<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1996
REGISTRATION NO. 333-01537
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
SUN COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------
PENNSYLVANIA 23-1743282
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
TEN PENN CENTER,
1801 MARKET STREET,
PHILADELPHIA, PA 19103-1699
(215) 977-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
THOMAS W. HOFMANN, COMPTROLLER
SUN COMPANY, INC.,
TEN PENN CENTER,
1801 MARKET STREET,
PHILADELPHIA, PA 19103-1699
(215) 977-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
FRANKLIN B. HOLLAND, VETA T. RICHARDSON, ESQUIRE JAMES D. PHYFE, ESQUIRE
ESQUIRE SUN COMPANY, INC. DAVIS POLK & WARDWELL
PEPPER, HAMILTON & SCHEETZ 1801 MARKET STREET 450 LEXINGTON AVENUE
3000 TWO LOGAN SQUARE PHILADELPHIA, PA 19103-1699 NEW YORK, NY 10017-3954
PHILADELPHIA, PA 19103-2799 (215) 977-3000 (212) 450-4000
(215) 981-4000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Post-Effective Amendment.
--------------
This Post-Effective Amendment amends the registrant's Registration Statement
on Form S-3, as filed with the Securities and Exchange Commission
("Commission") on March 7, 1996 ("Registration Statement") and amended by
Amendment No. 1 to such Form S-3 Registration Statement which was filed with
the Commission on March 19, 1996. Such Registration Statement, as amended, was
declared effective on April 1, 1996. Upon its effectiveness, the Registration
Statement covered 11,748,591 Depositary Shares. The Registrant hereby
deregisters 3,928,591 Depositary Shares. Upon effectiveness of this Post-
Effective Amendment No. 1, the total number of Depositary Shares registered
hereunder will be 7,820,000.
--------------
THE REGISTRANT HEREBY AMENDS THIS POST-EFFECTIVE AMENDMENT TO REGISTRATION
STATEMENT NO. 333-01537 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS POST-EFFECTIVE AMENDMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR
UNTIL THIS POST-EFFECTIVE AMENDMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
6,800,000 Shares
Sun Company, Inc.
$1.80 DEPOSITARY SHARES
EACH REPRESENTING ONE-HALF OF A SHARE OF
SERIES A CUMULATIVE PREFERENCE STOCK, NO PAR VALUE
Subject to Redemption into Shares of Common Stock, $1 Par Value
---------------
All of the Depositary Shares offered hereby are being sold by the Selling
Shareholders. See "Selling Shareholders." The Company will not receive any
proceeds from the sale of the Depositary Shares being offered hereby. Each
Depositary Share represents ownership of one-half of a share of Series A
Cumulative Preference Stock deposited with First Chicago Trust Company of New
York, as Preference Stock Depositary, and entitles the owner to all of the
proportionate rights, preferences, privileges and obligations of the Series A
Cumulative Preference Stock represented thereby. Dividends on the Series A
Cumulative Preference Stock are cumulative and accrue at a rate of $3.60 per
annum, payable quarterly in arrears in cash on or before the 13th day of each
March, June, September and December, the most recent payment having occurred
on March 13, 1996. The proportionate annual dividend rate for each Depositary
Share is $1.80, and dividends will be payable on the Depositary Shares as,
when and if paid on the Series A Cumulative Preference Stock. Each share of
Series A Cumulative Preference Stock has a liquidation preference equal to
$60, plus accrued and unpaid dividends. The proportionate liquidation
preference of each Depositary Share is half of this amount.
At any time and from time to time, the Company may call the outstanding
shares of Series A Cumulative Preference Stock (and thereby the Depositary
Shares), in whole or in part, for redemption. On any Redemption Date, the
Company shall cause to be delivered to the holders of Depositary Shares, in
exchange for each such Depositary Share, the following consideration:
(1) in the event such Redemption Date is prior to June 12, 1998 (the
"Specified Date"), (i) shares of Common Stock having a value equal to
$42.39976 on June 12, 1995, declining by $.002222 on each day following to
$40.13332 on April 12, 1998, and equal to $40 thereafter through June 11, 1998
(the "Depositary Share Call Price"), plus (ii) a cash amount equal to all
proportionate accrued but unpaid dividends thereon; and
(2) in the event such Redemption Date is on or after the Specified Date, (i)
one share of Common Stock, subject to adjustment in certain events, and (ii) a
cash amount equal to all proportionate accrued but unpaid dividends thereon.
The Company currently intends to redeem all the outstanding Series A
Cumulative Preference Stock (and thereby the Depositary Shares) on the
Specified Date if not theretofore redeemed. For a more detailed description of
the Series A Cumulative Preference Stock and the Depositary Shares, see
"Capital Stock."
The opportunity for equity appreciation afforded by an investment in the
Depositary Shares is limited because the Company may, at its option, call the
Series A Cumulative Preference Stock (and thereby the Depositary Shares) for
redemption at any time prior to the Specified Date at the Preference Stock
Call Price, and may be expected to do so prior to the Specified Date if, among
other things, the market price of the Common Stock has theretofore exceeded
the Depositary Share Call Price.
The Depositary Shares and the Common Stock are traded on the New York Stock
Exchange under the symbols "SUN pfA" and "SUN", respectively. On April 2,
1996, the last sale prices of the Depositary Shares and the Common Stock as
reported on the New York Stock Exchange were $28 5/8 and $28 1/8 per share,
respectively.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
PRICE $27 1/2 A SHARE
---------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) SHAREHOLDERS(2)
------------ -------------- ---------------
<S> <C> <C> <C>
Per Share........................... $27.500 $0.825 $26.675
Total(3)............................ $187,000,000 $5,610,000 $181,390,000
</TABLE>
- -------
(1) The Glenmede Trust Company and the Company have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities
under the Securities Act of 1933, as amended.
(2) Before deducting expenses payable by the Selling Shareholders estimated
at $157,000.
(3) The Selling Shareholders have granted to the Underwriters an option
exercisable within 30 days of the date hereof to purchase up to an
aggregate of 1,020,000 additional Depositary Shares at the price to
public less underwriting discounts and commissions for the purpose of
covering over-allotments, if any. If the Underwriters exercise such
option in full, the total price to public, underwriting discounts and
commissions and proceeds to Selling Shareholders will be $215,050,000,
$6,451,500, and $208,598,500, respectively. See "Underwriters."
---------------
The Depositary Shares are offered subject to prior sale, when, as and if
accepted by the Underwriters named herein, and subject to the approval of
certain legal matters by Davis Polk & Wardwell, counsel for the Underwriters.
It is expected that delivery of the Depositary Shares will be made on or about
April 9, 1996 at the office of Morgan Stanley & Co. Incorporated, New York,
N.Y., against payment therefor in immediately available funds.
---------------
MORGAN STANLEY & CO.
Incorporated
CS FIRST BOSTON
SMITH BARNEY INC.
April 3, 1996
<PAGE>
The map titled "Sun's Refining and Marketing System" has been included on the
inside front cover of the Prospectus. The map is a geographic representation of
the following states: Connecticut; Delaware; Indiana; Kentucky; Maine; Maryland;
Massachusetts; Michigan; New Hampshire; New Jersey; New York; Ohio; Oklahoma;
Pennsylvania; Rhode Island; Texas; Vermont; Virginia; and West Virginia; and the
Commonwealth of Puerto Rico. All the states except for Oklahoma and Texas and
the Commonwealth of Puerto Rico have been shaded to indicate Sun's retail
marketing presence. The number of retail gasoline outlets in each of the shaded
states has also been noted. Other assets identified on the map consist of Sun's
five refineries located in: Philadelphia, Pennsylvania; Marcus Hook,
Pennsylvania; Toledo, Ohio; Tulsa, Oklahoma; and Yabucoa, Puerto Rico, as well
as wholly and jointly-owned crude and refined product pipelines, chemical
facilities in Mont Belvieu, Texas and Brandenburg, Kentucky and a terminal in
Nederland, Texas.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE,
ANY SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, BY ANY SELLING SHAREHOLDER OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL, UNDER
ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Prospectus Summary....................................................... 3
The Company.............................................................. 6
Use of Proceeds.......................................................... 8
Capitalization........................................................... 8
Selected Financial Data.................................................. 9
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 10
Price Range and Dividends................................................ 24
Selling Shareholders..................................................... 25
Capital Stock............................................................ 26
Certain United States Federal Income Tax Considerations.................. 34
Underwriters............................................................. 36
Legal Matters............................................................ 37
Experts.................................................................. 37
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DEPOSITARY
SHARES AND THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR
THE ACCOUNTS OF OTHERS IN COMPANY COMMON STOCK AND DEPOSITARY SHARES PURSUANT
TO EXEMPTIONS FROM RULES 10B-6, 10B-7 AND 10B-8 UNDER THE SECURITIES EXCHANGE
ACT OF 1934.
<PAGE>
AVAILABLE INFORMATION
Sun Company, Inc. (the "Company") is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
Regional Offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can be obtained at prescribed rates from
the Commission's Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549. Reports, proxy material and other information concerning the
Company also may be inspected at the offices of the New York Stock Exchange,
Inc. (the "NYSE"), 20 Broad Street, New York, New York 10005 and the
Philadelphia Stock Exchange, Inc., 1900 Market Street, Philadelphia,
Pennsylvania 19103.
The Company has filed with the Commission a registration statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Securities offered hereby (together with all amendments and
exhibits, the "Registration Statement"). This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
2. The Company's Current Reports on Form 8-K dated February 2, 1996,
March 7, 1996 and March 20, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereunder shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. The Company will furnish without charge to each
person, including any beneficial owner, to whom this Prospectus is delivered,
upon written or oral request, a copy of any or all of the documents
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to: Sun Company, Inc., Ten Penn Center, 1801
Market Street, Philadelphia, Pennsylvania 19103-1699, Attention: Investor
Relations, Telephone: (215) 977-6440.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
2
<PAGE>
PROSPECTUS SUMMARY
The following Summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial statements
(including the notes thereto) appearing elsewhere in this Prospectus or
incorporated herein by reference. Unless otherwise indicated, the information
contained in this Prospectus assumes no exercise of the Underwriters' over-
allotment option. Hereafter, the term "Sun" means the Company and its
subsidiaries.
THE COMPANY
Sun is the largest independent refining and marketing company in the United
States. Headquartered in Philadelphia, Pennsylvania, Sun operates five domestic
refineries, markets gasoline under the Sunoco(R) brand through approximately
4,000 service stations in 17 states, sells lubricants and petrochemicals
worldwide and operates domestic pipelines and terminals. These refining and
marketing activities represented approximately 85 percent of Sun's assets as of
December 31, 1995. Sun also conducts coal mining and cokemaking operations in
Virginia and Kentucky and produces crude oil and natural gas in the U.K. North
Sea.
Sun's strategy is focused on improving financial and operating results by
increasing sales volumes, upgrading its product slate, and improving the
reliability and efficiency of production facilities, while reducing operating
and administrative costs. As a result of Sun's logistically advantaged
refining, chemical and distribution assets and its strong and well-known
branded marketing presence in the northeastern United States, Sun believes that
it is well-positioned to continue competing effectively.
Pursuant to its focused strategy, in 1995 Sun implemented an extensive
operational and financial restructuring. As part of this program, Sun divested
its 55-percent interest in Suncor Inc., its former Canadian petroleum
subsidiary, for net proceeds of $770 million. The divestment enabled Sun to
repurchase more than $200 million of Company Common Stock and reduce debt by
more than $500 million through the use of a significant portion of the proceeds
to repay debt and the elimination of approximately $165 million of Suncor's
debt. The operational restructuring organized the Company into eight distinct
business units, a holding company and a services organization. The operational
restructuring, combined with additional cost reduction actions taken in 1995,
is expected to result in pretax savings of approximately $110 million per year.
THE OFFERING
<TABLE>
<S> <C>
Depositary Shares offered.................... 6,800,000 shares(1)
Depositary Shares outstanding................ 25,000,000 shares
Selling Shareholders......................... The Pew Memorial Trust
The J. Howard Pew Freedom Trust
The Mabel Pew Myrin Trust
The J.N. Pew, Jr. Charitable Trust
The Medical Trust
NYSE symbol.................................. SUN pfA
</TABLE>
- --------
(1) Assumes the Underwriters' over-allotment option is not exercised. See
"Underwriters."
SUMMARY DESCRIPTION OF DEPOSITARY SHARES
GENERAL
Each Depositary Share represents ownership of one-half of a share of Series A
Cumulative Preference Stock, no par value of the Company (the "Series A
Cumulative Preference Stock"). Each owner of a Depositary Share is entitled,
proportionately, to all the rights, preferences, privileges and obligations of
the Series A Cumulative Preference Stock represented thereby (including
dividend, voting, redemption and liquidation rights). The Series A Cumulative
Preference Stock (and thereby the Depositary Shares) ranks prior to the
Company's Common Stock, $1 par value (the "Common Stock") with respect to
dividend rights and rights upon liquidation, dissolution and winding up of the
Company. For a more detailed description of the Series A Cumulative Preference
Stock and the Depositary Shares, see "Capital Stock."
3
<PAGE>
REDEMPTION
At any time and from time to time, the Company may call the outstanding
shares of Series A Cumulative Preference Stock (and thereby the Depositary
Shares), in whole or in part, for redemption (the "Redemption Date"). On any
Redemption Date, the Company shall cause to be delivered to the holders of
Depositary Shares representing such Series A Cumulative Preference Stock, in
exchange for each such Depositary Share, the following consideration:
(1) in the event such Redemption Date is prior to June 12, 1998 (the
"Specified Date"), (i) shares of Common Stock having a value equal to
$42.39976 on June 12, 1995 (the "Accrual Date"), declining by $.002222 on
each day following the Accrual Date (computed on the basis of a 360-day
year of twelve 30-day months) to $40.13332 on April 12, 1998, and equal to
$40 thereafter through June 11, 1998 (the "Depositary Share Call Price"),
plus (ii) a cash amount equal to all proportionate accrued but unpaid
dividends thereon; and
(2) in the event such Redemption Date is on or after the Specified Date,
(i) one share of Common Stock, subject to adjustment in certain events, and
(ii) a cash amount equal to all proportionate accrued but unpaid dividends
thereon.
The Company currently intends to redeem all the outstanding Series A
Cumulative Preference Stock (and thereby the Depositary Shares) on the
Specified Date if not theretofore redeemed.
Upon certain mergers, consolidations or other extraordinary transactions of
the Company at any time, each outstanding Depositary Share will be entitled to
receive consideration of the same type as is received by holders of the Common
Stock in such transaction and having a fair value equal to the value of the
Common Stock that such Depositary Share would receive if it were redeemed by
the Company at such time.
LIQUIDATION PREFERENCE
Each share of Series A Cumulative Preference Stock has a liquidation
preference equal to $60, plus accrued and unpaid dividends. The proportionate
liquidation preference of each Depositary Share will be half of this amount.
DIVIDENDS
Dividends on the Series A Cumulative Preference Stock are cumulative and
accrue at the rate of $3.60 per share per annum payable quarterly in arrears in
cash on or before the 13th day of each March, June, September and December, the
most recent payment having occurred on March 13, 1996. The proportionate annual
dividend rate on the Depositary Shares is $1.80 per share and dividends will be
payable on the Depositary Shares as, when and if paid on the Series A
Cumulative Preference Stock.
VOTING RIGHTS
A holder of Depositary Shares is entitled to instruct the Preference Stock
Depositary as to the exercise of voting rights with respect to the number of
shares of Series A Cumulative Preference Stock represented by such holder's
Depositary Shares. The holders of Series A Cumulative Preference Stock are
entitled to one vote per share (and therefore a holder of Depositary Shares
will effectively exercise one vote for each two Depositary Shares owned by such
holder), subject to certain adjustments, on all matters to be voted upon by the
shareholders of the Company, voting together with the Common Stock as a single
class, except as provided by law.
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table represents summary financial information of Sun for each
of the five years in the period ended December 31, 1995. Reference is made to
the detailed information and financial statements available in the documents
described above under "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ---------------------- -----------
(MILLIONS OF DOLLARS EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales and other
operating revenue
(including consumer
excise taxes).......... $ 10,121 $ 9,818 $ 9,180 $ 10,445 $ 11,493
Income (loss) from
continuing operations
before cumulative
effect of change in
accounting
principle (/1/)(/2/)... $ 227 $ 97 $ 283 $ (317)(/3/) $ (130)(/4/)
Net income (loss)
(/1/)(/2/)(/5/)........ $ 140 $ 90 $ 288 $ (559)(/3/) $ (387)(/4/)(/6/)
Income (loss) per common
share from continuing
operations before
cumulative effect of
change in accounting
principle (/7/)........ $ 2.24 $ .91 $ 2.65 $ (2.98) $ (1.23)
Net income (loss) per
common share (/7/)..... $ 1.29 $ .84 $ 2.70 $ (5.26) $ (3.65)
Capital expenditures.... $ 545 $ 848(/8/) $ 612 $ 530 $ 615
Ratio of earnings to
combined fixed charges
and preference stock
dividends (/9/)........ 2.68x 2.12x 4.90x N/A N/A
<CAPTION>
AT DECEMBER 31
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ---------------------- -----------
(MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Total assets............ $ 5,184 $ 6,465 $ 5,900 $ 6,071 $ 7,017
Long-term debt.......... $ 888 $ 1,073 $ 726 $ 792 $ 852
Stockholders' equity.... $ 1,699 $ 1,863 $ 1,984 $ 1,896 $ 2,696
Stockholders' equity per
common share........... $ 17.16(/1//0/) $ 17.42 $ 18.60 $ 17.82 $ 25.41
</TABLE>
- --------
(1) Includes after-tax gains on divestments of $159 million in 1995, $39
million in 1994 and $121 million in 1993.
(2) Includes after-tax provisions for write-down of assets and other matters of
$61 million in 1995, $32 million in 1994, $12 million in 1993, $456 million
in 1992 and $103 million in 1991.
(3) Includes after-tax gain on Iranian litigation settlement of $117 million.
(4) Includes after-tax provision for environmental remediation work at various
domestic refining and marketing sites of $78 million.
(5) Includes impact of the cumulative effect of a change: in the method of
accounting for impairment of long-lived assets in 1995 ($87 million after
tax charge); in the method of accounting for postemployment benefits in
1994 ($7 million after-tax charge); in the method of accounting for income
taxes in 1993 ($5 million tax benefit); and in the method of accounting for
postretirement health care and life insurance benefits in 1992 ($261
million after-tax charge).
(6) Includes after-tax loss from real estate operations held for sale of $255
million. Prior to the fourth quarter of 1993, real estate operations had
been classified as discontinued operations in the consolidated financial
statements.
(7) Amounts represent both primary and fully diluted earnings per share.
(8) Excludes $164 million attributable to the purchase of the Girard Point
refinery in Philadelphia and related assets.
(9) The ratio of earnings to combined fixed charges and preference stock
dividends has been computed using principally pretax earnings from
continuing operations before the cumulative effect of change in accounting
principles and before deducting fixed charges. Fixed charges are comprised
of interest cost and debt expense of continuing operations (including
amounts capitalized) and one-third of rental expense applicable to
operating leases (which is that portion deemed to be interest). The Company
began paying quarterly dividends on its Series A Cumulative Preference
Stock in the third quarter of 1995. For 1992 and 1991, earnings were
inadequate to cover fixed charges by $454 million and $76 million,
respectively, as a result of $745 million and $156 million pretax
provisions for write-down of assets and other matters.
(10) Assumes redemption of Series A Cumulative Preference Stock for Common
Stock.
5
<PAGE>
THE COMPANY
Sun is the largest independent refining and marketing company in the United
States. Headquartered in Philadelphia, Pennsylvania, Sun operates five
domestic refineries, markets gasoline under the Sunoco(R) brand through
approximately 4,000 service stations in 17 states, sells lubricants and
petrochemicals worldwide and operates domestic pipelines and terminals. These
refining and marketing activities represented approximately 85 percent of
Sun's assets as of December 31, 1995. Sun also conducts coal mining and
cokemaking operations in Virginia and Kentucky and produces crude oil and
natural gas in the U.K. North Sea.
Sun's strategy is focused on improving financial and operating results by
increasing sales volumes, upgrading its product slate, and improving the
reliability and efficiency of production facilities, while reducing operating
and administrative costs. As a result of Sun's logistically advantaged
refining, chemical and distribution assets and its strong and well-known
branded marketing presence in the northeastern United States, Sun believes
that it is well-positioned to continue competing effectively.
Pursuant to its focused strategy, in 1995 Sun implemented an extensive
operational and financial restructuring. As part of this program, Sun divested
its 55-percent interest in Suncor Inc., its former Canadian petroleum
subsidiary, for net proceeds of $770 million. The divestment enabled Sun to
repurchase more than $200 million of Company Common Stock and reduce debt by
more than $500 million through the use of a significant portion of the
proceeds to repay debt and the elimination of approximately $165 million of
Suncor's debt. The operational restructuring organized the Company into eight
distinct business units, which are described below, a holding company and a
services organization. The operational restructuring, combined with additional
cost reduction actions taken in 1995, is expected to result in pretax savings
of approximately $110 million per year.
REFINING AND MARKETING
SUN NORTHEAST REFINING
Sun Northeast Refining operates refineries in Pennsylvania at Marcus Hook
and Philadelphia. The Marcus Hook plant has a crude oil processing capacity of
175,000 barrels per day. The Philadelphia complex, with a capacity of 307,000
barrels per day, includes the Girard Point and Point Breeze processing
facilities. The Marcus Hook and Philadelphia refineries are interconnected by
pipeline, barge, truck and rail which permit the transfer of unfinished stocks
between the two refineries. The combined capacity (482,000 barrels per day) of
the Philadelphia and Marcus Hook refineries makes Sun the largest refiner in
the northeastern U.S., which is among the largest refined product markets in
the world.
