the holders to receive the shares of Common Stock and other funds,
if any, payable pursuant to this paragraph (4) without interest upon surrender
of their certificates therefor.
(j) Dividend Payments. The holders of shares of Series A Preference
Stock at the close of business on a dividend payment record date shall be
entitled to receive the dividend payable on such shares on the corresponding
dividend payment date notwithstanding the call for redemption thereof (except
that
<PAGE>
holders of shares called for redemption on a date occurring between such record
date and the dividend payment date or on such dividend payment date shall not be
entitled to receive such dividend on such dividend payment date but instead will
receive accrued and unpaid dividends to such redemption date.
(k) Payment of Taxes. The Corporation will pay any and all documentary,
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on the redemption of shares of Series A
Preference Stock pursuant to this paragraph (4); provided, however, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any registration of transfer involved in the issue or delivery of shares of
Common Stock in a name other than that of the registered holder of Series A
Preference Stock redeemed or to be redeemed, and no such issue or delivery shall
be made unless and until the person requesting such issue has paid to the
Corporation the amount of any such tax or has established, to the satisfaction
of the Corporation, that such tax has been paid.
5. Liquidation Preference.
(a) Upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the Series A Preference Stock shall be preferred
as to assets over Common Stock and any other Junior Stock so that the holder of
each share of the Series A Preference Stock shall be entitled to be paid or to
have set apart for payment in respect of each such share, before any
distribution is made to the holders of Common Stock and any other Junior Stock,
a liquidation preference equal to twice the fair market value (as determined by
the Board of Directors of the Corporation based on advice of tax counsel in
accordance with United States federal income tax principles, which determination
shall be conclusive) of a Series A Depositary Share (as defined in the Deposit
Agreement dated as of June 13, 1995 between the Corporation and First Chicago
Trust Company of New York, as Depositary) on the date of issuance thereof, plus
an amount equal to all dividends accrued and unpaid up to and including the date
fixed for such payment, and such holder of a share of the Series A Preference
Stock shall not be entitled to any other payment. If upon any such liquidation,
dissolution or winding up of the Corporation, its net assets shall be
insufficient to permit the payment in full of the respective amounts to which
the holders of all outstanding shares of the Series A Preference Stock and any
outstanding Preference Stock that is Parity Stock are entitled, the entire
remaining net assets of the Corporation shall be distributed among the holders
of the Series A Preference Stock and any outstanding Preference Stock that is
Parity Stock, in amounts proportionate to the full preferential amounts to which
they are respectively entitled.
(b) The voluntary sale, lease, exchange or transfer for cash, shares of
stock (securities or other consideration) of all or substantially all the
Corporation's
<PAGE>
property or assets to, or its consolidation or merger with, one or more
corporations shall not be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation.
6. Voting Rights.
(a) The holders of record of shares of Series A Preference Stock shall
not be entitled to any voting rights except as hereinafter provided in this
paragraph (6) or as otherwise provided in the Articles of Incorporation or by
statute.
(b) The holders of shares of Series A Preference Stock shall be
entitled to vote on all matters submitted to a vote of the holders of the Common
Stock, voting together with the holders of the Common Stock (and any other class
or series of capital stock of the Corporation entitled to vote together with the
Common Stock) as one class. Each share of the Series A Preference Stock shall be
entitled to one vote.
(c) (i) If the Corporation shall have failed to pay, or declare and set
apart for payment, dividends on Preference Stock in an aggregate amount
equivalent to six (6) full quarterly dividends on all shares of Preference Stock
at the time outstanding, the number of Directors of the Corporation shall be
increased by two (2) at the first annual meeting of the shareholders of the
Corporation held thereafter, and at such meeting and at each subsequent annual
meeting until dividends payable for all past quarterly dividend periods on all
outstanding shares of Preference Stock shall have been paid, or declared and set
apart for payment, in full, the holders of the shares of Preference Stock shall
have, in addition to any other voting rights which they otherwise may have, the
exclusive and special right, voting separately as a class without regard to
series, each share of Preference Stock entitling the holder thereof to one (1)
vote per share, to elect two (2) additional members of the Board of Directors to
hold office for a term of one (1) year; provided, that the right to vote as a
class upon the election of such two (2) additional Directors shall not limit the
right of holders of the Series A Preference Stock to vote upon the election of
all other Directors and upon other matters set forth in paragraph 6(b) above.
(ii) Upon such payment, or declaration and setting apart for payment,
in full, the terms of the two (2) additional Directors so elected shall
forthwith terminate, and the number of Directors of the Corporation shall be
reduced by two (2) and such voting right of the holders of shares of Preference
Stock shall cease, subject to increase in the number of Directors as aforesaid
and to revesting of such voting right in the event of each and every additional
failure in the payment of dividends in an aggregate amount equivalent to six (6)
full quarterly dividends as aforesaid.
<PAGE>
(d) The Corporation shall not, without the affirmative vote or consent
of the holders of at least 66 2/3% of the number of shares of Preference Stock
at the time outstanding, voting or consenting (as the case may be) separately as
a class without regard to series, given in person or by proxy, either in writing
or by resolution adopted at a meeting:
(i) create any class of stock ranking prior to or on a parity with
Preference Stock as to dividends or upon liquidation or increase the
authorized number of shares of any such previously authorized class of
stock;
(ii) alter or change any of the provisions of the Articles of
Incorporation so as to adversely affect the preferences, special rights or
powers given to the Preference Stock;
(iii) increase the number of shares of Preference Stock which the
Corporation is authorized to issue; or
(iv) alter or change any of the provisions of the Articles of
Incorporation or hereof so as to adversely affect the preferences, special
rights or powers given to the Series A Preference Stock.
7. Conversion. The Series A Preference Stock shall not have any
conversion rights to convert into Common Stock.
8. Fundamental Transactions. Upon the effectiveness of a Fundamental
Transaction at any time, each share of Series A Preference Stock shall be
entitled to receive consideration per share (i) of the same type as is offered
to or to be received by holders of Common Stock pursuant to or in connection
with such Fundamental Transaction and (ii) having a fair value equal to the fair
value of the Common Stock that each share of Series A Preference Stock would
receive if such share of Series A Preference Stock were redeemed by the Company
immediately prior to such time in accordance with paragraph 4 hereof.
SERIES B PARTICIPATING CUMULATIVE PREFERENCE STOCK
Section 1. Designation and Number of Shares. The shares of such series
shall be designated as "Series B Participating Cumulative Preference Stock" (the
"Series B Preference Stock"), and the number of shares constituting such series
shall be 1,743,019. Such number of shares of the Series B Preference Stock may
be increased or decreased by resolution of the Board of Directors; provided that
no decrease shall reduce the number of shares of Series B Preference Stock to a
number less than the number of shares then outstanding plus the number of shares
issuable upon exercise or conversion of outstanding rights, options or other
securities issued by the Corporation.
<PAGE>
Section 2. Dividends and Distributions.
(A) The holders of shares of Series B Preference Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable on or before 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) of each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of any share or
fraction of a share of Series B Preference Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 and (b) subject
to the provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends or other distributions and 100 times the
aggregate per share amount of all non-cash dividends or other distributions
(other than (i) a dividend payable in shares of Common Stock, par value $1.00
per share, of the Corporation (the "Common Stock")) or (ii) a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series B Preference Stock.
If the Corporation shall at any time after February 1, 1996 (the "Rights
Declaration Date") pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the amount to which holders of
shares of Series B Preference Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
B Preference Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than as described
in clauses (i) and (ii) of the first sentence of paragraph (A)); provided that
if no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date (or, with respect to the first
Quarterly Dividend Payment Date, the period between the first issuance of any
share or fraction of a share of Series B Preference Stock and such first
Quarterly Dividend Payment Date), a dividend of $1.00 per share on the Series B
Preference Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
<PAGE>
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series B Preference Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series B Preference Stock, unless
the date of issue of such shares is on or before the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue and be cumulative from the date of issue of such shares, or
unless the date of issue is a date after the record date for the determination
of holders of shares of Series B Preference Stock entitled to receive a
quarterly dividend and on or before such Quarterly Dividend Payment Date, in
which case dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on shares of Series B Preference Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series B Preference Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall not be more than 60 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. Except as otherwise provided by Article FOURTH of
the Articles of Incorporation of the Corporation or by statute, holders of
Series B Preference Stock shall have no voting rights, and their consent shall
not be required for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preference Stock as provided in Section 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on outstanding shares of Series B
Preference Stock shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other distributions on, any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series B Preference Stock;
(ii) declare or pay dividends on, or make any other distributions on, any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series B Preference Stock,
except dividends paid ratably on the Series B Preference Stock and all such
other parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled;
<PAGE>
(iii) redeem, purchase or otherwise acquire for value any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series B Preference Stock; provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of stock of the Corporation ranking
junior (as to dividends and upon dissolution, liquidation or winding up) to
the Series B Preference Stock; or
(iv) redeem, purchase or otherwise acquire for value any shares of Series B
Preference Stock, or any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series B
Preference Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of Series B Preference Stock and all such other parity stock upon
such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for value any shares of stock of the Corporation
unless the Corporation could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preference Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Series B Preference Stock without designation as to series and may be
reissued as part of a new series of Series B Preference Stock to be created by
resolution or resolutions of the Board of Directors as permitted by the Articles
of Incorporation or as otherwise permitted under Pennsylvania Law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preference Stock unless,
prior thereto, the holders of shares of Series B Preference Stock shall have
received $1.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment;
provided that the holders of shares of Series B Preference Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, or (2) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation,
<PAGE>
dissolution or winding up) with the Series B Preference Stock, except
distributions made ratably on the Series B Preference Stock and all such other
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. If the
Corporation shall at any time after the Rights Declaration Date pay any dividend
on Common Stock payable in shares of Common Stock or effect a subdivision or
combination of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of shares of Series B
Preference Stock were entitled immediately prior to such event under the
provision clause (1) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 7. Consolidation, Merger, etc. If the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash or any other property, then in any such case the shares of Series B
Preference Stock shall at the same time be similarly exchanged for or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount of stock, securities, cash or
any other property, as the case may be, into which or for which each share of
Common Stock is changed or exchanged. If the Corporation shall at any time after
the Rights Declaration Date pay any dividend on Common Stock payable in shares
of Common Stock or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of
Series B Preference Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The Series B Preference Stock shall not be
redeemable.
Section 9. Rank. The Series B Preference Stock shall rank junior (as to
dividends and upon liquidation, dissolution and winding up) to all other series
of the Corporation's preference stock except any series that specifically
provides that such series shall rank junior to the Series B Preference Stock.
<PAGE>
Section 10. Fractional Shares. Series B Preference Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series B Preference Stock.
Common Stock
Each holder of record of Common Stock shall have the right to one (1) vote
for each share of Common Stock standing in his name on the books of the
Corporation. Except as required by law or as otherwise specifically provided in
this Article Fourth, the holders of Preference Stock having voting rights and
holders of Common Stock shall vote together as one class.
Preemptive Rights
Neither the holders of Preference Stock nor the holders of Common Stock
shall have any preemptive rights, and the Corporation shall have the right to
issue and to sell to any person or persons any shares of its capital stock or
any option rights or any securities having conversion or option rights, without
first offering such shares, rights or securities to any holders of Preference
Stock or Common Stock.
Fifth: 1. The affirmative vote of the holders of not less than 75% of the
outstanding shares of "Voting Stock" held by shareholders other than a "Related
Person" shall be required for the approval or authorization of any "Business
Combination" of the Corporation with any Related Person; provided, however, that
the 75% voting requirement shall not be applicable if:
(i) The "Continuing Directors" of the Corporation by at least a two-thirds
vote of such Continuing Directors have expressly approved such Business
Combination either in advance of or subsequent to such Related Person's having
become a Related Person; or
(ii) The cash or fair market value (as determined by at least two-thirds of
the Continuing Directors) of the property, securities or other consideration to
be received per share by holders of Voting Stock of the Corporation in the
Business Combination is not less than the "Highest Per Share Price" or the
"Highest Equivalent Price" paid by the Related Person in acquiring any of its
holdings of the Corporation's Voting Stock.
2. For purposes of this Article FIFTH:
(i) The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a subsidiary of the Corporation with or into
a Related Person, (b) any sale, lease, exchange, transfer or other disposition,
including without limitation a mortgage or any other security device, of all or
any "Substantial Part" of the assets either of the Corporation (including
without limitation any voting securities of a subsidiary) or of a subsidiary of
the Corporation to a Related Person, (c) any merger or consolidation of a
Related Person with or into the Corporation or a subsidiary of the Corporation,
(d) any sale, lease, exchange, transfer or other disposition,
<PAGE>
including without limitation a mortgage or other security device, of all or any
Substantial Part of the assets of a Related Person to the Corporation or a
subsidiary of the Corporation, (e) the issuance of any securities of the
Corporation or a subsidiary of the Corporation to a Related Person other than
the issuance on a pro rata basis to all holders of shares of the same class
pursuant to a stock split or stock dividend, or a distribution of warrants or
rights, (f) any recapitalization that would have the effect of increasing the
voting power of a Related Person, and (g) any agreement, contract or other
arrangement providing for any of the transactions described in this definition
of Business Combination.
(ii) The term "Related Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with its
"Affiliates" and "Associates" becomes the "Beneficial Owner" of an aggregate of
10% or more of the outstanding Voting Stock of the Corporation, and any
Affiliate or Associate of any such individual, corporation, partnership or other
person or entity; provided, however, that the term "Related Person" shall not
include (1) a person or entity whose acquisition of such aggregate percentage of
Voting Stock was approved in advance by two-thirds of the Continuing Directors
or (2) any trustee or fiduciary when acting in such capacity with respect to any
employee benefit plan of the Corporation or a wholly owned subsidiary of the
Corporation. No person who became a Related Person prior to December 31, 1983
shall be treated as a Related Person for the purpose of voting on any amendment,
alteration, change or repeal of this Article FIFTH or voting on any Business
Combination to which such Related Person is not a party.
(iii) The term "Substantial Part" shall mean an amount equal to 10% or more
of the fair market value as determined by two-thirds of the Continuing Directors
of the total consolidated assets of the Corporation and its subsidiaries taken
as a whole as of the end of its most recent fiscal year ended prior to the time
the determination is being made.
(iv) The term "Beneficial Owner" shall mean any person (1) who beneficially
owns shares of Voting Stock within the meaning ascribed in Rule 13d-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on the date of adoption of this Article FIFTH by the shareholders of the
Corporation, or (2) who has the right to acquire Voting Shares (whether or not
such right is exercisable immediately) pursuant to any agreement, contract,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise.
<PAGE>
(v) For purposes of subparagraph l(ii) of this Article FIFTH, the term
"other consideration to be received" shall include, without limitation, the
value per share of Common Stock or other capital stock of the Corporation
retained by its existing shareholders as adjusted to give effect to the proposed
Business Combination in the event of any Business Combination in which the
Corporation is a surviving corporation.
(vi) The term "Voting Stock" shall mean all of the outstanding shares of
Common Stock entitled to vote on each matter on which the holders of record of
Common Stock shall be entitled to vote, and each reference to a proportion of
shares of Voting Stock shall refer to such proportion of the votes entitled to
be cast by such shares.
(vii) The term "Continuing Director" shall mean a Director who was a member
of the Board of Directors of the Corporation immediately prior to the time that
the Related Person involved in a Business Combination became a Related Person.
As to any person who became a Related Person prior to December 31, 1983, a
Continuing Director shall mean a Director who was a member of the Board of
Directors on December 31, 1983.
(viii) A Related Person shall be deemed to have acquired a share of the
Voting Stock of the Corporation at the time when such Related Person became the
Beneficial Owner thereof. With respect to the shares owned by Affiliates,
Associates or other persons whose ownership is attributed to a Related Person
under the foregoing definition of Related Person, if the price paid by such
Related Person for such shares is not determinable by two-thirds of the
Continuing Directors, the price so paid shall be deemed to be the higher of (a)
the price paid upon the acquisition thereof by the Affiliate, Associate or other
person or (b) the market price of the shares in question at the time when the
Related Person became the Beneficial Owner thereof.
(ix) The terms "Highest Per Share Price" and "Highest Equivalent Price" as
used in this Article FIFTH shall mean the following: If there is only one (1)
class of capital stock of the Corporation issued and outstanding, the Highest
Per Share Price shall mean the highest price that can be determined to have been
paid at any time by the Related Person for any share or shares of that class of
capital stock. If there is more than one class of capital stock of the
Corporation issued and outstanding, the Highest Equivalent Price shall mean,
with respect to each class and series of capital stock of the Corporation, the
amount determined by two-thirds of the Continuing Directors, on whatever basis
they believe is appropriate, to be the highest per share price equivalent of the
highest price that can be determined to have been paid at any time by the
Related Person for any share or shares of any class of series of capital stock
of the Corporation. In determining the Highest Per Share Price and Highest
Equivalent Price, all purchases by the Related Person shall be taken into
account regardless of whether the shares were purchased before or after the
Related Person became a Related Person. Also, the Highest Per Share Price and
the Highest
<PAGE>
Equivalent Price shall include any brokerage commissions, transfer taxes and
soliciting dealers' fees or other value paid by the Related Person with respect
to the shares of capital stock of the Corporation acquired by the Related
Person.
(x) The terms "Affiliate" and "Associate" shall have the same meaning as in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934 as on the date of the adoption of this Article FIFTH by the
shareholders of the Corporation.
3. The provisions set forth in this Article FIFTH may not be amended, altered,
changed or repealed in any respect unless such action is approved by the
affirmative vote of the holders of not less than 75% of the outstanding shares
of Voting Stock of the Corporation at a meeting of the shareholders duly called
for the consideration of such amendment, alteration, change or repeal; provided,
however, that if there is a Related Person, such action must also be approved by
the affirmative vote of the holders of not less than 75% of the outstanding
shares of Voting Stock not held by any Related Person.
Sixth: The duration of the Corporation shall be perpetual.
Seventh: The business and affairs of the Corporation shall be managed by a
Board of Directors. The number of Directors of the Corporation shall be fixed
from time to time by the Bylaws but shall not be fixed at less than five (5).
The number of the Directors may be increased or diminished (but not to less than
five (5)), as may from time to time be provided in the Bylaws. In case of any
increase in the number of Directors the additional Directors shall be elected as
may be provided in the Bylaws, either by the Directors or by the shareholders.
The shareholders of the Corporation shall not be entitled to cumulative
voting rights in the election of Directors.
Any officer elected or appointed by the Board of Directors may be removed
at any time by affirmative vote of a majority of the whole Board of Directors.
The Board of Directors, by the affirmative vote of a majority of the whole
Board, may appoint from the Directors an Executive Committee, of which a
majority shall constitute a quorum, and to such extent as shall be provided in
the Bylaws such Committee shall have and may exercise all or any of the powers
of the Board of Directors, including the power to cause the seal of the
Corporation to be affixed to all papers that may require it.
The Board of Directors, by the affirmative vote of a majority of the whole
Board, may appoint any other standing committees, and such standing committees
shall have and may exercise such powers as shall be conferred or authorized by
the Bylaws.
The Board of Directors shall have power from time to time to fix and to
determine and to vary the amount of the working capital of the Corporation and
to direct and determine the use and disposition of any surplus or net profits
over and above the capital stock paid in.
<PAGE>
Subject always to alteration and repeal by the shareholders, and to Bylaws
made by the shareholders, the Board of Directors may make Bylaws and from time
to time may alter, amend or repeal any Bylaws; and any Bylaws made by the Board
of Directors may be so altered or repealed by the shareholders at any annual
meeting or at any special meeting, provided notice of such proposed alteration
or repeal be included in the notice of the special meeting.
Eighth: 1. Any direct or indirect purchase or other acquisition by the
Corporation of any "Equity Security" of any class or series from any "Five
Percent Holder", if such Five Percent Holder has been the "Beneficial Owner" of
such security for less than two years prior to the earlier of the date of such
purchase or any agreement in respect thereof at a price in excess of the "Fair
Market Value" thereof, shall, except as hereinafter expressly provided, require
the affirmative vote of the holders of at least a majority of the "Voting Stock"
excluding Voting Stock of which such Five Percent Holder is the Beneficial
Owner; provided, however, that the foregoing majority voting requirement shall
not be applicable with respect to (i) any purchase or other acquisition of an
Equity Security made as part of a tender or exchange offer by the Corporation to
purchase Equity Securities of the same class made on the same terms to all
holders of such security, or (ii) a purchase program effected on the open market
and not the result of a privately-negotiated transaction, or (iii) any optional
or required redemption of an Equity Security pursuant to the terms of such
security.
2. For purposes of this Article EIGHTH:
(i) The term "Equity Security" means an equity security of the Corporation
within the meaning ascribed to such term in Section 3(a)(11) of the Securities
Exchange Act of 1934, as in effect on January 1, 1985.
(ii) The term "Fair Market Value" means, in the case of any Equity
Security, the closing sale price on the trading day immediately preceding the
earlier of the date of any purchase subject to Paragraph 1 of this Article
EIGHTH, or the date of any agreement in respect thereof (such earlier date, the
"Valuation Date"), of a share of such Equity Security on the Composite Tape for
New York Stock Exchange Listed Stocks, or, if such security is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such security is not
listed on such Exchange, on the principal United States securities exchange
registered under the Securities Exchange Act of 1934 on which such security is
listed, or, if such security is not listed on any such Exchange, the closing bid
quotation with respect to such security on the trading day immediately preceding
the Valuation Date on the National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in use, or if no such quotations
are available, the Fair Market Value on the Valuation Date of such security as
determined by the Board of Directors in good faith.
<PAGE>
(iii) The term "Person" shall mean any individual, corporation, partnership
or other entity and shall include any group comprised of any Person and any
other Person with whom such Person or any Affiliate or Associate of such Person
has any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Voting Stock, and any
member of such group.
(iv) The term "Five Percent Holder" shall mean and include any Person
which, together with its "Affiliates" and "Associates" becomes the Beneficial
Owner of an aggregate of five percent (5%) or more of any class of Voting Stock
of the Corporation, and any Affiliate or Associate of any such Person; provided,
however, that for purposes of this Article EIGHTH, including, without
limitation, Paragraphs 1 and 4 hereof, the term Five Percent Holder shall not
include (1) any trustee or fiduciary when acting in such capacity with respect
to any employee benefit plan of the Corporation or a wholly owned subsidiary of
the Corporation or (2) any Person that would have been a Five Percent Holder on
December 31, 1984 if this Article EIGHTH were then in effect.
(v) The terms "Affiliate" and "Associate" shall have the meanings ascribed
to them in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on May 3, 1984.
(vi) The term "Beneficial Owner" shall mean any person (1) who beneficially
owns shares of Voting Stock within the meaning ascribed in Rule 13d-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on May 3, 1984, or (2) who has the right to acquire Voting Stock (whether
or not such right is exercisable immediately) pursuant to any agreement,
contract, arrangement or understanding, or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise.
(vii) The term "Voting Stock" shall mean all of the outstanding shares of
Common Stock, and the outstanding shares of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation entitled
to vote on each matter on which the holders of Common Stock shall be entitled to
vote, and each reference to a vote of a proportion of shares of Voting Stock
shall refer to such proportion of the votes entitled to be cast by such shares.
(viii) In any determination whether a Person is a Five Percent Holder for
purposes of this Article EIGHTH, the relevant class of securities outstanding
shall be deemed to comprise all such securities deemed owned by such Person and
its Affiliates and Associates through application of Paragraph 2(vi)(2) of this
Article EIGHTH, but shall not include any other securities of such class which
may be issuable pursuant to any agreement, contract, arrangement or
understanding, or upon exercise of conversion rights, exchange rights, warrants
or options, or otherwise.
<PAGE>
3. The Board of Directors shall have the power to interpret all the provisions
of this Article EIGHTH and their application to a particular transaction,
including, without limitation, the power to determine (a) whether a Person is a
Five Percent Holder, (b) the number of shares of Voting Stock or other Equity
Securities of which any Person and its Affiliates and Associates are the
Beneficial Owners, (c) whether a Person is an Affiliate or Associate of another,
and (d) what is Fair Market Value and whether a price is above Fair Market Value
as of a given date. Any such determination made by the Board of Directors shall
be conclusive and binding to the fullest extent permitted by law.
4. The provisions set forth in this Article EIGHTH may not be amended, altered,
changed or repealed in any respect and no provision inconsistent herewith shall
be adopted unless such action is approved by the affirmative vote of the holders
of at least 75% of the Voting Stock of the Corporation at any annual meeting of
shareholders or at any special meeting duly called for that purpose, provided
notice of such amendment, alteration, change or repeal or adoption be included
in the notice of the special meeting; provided, however, that if there is a Five
Percent Holder such action must also be approved by the affirmative vote of the
holders of at least 75%. of the Voting Stock excluding Voting Stock of which any
Five Percent Holder is the Beneficial Owner.
Ninth: 1. Directors and Officers as Fiduciaries. A Director or Officer of
the Corporation shall stand in a fiduciary relation to the Corporation and shall
perform his duties as a Director or Officer, including his duties as a member of
any committee of the Board upon which he may serve, in good faith, in a manner
he reasonably believes to be in the best interests of the Corporation, and with
such care, including reasonable inquiry, skill and diligence, as a person of
ordinary prudence would use under similar circumstances. In performing his
duties, a Director or Officer shall be entitled to rely in good faith on
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by one or more Officers
or employees of the Corporation whom the Director or Officer reasonably believes
to be reliable and competent with respect to the matters presented, counsel,
public accountants or other persons as to matters that the Director or Officer
reasonably believes to be within the professional or expert competence of such
person, or a committee of the Board of Directors upon which the Director or
Officer does not serve, duly designated in accordance with law, as to matters
within its designated authority, which committee the Director or Officer
reasonably believes to merit confidence. A Director or Officer shall not be
considered to be acting in good faith if he has knowledge concerning the matter
in question that would cause his reliance to be unwarranted. Absent breach of
fiduciary duty, lack of good faith or self-dealing, actions taken as a Director
or Officer of the Corporation or any failure to take any action shall be
presumed to be in the best interests of the Corporation.
<PAGE>
2. Personal Liability of Directors. A Director of the Corporation shall not be
personally liable, as such, for monetary damages (including without limitation,
any judgment, amount paid in settlement, penalty, punitive damages or expense of
any nature (including, without limitation, attorneys' fees and disbursements))
for any action taken, or any failure to take any action, unless (1) the Director
has breached the duties of his office or has failed to perform his duties as a
Director in good faith, in a manner he reasonably believed to be in the best
interests of the Corporation and with such care, including reasonable inquiry,
skill and diligence, as a person of ordinary prudence would use under similar
circumstances; and (2) the breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness.
3. Personal Liability of Officers. An Officer of the Corporation shall not be
personally liable, as such, to the Corporation or its shareholders for monetary
damages (including without limitation, any judgment, amount paid in settlement,
penalty, punitive damages or expense or any nature (including, without
limitation, attorneys' fees and disbursements)) for any action taken, or any
failure to take any action, unless (1) the Officer has breached the duties of
his office or has failed to perform his duties as an Officer in good faith, in a
manner he reasonably believed to be in the best interests of the Corporation and
with such care, including reasonable inquiry, skill and diligence, as a person
of ordinary prudence would use under similar circumstances; and (2) the breach
or failure to perform constitutes self-dealing, willful misconduct or
recklessness.
Tenth: Any record holder of at least ten percent (10%) of the outstanding
shares of the Corporation's Voting Stock shall have the rights to:
(a) call a special meeting of the shareholders; and
(b) to propose an amendment to the Articles by a petition setting forth the
proposed amendment, which petition shall be directed to, and filed with, the
Board of Directors; subject, however, to all limitations and restrictions which
are, or may hereafter be, imposed on, or with respect to, the Corporation's
Voting Stock and/or record holders of the Corporation's Voting Stock by
Pennsylvania statutory law (other than the provisions of Section 2521(a) of the
Pennsylvania Business Corporation Law of 1988), these Articles, or the
Corporation's Bylaws. For purposes of this Article TENTH, the term "Voting
Stock" shall mean all of the outstanding shares of Common Stock, and the
outstanding shares of any class or series of stock having preference over the
Common Stock as to dividends or as to liquidation entitled to
<PAGE>
vote on each matter on which the holders of Common Stock shall be entitled to
vote, and reference to a percentage of shares of Voting Stock shall refer to the
percentage of votes entitled to be cast by such shares.
Approved and Filed: August 4, 1971
Amended and Restated: March 30, 1990
Amended: December 23, 1992
Amended: May 4, 1995
Amended: June 13, 1995
Amended: February 1, 1996
Articles of Incorporation
Footnote: all references to gender are denoted as "he."
I, Ann C. Mule', Secretary of Sun Company, Inc. hereby certify that the
foregoing is a true and correct copy of the Articles of Incorporation of Sun
Company, Inc.
Date: February 1, 1996
s/ ANN C. MULE' Secretary
-----------------------------------
<PAGE>
EXHIBIT 3.(ii)
Sun Company, Inc.
Bylaws
2/1/96
<PAGE>
Table of Contents
Article I Page
Directors
Section 1 - Membership 4
Section 2 - Vacancies 4
Section 3 - Emergency Board 4
Section 4 - Liability of Directors 5
Section 5 - Nomination of Directors 5
Article II
Meetings of the Board of Directors
Section 1 - Place 6
Section 2 - Annual & Regular Meetings 6
Section 3 - Special Meetings 6
Section 4 - Notice 7
Section 5 - Waiver of Notice 7
Section 6 - Notice of Adjourned Meeting 7
Section 7 - Quorum 7
Section 8 - Consent Action 7
Article III
Committees
Section 1 - Executive Committee 7
Section 2 - Notice 8
Section 3 - Special Committees 8
Section 4 - Relationship to Board 8
Section 5 - Quorum 8
Section 6 - Vacancies 8
Article IV
Officers
Section 1 - Designation 8
Section 2 - Authority 9
Section 3 - Chairman of the Board 9
Section 4 - Vice Chairman of the Board 9
Section 5 - President 9
Section 6 - Executive Vice Presidents 9
Section 7 - Vice Presidents 10
Section 8 - Secretary 10
Section 9 - Treasurer 10
Section 10 - Comptroller 10
Section 11 - General Auditor 10
Section 12 - Assistant Officers 10
Article V
Meetings of Shareholders
Section 1 - Annual Meetings 11
Section 2 - Special Meetings 11
Section 3 - Notice 12
Section 4.a - Quorum 12
Section 4.b - Quorum at Shareholder-
called Special Meeting 12
Section 4.c - No Waiver of Quorum 12
Section 5 - Voting 13
<PAGE>
Section 6 - Adjournment 13
Section 7 - Proxies 13
Section 8 - Shareholders List 13
Section 9 - Record Date 14
Section 10 - Certification by Nominee 14
Section 11 - Judge of Election 14
Section 12 - Prior Notice of Share-
holder Proposals 15
Article VI
Stock Certificates
Section 1 - Description 16
Section 2 - Transfers 16
Section 3 - Registered Shareholders 16
Section 4 - Lost Certificates 16
Section 5 - Dividends 16
Article VII
Indemnification
Section 1 - General 17
Section 2 - Agreements for Indemni-
fication and Funding 17
Section 3 - Expenses 17
Section 4 - Disputes 18
Article VIII
General Provisions
Section 1 - Voting Shares of Other
Corporations 18
Section 2 - Seal 18
Section 3 - Inapplicability of Certain
Sections of the
Pennsylvania Business
Corporation Law 18
Section 4 - Amendments 18
<PAGE>
Sun Company, Inc. Bylaws
Article I: Directors
Membership
Section 1. The business and affairs of the Corporation shall be managed
by a Board of Directors consisting of the number of Directors equal to
those elected at the annual meeting of shareholders or as may from time to
time be determined by the Board, except that it shall not consist of less
than five members. Except as hereinafter provided in the case of
vacancies, Directors shall be elected by ballot at the annual meeting of
shareholders and shall hold office for one year and until successors are
duly elected and qualified, or until earlier resignation or removal.
Directors need not be residents of the state of the Commonwealth of
Pennsylvania.
Vacancies
Section 2. Vacancies in the Board of Directors may be filled by a
majority of the incumbent members of the Board, though such majority be
less than a quorum. If the number of Directors is at any time increased,
the incumbent Directors may by majority vote elect any additional Director.
Such newly elected Director shall hold office until the next annual meeting
of the shareholders and until a successor is elected and qualified, or
until earlier resignation or removal.
Emergency Board
Section 3. In the event of any emergency by reason of nuclear attack or
other attacks by enemy forces upon the North American Continent, there
shall be constituted without further action or authority an Emergency Board
of Directors. In the event of an emergency by reason of physical disasters
of national or greater scope, an attack upon the United States outside the
North American Continent, or an imminent threat of an attack or physical
disaster of national or greater scope upon the North American Continent,
there shall be constituted an Emergency Board of Directors by declaration
of the Chairman of the Board of Directors. The Emergency Board shall
consist of at least three members from the regular Board of Directors or
from officers of the Corporation or its subsidiaries who are not members of
the regular Board of Directors but who have been designated as alternate
members of the Emergency Board. The Emergency Board may exercise all of
the powers of the regular Board of Directors in the management of the
business, affairs and property of the Corporation during the emergency and
until such time as the regular Board of Directors shall resume the exercise
of its powers.
The original members of the Emergency Board shall be the Chairman, the
President and the Executive Vice Presidents who are members of the Board of
Directors, provided however, that any vacancy existing because of the
unavailability of any two of the foregoing persons shall be filled by the
alternate members. The Chairman of the Board shall serve as Chairman of
any meeting of
<PAGE>
the Emergency Board or, in the event of his unavailability for any reason,
the President or an Executive Vice President, in order designated by the
Chairman of the Board, shall serve in this capacity. In the event of the
unavailability for any reason of all of the foregoing persons, an alternate
member shall serve as Chairman at any meeting of the Emergency Board in the
order previously designated for membership by resolution of the regular
Board of Directors.
Meetings may be called by any member of the Emergency Board. Two members
shall constitute a quorum for the transaction of business and the act of
any two members present at a meeting shall be the act of the Emergency
Board. Meetings may be held by any means of communication and Directors
shall be deemed present if they are in communication with other directors
by any means. Notice of meetings may be given at any time and in any
manner, provided that a reasonable effort shall be made to give actual
notice to each member of the Emergency Board.
To the extent not inconsistent with this Section 3 of Article I, the
Bylaws in their entirety shall remain in effect during any such emergency.
No officer, Director or employee acting in good faith in accordance with
this Section 3 of Article I or any resolutions made pursuant hereto, shall
be liable for his conduct unless it is willful misconduct.
Liability of Directors
Section 4. A Director of the Corporation shall not be personally liable
for monetary damages, as such, for any action taken or any failure to take
any action, unless (1) he has breached the duties of his office or has
failed to perform his duties as a Director in good faith, in a manner he
reasonably believed to be in the best interest of the Corporation and with
such care, including reasonable inquiry, skill and diligence, as a person
or ordinary prudence would use under similar circumstances; and (2) the
breach or failure to perform constitutes self-dealing, willful misconduct
or recklessness.
Nomination of Directors
Section 5. Nominations for election to the Board of Directors may be made
by shareholders entitled to vote for the election of Directors only in the
manner specified in this Section. Shareholders may submit nominations for
consideration by a committee appointed by the Board of Directors for that
purpose. A nomination proposed to be made at an annual meeting shall be
submitted in writing to the Secretary of the Corporation no later than the
December 31 prior to the annual meeting at which such nomination is
intended to be considered. Nominations may be made at any meeting of
shareholders called for the purpose of election of Directors other than an
annual meeting only upon written notice of the shareholder's intent to make
such nominations at the meeting delivered to the Secretary of the
Corporation at least sixty (60) days prior to the date of such meeting;
provided, however, that if the date of such meeting is first publicly
announced or disclosed (in a public filing or otherwise) less than seventy
(70) days prior to the date of such meeting,
<PAGE>
such prior notice shall be given not more than ten (10) days after such
date is first so announced or disclosed. Such nominations and written
notice of any nominations by shareholders under this section shall contain
the following information:
(a) name, residence and business address of the nominating
shareholder;
(b) a representation that the shareholder is a record holder or
beneficial owner of the Corporation's voting shares and a statement of the
number of such shares;
(c) a representation that the shareholder intends to appear in
person or by proxy at the meeting to nominate the individuals specified in
the notice, if the nominations are to be made at a meeting of shareholders;
(d) information regarding each nominee such as would be required
to be included in a proxy statement;
(e) a description of all arrangements or understandings between
and among the shareholder and each and every nominee; and
(f) the written consent of each nominee to serve as a Director,
if elected.
The judge of election or the person presiding at the meeting, in the
absence of the judge of election, shall determine whether any nomination is
made according to these procedures and should be accepted. Such decision
shall be deemed conclusive and binding on all shareholders of the
Corporation.
Article II: Meetings of the Board of Directors
Place
Section 1. Meetings of the Board of Directors, regular or special may be
held either within or without the Commonwealth of Pennsylvania.
Annual & Regular Meetings
Section 2. As soon as practicable following their election at the annual
meeting of the shareholders, the Directors shall meet for the purpose of
organization. Regular meetings of the Board of Directors thereafter may be
held at such times and at such places as the Board may by resolution
determine.
Special Meetings
Section 3. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors, the Vice Chairman, the
President, an Executive Vice President who is a member of the Board of
Directors, or upon the written request of a majority of the Directors.
<PAGE>
Notice
Section 4. No notice shall be required of the meeting of the Board of
Directors for the purpose of organization or for the regular meetings fixed
as aforesaid, but at least forty-eight hours notice shall be given by mail
or telegram of all special meetings of the Directors specifying the place,
day and hour of the meeting. Neither the business to be transacted nor the
purpose of any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting. This notice
may be waived by a Director in writing either before or after the meeting.
Waiver of Notice
Section 5. The attendance of a Director at any meeting small constitute a
waiver of notice of such meeting except where a Director attends for the
express purpose of objecting to the transaction of any business because the
meeting has not been lawfully called or convened.
Notice of Adjourned Meeting
Section 6. Notice of an adjourned meeting of the Board of Directors need
not be given if the time and place are fixed at the meeting adjourning.
Quorum
Section 7. At all meetings of the Board of Directors, a majority of the
Directors in office shall constitute a quorum for the transaction of
business. The act of a majority of the Directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors,
unless the act of a greater or lesser number is required by statute or the
Articles of Incorporation. The majority of Directors present, though less
than a quorum, may adjourn any meeting from time to time.
Consent Action
Section 8. Any action required to be taken at a meeting of the Board or
any committee thereof shall be deemed the action of the Board of Directors
or of a committee thereof if all the Directors or committee members, as the
case may be, execute, either before or after the action is taken, a written
consent thereto, and the consent is filed with the records of the
Corporation.
Article III: Committees
Executive Committee
Section 1. The Board of Directors shall designate an Executive Committee
consisting of such number of members as may be determined from time to time
to serve at the pleasure of the Board who shall be elected from the members
of the Board by a majority of the whole Board. The Committee shall elect a
Chairman from among its members. To the extent permitted by Pennsylvania
laws, the Executive Committee may exercise all or any of the powers of the
Board of Directors in the management of the business, affairs and property
of the Corporation during the interval between meetings of the Board;
provided however, that no action shall be taken by the Executive Committee
if any member of such Committee has voted in opposition thereto.
<PAGE>
Notice
Section 2. The Executive Committee need not hold its meetings at any
particular time or place, but such meetings shall be held upon reasonable
notice to members of the Committee.
Special Committees
Section 3. The Board of Directors may appoint such other standing or
special committees, and officers therefor, as it may deem proper, and, to
the extent permitted by Pennsylvania laws, may delegate to such committees
any of the powers possessed by the Board which may be required by such
committees in carrying out the purposes for which they are appointed. Each
of such committees shall have at least three members. Membership on the
Board of Directors shall not be prerequisite to membership on such
committees.
Relationship to Board
Section 4. Committees shall be responsible to the full Board of Directors
and shall report upon the exercise of their powers and duties at each
regular meeting of the Board of Directors, or when called upon by the
Board.
Quorum
Section 5. A majority of any committee shall constitute a quorum for the
transaction of business, and shall be required to constitute the act of the
committee.
Vacancies
Section 6. The Board of Directors may fill vacancies in any committee,
and may appoint one or more alternate members of a committee who shall have
the power to act in the absence or disability of a member of such
committee. The Board of Directors may abolish any committee at its
pleasure, and may remove a committee member from membership on a committee
at any time, with or without cause.
Article IV: Officers
Designation
Section 1. The officers of the Corporation shall be chosen by the Board
of Directors at its organization meeting and shall include a Chairman of
the Board of Directors, a President, one or more Executive Vice Presidents,
one or more Vice Presidents, any of whom at the pleasure of the Board may
be designated Senior Vice President or Group Vice President, a Secretary, a
Treasurer,a Comptroller, and a General Auditor, all of who shall be the
principal officers of the Corporation and may include one or more Vice
Chairmen of the Board who would be principal officers, and such other
officers and assistant officers as the Board of Directors may from time to
time determine. Any number of offices may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than
one capacity if such instrument is required by law to be executed,
acknowledged or verified by two or more officers. Of the officers so
chosen by the Board of Directors, the Chairman of the
<PAGE>
Board of Directors, the Vice Chairmen of the Board of Directors, and the
President shall be chosen from among the Directors. All officers of the
Corporation shall hold their offices at the pleasure of the Board of
Directors.
