<PAGE>
1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
Commission file number 1-6841
SUNOCO, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1743282
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Ten Penn Center 19103-1699
1801 Market Street, Philadelphia, PA (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code (215) 977-3000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each
exchange on which
Title of each class registered
------------------- -----------------
<S> <C>
Common Stock, $1 par value New York Stock Exchange
Philadelphia Stock
Exchange
Convertible Subordinated Debentures 6 3/4%, New York Stock Exchange
Due June 15, 2012
Sinking Fund Debentures 9 3/8%, Due June 1, New York Stock Exchange
2016
Notes 7.95%, Due December 15, 2001 New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments of this Form 10-K. [X]
At January 31, 2000, the aggregate market value of voting stock held by
nonaffiliates was $2,063 million.
At January 31, 2000, there were 89,843,869 shares of Common Stock, $1 par
value, outstanding.
Selected portions of the Sunoco, Inc. Annual Report to Shareholders for the
Fiscal Year Ended December 31, 1999 are incorporated by reference in Parts I,
II and IV of this Form 10-K.
Selected portions of the Sunoco, Inc. definitive Proxy Statement, which will
be filed with the Securities and Exchange Commission within 120 days after
December 31, 1999, are incorporated by reference in Part III of this Form 10-
K.
<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Those statements in the Business and Properties discussion that are not
historical in nature should be deemed forward-looking statements that are
inherently uncertain. See "Forward-Looking Statements" in Management's
Discussion and Analysis of Financial Condition and Results of Operations in
the Company's 1999 Annual Report to Shareholders for a discussion of the
factors which could cause actual results to differ materially from those
projected.
General
Sunoco, Inc.* was incorporated in Pennsylvania in 1971. It or its
predecessors have been active in the petroleum industry since 1886. Its
principal executive offices are located at 1801 Market Street, Philadelphia,
PA 19103-1699. Its telephone number is (215) 977-3000 and its Internet website
address is www.SunocoInc.com.
The Company, through its subsidiaries, is principally a petroleum refiner
and marketer with interests in cokemaking. Sunoco's petroleum refining and
marketing operations include the manufacturing and marketing of a full range
of petroleum products, including fuels, lubricants and petrochemicals, and the
transportation of crude oil and refined products. These operations are
conducted principally in the eastern half of the United States. Sunoco's
cokemaking operations are conducted in Virginia and Indiana.
The Company's operations are organized into seven business units plus a
holding company and a shared services organization. The accompanying
discussion of the Company's business and properties reflects this
organizational structure. For additional information regarding these business
units, see Management's Discussion and Analysis of Financial Condition and
Results of Operations in the Company's 1999 Annual Report to Shareholders.
Business segment information is also presented in Note 19 to the Consolidated
Financial Statements in the Company's 1999 Annual Report to Shareholders.
Refining and Marketing
The Company's refining and marketing operations consist of the manufacturing
and marketing of fuels, lubricants and petrochemicals and the transportation
of crude oil and refined products. These operations are conducted principally
through Sunoco, Inc. (R&M), a wholly owned subsidiary of the Company. The
Company's refining and marketing operations are classified into the following
six business units: Sun Northeast Refining; Sunoco Northeast Marketing; Sunoco
Chemicals; Sun Lubricants; Sunoco MidAmerica Marketing & Refining; and Sunoco
Logistics.
Sunoco owns and operates five domestic refineries which are located in
Marcus Hook, PA, Philadelphia, PA, Toledo, OH, Tulsa, OK and Yabucoa, Puerto
Rico. The refineries in Marcus Hook, Philadelphia and Toledo produce
principally fuels and petrochemicals while the refineries in Tulsa and
- --------
*In this report, the terms "Company" and "Sunoco" are used interchangeably to
mean Sunoco, Inc. or collectively, Sunoco, Inc. and its subsidiaries. The use
of these terms is for convenience of discussion and is not intended to be a
precise description of corporate relationships. References in this Annual
Report on Form 10-K to material in the Company's 1999 Annual Report to
Shareholders and in the Company's definitive Proxy Statement, which will be
filed with the Securities and Exchange Commission within 120 days after
December 31, 1999, mean that such material is incorporated herein by
reference; other material in those documents is not deemed to be filed as part
of this Annual Report on Form 10-K.
1
<PAGE>
Puerto Rico emphasize lubricants production with related fuels production
being sold in the wholesale market. Sunoco also owns and operates a
petrochemical facility in Philadelphia, PA, which produces phenol and acetone,
and one in Brandenburg, KY, which produces ethylene and ethylene oxide, and is
a joint venture partner in a facility in Mont Belvieu, TX, which produces
MTBE.
The following table sets forth certain consolidated information concerning
Sunoco's refining and marketing operations (in thousands of barrels daily).
Additional information is set forth on page 46 in the Company's 1999 Annual
Report to Shareholders.
Products Manufactured for Sale to Third Parties
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Crude Unit Capacity........................................ 730.0 697.0 692.0
===== ===== =====
Input to Crude Units*...................................... 683.6 685.8 696.0
===== ===== =====
Products Manufactured:
Gasoline.................................................. 343.9 334.9 348.8
Middle Distillates........................................ 225.1 221.6 224.8
Residual Fuel............................................. 66.1 67.0 67.9
Petrochemicals............................................ 41.6 37.8 34.8
Lubricants................................................ 16.5 15.1 15.9
Other..................................................... 88.1 84.5 73.5
----- ----- -----
781.3 760.9 765.7
===== ===== =====
</TABLE>
- --------
*Excludes approximately 30-35 thousand barrels per day of reduced crude oil
processed at the Puerto Rico refinery. Subsequent to its reconfiguration in
the first quarter of 1997, this facility processes reduced crude oil instead
of conventional crude oil (see "Sun Lubricants" below).
Supply and Distribution
Sunoco meets all of its crude oil requirements through purchases from third
parties. There is an ample supply of crude oil available to meet worldwide
refining needs, and Sunoco has been able to supply its refineries with the
proper mix and quality of crude oils without disruption. Sunoco's refineries
processed approximately 80 percent light sweet crude oil during 1999. The
Company believes that ample supplies of light sweet crude oil will continue to
be available. The following table sets forth Sunoco's net sources of crude oil
(in percentages):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Africa........................................................ 55 59 53
United States................................................. 20 21 20
Canada........................................................ 13 7 7
North Sea..................................................... 6 6 16
South and Central America..................................... 4 5 2
Russia........................................................ 2 2 1
Arabian Gulf.................................................. -- -- 1
--- --- ---
100 100 100
=== === ===
</TABLE>
2
<PAGE>
The following table sets forth summary information concerning Sunoco's
supply and distribution of crude oil and refined products (in thousands of
barrels daily):
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Supply:
Crude Oil Purchases*................................... 696.1 702.2 701.7
Crude Oil Inventory Change............................. 5.9 (7.4) .4
Refined Product Purchases (including Feedstocks)....... 134.4 119.8 116.3
----- ----- -----
836.4 814.6 818.4
===== ===== =====
Distribution:
Refined Product Sales.................................. 833.8 798.9 809.6
Refined Product Inventory Change....................... (7.9) 1.1 (4.0)
Internal Consumption and Other......................... 10.5 14.6 12.8
----- ----- -----
836.4 814.6 818.4
===== ===== =====
</TABLE>
- --------
*Includes purchases of reduced crude oil.
Refined Product Sales
Sunoco sells fuels through retail and wholesale channels principally in the
Northeast and upper Midwest and sells petrochemicals and lubricants on a
worldwide basis. The following table sets forth Sunoco's consolidated refined
product sales (in thousands of barrels daily):
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Gasoline:
Wholesale................................................. 169.1 164.6 170.2
Retail.................................................... 216.6 208.6 201.8
Middle Distillates......................................... 258.8 241.3 248.8
Residual Fuel.............................................. 68.0 70.8 80.1
Petrochemicals............................................. 42.4 37.8 35.2
Lubricants................................................. 18.8 17.9 18.8
Other...................................................... 60.1 57.9 54.7
----- ----- -----
833.8 798.9 809.6
===== ===== =====
</TABLE>
As of December 31, 1999, 1998 and 1997, branded fuels sales were made
through 3,538, 3,532 and 3,592 retail gasoline outlets, respectively. Of these
outlets, 1,841 were direct outlets (Company/dealer owned or leased) and 1,697
were distributor outlets at December 31, 1999.
The following is a discussion of the seven business units which comprise
Sunoco's refining and marketing and cokemaking operations.
3
<PAGE>
Sun Northeast Refining
The Sun Northeast Refining business consists of the manufacture of petroleum
products, including gasoline, middle distillates (including jet fuel, heating
oil and diesel fuel), residual fuel oil and petrochemical feedstocks at
Sunoco's Marcus Hook and Philadelphia refineries and the sale of these
products to other Sunoco business units and to wholesale and industrial
customers. (See "Sunoco MidAmerica Marketing & Refining" and "Sun Lubricants"
below, for a discussion of operations at Sunoco's Toledo, Tulsa and Puerto
Rico refineries.)
The following table sets forth information concerning operations at the
Marcus Hook and Philadelphia refineries (in thousands of barrels daily):
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
Marcus Phila., Marcus Phila., Marcus Phila.,
Hook, PA PA Total Hook, PA PA Total Hook, PA PA Total
-------- ------- ----- -------- ------- ----- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crude Unit Capacity..... 175.0 330.0 505.0 175.0 307.0 482.0 175.0 307.0 482.0
===== ===== ===== ===== ===== ===== ===== ===== =====
Input to Crude Units.... 169.2 301.3 470.5 166.7 304.3 471.0 165.7 314.4 480.1
===== ===== ===== ===== ===== ===== ===== ===== =====
Conversion Capacity*.... 98.0 112.0 210.0 86.0 105.0 191.0 86.0 105.0 191.0
===== ===== ===== ===== ===== ===== ===== ===== =====
Conversion Unit
Throughput............. 93.3 107.0 200.3 91.6 89.9 181.5 88.7 94.7 183.4
===== ===== ===== ===== ===== ===== ===== ===== =====
Products Manufactured:
Gasoline............... 90.9 151.4 242.3 88.0 143.6 231.6 88.4 154.1 242.5
Middle Distillates..... 68.2 100.2 168.4 68.6 99.4 168.0 65.3 103.6 168.9
Residual Fuel.......... 10.7 41.0 51.7 11.1 42.0 53.1 10.7 42.6 53.3
Petrochemical
Feedstocks**.......... 19.4 6.3 25.7 17.6 5.2 22.8 18.7 5.4 24.1
Other.................. 18.7 22.5 41.2 16.8 23.5 40.3 16.0 23.8 39.8
----- ----- ----- ----- ----- ----- ----- ----- -----
207.9 321.4 529.3 202.1 313.7 515.8 199.1 329.5 528.6
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- --------
*Represents Sunoco's capacity to upgrade low-value petroleum products into
higher-value products through catalytic cracking.
**Petrochemical feedstocks are utilized by the Sunoco Chemicals business to
produce petrochemicals at these facilities. (See "Sunoco Chemicals" below.)
During 1999, input to the crude units was voluntarily cut back in response
to the low margin environment. As a result, production of low-value products
was reduced without limiting production of high-value products from the
catalytic cracking units. Catalytic cracking utilization was higher in 1999
primarily due to the absence of any shutdowns in 1999. The Philadelphia
refinery had one planned and one unplanned catalytic cracker shutdown during
1998. The most significant of this downtime was at a 73 thousand barrels-per-
day unit at this facility. It included a 29-day shutdown due to an emergency
power interruption by the local utility and related start-up problems and a
subsequent scheduled six-week turnaround and modernization of the unit. With
the completion of this work in July 1998, all three of Sunoco's catalytic
cracking units in the Northeast had been modernized during the 1997-98 period.
Scheduled maintenance activity during 1998 also included a 23-day turnaround
of the 200 thousand barrels-per-day crude unit at the Philadelphia refinery.
4
<PAGE>
During 1999, Sun Northeast Refining completed numerous fuel recovery
projects at the Philadelphia refinery. The improvements made will enable the
upgrade of products previously used as refinery fuel into higher value
products.
The Philadelphia and Marcus Hook refineries process predominantly light
sweet crude oils, which are supplied from foreign sources. The following table
sets forth information concerning the crude oil purchased for processing at
these refineries (in thousands of barrels daily):
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
Marcus Phila., Marcus Phila., Marcus Phila.,
Hook, PA PA Total Hook, PA PA Total Hook, PA PA Total
-------- ------- ----- -------- ------- ----- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crude Type:
West African Light..... 54.4 174.1 228.5 71.4 197.5 268.9 39.1 203.2 242.3
West African Heavy..... 25.7 106.0 131.7 30.2 97.8 128.0 19.5 101.3 120.8
North Sea.............. 34.4 5.6 40.0 33.4 4.9 38.3 94.8 8.3 103.1
South and Central
American Light........ 20.1 4.3 24.4 29.3 5.5 34.8 12.0 .9 12.9
Canadian Light......... 31.6 5.4 37.0 4.0 .7 4.7 -- -- --
----- ----- ----- ----- ----- ----- ----- ----- -----
166.2 295.4 461.6 168.3 306.4 474.7 165.4 313.7 479.1
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
Total fuels products sold to third parties at wholesale by Sun Northeast
Refining in 1999 were 365.6 thousand barrels daily compared to 353.8 thousand
barrels daily in 1998 and 358.4 thousand barrels daily in 1997. Sales to other
Sunoco business units by Sun Northeast Refining (primarily gasoline, middle
distillates and chemical feedstocks) totalled 197.5, 186.1 and 182.9 thousand
barrels daily in 1999, 1998 and 1997, respectively.
Sunoco's Philadelphia and Marcus Hook refineries are connected by pipeline,
barge, truck and rail. An inter-refinery pipeline enables the transfer of
unfinished stocks, including butanes, naphtha, distillate blendstocks and
gasoline blendstocks. Finished products are delivered to customers via
Sunoco's pipeline and terminal network, third-party pipelines and barges.
During the fourth quarter of 1999, Sun Northeast Refining agreed to
substantive terms with FPL Energy ("FPL") which will permit FPL to build, own
and operate a 725-megawatt, natural gas fired cogeneration power plant at
Sunoco's Marcus Hook refinery. Steam supplied by the power plant will reduce
the refinery's steam supply costs. Construction of the plant is expected to
begin in late 2000.
Sunoco Northeast Marketing
The Sunoco Northeast Marketing business consists of the retail sale of
gasoline and middle distillates and the operation of convenience stores in the
New England and Mid-Atlantic states. These activities are conducted in a 12-
state region from Maine through northern Virginia, with the highest
concentration of outlets in Connecticut, Massachusetts, New Jersey, New York,
Pennsylvania and Rhode Island. (See "MidAmerica Marketing & Refining" below
for a discussion of similar operations conducted in the midwestern U.S.)
5
<PAGE>
The following table sets forth Sunoco's retail gasoline outlets in the New
England and Mid-Atlantic states at December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Direct Outlets:
Company Owned or Leased:
Company-Operated:
Traditional............................................. 148 127 124
APlus(R) Convenience Stores............................. 200 164 154
----- ----- -----
348 291 278
----- ----- -----
Dealer-Operated:
Traditional............................................. 319 352 351
APlus(R) Convenience Stores............................. 221 241 250
Ultra Service Centers SM................................ 229 234 239
----- ----- -----
769 827 840
----- ----- -----
Total Company Owned or Leased*............................ 1,117 1,118 1,118
Dealer Owned**............................................ 394 386 373
----- ----- -----
Total Direct Outlets....................................... 1,511 1,504 1,491
Distributor Outlets........................................ 1,136 1,121 1,164
----- ----- -----
2,647 2,625 2,655
===== ===== =====
</TABLE>
- --------
*Gasoline throughput per Company owned or leased outlet averaged 109.6, 103.8
and 99.8 thousands of gallons monthly during 1999, 1998 and 1997,
respectively. The improvement during the 1997-99 period is consistent with
Sunoco Northeast Marketing's goal of increasing gasoline throughput per
outlet.
**Primarily traditional outlets.
Sunoco Northeast Marketing's portfolio of outlets is designed to provide
optimal profit potential in each of its marketing areas. Sites differ in
various ways including: product distribution to the outlets; site ownership
and operation; and types of products and services provided.
Direct outlets are sites at which Sunoco fuel products are delivered
directly to the site by Sunoco or its contract carriers. Investment in the
property, through ownership or lease, may be held by either the Company or an
independent dealer. These sites may be traditional locations that sell almost
exclusively fuel products or may include APlus(R) convenience stores or Ultra
Service Centers SM that provide automotive diagnosis and repair. Included
among Sunoco Northeast Marketing's outlets at December 31, 1999 were 54
outlets on limited access highways in Pennsylvania, New Jersey, New York and
Maryland. Of these outlets, 37 were company-operated sites providing gasoline,
diesel fuel and convenience store merchandise.
Distributor outlets are sites in which the distributor takes delivery at a
terminal where Sunoco(R) products are available. Although these sites market
under the Sunoco(R) brand, Sunoco does not own, lease or operate the
locations.
6
<PAGE>
Sunoco's APlus(R) convenience stores are located principally in
Pennsylvania, New York and Massachusetts. These stores supplement sales of
fuel products with a broad mix of high-margin merchandise such as groceries,
fast foods and beverages. The following table sets forth information
concerning Sunoco's convenience store locations in the Northeast:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Number of Stores.......................................... 426 411 417
Merchandise Sales (Thousands of Dollars/Store/Month)...... $59.5 $52.5 $47.8
Merchandise Margin (Company Operated) (% of Sales)........ 27.3% 28.7% 29.3%
</TABLE>
The Company intends to grow its convenience store business through
acquisitions, new site construction and redesign of traditional gasoline
outlets in an effort to reduce its dependence on gasoline margins.
Sunoco Northeast Marketing offers four grades of gasoline at its retail
locations, consisting of Ultra(R) 94, the highest octane premium gasoline
commercially available in the United States, and 93, 89 and 87 octanes.
Branded fuels sales (including middle distillates) by Sunoco Northeast
Marketing averaged 185.6 thousand barrels daily in 1999 compared to 174.0
thousand barrels daily in 1998 and 169.6 thousand barrels daily in 1997.
Ultra(R) 94 sales (including Ultra(R) 94 used as an octane enhancer in
Sunoco's mid-grade gasolines) accounted for approximately 23 percent of
Sunoco's retail gasoline sales in the Northeast in 1999.
In the fourth quarter of 1998, Sunoco announced a Company-wide reimaging
program of its retail service station network. As part of this program, the
Company's Sunoco(R) logo has been updated and its retail outlet image has been
redesigned to provide a more contemporary appearance to Sunoco's outlets. The
roll-out of this program commenced in late 1998. As of December 31, 1999,
reimaging has been completed at 644 locations, primarily those owned or leased
by the Company. This represents approximately 25 percent of the Company's
total retail marketing outlets in the Northeast. The program is expected to be
substantially completed by the end of 2000 for Company owned or leased sites
at a total cost of approximately $65 million. Reimaging of dealer and
distributor owned sites is expected to be concluded by the end of 2001.
Sunoco Chemicals
The Sunoco Chemicals business includes the manufacturing, distribution and
marketing of base commodity and intermediate petrochemicals. These chemicals
are comprised principally of olefins and their derivatives (ethylene, ethylene
oxide and propylene) and aromatics and their derivatives (benzene, cumene,
cyclohexane, toluene, xylene, phenol and acetone). As a partner in a joint
venture, Sunoco Chemicals also produces MTBE which is utilized by Sun
Northeast Refining in manufacturing reformulated gasoline. Petrochemicals are
manufactured by Sunoco Chemicals at Sunoco's Marcus Hook and Philadelphia
refineries, at a phenol facility in Philadelphia, Pennsylvania, at an
ethylene/ethylene oxide facility in Brandenburg, Kentucky and at the joint
venture MTBE facility in Mont Belvieu, Texas. (See "Sunoco MidAmerica
Marketing & Refining" for a discussion of the petrochemicals produced at the
Toledo refinery.)
