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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Sun Company, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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Your VOTE is important
Sun Company, Inc. Proxy Statement
[LOGO OF SUN CO. APPEARS HERE]
1998 NOTICE OF ANNUAL MEETING
<PAGE>
[LOGO OF SUNOCO APPEARS HERE] SUN COMPANY, INC.
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
NOTICE OF ANNUAL MEETING
Dear Sun Shareholder:
On Thursday, May 7, 1998, Sun Company, Inc. will hold its 1998 Annual Meeting
of Shareholders at the Philadelphia Museum of Art, Van Pelt Auditorium, 26th
Street and the Benjamin Franklin Parkway, Philadelphia. The meeting will begin
at 9:30 a.m.
Only shareholders who owned stock at the close of business on February 10,
1998 can vote at this meeting or any adjournments that may take place. At the
meeting we will:
1. Elect a Board of Directors;
2. Approve the appointment of our independent auditors for 1998; and
3. Attend to other business properly presented at the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE TWO PROPOSALS
OUTLINED IN THIS PROXY STATEMENT.
At the meeting we will also report on Sun's 1997 business results and other
matters of interest to shareholders.
Sun recently mailed a copy of its 1997 Annual Report to all shareholders. The
approximate date of mailing for this proxy statement and card(s) is March 23,
1998.
We hope that you like the new format of our Proxy Statement. We welcome your
comments.
By Order of the Board of Directors,
/s/ Ann C. Mule
Ann C. Mule
General Attorney and Corporate Secretary
March 23, 1998
1
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Questions and Answers....................................................... 3
Proposals You May Vote On................................................... 7
Nominees for the Board of Directors......................................... 8
Statement on Corporate Governance........................................... 12
Board Committee Membership Roster........................................... 16
Directors' Compensation..................................................... 17
Named Executive Officers.................................................... 18
1997 Compensation Highlights.............................................. 18
Stock Performance Graph................................................... 19
Directors' and Officers' Ownership of Sun Stock............................. 20
Executive Compensation: Report of the Compensation Committee................ 22
Executive Compensation, Pension Plans & Other Arrangements.................. 26
Summary Compensation Table................................................ 26
Option Grant Table........................................................ 28
Aggregated Option/SAR Exercises and Year-End Values Table................. 29
Other Long-Term Incentive Awards.......................................... 30
Pension Plans............................................................. 31
Severance Plans and Other Information..................................... 32
</TABLE>
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QUESTIONS AND ANSWERS
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1. Q: WHAT MAY I VOTE ON?
A: (1) The election of nominees to serve on our Board of Directors; AND
(2) The approval of the appointment of our independent auditors for
1998.
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2. Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: The Board recommends a vote FOR each of the nominees and FOR the
appointment of Ernst & Young LLP as independent auditors for 1998.
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3. Q: WHO IS ENTITLED TO VOTE?
A: Shareholders as of the close of business on February 10, 1998 (the
Record Date) are entitled to vote at the Annual Meeting.
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4. Q: HOW DO I VOTE?
A: Sign and date each proxy card you receive and return it in the
prepaid envelope. If you return your signed proxy card but do not
mark the boxes showing how you wish to vote, your shares will be
voted FOR the two proposals. You have the right to revoke your
proxy at any time before the meeting by:
(1) notifying Sun's Corporate Secretary;
(2) voting in person; OR
(3) returning a later-dated proxy card.
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5. Q: WHO WILL COUNT THE VOTE?
A: Representatives of The Corporation Trust Company, an independent
tabulator, will count the votes and act as the inspector of
election.
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6. Q: IS MY VOTE CONFIDENTIAL?
A: Proxy cards, ballots and voting tabulations that identify
individual shareholders are mailed or returned directly to The
Corporation Trust Company, and handled in a manner that protects
your voting privacy. Your vote will not be disclosed except: (1)
as needed to permit The Corporation Trust Company to tabulate and
certify the vote; (2) as required by law; or (3) in limited
circumstances such as a proxy contest in opposition to the Board.
Additionally, all comments written on the proxy card or elsewhere
will be forwarded to management, but your identity will be kept
confidential unless you ask that your name be disclosed.
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7. Q: WHAT SHARES ARE INCLUDED ON THE PROXY CARD(S)?
A: The shares on your proxy card(s) represent ALL of your shares,
including those in Sun's Dividend Reinvestment Plan and shares
held in custody for your account by Bankers Trust Company as
trustee for the Sun Company, Inc. Capital Accumulation Plan (or
"SunCAP"), Sun's 401(k) plan for employees. If you do not return
your proxy card(s), your shares (except for SunCAP) will not be
voted. See Question 11 for an explanation of the voting procedure
for SunCAP shares.
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8. Q: WHAT DOES IT MEAN IF I RECEIVE ONE BLUE AND ONE YELLOW PROXY CARD?
A: You will receive both a blue and a yellow card only if you hold
both Sun's common stock and Depositary Shares.
BLUE CARD: Shows the total number of shares of Sun's
common stock registered to you, held through
the Dividend Reinvestment Plan, and/or held in
SunCAP.
YELLOW CARD: Shows the number of Depositary Shares you own.
By completing the yellow card, you're
instructing First Chicago Trust Company of New
York, the Preference Stock Depositary, how to
vote your underlying preference shares.
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9. Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE BLUE OR YELLOW PROXY CARD?
A: If your shares are registered differently and are in more than one
account, you will receive more than one blue or yellow card. Sign
and return all proxy cards to ensure that all your shares are
voted. We encourage you to have all accounts registered in the
same name and address (whenever possible). You can accomplish this
by contacting our transfer agent, First Chicago Trust Company of
New York, at (800) 888-8494.
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10. Q: HOW MANY SHARES CAN VOTE?
A: As of the Record Date, February 10, 1998, 70,680,379 shares of
common stock and 24,067,520 Depositary Shares were issued and
outstanding. Every shareholder of common stock is entitled to one
vote for each share held. Each Depositary Share represents one-
half of a share of the Series A Cumulative Preference Stock, and
is entitled to one-half of a vote. If you hold Depositary Shares,
you are entitled to vote the underlying Preference Stock on all
matters submitted to a vote of holders of Sun's common stock. In
summary, there were a total of 82,714,139 eligible votes as of the
Record Date.
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11. Q: HOW IS SUN COMMON STOCK IN SUNCAP (SUN'S 401(K) PLAN FOR
EMPLOYEES) VOTED?
A: SunCAP votes receive the same confidentiality as all other shares
voted. If you hold shares of Sun common stock through SunCAP, you
must instruct the SunCAP trustee, Bankers Trust Company, how to
vote your shares. If you do not return your proxy card (or return
it with an unclear voting designation, or with no voting
designation at all), then Bankers Trust will vote the shares in
your SunCAP account in proportion to the way the other SunCAP
participants voted their shares.
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12. Q: WHAT IS A "QUORUM"?
A: A "quorum" is a majority of the outstanding shares. They may be
present at the meeting or represented by proxy. There must be a
quorum for the meeting to be held, and a proposal must receive
more than 50% of the shares voting to be adopted. If you submit a
properly executed proxy card, even if you abstain from voting,
then you will be considered part of the quorum. However,
abstentions are not counted in the tally of votes FOR or AGAINST a
proposal. A WITHHELD vote is the same as an abstention.
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13. Q: WHO CAN ATTEND THE ANNUAL MEETING AND HOW DO I GET A TICKET?
A: All shareholders on February 10, 1998 can attend. Just check the
box on your proxy card or, if your shares are held through a
broker and you'd like to attend, please write to Ann C. Mule,
General Attorney and Corporate Secretary, Sun Company, Inc., 1801
Market Street, Philadelphia, PA 19103-1699. Include a copy of your
brokerage account statement or an omnibus proxy (which you can get
from your broker), and we will send you a ticket.
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14. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: Although we do not know of any business to be considered at the
1998 Annual Meeting other than the proposals described in this
proxy statement, if any other business is presented at the Annual
Meeting, your signed proxy card gives authority to Robert H.
Campbell, Sun's Chairman and Chief Executive Officer, and Jack L.
Foltz, Sun's Vice President and General Counsel, to vote on such
matters at their discretion.
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15. Q: WHO ARE THE LARGEST PRINCIPAL SHAREHOLDERS?
A: As of December 31, 1997, no shareholder owned more than 5% of
Sun's common stock, and no shareholder owned more than 5% of the
voting stock.
However, Wellington Management Company, LLP (75 State Street,
Boston, MA 02109) owned 2,165,100 Depositary Shares or 9.0% of
this class (1.3% of the total voting stock). The Capital Group
Companies, Inc. (333 South Hope Street, Los Angeles, CA 90071)
owned 2,495,000 Depositary Shares, or 10.4% of this class (1.5% of
the total voting stock).
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16. Q: WHEN ARE THE SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING DUE?
A: All shareholder proposals to be considered for inclusion in next
year's proxy statement must be submitted in writing to Ann C.
Mule, General Attorney and Corporate Secretary, Sun Company, Inc.,
Ten Penn Center--17th Floor, 1801 Market Street, Philadelphia, PA
19103-1699 by November 18, 1998.
Additionally, Sun's advance notice bylaw provisions require that any
shareholder proposal to be presented from the floor of the 1999 Annual
Meeting must be submitted in writing to Ann C. Mule, at the above
address, by December 31, 1998, and must be accompanied by the name,
residence and business address of the nominating shareholder; a
representation that the shareholder is a record holder of Sun stock or
holds Sun stock through a broker and the number and class of shares
held; and a representation that the shareholder intends to appear in
person or by proxy at the 1999 Annual Meeting to present the proposal.