Authority
Section 2. Notwithstanding the legal authority conferred by these Bylaws
upon the officers named herein, the Board of Directors may by resolution
establish such positions of authority, supervision and responsibility as in
the judgment of the Board may be necessary or appropriate for the internal
administration of the affairs of the Corporation. The performance of any
duty by any officer shall be conclusive evidence of his authority to act,
including the delegation of any of his powers to other officers or
employees under his direction.
The Board of Directors may designate either the Chairman of the Board or
the President as the Chief Executive Officer or the Chief Operating Officer
of the Corporation.
The Chief Executive Officer shall have general supervision of the affairs
of the Corporation, subject to the policies and direction of the Board of
Directors, and shall supervise and direct all officers and employees of the
Corporation, but may delegate in his discretion any of his powers to any
officer or such other executives as he may designate.
The Chief Operating Officer shall have general supervision and direction
of all operating officers and employees of the Corporation but may delegate
in his discretion any of his powers to any Vice President or such other
executives as he may designate.
Chairman of the Board
Section 3. The Chairman of the Board of Directors shall preside at all
meetings of the shareholders and of the Board of Directors. He shall ex-
officio be a member of all committees of the Board of Directors except as
otherwise determined by the Board. He shall also perform such other duties
as the Board of Directors may from time to time assign to him.
Vice Chairman of the Board
Section 4. The Vice Chairman of the Board of Directors shall perform such
duties as the Board of Directors or the Chairman may from time to time
assign to them.
President
Section 5. The President shall perform such duties as the Board of
Directors or the Chairman may from time to time assign to him.
Executive Vice Presidents
Section 6. The Executive Vice Presidents shall perform such duties as
shall, from time to time, be imposed upon them by the Chairman or the
President.
<PAGE>
Vice Presidents
Section 7. The Vice Presidents shall perform such duties and shall be
responsible to such officers of the Corporation as the Chairman, President
or an Executive Vice President may direct.
Secretary
Section 8. The Secretary shall keep the minutes of all meetings of the
shareholders, the Board of Directors, all committees of the Board except as
otherwise designated by the Board and shall give all notices of meetings of
the shareholders, the Boards and the committees of the Board of which he
serves as Secretary. He shall have control of the custody of all deeds,
contracts, agreements, and other corporate records, except as otherwise
provided in these Bylaws or by the Board of Directors, and shall attend to
such correspondence of the Corporation as the Chairman shall direct. He
shall be the custodian of the seal of the Corporation and shall affix it to
any instrument requiring the same, except as otherwise provided herein or
by the Board of Directors. He shall be responsible to such officer or
officers of the Corporation as the Chairman may designate.
Treasurer
Section 9. The Treasurer shall be responsible for all receipts and
disbursements of the Corporation and the custodianship of the Corporation's
funds. He shall have full authority, directly or by his delegation to
selected officers or other employees, to receive and give receipts for all
moneys due and payable to the Corporation from any source whatever, and to
endorse checks, drafts, and warrants in its name and on its behalf. He
shall be responsible for depositing the funds of the Corporation in its
name in such depositories as may be designated by him; shall sign or
delegate the signing of all checks, notes and drafts and shall be charged
with the general establishment of the Corporation's policies and procedures
relating to short-term financing, cash management, credits and collections
and insurance.
Comptroller
Section 10. The Comptroller shall be the chief accounting officer of the
Corporation and shall arrange for the keeping of adequate records of all
assets, liabilities and transactions of the Corporation.
General Auditor
Section 11. The General Auditor shall be chief control officer of the
Corporation and shall be responsible for the establishment of internal
controls. He shall see that adequate audits are currently and regularly
made.
Assistant Officers
Section 12. Assistant officers shall perform such duties as their
immediate principal officers may from time to time direct or delegate, and,
during the absence of said principal officers, shall perform all the duties
of said principal officers.
<PAGE>
Article V: Meetings of Shareholders
Annual Meetings
Section 1. The annual meeting of the shareholders for the election of
Directors for the ensuing year and for the transaction of such other
business as may be properly brought before the meeting shall be held each
year on such day and at such time and place, either within or without
Pennsylvania, as shall be determined in advance by the Board of Directors.
Special Meetings
Section 2. Special meetings of the shareholders may be called at any time
by the Chairman of the Board of Directors or by the order of the Board of
Directors. Special meetings of the shareholders may also be called by any
shareholder entitled to call such a meeting pursuant to, and in compliance
with, the provisions of Article TENTH of the Articles of Incorporation of
the Corporation. A shareholder wishing to call a special meeting of the
shareholders of the Corporation shall give written notice to the Secretary
of the Corporation which shall (a) certify that such shareholder is the
record owner of at least Ten Percent (10%) of the outstanding shares of the
Corporation's Voting Stock, (b) contain such shareholder's undertaking to
continue to hold, at all times from the date of such notice until the final
adjournment of such special meeting, at least ten percent of the
outstanding shares of the Corporation's Voting Stock, (c) specify the
proposal or proposals such shareholder desires to have submitted for
shareholder action at such special meeting, and (d) include all other
material and information required to be submitted or provided pursuant to
law, the Corporation's Articles of Incorporation and these Bylaws,
including, without limitation, Article I, Section 5 hereof, if applicable,
given the nature of such shareholder's proposal or proposals.
The Secretary of the Corporation promptly shall transmit such notice to
the Board of Directors which shall, within sixty days following the date on
which such notice is received by the Secretary, determine the sufficiency
of the notice and whether any one or more of the shareholder's proposals
constitutes a "Proper Matter for Shareholder Consideration" as set forth
herein. A shareholder's proposal shall be deemed a "Proper Matter for
Shareholder Consideration" unless, pursuant to Rule 14a-8(c) promulgated
under the Securities Exchange Act of 1934, as amended (or any similar or
successor rule or regulation), the Corporation would be entitled to omit
such proposal from its proxy statement for an annual meeting of
shareholders had such proposal been timely submitted to the Corporation for
consideration at such annual meeting of shareholders in accordance with
Rule 14a-8. No special meeting of shareholders shall be held at the call
of a shareholder unless there has been a determination by the Board of
Directors that (i) the notice submitted by the shareholder complies with
the requirements of this Section, and (ii) at least one of the proposals of
such shareholder is a Proper Matter for Shareholder Consideration;
<PAGE>
provided, however, that only proposals submitted by the calling shareholder
which are determined to be Proper Matters for Shareholder Consideration
shall be considered at such special meeting of shareholders.
Notwithstanding the foregoing, nothing herein shall prohibit the Board of
Directors from submitting matters to the shareholders at any special
meeting of shareholders including, without limitation, a special meeting of
shareholders called by a shareholder.
A shareholder calling a special meeting of shareholders shall reimburse
the Corporation for all costs incurred by it in connection with such
special meeting of shareholders including, without limitation, the costs of
preparing and disseminating a proxy statement or information statement in
connection with, and soliciting proxies to be voted at, such special
meeting of shareholders. A special meeting of shareholders of the
Corporation called by a shareholder in accordance with Article Tenth of the
Articles of Incorporation shall be held at such date, time and place as is
determined by the Board of Directors of the Corporation, which date shall
be not later than ninety days after the date on which the Board of
Directors shall have determined that the shareholder has duly called such
meeting by giving proper written notice to the Secretary of the Corporation
and has otherwise complied with applicable law and the Articles of
Incorporation and Bylaws of the Corporation.
Notice
Section 3. Unless waived, written notice of the time, place and purpose
of every meeting of the shareholders shall be given by the Secretary not
less than five nor more than ninety days before the date of the meeting
either personally or by mail, to each shareholder of record entitled to
vote at such meeting.
Quorum
Section 4.a. Unless otherwise provided in the Articles of Incorporation,
by statute or these Bylaws, at all meetings of shareholders, the presence
in person or by proxy, of shareholders entitled to cast a majority of the
votes which all shareholders are entitled to cast at the meeting shall
constitute a quorum for the transaction of business.
Quorum at Shareholder-called Special Meeting
Section 4.b. At any special meeting of shareholders called by a
shareholder pursuant to Article Tenth of the Corporation's Articles of
Incorporation, the presence, in person or by proxy, of shareholders
entitled to cast at least Sixty-Six and Two Thirds Percent (66 2/3%) of the
votes which all shareholders are entitled to cast shall constitute a quorum
for the transaction of business.
No Waiver of Quorum
Section 4.c. Section 1756(b) of the BCL (and any successor provision of
similar import) shall not be applicable with respect to any special meeting
of shareholders called by a shareholder
<PAGE>
pursuant to Article Tenth of the Corporation's Articles of Incorporation,
or to any adjournment thereof. If a special meeting of shareholders called
by a shareholder pursuant to Article Tenth of the Corporation's Articles of
Incorporation cannot be organized for lack of a quorum under Section 4.b of
these Bylaws, such special meeting shall be deemed finally adjourned
without the taking of any shareholder action.
Voting
Section 5. When a quorum is present at any meeting of the shareholders,
the shareholders entitled to vote and casting a majority of the votes at
the meeting shall decide any question brought before such meeting, unless
the question is one which, by express provision of law, the Articles of
Incorporation, or these Bylaws, requires a different vote, in which case
such express provision shall govern and control the decision of such
question. The shareholders present in person or by proxy at any duly
organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Adjournment
Section 6. The holders of shares entitled to cast a majority of the votes
present or represented at any meeting may adjourn the meeting from time to
time, though such majority constitutes less than a quorum. When a meeting
is adjourned to another time or place, it shall not be necessary to give
notice of the adjourned meeting if the time and place to which the meeting
is adjourned are announced at the meeting adjourning and at the adjourned
meeting only such business is transacted as might have been transacted at
the original meeting.
Proxies
Section 7. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may
authorize another person or persons to act for him by proxy. Every proxy
shall be executed in writing by the shareholder or his agent. No proxy
shall be valid after eleven months from the date of its execution, unless a
longer time is expressly provided therein. Unless it is coupled with an
interest, a proxy shall be revocable at will. A proxy shall not be revoked
by the death or incapacity of the shareholder but shall continue in force
until revoked by the personal representative or guardian of the
shareholder. The presence at any meeting of a shareholder who has given a
proxy shall not revoke such proxy unless the shareholder shall file written
notice of such revocation with the Secretary of the meeting prior to the
voting of such proxy.
Shareholders List
Section 8. The officer or agent having charge of the stock transfer books
for shares of the Corporation shall make and certify a complete list of the
shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof. Such list shall be arranged alphabetically within class and
series, with the address of and the number of shares held by each
shareholder.
<PAGE>
The information contained in such list shall be made available to the
shareholders by appropriate means at the time and place of the meeting of
shareholders.
Record Date
Section 9. For the purpose of determining the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment
thereof, or to express consent to or dissent from any proposal without a
meeting, or for the purpose of determining shareholders entitled to receive
payment of any dividend or allotment of any right, or for the purpose of
any other action, the Board of Directors may fix, in advance, a record date
for any such determination of shareholders. Such date shall not be more
than ninety days before the date of such meeting nor more than ninety days
prior to any other action. In such case only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to notice of,
and to vote at such meeting, or to receive payment of such dividend, or to
receive such allotments of rights or to exercise such rights, as the case
may be, notwithstanding transfer of any shares on the books of the
Corporation after any record date so fixed. When the determination of
shareholders of record entitled to notice of or to vote at any meeting of
shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, unless the Board fixes a new record
date under this section for the adjourned meeting.
Certification by Nominee
Section 10. The nominee shareholder of record of a shareholder dividend
reinvestment plan or of an employee benefit plan may certify in writing to
the Corporation that all or a portion of the shares of the Corporation
registered in the name of such nominee are held for the account of a
specified person or persons. Such certification shall be received by the
Corporation no later than 15 days after the record date for each special or
annual meeting of shareholders. The certification shall be in the form
specified by the Corporation and shall include such information as the
name, address and number of shares of the beneficial owners, taxpayer
identification number, and any other information that the Corporation may
deem necessary. Upon receipt by the Corporation of such certification, the
person or persons specified in the certification shall be deemed, for the
purposes of notice of and voting at the meeting of shareholders, to be the
holders of record of the number of shares specified, in place of the
nominee shareholder of record.
Judge of Election
Section 11. In advance of any meeting of shareholders the Board may
appoint one or three judges of election to act at the meeting or any
adjournment thereof. If such judges are not so provided by the Board or
shall fail to qualify, the person presiding at a shareholder meeting may,
and on the request of any shareholder entitled to vote thereat shall, make
such appointment. In case any person appointed as judge of election fails
to appear or act, the vacancy may be filled by appointment made by the
Board in
<PAGE>
advance of the meeting or at the meeting by the person presiding thereat.
Each judge of election, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of judge of
election at such meeting with strict impartiality and according to the best
of his ability. No person shall be elected a Director at a meeting at
which he has served as a judge of election.
Prior Notice of Shareholder Proposals
Section 12. At any annual or special meeting of shareholders, proposals
by shareholders (other than proposals of a shareholder calling a special
meeting of shareholders pursuant to Article Tenth of the Corporation's
Articles of Incorporation) shall be considered only if (a) such proposal is
a "Proper Matter for Shareholder Consideration" as set forth herein, and
(b) prior notice thereof has been timely given as provided herein. A
shareholder's proposal shall be deemed a "Proper Matter for Shareholder
Consideration" unless, pursuant to Rule 14a-8(c) promulgated under the
Securities Exchange Act of 1934, as amended (or any similar or successor
rule or regulation), the Corporation would be entitled to omit such
proposal from its proxy statement for an annual meeting of shareholders had
such proposal been timely submitted to the Corporation for consideration at
such annual meeting of shareholders in accordance with Rule 14a-8. Notice
of any proposal to be presented by any shareholder (outside the
solicitation of proxies pursuant to the rules and regulations of the
Securities and Exchange Commission) at an annual meeting of shareholders
shall be delivered in writing to the Secretary of the Corporation not later
than December 31 prior to the annual meeting of shareholders at which such
proposal is to be presented. Notice of any proposal to be presented by any
shareholder at any special meeting of shareholders shall be delivered in
writing to the Secretary of the Corporation not less than sixty (60) days
prior to the date of such special meeting; provided, however, that if the
date of such special meeting is first publicly announced or disclosed (in a
public filing or otherwise) less than seventy (70) days prior to the date
of such special meeting, such prior notice shall be given not more than ten
(10) days after such date is first so announced or disclosed. Notice of any
such proposal to be presented at any shareholders meeting shall include:
the text of the proposal to be presented, a brief written statement of the
reasons for such shareholder's support of the proposal, the name and
address of record of the proposing shareholder, the number and class of all
shares of each class of stock of the Corporation beneficially owned by such
shareholder, a representation that the shareholder is the holder of Voting
Stock of the Corporation, is entitled to vote at such meeting and intends
to appear in person or by proxy to present the proposal at such meeting.
It shall also describe, in detail, any material interest of such
shareholder in the proposal. If the Board of Directors, after affording
the shareholder a reasonable opportunity to cure any deficiency which the
Board of Directors identifies in the original notice, determines that
notice of a proposal was not effected in accordance with the foregoing
procedure, then such proposal shall not be eligible for consideration at
the meeting and such determination shall be conclusive and binding upon the
Corporation and its shareholders.
<PAGE>
Article VI: Stock Certificates
Description
Section 1. Certificates evidencing the ownership of the shares of stock
of the Corporation of any class shall be issued to those entitled to them
by transfer or otherwise. Each certificate shall bear a distinguishing
number, the actual or facsimile signatures of the Chairman of the Board and
of the Secretary, the actual or facsimile seal of the Corporation, and such
recitals as may be required by law. The stock certificates in any class or
classes shall be issued in numerical order, and a full record of the
issuance of each such certificate shall be made in the books usually kept
for that purpose or required by law. The certificates shall be of such
form and design as the Board of Directors may adopt and the form and design
thereof may from time to time be changed by the Board.
Transfers
Section 2. All shares of stock may be transferred on the books of the
Corporation by the registered holders thereof or by their attorneys legally
constituted or their legal representatives by surrender of the certificates
therefor for cancellation and a written assignment of the shares evidenced
thereby. The Board of Directors may from time to time appoint such
transfer Agents and Registrars of stock as it may deem advisable and may
define their powers and duties.
Registered Shareholders
Section 3. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold such person liable for
calls and assessments and shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Pennsylvania.
Lost Certificates
Section 4. Any person or persons applying for a certificate of stock to
be issued in lieu of one alleged to be lost or destroyed shall, pursuant to
the laws of Pennsylvania relating to lost or destroyed certificates of
stock, furnish to the Corporation such information as the Board of
Directors may require to ascertain whether a certificate of stock has been
lost or destroyed.
Dividends
Section 5. If any date appointed for the payment of any dividend, or
fixed for determining the shareholders of record to whom the same is
payable, shall in any year fall upon a Sunday or legal holiday, then such
dividend shall be payable or such shareholders of record shall be
determined on the next succeeding day not a Sunday or legal holiday.
<PAGE>
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 indemnity
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 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 thing
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.
<PAGE>
Article VIII: General Provisions
Voting Shares of Other Corporations
Section 1. The Chairman or the Vice Chairmen of the Board of Directors,
the President, any Executive Vice President, any Vice President, or the
Secretary of the Corporation may vote, or appoint a proxy to vote, the
shares of any other business corporation or nonprofit corporation which are
registered in the name of the Corporation.
Seal
Section 2. The seal of the Corporation shall be circular in form, and
shall have inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal Pennsylvania."
Inapplicability of Certain Sections of the Pennsylvania Business
Corporation Law
Section 3. 15 Pa.C.S. SS 2541-2548 (formerly Section 910),15 Pa.C.S. SS
2551-2556 (formerly Section 91 1) and 15 Pa.C.S. SS 2571-2575 as adopted
December 23, 1983, March 23, 1988 and April 27, 1990, respectively, shall
not be applicable to this Corporation.
Amendments
Section 4. These Bylaws, including Article I, Section 4 entitled
"Liability of Directors" and Article VII entitled "Indemnification," may be
altered or amended at any annual meeting of shareholders, or at any special
meeting called for that purpose, by the shareholders entitled to vote and
casting a majority of the votes at the meeting, or at any duly constituted
meeting of the Board of Directors, by a majority of the Directors then in
office. Any alteration or amendment of Article 1, Section 4 and Article
VII shall be prospective only and shall not affect any rights or
obligations then existing.
<PAGE>
EXHIBIT 10.1
SUN COMPANY, INC.
LONG-TERM INCENTIVE PLAN
ARTICLE I
General
1.1 PURPOSE. The purpose of this Long-Term Incentive Plan (the
"Plan") is to more closely associate the interests of the management of Sun
Company, Inc. and its subsidiaries and affiliates (collectively referred to
as the "Company") with the shareholders by relating capital accumulation
with increases in shareholder value, encourage management success by
providing capital accumulation as an incentive, maintain competitive
compensation levels, and provide an incentive to management for continuous
employment with the Company.
1.2 ADMINISTRATION. (a) The Plan shall be administered by a
Committee of disinterested persons appointed by the Board of Directors of
Sun Company, Inc., as constituted from time to time. The Committee shall
consist of at least three members of the Board, none of whom shall be,
while serving on the Committee, or shall have been, within one year prior
to commencement of service on the Committee, eligible for selection as a
person to whom stock may be allocated or to whom stock options or stock
appreciation rights may be granted under the Plan or any other plan of the
Company under which participants are entitled to acquire stock, stock
options or stock appreciation rights of the Company.
(b) The Committee shall have the authority, in its sole
discretion and from time to time: (i) to designate the employees or
classes of employees eligible to participate in the Plan; (ii) to grant
awards provided in the Plan in such form and amount as the Committee shall
determine; (iii) to impose such limitations, restrictions and conditions
upon any such award as the Committee shall deem appropriate; and (iv) to
interpret the Plan, to adopt, amend and rescind rules and regulations
relating to the Plan, and to make all other determinations and take all
other action necessary or advisable for the implementation and
administration of the Plan.
(c) Decisions and determinations of the Committee on all matters
relating to the Plan shall be in its sole discretion and shall be
conclusive. No member of the Committee shall be liable for any action
taken or decision made in good faith relating to the Plan or any award
thereunder.
1.3 ELIGIBILITY FOR PARTICIPATION. Participants shall be
selected by the Committee from the executive officers and other key
employees of the Company who occupy responsible managerial or
<PAGE>
professional positions and who have the capability of making a substantial
contribution to the success of the Company. In making this selection and
in determining the form and amount of awards the Committee shall give
consideration to the functions and responsibilities of the individual, past
and potential contributions to profitability and sound growth, the value of
his services to the Company, and any other factors deemed relevant by the
Committee.
1.4 TYPES OF AWARDS UNDER PLAN. Awards under the Plan may be in
the form of any one or more of the following:
(i) Stock Options ("Options"), as described in Article II;
(ii) Alternate Appreciation Rights ("Alternate Rights"), as described in
Article III;
(iii) Limited Rights ("Limited Rights") as described in Article IV;
and/or
(iv) Restricted Stock Units, as described in Article V.
1.5 AGGREGATE LIMITATION ON AWARDS. (a) Shares of stock which
may be issued under the Plan shall be authorized and unissued or treasury
shares of Common Stock of Sun Company, Inc. ("Common Stock"). The maximum
number of shares of Common Stock which may be issued under the Plan shall
be 3.0 million.
(b) For purposes of Section 1.5(a), in addition to shares of
Common Stock actually issued pursuant to the exercise of Options, there
shall be deemed to have been issued a number of shares equal to the sum of
(i) the number of shares of Common Stock in respect of which Alternate
Rights (as described in Article III) and Limited Rights (as described in
Article IV) shall have been exercised, and (ii) the number of Restricted
Stock Units (as described in Article V) the value of which the Company
shall have paid under the Plan.
(c) Any shares of Common Stock subject to an Option which for any
reason is terminated unexercised or expires shall again be available for
issuance under the Plan, but shares subject to an Option which are not
issued as a result of the exercise of Alternate Rights or Limited Rights
shall not again be available for issuance under the Plan.
1.6 EFFECTIVE DATE AND TERM OF PLAN. (a) The Plan shall become
effective on the date approved by the holders of a majority of the shares
of Common Stock present in person or by proxy and entitled to vote at the
1986 Annual Meeting of Shareholders of Sun Company, Inc.
(b) No awards shall be made under the Plan after the last day of
the Company's 1991 fiscal year provided, however, that the
<PAGE>
Plan and all awards made under the Plan prior to such date shall remain in
effect until such awards have been satisfied or terminated in accordance
with the Plan and the term of such awards.
1.7 PRIOR PLANS. Effective on December 31, 1986, no further
awards shall be made under the Sun Company, Inc. Executive Long-Term
Incentive Plan adopted in June, 1978 provided, however, that any rights
theretofore granted under that Plan shall not be affected.
ARTICLE II
Stock Options
2.1 AWARD OF STOCK OPTIONS. The Committee may from time to
time, and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant in the
Plan one or more Options to purchase for cash or shares the number of
shares of Common Stock allotted by the Committee. The date an Option is
granted shall mean the date selected by the Committee as of which the
Committee allots a specific number of shares to a participant pursuant to
the Plan.
2.2. OPTION AGREEMENTS. The grant of an Option shall be
evidenced by a written Stock Option Agreement, executed by the Company and
the holder of an Option ("optionee"), stating the number of shares of
Common Stock subject to the Option evidenced thereby, and in such form as
the Committee may from time to time determine.
2.3 OPTION PRICE. The purchase price per share of Common Stock
("option price") deliverable upon the exercise of an Option shall be 100%
of the fair market value of a share of Common Stock on the date the Option
is granted.
2.4 TERM AND EXERCISE OF OPTIONS. Except as provided in Section
2.10, and unless otherwise determined by the Committee, each Option granted
under the Plan shall become exercisable with respect to 25% of the shares
subject thereto on the first anniversary of the date of grant thereof, and
with respect to an additional 25% of such shares on each of the second,
third and fourth anniversaries of such date of grant. Options may be
partially exercised from time to time within such percentage limitations.
Options granted under the Plan shall be exercisable during such period or
periods as the Committee shall determine; provided, however, that no Option
shall be exercisable more than 10 years after the date of grant thereof.
<PAGE>
2.5 MANNER OF PAYMENT. Each Stock Option Agreement shall set
forth the procedure governing the exercise of the Option granted
thereunder, and shall provide that, upon such exercise in respect of any
shares of Common Stock subject thereto, the optionee shall pay to the
Company, in full, the option price for such shares with cash or with
previously owned Common Stock. As soon as practicable after receipt of
such payment, the Company shall deliver to the optionee a certificate or
certificates for such shares of Common Stock. Notwithstanding the
foregoing, if previously owned Common Stock is used in payment of the
option price, the optionee may not use the shares received upon such
exercise to immediately satisfy the exercise price of additional options.
2.6 DEATH OF OPTIONEE. Upon the death of the optionee, any rights
to the extent exercisable on the date of death may be exercised by the
optionee's estate, or by a person who acquires the right to exercise such
Option by bequest or inheritance or by reason of the death of the optionee,
provided that such exercise occurs within both the remaining effective term
of the Option and one year after the optionee's death. The provisions of
this Section 2.6 shall apply notwithstanding the fact that the optionee's
employment may have terminated prior to death, but only to the extent of
any rights exercisable on the date of death.
2.7 RETIREMENT OR DISABILITY. (a) Upon termination of the
optionee's employment by reason of permanent disability (as determined by
the Committee), the optionee may, within 36 months from the date of
termination, exercise any Options to the extent such Options are
exercisable during such 36-month period.
(b) Upon termination of the optionee's employment by reason of
retirement, in the sole discretion of the Committee, the number of such
Options which may be exercised will be adjusted by multiplying the total
number of such Options by a fraction, the numerator of which shall be the
number of full and partial calendar months between the date of award of
such Options and the date of retirement and the denominator of which shall
be 48 months. The optionee may within 36 months from the date of
retirement in the sole discretion of the Committee exercise such Options as
adjusted.
(c) Notwithstanding the provisions of Section 2.7(b), upon
termination of the optionee's employment by reason of retirement, in the
sole discretion of the Committee, the optionee may, within 36 months from
the date of retirement, exercise any Options granted by the Committee by
resolution dated January 5, 1989, provided such exercise occurs within the
effective term of the Options.
2.8 TERMINATION FOR OTHER REASONS. Except as provided in
Section 2.6, 2.7 and 2.10 or except as otherwise determined by the
Committee, all Options granted under the Plan shall terminate
<PAGE>
upon the termination of the optionee's employment.
2.9 EFFECT OF EXERCISE. The exercise of any Option shall cancel
that number of related Alternate Rights, if any, and Limited Rights, if
any, which is equal to the number of shares of Common Stock purchased
pursuant to said Option.
2.10 ACCELERATION OF OPTIONS. (a) Notwithstanding any
provisions to the contrary in agreements evidencing Options granted
thereunder, each outstanding Option shall, except as provided in Section
2.10(c), become immediately and fully exercisable if there is a Change in
Control of Sun Company, Inc. A "Change in Control" shall be deemed to have
occurred if: (i) Continuing Directors cease, within one year of a Control
Transaction, to constitute a majority of the Board (or of the Board of
Directors of any successor to Sun Company, Inc., or to all or substantially
all of its assets) or (ii) any entity, person or Group acquires shares of
Sun Company, Inc. in a transaction or series of transactions that result in
such entity, person or Group directly or indirectly owning beneficially
more than fifty percent (50%) of the outstanding voting shares.
As used herein, "Control Transaction" shall mean any of the
following transactions or any combination thereof: (1) any tender offer
for or acquisition of capital stock of Sun Company, Inc., (2) any merger,
consolidation or sale of all or substantially all of the assets of Sun
Company, Inc., or (3) the submission of a nominee or nominees for the
position of director of Sun Company, Inc. by a shareholder or a Group of
shareholders in a proxy solicitation or otherwise. As used herein,
"Continuing Director" shall mean a Director who was a member of the Board
of Directors immediately prior to a Control Transaction which results in a
Change in Control. As used herein, "Group" shall mean persons who act in
concert as described in Sections 13(d)(3) and/or 14(d)(2) of the Securities
Exchange Act of 1934, as amended.
(b) In the event of the occurrence of a Change in Control, each
outstanding Option will be exercisable in full for a period of seven months
following the date of occurrence of such event (the "Exercise Period"),
provided however, that such Options shall not be exercised more than 10
years after the date of the grant thereof.
(c) Notwithstanding the provisions of Section 2.10(a), no Option
granted to an optionee may become exercisable as a result of such
acceleration within six months of the date of its grant.
(d) The requirement that an optionee be employed by the Company
at the time of exercise, as set forth in Section 2.8 (except in cases of
death, disability or retirement) is waived
<PAGE>
during the Exercise Period as to an optionee who was employed by the
Company at the time of the Change in Control and who is subsequently
terminated by the Company other than for just cause or who voluntarily
terminates if such termination was the result of a good faith determination
by the optionee that as a result of the Change in Control he is unable to
effectively discharge his present duties or the duties of the position
which he occupied just prior to the Change in Control. As used herein,
"just case" shall mean willful misconduct or dishonesty, or conviction of
or failure to contest prosecution for a felony, or excessive absenteeism
unrelated to illness.
ARTICLE III
Alternate Appreciation Rights
3.1 AWARD OF ALTERNATE RIGHTS. Concurrently with or subsequent
to the award of any Option under the Plan to purchase one or more shares of
Common Stock, the Committee may, subject to the provisions of the Plan and
such other terms and conditions as the Committee may prescribe, award to
the optionee a related Alternate Appreciation Right ("Alternate Right")
with respect to each share of Common Stock.
3.2 AGREEMENT EVIDENCING ALTERNATE RIGHTS. Alternate Rights
granted under the Plan shall be evidenced by written agreements in such
form as the Committee may from time to time determine.
3.3. EXERCISE. An optionee who has been granted Alternate
Rights may, from time to time, in lieu of the exercise of an equal number
of Options, elect to exercise one or more Alternate Rights and thereby
become entitled to receive from the Company payment in such form and amount
as shall be determined pursuant to Sections 3.4 and 3.5. Alternate Rights
shall be exercisable only to the same extent and subject to the same
conditions as the Option or Options related thereto are exercisable, as
provided in Article II. The Committee may, in its discretion, prescribe
additional conditions to the exercise of any Alternate Rights.
3.4 AMOUNT OF PAYMENT. The amount of payment to which an
optionee shall be entitled upon the exercise of each Alternate Right shall
be equal to 100% of the amount, if any, by which the fair market value of a
share of Common Stock on the exercise date exceeds the fair market value of
a share of Common Stock on the date the Option related to said Alternate
Right was granted.
3.5 FORM OF PAYMENT. (a) Any exercise of an Alternate Right by
an optionee during the period beginning on the third business day following
the date of release of the Company's
<PAGE>
quarterly or annual financial data and ending on the twelfth business day
following such date shall be paid in cash only. The exercise of an
Alternate Right at any other time shall be paid in Common Stock only. To
the extent that payment is made in Common Stock, the number of shares shall
be determined by dividing the amount of such payment by the fair market
value of a share of Common Stock as of the close of business on the date on
which the Company receives notice of the optionee's exercise of such
Alternate Rights.
(b) Notwithstanding the provisions of Section 3.5(a), the
exercise of an Alternate Right granted by the Compensation Committee by
resolution dated January 5, 1989 shall be paid in Common Stock only.
3.6 EFFECT OF EXERCISE. The exercise of any Alternate Rights
shall cancel an equal number of shares of Common Stock subject to the
Options related thereto and an equal number of Limited Rights, if any,
related to said Options.
3.7 RETIREMENT OR DISABILITY. (a) Upon termination of the
optionee's employment (including employment as a director of this Company
after an optionee terminates employment as an officer or key employee of
this Company) by reason of permanent disability (as determined by the
Committee), the Alternate Right recipient may, in the sole discretion of
the Committee, within six months from the date of termination, exercise any
Alternate Rights to the extent such Alternate Rights are exercisable during
such six-month period.
(b) Upon termination of the optionee's employment by reason of
retirement, in the sole discretion of the Committee, the number of such
Alternate Rights which may be exercised will be adjusted by multiplying the
total number of such Alternate Rights by a fraction, the numerator of which
shall be the number of full and partial calendar months between the date of
award of the Options to which the Alternate Rights are related and the date
of retirement and the denominator of which shall be 48 months. The
optionee may within six months from the date of retirement, in the sole
discretion of the Committee, exercise such Alternate Rights as adjusted.
(c) Notwithstanding the provisions of Section 3.7(b), upon
termination of the optionee's employment by reason of retirement, in the
sole discretion of the Committee, the optionee may, within 36 months from
the date of retirement, exercise any Alternate Rights granted by the
Committee by resolution dated January 5, 1989, provided such exercise
occurs within the effective term of the Alternate Rights.
3.8 DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS. Except
as provided in Section 3.7. or except as otherwise
<PAGE>
determined by the Committee, all Alternate Rights granted under the Plan
shall terminate upon the termination of the optionee's employment or upon
the death of the optionee.
ARTICLE IV
Limited Rights
4.1 AWARD OF LIMITED RIGHTS. Concurrently with or subsequent to
the award of any Option and Alternate Rights, if any, the Committee may,
subject to the provisions of the Plan and such other terms and conditions
as the Committee may prescribe, award to the optionee a related Limited
Right with respect to each share of Common Stock.
4.2 AGREEMENT EVIDENCING LIMITED RIGHTS. Limited Rights granted
under the Plan shall be evidenced by written agreements in such form as the
Committee may from time to time determine.
4.3 EXERCISE. Limited Rights are exercisable in full for a
period of seven months following the date of a Change in Control, provided,
however, that Limited Rights may not be exercised under any circumstances
until the expiration of the six-month period following the date of grant.
Limited Rights shall be exercisable only to the same extent and subject to
the same conditions as the Option or Options related thereto are
exercisable, as provided in Section 2.10.
4.4. AMOUNT OF PAYMENT. The amount of payment to which an
optionee shall be entitled upon the exercise of each Limited Right shall be
equal to 100% of the amount, if any, which is equal to the difference
between the price per share of Common Stock covered by the related Option
on the date the Option was granted and the Market Price of a share of such
Common Stock. Market Price is defined to be the greater of (i) the highest
price per share of the Company's Common Stock paid in connection with any
Change in Control and (ii) the highest price per share of the Company's
Common Stock reflected in the consolidated trading tables of THE WALL
STREET JOURNAL (presently the NYSE - Composite Transactions) during the 60-
day period prior to the Change in Control.
4.5 FORM OF PAYMENT. Payment of the amount to which an optionee
is entitled upon the exercise of Limited Rights, as determined pursuant to
Section 4.4, shall be made solely in cash.
4.6 EFFECT OF EXERCISE. If Limited Rights are exercised, the
Options, and Alternate Rights, if any, related to such Limited Rights cease
to be exercisable to the extent of the number of shares with respect to
which the Limited Rights were exercised.
<PAGE>
Upon the exercise or termination of the Options, and Alternate Rights, if
any, related to such Limited Rights, the Limited Rights granted with
respect thereto terminate to the extent of the number of shares as to which
the related Options and Alternate Rights were exercised or terminated.
4.7 RETIREMENT OR DISABILITY. Upon termination of the
optionee's employment (including employment as a director of this Company
after an optionee terminates employment as an officer or key employee of
this Company) by reason of permanent disability (as determined by the
Committee) or retirement in the sole discretion of the Committee, the
optionee may, within six months from the date of termination, exercise any
Limited Right to the extent such Limited Right is exercisable during such
six-month period.
4.8 DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS. Except
as provided in Section 4.7 or 4.9, or except as otherwise determined by the
Committee, all Limited Rights granted under the Plan shall terminate upon
the termination of the optionee's employment or upon the death of the
optionee.
4.9 TERMINATION RELATED TO A CHANGE IN CONTROL. The requirement
that an optionee be employed by the Company at the time of exercise, as set
forth in Section 4.8 (except in cases of disability or retirement) is
waived during the Exercise Period as to any optionee who was employed by
the Company at the time of the Change in Control and who is subsequently
terminated by the Company other than for just cause or who voluntarily
terminates if such termination was the result of a good faith determination
by the optionee that as a result of the Change in Control he is unable to
effectively discharge his present duties or the duties of the position
which he occupied just prior to the Change in Control. As used herein
"just cause" shall mean willful misconduct or dishonesty or conviction of
or failure to contest prosecution for a felony, or excessive absenteeism
unrelated to illness.
ARTICLE V
Restricted Stock Units
5.1 AWARD OF RESTRICTED STOCK UNITS. The Committee may from
time to time, and subject to the provisions of the Plan and such other
terms and conditions as the Committee may prescribe, grant Restricted Stock
Units to any participant under the Plan. At the time it grants any
Restricted Stock Units, the Committee shall determine whether or not the
payment of such Restricted Stock Units shall be conditioned solely upon the
recipient's continued employment with the Company throughout the
Restriction Period or upon the attainment of certain performance targets.
<PAGE>
5.2 RESTRICTED STOCK UNIT AGREEMENTS. Restricted Stock Units
granted under the Plan shall be evidenced by written agreements in such
form as the Committee may from time to time determine.
5.3 NUMBER OF RESTRICTED STOCK UNITS. Upon making an award, the
Committee shall determine (and the Restricted Stock Unit Agreement shall
state) the number of Restricted Stock Units granted to the grantee. The
initial number of Units granted may be adjusted by a performance factor, in
accordance with Section 5.8, to be applied at the conclusion of the
Restriction Period to determine the final number of Restricted Stock Units
to be paid.
5.4 LENGTH OF RESTRICTION PERIOD. Upon making an award, the
Committee shall determine (and the Restricted Stock Unit Agreement shall
state) the length of the Restriction Period. Restriction Periods will
normally be from three to five years; however, the Committee may establish
other time periods in its sole discretion.
5.5 DIVIDEND EQUIVALENTS. At the Committee's discretion, each
grantee of Restricted Stock Units which have not been terminated will be
entitled to receive payment from the Company in an amount equal to each
cash dividend the Company would have paid to such grantee had he or she, on
the record date for payment of such dividend, owned of record shares of
Common Stock equal to the number of Restricted Stock Units which had been
awarded to such grantee as of the close of business on such record date.
Payment of Dividend Equivalents is expressly conditioned on continued
employment with the Company at the time of payment. Each such payment
shall be made by the Company on the payment date of the cash dividend in
respect of which it is to be made, or as soon as practicable thereafter.
5.6 PAYMENT OF RESTRICTED STOCK UNITS. (a) Payment in respect
of Restricted Stock Units conditioned solely upon the participant's
continued employment with the Company throughout the Restriction Period
shall be made within 90 days after the Restriction Period for such Units
has ended.
(b) Payment in respect of Restricted Stock Units conditioned upon
the attainment of performance targets shall be made to the grantee thereof
within 90 days after the Restriction Period for such Units has ended, but
only to the extent the Committee determines that the applicable performance
targets have been met and subject to any adjustment made to the number of
Restricted Stock Units which shall be paid, pursuant to Section 5.8(b).
5.7 FORM OF PAYMENT. Payment for Restricted Stock Units shall
be made in cash, shares of Common Stock or partly in cash and partly in
Common Stock as the Committee shall determine in its sole discretion. To
the extent that payment is made in cash,
<PAGE>
the amount shall be determined by multiplying the number of Restricted
Stock Units paid out by the fair market value of a share of Common Stock as
of the close of business on the day after the Restriction Period has ended.
To the extent that payment is made in Common Stock, the number of shares
paid shall be equal to the number of Restricted Stock Units so paid out.
5.8 PERFORMANCE TARGETS. (a) Upon the award of Restricted
Stock Units, the Committee may establish (and the Restricted Stock Unit
Agreement shall state) the performance targets to be attained within the
Restriction Period as a condition of such Units being earned out.
Performance targets may be based entirely on each participant's business
unit goals, or partially on business unit goals and partially on corporate
goals, or entirely on corporate goals. Goals may include qualitative as
well as quantitative measures. Performance targets may be adjusted during
the Restriction Period, at the Committee's sole discretion, to reflect
extraordinary events beyond management's control.
(b) Attainment by the participant of performance targets in
respect of a Restriction Period will result in 100% of the Restricted Stock
Units being earned out. Attainment of performance below the performance
targets in respect of a Restriction Period shall result in a proportionate
amount of the value of the Units (on a scale from 0 to 100%) being earned
out, as determined by the Committee.
5.9 TERMINATION OF EMPLOYMENT. Except as provided in Sections
5.10 and 5.11, or except as otherwise determined by the Committee, all
Restricted Stock Units granted to a participant under the Plan shall
terminate upon termination of the participant's employment with the Company
prior to the end of the Restriction Period applicable to such Restricted
Stock Units, and in such event the participant shall not be entitled to
receive any payment in respect thereof.