Sun Northeast Refining manufactures gasoline and a wide variety of other
petroleum products, including diesel fuel, home heating oil, residual fuel
oil, asphalt, propane and butane. The unit markets these products to wholesale
and industrial customers, and provides product to Sunoco Northeast Marketing
and Sunoco Chemicals.
SUNOCO NORTHEAST MARKETING
Sunoco Northeast Marketing's 2,944 retail sites sell gasoline, kerosene and
diesel fuels, motor oils and other Sunoco accessories. These operations are
located in a 12-state region from Maine through northern Virginia, with the
highest concentration of outlets in Connecticut, Massachusetts, New Jersey,
New York, Pennsylvania and Rhode Island, where Sun, in the aggregate, has the
second largest market share.
Sunoco Northeast Marketing's 279 Ultra Service Centers SM offer state-of-
the-art automotive diagnosis and repair, while its 418 APlus(R) convenience
store locations are designed to support high-volume sales of gasoline and
provide a broad range of merchandise.
Sunoco Northeast Marketing is the exclusive provider under long-term
contracts on several of the major limited access highway systems in the
northeastern United States, including the Pennsylvania Turnpike, the New
Jersey Turnpike, the Atlantic City Expressway and New Jersey's Palisades
Parkway. Sunoco also supplies 16 of the service stops on the New York Thruway
and two sites on U. S. Interstate 95 in Maryland.
6
<PAGE>
SUNOCO CHEMICALS
Sunoco Chemicals manufactures base and intermediate commodity petrochemicals
at Sun's Marcus Hook and Philadelphia refineries and at an ethylene oxide
plant in Brandenburg, Kentucky. These chemicals are comprised principally of
olefins and their derivatives (ethylene, ethylene oxide and propylene) and
aromatics (benzene, cumene, cyclohexane, toluene and xylenes). Sunoco
Chemicals sells these products principally in the northeastern United States
where it has a competitive advantage due to the geographic proximity of its
manufacturing operations to its customers. The balance is sold in other
regions of the United States and in Canada, Europe and the Far East.
Sunoco Chemicals is also a one-third partner in a Mont Belvieu, Texas joint
venture that manufactures MTBE used in the production of reformulated fuels.
All of the MTBE is purchased by Sun for use at its northeastern refineries
pursuant to an off-take agreement.
SUNOCO LUBRICANTS
Sunoco Lubricants is one of the largest manufacturers and marketers of
lubricating and specialty oil products in the United States. This business
unit produces lubricants and fuels at facilities in Yabucoa, Puerto Rico and
Tulsa, Oklahoma. These facilities have a combined crude oil processing
capacity of 170,000 barrels per day and a combined paraffinic lubes production
capacity of 16,800 barrels per day.
Among the many products manufactured are Sunoco(R) automotive and industrial
lubricants, process oils, spray oils (including Sun-Spray(R) Ultra-Fine(R)
Horticultural Spray Oil), waxes and synthetic lubricants.
SUNOCO MIDAMERICA MARKETING & REFINING
Sunoco MidAmerica Marketing & Refining is an integrated business consisting
of retail gasoline and middle distillate marketing operations in the
midwestern U.S. (principally Ohio and Michigan). Sunoco MidAmerica is the
exclusive retailer of petroleum products on the Ohio Turnpike. This business
unit also manufactures and markets fuels and petrochemicals produced at Sun's
Toledo, Ohio refinery to wholesale customers.
Sunoco MidAmerica's major assets are the 125,000-barrel-per-day Toledo
refinery and 917 Sunoco(R) service stations supplied by the refinery.
SUNOCO LOGISTICS
Sunoco Logistics' business consists of pipeline transportation of crude oil
and refined petroleum products; domestic crude oil acquisition from third-
party leases; crude oil trucking; and a marine terminal in Nederland, Texas,
with 10 million barrels of storage capacity. It also includes product
terminals and rail, tank car, transport and marine operations. Sun Pipe Line
Company oversees more than 7,000 miles of pipelines in 12 states and has
additional equity interests in nearly 3,000 miles of pipeline in three other
states.
Sunoco Logistics' crude oil pipeline operations are located primarily in the
Southwest and transport crude oil to refiners (including Sun's Tulsa refinery)
or to local trade points. The refined product pipeline operations are located
primarily in the Northeast and Midwest and transport gasoline and other
petroleum products for Sun's other businesses, integrated petroleum companies
and independent marketers and distributors.
SUN COAL AND COKE
Sun Coal and Coke, headquartered in Knoxville, Tennessee, operates coal
mines in southwestern Virginia and southeastern Kentucky and a coke producing
facility in southwestern Virginia. Using its environmentally superior non-
recovery cokemaking technology, Sun Coal and Coke converted 59 percent of its
metallurgical coal production into 660 thousand tons of high-quality coke
during 1995. Commencing in April 1996, all coke production will be sold to a
domestic steel producer under a long-term contract.
7
<PAGE>
SUN INTERNATIONAL PRODUCTION
Sun International Production, headquartered in the United Kingdom, is
engaged in the development, production and marketing of crude oil and natural
gas in the U.K. sector of the North Sea. The North Sea properties contain net
proved reserves totalling 39 million barrels of crude oil, condensate and
natural gas liquids, and 83 billion cubic feet of natural gas. In 1995, the
properties produced 27,400 barrels a day of crude oil and 36 million cubic
feet a day of natural gas. Sun is the operator and 59-percent owner of a
floating production vessel used in the successful development of the Balmoral,
Glamis and Stirling fields in Block 16/21.
USE OF PROCEEDS
All the Depositary Shares offered hereby are being offered by the Selling
Shareholders. The Company will receive no proceeds from the sale of the
Depositary Shares.
CAPITALIZATION
The following table sets forth the capitalization of Sun as of December 31,
1995. The capitalization table should be read in conjunction with the
consolidated financial statements of Sun, including the notes thereto,
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, which is incorporated herein by reference.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
---------------------
(MILLIONS OF DOLLARS)
<S> <C>
Short-term borrowings and current portion of long-term
debt.................................................... $ 57
=======
Long-term debt........................................... $ 888
-------
Stockholders' equity
Series A Cumulative Preference Stock, no par value,
issued and outstanding 12,500,000 shares.............. 750
Common Stock, par value $1 per share, issued
129,709,084 shares.................................... 130
Capital in excess of par value......................... 1,310
Earnings employed in the business...................... 1,518
Less common stock held in treasury, at cost (55,699,366
shares)............................................... (2,009)
-------
Total stockholders' equity............................. 1,699
-------
Total stockholders' equity and long-term debt............ $ 2,587
=======
</TABLE>
8
<PAGE>
SELECTED FINANCIAL DATA
The following table represents selected financial data of Sun for each of
the five years in the period ended December 31, 1995. Reference is made to the
detailed information and financial statements available in the documents
described above under "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ---------------------- -----------
(MILLIONS OF DOLLARS EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales and other
operating revenue
(including consumer
excise taxes).......... $ 10,121 $ 9,818 $ 9,180 $ 10,445 $ 11,493
Income (loss) from
continuing operations
before cumulative
effect of change in
accounting
principle(/1/)(/2/).... $ 227 $ 97 $ 283 $ (317)(/3/) $ (130)(/4/)
Net income
(loss)(/1/)(/2/)(/5/).. $ 140 $ 90 $ 288 $ (559)(/3/) $ (387)(/4/)(/6/)
Income (loss) per common
share from continuing
operations before
cumulative effect of
change in accounting
principle(/7/)......... $ 2.24 $ .91 $ 2.65 $ (2.98) $ (1.23)
Net income (loss) per
common share(/7/)...... $ 1.29 $ .84 $ 2.70 $ (5.26) $ (3.65)
Capital expenditures.... $ 545 $ 848(/8/) $ 612 $ 530 $ 615
Ratio of earnings to
combined fixed charges
and preference stock
dividends(/9/)......... 2.68x 2.12x 4.90x N/A N/A
<CAPTION>
AT DECEMBER 31
----------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ---------------------- -----------
(MILLIONS OF DOLLARS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Total assets............ $ 5,184 $ 6,465 $ 5,900 $ 6,071 $ 7,017
Long-term debt.......... $ 888 $ 1,073 $ 726 $ 792 $ 852
Stockholders' equity.... $ 1,699 $ 1,863 $ 1,984 $ 1,896 $ 2,696
Stockholders' equity per
common share........... $ 17.16(/1//0/) $ 17.42 $ 18.60 $ 17.82 $ 25.41
</TABLE>
- --------
(1) Includes after-tax gains on divestments of $159 million in 1995, $39
million in 1994 and $121 million in 1993.
(2) Includes after-tax provisions for write-down of assets and other matters
of $61 million in 1995, $32 million in 1994, $12 million in 1993, $456
million in 1992 and $103 million in 1991.
(3) Includes after-tax gain on Iranian litigation settlement of $117 million.
(4) Includes after-tax provision for environmental remediation work at various
domestic refining and marketing sites of $78 million.
(5) Includes impact of the cumulative effect of a change: in the method of
accounting for impairment of long-lived assets in 1995 ($87 million after
tax charge); in the method of accounting for postemployment benefits in
1994 ($7 million after-tax charge); in the method of accounting for income
taxes in 1993 ($5 million tax benefit); and in the method of accounting
for postretirement health care and life insurance benefits in 1992 ($261
million after-tax charge).
(6) Includes after-tax loss from real estate operations held for sale of $255
million. Prior to the fourth quarter of 1993, real estate operations had
been classified as discontinued operations in the consolidated financial
statements.
(7) Amounts represent both primary and fully diluted earnings per share.
(8) Excludes $164 million attributable to the purchase of the Girard Point
refinery in Philadelphia and related assets.
(9) The ratio of earnings to combined fixed charges and preference stock
dividends has been computed using principally pretax earnings from
continuing operations before the cumulative effect of change in accounting
principles and before deducting fixed charges. Fixed charges are comprised
of interest cost and debt expense of continuing operations (including
amounts capitalized) and one-third of rental expense applicable to
operating leases (which is that portion deemed to be interest). The
Company began paying quarterly dividends on its Series A Cumulative
Preference Stock in the third quarter of 1995. For 1992 and 1991, earnings
were inadequate to cover fixed charges by $454 million and $76 million,
respectively, as a result of $745 million and $156 million pretax
provisions for write-down of assets and other matters.
(10) Assumes redemption of Series A Cumulative Preference Stock for Common
Stock.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OUTLOOK
The petroleum industry is a highly competitive global business subject to
significant volatility. Although Sun cannot be certain that its planning
assumptions will prove accurate, these assumptions and anticipated near-term
market trends are enumerated below:
. Sun's results will continue to be highly leveraged to refining margins
which are historically difficult to predict. Although market fundamentals
for refined petroleum products appear to be improving and offer the
possibility for increasing margins over the next several years, the
Company has developed a business plan which assumes margins experienced
in the 1994-95 time period will continue into the future. This plan is
focused on improving Sun's results by increasing sales volumes, upgrading
products, improving reliability and efficiency of production facilities
and reducing operating and administrative costs.
. Ample supplies of light sweet crude oil will continue to be available,
and the price differential between light sweet and heavy sour crude oils
will remain relatively low. As Sun's domestic refineries process
approximately 80 percent light sweet crude oil, the availability of light
sweet crude oil and its price relative to alternative heavy sour crude
oil are important to Sun's profitability and competitive position. The
Company continually manages the raw material slate processed at its
refineries in an effort to enhance refining margins.
. Retail gasoline marketing in the northeastern U.S. will continue to offer
attractive investment returns. The Company's strategy is to improve
profitability in this mature market by increasing sales volumes and
reducing operating and administrative costs. The Company will increase
market share, despite a continuing rationalization of marginal accounts,
through aggressive investments and marketing efforts. As a result of its
logistically advantaged refining and distribution assets and its strong
branded marketing presence in this region, the Company believes that it
is well positioned to compete effectively.
. Supply and demand for lubricants will be in balance in 1996. However, new
lubricants supply coming onstream within the next year is expected to
adversely impact margins. The Company is aggressively pursuing new
contract customers, upgrading its product mix and lowering production
costs to offset the impact of the industry's increase in supply.
. Overall margins for chemicals in 1996 will decline compared to the very
strong margins experienced during 1995.
. Crude oil prices and production levels will continue to significantly
impact the earnings of Sun's International Production business. Crude oil
prices, on average, will approximate 1995 levels. While the Company's
strategy is to opportunistically invest in producing properties or near-
term development projects in the U.K. North Sea if returns on such
investments are expected to exceed the Company's cost of capital for such
projects, the Company will also consider other options for this business,
including divestment. In the absence of acquisitions, the income and
crude oil and natural gas reserves and production from this business will
decline significantly through the end of the decade.
. An oversupply of natural gas in the U.K. sector of the North Sea will
cause downward pressure on natural gas prices in this region over the
next several years. Although a large portion of Sun's natural gas
production is sold under long-term contracts to British Gas Corporation,
the timing of the liftings and the recognition of earnings associated
with these contracts are uncertain.
10
<PAGE>
FINANCIAL AND OPERATIONAL RESTRUCTURING
During 1995, the Company implemented an extensive operational and financial
restructuring designed to significantly improve its competitive position and
establish a solid foundation for improved financial performance. The major
actions taken by the Company are enumerated below:
. Divested the Company's 55-percent interest in Suncor Inc., its former
Canadian petroleum subsidiary, for net cash proceeds of $770 million, of
which $635 million was received in June 1995, with the remainder due in
1996;
. Reduced debt by more than $500 million through the use of a significant
portion of the Suncor proceeds to repay debt and the elimination of
Suncor's debt of approximately $165 million as part of the Suncor sale;
. Reduced the quarterly Common Stock dividend from $.45 per share ($1.80
per year) to $.25 per share ($1.00 per year);
. Repurchased 6.4 million shares of Common Stock through a tender offer for
$192 million;
. Exchanged 25 million Depositary Shares in a tax-free transaction for an
equal number of shares of Common Stock. Each Depositary Share represents
ownership of one-half of a share of the Company's Series A Cumulative
Preference Stock and accrues dividends quarterly at a rate of $.45 per
Depositary Share ($1.80 per year);
. Established a program to purchase up to $100 million of Common Stock in
the open market from time to time depending on prevailing market
conditions and opportunities. Pursuant to this program, approximately 1.7
million shares of Common Stock were purchased by the Company during 1995
for approximately $46 million;
. Restructured the Company into eight business units plus a holding company
and a services organization. The following "Earnings Profile of Sun
Businesses" and related analyses reflect this new organizational
structure; and
. Reduced complement and implemented other cost reduction actions that are
expected to result in pretax savings of approximately $110 million a
year.
For additional information regarding the elements of the financial and
operational restructuring, see Notes 2 and 15 to the Consolidated Financial
Statements in the Company's 1995 Annual Report on Form 10-K, incorporated by
reference herein.
11
<PAGE>
RESULTS OF OPERATIONS
The following Earnings Profile of Sun Businesses and related analyses
reflect Sun's new organizational structure established in 1995. Prior year
amounts have been restated to conform to this new presentation. The major
element of this restatement is the reclassification of Sun's midwestern U.S.
wholesale fuels, branded marketing and chemicals operations from the
predecessor Fuels and Chemicals businesses into the new Sunoco MidAmerica
Marketing & Refining business unit. In addition, the restatement reflects a
new method of allocating support costs among Sun's core refining and marketing
businesses based upon the level of services rendered.
EARNINGS PROFILE OF SUN BUSINESSES (AFTER TAX)
<TABLE>
<CAPTION>
1995 1994/(1)/ 1993/(1)/
---- ---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C> <C>
Sun Northeast Refining............................... $(37) $(77) $(22)
Sunoco Northeast Marketing........................... 45 59 80
Sunoco Chemicals..................................... 68 25 10
Sunoco Lubricants.................................... (15) (2) 5
Sunoco MidAmerica Marketing & Refining............... (8) (8) 5
Sunoco Logistics..................................... 53 45 55
Sun Coal and Coke.................................... 25 15 2
Sun International Production......................... 57 60 73
Corporate expenses................................... (24) (23) (21)
Net financing expenses............................... (55) (32) (25)
Real estate operations held for sale................. (1) 2 1
Canada (Suncor)/(2)/................................. 23 37 33
---- ---- ----
131 101 196
Special items/(3)/:
Gain on divestment of Suncor common stock.......... 157 -- 19
Gain on divestment of exploration and production
properties........................................ -- 28 80
Provision for write-down of assets and other
matters........................................... (61) (32) (12)
Cumulative effect of change in accounting
principle/(4)/.................................... (87) (7) 5
---- ---- ----
Consolidated net income.............................. $140 $ 90 $288
==== ==== ====
</TABLE>
- --------
(1) Restated to conform to the 1995 presentation.
(2) Sun reduced its ownership interest in Suncor from 68 percent to 55 percent
in May 1993 and sold its remaining 55-percent interest in June 1995.
(3) For a discussion of special items, see Notes 2 and 6 to the Consolidated
Financial Statements in the Company's 1995 Annual Report on Form 10-K,
incorporated by reference herein.
(4) Consists of the impact of the cumulative effect of a change in the method
of accounting for impairment of long-lived assets in 1995, postemployment
benefits in 1994 and income taxes in 1993.
ANALYSIS OF EARNINGS PROFILE OF SUN BUSINESSES
In 1995, Sun Company, Inc. and its subsidiaries recorded net income of $140
million, or $1.29 per share of common stock compared to $90 million, or $.84
per share in 1994 and $288 million, or $2.70 per share in 1993. Excluding the
special items shown separately in the Earnings Profile of Sun Businesses
above, Sun's income was $131 million in 1995, compared to $101 million in 1994
and $196 million in 1993.
The $30 million increase in earnings before special items in 1995 was
primarily due to higher chemical, wholesale gasoline and asphalt margins,
improved refinery operations, income associated with growth capital
expenditures and reduced expenses resulting from cost containment efforts.
Partially offsetting these positive factors were record low distillate margins
experienced in the first half of 1995, lower retail gasoline and lubricant
12
<PAGE>
sales volumes, higher net financing expenses and the absence of earnings from
Suncor following its sale in June 1995. In 1994, the $95 million decline in
earnings before special items was primarily due to lower average wholesale
product margins, lower retail sales volumes and higher operating and
administrative expenses. For a more detailed discussion of the key factors
that affected Sun's income during the 1993-95 period, see the individual
business discussions below.
Sun Northeast Refining--The Sun Northeast Refining business consists of the
manufacturing and wholesale marketing of fuels produced at Sun's Marcus Hook,
Pennsylvania and Philadelphia, Pennsylvania refineries.
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Losses (millions of dollars)............................. $ (37) $ (77) $ (22)
Wholesale margin (per barrel)/(1)/....................... $2.73 $2.38 $2.84
Wholesale sales (thousands of barrels daily):
To unaffiliated customers:
Gasoline............................................. 98.2 41.3 6.7
Middle distillates................................... 133.8 104.3 85.1
Residual fuel........................................ 50.6 34.1 23.7
Asphalt.............................................. 24.1 26.5 25.2
Other................................................ 39.7 38.6 18.5
----- ----- -----
346.4 244.8 159.2
To affiliates (primarily gasoline)..................... 184.3 197.4 202.0
----- ----- -----
530.7 442.2 361.2
===== ===== =====
Crude unit capacity (thousands of barrels daily) at
December 31............................................. 482.0 482.0 305.0
Crude unit capacity utilized............................. 93% 86% 83%
</TABLE>
- --------
(1) Wholesale sales price less cost of crude oil, other feedstocks and
purchased refined products.
Sun Northeast Refining results increased $40 million in 1995 after declining
$55 million during 1994. The results in 1995 and 1994 included $17 million and
$1 million, respectively, of after-tax income from operations at the
Philadelphia refinery's 177,000 barrel-per-day Girard Point facilities
acquired on August 4, 1994. (See "Sunoco Chemicals" below for a discussion of
the income contribution to that business attributable to the Girard Point
acquisition.)
Excluding activity from the Girard Point facilities, Sun Northeast Refining
results increased $24 million during 1995 primarily due to higher average
wholesale fuels product margins ($36 million), partially offset by lower sales
volumes ($15 million). The improvement in wholesale fuels margins reflects the
favorable impact of stronger market conditions for asphalt and wholesale
gasoline, partially offset by the record low margins for middle distillates
experienced in the first half of 1995.
During 1994, the $55 million decline in Sun Northeast Refining results was
largely due to lower average wholesale fuels product margins ($42 million),
principally on gasoline, and higher operating and administrative expenses ($11
million), partially offset by a $5 million after-tax gain recognized in
connection with the settlement of various inventory hedging contracts.
Wholesale gasoline margins were adversely impacted in both 1994 and 1995 by
the inability to fully recover the higher cost of making reformulated
gasoline.
13
<PAGE>
Sunoco Northeast Marketing--The Sunoco Northeast Marketing business consists
of the retail sale of gasoline and middle distillates in New England and the
Mid-Atlantic states and convenience-store operations in these regions. Branded
marketing operations conducted in the midwestern U.S. are included in the Su-
noco MidAmerica Marketing & Refining business discussed below.