Proposals may be presented from the floor only after Sun's Board of
Directors has determined that it is a proper matter for consideration
under our bylaws.
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17. Q: CAN A SHAREHOLDER NOMINATE SOMEONE TO BE A DIRECTOR OF THE COMPANY?
A: As a shareholder, you may recommend any person as a nominee for
director of Sun by writing to the Governance Committee of the
Board of Directors, c/o Sun Company, Inc., Ten Penn Center, 1801
Market Street, Philadelphia, PA 19103-1699. Recommendations must
be received by December 31, 1998 for the 1999 Annual Meeting, and
must be accompanied by the name, residence and business address of
the nominating shareholder; a representation that the shareholder
is a record holder of Sun stock or holds Sun stock through a
broker and the number and class of shares held; a representation
that the shareholder intends to appear in person or by proxy at
the meeting of the shareholders to nominate the individual(s) if
the nominations are to be made at a shareholder meeting;
information regarding each nominee which would be required to be
included in a proxy statement; a description of any arrangement or
understandings between and among the shareholder and each and
every nominee; and the written consent of each nominee to serve as
a director, if elected.
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18. Q: HOW MUCH DID THIS PROXY SOLICITATION COST?
A: Morrow & Co., Inc. was hired to assist in the distribution of
proxy materials and solicitation of votes for $10,000, plus
estimated out-of-pocket expenses of $20,000. We also reimburse
brokerage houses and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding proxy
and solicitation materials to shareholders.
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6
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PROPOSALS YOU MAY VOTE ON
1.ELECTION OF DIRECTORS
There are 13 nominees for election this year. Detailed information on each
is provided on pages 8 to 11. All directors are elected annually, and serve
a one-year term until the next Annual Meeting. If any director is unable to
stand for re-election, the Board may reduce its size or designate a
substitute. If a substitute is designated, proxies voting on the original
director candidate will be cast for the substituted candidate.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THESE DIRECTORS.
2. APPROVAL OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
The Audit Committee has recommended, and the Board has approved, the
appointment of Ernst & Young LLP ("Ernst & Young") as our independent
auditors for 1998 subject to your approval. Ernst & Young has served as our
independent auditors since 1996. They have unrestricted access to the Audit
Committee to discuss audit findings and other financial matters.
Representatives of Ernst & Young will attend the Annual Meeting to answer
appropriate questions. They also may make a statement.
Audit services provided by Ernst & Young during 1997 included an audit of
Sun's consolidated financial statements, audits of the separate financial
statements of certain Company affiliates, audits of employee benefit plan
financial statements and a review of Sun's Annual Report and certain other
filings with the SEC and certain other governmental agencies. In addition,
Ernst & Young provided various non-audit services to the Company during
1997.
YOUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF ERNST &
YOUNG'S APPOINTMENT AS INDEPENDENT AUDITORS FOR 1998.
Abstentions or votes withheld on any of the proposals will be treated as
present at the meeting for purposes of determining a quorum, but will not be
counted as votes cast.
7
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NOMINEES FOR THE BOARD OF DIRECTORS
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[PICTURE OF ROBERT H. CAMPBELL Director since 1988
ROBERT H. Age 60
CAMPBELL
APPEARS HERE] Mr. Campbell was elected Chairman of the Board of Sun in May
1992 and was elected Chief Executive Officer in September
1991. Previously, he was President from February 1991 until
December 1996 and an Executive Vice President from November
1988 until February 1991. He joined the Company in 1960. Mr.
Campbell is also a director of CIGNA Corporation and Hershey
Foods Corporation.
[PICTURE OF RAYMOND E. CARTLEDGE Director since 1990
RAYMOND E. Age 68
CARTLEDGE
APPEARS HERE] Mr. Cartledge retired as a director of Savannah Foods &
Industries, Inc. in December 1997, a position he had held
since January 1995, and he retired as Chairman of Savannah
Foods & Industries, Inc. in October 1997, a position he had
held since April 1996. Mr. Cartledge retired as Chairman and
Chief Executive Officer of Union Camp Corporation in June
1994, a position he had held since 1986, and he continues as
a director. Mr. Cartledge is also a director of Blount, Inc.;
Chase Brass Industries, Inc.; Delta Air Lines, Inc.; and UCAR
International.
[PICTURE OF ROBERT E. CAWTHORN Director since 1989
ROBERT E. Age 62
CAWTHORN
APPEARS HERE] Mr. Cawthorn became Managing Director of Global Health Care
Partners, DLJ Merchant Banking Partners, L.P. in January
1997. He is Chairman Emeritus of Rhone-Poulenc Rorer, Inc. He
retired as Chairman of Rhone-Poulenc Rorer, Inc. in May 1996,
a position he had held since 1986 and as Chief Executive
Officer in May 1995, a position he had held since 1985. He
served as President of Rhone-Poulenc Rorer from 1987 to 1993,
and as a director from 1984 to November 1997. He is also a
director of The Vanguard Group of Investment Companies and
CBS Corporation.
[PICTURE OF JOHN G. DROSDICK Director since 1996
JOHN G. Age 54
DROSDICK
APPEARS HERE] Mr. Drosdick became a director and President and Chief
Operating Officer of Sun in December 1996. He was President
and Chief Operating Officer of Ultramar Corporation (which
merged with Diamond Shamrock, Inc. in 1997 to become Ultramar
Diamond Shamrock Corporation) from June 1992 to August 1996,
and from 1990 to June 1992, he was President of its U.S.
refining and marketing business. Previously, Mr. Drosdick was
President and Chief Operating Officer of Tosco Corporation
from 1987 to 1989, and from 1989 to 1990 he was President and
Chief Executive Officer of its subsidiary, Tosco Refining
Company. He is also a director of BetzDearborn, Inc.
8
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NOMINEES FOR THE BOARD OF DIRECTORS
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[PICTURE OF MARY JOHNSTON EVANS Director since 1980
MARY JOHNSTON Age 68
EVANS APPEARS
HERE] Mrs. Evans is the former Vice-Chairman of Amtrak, and is a
director of Baxter International Inc.; Delta Air Lines, Inc.;
Household International, Inc.; Saint-Gobain Corp.; Scudder
New Europe Fund; and The Dun & Bradstreet Corporation. In
addition, Mrs. Evans is a member of the advisory board of
Morgan Stanley, Dean Witter, Discover & Co.
[PICTURE OF THOMAS P. GERRITY Director since 1990
THOMAS P. Age 56
GERRITY
APPEARS HERE] Dr. Gerrity has been Dean of The Wharton School of the
University of Pennsylvania since July 1990. Previously, Dr.
Gerrity had served as President of CSC Consulting and Vice
President of Computer Science Corp. from 1989 to June 1990.
He is also a director of Digital Equipment Corporation; CVS
Corporation; Reliance Group Holdings, Inc.; The Federal
National Mortgage Association ("Fannie Mae"); and is a
trustee of the Miller, Anderson & Sherrerd LLP's Mutual Funds
Group.
[PICTURE OF ROSEMARIE B. GRECO
ROSEMARIE B. Age 51
GRECO APPEARS
HERE] In August 1997, Ms. Greco resigned her positions as President
of CoreStates Financial Corp. and as President and Chief
Executive Officer of CoreStates Bank. She served as Chief
Banking Officer of CoreStates Financial Corp. from August
1994 to June 1996, and as Chief Retail Services Officer from
October 1993 to August 1994. She was a bank director from
April 1992 to August 1997. She was the President and Chief
Executive Officer of CoreStates First Pennsylvania Bank
Division of CoreStates Bank from March 1991 to August 1994.
Ms. Greco is also a director of PECO Energy Company.
9
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NOMINEES FOR THE BOARD OF DIRECTORS
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[PICTURE OF JAMES G. KAISER Director since 1993
JAMES G. KAISER Age 55
APPEARS HERE]
Mr. Kaiser retired as President, Chief Executive Officer and
director of Quanterra Incorporated in January 1996, positions
he had held since June 1994. Quanterra succeeded to the
environmental analytical services division of International
Technology Corporation and Enseco, a unit of Corning
Incorporated, for which Mr. Kaiser had been President and
Chief Executive Officer since June 1992. Previously, he had
served as Senior Vice President and General Manager of
Corning's Technical Products Division and Latin America/Asia
Pacific Exports Group since 1984. Mr. Kaiser is also a
director of Mead Corp.; The Stanley Works; and The Keystone
Center.
[PICTURE OF ROBERT D. KENNEDY Director since 1995
ROBERT D. Age 65
KENNEDY
APPEARS HERE] Mr. Kennedy retired as Chairman of the Board of Union Carbide
Corporation in December 1995, a position he had held since
December 1986. Previously, he served as its Chief Executive
Officer from April 1986 to April 1995 and its President from
April 1986 to 1993. Since 1985, he has been one of its
directors. Mr. Kennedy is also a director of Birmingham Steel
Corp.; General Signal Corporation; Kmart Corporation; UCAR
International; Union Camp Corporation; and Lion Ore Mining
International, Ltd. Mr. Kennedy is also on the advisory
boards of The Blackstone Group and RFE Investment Partners.
[PICTURE OF R. ANDERSON PEW Director since 1978
R. ANDERSON Age 61
PEW APPEARS
HERE] Mr. Pew retired from Sun in May 1996 as Chief Executive
Officer of Radnor Corporation, a position he had held since
March 1995, and as President of Helios Capital Corporation, a
position he had held since September 1977, both Sun
subsidiaries. Mr. Pew joined Sun in 1958, and served as
Corporate Secretary from May 1974 until July 1977. Mr. Pew is
also Chairman of the Board of Directors of The Glenmede
Corporation and is a director of its subsidiary, The Glenmede
Trust Company. Mr. Pew is also a director of Alex. Brown
Capital Advisory and Trust Company.