5.10 DEATH, DISABILITY OR RETIREMENT. In the event that the
employment of a participant who has been granted Restricted Stock Units
under the Plan shall terminate during a Restriction Period by reason of
death, permanent disability (as determined by the Committee), or
retirement, such participant shall be entitled, in the sole discretion of
the Committee, to receive upon the expiration of the Restriction Period
payment in respect of said Restricted Stock Units; provided, however, that
such Units shall be adjusted by multiplying the amount thereof by a
fraction, the numerator of which shall be the number of full and partial
calendar months between the date of award of the Restricted Stock Units and
the date that employment terminated, and the denominator of which shall be
the number of full and partial calendar months from the date of award to
the end of the Restriction Period.
<PAGE>
5.11 ACCELERATION OF RESTRICTED STOCK UNITS. (a) Notwith-
standing any provisions to the contrary in Restricted Stock Unit Agreements
or the provisions of Sections 5.1 through 5.8, if there is a Change in
Control of the Company all outstanding Restricted Stock Units shall be
payable in shares of Common Stock, regardless of whether the applicable
Restriction Period has expired and regardless of whether the applicable
performance targets have been met.
(b) In the event of the occurrence of a Change in Control, the
grantee of Restricted Stock Units shall be entitled to receive payment
thereunder within 90 days following the date of occurrence of such event.
(c) Notwithstanding the provisions of Section 5.9, if a
participant was employed by the Company at the time of the Change in
Control and is subsequently terminated by the Company other than for cause
or who voluntarily terminates if such termination is the result of a good
faith determination by the participant that as a result of the Change in
Control he is unable to effectively discharge his present duties of the
position which he occupied just prior to the Change in Control, within the
90-day period as described in Section 5.11(b), he shall be eligible to
receive payment of Restricted Stock Units as provided in Section 5.11(a)
and (b). As used herein, "just cause" shall mean willful misconduct or
dishonesty or conviction of or failure to contest prosecution for a felony,
or excessive absenteeism unrelated to illness.
ARTICLE VI
Miscellaneous
6.1 GENERAL RESTRICTION. Each award under the Plan shall be
subject to the requirement that, if at any time the Committee shall
determine that (i) the listing, registration or qualification of the shares
of Common Stock subject or related thereto upon any securities exchange or
under any state or Federal law, or (ii) the consent or approval of any
government regulatory body, or (iii) an agreement by the grantee of an
award with respect to the disposition of shares of Common Stock, is
necessary or desirable as a condition of, or in connection with, the
granting of such award or the issue or purchase of shares of Common Stock
thereunder, such award may not be consummated in whole or in part unless
such listing, registration, qualification, consent, approval or agreement
shall have been effected or obtained free of any conditions not acceptable
to the Committee.
<PAGE>
6.2 NON-ASSIGNABILITY. No award under the Plan shall be
assignable or transferable by the recipient thereof, except by will or by
the laws of descent and distribution. During the life of the recipient,
such award shall be exercisable only by such person or by such person's
guardian or legal representative.
6.3 WITHHOLDING TAXES. Whenever the Company proposes or is
required to issue or transfer shares of Common Stock under the Plan, the
Company shall have the right to require the grantee to remit to the Company
an amount sufficient to satisfy any Federal, state and/or local withholding
tax requirements prior to the delivery of any certificate or certificates
for such shares. Whenever under the Plan payments are to be made in cash,
such payments shall be net of an amount sufficient to satisfy any Federal,
state and/or local withholding tax requirements.
6.4 RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in
any agreement entered into pursuant to the Plan shall confer upon any
participant the right to continue in the employment of the Company or
effect any right which the Company may have to terminate the employment of
such participant.
6.5 NON-UNIFORM DETERMINATIONS. The Committee's determinations
under the Plan (including without limitation determinations of the persons
to receive awards, the form, amount and timing of such awards, the terms
and provisions of such awards and the agreements evidencing same) need not
be uniform and may be made by it selectively among persons who receive, or
are eligible to receive, awards under the Plan, whether or not such persons
are similarly situated.
6.6 RIGHTS AS A SHAREHOLDER. The recipient of any award under
the Plan shall have no rights as a shareholder with respect thereto unless
and until certificates for shares of Common Stock are issued to him.
6.7 DEFINITIONS. (a) As used in the Plan, the term
"subsidiary" means any corporation of which, at the time more than 50% of
the shares entitled to vote generally in an election of directors are owned
directly or indirectly by the Sun Company, Inc. or any subsidiary thereof.
(b) As used in the Plan, the term "affiliate" means any person or
entity which directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with Sun Company,
Inc.
(c) As used in the Plan, the term "fair market value" as of any
date and in respect of any share of common Stock means the
<PAGE>
then most-recent closing price of a share of Common Stock reflected in the
consolidated trading tables of THE WALL STREET JOURNAL (presently the NYSE-
Composite Transactions) or any other publication selected by the Committee,
provided that, if shares of Common Stock shall not have been traded on the
New York Stock Exchange for more than 10 days immediately preceding such
date or if deemed appropriate by the Committee for any other reason, the
fair market value of shares of Common Stock shall be as determined by the
Committee in such other manner as it may deem appropriate. In no event
shall the fair market value of any share of Common Stock be less than its
par value.
6.8 LEAVES OF ABSENCE. The Committee shall be entitled to make
such rules, regulations and determinations as it deems appropriate under
the Plan in respect of any leave of absence taken by the recipient of any
award. Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (i) whether or not any such leave of absence
shall constitute a termination of employment within the meaning of the Plan
and (ii) the impact, if any, of any such leave of absence on awards under
the Plan theretofore made to any recipient who takes such leave of absence.
6.9 NEWLY ELIGIBLE EMPLOYEES. The Committee shall be entitled
to make such rules, regulations, determinations and awards as it deems
appropriate in respect of any employee who becomes eligible to participate
in the Plan or any portion thereof after the commencement of an award or
incentive period.
6.10 ADJUSTMENTS. In any event of any change in the
outstanding Common Stock by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares or the like, the Committee may appropriately adjust the number of
shares of Common Stock which may be issued under the Plan, the number of
shares of Common Stock subject to Options theretofore granted under the
Plan, the option price of Options theretofore granted under the Plan, the
amount of Restricted Stock Units theretofore awarded under the Plan, the
performance targets referred to in Section 5.8 and any and all other
matters deemed appropriate by the Committee.
6.11 AMENDMENT OF THE PLAN. The Committee may at any time and
from time to time terminate or modify or amend the Plan in any respect,
except that without shareholder approval the Committee may not (i) increase
the maximum number of shares of Common Stock which may be issued under the
Plan (other than increases pursuant to Section 6.10), (ii) extend the
period
<PAGE>
during which any award may be granted or exercised, or (iii) extend the
term of the Plan. The termination or any modification or amendment of the
Plan shall not without the consent of a participant, affect his or her
rights under an award previously granted to him or her.
<PAGE>
1
EXHIBIT 10.3
SUN COMPANY, INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
As Amended and Restated
Effective February 7, 1996
<PAGE>
2
ARTICLE I
Definitions
1.01 CASH UNIT is the entry in a Deferred Compensation Account of a credit equal
to one dollar.
1.02 COMMITTEE means the Board Nominating and Policy Committee of the Board of
Directors of the Company.
1.03 COMPANY means Sun Company, Inc., a Pennsylvania corporation
1.04 COMPENSATION means those fees and retainers payable by the Company to a
Director in consideration for his or her service as a Director.
1.05 DEFERRED COMPENSATION ACCOUNT with respect to any Participant means the
total amount of the Company's liability for payment of voluntary deferred
compensation to the Participant under this Plan.
1.06 DIRECTOR means a member of the Board of Directors of the Company.
1.07 DIVIDEND EQUIVALENT is the entry in a Deferred Compensation Account or a
Restricted Deferred Compensation Account of a dividend credit with respect
to a Share Unit, each Dividend Equivalent being equal to the dividend paid
from time to time on a Share.
1.08 INTEREST EQUIVALENT is the entry in a Deferred Compensation Account of an
interest credit with respect to a Cash Unit, the interest factor being
determined by the Compensation Committee of the Board of Directors of the
Company in the same manner as in the Executive Resource Deferred
Compensation Plan.
1.09 PARTICIPANT means a Director who has elected to defer the receipt of
compensation or a Director who is required to defer the receipt of the
Restricted Share Units in accordance with the terms of this Plan.
1.10 PLAN means this Directors' Deferred Compensation Plan, as it may be amended
from time to time.
1.11 RESTRICTED DEFERRED COMPENSATION ACCOUNTS with respect to any Participant
means the total amount of the Company's liability for payment of Restricted
Share Units to the Participant under this Plan.
<PAGE>
3
1.12 RESTRICTED SHARE UNITS is the entry in a Restricted Deferred Compensation
Account of a credit equal to one Share that will be restricted until death,
retirement or termination of board service.
1.13 SHARE means a share of the Company's authorized voting Common Stock ($1.00
par value per share) and any share or shares of stock of the Company
hereafter issued or issuable in substitution or exchange for each such
share, except for the Company's Series A Preference Stock.
1.14 SHARE UNIT is the entry in a Deferred Compensation Account of a credit
equal to one Share.
ARTICLE II
Voluntary Deferral of Directors' Compensation
2.01 ELECTION TO DEFER - A Director may elect to defer all or a portion of his
or her Compensation by filing a written election with the Committee on
forms prescribed by the Committee. Such election must include the
following: a) percentage of Compensation to be deferred; b) the form of
deferral, being either Cash Units, Share Units, or a combination of the two
and the percentage allocations of such; c) a designation of beneficiary as
set forth in Article V; and d) an irrevocable election of a method of
payment as set forth in Article III. Except as otherwise determined by the
Committee in its sole discretion, effective with the first quarter 1992,
any such election shall apply only to Compensation to be earned on or after
the first day of the quarter following the calendar quarter in which the
election is received by the Committee. Such election shall continue, and
be effective, until revoked.
2.02 AMOUNT OF DEFERRAL - The amount of Compensation to be deferred shall be
designated by the Participant as a percentage of the Director's
Compensation in multiples of 5% but shall not be less than 10%. Effective
with the first quarter 1992, from time to time, but not more than once in
any one quarter, a Participant may designate the portion of fees to be
deferred and the fractions of such Compensation to be allocated to Share
Units and Cash Units. Such a designation shall not apply to any previously
credited balance in the Participant's Deferred Compensation Account, but
is only applicable to Compensation to be earned on or after the first day
of the quarter following the calendar quarter in which the designation
request is received by the Committee.
<PAGE>
4
2.03 TIME OF ELECTION - Except as otherwise determined by the Committee in its
sole discretion, an election to defer must be filed and received by the
Committee by the end of the quarter preceding the quarter in which the
Compensation is to be earned. A new Director may also elect to defer
Compensation prior to the commencement of his or her term in office. Any
election by a Participant with respect to Compensation to be earned in a
given quarter will not preclude a different action with respect to
Compensation to be earned in subsequent quarters, consistent with the
provisions of this Article II with respect to the giving of notice of
deferral election.
ARTICLE III
Voluntary Deferred Compensation Accounts
3.01 CREATION OF DEFERRED COMPENSATION ACCOUNTS - Compensation deferred
hereunder shall be credited to a Deferred Compensation Account established
by the Company for each Participant. The Participant must elect to convert
the deferred compensation to either Cash Units or Share Units, which shall
be credited to a Participant's Deferred Compensation Account as set forth
in the Plan.
3.02 CREDITING SHARE UNITS - Share Units shall be credited to a Participant's
Deferred Compensation Account at the time the Compensation would otherwise
have been paid had no election to defer been made. The number of Share
Units to be credited to the Deferred Compensation Account shall be
determined by dividing the Compensation by the average closing price for
Shares as reported on the New York Stock Exchange-Composite Transactions
for the ten (10) day period prior to the day on which the Compensation
would otherwise have been paid. Any fractional Share Units shall also be
credited to a Participant's Deferred Compensation Account. The number of
Share Units in a Deferred Compensation Account shall be appropriately
adjusted by the Committee in the event of changes in the Company's
outstanding common stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization, and such adjustments
shall be conclusive. Share Units shall not entitle any person to the
rights of a stockholder.
3.03 CREDITING CASH UNITS - Cash Units shall be credited to a Participant's
Deferred Compensation Account at the time Compensation would otherwise have
been paid had no election to defer been made.
<PAGE>
5
3.04 CREDITING DIVIDEND EQUIVALENTS - For Share Units, the Company shall credit
the Participant's Deferred Compensation Account with Dividend Equivalents
being equal to the dividends declared on the Company's Shares. The
crediting shall occur as of the date on which said dividends are paid. The
number of Share Units to be credited to the Deferred Compensation Account
shall be calculated by dividing the Dividend Equivalents by the closing
price for Shares as reported on the New York Stock Exchange-Composite
Transactions on the date the dividends are paid on the Company's Shares.
Any fractional Share Units shall also be credited to a Participant's
Deferred Compensation Account.
3.05 CREDITING INTEREST EQUIVALENTS - For Cash Units credited to their Deferred
Compensation Accounts, the Company shall credit the Participant's Deferred
Compensation Account on a quarterly basis with an Interest Equivalent.
3.06 TIME OF PAYMENT - All payments of a Participant's Deferred Compensation
Account shall be made at, or shall commence on, the date selected by the
Participant in accordance with the terms of this Article. The date of
payment or distribution must be irrevocably specified by the Director in
his or her written notice of election. The Director may elect to defer the
receipt of his or her Compensation to: (a) the first day of any calendar
year, provided such date is at least six months after the end of the
quarter in which the Compensation is earned; or (b) the first day of the
year following the date of (i) retirement as a Director; (ii) termination
of Board membership; or (iii) death. Upon the death of a Director or
former Director, prior to the final payment of all amounts credited to his
or her Account, the balance of the Deferred Compensation Account shall be
paid in accordance with Article V, commencing on the first day of the
calendar year following the year of death. Notwithstanding the foregoing
provisions of this Section 3.06, in no event, however, shall any payment or
distribution be made within six months of the Compensation being earned or
awarded. The benefit commencement date may not be later than the third
calendar year following the attainment of mandatory retirement age for
Directors.
3.07 METHOD OF PAYMENT - Participant in this portion of the Deferred
Compensation Plan shall have the option of selecting (a) a lump-sum
payment, (b) a series of equal annual installments in such number as the
Participant shall specify (not exceeding 10) or (c) not selecting a method
of payment at the time the Form for Deferred Payment Election/Designation
of Beneficiary is prepared. If the Participant does not select a method of
payment, he or she must, at least twelve months prior to the time the
deferral amount is scheduled to be paid, notify the Corporate Secretary as
to the specific method of payment which will be
<PAGE>
6
either in a lump sum or in equal annual installments. Failure to provide
appropriate notification to the Corporate Secretary will result in a lump
sum payment on the deferral payment date. Participant shall receive in
cash all deferred compensation credited to such Participant's Deferred
Compensation Account. Share Units credited to the Participant's Deferred
Compensation Account shall be valued at the average closing price for
Shares as reported on the New York Stock Exchange-Composite Transactions
for the ten (10) day period prior to each new calendar year.
ARTICLE IV
Restricted Deferred Compensation Accounts
4.01 CREATION OF RESTRICTED DEFERRED COMPENSATION ACCOUNTS -Compensation
deferred hereunder shall be credited to a Restricted Deferred Compensation
Account established by the Company for each Participant. The Restricted
Deferred Compensation Accounts will be initialized as of February 15, 1996
by transferring to the Plan the present value of the accrued benefits of
each Participant in the Non-Employee Directors' Retirement Plan. The
present value of these accrued benefits will then be converted into
Restricted Share Units. The number of Restricted Share Units to be
credited to the Restricted Deferred Compensation Account of each
Participant will be determined by using the average closing price for
Shares as reported on the New York Stock Exchange-Composite Transactions
for the ten (10) business days prior to February 15, 1996. Payout of these
Restricted Share Units shall not commence until death, retirement or the
termination of board service.
4.02 CREDITING SHARE UNITS - If the Committee elects to do so, each year in
conjunction with either the Participant's election or re-election to the
Board, a yearly dollar amount ("Yearly Credit") will be credited to a
Participant's Restricted Deferred Compensation Account in the form of
Restricted Share Units. The number of Restricted Share Units credited to a
Participant's Restricted Deferred Compensation Account shall be determined
by dividing the Yearly Credit by the average closing price for Shares as
reported on the New York Stock Exchange-Composite Transactions for the ten
(10) day period prior to the Company's annual meeting. Any fractional
Restricted Share Units shall also be credited to a Participant's Restricted
Deferred Compensation Account. The number of Restricted Share Units in a
Restricted Deferred Compensation Account shall be appropriately adjusted by
the Committee in the event of changes in the Company's outstanding common
stock
<PAGE>
7
by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in capitalization, and such adjustments shall be
conclusive. Restricted Share Units shall not entitle any person to the
rights of a stockholder.
4.03 CREDITING DIVIDED EQUIVALENTS - The Company shall credit the Participant's
Restricted Deferred Compensation Account with Dividend Equivalents being
equal to the dividends declared on the Company's Shares. The crediting
shall occur as of the date on which said dividends are paid. The number of
Restricted Share Units to be credited to the Restricted Deferred
Compensation Account shall be calculated by dividing the Dividend
Equivalents by the closing price for Shares as reported on the New York
Stock Exchange-Composite Transactions on the date the dividends are paid on
the Company's Shares. Any fractional Restricted Share Units shall also be
credited to a Participant's Restricted Deferred Compensation Account.
4.04 TIME OF PAYMENT - All payments of a Participant's Restricted Deferred
Compensation Account shall be made at, or shall commence on, the date
selected by the Participant in accordance with the terms of this Article
IV. The date of payment or distribution must be specified by the Director
in his or her written Form of Continuing Deferral unless such election is
revoked. A Participant's revocation must be submitted to the Corporate
Secretary in writing. If the Participant selects a new election with
regard to the date of payment or distribution, such election will apply
only prospectively to any additional Restricted Share Units to be credited
to a Director's Restricted Deferred Compensation Account. If the
Participant fails to designate a time of payment, payment shall commence on
the first day of the calendar year following termination of the
directorship. The Participant may elect to defer the receipt of his or her
Compensation to the first day of the year following the date of: (i)
retirement as a Director; (ii) termination of Board membership; or (iii)
death. Upon the death of a Director or former Director, prior to the final
payment of all amounts credited to his or her Account, the balance of the
Restricted Deferred Compensation Account shall be paid in accordance with
Article V, commencing on the first day of the calendar year following the
year of death. Notwithstanding the foregoing provisions of this Section
4.04, in no event, however, shall any payment or distribution be made
within the six months of the Compensation being earned. The benefit
commencement date may not be later than the third calendar year following
the attainment of mandatory retirement age for Participants.
<PAGE>
8
4.05 METHOD OF PAYMENT - Participant shall have the option of selecting a (a) a
lump sum payment, (b) a series of equal annual installments in such number
as Participant shall specify (not exceeding 10 installments) or (c) not
selecting a method of payment at the time the Form for Continuing Deferral
is prepared. If the Participant does not select a method of payment, he or
she must, at least twelve months prior to the time the deferral amount is
scheduled to be paid, notify the Corporate Secretary as to the specific
method of payment which will be either in a lump sum or in equal annual
installments. Failure to provide appropriate notification to the Corporate
Secretary will result in a lump sum payment on the deferral payment date.
Share Units credited to the Participant's Restricted Deferred Compensation
Account shall be valued at the average closing price for Shares as reported
on the New York Stock Exchange-Composite Transactions for the ten (10) day
period prior to each new calendar year.
ARTICLE V
Designation of Beneficiaries
The Participant shall name a beneficiary and a contingent beneficiary to
receive any payments due him or her at the time of his or her death, with the
right to change such beneficiary at any time. In case of a failure of
designation or the death of the designated beneficiary with a designated
successor, distribution shall be made to the estate of the Participant. No
designation of beneficiaries shall be valid unless in writing signed by the
Participant, dated and filed with the Committee. Upon the Participant's death,
any balance in the Participant's Deferred Compensation Account and Restricted
Deferred Compensation Account is payable under the method and form elected by
the Participant.
ARTICLE VI
Source of Payments
All payments of deferred compensation shall be paid in cash from the
general funds of the Company and the Company shall be under no obligation to
segregate any assets in connection with the maintenance of a Deferred
Compensation Account or Restricted Deferred Compensation Account, nor shall
anything contained in this Plan nor any action taken pursuant to the Plan create
or be construed to create a trust of any kind, or a fiduciary relationship
between the Company and Participant. Title to the beneficial ownership of any
assets, whether cash or investments, which the Company may designate to pay the
amount credited to the Deferred Compensation Account or a Restricted Deferred
Compensation Account shall at all times remain in the Company and
<PAGE>
9
Participant shall not have any property interest whatsoever in any specific
assets of the Company. Participant's interest in the Deferred Compensation
Account or a Restricted Deferred Compensation Account shall be limited to the
right to receive payments pursuant to the terms of this Plan and such rights to
receive shall be no greater than the right of any other unsecured general
creditor of the Company.
ARTICLE VII
Nonalienation of Benefits
Participant shall not have the right to sell, assign, transfer or otherwise
convey or encumber in whole or in part the right to receive any payment under
this Plan except in accordance with Article V.
ARTICLE VIII
Acceptance of Terms
The terms and conditions of this Plan shall be binding upon the heirs,
beneficiaries and other successors in interest of Participant to the same extent
that said terms and conditions are binding upon the Participant.
ARTICLE IX
Administration of the Plan
The Plan shall be administered by the Committee which may make such rules
and regulations and establish such procedures for the administration of this
Plan as it deems appropriate. In the event of any dispute or disagreements as
to the interpretation of this Plan or of any rule, regulation or procedure or as
to any questioned right or obligation arising from or related to this Plan, the
decision of the Committee shall be final and binding upon all persons.
ARTICLE X
Termination and Amendment
The Plan may be terminated at any time by the Board of Directors of Sun
Company, Inc. and may be amended at any time by the Committee provided, however,
that no such amendment or termination shall adversely affect the rights of
Participants or their beneficiaries with respect to amounts credited to Deferred
Compensation Accounts or Restricted Deferred Compensation Accounts prior to such
amendment or termination, without the written consent of the Participant.
<PAGE>
10
ARTICLE XI
Construction
In the case any one or more of the provisions contained in this Plan shall
be invalid, illegal or unenforceable in any respect the remaining provisions
shall be construed in order to effectuate the purposes hereof and the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
ARTICLE XII
Governing Law
This Plan shall be construed in accordance with and governed by the laws of
the Commonwealth of Pennsylvania.
<PAGE>
EXHIBIT 10.4
SUN COMPANY, INC.
DEFERRED COMPENSATION PLAN
Introduction
A. Executive Resources who are participants in the Executive Incentive
Plan (hereinafter called the "Incentive Plan") of Sun Company, Inc.
(hereinafter called the "Company"), constitute a select group of management
or highly compensated employees.
B. The Incentive Plan provides that the Board of Directors may pay
bonuses annually, as additional compensation to such employees as the Board
determines have principally contributed to the profitability of the
Company.
C. The Company has established this Deferred Compensation Plan to provide
Executive Resources who are participants in the Incentive Plan with the
option to irrevocably defer the receipt of all or a portion of the bonus to
which such participants would otherwise be entitled, subject to the terms
and conditions hereinafter set forth.
<PAGE>
SUBSTANTIVE PROVISIONS
ARTICLE I
Definitions
1.1 COMMITTEE means the Compensation Committee of the Board of Directors
of Sun Company, Inc.
1.2 DEFERRED BONUS ACCOUNT with respect to any Participant means the total
amount of the Company's promise to pay an executive the deferred
amount in his account, in addition to any interest accumulation.
1.3 EXECUTIVE RESOURCE means any employee who is employed by the Company
as a principal officer or in a job which, in accordance with the
Company's job evaluation program, has been assigned 1400 or more Hay
points, and any other employee who is designated by the Board
Committee as being an Executive for purposes of this Plan.
1.4 PARTICIPANT means an Executive Resource who meets the eligibility
requirements of the Incentive Plan and who is participating in this
Plan.
1.5 PERMANENT AND TOTAL DISABILITY - A Participant shall be deemed to be
permanently and totally disabled if he is eligible to receive benefits
under his employer's long-term disability plan.
1.6 PLAN means the Deferred Compensation Plan set forth herein and as it
may be amended from time to time.
1.7 RETIREMENT means the date on which a Participant is retired in
accordance with his employer's retirement plan, program, or policy.
1.8 SUBSIDIARIES means corporations in which the Company, directly or
indirectly owns fifty percent or more of the outstanding voting stock.
ARTICLE II
Deferral of Bonuses
2.1 ELECTION TO DEFER - A Participant may elect to defer all or a portion
of his bonus to be awarded under the Incentive Plan by filing a
written election with the Committee on forms to be prescribed by the
Committee. Such election must include a designation of beneficiary and
an irrevocable election of a method of payment as described in
Articles IV and V. Any such election shall apply only to bonuses to be
<PAGE>
earned in years beginning after the effective date of the election.
2.2 AMOUNT OF DEFERRAL - The amount of bonus to be deferred in any year
shall be designated by the Participant as a percentage of his bonus in
multiples of 5% but shall not be less than 10%.
2.3 TIME OF ELECTION - A separate election to defer must be filed for each
year and must be received by the Committee by the end of the year
preceding the year in which the bonus is earned. Any election by a
Participant with respect to a bonus in a given year will not preclude
a different action with respect to bonuses in subsequent years.
ARTICLE III
Deferred Bonus Accounts
3.1 CREATION OF DEFERRED BONUS ACCOUNT - The Company shall establish a
Deferred Bonus Account for each Participant. The account will be the
method the Company shall use to record any deferred bonus at the time
Participant would have otherwise first been entitled to such bonus.
3.2 CREDITING INTEREST EQUIVALENTS - As additional deferred compensation,
the Company shall credit Participant's Deferred Bonus Account on
January 1, of each year with an interest factor determined each year
by the Committee, to be compounded on the basis of the balance in the
Participant's Deferred Bonus Account.
ARTICLE IV
Payment of Deferred Bonuses
4.1 TIME OF PAYMENT - All payments of a Participant's Deferred Bonus
Account shall be made at, or shall commence on, the earliest of the
following date:
a. Separation, from employment,
b. Retirement,
c. Permanent and total disability, and
d. Death of a participant, in which case, payment will be made to
the heir, beneficiary, or successor designated by the employee
under Article V.
provided, however, that the Participant may irrevocably designate such
other date on which payment will commence, so long as the latest date
shall not be more than three years following retirement or separation
from employment.
<PAGE>
4.2 METHOD OF PAYMENT - Participant shall have the option of selecting
either a lump sum payment or a series of annual installments (not
exceeding ten), provided such election is irrevocable and made at the
date of deferral.
4.3 HARDSHIP DISTRIBUTION - Participant may request a modification in the
payment terms hereunder only in the event of severe financial hardship
and only to the extent reasonably necessary to eliminate the hardship.
Such request shall specify in detail the grounds for the requested
modification and shall be referred to the Committee. A qualifying
severe financial hardship must be caused by accident, illness, or
event beyond the control of the Participant. The decision of the
Committee with respect to the requested modification shall be solely
at the discretion of the Committee and in accordance with its
evaluation of the exigencies of the situation. Such decision shall be
binding on the Company and Participant.
ARTICLE V
Designation of Beneficiaries
The Participant shall name a beneficiary to receive any payments due him at
the time of his death, with the right to change such beneficiary at any
time. In case of a failure of designation or the death of the designated
beneficiary without a designated successor, distribution shall be made to
the person or persons designated as beneficiary in the designation most
recently filed under the Sun Company, Inc. Stock Purchase Program or
Employees' Savings Program, or if no such designation has been made or the
Participant is not participating in such programs, the surviving spouse of
a deceased Participant, or, if there is no surviving spouse, the children
of the Participant in equal shares (the share of any child who predeceases
the Participant to go in equal shares to the issue of such deceased child),
or if there is no surviving spouse, child, or issue of such children, the
estate of the Participant. No designation of beneficiaries shall be valid
unless in writing signed by the Participant, dated and filed with the
Committee. Upon the Participant's death, any balance in the Participant's
Deferred Bonus Account is payable under the method elected by the
Participant or in such other manner as the Committee may determine in its
sole discretion.
ARTICLE VI
Source of Payment
All payments of deferred bonuses shall be paid in cash from the general
funds of the Company and the Company shall be under no obligation to
segregate any assets in connection with the maintenance of the Deferred
Bonus Account, nor shall anything contained in this Plan nor any action
taken pursuant to the Plan create or be construed to create a trust of any
kind, or a
<PAGE>
fiduciary relationship between the Company and Participant. Title to the
beneficial ownership of any assets, whether cash or investments, which the
Company may designate to pay the amount credited to the Deferred Bonus
Account shall at all times remain in the Company and Participant shall not
have any property interest whatsoever in any specific assets of the
Company. Participant's interest in the Deferred Bonus Account shall be
limited to the right to receive payments pursuant to the terms of this Plan
and such rights to receive shall be no greater than the right of any other
unsecured general creditor of the Company.
ARTICLE VII
Nonalienation of Benefits
Participant shall not have the right to sell, assign, transfer or otherwise
convey or encumber in whole or in part the right to receive any payment
under this Plan except in accordance with Article V.
ARTICLE VIII
Acceptance of Terms
The terms and conditions of this Plan shall be binding upon the heirs,
beneficiaries, and other successors in interest of Participant to the same
extent that said terms and conditions are binding upon the Participant.
This Plan shall not be construed in any way as an employment contract
requiring the Company or Participant to continue the employment relation.
ARTICLE IX
Administration of the Plan
The Plan shall be administered by the Committee which may make such rules
and regulations and establish such procedures for the administration of
this Plan as it deems appropriate. In the event of any dispute or
disagreements as to the interpretation of this Plan or of any rules,
regulation, or procedure or as to any questioned right or obligation
arising from or related to this Plan, the decision of the Committee shall
be final and binding upon all persons.
ARTICLE X
Termination and Amendment
The Plan may be terminated at any time by the Board of Directors of Sun
Company, Inc., and may be amended at any time by the Committee provided,
however, that no such amendment or termination shall adversely affect the
rights of Participants or their beneficiaries with respect to amounts
credited to Deferred Bonus Accounts prior to such amendment or termination,
without the written consent of the Participant.
<PAGE>
ARTICLE XI
Construction
In the case of any one or more of the provisions contained in this Plan
shall be invalid, illegal, or unenforceable in any respect the remaining
provisions shall be construed in order to effectuate the purposes hereof
and the validity, legality, and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
<PAGE>
EXHIBIT 10.5
SUN COMPANY, INC.
PENSION RESTORATION PLAN
As Amended and Restated Effective
February 1, 1996
PURPOSE
Sun Company, Inc. hereby amends and restates this Pension Restoration
Plan effective February 1, 1996 for the purpose of providing to
Participants (as hereinafter defined) retirement benefits which would
otherwise be provided by either the Sun Company, Inc. Retirement Plan or
the Sun Company, Inc. Cash Option Retirement Plan but for the restrictions
on benefits payable under these plans by Sections 401(a)(17) and 415 of the
Internal Revenue Code of 1986. This Plan is intended to constitute an
"excess benefit plan" within the meaning of Section 3(36) of the Employee
Retirement Income Security Act of 1974, as amended, ("ERISA") and an
unfunded plan maintained primarily to provide deferred compensation for a
select group of management or highly compensated employees within the
meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
ARTICLE I
DEFINITIONS
1.01 "Actuarial Equivalent" means a benefit of equivalent current value
to the benefit which would otherwise have been provided to the
Participant, determined on the same basis as determined under the
Applicable Sun Retirement Plan.
1.02 "Affiliated Company" means the Company and:
(a) Any other corporation which is included within a "controlled
group of corporations" within which Sun Company, Inc., is also
included as determined under Section 1563 of the 1954 Internal
Revenue Code without regard to subsections (a)(4) and (e)(3)(C)
of said Section 1563;
(b) Any other trades or businesses (whether or not incorporated)
which, based on principles similar to those defining a
"controlled group of corporations" for purposes of (a) above,
are under common control; and
(c) Any other organization so designated by the Board Committee.
<PAGE>
1.03 "Applicable Sun Retirement Plan" means the Sun Company, Inc.
Retirement Plan or the Sun Company, Inc. Cash Option Retirement
Plan, whichever plan the Participant will receive benefits under.
1.04 "Beneficiary" means the person or persons, other than a contingent
annuitant, designated by a Participant or retired Participant
pursuant to Article IV.
1.05 "Board of Directors" means the Board of Directors of Sun Company,
Inc.
1.06 "Board Committee" means those individual Directors who have been
appointed by the Board of Directors with the powers and
responsibilities specified in Article V and to which has been
delegated any fiduciary responsibilities of the Board of Directors
with respect to the Plan.
1.06A "Change in Control" of the Company shall be deemed to have occurred
for purposes of this Plan, if: (i) Continuing Directors cease,
within one year of a Control Transaction, to constitute a majority
of the Board (or of the Board of Directors of any successor to Sun
Company, Inc., or to all or substantially all of its assets) or
(ii) any entity, person or Group acquires shares of Sun Company,
Inc. in a transaction or series of transactions that result in such
entity, person or Group directly or indirectly owning beneficially
more than fifty percent (50%) of the outstanding voting shares. As
used herein, "Group" shall mean persons who act in concert as
described in Sections 13(d)(3) and/or 14(d)(2) of the Securities
Exchange Act of 1934, as amended.
1.07 "Code" means the Internal Revenue Code of 1986, as amended.
1.08 "Company" means Sun Company, Inc. or any corporation which succeeds
to the position of Sun Company, Inc. as common parent of the Sun
Affiliated Group, within the meaning of regulations issued under
the Internal Revenue Code.
1.08A "Continuing Director" means a Director who was a member of the Sun
Company, Inc. Board of Directors immediately prior to a Control
Transaction which results in a Change in Control.
1.08B "Control Transaction" means any of the following transactions or
any combination thereof: (1) any tender offer for or acquisition of
capital stock of
<PAGE>
Sun Company, Inc., (2) any merger, consolidation or sale of all or
substantially all of the assets of Sun Company, Inc., or (3) the
submission of a nominee or nominees for the position of director of
Sun Company, Inc. by a shareholder or a Group of shareholders in a
proxy solicitation or otherwise.
1.09 "Effective Date" means September 2, 1974; as to this amendment and
restatement, February 1, 1996; and as to any amendment, the
effective date specified by the Board of Directors.
1.10 "Employee" means any individual who is employed by the Company or
an Affiliated Company.
1.11 "Participant" means any Employee who is a participant in an
Applicable Sun Retirement Plan who: (i) has had his retirement
benefit under that plan reduced due to Statutory Limitations or
(ii) has received Restricted Stock Unit Income.
1.12 "Plan" means the Sun Company, Inc. Pension Restoration Plan as set
forth in this document and as it may from time to time be amended.
1.13 "Plan Administrator" means the individual or entity designated as
such by the Board Committee pursuant to Article V.
1.14 "Plan Year" means the annual period beginning on January 1 of any
year and ending on the following December 31.
1.14A "Restricted Stock Unit Income" means the payment that would have
been made to a Participant upon the vesting of a restricted stock
unit granted under either the Sun Company, Inc. Long-Term Incentive
Plan or the Sun Company, Inc. Executive Long-Term Stock Investment
Plan had the price of Sun Company, Inc. common stock on the date of
such payment been equal to the price on the date the restricted
stock unit was granted.
1.15 "Spouse" means the individual who is the legally married husband or
wife of a Participant.
1.16 "Statutory Limitations" means the limitations placed the benefits
that can be accrued under a qualified pension plan pursuant to
Section 401(a)(17) and 415 of the Code
1.17 "Termination Date" means the date on which a Participant ceases to
be an Employee.
<PAGE>
ARTICLE II
CONTRIBUTIONS
2.01 EMPLOYER CONTRIBUTIONS. All benefits payable under this Plan will be
paid by the Company. A Participant will have no right, title or
interest whatsoever in or to any investments which the Company may
make to aid in meeting such obligations as may arise under the Plan.
Nothing contained in the Plan, nor any action taken pursuant to its
provisions, will create or be construed to create a trust or a
fiduciary relationship between the Company and any Participant or any
other person. To the extent that any person acquires a right to
benefits under this Plan, such right will be no greater than the
right of an unsecured general creditor of the Company. All payments
to be made under the Plan will be paid from the general funds of the
Company and no special or separate fund will be established and no
segregation of assets will be made to assure payment of such amounts.
2.02 PARTICIPANT CONTRIBUTIONS. No contributions by Participants will be
required or permitted under this Plan.
2.03 EXPENSES OF ADMINISTRATION. All expenses of administering this Plan
will be paid by the Company.
ARTICLE III
RETIREMENT BENEFITS
3.01 AMOUNT OF BENEFITS. The benefit payable to a Participant or his
Beneficiary will be equal to the excess of:
(a) The benefits which would have been paid to the Participant or his
Beneficiary under the Applicable Sun Retirement Plan, if the
provisions of that plan were administered:
(i) without regard to the Statutory Limitations, and
(ii) so that the compensation used for benefit accrual
purposes under the Applicable Sun Retirement Plan was
increased to reflect Restricted Stock Unit income, over
(b) The benefits payable to the Participant or his Beneficiary under
the Applicable Sun Retirement Plan.
3.01A ADJUSTMENTS TO RETIREMENT BENEFITS SUBSEQUENT TO CERTAIN CONTROL
TRANSACTIONS. (a) If, subsequent to a Control Transaction which has
not been expressly approved by at least a majority vote of the
Continuing Directors, there is
<PAGE>
a Change in Control and the Employer thereafter takes action or omits
to take action which will result in either a complete or partial
termination of the Plan, then:
(i) effective immediately prior to a complete termination of the
Plan, there shall be an increase in the benefits originally
calculated under Section 3.01 by an amount equal to three
percent (3%) per year reduced by any prior retiree benefit
adjustments to such benefits, compounded annually, for a
period of fifteen (15) years, for the benefit of active
Participants, Participants who retired on or after December
31, 1990 and each surviving Spouse of a Participant who was
entitled to pre- or post-retirement Spouse's benefits. Such
benefit increases shall be calculated immediately upon the
termination of the Plan, regardless of whether the payment of
such benefits has commenced;
(ii) effective immediately prior to a partial termination of the
Plan, the benefit increases set forth in Section 3.01A(a)(i)
above shall be provided to the affected Participants.
(b) If, subsequent to a Control Transaction which has not been
expressly approved by at least a majority vote of the Continuing
Directors, there is a Change in Control, then this Section 3.01A
shall be irrevocable, shall apply to successor Plans and cannot
be amended or modified at any time.
3.02 NORMAL FORM OF PAYMENT. Except as otherwise provided in Article IV,
retirement benefits under this Plan will be in the form of a lump sum
payment of the Actuarial Equivalent of the benefit determined under
Section 3.01.
3.03 COMMENCEMENT OF PAYMENTS. A Participant's retirement income will
commence on the same date as the commencement of benefits under the
Applicable Sun Retirement Plan.
ARTICLE IV
OPTIONAL FORMS OF RETIREMENT INCOME
4.01 ELECTION OF AN OPTIONAL FORM OF PAYMENT. Not later than thirty (30)
days prior to a Participant's retirement date a Participant may elect
in lieu of the normal form of retirement income, an optional form of
retirement income which is the Actuarial Equivalent of the monthly
income determined under Section 3.01. A Participant may not change or
revoke an elected option unless such change or revocation is made at
least thirty (30) days prior to the Participant's
<PAGE>
retirement date. Each election, designation and revocation of an
option will be made in writing and in conformity with such rules as
may be prescribed by the Plan Administrator.
4.02 OPTIONAL FORMS OF PAYMENT. A Participant may elect to receive an
optional form of retirement income in the same form and manner as the
Participant is receiving under the Applicable Sun Retirement Plan.
4.03 ACCELERATION OF ANNUITY OPTIONS. Notwithstanding the foregoing, if
the Internal Revenue Service makes a determination that the
Participant must include any amounts from the Plan in his taxable
income in a taxable year prior to the year in which the Participant
actually receives those amounts, the Participant shall receive the
Actuarial Equivalent of the remainder of his benefit determined under
Section 4.02. Such distribution shall be made no later than the last
day of the calendar year in which the Participant informs the Plan
Administrator that the Internal Revenue Service has made such a
determination.
ARTICLE V
ADMINISTRATION OF THE PLAN
5.01 ALLOCATION AND DELEGATION OF FIDUCIARY RESPONSIBILITIES. Fiduciary
responsibilities with respect to the Plan are to be allocated as set
forth in this Article V. A fiduciary will have only those specific
powers, duties, responsibilities and obligations as are specifically
given him under this Plan. It is intended that each fiduciary be
responsible for the proper exercise of his own powers, duties,
responsibilities and obligations under this Plan, and generally will
not be responsible for any act or failure to act of another
fiduciary. A fiduciary may delegate to any person or entity, who may
or may not be a fiduciary, any of its powers or duties under the
Plan.
5.02 POWERS AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS. The Board of
Directors has the following powers and responsibilities:
(a) To authorize amendments to the Plan;
(b) To terminate the Plan; and
(c) To appoint and remove members of the Board Committee, as set
forth in Section 5.03, below.