On June 30, 1998, Sunoco acquired the Philadelphia phenol facility of
AlliedSignal Inc. ("Allied") for $157 million. This acquisition was made
pursuant to the Company's strategy to expand its chemicals business by
manufacturing intermediate products further down the value chain. This
facility has the capacity to produce annually more than one billion pounds of
phenol and 620 million pounds of acetone. In connection with the acquisition,
Sunoco Chemicals entered into a long-term contract to supply Allied with
approximately 740 million pounds of phenol annually at a price based on the
market value of cumene feedstock plus an amount approximating other phenol
production costs. Sunoco intends to continue to grow its chemicals business.
7
<PAGE>
The following table sets forth information concerning petrochemicals
production by Sunoco Chemicals (in thousands of barrels daily):
<TABLE>
<CAPTION>
Production
Capacity at -----------------
December 31, 1999* 1999 1998 1997
----------------- ---- ---- ----
<S> <C> <C> <C> <C>
Benzene................... 5.0 5.0 4.4 4.2
Toluene................... 2.0 1.3 1.2 1.5
Xylene.................... .5 .1 .3 .5
Cumene**.................. 11.0 9.1 6.0 5.2
Cyclohexane............... 2.5 1.7 1.9 2.1
Phenol.................... 8.0 7.7 3.8*** --
Acetone................... 7.0 6.8 3.4*** --
---- ---- ---- ----
Total Aromatics......... 36.0 31.7 21.0 13.5
---- ---- ---- ----
Ethylene.................. 1.7 1.2 1.3 1.2
Ethylene Oxide............ 1.8 1.5 1.7 1.7
Propylene:
Polymer-grade............ 11.0 10.1 10.3 10.6
Refinery-grade........... 9.9 9.1 6.7 6.4
---- ---- ---- ----
Total Olefins........... 24.4 21.9 20.0 19.9
---- ---- ---- ----
Total Petrochemicals.... 60.4 53.6 41.0 33.4
====
Less: Production Used as
Feedstocks+.............. 23.2 13.6 9.3
---- ---- ----
Total Production
Available for Sale..... 30.4 27.4 24.1
==== ==== ====
</TABLE>
- --------
*Calendar-day basis.
**Reflects an increase of 6.5 thousand barrels daily in production capacity
in the third quarter of 1998 as a result of an expansion project at the
Philadelphia refinery (see below).
***Total production divided by 365 days. During the 184-day period after the
June 30, 1998 acquisition of the phenol plant, phenol and acetone production
totalled 7.6 and 6.7 thousand barrels daily, respectively.
+Consists of benzene and refinery-grade propylene which are used in the
manufacture of cumene and cyclohexane, and of cumene (after June 30, 1998)
which is used in the manufacture of phenol and acetone.
Sunoco's petrochemical products are distributed and sold on a worldwide
basis with most of the sales made to customers in the United States. Sales of
petrochemicals to third parties by Sunoco Chemicals totalled 33.3 thousand
barrels daily in 1999 versus 27.7 thousand barrels daily in 1998 and 24.4
thousand barrels daily in 1997. The increased levels of both sales and
production volumes in the 1997-99 period were due to the acquisition of the
phenol facility.
Sales volumes during 1999 were distributed through the following channels:
. Benzene and Benzene Derivatives (including Cyclohexane)--Customers are
large manufacturers of fibers, detergents and specialty products who buy
a significant percentage of their requirements from Sunoco Chemicals
under long-term contracts;
8
<PAGE>
. Toluene and Xylenes--Buyers generally purchase large volumes for fibers,
film and urethane products. These sales are made in both the contract and
spot markets and tend to be international in scope. Customers and
distributors also take individually small volumes of toluene and xylenes
for paints, coatings, solvents and a variety of specialty applications;
. Phenol and Acetone--Long-term phenol contract sales to AlliedSignal are
used in nylon production. Other phenol contract sales are to large
manufacturers of resins and adhesives primarily for use in building
products. Large contract sales of acetone are to major customers who
manufacture polymers. Other sales of acetone are made to individually
smaller customers for use in inks, paints, varnishes and adhesives;
. Polymer-grade Propylene--Sales are primarily made pursuant to a long-term
contract to Epsilon Products Co. ("Epsilon"), a polypropylene
manufacturer (see below); and
. Ethylene and Ethylene Oxide--Sales are primarily to intermediate-size
specialty chemical companies that make diverse products such as
surfactants, co-polymer resins and emulsions, and additives.
Benzene, extracted at Sunoco's Marcus Hook and Philadelphia refineries and
purchased from third parties, and refinery-grade propylene are used to produce
cumene at Philadelphia. The cumene is then used to produce phenol and acetone
at the phenol facility in Philadelphia. In the third quarter of 1998, Sunoco
Chemicals completed a project to expand its cumene production capacity at the
Philadelphia refinery from 500 to 1,220 million pounds per year (4.5 to 11.0
thousand barrels per day). The expanded facility, which utilizes a new
catalyst technology, produced cumene at an annualized rate of 1,012 million
pounds during the fifteen-month period ended December 31, 1999. Opportunities
exist for incremental expansions of polymer-grade propylene, cumene, phenol
and acetone.
Sun Lubricants
The Sun Lubricants business is comprised of the manufacturing, blending,
packaging and marketing of a broad line of paraffinic and aromatic lubricating
and specialty oils produced at the Tulsa and Puerto Rico refineries as well as
the manufacturing and wholesale marketing of the fuels produced at these
facilities.
Base oils are sold to domestic and international customers who manufacture
their own finished transportation and industrial lubricants. Sun Lubricants
also upgrades a significant portion of its base oil production into specialty
oils at its blending and packaging facilities. Blending and packaging
operations are conducted principally at lube service centers located at the
Marcus Hook and Tulsa refineries for Sunoco and third parties.
Specialty oil production is comprised principally of transportation and
industrial lubricants. Sun Lubricants also produces other specialty lube
products such as horticultural and agricultural oils, aromatic and paraffinic
rubber oils, paper defoamer oils, asphalt quality improvement extracts,
textile oils and finished waxes. These finished products are marketed under
the Sunoco(R) and Kendall(R) brand labels directly by Sunoco or through
distributors to a wide variety of domestic and foreign customers.
9
<PAGE>
The following table sets forth information concerning operations at the
Tulsa and Puerto Rico refineries (in thousands of barrels daily):
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
Tulsa Puerto Tulsa Puerto Tulsa Puerto
OK Rico Total OK Rico Total OK Rico Total
----- ------ ----- ----- ------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Crude Unit Capacity..... 85.0 85.0 85.0 85.0 85.0 85.0
==== ===== ==== ===== ==== =====
Input to Crude Units*... 79.3 79.3 82.4 82.4 82.9 82.9
==== ===== ==== ===== ==== =====
Base Oil Lubes
Capacity............... 8.5 9.1 17.6 8.5 9.1 17.6 8.1 9.3 17.4
==== ==== ===== ==== ==== ===== ==== ==== =====
Products Manufactured:
Base Oil Lubricants.... 8.2 8.3 16.5 8.5 6.6 15.1 8.1 7.8 15.9
Gasoline............... 16.6 -- 16.6 16.8 -- 16.8 17.0 .5 17.5
Middle Distillates..... 25.8 2.8 28.6 26.0 2.1 28.1 27.0 4.5 31.5
Residual Fuel.......... .1 10.1 10.2 -- 9.6 9.6 .1 11.0 11.1
Lubes Extracted
Feedstocks............ 16.2 -- 16.2 18.8 -- 18.8 20.7 -- 20.7
Waxes and Other........ 8.8 7.6 16.4 9.8 8.4 18.2 6.9 9.1 16.0
---- ---- ----- ---- ---- ----- ---- ---- -----
75.7 28.8 104.5 79.9 26.7 106.6 79.8 32.9 112.7
==== ==== ===== ==== ==== ===== ==== ==== =====
</TABLE>
- --------
*Excludes approximately 30-35 thousand barrels per day of reduced crude oil
processed at the Puerto Rico refinery (see discussion below).
Production volumes during 1998 were limited by a 59-day maintenance
turnaround at the Puerto Rico refinery as well as by a two-week shutdown of
this facility due to Hurricane Georges. After completion of the maintenance
turnaround in April 1998, lubricants production increased at the refinery. The
16.5 thousand barrels per day of base oils produced by Sun Lubricants during
1999 represents a record level of lubricants production.
In 1997, Sun Lubricants reconfigured the Puerto Rico refinery to eliminate
the processing of conventional crude oil and to process, instead,
approximately 30-35 thousand barrels per day of reduced crude oil. This change
significantly reduced the amount of unprofitable fuels produced at the
facility while fully maintaining the volume and quality of lubricants
production. The streamlining of the Puerto Rico refining operation has
improved operating efficiency, lowered fixed costs and reduced ongoing capital
spending and working capital requirements.
Sales of specialty oil lubricant products totalled 11.0 thousand barrels
daily in 1999 versus 11.0 thousand barrels daily in 1998 and 11.7 thousand
barrels daily in 1997 while sales of base oils totalled 7.8 thousand barrels
daily in 1999 versus 6.9 thousand barrels daily in 1998 and 7.1 thousand
barrels daily in 1997. Fuels and waxes sold to third parties from the Tulsa
and Puerto Rico refineries totalled 83.3 thousand barrels per day in 1999
compared to 82.9 thousand barrels per day in 1998 and 99.5 thousand barrels
per day in 1997. The significant decline in fuels and wax sales in 1998
reflects a decline in fuels sales resulting from the Company's strategy to
significantly reduce fuels production at the Puerto Rico refinery.
10
<PAGE>
The following table sets forth information concerning the feedstocks
purchased for processing at the Tulsa and Puerto Rico refineries (in thousands
of barrels daily):
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
Tulsa Puerto Tulsa Puerto Tulsa Puerto
OK Rico Total OK Rico Total OK Rico Total
----- ------ ----- ----- ------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Feedstock Type:
Oklahoma Sweet and West
Texas Intermediate.... 76.9 -- 76.9 78.7 -- 78.7 79.3 -- 79.3
Reduced Crude Oil...... -- 29.2 29.2 -- 26.2 26.2 -- 27.6 27.6
Other.................. -- -- -- -- -- -- -- 3.6 3.6
---- ---- ----- ---- ---- ----- ---- ---- -----
76.9 29.2 106.1 78.7 26.2 104.9 79.3 31.2 110.5
==== ==== ===== ==== ==== ===== ==== ==== =====
</TABLE>
Sunoco MidAmerica Marketing & Refining
The Sunoco MidAmerica Marketing & Refining ("Sunoco MidAmerica") business
consists of the retail sale of gasoline and middle distillates and the
operation of convenience stores in the Midwest as well as the manufacturing,
distribution and wholesale marketing of fuels and petrochemicals produced at
the Toledo refinery.
Retail Marketing
Sunoco MidAmerica markets, through direct and distributor channels, five
grades of retail gasoline products under the Sunoco(R) brand ranging from
Ultra(R) 94 to an 86 octane grade of gasoline. These outlets are located in
Indiana, Kentucky, Michigan, Ohio and West Virginia with the strongest market
presence in Michigan and Ohio. Sunoco MidAmerica is also the sole supplier to
all 16 gasoline outlets on the Ohio turnpike.
The following table sets forth Sunoco's retail gasoline outlets in the
Midwest at December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Direct Outlets:
Company Owned or Leased:
Company-Operated:
Traditional................................................ 18 17 19
Sunoco Food Market(R) Convenience Stores................... 70 76 79
--- --- ---
88 93 98
--- --- ---
Dealer-Operated:
Traditional................................................ 69 75 77
Sunoco Food Market(R) Convenience Stores................... 23 23 26
Ultra Service Centers SM................................... 12 14 15
--- --- ---
104 112 118
--- --- ---
Total Company Owned or Leased................................ 192 205 216
Dealer Owned*................................................ 138 133 126
--- --- ---
Total Direct Outlets.......................................... 330 338 342
Distributor Outlets........................................... 561 569 595
--- --- ---
891 907 937
=== === ===
</TABLE>
- --------
*Primarily traditional outlets.
11
<PAGE>
Branded fuels sales averaged 59.9 thousand barrels daily in 1999 compared to
57.4 thousand barrels daily in 1998 and 54.1 thousand barrels daily in 1997.
Ultra(R) 94 sales (including the Ultra(R) 94 used as an octane enhancer in
Sunoco's mid-grade gasolines) accounted for approximately 19 percent of
Sunoco's retail gasoline sales in the Midwest in 1999. The increases in
branded fuels sales during 1999 and 1998 are largely a result of new supply
agreements in the distributor channel. Sunoco MidAmerica expects these sales
to increase further in 2000 due to ongoing efforts to grow the brand.
The following table sets forth information concerning Sunoco's convenience
stores in the Midwest:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Number of Stores.......................................... 93 101 108
Merchandise Sales (Thousands of Dollars/Store/Month)...... $52.8 $45.1 $43.0
Merchandise Margin (Company Operated) (% of Sales)........ 24.3% 27.7% 30.6%
</TABLE>
In late 1998, Sunoco MidAmerica began reimaging its service stations in
connection with Sunoco's company-wide reimaging program. As of December 31,
1999, reimaging has been completed at 268 locations, or 30 percent of the
Company's total retail marketing outlets in the Midwest. The program is
expected to be substantially completed by the end of 2001 at a total cost of
approximately $16 million. (See "Sunoco Northeast Marketing" above for a
further discussion of this program.)
Refining and Wholesale Marketing
The following table sets forth information concerning operations at the
Toledo refinery (in thousands of barrels daily):
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Crude Unit Capacity........................................ 140.0 130.0 125.0
===== ===== =====
Input to Crude Units....................................... 133.8 132.4 133.0
===== ===== =====
Conversion Capacity........................................ 88.0 88.0 86.0
===== ===== =====
Conversion Unit Throughput................................. 78.3 81.0 83.1
===== ===== =====
Products Manufactured:
Gasoline.................................................. 85.0 86.5 88.8
Middle Distillates........................................ 28.1 25.5 24.4
Residual Fuel............................................. 4.2 4.3 3.5
Petrochemicals............................................ 9.2 10.4 10.7
Other..................................................... 19.3 18.6 17.7
----- ----- -----
145.8 145.3 145.1
===== ===== =====
</TABLE>
Production volumes increased during 1999 despite both planned and unplanned
refinery maintenance activities and voluntary production cutbacks due to the
low margin environment. Production volumes during 1998 were impacted by a one-
month scheduled turnaround of one of the Toledo refinery's crude units and a
one-week shutdown of the refinery caused by a regional electricity emergency.
Fuels products sold at wholesale to third parties from Sunoco's Toledo
refinery in 1999 averaged 78.2 thousand barrels daily compared to 75.1
thousand barrels daily in 1998 and 74.0 thousand barrels daily in 1997.
12
<PAGE>
The Toledo refinery is a high conversion refinery that refines predominantly
light, low-sulfur crude oil. The following table sets forth information
concerning the feedstocks purchased for processing at the facility (in
thousands of barrels daily):
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Feedstock Type:
West Texas
Intermediate........... 58.2 65.1 59.1
Canadian................ 57.1 50.9 53.0
African................. 9.1 3.6 --
South American.......... 4.0 3.1 --
"Lubes-Extracted"
Gasoil/Naphtha
Intermediate
Feedstock.............. 5.0 11.3 20.3
----- ----- -----
133.4 134.0 132.4
===== ===== =====
</TABLE>
Ethanol blending is employed by Sunoco MidAmerica at its terminals in order
to reduce octane costs, simplify the product slate and enhance the storage and
transportation of gasoline products.
Chemicals
Sunoco MidAmerica chemical operations consist of the manufacturing of base
commodity and intermediate petrochemicals. These chemicals are comprised of
aromatics (including benzene, toluene and xylene), spirits, nonene and
tetramer. All of these products are sold under a marketing agreement with
Suncor Energy Inc. through a joint venture partnership that is managed by
Sunoco Chemicals. Almost all of the nonene and tetramer production is sold
under a long-term contract and a significant portion of the aromatics and
spirits production is sold into the solvents channel and/or higher-end
derivative markets. Sales of petrochemicals to third parties by Sunoco
MidAmerica totalled 9.1 thousand barrels daily in 1999 versus 10.1 thousand
barrels daily in 1998 and 10.8 thousand barrels daily in 1997.
Sunoco Logistics
The Sunoco Logistics business consists of crude oil and refined product
pipeline operations; domestic lease crude oil acquisition and related trucking
operations; crude oil terminalling; and product terminalling and transport
operations. These operations are conducted primarily in the Northeast, Midwest
and South Central regions of the United States.
Pipeline operations are conducted through wholly-owned subsidiaries and
through other pipelines in which Sunoco has an ownership interest. The
pipelines are principally common carriers and, as such, are regulated by the
Federal Energy Regulatory Commission for interstate movements and by state
regulatory agencies for intrastate movements. The tariff rates charged, while
regulated by the governing agencies, are based upon competition from other
pipelines or alternate modes of transportation.
Sunoco Logistics crude oil pipeline operations, located primarily in the
South Central United States, transport crude oil produced in Oklahoma, Texas,
New Mexico and Louisiana to refiners (including Sunoco's Tulsa refinery) or to
local trade points. The refined product pipeline operations, located primarily
in the Northeast and Midwest, transport gasoline, jet fuel, diesel fuel, home
heating oil and other products for Sunoco's other businesses and for third-
party integrated petroleum companies, independent marketers and distributors.
At December 31, 1999, Sunoco Logistics had an equity interest in 5,966 miles
of crude oil pipelines and 4,641 miles of refined product pipelines. In 1999,
crude oil and refined product shipments, including Sunoco's proportionate
share of shipments in pipelines in which it had an ownership interest,
totalled
13
<PAGE>
49.4 and 32.0 billion barrel miles, respectively, as compared to 53.8 and 30.6
billion barrel miles in 1998 and 58.9 and 29.7 billion barrel miles in 1997.
Sunoco Logistics crude oil pipeline operations in the South Central United
States are complemented by lease crude oil acquisition and related trucking
operations. Approximately 147 thousand barrels daily of crude oil were
purchased from third-party leases during 1999. This crude oil is delivered to
various pipelines either directly from the wellhead or utilizing Sunoco
Logistics fleet of 150 trucks. Product terminalling and transport operations
include 37 terminals in the Northeast and Midwest that support Sunoco's
branded and wholesale marketing operations, 115 trucks that transport gasoline
and distillates and a railroad fleet of 155 owned and 2,560 leased tank cars
that primarily supports the Sunoco Chemicals and Sun Lubricants businesses.
The Company's marine transportation requirements are satisfied through the use
of third-party charters. Sunoco maintains an extensive vessel inspection
review and evaluation program to assure the vessels chartered into Sunoco
service are of appropriate quality.
Sunoco's Nederland, TX, terminal provides approximately ten million barrels
of storage and provides terminalling throughput capacity exceeding one million
barrels per day. Its Gulf Coast location provides local and midwestern
refiners access to increasing volumes of foreign and offshore domestic crude
oil. The facility is also a key link in the distribution system for United
States government purchases for and sales from the Strategic Petroleum Reserve
storage facilities.
In 1999, Sunoco expanded its crude oil acquisition and pipeline businesses
in the South Central United States with the $36 million acquisition of Pride
Companies, L.P.'s 800-mile crude pipeline system, 800,000 barrels of tankage
and related assets, and 35 thousand barrels per day of third party lease
purchases.