10
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NOMINEES FOR THE BOARD OF DIRECTORS
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[PICTURE OF WILLIAM F. POUNDS Director since 1973
WILLIAM F. Age 69
POUNDS APPEARS
HERE] Dr. Pounds is a Professor at the Alfred P. Sloan School of
Management at Massachusetts Institute of Technology. He
joined its faculty in 1961 and served as Dean of the Sloan
School from 1966 to 1980. Dr. Pounds retired as President and
Chief Executive Officer of Rockefeller Financial Services,
Inc. in May 1991, a position he had held since 1982. Dr.
Pounds is also a director of IDEXX Laboratories, Inc. and the
Putnam Mutual Funds.
[PICTURE OF G. JACKSON RATCLIFFE
G. JACKSON Age 61
RATCLIFFE
APPEARS HERE] Mr. Ratcliffe is Chairman of the Board of Hubbell
Incorporated, a position he has held since 1987, having been
first elected to its Board in 1980. Since January 1988, he
has also served as its President and Chief Executive Officer.
Mr. Ratcliffe is also a director of Aquarion Company;
Praxair, Inc.; and Olin Corporation.
[PICTURE OF ALEXANDER B. TROWBRIDGE Director since 1990
ALEXANDER B. Age 68
TROWBRIDGE
APPEARS HERE] Mr. Trowbridge is President of Trowbridge Partners Inc. He
assumed this position in January 1990 upon his retirement as
President of the National Association of Manufacturers, a
position he had held since 1980. Mr. Trowbridge also serves
as a director of E. M. Warburg, Pincus Funds; Harris
Corporation; ICOS Corporation; IRI International Corporation;
New England Life Insurance Company; The Gillette Company; The
Rouse Company; and Waste Management, Inc.
11
<PAGE>
STATEMENT ON CORPORATE GOVERNANCE
The corporate governance standards established by the Board provide a
structure within which directors and management can effectively pursue Sun's
objectives for the benefit of its shareholders. Sun's business is managed
under the direction of the Board of Directors, but the Board delegates the
conduct of business to Sun's senior management team. The principal functions
of the Board are to:
. Select and evaluate the Chief Executive Officer;
. Review and approve Sun's strategic direction and annual operating
plan, and monitor Sun's performance against the plan;
. Review management compensation and succession planning;
. Advise and counsel management; and
. Review the structure and operation of the Board.
SELECT AND EVALUATE THE CHIEF EXECUTIVE OFFICER: Annually, the outside
directors meet to evaluate the performance of the Chief Executive Officer.
The results of this evaluation are then clearly communicated to the Chief
Executive Officer.
REVIEW AND APPROVE SUN'S STRATEGIC DIRECTION AND ANNUAL OPERATING PLAN, AND
MONITOR SUN'S PERFORMANCE AGAINST THE PLAN: The Board stays abreast of
political, regulatory and economic trends and developments that may impact
Sun's strategic direction. Each year, the Board and management participate
in a two-day off-site meeting at which major long-term strategies and
financial and other objectives and plans are discussed and approved.
Annually, the Board reviews and approves a three-year strategic plan and a
yearly budget and operating plan for the Company. On an ongoing basis
during the year, the Board monitors Sun's performance against its annual
operating plan.
12
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REVIEW MANAGEMENT COMPENSATION AND SUCCESSION PLANNING: The Board reviews
and approves the Chief Executive Officer's evaluation of the top management
team. On an annual basis, the following occur:
. The Chief Executive Officer reviews succession planning and
management development with the Board, and provides an assessment of
persons considered potential successors.
. The Board (largely through the Compensation Committee) evaluates the
compensation plans for senior management and other employees to
ensure they are appropriate, competitive and properly reflect Sun's
objectives and performance.
. The Chief Executive Officer meets with the Compensation Committee to
develop appropriate goals and objectives for the next year, which
are then discussed with the entire Board.
. The Compensation Committee meets to review performance against these
established goals and communicates its evaluation to the Chief
Executive Officer.
ADVISE AND COUNSEL MANAGEMENT: Providing advice and counsel to management
occurs both in formal Board and Committee meetings and through informal,
individual director's contacts with the Chief Executive Officer and other
members of management. The Board is composed of individuals whose
knowledge, background, experience and judgment are useful to the Company.
The information needed for the Board's decision-making generally will be
found within Sun, and Board members have full access to management. On
occasion, the Board may seek legal or other expert advice from a source
independent of management, and generally this is done with the knowledge
and concurrence of the Chief Executive Officer.
REVIEW STRUCTURE AND OPERATIONS OF THE BOARD: The Board and the Governance
Committee periodically review the Board's structure and operations.
. SELECTION AND EVALUATION OF BOARD CANDIDATES: When searching for new
nominees, the Board selects candidates based on their character,
judgment, and business experience. The Governance Committee
evaluates the performance of individual directors on an annual
basis. This evaluation provides the basis for the Board's
recommendation of a slate of directors to the shareholders. You
should know the following information about this process:
. Each director is elected annually by shareholders for a one-
year term.
13
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. The Board consists entirely of independent outside directors
except for the Chief Executive Officer and the Chief
Operating Officer. None of the directors has a consulting
contract with Sun.
. Periodically, the full Board conducts an assessment of how it
is functioning as a whole so that it may continuously improve
its performance.
. BOARD PRACTICES: The Board observes the following general practices:
. The mandatory retirement age for directors is 72.
. An outside director must tender his or her resignation for
consideration by the Governance Committee if the position he
or she held at the time of election changes.
. New directors must participate in an orientation process that
includes reviewing extensive materials regarding Sun's
business and operations, visits to Sun facilities and
meetings with key personnel. As part of this process, new
directors are required to attend meetings of the Board's
committees on a rotating basis to acquaint them with the work
and operations of each.
. BOARD OPERATIONS AND MEETINGS: Sun's Board usually meets eight times
per year in regularly scheduled meetings, but will meet more often
if necessary. The Board held nine meetings during 1997, and all of
the directors attended at least 75% of the Board meetings and
Committee meetings of which they were members. The Board meets
periodically, at least annually, without the Chief Executive Officer
and the Chief Operating Officer. While the Board believes that a
carefully planned agenda is important for effective Board meetings,
the agenda is flexible enough to accommodate unexpected
developments. You should know the following information about Board
operations and meetings:
. The items on the agenda are typically determined by the
Chairman in consultation with the Board. Any director may
request that an item be included on the agenda.
. At Board meetings, ample time is scheduled to assure full
discussion of important matters. Management presentations are
scheduled to permit a substantial proportion of Board meeting
time to be available for discussion and comments.
14
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. Generally, Board members receive information well in advance
of Board meetings so they will have an opportunity to prepare
for discussion of the items at the meeting. Information is
provided from a variety of sources, including management
reports, a comparison of performance to operating and
financial plans, reports on Sun's stock performance and
operations prepared by third parties, and articles in various
business publications. In many cases, significant items
requiring Board approval may be reviewed in one or more
meetings and voted upon in subsequent meetings, with the
intervening time being used for clarification and discussion
of relevant issues.
. COMMITTEE STRUCTURE: The full Board considers all major decisions of
the Company. However, the Board has established the following five
standing committees, each of which is chaired by an outside director
except for the Executive Committee, so that certain important areas
can be addressed in more depth than may be possible in a full Board
meeting:
. The Audit Committee examines accounting processes and
reporting systems, assesses the adequacy of internal controls
and risk management, reviews and approves Sun's financial
disclosures, and evaluates the performance and recommends the
appointment of independent auditors.
. The Governance Committee reviews the role, composition and
structure of the Board and its committees as well as
directors' compensation. It also reviews and evaluates Board
members in determining the annual directors' slate and
identifies new director nominees. This Committee, along with
the Board, is responsible for reviewing and updating Sun's
Statement on Corporate Governance.
. The Compensation Committee reviews matters related to
compensation of the Chief Executive Officer and other senior
management personnel, as well as the general employee
compensation and benefit policies and practices of the
Company. This Committee also approves goals for incentive
plans, evaluates performance against these goals, and issues
the Compensation Committee Report on executive compensation
to shareholders (see pages 22 to 25).
. The Public Affairs Committee reviews compliance with laws
governing health, environment and safety, equal employment
opportunity, and political activities. It also oversees the
administration of corporate contributions and evaluates Sun's
relationship with shareholders and all other constituencies.
. The Executive Committee exercises the authority of the Board
during the intervals between meetings of the Board.
The Board of Directors believes that corporate governance is an evolving
process and periodically reviews and updates this Statement on Corporate
Governance.