5.03 BOARD COMMITTEE.
(a) The Board Committee will consist of at least three Directors who
will be appointed by and serve at the pleasure of the Board of
Directors. The Board of Directors will also appoint one member of
the Board Committee to act as Chairman of such Committee.
<PAGE>
Vacancies will be filled in the same manner as appointments. Any
member of the Board Committee may resign by delivering a written
resignation to the Board of Directors, to become effective upon
delivery or at any other date specified therein.
(b) The members of the Board Committee will appoint a Secretary who
may, but need not be, a member of the Board Committee. The Board
Committee may, in writing, delegate some or all of its powers and
responsibilities as specified in Section 5.03(d) to any other
person or entity, who may or may not be a fiduciary.
(c) The Board Committee will hold meetings upon such notice, at such
time or times, and at such place or places as it may determine.
The majority of the members of the Board Committee at the time in
office will constitute a quorum for the transaction of business
at all meetings and a majority vote of those present at any
meeting will be required for action. The Board Committee may also
act by written consent of a majority of its members.
(d) The Board Committee will have the following powers and
responsibilities:
(i) To prepare periodic administration reports to the Board of
Directors which will show, in reasonable detail, the
administrative operations of the Plan;
(ii) To appoint and remove the Plan Administrator; and
(iii) To appoint and remove other fiduciaries.
5.04 PLAN ADMINISTRATOR.
(a) The Plan Administrator will be appointed by and serve at the
pleasure of the Board Committee. The Plan Administrator may
resign by delivering a written resignation to the Board
Committee, to be effective on delivery or at any other date
specified therein. Upon the resignation or removal of the Plan
Administrator, a successor Plan Administrator will be appointed
by the Board Committee.
(b) The Plan Administrator may, in writing, delegate some or all of
his powers and responsibilities as set forth in Section 5.04(c)
to any other person or entity, who may or may not be a fiduciary.
(c) The Plan Administrator will adopt such rules for administration
of the Plan as he considers desirable, provided they do not
conflict with the Plan. Records
<PAGE>
of administration of the Plan will be kept, and Participants and
their Spouses, Beneficiaries and contingent annuitants may
examine records pertaining directly to themselves. The Plan
Administrator will have the following powers and
responsibilities:
(i) To select and terminate an actuary for the Plan.
(ii) To establish and maintain claims review procedures.
(iii) To construe the Plan, correct defects, supply omissions and
reconcile inconsistencies to the extent necessary to
administer the Plan, with any instructions or
interpretation of the Plan made in good faith by the Plan
Administrator to be final and conclusive for all purposes.
(iv) To comply with any requirements of the Employee Retirement
Income Security Act of 1974 with respect to filing reports
with governmental agencies.
(v) To provide Employees with any and all information required
by the Employee Retirement Income Security Act of 1974.
(vi) To approve any actuarial assumptions.
(vii) To coordinate any necessary audit process with respect to
reports on administration data.
(viii)To conduct routine Plan administration.
5.05 EMPLOYMENT OF AGENTS. The fiduciaries may retain such counsel,
actuarial, medical, accounting, clerical and other services as they
may require to carry out the provisions and purposes of the Plan.
5.06 RELIANCE ON REPORTS AND CERTIFICATES. Fiduciaries under the Plan and
the officers and managers and Employees of the Company and any
Affiliated Company will be entitled to rely upon all tables,
valuations, certificates and reports furnished by a duly appointed
actuary, insurance company, or by any duly appointed accountant, and
upon all opinions given by any duly appointed legal counsel.
5.07 COMPENSATION. Fiduciaries under the Plan will not receive any
compensation for their services as such.
5.08 FIDUCIARY'S OWN PARTICIPATION. A fiduciary may not act, vote or
otherwise influence a decision specifically relating to his own
participation under the Plan.
<PAGE>
5.09 LIABILITY FOR ADMINISTRATION OF THE PLAN. In the administration of
the Plan, neither a fiduciary, nor any officers, directors or
Employees of the Company or any Affiliated Company or their agents
will be liable jointly or severally for any loss due to his or its
error or acts of omission or commission, except for his or its own
individual misconduct. The Company will indemnify each fiduciary,
officer, director or Employee of the Company and any Affiliated
Company from any and all expenses arising out of his or its
responsibilities under the Plan, excepting such expenses and
liabilities arising out of his or its own individual willful
misconduct.
ARTICLE VI
GENERAL PROVISIONS
6.01 RIGHT TO AMEND OR TERMINATE. The Company expects and intends to
continue the Plan indefinitely, but necessarily reserves the right,
by action of the Board of Directors, to amend, alter, suspend or
terminate the Plan in whole or in part, and at any time. However, if
the Board of Directors should amend, alter, suspend or terminate the
Plan, the Company will be liable for any benefits accrued under this
Plan (determined on the basis of each employee's presumed termination
of employment as of the date of such amendment, alteration,
suspension or termination) as of the date of such action.
6.02 ALIENATION OF BENEFITS. No benefits payable under the Plan will be
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any action by way of
anticipating, alienating, selling, transferring, assigning, pledging,
encumbering or charging the same will be void and of no effect nor
will any such benefit be in any manner liable for or subject to the
debts, contracts, liabilities, engagements or torts of the person
entitled to such benefit.
6.03 PAYMENT TO MINORS AND INCOMPETENTS. If a Participant, Spouse,
contingent annuitant or Beneficiary entitled to receive any benefits
hereunder is a minor, or is deemed by the Plan Administrator or is
adjudged to be legally incapable of giving a valid receipt and
discharge for such benefits, they will be paid to the duly appointed
guardian or committee of such minor or incompetent, or they may be
paid to such person or persons who the Plan Administrator believes is
or are caring for or supporting such minors or incompetents. Any such
payments, to the extent thereof, will be a complete discharge for the
payment of such benefit.
<PAGE>
6.04 UNCLAIMED BENEFITS. If any benefit under the Plan had been payable to
and unclaimed by any person for a period of four years since the
whereabouts or existence of such person was last known to the Plan
Administrator, the Plan Administrator may direct that all rights of
such person to payments accrued and to future payments be terminated
absolutely, provided that if such person subsequently appears and
identifies himself to the satisfaction of the Plan Administrator,
then the liability will be reinstated.
6.05 PLAN VOLUNTARY. The Plan is purely voluntary on the part of the
Company. Neither the establishment of the Plan, nor any amendment
thereto, nor the creation of any fund or account, nor the payment of
any benefit will be construed as conferring upon any Employee or
Participant the right to be retained in the employ of the Company or
any Affiliated Company, and all Employees and Participants will
remain subject to discharge, discipline or termination to the same
extent as if the Plan had never been established.
6.06 GENDER. Whenever used herein, the masculine pronoun will include the
feminine and the singular the plural, unless a different meaning is
plainly required by the context.
6.07 CONSTRUCTION. The Plan will be construed, enforced and administered
according to the laws of the Commonwealth of Pennsylvania to the
extent not preempted by Federal law, which shall otherwise control.
In the event any provision of the Plan is held illegal or invalid for
any reason, it will not affect the remaining provisions of the Plan,
but the Plan will be construed and enforced as if such illegal and
invalid provision had not been included therein.
<PAGE>
EXHIBIT 10.7
SUN COMPANY, INC.
SAVINGS RESTORATION PLAN
As Amended and Restated
After the
Sun Company, Inc. Savings Restoration Plan II
Merged into the Plan
Effective
December 21, 1995
<PAGE>
SUN COMPANY, INC.
SAVINGS RESTORATION PLAN
I. STRUCTURE OF THE PLAN
The Sun Company, Inc. Savings Restoration Plan ("Plan") is established for
the purpose of providing for certain employees benefits which otherwise
would be lost by reason of the restrictive provisions of Section 401(a)(17)
and Section 415 of the Internal Revenue Code of 1986, as amended (the
"Code") applicable to the Sun Company, Inc. Capital Accumulation Plan
("SunCAP"). This Plan is the result of the merger of the Sun Company, Inc.
Savings Restoration Plan II ("Plan II") into the Plan, effective December
21, 1995. The provisions of the Plan and Plan II prior to the effective
date of the merger will remain effective with regard to those
contributions.
This plan is an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees within the meaning of Sections 3(36), 201(2),
301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of
1974.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator (as this term is defined in SunCAP), or its
delegate, ("Plan Administrator") shall administer the Plan. The Plan
Administrator shall have full authority to determine all questions arising
in connection with the Plan. The Plan Administrator will also interpret the
Plan, adopt procedural rules, and may employ and rely on such legal
counsel, such actuaries, such accountants and such agents as it may deem
advisable to assist in the administration of the Plan. Decisions of the
Plan Administrator shall be conclusive and binding on all persons.
III. PARTICIPATION IN THE PLAN
The Plan Administrator shall select the employees eligible to participate
in the Plan for the next succeeding calendar year from among the
participants in SunCAP whose employing corporation participates in SunCAP
and adopts this Plan (hereinafter referred to as a "participating employer"
which term also includes Sun Company, Inc. (the "Company")). The
participants in SunCAP selected for participation in this Plan shall be
those SunCAP participants that the Plan Administrator reasonably believes
will have compensation in excess of the limitations on compensation imposed
under the terms of SunCAP by reason of Sections 401(a)(17) of the Code
<PAGE>
(the "Compensation Cap") and/or will exceed the limitations on
contributions imposed under the terms of SunCAP by reason of Section 415 of
the Code ("Annual Additions Limit") during the succeeding calendar year.
IV. BENEFITS PROVIDED UNDER THE PLAN
1. PARTICIPANT CONTRIBUTIONS
A. COMPENSATION CAP LIMITATION. If a participant's Basic
Contributions (as this term is defined in SunCAP) to SunCAP may
be limited due to the imposition of the Compensation Cap, the
participant may elect, before the beginning of the calendar year
during which the participant is subject to the Compensation Cap,
to contribute on a pretax basis to the participating employer by
which the participant is employed, any remaining percentage of
such Basic Contributions which the participant was otherwise
prevented from making.
B. ANNUAL ADDITIONS LIMITATION. If a participant's Basic
Contributions to SunCAP may be limited due to the imposition of
the Annual Additions Limit, the participant may elect, before the
beginning of the calendar year during which the Annual Addition
Limit is reached, to contribute on a pretax basis to the
participating employer by which the participant is employed, any
remaining percentage of such Basic Contributions which the
participant was otherwise prevented from making.
C. METHOD OF MAKING PARTICIPANT CONTRIBUTIONS. Participant
contributions, as determined above, will be withheld from the
compensation payable to the participant for services rendered to
the participating employer after the date of the election and
credited to a book account maintained for the participant by or
on behalf of the participating employer as of the date such
contributions would have been made to SunCAP. In determining the
percentage of a participant's compensation to be contributed on a
pretax basis under this Plan, no change in a participant's Basic
Contributions during a calendar year for purposes of SunCAP shall
be effective with respect to this Plan until the calendar year
following the calendar year in
<PAGE>
which the change is made. Notwithstanding the foregoing, an
election made by a participant under this Plan will be void if
made after the beginning of the calendar year to which the
election relates or the participant reduces his Basic
Contributions during the calendar year to which the election
relates.
2. PARTICIPATING EMPLOYER CONTRIBUTION
A participant's participating employer shall maintain, or cause to be
maintained, a book account for such participant to which the
participating employer shall credit an amount equal to the Matching
Employer Contributions (as this term is defined in SunCAP) that the
participating employer would have made on the participant's behalf to
SunCAP had the participant's Basic Contributions continued to be made
to SunCAP, instead of to the participating employer under this Plan.
3. NONFORFEITABILITY OF AND EARNINGS ON BOOK ACCOUNTS
A. NONFORFEITABILITY. All amounts credited to book accounts on
behalf of participants shall be nonforfeitable.
B. EARNINGS. Participant and participating employer contributions
will be credited to book accounts as of the date such
contributions would have been made to SunCAP. All amounts
credited to book accounts shall be deemed to have been invested
in Fund C established under SunCAP and such book accounts shall
be revalued monthly as if they had been invested in Fund C,
except as provided in the following sentence. Effective January
1, 1996, all amounts credited to book accounts shall be deemed to
have been invested in any of the Funds established under SunCAP,
and may be transferred among the Funds, in accordance with the
elections made by the participant under this Plan, pursuant to
procedures and limitations in effect under SunCAP.
<PAGE>
V. DISTRIBUTIONS
1. LUMP-SUM DISTRIBUTION
Each participating employer shall distribute to each participant in
the Plan employed by it for whom it maintains book accounts or his
beneficiary under SunCAP an amount in cash equal to 100% of the value
of his book account(s) attributable to all participant contributions
and employer contributions made for calendar years prior to 1996 (and
investment earnings on such contributions), and attributable to all
participant contributions and employer contributions for calendar
years after 1995 (and investment earnings on such contributions) for
which an election has not been made pursuant to Section 2 of this
Article V, upon the termination of employment of such participant
under circumstances entitling him or his beneficiary to a distribution
of the participant's interest in SunCAP whether or not a distribution
is made at that time for SunCAP.
2. TEN-YEAR CERTAIN OPTION
Each participant may irrevocably elect, prior to the beginning of any
calendar year after 1995, with respect to participant contributions
and employer contributions (and investment earnings on such
contributions) for such year, to waive the right to receive a lump-sum
distribution of such contributions (and investment earnings on such
contributions) (the "Ten-Year Certain Amounts") at termination of
employment as provided in Section 1 of this Article V, and to receive
a distribution of all Ten-Year Certain Amounts as determined under
this Section 2. The Ten-Year Certain Amounts shall be distributed
commencing no later than two months after the time lump-sum amounts
are distributable pursuant to Section 1 of this Article V, in ten
annual distributions, with the amount of each annual distribution
equal to the value of the account balance two months prior to the
distribution date divided by the number of annual distributions
remaining as of the date the participant's account is valued for the
annual distribution. The tenth annual distribution shall include 100%
of the value of the participant's book account(s). Undistributed Ten-
Year Certain Amounts shall remain credited to the participant's book
account(s) and shall be deemed to be invested in accordance with the
provisions of Section 3 of
<PAGE>
Article IV. In the event of the death of the participant prior to
distribution of all Ten-Year Certain Amounts, any undistributed Ten-
Year Certain Amounts shall be paid to the participant's beneficiary
under SunCAP as soon as is administratively feasible.
VI. GENERAL PROVISIONS
1. RIGHT TO TERMINATE
This Plan may be terminated at any time by the Company. The Company or
any participating employer may terminate this Plan with respect to its
employees participating in SunCAP. If a participating employer shall
terminate SunCAP with respect to its employees the amounts to their
credit in their book accounts established under this Plan shall be
distributed to such participants in a single sum in accordance with
the provisions of SunCAP applicable in the event of termination of
SunCAP or the complete discontinuance of contribution thereto.
2. RIGHT TO AMEND
This Plan may be amended at any time by the Board of Directors of the
Company, except that no such amendment shall reduce for any
participant the amount then credited to his book account established
under this Plan.
3. NONALIENATION OF BENEFITS
No right to payment or any other interest under this Plan shall be
assignable or subject to attachment, execution, or levy of any kind.
4. EMPLOYMENT RELATIONSHIPS
Nothing in this Plan shall be construed as giving any employee the
right to be retained in the employ of any participating employer. Each
participating employer in the Plan expressly reserves the right to
dismiss any employee at any time without regard to the effect which
such dismissal might have upon him under the Plan.
5. PLAN NOT FUNDED
Benefits payable under this Plan shall not be funded and shall be made
out of the general funds of the participating employers.
<PAGE>
6. CONSTRUCTION
This Plan shall be construed, administered and enforced according to
the laws of the state of Pennsylvania.
VII. EFFECTIVE DATE
This merger of Plan II into the Plan shall be effective December 21, 1995.
<PAGE>
EXHIBIT 10.9
Sun Company, Inc.
Retainer Stock Plan for Outside Directors
(As Amended and Restated Effective May 5, 1994)
ARTICLE I
Purpose
The purpose of the Sun Company, Inc. Retainer Stock Plan for Outside
Directors (the "Plan") is to provide ownership of the Company's Common
Stock to Outside Directors of the Sun Company, Inc. Board of Directors by
paying, in shares of Common Stock, a portion of the retainer fee paid to
each Outside Director, and thereby improve the Company's ability to attract
and retain highly qualified individuals to serve as directors of the
Company; provide competitive remuneration for Board service; enhance the
breadth of Outside Director remuneration; and strengthen the commonality of
interest between directors and shareholders.
ARTICLE II
Effective Date
This Plan shall become effective upon its approval by the shareholders of
the Company. This Plan shall be submitted to the shareholders for their
approval at the Annual Meeting to be held in 1990.
<PAGE>
ARTICLE III
Definitions
In this Plan, the following definitions apply:
(1) "Annual Meeting" means the Annual Meeting of Shareholders of Sun
Company, Inc.
(2) "Award" means the annual award of an equal number of shares of Common
Stock to each Outside Director under this Plan.
(3) "Board" means the Board of Directors of Sun Company, Inc.
(4) "Chairman" shall mean the Chairman of the Board of Directors of Sun
Company, Inc.
(5) "Common Stock" means Sun Company, Inc. common stock.
(6) "Company" means Sun Company, Inc., a Pennsylvania corporation.
(7) "Outside Director" means any member of the Company's Board of
Directors who is not also a principal officer of the Company.
(8) "Participant" means each Outside Director to whom an award of Common
Stock is granted under this Plan upon his or her election or
reelection to the Board.
(9) "Plan" means this Sun Company, Inc. Retainer Stock Plan for Outside
Directors, as it may be amended from time to time.
(10) "Restricted" means stock may not be sold or transferred for a period
of two years from the date of issuance.
<PAGE>
ARTICLE IV
Administration
(1) The Board shall administer this Plan. The Chairman shall have
responsibility to conclusively interpret the provisions of this Plan
and decide all questions of fact arising in its application and such
determinations shall be final and binding on the Company and the
Outside Director.
(2) Determinations made with respect to any individual under this Plan
shall be made without the participation of such individual.
(3) This Plan and all action taken under it shall be governed, as to
construction and administration, by the laws of the Commonwealth of
Pennsylvania.
ARTICLE V
Eligibility and Awards
(1) ELIGIBILITY. Each Outside Director shall participate in this Plan.
(2) GRANT OF AWARDS. Commencing with the Annual Meeting in 1990, each
Participant shall be granted an Award of two hundred (200) shares of
Common Stock. Commencing with the Annual Meeting in 1992, each
Participant shall be granted an Award of a number of shares of Common
Stock (rounded up to the nearest five whole shares), the market value
of which shall equal fifty percent (50%) of the Board retainer fee then
in effect. Commencing with the Annual Meeting in 1994, each Participant
shall be granted an Award of a number
<PAGE>
of shares of Common Stock (rounded up to the nearest five whole
shares), the market value of which shall equal seventy percent (70%) of
the Board retainer fee then in effect. For purposes of determining such
market value, the closing price of Common Stock on the New York Stock
Exchange on the fifth business day prior to the applicable Annual
Meeting shall be used.
(3) AWARD LIMITATIONS.
(a) Notwithstanding the above subsection, the number of shares of
Common Stock to be awarded to each Participant shall be limited to
an amount the fair market value of which shall not exceed $40,000,
as determined by the closing price of Common Stock on the New York
Stock Exchange on the day prior to such Participant's election or
reelection.
(b) The maximum number of shares of Common Stock which may be issued
under this Plan shall be two hundred and fifty thousand shares
(250,000), subject to adjustments pursuant to ARTICLE VII.
(c) Subject to applicable rules and regulations of the Securities and
Exchange Commission, shares of Common Stock issued hereunder shall
be freely transferable and non-forfeitable prior to May 6, 1993.
Thereafter, stock is restricted and may not be sold or transferred
for a period of two years from the date of issuance.
(4) PRO RATION OF CERTAIN AWARDS. In the event that any Outside Director
is elected by the Board to fill a vacancy between Annual Meetings,
such Outside Director shall participate in this Plan and he or she
shall receive a number of shares representing a pro rata portion of
the number of shares of Common Stock awarded to the Participants as of
the Annual Meeting which immediately preceded the election of such
Outside Director; however, in no event shall the fair market value of
such shares exceed $40,000 as determined pursuant to subparagraph
(3)(a).
<PAGE>
(5) ISSUANCE OF COMMON STOCK. As soon as practicable after the applicable
Annual Meeting or the date an Outside Director is otherwise elected as
described above, the Company shall cause to be issued and delivered to
each Outside Director a stock certificate, registered in the name of
such Outside Director, evidencing the award of Common Stock pursuant
to this Plan. Outside Directors shall not be deemed for any purpose to
be or have any rights as shareholders of the Company with respect to
any shares of Common Stock awarded under this Plan, except as and when
certificates therefor are issued. No adjustment shall be made for
dividends or distributions or other rights for which the record date
is prior to the date of such stock certificate.
(6) DISCONTINUATION. The Board may at any time discontinue granting Awards
under this Plan.
(7) DEFERRAL OF AWARD. Notwithstanding the provisions of subsection (5)
above, if a Participant so desires, awards of shares of Common Stock
granted hereunder may be deferred in the form of Share Units pursuant
to the Sun Company, Inc. Directors' Deferred Compensation Plan
("Deferred Plan"). Such deferral shall be subject to the provisions of
the Deferred Plan except that the following terms shall supersede the
terms of the Deferred Plan:
(a) The deferral of shares of Common Stock under this Plan as Share
Units under the Deferred Plan shall be pursuant to a one-time
irrevocable election by a Participant.
(b) The irrevocable election shall apply to all shares of Common Stock
granted subsequent to such election.
(c) The method of payment or distribution of deferred amounts must be
irrevocably specified in a notice delivered to the Compensation
Committee. The method of payment or distribution may be changed
with respect to future awards of shares of Common Stock by filing
notice of such change with the Compensation Committee. Any such
change shall apply only to shares of Common Stock awarded on or
after the first day of the quarter following the calendar quarter
in which the notice is received by the Compensation Committee.
Such notice shall continue, and be effective, until revoked.
<PAGE>
ARTICLE VI
Regulatory Compliance and Listing
The issuance or delivery of any shares of Common Stock may be postponed
by the Company for such period as may be required to comply with any
applicable requirements under the federal securities laws, any applicable
listing requirements of any national securities exchange, or any
requirements under any other law or regulation applicable to the issuance
or delivery of such shares. The Company shall not be obligated to issue or
deliver any such shares if the issuance or delivery thereof shall
constitute a violation of any provision of any law or of any regulation of
any governmental authority or any national securities exchange.
ARTICLE VII
Adjustments
In the event of any change in the outstanding shares of Common Stock by
reason of a stock dividend or distribution, reorganization,
recapitalization, merger, consolidation, split-up, combination, exchange of
shares of Common Stock or the like, the Board may appropriately adjust the
number of shares of Common Stock which may be issued under this Plan.
ARTICLE VIII
Amendment of the Plan
(1) The Board may, without further action by the shareholders and without
further consideration to the Company, amend this Plan or condition or
modify Awards under this Plan in response to changes in securities or
other laws or rules, regulations or regulatory interpretations thereof
applicable to this Plan or to comply with stock exchange rules or
requirements.
(2) The Board may, from time to time, amend this Plan or any provisions
thereof without further action by the shareholders except that no
amendment may:
(a) change the provisions of ARTICLE V, subsection (2), more than once
in any six month period, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security
Act, or the rules thereunder;
<PAGE>
(b) increase Awards (i) retroactively, (ii) more than once in any
calendar year, or (iii) to an amount greater than $40,000 per year
as determined pursuant to this Plan;
(c) change the eligibility for Awards or otherwise materially modify
the terms of this Plan; or
(d) affect an Outside Director's rights under any Award made under
this Plan prior to such amendment without such Outside Director's
consent.
<PAGE>
EXHIBIT 10.10
SUN COMPANY, INC.
EXECUTIVE LONG-TERM STOCK INVESTMENT PLAN
ARTICLE I
General
1.1 PURPOSE. The purposes of this Sun Company, Inc. Executive Long-Term
Stock Investment Plan (the "Plan") are to: (1) better align the interests
of shareholders and management of Sun Company, Inc. and its subsidiaries
and affiliates (collectively referred to as the "Company") by creating a
direct linkage between participants' rewards and shareholders' gains; (2)
provide management with an equity ownership in Sun Company, Inc.
commensurate with Company performance, as reflected in increased
shareholder value; (3) maintain competitive compensation levels; and (4)
provide an incentive to management for continuous employment with the
Company.
1.2 ADMINISTRATION. (a) The Plan shall be administered by a Committee
of disinterested persons appointed by the Board of Directors of Sun
Company, Inc. (the "Committee"), as constituted from time to time. The
Committee shall consist of at least two members of the Board of Directors.
During the year prior to commencement of service on the Committee, the
Committee members will not have participated in, and while serving on the
Committee, such members shall not be eligible for selection as persons to
whom stock may be allocated or to whom stock options or stock appreciation
rights may be granted under the Plan or any other discretionary plan of the
Company under which participants are entitled to acquire stock, stock
options or stock appreciation rights of Sun Company, Inc.
(b) The Committee shall have the authority, in its sole discretion and
from time to time to: (i) designate the employees or classes of employees
eligible to participate in the Plan; (ii) grant awards provided in the Plan
in such form and amount as the Committee shall determine; (iii) impose such
limitations, restrictions and conditions upon any such award as the
Committee shall deem appropriate; and (iv) interpret the Plan, adopt, amend
and rescind rules and regulations relating to the Plan, and make all other
determinations and take all other action necessary or advisable for the
implementation and administration of the Plan.
(c) Decisions and determinations of the Committee on all matters relating
to the Plan shall be in its sole discretion and shall be conclusive. No
member of the Committee shall be liable
<PAGE>
for any action taken or decision made in good faith relating to the Plan or
any award thereunder.
1.3 ELIGIBILITY FOR PARTICIPATION. Participants in the Plan shall be
selected by the Committee from the executive officers and other key
employees of the Company who occupy responsible managerial or professional
positions and who have the capability of making a substantial contribution
to the success of the Company. In making this selection and in determining
the form and amount of awards, the Committee shall consider any factors
deemed relevant, including the individual's functions, responsibilities,
value of services to the Company and past and potential contributions to
the Company's profitability and sound growth.
1.4 TYPES OF AWARDS UNDER PLAN. Awards under the Plan may be in the
form of any one or more of the following:
(i) Stock Options, as described in Article II;
(ii) Incentive Stock Options, as described in Article III;
(iii) Reload Options (referred to and generally described as "Equity
Options"), as described in Article IV;
(iv) Alternate Appreciation Rights, as described in Article V;
(v) Limited Rights, as described in Article VI; and/or
(vi) Restricted Stock Units, as described in Article VII.
1.5 AGGREGATE LIMITATION ON AWARDS. (a) Shares of stock which may be
issued under the Plan shall be authorized and unissued or treasury shares
of Common Stock of Sun Company, Inc. ("Common Stock"). The maximum number
of shares of Common Stock which may be issued under the Plan shall be 5.8
million.
(b) For purposes of calculating the maximum number of shares of Common
Stock which may be issued under the Plan: (i) all the shares issued
(including the shares, if any, withheld for tax withholding requirements)
shall be counted when cash is used as full payment for shares issued upon
exercise of a Stock Option, Incentive Stock Option or Reload Option; (ii)
only the shares issued (including the shares, if any, withheld for tax
withholding requirements) as a result of an exercise of Alternate
<PAGE>
Appreciation Rights shall be counted; and (iii) only the net shares issued
(including the shares, if any, withheld for tax withholding requirements)
shall be counted when shares of Common Stock are used as full or partial
payment for shares issued upon exercise of a Stock Option, Incentive Stock
Option or Reload Option.
(c) In addition to shares of Common Stock actually issued pursuant to the
exercise of Stock Options, Incentive Stock Options, Reload Options or
Alternate Appreciation Rights, there shall be deemed to have been issued a
number of shares equal to the sum of
(i) the number of shares of Common Stock in respect of which Limited
Rights (as described in Article VI) shall have been exercised, and (ii) the
number of Restricted Stock Units (as described in Article VII), the value
of which the Company shall have paid under the Plan.
(d) Shares tendered by a participant as payment for shares issued upon
exercise of a Stock Option, Incentive Stock Option or Reload Option shall
be available for issuance under the Plan. Any shares of Common Stock
subject to a Stock Option, Incentive Stock Option or Reload Option which
for any reason is terminated unexercised or expires shall again be
available for issuance under the Plan, but shares subject to a Stock
Option, Incentive Stock Option or Reload Option which are not issued as a
result of the exercise of Limited Rights shall not again be available for
issuance under the Plan.
1.6 EFFECTIVE DATE AND TERM OF PLAN. (a) The Plan shall become
effective on the date approved by the holders of a majority of the shares
of Common Stock voting at the 1991 Annual Meeting of Shareholders of Sun
Company, Inc.
(b) No awards shall be made under the Plan after the last day of the
Company's 1996 fiscal year provided, however, that the Plan and all awards
made under the Plan prior to such date shall remain in effect until such
awards have been satisfied or terminated in accordance with the Plan and
the terms of such awards.
1.7 PRIOR PLAN. Effective on December 31, 1991, no further awards shall
be made under the Sun Company, Inc. Long-Term Incentive Plan adopted in
May, 1986 provided, however, that any rights theretofore granted under that
plan shall not be affected.
<PAGE>
ARTICLE II
Stock Options
2.1 AWARD OF STOCK OPTIONS. The Committee may from time to time, and
subject to the provisions of the Plan and such other terms and conditions
as the Committee may prescribe, grant to any participant in the Plan one or
more options to purchase for cash or shares the number of shares of Common
Stock ("Stock Options") allotted by the Committee. The date a Stock Option
is granted shall mean the date selected by the Committee as of which the
Committee allots a specific number of options to a participant pursuant to
the Plan.
2.2 STOCK OPTION AGREEMENTS. The grant of a Stock Option shall be
evidenced by a written Stock Option Agreement, executed by the Company and
the holder of a Stock Option (the "optionee"), stating the number of shares
of Common Stock subject to the Stock Option evidenced thereby, and in such
form as the Committee may from time to time determine.
2.3 STOCK OPTION PRICE. The option price per share of Common Stock
deliverable upon the exercise of a Stock Option shall be 100% of the fair
market value of a share of Common Stock on the date the Stock Option is
granted.
2.4 TERM AND EXERCISE. Each Stock Option shall be fully exercisable six
months from the date of its grant and unless a shorter period is provided
by the Committee or by another Section of this Plan, may be exercised
during a period of ten years from the date of grant thereof (the "option
term"). No Stock Option shall be exercisable after the expiration of its
option term.
2.5 MANNER OF PAYMENT. Each Stock Option Agreement shall set forth the
procedure governing the exercise of the Stock Option granted thereunder,
and shall provide that, upon such exercise in respect of any shares of
Common Stock subject thereto, the optionee shall pay to the Company, in
full, the option price for such shares with cash or with Common Stock. All
shares of Common Stock issued under the Sun Company, Inc. Executive Long-
Term Incentive Plan, the Sun Company, Inc. Long-Term Incentive Plan or this
Plan must be held at least six months before they may be used as payment of
the option price.
2.6 RESTRICTION ON CERTAIN SHARES. As soon as practicable after receipt
of payment, the Company shall deliver to the optionee a certificate or
certificates for such shares of Common Stock. The optionee shall become a
shareholder of the
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Company with respect to Common Stock represented by share certificates so
issued and as such shall be fully entitled to receive dividends, to vote
and to exercise all other rights of a shareholder. Notwithstanding the
foregoing, a number of shares of Common Stock received upon the exercise of
the options shall be subject to certain restrictions. The number of shares
subject to the restrictions shall be determined based on the optionee's
method of financing the payment of the option price. If the optionee
finances the option exercise by borrowing money which is secured by
unrestricted shares of Common Stock which will be sold to repay the loan,
the number of shares subject to the restrictions shall be equal to the
total number of shares received in the exercise of the option minus (i) the
number of shares that needed to be sold in order to satisfy the loan,
including interest thereupon, and any brokerage commissions involved in the
sale of such stock and (ii) the number of shares which have a fair market
value on the date of the option exercise equal to the applicable federal,
state and local withholding tax on the option exercise. If the optionee
finances the payment of the option price by any other method, the number of
shares subject to the restrictions shall be equal to the total number of
shares received in the exercise of the option minus (i) the number of
shares which have a fair market value on the date of the option exercise
equal to the total amount paid for all the shares received in the option
exercise and (ii) the number of shares which have a fair market value on
the date of the option exercise equal to the applicable federal, state and
local withholding tax on the option exercise. The restrictions on these
shares of Common Stock shall be as follows:
(a) the optionee shall be prohibited from the sale, exchange,
transfer, pledge, hypothecation, gift or other disposition of such
shares of Common Stock until the earlier of the expiration of the
option term or termination of the optionee's employment for any
reason. Notwithstanding the foregoing, six months after the
exercise of the option, such shares of Common Stock may be used as
payment of the option price of shares issued upon the exercise of
other Stock Options. However, all such shares issued will be
restricted shares.
(b) The restrictions shall apply to any new, additional or different
securities the optionee may become entitled to receive with
respect to such shares by virtue of a stock split or stock
dividend or any other change in the corporate or capital structure
of the Company.
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(c) Until such time as the restrictions hereunder lapse, the share
certificate representing such shares shall contain a restrictive
legend evidencing said restrictions. Alternatively, the optionee
shall be required to deposit the share certificate with the
Company or its agent, endorsed in blank or accompanied by a duly
executed irrevocable stock power or other instrument of transfer.
2.7 DEATH OF OPTIONEE. (a) Upon the death of the optionee, any rights
to the extent exercisable on the date of death may be exercised by the
optionee's estate, or by a person who acquires the right to exercise such
Stock Option by bequest or inheritance or by reason of the death of the
optionee, provided that such exercise occurs within both the remaining
option term of the Stock Option and one year after the optionee's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the optionee's employment may have terminated prior to death, but only
to the extent of any Stock Options exercisable on the date of death.
2.8 RETIREMENT OR DISABILITY. Upon termination of the optionee's
employment by reason of retirement or permanent disability (as each is
determined by the Committee), the optionee may, within 36 months from the
date of termination, exercise any Stock Options to the extent such options
are exercisable during such 36-month period.
2.9 TERMINATION FOR OTHER REASONS. Except as provided in Sections 2.7
and 2.8, or except as otherwise determined by the Committee, all Stock
Options shall terminate upon the termination of the optionee's employment;
provided, however, that the Limited Rights (described herein at Article VI)
awarded in tandem with such Stock Options shall not terminate and such
Limited Rights shall remain exercisable during the Exercise Period for any
optionee who:
(a) was employed by the Company at the time of the Change in Control and
is subsequently terminated by the Company other than for just cause; or
(b) voluntarily terminates if such termination was the result of a good
faith determination by the optionee that, as a result of the Change in
Control, he is unable to effectively discharge his present duties or the
duties of the position which he occupied just prior to the Change in
Control.
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As used herein, "just cause" shall mean willful misconduct or dishonesty
or conviction of or failure to contest prosecution for a felony or
excessive absenteeism unrelated to illness.
2.10 EFFECT OF EXERCISE. The exercise of any Stock Option shall cancel
that number of related Alternate Appreciation Rights and/or Limited Rights,
if any, which is equal to the number of shares of Common Stock purchased
pursuant to said options.
ARTICLE III
Incentive Stock Options
3.1 AWARD OF INCENTIVE STOCK OPTIONS. The Committee may, from time to
time and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant in the
Plan one or more "incentive stock options" (intended to qualify as such
under the provisions of Section 422 of the Internal Revenue Code of 1986,
as amended ("Incentive Stock Options")) to purchase for cash or shares the
number of shares of Common Stock allotted by the Committee. The date an
Incentive Stock Option is granted shall mean the date selected by the
Committee as of which the Committee allots a specific number of options to
a participant pursuant to the Plan.
Notwithstanding the foregoing, Incentive Stock Options shall not be
granted to any owner of 10% or more of the total combined voting power of
the Company and its subsidiaries.
3.2 INCENTIVE STOCK OPTION AGREEMENTS. The grant of an Incentive Stock
Option shall be evidenced by a written Incentive Stock Option Agreement,
executed by the Company and the holder of an Incentive Stock Option (the
"optionee"), stating the number of shares of Common Stock subject to the
Incentive Stock Option evidenced thereby, and in such form as the Committee
may from time to time determine.
3.3 INCENTIVE STOCK OPTION PRICE. The option price per share of Common
Stock deliverable upon the exercise of an Incentive Stock Option shall be
100% of the fair market value of a share of Common Stock on the date the
Incentive Stock Option is granted.
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3.4 TERM AND EXERCISE. Each Incentive Stock Option shall be fully
exercisable six months from the date of its grant and unless a shorter
period is provided by the Committee or another Section of this Plan, may be
exercised during a period of ten years from the date of grant thereof (the
"option term"). No Incentive Stock Option shall be exercisable after the
expiration of its option term.
3.5 MAXIMUM AMOUNT OF INCENTIVE STOCK OPTION GRANT. The aggregate fair
market value (determined on the date the option is granted) of Common Stock
subject to an Incentive Stock Option granted to an optionee by the
Committee in any calendar year shall not exceed $100,000.
3.6 DEATH OF OPTIONEE. (a) Upon the death of the optionee, any
Incentive Stock Option exercisable on the date of death may be exercised by
the optionee's estate or by a person who acquires the right to exercise
such Incentive Stock Option by bequest or inheritance or by reason of the
death of the optionee, provided that such exercise occurs within both the
remaining option term of the Incentive Stock Option and one year after the
optionee's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the optionee's employment may have terminated prior to death, but only
to the extent of any Incentive Stock Options exercisable on the date of
death.
3.7 RETIREMENT OR DISABILITY. Upon the termination of the optionee's
employment by reason of permanent disability or retirement (as each is
determined by the Committee), the optionee may, within 36 months from the
date of such termination of employment, exercise any Incentive Stock
Options to the extent such Incentive Stock Options are exercisable during
such 36-month period. Notwithstanding the foregoing, the tax treatment
available pursuant to Section 422 of the Internal Revenue Code of 1986 upon
the exercise of an Incentive Stock Option will not be available to an
optionee who exercises any Incentive Stock Option more than (i) 12 months
after the date of termination of employment due to permanent disability or
(ii) three months after the date of termination of employment due to
retirement.
3.8 TERMINATION FOR OTHER REASONS. Except as provided in Sections 3.6
and 3.7 or except as otherwise determined by the Committee, all Incentive
Stock Options shall terminate upon the termination of the optionee's
employment; provided, however,
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that the Limited Rights (described herein at Article VI) awarded in tandem
with such Incentive Stock Options shall not terminate and such Limited
Rights shall remain exercisable during the Exercise Period for any optionee
who:
(a) was employed by the Company at the time of the Change in Control and
is subsequently terminated by the Company other than for just cause; or
(b) voluntarily terminates if such termination was the result of a good
faith determination by the optionee that, as a result of the Change in
Control, he is unable to effectively discharge his present duties or the
duties of the position which he occupied just prior to the Change in
Control.
As used herein, "just cause" shall mean willful misconduct or dishonesty
or conviction of or failure to contest prosecution for a felony or
excessive absenteeism unrelated to illness."
3.9 APPLICABILITY OF STOCK OPTIONS SECTIONS. Sections 2.5, Manner of
Payment; 2.6, Restrictions on Certain Shares; and 2.10, Effect of Exercise,
applicable to Stock Options, shall apply equally to Incentive Stock
Options. Said Sections are incorporated by reference in this Article III
as though fully set forth herein.
ARTICLE IV
Reload Options
4.1 AUTHORIZATION OF RELOAD OPTIONS. Concurrently with the award of
Stock Options and/or the award of Incentive Stock Options to any
participant in the Plan, the Committee may authorize reload options
("Reload Options") to purchase for cash or shares a number of shares of
Common Stock. The number of Reload Options (which are referred to and
generally described as "Equity Options") shall equal (i) the number of
shares of Common Stock used to exercise the underlying Stock Options or
Incentive Stock Options and (ii) to the extent authorized by the Committee,
the number of shares of Common Stock used to satisfy any tax withholding
requirement incident to the exercise of the underlying Stock Options or
Incentive Stock Options. The grant of a Reload Option will be effected
upon the exercise of underlying Stock Options, Incentive Stock Options or
Reload Options through the use of shares of Common Stock held by the
optionee for at least 12 months. Notwithstanding the fact that the
underlying option may be an Incentive Stock Option, a Reload Option is not
intended to qualify as an "incentive stock option" under Section 422 of the
Internal Revenue Code of 1986.
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4.2 RELOAD OPTION AMENDMENT. Each Stock Option Agreement and Incentive
Stock Option Agreement shall state whether the Committee has authorized
Reload Options with respect to the underlying Stock Options and/or
Incentive Stock Options. Upon the exercise of an underlying Stock Option,
Incentive Stock Option or other Reload Option, the Reload Option will be
evidenced by an amendment to the underlying Stock Option Agreement or
Incentive Stock Option Agreement.
4.3 RELOAD OPTION PRICE. The option price per share of Common Stock
deliverable upon the exercise of a Reload Option shall be the fair market
value of a share of Common Stock on the date of grant of the Reload Option.