In 1998, Sunoco entered into an agreement to charter two new innovative
VLCCs (Very Large Crude Carriers) to transport crude oil to its Philadelphia
and Marcus Hook refineries. Construction of the two two-million-barrel-
capacity tankers is expected to be completed in 2001. The tankers will be put
on three-year charter to Sunoco at that time. The new VLCCs will provide
transportation cost savings compared to existing VLCCs and the smaller, one-
million-barrel-capacity tankers typically used to supply the Company's
Northeast refineries.
Sun Coke
Sun Coke Company's business consists of blast furnace coke manufacturing at
the Company's facilities in East Chicago, IN, and Vansant, VA, and coal
production from mines in Virginia. Such operations are conducted by Sun Coke
Company and its affiliates.
Sun Coke produces high-quality coke at its 1.3 million ton-per-year Indiana
Harbor cokemaking operation in East Chicago, IN, and at its 700 thousand ton-
per-year Jewell cokemaking operation in Vansant, VA. These facilities use Sun
Coke's proprietary low-cost, heat-recovery cokemaking technology, which is
environmentally superior to the chemical by-product recovery technology
currently used by other coke producers.
Start-up of the Indiana Harbor cokemaking operation commenced in the first
quarter of 1998 and all four batteries at this facility, totalling 268 ovens,
have been producing at full rated capacity beginning in the second half of
1998. Production from this facility is sold to Ispat Inland Inc. ("Ispat") for
use at Ispat's Indiana Harbor Works steel plant located adjacent to Sun Coke's
facility. A supply agreement requires Sun Coke to provide Ispat 1.2 million
tons of coke annually on a take-or-pay basis through 2013. Additional
production of up to 150,000 tons per year will be sold either to Ispat or to
other steel producers. Sun Coke is also required to supply all of the flue gas
by-product produced at
14
<PAGE>
the cokemaking facility to a third-party utility for the generation of steam
and electricity. In return, the utility reduces the sulfur and particulate
content of the flue gas to acceptable emission levels.
Sunoco intends to continue to grow its cokemaking business so that it can
capitalize on its proprietary cokemaking technology and realize additional
earnings diversification and growth.
In 1997, Sun Coke completed a 9-year program to replace the existing coke
ovens at its Jewell cokemaking facility with 142 new ovens. This program has
resulted in an improvement in overall cost efficiencies and an enhancement in
coke quality.
In 1998, Sun Coke transferred an interest in its Indiana Harbor cokemaking
operation to a third party for $200 million in cash. In 1995, Sun Coke
transferred an interest in its Jewell cokemaking operation to another third
party for $95 million in cash. The investors in each operation are entitled to
95 percent of the cash flows and tax benefits from the respective cokemaking
operations until certain cumulative return targets have been met. After these
preferential return periods, which are expected to end in 2002 and 2000,
respectively, the third parties will be entitled to variable minority
interests in the cash flows and tax benefits from the respective operations
ranging from 5 to 25 percent.
The following table sets forth information concerning Sun Coke's cokemaking
and coal mining operations:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Production (Thousands of Tons):
Coke...................................................... 1,910 1,473 664
===== ===== =====
Coal:
Metallurgical (Jewell)................................... 850 1,063 1,460
Steam (Shamrock)*........................................ 204 1,896 1,827
----- ----- -----
1,054 2,959 3,287
===== ===== =====
Proven and Probable Coal Reserves at
December 31 (Millions of Tons):
Metallurgical (Jewell)................................... 112 113 114
Steam (Shamrock)*........................................ -- 8 10
----- ----- -----
112 121 124
===== ===== =====
</TABLE>
- --------
*In February 1999, Sun Coke divested its Shamrock steam coal mining operation
located in Kentucky. With this divestment, Sun Coke ceased steam coal mining
activities.
In 1999, 86 percent of Sun Coke's metallurgical coal production was
converted into coke at the Jewell cokemaking facility and 14 percent was sold
in spot market transactions. This is consistent with the Company's strategy,
adopted in the fourth quarter of 1998, of using its metallurgical coal
production predominantly in its Jewell cokemaking operation. All of the
metallurgical coal used to produce coke at Indiana Harbor is purchased under
short-term market rate contracts from third parties.
During 1999, all of Indiana Harbor's coke sales were made to Ispat (see
above) while 98 percent of Jewell's coke sales were made under a long-term
contract which provides for delivery of nearly all of this facility's coke
production to National Steel Corporation through April 1, 2005. Sun Coke's
long-term sales contracts contain cost pass through or escalating fixed price
provisions.
15
<PAGE>
Competition
The refining and marketing business is very competitive. Sunoco competes
with other domestic refiners and marketers in the northeastern United States
and U.S. Gulf coast, with foreign refiners who import products into the United
States and with producers and marketers in other industries supplying other
forms of energy and fuels to consumers. The recent consolidation and
convergence experienced in the refining and marketing industry has reduced the
number of competitors. However, it has not reduced competition. Sunoco
believes the current trend of industry restructuring may continue. As a
result, the business environment may become more competitive, while providing
the Company with opportunities to expand its operations.
Profitability in the refining and marketing industry depends largely on
refined product margins, as well as operating efficiency, product mix, and
costs of product distribution and transportation. Certain of Sunoco's
competitors that have larger and more complex refineries may be able to
realize lower per barrel costs or higher margins per barrel of throughput.
Several of Sunoco's principal competitors are integrated multi-national oil
companies that are larger and have substantially greater resources than
Sunoco. Because of their integrated operations and larger capitalization,
these companies may be more flexible in responding to volatile industry or
market conditions, such as shortages of feedstocks or intense price
fluctuations. Refining margins are frequently impacted by sharp changes in
crude oil costs, which are not immediately reflected in product prices. A
large, rapid increase in crude oil prices adversely affects the Company's
operating margins if the increased costs cannot be passed on to customers.
Unlike certain of its competitors that have access to proprietary sources of
controlled crude oil production, Sunoco must obtain all of its feedstocks from
unaffiliated sources. Most of the crude oils processed in Sunoco's refining
system are light sweet crude oils. However, management believes that any
potential competitive impact of Sunoco's inability to process significant
quantities of less expensive heavy sour crude oils will likely be mitigated
by: the higher-value product slate obtained from light sweet crude oils; the
higher cost to process heavy sour crude oils; and the continued availability
of ample quantities of light sweet crude oils.
Sunoco also faces strong competition in the market for the sale of retail
gasoline and merchandise. Sunoco's competitors include service stations of
large integrated gasoline companies, independent gasoline service stations,
convenience stores, fast food stores, and other similar retail outlets, some
of which are well-recognized national or regional retail systems. This
competition is expected to continue. The principal competitive factors
affecting Sunoco's retail marketing operations include: location of stores,
product price, selection and quality, appearance and cleanliness, hours of
operation, store safety, customer loyalty and brand recognition.
Sunoco competes by pricing gasoline competitively, combining its retail
gasoline business with convenience stores which provide a wide variety of
branded products, and using effective advertising and promotional campaigns.
Sunoco believes that it is in a position to compete effectively as a marketer
of refined products because of the location of its Northeast and Midwest
refineries and retail network which are well integrated with its proprietary
distribution system.
Sunoco's chemicals businesses compete with national, regional and local
companies throughout North America, largely on the basis of costs and service.
Sunoco's petrochemicals business is largely a commodities business, with
pricing and quality being the most important factors. Sunoco faces similarly
strong competition in the sale of petroleum lubricants in largely fragmented
markets.
Cokemaking operations are also highly competitive. While domestic coke
consumption has stabilized over the past two years, U.S. coke production has
declined to about 80 percent of consumption. Lower quality foreign coke has
supplanted some U.S. coke production as aging coke
16
<PAGE>
plants have been adversely impacted by the Clean Air Act. Sunoco believes the
shutdown of existing coke plants will continue and offers Sun Coke an
opportunity to build new plants. Sunoco also believes it is well-positioned to
compete with other coke producers since Sunoco's proprietary technology allows
Sunoco to construct coke ovens that, compared to conventional coke ovens, are
more environmentally benign, are generally less costly to build, and can be
operated with significantly fewer workers.
Research and Development
In recent years, Sunoco's research and development activities have focused
on applied research, process and product development, and engineering and
technical services related to fuels, lubricants and chemicals. Sunoco spent
$4, $4 and $5 million on research and development activities in 1999, 1998 and
1997, respectively. As of December 31, 1999, approximately 90 scientists,
engineers, technicians and support personnel participated in these activities.
Sunoco owns or has made application for numerous patents in the U.S.
Employees
As of December 31, 1999, Sunoco had approximately 11,300 employees compared
to approximately 11,100 employees as of December 31, 1998. The increase in
1999 is primarily attributable to an increase in company-operated convenience
stores, partially offset by the divestment of the Company's Shamrock steam
coal mining operations. Approximately 40 percent of Sunoco's employees are
employed in company-operated convenience stores and service stations.
Approximately 25 percent of Sunoco's employees were covered by 45 collective
bargaining agreements as of December 31, 1999. The collective bargaining
agreements have various terms and dates of expiration. In management's
opinion, Sunoco's relationship with its employees is generally satisfactory.
Environmental Matters
Sunoco is subject to numerous federal, state and local laws which regulate
the discharge of materials into the environment or that otherwise relate to
the protection of the environment. These laws have required, and are expected
to continue to require, Sunoco to make significant expenditures of both a
capital and expense nature. The following table summarizes Sunoco's
expenditures for environmental projects and compliance activities (in millions
of dollars):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Pollution Abatement Capital*................................. $ 33 $ 35 $ 23
Remediation.................................................. 35 34 38
Operations, Maintenance and Administration................... 155 173 188
---- ---- ----
$223 $242 $249
==== ==== ====
</TABLE>
- --------
*Capital expenditures for pollution abatement are expected to approximate $25
and $35 million in 2000 and 2001, respectively.
The Clean Air Act of 1990, as amended (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
also requires refiners to market cleaner-burning gasoline that reduces
emissions of certain toxics and conventional pollutants. The Company has
implemented the first two phases of the reformulated gasoline regulations
which require an increase in the minimum quantity of oxygen for certain non-
attainment areas, a reduction in benzene content, and a reduction in
summertime Reid Vapor Pressure ("RVP"). Sunoco expects to implement the more
stringent final phase of these regulations in the spring of 2000.
17
<PAGE>
Pursuant to the Clean Air Act, in December 1999 the U.S. Environmental
Protection Agency ("EPA") issued a final rule to require more stringent
emissions standards ("Tier 2 Standards") for new passenger cars and light duty
trucks. The final rule mandates significant reductions in the sulfur levels in
reformulated and conventional gasoline commencing in 2004. The rule includes a
banking and trading credit system, which could provide refiners compliance
flexibility until 2006. Sunoco currently has gasoline sulfur levels which are
below the industry average and idle assets which may be used to help meet this
new requirement. Analysis of the rule to determine its impact and to identify
compliance alternatives by the required dates is ongoing. The rule could have
a significant impact on Sunoco and its operations, primarily with respect to
the capital and operating expenditures at the Philadelphia, Marcus Hook and
Toledo refineries. The capital spending is likely to begin in early 2003 while
the higher operating costs will be incurred when production of the low-sulfur
gasoline commences. The ultimate impact of the rule cannot be determined at
this time, and may be affected by such factors as technology selection, the
effectiveness of the banking and trading credit system, timing uncertainties
created by permitting requirements and construction schedules and any effect
on prices created by changes in the level of gasoline production.
In November 1998, the EPA convened an advisory Panel on Oxygenate Use in
Gasoline (the "Panel"). The purpose of the Panel was to review public health
and environmental issues that have been raised by the use of MTBE in gasoline,
and specifically by the discovery of MTBE in water supplies. The Panel made
its recommendations to the EPA on July 27, 1999. The recommendations call for
the improved protection of drinking water from MTBE contamination, a
substantial reduction in the use of MTBE, and action by Congress to remove the
oxygenate requirements for reformulated gasoline under the Clean Air Act.
State and federal environmental agencies could implement the majority of the
recommendations, and some would require Congressional legislative action.
While the Panel recommended that certain public and private funding options be
explored for the clean up of contaminated sites, it made no specific
recommendations concerning such funding options. However, private parties are
seeking clean-up remedies primarily from East and West Coast gasoline
marketers, including Sunoco. California has acted to ban MTBE use by December
31, 2002. In connection with the MTBE ban, California has requested a waiver
from the EPA of its oxygenate requirements. Other states are also reviewing
the use of MTBE in gasoline. MTBE is the primary oxygenate used by Sunoco and
throughout the industry to meet the reformulated gasoline requirements under
the Clean Air Act. While phase-outs or restrictions on the use of MTBE or any
required clean up of MTBE could have a significant impact on Sunoco and its
results of operations, the ultimate impact cannot be determined at this time.
The Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") and the Solid Waste Disposal Act as amended by the Resource
Conservation and Recovery Act ("RCRA"), and related federal and state laws
subject Sunoco to the potential obligation to remove or mitigate the
environmental effects of the disposal or release of certain pollutants at
Sunoco's facilities and at third-party or formerly-owned sites. Under CERCLA,
Sunoco 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, 1999, Sunoco had been named as
a PRP at 52 sites identified or potentially identifiable as "Superfund" sites
under CERCLA. Sunoco has reviewed the nature and extent of its involvement at
each site and other relevant circumstances and, based upon the other parties
involved or Sunoco's negligible participation therein, believes that its
potential liability associated with such sites will not be significant.
Under various environmental laws, including RCRA, Sunoco has initiated
corrective remedial action at Sunoco's facilities, formerly-owned facilities
and third-party sites and could be required to undertake similar actions at
various other sites. The cost of such remedial actions could be significant
but is expected to be incurred over an extended period of time.
18
<PAGE>
Sunoco 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. 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 1999 Annual
Report to Shareholders.
On October 4, 1996, Sunoco filed a complaint in Los Angeles County Superior
Court, Jalisco Corporation, Inc., et al. v. Argonaut Insurance Company, et al.
(Case No. BC 158441), naming more than 45 insurance companies as defendants
and seeking recovery under numerous insurance policies for certain
environmental matters of Sunoco, including its predecessor companies and
subsidiaries, arising from the ownership and operation of its businesses. In
1999 and 1998, the Company entered into several settlements which resolved
most of these claims. As a result, the Company received net cash proceeds
totalling $4 million in 1998, $96 million in 1999 and $28 million in early
2000. Pretax gains of $73 million ($47 million after tax) and $58 million ($38
million after tax) were recognized in 1999 and 1998, respectively, in
connection with these settlements.
Total future costs for environmental remediation activities will depend
upon, among other things, the identification of any 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 Sunoco'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 Sunoco'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 Sunoco's consolidated financial
position or, over an extended period of time, on Sunoco's cash flows or
liquidity.
Year 2000 Information Processing
During the 1997-99 period, Sunoco assessed, remediated or replaced, tested
and implemented computer systems and applications in order that they would be
able to operate and properly process information dated after December 31,
1999. As a result of these efforts, the Company has not experienced any Year
2000 failures of its key computer systems and applications. Likewise, the
Company's key customers and suppliers have been able to continue to meet their
obligations to the Company. Although unlikely, the possibility still exists
that interruptions to Company and/or key customer and supplier operations or
business activities could occur as a result of lingering Year 2000 Issues.
Such interruptions, if they were to occur, could have a material adverse
impact on Sunoco's consolidated results of operations or financial condition.
ITEM 3. LEGAL PROCEEDINGS
In 1999, Sunoco, Inc. (R&M) and Atlantic Refining and Marketing Corp., an
affiliate of Sunoco, paid civil fines aggregating $106,000 under a 1996
Consent Decree executed with the United States Environmental Protection Agency
Region III (acting through the United States Department of Justice), and
lodged in the United States District Court for the Eastern District of
Pennsylvania. These payments stem from several alleged NPDES permit violations
at Sunoco's Philadelphia refinery.
Many other legal and administrative proceedings are pending against Sunoco.
Although the ultimate outcome of these proceedings cannot be ascertained at
this time, it is reasonably possible that some of them could be resolved
unfavorably to Sunoco. Management of Sunoco believes that any liabilities
which may arise from such proceedings would not be material in relation to the
consolidated financial position of Sunoco at December 31, 1999.
19
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Executive Officers of Sunoco, Inc.
<TABLE>
<CAPTION>
Name, Age and
Present
Position with
Sunoco, Inc. Business Experience During Past Five Years
------------- ------------------------------------------
<S> <C>
Robert H. Campbell, 62 Mr. Campbell will retire as Chairman and Chief Executive
Chairman of the Board Officer effective after the 2000 Annual Meeting of
and Chief Executive Shareholders on May 4, 2000. He was elected Chairman of the
Officer Board in May 1992 and Chief Executive Officer in September
1991. He also held the additional positions of President and
Chief Operating Officer from February 1991 until December
1996. He has been a Director since November 1988.
Michael H.R. Dingus, 51 Mr. Dingus was elected as a Vice President of Sunoco, Inc.
Vice President, Sunoco, in May 1999. He was elected President, Sun Coke Company in
Inc., and President, June 1996. From September 1995 to June 1996, he was Vice
Sun President of Sunoco responsible for special projects and
Coke Company from September 1993 to September 1995, he served as Sunoco's
Vice President, Materials Management & Administration. In
addition, from January 1994 to February 1995, he served as
Chief Executive Officer of Radnor Corporation, a Company
subsidiary.
John G. Drosdick, 56 Mr. Drosdick will assume the Chief Executive Officer
President and Chief position and is expected to be elected Chairman following
Operating Officer the 2000 Annual Meeting of Shareholders on May 4, 2000. He
was elected a Director and President and Chief Operating
Officer in December 1996. He was President and Chief
Operating Officer of Ultramar Corporation (prior to its
merger with Diamond Shamrock, Inc. to become Ultramar
Diamond Shamrock Corporation) from June 1992 to August 1996.
Bruce G. Fischer, 44 Mr. Fischer was elected to his present position in January
Vice President and 1999. From June 1995 to January 1999, he was General
General Manager, Sunoco Manager, Sunoco MidAmerica Marketing & Refining and from
MidAmerica Marketing December 1991 to June 1995, served as Manager, Chemicals and
and Refining Lubes Operations & Central Transportation.
Jack L. Foltz, 64 Mr. Foltz was elected to his present position in October
Vice President 1992.
and General Counsel
Deborah M. Fretz, 51 Ms. Fretz was elected Senior Vice President, Logistics in
Senior Vice President, August 1994. She assumed the additional position of Senior
Lubricants and Vice President, Lubricants in January 1997. In addition, she
Logistics has been President of Sun Pipe Line Company, a Company
subsidiary, since October 1991.
Thomas W. Hofmann, 48 Mr. Hofmann was elected to his present position in July
Vice President and 1998. From July 1995 to July 1998, he served as Comptroller
Chief Financial Officer and from September 1994 to July 1995, as Director,
Performance Analysis.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Name, Age and
Present
Position with
Sunoco, Inc. Business Experience During Past Five Years
------------- ------------------------------------------
<S> <C>
David E. Knoll, 56 Mr. Knoll was elected to his present position in August
Senior Vice President, 1994.
Northeast Refining and
Chemicals
Joseph P. Krott, 36 Mr. Krott was elected to his present position in July 1998.
Comptroller From September 1997 to July 1998, he served as Director,
Compensation, Benefits & HR Systems; from July 1996 to
September 1997 as Manager, Compensation & HR Systems; and
from February 1996 to July 1996, Manager, Compensation
Special Projects. He was Manager, Consolidation Accounting
and Special Projects from September 1995 to February 1996
and Manager, Accounting Special Projects from January 1993
to September 1995.
Robert W. Owens, 46 Mr. Owens was elected to his present position in February
Vice President and 1997. He was Vice President, Marketing and Services of
General Ultramar Diamond Shamrock Corporation from 1996 to 1997 and
Manager, Sunoco of Ultramar Corporation from 1994 to 1996.
Northeast Marketing
Malcolm I. Ruddock, 57 Mr. Ruddock was elected to his present position in 1989.