15
<PAGE>
BOARD COMMITTEE MEMBERSHIP ROSTER
(AS OF FEBRUARY 10, 1998)
<TABLE>
<CAPTION>
================================================================================
PUBLIC
NAME AUDIT COMPENSATION EXECUTIVE GOVERNANCE AFFAIRS
================================================================================
<S> <C> <C> <C> <C> <C>
R. H. Campbell X* x
- - --------------------------------------------------------------------------------
R. E. Cartledge X* x x
- - --------------------------------------------------------------------------------
R. E. Cawthorn x x x
- - --------------------------------------------------------------------------------
J. G. Drosdick x x
- - --------------------------------------------------------------------------------
M. J. Evans x x X*
- - --------------------------------------------------------------------------------
T. P. Gerrity X* x
- - --------------------------------------------------------------------------------
J. G. Kaiser x x
- - --------------------------------------------------------------------------------
R. D. Kennedy x x x
- - --------------------------------------------------------------------------------
R. A. Pew x x
- - --------------------------------------------------------------------------------
W. F. Pounds x x X*
- - --------------------------------------------------------------------------------
A. B. Trowbridge x x
================================================================================
Number of Meetings in 1997 6 7 1 5 3
================================================================================
</TABLE>
* Chairperson
16
<PAGE>
DIRECTORS' COMPENSATION
Sun annually benchmarks directors' compensation and strives to pay at the
median for companies of comparable size in its industry. Directors are
compensated partially in Sun common stock or stock equivalents to align their
interests with those of shareholders. Executive officers are not paid for
their services as directors. The following table summarizes the compensation
of Sun's directors:
DIRECTORS' COMPENSATION TABLE
<TABLE>
<CAPTION>
================================================================================
TYPE OF COMPENSATION CASH STOCK BASED
================================================================================
<S> <C> <C>
Annual Retainer $8,520 $19,880/1/
- - --------------------------------------------------------------------------------
Yearly Credit under Deferred Compensation Plan $10,000/2/
- - --------------------------------------------------------------------------------
Annual Retainer for Committee Chair $2,000
- - --------------------------------------------------------------------------------
Board or Committee Attendance Fee (per meeting)/3/ $1,250
================================================================================
</TABLE>
NOTES TO DIRECTORS' COMPENSATION TABLE:
/1/ 70% of the Annual Retainer of $28,400 is paid in shares of Sun common
stock under the Directors' Stock Retainer Plan. On May 1, 1997, each
director received 795 shares for this portion of the Annual Retainer.
/2/ In February 1996, Sun eliminated its Non-Employee Directors' Retirement
Plan. Each director's accrued benefit in that plan was transferred into
separate accounts under the Directors' Deferred Compensation Plan in the
form of share units that are not payable until death or other termination
of Board service. Since May 1996, in order to maintain an overall
competitive directors' compensation package, each outside director's
account is credited annually with $10,000 worth of share units.
/3/ A fee of $1,250 per day is also paid in cash for special
assignments.
. DIRECTORS' DEFERRED COMPENSATION: The Directors' Deferred Compensation
Plan permits outside directors to defer all or a portion of their
compensation. Payments of compensation deferred under this plan are
restricted in terms of the earliest and latest dates that payments may
begin. Deferred compensation is designated as share units, cash units, or
a combination of both. A share unit is treated as if it were invested in
shares of Sun common stock and dividend equivalents are credited to each
Director in the form of additional share units. Share units are settled in
cash, based upon the fair market value of Sun common stock at the time of
payment. Cash units accrue interest as if they were invested in 10-year
Treasury Notes.
. DIRECTORS' STOCK OWNERSHIP GUIDELINES: In October 1997, Sun set minimum
stock ownership guidelines for all directors. Each director is expected to
own, within a five-year period, Sun common stock with a market value equal
to at least three times the average annual director's compensation,
including retainer and Board fees (currently, this ownership guideline is
approximately $200,000). Included in the determination of stock ownership
for purposes of these guidelines are all shares beneficially owned and any
share units held in the Directors' Deferred Compensation Plan. As of the
February 10, 1998 record date, all of Sun's current directors were in
compliance with these stock ownership guidelines. Sun has also established
stock ownership guidelines for its executives, and these are discussed on
page 22.
17
<PAGE>
NAMED EXECUTIVE OFFICERS/1/
[PICTURE OF ROBERT H. [PICTURE OF JOHN G.
CAMPBELL APPEARS HERE] DROSDICK APPEARS HERE]
ROBERT H. CAMPBELL JOHN G. DROSDICK
Chairman and President and
Chief Executive Officer Chief Operating Officer
1997 Compensation Highlights/2/
(In Dollars)
[BAR CHART APPEARS HERE]
================================================================================
R.H. Campbell J.G. Drosdick R.M. Aiken, Jr. D.E. Knoll D.M. Fretz
- - --------------------------------------------------------------------------------
Salary 699,140 560,040 329,992 326,976 281,996
- - --------------------------------------------------------------------------------
Annual
Incentive 882,000 557,300 335,900 236,600 236,600
================================================================================
[PHOTO OF ROBERT M. [PHOTO OF DAVID E. [PHOTO OF DEBORAH M.
AIKEN, JR. APPEARS HERE] KNOLL APPEARS HERE] FRETZ APPEARS HERE]
ROBERT M. AIKEN, JR. DAVID E. KNOLL DEBORAH M. FRETZ
Executive Vice President Senior Vice President Senior Vice President
and Chief Financial Northeast Refining Lubricants and Logistics
Officer and Chemicals
- - --------------------------------------------------------------------------------
/1/ The Chief Executive Officer and the next four most highly compensated
executive officers during the last fiscal year.
/2/ For more comprehensive information refer to pages 26 through 30.
18
<PAGE>
Sun's Performance Peer Group is composed of the major domestic independent
refining and marketing companies and integrated oil companies which are both
similar in size to Sun and represent its competitors in certain geographic
areas:
STOCK PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN/1/
-------------------------------
Peer Group
-------------------------------
Amerada Hess
Ashland
Crown Central
Tosco
Total Petroleum, N.A./2/
Ultramar Diamond Shamrock/2/
USX/Marathon
Valero
-------------------------------
[LINE GRAPH OF STOCK PERFORMANCE APPEARS HERE]
-------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
-------------------------------------------------------------------------
SUN CO. INC. 100 112 116 115 106 189
-------------------------------------------------------------------------
PEER GROUP 100 108 111 130 167 210
-------------------------------------------------------------------------
S&P 500 100 110 112 153 189 252
-------------------------------------------------------------------------
NOTES TO STOCK PERFORMANCE GRAPH:
1 Assuming that the value of the investment in Sun common stock and each
index was $100 on December 31, 1992, and that all dividends were
reinvested, this graph compares Sun's cumulative total return (i.e., based
on common stock price and dividends), plotted on an annual basis, with the
S&P 500 Stock Index (a performance indicator of the overall stock market)
and Sun's Performance Peer Group's cumulative total return.
2 On December 4, 1996, Ultramar Corporation merged with Diamond Shamrock,
Inc. to form Ultramar Diamond Shamrock Corporation ("UDS"). Prior to the
merger, Ultramar Corporation's stock price was used in the computation of
the Peer Group's Cumulative Return. On September 29, 1997, UDS acquired
Total Petroleum, N.A. ("Total") in a transaction in which each share of
Total was exchanged for .322 of a share of UDS. For purposes of this graph,
the resultant cash value of this transaction has been reinvested in the
Peer Group of companies in proportion to their market capitalization on
that date.
19
<PAGE>
DIRECTORS' & OFFICERS' OWNERSHIP OF SUN STOCK
The following table shows how much Sun common stock each Named Executive
Officer and director nominee owned as of December 31, 1997. No director or
executive officer beneficially owns more than 1% of the common stock, and
directors and executive officers as a group beneficially own approximately 2%
of the common stock. No director or executive officer beneficially owns any
Depositary Shares, other than R. M. Aiken, Jr., who beneficially owns 500
Depositary Shares.
DIRECTORS' & OFFICERS' STOCK OWNERSHIP
<TABLE>
<CAPTION>
===================================================================================
TOTAL OF SHARES OF
SHARES OF DIRECTORS' COMMON STOCK
COMMON DEFERRED BENEFICIALLY OWNED PLUS
STOCK COMPENSATION DIRECTORS' DEFERRED
BENEFICIALLY PLAN SHARE COMPENSATION PLAN
NAME OWNED /1/ UNIT BALANCE /2/ SHARE UNIT BALANCE
===================================================================================
<S> <C> <C> <C>
Robert M. Aiken, Jr. /3/ 152,857 152,857
- - -----------------------------------------------------------------------------------
Robert H. Campbell /3/ 620,762 620,762
- - -----------------------------------------------------------------------------------
Raymond E. Cartledge 4,402 6,659 11,061
- - -----------------------------------------------------------------------------------
Robert E. Cawthorn 4,585 21,190 25,775
- - -----------------------------------------------------------------------------------
John G. Drosdick/3/ 85,000 85,000
- - -----------------------------------------------------------------------------------
Mary J. Evans 3,927 12,237 16,164
- - -----------------------------------------------------------------------------------
Deborah M. Fretz /3/ 59,956 59,956
- - -----------------------------------------------------------------------------------
Thomas P. Gerrity 5,297 5,848 11,145
- - -----------------------------------------------------------------------------------
Rosemarie B. Greco /4/ 1,250 1,250
- - -----------------------------------------------------------------------------------
James G. Kaiser 3,740 3,554 7,294
- - -----------------------------------------------------------------------------------
Robert D. Kennedy 13,250 1,746 14,996
- - -----------------------------------------------------------------------------------
David E. Knoll /3,5/ 167,810 167,810
- - -----------------------------------------------------------------------------------
R. Anderson Pew /3,5/ 100,352 748 101,100
- - -----------------------------------------------------------------------------------
William F. Pounds 2,555 20,046 22,601
- - -----------------------------------------------------------------------------------
G. Jackson Ratcliffe /4/ 1,000 1,000
- - -----------------------------------------------------------------------------------
Alexander B. Trowbridge 4,250 5,848 10,098
- - -----------------------------------------------------------------------------------
All directors and
executive officers as a
group including those
named above /3,4,5/ 1,488,138 77,876 1,566,014
===================================================================================
</TABLE>
20
<PAGE>
NOTES TO STOCK OWNERSHIP TABLE:
/1/ This column includes Sun stock held by directors and officers or by certain
members of their families (for which the directors and officers have sole or
shared voting or investment power), shares of common stock they hold in
SunCAP and the Dividend Reinvestment Plan, and Sun securities directors and
officers have the right to acquire within 60 days of December 31, 1997.