4.4 TERM AND EXERCISE. Each Reload Option is fully exercisable six
months from the effective date of grant. The term of each Reload Option
shall be equal to the remaining option term of the underlying Stock Option
and/or Incentive Stock Option.
4.5 TERMINATION OF EMPLOYMENT. No additional Reload Options shall be
granted to optionees when Stock Options, Incentive Stock Options and/or
Reload Options are exercised pursuant to the terms of this Plan following
termination of the optionee's employment.
4.6 APPLICABILITY OF STOCK OPTIONS SECTIONS. Sections 2.5, Manner of
Payment; 2.6, Restrictions on Certain Shares; 2.7, Death of Optionee; 2.8,
Retirement or Disability; 2.9, Termination for Other Reasons; and 2.10,
Effect of Exercise, applicable to Stock options, shall apply equally to
Reload Options. Said Sections are incorporated by reference in this
Article IV as though fully set forth herein.
ARTICLE V
Alternate Appreciation Rights
5.1 AWARD OF ALTERNATE APPRECIATION RIGHTS. Concurrently with or
subsequent to the award of any Stock Option, Incentive Stock Option or
Reload Option to purchase one or more shares of Common Stock, the Committee
may, subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, award to the optionee with
respect to each share of Common Stock, a related alternate appreciation
right ("Alternate Appreciation Right"), permitting the optionee to be paid
the appreciation on the option in lieu of exercising the option.
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5.2 ALTERNATE APPRECIATION RIGHTS AGREEMENT. Alternate Appreciation
Rights shall be evidenced by written agreements in such form as the
Committee may from time to time determine.
5.3 EXERCISE. An optionee who has been granted Alternate Appreciation
Rights may, from time to time, in lieu of the exercise of an equal number
of options, elect to exercise one or more Alternate Appreciation Rights and
thereby become entitled to receive from the Company payment in Common Stock
the number of shares determined pursuant to Sections 5.4 and 5.5.
Alternate Appreciation Rights shall be exercisable only to the same extent
and subject to the same conditions as the options related thereto are
exercisable, as provided in this Plan. The Committee may, in its
discretion, prescribe additional conditions to the exercise of any
Alternate Appreciation Rights.
5.4 AMOUNT OF PAYMENT. The amount of payment to which an optionee shall
be entitled upon the exercise of each Alternate Appreciation Right shall be
equal to 100% of the amount, if any, by which the fair market value of a
share of Common Stock on the exercise date exceeds the fair market value of
a share of Common Stock on the date the option related to said Alternate
Appreciation Right was granted.
5.5 FORM OF PAYMENT. The number of shares to be paid shall be
determined by dividing the amount of payment determined pursuant to Section
5.4 by the fair market value of a share of Common Stock on the exercise
date of such Alternate Appreciation Rights. As soon as practicable after
exercise, the Company shall deliver to the optionee a certificate or
certificates for such shares of Common Stock. All such shares shall be
issued with the rights and restrictions specified in Section 2.6.
5.6 EFFECT OF EXERCISE. The exercise of any Alternate Appreciation
Rights shall cancel an equal number of Stock Options, Incentive Stock
Options, Reload Options and Limited Rights, if any, related to said
Alternate Appreciation Rights.
5.7 RETIREMENT OR DISABILITY. Upon termination of the optionee's
employment (including employment as a director of the Company after an
optionee terminates employment as an officer or key employee of the
Company) by reason of permanent disability or retirement (as each is
determined by the Committee), the optionee may, within six months from the
date of such termination, exercise any Alternate Appreciation Rights to the
extent such Alternate Appreciation Rights are exercisable during such six-
month period.
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5.8 DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS.
Except as provided in Section 5.7, or except as otherwise determined by the
Committee, all Alternate Appreciation Rights shall terminate upon the
termination of the optionee's employment or upon the death of the optionee;
provided, however, that the Limited Rights (described herein at Article VI)
awarded in tandem with such Alternate Appreciation Rights shall not
terminate and such Limited Rights shall remain exercisable during the
Exercise Period for any optionee who:
(a) was employed by the Company at the time of the Change in Control and
is subsequently terminated by the Company other than for just cause; or
(b) voluntarily terminates if such termination was the result of a good
faith determination by the optionee that, as a result of the Change in
Control, he is unable to effectively discharge his present duties or the
duties of the position which he occupied just prior to the Change in
Control.
As used herein, "just cause" shall mean willful misconduct or dishonesty
or conviction of or failure to contest prosecution for a felony or
excessive absenteeism unrelated to illness."
ARTICLE VI
Limited Rights
6.1 AWARD OF LIMITED RIGHTS. Concurrently with or subsequent to the
award of any Stock Option, Incentive Stock Option, Reload Option or
Alternate Appreciation Right, the Committee may, subject to the provisions
of the Plan and such other terms and conditions as the Committee may
prescribe, award to the optionee with respect to each share of Common
Stock, a related limited right permitting the optionee, during a specified
limited time period, to be paid the appreciation on the option in lieu of
exercising the option ("Limited Right").
6.2 LIMITED RIGHTS AGREEMENT. Limited Rights granted under the Plan
shall be evidenced by written agreements in such form as the Committee may
from time to time determine.
6.3 EXERCISE PERIOD. Limited Rights are exercisable in full for a
period of seven months following the date of a Change in Control of Sun
Company, Inc. (the "Exercise Period"); provided, however, that Limited
Rights may not be exercised under
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any circumstances until the expiration of the six-month period following
the date of grant. As used in the Plan, a "Change in Control" shall be
deemed to have occurred if: (i) Continuing Directors cease, within one
year of a Control Transaction, to constitute a majority of the Board (or of
the Board of Directors of any successor to Sun Company, Inc., or to all or
substantially all of its assets) or (ii) any entity, person or Group
acquires shares of Sun Company, Inc. in a transaction or series of
transactions that result in such entity, person or Group directly or
indirectly owning beneficially more than fifty percent (50%) of the
outstanding voting shares.
As used herein, "Control Transaction" shall mean any of the following
transactions or any combination thereof: (1) any tender offer for or
acquisition of capital stock of Sun Company, Inc., (2) any merger,
consolidation or sale of all or substantially all of the assets of Sun
Company, Inc., or (3) the submission of a nominee or nominees for the
position of director of Sun Company, Inc. by a shareholder or a Group of
shareholders in a proxy solicitation or otherwise. As used herein,
"Continuing Director" shall mean a Director who was a member of the Board
of Directors immediately prior to a Control Transaction which results in a
Change in Control. As used herein, "Group" shall mean persons who act in
concert as described in Sections 13(d)(3) and/or 14(d)(2) of the Securities
Exchange Act of 1934, as amended."
6.4 AMOUNT OF PAYMENT. The amount of payment to which an optionee shall
be entitled upon the exercise of each Limited Right shall be equal to 100%
of the amount, if any, which is equal to the difference between the price
per share of Common Stock covered by the related option on the date the
option was granted and the market price of a share of such Common Stock.
Market price is defined to be the greater of (i) the highest price per
share of Common Stock paid in connection with any Change in Control and
(ii) the highest price per share of Common Stock reflected in the
consolidated trading tables of THE WALL STREET JOURNAL (presently the New
York Stock Exchange Composite Transactions quotations) during the 60-day
period prior to the Change in Control.
6.5 FORM OF PAYMENT. Payment of the amount to which an optionee is
entitled upon the exercise of Limited Rights, as determined pursuant to
Section 6.4, shall be made solely in cash.
6.6 EFFECT OF EXERCISE. If Limited Rights are exercised, the Stock
Options, Incentive Stock Options, Reload Options and Alternate Appreciation
Rights, if any, related to such Limited Rights cease to be exercisable to
the extent of the number of shares with respect to which the Limited Rights
were exercised.
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Upon the exercise or termination of the options, and Alternate Appreciation
Rights, if any, related to such Limited Rights, the Limited Rights granted
with respect thereto terminate to the extent of the number of shares as to
which the related options and Alternate Appreciation Rights were exercised
or terminated; provided, however, that with respect to Stock Options,
Incentive Stock Options and/or Alternate Appreciation Rights that are
terminated as a result of the termination of the optionee's employment
status, the Limited Rights awarded in tandem therewith shall not terminate
and such Limited Rights shall remain exercisable during the Exercise Period
for any optionee who:
(a) was employed by the Company at the time of the Change in Control and
is subsequently terminated by the Company other than for just cause; or
(b) voluntarily terminates if such termination was the result of a good
faith determination by the optionee that, as a result of the Change in
Control, he is unable to effectively discharge his present duties or the
duties of the position which he occupied just prior to the Change in
Control.
As used herein, "just cause" shall mean willful misconduct or dishonesty
or conviction of or failure to contest prosecution for a felony or
excessive absenteeism unrelated to illness.
6.7 RETIREMENT OR DISABILITY. Upon termination of the optionee's
employment (including employment as a director of this Company after an
optionee terminates employment as an officer or key employee of this
Company) by reason of permanent disability or retirement (as each is
determined by the Committee), the optionee may, within six months from the
date of termination, exercise any Limited Right to the extent such Limited
Right is exercisable during such six-month period.
6.8 DEATH OF OPTIONEE OR TERMINATION FOR OTHER REASONS. Except as
provided in Sections 6.7 and 6.9, or except as otherwise determined by the
Committee, all Limited Rights granted under the Plan shall terminate upon
the termination of the optionee's employment or upon the death of the
optionee.
6.9 TERMINATION RELATED TO A CHANGE IN CONTROL. The requirement that an
optionee be terminated by reason of retirement or permanent disability or
be employed by the Company at the time of exercise pursuant to Sections 6.7
and 6.8 respectively, is waived during the Exercise Period as to any
optionee who (i) was employed by the Company at the time of the Change in
Control and (ii) is subsequently terminated by the Company other than for
just cause or who voluntarily terminates if such termination was the result
of a good faith determination
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by the optionee that as a result of the Change in Control he is unable to
effectively discharge his present duties or the duties of the position
which he occupied just prior to the Change in Control. As used herein
"just cause" shall mean willful misconduct or dishonesty or conviction of
or failure to contest prosecution for a felony, or excessive absenteeism
unrelated to illness.
ARTICLE VII
Restricted Stock Units
7.1 AWARD OF RESTRICTED STOCK UNITS. The Committee may from time to
time, and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any participant
restricted rights to receive either cash or shares of Common Stock
("Restricted Stock Units"). At the time it grants any Restricted Stock
Units, the Committee shall determine whether the payment of such Restricted
Stock Units shall be conditioned upon either (i) the participant's
continued employment with the Company throughout a stated period; or (ii)
the attainment of certain predetermined performance targets during a stated
period.
7.2 RESTRICTED STOCK UNIT AGREEMENTS. Restricted Stock Units granted
under the Plan shall be evidenced by written agreements in such form as the
Committee may from time to time determine.
7.3 LENGTH OF RESTRICTION PERIOD. Upon making an award, the Committee
shall determine (and the Restricted Stock Unit Agreement shall state) the
length of the applicable period during which employment must be maintained
or certain performance targets must be attained (the "Restriction Period").
Restriction Periods will normally be from three to five years; however, the
Committee may establish other time periods in its sole discretion.
7.4 NUMBER OF RESTRICTED STOCK UNITS. Upon making an award, the
Committee shall determine (and the Restricted Stock Unit Agreement shall
state) the number of Restricted Stock Units granted. The initial number of
Restricted Stock Units granted may be adjusted by a performance factor, in
accordance with Section 7.8, to be applied at the conclusion of the
Restriction Period to determine the final number of Restricted Stock Units
to be paid.
7.5 DIVIDEND EQUIVALENT. At the Committee's discretion, a holder of
Restricted Stock Units will be entitled to receive payment from the Company
in an amount equal to each cash dividend
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("Dividend Equivalent") the Company would have paid to such holder had he,
on the record date for payment of such dividend, owned of record shares of
Common Stock equal to the number of Restricted Stock Units which had been
awarded to such holder as of the close of business on such record date.
Payment of the Dividend Equivalent is expressly conditioned on continued
employment with the Company at the time of payment. Each such payment
shall be made by the Company on the payment date of the cash dividend in
respect of which it is to be made, or as soon as practicable thereafter.
7.6 PAYMENT OF RESTRICTED STOCK UNITS. (a) Payment in respect of
Restricted Stock Units conditioned solely upon the participant's continued
employment with the Company throughout the Restriction Period shall be made
within 90 days after the Restriction Period for such units has ended.
(b) Payment in respect of Restricted Stock Units conditioned upon the
attainment of performance targets shall be made to the holder thereof
within 90 days after the Restriction Period for such units has ended, but
only to the extent the Committee determines that the applicable performance
targets have been met and subject to any adjustment made to the number of
Restricted Stock Units which shall be paid, pursuant to Section 7.8(b).
7.7 FORM OF PAYMENT. Payment for Restricted Stock Units shall be made
in cash, shares of Common Stock or partly in cash and partly in Common
Stock as the Committee shall determine in its sole discretion. To the
extent that payment is made in cash, the amount shall be determined by
multiplying the number of Restricted Stock Units paid out by the fair
market value of a share of Common Stock as of the close of business on the
day after the Restriction Period has ended. To the extent that payment is
made in Common Stock, the number of shares paid shall be equal to the
number of Restricted Stock Units so paid out.
7.8 PERFORMANCE TARGETS. (a) Upon the award of Restricted Stock Units,
the Committee may establish (and the Restricted Stock Unit Agreement shall
state) the performance targets to be attained within the Restriction Period
as a condition of such units being paid out. Performance targets may be
based entirely on each participant's business unit goals, or partially on
business unit goals and partially on corporate goals, or entirely on
corporate goals. Goals may include qualitative as well as quantitative
measures. Performance targets may be adjusted during the Restriction
Period, at the Committee's sole discretion, to reflect extraordinary events
beyond management's control.
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(b) Attainment by the participant of performance targets in respect of a
Restriction Period will result in 100% of the Restricted Stock Units being
paid out. Attainment of performance below the performance targets in
respect of a Restriction Period shall result in a proportionate amount of
the value of the units (on a scale from 0 to 100%) being paid out, as
determined by the Committee.
7.9 TERMINATION OF EMPLOYMENT. Except as provided in Sections 7.10 and
7.11, or except as otherwise determined by the Committee, all Restricted
Stock Units granted to a participant under the Plan shall terminate upon
termination of the participant's employment with the Company prior to the
end of the Restriction Period applicable to such Restricted Stock Units,
and in such event the participant shall not be entitled to receive any
payment in respect thereof.
7.10 DEATH, DISABILITY OR RETIREMENT. In the event that the employment
of a holder of Restricted Stock Units shall terminate during a Restriction
Period by reason of death, permanent disability or retirement (as
disability and retirement are determined by the Committee), such holder
shall be entitled to receive upon the expiration of the Restriction Period,
payment in respect of said Restricted Stock Units, as adjusted. Such units
shall be adjusted by multiplying the amount thereof by a fraction, the
numerator of which shall be the number of full and partial calendar months
between the date of award of the Restricted Stock Units and the date that
employment terminated, and the denominator of which shall be the number of
full and partial calendar months from the date of award to the end of the
Restriction Period.
7.11 ACCELERATION OF RESTRICTED STOCK UNITS. (a) Notwithstanding any
provisions to the contrary in Restricted Stock Unit Agreements or the
provisions of Sections 7.1 through 7.8, if there is a Change in Control of
the Company all outstanding Restricted Stock Units shall be payable in
shares of Common Stock, regardless of whether the applicable Restriction
Period has expired and regardless of whether the applicable performance
targets have been met.
(b) In the event of the occurrence of a Change in Control, the holder of
Restricted Stock Units shall be entitled to receive payment thereunder
within 90 days following the date of occurrence of such event.
(c) If a participant was employed by the Company at the time of the
Change in Control and is subsequently terminated by the Company other than
for just cause or who voluntarily terminates if such termination is the
result of a good faith determination by the participant that as a result of
the Change
<PAGE>
in Control he is unable to effectively discharge the duties of the position
which he occupied just prior to the Change in Control, within the 90-day
period as described in subsection (b), he shall be eligible to receive
payment of Restricted Stock Units as provided in subsections (a) and (b).
As used herein, "just cause" shall mean willful misconduct or dishonesty or
conviction of or failure to contest prosecution for a felony, or excessive
absenteeism unrelated to illness.
ARTICLE VIII
Miscellaneous
8.1 GENERAL RESTRICTION. Each award under the Plan shall be subject to
the requirement that, if at any time the Committee shall determine that (i)
the listing, registration or qualification of the shares of Common Stock
subject or related thereto upon any securities exchange or under any state
or Federal law, or (ii) the consent or approval of any government
regulatory body, or (iii) an agreement by the recipient of an award with
respect to the disposition of shares of Common Stock, is necessary or
desirable as a condition of, or in connection with, the granting of such
award or the issue or purchase of shares of Common Stock thereunder, such
award may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the
Committee.
8.2 NON-ASSIGNABILITY. No award under the Plan shall be assignable or
transferable by the recipient thereof, except by will or by the laws of
descent and distribution. During the life of the recipient, such award
shall be exercisable only by such person or by such person's guardian or
legal representative.
8.3 WITHHOLDING TAXES. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall
have the right to require the participant to remit to the Company an amount
sufficient to satisfy any Federal, state and/or local withholding tax
requirements prior to the delivery of any certificate or certificates for
such shares. Alternatively, the Company may issue or transfer such shares
of Common Stock net of the number of shares sufficient to satisfy the
withholding tax requirements. For withholding tax purposes, the shares of
Common Stock shall be valued on the date the withholding obligation is
incurred.
8.4 RIGHT TO TERMINATE EMPLOYMENT. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any
participant the right to continue in the employment of the Company or
affect any right which the Company may have to terminate the employment of
such participant.
<PAGE>
8.5 NON-UNIFORM DETERMINATIONS. The Committee's determinations under
the Plan (including without limitation determinations of the persons to
receive awards, the form, amount and timing of such awards, the terms and
provisions of such awards and the agreements evidencing same) need not be
uniform and may be made by it selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not such persons are
similarly situated.
8.6 RIGHTS AS A SHAREHOLDER. The recipient of any award under the Plan
shall have no rights as a shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued to such recipient.
8.7 DEFINITIONS. In this Plan the following definitions shall apply:
(a) "Subsidiary" means any corporation of which, at the time more than 50%
of the shares entitled to vote generally in an election of directors are
owned directly or indirectly by Sun Company, Inc. or any subsidiary
thereof.
(b) "Affiliate" means any person or entity which directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with Sun Company, Inc.
(c) "Fair market value" as of any date and in respect of any share of
Common Stock means the opening price on such date of a share of Common
Stock (which price shall be the closing price on the previous trading day
of a share of Common Stock on the New York Stock Exchange Composite
Transactions as reflected in the consolidated trading tables of THE WALL
STREET JOURNAL or any other publication selected by the Committee),
provided that, if shares of Common Stock shall not have been traded on the
New York Stock Exchange for more than 10 days immediately preceding such
date or if deemed appropriate by the Committee for any other reason, the
fair market value of shares of Common Stock shall be as determined by the
Committee in such other manner as it may deem appropriate. In no event
shall the fair market value of any share of Common Stock be less than its
par value.
(d) "Option" means Stock Option, Incentive Stock Option or Reload Option.
(e) "Option price" means the purchase price per share of Common Stock
deliverable upon the exercise of a Stock Option, Incentive Stock Option or
Reload Option.
<PAGE>
8.8 LEAVES OF ABSENCE. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the
Plan in respect of any leave of absence taken by the recipient of any
award. Without limiting the generality of the foregoing, the Committee
shall be entitled to determine (i) whether or not any such leave of absence
shall constitute a termination of employment within the meaning of the Plan
and (ii) the impact, if any, of any such leave of absence on awards under
the Plan theretofore made to any recipient who takes such leave of absence.
8.9 NEWLY ELIGIBLE EMPLOYEES. The Committee shall be entitled to make
such rules, regulations, determinations and awards as it deems appropriate
in respect of any employee who becomes eligible to participate in the Plan
or any portion thereof after the commencement of an award or incentive
period.
8.10 ADJUSTMENTS. In any event of any change in the outstanding Common
Stock by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the
like, the Committee may appropriately adjust the number of shares of Common
Stock which may be issued under the Plan, the number of shares of Common
Stock subject to options theretofore granted under the Plan, the option
price of options theretofore granted under the Plan, the amount of
Restricted Stock Units theretofore awarded under the Plan, the performance
targets referred to in Section 7.8 and any and all other matters deemed
appropriate by the Committee.
8.11 AMENDMENT OF THE PLAN. (a) The Committee may, without further
action by the shareholders and without receiving further consideration from
the participants, amend this Plan or condition or modify awards under this
Plan in response to changes in securities or other laws or rules,
regulations or regulatory interpretations thereof applicable to this Plan
or to comply with stock exchange rules or requirements.
(b) The Committee may at any time and from time to time terminate or
modify or amend the Plan in any respect, except that without shareholder
approval the Committee may not (i) increase the maximum number of shares of
Common Stock which may be issued under the Plan (other than increases
pursuant to Section 8.10), (ii) extend the period during which any award
may be granted or exercised, or (iii) extend the term of the Plan. The
termination or any modification or amendment of the Plan, except as
provided in subsection (a), shall not without the consent of a participant,
affect the participant's rights under an award previously granted.
<PAGE>
EXHIBIT 10.15
FORM OF INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this ______
day of _______________, 19___, by and between Sun Company, Inc., a
Pennsylvania corporation (the "Company") and _____________________________
("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing difficulty
in obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reduction in the
coverage of such insurance; and
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation, in general, subjecting officers and
directors to expensive litigation risks at the same time as liability
insurance has been severely limited; and
WHEREAS, Indemnitee does not regard the current protection available as
adequate given the present circumstances, and Indemnitee and other officers
and directors of the Company may not be willing to serve as officers and
directors without adequate protection; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as
to provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) Third Party Proceedings. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action by or in the right of the Company) by reason of the fact that
Indemnitee is or was a director, officer, employee or agent of the Company,
or any affiliate of the Company, by reason of any action or inaction on the
part of Indemnitee while an officer or director, or by reason of the fact
that Indemnitee is or was serving at the request of the Company as a
director, officer, employee or agent
<PAGE>
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement (if such settlement is approved pursuant to
Section 2(f) hereof) actually and reasonably incurred by Indemnitee in
connection with such action, suit or proceeding if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
Indemnitee's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
lawful.
(b) Proceedings By or in the Right of the Company. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit
by or in the right of the Company or any subsidiary of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee is or
was a director, officer, employee or agent of the Company, or any affiliate
of the Company, by reason of any action or inaction on the party of
Indemnitee while an officer or director or by reason of the fact that
Indemnitee is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved
pursuant to Section 2(f) hereof) actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such action or
suit if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification shall be made in respect of any
claim, issue or matter as to which Indemnitee shall have been adjudged to
be liable to the Company unless and only to the extent that the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
<PAGE>
(c) Mandatory Indemnification. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in Sections 1(a) and 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith. For purposes of this Section 1(c), the
term "successful on the merits or otherwise" shall include, but not be
limited to, (i) any termination, withdrawal, or dismissal (with or without
prejudice) of any claim, action, suit or proceeding against Indemnitee
without any express finding of liability or guilt against him, or (ii) the
expiration of a reasonable period of time after the making of any claim or
threat of an action, suit or proceeding without the institution of the same
and without any promise or payment made to induce a settlement.
2. EXPENSES AND INDEMNIFICATION PROCEDURE.
(a) Advancement of Expenses. The Company shall advance all
reasonable expenses incurred by Indemnitee in connection with the
investigation, defense, settlement or appeal of any civil or criminal
action, suit or proceeding referenced in Section 1(a) or (b) hereof. For
purposes of any advancement hereunder, the Indemnitee shall be deemed to
have acted (i) in good faith and in a manner he reasonably believed to be
in or not opposed to the best interest of the Company, and (ii) with
respect to any criminal action or procedure, to have had no reasonable
cause to believe his conduct was unlawful if, under either (i) or (ii), his
action is based on the records or books of account of the Company, or the
records or books of account of another corporation, partnership, joint
venture, trust or another enterprise (collectively, the "other
enterprises"), including financial statements, or on information supplied
to him by the officers of the Company or other enterprises in the course of
their duties, or on the advice of legal counsel for the Company or other
enterprises or on information or records given or reports made to the
Company or other enterprises by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Company or other enterprises. Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company
as authorized hereby.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement,
give the Company notice in writing as soon
<PAGE>
as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to Sun Company, Inc., 1801 Market Street,
Philadelphia, PA 19103, Attention: Vice President and General Counsel (or
such other address as the Company may from time to time designate in
writing to Indemnitee). Notice shall be deemed received on the third
business day after the date postmarked if sent by domestic certified or
registered mail, properly addressed; otherwise, notice shall be deemed
received when such notice shall actually be received by the Company. In
addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within
Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
Section 1 hereof and this Section 2 shall be made no later than forty-five
(45) days after receipt of the written request of Indemnitee, coupled with
appropriate documentation to support the requested payment. If a claim
under this Agreement, under any statute, or under any provision of the
Company's Certificate of Incorporation or Bylaws providing for
indemnification is not paid in full by the Company within forty-five (45)
days after receipt of a fully documented written request for payment
thereof has first been received by the Company, Indemnitee may, but need
not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 13 hereof,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in connection with any action, suit or proceeding in advance of
its final disposition) that Indemnitee has not met the standards of conduct
which make it permissible under applicable law for the Company to indemnify
Indemnitee for the amount claimed, but the burden of proving such defense
shall be on the Company, and Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Section 2(a) hereof unless and
until such defense may be finally adjudicated by court order or judgment
from which no further right of appeal exists. It is the parties' intention
that if the Company contests Indemnitee's right to indemnification, the
question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the
<PAGE>
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel,
or its stockholders) that Indemnitee has not met such applicable standard
of conduct, shall create a presumption that Indemnitee has or has not met
the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice
of claim pursuant to Section 2(b) hereof, the Company has directors' and
officers' liability insurance in effect, the Company shall give prompt
notice of the commencement of such proceeding to the insurers in accordance
with the procedures set forth in the respective policies. The Company
shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of Indemnitee, all amounts payable as a result
of such proceeding in accordance with the terms of such policies.
(e) Selection of Counsel. If the Company shall be obligated under
Section 2(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election to do so. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently
incurred by Indemnitee with respect to the same proceeding; provided that
(i) Indemnitee shall have the right to employ separate counsel in any such
proceeding at Indemnitee's expense; and (ii) if (A) the employment of
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such
defense, or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the reasonable fees and
expenses of Indemnitee's counsel shall be at the expense of the Company.
(f) Settlements. The Company shall not be liable to Indemnitee
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither the
Company nor Indemnitee will reasonably withhold consent to any proposed
settlement.
<PAGE>
(g) Change in Control. If, at any time subsequent to the date of
this Agreement, continuing directors do not constitute a majority of the
members of the Board of Directors, or there is otherwise a change in
control of the Company (as contemplated by Item 403(c) of Regulation S-K
under the Securities Act of 1933, as amended, and the Securities Exchange
Act of 1934, as amended), then upon the request of Indemnitee, the Company
shall cause the determination of indemnification and advances required by
Section 2 hereof to be made by a third-party (mutually agreed upon by the
parties or failing such agreement, as determined by the Chief Judge of the
Federal District Court for the Eastern District of Pennsylvania). The fees
and expenses incurred by the third party in making the determination of
indemnification and advances shall be borne solely by the Company. If such
third party is unwilling and/or unable to make the determination of
indemnification and advances, then the Company shall cause the
indemnification and advances to be made by a majority vote or consent of a
Board committee consisting solely of continuing directors. For purposes of
this Agreement, a "continuing director" means either a member of the Board
at the date of this Agreement or a person nominated to serve as a member of
the Board by a majority of then-continuing directors.
3. ADDITIONAL INDEMNIFICATION RIGHTS:
(a) Scope. Notwithstanding any other provision of this Agreement,
the Company shall indemnify Indemnitee to the fullest extent permitted by
law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's
Certificate of Incorporation, the Company's Bylaws or by statute. In the
event of any change, after the date of this Agreement, in any applicable
law, statute, or rule which expands the right of a Pennsylvania corporation
to indemnify a member of its board of directors or an officer, such changes
shall be, ipso facto, within the purview of Indemnitee's rights and
Company's obligations under this Agreement. In the event of any change in
any applicable law, statute or rule which narrows the right of a
Pennsylvania corporation to indemnify a member of its board of directors or
an officer, such changes (to the extent not otherwise required by such law,
statute or rule to be applied to this Agreement) shall have no effect on
this Agreement or the parties' rights and obligations hereunder.
<PAGE>
(b) Non-exclusivity. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which an
Indemnitee may be entitled under the Company's Certificate of
Incorporation, its Bylaws, any agreement, any vote of stockholders or
disinterested directors, the Pennsylvania Business Corporation Law of 1988,
as amended, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office.
4. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Company contained herein shall continue during the period Indemnitee is a
director, officer, employee or agent of the Company (or is or was serving
at the request of the Company as a director, officer, employee or agent of
other enterprises) and shall continue thereafter, so long as Indemnitee
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal or investigative, by
reason of the fact that Indemnitee was a director, officer, employee or
agent of the Company or serving in any other capacity referred to herein.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or
reasonably incurred by him in the investigation, defense, appeal or
settlement of any civil or criminal action, suit or proceeding, but not for
the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such expenses, judgments, fines or penalties
to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that, in certain instances, federal law or public policy may override
applicable state law and prohibit the Company from indemnifying its
directors and officers under this Agreement or otherwise. For example, the
Company and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA
violations. Indemnitee understands and acknowledges that the Company has
undertaken with the SEC to submit the question of indemnification to a
court in certain circumstances for a determination of the Company's right
under public policy to indemnify Indemnitee.
<PAGE>
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its indemnification obligations under
this Agreement. Among other considerations, the Company will weigh the
costs of obtaining such insurance coverage against the protection afforded
by such coverage. In all policies of directors' and officers' liability
insurance, Indemnitee shall be insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most
favorably insured of the Company's directors, if Indemnitee is a director;
or of the Company's officers, if Indemnitee is not a director of the
Company but is an officer; or one of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee.
Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain such insurance if the Company determines in good faith
that such insurance is not reasonably available, if the premium costs for
such insurance are disproportionate to the amount of coverage provided, if
the coverage provided by such insurance is limited by exclusions so as to
provide an insufficient benefit, or Indemnitee is covered by similar
insurance maintained by an affiliate of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court
order, to perform its obligations under this Agreement shall not constitute
a breach of this Agreement. The provisions of this Agreement shall be
severable as provided in this Section 8. If this Agreement or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company shall nevertheless indemnify Indemnitee to
the full extent permitted by any applicable portion of this Agreement that
shall not have been invalidated, and the balance of this Agreement not so
invalidated shall be enforceable in accordance with its terms.
<PAGE>
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms
of this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or
otherwise as required under the Pennsylvania Business Corporation Act of
1988, as amended, but such indemnification or advancement of expenses may
be provided by Company in specific cases if the Board of Directors finds it
to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by
Indemnitee in such proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties, and amounts paid in
settlement) which have been paid directly to Indemnitee by an insurance
carrier under a policy of officers' and directors' liability insurance
maintained by the Company or other enterprise; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that if Indemnitee is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as
<PAGE>
a director, officer, employee or agent of other enterprises, Indemnitee
shall stand in the same position under the provisions of this Agreement
with respect to the resulting or surviving corporation as Indemnitee would
have with respect to such constituent corporation if its separate existence
had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and reference to "serving at the request of the
Company" shall include any service as a director, officer, employee or
agent of the Company which imposes duties on, or involves services by,
Indemnitee with respect to an employee benefit plan, its participants, or
beneficiaries; and, if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan, Indemnitee shall be deemed
to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
(c) For the purposes of this Agreement, references to "affiliates"
shall mean any entity which, directly or indirectly, is in the control of,
is controlled by, or is under common control with, the Company.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns, and
Indemnitee and Indemnitee's estate, heirs, legal representatives and
assigns.
13. ATTORNEYS' FEES. If any action is instituted by Indemnitee under
this Agreement to enforce or interpret any of the terms hereof, Indemnitee
shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such
action, unless as a part of such action, the court of competent
jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous. In the event of an action instituted by or in the name of the
Company under this Agreement or to enforce or
<PAGE>
interpret any of the terms of this Agreement, Indemnitee shall be entitled
to be paid all court costs and expenses, including attorneys' fees,
incurred by Indemnitee in defense of such action (including with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as
a part of such action the court determines that each of Indemnitee's
material defenses to such action was made in bad faith or was frivolous.
14. NOTICE. All notices, requests, demands and other communications
under this Agreement shall be in writing and, unless otherwise provided,
shall be deemed duly given (a) if delivered by hand and receipted for by
the party addressee, on the date of such receipt, or (b) if mailed by
domestic certified or registered mail with postage prepaid, on the third
business day after the date postmarked. The address for notice to the
Company shall be as set forth in Section 2(b) hereof, and the address for
notice to Indemnitee shall be as set forth on the signature page of this
Agreement, or as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the Commonwealth
of Pennsylvania for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement. Any action
instituted under this Agreement shall be brought only in the state courts
of the Commonwealth of Pennsylvania.
16. Subrogation. In the event of payment under this Agreement, Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of the Indemnitee, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable Company effectively to
bring suit to enforce such rights.
17. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the Commonwealth of
Pennsylvania, as applied to contracts between Pennsylvania residents
entered into and to be performed within Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ACCEPTED AND AGREED TO: SUN COMPANY, INC.
INDEMNITEE:
_______________________ By:______________________
(signature) (name and title)
_______________________
(name)
_______________________
(address)
_______________________
<PAGE>
SCHEDULE TO
EXHIBIT 10.15
INDEMNIFICATION AGREEMENT
The Indemnification Agreements dated as of February 1, 1996, between Sun
Company, Inc. and the directors and executive officers named below are
identical in all material respects.
Robert M. Aiken, Jr. Raymond E. Cartledge
Robert H. Campbell Robert E. Cawthorn
John G. Driscoll Mary J. Evans
Jack L. Foltz Thomas P. Gerrity
Deborah M. Fretz James G. Kaiser
Thomas W. Hofmann Robert D. Kennedy
David E. Knoll Thomas W. Langfitt
Malcolm I. Ruddock, Jr. R. Anderson Pew
Sheldon L. Thompson Albert E. Piscopo
William F. Pounds
Alexander B. Trowbridge
<PAGE>
EXHIBIT 11
STATEMENTS RE COMPUTATION OF PER SHARE EARNINGS
Sun Company, Inc. and Subsidiaries
(In Millions Except Per Share Amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31
-----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Income before cumulative effect
of change in accounting
principle(1) $227.4 $ 96.7 $283.0
Less: Dividends on preference
stock (22.5) -- --
------ ------ ------
Income before cumulative effect
of change in accounting
principle attributable to
common stock (2) 204.9 96.7 283.0
Cumulative effect of change in
accounting principle (3)(a) (87.2) (6.8) 5.0
------ ------ ------
Net income attributable to
common stock (4) $117.7 $ 89.9 $288.0
====== ====== ======
Weighted average number of
shares of common stock and
common stock equivalents
outstanding (5) 91.3 107.0 106.6
====== ====== ======
Earnings per share of common
stock:
Income before cumulative effect
of change in accounting
principle (2)/(5) $ 2.24 $ .91 $ 2.65
Cumulative effect of change in
accounting principle (3)/(5) (.95) (.07) .05
------ ------ ------
Net income (4)/(5) $ 1.29 $ .84 $ 2.70
====== ====== ======
Weighted average number of shares
of common stock and common stock
equivalents outstanding on a fully
diluted basis (6) 91.3 107.1 106.6
====== ====== ======
Earnings per share of common stock
on a fully diluted basis (b):
Income before cumulative effect
of change in accounting
principle (2)/(6) $ 2.24 $ .91 $ 2.65
Cumulative effect of change in
accounting principle (3)/(6) (.95) (.07) .05
------ ------ ------
Net income (4)/(6) $ 1.29 $ .84 $ 2.70
====== ====== ======
</TABLE>
<PAGE>
- ---------------
(a) Includes 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. (See Note 6 to the Consolidated
Financial Statements in the Company's 1995 Annual Report to Shareholders.)
(b) Fully diluted earnings per share generaly are determined by dividing
earnings by the weighted average number of shares outstanding, assuming
redemption of the preference shares for common stock. However, redemption
was not assumed in 1995 since it would have resulted in an increase in
earnings per share.
<PAGE>
EXHIBIT 12
STATEMENTS RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES--UNAUDITED(a)
Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Ratios)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31
-----------
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Fixed Charges:
Consolidated interest cost and
debt expense $ 105 $ 97 $ 81
Interest cost and debt expense of
operations held for sale 16 22 8
Interest allocable to rental
expense(b) 34 35 29
----- ----- -----
Total $ 155 $ 154 $ 118
===== ===== =====
Earnings:
Consolidated income from continuing
operations before provision for
income taxes and cumulative effect
of change in accounting principle $ 319 $ 120 $ 426
Minority interest in net income of
subsidiaries having fixed charges 19 35 25
Proportionate share of provision for
income taxes of 50 percent owned but
not controlled affiliated companies 4 3 3
Equity in income of less than 50
percent owned affiliated companies (10) (7) (6)
Dividends received from less than 50
percent owned affiliated companies 5 5 5
Fixed charges 155 154 118
Interest capitalized (6) (15) (9)
Amortization of previously capitalized
interest 16 31 16
----- ----- -----
Total $ 502 $ 326 $ 578
===== ===== =====
Ratio of Earnings to Fixed Charges 3.24 2.12 4.90
===== ===== =====
</TABLE>
- ---------------
(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 fixed charges. 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 fixed charges. (See Note 2 to the consolidated
financial statements in the Company's 1995 Annual Report to Shareholders.)
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.
<PAGE>
FINANCIAL SECTION CONTENTS
<TABLE>
<S> <C>
Selected Financial Data 26
Management's Discussion and Analysis 27
Consolidated Statements of Income 36
Consolidated Balance Sheets 37
Consolidated Statements of Cash Flows 38
Consolidated Statements of Changes in
Stockholders' Equity 39
Notes to Consolidated Financial Statements 40
Reports of Management and of Independent
Accountants 55
Supplemental Financial and Operating Infor-
mation 56
Quarterly Financial and Stock Market Infor-
mation 62
</TABLE>
SELECTED FINANCIAL DATA
(Millions of Dollars Except Per Share Amounts)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
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* $227 $97 $283 $(317)** $(130)***
Income (loss) from discontin-
ued operations+ $-- $-- $-- $19 $(257)
Cumulative effect of change
in accounting principle++ $(87) $(7) $5 $(261) $--
Net income (loss)* $140 $90 $288 $(559)** $(387)***
- -------------------------------------------------------------------------------
PER SHARE DATA:
Income (loss) from continuing
operations before cumulative
effect of change in
accounting principle $2.24 $.91 $2.65 $(2.98) $(1.23)
Net income (loss) $1.29 $.84 $2.70 $(5.26) $(3.65)
Cash dividends on preference
stock $1.80 $-- $-- $-- $--
Cash dividends on common
stock $1.40 $1.80 $1.80 $1.80 $1.80
Stockholders' equity $17.16+++ $17.42 $18.60 $17.82 $25.41
- -------------------------------------------------------------------------------
BALANCE SHEET DATA:
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
- -------------------------------------------------------------------------------
</TABLE>
*Includes after-tax income (loss) attributable to gain on divestments and pro-
vision for write-down of assets and other matters totalling $98, $7 and $109
million for 1995, 1994 and 1993, respectively. (See Note 2 to the
consolidated financial statements.)
**Includes impact of a $456 million after-tax provision for write-down of as-
sets and other matters and a $117 million after-tax gain on Iranian
litigation settlement.
***Includes impact of a $103 million after-tax provision for write-down of as-
sets and other matters and a $78 million after-tax provision for
environmental remediation work at various domestic refining and marketing
sites.
+For a discussion of these operations, see Note 2 to the consolidated finan-
cial statements.
++Consists of 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, income taxes in 1993 and postretirement health care and
life insurance benefits in 1992. (See Note 6 to the consolidated financial
statements.)
+++Assumes redemption of preference shares for common stock.
26
<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 sig-
nificant volatility. Although Sun cannot be certain that its planning assump-
tions 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 re-
fined petroleum products appear to be improving and offer the possibility
for increasing margins over the next several years, the Company has devel-
oped 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 re-
liability 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 man-
ages the raw material slate processed at its refineries in an effort to en-
hance refining margins.
. Retail gasoline marketing in the northeastern U.S. will continue to offer
attractive investment returns. The Company's strategy is to improve profit-
ability in this mature market by increasing sales volumes and reducing oper-
ating and administrative costs. The Company will increase market share, de-
spite 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 ad-
versely 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 un-
der long-term contracts to British Gas Corporation, the timing of the
liftings and the recognition of earnings associated with these contracts are
uncertain.