Treasurer
David C. Shanks, 60 Mr. Shanks was elected to his present position in February
Vice President, Human 1997. Previously, he was a Corporate Vice President of
Resources, Public Arthur D. Little, Inc.
Affairs
& Strategic Planning
Sheldon L. Thompson, 61 Mr. Thompson was elected to his present position in October
Senior Vice President 1992.
and Chief
Administrative Officer
Charles K. Valutas, 49 Mr. Valutas was elected to his present position in August
Vice President, 1994.
Sunoco Chemicals
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated herein by reference to
the Quarterly Financial and Stock Market Information on page 47 of the
Company's 1999 Annual Report to Shareholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated herein by reference to
the Selected Financial Data on page 9 of the Company's 1999 Annual Report to
Shareholders.
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is incorporated herein by reference to
pages 10-25 in the Company's 1999 Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information in the Company's 1999 Annual Report to
Shareholders is incorporated herein by reference: the Consolidated Financial
Statements on pages 26-29; the Notes to Consolidated Financial Statements on
pages 30-44; the Report of Independent Auditors on page 45; and the Quarterly
Financial and Stock Market Information on page 47.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information on directors required by Items 401 and 405 of Regulation S-K
is incorporated herein by reference to the Company's definitive Proxy
Statement ("Proxy Statement") which will be filed with the Securities and
Exchange Commission ("SEC") within 120 days after December 31, 1999.
Information concerning the Company's executive officers appears in Part I of
this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1999, except that the Report of the
Compensation Committee and the Stock Performance Graph contained in the Proxy
Statement are specifically excluded from incorporation by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 404 of Regulation S-K is incorporated
herein by reference to the Company's Proxy Statement which will be filed with
the SEC within 120 days after December 31, 1999.
22
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1.Consolidated Financial Statements:
The information appearing in the Company's 1999 Annual Report to
Shareholders as described in Item 8 is incorporated herein by
reference.
2.Financial Statement Schedules:
Schedule II--Valuation Accounts is included on page 28 of this Form
10-K. Other schedules are omitted because the required information is
shown elsewhere in this report, is not necessary or is not applicable.
3.Exhibits:
<TABLE>
<C> <S>
3.(i) --Articles of Incorporation of Sunoco, Inc., as amended and
restated effective as of November 6, 1998 (incorporated by
reference to Exhibit 3.(i) of the Company's 1998 Form 10-K
filed March 5, 1999, File No. 1-6841).
3.(ii) --Sunoco, Inc. Bylaws, as amended and restated effective as of
November 4, 1999.
4.1 --Instruments defining the rights of security holders of long-
term debt of the Company and its subsidiaries are not being
filed since the total amount of securities authorized under
each such instrument does not exceed 10 percent of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company will provide the SEC a copy of any
instruments defining the rights of holders of long-term debt of
the Company and its subsidiaries upon request.
4.2 --Second Amendment to Rights Agreement dated as of February 3,
2000 between Sunoco, Inc. and EquiServe First Chicago Trust
Division (incorporated by reference to Exhibit 4.4 of the
Company's Form 8-A/A filed February 7, 2000, File No. 1-6841).
4.3 --Amendment to Rights Agreement dated as of July 3, 1997 between
Sunoco, Inc. and First Chicago Trust Company of New York
(predecessor to EquiServe First Chicago Trust Division)
(incorporated by reference to Exhibit 4 of the Company's
Current Report on Form 8-K dated July 8, 1997, File No. 1-
6841).
4.4 --Rights Agreement between Sunoco, Inc. and First Chicago Trust
Company of New York (predecessor to EquiServe First Chicago
Trust Division) dated as of February 1, 1996 (incorporated by
reference to Exhibit 99(b) of the Company's Current Report on
Form 8-K dated February 2, 1996, File No. 1-6841).
10.1* --Sunoco, Inc. Long-Term Performance Enhancement Plan, as
amended and restated effective as of June 30, 1999.
10.2* --Sunoco, Inc. Executive Long-Term Stock Investment Plan, as
amended and restated effective as of June 30, 1999.
</TABLE>
23
<PAGE>
<TABLE>
<C> <S>
10.3* --Sunoco, Inc. Long-Term Incentive Plan, as amended and restated
effective as of June 30, 1999.
10.4* --Sunoco, Inc. Directors' Deferred Compensation Plan, as amended
and restated effective as of February 3, 2000.
10.5* --Sunoco, Inc. Deferred Compensation Plan, as amended and
restated effective as of February 2, 2000.
10.6* --Sunoco, Inc. Pension Restoration Plan, as amended and restated
effective February 1, 1996 (incorporated by reference to Exhibit
10.5 of the Company's 1995 Form 10-K filed March 7, 1996, File
No. 1-6841) and as amended effective September 1, 1997
(incorporated by reference to Exhibit 10.6 of the Company's 1997
Form 10-K filed March 6, 1998, File No. 1-6841).
10.7* --Sunoco, Inc. Savings Restoration Plan, as amended and restated
effective as of February 3, 2000.
10.8* --Sunoco, Inc. Executive Incentive Plan, as amended and restated
effective March 4, 1998 (incorporated by reference to Exhibit
10.8 of the Company's 1997 Form 10-K filed March 6, 1998, File
No. 1-6841) and as amended effective July 1, 1998 (incorporated
by reference to Exhibit 10.2 of the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1998 filed
August 7, 1998, File No. 1-6841).
10.9* --Sunoco, Inc. Executive Retirement Plan, as amended and restated
effective as of January 1, 2000.
10.10* --Sunoco, Inc. Special Executive Severance Plan, as amended and
restated effective as of July 1, 1999.
10.11* --Sunoco, Inc. Executive Involuntary Severance Plan, as amended
and restated effective as of September 4, 1997 (incorporated by
reference to Exhibit 10.11 of the Company's 1997 Form 10-K filed
March 6, 1998, File No. 1-6841).
10.12* --Sunoco, Inc. Retainer Stock Plan for Outside Directors
(incorporated by reference to Exhibit 10.9 of the Company's 1995
Form 10-K filed March 7, 1996, File No. 1-6841).
10.13* --Amended Schedule to the Form of Indemnification Agreement,
individually entered into between Sunoco, Inc. and certain
officers and directors of the Company. The Form of
Indemnification Agreement is incorporated by reference to
Exhibit 10.15 of the Company's 1995 Form 10-K filed March 7,
1996, File No. 1-6841.
10.14* --Sunoco, Inc. Directors' Deferred Compensation and Benefits
Trust Agreement dated as of January 11, 1999 by and among
Sunoco, Inc., Bankers Trust Company and Towers, Perrin, Forster
& Crosby, Inc. (incorporated by reference to Exhibit 10.14 of
the Company's 1998 Form 10-K filed March 5, 1999, File No. 1-
6841).
10.15* --First Amendment to Sunoco, Inc. Deferred Compensation and
Benefits Trust Agreement dated as of September 3, 1999 by and
among Sunoco, Inc., Bankers Trust Company and Towers, Perrin,
Forster & Crosby, Inc.
</TABLE>
24
<PAGE>
<TABLE>
<C> <S>
10.16* --Sunoco, Inc. Deferred Compensation and Benefits Trust Agreement
dated as of January 11, 1999 by and among Sunoco, Inc., Bankers
Trust Company and Towers, Perrin, Forster & Crosby, Inc.
(incorporated by reference to Exhibit 10.15 of the Company's
1998 Form 10-K filed March 5, 1999, File No. 1-6841).
12 --Statement re Sunoco, Inc. and Subsidiaries Computation of Ratio
of Earnings to Fixed Charges for the Year Ended December 31,
1999.
13 --Sunoco, Inc. 1999 Annual Report to Shareholders Financial
Section.
21 --Subsidiaries of Sunoco, Inc.
23 --Consent of Ernst & Young LLP.
24.1 --Power of Attorney executed by certain officers and directors of
Sunoco, Inc.
24.2 --Certified copy of the resolution authorizing certain officers
to sign on behalf of Sunoco, Inc.
27 --Article 5 of Regulation S-X, Financial Data Schedule.
</TABLE>
- --------
*These exhibits constitute the Executive Compensation Plans and Arrangements of
the Company.
(b) Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during the quarter ended
December 31, 1999.
Note: Copies of each Exhibit to this Form 10-K are available upon request.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Sunoco, Inc.
By s/Thomas W. Hofmann
-----------------------
Thomas W. Hofmann
Vice President and Chief Financial Officer
Date March 2, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by or on behalf of the following persons on
behalf of the registrant and in the capacities indicated on March 2, 2000:
Signatures Titles
Robert H. Campbell* Chairman of the Board, Chief
--------------------- Executive Officer and Director
Robert H. Campbell (Principal Executive Officer)
Raymond E. Cartledge* Director
---------------------
Raymond E. Cartledge
John G. Drosdick* President, Chief Operating Officer
--------------------- and Director
John G. Drosdick
Mary Johnston Evans* Director
---------------------
Mary Johnston Evans
Thomas P. Gerrity* Director
---------------------
Thomas P. Gerrity
Rosemarie B. Greco* Director
---------------------
Rosemarie B. Greco
Thomas W. Hofmann* Vice President and Chief Financial
--------------------- Officer (Principal Financial
Thomas W. Hofmann Officer)
James G. Kaiser* Director
---------------------
James G. Kaiser
26
<PAGE>
Signatures Titles
Robert D. Kennedy* Director
------------------------
Robert D. Kennedy
Joseph P. Krott* Comptroller (Principal Accounting
------------------------ Officer)
Joseph P. Krott
Norman S. Matthews* Director
------------------------
Norman S. Matthews
R. Anderson Pew* Director
------------------------
R. Anderson Pew
William F. Pounds* Director
------------------------
William F. Pounds
G. Jackson Ratcliffe* Director
------------------------
G. Jackson Ratcliffe
Alexander B. Trowbridge* Director
------------------------
Alexander B. Trowbridge
*By /s/Thomas W. Hofmann Individually and as Attorney-in-Fact
------------------------
Thomas W. Hofmann
27
<PAGE>
SUNOCO, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION ACCOUNTS
For the Years Ended December 31, 1999, 1998 and 1997
(Millions of Dollars)
<TABLE>
<CAPTION>
Additions
-------------------
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
of Period Expenses Accounts Deductions of Period
---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
For the year ended
December 31, 1999:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $ 9 $ 4 $-- $ 4 $ 9
=== === === === ===
For the year ended
December 31, 1998:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $6 $7 $-- $4 $9
=== === === === ===
For the year ended
December 31, 1997:
Deducted from asset in
balance sheet--allowance
for doubtful accounts
and notes receivable.... $8 $6 $-- $8 $6
=== === === === ===
</TABLE>
28
<PAGE>
Exhibit 3.(ii)
Sunoco, Inc.
Bylaws
(Amended and Restated as of November 4, 1999)
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Article I Page
<S> <C>
Directors
Section 1 - Membership 1
Section 2 - Vacancies 1
Section 3 - Emergency Board 1
Section 4 - Liability of Directors 2
Section 5 - Nomination of Directors 2
Article II
Meetings of the Board of Directors
Section 1 - Place 3
Section 2 - Annual & Regular Meetings 3
Section 3 - Special Meetings 3
Section 4 - Notice 3
Section 5 - Waiver of Notice 3
Section 6 - Notice of Adjourned Meeting 3
Section 7 - Quorum 4
Section 8 - Consent Action 4
Article III
Committees
Section 1 - Executive Committee 4
Section 2 - Notice 4
Section 3 - Special Committees 4
Section 4 - Relationship to Board 4
Section 5 - Quorum 5
Section 6 - Vacancies 5
Article IV
Officers
Section 1 - Designation 5
Section 2 - Authority 5
Section 3 - Chairman of the Board 6
Section 4 - Vice Chairman of the Board 6
Section 5 - President 6
Section 6 - Executive Vice Presidents 6
Section 7 - Vice Presidents 6
Section 8 - Secretary 6
Section 9 - Treasurer 6
Section 10 - Comptroller 7
Section 11 - General Auditor 7
Section 12 - Assistant Officers 7
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Article V
Meetings of Shareholders
Section 1 - Annual Meetings 7
Section 2 - Special Meetings 7
Section 3 - Notice 8
Section 4.a - Quorum 8
Section 4.b - Quorum at Shareholder-
called Special Meeting 8
Section 4.c - No Waiver of Quorum 8
Section 5 - Voting 9
Section 6 - Adjournment 9
Section 7 - Proxies 9
Section 8 - Shareholders List 9
Section 9 - Record Date 10
Section 10 - Certification by Nominee 10
Section 11 - Judge of Election 10
Section 12 - Prior Notice of Shareholder Proposals 11
Article VI
Stock Certificates
Section 1 - Description 11
Section 2 - Transfers 12
Section 3 - Registered Shareholders 12
Section 4 - Lost Certificates 12
Section 5 - Dividends 12
Section 6 - Uncertificated Stock 12
Article VII
Indemnification
Section 1 - General 12
Section 2 - Agreements for Indemnification and Funding 13
Section 3 - Expenses 13
Section 4 - Disputes 13
Article VIII
General Provisions
Section 1 - Voting Shares of Other Corporations 13
Section 2 - Seal 13
Section 3 - Inapplicability of Certain Sections of
the Pennsylvania Business Corporation Law 14
Section 4 - Amendments 14
</TABLE>
ii
<PAGE>
Sunoco, Inc.
Bylaws
Article I: Directors
Membership
Section 1. The business and affairs of the Corporation shall be managed by
a Board of Directors consisting of the number of Directors equal to those
elected at the annual meeting of shareholders or as may from time to time be
determined by the Board, except that it shall not consist of less than five
members. Except as hereinafter provided in the case of vacancies, Directors
shall be elected by ballot at the annual meeting of shareholders and shall hold
office for one year and until successors are duly elected and qualified, or
until earlier resignation or removal. Directors need not be residents of the
state of the Commonwealth of Pennsylvania.
Vacancies
Section 2. Vacancies in the Board of Directors may be filled by a majority
of the incumbent members of the Board, though such majority be less than a
quorum. If the number of Directors is at any time increased, the incumbent
Directors may by majority vote elect any additional Director. Such newly
elected Director shall hold office until the next annual meeting of the
shareholders and until a successor is elected and qualified, or until earlier
resignation or removal.
Emergency Board
Section 3. In the event of any emergency by reason of nuclear attack or
other attacks by enemy forces upon the North American Continent, there shall be
constituted without further action or authority an Emergency Board of Directors.
In the event of an emergency by reason of physical disasters of national or
greater scope, an attack upon the United States outside the North American
Continent, or an imminent threat of an attack or physical disaster of national
or greater scope upon the North American Continent, there shall be constituted
an Emergency Board of Directors by declaration of the Chairman of the Board of
Directors. The Emergency Board shall consist of at least three members from the
regular Board of Directors or from officers of the Corporation or its
subsidiaries who are not members of the regular Board of Directors but who have
been designated as alternate members of the Emergency Board. The Emergency Board
may exercise all of the powers of the regular Board of Directors in the
management of the business, affairs and property of the Corporation during the
emergency and until such time as the regular Board of Directors shall resume the
exercise of its powers.
The original members of the Emergency Board shall be the Chairman, the
President and the Executive Vice Presidents who are members of the Board of
Directors, provided however, that any vacancy existing because of the
unavailability of any two of the foregoing persons shall be filled by the
alternate members. The Chairman of the Board shall serve as Chairman of any
meeting of the Emergency Board or, in the event of his unavailability for any
reason, the President or an Executive Vice President, in order designated by the
Chairman of the Board, shall serve in this capacity. In the event of the
unavailability for any reason of all of the foregoing persons, an alternate
member shall serve as Chairman at any meeting of the Emergency Board in the
order previously designated for membership by resolution of the regular Board of
Directors.
1
<PAGE>
Meetings may be called by any member of the Emergency Board. Two members
shall constitute a quorum for the transaction of business and the act of any two
members present at a meeting shall be the act of the Emergency Board. Meetings
may be held by any means of communication and Directors shall be deemed present
if they are in communication with other directors by any means. Notice of
meetings may be given at any time and in any manner, provided that a reasonable
effort shall be made to give actual notice to each member of the Emergency
Board.
To the extent not inconsistent with this Section 3 of Article I, the Bylaws
in their entirety shall remain in effect during any such emergency. No officer,
Director or employee acting in good faith in accordance with this Section 3 of
Article I or any resolutions made pursuant hereto, shall be liable for his
conduct unless it is willful misconduct.
Liability of Directors
Section 4. A Director of the Corporation shall not be personally liable
for monetary damages, as such, for any action taken or any failure to take any
action, unless (1) he has breached the duties of his office or has failed to
perform his duties as a Director in good faith, in a manner he reasonably
believed to be in the best interest of the Corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances; and (2) the breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness.
Nomination of Directors
Section 5. Nominations for election to the Board of Directors may be made
by shareholders entitled to vote for the election of Directors only in the
manner specified in this Section. Shareholders may submit nominations for
consideration by a committee appointed by the Board of Directors for that
purpose. A nomination proposed to be made at an annual meeting shall be
submitted in writing to the Secretary of the Corporation no later than the
December 31 prior to the annual meeting at which such nomination is intended to
be considered. Nominations may be made at any meeting of shareholders called
for the purpose of election of Directors other than an annual meeting only upon
written notice of the shareholder's intent to make such nominations at the
meeting delivered to the Secretary of the Corporation at least sixty (60) days
prior to the date of such meeting; provided, however, that if the date of such
meeting is first publicly announced or disclosed (in a public filing or
otherwise) less than seventy (70) days prior to the date of such meeting, such
prior notice shall be given not more than ten (10) days after such date is first
so announced or disclosed. Such nominations and written notice of any
nominations by shareholders under this section shall contain the following
information:
(a) name, residence and business address of the nominating shareholder;
(b) a representation that the shareholder is a record holder or beneficial
owner of the Corporation's voting shares and a statement of the number of such
shares;
(c) a representation that the shareholder intends to appear in person or
by proxy at the meeting to nominate the individuals specified in the notice, if
the nominations are to be made at a meeting of shareholders;
2
<PAGE>
(d) information regarding each nominee such as would be required to be
included in a proxy statement;
(e) a description of all arrangements or understandings between and among
the shareholder and each and every nominee; and
(f) the written consent of each nominee to serve as a Director, if
elected.
The judge of election or the person presiding at the meeting, in the absence of
the judge of election, shall determine whether any nomination is made according
to these procedures and should be accepted. Such decision shall be deemed
conclusive and binding on all shareholders of the Corporation.
Article II: Meetings of the Board of Directors
Place
Section 1. Meetings of the Board of Directors, regular or special may be
held either within or without the Commonwealth of Pennsylvania.
Annual & Regular Meetings
Section 2. As soon as practicable following their election at the annual
meeting of the shareholders, the Directors shall meet for the purpose of
organization. Regular meetings of the Board of Directors thereafter may be held
at such times and at such places as the Board may by resolution determine.
Special Meetings
Section 3. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors, the Vice Chairman, the
President, an Executive Vice President who is a member of the Board of
Directors, or upon the written request of a majority of the Directors.
Notice
Section 4. No notice shall be required of the meeting of the Board of
Directors for the purpose of organization or for the regular meetings fixed as
aforesaid, but at least forty-eight hours notice shall be given by mail or
telegram of all special meetings of the Directors specifying the place, day and
hour of the meeting. Neither the business to be transacted nor the purpose of
any regular or special meeting of the Board of Directors need be specified in
the notice or waiver of notice of such meeting. This notice may be waived by a
Director in writing either before or after the meeting.
Waiver of Notice
Section 5. The attendance of a Director at any meeting shall constitute a
waiver of notice of such meeting except where a Director attends for the express
purpose of objecting to the transaction of any business because the meeting has
not been lawfully called or convened.