/2/ Although ultimately paid in cash, the value of share units mirrors the value
of Sun common stock. Thus, the amounts ultimately realized by the directors
will reflect all changes in the market value of Sun common stock from the
date of deferral until the date of payout. The share units do not have
voting rights.
/3/ The amounts shown include shares of Sun common stock which the following
persons have the right to acquire as a result of the exercise of stock
options within 60 days after December 31, 1997 under the Sun Company, Inc.
Long-Term Incentive Plan ("LTIP") and under the Sun Company, Inc. Executive
Long-Term Stock Investment Plan ("ELSIP"), both of which are predecessor
plans to the Long-Term Performance Enhancement Plan ("LTPEP"), Sun's current
long-term incentive plan:
<TABLE>
<S> <C>
R. M. Aiken, Jr. 143,180 shares
R. H. Campbell 568,690 shares
J. G. Drosdick 40,000 shares
D. M. Fretz 57,780 shares
D. E. Knoll 154,170 shares
R. A. Pew 24,870 shares
</TABLE>
All directors and executive officers as a group (including those
named above): 1,189,320 shares
/4/ Neither Ms. Greco nor Mr. Ratcliffe has been an officer or director of Sun,
and each is standing for election to Sun's Board of Directors for the first
time. On February 11, 1998, Ms. Greco purchased 1,250 shares of Sun common
stock, and on February 17, 1998, Mr. Ratcliffe purchased 1,000 shares of Sun
common stock. These shares are included in the totals for all officers and
directors as a group.
/5/ The individuals and group named in the table have sole voting and investment
power with respect to shares of common stock beneficially owned, except that
voting and investment power is shared as follows:
<TABLE>
<S> <C>
D. E. Knoll 411 shares
R. A. Pew 16,050 shares
</TABLE>
All directors and executive officers as a group (including those
named above): 16,461 shares
21
<PAGE>
EXECUTIVE COMPENSATION: REPORT OF THE COMPENSATION COMMITTEE
THE COMMITTEE'S RESPONSIBILITIES: The Compensation Committee of the Board (the
"Committee") has responsibility for setting and administering the policies
which govern executive compensation. The Committee is composed entirely of
outside directors. Reports of the Committee's actions and decisions are
presented to the full Board. The purpose of this report is to summarize the
philosophical principles, specific program objectives and other factors
considered by the Committee in reaching its determinations regarding the
executive compensation of the Named Executive Officers.
COMPENSATION PHILOSOPHY: The Committee has approved principles for the
management compensation program which:
. Encourage strong financial and operational performance of the
Company;
. Emphasize performance-based compensation ("pay at risk"), which
balances rewards for short-term and long-term results;
. Focus executives on "beating the competition" through plans which
include measurements based on performance relative to peer
companies;
. Link compensation to the interests of shareholders by providing
stock incentives and requiring significant shareholdings; and
. Provide a competitive level of total compensation necessary to
attract and retain talented and experienced executives.
The Committee considers stock ownership by management to be an important means
of linking management's interests directly to those of shareholders. Effective
January 1997, Sun adopted stock ownership guidelines for its top 40
executives. The amount of stock required to be owned increases with the level
of responsibility of each executive, with the Chief Executive Officer expected
to own stock with a value at least equal to three times base salary. Shares
that the executives have the right to acquire through the exercise of stock
options are not included in the calculation of stock ownership for purposes of
these guidelines. Participants are expected to reach their respective stock
ownership goals over a five-year period. Sun also has established stock
ownership guidelines for its directors, and these are discussed on page 17.
22
<PAGE>
COMPENSATION METHODOLOGY: Sun strives to provide a comprehensive executive
compensation program that is competitive and performance-based in order to
attract and retain superior executive talent. Each year the Committee
reviews market data and assesses Sun's competitive position for three
components of executive compensation: (1) base salary, (2) annual
incentives, and (3) long-term incentives. To assist in benchmarking the
competitiveness of its compensation programs, Sun participates in executive
compensation surveys compiled by third-party consultants. Because the
Committee believes that the Company's direct competition for executive
talent is broader than the companies that are included in the Performance
Peer Group established for purposes of comparing shareholder returns (see
Stock Performance Graph on page 19 for more information), these surveys
include companies in the Performance Peer Group and others in the oil
industry. This information is supplemented by compensation information for
general industry. The compensation survey data reflect adjustments for each
company's relative revenue, asset base, employee population and
capitalization, along with the scope of managerial responsibility and
reporting relationships.
COMPONENTS OF COMPENSATION:
. BASE SALARY: Annual base salary is designed to compensate executives
for their level of responsibility and sustained individual
performance. The Committee approves in advance all salary increases
for executive officers. The goal is to compensate executives within
the mid-level of the range of base salaries paid by companies in the
oil industry.
. ANNUAL INCENTIVES: Annual incentive awards for the Named Executive
Officers are provided in order to promote the achievement of Sun's
business objectives. Each year the Committee considers the Company's
prior year's performance and objectives, as well as its expectations
for Sun in the upcoming year. Bearing in mind these considerations,
the Committee sets certain Company performance criteria or goals
which must be met before payments are made. Additionally, individual
performance goals may be established for each participant.
Participants receive no payments unless minimum thresholds are
achieved. Payments may range from 0% to 200% of the guideline annual
incentive, with payments increasing as performance improves.
The Committee establishes a fixed percentage of annual salary as an
executive's guideline annual incentive opportunity, based on comparative
survey data on annual incentives paid in the oil industry. The guideline
amount increases with the level of responsibility of the executive. Annual
incentive awards for 1997 were based on meeting weighted objectives for two
principal measurements:
. after-tax operating income; and
. relative ranking, as measured by return on capital employed,
or "ROCE", against the Performance Peer Group (see page 19).
23
<PAGE>
For 1997, Sun achieved slightly less than the maximum award level
established for operating income and attained the maximum award
level for ROCE ranking. As a result, the annual incentive approved
by the Committee for each Named Executive Officer was 199% of the
guideline incentive opportunity. The Bonus column of the Summary
Compensation Table on page 26 contains the annual incentive earned
for 1997 for each of the Named Executive Officers.
. LONG-TERM INCENTIVE COMPENSATION: The Committee reviews and approves
all long-term incentive awards. In 1996 and 1997, these awards were
primarily a combination of stock options and performance-based
common stock units (which represent shares of Sun common stock).
These awards provide compensation to executives only if shareholder
value increases. Common stock units also focus executives on
"beating the competition" by measuring Sun's performance versus the
Performance Peer Group. In determining the number of stock options
and performance-based common stock units awarded, the Committee
reviewed surveys of similar awards made to individuals in comparable
positions at other oil companies and the executive's past
performance. They also consider the number of long-term incentive
awards previously granted to the executive.
. Stock Options: Options have an exercise price equal to the fair market
value of common stock on the date of grant and are typically exercisable
beginning two years from the date of grant.
. Common Stock Units: Performance-based common stock units are earned only
if the Company's total common stock shareholder return (stock price
appreciation plus dividend yield) for a three-year performance period
compares favorably to that of the Performance Peer Group. Additionally,
if the price of Sun common stock at the end of the performance period is
less than the price at the beginning of this period, no common stock
units will be earned regardless of how Sun performs versus the
Performance Peer Group. In order to ensure the retention of key
executives, or as part of the compensation to a new executive hired from
outside the Company, the Committee also occasionally grants common stock
units which require only continued employment as a condition of vesting.
24
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION: The non-employee directors meet
annually, in private, to review Mr. Campbell's performance. The Committee
uses this performance evaluation in considering Mr. Campbell's
compensation. The Chief Executive Officer participates in the same programs
and receives compensation based on the same factors as the other executive
officers. However, Mr. Campbell's overall compensation reflects a greater
degree of policy and decision-making authority and a higher level of
responsibility with respect to the strategic direction and financial and
operational results of the Company. The Chief Executive Officer's
compensation components are:
. BASE SALARY: As a result of Sun's performance in 1996, Mr. Campbell
did not receive a salary increase for 1997.
. ANNUAL INCENTIVE: Annual incentive compensation for Mr. Campbell is
based upon relative attainment of the annual performance goals for
the Company, and on Mr. Campbell's individual objectives as
determined by the Committee. Based on these criteria, Mr. Campbell
was awarded $882,000 representing 199% of his guideline incentive
for performance in 1997.
. LONG-TERM INCENTIVE AWARDS: In December 1997, Mr. Campbell received
a grant of 50,000 stock options which become exercisable in December
1999, and 15,000 performance-based common stock units. In
determining the amounts granted, the Committee considered, without
specific weighting, the performance of the Company and relative
total shareholder return, the value of such awards granted to other
chief executive officers in the oil industry, and the number of
stock options and common stock units granted in prior years.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993: This Act has had no material
impact upon Sun's ability to take a tax deduction for annual compensation
in excess of $1 million paid to any of the Named Executive Officers.
Therefore, the Committee has determined that it is not necessary to seek
shareholder approval to amend any current compensation plan at this time to
comply with this Act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION: There are
none.