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 ac-
tions taken by the Company are enumerated below:
. Divested the Company's 55-percent interest in Suncor Inc., its former Cana-
dian 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 por-
tion 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 share of the Company's newly issued Series A cumula-
tive 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 common
shares were purchased by the Company during 1995 for approximately $46 mil-
lion;
. Restructured the Company into eight business units plus a holding company
and a services organization. The accompanying "Earnings Profile of Sun Busi-
nesses" and related analyses reflect this new organizational structure; and
. Reduced complement and implemented other cost reduction actions that are ex-
pected to result in pretax savings of approximately $110 million a year.
27
<PAGE>
For additional information regarding the elements of the financial and opera-
tional restructuring, see Notes 2 and 15 to the consolidated financial state-
ments.
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 allocat-
ing support costs among Sun's core refining and marketing businesses based
upon the level of services rendered.
EARNINGS PROFILE OF SUN BUSINESSES (after tax)
(Millions of Dollars)
<TABLE>
<CAPTION>
1995 1994* 1993*
- ------------------------------------------------------------------------------
<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)** 23 37 33
- ------------------------------------------------------------------------------
131 101 196
Special items:***
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+ (87) (7) 5
- ------------------------------------------------------------------------------
Consolidated net income $140 $ 90 $288
- ------------------------------------------------------------------------------
</TABLE>
*Restated to conform to the 1995 presentation.
**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.
***For a discussion of special items, see Notes 2 and 6 to the consolidated
financial statements.
+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,
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 primar-
ily 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 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 re-
tail 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,
PA and Philadelphia, PA refineries.
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Losses (millions of dollars) $ (37) $ (77) $ (22)
Wholesale margin* (per barrel) $ 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>
*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 and $1 mil-
lion, 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
28
<PAGE>
"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 gaso-
line, partially offset by the record low margins for middle distillates expe-
rienced 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 con-
nection 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 gaso-
line.
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) $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>
*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 pri-
marily due to a 6 percent decline in sales volumes ($14 million) and higher
depreciation expense ($6 million), partially offset by lower operating and ad-
ministrative 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 ex-
penses ($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 Bran-
denburg, KY and at a joint venture MTBE facility in Mont Belvieu, TX. Petro-
chemicals manufactured and sold at the Toledo, OH 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) $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>
*Wholesale sales price less the cost of feedstocks and product purchases.
Income from Sunoco Chemicals increased $43 million in 1995 due to signifi-
cantly 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.
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 manufac-
turing, packaging and marketing of a broad line of lubricating and specialty
oils produced at Sun's Tulsa, OK and Puerto Rico refineries as well as the re-
lated manufacturing and wholesale marketing of fuels produced at these facili-
ties.
29
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) (millions of dollars) $(15) $(2) $5
Wholesale margin* (per barrel) $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** 27.0 33.9 34.6
- ------------------------------------------------------------------
148.4 154.2 145.9
- ------------------------------------------------------------------
</TABLE>
*Wholesale sales price less cost of crude oil, other feedstocks and purchased
refined products.
**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 distil-
lates, and lower lubricants sales volumes ($15 million), partially offset by
higher average margins for both base oil and specialty oil products ($9 mil-
lion) 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 pri-
marily 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).
SUNOCO MIDAMERICA MARKETING & REFINING--The Sunoco MidAmerica Marketing & Re-
fining 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, OH refinery.
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) (millions of dollars) $(8) $(8) $5
- --------------------------------------------------------------------------
Retail Marketing:
Gasoline margin* (per barrel) $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):
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>
*Retail sales price less wholesale sales price. The retail sales price is the
weighted average price received through the various branded marketing distri-
bution channels.
**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 op-
erating expenses was largely attributable to a major planned maintenance turn-
around 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 administra-
tive expenses ($10 million). Partially offsetting these negative factors were
higher petrochemicals margins ($8 million).
SUNOCO LOGISTICS--The Sunoco Logistics business consists of pipeline transpor-
tation of crude oil and refined petroleum products, domestic crude oil acquisi-
tion from third-party leases, crude oil trucking and the Nederland, TX crude
oil terminalling operation.
30
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $53 $45 $55
Pipeline throughput (thousands of barrels daily):
Unaffiliated customers 557.0 565.0 567.0
Affiliated customers 776.0 715.0 687.0
- --------------------------------------------------------------------------
1,333.0 1,280.0 1,254.0
- --------------------------------------------------------------------------
</TABLE>
Sunoco Logistics income increased $8 million in 1995 in part due to higher
earnings from Sun's joint venture operations, the Marysville, MI 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 Philadel-
phia 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 re-
fined 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, VA.
<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*
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>
*Includes the impact of lower-value subbituminous coal sales prior to the di-
vestment 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 op-
eration. (See Note 2 to the consolidated financial statements.)
SUN INTERNATIONAL PRODUCTION--The Sun International Production business con-
sists 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 vol-
umes, and higher operating and administrative expenses ($5 million) attribut-
able 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 recog-
nized 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 ac-
tivities at the Ninian/Columba fields. The decline in natural gas volumes re-
flects 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 at-
tributable 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 mil-
lion) 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 primar-
ily 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), par-
tially offset by higher earnings from leas-
31
<PAGE>
ing 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.
CANADA (SUNCOR)--Suncor's operating income decreased $14 million in 1995 pri-
marily due to the absence of earnings subsequent to the June 8, 1995 divest-
ment 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 fi-
nancial statements.
ANALYSIS OF CONSOLIDATED STATEMENTS OF INCOME
1995 VS. 1994--Sales and other operating revenue increased $303 million, or 3
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 reve-
nue 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. The $48 million de-
crease 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 prop-
erties 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 acqui-
sition costs ($907 million) and higher domestic refinery operating expenses
($72 million), partially offset by lower cost and operating expenses attribut-
able to Suncor ($281 million). The increase in product acquisition costs and
refinery operating expenses was largely attributable to the Girard Point re-
fining facilities acquisition. Selling, general and administrative expenses
decreased $79 million, or 11 percent, primarily due to lower expenses as a re-
sult 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 5 percent, primarily as a result of the Suncor divestment ($52
million), partially offset by an increased depreciable asset base in Sun's do-
mestic refining and marketing operations resulting from the high level of 1994
capital spending. For a discussion of the $93 and $54 million pretax provi-
sions for write-down of assets and other matters recorded in 1995 and 1994,
respectively, see Note 2 to the consolidated financial statements. The $9 mil-
lion decrease in exploratory costs and leasehold impairment and the $16 mil-
lion decrease in minority interest are due to the Suncor divestment. Interest
cost and debt expense increased $8 million, or 8 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 ac-
counting principles, see Note 6 to the consolidated financial statements.
1994 VS. 1993--Sales and other operating revenue increased $638 million, or 7
percent, principally due to higher refined product sales volumes ($644 mil-
lion) and an increase in consumer excise taxes ($233 million), partially off-
set 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. The $93 million de-
crease 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 mil-
lion) 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 di-
vestment 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 8 per-
cent, primarily due to higher domestic crude oil and refined product acquisi-
tion costs ($463 million) and higher refinery operating expenses ($95 mil-
lion), partially offset by lower resales of purchased crude oil and refined
products ($90 million). The increase in acquisition costs and refinery operat-
ing expenses was primarily due to the acquisition of the Girard Point refining
facilities on August 4, 1994. Selling, general and administrative expenses in-
creased $56 million, or 9 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 in-
32
<PAGE>
creased $5 million, or 1 percent, primarily as a result of a higher depreciable
asset base in Sun's domestic refining and marketing operations. For a discus-
sion 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 con-
solidated financial statements. 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.
FINANCIAL CONDITION
CAPITAL RESOURCES AND LIQUIDITY
CASH AND WORKING CAPITAL--At December 31, 1995, Sun had cash and cash equiva-
lents 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 inven-
tories exceeds the carrying value at December 31, 1995 by $528 million. Inven-
tories 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 sup-
port for its ongoing operations.
CASH FLOWS AND FINANCIAL CAPACITY--In 1995, Sun's net cash provided by operat-
ing 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 sig-
nificantly greater than net income during the 1993-95 period primarily due to
the significant amounts of noncash charges which result from the capital inten-
sive nature of Sun's businesses.
Divestment activities have also been a source of cash and have enhanced liquid-
ity. During the 1993-95 period, proceeds from divestments totalled $1,202 mil-
lion, 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, Colom-
bia, 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 opera-
tions.
Management believes that future cash generation will be sufficient to satisfy
Sun's capital requirements and to pay the current cash dividends on common and
preference stock. However, from time to time, the Company's short-term cash re-
quirements may exceed its cash generation due to various factors including vol-
atility in crude oil and refined product markets and increases in capital
spending and working capital levels. During those periods, the Company may sup-
plement its cash generation with proceeds from divestment and financing activi-
ties. In the event that cash generation and divestment proceeds are insuffi-
cient 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 ac-
cess to short-term financing under non-committed money market facilities.
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
-----------
(Millions of Dollars) 1995 1994
- --------------------------------------------------
<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; how-
ever, 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>
(Millions of Dollars) 1996 PLAN 1995 1994* 1993*
- ---------------------------------------------------------------
<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** 18 7 -- --
Sun International Production 30 30 100 51
Canada (Suncor) -- 106 220 202
- ---------------------------------------------------------------
Consolidated capital expenditures $460 $545 $848*** $612
- ---------------------------------------------------------------
</TABLE>
*Restated to conform to the new organizational structure established in 1995.
**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.
***Excludes $164 million attributable to the purchase of the Girard Point re-
fining facilities, related inventory and pipeline interests.
33
<PAGE>
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 re-
fining and marketing and international production businesses as the Company fo-
cused on fully integrating the acquisitions and growth projects completed dur-
ing 1994. Also contributing to the decline in 1995 capital spending was a re-
duction in outlays in Canada as a result of the divestment of Suncor on June 8,
1995.
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 pro-
pylene 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 ("Northeast Aromatics and Cyclohexane Project"); $13 mil-
lion 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 re-
fining 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 ex-
penditures in connection with pollution abatement activities.
ENVIRONMENTAL MATTERS
Sun is subject to numerous federal, state, local and foreign laws which regu-
late the discharge of materials into, or otherwise relate to the protection of,
the environment. These laws have required, and are expected to continue to re-
quire, Sun to make significant expenditures of both a capital and expense na-
ture. 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>
(Millions of Dollars) 1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Pollution abatement capital* $ 78 $245 $123
Remediation and reclamation 49 60 53
Operations, maintenance and administration 244 224** 142**
- --------------------------------------------------------------
$371 $529 $318
- --------------------------------------------------------------
</TABLE>
*Capital expenditures for pollution abatement are expected to approximate $33
and $46 million in 1996 and 1997, respectively.
**Restated to conform to the 1995 presentation.
The increase in pollution abatement capital expenditures during 1994 was pri-
marily due to outlays relating to the wastewater treatment and Northeast
Aromatics and Cyclohexane projects at the Marcus Hook refinery and to enhance-
ments 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 re-
duces emissions of certain toxic and conventional pollutants. Compliance with
Clean Air Act requirements necessitates significant alterations to the composi-
tion 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 ad-
ditional regulations, management of Sun believes these businesses are well po-
sitioned to meet the air toxics and reformulated fuel requirements under pres-
ent 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
34
<PAGE>
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 iden-
tified or potentially identifiable as "Superfund" sites under CERCLA. Sun has
reviewed the nature and extent of its involvement at each site and other rele-
vant circumstances and, based upon the other parties involved or Sun's negligi-
ble 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 in-
volved 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 dismantle-
ment, restoration and abandonment costs at its international oil and gas pro-
duction operations. For a discussion of the accrued liabilities and charges
against income related to these activities, see Note 14 to the consolidated fi-
nancial statements.
Total future costs for environmental remediation and dismantlement, restoration
and abandonment activities will depend upon, among other things, the identifi-
cation of additional sites, the determination of the extent of the contamina-
tion of each site, the timing and nature of required remedial actions, the
technology available and needed to meet the various existing legal require-
ments, 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 ac-
tivities. Although potentially significant with respect to results of opera-
tions 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 ex-
change rates and interest rates. Significant hedging strategies are reviewed
and approved by the Board of Directors before being implemented. Policy con-
trols 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 ex-
change rate changes on the Canadian dollar-denominated installment note receiv-
able due in 1996 from the divestment of Suncor. Gains and losses from the above
hedging activities have not been material.
STOCK-BASED COMPENSATION
In October 1995, Statement of Financial Accounting Standards No. 123, "Account-
ing for Stock-Based Compensation," was issued. It encourages, but does not re-
quire, 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 ac-
counting 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.
CASH DIVIDENDS
The Company has paid cash dividends on a regular quarterly basis since 1904.
During the 1993-94 period, annual cash dividends of $1.80 per share ($.45 per
share each quarter) were paid on the Company's common stock. Effective with the
third quarter of 1995, Sun reduced its quarterly common stock dividend to $.25
per share. As a result, the cash dividends paid on common stock for 1995 to-
talled $1.40 per share. The Company expects to continue to sustain the quar-
terly common stock cash dividend at its current level.
During the third quarter of 1995, Sun exchanged 25 million "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 share of the Company's
newly issued Series A cumulative preference stock. The depositary shares accrue
dividends annually at a rate of $1.80 per share ($.45 per share each quarter).
In 1995, cash dividends paid on depositary shares totalled $.90 per share. (See
Note 15 to the consolidated financial statements.)
35
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME Sun Company, Inc. and Subsidiaries
(Millions of Dollars Except Per Share Amounts)
<TABLE>
<CAPTION>
For the Years Ended December 31 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Sales and other operating revenue (including consumer
excise taxes of $1,751 in 1995,
$2,116 in 1994 and $1,883 in 1993) $10,121 $9,818 $9,180
Gain on divestment of Suncor common stock (Note 2) 242 -- 30
Gain on other divestments (Note 2) 3 51 144
Interest income 14 16 18
Other income (Note 3) 39 23 45
- -------------------------------------------------------------------------------
10,419 9,908 9,417
COSTS AND EXPENSES
Cost of products sold and operating expenses 7,029 6,276 5,821
Selling, general and administrative expenses 624 703 647
Taxes, other than income taxes (Note 4) 1,878 2,253 2,024
Depreciation, depletion and amortization 341 359 354
Provision for write-down of assets and other matters
(Note 2) 93 54 23
Exploratory costs and leasehold impairment 15 24 22
Minority interest 19 35 27
Interest cost and debt expense 105 97 81
Interest capitalized (4) (13) (8)
- -------------------------------------------------------------------------------
10,100 9,788 8,991
Income before provision for income taxes and
cumulative effect of change in accounting principle 319 120 426
Provision for income taxes (Note 5) 92 23 143
- -------------------------------------------------------------------------------
Income before cumulative effect of change in
accounting principle 227 97 283
Cumulative effect of change in accounting principle
(Note 6) (87) (7) 5
- -------------------------------------------------------------------------------
NET INCOME $ 140 $ 90 $ 288
- -------------------------------------------------------------------------------
Earnings per share of common stock:*
Income before cumulative effect of change in
accounting principle $2.24 $ .91 $2.65
Cumulative effect of change in accounting principle (.95) (.07) .05
- -------------------------------------------------------------------------------
NET INCOME $1.29 $ .84 $2.70
- -------------------------------------------------------------------------------
Cash dividends paid per share (Note 15):
Preference stock $1.80 $-- $--
Common stock $1.40 $1.80 $1.80
- -------------------------------------------------------------------------------
</TABLE>
*Represents both primary and fully diluted earnings per share (Note 7). Based
on the weighted average number of common shares outstanding (in millions) of
91.3 in 1995, 107.0 in 1994 and 106.6 in 1993.
(See Accompanying Notes)
36
<PAGE>
CONSOLIDATED BALANCE SHEETS Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
<TABLE>
<CAPTION>
At December 31 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 14 $ 117
Note receivable from divestment of Suncor common stock (Note 2) 130 --
Accounts and other notes receivable, net 662 655
Inventories (Note 8) 522 613
Deferred income taxes (Note 5) 132 123
- -------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,460 1,508
- -------------------------------------------------------------------------------
INVESTMENT IN REAL ESTATE OPERATIONS HELD FOR SALE (Note 2) 87 123
LONG-TERM RECEIVABLES AND INVESTMENTS (Note 9) 104 143
PROPERTIES, PLANTS AND EQUIPMENT, NET (Note 10) 3,262 4,348
DEFERRED CHARGES AND OTHER ASSETS (Note 2) 271 343
- -------------------------------------------------------------------------------
TOTAL ASSETS $5,184 $6,465
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 811 $ 776
Accrued liabilities 521 540
Short-term borrowings (Note 11) 54 221
Current portion of long-term debt (Note 12) 3 99
Taxes payable 141 279
- -------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,530 1,915
- -------------------------------------------------------------------------------
LONG-TERM DEBT (Note 12) 888 1,073
RETIREMENT BENEFIT LIABILITIES (Note 13) 507 515
DEFERRED INCOME TAXES (Note 5) 122 301
OTHER DEFERRED CREDITS AND LIABILITIES 438 429
COMMITMENTS AND CONTINGENT LIABILITIES (Note 14)
MINORITY INTEREST (Note 2) -- 369
STOCKHOLDERS' EQUITY (Notes 15, 16 and 20)
Cumulative preference stock - Series A, no par value
Authorized - 12,500,000 shares;
Issued and outstanding, 1995 - 12,500,000 shares 750 --
Common stock, par value $1 per share
Authorized - 200,000,000 shares; Issued, 1995 - 129,709,084
shares;
Issued, 1994 - 129,521,449 shares 130 130
Capital in excess of par value 1,310 1,309
Cumulative foreign currency translation adjustment (Note 2) -- (89)
Earnings employed in the business 1,518 1,534
- -------------------------------------------------------------------------------
3,708 2,884
Less common stock held in treasury, at cost
1995 - 55,699,366 shares; 1994 - 22,583,733 shares 2,009 1,021
- -------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 1,699 1,863
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,184 $6,465
- -------------------------------------------------------------------------------
</TABLE>
(See Accompanying Notes)
37
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS Sun Company, Inc. and Subsidiaries
(Millions of Dollars)
<TABLE>
<CAPTION>
For the Years Ended December 31 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 140 $ 90 $ 288
Adjustments to reconcile net income to net cash pro-
vided by operating activities:
Cumulative effect of change in accounting principle 87 7 (5)
Provision for write-down of assets and other matters 93 54 23
Gain on divestment of Suncor common stock (242) -- (30)
Gain on other divestments (3) (51) (144)
Depreciation, depletion and amortization 341 359 354
Dry hole costs and leasehold impairment 7 14 14
Deferred income taxes 61 (60) 59
Changes in working capital pertaining to operating ac-
tivities:
Accounts and notes receivable (148) (85) 106
Inventories (27) (41) (13)
Accounts payable and accrued liabilities 87 107 (277)
Taxes payable (57) 47 (3)
Other 13 40 41
- -----------------------------------------------------------------------------
Net cash provided by operating activities 352 481 413
- -----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (545) (848) (612)
Acquisition of Girard Point refinery and related assets
(Notes 2 and 18) -- (164) --
Cash provided by (used in) operations held for sale
(Note 2) (4) 43 154
Proceeds from divestment of Suncor common stock (Notes
2 and 18) 635 -- 169
Proceeds from other divestments 66 131 201
Other (15) 2 (26)
- -----------------------------------------------------------------------------
Net cash provided by (used in) investing activities 137 (836) (114)
- -----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term borrowings (167) 111 (105)
Proceeds from issuance of long-term debt 15 543 26
Repayments of long-term debt (142) (115) (97)
Cash dividend payments on preference stock (23) -- --
Cash dividend payments on common stock (133) (192) (192)
Purchases of common stock for treasury (238) -- --
Other 96 7 8
- -----------------------------------------------------------------------------
Net cash provided by (used in) financing activities (592) 354 (360)
- -----------------------------------------------------------------------------
Net decrease in cash and cash equivalents (103) (1) (61)
Cash and cash equivalents at beginning of year 117 118 179
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 14 $ 117 $ 118
- -----------------------------------------------------------------------------
</TABLE>
(See Accompanying Notes)
38
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Sun Company, Inc. and
Subsidiaries
(Dollars in Millions, Shares in Thousands)
<TABLE>
<CAPTION>
Common Stock
Preference Stock Common Stock Earnings Held in Treasury
--------------------- --------------- Capital in Employed ------------------
Number of Liquidation Number of Par Excess of Translation in the
Shares Value Shares Value Par Value Adjustment Business Shares Cost
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1992 -- $ -- 129,245 $129 $1,302 $(47) $1,540 22,832 $1,028
Net income -- -- -- -- -- -- 288 -- --
Cash dividend payments -- -- -- -- -- -- (192) -- --
Issued under management
incentive plans -- -- 68 -- 2 -- -- -- --
Sales to dividend rein-
vestment plan -- -- -- -- (1) -- -- (202) (6)
Foreign currency trans-
lation adjustment -- -- -- -- -- (15) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1993 -- $ -- 129,313 $129 $1,303 $(62) $1,636 22,630 $1,022
Net income -- -- -- -- -- -- 90 -- --
Cash dividend payments -- -- -- -- -- -- (192) -- --
Issued under management
incentive plans -- -- 208 1 6 -- -- -- --
Sales to dividend rein-
vestment plan -- -- -- -- -- -- -- (46) (1)
Foreign currency trans-
lation adjustment -- -- -- -- -- (27) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1994 -- $ -- 129,521 $130 $1,309 $(89) $1,534 22,584 $1,021
Net income -- -- -- -- -- -- 140 -- --
Cash dividend payments -- -- -- -- -- -- (156) -- --
Exchange of preference
stock for common
stock (Note 15) 12,500 750 -- -- -- -- -- 25,000 750
Purchases for treasury -- -- -- -- -- -- -- 8,125 238
Issued under management
incentive plans -- -- 56 -- 2 -- -- -- --
Issued under employee
option plan -- -- 132 -- 4 -- -- (4) --
Foreign currency trans-
lation adjustment -- -- -- -- -- 89 -- -- --
Other -- -- -- -- (5) -- -- (6) --
- ---------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 1995 12,500 $750 129,709 $130 $1,310 $ -- $1,518 55,699 $2,009
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Accompanying Notes)
39
<PAGE>
Sun Company, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements contain the accounts of Sun
Company, Inc. ("Company") and all subsidiaries that are controlled (generally
more than 50 percent owned) except those accounted for as investments in oper-
ations held for sale (Note 2) (collectively, "Sun"). 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.
USE OF ESTIMATES
Certain amounts included in the accompanying consolidated financial statements
and related footnotes reflect the use of estimates based on assumptions made
by management. Actual amounts could differ from these estimates.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Sun considers all highly liquid investments with a remaining maturity of three
months or less at the time of purchase to be cash equivalents. Sun's cash
equivalents consist principally of time deposits and certificates of deposit.
Investments with maturities from greater than three months to one year are
classified as short-term investments. Cash equivalents and short-term invest-
ments are stated at cost which approximates market value.
INVENTORIES
Inventories of crude oil and refined products are valued at the lower of cost
or market. The cost of such inventories is determined principally using the
last-in, first-out method ("LIFO"). Materials, supplies and other inventories
are valued principally at the lower of average cost or market.
OIL AND GAS COSTS INCURRED
The successful efforts method of accounting was followed for costs incurred in
oil and gas exploration operations in Canada prior to the divestment of Suncor
Inc. on June 8, 1995 (Note 2) and outside North America prior to the decision
to withdraw from international exploration activities in October 1992. Prop-
erty acquisition and development costs are capitalized. Costs incurred to op-
erate and maintain wells and equipment and to lift oil and gas to the surface
are generally expensed.
DEPRECIATION AND RETIREMENTS
Plants and equipment are generally depreciated on a straight-line basis over
their estimated useful lives. Acquisition costs of oil and gas proved proper-
ties are depleted by the unit of production method based on proved reserves and
oil and gas development costs are depreciated by the unit of production method
based on proved developed reserves. The unit determination is by field. Coal
property acquisition costs and capitalized development costs are depleted by the
unit of production method based on proved reserves. Gains and losses on the
disposals of fixed assets are generally reflected in income.
ENVIRONMENTAL REMEDIATION AND DISMANTLEMENT, RESTORATION AND ABANDONMENT COSTS
Sun accrues environmental remediation costs for work at identified sites where
an assessment has indicated that cleanup costs are probable and reasonably es-
timable. Such accruals are based on currently available facts, estimated tim-
ing of remedial actions and related inflation assumptions, existing technology
and presently enacted laws and regulations. Sun accrues estimated costs of fu-
ture dismantlement, restoration and abandonment at its oil and gas production
and coal operations on a unit of production basis; actual costs are charged to
the accrual when incurred.
REFINERY MAINTENANCE SHUTDOWNS
Maintenance and repair costs in excess of $500 thousand incurred in connection
with major refinery maintenance shutdowns are capitalized when incurred and
then charged against income over the period benefitted by the major mainte-
nance shutdown.
FOREIGN CURRENCY TRANSLATION
Foreign exchange gains and losses as a result of translating a foreign
entity's balance sheet from its functional currency into U.S. dollars are in-
cluded as a separate component of stockholders' equity. Prior to the divest-
ment of Suncor Inc., the functional currency for Canadian operations was the
Canadian dollar. The functional currency for all remaining foreign operations
is the U.S. dollar. Gains or losses on currency transactions in other than the
functional currency are included in income when incurred.
COMMODITY AND FOREIGN CURRENCY CONTRACTS
Sun uses futures, options, forwards, swaps and other similar contracts to
hedge the impact on future transactions of fluctuations in oil and natural gas
prices, foreign currency exchange rates and interest rates. Gains and losses
on these contracts are generally deferred and recognized as a component of the
related transactions.
40
<PAGE>
2. CHANGES IN BUSINESS
The following is a summary of Sun's significant changes in business during the
three-year period ended December 31, 1995:
ACQUISITION OF GIRARD POINT REFINERY AND RELATED ASSETS
Sun concluded the purchase from Chevron U.S.A. Inc. ("Chevron") of its 177,000
barrel-per-day refinery ("Girard Point") and related inventory located in Phil-
adelphia, PA on August 4, 1994 and its interest in the Woodbury and Harbor
Pipelines, which connect the refinery to the New York Harbor, on October 26,
1994. As part of the acquisition, Sun assumed certain liabilities. The acquisi-
tion has been accounted for as a purchase and, accordingly, the results of op-
erations of these assets have been included in the consolidated statements of
income since their respective acquisition dates. The purchase price of $164
million has been allocated to the assets acquired and liabilities assumed on
the basis of their relative fair market values (Note 18).
The unaudited pro forma sales and other operating revenue (excluding consumer
excise taxes) of Sun for the years ended December 31, 1994 and 1993, as if the
acquisition of these assets had occurred on January 1, 1993, were $8,417 and
$8,757 million, respectively. The unaudited pro forma net income and net income
per share of common stock of Sun for the years ended December 31, 1994 and 1993
were $102 million ($.95 per share of common stock) and $315 million ($2.96 per
share of common stock), respectively. The pro forma information does not pur-
port to be indicative of the results that actually would have been obtained if
the combined operations had been conducted during these periods.
Actual sales and other operating revenue (excluding consumer excise taxes) and
net income attributable to these assets in 1994 subsequent to their acquisition
amounted to $644 and $11 million, respectively.
DIVESTMENT OF SUNCOR COMMON STOCK
On June 8, 1995, Sun completed the sale of its remaining 55-percent interest in
Suncor Inc., the Company's Canadian integrated oil company, to a group of Cana-
dian underwriters who subsequently sold the shares publicly in Canada and
through private placement in the United States. In connection with this sale,
Sun recognized a $242 million gain, which increased net income for 1995 by $157
million, or $1.72 per share of common stock. Results of operations attributable
to Sun's 55-percent interest in Suncor totalled $23 million during 1995 prior
to the sale. Under the terms of the underwriting agreement, Sun was to receive
gross proceeds of approximately $855 million, after U.S. dollar exchange, pay-
able in three equal installments. In a separate transaction, Sun subsequently
sold to two banks all but one-half of the third installment note receivable. As
a result of these transactions, Sun will ultimately receive pretax cash pro-
ceeds of $770 million, after commissions and discount, of which $635 million
was received in June 1995. The remainder, which is pledged as collateral for
the installment notes receivable yet to be collected by the banks, is due in
1996.
In May 1993, Sun sold 6.8 million shares of Suncor common stock which reduced
Sun's ownership interest in Suncor from 68 percent to 55 percent. In connection
with this sale, Sun recognized a $30 million gain, which increased net income
for 1993 by $19 million, or $.18 per share of common stock. Pretax cash pro-
ceeds from this offering, after underwriting and other fees and U.S. dollar ex-
change, totalled $139 million. During 1993, Sun also received a final install-
ment of $30 million in pretax cash proceeds related to the sale of 4 million
shares of Suncor common stock in 1992.
OTHER DIVESTMENTS
The following table sets forth summary information regarding Sun's other
divestments:
<TABLE>
<CAPTION>
Gains on
Divestments
----------------- After-Tax Gains
(Millions of Dollars Except Per Share of
Per Share Amounts) Pretax After Tax Common Stock
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1995 $ 3 $ 2 $.02
- -----------------------------------------------------------------------------
1994
North Sea exploration property $ 15 $ 15 $.14
Colombian exploration and producing
properties 20 13 .12
Other 16 11 .10
- -----------------------------------------------------------------------------
$ 51 $ 39 $.36
- -----------------------------------------------------------------------------
1993
North Sea and other exploration properties $ 88 $ 68 $.64
Dubai producing properties 11 7 .07
Canadian producing properties 10* 5 .05
Refined products pipeline system 17 10 .09
Other 18 12 .11
- -----------------------------------------------------------------------------
$144 $102 $.96
- -----------------------------------------------------------------------------
</TABLE>
* Net of minority interest share of gain on divestments.
41
<PAGE>
WRITE-DOWNS OF ASSETS AND OTHER MATTERS
The following table sets forth summary information regarding the provisions
for write-down of assets and other matters:
<TABLE>
<CAPTION>
After-Tax
Provisions
(Millions of Dollars Except Pretax After-Tax Per Share of
Per Share Amounts) Provisions Provisions Common Stock
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
1995
Refining and marketing assets $43 $28 $.31
Employee terminations and related costs 50 33 .36
- ----------------------------------------------------------------------------
$93 $61 $.67
- ----------------------------------------------------------------------------
1994
Coal investment $36 $20 $.19
Other 18 12 .11
- ----------------------------------------------------------------------------
$54 $32 $.30
- ----------------------------------------------------------------------------
1993
Canadian operations $15* $ 7 $.06
Leasing operations 8 5 .05
- ----------------------------------------------------------------------------
$23 $12 $.11
- ----------------------------------------------------------------------------
</TABLE>
*Net of minority interest share of provision for write-down of assets and
other matters.
During 1995, Sun recorded a provision to write down to net realizable value
certain assets in the refining and marketing business and to establish
accruals for employee terminations and related costs. The $50 million accrual
for employee terminations and related costs includes $38 million attributable
to termination benefits and $12 million related to future rental payments for
vacated office space. The termination benefits are for 600 employees to be in-
voluntarily terminated, of which 380 were terminated during 1995. The Company
expects that, overall, approximately 800 positions, primarily staff and sup-
port personnel, will be eliminated. The 800 position reduction is comprised of
the 600 employees identified above and approximately 200 other positions, in-
cluding independent contractors and employees who have voluntarily terminated
employment without benefits. As of December 31, 1995, the amount of actual
termination benefits and related costs paid and charged against the accrual
totalled approximately $13 million. Termination benefits are generally paid as
wage continuation over a period of time.
During 1994, Sun recorded a provision primarily attributable to a write down
to estimated net realizable value of its investment in coal operations and es-
tablished accruals related to certain litigation and other matters.
During 1993, Sun recorded a provision associated with the restructuring of its
Canadian refining and marketing operations and established additional loss
accruals related to the recoverability of its remaining leasing and secured
lending portfolio.
INVESTMENTS IN OPERATIONS HELD FOR SALE
REAL ESTATE OPERATIONS--Sun has been pursuing the disposition of the Company's
investment in Radnor Corporation, its wholly owned real estate development
subsidiary, since October 1991 and has divested approximately 75 percent of
its real estate portfolio subsequent to that date. Prior to the fourth quarter
of 1993, real estate operations had been classified as discontinued operations
in the consolidated financial statements. In accordance therewith, results of
operations of Sun's real estate business had been excluded from the consoli-
dated statements of income. Beginning with the fourth quarter of 1993, this
business has been accounted for prospectively as an investment held for sale.
As a result, pretax income (loss) from real estate operations for the years
1995 and 1994 and for the fourth quarter of 1993 has been included as a single
amount in other income in the consolidated statements of income (Note 3).
The assets and liabilities relating to real estate operations have been segre-
gated in the consolidated balance sheets and separately reflected as an in-
vestment in operations held for sale. Such amounts are detailed as follows:
<TABLE>
<CAPTION>
December 31
------------
(Millions of Dollars) 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Inventories $ 83 $ 144
Properties, plants and equipment 144 198
Other assets 20 21
Debt (Note 14) (132) (204)
Other liabilities (28) (36)
- -----------------------------------------------------------------
Investment in real estate operations held for sale $ 87 $ 123
- -----------------------------------------------------------------
</TABLE>
COAL AND COKEMAKING OPERATIONS--In January 1993, Sun decided to sell its coal
and cokemaking operations. In connection with this decision, Sun sold its
western U.S. coal operations during 1993 and certain of its eastern U.S. coal
operations during 1994. As with the real estate operations discussed above,
Sun's coal and cokemaking operations had been accounted for as discontinued
operations until the fourth quarter of 1993, at which time they were accounted
for prospectively as an investment held for sale (Note 3). However, effective
June 30, 1995, the remaining coal and cokemaking business became one of the
Company's eight ongoing business units and is no longer held for sale. Accord-
ingly, the consolidated balance sheet of Sun as of December 31, 1995 contains
the accounts of its coal and cokemaking operations on a fully consolidated ba-
sis. The consolidated statements of income and cash flows for 1995 reflect
coal and cokemaking operations as an operation held for sale for the first
half of 1995 and on a fully consolidated basis thereafter. Prior period con-
solidated financial statements of Sun have not been restated to give effect to
this change in presentation because the impact of such a restatement would not
be material. The $51 million investment in coal operations held for sale at
December 31, 1994 is included in deferred charges and other assets in the con-
solidated balance sheet as of that date.
42
<PAGE>
3. OTHER INCOME
<TABLE>
<CAPTION>
(Millions of Dollars) 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Equity in earnings of affiliated
companies $17 $13 $11
Foreign exchange gains (losses) 2 (3) 3
Pretax income (loss) from investments in operations
held for sale (Note 2) 5 (1) (1)
Oil sands litigation settlement -- -- 17
Other 15 14 15
- -----------------------------------------------------------------------------
$39 $23 $45
- -----------------------------------------------------------------------------
4. TAXES, OTHER THAN INCOME TAXES
<CAPTION>
(Millions of Dollars) 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Consumer excise $1,751 $2,116 $1,883
Production 33 27 25
Payroll, property and other 94 110 116
- -----------------------------------------------------------------------------
$1,878 $2,253 $2,024
- -----------------------------------------------------------------------------
5. INCOME TAXES
The components of income before provision for income taxes and cumulative ef-
fect of change in accounting principle are as follows:
<CAPTION>
(Millions of Dollars) 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $184 $(79) $138
Foreign 135 199 288
- -----------------------------------------------------------------------------
$319 $120 $426
- -----------------------------------------------------------------------------
The components of the provision for income taxes before cumulative effect of
change in accounting principle are as follows:
<CAPTION>
(Millions of Dollars) 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes currently payable:
U.S. federal $(3) $ 17 $ 29
Foreign and other 34 66 55
- -----------------------------------------------------------------------------
31 83 84
- -----------------------------------------------------------------------------
Deferred taxes:
U.S. federal 53 (86) 11
Foreign and other 8 26 48
- -----------------------------------------------------------------------------
61 (60) 59
- -----------------------------------------------------------------------------
$92 $ 23 $143*
- -----------------------------------------------------------------------------
</TABLE>
* Includes a $17 million benefit resulting from the realization of a deferred
tax asset for which a valuation allowance previously had been provided.
At December 31, 1995 and 1994, U.S. income taxes have been provided on all un-
distributed earnings of foreign subsidiaries and affiliated companies.
The reconciliation of income taxes at the U.S. statutory rate to the provision
for income taxes before cumulative effect of change in accounting principle is
as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) 1995 1994 1993
- -------------------------------------------
<S> <C> <C> <C>
Income taxes at U.S.
statutory rate $112 $ 42 $149
Increase (reduction) in
taxes resulting from:
Tax expense of foreign
operations in excess of
statutory rate 4 13 4
Benefit of
nonconventional fuels
credit (8) (18) (4)
Benefit of Puerto Rico
tax exemption (expires
in 2007) (5) (6) (6)
Impact of change in
statutory rates on
deferred income taxes -- (2) 3
Other (11) (6) (3)
- -------------------------------------------
$ 92 $ 23 $143
- -------------------------------------------
</TABLE>
The tax effects of temporary differences which comprise the net deferred income
tax asset (liability) are as follows:
<TABLE>
<CAPTION>
December 31
------------
(Millions of Dollars) 1995 1994
- ----------------------------------------------------------
<S> <C> <C>
Deferred tax debits:
Retirement benefit liabilities $ 165 $ 166
Other liabilities not yet deductible 306 272
Alternative minimum tax credit carryforward 29 90
Investments in operations held for sale 37 113
Other 93 96
Valuation allowance (101) (106)
- ----------------------------------------------------------
529 631
- ----------------------------------------------------------
Deferred tax credits:
Properties, plants and equipment (445) (711)
Investments in foreign subsidiaries (12) (27)
Other (62) (71)
- ----------------------------------------------------------
(519) (809)
- ----------------------------------------------------------
Net deferred income tax asset (liability) $ 10 $(178)
- ----------------------------------------------------------
</TABLE>
The following table sets forth the net deferred income tax asset (liability) in
the consolidated balance sheets at:
<TABLE>
<CAPTION>
December 31
------------
(Millions of Dollars) 1995 1994
- ------------------------------------
<S> <C> <C>
Current asset $ 132 $ 123
Noncurrent liability (122) (301)
- ------------------------------------
$ 10 $(178)
- ------------------------------------
</TABLE>
6. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1995, Sun adopted the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived As-
sets and for Long-Lived Assets to be Disposed Of." This statement requires com-
panies to write down to estimated fair value long-lived assets that are im-
paired. The write-downs recognized in 1995 are reflected as a cu-
43
<PAGE>
mulative effect of change in accounting principle in the consolidated statement
of income and relate to properties to be disposed of in the Company's real es-
tate, coal and refining and marketing operations. The following table sets
forth summary information concerning these write-downs:
<TABLE>
<CAPTION>
Cumulative Effect
of Accounting
Change After-Tax
---------------------- Cumulative Effect Expected
(Millions of Dollars Except Per Share of Disposal
Per Share Amounts) Pretax After-tax Common Stock Date
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Real estate $ 33 $15 $.16 1996-2001*
Coal 45 29 .32 1996
Refining and marketing** 67 43 .47 1996-1998
- ------------------------------------------------------------------------------------
$145 $87 $.95
- ------------------------------------------------------------------------------------
</TABLE>
* Approximately 65 percent of the remaining real estate portfolio is expected
to be disposed of by 1998.
** Primarily service stations and terminals.
Other than the cumulative effect, this change did not have a significant impact
on Sun's net income during 1995. The results of operations during 1995 for all
properties to be disposed of were not significant.
Effective January 1, 1994, Sun adopted the provisions of Statement of Financial
Accounting Standards No. 112 "Employers' Accounting for Postemployment Bene-
fits." It required companies to recognize the obligation to provide benefits to
their former or inactive employees after employment but before retirement. The
cumulative effect of this accounting change for years prior to 1994 decreased
net income for 1994 by $7 million (after related income tax benefit of $4 mil-
lion), or $.07 per share of common stock. Other than the cumulative effect,
this change did not have a significant impact on Sun's net income during 1994.
Effective January 1, 1993, Sun adopted the provisions of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" which changed the
method of computing deferred income taxes from a deferred to a liability ap-
proach. Under the liability method, deferred income taxes are determined based
on temporary differences between the financial statement and tax bases of as-
sets and liabilities and available tax credits and carryforwards, using enacted
tax law in effect during the years in which the differences are expected to re-
verse and the credits and carryforwards are expected to be realized. The cumu-
lative effect of this accounting change for years prior to 1993 increased net
income for 1993 by $5 million, or $.05 per share of common stock. Other than
the cumulative effect, this change increased net income for 1993 by $45 million
or $.42 per share of common stock, primarily due to lower U.S. income tax ex-
pense on foreign earnings including a $22 million reduction in deferred income
tax expense related to the 1993 sale of certain exploration properties in the
U.K. North Sea (Note 2). Since deferred income taxes will have to be adjusted
for any enacted change in tax rate, Sun's net income may be subject to in-
creased volatility.
7. EARNINGS PER SHARE
Primary earnings per share were computed by dividing earnings, after deducting
dividends on the preference stock issued in 1995 (Note 15), by the weighted av-
erage number of common shares outstanding. Fully diluted earnings per share
generally are determined by dividing earnings by the weighted average number of
shares outstanding, assuming redemption of the preference shares for common
stock. However, since the assumed redemption of preference shares in 1995 would
have resulted in an increase in earnings per share, fully diluted per share
amounts are equal to those reported on a primary basis.