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Income (millions of dollars)................................. $ 45 $ 59 $ 80
Gasoline margin (per barrel)/(1)/............................ $4.88 $4.86 $5.00
Sales (thousands of barrels daily):
Gasoline................................................... 158.0 168.5 177.6
Middle distillates......................................... 14.7 16.2 17.2
----- ----- -----
172.7 184.7 194.8
===== ===== =====
Retail gasoline outlets...................................... 2,944 3,186 3,424
</TABLE>
- --------
(1) Retail sales price less wholesale sales price. The retail sales price is
the weighted average price received through the various branded marketing
distribution channels.
The $14 million decrease in Sunoco Northeast Marketing income in 1995 was
primarily due to a six-percent decline in sales volumes ($14 million) and
higher depreciation expense ($6 million), partially offset by lower operating
and administrative expenses ($10 million). The volume decline was due largely
to the elimination of some marginal accounts and the further rationalization
of Sun's service station portfolio in connection with a program to modernize
its retail gasoline outlets and convert them to a single brand ("Branded for
Success").
Sunoco Northeast Marketing results declined $21 million in 1994 due largely
to lower sales volumes ($11 million) and higher operating and administrative
expenses ($9 million) in part due to increased expenses related to the Branded
for Success program. The adverse impact of lower retail gasoline margins in
1994 was essentially offset by higher margins on middle distillates sold at
retail. The five percent decline in branded gasoline volumes during 1994 was
caused primarily by the temporary closure of service stations during the
Branded for Success program and the elimination of some marginal accounts.
Sunoco Chemicals--The Sunoco Chemicals business consists of the
manufacturing and marketing of commodity and intermediate petrochemicals
produced at the Marcus Hook and Philadelphia refineries, at an ethylene oxide
plant in Brandenburg, Kentucky and at a joint venture MTBE facility in Mont
Belvieu, Texas. Petrochemicals manufactured and sold at the Toledo, Ohio
refinery are included in the Sunoco MidAmerica Marketing & Refining business
discussed below.
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Income (millions of dollars).............................. $ 68 $ 25 $ 10
Chemicals margin (per barrel)/(1)/........................ $25.58 $17.63 $12.61
Petrochemical sales (thousands of barrels daily):
Aromatics............................................... 8.5 5.2 5.3
Propylene............................................... 8.1 8.4 10.2
Ethylene/ethylene oxide................................. 2.3 2.3 2.4
Other................................................... 2.0 2.6 1.6
------ ------ ------
20.9 18.5 19.5
====== ====== ======
</TABLE>
- --------
(1) Wholesale sales price less the cost of feedstocks and product purchases.
Income from Sunoco Chemicals increased $43 million in 1995 due to
significantly higher margins ($32 million), higher sales volumes ($2 million)
and higher aromatics production from the Girard Point facilities acquired from
Chevron in August 1994 ($11 million). The addition of cyclohexane production
from a new plant completed at the Marcus Hook refinery in the first quarter of
1995 contributed to the higher margins and volumes.
14
<PAGE>
Sunoco Chemicals income increased $15 million in 1994 due to higher margins
($17 million) and a $10 million contribution from the sale of petrochemicals
produced at the Girard Point facilities. A strengthening in the worldwide
economy and a cyclical upturn in most petrochemical product markets in the
second half of 1994 led to the improved product margins, which continued
through most of 1995. Partially offsetting these positive factors were lower
sales volumes ($10 million) resulting from production curtailments during the
first half of 1994 and higher operating expenses ($5 million).
Sunoco Lubricants--The Sunoco Lubricants business is comprised of the
manufacturing, packaging and marketing of a broad line of lubricating and
specialty oils produced at Sun's Tulsa, Oklahoma and Puerto Rico refineries as
well as the related manufacturing and wholesale marketing of fuels produced at
these facilities.
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Income (loss) (millions of dollars)........................ $ (15) $ (2) $ 5
Wholesale margin (per barrel)/(1)/......................... $4.12 $4.56 $4.79
Wholesale sales (thousands of barrels daily):
To unaffiliated customers:
Specialty oils......................................... 8.6 9.8 9.5
Base oils.............................................. 6.9 8.9 6.6
Waxes and other lubricants............................. 4.5 3.6 3.4
----- ----- -----
20.0 22.3 19.5
Gasoline............................................... 25.9 31.2 26.8
Middle distillates..................................... 44.9 47.4 41.5
Residual fuel.......................................... 19.5 13.3 13.7
Other.................................................. 11.1 6.1 9.8
----- ----- -----
121.4 120.3 111.3
To affiliates/(2)/....................................... 27.0 33.9 34.6
----- ----- -----
148.4 154.2 145.9
===== ===== =====
</TABLE>
- --------
(1) Wholesale sales price less cost of crude oil, other feedstocks and
purchased refined products.
(2) Primarily "lubes-extracted" feedstocks which are transported to the Toledo
refinery for further processing.
The $13 million decline in Sunoco Lubricants results in 1995 was due
primarily to lower margins on wholesale fuels products ($15 million),
principally distillates, and lower lubricants sales volumes ($15 million),
partially offset by higher average margins for both base oil and specialty oil
products ($9 million) and lower operating and administrative expenses ($9
million). The decline in sales volumes and operating expenses was in part due
to a major planned maintenance turnaround at the Tulsa refinery during 1995.
Income from Sunoco Lubricants declined $7 million in 1994 due largely to
lower margins ($18 million), principally for base oils and wholesale fuels
products, and higher operating and administrative expenses ($15 million)
resulting primarily from increased refinery production levels. Partially
offsetting these negative factors were higher lubricants ($16 million) and
wholesale fuels ($3 million) sales volumes and a lower effective tax rate ($6
million).
15
<PAGE>
Sunoco MidAmerica Marketing & Refining--The Sunoco MidAmerica Marketing &
Refining business consists of the retail sale of gasoline and middle
distillates and convenience-store operations in the midwestern U.S. (primarily
Ohio and Michigan) as well as the manufacturing and wholesale marketing of
fuels and petrochemicals produced at Sun's Toledo, Ohio refinery.
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Income (loss) (millions of dollars)....................... $ (8) $ (8) $ 5
Retail Marketing:
Gasoline margin (per barrel)/(1)/....................... $3.86 $3.83 $3.68
Sales (thousands of barrels daily):
Gasoline.............................................. 46.6 46.4 46.0
Middle distillates.................................... 4.2 4.3 4.2
----- ----- -----
50.8 50.7 50.2
===== ===== =====
Retail gasoline outlets................................. 917 929 1,018
Refining and Wholesale Marketing:
Wholesale margin (per barrel)(/2/):
Fuels................................................. $2.98 $3.75 $3.96
Petrochemicals........................................ $9.06 $9.88 $6.10
Wholesale sales (thousands of barrels daily):
To unaffiliated customers:
Gasoline............................................ 29.9 22.6 23.2
Middle distillates.................................. 13.3 14.4 13.8
Residual fuel....................................... 3.8 4.1 3.4
Petrochemicals...................................... 10.2 9.0 9.3
Asphalt............................................. 2.6 2.8 2.9
Other............................................... 5.8 5.6 8.0
----- ----- -----
65.6 58.5 60.6
To affiliates and Sunoco MidAmerica Retail Marketing.. 54.8 53.8 55.5
----- ----- -----
120.4 112.3 116.1
===== ===== =====
Crude unit capacity (thousands of barrels daily) at
December 31.............................................. 125.0 125.0 125.0
Crude unit capacity utilized.............................. 89% 90% 94%
</TABLE>
- --------
(1) Retail sales price less wholesale sales price. The retail sales price is
the weighted average price received through the various branded marketing
distribution channels.
(2) Wholesale sales price of fuels and petrochemicals less cost of crude oil,
other feedstocks and purchased refined products.
Sunoco MidAmerica Marketing & Refining results were unchanged in 1995 as
lower average wholesale fuels product margins ($21 million) were essentially
offset by higher wholesale fuels ($6 million) and petrochemicals ($3 million)
sales volumes and lower refinery operating expenses ($10 million). The decline
in operating expenses was largely attributable to a major planned maintenance
turnaround at the Toledo refinery during 1995.
Sunoco MidAmerica Marketing & Refining results declined $13 million in 1994
primarily due to lower average wholesale fuels margins ($6 million), lower
wholesale fuels sales volumes ($3 million) and higher operating and
administrative expenses ($10 million). Partially offsetting these negative
factors were higher petrochemicals margins ($8 million).
16
<PAGE>
Sunoco Logistics--The Sunoco Logistics business consists of pipeline
transportation of crude oil and refined petroleum products, domestic crude oil
acquisition from third-party leases, crude oil trucking and the Nederland,
Texas crude oil terminalling operation.
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Income (millions of dollars).................................. $53 $45 $55
Pipeline throughput (thousands of barrels daily):
Unaffiliated customers...................................... 557 565 567
Affiliated customers........................................ 776 715 687
----- ----- -----
1,333 1,280 1,254
===== ===== =====
</TABLE>
Sunoco Logistics income increased $8 million in 1995 in part due to higher
earnings from Sun's joint venture operations, the Marysville, Michigan crude
oil pipeline system and expanded crude oil pipeline operations in Texas.
Income from Sun's new inter-refinery pipeline connecting the Philadelphia and
Marcus Hook refineries and from a new pipeline delivering jet fuel to the
Philadelphia airport also contributed to the improvement in earnings.
Income from Sunoco Logistics decreased $10 million in 1994 due to the
absence of a $10 million after-tax gain recognized in 1993 on the sale of
Sun's refined products pipeline system operating in Oklahoma and Arkansas.
Sun Coal and Coke--The Sun Coal and Coke business consists of coal
production from mines in Virginia and Kentucky and coke manufacturing at the
Company's facility in Vansant, Virginia.
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Income (millions of dollars)........................ $ 25 $ 15 $ 2
Average sales price of coal and coke (per ton)...... $37.65 $34.00 $21.49/(1)/
Proven and probable coal reserves (millions of
tons).............................................. 139 187 251
Production (thousands of tons):
Coal.............................................. 5,121 6,595 12,858
Coke.............................................. 638 678 642
</TABLE>
- --------
(1) Includes the impact of lower-value subbituminous coal sales prior to the
divestment of Sun's western U.S. coal operations during 1993.
Income from Sun Coal and Coke increased $10 million during 1995 primarily
due to higher margins for coke and improved mining operations. During 1994,
Sun Coal and Coke earnings increased $13 million primarily due to the
exclusion of income of this business from consolidated net income during the
first nine months of 1993 when Sun Coal and Coke was accounted for as a
discontinued operation. (See Note 2 to the Consolidated Financial Statements
in the Company's 1995 Annual Report on Form 10-K, incorporated by reference
herein.)
17
<PAGE>
Sun International Production--The Sun International Production business
consists of the development, production and marketing of crude oil,
condensate, natural gas liquids and natural gas located in the United Kingdom
sector of the North Sea.
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Income (millions of dollars).............................. $ 57 $ 60 $ 73
Crude oil, condensate and natural gas liquids:
Proved reserves (millions of barrels) at December 31.... 39 38 31
Net production (thousands of barrels daily)............. 27.4 29.0 28.0
Average price (per barrel).............................. $16.82 $15.73 $16.75
Natural gas:
Proved reserves (billions of cubic feet) at December
31..................................................... 83 96 109
Net production (millions of cubic feet daily)........... 36 46 56
Average price (per thousand cubic feet)................. $ 2.99 $ 2.96 $ 2.93
</TABLE>
Sun International Production earnings decreased $3 million in 1995 due
largely to lower crude oil ($5 million) and natural gas ($7 million)
production volumes, and higher operating and administrative expenses ($5
million) attributable to operating activities at the Ninian/Columba fields in
the U.K. North Sea, which were acquired in the third quarter of 1994. Also
contributing to the decrease in earnings was the absence of a $2 million
after-tax gain recognized in 1994 on the redetermination of the Pickerill
field in the U.K. North Sea. Partially offsetting these negative factors were
higher crude oil prices ($7 million), a gain from the settlement of litigation
surrounding previously expropriated assets outside the U.K. North Sea ($4
million) and a decrease in after-tax foreign exchange translation losses ($5
million). The decrease in crude oil volumes was attributable to natural
production declines at mature fields in the U.K. North Sea, partially offset
by the increased operating activities at the Ninian/Columba fields. The
decline in natural gas volumes reflects lower nominations by British Gas
Corporation.
Income declined $13 million in 1994 due largely to lower crude oil prices
($7 million) and natural gas volumes ($8 million) and an increase in after-tax
foreign exchange translation losses ($7 million). Partially offsetting these
negative factors were the $2 million after-tax gain recognized in 1994 on the
redetermination of the Pickerill field and $6 million of after-tax income
attributable to crude oil production from the Ninian/Columba fields.
Net Financing Expenses--Net financing expenses (excluding Suncor) increased
$23 million in 1995 primarily due to higher long-term debt expense ($13
million) and lower capitalized interest ($6 million). The increase in long-
term debt expense was due largely to the high level of growth capital
expenditures in 1994 which was partially offset by the substantial reduction
in Company debt that occurred in the second half of 1995 in connection with
the financial restructuring. Net financing expenses increased $7 million in
1994 due primarily to the absence of a gain on the sale of an equity
investment recognized in 1993 ($3 million) and a higher average borrowing
position ($9 million), partially offset by higher earnings from leasing
operations ($5 million). The higher average borrowing position in 1994 was due
in part to the high level of growth capital spending in that year.
Real Estate Operations Held for Sale--For a discussion of Sun's real estate
operations held for sale, see Note 2 to the Consolidated Financial Statements
in the Company's 1995 Annual Report on Form 10-K, incorporated by reference
herein.
Canada (Suncor)--Suncor's operating income decreased $14 million in 1995
primarily due to the absence of earnings subsequent to the June 8, 1995
divestment of Sun's remaining 55-percent interest in this former Canadian
petroleum subsidiary. In 1994, operating income at Suncor increased $4 million
primarily as a result of higher earnings from Canadian exploration and
production and oil sands operations.
Special Items--For a discussion of the special items shown separately in the
Earnings Profile of Sun Businesses, see Notes 2 and 6 to the Consolidated
Financial Statements in the Company's Annual Report on Form 10-K, incorporated
by reference herein.
18
<PAGE>
ANALYSIS OF CONSOLIDATED STATEMENTS OF INCOME
1995 vs. 1994--Sales and other operating revenue increased $303 million, or
three percent, principally due to higher domestic refined product sales
volumes ($677 million) and prices ($442 million), partially offset by lower
domestic consumer excise taxes ($57 million) and lower sales and other
operating revenue attributable to Suncor ($733 million, including Canadian
consumer excise taxes of $308 million) reflecting its divestment on June 8,
1995. The higher domestic refined product sales volumes were largely
attributable to the Girard Point refining facilities acquired on August 4,
1994. For a discussion of the $242 million pretax gain on divestment of Suncor
common stock recorded in 1995, see Note 2 to the Consolidated Financial
Statements in the Company's Annual Report on Form 10-K, incorporated by
reference herein. The $48 million decrease in gain on other divestments is
primarily due to the absence of $35 million of gains recognized during 1994 on
the divestment of oil and gas properties located in Colombia and the U.K.
North Sea. Other income increased $16 million, principally due to higher
income from operations held for sale ($6 million), lower foreign exchange
losses ($5 million) and higher equity in earnings of affiliated companies ($4
million).
Cost of products sold and operating expenses increased $753 million, or 12
percent, primarily due to higher domestic crude oil and refined product
acquisition costs ($907 million) and higher domestic refinery operating
expenses ($72 million), partially offset by lower cost and operating expenses
attributable to Suncor ($281 million). The increase in product acquisition
costs and refinery operating expenses was largely attributable to the Girard
Point refining facilities acquisition. Selling, general and administrative
expenses decreased $79 million, or 11 percent, primarily due to lower expenses
as a result of the Suncor divestment and cost containment efforts implemented
during 1995. Taxes, other than income taxes decreased $375 million, or 17
percent, due to a decline in consumer excise taxes ($365 million) largely
attributable to the Suncor divestment. Depreciation, depletion and
amortization decreased $18 million, or five percent, primarily as a result of
the Suncor divestment ($52 million), partially offset by an increased
depreciable asset base in Sun's domestic refining and marketing operations
resulting from the high level of 1994 capital spending. For a discussion of
the $93 and $54 million pretax provisions for write-down of assets and other
matters recorded in 1995 and 1994, respectively, see Note 2 to the
Consolidated Financial Statements in the Company's Annual Report on Form 10-K,
incorporated by reference herein. The $9 million decrease in exploratory costs
and leasehold impairment and the $16 million decrease in minority interest are
due to the Suncor divestment. Interest cost and debt expense increased $8
million, or eight percent, due principally to higher long-term debt expense
associated with the high level of 1994 growth capital expenditures, partially
offset by the substantial reduction in Company debt that occurred in the
second half of 1995 in connection with the financial restructuring. For a
discussion of the cumulative effect of the changes in accounting principles,
see Note 6 to the Consolidated Financial Statements in the Company's Annual
Report on Form 10-K, incorporated by reference herein.
1994 vs. 1993--Sales and other operating revenue increased $638 million, or
seven percent, principally due to higher refined product sales volumes ($644
million) and an increase in consumer excise taxes ($233 million), partially
offset by lower refined product sales prices ($158 million) and lower revenues
from resales of purchased crude oil and refined products ($90 million). The
higher refined product sales volumes were primarily due to the acquisition of
the Girard Point refining facilities on August 4, 1994. For a discussion of
the $30 million pretax gain on divestment of Suncor common stock recorded in
1993, see Note 2 to the Consolidated Financial Statements in the Company's
Annual Report on Form 10-K, incorporated by reference herein. The $93 million
decrease in gain on other divestments is primarily due to the absence of gains
recognized in 1993 on the divestment of a products pipeline system ($17
million) and oil and gas properties located in Dubai, Canada and the U.K.
North Sea ($109 million), partially offset by gains recognized in 1994 on the
divestment of oil and gas properties located in Colombia and the U.K. North
Sea ($40 million). Interest income decreased $2 million, or 11 percent,
primarily due to lower average investment balances. Other income decreased $22
million primarily as a result of the absence of a $17 million gain
attributable to the 1993 settlement of claims arising from a 1987 fire at
Suncor's oil sands plant and lower foreign exchange gains ($6 million).
Cost of products sold and operating expenses increased $455 million, or
eight percent, primarily due to higher domestic crude oil and refined product
acquisition costs ($463 million) and higher refinery operating
19
<PAGE>
expenses ($95 million), partially offset by lower resales of purchased crude
oil and refined products ($90 million). The increase in acquisition costs and
refinery operating expenses was primarily due to the acquisition of the Girard
Point refining facilities on August 4, 1994. Selling, general and
administrative expenses increased $56 million, or nine percent, primarily due
to higher expenses in Sun's domestic refining and marketing operations. This
increase was due in part to higher employee-related expenses and to increased
expenses associated with the Branded for Success program. Taxes, other than
income taxes increased $229 million, or 11 percent, due to higher consumer
excise taxes ($233 million). Depreciation, depletion and amortization
increased $5 million, or one percent, primarily as a result of a higher
depreciable asset base in Sun's domestic refining and marketing operations.
For a discussion of the $54 and $23 million pretax provisions for write-down
of assets and other matters recorded in 1994 and 1993, respectively, see Note
2 to the Consolidated Financial Statements in the Company's Annual Report on
Form 10-K, incorporated by reference herein. Interest cost and debt expense
increased $16 million, or 20 percent, due largely to higher average corporate
borrowings. For a discussion of the cumulative effect of the changes in
accounting principles, see Note 6 to the Consolidated Financial statements in
the Company's Annual Report on Form 10-K, incorporated by reference herein.
FINANCIAL CONDITION
CAPITAL RESOURCES AND LIQUIDITY
Cash and Working Capital--At December 31, 1995, Sun had cash and cash
equivalents of $14 million compared to $117 million at December 31, 1994 and
had a working capital deficit of $70 million versus a working capital deficit
of $407 million at December 31, 1994. Sun's working capital position is
considerably stronger than indicated because of the relatively low historical
costs assigned under the LIFO method of accounting for most of the inventories
reflected in the consolidated balance sheet. The current replacement cost of
all such inventories exceeds the carrying value at December 31, 1995 by $528
million. Inventories valued at LIFO, which consist of crude oil and refined
products, are readily marketable at their current replacement values.
Management believes that the current levels of Sun's cash and working capital
provide adequate support for its ongoing operations.
Cash Flows and Financial Capacity--In 1995, Sun's net cash provided by
operating activities ("cash generation") was $352 million compared to $481
million in 1994 and $413 million in 1993. The fluctuations in cash generation
during the 1993-95 period were primarily due to changes in income before
special items and in working capital pertaining to operating activities. Cash
generation was significantly greater than net income during the 1993-95 period
primarily due to the significant amounts of noncash charges which result from
the capital intensive nature of Sun's businesses.
Divestment activities have also been a source of cash and have enhanced
liquidity. During the 1993-95 period, proceeds from divestments totalled
$1,202 million, including $804 million received in the 1993-95 period from the
sale of Suncor common stock and $141 million received in the 1993-94 period
from the sale of certain exploration and production properties located in
Dubai, Colombia, Canada and the U.K. North Sea. In addition, coal operations
held for sale provided $129 million in 1993 from the sale of Sun's western
U.S. coal operations.