Respectfully submitted by the members of the Compensation Committee of the
Board of Directors:
Raymond E. Cartledge, Chair
Robert E. Cawthorn
Mary J. Evans
James G. Kaiser
Robert D. Kennedy
25
<PAGE>
EXECUTIVE COMPENSATION, PENSION PLANS & OTHER ARRANGEMENTS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION/3/
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ----------------------- -------
OTHER RESTRICTED SECURITIES
BASE ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL YEAR SALARY/1/ BONUS COMPENSATION/2/ AWARDS OPTIONS PAYOUTS COMPENSATION/4/
POSITION ($) ($) ($) ($) (#) ($) ($)
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. H. CAMPBELL 1997 699,140 882,000/5/ 0 0 50,000 0 53,935
Chairman of the 1996 699,140 0 4,789 0 45,000 0 48,922
Board and Chief 1995 699,140 377,000 3,409 0 100,000 0 48,922
Executive Officer
- - --------------------------------------------------------------------------------------------------------------------------
J. G. DROSDICK 1997 560,040 557,300 125,047 104,688/6/ 40,000 0 5,852
President and 1996 56,004/6/ 0 0 581,250/6/ 140,000/6/ 0 328
Chief Operating
Officer
- - --------------------------------------------------------------------------------------------------------------------------
R. M. AIKEN, JR. 1997 329,992 335,900 3,997 0 16,000 0 21,347
Executive Vice 1996 329,992 0 3,864 0 19,200 0 20,974
President and Chief 1995 327,886 122,000 2,650 0 21,820 0 20,163
Financial Officer
- - --------------------------------------------------------------------------------------------------------------------------
D. E. KNOLL 1997 326,976 236,600 3,470 104,688/7/ 10,910 0 20,636
Senior Vice President, 1996 326,976 0 3,520 0 10,910 0 20,636
Northeast Refining and 1995 339,749 100,000 3,885 0 21,820 0 20,201
Chemicals
- - --------------------------------------------------------------------------------------------------------------------------
D. M. FRETZ 1997 281,996 236,600 5,283 0 10,910 71,626/8/ 14,912
Senior Vice President, 1996 266,417 0 5,053 257,500/8/ 13,090 0 14,083
Lubricants and 1995 233,836 103,000 2,863 0 21,820 0 11,541
Logistics
============================================================================================================================
</TABLE>
26
<PAGE>
NOTES TO SUMMARY COMPENSATION TABLE:
/1/ Included in this column are fees received in 1995 by Mr. Aiken, Mr. Knoll
and Ms. Fretz for serving on the Board of Directors of Suncor Inc., Sun's
former Canadian subsidiary prior to its divestment. The U.S. dollar value of
these fees was as follows:
R. M. Aiken, Jr.,--$10,738; D. E. Knoll,--$19,585; and D. M. Fretz,--
$14,780.
Sun sold its remaining interest in Suncor on June 8, 1995, and no one from
Sun served as a Suncor director in 1996 or 1997.
/2/ For each of the Named Executive Officers, the amounts in this column reflect
reimbursements for the payment of taxes associated with certain payments for
club memberships. For Mr. Drosdick, this column also reflects the payment of
$41,953 in certain expenses and $43,063 for payment of taxes associated with
moving and relocation.
/3/ Long-term awards in 1997 and 1996 were composed of stock options and common
stock units (representing shares of Sun common stock). The performance-based
common stock unit portion of these awards is reflected in the table of
Performance-Based Common Stock Unit Awards on page 30. Other common stock
unit awards made in 1997 and 1996 are included in the Summary Compensation
Table as Restricted Stock Awards, and are described in further detail in
notes 5 through 8 below. In 1995, long-term awards were composed solely of
stock options.
/4/ The table below shows the components of this column for 1997:
<TABLE>
<CAPTION>
COMPANY MATCH UNDER COST OF
DEFINED CONTRIBUTION PLANS* TERM LIFE INSURANCE TOTAL
--------------------------- ------------------- -------
<S> <C> <C> <C>
R. H. Campbell $34,957 $18,978 $53,935
J. G. Drosdick 3,231 2,621 5,852
R. M. Aiken, Jr. 16,500 4,847 21,347
D. E. Knoll 16,349 4,287 20,636
D. M. Fretz 14,100 812 14,912
</TABLE>
* Executive officers participate in two defined contribution plans: (i)
SunCAP, Sun's 401(k) plan for most employees, and (ii) the Sun Company,
Inc. Savings Restoration Plan. The Savings Restoration Plan permits a
SunCAP participant to continue receiving the Company-matching contribution
even after reaching certain limitations under the Internal Revenue Code.
/5/ $534,000 of R.H. Campbell's total 1997 annual incentive award was deferred
in the form of share units under Sun's Deferred Compensation Plan. These
share units are treated as if invested in shares of Sun common stock, and
are credited with dividend equivalents in the form of additional share
units.
/6/ J. G. Drosdick became an employee of Sun on November 15, 1996. As part of
his Employment Agreement with Sun, Mr. Drosdick received a one-time grant of
100,000 stock options (exercisable after two years at an exercise price of
$23.25) and an award of 25,000 common stock units (valued at $581,250 on the
date of grant which will vest and be payable after three years of continued
employment with the Company). Additionally, Mr. Drosdick was granted a
special award of 2,500 common stock units in 1997, with a value of $104,688
on the date of grant. These common stock units are payable in installments
of 1,250 shares in 1999 and 1,250 shares in 2000. Payment is contingent only
upon his continued employment with Sun as of each payment date. The value of
the 27,500 outstanding common stock units at December 31, 1997 was
$1,156,733. The common stock units are entitled to dividend equivalents.
/7/ In 1997, D. E. Knoll was granted a special award of 2,500 common stock units
with a value of $104,688 on the date of grant. These common stock units are
payable in installments of 1,250 shares in 1999 and 1,250 shares in 2000.
Payment is contingent only upon his continued employment with Sun as of each
payment date. The value of these common stock units at December 31, 1997 was
$105,158. The common stock units are entitled to dividend equivalents.
/8/ In 1996, D. M. Fretz was granted a special award of 10,000 common stock
units with a value of $257,500 on the date of grant. 2,000 shares with a
value of $71,626 were paid to Ms. Fretz in 1997. The remaining portion of
this award is payable in installments of 3,000 shares in 1998 and 5,000
shares in 1999. Payment is contingent only upon her continued employment
with the Company as of each payment date. The value of the remaining 8,000
common stock units at December 31, 1997 was $336,504.
27
<PAGE>
OPTION GRANT TABLE
The following table presents additional information concerning the option
awards shown in the Summary Compensation Table for fiscal year 1997. These
options to purchase common stock were granted to the Named Executive Officers
under Sun's Long-Term Performance Enhancement Plan ("LTPEP").
OPTION GRANTS IN 1997/1/
<TABLE>
<CAPTION>
===========================================================================================================
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM/3/
- - ---------------------------------------------------------------------------------------------------------
PERCENT OF
TOTAL
SECURITIES OPTIONS 0% 5% 10%
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE STOCK STOCK STOCK
GRANTED/2/ IN FISCAL PRICE EXPIRATION PRICE PRICE PRICE
NAME -------------- YEAR ($/SHARE) DATE $39.875 $64.952 $103.425
DATE NUMBER
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. H. CAMPBELL 12/3/97 50,000 9.0 39.875 12/2/07 0 1,253,850 3,177,500
Chairman of the
Board and Chief
Executive Officer
- - -----------------------------------------------------------------------------------------------------------
J. G. DROSDICK 12/3/97 40,000 7.2 39.875 12/2/07 0 1,003,080 2,542,000
President and
Chief Operating
Officer
- - -----------------------------------------------------------------------------------------------------------
R. M. AIKEN, JR. 12/3/97 16,000 2.9 39.875 12/2/07 0 401,232 1,016,800
Executive Vice
President and Chief
Financial Officer
- - -----------------------------------------------------------------------------------------------------------
D. E. KNOLL 12/3/97 10,910 2.0 39.875 12/2/07 0 273,590 693,331
Senior Vice President,
Northeast Refining
and Chemicals
- - -----------------------------------------------------------------------------------------------------------
D. M. FRETZ 12/3/97 10,910 2.0 39.875 12/2/07 0 273,590 693,331
Senior Vice President,
Lubricants and
Logistics
===========================================================================================================
</TABLE>
NOTES TO OPTION GRANT TABLE:
/1/ No Stock Appreciation Rights ("SARs") were granted in 1997.
/2/ Each option was awarded with an exercise price equal to the fair market
value of a share of Sun common stock on the date of the grant and will
become exercisable two years from the grant date. These stock options were
granted along with an equal number of limited rights. Limited rights become
exercisable only in the event of a Change in Control of the Company (as
defined on page 32) and permit the holder to be paid in cash the
appreciation on a stock option instead of exercising the option.
/3/ These dollar amounts are not intended to forecast future appreciation of the
common stock price. Executives will not benefit unless the common stock
price increases above the stock option exercise price. Any gain to the
executives resulting from common stock price appreciation would benefit all
shareholders of the common stock. The additional value realized by all
shareholders of Sun common stock as a group based on these assumed
appreciation levels is as follows:
<TABLE>
<CAPTION>
APPRECIATION LEVEL ADDITIONAL VALUE
------------------ ----------------
<S> <C>
0% $0
5% $1,776,164,012
10% $4,501,145,392
</TABLE>
28
<PAGE>
AGGREGATED OPTION/SAR EXERCISES AND YEAR-END VALUES
The following table shows information for the Named Executive Officers,
concerning:
(i) exercises of stock options and SARs during 1997; and
(ii) the amount and values of unexercised stock options and
SARs as of December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN 1997 AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
==========================================================================================
NUMBER OF
SECURITIES VALUE OF UNEXERCISED
UNDERLYING NUMBER OF SECURITIES IN-THE-MONEY
OPTIONS/ UNDERLYING OPTIONS/SARS AT YEAR-END
SARS VALUE OPTIONS/SARS GRANTED (#) ($)
NAME EXERCISED REALIZED/1/ ------------------------- --------------------------
(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
==========================================================================================
<S> <C> <C> <C> <C> <C> <C>
R. H.
CAMPBELL
Chairman 12,516/2/ 58,644 568,690 50,000 7,219,852 109,400
of the
Board and
Chief
Executive
Officer
- - ------------------------------------------------------------------------------------------
J. G.
DROSDICK
President 0 0 40,000 140,000 697,520 1,968,820
and
Chief
Operating
Officer
- - ------------------------------------------------------------------------------------------
R. M.
AIKEN,
JR.