8. INVENTORIES
<TABLE>
<CAPTION>
December 31
-----------
(Millions of Dollars) 1995 1994
- ------------------------------------------
<S> <C> <C>
Crude oil $184 $193
Refined products 272 335
Materials, supplies and other 66 85
- ------------------------------------------
$522 $613
- ------------------------------------------
</TABLE>
The current replacement cost of all inventories valued at LIFO exceeded their
carrying value by $528 and $459 million at December 31, 1995 and 1994, respec-
tively.
9. LONG-TERM RECEIVABLES AND INVESTMENTS
<TABLE>
<CAPTION>
December 31
-----------
(Millions of Dollars) 1995 1994
- ------------------------------------------------
<S> <C> <C>
Investments in affiliated companies $ 80 $ 78
Accounts and notes receivable 13 22
Investments in capital leases 3 34
Other investments, at cost 8 9
- ------------------------------------------------
$104 $143
- ------------------------------------------------
</TABLE>
Dividends received from affiliated companies amounted to $11, $10 and $9 mil-
lion in 1995, 1994 and 1993, respectively. Earnings employed in the business at
December 31, 1995 include $21 million of undistributed earnings of affiliated
companies.
44
<PAGE>
10. PROPERTIES, PLANTS AND EQUIPMENT
<TABLE>
<CAPTION>
Accumulated
Depreciation,
(Millions of Dollars) Gross Depletion and Net
December 31 Investment Amortization Investment
- ---------------------------------------------------------------
<S> <C> <C> <C>
1995
Refining and marketing* $5,418 $2,463 $2,955
Oil and gas production 937 723 214
Coal mining and cokemaking 375 283 92
Corporate 1 -- 1
- ---------------------------------------------------------------
$6,731 $3,469 $3,262
- ---------------------------------------------------------------
1994
Refining and marketing* $5,872 $2,587 $3,285
Oil and gas exploration
and production 1,572 1,016 556
Oil sands mining 983 477 506
Corporate 3 2 1
- ---------------------------------------------------------------
$8,430 $4,082 $4,348
- ---------------------------------------------------------------
</TABLE>
* Includes gross amounts leased to third parties totalling $624 and $631 mil-
lion at December 31, 1995 and 1994, respectively. Related accumulated depre-
ciation totalled $203 and $246 million at December 31, 1995 and 1994, respec-
tively.
Annual future minimum rentals due Sun, as lessor, on noncancelable operating
leases at December 31, 1995 are as follows (in millions of dollars):
<TABLE>
- ------------------------------
<S> <C>
Year ending December 31:
1996 $ 49
1997 34
1998 17
1999 3
2000 1
Later years 3
- ------------------------------
$107
- ------------------------------
</TABLE>
11. SHORT-TERM BORROWINGS AND CREDIT FACILITIES
As of December 31, 1995, the Company has access to $600 million of short-term
financing in the form of commercial paper and revolving credit agreements with
commercial banks that provide for revolving credit through September 2000. The
revolving credit agreements are subject to commitment fees, the amounts of
which are not material. The Company also has access to short-term financing un-
der non-committed money market facilities. The following table sets forth
amounts outstanding related to these facilities:
<TABLE>
<CAPTION>
December 31
-------------
(Millions of Dollars) 1995 1994
- ----------------------------------------------------
<S> <C> <C>
Commercial paper $ 4 $216
Non-committed money market facilities 50 5
- ----------------------------------------------------
$54 $221
- ----------------------------------------------------
</TABLE>
12. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31
-----------
(Millions of Dollars) 1995 1994
- ---------------------------------------------------
<S> <C> <C>
SUN COMPANY, INC.
9 3/8% debentures due 2016 $200 $ 200
9% debentures due 2024 100 100
8 1/8% notes due 1999 150 150
7.95% notes due 2001 150 150
7 1/8% notes due 2004 100 100
7.03% - 7.10% notes due 1997 50 50
6 3/4% convertible debentures due 2012
(Note 15) 10 10
- ---------------------------------------------------
760 760
- ---------------------------------------------------
SUBSIDIARIES OF SUN COMPANY, INC.
7.60% environmental industrial revenue
bonds due 2024 100 100
Canadian subsidiary debentures -- 139
Leasing subsidiary notes -- 139
Other 35 37
- ---------------------------------------------------
135 415
- ---------------------------------------------------
895 1,175
Less: unamortized discount 4 3
current portion 3 99
- ---------------------------------------------------
$888 $1,073
- ---------------------------------------------------
</TABLE>
The aggregate amount of long-term debt maturing and sinking fund requirements
in the years 1996 through 2000 is as follows (in millions of dollars):
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
1996 $ 3 1999 $151
1997 $54 2000 $ 2
1998 $11
</TABLE>
- --------------------------------------------------------------------------------
45
<PAGE>
13. RETIREMENT BENEFIT PLANS
DEFINED BENEFIT PENSION PLANS
Sun has noncontributory defined benefit pension plans which provide retirement
benefits for most of its employees. Plan benefits are generally based on years
of service, age at retirement and employees' compensation. For Sun's principal
defined benefit pension plans, the benefit for employees hired prior to January
1, 1987 is determined based on either final or total career average compensa-
tion, whichever produces the greater benefit. For employees hired on or after
January 1, 1987, the benefit is determined based on total career average com-
pensation. It is Sun's policy to fund defined benefit pension contributions, at
a minimum, in accordance with the requirements of the Internal Revenue Code.
Pension expense for 1995, 1994 and 1993 consisted of the following components:
<TABLE>
<CAPTION>
(Millions of Dollars) 1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (cost of benefits earned during the year) $ 28 $ 33 $ 30
Interest cost on projected benefit
obligation 103 102 103
Actual return on plan assets* (246) (8) (182)
Net amortization and deferral* 134 (107) 66
- -----------------------------------------------------------------------------
$ 19** $ 20 $ 17
- -----------------------------------------------------------------------------
</TABLE>
*Estimated returns on assets are used in determining net periodic pension cost.
Differences between estimated and actual returns are included in net amortiza-
tion and deferral. Also included in net amortization and deferral are amorti-
zation of the unrecognized net asset or obligation at January 1, 1986, the
unrecognized prior service cost and the unrecognized net gain or loss.
**Excludes a $1 million curtailment gain recognized in connection with the
employee termination program implemented during 1995 (Note 2).
The following table sets forth the funded status of the plans and amounts rec-
ognized in the balance sheets at:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 December 31, 1994
------------------------------ ------------------------------
Plans in Which Plans in Which Plans in Which Plans in Which
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
(Millions of Dollars) Benefits Exceed Assets Benefits Exceed Assets
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value
of benefit obligation:
Vested $ 875 $253 $ 875 $204
Nonvested 36 21 32 10
- -----------------------------------------------------------------------------------------
Accumulated benefit ob-
ligation 911 274 907 214
Effect of projected fu-
ture salary increases 107 25 117 15
- -----------------------------------------------------------------------------------------
Projected benefit obli-
gation 1,018 299 1,024 229
Less plan assets at fair
value* 1,090 132 1,095 88
- -----------------------------------------------------------------------------------------
Projected benefit obli-
gation in excess of
(less than) plan assets (72) 167 (71) 141
Unrecognized net asset
(obligation) at January
1, 1986 56 (17) 102 (21)
Unrecognized prior serv-
ice cost (15) -- (27) --
Unrecognized net loss (5) (46) (8) (19)
Additional minimum lia-
bility** -- 50 -- 38
- -----------------------------------------------------------------------------------------
Pension liability (as-
set)*** $ (36) $154 $ (4) $139
- -----------------------------------------------------------------------------------------
</TABLE>
*Plan assets consist principally of commingled trust funds, marketable equity
securities, corporate and government debt securities and real estate. Less
than 1 percent of plan assets was invested in Company common and preference
stock at both December 31, 1995 and 1994.
**An equivalent intangible asset is included in deferred charges and other as-
sets in the consolidated balance sheets.
***The pension liability (asset) is included in retirement benefit liabilities
in the consolidated balance sheets.
As of December 31, 1995 and 1994, the projected benefit obligations were deter-
mined using weighted average assumed discount rates of 7.0 and 8.5 percent, re-
spectively, and rates of compensation increase of 4.0 and 5.0 percent, respec-
tively. The weighted average expected long-term rate of return on plan assets
was 9.25 percent in both 1995 and 1994. All of these rates are subject to
change in the future as economic conditions change.
DEFINED CONTRIBUTION PENSION PLANS
Sun has defined contribution pension plans which provide retirement benefits
for most of its employees. Sun's contributions, which are principally based on
a percentage of employees' annual compensation and are charged against income
as incurred, amounted to $19, $16 and $9 million in 1995, 1994 and 1993, re-
spectively.
46
<PAGE>
Sun's principal defined contribution plan is the Sun Company, Inc. Capital Ac-
cumulation Plan ("SunCAP"). Sun matches 100 percent of employee contributions
to the plan up to 5 percent of an employee's base compensation. Effective Jan-
uary 1, 1993, the matching contribution was reduced to 50 percent for a period
of one year. SunCAP is a combined profit sharing and employee stock ownership
plan which contains a provision designed to permit SunCAP, only upon approval
by the Company's Board of Directors, to borrow in order to purchase shares of
Company common stock. As of December 31, 1995, no such borrowings had been ap-
proved.
POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
Sun has plans which provide health care and life insurance benefits for sub-
stantially all retirees. Such benefits are provided through insurance policies
which have premiums based on benefits paid during the year. These premiums are
funded currently. Postretirement benefits expense for 1995, 1994 and 1993 con-
sisted of the following components:
<TABLE>
<CAPTION>
(Millions of Dollars) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (cost of benefits earned during the year) $ 5 $ 4 $ 5
Interest cost on accumulated postretirement benefit obliga-
tion 24 22 23
Net amortization* (10) (8) (6)
- -------------------------------------------------------------------------------
$19** $18 $22
- -------------------------------------------------------------------------------
</TABLE>
*Consists of amortization of the unrecognized prior service benefit and the
unrecognized net gain or loss.
**Excludes a $4 million curtailment gain recognized in connection with the
employee termination program implemented during 1995 (Note 2).
The following table sets forth the funded status of the plans and amounts rec-
ognized in the balance sheets at:
<TABLE>
<CAPTION>
December 31
------------
(Millions of Dollars) 1995 1994
- --------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation ("APBO"):
Retirees $220 $ 185
Fully eligible active participants 26 15
Other active participants 93 55
- --------------------------------------------------------
339 255
Unrecognized prior service benefit 60 76
Unrecognized net gain (loss) (10) 49
- --------------------------------------------------------
Accrued postretirement benefit obligation* $389 $ 380
- --------------------------------------------------------
</TABLE>
*Accrued postretirement benefit obligation is included in retirement benefit
liabilities in the consolidated balance sheets.
As of December 31, 1995 and 1994, the APBO was determined using weighted aver-
age assumed discount rates of 7.0 and 8.5 percent, respectively. The initial
health care cost trend assumptions used at December 31, 1995 and 1994 were 9.0
and 9.3 percent, respectively, which are assumed to decline gradually to 5.5
percent in 2004 and to remain at that level thereafter. All of these rates are
subject to change in the future as economic conditions change. An increase in
the assumed health care cost trend rate by one percentage point in each year
would have increased the APBO by $10 million at December 31, 1995 and would
have increased the service and interest components of postretirement benefits
expense in the aggregate by $1, $1 and $3 million for the years ended December
31, 1995, 1994 and 1993, respectively.
14. COMMITMENTS AND CONTINGENT LIABILITIES
Sun, as lessee, has noncancelable operating leases for marine transportation
time charters and for service stations, office space and other property and
equipment. Total rental expense for such leases for the years 1995, 1994 and
1993 amounted to $103, $104 and $88 million, respectively. Approximately 11
percent of total rental expense was recovered through related rental income
from subleases during 1995. Under contracts existing as of December 31, 1995,
future minimum annual rentals applicable to noncancelable operating leases are
as follows (in millions of dollars):
<TABLE>
- ------------------------------
<S> <C>
Year ending December 31:
1996 $ 64
1997 61
1998 57
1999 36
2000 31
Later years 210
- ------------------------------
$459
- ------------------------------
</TABLE>
In 1992, a wholly owned subsidiary of the Company became a one-third partner
in Belvieu Environmental Fuels ("BEF"), a joint venture formed for the purpose
of constructing, owning and operating a $225 million methyl tertiary butyl
ether ("MTBE") production facility in Mont Belvieu, Texas. The construction of
the facility, which had an initial designed capacity of 12,600 barrels daily
of MTBE, was completed during 1995. As part of the financing of this project,
BEF borrowed $176 million, the total amount available under a construction
loan facility, of which the Company had guaranteed one-third or $59 million.
The construction loan was restructured into a five-year nonrecourse term loan
with a first priority lien on all project assets.
In order to obtain a secure supply of oxygenates for the manufacture of refor-
mulated fuels, Sun has entered into a 10-year off-take agreement with bef
which commenced in 1994. Pursuant to this agreement, Sun will purchase all of
the MTBE production from the plant. The minimum per unit price to be paid for
the first 12,600 barrels daily of MTBE production while the nonrecourse term
loan is outstanding is equal to BEF's annual raw material and operating costs
and debt service payments divided by the plant's annual de-
47
<PAGE>
signed capacity. Notwithstanding this minimum price, Sun has agreed to pay BEF
prices through May 2000 which approximate those included in existing MTBE
long-term sales agreements in the marketplace. These prices are expected to
exceed the minimum price required by the loan agreement. For the last four
years the off-take agreement is in effect, Sun will negotiate a new price with
BEF based upon the market conditions existing at that time. During 1995 and
1994, Sun's total MTBE purchases under this agreement were $150 and $79 mil-
lion, respectively.
In February 1996, Radnor Corporation, the Company's real estate operation held
for sale, refinanced its $132 million of outstanding debt with two term loans
due in January 2001. These term loans, which have lower interest rates than
the prior debt, are guaranteed by the Company (Note 2). Sun is also contin-
gently liable under various other arrangements which guarantee debt of associ-
ated companies and others aggregating approximately $21 million at December
31, 1995 and maturing at various dates through 2014.
Sun is subject to numerous federal, state, local and foreign laws regulating
the discharge of materials into, or otherwise relating to the protection of,
the environment. These laws result in loss contingencies for remediation at
Sun's facilities, including refineries, service stations, terminals, pipelines
and truck transportation facilities as well as at third-party or formerly
owned sites at which contaminants generated by Sun may be located. The accrued
liability for environmental remediation at Sun's domestic refining and market-
ing operations was classified in the consolidated balance sheets as follows:
<TABLE>
<CAPTION>
December
31
---------
(Millions of Dollars) 1995 1994
- -------------------------------------------------
<S> <C> <C>
Accrued liabilities $ 55 $ 55
Other deferred credits and liabilities 144 181
- -------------------------------------------------
$199 $236
- -------------------------------------------------
</TABLE>
The accrued liability for dismantlement, restoration and abandonment at Sun's
international oil and gas production operations totalled $56 and $45 million
at December 31, 1995 and 1994, respectively. This accrual is included in accu-
mulated depreciation, depletion and amortization in the consolidated balance
sheets. Sun estimates that the total cost for such activities at these opera-
tions will be approximately $118 million. Pretax charges against income for
environmental remediation and for dismantlement, restoration and abandonment
totalled $26, $24 and $45 million in 1995, 1994 and 1993, respectively. Claims
for recovery of environmental liabilities that are probable of realization to-
talled $8 million at December 31, 1995 and are included in deferred charges
and other assets in the consolidated balance sheets.
Total future costs for environmental remediation and dismantlement, restora-
tion and abandonment activities will depend upon, among other things, the
identification of additional sites, the determination of the extent of contam-
ination of each site, the timing and nature of required remedial actions, the
technology available and needed to meet the various existing legal require-
ments, the nature and extent of future environmental laws, inflation rates and
the determination of Sun's liability at multi-party sites, if any, in light of
the number, participation levels and financial viability of other parties.
Sun is currently involved in litigation with a private party to determine re-
sponsibility for remediation at a formerly-owned refinery in Oklahoma. Manage-
ment believes that Sun is fully indemnified for this potential liability.
Many other legal and administrative proceedings are pending against Sun. The
ultimate outcome of these proceedings and the matters discussed above cannot
be ascertained at this time; however, it is reasonably possible that some of
them could be resolved unfavorably to Sun. Management believes that any expen-
ditures attributable to these matters will be incurred over an extended period
of time and will be funded from Sun's net cash flow from operating activities.
Although the ultimate impact of these matters could have a significant impact
on results of operations for any one year, management of Sun believes that any
liabilities which may arise pertaining to such matters would not be material
in relation to the consolidated financial position of Sun at December 31,
1995.
15. STOCKHOLDERS' EQUITY
Each share of Company common stock is entitled to one full vote. The $10 mil-
lion of outstanding 6 3/4 percent debentures are convertible into shares of
common stock of the Company at any time prior to maturity at a conversion
price of $40.81 per share and are redeemable at the option of the Company. At
December 31, 1995, there were 246,166 shares of common stock reserved for this
potential conversion (Note 12).
In June 1995, the Company announced the details of an extensive operational
and financial restructuring. As part of this restructuring, the Company re-
duced the quarterly dividend paid on common stock from $.45 per share ($1.80
per year) to $.25 per share ($1.00 per year). The Company also repurchased
6,400,000 shares of its common stock on August 9, 1995 through a tender offer
for $192 million and 1,725,000 shares during 1995 on the open market for ap-
proximately $46 million. The latter purchases were made under a program autho-
rized by the Company's Board of Directors ("Board") to purchase up to $100
million of common stock in the open market from time to time depending on pre-
vailing market conditions and opportunities. In addition, on August 3, 1995,
the Company exchanged 25,000,000 "depositary shares" in a tax free transaction
for an equal number of shares of Company common stock. Each depositary share
represents ownership of one-half share of the Company's newly issued Series A
cumulative preference stock.
Each owner of a depositary share is entitled, proportionately, to all the
rights, preferences and privileges of the preference stock
48
<PAGE>
represented thereby. Dividends on the preference stock are cumulative and ac-
crue at a rate of $3.60 per annum. The preference stock ranks prior to common
stock with respect to dividend rights and rights upon liquidation, dissolution
and winding up of the Company. Each share of preference stock has a liquidation
preference equal to $60.00, which is twice the fair market value of a deposi-
tary share at its date of issuance, plus accrued and unpaid dividends. The
holders of preference stock vote together with the holders of common stock as a
single class, and are entitled to one full vote for each share of preference
stock owned.
The outstanding shares of preference stock are redeemable at any time by the
Company, in whole or in part, for common stock at a value initially equal to
approximately $84.80 per share of preference stock at June 12, 1995, decreasing
ratably to $80.00 per share of preference stock at June 11, 1998. After June
11, 1998, the Company may elect to redeem each outstanding share of preference
stock for two shares of common stock, subject to adjustment in certain events.
The redemption value also includes a cash amount equal to all proportionate ac-
crued but unpaid dividends. The Company currently intends to redeem all of the
outstanding preference stock (and thereby the depositary shares) on June 12,
1998 but could elect to redeem such stock at an earlier date.
The Company's Articles of Incorporation authorize the issuance of up to
2,500,000 shares of additional classes of preference stock without par value,
subject to approval of issuance by the Board. The Board also has authority to
fix the number, designation, rights, preferences and limitations of these
shares, subject to applicable laws and the provisions of the Articles of Incor-
poration (Note 20).
In December 1992, The Board approved the adoption of the Employee Option Plan
("EOP") which provides for the award of stock options to all employees (other
than executives) of the Company and certain subsidiaries. The awards, which
have a ten-year term and are exercisable two years from the date of grant, per-
mit optionees to purchase Company common stock at the fair market value on the
date of grant. Two million shares of Company common stock are authorized for
issuance under the EOP. In 1994 and 1993, stock option awards totalling 241,895
and 1,721,385, respectively, were made to eligible employees.
16. MANAGEMENT INCENTIVE PLANS
Sun's principal management incentive plans are the Executive Incentive Plan
("EIP") and the Executive Long-Term Stock Investment Plan ("ELSIP"). The EIP
provides for the payment of annual incentive awards in cash and/or Company com-
mon stock and the ELSIP provides for the award of stock options and related
rights to officers and other key employees of Sun. The option awards under
ELSIP and its predecessor plan have a ten-year term and permit optionees to
purchase Company common stock at the fair market value on the date of grant.
Certain shares of common stock issued upon exercise of the stock options or re-
lated rights will be subject to restrictions prohibiting their sale or other
disposition during the related option term. No awards will be made under ELSIP
after December 31, 1996. Aggregate charges against income for Sun's principal
management incentive plans for the years 1995, 1994 and 1993 were $4, $2 and $7
million, respectively.
The following table summarizes information with respect to common stock option
awards under the EOP (Note 15) and Sun's management incentive plans:
<TABLE>
<CAPTION>
Shares Option Price
Under Option Per Share
- --------------------------------------------------------------
<S> <C> <C>
OUTSTANDING, DECEMBER 31, 1992 2,313,411 $25.38-$41.13
Granted 2,835,415 $28.00-$31.38
Exercised (94,474)* $27.88-$31.50
Cancelled (109,217)
- --------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1993 4,945,135 $25.38-$41.13
Granted 868,105 $28.00-$30.19
Exercised (219,318)* $27.88-$31.50
Cancelled (334,055)
- --------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1994 5,259,867 $25.38-$41.13
Granted 687,990 $27.13-$27.88
Exercised (189,690) $27.88-$30.50
Cancelled (482,970)
- --------------------------------------------------------------
OUTSTANDING, DECEMBER 31, 1995 5,275,197 $25.88-$41.13
- --------------------------------------------------------------
EXERCISABLE, DECEMBER 31
- --------------------------------------------------------------
1993 2,552,166 $25.38-$41.13
1994 2,687,316 $25.38-$41.13
1995 4,350,512 $25.88-$41.13
- --------------------------------------------------------------
AVAILABLE FOR GRANT, DECEMBER 31
- --------------------------------------------------------------
1993 4,439,545**
1994 3,618,940**
1995 3,104,470**
- --------------------------------------------------------------
</TABLE>
*Includes 23,023 and 41,050 options cancelled during 1994 and 1993, respective-
ly, due to the exercise of related alternate appreciation rights which resulted
in the issuance of 1,939 and 482 shares in 1994 and 1993, respectively. Alter-
nate appreciation rights permit the optionee to receive in cash or common stock
the appreciation of Company common stock from the date of grant. In addition,
1,970, 10,480 and 13,900 shares were issued for matured restricted stock units
during 1995, 1994 and 1993, respectively. Restricted stock units are awards
which entitle the holder to receive cash or Company common stock upon comple-
tion of a restriction period or upon attainment of predetermined performance
targets.
**Consists of shares available for grant under the EOP and the ELSIP totalling
213,250 and 2,891,220 shares, respectively, at December 31, 1995, 125,020 and
3,493,920 shares, respectively, at December 31, 1994 and 336,325 and 4,103,220
shares, respectively, at December 31, 1993.
49
<PAGE>
17. FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments has been determined based on
the Company's assessment of available market information and appropriate valua-
tion methodologies. However, these estimates may not necessarily be indicative
of the amounts that the Company could realize in a current market exchange.
Most of Sun's current assets (excluding inventories and deferred income taxes)
and current liabilities are financial instruments. The estimated fair value of
these financial instruments approximates their carrying amounts. At December
31, 1995 and 1994, the estimated fair value of Sun's long-term debt amounted to
$1,008 and $1,051 million, respectively, compared to carrying amounts totalling
$888 and $1,073 million, respectively. Long-term debt which is publicly traded
was valued based on quoted market prices while the fair value of other debt is-
sues was estimated by management based upon current interest rates available to
Sun at the respective balance sheet dates for similar issues.
Sun has entered into foreign currency forward contracts which hedge the impact
of exchange rate changes on the Canadian dollar denominated installment note
receivable due in 1996 from the divestment of Suncor common stock (Note 2). The
fair value of these contracts, which represents the estimated amount Sun would
have paid to terminate the contracts, was $2 million at December 31, 1995 and
is included as part of the carrying value of the installment note.
The Company guarantees the debt of associated companies and others (Note 14).
Due to the complexity of these guarantees and the absence of any market for
these financial instruments, the Company does not believe it is practicable to
estimate their fair value.
Prior to the divestment of Suncor, fluctuations in sales and other operating
revenue were reduced by locking in fixed exchange rates and prices on a portion
of Canadian oil and natural gas sales. At December 31, 1994, Suncor had out-
standing crude oil and foreign currency swap contracts hedging sales revenues
for 1995, 1996 and 1997 totalling $C408, $C360 and $C237 million, respectively.
The estimated fair value of these contracts as of December 31, 1994 was not ma-
terial.
18. SUPPLEMENTAL CASH FLOW INFORMATION
During 1995, Sun completed the divestment of its remaining 55-percent interest
in Suncor and in 1994, Sun acquired the Girard Point refinery, related inven-
tory and certain pipeline interests (Note 2). The following is a summary of the
effects of these transactions on Sun's consolidated financial position:
<TABLE>
<CAPTION>
Suncor Girard Point
(Millions of Dollars) Divestment Acquisition
- -------------------------------------------------------------------
<S> <C> <C>
(Increase) decrease in:
Note receivable from divestment
of Suncor common stock $ (125) $ --
Accounts and other notes receivable 165 --
Inventories 123 (108)
Properties, plants and equipment 1,328 (149)
Other noncurrent assets 41 --
Increase (decrease) in:
Accounts payable and accrued liabilities (230) 10
Current portion of long-term debt (4) --
Taxes payable (47) --
Long-term debt (160) --
Retirement benefit liabilities (45) 22
Deferred income taxes (146) --
Other deferred credits and liabilities (109) 61
Minority interest (392) --
Cumulative foreign currency
translation adjustment 79 --
Earnings employed in the business 157 --
- -------------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents $ 635 $(164)
- -------------------------------------------------------------------
</TABLE>
In 1995, Sun transferred an interest in its cokemaking operations in exchange
for $95 million in cash. The transferee is entitled to a preferential return
from the cash flows of the cokemaking operation until certain cumulative return
targets have been met. Sun did not recognize a gain or loss on this transac-
tion. The transaction is not expected to have a significant impact on Sun's fu-
ture results of operations.
Cash payments for income taxes were $74, $58 and $116 million in 1995, 1994 and
1993, respectively. Cash payments for interest, net of amounts capitalized,
were $100, $74 and $73 million in 1995, 1994 and 1993, respectively.
19. BUSINESS SEGMENT INFORMATION
Sun is principally a petroleum refiner and marketer with interests in oil and
gas production and coal mining and cokemaking. Sun also has interests in real
estate operations held for sale. Prior to the sale of Suncor Inc. on June 8,
1995, Sun had interests in refining and marketing, exploration and production
and oil sands mining in Canada (Note 2).
Sun's petroleum refining and marketing operations include the refining of crude
oil and its derivatives; the marketing of crude oil and a full range of petro-
leum products, including fuels, lubricants
50
<PAGE>
and petrochemicals, and the transportation of crude oil and refined products.
Such operations are conducted principally in the eastern half of the United
States. Petroleum refining and marketing operations outside North America in-
volve purchasing crude oil and refined products primarily for United States re-
fining operations and also for sale to third parties. Sun's oil and gas produc-
tion operations consist of development, production and marketing of crude oil,
condensate, natural gas and natural gas liquids and are located in the United
Kingdom sector of the North Sea. Sun's coal mining and cokemaking operations
are conducted in the eastern United States. Corporate includes Sun's domestic
real estate operations held for sale, and prior to 1995, coal operations and
equipment leasing and secured lending activities. In 1995, Sun's coal mining
and cokemaking business is reflected as a separate business segment as it is
now considered one of Sun's ongoing business units and is no longer being held
for sale (Note 2). At December 31, 1994, Sun had substantially liquidated its
remaining portfolio of leases and secured loans.
SEGMENT INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Refining and Exploration and Coal Mining Oil Sands
Marketing Production and Cokemaking* Mining Corporate Consolidated**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated customers $9,909 $ 93 $ 87 $ 32 $ -- $10,121
- ---------------------------------------------------------------------------------------------------------------
Intersegment $ -- $193 $ -- $189 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------
Operating profit $ 45 $ 81 $ 22 $ 52 $234 $ 434
Equity income 17 -- -- -- -- 17
Related income taxes (11) (24) 3 (26) (82) (140)
- ---------------------------------------------------------------------------------------------------------------
Profit contribution be-
fore net
financing expenses and
after tax*** $ 51 $ 57 $ 25 $ 26 $152 311
- ---------------------------------------------------------------------------------------------------------------
Corporate expenses (af-
ter taxes) (28)
Net financing expenses
(after taxes) (56)
Cumulative effect of
change in accounting
principle (87)+
-------
Net income $ 140
-------
Depreciation, depletion
and amortization $ 253 $ 71++ $ 10 $ 14 $ -- $ 348
- ---------------------------------------------------------------------------------------------------------------
Capital expenditures $ 410 $ 87 $ 7 $ 41 $ -- $ 545
- ---------------------------------------------------------------------------------------------------------------
Identifiable assets $4,397 $253 $143 $ -- $403+++ $ 5,184
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
*Reflects coal and cokemaking operations as an operation held for sale for the
first half of 1995 and on a fully consolidated basis thereafter. Accordingly,
the amounts presented for sales and other operating revenue, depreciation,
depletion and amortization and capital expenditures are for the second half
of 1995 (Note 2).
**After elimination of intersegment amounts.
***Includes after-tax provision for write-down of assets and other matters of
$57 million in refining and marketing and $4 million in corporate. In addi-
tion, corporate includes an after-tax gain of $157 million on the sale of
Suncor common stock and a $1 million net loss from real estate operations
held for sale (Note 2).
+Reflects the cumulative effect for years prior to 1995 of a change in the
method of accounting for the impairment of long-lived assets (Note 6).
++Includes dry hole costs and leasehold impairment which are included in ex-
ploratory costs and leasehold impairment in the consolidated statements of
income.
+++Includes investment in real estate operations held for sale of $87 million
(Note 2).
51
<PAGE>
SEGMENT INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Refining and Exploration and Oil Sands
Marketing Production Mining Corporate Consolidated*
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales and other operat-
ing revenue
(including consumer ex-
cise taxes):
Unaffiliated customers $9,651 $156 $ -- $ 11 $9,818
- -------------------------------------------------------------------------------------------------
Intersegment $ -- $206 $416 $ -- $ --
- -------------------------------------------------------------------------------------------------
Operating profit $ 41 $144 $ 68 $(34) $ 219
Equity income 13 -- -- -- 13
Related income taxes (15) (50) (38) 34 (69)
- -------------------------------------------------------------------------------------------------
Profit contribution be-
fore net
financing expenses and
after tax** $ 39 $ 94 $ 30 $ --*** 163
- -------------------------------------------------------------------------------------------------
Corporate expenses (af-
ter taxes) (28)
Net financing expenses
(after taxes) (38)***
Cumulative effect of
change in accounting
principle (7)+
------
Net income $ 90
------
Depreciation, depletion
and amortization $ 246 $ 96++ $ 31 $ -- $ 373
- -------------------------------------------------------------------------------------------------
Capital expenditures $ 550 $215 $ 83 $ -- $ 848
- -------------------------------------------------------------------------------------------------
Identifiable assets $4,807 $647 $592 $486+++ $6,465
- -------------------------------------------------------------------------------------------------
</TABLE>
*After elimination of intersegment amounts.
**Includes after-tax gain from the disposal of certain oil and gas properties
of $28 million in exploration and production and after-tax provision for
write-down of assets and other matters of $12 million in refining and market-
ing and $20 million in corporate (Note 2).
***Net financing expenses of leasing operations are included in corporate. In
addition, corporate includes net income from coal and real estate operations
held for sale of $15 and $2 million, respectively (Note 2).
+Reflects the cumulative effect for years prior to 1994 of a change in the
method of accounting for postemployment benefits (Note 6).
++ Includes dry hole costs and leasehold impairment which are included in ex-
ploratory costs and leasehold impairment in the consolidated statements of
income.
+++ Includes investments in coal and real estate operations held for sale of
$51 and $123 million, respectively (Note 2).
<TABLE>
<CAPTION>
Refining and Exploration and Oil Sands
Marketing Production Mining Corporate Consolidated*
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Sales and other operat-
ing revenue
(including consumer ex-
cise taxes):
Unaffiliated customers $8,975 $194 $ -- $ 11 $9,180
- -------------------------------------------------------------------------------------------------
Intersegment $ -- $164 $363 $ -- $ --
- -------------------------------------------------------------------------------------------------
Operating profit $ 194 $234 $ 63 $ 17 $ 508
Equity income 11 -- -- -- 11
Related income taxes (70) (76) (35) (2) (183)
- -------------------------------------------------------------------------------------------------
Profit contribution be-
fore net
financing expenses and
after tax** $ 135 $158 $ 28 $ 15*** 336
- -------------------------------------------------------------------------------------------------
Corporate expenses (af-
ter taxes) (27)
Net financing expenses
(after taxes) (26)***
Cumulative effect of
change in accounting
principle 5+
------
Net income $ 288
------
Depreciation, depletion
and amortization $ 237 $ 98++ $ 32 $ 1 $ 368
- -------------------------------------------------------------------------------------------------
Capital expenditures $ 381 $120 $111 $ -- $ 612
- -------------------------------------------------------------------------------------------------
Identifiable assets $4,175 $554 $580 $641+++ $5,900
- -------------------------------------------------------------------------------------------------
</TABLE>
*After elimination of intersegment amounts.
**Includes after-tax provision for write-down of assets and other matters of $7
million in refining and marketing and $5 million in corporate. In addition,
exploration and production includes an after-tax gain of $80 million from the
disposal of certain oil and gas properties and corporate includes an after-
tax gain of $19 million on the sale of Suncor common stock (Note 2).
***Net financing expenses of leasing operations are included in corporate. In
addition, corporate includes net income from coal and real estate operations
held for sale of $2 and $1 million, respectively (Note 2).
+Reflects the cumulative effect for years prior to 1993 of a change in the
method of accounting for income taxes (Note 6).
++Includes dry hole costs and leasehold impairment which are included in ex-
ploratory costs and leasehold impairment in the consolidated statements of
income.
+++Includes investments in coal and real estate operations held for sale of
$113 and $134 million, respectively (Note 2).
52
<PAGE>
GEOGRAPHIC INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Outside
North
U.S.* Canada America Corporate Consolidated**
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Sales and other operat-
ing revenue
(including consumer ex-
cise taxes
of $1,544 in U.S. and
$207 in Canada):
Unaffiliated customers $9,125 $ 611 $ 385 $ -- $10,121
- -------------------------------------------------------------------------------
Intergeographic $ 9 $ 1 $3,412 $ -- $ --
- -------------------------------------------------------------------------------
Profit contribution be-
fore net
financing expenses and
after tax*** $ 63 $ 28 $ 68 $152 $ 311
- -------------------------------------------------------------------------------
Corporate expenses (af-
ter taxes) (28)
Net financing expenses
(after taxes) (56)
Cumulative effect of
change in accounting
principle (87)+
-------
Net income $ 140
-------
Depreciation, depletion
and amortization $ 252 $ 46++ $ 50 $ -- $ 348
- -------------------------------------------------------------------------------
Capital expenditures $ 409 $ 106 $ 30 $ -- $ 545
- -------------------------------------------------------------------------------
Identifiable assets $4,515 $ -- $ 790 $403+++ $ 5,184
- -------------------------------------------------------------------------------
*Includes coal and cokemaking operations as an operation held for sale for the
first half of 1995 and on a fully consolidated basis thereafter (Note 2).
**After elimination of intergeographic amounts.
***Includes after-tax provision for write-down of assets and other matters of
$57 million in U.S. and $4 million in corporate. In addition, corporate in-
cludes an after-tax gain of $157 million on the sale of Suncor common stock
and a $1 million net loss from real estate operations held for sale (Note 2).
+Reflects the cumulative effect for years prior to 1995 of a change in the
method of accounting for the impairment of long-lived assets (Note 6).
++Includes dry hole costs and leasehold impairment which are included in
exploratory costs and leasehold impairment in the consolidated statements
of income.
+++Includes corporate assets outside North America of $15 million. Also in-
cludes investment in real estate operations held for sale of $87 million
(Note 2).
<CAPTION>
Outside
North
U.S. Canada America Corporate Consolidated*
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Sales and other operat-
ing revenue
(including consumer ex-
cise taxes
of $1,601 in U.S. and
$515 in Canada):
Unaffiliated customers $7,963 $1,397 $ 447 $ 11 $ 9,818
- -------------------------------------------------------------------------------
Intergeographic $ 9 $ 5 $2,454 $ -- $ --
- -------------------------------------------------------------------------------
Profit contribution be-
fore net
financing expenses and
after tax** $ 24 $ 45 $ 94 $ --*** $ 163
- -------------------------------------------------------------------------------
Corporate expenses (af-
ter taxes) (28)
Net financing expenses
(after taxes) (38)***
Cumulative effect of
change in accounting
principle (7)+
-------
Net income $ 90
-------
Depreciation, depletion
and amortization $ 218 $ 104++ $ 51 $ -- $ 373
- -------------------------------------------------------------------------------
Capital expenditures $ 528 $ 220 $ 100 $ -- $ 848
- -------------------------------------------------------------------------------
Identifiable assets $4,138 $1,541 $ 703 $486+++ $ 6,465
- -------------------------------------------------------------------------------
</TABLE>
*After elimination of intergeographic amounts.
**Includes after-tax gain from the disposal of certain oil and gas properties
of $28 million outside North America and after-tax provision for write-down
of assets and other matters of $12 million in U.S. and $20 million in
corporate (Note 2).
***Net financing expenses of leasing operations are included in corporate. In
addition, corporate includes net income from coal and real estate operations
held for sale of $15 and $2 million, respectively (Note 2).
+Reflects the cumulative effect for years prior to 1994 of a change in the
method of accounting for postemployment benefits (Note 6).
++Includes dry hole costs and leasehold impairment which are included in ex-
ploratory costs and leasehold impairment in the consolidated statements of
income.
+++Includes corporate assets in Canada of $33 million and outside North
America of $13 million. Also includes investments in coal and real estate
operations held for sale of $51 and $123 million, respectively (Note 2).
53
<PAGE>
GEOGRAPHIC INFORMATION
(Millions of Dollars)
<TABLE>
<CAPTION>
Outside
North
U.S. Canada America Corporate Consolidated*
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1993
Sales and other operat-
ing revenue
(including consumer ex-
cise taxes
of $1,381 in U.S. and
$502 in Canada):
Unaffiliated customers $7,262 $1,373 $ 534 $ 11 $9,180
- ------------------------------------------------------------------------------
Intergeographic $ 1 $ 6 $2,003 $ -- $ --
- ------------------------------------------------------------------------------
Profit contribution be-
fore net
financing expenses and
after tax** $ 124 $ 40 $ 157 $ 15*** $ 336
- ------------------------------------------------------------------------------
Corporate expenses (af-
ter taxes) (27)
Net financing expenses
(after taxes) (26)***
Cumulative effect of
change in accounting
principle 5+
------
Net income $ 288
------
Depreciation, depletion
and amortization $ 209 $ 106++ $ 52 $ 1 $ 368
- ------------------------------------------------------------------------------
Capital expenditures $ 359 $ 202 $ 51 $ -- $ 612
- ------------------------------------------------------------------------------
Identifiable assets $3,442 $1,522 $ 514 $641+++ $5,900
- ------------------------------------------------------------------------------
</TABLE>
*After elimination of intergeographic amounts.
**Includes after-tax provision for write-down of assets and other matters of $7
million in Canada and $5 million in corporate. In addition, Canada and
outside North America include after-tax gains of $5 and $75 million,
respectively, from the disposal of certain oil and gas properties and
corporate includes an after-tax gain of $19 million on the sale of Suncor
common stock (Note 2).
***Net financing expenses of leasing operations are included in corporate. In
addition, corporate includes net income from coal and real estate operations
held for sale of $2 and $1 million, respectively (Note 2).
+Reflects the cumulative effect for years prior to 1993 of a change in the
method of accounting for income taxes (Note 6).
++Includes dry hole costs and leasehold impairment which are included in ex-
ploratory costs and leasehold impairment in the consolidated statements of
income.
+++Includes corporate assets in Canada of $16 million and outside North America
of $83 million. Also includes investments in coal and real estate operations
held for sale of $113 and $134 million, respectively (Note 2).
Income tax expenses give effect to tax credits and allowances in each of the
designated industry segments and geographic areas. Overhead expenses that can
be identified with Sun's operations in the designated industry segments and ge-
ographic areas have been included as deductions in determining operating prof-
its and profit contributions. Net financing expenses consist of interest cost
and debt expense less interest income, interest capitalized, dividends and gains
(losses) on sales of securities held for investment. Intersegment and
intergeographic sales and other operating revenue are accounted for based on the
prices negotiated between the parties which approximate market. Identifiable
assets are those assets that are utilized within a specific segment or
geographic area.