Management believes that future cash generation will be sufficient to
satisfy Sun's capital requirements and to pay the current cash dividends on
Common Stock and Series A Cumulative Preference Stock. However, from time to
time, the Company's short-term cash requirements may exceed its cash
generation due to various factors including volatility in crude oil and
refined product markets and increases in capital spending and working capital
levels. During those periods, the Company may supplement its cash generation
with proceeds from divestment and financing activities. In the event that cash
generation and divestment proceeds are insufficient to satisfy near-term cash
requirements, the Company has access to $600 million of short-term financing
for operations in the form of commercial paper and revolving credit agreements
from commercial banks. The Company also has access to short-term financing
under non-committed money market facilities.
20
<PAGE>
The following table sets forth amounts outstanding related to the above
short-term borrowing arrangements as well as to Sun's other borrowings at:
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
---------------------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Short-term borrowings:
Commercial paper....................................... $ 4 $ 216
Non-committed money market facilities.................. 50 5
--------- -----------
54 221
Current portion of long-term debt........................ 3 99
Long-term debt........................................... 888 1,073
--------- -----------
Total borrowings......................................... $945 $ 1,393
========= ===========
</TABLE>
The Company has been able to substantially reduce its debt as a result of
the Suncor sale and the financial restructuring completed during 1995. The
Company also repurchased approximately 8.1 million shares of Common Stock
during 1995 through a tender offer and open market purchases. As a result of
these actions, Sun's debt-to-capital ratio declined from 42.8 percent at
December 31, 1994 to 35.7 percent at December 31, 1995.
Management believes there is sufficient borrowing capacity available to
provide for Sun's future cash requirements. In addition, the Company has the
option of issuing additional Common Stock as a means of increasing its equity
base; however, there are no current plans to do so. Furthermore, no
commitments have been made with respect to any investment opportunity which
would require the use of a significant portion of Sun's unused financial
capacity.
CAPITAL EXPENDITURES
<TABLE>
<CAPTION>
1996 PLAN 1995 1994/(1)/ 1993/(1)/
--------- ---- --------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Sun Northeast Refining................... $137 $103 $163 $112
Sunoco Northeast Marketing............... 104 102 146 101
Sunoco Chemicals......................... 59 55 61 23
Sunoco Lubricants........................ 28 52 25 54
Sunoco MidAmerica Marketing & Refining... 44 48 52 38
Sunoco Logistics......................... 40 42 81 31
Sun Coal and Coke/(2)/................... 18 7 -- --
Sun International Production............. 30 30 100 51
Canada (Suncor).......................... -- 106 220 202
---- ---- ---- ----
Consolidated capital expenditures........ $460 $545 $848/(3)/ $612
==== ==== ==== ====
</TABLE>
- --------
(1) Restated to conform to the new organizational structure established in
1995.
(2) Excludes capital expenditures of Sun Coal and Coke prior to June 30, 1995
while such operations were accounted for as an investment held for sale.
(3) Excludes $164 million attributable to the purchase of the Girard Point
refining facilities, related inventory and pipeline interests.
Capital expenditures for 1995 totalled $545 million compared to $848 million
in 1994 and $612 million in 1993. The 36-percent decrease in 1995 was largely
due to significantly lower spending on growth projects in Sun's core domestic
refining and marketing and international production businesses as the Company
focused on fully integrating the acquisitions and growth projects completed
during 1994. Also contributing to the decline in 1995 capital spending was a
reduction in outlays in Canada as a result of the divestment of Suncor on June
8, 1995.
21
<PAGE>
Capital expenditures in 1995 included the following major outlays: $61
million related to the Branded for Success service station conversion and
modernization program; $26 million at the Marcus Hook refinery to begin
expansion of a propylene unit and complete expansion of an ethylene oxide
unit; $18 million to complete a new cyclohexane plant and expand benzene
extraction capacity at the Marcus Hook refinery (the "Northeast Aromatics and
Cyclohexane Project"); $13 million to complete the construction of a pipeline
connecting the Philadelphia and Marcus Hook facilities; and $12 million to
develop the Columba field in the U.K. North Sea. In 1994, in addition to the
acquisition of the Girard Point refining facilities and related assets, major
capital expenditures included: $64 million related to the Branded for Success
program; $58 million related to the Northeast Aromatics and Cyclohexane
Project; $43 million related to the inter-refinery pipeline construction; and
$78 million to acquire an interest in the Ninian and Columba fields in the
U.K. North Sea. In addition, $58 million was spent in 1994 to substantially
complete a $110 million project to upgrade the wastewater treatment processing
facilities at the Marcus Hook refinery.
The 1996 planned capital expenditures include $140 million for growth
projects. Significant projects include: ongoing expansion of the propylene
unit at the Marcus Hook refinery; continued investment in Sunoco branded
marketing outlets; expansion of Sun's pipeline and terminalling capacity; and
further development of Sun's existing reserves in the U.K. North Sea. An
additional $320 million is designated for legally required and base
infrastructure spending in 1996. A significant portion of the $320 million
relates to projects that will enhance the reliability of the Company's
operations or maintain the high quality image of Sunoco(R) retail outlets.
See "Environmental Matters" below for further discussion of Sun's capital
expenditures in connection with pollution abatement activities.
ENVIRONMENTAL MATTERS
Sun is subject to numerous federal, state, local and foreign laws which
regulate the discharge of materials into, or otherwise relate to the
protection of, the environment. These laws have required, and are expected to
continue to require, Sun to make significant expenditures of both a capital
and expense nature. Several of the more significant federal laws applicable to
the Company's operations include the Clean Air Act, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA") and the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act ("RCRA").
The following table summarizes Sun's expenditures for environmental projects
and compliance activities:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Pollution abatement capital/(1)/............. $ 78 $ 245 $ 123
Remediation and reclamation.................. 49 60 53
Operations, maintenance and administration... 244 224/(2)/ 142/(2)/
------- ------- -------
$371 $ 529 $ 318
======= ======= =======
</TABLE>
- --------
(1) Capital expenditures for pollution abatement are expected to approximate
$33 and $46 million in 1996 and 1997, respectively.
(2)Restated to conform to the 1995 presentation.
The increase in pollution abatement capital expenditures during 1994 was
primarily due to outlays relating to the wastewater treatment and Northeast
Aromatics and Cyclohexane projects at the Marcus Hook refinery and to
enhancements to the steam and electricity generating facilities at Suncor's
oil sands plant.
The Clean Air Act establishes stringent criteria for regulating air toxics
at operating facilities by mandating major reductions in allowable emissions
and establishing a more comprehensive list of substances deemed to be air
toxics. The Clean Air Act requires refiners to market cleaner-burning gasoline
that reduces emissions of certain toxic and conventional pollutants.
Compliance with Clean Air Act requirements necessitates significant
22
<PAGE>
alterations to the composition of gasoline sold in Sun's northeastern U.S.
marketing area by reducing the maximum allowable benzene content, reducing
summertime Reid Vapor Pressure ("RVP") and increasing the minimum oxygenate
content for certain non-attainment areas. Despite uncertainties regarding the
impact on the future profitability of Sun's domestic petroleum businesses of
the Clean Air Act, as amended by additional regulations, management of Sun
believes these businesses are well positioned to meet the air toxics and
reformulated fuel requirements under present regulations as they continue to
be phased in over the next few years.
CERCLA and RCRA, and related state laws subject Sun to the potential
obligation to remove or mitigate the environmental effects of the disposal or
release of certain pollutants at Sun's facilities and at third-party or
formerly-owned sites at which contaminants generated by Sun may be located.
Under CERCLA, Sun is subject to potential joint and several liability for the
costs of remediation at sites at which it has been identified as a
"potentially responsible party" ("PRP"). As of December 31, 1995, Sun had been
named as a PRP at 45 sites identified or potentially identifiable as
"Superfund" sites under CERCLA. Sun has reviewed the nature and extent of its
involvement at each site and other relevant circumstances and, based upon the
other parties involved or Sun's negligible participation therein, believes
that its potential liability associated with such sites will not be
significant. Under RCRA and related state laws, corrective remedial action has
been initiated at some of Sun's facilities and will be required to be
undertaken by Sun at various of its other facilities. The cost of such
remedial actions could be significant but is expected to be incurred over an
extended period of time. In addition, Sun is currently involved in litigation
with a private party to determine responsibility for remediation at a
formerly-owned refinery in Oklahoma. Management believes that Sun is fully
indemnified for this potential liability.
Sun establishes accruals related to environmental remediation activities for
work at identified sites where an assessment has indicated that cleanup costs
are probable and reasonably estimable. Sun also accrues estimated
dismantlement, restoration and abandonment costs at its international oil and
gas production operations. For a discussion of the accrued liabilities and
charges against income related to these activities, see Note 14 to the
Consolidated Financial Statements in the Company's Annual Report on Form 10-K,
incorporated by reference herein.
Total future costs for environmental remediation and dismantlement,
restoration and abandonment activities will depend upon, among other things,
the identification of additional sites, the determination of the extent of the
contamination of each site, the timing and nature of required remedial
actions, the technology available and needed to meet the various existing
legal requirements, the nature and extent of future environmental laws,
inflation rates and the determination of Sun's liability at multi-party sites,
if any, in light of the number, participation level and financial viability of
other parties.
Management believes that the overall expenditures for environmental
activities are likely to be significant but are expected to be incurred over
an extended period of time and to be funded from Sun's net cash provided by
operating activities. Although potentially significant with respect to results
of operations or cash flows for any one year, management believes that such
costs will not have a material impact on Sun's consolidated financial position
or, over an extended period of time, on Sun's cash flows or liquidity.
COMMODITY AND FOREIGN CURRENCY CONTRACTS
Sun uses futures, options, forwards, swaps and other similar contracts to
hedge the impact of fluctuations in oil and natural gas prices, foreign
currency exchange rates and interest rates. Significant hedging strategies are
reviewed and approved by the Board of Directors before being implemented.
Policy controls limit the aggregate commodity and foreign currency price
exposure as well as the maximum volume and/or dollar amount of hedging
positions.
In Sun's domestic refining and marketing operations, hedging strategies are
used to achieve ratable pricing of crude oil purchases and refined product
sales. These hedging activities have not been significant. In 1995, Sun also
has entered into foreign currency forward contracts to hedge the impact of
exchange rate changes on the Canadian dollar-denominated installment note
receivable due in 1996 from the divestment of Suncor. Gains and losses from
the above hedging activities have not been material.
23
<PAGE>
STOCK-BASED COMPENSATION
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued. It encourages, but does
not require, an alternative method of accounting for employee stock
compensation plans to the method currently prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No.
25"). The new accounting standard will have no impact on Sun's net income or
financial position as the Company intends to continue to utilize the
accounting guidance set forth in APB No. 25.
PRICE RANGE AND DIVIDENDS
The Company's Common Stock is principally traded on the New York Stock
Exchange under the symbol "SUN." The Depositary Shares are traded on the New
York Stock Exchange under the symbol "SUN pfA." The following table shows the
high and low sale prices for the periods indicated, as reported on the New
York Stock Exchange Composite Tape, as well as the cash dividends paid per
share for the periods indicated.
<TABLE>
<CAPTION>
COMMON STOCK DEPOSITARY SHARES/(1)/
----------------------- ---------------------------------
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- --- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996
Second Quarter (through
April 2)............... 29 1/8 28 1/8 28 7/8 28 1/2
First Quarter........... 30 1/4 25 3/8 .25 30 26 .45
1995
Fourth Quarter.......... 29 3/4 24 3/4 .25 30 1/8 26 .45
Third Quarter........... 29 3/4 25 3/4 .25 30 1/8 27 1/8 .45
Second Quarter.......... 32 7/8 27 1/4 .45
First Quarter........... 30 1/4 27 1/8 .45
1994
Fourth Quarter.......... 32 1/2 26 3/8 .45
Third Quarter........... 29 1/4 25 7/8 .45
Second Quarter.......... 34 3/8 25 1/8 .45
First Quarter........... 35 1/4 29 3/8 .45
</TABLE>
- --------
(1) The Depositary Shares commenced trading on a "when issued" basis in July
1995 and on a regular basis in August 1995.
On April 2, 1996, the last sale prices as reported on the New York Stock
Exchange Composite Tape were $28 1/8 per share of Common Stock and $28 5/8 per
Depositary Share.
The Company has paid quarterly cash dividends on Common Stock on a regular
basis since 1904. In June 1995, the Company announced the reduction of its
quarterly Common Stock cash dividend from $.45 per share ($1.80 per year) to
$.25 per share ($1.00 per year), commencing with the third quarter dividend
paid in September 1995. The Company expects to continue to sustain the
quarterly Common Stock cash dividend at its current level.
In August 1995, the Company completed the exchange of 25,000,000 Depositary
Shares, each Depositary Share representing ownership of one-half of a share of
the Company's Series A Cumulative Preference Stock for an equal number of
shares of Common Stock. The Depositary Shares accrue dividends quarterly at a
rate of $.45 per share ($1.80 per year).
24
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth (a) the number and percentage of outstanding
Depositary Shares (i) owned by each of the Selling Shareholders immediately
prior to this offering, and (ii) to be owned by the Selling Shareholders
assuming completion of this offering, and (b) the number of Depositary Shares
to be sold by the Selling Shareholders pursuant to this offering:
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR SHARES TO OWNERSHIP AFTER
TO OFFERING BE SOLD OFFERING /(2)/
--------------- --------- ----------------
NAME AND ADDRESS OF
BENEFICIAL OWNER /(1)/ SHARES % SHARES %
---------------------- ---------- ---- ---------- -----
<S> <C> <C> <C> <C> <C>
The Pew Memorial Trust............. 7,623,958 30.5 4,412,692 3,211,266 12.9
The J. Howard Pew Freedom Trust.... 1,796,351 7.2 1,039,715 756,636 3.0
The Mabel Pew Myrin Trust.......... 1,023,509 4.1 592,400 431,109 1.7
The J. N. Pew, Jr. Charitable
Trust............................. 908,597 3.6 525,889 382,708 1.5
The Medical Trust/(3)/............. 396,176 1.6 229,304 166,872 0.7
---------- ---- --------- ---------- -----
Total.......................... 11,748,591 47.0 6,800,000 4,948,591 19.8
========== ==== ========= ========== =====
</TABLE>
- --------
(1) The Depositary Shares being sold by the Selling Shareholders are
beneficially owned by The Glenmede Trust Company, a Pennsylvania trust
company without banking powers, which is located at One Liberty Place,
Suite 1200, 1650 Market Street, Philadelphia, Pennsylvania 19103
("Glenmede"). These shares are held by Glenmede in its fiduciary capacity
as trustee or co-trustee of the Selling Shareholders, each of which is a
charitable trust. Glenmede owns no Depositary Shares or other shares of
the Company for its own account. As of February 29, 1996, Glenmede, in its
fiduciary capacity for customer accounts other than the Selling
Shareholders, was the beneficial owner of 195,854 additional Depositary
Shares, constituting .78% of the outstanding Depositary Shares, none of
which are being sold in this offering. As to these additional Depositary
Shares, Glenmede has sole voting power as to 108,991 shares (.44% of the
outstanding Depositary Shares), shared voting power as to 85,756 shares
(.34% of the outstanding Depositary Shares), sole investment power as to
7,146 shares (.03% of the outstanding Depositary Shares), and shared
investment power as to 169,890 shares (.68% of the outstanding Depositary
Shares). In addition, as of February 29, 1996 Glenmede, as fiduciary for
various client accounts, including the Selling Shareholders, was the
beneficial owner of 4,174,025 shares of the Company's Common Stock (5.66%
of the outstanding shares of Common Stock). None of these shares of Common
Stock are being sold in this offering. The foregoing percentage of Common
Stock assumes 73,807,207 shares of Common Stock outstanding as of February
29, 1996.
(2) Upon the completion of the offering, the Selling Shareholders will own
4,948,591 Depositary Shares (3,928,591 Depositary Shares assuming the
Underwriters' over-allotment option is exercised) and will own 3,869,148
shares of Common Stock (5.24% of the outstanding Common Stock assuming
73,807,207 shares of Common Stock outstanding).
(3) Voting and investment power is shared between Glenmede and Francis M.
Richards, Jr., co-trustee with Glenmede of The Medical Trust.
Effective February 1, 1996, the Company entered into an agreement (the
"Registration Rights Agreement") with Glenmede, as trustee or co-trustee of
the Selling Shareholders. The Registration Rights Agreement provides that
Glenmede has the right to require the Company to complete a maximum of two
registrations under the Securities Act of Depositary Shares, Common Stock
and/or other voting stock of the Company held by the Selling Shareholders
("Demand Registrations"). The expenses of Demand Registrations (other than
fees and expenses of the parties' legal counsel and the parties' internal
costs) are to be divided equally between the Company and Glenmede. Glenmede
also has the right to request that the Company register shares of Common Stock
held by the Selling Shareholders if the Company proposes to register any
shares of Common Stock under the Securities Act for sale to the public in an
underwritten offering ("Incidental Registrations"). The expenses of Incidental
Registrations (other than the fees and expenses of Glenmede's legal counsel
and Glenmede's internal costs) are to be paid by the Company. The Registration
Rights Agreement prohibits the sale or transfer of the Selling Shareholders'
interests in the Company during the term of the Registration Rights Agreement
except (i) in a registered public offering, (ii) to the Company, (iii) in
response to a public tender offer or exchange offer made to all shareholders
of the Company, (iv) in accordance with the terms of the capital stock of the
Company held by the charitable trusts, (v) in connection with a merger or
other extraordinary corporate
25
<PAGE>
transaction, (vi) by charitable gift, or (vii) after June 30, 1996, in
accordance with Rule 144 promulgated by the Commission.
After the offering and until July 31, 1997, Glenmede will retain the right
to Incidental Registrations and will have the right to require the Company to
effect one additional Demand Registration.
CAPITAL STOCK
The authorized capital stock of the Company consists of 200,000,000 shares
of Common Stock, of which 73,807,207 shares were outstanding on February 29,
1996, and 15,000,000 shares of cumulative preference stock without par value
("Preference Stock"), of which 12,500,000 shares of Series A Cumulative
Preference Stock were outstanding on February 29, 1996.
During August 1995, the Company completed the exchange of 25,000,000
Depositary Shares in a tax-free transaction for an equal number of shares of
its Common Stock. Each Depositary Share represents ownership of one-half of a
share of the Series A Cumulative Preference Stock.
COMMON STOCK
All shares of Common Stock presently outstanding are duly authorized, fully
paid and nonassessable. Holders of the Common Stock are entitled to one vote
per share on any matter submitted to the stockholders and do not have
cumulative voting rights. The Common Stock is not redeemable or convertible
and the holders of Common Stock do not have any preemptive right to purchase
securities of the Company. Upon dissolution of the Company, the holders of
Common Stock are entitled to receive ratably all of the assets, if any, which
remain legally available for distribution to the Company's stockholders after
the liquidation preferences of the Company's Preference Stock, if any, have
been satisfied in full. Subject to the prior dividend rights of the holders of
any Preference Stock, the holders of the Common Stock outstanding from time to
time are entitled to receive dividends as and when declared by the Board of
Directors of the Company out of funds legally available therefor.
PREFERENCE STOCK
The Board of Directors of the Company is authorized without further
stockholder action to provide for the issuance of up to 15,000,000 shares of
Preference Stock in one or more series and to determine the designations,
preferences, dividend rates, liquidation rights, voting rights, conversion
rights, redemption rights, sinking funds, stated value and such other
provisions as may be determined by the Board of Directors pursuant to
Pennsylvania law. On June 12, 1995, the Board of Directors designated
12,500,000 shares of the Preference Stock as Series A Cumulative Preference
Stock with the rights discussed below under "Series A Cumulative Preference
Stock."
In addition, on February 1, 1996, the Board of Directors designated an
additional 1,743,019 shares of Preference Stock as Series B Participating
Cumulative Preference Stock and reserved such shares for issuance pursuant to
a Shareholder Rights Agreement dated February 1, 1996 between the Company and
First Chicago Trust Company of New York, as the rights agent. For additional
information, see "Shareholder Rights Plan" below.
SERIES A CUMULATIVE PREFERENCE STOCK
Rank--The Series A Cumulative Preference Stock ranks, with respect to
dividend rights and rights upon liquidation, dissolution or winding up, prior
to the Common Stock and to any other capital stock of the Company
(collectively, the "Junior Stock"), other than capital stock which shall by
its terms rank prior to or on a parity with ("Parity Stock") Series A
Cumulative Preference Stock and which shall be authorized by a vote of the
holders of at least two-thirds of the then-outstanding Preference Stock of all
series voting separately as a class without regard to series.
Dividend Rights--Holders of Series A Cumulative Preference Stock are
entitled to receive when and as declared by the Board of Directors of the
Company, cumulative cash dividends accruing at the rate per share
26
<PAGE>
(the "Dividend Rate") of $3.60 per annum and no more, payable in cash
quarterly, each such quarterly payment to be in respect of the quarterly
period ending on the day next preceding the date such payment to holders of
Series A Cumulative Preference Stock of record on the respective dates, not
exceeding 40 days preceding such quarterly dividend payment dates, fixed for
that purpose by the Board of Directors. Such dividends are cumulative from
June 12, 1995 (the "Accrual Date") and accrue daily. Accruals of dividends do
not bear interest. Dividends are payable on or before each March 13, June 13,
September 13 and December 13 (or, if any such day is not a business day, on
the next succeeding business day).
Dividends will cease to accrue in respect of any shares of Series A
Cumulative Preference Stock redeemed on the redemption date with respect to
such redemption. See "Redemption" below.