Notice of Adjourned Meeting
Section 6. Notice of an adjourned meeting of the Board of Directors need
not be given if the time and place are fixed at the meeting adjourning.
3
<PAGE>
Quorum
Section 7. At all meetings of the Board of Directors, a majority of the
Directors in office shall constitute a quorum for the transaction of business.
The act of a majority of the Directors present at any meeting at which a quorum
is present shall be the act of the Board of Directors, unless the act of a
greater or lesser number is required by statute or the Articles of
Incorporation. The majority of Directors present, though less than a quorum,
may adjourn any meeting from time to time.
Consent Action
Section 8. Any action required to be taken at a meeting of the Board or
any committee thereof shall be deemed the action of the Board of Directors or of
a committee thereof if all the Directors or committee members, as the case may
be, execute, either before or after the action is taken, a written consent
thereto, and the consent is filed with the records of the Corporation.
Article III: Committees
Executive Committee
Section 1. The Board of Directors shall designate an Executive Committee
consisting of such number of members as may be determined from time to time to
serve at the pleasure of the Board who shall be elected from the members of the
Board by a majority of the whole Board. The Committee shall elect a Chairman
from among its members. To the extent permitted by Pennsylvania law, the
Executive Committee may exercise all or any of the powers of the Board of
Directors in the management of the business, affairs and property of the
Corporation during the interval between meetings of the Board; provided however,
that no action shall be taken by the Executive Committee if any member of such
Committee has voted in opposition thereto.
Notice
Section 2. The Executive Committee need not hold its meetings at any
particular time or place, but such meetings shall be held upon reasonable notice
to members of the Committee.
Special Committees
Section 3. The Board of Directors may appoint such other standing or
special committees, and officers therefor, as it may deem proper, and, to the
extent permitted by Pennsylvania law, may delegate to such committees any of the
powers possessed by the Board which may be required by such committees in
carrying out the purposes for which they are appointed. Each of such committees
shall have at least three members. Membership on the Board of Directors shall
not be prerequisite to membership on such committees.
Relationship to Board
Section 4. Committees shall be responsible to the full Board of Directors
and shall report upon the exercise of their powers and duties at each regular
meeting of the Board of Directors, or when called upon by the Board.
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Quorum
Section 5. A majority of any committee shall constitute a quorum for the
transaction of business, and shall be required to constitute the act of the
committee.
Vacancies
Section 6. The Board of Directors may fill vacancies in any committee, and
may appoint one or more alternate members of a committee who shall have the
power to act in the absence or disability of a member of such committee. The
Board of Directors may abolish any committee at its pleasure, and may remove a
committee member from membership on a committee at any time, with or without
cause.
Article IV: Officers
Designation
Section 1. The officers of the Corporation shall be chosen by the Board of
Directors at its organization meeting and shall include a Chairman of the Board
of Directors, a President, one or more Executive Vice Presidents, one or more
Vice Presidents, any of whom at the pleasure of the Board may be designated
Senior Vice President or Group Vice President, a Secretary, a Treasurer, a
Comptroller, and a General Auditor, all of who shall be the principal officers
of the Corporation and may include one or more Vice Chairmen of the Board who
would be principal officers, and such other officers and assistant officers as
the Board of Directors may from time to time determine. Any number of offices
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such instrument is required
by law to be executed, acknowledged or verified by two or more officers. Of the
officers so chosen by the Board of Directors, the Chairman of the Board of
Directors, the Vice Chairmen of the Board of Directors, and the President shall
be chosen from among the Directors. All officers of the Corporation shall hold
their offices at the pleasure of the Board of Directors.
Authority
Section 2. Notwithstanding the legal authority conferred by these Bylaws
upon the officers named herein, the Board of Directors may by resolution
establish such positions of authority, supervision and responsibility as in the
judgment of the Board may be necessary or appropriate for the internal
administration of the affairs of the Corporation. The performance of any duty
by any officer shall be conclusive evidence of his authority to act, including
the delegation of any of his powers to other officers or employees under his
direction. The Board of Directors may designate either the Chairman of the
Board or the President as the Chief Executive Officer or the Chief Operating
Officer of the Corporation.
The Chief Executive Officer shall have general supervision of the affairs
of the Corporation, subject to the policies and direction of the Board of
Directors, and shall supervise and direct all officers and employees of the
Corporation, but may delegate in his discretion any of his powers to any officer
or such other executives as he may designate.
The Chief Operating Officer shall have general supervision and direction of
all operating officers and employees of the Corporation but may delegate in his
discretion any of his powers to any Vice President or such other executives as
he may designate.
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Chairman of the Board
Section 3. The Chairman of the Board of Directors shall preside at all
meetings of the shareholders and of the Board of Directors. He shall ex-officio
be a member of all committees of the Board of Directors except as otherwise
determined by the Board. He shall also perform such other duties as the Board
of Directors may from time to time assign to him.
Vice Chairman of the Board
Section 4. The Vice Chairman of the Board of Directors shall perform such
duties as the Board of Directors or the Chairman may from time to time assign to
them.
President
Section 5. The President shall perform such duties as the Board of
Directors or the Chairman may from time to time assign to him.
Executive Vice Presidents
Section 6. The Executive Vice Presidents shall perform such duties as
shall, from time to time, be imposed upon them by the Chairman or the President.
Vice Presidents
Section 7. The Vice Presidents shall perform such duties and shall be
responsible to such officers of the Corporation as the Chairman, President or an
Executive Vice President may direct.
Secretary
Section 8. The Secretary shall keep the minutes of all meetings of the
shareholders, the Board of Directors, all committees of the Board except as
otherwise designated by the Board and shall give all notices of meetings of the
shareholders, the Board of Directors, and any committees of the Board for which
he serves as Secretary. He shall have control of the custody of all deeds,
contracts, agreements, and other corporate records, except as otherwise provided
in these Bylaws or by the Board of Directors, and shall attend to such
correspondence of the Corporation as the Chairman shall direct. He shall be the
custodian of the seal of the Corporation and shall affix it to any instrument
requiring the same, except as otherwise provided herein or by the Board of
Directors. He shall be responsible to such officer or officers of the
Corporation as the Chairman may designate.
Treasurer
Section 9. The Treasurer shall be responsible for all receipts and
disbursements of the Corporation and the custodianship of the Corporation's
funds. He shall have full authority, directly or by his delegation to selected
officers or other employees, to receive and give receipts for all moneys due and
payable to the Corporation from any source whatever, and to endorse checks,
drafts, and warrants in its name and on its behalf. He shall be responsible for
depositing the funds of the Corporation in its name in such depositories as may
be designated by him; shall sign or delegate the signing of all checks, notes
and drafts and shall be charged with the general establishment of the
Corporation's policies and procedures relating to short-term financing, cash
management, credits and collections and insurance.
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Comptroller
Section 10. The Comptroller shall be the chief accounting officer of the
Corporation and shall arrange for the keeping of adequate records of all assets,
liabilities and transactions of the Corporation.
General Auditor
Section 11. The General Auditor shall be chief control officer of the
Corporation and shall be responsible for the establishment of internal controls.
He shall see that adequate audits are currently and regularly made.
Assistant Officers
Section 12. Assistant officers shall perform such duties as their
immediate principal officers may from time to time direct or delegate, and,
during the absence of said principal officers, shall perform all the duties of
said principal officers.
Article V: Meetings of Shareholders
Annual Meetings
Section 1. The annual meeting of the shareholders for the election of
Directors for the ensuing year and for the transaction of such other business as
may be properly brought before the meeting shall be held each year on such day
and at such time and place, either within or without Pennsylvania, as shall be
determined in advance by the Board of Directors.
Special Meetings
Section 2. Special meetings of the shareholders may be called at any time
by the Chairman of the Board of Directors or by the order of the Board of
Directors. Special meetings of the shareholders may also be called by any
shareholder entitled to call such a meeting pursuant to, and in compliance with,
the provisions of Article TENTH of the Articles of Incorporation of the
Corporation. A shareholder wishing to call a special meeting of the
shareholders of the Corporation shall give written notice to the Secretary of
the Corporation which shall (a) certify that such shareholder is the record
owner of at least ten percent (10%) of the outstanding shares of the
Corporation's Voting Stock, (b) contain such shareholder's undertaking to
continue to hold, at all times from the date of such notice until the final
adjournment of such special meeting, at least ten percent of the outstanding
shares of the Corporation's Voting Stock, (c) specify the proposal or proposals
such shareholder desires to have submitted for shareholder action at such
special meeting, and (d) include all other material and information required to
be submitted or provided pursuant to law, the Corporation's Articles of
Incorporation and these Bylaws, including, without limitation, Article I,
Section 5 hereof, if applicable, given the nature of such shareholder's proposal
or proposals.
The Secretary of the Corporation promptly shall transmit such notice to the
Board of Directors which shall, within sixty days following the date on which
such notice is received by the Secretary, determine the sufficiency of the
notice and whether any one or more of the shareholder's proposals constitutes a
"Proper Matter for Shareholder Consideration" as set forth herein. A
shareholder's proposal shall be deemed a "Proper Matter for Shareholder
Consideration" unless, pursuant to Rule 14a-8(c) promulgated under the
Securities Exchange Act of 1934, as amended (or any similar or successor rule or
regulation), the Corporation would be entitled to omit such proposal from its
proxy statement for an annual meeting of shareholders had such proposal been
timely submitted to the Corporation for consideration at
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such annual meeting of shareholders in accordance with Rule 14a-8. No special
meeting of shareholders shall be held at the call of a shareholder unless there
has been a determination by the Board of Directors that (i) the notice submitted
by the shareholder complies with the requirements of this Section, and (ii) at
least one of the proposals of such shareholder is a Proper Matter for
Shareholder Consideration; provided, however, that only proposals submitted by
the calling shareholder which are determined to be Proper Matters for
Shareholder Consideration shall be considered at such special meeting of
shareholders. Notwithstanding the foregoing, nothing herein shall prohibit the
Board of Directors from submitting matters to the shareholders at any special
meeting of shareholders including, without limitation, a special meeting of
shareholders called by a shareholder.
A shareholder calling a special meeting of shareholders shall reimburse the
Corporation for all costs incurred by it in connection with such special meeting
of shareholders including, without limitation, the costs of preparing and
disseminating a proxy statement or information statement in connection with, and
soliciting proxies to be voted at, such special meeting of shareholders. A
special meeting of shareholders of the Corporation called by a shareholder in
accordance with Article Tenth of the Articles of Incorporation shall be held at
such date, time and place as is determined by the Board of Directors of the
Corporation, which date shall be not later than ninety days after the date on
which the Board of Directors shall have determined that the shareholder has duly
called such meeting by giving proper written notice to the Secretary of the
Corporation and has otherwise complied with applicable law and the Articles of
Incorporation and Bylaws of the Corporation.
Notice
Section 3. Unless waived, written notice of the time, place and purpose
of every meeting of the shareholders shall be given by the Secretary not less
than five nor more than ninety days before the date of the meeting either
personally or by sending a copy of such notice by mail, e-mail or other
electronic transmission, to each shareholder of record entitled to vote at such
meeting.
Quorum
Section 4.a. Unless otherwise provided in the Articles of Incorporation,
by statute or these Bylaws, at all meetings of shareholders, the presence in
person or by proxy, of shareholders entitled to cast a majority of the votes
which all shareholders are entitled to cast at the meeting shall constitute a
quorum for the transaction of business.
Quorum at Shareholder-called Special Meeting
Section 4.b. At any special meeting of shareholders called by a
shareholder pursuant to Article Tenth of the Corporation's Articles of
Incorporation, the presence, in person or by proxy, of shareholders entitled to
cast at least sixty-six and two thirds percent (66 2/3%) of the votes which all
shareholders are entitled to cast shall constitute a quorum for the transaction
of business.
No Waiver of Quorum
Section 4.c. Section 1756(b) of the BCL (and any successor provision of
similar import) shall not be applicable with respect to any special meeting of
shareholders called by a shareholder pursuant to Article Tenth of the
Corporation's Articles of Incorporation, or to any adjournment thereof. If a
special meeting of shareholders called by a shareholder pursuant to Article
Tenth of the Corporation's Articles of Incorporation cannot be organized for
lack of a
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quorum under Section 4.b of these Bylaws, such special meeting shall be deemed
finally adjourned without the taking of any shareholder action.
Voting
Section 5. When a quorum is present at any meeting of the shareholders,
the shareholders entitled to vote and casting a majority of the votes at the
meeting shall decide any question brought before such meeting, unless the
question is one which, by express provision of law, the Articles of
Incorporation, or these Bylaws, requires a different vote, in which case such
express provision shall govern and control the decision of such question. The
shareholders present in person or by proxy at any duly organized meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
Adjournment
Section 6. The holders of shares entitled to cast a majority of the votes
present or represented at any meeting may adjourn the meeting from time to time,
though such majority constitutes less than a quorum. When a meeting is
adjourned to another time or place, it shall not be necessary to give notice of
the adjourned meeting if the time and place to which the meeting is adjourned
are announced at the meeting adjourning and at the adjourned meeting only such
business is transacted as might have been transacted at the original meeting.
Proxies
Section 7. Every shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize another person
or persons to act for him by proxy. Every proxy shall be executed or
authenticated by the shareholder or by his duly authorized attorney-in-fact, and
filed with, or transmitted to, the Secretary of the Corporation or its
designated agent. A shareholder, or his duly authorized attorney-in-fact, may
execute or authenticate a writing or transmit an electronic message authorizing
another person to act for him by proxy. A telegram, telex, cablegram, datagram,
e-mail, internet communication or other means of electronic transmission from a
shareholder or attorney-in-fact, or a photographic, facsimile or similar
reproduction of a writing executed by a shareholder or attorney-in-fact, will be
treated as properly executed or authenticated for purposes of this section if it
sets forth or utilizes a confidential and unique identification number or other
mark furnished by the Corporation to the shareholder for the purposes of a
particular meeting or transaction. No proxy shall be valid after eleven months
from the date of its execution, authentication or transmission, unless a longer
time is expressly provided therein. Unless it is coupled with an interest, a
proxy shall be revocable, notwithstanding any other agreement or any provision
in the proxy to the contrary. Revocation of a proxy shall not be effective
until notice thereof has been given to the Secretary of the Corporation or its
designated agent in writing or by electronic transmission. A proxy shall not be
revoked by the death or incapacity of the shareholder but shall continue in
force until revoked by the personal representative or guardian of the
shareholder. The presence at any meeting of a shareholder who has given a proxy
shall not revoke such proxy unless the shareholder shall give notice of such
revocation in writing, or by electronic transmission, to the Secretary of the
meeting prior to the voting of such proxy.
Shareholders List
Section 8. The officer or agent having charge of the stock transfer books
for shares of the Corporation shall make and certify a complete list of the
shareholders entitled to vote at a shareholders' meeting or any adjournment
thereof. Such list shall be arranged alphabetically
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within class and series, with the address of and the number of shares held by
each shareholder. The information contained in such list shall be made available
to the shareholders by appropriate means at the time and place of the meeting of
shareholders.
Record Date
Section 9. For the purpose of determining the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to or dissent from any proposal without a meeting, or for
the purpose of determining shareholders entitled to receive payment of any
dividend or allotment of any right, or for the purpose of any other action, the
Board of Directors may fix, in advance, a record date for any such determination
of shareholders. Such date shall not be more than ninety days before the date
of such meeting nor more than ninety days prior to any other action. In such
case only such shareholders as shall be shareholders of record on the date so
fixed shall be entitled to notice of, and to vote at such meeting, or to receive
payment of such dividend, or to receive such allotments of rights or to exercise
such rights, as the case may be, notwithstanding transfer of any shares on the
books of the Corporation after any record date so fixed. When the determination
of shareholders of record entitled to notice of or to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board fixes a new record date under
this section for the adjourned meeting.
Certification by Nominee
Section 10. The nominee shareholder of record of a shareholder dividend
reinvestment plan or of an employee benefit plan may certify in writing to the
Corporation that all or a portion of the shares of the Corporation registered in
the name of such nominee are held for the account of a specified person or
persons. Such certification shall be received by the Corporation no later than
15 days after the record date for each special or annual meeting of
shareholders. The certification shall be in the form specified by the
Corporation and shall include such information as the name, address and number
of shares of the beneficial owners, taxpayer identification number, and any
other information that the Corporation may deem necessary. Upon receipt by the
Corporation of such certification, the person or persons specified in the
certification shall be deemed, for the purposes of notice of and voting at the
meeting of shareholders, to be the holders of record of the number of shares
specified, in place of the nominee shareholder of record.
Judge of Election
Section 11. In advance of any meeting of shareholders the Board may
appoint one or three judges of election to act at the meeting or any adjournment
thereof. If such judges are not so provided by the Board or shall fail to
qualify, the person presiding at a shareholder meeting may, and on the request
of any shareholder entitled to vote thereat shall, make such appointment. In
case any person appointed as judge of election fails to appear or act, the
vacancy may be filled by appointment made by the Board in advance of the meeting
or at the meeting by the person presiding thereat. Each judge of election,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of judge of election at such meeting with
strict impartiality and according to the best of his ability. No person shall
be elected a Director at a meeting at which he has served as a judge of
election.
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Prior Notice of Shareholder Proposals
Section 12. At any annual or special meeting of shareholders, proposals by
shareholders (other than proposals of a shareholder calling a special meeting of
shareholders pursuant to Article Tenth of the Corporation's Articles of
Incorporation) shall be considered only if (a) such proposal is a "Proper Matter
for Shareholder Consideration" as set forth herein, and (b) prior notice thereof
has been timely given as provided herein. A shareholder's proposal shall be
deemed a "Proper Matter for Shareholder Consideration" unless, pursuant to Rule
14a-8(c) promulgated under the Securities Exchange Act of 1934, as amended (or
any similar or successor rule or regulation), the Corporation would be entitled
to omit such proposal from its proxy statement for an annual meeting of
shareholders had such proposal been timely submitted to the Corporation for
consideration at such annual meeting of shareholders in accordance with Rule
14a-8.
Notice of any proposal to be presented by any shareholder (outside the
solicitation of proxies pursuant to the rules and regulations of the Securities
and Exchange Commission) at an annual meeting of shareholders shall be delivered
in writing to the Secretary of the Corporation not later than December 31 prior
to the annual meeting of shareholders at which such proposal is to be presented.
Notice of any proposal to be presented by any shareholder at any special meeting
of shareholders shall be delivered in writing to the Secretary of the
Corporation not less than sixty (60) days prior to the date of such special
meeting; provided, however, that if the date of such special meeting is first
publicly announced or disclosed (in a public filing or otherwise) less than
seventy (70) days prior to the date of such special meeting, such prior notice
shall be given not more than ten (10) days after such date is first so announced
or disclosed. Notice of any such proposal to be presented at any shareholders
meeting shall include: the text of the proposal to be presented, a brief written
statement of the reasons for such shareholder's support of the proposal, the
name and address of record of the proposing shareholder, the number and class of
all shares of each class of stock of the Corporation beneficially owned by such
shareholder, a representation that the shareholder is the holder of Voting Stock
of the Corporation, is entitled to vote at such meeting and intends to appear in
person or by proxy to present the proposal at such meeting. It shall also
describe, in detail, any material interest of such shareholder in the proposal.
If the Board of Directors, after affording the shareholder a reasonable
opportunity to cure any deficiency which the Board of Directors identifies in
the original notice, determines that notice of a proposal was not effected in
accordance with the foregoing procedure, then such proposal shall not be
eligible for consideration at the meeting and such determination shall be
conclusive and binding upon the Corporation and its shareholders.