Executive 17,534 196,490 143,180 16,000 1,829,042 35,008
Vice
President
and Chief
Financial
Officer
- - ------------------------------------------------------------------------------------------
D. E. KNOLL
Senior Vice 27,444/3/ 269,302 154,170 10,910 1,883,191 23,871
President,
Northeast
Refining
and
Chemicals
- - ------------------------------------------------------------------------------------------
D. M.
FRETZ
Senior 20,338/4/ 221,127 57,780 10,910 800,101 23,871
Vice
President,
Lubricants
and
Logistics
===========================================================================================
</TABLE>
NOTES TO OPTION EXERCISE TABLE:
/1/ Value realized is equal to the difference between the option/SAR exercise
price and the fair market value of Sun common stock at the date of exercise
multiplied by the number of options/SARs exercised.
/2/ Mr. Campbell retained all 12,516 shares of Sun common stock following the
exercise of these stock options which would have expired on December 31,
1997.
/3/ Mr. Knoll retained 1,654 shares of Sun common stock following the exercise
of these stock options.
/4/ Ms. Fretz retained 88 shares of Sun common stock following the exercise of
these stock options.
29
<PAGE>
LONG-TERM INCENTIVE AWARDS
PERFORMANCE-BASED COMMON STOCK UNIT AWARDS
<TABLE>
<CAPTION>
================================================================================
ESTIMATED FUTURE
PAYOUTS/1/
--------------------------
NUMBER OF PERFORMANCE MAXIMUM
COMMON PERIOD THRESHOLD TARGET (NUMBER
STOCK UNITS UNTIL (NUMBER (NUMBER OF
NAME YEAR (CSUS) PAYOUT OF CSUS) OF CSUS) CSUS)
================================================================================
<S> <C> <C> <C> <C> <C> <C>
R. H. CAMPBELL 1997 15,000 12/31/00 3,750 15,000 22,500
Chairman of the 1996 13,000 12/31/99 3,250 13,000 19,500
Board and Chief
Executive Officer
- - --------------------------------------------------------------------------------
J. G. DROSDICK 1997 12,000 12/31/00 3,000 12,000 18,000
President and 1996 12,000 12/31/99 3,000 12,000 18,000
Chief Operating
Officer
- - --------------------------------------------------------------------------------
R. M. AIKEN, JR. 1997 4,600 12/31/00 1,150 4,600 6,900
Executive Vice 1996 5,520 12/31/99 1,380 5,520 8,280
President and Chief
Financial Officer
- - --------------------------------------------------------------------------------
D. E. KNOLL 1997 3,100 12/31/00 775 3,100 4,650
Senior Vice 1996 3,100 12/31/99 775 3,100 4,650
President,
Northeast Refining
and Chemicals
- - --------------------------------------------------------------------------------
D. M. FRETZ 1997 3,100 12/31/00 775 3,100 4,650
Senior Vice 1996 3,720 12/31/99 930 3,720 5,580
President,
Lubricants and
Logistics
================================================================================
</TABLE>
NOTE TO PERFORMANCE-BASED COMMON STOCK UNIT TABLE:
/1/ The actual payout of the performance-based common stock units granted will
depend upon Sun achieving certain performance levels, based upon total
common stock shareholder return, as compared with the total common stock
shareholder return of the Performance Peer Group over a three-year
performance period from January 1, 1997 through December 31, 1999 for the
1996 awards, and from January 1, 1998 through December 31, 2000 for the 1997
awards. Additionally, if the price of Sun common stock at the end of a
performance period is less than the price at the beginning of the period, no
common stock units will be earned for the period regardless of how Sun
performs in comparison to the Performance Peer Group. The threshold numbers
presented represent the payout of common stock units if the minimum
performance levels are achieved. No common stock units would be paid out if
the minimum levels for each performance period are not met. At the end of
each three-year period, the Committee will determine, based upon the
Company's performance, the extent to which the target awards have been
earned.
30
<PAGE>
PENSION PLANS
This table shows the estimated annual retirement benefits payable to a covered
participant based upon the final average pay formulas of the Sun Company, Inc.
Retirement Plan ("SCIRP"), the Sun Company, Inc. Pension Restoration Plan, and
the Sun Company, Inc. Supplemental Executive Retirement Plan ("SERP"). The
estimates assume that benefits are received in the form of a single life
annuity.
<TABLE>
<CAPTION>
=========================================================================
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT AT AGE
62 OR
FINAL AVERAGE LATER
TOTAL CASH AFTER COMPLETION OF THE FOLLOWING YEARS OF
COMPENSATION/1/ SERVICE
=======================================================
20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
=========================================================================
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 80,000 $ 90,000 $100,000 $108,000 115,000
-------------------------------------------------------------------------
400,000 160,000 180,000 200,000 215,000 230,000
-------------------------------------------------------------------------
600,000 240,000 270,000 300,000 323,000 345,000
-------------------------------------------------------------------------
800,000 320,000 360,000 400,000 430,000 460,000
-------------------------------------------------------------------------
1,000,000 400,000 450,000 500,000 538,000 575,000
-------------------------------------------------------------------------
1,200,000 480,000 540,000 600,000 645,000 690,000
-------------------------------------------------------------------------
1,400,000 560,000 630,000 700,000 750,000 805,000
=========================================================================
</TABLE>
NOTE TO PENSION BENEFITS TABLE:
/1/ Final Average Total Cash Compensation is the average of the base salary and
annual incentive award in the highest 36 consecutive months during the last
120 months of service. The salaries (excluding any directors' fees from
Suncor Inc., a former Canadian subsidiary) and bonuses in the Summary
Compensation Table on page 26 reflect the total cash compensation covered by
the pension plans.
The retirement benefits shown above for SCIRP, the Pension Restoration Plan
and SERP are amounts calculated prior to the Social Security offset. The
Social Security offset is equal to one and two-thirds percent of primary
Social Security benefits for each year of Retirement Plan participation up to
30 years or a maximum offset of 50% of primary Social Security benefits.
Credited years of service under these plans for the Named Executive Officers
as of December 31, 1997 are as follows: R. H. Campbell, 37; J. G. Drosdick, 1;
R. M. Aiken, Jr., 27; D. E. Knoll, 30; and D. M. Fretz, 20. For further
information on Mr. Drosdick's pension benefits, see page 33.
31
<PAGE>
SEVERANCE PLANS AND OTHER INFORMATION
The Named Executive Officers participate in plans with certain other key
management personnel which provide for severance benefits in the event they
are involuntarily terminated without cause by Sun. In the case of the Chief
Executive Officer, the Chief Operating Officer and the Chief Financial
Officer, severance payments would be equal to two years of base salary plus
guideline annual incentive. The other Named Executive Officers would receive
such payments for one and one-half years. If termination (whether actual or
constructive) occurs within two years of a Change in Control of Sun, severance
would be payable in a lump sum equal to three years of base salary plus
guideline annual incentive for the Chief Executive Officer, the Chief
Operating Officer and the Chief Financial Officer, and two years for the other
Named Executive Officers. Based upon base salary and guideline annual
incentive for 1997, payments under these plans would have been as follows:
<TABLE>
<CAPTION>
=======================================================================================
NAME INVOLUNTARY TERMINATION CHANGE IN CONTROL/1/
=======================================================================================
<S> <C> <C>
R. H. Campbell $2,283,880 $3,425,820
- - ---------------------------------------------------------------------------------------
J. G. Drosdick 840,060/2/ 2,520,180
- - ---------------------------------------------------------------------------------------
R. M. Aiken, Jr. 997,504 1,496,256
- - ---------------------------------------------------------------------------------------
D. E. Knoll 668,799 891,732
- - ---------------------------------------------------------------------------------------
D. M. Fretz 601,329 801,772
=======================================================================================
</TABLE>
NOTES TO SEVERANCE BENEFITS TABLE:
/1/ For purposes of these arrangements, a "Change in Control" means the
occurrence of any of the following events or transactions:
(a) Those directors who were members of Sun's Board of Directors immediately
prior to any of the following transactions cease, within one year of a
control transaction, to constitute a majority of either Sun's Board or
the Board of any successor to Sun (or to all or substantially all of
Sun's assets):
(1) any tender offer for or acquisition of Sun's capital stock;
(2) any merger, consolidation, or sale of all or substantially all of
Sun's assets; or
(3) the submission of a nominee or nominees for the position of director
of Sun, in a proxy solicitation or otherwise, by a shareholder or
group of shareholders acting in concert as described in Sections
13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as
amended; or
(b) Any entity, person (or group of persons acting in concert as described
in Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of
1934, as amended), acquires shares of Sun Company, Inc. in a transaction
or series of transactions that results in such entity, person or Group
directly or indirectly owning beneficially more than twenty percent
(20%) of the outstanding voting shares of Sun Company, Inc.