Dividends on the Series A Cumulative Preference Stock accrue whether or not
such dividends are declared and accumulate to the extent they are not paid on
the dividend payment date for the quarter for which they accrue. Holders of
Series A Cumulative Preference Stock are not entitled to any dividends,
whether payable in cash, property or stock, in excess of full cumulative
accrued dividends as described herein.
Before any dividends (other than dividends payable in Junior Stock) on any
Junior Stock shall be declared and set apart for payment or paid, the holders
of shares of Series A Cumulative Preference Stock are entitled to receive cash
dividends, when and as declared by the Board of Directors at the Dividend
Rate, and no more. No dividends shall be declared or paid or set apart for
payment on the Series A Cumulative Preference Stock in respect of any
quarterly dividend period unless there shall likewise be or have been declared
and paid or set apart for payment on all shares of Preference Stock of each
other series at the time outstanding like dividends in proportion to the
respective annual dividend rates fixed therefor for all quarterly dividend
periods coinciding with or ending before such quarterly dividend period.
So long as any shares of Series A Cumulative Preference Stock are
outstanding, the Company shall not declare or set apart for payment or pay any
dividends (other than stock dividends payable upon shares of Junior Stock) or
make any distribution on any Junior Stock and shall not redeem, purchase or
otherwise acquire, or permit any subsidiary to purchase or otherwise acquire,
any shares of such Junior Stock if at the time of making such declaration,
payment, distribution, redemption, purchase or acquisition the Company shall
be in default with respect to any dividend payable on, or any obligation to
purchase, shares of Series A Cumulative Preference Stock; provided, however,
that, notwithstanding the foregoing, the Company may at any time redeem,
purchase or otherwise acquire shares of stock of any such Junior Stock in
exchange for, or out of net cash proceeds from the sale of, other shares of
stock of any Junior Stock.
Liquidation Preference--Upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, the shares of Series A Cumulative
Preference Stock shall be preferred as to assets over Junior Stock so that the
holder of each share of the Series A Cumulative Preference Stock shall be
entitled to be paid or to have set apart for payment in respect of each such
share, before any distribution is made to the holders of any Junior Stock, a
liquidation preference equal to $60, plus an amount equal to all dividends
accrued and unpaid up to and including the date fixed for payment, and such
holder of a share of Series A Cumulative Preference Stock shall not be
entitled to any other payment. If upon any such liquidation, dissolution or
winding up of the Company, its net assets shall be insufficient to permit the
payment in full of the respective amounts to which the holders of all
outstanding shares of the Series A Cumulative Preference Stock and any
outstanding Preference Stock that is Parity Stock are entitled, the entire
remaining net assets of the Company shall be distributed among the holders of
the Series A Cumulative Preference Stock and any outstanding Preference Stock
that is Parity Stock, in amounts proportionate to the full preferential
amounts to which they are respectively entitled.
The voluntary sale, lease, exchange or transfer of cash, shares of stock
(securities or other consideration) of all or substantially all the Company's
property or assets to, or its consolidation or merger with, one or more
corporations shall not be deemed to be a voluntary or involuntary liquidation,
dissolution or winding up of the Company.
27
<PAGE>
The liquidation preference of the Series A Cumulative Preference Stock is
not indicative of the price at which the Depositary Shares may actually trade.
Voting Rights--The holders of shares of Series A Cumulative Preference Stock
are entitled to vote on all matters submitted to a vote of the holders of the
Common Stock, voting together with the holders of the Common Stock (and any
other class or series of capital stock of the Company entitled to vote
together with the Common Stock) as one class. Each share of Series A
Cumulative Preference Stock is entitled to one vote.
In addition, if the Company shall have failed to pay, or declare and set
apart for payment, dividends on Preference Stock in an aggregate amount
equivalent to six full quarterly dividends on all shares of Preference Stock
at the time outstanding, the number of Directors of the Company shall be
increased by two at the first annual meeting of the shareholders of the
Company held thereafter, and at such meeting and at each subsequent annual
meeting until dividends payable for all past quarterly dividend periods on all
outstanding shares of Preference Stock shall have been paid, or declared and
set apart for payment, in full, the holders of the shares of Preference Stock
of each series shall have, in addition to any other voting rights which they
may otherwise have, the exclusive and special right, voting separately as a
class without regard to series, each share of Preference Stock entitling the
holder thereof to one vote per share, to elect two additional members of the
Board of Directors to hold office for a term of one year; provided, however,
that the right to vote as a class upon the election of such two additional
Directors shall not limit the right of holders of the Series A Cumulative
Preference Stock to vote upon the election of all other Directors and upon
such other matters set forth in the immediately preceding paragraph above.
Upon such payment, or declaration and setting apart for payment, in full, the
terms of the two additional Directors so elected shall forthwith terminate,
and the number of Directors of the Company shall be reduced by two and such
special voting right of the holders of shares of Series A Cumulative
Preference Stock shall cease, subject to increase in the number of Directors
as aforesaid and to revesting of such voting right in the event of each and
every additional failure in the payment of dividends in an aggregate amount
equivalent to six full quarterly dividends as aforesaid.
The Company shall not, without the affirmative vote or consent of the
holders of at least 66 2/3 percent of the number of shares of Preference Stock
of all series at the time outstanding, voting or consenting (as the case may
be) separately as a class without regard to series, given in person or by
proxy, either in writing or resolution adopted at a meeting:
(i) create any class of stock ranking prior to or on a parity with
Preference Stock as to dividends or upon liquidation or increase the
authorized number of shares of any previously authorized class of stock;
(ii) alter or change any of the provisions of the Articles of
Incorporation so as to adversely affect the preferences, special rights or
powers given to the Preference Stock;
(iii) increase the number of shares of Preference Stock which the Company
is authorized to issue; or
(iv) alter or change any of the provisions of the Articles of
Incorporation or hereof so as to adversely affect the preferences, special
rights or powers given to the Series A Cumulative Preference Stock.
Redemption--At any time and from time to time, the Company shall have the
right to call, in whole or in part, the outstanding shares of Series A
Cumulative Preference Stock for redemption (the "Redemption Date"). On any
Redemption Date, the Company shall deliver to the holders thereof, in exchange
for each such share called for redemption, the following consideration:
(1) in the event such Redemption Date is prior to June 12, 1998 (the
"Specified Date"),
(i) a number of shares of Common Stock equal to the Preference Stock
Call Price (as defined below) in effect on the Redemption Date divided
by the Current Market Price (as defined below) of the Common Stock as
of the end of the second trading day immediately preceding the date on
which the Company commences the mailing of notice regarding the
redemption to the holders of the Series A Cumulative Preference Stock;
and
28
<PAGE>
(ii) an amount in cash equal to all accrued and unpaid dividends on
such share of Series A Cumulative Preference Stock to and including the
Redemption Date, whether or not declared, out of funds legally
available therefor (and dividends shall cease to accrue on such share
as of such Redemption Date); and
(2) in the event such Redemption Date is on or after the Specified Date,
(i) shares of Common Stock at the Common Equivalent Rate (as defined
below) in effect on the Redemption Date; and
(ii) an amount in cash equal to all accrued and unpaid dividends on
each such share of Series A Cumulative Preference Stock to and
including the Redemption Date, whether or not declared, out of funds
legally available for the payment of dividends (and dividends shall
cease to accrue on such share as of such Redemption Date).
The Company currently intends to redeem all of the outstanding shares of
Series A Cumulative Preference Stock (and Depositary Shares represented
thereby) on the Specified Date if not theretofore redeemed.
If at any time less than all of the shares of Series A Cumulative Preference
Stock then outstanding are to be called for redemption, the shares to be
redeemed may be selected by lot or such other equitable method as the Board of
Directors of the Company in its discretion may determine.
The opportunity for equity appreciation afforded by an investment in Series
A Cumulative Preference Stock (and the Depositary Shares) is limited because
the Company may, at its option, call the Series A Cumulative Preference Stock
(and thereby the Depositary Shares) for redemption at any time prior to the
Specified Date at the Preference Stock Call Price, and may be expected to do
so prior to the Specified Date if, among other things, the market price of the
Common Stock has theretofore exceeded the Depositary Share Call Price. Because
the price of the Common Stock is subject to market fluctuations, the value of
the Common Stock received by a holder of Depositary Shares upon redemption
thereof on or after the Specified Date may be more or less than the value of
the Common Stock as of the date of this offering.
The shares of Series A Cumulative Preference Stock are not redeemable for
Common Stock or cash at the option of the holders thereof.
Upon the effectiveness at any time of a merger, consolidation or similar
extraordinary transaction involving the Company that results in the conversion
or exchange of the Common Stock into, or results in the holders of Common
Stock having the right to receive, other securities or other property (a
"Fundamental Transaction"), the holder of each share of Series A Cumulative
Preference Stock will be entitled to receive consideration in such transaction
of the same type as is received by holders of Common Stock in such transaction
and having a fair value equal to the value of the Common Stock that the holder
of such share of Series A Cumulative Preference Stock would receive if such
share of Series A Cumulative Preference Stock were redeemed by the Company at
such time.
The "Common Equivalent Rate" initially will be two shares of Common Stock
for each share of Series A Cumulative Preference Stock, subject to adjustment
in the event of certain stock dividends or distributions, subdivisions,
splits, combinations, issuances of certain rights or warrants, distributions
of certain assets, or certain other dilutive events with respect to the Common
Stock.
The term "Current Market Price" on any date of determination means the
average closing price of a share of Common Stock on the NYSE for the five
consecutive trading days ending on and including such date of determination;
provided, however, that if the closing price of the Common Stock on the NYSE
on the trading day next following such five-day period (the "next-day closing
price") is less than 95 percent of such average closing price, then the
Current Market Price per share of Common Stock on such date of determination
will be the next-day closing price; and provided further that, with respect to
any redemption of the Series A Cumulative
29
<PAGE>
Preference Stock, if any adjustment of the Common Equivalent Rate becomes
effective during the period beginning on the first day of such five-day period
and ending on the applicable redemption date, the Current Market Price as
determined pursuant to the foregoing will be appropriately adjusted to reflect
such adjustment.
The "Preference Stock Call Price" was $84.79952 for each share of Series A
Cumulative Preference Stock on the Accrual Date (June 12, 1995), declining by
$.004444 on each day thereafter (computed on the basis of a 360-day year of
twelve 30-day months) to $80.26664 on April 12, 1998, and equal to $80 per
share thereafter through June 11, 1998. The Preference Stock Call Price in
effect at any time is equal to the sum of (i) $80 plus (ii) the Dividend
Premium (as defined below) then in effect. The term "Dividend Premium" with
respect to a share of the Series A Cumulative Preference Stock means an amount
equal to $4.79952 for each share of Series A Cumulative Preference Stock on
the Accrual Date, declining by $.004444 on each day thereafter to $.26664 on
April 12, 1998, and equal to $0 per share thereafter through June 11, 1998.
Notice of a redemption must be given to the holders of Series A Cumulative
Preference Stock at least 30 but not more than 60 days prior to the Redemption
Date.
No fractional shares of Common Stock or scrip representing fractional shares
of Common Stock shall be issued upon the redemption of any shares of Series A
Cumulative Preference Stock. Instead of any fractional interest in a share of
Common Stock which would otherwise be deliverable upon the redemption of a
share of Series A Cumulative Preference Stock, the Company shall pay to the
holder of such share an amount in cash (computed to the nearest cent) equal to
the same fraction of the Current Market Price of the Common Stock determined
as of the second trading day immediately preceding the relevant notice date.
Miscellaneous--The Series A Cumulative Preference Stock has no rights to
convert into Common Stock. The Series A Cumulative Preference Stock has no
preemptive rights.
DEPOSITARY SHARES
Each Depositary Share represents ownership of one-half of a share of Series
A Cumulative Preference Stock deposited under the Deposit Agreement dated as
of June 13, 1995 (the "Deposit Agreement") between the Company and First
Chicago Trust Company of New York, as depositary (the "Preference Stock
Depositary"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Share is entitled, proportionately, to all the rights, preferences,
privileges and obligations of the Series A Cumulative Preference Stock
represented thereby (including dividend, voting, redemption and liquidation
rights).
The Depositary Shares are evidenced by depositary receipts issued pursuant
to the Deposit Agreement (the "Depositary Receipts"). The Depositary Shares
are subject to the terms and conditions of the Deposit Agreement.
Withdrawal of Preference Stock--Upon surrender of Depositary Receipts at the
principal office of the Preference Stock Depositary, upon payment of a sum
sufficient for the payment of any tax or other governmental charge with
respect thereto, and subject to the terms of the Deposit Agreement, the owner
of the Depositary Shares evidenced thereby is entitled to delivery of the
number of whole shares of Series A Cumulative Preference Stock represented by
such Depositary Shares. Fractional shares of Series A Cumulative Preference
Stock will not be issued. However, the Preference Stock Depositary may, with
the Company's consent, sell such shares of Series A Cumulative Preference
Stock representing in the aggregate such fractional interests, and the net
proceeds of such sale shall be distributed to the record holders of the
fractional interests. If the Depositary Receipts delivered by the holder
evidence a number of Depositary Shares in excess of the number of Depositary
Shares representing the number of whole shares of Series A Cumulative
Preference Stock to be withdrawn, the Preference Stock Depositary will deliver
to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares. Holders of Series A Cumulative Preference
Stock thus withdrawn will not thereafter be entitled to deposit such shares
under the Deposit Agreement or to receive Depositary Receipts evidencing
Depositary Shares therefor. There is currently no market for Series A
Cumulative Preference Stock and it is not expected that an active trading
market for Series A Cumulative Preference Stock will develop.
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<PAGE>
Call or Redemption of Depositary Shares--As described under "Series A
Cumulative Preference Stock--Redemption," the Series A Cumulative Preference
Stock is subject to the right of the Company to call the Series A Cumulative
Preference Stock (and thereby the Depositary Shares) at any time, at the
Company's option, for redemption. The Depositary Shares are subject to call or
redemption upon the same terms and conditions (including as to notice to the
owners of Depositary Shares and as to selection of Depositary Shares to be
called if fewer than all the outstanding Depositary Shares are to be called)
as the Series A Cumulative Preference Stock held by the Preference Stock
Depositary in exchange for Common Stock delivered by the Company to the
Preference Stock Depositary, except that the number of shares of Common Stock
received upon call or redemption of each Depositary Share will be equal to
one-half of the number of shares of Common Stock received upon call or
redemption of each share of Series A Cumulative Preference Stock. To the
extent that Depositary Shares are redeemed for Common Stock and all of such
Common Stock cannot be distributed to the record holders of Depositary
Receipts without creating fractional interests in such shares, the Preference
Stock Depositary may, with the consent of the Company, adopt such method as it
deems equitable and practicable for the purpose of effecting such
distribution, including the public or private sale of such shares representing
in the aggregate such fractional interests at such places and upon such terms
as it may deem proper, and the net proceeds of any such sale shall be
distributed or made available for distribution to such record holders that
would otherwise have received fractional interests in such shares. The amount
distributed in the foregoing cases may be reduced by any amounts required to
be withheld by the Company or the Preference Stock Depositary on account of
taxes or otherwise required pursuant to law, regulation or court process.
Dividends and Other Distributions--The Company, on behalf of the Preference
Stock Depositary (or, if the Company determines otherwise, the Preference
Stock Depositary), will distribute all cash dividends or other cash
distributions in respect of the Series A Cumulative Preference Stock
represented by the Depositary Shares to the record holders of Depositary
Receipts in proportion to the number of Depositary Shares owned by such
holders on the relevant record date, which will be the same date as the
relevant record date fixed by the Company for the Series A Cumulative
Preference Stock. In each case where a holder of Depositary Shares would
otherwise be entitled to receive a fraction of a cent, the Company, on behalf
of the Preference Stock Depositary (or, if the Company determines otherwise,
the Preference Stock Depositary), will round the amount of the distribution up
to the next whole cent.
In the event of a distribution other than in cash, the Company, on behalf of
the Preference Stock Depositary (or, if the Company determines otherwise, the
Preference Stock Depositary), will distribute property to the record holders
of Depositary Receipts entitled thereto, in proportion, as nearly as may be
practicable, to the number of Depositary Shares owned by such holders on the
relevant record date, unless the Company determines that it is not feasible to
make such distribution, in which case the Company on behalf of the Preference
Stock Depositary (or, if the Company determines otherwise, the Preference
Stock Depositary), may adopt any other method for such distribution as it
deems appropriate, including the sale of such property and distribution of the
net proceeds from such sale to such holders.
Procedures for Voting--Upon receipt of notice of any meeting at which the
holders of Series A Cumulative Preference Stock represented by such holders'
Depositary Shares are entitled to vote, the Preference Stock Depositary
(unless another arrangement for allowing holders of Depositary Shares to
exercise the voting rights associated with the Depositary Shares is agreed by
the Company and the Preference Stock Depositary) will, as soon as practicable
thereafter, cause the information contained in such notice of meeting to be
mailed to the record holders of Depositary Receipts as of the record date for
such meeting. Each such record holder of Depositary Receipts will be entitled
to instruct the Preference Stock Depositary as to the exercise of voting
rights with respect to the number of shares of Series A Cumulative Preference
Stock represented by such holder's Depositary Shares. The Preference Stock
Depositary will endeavor, insofar as practicable, to vote with respect to the
number of shares of Series A Cumulative Preference Stock represented by such
Depositary Shares in accordance with such instructions, and the Company
intends to take all action which may be deemed necessary by the Preference
Stock Depositary in order to enable the Preference Stock Depositary to do so.
The Preference Stock Depositary will abstain from voting with respect to the
Series A Cumulative Preference Stock to the extent that it does not receive
specific written instructions from the holders of Depositary Receipts.
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<PAGE>
Amendment and Termination of Deposit Agreement--The form of Depositary
Receipt evidencing the Depositary Shares and any provision of the Deposit
Agreement may at any time and from time to time be amended by agreement
between the Company and the Preference Stock Depositary. However, any
amendment which imposes or increases any fees, taxes, or charges upon holders
of Depositary Shares (other than fees and other charges payable by such
holders as provided for in the Deposit Agreement or Depositary Receipt and as
stated under "Charges of Preference Stock Depositary"), or which otherwise
prejudices any substantial existing right of holders of Depositary Shares,
will not take effect as to outstanding Depositary Shares until the expiration
of 30 days after notice of such amendment has been mailed to the record
holders of outstanding Depositary Shares. Every holder of an outstanding
Depositary Share at the time any such amendment becomes effective will be
deemed, by continuing to hold such Depositary Share, to consent and agree to
such amendment and to be bound by the Deposit Agreement as amended thereby. No
such amendment may impair the right, subject to the terms of the Deposit
Agreement, of any owner of any Depositary Shares to surrender the Depositary
Receipt evidencing such Depositary Shares with instructions to the Preference
Stock Depositary to deliver to the holder of the Series A Cumulative
Preference Stock represented thereby, except in order to comply with mandatory
provisions of applicable law.
The Deposit Agreement may be terminated by the Company or the Preference
Stock Depositary only if (a) (i) all outstanding Depositary Shares have been
redeemed or (ii) there has been a final distribution in respect of the Series
A Cumulative Preference Stock in connection with any liquidation, dissolution
or winding up of the Company and such distribution has been made to all the
holders of Depositary Shares; and (b) reasonable notice has been given to any
remaining holders of Depositary Shares. In the event the Deposit Agreement is
terminated, the Company will use its best efforts to list the Series A
Cumulative Preference Stock on the NYSE or any other national securities
exchange on which the Common Stock is listed.
Charges of Preference Stock Depositary--The Company will pay all transfer
and other taxes and governmental charges arising solely from the existence of
the depositary arrangements. The Company will pay charges of the Preference
Stock Depositary for any redemption of the Series A Cumulative Preference
Stock and all withdrawals of the Series A Cumulative Preference Stock by
owners of Depositary Shares. Holders of Depositary Shares will pay transfer,
income and other taxes and governmental charges and charges incurred by the
Preference Stock Depositary at the election of the holder, as provided in the
Deposit Agreement to be for their accounts. In certain circumstances, the
Preference Stock Depositary and the Company may refuse to transfer Depositary
Shares, may withhold dividends and distributions and may sell Depositary
Shares if such charges are not paid.
Other Rights--As to any alleged breach of fiduciary or contractual duty owed
to a holder of Depositary Shares by either the Company or its directors, such
holder has the same right to bring a cause of action as would any owner of
Series A Cumulative Preference Stock whose shares were held of record by a
nominee, including so-called "street name" shares. Such a cause of action
could be brought either directly or derivatively on behalf of the Company,
depending on the nature of the underlying claim; provided that in bringing any
such cause of action, a holder of Depositary Shares must otherwise comply with
applicable statutory or common law requirements. In addition, holders of
Depositary Shares may request the Preference Stock Depositary to bring such
causes of action provided indemnities satisfactory to the Preference Stock
Depositary are given.
Miscellaneous--The Company will deliver to the Preference Stock Depositary
all reports to shareholders and other communications which the Company is
required to furnish to the holders of the Series A Cumulative Preference Stock
by law, by the rules of the NYSE or by the Articles of Incorporation of the
Company or Statement of Designation relating to the Series A Cumulative
Preference Stock. The Preference Stock Depositary will forward, at the
Company's expense, to the holders of Depositary Shares and will make available
for inspection by holders of such Depositary Shares at the principal office of
the Preference Stock Depositary, and at such other places as it may from time
to time deem advisable, any reports and communications received from the
Company.