Article VI: Stock Certificates
Description
Section 1. Certificates evidencing the ownership of the shares of stock of
the Corporation of any class shall be issued to those entitled to them by
transfer or otherwise. Each certificate shall bear a distinguishing number, the
actual or facsimile signatures of the Chairman of the Board and of the
Secretary, the actual or facsimile seal of the Corporation, and such recitals as
may be required by law. The stock certificates in any class or classes shall be
issued in numerical order, and a full record of the issuance of each such
certificate shall be made in the books usually kept for that purpose or required
by law. The certificates shall be of
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such form and design as the Board of Directors may adopt and the form and design
thereof may from time to time be changed by the Board.
Transfers
Section 2. All shares of stock may be transferred on the books of the
Corporation by the registered holders thereof or by their attorneys legally
constituted or their legal representatives by surrender of the certificates
therefor for cancellation and a written assignment of the shares evidenced
thereby. The Board of Directors may from time to time appoint such transfer
Agents and Registrars of stock as it may deem advisable and may define their
powers and duties.
Registered Shareholders
Section 3. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold such person liable for calls
and assessments and shall not be bound to recognize any equitable or other claim
to or interest in such shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by the
laws of Pennsylvania.
Lost Certificates
Section 4. Any person or persons applying for a certificate of stock to be
issued in lieu of one alleged to be lost or destroyed shall, pursuant to the
laws of Pennsylvania relating to lost or destroyed certificates of stock,
furnish to the Corporation such information as the Board of Directors may
require to ascertain whether a certificate of stock has been lost or destroyed.
Dividends
Section 5. If any date appointed for the payment of any dividend, or fixed
for determining the shareholders of record to whom the same is payable, shall in
any year fall upon a Sunday or legal holiday, then such dividend shall be
payable or such shareholders of record shall be determined on the next
succeeding day not a Sunday or legal holiday.
Uncertificated Stock
Section 6. Notwithstanding anything herein to the contrary, any or all
classes and series of shares, or any part thereof, may be represented by
uncertificated shares, except that shares represented by a certificate that is
issued and outstanding shall continue to be represented thereby until the
certificate is surrendered to the Corporation. Within a reasonable time after
the issuance or transfer of uncertificated shares, the Corporation shall send to
the registered owner thereof, a written notice containing the information
required to be set forth or stated on certificates. The rights and obligations
of the holders of uncertificated shares of the same class and series shall be
identical. Notwithstanding anything herein to the contrary, the first sentence
of Section 2 of this Article VI shall be inapplicable to uncertificated shares
and in lieu thereof, the Corporation shall adopt alternative procedures for
registration of transfers.
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
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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 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.
Article VIII: General Provisions
Voting Shares of Other Corporations
Section 1. The Chairman or the Vice Chairmen of the Board of Directors,
the President, any Executive Vice President, any Vice President, or the
Secretary of the Corporation may vote, or appoint a proxy to vote, the shares of
any other business corporation or nonprofit corporation which are registered in
the name of the Corporation.
Seal
Section 2. The seal of the Corporation shall be circular in form, and
shall have inscribed thereon the name of the Corporation, the year of its
organization and the words "Corporate Seal Pennsylvania."
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Inapplicability of Certain Sections of the Pennsylvania Business Corporation Law
Section 3. 15 Pa.C.S. SS 2541-2548 (formerly Section 910),15 Pa.C.S. SS
2551-2556 (formerly Section 911) and 15 Pa.C.S. SS 2571-2575 as adopted December
23, 1983, March 23, 1988 and April 27, 1990, respectively, shall not be
applicable to this Corporation.
Amendments
Section 4. These Bylaws, including Article I, Section 4 entitled
"Liability of Directors" and Article VII entitled "Indemnification," may be
altered or amended at any annual meeting of shareholders, or at any special
meeting called for that purpose, by the shareholders entitled to vote and
casting a majority of the votes at the meeting, or at any duly constituted
meeting of the Board of Directors, by a majority of the Directors then in
office. Any alteration or amendment of Article 1, Section 4 and Article VII
shall be prospective only and shall not affect any rights or obligations then
existing.
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Exhibit 10.1
===============================================================================
SUNOCO, INC.
LONG-TERM PERFORMANCE ENHANCEMENT PLAN
(Amended and Restated as of June 30, 1999)
===============================================================================
1
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ARTICLE I
Definitions
As used in this Plan, the following terms shall have the meanings
herein specified:
1.1 Affiliate - shall mean any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with Sunoco, Inc.
1.2 Board of Directors - shall mean the Board of Directors of Sunoco,
Inc.
1.3 Change in Control - shall mean the occurrence of any of the
following events or transactions:
(a) Continuing Directors cease, within one year of a Control
Transaction, to constitute a majority of the Board of Directors of
Sunoco, Inc. (or of the Board of Directors of any successor to Sunoco,
Inc. or to all or substantially all of its assets), or
(b) any entity, person or Group acquires shares of Sunoco, Inc.
in a transaction or series of transactions that result in such entity,
person or Group directly or indirectly owning beneficially more than
twenty percent (20%) of the outstanding voting shares.
1.4 Code - shall mean the Internal Revenue Code of 1986, as amended.
1.5 Committee - shall mean the committee appointed to administer this
Plan by the Board of Directors of the Company, as constituted from time to time.
The Committee shall consist of at least two (2) members of the Board of
Directors, each of whom shall meet applicable requirements set forth in the
pertinent regulations under Section 16 of the Securities Exchange Act of 1934,
as amended, and Section 162(m) of the Code.
1.6 Common Stock - shall mean the authorized and unissued or treasury
shares of common stock of Sunoco, Inc.
1.7 Common Stock Units - shall have the meaning provided herein at
Section 6.1.
1.8 Company - shall mean Sunoco, Inc., a Pennsylvania corporation. The
term "Company" shall include any successor to Sunoco, Inc., any Subsidiary or
Affiliate which has adopted the Plan, or a corporation succeeding to the
business of Sunoco, Inc., or any Subsidiary or Affiliate by merger,
consolidation, liquidation or purchase of assets or stock or similar
transaction.
1.9 Continuing Director - shall mean a Director who was a member of
the Board of Directors immediately prior to a Control Transaction which results
in a Change in Control.
1.10 Control Transaction - shall mean any of the following
transactions or any combination thereof:
(a) any tender offer for or acquisition of capital stock of
Sunoco, Inc.;
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(b) any merger, consolidation, or sale of all or substantially
all of the assets of Sunoco, Inc.; or
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or a Group of shareholders
in a proxy solicitation or otherwise.
1.11 CSU Payout Date - shall have the meaning provided herein at
Section 6.9
1.12 Disability - shall mean any illness, injury or incapacity of such
duration and type as to render a Participant eligible to receive long-term
disability benefits under the applicable broad-based long-term disability
program of the Company.
1.13 Dividend Equivalents - shall have the meaning provided herein at
Section 6.3.
1.14 Dividend Equivalent Account - shall have the meaning provided
herein at Section 6.3.
1.15 Employment Termination Date - shall mean the date on which the
employment relationship between the Participant and the Company is terminated.
1.16 Exercise Period - shall have the meaning provided herein at
Section 5.3.
1.17 Fair Market Value - shall mean, as of any date and in respect of
any share of Common Stock, the opening price on such date of a share of Common
Stock (which price shall be the closing price on the previous trading day of a
share of Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape, and as reflected in the consolidated trading tables of the
Wall Street Journal or any other publication selected by the Committee). If
there is no sale of shares of Common Stock on the New York Stock Exchange for
more than ten (10) days immediately preceding such date, or if deemed
appropriate by the Committee for any other reason, the fair market value of the
shares of Common Stock shall be as determined by the Committee in such other
manner as it may deem appropriate. In no event shall the fair market value of
any share of Common Stock be less than its par value.
1.18 Group - shall mean persons who act in concert as described in
Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as
amended.
1.19 Incentive Stock Options - shall have the meaning provided herein
at Article IV.
1.20 Just Cause - shall mean:
(a) a judicial determination that the Participant has committed
fraud, misappropriation, or embezzlement against the Company; or
(b) a non-appealable conviction of, or entry of a plea of nolo
contendere for, an act by the Participant constituting a felony which,
as determined by the Company in good faith, constitutes a crime
involving moral turpitude and has resulted in material harm to the
Company, its subsidiaries and affiliates taken as a whole.
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No termination of employment shall be deemed an effective
termination for Just Cause unless accompanied by a copy of a
resolution duly adopted by the affirmative vote of not less than a
majority of the Continuing Directors at a meeting of the Board of
Directors which was called and held for the purpose of considering
such termination, or if there are no Continuing Directors, then by at
least three quarters (3/4) of the entire Board of Directors (after
reasonable notice to the Participant and an opportunity for the
Participant, together with the Participant's counsel, to be heard
before the Board of Directors) finding that, in the good faith opinion
of the Board of Directors, the Participant was guilty of conduct set
forth in the preceding sentence, and specifying the particulars
thereof in detail. In any deliberations or votes by the Board of
Directors concerning a determination under this Section, the
Participant shall recuse himself from such deliberations and votes.
1.21 Limited Rights - shall have the meaning provided herein at
Article V.
1.22 Market Price - shall have the meaning provided herein at Section
5.4.
1.23 Option - shall mean Stock Option and/or Incentive Stock Option.
1.24 Option Price - shall mean the purchase price per share of Common
Stock deliverable upon the exercise of an Option.
1.25 Optionee - shall mean the holder of an Option.
1.26 Participant - shall have the meaning provided herein at Section
2.4(a).
1.27 Performance Factors - shall mean the various payout percentages
related to the attainment levels of one or more Performance Goals, as determined
by the Committee.
1.28 Performance Goals - shall mean the specific targeted amounts of,
or changes in, financial or operating goals including: revenues; expenses; net
income; operating income; equity; return on equity, assets or capital employed;
working capital; shareholder return; operating capacity utilized; production or
sales volumes; or throughput. Other financial or operating goals may also be
used as determined by the Committee. Such goals may be applicable to the Company
as a whole or one or more of its business units and may be applied in total or
on a per share, per barrel or percentage basis and on an absolute basis or
relative to other companies, industries or indices or any combination thereof,
as determined by the Committee.
1.29 Performance Period - shall have the meaning provided herein at
Section 6.4.
1.30 Potential Change in Control - shall mean the occurrence of any
of the following events or transactions:
(a) any person (other than Sunoco, Inc., or any affiliate or
subsidiary thereof) makes a tender offer for capital stock of Sunoco,
Inc.;
(b) any person becomes the beneficial owner, directly or
indirectly, of capital stock of Sunoco, Inc. in an amount which
requires the filing of Schedule 13D or its equivalent
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form pursuant to the Rules and Regulations under the Securities
Exchange Act of 1934 as from time to time amended;
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or Group of shareholders in
a proxy solicitation or otherwise which, in its judgment, the Board of
Directors determines by adoption of a resolution within thirty (30)
days of such submission, might result in a Change in Control of
Sunoco, Inc.;
(d) any person files a pre-merger notification for the
acquisition of capital stock of Sunoco, Inc. pursuant to the Hart-
Scott-Rodino Act; or
(e) the Board of Directors in its judgment determines by
adoption of a resolution that a Potential Change in Control of Sunoco,
Inc. for purposes of this Plan has occurred.
1.31 Qualifying Termination - shall mean, with respect to the
employment of any Participant, the following:
(a) a termination of employment by the Company within seven (7)
months after a Change in Control, other than for Just Cause, death or
Disability;
(b) a termination of employment by the Participant within seven
(7) months after a Change in Control for one or more of the following
reasons:
(1) the assignment to such Participant of any duties
inconsistent in a way adverse to such Participant, with such
Participant's positions, duties, responsibilities and status with
the Company immediately prior to the Change in Control, or a
reduction in the duties and responsibilities held by the
Participant immediately prior to the Change in Control; a change
in the Participant's reporting responsibilities, title or offices
as in effect immediately prior to the Change in Control that is
adverse to the Participant; or any removal of the Participant
from or any failure to re-elect the Participant to any position
with the Company that such Participant held immediately prior to
the Change in Control except in connection with such
Participant's:
(i) assignment to a new position at a higher combined
annual base salary and guideline (target) bonus; or
(ii) termination of employment by the Company for Just
Cause; or
(2) with respect to any Participant who is a member of the
Board of Directors immediately prior to the Change in Control,
any failure of the shareholders of the Company to elect or
reelect, or of the Company to appoint or reappoint, the
Participant as a member of the Board of Directors;
(3) a reduction by the Company in either of the
Participant's annual base salary or guideline (target) bonus as
in effect immediately prior to the Change in Control; the failure
by the Company to continue in effect, or the taking of any action
by the Company that would adversely affect such Participant's
participation in or significantly reduce such Participant's
benefits under, any employee benefit plan or
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compensation plan in which such Participant was participating
immediately prior to the Change in Control, provided, however,
that in the aggregate such actions by the Company significantly
reduce the Participant's total compensation (i.e., the sum of
Participant's annual base salary, guideline (target) bonus, and
the aggregate value to the Participant of all employee benefit
and compensation plans); or the failure by the Company, without
the Participant's consent, to pay to the Participant any portion
of the Participant's current compensation, or to pay to the
Participant any portion of an installment of deferred
compensation under any deferred compensation program of the
Company; or
(4) The Company requires the Participant to be based
anywhere other than the Participant's present work location or a
location within thirty-five (35) miles from the present location;
or the Company requires the Participant to travel on Company
business to an extent substantially more burdensome than such
Participant's travel obligations during the period of twelve (12)
consecutive months immediately preceding the Change in Control;
provided, however, that in the case of any such termination of
employment by the Participant under this subparagraph (b), such
termination shall not be deemed to be a Qualifying Termination unless
the termination occurs within 120 days after the occurrence of the
event or events constituting the reason for the termination; or
(c) a termination of employment by the Company other than a
termination for Just Cause, or a termination of employment by the
Participant for one of the reasons set forth in (b) above, following a
Potential Change in Control, if the Participant can demonstrate that
such termination or circumstance in (b) above leading to termination:
(1) was at the request of a third party with which the
Company had entered into negotiations or an agreement with regard
to a Change in Control; or
(2) otherwise occurred in connection with, or in
anticipation of, a Change in Control;
provided, however, that in either such case, such Change in Control
actually occurs within one (1) year following the Employment
Termination Date.
1.32 Stock Options - shall have the meaning provided herein at
Section 3.1.
1.33 Subsidiary - shall mean any corporation of which, at the time
more than fifty percent (50%) of the shares entitled to vote generally in an
election of directors are owned directly or indirectly by Sunoco, Inc. or any
subsidiary thereof.
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ARTICLE II
Background, Purpose and Term of Plan; Participation & Eligibility for
Benefits
2.1 Background. Effective on December 31, 1996, no further awards shall be
made under the Sunoco, Inc. Executive Long-Term Stock Investment Plan adopted in
May, 1991 provided, however, that any rights theretofore granted under that plan
shall not be affected.
2.2 Purpose of the Plan. The purposes of this Sunoco, Inc. Long-Term
Performance Enhancement Plan (the "Plan") are to:
(a) better align the interests of shareholders and management of the
Company by creating a direct linkage between Participants' rewards and
shareholders' gains;
(b) provide management with the ability to increase equity ownership
in Sunoco, Inc.;
(c) provide competitive compensation opportunities which can be
realized through attainment of performance goals; and
(d) provide an incentive to management for continuous employment with
the Company.
It is intended that most awards made under the Plan will qualify as
performance-based compensation under Section 162(m) of the Code.
2.3 Term of the Plan. This Plan shall become effective upon approval by
the holders of a majority of the votes present, in person or represented by
proxy, at the 1997 Annual Meeting of Shareholders of the Company. No awards will
be made under the Plan after December 31, 2001, unless the Board of Directors
extends this date to a date no later than December 31, 2006. The Plan and all
awards made under the Plan prior to such date (or extended date) shall remain in
effect until such awards have been satisfied or terminated in accordance with
the Plan and the terms of such awards.
2.4 Administration. The Plan shall be administered by the Committee which
shall have the authority, in its sole discretion and from time to time to:
(a) designate the employees or classes of employees eligible to
participate in the Plan (each such employee being, a "Participant");
(b) grant awards provided in the Plan in such form and amount as the
Committee shall determine;
(c) impose such limitations, restrictions and conditions upon any such
award as the Committee shall deem appropriate; and
(d) interpret the Plan, adopt, amend and rescind rules and regulations
relating to the Plan, and make all other determinations and take all other
action necessary or advisable for the implementation and administration of
the Plan.
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The decisions and determinations of the Committee on all matters relating
to the Plan shall be in its sole discretion and shall be conclusive. No member
of the Committee shall be liable for any action taken or not taken or decision
made or not made in good faith relating to the Plan or any award thereunder.
2.5 Eligibility for Participation. Participants in the Plan shall be the
officers and other key employees of the Company who occupy responsible
managerial or professional positions and who have the capability of making a
substantial contribution to the success of the Company. In making this selection
and in determining the amount of awards, the Committee shall consider any
factors deemed relevant, including the individual's functions, responsibilities,
value of services to the Company and past and potential contributions to its
profitability and sound growth.
2.6 Types of Awards Under the Plan. Awards under the Plan may be in the
form of any one or more of the following:
(a) Stock Options, as described in Article III;
(b) Incentive Stock Options, as described in Article IV;
(c) Limited Rights, as described in Article V; and/or
(d) Common Stock Units, as described in Article VI.
2.7 Aggregate Limitation on Awards. Shares of stock which may be issued
under the Plan shall be Common Stock. The maximum number of shares of Common
Stock which may be issued under the Plan shall be four million (4,000,000). For
purposes of calculating the maximum number of shares of Common Stock which may
be issued under the Plan:
(a) all the shares issued (including the shares, if any, withheld for
tax withholding requirements) shall be counted when cash is used as full
payment for shares issued upon exercise of an Option;
(b) only the shares issued (including the shares, if any, withheld for
tax withholding requirements) net of shares of Common Stock used as full or
partial payment for such shares upon exercise of an Option;
(c) only the shares issued (including the shares, if any, withheld for
tax withholding) upon vesting and payment of the Common Stock Units, shall
be counted.
In addition to shares of Common Stock actually issued pursuant to the
exercise of Options, there shall be deemed to have been issued a number of
shares equal to the number of shares of Common Stock in respect of which Limited
Rights (as described in Article V) shall have been exercised. Shares tendered by
a Participant as payment for shares issued upon exercise of an Option, shall be
available for issuance under the Plan. Any shares of Common Stock subject to an
Option, which for any reason is terminated unexercised or expires shall again be
available for issuance under the Plan, but shares subject to an Option which are
not issued as a result of the exercise of Limited Rights shall not be available
for issuance under the Plan.
(d) The maximum number of Options that shall be granted with respect
to each calendar year to a Participant shall be two-hundred thousand.
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(e) The maximum number of Common Stock Units granted with respect to
each calendar year to a Participant shall be fifty thousand.
(f) The maximum number of Common Stock Units granted under the Plan
will be one million.
The share limits set forth in this Section 2.7 shall be adjusted to reflect
any capitalization changes as discussed in Section 7.9.
ARTICLE III
Stock Options
3.1 Award of Stock Options. The Committee, from time to time, and subject
to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, may grant to any Participant in the Plan one or more
options to purchase for cash or shares the number of shares of Common Stock
("Stock Options") allotted by the Committee. The date a Stock Option is granted
shall mean the date selected by the Committee as of which the Committee allots a
specific number of options to a Participant pursuant to the Plan.
3.2 Stock Option Agreements. The grant of a Stock Option shall be
evidenced by a written Stock Option Agreement, executed by the Company and the
holder of a Stock Option, stating the number of shares of Common Stock subject
to the Stock Option evidenced thereby, and in such form as the Committee may
from time to time determine.
3.3 Stock Option Price. The Option Price per share of Common Stock
deliverable upon the exercise of a Stock Option shall be not less than 100% of
the Fair Market Value of a share of Common Stock on the date the Stock Option is
granted.