20. SUBSEQUENT EVENT
On February 1, 1996, the Company adopted a stockholder rights plan and desig-
nated 1,743,019 shares of its remaining 2,500,000 authorized cumulative prefer-
ence stock as 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 cumu-
lative preference stock outstanding on February 12, 1996. A Right will be
granted for each share of common stock issued after such date and prior to the
expiration date of the rights plan.
Generally, the Rights become exercisable a specified period after a party ac-
quires 15 percent or more of the aggregate outstanding common stock and Series
A cumulative preference stock (collectively, "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 par-
ticipating 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 Company common stock (or in certain situa-
tions, 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
Company 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.
54
<PAGE>
REPORT OF MANAGEMENT
To the Shareholders of Sun Company, Inc.:
The accompanying consolidated financial statements of Sun Company, Inc. and its
subsidiaries ("Sun") and the related information are the responsibility of man-
agement. The financial statements, which include amounts based on informed es-
timates and judgments, were prepared using generally accepted accounting prin-
ciples deemed appropriate in the circumstances. Management believes these fi-
nancial statements present fairly, in all material respects, Sun's financial
position, results of operations and cash flows. Other financial information
presented in this Annual Report is consistent with that in the financial state-
ments.
To fulfill its responsibility for the financial statements, Sun maintains a
system of internal accounting controls which in management's opinion provides
reasonable assurance of achieving the objectives of internal accounting con-
trol. These objectives include safeguarding of assets from loss through unau-
thorized use or disposition and maintaining reliable records permitting the
preparation of financial statements and accountability for assets. The system
of internal accounting controls is subject to ongoing evaluation of its contin-
uing effectiveness.
Sun's independent accountants, Coopers & Lybrand L.L.P., have expressed an
opinion on the fairness of management's financial statements by conducting
their audit in accordance with generally accepted auditing standards and issu-
ing the report presented on this page.
The Audit Committee of the Board of Directors is comprised of directors who are
not employees of Sun and meets a minimum of four times annually. It assists the
Board of Directors in discharging its duties relating to accounting and report-
ing practices and internal controls, and it assesses the performance and recom-
mends the appointment of independent accountants. Both the independent accoun-
tants and Sun's internal auditors have unrestricted access to the Committee to
discuss audit findings and other financial matters.
/S/ Robert H. Campbell
ROBERT H. CAMPBELL
Chairman, Chief Executive Officer and President
/S/ Robert M. Aiken, Jr.
ROBERT M. AIKEN, JR.
Senior Vice President and Chief Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors, Sun Company, Inc.:
We have audited the accompanying consolidated balance sheets of Sun Company,
Inc. and its subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of mate-
rial misstatement. An audit includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audits provide a reasonable basis for our opin-
ion.
In our opinion, the financial statements referred to above (pages 36 to 54)
present fairly, in all material respects, the consolidated financial position
of Sun Company, Inc. and its subsidiaries as of December 31, 1995 and 1994 and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with gen-
erally accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, the Company
changed: its method of accounting for the impairment of long-lived assets in
1995; its method of accounting for postemployment benefits in 1994; and, its
method of accounting for income taxes in 1993.
/S/ Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
February 13, 1996
55
<PAGE>
SUPPLEMENTAL FINANCIAL AND OPERATING INFORMATION (Unaudited)
DOMESTIC REFINING AND MARKETING DATA
<TABLE>
<CAPTION>
REFINERY UTILIZATION* 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Refinery crude unit capacity at De-
cember 31 777.0 777.0 600.0 600.0 600.0
- -------------------------------------------------------------------------------
Total input to crude units:
Crude oil 673.9 551.4 465.8 530.8 524.2
Other feedstocks 26.5 39.2 36.3 6.0 6.9
- -------------------------------------------------------------------------------
700.4 590.6** 502.1 536.8 531.1
- -------------------------------------------------------------------------------
Refinery crude unit capacity utilized 90% 88% 84% 89% 89%
- -------------------------------------------------------------------------------
*Thousands of barrels daily except percentages. Reflects the acquisition on
August 4, 1994 of the 177.0 thousand barrel-per-day Girard Point refining fa-
cilities.
**Includes 78.9 thousand barrels daily attributable to the Girard Point refin-
ing facilities and reflects total input at Girard Point from August 4, 1994
through December 31, 1994 divided by 365 days. During this 150-day period,
input to crude units at these facilities actually totalled 191.9 thousand
barrels daily.
<CAPTION>
REFINED PRODUCT SALES* 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gasoline:
Wholesale 154.0 95.1 56.7 80.0 78.6
Retail 204.6 214.9 223.6 233.9 235.3
Middle distillates 210.9 186.6 161.8 169.0 161.7
Residual fuel 73.9 51.5 40.8 50.5 43.0
Petrochemicals 31.1 27.5 28.8 28.9 25.3
Lubricants 20.0 22.3 19.5 19.6 19.1
Asphalt 26.7 29.3 29.9 29.3 25.2
Other 56.6 50.3 34.5 34.6 40.9
- -------------------------------------------------------------------------------
777.8 677.5 595.6 645.8 629.1
- -------------------------------------------------------------------------------
*Thousands of barrels daily to third parties; excludes refined product trading
activities.
<CAPTION>
REFINED PRODUCT MARGIN INFORMATION* 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average sales price $25.26 $24.31 $25.39 $26.47 $28.48
Average cost of products sold** 19.95 18.70 19.08 20.96 22.11
- -------------------------------------------------------------------------------
$ 5.31*** $ 5.61*** $ 6.31 $ 5.51 $ 6.37
- -------------------------------------------------------------------------------
*Dollars per barrel.
**Consists of crude oil and other purchased feedstocks and refined products.
***Excluding sales from the Girard Point facilities, refined product margins
totalled $6.03 and $5.97 per barrel in 1995 and 1994, respectively.
<CAPTION>
RETAIL GASOLINE OUTLETS 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Direct outlets:
Company owned or leased 1,446 1,519 1,577 1,645 1,674
Dealer owned 611 658 741 880 973
- -------------------------------------------------------------------------------
Total direct outlets 2,057 2,177 2,318 2,525 2,647
Distributor outlets 1,804 1,938 2,124 2,864 3,207
- -------------------------------------------------------------------------------
3,861 4,115 4,442 5,389 5,854
- -------------------------------------------------------------------------------
<CAPTION>
THROUGHPUT PER DIRECT OUTLET* 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Company owned or leased 96.1 97.2 93.5 89.4 83.9
Dealer owned 71.3 70.3 63.6 58.6 52.9
- -------------------------------------------------------------------------------
Average-total direct outlets 88.6 88.8 83.5 78.3 72.0
- -------------------------------------------------------------------------------
*Thousands of gallons of gasoline monthly.
<CAPTION>
PIPELINE MILEAGE* 1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Crude lines 5,264 5,577 5,579 5,493 5,493
Product lines 4,805 4,552 4,303 4,605 4,704
- -------------------------------------------------------------------------------
</TABLE>
*Includes all pipelines in which Sun has an ownership interest.
56
<PAGE>
OIL AND GAS DATA
On June 8, 1995, Sun sold its remaining 55-percent interest in Suncor Inc., the
Company's Canadian petroleum company. The oil and gas data below reflect
amounts pertaining to Canadian operations prior to the date of sale. (See Note
2 to the consolidated financial statements.)
CAPITALIZED COSTS*
(Millions of Dollars)
<TABLE>
<CAPTION>
At December 31, 1995 At December 31, 1994
-------------------- ---------------------
Outside Outside
North North
Canada America Total Canada America Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Proved properties $ -- $913 $913 $518 $883 $1,401
Unproved properties -- 24 24 147 24 171
- -------------------------------------------------------------------------------
Total capitalized costs -- 937 937 665 907 1,572
Accumulated depreciation, depletion
and amortization -- 723 723 346 670 1,016
- -------------------------------------------------------------------------------
Net capitalized costs $ -- $214 $214 $319 $237 $ 556
- -------------------------------------------------------------------------------
</TABLE>
*Includes capitalized costs of support equipment and facilities.
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES*
(Millions of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Outside Outside Outside
North North North
Canada America Total Canada America Total Canada America Total
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property acquisition
costs:
Proved $ 7 $-- $ 7 $ 6 $66 $72 $ 3 $22 $25
Unproved $ 6 $-- $ 6 $19 $12 $31 $ 9 $-- $ 9
Exploration costs $19 $--** $19 $32 $--** $32 $26 $--** $26
Development costs $33 $30 $63 $65 $22 $87 $38 $29 $67
- ------------------------------------------------------------------------------------------
</TABLE>
*Consists of both capitalized and expensed costs incurred in oil and gas pro-
ducing activities.
**In connection with the Company's decision to withdraw from oil and gas ex-
ploration activities outside North America effective September 30, 1992, an
accrual was established in 1992 for all future exploration commitments. Ac-
tual costs incurred subsequent to September 30, 1992 to satisfy these com-
mitments were charged against this accrual and excluded from costs incurred
in oil and gas producing activities.
RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCTION
(Millions of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- -------------------- --------------------
Outside Outside Outside
North North North
Canada America Total Canada America Total Canada America Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Sales to unaffiliated
customers $18 $ 43 $ 61 $ 57 $ 67 $124 $ 48 $134 $182
Transfers to other Sun
operations* 29 164 193 57 149 206 65 97 162
- ---------------------------------------------------------------------------------------
Revenues from oil and
gas production 47 207 254 114 216 330 113 231 344
Other operating reve-
nues 3 29 32 3 29 32 3 11 14
Gain on sale of
exploration and
production
properties** -- -- -- -- 35 35 10 99 109
- ---------------------------------------------------------------------------------------
50 236 286 117 280 397 126 341 467
Expenses:
Production:
Taxes -- 30 30 -- 27 27 -- 25 25
Operating costs 13 76 89 25 76 101 25 57 82
Depreciation, depletion
and amortization 14 50 64 31 51 82 32 52 84
Exploration 15 -- 15 24 -- 24 22 -- 22
Other related costs*** 7 -- 7 19 -- 19 20 -- 20
- ---------------------------------------------------------------------------------------
49 156 205 99 154 253 99 134 233
- ---------------------------------------------------------------------------------------
Operating profit before
income taxes 1 80 81 18 126 144 27 207 234
Related income taxes 1 23 24 12 38 50 17 59 76
- ---------------------------------------------------------------------------------------
Results of operations
from exploration and
production $-- $ 57 $ 57 $ 6 $ 88 $ 94 $ 10 $148 $158
- ---------------------------------------------------------------------------------------
</TABLE>
*Outside North America amounts reflect sales of crude oil to Sun's domestic
refining and marketing business. This crude oil is principally resold to
third parties.
**Consists of gains on the disposition of Sun's interests in an exploration
block in the North Sea and in exploration and production properties in Co-
lombia during 1994 and in certain oil and gas producing properties in Canada
and Dubai and certain exploration properties in the North Sea during 1993.
The after-tax effect of these divestments increased results of operations
from oil and gas exploration and production outside North America by $28
million in 1994 and in Canada and outside North America by $5 and $75 mil-
lion, respectively, in 1993. (See Note 2 to the consolidated financial
statements.)
***Consists principally of exploration and production direct general and admin-
istrative costs and foreign exchange gains and losses.
57
<PAGE>
REVENUES PER UNIT OF OIL AND GAS PRODUCTION
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
Outside Outside Outside
North North North
Canada America Canada America Canada America
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:*
Crude oil, condensate and natural
gas liquids (per barrel) $15.51 $16.82 $13.62 $15.73 $14.49 $16.75
Natural gas (per thousand cubic
feet) $ .87 $ 2.99 $ 1.40 $ 2.96 $ 1.42 $ 2.93
- -------------------------------------------------------------------------------
</TABLE>
*Includes transfers to other Sun operations.
ESTIMATED NET QUANTITIES OF PROVED OIL AND GAS RESERVES
Proved reserves are the estimated quantities which geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under economic and operating conditions existing at the
time the estimate is made. Proved developed reserves are the quantities ex-
pected to be recovered through existing wells with existing equipment and oper-
ating methods. The reserve balance estimates in Canada were prepared by Coles
Gilbert Associates Ltd., independent petroleum consultants, while the reserve
balance estimates outside of North America were prepared by Sun engineers. Sun
considers such estimates to be reasonable; however, due to inherent
uncertainties and the limited nature of reservoir data, estimates of underground
reserves are imprecise and subject to change over time as additional
information becomes available.
<TABLE>
<CAPTION>
Crude Oil, Condensate and
Recoverable Natural Gas
Liquids Natural Gas
(Millions of Barrels) (Billions of Cubic Feet)
------------------------------------ ---------------------------------
Outside Outside
North North
PROVED RESERVES Canada America Total Canada America Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1991 32 81 113 407 101 508
Revisions of previous
estimates 1 8 9 1 20 21
Purchases of minerals in
place 5 -- 5 89 -- 89
Sales of minerals in
place (2) -- (2) (8) -- (8)
Extensions and discover-
ies 1 3 4 28 -- 28
Production (3) (15) (18) (42) (17) (59)
- -----------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1992 34 77 111 475 104 579
Revisions of previous
estimates -- 5 5 26 26 52
Purchases of minerals in
place 1 2 3 5 -- 5
Sales of minerals in
place (2) (42)* (44) (46) -- (46)
Extensions and discover-
ies 4 -- 4 74 -- 74
Production (3) (11) (14) (42) (21) (63)
- -----------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1993 34 31 65 492 109 601
Revisions of previous
estimates 3 9 12 34 15 49
Purchases of minerals in
place 1 16 17 5 -- 5
Sales of minerals in
place -- (7) (7) -- (11) (11)
Extensions and discover-
ies 6 -- 6 105 -- 105
Production (4) (11) (15) (43) (17) (60)
- -----------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1994 40 38 78 593 96 689
Revisions of previous
estimates -- 11 11 2 -- 2
Purchases of minerals in
place 1 -- 1 13 -- 13
Extensions and discover-
ies 1 -- 1 20 -- 20
Production (2) (10) (12) (21) (13) (34)
Divestment of Suncor** (40) -- (40) (607) -- (607)
- -----------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1995 -- 39 39 -- 83 83
- -----------------------------------------------------------------------------------------------------
PROVED DEVELOPED
RESERVES AT DECEMBER 31
- -----------------------------------------------------------------------------------------------------
1991 28 77 105 256 55 311
1992 30 74 104 370 104 474
1993 30 25 55 338 100 438
1994 33 28 61 357 87 444
1995 -- 29 29 -- 74 74
- -----------------------------------------------------------------------------------------------------
</TABLE>
*Consists of proved reserves in Dubai which were subject to disposition as
part of a restructuring plan adopted in 1992. Results of operations for these
properties werenot significant. (See Note 2 to the consolidated financial
statements.)
**Consists of Suncor's proved reserve balances at June 8, 1995.
58
<PAGE>
There has been no major discovery or other favorable or adverse event that has
caused a significant change in estimated proved reserves since December 31,
1995. Sun has no long-term supply agreements or contracts with governments or
authorities in which it acts as producer nor does it have any interest in oil
and gas operations accounted for by the equity method. Sun sold 4 and 6.8 mil-
lion shares of Suncor common stock in 1992 and 1993, respectively, which in-
creased the minority interest in Sun's reserves in Canada from 25 percent to
32 percent and 45 percent, respectively. Sun sold its remaining 55-percent in-
terest in Suncor common stock in 1995.
AVERAGE NET OIL AND GAS PRODUCTION
<TABLE>
<CAPTION>
(Thousands of Barrels Daily) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Crude oil, condensate and processed natural gas
liquids:
Canada 5.2* 10.8 10.1 10.1 9.2
Outside North America** 27.4 29.0 28.0 42.7 48.3
- --------------------------------------------------------------------------
32.6 39.8 38.1 52.8 57.5
- --------------------------------------------------------------------------
(Millions of Cubic Feet Daily)
- --------------------------------------------------------------------------
Natural gas:
Canada 57* 119 116 116 83
Outside North America 36 46 56 46 56
- --------------------------------------------------------------------------
93 165 172 162 139
- --------------------------------------------------------------------------
</TABLE>
*Reflects total volumes in Canada prior to the sale of Sun's remaining inter-
est in Suncor on June 8, 1995 divided by 365 days. During the 158-day period
prior to the sale, actual crude oil, condensate and processed natural gas
liquids volumes totalled 12.0 thousand barrels daily and actual natural gas
volumes totalled 131 million cubic feet daily.
**Reflects impact of the April 1993 sale of producing properties in Dubai.
Production from these properties averaged 4.4 thousand barrels daily during
1993 (based on a 365-day period) and 17.8 thousand barrels daily during 1992.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS FROM ESTIMATED
PRODUCTION OF PROVED OIL AND GAS RESERVES AFTER INCOME TAXES
The standardized measure of discounted future net cash flows from estimated
production of proved oil and gas reserves after income taxes is presented in
accordance with the provisions of Statement of Financial Accounting Standards
No. 69, "Disclosures about Oil and Gas Producing Activities" ("SFAS NO. 69").
In computing this data, assumptions other than those mandated by SFAS NO. 69
could produce substantially different results. Sun cautions against viewing
this information as a forecast of future economic conditions or revenues.
The standardized measure of discounted future net cash flows is determined by
using estimated quantities of proved reserves and taking into account the fu-
ture periods in which they are expected to be developed and produced based on
year-end economic conditions. The estimated future production is priced at
year-end prices, except that future gas prices are increased, where applica-
ble, for fixed and determinable price escalations provided by contract or reg-
ulation. The resulting estimated future cash inflows are reduced by estimated
future costs to develop and produce the proved reserves based on year-end cost
levels. In addition, Sun has also deducted certain other estimated costs
deemed necessary to derive the estimated pretax future net cash flows from the
proved reserves including direct general and administrative costs and
abandonment/dismantlement costs. The estimated pretax future net cash flows
are then reduced further by deducting future income tax expenses. Such income
taxes are determined by applying the appropriate year-end statutory tax rates,
with consideration of future tax rates already legislated, to the future pre-
tax net cash flows relating to Sun's proved oil and gas reserves less the tax
basis of the properties involved. The future income tax expenses give effect
to tax credits and allowances relating to Sun's proved oil and gas reserves.
The resultant future net cash flows are reduced to present value amounts by
applying the SFAS NO. 69 mandated ten percent discount factor. The result is
referred to as the "Standardized Measure of Discounted Future Net Cash Flows
from Estimated Production of Proved Oil and Gas Reserves after Income Taxes."
59
<PAGE>
<TABLE>
<CAPTION>
Outside
North
(Millions of Dollars) Canada* America Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
1995
Future cash inflows $ -- $1,116 $ 1,116
Future production and development costs -- (698) (698)
Other related future costs -- (26) (26)
Future income tax expenses -- (95) (95)
- -----------------------------------------------------------------------------
Future net cash flows -- 297 297
Discount at 10 percent -- (55) (55)
- -----------------------------------------------------------------------------
Standardized measure of discounted future net cash
flows from estimated
production of proved oil and gas reserves after
income taxes $ -- $ 242 $ 242
- -----------------------------------------------------------------------------
1994
Future cash inflows $1,386 $1,055 $ 2,441
Future production and development costs (503) (658) (1,161)
Other related future costs (73) (69) (142)
Future income tax expenses (234) (118) (352)
- -----------------------------------------------------------------------------
Future net cash flows 576 210 786
Discount at 10 percent (232) (21) (253)
- -----------------------------------------------------------------------------
Standardized measure of discounted future net cash
flows from estimated
production of proved oil and gas reserves after
income taxes $ 344 $ 189 $ 533
- -----------------------------------------------------------------------------
1993
Future cash inflows $1,294 $ 724 $ 2,018
Future production and development costs (415) (442) (857)
Other related future costs (67) (8) (75)
Future income tax expenses (231) (117) (348)
- -----------------------------------------------------------------------------
Future net cash flows 581 157 738
Discount at 10 percent (251) (28) (279)
- -----------------------------------------------------------------------------
Standardized measure of discounted future net cash
flows from estimated
production of proved oil and gas reserves after
income taxes $ 330 $ 129 $ 459
- -----------------------------------------------------------------------------
</TABLE>
*In 1995, Sun sold its remaining 55-percent interest in Suncor common stock.
Previously, in 1993, Sun sold 6.8 million shares of Suncor common stock
which increased the minority interest in Sun's standardized measure of
discounted future net cash flows in Canada from 32 percent to 45 percent.
SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH
FLOWS FROM ESTIMATED PRODUCTION OF PROVED OIL AND GAS RESERVES AFTER INCOME
TAXES
(Millions of Dollars)
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year $ 533 $ 459 $ 570
Increase (decrease) in discounted future net cash flows:
Sales and transfers of oil and gas net of related costs (135) (202) (237)
Revisions to estimates of proved reserves:
Prices (8) 88 (54)
Development costs (46) (40) (8)
Production costs 17 (31) 82
Quantities 45 59 23
Other (6) (30) (57)
Extensions, discoveries and improved recovery less re-
lated costs 12 84 62
Development costs incurred during the period 63 87 67
Purchases of reserves in place 10 56 21
Sales of reserves in place -- (6) (289)
Divestment of Suncor (329)* -- --
Accretion of discount 48 65 80
Income taxes 38 (56) 199
- -------------------------------------------------------------------------------
Balance, end of year $ 242 $ 533 $ 459
- -------------------------------------------------------------------------------
</TABLE>
*Consists of Sun's standardized measure of discounted future net cash flows
in Canada at June 8, 1995.
60
<PAGE>
MINING DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OIL SANDS (CANADA)
Proven reserves* (millions of bar-
rels) at December 31 -- 205 231 256 276
Synthetic crude oil produced for
shipment (thousands of barrels dai-
ly) 33.3** 70.7 60.5 58.5 60.6
Average price (per barrel) $18.19 $16.18 $16.61 $19.03 $20.03
- ------------------------------------------------------------------------------
*Before crown and other royalties and reflects (3), 1 and 15 million barrel
revisions of previous estimates during 1993, 1992 and 1991, respectively.
**Reflects total volumes prior to the sale of Sun's remaining interest in
Suncor on June 8, 1995 divided by 365 days. During the 158-day period prior to
the sale, actual volumes totalled 76.9 thousand barrels daily.
- ------------------------------------------------------------------------------
COAL AND COKEMAKING (UNITED STATES)
Proven and probable coal reserves
(millions of tons) at December 31:
Bituminous:
Metallurgical 116 116 117 120 116
Steam 23 71 134 197 266
Subbituminous -- -- -- 384 397
- ------------------------------------------------------------------------------
139* 187** 251** 701 779
- ------------------------------------------------------------------------------
Proven coal reserves (million of
tons) at December 31 70 104 147 564 577
- ------------------------------------------------------------------------------
*Reflects a 45 million ton revision of previous estimates.
**In January 1993, Sun decided to sell its coal and cokemaking operations. In
connection with this decision, Sun sold its western U.S. coal operations
during 1993 and certain of its eastern U.S. coal operations during 1994
which resulted in a reduction in proven and probable reserves of 508
million tons in the 1993-94 period. In 1995, Sun decided to retain its
remaining coal and cokemaking operations as one of its eight ongoing
business units. (See Note 2 to the consolidated financial statements.)
<CAPTION>
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Production (thousands of tons):
Bituminous:
Metallurgical 1,627 1,633 1,959 2,047 2,090
Steam 3,494 4,962 6,209 7,265 7,969
Subbituminous -- -- 4,690 13,338 13,743
- ------------------------------------------------------------------------------
5,121 6,595 12,858 22,650 23,802
- ------------------------------------------------------------------------------
Coke 638 678 642 640 622
- ------------------------------------------------------------------------------
Sales (thousands of tons):
Bituminous:
Metallurgical 674 772 1,033 1,197 1,265
Steam 3,556 5,537 6,214 7,385 8,116
Subbituminous -- -- 4,690 13,338 13,743
- ------------------------------------------------------------------------------
4,230 6,309 11,937 21,920 23,124
- ------------------------------------------------------------------------------
Coke 660 782 622 634 537
- ------------------------------------------------------------------------------
Average sales price of coal and coke
(per ton) $37.65* $34.00* $21.49* $15.86 $15.79
Net acreage (in thousands) at Decem-
ber 31:
Developed:
Bituminous 35 34 45 49 53
Subbituminous -- -- -- 8 8
Undeveloped bituminous 112 113 154 163 257
- ------------------------------------------------------------------------------
</TABLE>
*Reflects the absence of lower-value subbituminous coal sales subsequent to
the divestment of Sun's western U.S. coal operations during 1993.
61
<PAGE>
QUARTERLY FINANCIAL AND STOCK MARKET INFORMATION
(Millions of Dollars Except Per Share Amounts and Common Stock Prices)
<TABLE>
<CAPTION>
1995 1994
----------------------------------- -----------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and other
operating revenue
(including consumer
excise taxes) $ 2,578 $ 2,656 $ 2,398 $ 2,489 $ 2,056 $ 2,218 $ 2,699 $ 2,845
Gross profit* $212 $257 $273 $161 $244 $181 $302 $234
Income (loss) before
cumulative effect of
change in accounting
principle** $(7) $138*** $78 $18 $34 $12+ $48++ $3+++
Net income (loss)** $(94) $138 $78 $18 $27# $12 $48 $3
Income (loss) per share
of common stock before
cumulative effect of
change in accounting
principle**## $(.07) $1.29 $.87 $.09 $.32 $.11 $.45 $.03
Net income (loss) per
share of common
stock**## $(.88) $1.29 $.87 $.09 $.25# $.11 $.45 $.03
Cash dividends per share
of preference stock $-- $-- $.90 $.90 $-- $-- $-- $--
Cash dividends per share
of common stock $.45 $.45 $.25 $.25 $.45 $.45 $.45 $.45
Common stock price
range###--high $30 1/4 $32 7/8 $29 3/4 $29 3/4 $35 1/4 $34 3/8 $29 1/4 $32 1/2
--low $27 1/8 $27 1/4 $25 3/4 $24 3/4 $29 3/8 $25 1/8 $25 7/8 $26 3/8
- ----------------------------------------------------------------------------------------------------
</TABLE>
*Gross profit equals sales and other operating revenue less cost of products
sold and operating expenses; depreciation, depletion and amortization;
exploratory costs and leasehold impairment; and production, consumer excise
and other applicable taxes.
**For the first and second quarters of 1995, reflects increases (decreases)
compared to amounts previously reported on Securities and Exchange Commission
Form 10-Q in income (loss) before cumulative effect of change in accounting
principle of $-- and $29 million, respectively, or $-- and $.27,
respectively, per share of common stock and in net income (loss) of $(87) and
$29 million, respectively, or $(.81) and $.27, respectively, per share of
common stock. The changes are due to the Company's change in method of
accounting for the impairment of long-lived assets in the fourth quarter of
1995. (See Note 6 to the consolidated financial statements.)
***Includes a $157 million gain on sale of Suncor common stock and a $61
million provision for write-down of assets and other matters.
+Includes a $13 million gain on the sale of certain oil and gas exploration
and production properties.
++Includes a $15 million gain on the sale of certain oil and gas exploration
properties and a $22 million provision for write-down of assets and other
matters.
+++Includes a $10 million provision for write-down of assets and other
matters.
#Reflects a decrease in net income of $7 million or $.07 per share of common
stock due to the cumulative effect for years prior to 1994 of a change in the
method of accounting for the cost of postemployment benefits.
##Represents both primary and fully diluted earnings per share, except in the
third quarter of 1995 when the assumed redemption of preference shares
resulted in a reduction in earnings per share to $.76 on a fully diluted
basis. (See Note 7 to the consolidated financial statements.)
###The Company's common stock is principally traded on the New York Stock
Exchange, Inc. under the symbol "SUN." The Company had approximately 42,000
holders of record of common stock as of January 31, 1996.
62
<PAGE>
EXHIBIT 16
March 7, 1996
Office of the Chief Accountant
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sir:
We have read Item 9 included in the Sun Company, Inc. Annual Report on Form
10-K for the fiscal year ended December 31, 1995 filed with the Securities
and Exchange Commission on March 7, 1996 and are in agreement with the
statements contained in paragraph (b) and those contained in paragraph (a)
which pertain to Coopers & Lybrand L.L.P.
Very truly yours,
s/ COOPERS & LYBRAND L.L.P.
- ---------------------------
Coopers & Lybrand L.L.P.
<PAGE>
EXHIBIT 21
50.10% SUN COMPANY, INC. DECEMBER 31, 1995
SUBSIDIARIES OF THE REGISTRANT
COMPANY NAME: INC/REG
- ------------ -------
British Sun Oil Company Limited GB
COS Corporation IL
Elk River Resources, Inc. DE
- --Elk River Minerals Corporation DE
- --Jewell Coke Company DE
- --Jewell Resources Corporation VA
- ----Dominion Coal Corporation VA
- ----Jewell Coal & Coke Company, Inc. VA
- ----Jewell Smokeless Coal Corporation VA
- ----Oakwood Red Ash Coal Corporation VA
- ----Vansant Coal Corporation VA
- --Ray Coal Company, Inc. KY
- ----Whitaker Coal Corporation KY
- --Shamrock Coal Company, Incorporated DE
Helios Capital Corporation DE
- --Beneco Leasing Two, Inc. OH
- --Sunoco Leasing, Inc. DE
- ----Three Company, Inc. DE
- ----Heleasco Seven, Inc. DE
- ----Heleasco Fifteen, Inc. DE
- ----Heleasco Eighteen, Inc. DE
- ----Heleasco Twenty, Inc. DE
- ----Heleasco Twenty-Three, Inc. DE
- ----HCC Financial Group, Inc. DE
- --Sun Leasing Company DE
<PAGE>
Marine Investment Company of Delaware DE
- --Alaska Bulk Carriers, Inc. PA
- --Aston Shipping Company DE
- --Eastern Sun Barge Company DE
- --Florida Barge Company DE
- --New York Sun Shipping Co., Inc. DE
- --Philadelphia Sun Shipping Co., Inc. DE
- --Sun Barge Company DE
- --Sun Transport, Inc. DE
- ----Sarnia Shipping Company, Inc. (Name Saver) LI
- ----Welland Shipping Company, Inc. LI
Mascot Petroleum Company, Inc. DE
Mohawk Valley Oil, Inc. NY
Radnor Corporation PA
- --Morgan's Run Investment Company DE
- --Radnor Development Corporation DE
- --Radnor MidAtlantic Corporation PA
- --Radnor Suncoast Corporation DE
- --Radnor West, Inc. DE
- --Radnor/Aire Corporation PA
- --Radnor/Alexandria Corporation DE
- ----#1 Radnor/Alexandria Corporation DE
- --Radnor/Aragon Corporation DE
- --Radnor/Argyle Corporation DE
- --Radnor/Arlington Corporation DE
- --Radnor/Ballston Corporation DE
- --Radnor/Beachway Corporation DE
- --Radnor/Bowie Corporation DE
- --Radnor/Brown Street Corporation DE
- --Radnor/California Corporation DE
- --Radnor/California Service Corporation DE
- --Radnor/Carlsbad Corporation DE
- --Radnor/Centre Corporation DE
- --Radnor/College Park I Corporation DE
- --Radnor/Credit Corporation DE
- --Radnor/Delaware Avenue Corporation PA
- --Radnor/Dutton Mill Corporation PA
<PAGE>
- --Radnor/East Peoria Corporation DE
- --Radnor/Edgewater, Inc. DE
- --Radnor/Fulton County Corporation DE
- --Radnor/Fulton Industrial Corporation DE
- --Radnor/Georgia Corporation DE
- --Radnor/Grand Oaks Corporation DE
- --Radnor/Green Meadows Corporation DE
- --Radnor/Greenway Corporation DE
- --Radnor/Hampton Corporation DE
- --Radnor/Indianapolis Corporation DE
- --Radnor/Investment Corporation DE
- --Radnor/Island Corporation DE
- --Radnor/Jupiter Beach Corporation DE
- --Radnor/Kearny Mesa Corporation DE
- --Radnor/La Jolla Centre Corporation DE
- --Radnor/La Jolla Corporation DE
- --Radnor/Lakeside Corporation DE
- --Radnor/Lemon Grove Corporation DE
- --Radnor/Loudoun Corporation DE
- ----Radnor/Loudoun Day Care Corporation DE
- --Radnor/Main St. Corporation DE
- --Radnor/Marina Corporation PA
- --Radnor/Matsonford Corporation PA
- --Radnor/Murrieta Corporation DE
- --Radnor/North Corporation DE
- --Radnor/Orange Grove Corporation DE
- --Radnor/Pacific Corporate Center Corporation DE
- --Radnor/Painted Desert Corporation DE
- --Radnor/Parke East Corporation DE
- --Radnor/Peachtree Point Corporation DE
- --Radnor/Phillips Industrial Park Corporation DE
- --Radnor/Pier 5 Corporation PA
- --Radnor/Plantation Corporation DE
- ----Radnor Realty, Inc. DE
- --Radnor/Plymouth Corporation PA
- --I Radnor/Plymouth Investment Company DE
- ----Plymouth Building I Business Trust PA
- --III Radnor/Plymouth Investment Company DE
- --Radnor/Rancho California Corporation DE
- --Radnor/Rocky Point Corporation DE
<PAGE>
- --Radnor/Sarasota Corporation DE
- ----Laurel Oak Realty Corporation DE
- --Radnor/Service Corporation PA
- --Radnor/Sorrento Mesa Corporation DE
- --Radnor/Spring Ridge Corporation DE
- ----Radnor/Frederick Corporation DE
- --Radnor/Spring Valley Corporation DE
- --Radnor/Sun Village Construction Corporation DE
- --Radnor/Sun Village Corporation DE
- --Radnor/Tempe Corporation DE
- --Radnor/Vail Ranch Corporation DE
- --Radnor/Vanguard Corporation DE
- --Radnor/Victorville Corporation DE
- --Radnor/Villa Trinidad Corporation DE
- --Radnor/Vista Mar Corporation DE
- --Radnor/Weston Corporation DE
- --Radnor/Willoughby Corporation DE
- --Radnor/Yorba Linda-I Corporation DE
- --Striker Investment Company DE
Scandinavian Sun Oil Company A/S NW
Stop-N-Go Foods, Inc. DE
- --Stop-N-Go Foods of Dayton, Inc. OH
Sun Alternate Energy Corporation DE
Sun Atlantic Refining and Marketing Company DE
- --Sun Atlantic Refining and Marketing B.V., Inc. DE
- --Sun Atlantic Refining and Marketing B.V. NL
- ------Atlantic Petroleum Corporation DE
- --------Atlantic Pipeline Corp. DE
- --------Atlantic Refining & Marketing Corp. DE
<PAGE>
Sun Canada, Inc. DE
- --Helios Assurance Company Limited BA
- --Petrosun Limited GB
- --Sun International Limited BA
- --Sun Mexico One, Inc. DE
- ----Sunoco de Mexico, S.A. de C.V. MX
- --Sun Mexico Two, Inc. DE
- --Sun Oil Ghadames Algerie Limited BA
- --Sunoco Limited GB
Sun Coal Company DE
Sun Company, Inc. (Name Saver) DE
Sun Company, Inc. (R&M) PA
- --Hemisphere Oil Company, Inc. DE
- --Mid-State Oil Company DE
- --Puerto Rico Sun Oil Company DE
- --Sun BEF, Inc. TX
- --Sun Far East Trading, Inc. DE
- --Sun FSC, Inc. VI
- --Sun Lubricants and Specialty Products Inc. QU
- --Sun Oil Far East, Inc. DE
- --Sun Petrochemicals, Inc. DE
- --Sunmarks, Inc. DE
Sun Executive Services Company PA
Sun Ocean Ventures, Inc. DE
Sun Oil Argentina Limited BA
Sun Oil Argentina Limited S.A. AT
Sun Oil Britain Limited DE
- --Sun Oil Company (U.K.) Ltd. DE
- --Sun Oil North Sea Limited EN
Sun Oil Company (Name Saver) DE
<PAGE>
Sun Oil Export Company DE
Sun Oil International, Inc. DE
Sun Oil Shabwa Yemen Limited BA
Sun Oil (Thailand) Limited TH
Sun Oil Trading Company DE
Sun Orient Exploration Company DE
Sun Pipe Line Company of Delaware DE
- --Mid-Continent Pipe Line Company OK
- --Mid-Valley Pipeline Company OH
- --Sun Oil Line Company of Michigan MI
- --Sun Pipe Line Company PA
- --Sun Pipe Line Services Co. DE
Sun Refining and Marketing Company (Name Saver) DE
Sun Services Corporation PA
Sun Ship, Inc. PA
- --Lesley Corporation DE
Sun Tech, Inc. (Name Saver) DE
Sun Ventures, Inc. PA
Sun-Del Services, Inc. DE
Suncrest Industries, Inc. PA
Sunoco Overseas, Inc. DE
- --Lugrasa, S.A. PN
Sunoco Science and Technological Services, Inc. NY
(Name Saver)
The Claymont Investment Company DE
- --Sunoco Credit Corporation DE
Triad Carriers, Inc. PA
- --BBQ, Inc. PA
- --Carrier Systems Motor Freight, Inc. DE
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated
February 13, 1996 (which includes an explanatory paragraph regarding the
Company's change in method of accounting for 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 of our report
dated February 13, 1996 on our audits of the 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 this Annual Report on Form 10-K, in the
following registration statements:
Sun Company, Inc. Capital Accumulation Plan Form S-8
Registration Statement (Registration No. 33-9931);
Sun Company, Inc. Long-Term Incentive Plan Form S-8
Registration Statement (Registration No. 33-10055);
Sun Company, Inc. & Subsidiaries Stock Supplement Plan Form
S-8 Registration Statement (Registration No. 2-53283);
Sun Company, Inc. Executive Long-Term Stock Investment Plan
Form S-8 Registration Statement (Registration No. 33-44059);
Sun Company, Inc. Employee Option Plan Form S-8 Registration
Statement (Registration No. 33-49275);
Sun Company, Inc. Form S-3 Registration Statement
(Registration No. 33-53717);
Sun Company, Inc. Dividend Reinvestment Plan Form S-3
Registration Statement (Registration No. 33-39834); and
Sun Company, Inc. Dividend Reinvestment Plan Form S-3
Registration Statement (Registration No. 33-52615).
/s/Coopers & Lybrand L.L.P.
- -------------------------------
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
March 7, 1996
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned officers and/or
directors of Sun Company, Inc., a Pennsylvania corporation, do and each of them
does, hereby constitute and appoint Robert M. Aiken, Jr., Thomas W. Hofmann and
Jack L. Foltz, his or her true and lawful attorneys-in-fact and agents, and each
of them with full power to act without the others, for him or her and in his or
her name, place and stead, to sign the Sun Company, Inc. Form 10-K for the year
ending December 31, 1995 and any and all future amendments thereto; and to file
said Form 10-K and any such amendments with all exhibits thereto, and any and
all other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, 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
Robert H. Campbell Director
Chairman of the Board, Chief
Executive Officer, President
and Director
(Principal Executive Officer)
s/THOMAS W. LANGFITT
Thomas W. Langfitt
Director
s/RAYMOND E. CARTLEDGE
Raymond E. Cartledge
Director
s/R. ANDERSON PEW
R. Anderson Pew
s/ROBERT E. CAWTHORN Director
Robert E. Cawthorn
Director
s/ALBERT E. PISCOPO
Albert E. Piscopo
s/MARY J. EVANS Director
Mary J. Evans
Director
s/WILLIAM F. POUNDS
William F. Pounds
s/THOMAS P. GERRITY Director
Thomas P. Gerrity
Director
s/ALEXANDER B. TROWBRIDGE
Alexander B. Trowbridge
s/THOMAS W. HOFMANN Director
Thomas W. Hofmann
Comptroller
(Principal Accounting Officer)
<PAGE>
EXHIBIT 24.2
I, Ann C. Mule', Secretary of Sun Company, Inc., a Pennsylvania
corporation, hereby certify that the following is a full, true and complete copy
of a resolution adopted at a meeting of the Board of Directors of Sun Company,
Inc., duly called and held on March 7, 1996, at which a quorum was present and
acting throughout and that no action has been taken to rescind or amend said
resolution and that the same is now in full force and effect:
RESOLVED, That the Sun Company, Inc. Annual Report to the
Securities and Exchange Commission on Form 10-K, for the year ended
December 31, 1995, is approved in the form presented to this meeting,
subject to such changes or amendments as may be approved (as so
amended, the "Form 10-K") by any one of the following officers of the
Company: The Chief Executive Officer, Senior Vice President and Chief
Financial Officer, Senior Vice President and Chief Administrative
Officer or Vice President and General Counsel;
FURTHER RESOLVED, That each of the above-named officers and the
Comptroller (collectively, the "Authorized Officers") is authorized to sign
and file, or cause to be filed, on behalf of the Corporation, the Form 10-
K, together with any such other certificates, documents, instruments or
notices as may be necessary or as any such officer may deem necessary or
desirable in order to effectuate or carry out the purposes and intent of
the foregoing resolutions; and that all such actions heretofore taken by
any one or more of the Authorized Officers in order to effectuate or carry
out the purposes and intent of the foregoing resolutions are hereby
ratified, adopted and approved.
(Corporate Seal) s/ANN C. MULE'
---------------------
Ann C. Mule'
Secretary
March 7, 1996
Philadelphia, Pennsylvania
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