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<PAGE>
Neither the Preference Stock Depositary nor the Company will be subject to
any liability under the Deposit Agreement to holders of Depositary Receipts
other than for negligence, bad faith or willful misconduct. Neither the
Preference Stock Depositary nor the Company will be liable if it is prevented
or delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and
the Preference Stock Depositary under the Deposit Agreement will be limited to
performance in good faith of their duties thereunder, and they will not be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or shares of Series A Cumulative Preference Stock unless
satisfactory indemnity is furnished. The Company and Preference Stock
Depositary may rely upon written advice of counsel or accountants, on
information provided by holders of Depositary Shares or other persons believed
in good faith to be competent to give such information and on documents
believed to be genuine and to have been signed or presented by the proper
party or parties.
Resignation and Removal of Preference Stock Depositary--The Preference Stock
Depositary may resign at any time by delivering to the Company notice of its
election to do so. The Company may at any time, by notice, remove the
Preference Stock Depositary or may terminate the engagement of the Preference
Stock Depositary with respect to any or all of its duties and obligations
under the Deposit Agreement. Any such resignation, removal or termination will
take effect upon the appointment of a successor Preference Stock Depositary
and such successor's acceptance of such appointment with respect to all the
predecessor's duties and obligations so terminated. Such successor Preference
Stock Depositary must be appointed within 45 days after delivery of the notice
for resignation, removal or termination, or the predecessor Preference Stock
Depositary may petition a court of competent jurisdiction to appoint a
successor. If the successor Preference Stock Depositary is to acquire title to
Series A Cumulative Preference Stock, such successor must be a bank or trust
company having its principal office in the United States of America and having
a combined capital and surplus of at least $50,000,000.
PROCEDURES WITH RESPECT TO CERTAIN BUSINESS COMBINATIONS
Under the Company's Articles of Incorporation, a business combination or
other specified transaction entered into with a holder (with certain
exceptions) of more than 10 percent of the voting stock of the Company (a
"Related Person") must either (i) be approved by a vote of the holders of not
less than 75 percent of the outstanding shares of the Company's voting stock
held by stockholders other than the Related Person; (ii) be approved by two-
thirds of the members of the Board of Directors not affiliated with the
Related Person; or (iii) satisfy certain minimum price criteria and procedural
requirements with respect to the remaining stockholders.
RIGHT OF 10 PERCENT SHAREHOLDER TO CALL SPECIAL MEETING
Glenmede, as a beneficial owner of 10 percent of the voting stock of the
Company, has the right to call a special meeting of the Company's shareholders
and the right to propose amendments to the Company's Articles of
Incorporation. Upon the completion of this offering, Glenmede will no longer
hold beneficial ownership of 10 percent or more of the Company's voting stock,
and as a result, will no longer have the right to call a special meeting of
the Company, pursuant to the Company's Articles of Incorporation and Bylaws.
The Company is not aware of any other holder of 10 percent of the voting stock
of the Company.
SHAREHOLDER RIGHTS PLAN
On February 1, 1996, the Company adopted a Shareholder Rights Plan (the
"Plan") and designated 1,743,019 shares of its remaining 2,500,000 authorized
cumulative preference stock as the "Series B Participating Cumulative
Preference Stock." Pursuant to the Plan, the Company declared a dividend of
one stock purchase right ("Right") for each share of Common Stock and two
Rights for each share of Series A Cumulative Preference Stock (equivalent to
one Right for each Depositary Share) outstanding at the close of business on
February 12, 1996. A Right will be granted for each share of Common Stock
issued after such date and prior to the expiration of the Plan.
33
<PAGE>
Generally, the Rights become exercisable a specified period after a party
acquires 15 percent or more of the voting stock or announces a tender offer
for 15 percent or more of the voting stock. Each Right initially entitles a
holder to purchase one one-hundredth of a share of the Series B Participating
Cumulative Preference Stock for $100. After a party has acquired 15 percent or
more of the voting stock, each Right will entitle a holder to pay $100 for the
number of shares of Common Stock (or in certain situations, common stock of
the acquiring party) having a then current market value of $200.
Alternatively, the Company has the option to exchange one share of Common
Stock for each Right at any time after a party has acquired at least 15
percent but less than 50 percent of the voting stock. The Company may redeem
each Right for $.01 per Right at any time until the end of a specified period
after a party has acquired 15 percent or more of the voting stock. In general,
none of the benefits of the Rights will be available to a holder of 15 percent
or more of the voting stock. The Rights will expire on February 12, 2006,
unless earlier exchanged or redeemed.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
consequences of the purchase and disposition or exchange of Depositary Shares
and Series A Cumulative Preference Stock. The discussion contained in this
summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations, judicial decisions and
administrative pronouncements, changes to which could materially affect the
tax consequences described herein and could be made on a retroactive basis. In
addition, stock having terms closely resembling those of the Series A
Cumulative Preference Stock have not been the subject of any regulation,
ruling or judicial decision currently in effect and there can be no assurance
that the Internal Revenue Service will take the positions set forth below.
The summary discusses only Depositary Shares and Series A Cumulative
Preference Stock held as capital assets within the meaning of Section 1221 of
the Code and addresses only holders who are "United States persons" for
purposes of the Code. The summary also does not deal with all tax consequences
that may be relevant in the particular circumstances of all holders, some of
which (such as dealers in securities or commodities, insurance companies, tax
exempt organizations, foreign persons and persons who hold Depositary Shares
or Series A Cumulative Preference Stock as a position in a straddle) may be
subject to certain special rules. The summary does not address state or local
tax consequences. Prospective investors should consult their tax advisors as
to the particular consequences to them of the acquisition, ownership or
disposition of Depositary Shares or Series A Cumulative Preference Stock.
The following summary does not take account of proposed legislation that is
currently under consideration which, if enacted, would change certain tax
consequences described herein (including the dividends-received deduction
available to corporate shareholders and the rules with respect to
"extraordinary dividends"). Prospective investors are urged to consult their
tax advisors with respect to the status and effects of this legislation.
DEPOSITARY SHARES
The tax treatment of holders of Depositary Shares will be the same as the
tax treatment of holders of Series A Cumulative Preference Stock as described
below. In addition, a holder will recognize no gain or loss on the withdrawal
of Series A Cumulative Preference Stock in exchange for Depositary Shares
pursuant to the Deposit Agreement; the holder's tax basis in the withdrawn
Series A Cumulative Preference Stock will be the same as such holder's tax
basis in the Depositary Shares surrendered therefor; and the holder's holding
period for the withdrawn Series A Cumulative Preference Stock will include the
period during which such holder held the surrendered Depositary Shares.
DIVIDENDS
Dividends paid on the Series A Cumulative Preference Stock out of the
Company's current or accumulated earnings and profits will be taxable as
ordinary income and will qualify for the 70 percent intercorporate dividends-
received deduction, subject to the minimum holding period requirement
(generally at least 46 days)
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<PAGE>
and other applicable requirements. The dividends-received deduction will not
be allowed for purposes of calculating a corporate holder's adjusted current
earnings under the alternative minimum tax rules.
Under certain circumstances, a corporation that receives an "extraordinary
dividend," as defined in Section 1059(c) of the Code, is required to reduce
the tax basis of its stock by the non-taxed portion of such dividend. A
corporate holder must consider its holding period for, its tax basis in, and
the fair market value of, the Series A Cumulative Preference Stock in
determining whether dividends paid on the Series A Cumulative Preference Stock
will constitute "extraordinary dividends." In addition, under Section 1059(f),
any dividend with respect to "disqualified preferred stock" is treated as an
"extraordinary dividend." However, while the issue is not free from doubt due
to the lack of authority directly on point, the Series A Cumulative Preference
Stock should not constitute "disqualified preferred stock."
REDEMPTION PREMIUM
Under certain circumstances, Section 305(c) of the Code requires that any
excess of the redemption price of preferred stock over its issue price be
includable in income, prior to receipt, as a constructive dividend.
Regulations recently promulgated under Section 305(c) do not apply to
preferred stock, such as the Series A Cumulative Preference Stock, that was
issued prior to the effective date of the regulations. In addition, a call of
the Series A Cumulative Preference Stock for Common Stock does not constitute
a redemption for purposes of Section 305(c). Therefore, these provisions of
Section 305(c) relating to redemption premiums do not currently apply to stock
with terms such as those of the Series A Cumulative Preference Stock.
CALL OF SERIES A CUMULATIVE PREFERENCE STOCK FOR COMMON STOCK
Gain or loss generally will not be recognized by a holder upon the call of
the Series A Cumulative Preference Stock for Common Stock. Cash received in
payment of dividends in arrears is likely to be treated as dividend income. In
addition, a holder that receives cash in lieu of a fractional share will be
treated as having received such fractional share and having exchanged it for
cash in a transaction generally giving rise to capital gain or loss. A
holder's tax basis in the Common Stock, including any fractional share,
received on the call of the Series A Cumulative Preference Stock will equal
the tax basis of the Series A Cumulative Preference Stock that was called. The
holding period of such Common Stock will include the holding period of the
Series A Cumulative Preference Stock that was called.
OTHER DISPOSITIONS OF SERIES A CUMULATIVE PREFERENCE STOCK
A holder will generally recognize gain or loss on a sale, exchange or other
disposition of Series A Cumulative Preference Stock in an amount equal to the
difference between the amount realized on the disposition and such holder's
tax basis in the Series A Cumulative Preference Stock. Any such gain or loss
will be capital gain or loss and will be long-term capital gain or loss if the
holding period of the Series A Cumulative Preference Stock exceeds one year as
of the date of the disposition.
ADJUSTMENT OF COMMON EQUIVALENT RATE
Certain adjustments to the Common Equivalent Rate to reflect the Company's
issuance of certain rights, warrants, evidence of indebtedness, securities or
other assets to holders of Common Stock may result in constructive
distributions taxable as dividends to the holders of the Series A Cumulative
Preference Stock. Any such constructive dividend may constitute, and may cause
other dividends to constitute, "extraordinary dividends" to corporate holders.
See "Dividends" above.
BACKUP WITHHOLDING
Certain noncorporate holders may be subject to backup withholding at a rate
of 31 percent on dividends received on the Series A Cumulative Preference
Stock, on certain consideration received on a call of the Series
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<PAGE>
A Cumulative Preference Stock and on cash or other property received on the
disposition of Series A Cumulative Preference Stock. Generally, backup
withholding applies only when the taxpayer fails to furnish or certify a
proper taxpayer identification number or when the taxpayer is notified by the
Internal Revenue Service that the taxpayer has failed to report payments of
interest and dividends properly. Holders should consult their tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining any applicable exemption.
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Selling Shareholders have agreed to sell to them,
severally, the respective number of Depositary Shares set forth opposite the
names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated.................................. 2,144,720
CS First Boston Corporation........................................ 1,608,540
Smith Barney Inc. ................................................. 1,608,540
Bear, Stearns & Co. Inc. .......................................... 172,600
Dean Witter Reynolds Inc........................................... 172,600
A.G. Edwards & Sons, Inc........................................... 172,600
Howard, Weil, Labouisse, Friedrichs Incorporated................... 172,600
Lehman Brothers Inc................................................ 172,600
Merrill Lynch, Pierce, Fenner & Smith Incorporated................. 172,600
Petrie Parkman & Co................................................ 115,000
Pryor, McClendon, Counts & Co., Inc................................ 115,000
Salomon Brothers Inc............................................... 172,600
---------
Total.......................................................... 6,800,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Depositary Shares offered
hereby are subject to the approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters are obligated to take and
pay for all of the Depositary Shares offered hereby (other than those covered
by the over-allotment option described below) if any such Depositary Shares
are taken.
The Underwriters initially propose to offer part of the Depositary Shares
directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a
concession not in excess of $.50 a Depositary Share under the public offering
price. Any Underwriter may allow, and such dealers may reallow, a concession
not in excess of $.10 a Depositary Share to other Underwriters or to certain
other dealers. After the initial offering of the Depositary Shares, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
The Selling Shareholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
aggregate of 1,020,000 additional Depositary Shares at the public offering
price set forth on the cover page hereof, less underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose
of covering over-allotments, if any, made in connection with the offering of
the Depositary Shares offered hereby. To the extent such option is exercised,
each Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional Depositary
Shares as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of Depositary Shares offered by the
Underwriters hereby.
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<PAGE>
The Underwriters have informed the Company and the Selling Shareholders that
they do not intend to confirm sales to any accounts over which they exercise
discretionary authority.
The Company has agreed in the Underwriting Agreement not to offer, sell,
contract to sell or otherwise dispose of any Depositary Shares or shares of
Common Stock or any securities convertible into, or exercisable or
exchangeable for, Depositary Shares or Common Stock for a period of 90 days
after the date of this Prospectus, without the prior written consent of Morgan
Stanley & Co. Incorporated ("Morgan Stanley"), as representative of the
several Underwriters, provided that the Company may issue shares under its
stock option, dividend reinvestment and shareholder rights plans during such
90-day period. The Selling Shareholders have agreed in the Underwriting
Agreement not to offer, sell, contract to sell or otherwise dispose of any
Depositary Shares or shares of Common Stock or any securities convertible
into, or exercisable for, Depositary Shares or Common Stock for a period of 90
days after the date of this Prospectus, without the prior written consent of
Morgan Stanley, as representative of the several Underwriters.
From time to time, each of Morgan Stanley, CS First Boston Corporation and
Smith Barney Inc. has provided, and continues to provide, investment banking
services to the Company.
The Company, Glenmede and the Underwriters have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act.
LEGAL MATTERS
The validity of the Depositary Shares offered hereby will be passed upon for
the Company by Jack L. Foltz, Esq., Vice President and General Counsel of the
Company or Jonathan C. Waller, Esq., Assistant General Counsel of the Company;
certain legal matters will be passed on for the Selling Shareholders by
Pepper, Hamilton & Scheetz, Philadelphia, Pennsylvania; and certain matters
will be passed on for the Underwriters by Davis Polk & Wardwell, New York, New
York. Davis Polk & Wardwell may rely upon the opinion of Mr. Foltz or Mr.
Waller, as the case may be, and Pepper, Hamilton & Scheetz as to all matters
of Pennsylvania law. Mr. Foltz and Mr. Waller, in their respective capacities
as Vice President and General Counsel and Assistant General Counsel of the
Company, participate in various employee benefit plans offered by the Company
and in connection with certain of such benefit plans receive Common Stock and
options to purchase Common Stock.
EXPERTS
The consolidated balance sheets of Sun at December 31, 1995 and 1994, the
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995, and
the financial statement schedule included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, incorporated by
reference in this Prospectus, have been incorporated herein in reliance upon
the reports (which include an explanatory paragraph regarding the Company's
change in method of accounting for the impairment of long-lived assets in
1995, the Company's change in method of accounting for postemployment benefits
in 1994 and the Company's change in method of accounting for income taxes in
1993) of Coopers & Lybrand, L.L.P., independent accountants, given on the
authority of that firm as experts in auditing and accounting.
37
<PAGE>
[LOGO OF SUN COMPANY, INC. APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Registrant estimates that the expenses of the distribution of the
securities being registered, other than underwriting discounts and
commissions, will be:
<TABLE>
<S> <C>
Registration Fee--Securities and Exchange Commission.............. $118,246
Legal Fees and Expenses of Outside Counsel to Selling Sharehold-
ers.............................................................. 40,000
Accounting Fees and Expenses...................................... 10,000
Printing Expenses................................................. 70,000
Blue Sky Fees and Expenses (including Counsel Fees)............... 20,000
Miscellaneous..................................................... 15,754
--------
Total........................................................... $274,000
========
</TABLE>
The Selling Shareholders have agreed to reimburse the Registrant for 50
percent of the fees and expenses incurred by the Registrant in connection with
the offering other than legal fees and expenses of the Registrant's legal
counsel and the Registrant's internal costs for which the Registrant shall be
solely responsible, and legal fees and expenses of outside counsel to the
Selling Shareholders and the internal costs of Glenmede as trustee or co-
trustee for the Selling Shareholders, as to which the Selling Shareholders
shall be solely responsible.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Pennsylvania Business Corporation Law variously empowers or requires Sun
Company, Inc. ("Corporation") under specified circumstances, to indemnify
officers, directors and other persons against expenses incurred in connection
with any action, suit or proceeding, civil or criminal, to which such person
is a party or is threatened to be made a party.
Article VII of the Corporation's Bylaws provides as follows:
ARTICLE VII: INDEMNIFICATION
GENERAL
Section 1. The Corporation shall pay on behalf of any individual who is
or was a Director, officer, employee or agent of the Corporation or who is
or was serving at the request of the Corporation as Director, officer,
trustee, fiduciary, employee or agent of any other domestic or foreign
corporation or partnership, joint venture, sole proprietorship, trust or
other enterprise, or who is or was serving as a fiduciary with respect to
any employee benefit plan as a result of his employment by, or service as a
Director of, the Corporation ("Indemnified Person") all expenses, including
attorneys' fees and disbursements, incurred by such person in the defense
or settlement of any civil, criminal, administrative or arbitrative
proceeding pending, threatened or completed against such person by reason
of his being or having been such Indemnified Person, and shall indemnify
such person against amounts paid or incurred by him in satisfaction of
settlements, judgments, fines, and penalties in connection with any such
proceeding, including any proceeding by or in the right of the Corporation,
except where such indemnification is expressly prohibited by applicable law
or where the acts or failures to act of the Indemnified Person constitute
willful misconduct, self-dealing or recklessness. The foregoing right to
payment and to indemnification shall not be exclusive of other rights to
which such person may be entitled as a matter of law or otherwise.
AGREEMENTS FOR INDEMNIFICATION AND FUNDING
Section 2. The Corporation is authorized, but not required, to enter into
agreements for indemnification with any Indemnified Person, however,
failure to enter into such agreements shall not in
II-1
<PAGE>
any way limit the rights of such Indemnified Persons hereunder. The
Corporation may, in addition to the foregoing, create a fund of any nature,
which may, but need not be, under the control of a trustee, or otherwise
secure or insure in any manner its indemnification obligations.
EXPENSES
Section 3. Expenses incurred by a Director, officer, employee or agent in
defending a civil or criminal action, suit or proceeding shall be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation.
DISPUTES
Section 4. Any dispute related to the right to indemnification of or
advancement of expenses to Indemnified Persons as provided under this
Article, except with respect to indemnification for liabilities arising
under the Securities Act of 1933 which the Corporation has undertaken to
submit to a court for adjudication, shall be decided only by arbitration in
accordance with the commercial arbitration rules then in effect of the
American Arbitration Association.
The Corporation has obtained Executive Liability Coverage and Executive
Indemnification Coverage covering all claims during the policy period in an
aggregate amount up to $100,000,000. The Executive Liability portion of this
policy protects all directors and officers of the Corporation and its
subsidiaries. This section of the policy provides protection for losses
arising from any error, misstatement, misleading statement, act, omission,
neglect, or breach of duty committed, attempted or allegedly committed or
attempted by such persons in the discharge of their duties as directors and
officers for which the director or officer is not indemnified by the
Corporation. The Executive Indemnification portion of the policy protects the
Corporation (subject to several limitations and exceptions) against losses for
which it grants indemnification as permitted or required by law. The terms of
the policy provide for the payment of an insurance deductible in the amount of
$5,000,000 on a per occurrence basis, on all claims for which coverage under
the policy has been provided. In February 1996, the Board of Directors
approved and authorized the Corporation to enter into Agreements of
Indemnification with each officer and director of the Corporation to provide
for the Corporation's payment of the deductible for any claims for which
coverage has been provided.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
**1 Underwriting Agreement dated April 3, 1996.
*4.1 Articles of Incorporation of Sun Company, Inc., as restated and amended,
effective as of February 1, 1996 (incorporated by reference to Exhibit
3.(i) to the Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
*4.2 Sun Company, Inc. Bylaws, as restated and amended, effective as of
February 1, 1996 (incorporated by reference to Exhibit 3.(ii) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995).
*4.3 Rights Agreement between Sun Company, Inc. and First Chicago Trust
Company of New York dated as of February 1, 1996 (incorporated by
reference to Exhibit 99(b) of Registrant's Current Report on Form 8-K
dated February 2, 1996).
*4.4 Deposit Agreement for Series A Cumulative Preference Stock (incorporated
by reference to Exhibit 99(g)(4) of the Sun Company, Inc. Schedule 13E-4
filed June 13, 1995).
**5 Opinion of Jack L. Foltz, Esq., Vice President and General Counsel of
the Company or Jonathan C. Waller, Esq., Assistant General Counsel of
the Company.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
*11 Statements re Sun Company, Inc. and Subsidiaries Computation of Per
Share Earnings for the Years Ended December 31, 1995, 1994, 1993, 1992
and 1991 (incorporated by reference to Exhibit 11 to Registrant's Annual
Report on Form 10-K for the fiscal years ended December 31, 1995 and
1993).
*12 Statements re Sun Company, Inc. and Subsidiaries Computation of Ratio of
Earnings to Combined Fixed Charges and Preference Stock Dividends for
the Years Ended December 31, 1995, 1994, 1993, 1992 and 1991.
*23.1 Consent of Jack L. Foltz, Esq., Vice President and General Counsel of
the Company.
*23.2 Consent of Jonathan C. Waller, Esq., Assistant General Counsel of the
Company.
*23.3 Consent of Independent Accountants.
*24 Power of Attorney.
*99 Registration Rights Agreement by and among Sun Company, Inc. and The
Glenmede Trust Company (in its corporate capacity and as trustee or co-
trustee of The Pew Memorial Trust, The J. Howard Pew Freedom Trust, The
Mabel Pew Myrin Trust, The J.N. Pew, Jr. Charitable Trust and The
Medical Trust), dated as of February 1, 1996.