3.4 Term and Exercise. The term and the vesting schedule of the Stock
Options shall be determined by the Committee. However, no Stock Option may be
exercisable before the second anniversary of the date of grant or after the
tenth anniversary of such date. No Stock Option shall be exercisable after the
expiration of its term.
3.5 Manner of Payment. Each Stock Option Agreement shall set forth the
procedure governing the exercise of the Stock Option granted thereunder, and
shall provide that, upon such exercise in respect of any shares of Common Stock
subject thereto, the Optionee shall pay to the Company, in full, the Option
Price for such shares with cash or with Common Stock. All shares of Common Stock
issued under the Sunoco, Inc. Long-Term Incentive Plan, the Sunoco, Inc.
Executive Long-Term Stock Investment Plan or this Plan must be held at least six
months before they may be used as payment of the Option Price.
3.6 Issuance and Delivery of Shares. As soon as practicable after receipt
of payment, the Company shall deliver to the Optionee a certificate or
certificates for such shares of Common Stock. The Optionee shall become a
shareholder of the Company with respect to Common Stock represented by share
certificates so issued and as such shall be fully entitled to receive dividends,
to vote and to exercise all other rights of a shareholder.
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3.7 Retirement or Disability. Upon termination of the Optionee's
employment by reason of retirement or permanent disability (as each is
determined by the Committee), the Optionee may, within sixty (60) months from
the date of termination, exercise any Stock Options to the extent such options
are exercisable during such 60-month period.
3.8 Termination for Other Reasons. Except as provided in Sections 3.7 and
3.9, or except as otherwise determined by the Committee, upon termination of an
Optionee's employment, all unvested Stock Options shall terminate immediately,
and all vested Stock Options shall terminate:
(a) immediately, in the case of an Optionee terminated by the Company for
Just Cause; or
(b) upon the expiration of ninety (90) calendar days following the date
of termination of an Optionee's employment, other than for Just Cause;
provided, however, that the Limited Rights awarded in tandem with such Stock
Options shall not terminate and such Limited Rights shall remain exercisable
during the Exercise Period for any Optionee whose employment relationship with
the Company has been terminated as a result of any Qualifying Termination.
3.9 Death of Optionee. Any rights in respect of Stock Options to the
extent exercisable on the date of the Optionee's death may be exercised by the
Optionee's estate or by any person that acquires the legal right to exercise
such Stock Option by bequest, inheritance, or otherwise by reason of the death
of the Optionee. Any such exercise to be valid must occur within the remaining
option term of the Stock Option. The foregoing provisions of this Section 3.9
shall apply to an Optionee who dies while employed by the Company and to an
Optionee whose employment may have terminated prior to death; provided, however,
that:
(a) an Optionee who dies while employed by the Company will be treated
as if the Optionee had retired on the date of death. Accordingly, the
Optionee's estate or a person who acquires the right to exercise such Stock
Option by bequest or inheritance will have the right to exercise the Stock
Option in accordance with Section 3.7; or
(b) the estate or a person who acquires the right to exercise a stock
option by bequest or inheritance from an Optionee who dies after
terminating employment with the Company will have the remainder of any
exercise period provided under Sections 3.7 and 3.8.
3.10 Acceleration of Options. Notwithstanding any provisions to the
contrary in agreements evidencing Options granted thereunder, each outstanding
Option shall become immediately and fully exercisable upon the occurrence of any
Change in Control of Sunoco, Inc.
3.11 Effect of Exercise. The exercise of any Stock Options shall cancel
that number of related Limited Rights, if any, which is equal to the number of
shares of Common Stock purchased pursuant to said options.
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ARTICLE IV
Incentive Stock Options
4.1 Award of Incentive Stock Options. The Committee, from time to time,
and subject to the provisions of the Plan and such other terms and conditions as
the Committee may prescribe, grant to any Participant in the Plan one or more
"incentive Stock Options" (intended to qualify as such under the provisions of
Section 422 of the Internal Revenue Code of 1986, (the "Code") as amended
("Incentive Stock Options")) to purchase for cash or shares the number of shares
of Common Stock allotted by the Committee. The date an Incentive Stock Option is
granted shall mean the date selected by the Committee as of which the Committee
allots a specific number of options to a Participant pursuant to the Plan.
Notwithstanding the foregoing, Incentive Stock Options shall not be granted to
any owner of ten percent (10%) or more of the total combined voting power of the
Company and its subsidiaries.
4.2 Incentive Stock Option Agreements. The grant of an Incentive Stock
Option shall be evidenced by a written Incentive Stock Option Agreement,
executed by the Company and the holder of an Incentive Stock Option stating the
number of shares of Common Stock subject to the Incentive Stock Option evidenced
thereby, and in such form as the Committee may from time to time determine.
4.3 Incentive Stock Option Price. The Option Price per share of Common
Stock deliverable upon the exercise of an Incentive Stock Option shall not be
less than 100% of the Fair Market Value of a share of Common Stock on the date
the Incentive Stock Option is granted.
4.4 Term and Exercise. The term and the vesting schedule of the Incentive
Stock Option shall be determined by the Committee. However, no Incentive Stock
Option may be exercisable before the second anniversary of the date of grant or
after the tenth anniversary of such date. No Incentive Stock Option shall be
exercisable after the expiration of its term.
4.5 Limits on Incentive Stock Options. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of
grant with respect to which Incentive Stock Options are exercisable for the
first time by an Optionee during any calendar year, under this Plan or any other
stock option plan of the Company exceeds One Hundred Thousand Dollars
($100,00.00), then the option, as to the excess shall be treated as a non-
qualified stock option. An incentive Stock Option shall not be granted to any
person who is not an "employee" of the Company (within the meaning of Section
424(f) of the Code).
4.6 Retirement or Disability. Upon the termination of the Optionee's
employment by reason of retirement or permanent disability (as each is
determined by the Committee), the Optionee may, within sixty (60) months from
the date of such termination of employment, exercise any Incentive Stock Options
to the extent such Incentive Stock Options are exercisable during such 60-month
period. Notwithstanding the foregoing, the tax treatment available pursuant to
Section 422 of the Internal Revenue Code of 1986 upon the exercise of an
Incentive Stock Option will not be available to an Optionee who exercises any
Incentive Stock Option more than:
(a) twelve (12) months after the date of termination of employment due
to permanent disability; or
(b) three (3) months after the date of termination of employment due
to retirement.
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4.7 Termination for Other Reasons. Except as provided in Sections 4.6
and 4.8, or except as otherwise determined by the Committee, upon termination of
an Optionee's employment, all unvested Incentive Stock Options shall terminate
immediately, and all vested Incentive Stock Options shall terminate:
(a) immediately, in the case of an Optionee terminated by the Company
for Just Cause; or
(b) upon the expiration of ninety (90) calendar days following the
date of termination of an Optionee's employment other than for Just Cause;
provided, however, that the Limited Rights awarded in tandem with such Incentive
Stock Options shall not terminate and such Limited Rights shall remain
exercisable during the Exercise Period for any Optionee whose employment
relationship with the Company has been terminated as a result of any Qualifying
Termination.
4.8 Death of Optionee. Any rights in respect of Incentive Stock Options to
the extent exercisable on the date of the Optionee's death may be exercised by
the Optionee's estate or by any person that acquires the legal right to exercise
such Stock Option by bequest, inheritance, or otherwise by reason of the death
of the Optionee. Any such exercise to be valid must occur within the remaining
option term of the Incentive Stock Option. The foregoing provisions of this
Section 4.8 shall apply to an Optionee who dies while employed by the Company
and to an Optionee whose employment may have terminated prior to death;
provided, however, that:
(a) an Optionee who dies while employed by the Company will be
treated as if the Optionee had retired on the date of death. Accordingly,
the Optionee's estate or a person who acquires the right to exercise such
Incentive Stock Option by bequest or inheritance will have the right to
exercise the Incentive Stock Option in accordance with Section 4.6; or
(b) the estate or a person who acquires the right to exercise a stock
option by bequest or inheritance from an Optionee who dies after
terminating employment with the Company will have the remainder of any
exercise period provided under Section 4.6 and 4.7.
4.9 Applicability of Stock Options Selections. Section 3.5, Manner of
Payment, Section 3.6, Issuance and Delivery of Shares, Section 3.10,
Acceleration of Options and Section 3.11, Effect of Exercise, applicable to
Stock Options, shall apply equally to Incentive Stock Options. Said Sections are
incorporated by reference in this Article IV as though fully set forth herein.
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ARTICLE V
Limited Rights
5.1 Award of Limited Rights. Concurrently with or subsequent to the award
of any Option, the Committee may, subject to the provisions of the Plan and such
other terms and conditions as the Committee may prescribe, award to the Optionee
with respect to each Option, a related limited right permitting the Optionee,
during a specified limited time period, to be paid the appreciation on the
Option in lieu of exercising the Option ("Limited Right").
5.2 Limited Rights Agreement. Limited Rights granted under the Plan shall
be evidenced by written agreements in such form as the Committee may from time
to time determine.
5.3 Exercise Period. Limited Rights are immediately exercisable in full
upon grant for a period of up to seven (7) months following the date of a Change
in Control (the "Exercise Period").
5.4 Amount of Payment. The amount of payment to which an Optionee shall be
entitled upon the exercise of each Limited Right shall be equal to 100% of the
amount, if any, which is equal to the difference between the Option Price of the
related Option and the Market Price of a share of such Common Stock. Market
Price is defined to be the greater of:
(a) the highest price per share of Common Stock paid, in connection
with any Change in Control, during the period from the date of occurrence
of a Potential Change in Control through the ninetieth (90/th/) day
following the subsequent related Change in Control; and
(b) the highest price per share of Common Stock reflected in the
consolidated trading tables of The Wall Street Journal (presently the New
York Stock Exchange Composite Transactions quotations) during the 60-day
period prior to the Change in Control.
5.5 Form of Payment. Payment of the amount to which an Optionee is
entitled upon the exercise of Limited Rights, as determined pursuant to Section
5.4, shall be made solely in cash.
5.6 Effect of Exercise. If Limited Rights are exercised, the Stock
Options, if any, related to such Limited Rights cease to be exercisable to the
extent of the number of shares with respect to which the Limited Rights were
exercised. Upon the exercise or termination of the Options, if any, related to
such Limited Rights, the Limited Rights granted with respect thereto terminate
to the extent of the number of shares as to which the related Options were
exercised or terminated; provided, however, that with respect to Options that
are terminated as a result of the termination of the Optionee's employment
status, the Limited Rights awarded in tandem therewith shall not terminate and
such Limited Rights shall remain exercisable during the Exercise Period for any
Optionee whose employment relationship with the Company has been terminated as a
result of any Qualifying Termination.
5.7 Retirement or Disability. Upon termination of the Optionee's
employment by reason of permanent disability or retirement (as each is
determined by the Committee), the Optionee
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may, within six (6) months from the date of termination, exercise any Limited
Rights to the extent such Limited Right is exercisable during such six-month
period.
5.8 Death of Optionee or Termination for Other Reasons. Except as provided
in Sections 5.7 and 5.9 or except as otherwise determined by the Committee, all
Limited Rights granted under the Plan shall terminate upon the termination of
the Optionee's employment or upon the death of the Optionee.
5.9 Termination Related to a Change in Control. The requirement that an
Optionee be terminated by reason of retirement or permanent disability or be
employed by the Company at the time of exercise pursuant to Sections 5.7 and 5.8
respectively, is waived during the Exercise Period as to any Optionee whose
employment relationship with the Company has been terminated as a result of any
Qualifying Termination.
ARTICLE VI
Common Stock Units
6.1 Award of Common Stock Units. The Committee, from time to time, and
subject to the provisions of the Plan, may grant to any Participant in the Plan
rights to receive shares of Common Stock which are subject to a risk of
forfeiture by the Participant ("Common Stock Units"). At the time it grants any
Common Stock Units, the Committee shall determine whether the payment of such
Common Stock Units shall be conditioned upon either:
(a) the Participant's continued employment with the Company throughout
a stated period (Section 6.4); or
(b) the attainment of certain predetermined performance objectives
during a stated period (Section 6.5).
The date Common Stock Units are granted shall mean the date selected by the
Committee as of which the Committee allots a specific number of Common Stock
Units to a Participant pursuant to the Plan.
6.2 Common Stock Unit Agreements. Common Stock Units granted under the
Plan shall be evidenced by written agreements stating the number of Common Stock
Units evidenced thereby or in such form and as the Committee may from time to
time determine.
6.3 Dividend Equivalents. A holder of Common Stock Units will be entitled
to receive payment from the Company in an amount equal to each cash dividend
("Dividend Equivalent") the Company would have paid to such holder had he, on
the record date for payment of such dividend, been the holder of record of
shares of Common Stock equal to the number of Common Stock Units which had been
awarded to such holder as of the close of business on such record date. The
Company shall establish a bookkeeping account on behalf of each Participant in
which the Dividend Equivalents that would have been paid to the holder of Common
Stock Units ("Dividend Equivalent Account") shall be credited. The Dividend
Equivalent Account will not bear interest.
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6.4 Performance Period. Upon making an award, the Committee shall
determine (and the Common Stock Unit Agreement shall state) the length of the
applicable period during which employment must be maintained or certain
performance targets must be attained (the "Performance Period"). Performance
Periods will normally be from three (3) to five (5) years; however, the
Committee at its sole discretion may establish other time periods.
6.5 Performance Goals. Common Stock Units and the related Dividend
Equivalent Account earned may be based upon the attainment of Performance Goals
established by the Committee in accordance with Section 162(m). Within the first
ninety (90) days of the Performance Period, the Committee shall establish, in
writing, the weighted Performance Goals and related Performance Factors for
various goal achievement levels for the Company. In establishing the weighted
Performance Goals, the Committee shall take the necessary steps to insure that
the Company's ability to achieve the preestablished goals is uncertain at the
time the goals are set. The established written Performance Goals, assigned
weights, and Performance Factors shall be written in terms of an objective
formula, whereby any third party having knowledge of the relevant Company
performance results could calculate the amount to be paid. Such Performance
Goals may vary by Participant and by grant.
The number of Common Stock Units and Dividend Equivalents earned will be
equal to the amounts awarded multiplied by the Performance Factor. However, the
Committee shall have the discretion, by Participant and by grant, to reduce (but
not to increase) some or all of the amount that would otherwise be payable by
reason of the satisfaction of the Performance Goals. In making any such
determination, the Committee is authorized to take into account any such factor
or factors it determines are appropriate, including but not limited to Company,
business unit and individual performance.
6.6 Payment of Common Stock Units and Dividend Equivalent Account. Payment
in respect of Common Stock Units earned (as determined under Sections 6.4 and
6.5) shall be made to the holder thereof within ninety (90) days after the
Performance Period for such units has ended, but only to the extent the
Committee determines that the continuing employment and/or any applicable
performance targets have been met.
Payment for Common Stock Units earned shall be made in shares of Common
Stock, except as provided in Section 6.9. The number of shares paid shall be
equal to the number of Common Stock Units earned. The holder may elect to reduce
this amount by the number of shares of Common Stock which have, on the date the
Common Stock Units are paid, a fair market value equal to the applicable
federal, state and local withholding tax due on the receipt of Common Stock, in
lieu of making a cash payment equal to the amount of such withholding tax due.
A holder of Common Stock Units will be entitled to receive payment from the
Company at the end of the Performance Period an amount in cash equal to the
Dividend Equivalent Account earned (as determined under Sections 6.4 and 6.5) by
the holder minus applicable federal, state and local withholding tax due.
6.7 Death, Disability or Retirement.
(a) Upon the termination of a Participant's employment by reason
of death, or permanent disability or retirement (as each is determined by
the Committee) prior to the end of the Performance Period:
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(1) in the case of an award of Common Stock Units made
pursuant to Section 6.1(a) hereof and conditioned upon the
Participant's continued employment, the conditions to payout, if any,
shall be determined by the Committee and shall be as set forth in the
agreement granting the Common Stock Units.
(2) in the case of an award of Common Stock Units made
pursuant to Section 6.1(b) hereof and conditioned upon the attainment
of certain predetermined performance objectives, no portion of the
Participant's Common Stock Unit and the Dividend Equivalent Account
related to such award shall be forfeited, and the Common Stock Units,
together with related Dividend Equivalents, shall be paid out as
though such Participant continued in the employment of the Company
through any applicable Performance Period, and as, if, and when the
applicable Performance Goals have been met.
6.8 Termination of Employment. Except as provided in Sections 6.7 and
6.9, or as determined by the Committee, 100% of all Common Stock Units of a
Participant under the Plan shall be forfeited and the Dividend Equivalent
Account shall be forfeited upon termination of the Participant's employment with
the Company prior to the end of the Performance Period, and in such event the
Participant shall not be entitled to receive any Common Stock or any payment of
the Dividend Equivalent Account regardless of the level of Performance Goals
achieved for the respective Performance Periods.
6.9 Change in Control. In the event of a Change in Control, all the
Participant's outstanding Common Stock Units shall be payable to the Participant
in cash or stock, as follows:
(a) if pooling of interests accounting treatment is to be used with
respect to such Change in Control, the Participant will receive shares of
Common Stock equal in number to the total number of Common Stock Units
granted to such Participant; or
(b) if pooling of interests accounting treatment is not to be used
with respect to such Change in Control, the Participant will be paid an
amount in cash equal to the number of Common Stock Units outstanding
multiplied by the Market Price as defined in Section 5.4. Such amount
will be reduced by the applicable federal, state and local withholding
taxes due.
The cash or stock, as the case may be, shall be paid out to the
Participant no later than ninety (90) days following the date of occurrence of
such Change in Control (the "CSU Payout Date"), regardless of whether the
applicable Performance Period has expired or whether performance targets have
been met. There will be no adjustment for any Performance Factors described in
Section 6.5.
On or before the CSU Payout Date, and regardless of whether pooling of
interests accounting treatment is to be used with respect to such Change in
Control, the Participant will be paid an amount in cash equal to the value of
the amounts accrued in the Participant's Dividend Equivalent Account immediately
preceding the Change in Control. Payout of Common Stock Units and the Dividend
Equivalent Account shall be made to each Participant:
(c) who is employed by the Company on the CSU Payout Date; or
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(d) whose employment relationship with the Company is terminated:
(1) as a result of any Qualifying Termination prior to the CSU
Payout Date; or
2) as a result of death, or permanent disability or retirement
(as each is determined by the Committee), that has occurred prior to
the CSU Payout Date.
The Committee may establish, at the time of the grant of Common Stock
Units, other conditions which must be met for payout to occur. These conditions
shall be set forth in the Committee's resolution granting the Common Stock Units
and in the Agreement with the holder.
ARTICLE VII
Miscellaneous
7.1 General Restriction. Each award under the Plan shall be subject to the
requirement that if, at any time, the Committee shall determine that:
(a) the listing, registration or qualification of the shares of Common
Stock subject or related thereto upon any securities exchange or under any
state or Federal law; or
(b) the consent or approval of any government regulatory body; or
(c) an agreement by the recipient of an award with respect to the
disposition of shares of Common Stock,
is necessary or desirable as a condition of, or in connection with, the granting
of such award or the issue or purchase of shares of Common Stock thereunder,
then such award may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
7.2 Accounting and Tax Treatment for Change in Control. Notwithstanding
anything in this Plan to the contrary, in the event of a Change in Control, the
Committee shall not have the right to take any actions described in the Plan
that would make the Change in Control ineligible for pooling of interests
accounting treatment or that would make the Change in Control ineligible for
desired tax treatment if, in the absence of such right, the Change in Control
would qualify for such treatment and the Company intends to use such treatment
with respect to the Change in Control.
7.3 Non-Assignability. Awards under the Plan shall not be assignable or
transferable by the recipient thereof, except by will or by the laws of descent
and distribution except as otherwise determined by the Committee. Accordingly,
during the life of the recipient, such award shall be exercisable only by such
person or by such person's guardian or legal representative, unless the
Committee determines otherwise.