/2/ Mr. Drosdick is not eligible to participate in the involuntary termination
plan until the expiration of his three-year employment contract on November
15, 1999. The amount presented represents the severance provisions of this
contract.
Each eligible executive will be entitled to medical, life insurance and
disability coverage for up to the number of years of severance received, at
the same rate that such benefits are provided to all active employees of Sun.
In the case of a Change in Control, the plans also provide for protection of
certain pension benefits which would have been earned during the years for
which severance was paid and reimbursement for any additional tax liability
incurred as a result of excise taxes imposed on payments deemed to be
attributable to the Change in Control. Sun's long-term incentive compensation
plans provide that upon a Change in Control, all stock options become
immediately exercisable, and all common stock unit awards are paid out
regardless of whether performance targets have been met.
32
<PAGE>
When Mr. Drosdick became President and Chief Operating Officer in 1996, he
entered into a three-year employment agreement with Sun that specifies his
minimum base salary and eligibility for annual incentive awards. Under the
terms of the agreement, Mr. Drosdick received a one-time grant of 100,000
stock options under Sun's Executive Long-Term Stock Investment Plan (ELSIP)
exercisable November 15, 1998 at an exercise price of $23.25, and 25,000
common stock units with a value of $581,250 on the date of grant. Mr.
Drosdick's employment agreement provides that he is eligible to participate in
Sun's Supplemental Executive Retirement Plan ("SERP"), and that any SERP
benefit payable to him will be offset by accrued benefits from the pension
plans of prior employers. Assuming a retirement age of 62 and the satisfaction
of applicable plan conditions, the estimated total annual retirement benefit
under Sun's plans to be paid to Mr. Drosdick based upon his 1997 salary and
guideline annual incentive would be approximately $200,000.
DIRECTORS' & OFFICERS' INDEMNIFICATION AGREEMENTS
Sun's bylaws require that Sun indemnify its directors and officers, to the
extent permitted by Pennsylvania law, against any costs, expenses (including
attorneys' fees) and other liabilities to which they may become subject by
reason of their service to Sun. To insure against such liabilities, Sun has
purchased liability insurance for its directors and officers and has entered
into indemnification agreements with its directors and certain key executive
officers and other management personnel. This insurance and the
indemnification agreements supplement the provisions in Sun's Articles of
Incorporation which eliminate the potential monetary liability of directors
and officers to Sun or its shareholders in certain situations as permitted by
law.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Sun believes that during 1997, all SEC filings of its officers, directors and
ten percent shareholders complied with the requirements of Section 16 of the
Securities Exchange Act, based on a review of forms filed, or written notice
that no annual forms were required.
By Order of the Board of Directors,
Ann C. Mule
General Attorney and Corporate Secretary
Philadelphia, PA
March 23, 1998
33
<PAGE>
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN
YOUR PROXY CARD
IN THE ENVELOPE PROVIDED
AS SOON AS POSSIBLE
34
<PAGE>
Your vote is important. Please sign and date your proxy card below. After voting
on the reverse side, detach the proxy card and return it in the envelope
provided, whether your holdings are large or small, thus assuring your
representation at the 1998 ANNUAL MEETING.
SUN COMPANY INC.
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
THIS PROXY AND VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF SUN COMPANY, INC. FOR THE MAY 7, 1998 ANNUAL MEETING OF
SHAREHOLDERS OR ANY ADJOURNMENTS THEREOF.
COMMON STOCK PROXY CARD
The undersigned appoints R. H. CAMPBELL and J. L. FOLTZ and each of them, with
full power of substitution, as proxies and attorneys-in-fact (the "Proxies") to
vote as indicated all shares of Sun Company, Inc. Common Stock, which the
undersigned is entitled to vote, and in their discretion, to vote upon such
other business as may properly come before the 1998 Annual Meeting. This proxy
card also provides voting instructions for shares held for the account of the
undersigned, if any, in the Sun Company, Inc. Capital Accumulation Plan. For
additional explanatory information, see the "Questions and Answers" section on
pages 3 to 6 of the accompanying proxy statement.
SIGNATURE _________________________________
SIGNATURE _________________________________
DATED ________________________, 1998
Please sign exactly as your name appears above. When signing as attorney,
executor, administrator, trustee, guardian, etc., give full title. If stock is
jointly owned, each joint owner should sign.
CONTINUED ON REVERSE SIDE
THIS PROXY CARD WHEN PROPERLY EXECUTED WILL BE VOTED BY THE PROXIES IN THE
MANNER DESIGNATED BELOW. IF THIS PROXY CARD IS RETURNED SIGNED, BUT THERE IS NO
INDICATION OF A VOTE OR IF IT IS NOT CLEAR WHICH BOX IS CHECKED, THE PROXIES
WILL VOTE FOR ITEMS (1) AND (2). SUNCAP SHARES WILL BE VOTED IN ACCORDANCE WITH
THE TERMS OF THAT PLAN.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ITEMS (1) AND (2).
(1) ELECTION OF DIRECTORS
R. H. CAMPBELL J. G. DROSDICK R. B. GRECO R. A. PEW A. B. TROWBRIDGE
R. E. CARTLEDGE M. J. EVANS J. G. KAISER W. F. POUNDS
R. E. CAWTHORN T. P. GERRITY R. D. KENNEDY G. J. RATCLIFFE
<PAGE>
[_] FOR All Nominees Listed [_] AGAINST All Nominees Listed
TO VOTE AGAINST ANY NOMINEE, LIST NOMINEE'S NAME.
- - --------------------------------------------------------------------------------
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE (TO ABSTAIN), LIST
NOMINEE'S NAME.
- - --------------------------------------------------------------------------------
(2) Approval of the appointment of Ernst & Young LLP as
independent auditors for the fiscal year 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] Please check ONLY if you plan to attend the 1998 Annual Meeting. Admission
tickets are required and will be mailed to you.
PLEASE SIGN AND DATE YOUR PROXY CARD ON THE REVERSE SIDE AND RETURN IT PROMPTLY
IN THE ENVELOPE PROVIDED.
<PAGE>
Your vote is important. Please sign and date your proxy card below. After voting
on the reverse side, detach the proxy card and return it in the envelope
provided, whether your holdings are large or small, thus assuring your
representation at the 1998 ANNUAL MEETING.
SUN COMPANY INC.
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103-1699
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SUN COMPANY,
INC. FOR THE MAY 7, 1998 ANNUAL MEETING OF SHAREHOLDERS OR ANY ADJOURNMENTS
THEREOF.
DEPOSITARY SHARES REPRESENTING SERIES A CUMULATIVE PREFERENCE STOCK
The undersigned holder of Depositary Shares instructs First Chicago Trust
Company of New York ("First Chicago") to vote, as indicated, all shares of Sun
Company, Inc. Series A Cumulative Preference Stock ("Preference Stock"), as to
the voting of which the undersigned is entitled to instruct First Chicago to
vote, and in First Chicago's discretion, to vote upon such other business as may
properly come before the 1998 Annual Meeting. First Chicago has authorized The
Corporation Trust Company to tabulate the vote received and has further
authorized and instructed R.H. CAMPBELL and J.L. FOLTZ and each of them, with
full power of substitution, to act as First Chicago's proxies and attorneys-in-
fact (the "Proxies") to vote as indicated all Depositary Shares and thereby the
underlying Preference Stock held by the undersigned. The undersigned hereby
approves the appointment of such proxies by First Chicago. For additional
explanatory information see the "Questions and Answers" section on pages 3 to 6
of the accompanying proxy statement.
SIGNATURE _________________________________
SIGNATURE _________________________________
DATED ________________________, 1998
Please sign exactly as your name appears above. When signing as attorney,
executor, administrator, trustee, guardian, etc., give full title. If stock is
jointly owned, each joint owner should sign.
CONTINUED ON REVERSE SIDE
THIS PROXY CARD WHEN PROPERLY EXECUTED WILL BE VOTED BY THE PROXIES IN THE
MANNER DESIGNATED BELOW. IF THIS PROXY CARD IS RETURNED SIGNED, BUT THERE IS NO
INDICATION OF A VOTE OR IF IT IS NOT CLEAR WHICH BOX IS CHECKED, THE PROXIES
WILL VOTE FOR ITEMS (1) AND (2). THE PROXIES WILL NOT VOTE THE PREFERENCE STOCK
TO THE EXTENT THAT PROXY CARDS ARE NOT RECEIVED FROM THE HOLDERS OF THE
DEPOSITARY SHARES.
<PAGE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ITEMS (1) AND (2).
(1) ELECTION OF DIRECTORS
R. H. CAMPBELL J. G.DROSDICK R. B. GRECO R. A. PEW A. B. TROWBRIDGE
R. E. CARTLEDGE M. J. EVANS J. G. KAISER W. F. POUNDS
R. E. CAWTHORN T. P. GERRITY R. D. KENNEDY G. J. RATCLIFFE
[_] FOR All Nominees Listed [_] AGAINST All Nominees Listed
TO VOTE AGAINST ANY NOMINEE, LIST NOMINEE'S NAME.
- - -------------------------------------------------------------------------------
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE (TO ABSTAIN), LIST
NOMINEE'S NAME.
- - -------------------------------------------------------------------------------
(2) Approval of the appointment of Ernst & Young LLP as
independent auditors for the fiscal year 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
[_] Please check ONLY if you plan to attend the 1998 Annual Meeting. Admission
tickets are required and will be mailed to you.
PLEASE SIGN AND DATE YOUR PROXY CARD ON THE REVERSE SIDE AND RETURN IT PROMPTLY
IN THE ENVELOPE PROVIDED.