</TABLE>
- --------
* Previously filed.
** Filed herewith.
ITEM 17. UNDERTAKINGS
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
a registration statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS POST-EFFECTIVE
AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF PHILADELPHIA AND COMMONWEALTH OF PENNSYLVANIA ON
THIS 3RD DAY OF APRIL, 1996.
Sun Company, Inc.
/s/ Robert M. Aiken, Jr.
By: _________________________________
ROBERT M. AIKEN, JR.
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-
EFFECTIVE AMENDMENT HAS BEEN SIGNED BY OR ON BEHALF OF THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON THIS 3RD DAY OF APRIL, 1996.
SIGNATURES TITLES
Robert M. Aiken, Jr.* Senior Vice President and Chief
- ------------------------------------- Financial Officer (Principal
ROBERT M. AIKEN, JR. Financial Officer)
Robert H. Campbell* Chairman, Chief Executive Officer,
- ------------------------------------- President and Director (Principal
ROBERT H. CAMPBELL Executive Officer)
Raymond E. Cartledge* Director
- -------------------------------------
RAYMOND E. CARTLEDGE
Robert E. Cawthorn* Director
- -------------------------------------
ROBERT E. CAWTHORN
Mary J. Evans* Director
- -------------------------------------
MARY J. EVANS
Thomas P. Gerrity* Director
- -------------------------------------
THOMAS P. GERRITY
Thomas W. Hofmann* Comptroller (Principal Accounting
- ------------------------------------- Officer)
THOMAS W. HOFMANN
James G. Kaiser* Director
- -------------------------------------
JAMES G. KAISER
Thomas W. Langfitt* Director
- -------------------------------------
THOMAS W. LANGFITT
R. Anderson Pew* Director
- -------------------------------------
R. ANDERSON PEW
Albert E. Piscopo* Director
- -------------------------------------
ALBERT E. PISCOPO
William F. Pounds* Director
- -------------------------------------
WILLIAM F. POUNDS
Alexander B. Trowbridge* Director
- -------------------------------------
ALEXANDER B. TROWBRIDGE
/s/ Robert M. Aiken, Jr. Individually and as Attorney-in-Fact
*By: ________________________________
ROBERT M. AIKEN, JR.
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
**1 Underwriting Agreement dated April 3, 1996.
*4.1 Articles of Incorporation of Sun Company, Inc., as restated and
amended, effective as of February 1, 1996 (incorporated by reference
to Exhibit 3.(i) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995).
*4.2 Sun Company, Inc. Bylaws, as restated and amended, effective as of
February 1, 1996 (incorporated by reference to Exhibit 3.(ii) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995).
*4.3 Rights Agreement between Sun Company, Inc. and First Chicago Trust
Company of New York dated as of February 1, 1996 (incorporated by
reference to Exhibit 99(b) of Registrant's Current Report on Form 8-K
dated February 2, 1996).
*4.4 Deposit Agreement for Series A Cumulative Preference Stock
(incorporated by reference to Exhibit 99(g)(4) of the Sun Company,
Inc. Schedule 13E-4 filed June 13, 1995).
**5 Opinion of Jack L. Foltz, Esq., Vice President and General Counsel of
the Company or Jonathan C. Waller, Esq., Assistant General Counsel of
the Company.
*11 Statements re Sun Company, Inc. and Subsidiaries Computation of Per
Share Earnings for the Years Ended December 31, 1995, 1994, 1993, 1992
and 1991 (incorporated by reference to Exhibit 11 to Registrant's
Annual Report on Form 10-K for the fiscal years ended December 31,
1995 and 1993).
*12 Statements re Sun Company, Inc. and Subsidiaries Computation of Ratio
of Earnings to Combined Fixed Charges and Preference Stock Dividends
for the Years Ended December 31, 1995, 1994, 1993, 1992 and 1991.
*23.1 Consent of Jack L. Foltz, Esq., Vice President and General Counsel of
the Company.
*23.2 Consent of Jonathan C. Waller, Esq., Assistant General Counsel of the
Company.
*23.3 Consent of Independent Accountants.
*24 Power of Attorney.
*99 Registration Rights Agreement by and among Sun Company, Inc. and The
Glenmede Trust Company (in its corporate capacity and as trustee or
co-trustee of The Pew Memorial Trust, The J. Howard Pew Freedom Trust,
The Mabel Pew Myrin Trust, The J.N. Pew, Jr. Charitable Trust and The
Medical Trust), dated as of February 1, 1996.
</TABLE>
- --------
* Previously filed.
** Filed herewith.
<PAGE>
6,800,000 Shares
SUN COMPANY, INC.
Depositary Shares
Each Representing One-Half of a Share of Series A Cumulative Preference Stock
(No Par Value)
UNDERWRITING AGREEMENT
April 3, 1996
Morgan Stanley & Co. Incorporated
CS First Boston Corporation
Smith Barney Inc.
as Representatives of the several
Underwriters named in Schedule II
hereto
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
The Glenmede Trust Company, as trustee and not in its individual capacity
(the "Trustee") for certain shareholders of Sun Company, Inc., a Pennsylvania
corporation (the "Company"), named in Schedule I hereto (the "Charitable
Trusts"), on behalf of the Charitable Trusts, severally with respect to each
Charitable Trust and not jointly, proposes to sell to the several Underwriters
referred to below an aggregate of 6,800,000 Depositary Shares, each representing
ownership of one-half of a share of Series A Cumulative Preference Stock, no par
value, of the Company (the "Firm Shares"), each Charitable Trust selling the
amount set forth opposite such Charitable Trust's name in Schedule I hereto.
Morgan Stanley & Co. Incorporated ("Morgan Stanley"), CS First Boston
Corporation and Smith Barney Inc. shall act as the representatives (the
"Representatives") of the several Underwriters. The Trustee,
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -2- April 3, 1996
Smith Barney Inc.
on behalf of the Charitable Trusts, severally with respect to each Charitable
Trust and not jointly, also proposes to issue and sell to the several
Underwriters not more than an additional 1,020,000 Depositary Shares, each
representing ownership of one-half of a share of Series A Cumulative Preference
Stock, no par value (the "Additional Shares"), if and to the extent that you
shall have determined to exercise, on behalf of the Underwriters, the right to
purchase the Additional Shares granted to the Underwriters in Article I hereof.
The Firm Shares and the Additional Shares are hereinafter collectively referred
to as the "Shares". The Trustee and Charitable Trusts are hereinafter sometimes
collectively referred to as the "Sellers".
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement, including the exhibits thereto and the
documents incorporated by reference therein, as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), and as further
amended by Post-Effective Amendment No. 1 thereto (as the context may require)
is hereinafter referred to as the "Registration Statement"; and the prospectus
in the form first used to confirm sales of Shares is hereinafter referred to as
the "Prospectus".
I.
Subject to the terms and conditions hereof, the Trustee, on behalf of each
Charitable Trust, severally with respect to each Charitable Trust and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from the Trustee, on behalf of each Charitable
Trust, at $26.675 a share (the "Purchase Price") the number of Firm Shares
(subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the number of
Firm Shares to be sold by such Charitable Trust as the number of Shares set
forth opposite the name of such Underwriter in Schedule II hereto bears to the
total number of Firm Shares.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Trustee, on behalf of
each Charitable Trust, severally with respect to each Charitable Trust and not
jointly,
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -3- April 3, 1996
Smith Barney Inc.
hereby agrees to sell to the Underwriters the Additional Shares, and the
Underwriters shall have a one-time right to purchase, severally and not jointly,
up to 1,020,000 Additional Shares at the Purchase Price. If you, on behalf of
the Underwriters, elect to exercise such option, you shall so notify the Trustee
and the Company in writing not later than 30 days after the date of this
Agreement, which notice shall specify the number of Additional Shares to be
purchased by the Underwriters and the date on which such shares are to be
purchased. Such date may be the same as the Closing Date (as defined below) but
not earlier than the Closing Date nor later than ten business days after the
date of such notice. Additional Shares may be purchased as provided in Article
III hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter agrees, severally and not jointly, to purchase the
number of Additional Shares (subject to such adjustments to eliminate fractional
shares as you may determine) that bears the same proportion to the total number
of Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule II hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
Each of the Company and the Charitable Trusts hereby agrees that, without
the prior written consent of Morgan Stanley on behalf of the Underwriters, it
will not, during the period ending 90 days after the date of the Prospectus, (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
Depositary Shares or shares of common stock of the Company (the "Common Stock")
or any securities convertible into or exercisable or exchangeable for Common
Stock or (ii) enter into any swap or other agreement that transfers, in whole or
in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold
hereunder, (B) the issuance by the Company of any shares of Common Stock upon
the exercise of an option or warrant or the conversion of a security outstanding
on the date hereof of which the Underwriters have been advised in writing or
which is described in the Prospectus or the materials incorporated therein by
reference, (C) options and similar instruments granted to employees of the
Company to acquire Common Stock and other interests in shares of Common Stock,
in each case granted pursuant to the Company's employee benefit plans, (D) any
Common Stock issuable pursuant to the Company's Dividend Reinvestment Plan, or
(E) any stock purchase rights or shares issuable pursuant to the Company's
Shareholder Rights Plan adopted
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -4- April 3, 1996
Smith Barney Inc.
February 1, 1996, provided however, that it is understood and agreed to by the
parties hereto that the registration statement of the Company filed with the
Commission on May 20, 1994 and declared effective on June 27, 1994 shall not be
deemed to constitute an offer of Common Stock for purposes of this paragraph,
provided further, that any sale of securities by the Company pursuant to such
registration statement shall be subject to the provisions contained in this
paragraph. In addition, the Charitable Trusts agree that, without the prior
written consent of Morgan Stanley on behalf of the Underwriters, they will not,
during the period ending 90 days after the date of the Prospectus, make any
demand for, or exercise any right with respect to, the registration of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock.
II.
The Company and the Sellers are advised by you that the Underwriters
propose to make a public offering of their respective portions of the Shares as
soon after Post-Effective Amendment No. 1 to the Registration Statement and this
Agreement have become effective as in your judgment is advisable. The Company
and the Sellers are further advised by you that the Shares are to be offered to
the public initially at $27.50 a Share (the "Public Offering Price") and to
certain dealers selected by you at a price that represents a concession not in
excess of $.50 a Share under the Public Offering Price, and that any Underwriter
may allow, and such dealers may reallow, a concession, not in excess of $.10 a
Share, to any Underwriter or to certain other dealers.
III.
Payment for the Firm Shares shall be made to the Trustee, in Federal or
other funds immediately available in New York City against delivery of such Firm
Shares for the respective accounts of the several Underwriters at the office of
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York, or such other
place as shall be designated in writing by you. Such payment shall be made at
10:00 A.M., New York City time, on April 9, 1996, or at such other time on the
same or such other date, not later than April 16, 1996, as shall be designated
in writing by you. The time and date of such payment are hereinafter referred
to as the Closing Date.
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -5- April 3, 1996
Smith Barney Inc.
Payment for any Additional Shares shall be made to the Trustee, in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at the
office of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York at
10:00 A.M., local time, on the date specified in the notice described in Article
I or on such other date, in any event not later than May 17, 1996, as shall be
designated in writing by you. The time and date of such payment are hereinafter
referred to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than two full business days prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and the Additional Shares shall be delivered to you
on the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
IV.
The Company represents, warrants and agrees with each Underwriter that:
(a) The Registration Statement, including Post-Effective Amendment No.
1 thereto, has been prepared by the Company in conformity with the
requirements of the Securities Act and the rules and regulations (the
"Rules and Regulations") of the Commission thereunder, and the Registration
Statement and Post-Effective Amendment No. 1 thereto have become effective
under the Securities Act. Copies of the Registration Statement as
originally filed and each amendment thereto, have been delivered by the
Company to the Underwriters. The Commission has not issued any order
preventing or suspending the use of any preliminary prospectus, the
Prospectus or the Registration Statement and, to the best of the Company's
knowledge, no proceedings for such purpose are pending before or threatened
by the Commission;
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -6- April 3, 1996
Smith Barney Inc.
(b) On the date as of which the Registration Statement was declared
effective and on the date as of which Post-Effective Amendment No. 1
thereto was declared effective, the Registration Statement conformed in all
respects to the requirements of the Securities Act and the Rules and
Regulations and did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and on the date hereof, the
Registration Statement and the Prospectus conform and will conform in all
respects to the requirements of the Securities Act and the Rules and
Regulations and neither of such documents include or will include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided, that no representation or warranty is made as to
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information
furnished to the Company through the Representatives by or on behalf of any
Underwriter or written information furnished to the Company by or on behalf
of any Seller specifically for inclusion therein;
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the results of operations or the consolidated financial position
of the Company and its subsidiaries, taken as a whole;
(d) Each Significant Subsidiary of the Company (as defined in Rule 405
of the Rules and Regulations) has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to
own its property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -7- April 3, 1996
Smith Barney Inc.
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the results
of operations or the consolidated financial position of the Company and its
subsidiaries, taken as a whole;
(e) All of the issued shares of capital stock of each Significant
Subsidiary of the Company (except as described in the Prospectus) have been
duly and validly authorized and issued and are fully paid, non-assessable
and are owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(f) The execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Company or any of its Significant Subsidiaries is a party or by which the
Company or any of its Significant Subsidiaries is bound or to which any
property or assets of the Company or any of its Significant Subsidiaries
are subject, except for any conflict, breach or violation which would not,
individually or in the aggregate, have a material adverse effect on the
business, properties, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, taken as a whole, nor
will such actions result in any violation of the provisions of the charter
or bylaws of the Company or any of its Significant Subsidiaries or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
Significant Subsidiaries or any of their properties or assets; and except
for the registration of the Shares under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as may
be required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and applicable state or foreign securities laws in
connection with the purchase and distribution of the Shares by the
Underwriters, no consent approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated hereby;
(g) There are no contracts, agreements or understandings between
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -8- April 3, 1996
Smith Barney Inc.
the Company and any person granting such person the right to require the
Company to include any securities owned or to be owned by such person in
the securities registered pursuant to the Registration Statement, or,
except as described in the Prospectus, to require the Company to file any
other registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in any securities being registered
pursuant to any other registration statement filed by the Company under the
Securities Act;
(h) This Agreement has been duly authorized, executed and delivered by
the Company;
(i) The Common Stock and the cumulative preference stock of the
Company ("the Cumulative Preference Stock") (including the Series A
Cumulative Preference Stock underlying the Shares to be sold by the
Charitable Trusts) outstanding on the date hereof have been duly authorized
and are validly issued, fully paid and non-assessable;
(j) The Shares (including the Series A Cumulative Preference Stock
underlying the Shares) have been duly authorized, are validly issued, fully
paid and non-assessable, and will remain subject to the obligations of the
Deposit Agreement for the Series A Cumulative Preference Stock dated as of
June 13, 1995 as described in the Prospectus;
(k) The authorized capital stock of the Company conforms in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus;
(l) Except as described in the Prospectus, there are no legal or
governmental proceedings pending or, to the knowledge of the Company,
threatened, to which the Company is a party or of which any property of the
Company or any of the Company's subsidiaries is the subject, the outcome of
which is likely to have a material adverse effect on the consolidated
financial position of the Company and its subsidiaries, taken as a whole;
(m) The audited financial statements included or incorporated by
reference in the Registration Statement and included or incorporated by
reference in the Prospectus present fairly the consolidated financial
position of
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -9- April 3, 1996
Smith Barney Inc.
the Company and its subsidiaries and the consolidated results of their
operations, changes in stockholders' equity and their cash flows, at the
dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles. Since the date of such
statements, there has been no material adverse change in the operations,
business, property, assets or liabilities of the Company or any of its
subsidiaries, taken as a whole, or in the consolidated financial position
of the Company and its subsidiaries taken as a whole;
(n) No relationship, direct or indirect, exists between or among the
Company on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company on the other hand, which is required
to be described in the Prospectus and which is not so described;
(o) Except as described in the Prospectus, since the date as of which
information is given in the Prospectus, the Company has not issued or
granted any rights to acquire any equity securities of the Company (other
than pursuant to employee benefit plans, stock option plans or other
employee or director compensation plans existing on the date of the
Prospectus);
(p) Neither the Company nor any of its subsidiaries is in violation of
its charter or bylaws or in default, and no event has occurred which, with
the notice or lapse of time or both, would constitute a default, in the due
performance or observance of any term, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any subsidiary is a party or by which
they are bound or to which any of their properties or assets is subject,
which violation, default or event in each case will have a material adverse
effect on the consolidated business, properties, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, taken as a whole;
(q) There are no contracts or other documents which are required to
be filed as exhibits to the Registration Statement by the Securities Act or
by the Rules and Regulations which have not been filed as exhibits to the
Registration Statement;
(r) The Company is not required to be registered, and is not
regulated, as an "investment company" as such term is defined under the
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -10- April 3, 1996
Smith Barney Inc.
United States Investment Company Act of 1940;
(s) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
consolidated condition, financial or otherwise, or in the consolidated
earnings, business or operations of the Company and its subsidiaries, taken
as a whole, from that set forth in the Prospectus;
(t) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba; and
(u) Any certificate signed by any officer of the Company and delivered
to you or to counsel for the Underwriters shall be deemed a representation
and warranty by the Company to each Underwriter as to the matters covered
thereby.
V.
The Trustee, on behalf of the Charitable Trusts, severally with
respect to each Charitable Trust and not jointly represents, warrants and
agrees with each Underwriter that:
(a) Such Charitable Trust was duly established and the Trustee is the
duly appointed and incumbent trustee or co-trustee of such Trust having the
requisite authority to execute and deliver this Agreement and to sell the
Shares being sold to the Underwriters by such Charitable Trust;
(b) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Charitable Trust, and all authorizations and
consents necessary for the execution and delivery by such Charitable Trust
of this Agreement have been given and are in full force and effect on the
date hereof;
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by the Trustee will
not conflict with any provision of law applicable to the Charitable Trusts
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any material agreement, instrument, decree,
judgment or order
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -11- April 3, 1996
Smith Barney Inc.
pursuant to which such Charitable Trust was established or to which such
Charitable Trust is a party or by which such Charitable Trust may be bound
or to which any material portion of the properties of such Charitable Trust
may be subject;
(d) Such Charitable Trust has, and on the Closing Date will have,
valid marketable title to the Shares to be sold by such Charitable Trust
and the legal right and power, and all authorization and approval required
by law, to enter into this Agreement and to sell, transfer and deliver the
Shares to be sold by such Charitable Trust;
(e) The Shares to be sold by such Charitable Trust pursuant to this
Agreement are owned by such Charitable Trust free and clear of all liens,
encumbrances, equities or claims;
(f) Delivery of the Shares to be sold by such Charitable Trust
pursuant to this Agreement will pass marketable title to such Shares free
and clear of all liens, encumbrances, equities or claims;
(g) All information furnished by or on behalf of such Charitable
Trust for use in the Registration Statement and Prospectus is on the date
hereof, and will be at the time of the filing of Post-Effective Amendment
No. 1 under the Rules and Regulations, true and correct, and does not on
the date hereof, and will not at the time of the filing of Post-Effective
Amendment No. 1 under the Rules and Regulations, contain any untrue
statement of a material fact or omit to state any material fact necessary
to make such information not misleading; and
(h) Any certificate signed by or on behalf of such Charitable Trust
and delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by such Charitable Trust to each Underwriter as
to the matters covered thereby.
VI.
The Glenmede Trust Company, in its individual capacity ("Glenmede"),
represents, warrants and agrees with each Underwriter and the Company that:
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -12- April 3, 1996
Smith Barney Inc.
(a) Glenmede is a trust company (without banking powers) duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania; and Glenmede is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing would
not have a material adverse effect on Glenmede and its subsidiaries, taken
as a whole;
(b) This Agreement has been duly authorized, executed and delivered
by Glenmede; and all authorizations and consents necessary for the
execution and delivery by Glenmede of this Agreement have been obtained and
are in full force and effect on the date hereof;
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any material agreement, instrument, decree,
judgment or order to which Glenmede is a party or by which Glenmede may be
bound or to which any material portion of the properties of Glenmede may be
subject; and
(d) Any certificate signed by any officer of Glenmede and delivered
to you or to counsel for the Underwriters shall be deemed a representation
and warranty by Glenmede to each Underwriter as to the matters covered
thereby.
VII.
The obligations of the Underwriters hereunder are subject to all of
the following conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement or Post-Effective Amendment No. 1 thereto shall be in effect, and
no proceedings for such purpose shall be pending before or threatened by
the Commission. There shall not have occurred any change, or any
development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and
its subsidiaries, taken
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -13- April 3, 1996
Smith Barney Inc.
as a whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement), that, in your judgment, is material and adverse and that makes
it, in your judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
(b) You shall have received on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of the Company (i) to
the effect set forth in Article VII(a) and (ii) to the effect that the
representations and warranties of the Company contained herein are true and
correct as of the Closing Date and that the Company has complied with all
of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) You shall have received on the Closing Date a certificate, dated
the Closing Date and signed by the Trustee on behalf of each Charitable
Trust, to the effect that the representations and warranties of such
Charitable Trust contained herein are true and correct as of the Closing
Date.
(d) You shall have received on the Closing Date a certificate, dated
the Closing Date and signed by an executive officer of Glenmede, to the
effect that the representations and warranties of Glenmede contained herein
are true and correct as of the Closing Date.
(e) You shall have received on the Closing Date an opinion of either
the Vice President and General Counsel or the Assistant General Counsel of
the Company, counsel to the Company, dated the Closing Date, in form and
substance satisfactory to the Underwriters, to the effect that:
(i) The Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its
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ownership or leasing of property requires such qualification, except
to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) Each Significant Subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in
which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, taken as
a whole;
(iii) The Common Stock and the Cumulative Preference Stock
(including the Series A Cumulative Preference Stock underlying the
Shares to be sold by the Charitable Trusts) outstanding on the date
hereof have been duly authorized and are validly issued, fully paid
and non-assessable;
(iv) The Shares (including the Series A Cumulative Preference
Stock underlying the Shares) have been duly authorized, are validly
issued, fully paid and non-assessable, and will remain subject to the
obligations of the Deposit Agreement for the Series A Cumulative
Preference Stock dated as of June 13, 1995 as described in the
Prospectus;
(v) The authorized capital stock of the Company conforms in all
material respects to the description thereof contained in the
Registration Statement and the Prospectus;
(vi) The Registration Statement and Post-Effective Amendment No.
1 thereto have become effective and, to the knowledge of such counsel,
no stop order suspending the effectiveness of the Registration
Statement or Post-Effective Amendment No. 1 thereto has been issued
and no proceeding for that purpose is pending or threatened
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by the Commission;
(vii) To such counsel's knowledge, there are no contracts or
other documents which are required to be filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been filed as exhibits to the Registration
Statement;
(viii) This Agreement has been duly authorized, executed and
delivered by the Company;
(ix) The compliance by the Company with all of the provisions of
this Agreement and the Shares and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach of
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument, the conflict, breach, violation, or
default of which would have a materially adverse effect on the
business, properties, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries taken as a
whole, nor will such actions result in any violation of the provisions
of the charter or bylaws of the Company or any violation of any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties or
assets; and, except for the registration of the Shares under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the Exchange
Act and applicable state or foreign securities laws in connection with
the purchase and distribution of the Shares by the Underwriters, no
consent, approval authorization or order of, or filing, or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated
hereby;
(x) The Company is not required to be registered, and is not
regulated, as an "investment company" as such term is defined under
the Investment Company Act of 1940;
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(xi) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or to which any of the properties
of the Company or any of its subsidiaries is subject that are required
to be described in the Registration Statement or the Prospectus and
are not so described or of any statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required;
(xii) Such counsel (A) is of the opinion that the Registration
Statement, Post-Effective Amendment No. 1 thereto and the Prospectus
(except for financial statements and schedules included therein as to
which such counsel need not express any opinion) comply as to form in
all material respects with the Securities Act and the applicable rules
and regulations of the Commission thereunder, (B) although such
counsel is not passing upon and does not assume any responsibility
for, and shall not be deemed to have independently verified, the
accuracy, completeness or fairness of the statements contained or
incorporated by reference in the Registration Statement and Prospectus
(except as to (v) above), no facts have come to the attention of such
counsel that lead him to believe that (except for financial statements
and schedules as to which such counsel need not express any belief)
the Registration Statement at the time it became effective or Post-
Effective Amendment No. 1 thereto at the time it became effective
contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading and (C) although such counsel is not
passing upon and does not assume any responsibility for, and shall not
be deemed to have independently verified, the accuracy, completeness
or fairness of the statements contained or incorporated by reference
in the Registration Statement and Prospectus (except as to (v) above),
no facts have come to the attention of such counsel that lead him to
believe that (except for financial statements and schedules as to
which such counsel need not express any belief) the Prospectus
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
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In rendering such opinion, such counsel may rely as to matters of
fact upon certificates of officers of the Company and its subsidiaries
and public officials and include such limitations and assumptions as
are customarily contained in opinions given by counsel for issuers in
securities transactions.
With respect to certain matters relating to the laws of the State
of New York, such counsel may rely on the opinion of counsel to the
Underwriters.
(f) You shall have received on the Closing Date an opinion of Pepper,
Hamilton & Scheetz, counsel for Glenmede, the Trustee and the Charitable
Trusts, dated the Closing Date, in form and substance satisfactory to the
Underwriters, to the effect that:
(i) Each Charitable Trust was duly established either by will or
by execution of a trust agreement (the "Governing Instrument(s)"), and
the Trustee is the duly appointed and incumbent trustee or, in the
case of The Medical Trust, the duly appointed and incumbent co-
trustee, of each such Charitable Trust and, except as set forth in the
next succeeding sentence, each Governing Instrument duly empowers the
Trustee, on behalf of such Charitable Trust, to execute and deliver
this Agreement and to sell the Shares being sold to the Underwriters
by such Charitable Trust; the execution and delivery of this
Agreement and the sale of the Shares to the Underwriters (A) by The
Medical Trust require the consent of the other co-trustee, which has
been obtained, and (B) by certain of the Charitable Trusts require the
consent of the holders of the outstanding shares of Class A Voting
Common Stock of The Glenmede Corporation, which has been obtained;
(ii) This Agreement has been duly authorized, executed and
delivered by or on behalf of each Charitable Trust and Glenmede, and
all authorizations and consents necessary for the execution and
delivery by each Charitable Trust and Glenmede of this Agreement have
been given and are in full force and effect on the date hereof;
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(iii) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated thereby will not
conflict with or result in a breach or violation of, or constitute as
default under, any of the terms or provisions of (A) law applicable to
Glenmede or any of the Charitable Trusts, (B) any Governing
Instrument, or (C) to our knowledge, any material agreement,
instrument, decree, judgment or order binding upon Glenmede or any
Charitable Trust or any material portion of the properties of Glenmede
or any Charitable Trust; and no consent, approval or authorization of
any governmental body is required for the performance by Glenmede or
any Charitable Trust of this Agreement;
(iv) Upon delivery of the certificates for the Shares to be sold
by each Charitable Trust pursuant to this Agreement, together with the
executed stock powers attached thereto, and payment therefor by the
Underwriters pursuant to this Agreement, the Underwriters will acquire
such Shares free and clear of any adverse claim (as defined in Article
8 of the Uniform Commercial Code as in effect in the Commonwealth of
Pennsylvania), assuming that the Underwriters acquire the Shares in
good faith and without notice of any such adverse claim; and
(v) Glenmede is a trust company (without banking powers) duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania; Glenmede is duly qualified to transact
business and is in good standing as a foreign corporation in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on Glenmede and its subsidiaries, taken
as a whole.
In rendering such opinion, such counsel may rely as to matters of fact
upon certificates of officers of the Company and its subsidiaries and public
officials and include such limitations and assumptions as are customarily
contained in opinions given by counsel for issuers in securities transactions.
With respect to certain matters relating to the laws of the State of
New York, counsel for Glenmede, the Trustee and the Charitable Trusts may rely
on the
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opinion of counsel for the Underwriters.
(g) You shall have received on the Closing Date an opinion of Davis
Polk & Wardwell, counsel for the Underwriters, dated the Closing Date, as
to certain matters.
With respect to certain matters relating to the laws of the
Commonwealth of Pennsylvania, Davis Polk & Wardwell may rely on the opinions of
counsel for the Company and counsel for Glenmede, the Trustee and the Charitable
Trusts.
(h) You shall have received on the date hereof and the Closing Date a
letter dated the date hereof or the Closing Date, as the case may be, in
each case in form and substance satisfactory to you, from independent
public accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectus; provided that
the letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request confirming as of the Option
Closing Date the matters referred to above in this Article VII.
VIII.
The obligations of the Charitable Trusts to deliver certificates for
the Shares to be purchased and sold hereunder on the Closing Date or on the
Option Closing Date, as the case may be, are subject to all of the following
conditions:
(a) The Charitable Trusts shall have been tendered payment on the
Closing Date or on the Option Closing Date, as the case may be, for the
Shares as provided in Article III hereof; and
(b) The conditions set forth in Article VII(b), (e) and (h) to the
Underwriters' obligations hereunder shall have been satisfied.
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IX.
In further consideration of the agreements of the Company herein
contained, the Charitable Trusts covenant as follows:
(a) The Company shall have received on the Closing Date a certificate,
dated the Closing Date and signed by the Trustee on behalf of each
Charitable Trust, to the effect that the representations and warranties of
such Charitable Trust contained herein are true and correct as of the
Closing Date;
(b) The Company shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
Glenmede, to the effect that the representations and warranties of Glenmede
contained herein are true and correct as of the Closing Date; and
(c) The Company shall have received on the Closing Date an opinion
of Pepper, Hamilton & Scheetz, counsel for Glenmede, the Trustee and the
Charitable Trusts, dated the Closing Date, in form and substance as set
forth in Article VII(f) of this Agreement.
X.
In further consideration of the agreements of the Underwriters herein
contained, the Company covenants as follows:
(a) To furnish you, without charge, four signed copies of the
Registration Statement (including all amendments and exhibits thereto and
documents incorporated therein by reference) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (including each
amendment thereto) (without exhibits thereto but including documents
incorporated therein by reference) and to furnish you in New York City,
without charge, prior to 10 A.M. local time on the business day next
succeeding the date of this Agreement and, during the period mentioned in
paragraph (c) below, as many copies of the Prospectus, any documents
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incorporated therein by reference, and any supplements and amendments
thereto as you and they may reasonably request; The terms "supplement" and
"amendment" or "amend" as used in this Agreement shall include all
documents subsequently filed by the Company with the Commission pursuant to
the Exchange Act that are deemed to be incorporated by reference in the
Prospectus;
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish you a copy of each such proposed amendment or
supplement and to file no such proposed amendment or supplement to which
you reasonably object unless such proposed amendment or supplement is, in
the opinion of Counsel to the Company, required by law;
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law or any agreement
between the Company and the Trustee, Glenmede or the Charitable Trusts,
forthwith to prepare, file with the Commission (but only to the extent
required by the Commission's rules and regulations) and furnish, at its own
expense, to the Underwriters and to the dealers (whose names and addresses
you will furnish to the Company) to which Shares may have been sold by you
on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented will
comply with applicable law;
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request and to pay all expenses (including fees and disbursements of
counsel) in connection therewith; provided, that nothing contained in this
Paragraph shall require the Company to qualify as a foreign corporation in
any
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jurisdiction where the operations and business of the Company would not
otherwise require such qualification; and
(e) To make generally available to the Company's security holders as
soon as practicable an earnings statement covering the twelve-month period
ending December 31, 1996, that satisfies the provisions of Section 11(a) of
the Securities Act and the Rules and Regulations (including, at the option
of the Company, Rule 158).
XI.
The Company and the Trustee, severally and not jointly, agree to pay
or cause to be paid, in such proportion as they shall have agreed in the
Registration Rights Agreement dated February 1, 1996, between the Company and
The Glenmede Trust Company in its corporate capacity and as trustee or co-
trustee of the Charitable Trusts, all taxes, if any, on the transfer and sale of
the Shares being sold by the Charitable Trusts and all costs and expenses
incident to the performance of the obligations of the Company and the Charitable
Trusts under this Agreement, including, but not limited to, all expenses
incident to the delivery of the Shares, the fees and expenses of counsel and
accountants for the Trustee, the Charitable Trusts and the Company, the costs
and expenses incident to the preparation, printing and filing of the
Registration Statement (including all amendments and exhibits thereto) and the
Prospectus and any amendments or supplements thereto, the expenses of qualifying
the Shares under the securities or Blue Sky laws of various jurisdictions, any
fees payable or expenses in connection with the listing of the Shares on any
securities exchange and the cost of furnishing to the Underwriters the required
copies of the Registration Statement and Prospectus and any amendments or
supplements thereto.
XII.
The Company agrees to indemnify and hold harmless each Underwriter,
Glenmede and each Charitable Trust and each person, if any, who controls any
Underwriter, Glenmede or such Charitable Trust within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages and liabilities (including without
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limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except (i) with respect
to the Charitable Trusts or Glenmede insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Charitable
Trusts or Glenmede furnished to the Company in writing by or on behalf of any
Charitable Trust or Glenmede expressly for use in the Registration Statement or
any amendment thereof, the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto), or any preliminary
prospectus; and (ii) with respect to the Underwriters insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to the Underwriters furnished to the Company in writing by or on behalf of any
Underwriter expressly for use in the Registration Statement or any amendment
thereof, the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto), or any preliminary prospectus.
Glenmede, in its individual capacity, agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act and the Company, its directors, its officers who sign the
Registration Statement or any amendment thereof and each person, if any, who
controls the Company within the meaning of either such Section, from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with reference
to information relating to the Sellers furnished in writing by or on behalf of
the Sellers expressly for use in the Registration Statement, the Prospectus, any
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preliminary prospectus or any amendment or supplement thereto. The statements
set forth under the caption "Selling Shareholders" in the Registration Statement
and the Prospectus or any amendments or supplements thereto or in any
preliminary prospectus or any amendments or supplements thereto constitute the
only written information furnished by or on behalf of any of the Charitable
Trusts, the Trustee or Glenmede referred to in Articles IV(b) and XII.
Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless Glenmede, the Charitable Trusts, the Company, the directors of the
Company, the officers of the Company who sign the Registration Statement or any
amendment thereof and each person, if any, who controls the Company, Glenmede or
any Charitable Trust within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses, reasonably incurred in connection with defending or
investigating any such claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof or the Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, the Prospectus, any preliminary
prospectus or any amendment or supplement thereto.
In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to any of the three preceding paragraphs, such person
(hereinafter called the indemnified party) shall promptly notify the person
against whom such indemnity may be sought (hereinafter called the indemnifying
party) in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including
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any impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for (a)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for all Underwriters and all persons, if any, who control any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, (b) the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Company, its directors,
its officers who sign the Registration Statement or any amendment thereof and
each person, if any, who controls the Company within the meaning of either such
Section and (c) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Charitable Trusts and Glenmede and all
persons, if any, who control any Charitable Trust or Glenmede within the meaning
of either such Section, and that all such fees and expenses shall be reimbursed
as they are incurred. In the case of any such separate firm for the
Underwriters and such control persons of Underwriters, such firm shall be
designated in writing by Morgan Stanley. In the case of any such separate firm
for the Company and such directors, officers and control persons of the Company,
such firm shall be designated in writing by the Company. In the case of any
such separate firm for the Charitable Trusts and Glenmede and such controlling
persons of the Charitable Trusts and Glenmede, such firm shall be designated in
writing by the Trustee, or its appointed successor. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional
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release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
If the indemnification provided for in the first, second or third paragraph
of this Article XII is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraphs, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand and of the indemnified party or
parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by Glenmede
on the one hand and the Underwriters on the other hand in connection with the
offering shall be deemed to be in the same respective proportions as the net
proceeds from the offering (before deducting expenses) received by the
Charitable Trusts and the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate Public Offering Price of the Shares.
Notwithstanding the immediately preceding sentence, if the losses, claims,
damages or liabilities in respect of which contribution is being sought are
caused by any untrue statement or alleged untrue statement of a material fact or
any omission or alleged omission to state a material fact other than any such
statements or omissions based upon information (i) relating to Underwriters
furnished to the Company in writing by or on behalf of any Underwriter or (ii)
relating to Glenmede or the Charitable Trusts furnished to the Company in
writing by or on behalf of Glenmede or the Charitable Trusts, then the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand in connection with the offering of the Shares shall be deemed to be
in the same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by the Charitable Trusts
(notwithstanding that the Company receives none of such proceeds) and the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover of the Prospectus, bear to the
aggregate Public Offering Price of the Shares; and, in such case, the parties
hereto agree that for
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purposes of this sentence only, the Charitable Trusts and Glenmede would be
deemed to receive no benefits from the offering of the Shares. The relative
fault of Glenmede on the one hand and the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by Glenmede or the Charitable Trusts, the Company or the Underwriters
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Glenmede and the Charitable Trusts, the Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Article XII were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Article XII, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Shares underwritten by it
and distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriter has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Article XII are several in proportion
to the respective number of Shares they have agreed to purchase hereunder, and
not joint. The remedies provided for in this Article XII are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
The indemnity and contribution agreements contained in this Article
XII and the representations and warranties of the Company, Glenmede and the
Charitable Trusts contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, Glenmede
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -28- April 3, 1996
Smith Barney Inc.
or any Charitable Trust or any person controlling Glenmede or any Charitable
Trust or the Company, its officers or directors or any other person controlling
the Company and (iii) acceptance of and payment for any of the Shares.
XIII.
This Agreement shall be subject to termination in your absolute
discretion, by notice given to the Company, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the
Philadelphia Stock Exchange, the National Association of Securities Dealers,
Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade, (ii) trading of any securities of the Company shall have
been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by New York State or Federal authorities, or (iv) there shall have
occurred any outbreak or escalation of hostilities or any change in financial
markets or any calamity or crisis that, in your judgment, is material and
adverse and (b) in the case of any of the events specified in clauses (a)(i)
through (iv), such event singly or together with any other such event makes it,
in your judgment, impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
XIV.
This Agreement shall become effective upon the execution and delivery
hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may
be, any one or more of the Underwriters shall fail or refuse to purchase Shares
that it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Firm Shares set forth opposite their respective names in Schedule II bears to
the aggregate number of Firm Shares set forth opposite
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -29- April 3, 1996
Smith Barney Inc.
the names of all such non-defaulting Underwriters, or in such other proportions
as you may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Article XIV by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased on such date,
and arrangements satisfactory to you, the Company and the Charitable Trusts for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter, the Company, Glenmede or the Charitable Trusts. In
any such case either you, the Company, Glenmede or the Charitable Trusts shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that required changes, if any, in the Registration
Statement and in the Prospectus or in any other documents or arrangements may be
effected. If, on the Option Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than one-
tenth of the aggregate number of Additional Shares to be purchased, the non-
defaulting Underwriters shall have the option to (i) terminate their obligation
hereunder to purchase Additional Shares or (ii) purchase not less than the
number of Additional Shares that such non-defaulting Underwriters would have
been obligated to purchase in the absence of such default. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of either the Company or the
Sellers to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason either the Company or the Sellers shall be
unable to perform their obligations under this Agreement, the Company or the
Sellers, as the case may be, will reimburse the Underwriters or such
Underwriters as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Underwriters in connection with
this Agreement or the offering contemplated hereunder.
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -30- April 3, 1996
Smith Barney Inc.
This Agreement may be signed in two or more counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -31- April 3, 1996
Smith Barney Inc.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York.
Very truly yours,
SUN COMPANY, INC.
By:
---------------------------------
Name:
Title:
THE CHARITABLE TRUSTS
named in Schedule I hereto,
acting severally
By: THE GLENMEDE TRUST COMPANY
Trustee for the Charitable Trusts
and not in its individual capacity
By:
---------------------------------
Name:
Title:
THE GLENMEDE TRUST COMPANY
in its individual capacity
By:
---------------------------------
Name:
Title:
<PAGE>
Morgan Stanley & Co. Incorporated
CS First Boston Corporation -32- April 3, 1996
Smith Barney Inc.
Accepted: April __, 1996
MORGAN STANLEY & CO. INCORPORATED
CS FIRST BOSTON CORPORATION
SMITH BARNEY INC.
acting severally on behalf of
themselves and the several
Underwriters named
in Schedule II hereto
By: MORGAN STANLEY & CO. INCORPORATED
By:
------------------------------------
Name:
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm Shares
Charitable Trust To Be Sold
- ---------------- -----------
<S> <C>
The Pew Memorial Trust 4,412,692
The J. Howard Pew Freedom Trust 1,039,715
The Mabel Pew Myrin Trust 592,400
The J.N. Pew, Jr. Charitable Trust 525,889
The Medical Trust 229,304
---------
Total 6,800,000
=========
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
<CAPTION>
Number of
Firm Shares
Underwriter To Be Sold
- ----------- -----------
<S> <C>
Morgan Stanley & Co. Incorporated 2,144,720
CS First Boston Corporation 1,608,540
Smith Barney Inc. 1,608,540
Bear, Stearns & Co. Inc. 172,600
Dean Witter Reynolds Inc. 172,600
A.G. Edwards & Sons, Inc. 172,600
Howard, Weil, Labouisse, Friedrichs Incorporated 172,600
Lehman Brothers Inc. 172,600
Merrill Lynch, Pierce, Fenner & Smith Incorporated 172,600
Petrie Parkman & Co. 115,000
Pryor, McClendon, Counts & Co., Inc. 115,000
Salomon Brothers Inc 172,600
---------
Total 6,800,000
=========
</TABLE>
<PAGE>
EXHIBIT 5
April 3, 1996
Sun Company, Inc.
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103
Ladies and Gentlemen:
I am the Assistant General Counsel for Sun Company, Inc. ("Sun"), a Pennsylvania
corporation. I have been asked to deliver this opinion in connection with the
registration under the Securities Act of 1933, as amended, of 7,820,000
Depositary Shares, each of which represents one-half of a share of Sun's Series
A Cumulative Preference Stock ("Depositary Shares"). I, or members of my staff,
have examined Sun's corporate records as I have deemed necessary or advisable in
expressing this opinion.
It is my opinion that the 7,820,000 Depositary Shares of Sun covered by Sun's
registration statement on Form S-3 (File No. 333-01537), filed by Sun with the
Securities and Exchange Commission (the "Commission") on March 7, 1996 as
amended by Amendment No. 1 thereto filed by Sun with the Commission on
March 19, 1996 which was declared effective by the Commission on April 1, 1996
and amended by the Post-Effective Amendment No. 1 filed by Sun with the
Commission on April 3, 1996 (the "Registration Statement"), have been duly
authorized and validly issued and are fully paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Jonathan C. Waller
JONATHAN C. WALLER, ESQUIRE
Assistant General Counsel