7.4 Right to Terminate Employment. Nothing in the Plan or in any agreement
entered into pursuant to the Plan shall confer upon any Participant the right to
continue in the employment
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of the Company or effect any right which the Company may have to terminate the
employment of such Participant.
7.5 Non-Uniform Determinations. The Committee's determinations under the
Plan (including without limitation, determinations of the persons to receive
awards, the form, amount and timing of such awards, the terms and provisions of
such awards, and the agreements evidencing same) need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan, whether or not such persons are similarly situated.
7.6 Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued on behalf of such recipient.
7.7 Leaves of Absence. The Committee shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the Plan in respect
of any leave of absence taken by the recipient of any award. Without limiting
the generality of the foregoing, the Committee shall be entitled to determine
(i) whether or not any such leave of absence shall constitute a termination of
employment within the meaning of the Plan and (ii) the impact, if any, of any
such leave of absence on awards under the Plan theretofore made to any recipient
who takes such leaves of absence.
7.8 Newly Eligible Employees. The Committee shall be entitled to make such
rules, regulations, determinations and awards as it deems appropriate in respect
of any employee who becomes eligible to participate in the Plan or any portion
thereof after the commencement of an award or incentive period.
7.9 Adjustments. In any event of any change in the outstanding Common
Stock by reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, the
Committee may appropriately adjust the number of shares of Common Stock which
may be issued under the Plan, the number of shares of Common Stock subject to
Options theretofore granted under the Plan, the Option Price of Options
theretofore granted under the Plan, the number of Common Stock Units theretofore
awarded under the Plan and any and all other matters deemed appropriate by the
Committee.
7.10 Amendment of the Plan.
(a) The Committee may, without further action by the shareholders and
without receiving further consideration from the Participants, amend this
Plan or condition or modify awards under this Plan in response to changes
in securities or other laws or rules, regulations or regulatory
interpretations thereof applicable to this Plan or to comply with stock
exchange rules or requirements.
(b) The Committee may at any time, and from time to time, modify or
amend the Plan in any respect, except that without shareholder approval the
Committee may not:
(1) increase the maximum award levels established in Section
2.7, including the maximum number of shares of Common Stock which may
be issued under the Plan (other than increases pursuant to Section
7.9);
(2) extend the term during which an Option may be exercised
beyond ten years from the date of grant; or
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(3) extend the term of the Plan, except that the Board may
extend the period during which awards may be made in accordance with
Section 2.3.
The termination or any modification or amendment of the Plan, except as
provided in Section 7.10(a) above, shall not without the consent of a
Participant, affect the Participant's rights under an award previously granted.
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Exhibit 10.2
===============================================================================
SUNOCO, INC.
EXECUTIVE LONG-TERM STOCK INVESTMENT PLAN
(Amended and Restated as of June 30, 1999)
================================================================================
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ARTICLE I
Definitions
As used in this Plan, the following terms shall have the meanings herein
specified:
1.1 Affiliate - shall mean any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with Sunoco, Inc.
1.2 Alternate Appreciation Rights - shall have the meaning provided herein
at Section 6.1.
1.3 Board of Directors - shall mean the Board of Directors of Sunoco, Inc.
1.4 Change in Control - shall mean the occurrence of any of the following
events or transactions:
(a) Continuing Directors cease, within one year of a Control
Transaction, to constitute a majority of the Board of Directors of Sunoco,
Inc. (or of the Board of Directors of any successor to Sunoco, Inc. or to
all or substantially all of its assets), or
(b) any entity, person or Group acquires shares of Sunoco, Inc. in a
transaction or series of transactions that result in such entity, person or
Group directly or indirectly owning beneficially more than twenty percent
(20%) of the outstanding voting shares.
1.5 Code - shall mean the Internal Revenue Code of 1986, as amended.
1.6 Committee - shall mean the committee appointed to administer this Plan
by the Board of Directors of the Company, as constituted from time to time. The
Committee shall consist of at least two (2) members of the Board of Directors,
each of whom shall meet applicable requirements set forth in the pertinent
regulations under Section 16 of the Securities Exchange Act of 1934, as amended,
and Section 162(m) of the Code.
1.7 Common Stock - shall mean the authorized and unissued or treasury
shares of common stock of Sunoco, Inc.
1.8 Common Stock Units - shall have the meaning provided herein at Section
8. 1.
1.9 Company - shall mean Sunoco, Inc., a Pennsylvania corporation. The
term "Company" shall include any successor to Sunoco, Inc., any Subsidiary or
Affiliate which has adopted the Plan, or a corporation succeeding to the
business of Sunoco, Inc., or any Subsidiary or Affiliate by merger,
consolidation, liquidation or purchase of assets or stock or similar
transaction.
1.10 Continuing Director - shall mean a Director who was a member of the
Board of Directors immediately prior to a Control Transaction which results in a
Change in Control.
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1.11 Control Transaction - shall mean any of the following transactions or
any combination thereof:
(a) any tender offer for or acquisition of capital stock of Sunoco,
Inc.;
(b) any merger, consolidation, or sale of all or substantially all of
the assets of Sunoco, Inc.; or
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or a Group of shareholders in a
proxy solicitation or otherwise.
1.12 CSU Payout Date - shall have the meaning provided herein at Section
8.9.
1.13 Disability - shall mean any illness, injury or incapacity of such
duration and type as to render a Participant eligible to receive long-term
disability benefits under the applicable broad-based long-term disability
program of the Company.
1.14 Dividend Equivalents - shall have the meaning provided herein at
Section 8.3.
1.15 Dividend Equivalent Account - shall have the meaning provided herein
at Section 8.3.
1.16 Employment Termination Date - shall mean the date on which the
employment relationship between the Participant and the Company is terminated.
1.17 Exercise Period - shall have the meaning provided herein at Section
7.3.
1.18 Fair Market Value - shall mean, as of any date and in respect of any
share of Common Stock, the opening price on such date of a share of Common Stock
(which price shall be the closing price on the previous trading day of a share
of Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape, and as reflected in the consolidated trading tables of the
Wall Street Journal or any other publication selected by the Committee). If
there is no sale of shares of Common Stock on the New York Stock Exchange for
more than ten (10) days immediately preceding such date, or if deemed
appropriate by the Committee for any other reason, the fair market value of the
shares of Common Stock shall be as determined by the Committee in such other
manner as it may deem appropriate. In no event shall the fair market value of
any share of Common Stock be less than its par value.
1.19 Group - shall mean persons who act in concert as described in Sections
13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as amended.
1.20 Incentive Stock Options - shall have the meaing provided herein at
Article IV.
1.21 Just Cause - shall mean:
(a) a judicial determination that the Participant has committed fraud,
misappropriation, or embezzlement against the Company; or
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(b) a non-appealable conviction of, or entry of a plea of nolo
contendere for, an act by the Participant constituting a felony which, as
determined by the Company in good faith, constitutes a crime involving
moral turpitude and has resulted in material harm to the Company, its
subsidiaries and affiliates taken as a whole.
No termination of employment shall be deemed an effective termination
for Just Cause unless accompanied by a copy of a resolution duly adopted by
the affirmative vote of not less a majority of the Continuing Directors at
a meeting of the Board of Directors which was called and held for the
purpose of considering such termination, or if there are no Continuing
Directors, then by at least three quarters (3/4) of the entire Board of
Directors (after reasonable notice to the Participant and an opportunity
for the Participant, together with the Participant's counsel, to be heard
before the Board of Directors) finding that, in the good faith opinion of
the Board of Directors, the Participant was guilty of conduct set forth in
the preceding sentence, and specifying the particulars thereof in detail.
In any deliberations or votes by the Board of Directors concerning a
determination under this Section, the Participant shall recuse himself from
such deliberations and votes.
1.22 Limited Rights - shall have the meaning provided herein at Article
VII.
1.23 Market Price - shall have the meaning provided herein at Section 7.4.
1.24 Option - shall mean Stock Option, Incentive Stock Option and/or Reload
Option.
1.25 Option Price - shall mean the purchase price per share of Common Stock
deliverable upon the exercise of an Option.
1.26 Optionee - shall mean the holder of an Option.
1.27 Participant - shall have the meaning provided herein at Section
2.4(a).
1.28 Performance Factors - shall mean the various payout percentages
related to the attainment levels of one or more Performance Goals, as determined
by the Committee.
1.29 Performance Goals - shall mean the specific targeted amounts of, or
changes in, financial or operating goals including: revenues; expenses; net
income; operating income; equity; return on equity, assets or capital employed;
working capital; shareholder return; operating capacity utilized; production or
sales volumes; or throughput. Other financial or operating goals may also be
used as determined by the Committee. Such goals may be applicable to the Company
as a whole or one or more of its business units and may be applied in total or
on a per share, per barrel or percentage basis and on an absolute basis or
relative to other companies, industries or indices or any combination thereof,
as determined by the Committee.
1.30 Performance Period - shall have the meaning provided herein at Section
8.4.
1.31 Potential Change in Control - shall mean the occurrence of any of the
following events or transactions:
(a) any person (other than Sunoco, Inc., or any affiliate or
subsidiary thereof) makes a tender offer for capital stock of Sunoco, Inc.;
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(b) any person becomes the beneficial owner, directly or indirectly,
of capital stock of Sunoco, Inc. in an amount which requires the filing of
Schedule 13D or its equivalent form pursuant to the Rules and Regulations
under the Securities Exchange Act of 1934 as from time to time amended;
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or Group of shareholders in a
proxy solicitation or otherwise which, in its judgment, the Board of
Directors determines by adoption of a resolution within thirty (30) days of
such submission, might result in a Change in Control of Sunoco, Inc.;
(d) any person files a pre-merger notification for the acquisition of
capital stock of Sunoco, Inc. pursuant to the Hart-Scott-Rodino Act; or
(e) the Board of Directors in its judgment determines by adoption of a
resolution that a Potential Change in Control of Sunoco, Inc. for purposes
of this Plan has occurred.
1.32 Qualifying Termination - shall mean, with respect to the
employment of any Participant, the following:
(a) a termination of employment by the Company within seven (7) months
after a Change in Control, other than for Just Cause, death or Disability;
(b) a termination of employment by the Participant within seven (7)
months after a Change in Control for one or more of the following reasons:
(1) the assignment to such Participant of any duties
inconsistent in a way adverse to such Participant, with such
Participant's positions, duties, responsibilities and status with the
Company immediately prior to the Change in Control, or a reduction in
the duties and responsibilities held by the Participant immediately
prior to the Change in Control; a change in the Participant's
reporting responsibilities, title or offices as in effect immediately
prior to the Change in Control that is adverse to the Participant; or
any removal of the Participant from or any failure to re-elect the
Participant to any position with the Company that such Participant
held immediately prior to the Change in Control except in connection
with such Participant's:
(i) assignment to a new position at a higher combined
annual base salary and guideline (target) bonus; or
(ii) termination of employment by the Company for Just
Cause; or
(2) with respect to any Participant who is a member of the
Board of Directors immediately prior to the Change in Control, any
failure of the shareholders of the Company to elect or reelect, or of
the Company to appoint or reappoint, the Participant as a member of
the Board of Directors;
(3) a reduction by the Company in either of the
Participant's annual base salary or guideline (target) bonus as in
effect immediately prior to the Change in Control; the failure by the
Company to continue in effect, or the taking of any action by the
Company that would adversely affect such Participant's participation
in or
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significantly reduce such Participant's benefits under, any employee
benefit plan or compensation plan in which such Participant was
participating immediately prior to the Change in Control, provided,
however, that in the aggregate such actions by the Company
significantly reduce the Participant's total compensation (i.e., the
sum of Participant's annual base salary, guideline (target) bonus, and
the aggregate value to the Participant of all employee benefit and
compensation plans); or the failure by the Company, without the
Participant's consent, to pay to the Participant any portion of the
Participant's current compensation, or to pay to the Participant any
portion of an installment of deferred compensation under any deferred
compensation program of the Company; or
(4) The Company requires the Participant to be based
anywhere other than the Participant's present work location or a
location within thirty-five (35) miles from the present location; or
the Company requires the Participant to travel on Company business to
an extent substantially more burdensome than such Participant's travel
obligations during the period of twelve (12) consecutive months
immediately preceding the Change in Control;
provided, however, that in the case of any such termination of employment
by the Participant under this subparagraph (b), such termination shall not
be deemed to be a Qualifying Termination unless the termination occurs
within 120 days after the occurrence of the event or events constituting
the reason for the termination; or
(c) a termination of employment by the Company other than a
termination for Just Cause, or a termination of employment by the
Participant for one of the reasons set forth in (b) above, following a
Potential Change in Control, if the Participant can demonstrate that such
termination or circumstance in (b) above leading to termination:
(1) was at the request of a third party with which the
Company had entered into negotiations or an agreement with regard to a
Change in Control; or
(2) otherwise occurred in connection with, or in
anticipation of, a Change in Control;
provided, however, that in either such case, such Change in Control
actually occurs within one (1) year following the Employment Termination
Date.
1.33 Reload Options - shall have the meaning provided herein at Section
5.1.
1.34 Stock Options - shall have the meaning provided herein at Section 3.1.
1.35 Subsidiary - shall mean any corporation of which, at the time more
than fifty percent (50%) of the shares entitled to vote generally in an election
of directors are owned directly or indirectly by Sunoco, Inc. or any subsidiary
thereof.
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ARTICLE II
Background, Purpose and Term of Plan; Participation & Eligibility for
Benefits
2.1 Background. Effective on December 31, 1991, no further awards shall be
made under the Sunoco, Inc. Long-Term Incentive Plan adopted in June, 1986;
provided, however, that any rights theretofore granted under that plan shall not
be affected.
2.2 Purpose of the Plan. The purposes of this Sunoco, Inc. Executive Long-
Term Stock Investment Plan (the "Plan") are to:
(a) better align the interests of shareholders and management of the
Company by creating a direct linkage between Participants' rewards and
shareholders' gains;
(b) provide management with an equity ownership in Sunoco, Inc.
commensurate with Company performance, as reflected in increased
shareholder value;
(c) maintain competitive compensation levels; and
(d) provide an incentive to management for continuous employment with
the Company.
It is intended that most awards made under the Plan will qualify as
performance-based compensation under Section 162(m) of the Code.
2.3 Term of the Plan. This Plan became effective upon approval by the
holders of a majority of the votes present, in person or represented by proxy,
at the 1991 Annual Meeting of Shareholders of the Company. No awards will be
made under the Plan after December 31, 1996. The Plan and all awards made under
the Plan prior to such date shall remain in effect until such awards have been
satisfied or terminated in accordance with the Plan and the terms of such
awards.
2.4 Administration. The Plan shall be administered by the Committee which
shall have the authority, in its sole discretion and from time to time to:
(a) designate the employees or classes of employees eligible to
participate in the Plan (each such employee being, a "Participant");
(b) grant awards provided in the Plan in such form and amount as the
Committee shall determine;
(c) impose such limitations, restrictions and conditions upon any such
award as the Committee shall deem appropriate; and
(d) interpret the Plan, adopt, amend and rescind rules and regulations
relating to the Plan, and make all other determinations and take all other
action necessary or advisable for the implementation and administration of
the Plan.
The decisions and determinations of the Committee on all matters relating
to the Plan shall be in its sole discretion and shall be conclusive. No member
of the Committee shall be liable for
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any action taken or not taken or decision made or not made in good faith
relating to the Plan or any award thereunder.
2.5 Eligibility for Participation. Participants in the Plan shall be the
officers and other key employees of the Company who occupy responsible
managerial or professional positions and who have the capability of making a
substantial contribution to the success of the Company. In making this selection
and in determining the amount of awards, the Committee shall consider any
factors deemed relevant, including the individual's functions, responsibilities,
value of services to the Company and past and potential contributions to its
profitability and sound growth.
2.6 Types of Awards Under the Plan. Awards under the Plan may be in the
form of any one or more of the following:
(a) Stock Options, as described in Article III;
(b) Incentive Stock Options, as described in Article IV;
(c) Reload Options, as described in Article V;
(d) Alternate Appreciation Rights, as described in Article VI;
(e) Limited Rights, as described in Article VII; and/or
(f) Common Stock Units, as described in Article VIII.
2.7 Aggregate Limitation on Awards. Shares of stock which may be issued
under the Plan shall be Common Stock. The maximum number of shares of Common
Stock which may be issued under the Plan shall be 5.8 million. For purposes of
calculating the maximum number of shares of Common Stock which may be issued
under the Plan:
(a) all the shares issued (including the shares, if any, withheld for
tax withholding requirements) shall be counted when cash is used as full
payment for shares issued upon exercise of an Option;
(b) only the shares issued (including the shares, if any, withheld for
tax withholding requirements) as a result of an exercise of Alternate
Appreciation Rights shall be counted;
(c) only the shares issued (including the shares, if any, withheld for
tax withholding requirements) net of shares of Common Stock used as full or
partial payment for such shares upon exercise of an Option; and
(d) only the shares issued (including the shares, if any, withheld for
tax withholding) upon vesting and payment of the Common Stock Units, shall
be counted.
In addition to shares of Common Stock actually issued pursuant to the
exercise of Options, there shall be deemed to have been issued a number of
shares equal to the number of shares of Common Stock in respect of which Limited
Rights (as described in Article VII) shall have been exercised. Shares tendered
by a Participant as payment for shares issued upon exercise of an Option, shall
be available for issuance under the Plan. Any shares of Common Stock subject to
an Option, which for any reason is terminated unexercised or expires shall again
be available
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for issuance under the Plan, but shares subject to an Option which are not
issued as a result of the exercise of Limited Rights shall not be available for
issuance under the Plan.
ARTICLE III
Stock Options
3.1 Award of Stock Options. The Committee, from time to time, and
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, may grant to any Participant in the Plan one or more
options to purchase for cash or shares the number of shares of Common Stock
("Stock Options") allotted by the Committee. The date a Stock Option is granted
shall mean the date selected by the Committee as of which the Committee allots a
specific number of options to a Participant pursuant to the Plan.
3.2 Stock Option Agreements. The grant of a Stock Option shall be
evidenced by a written Stock Option Agreement, executed by the Company and the
holder of a Stock Option, stating the number of shares of Common Stock subject
to the Stock Option evidenced thereby, and in such form as the Committee may
from time to time determine.
3.3 Stock Option Price. The Option Price per share of Common Stock
deliverable upon the exercise of a Stock Option shall be not less than 100% of
the Fair Market Value of a share of Common Stock on the date the Stock Option is
granted.
3.4 Term and Exercise. Each Stock Option shall be fully exercisable
six (6) months from the date of its grant or such longer period as the Committee
shall determine in its discretion and, unless a shorter period is provided by
the Committee or by another Section of this Plan, may be exercised during a
period of ten (10) years from the date of grant thereof. No Stock Option shall
be exercisable after the tenth anniversary of the date of its grant.
3.5 Manner of Payment. Each Stock Option Agreement shall set forth
the procedure governing the exercise of the Stock Option granted thereunder, and
shall provide that, upon such exercise in respect of any shares of Common Stock
subject thereto, the Optionee shall pay to the Company, in full, the Option
Price for such shares with cash or with Common Stock. All shares of Common Stock
issued under the Sunoco, Inc. Long-Term Incentive Plan, this Plan, or any
similar executive stock option plan must be held at least six (6) months before
they may be used as payment of the Option Price.
3.6 Issuance and Delivery of Shares. As soon as practicable after
receipt of payment, the Company shall deliver to the Optionee a certificate or
certificates for such shares of Common Stock. The Optionee shall become a
shareholder of the Company with respect to Common Stock represented by share
certificates so issued and as such shall be fully entitled to receive dividends,
to vote and to exercise all other rights of a shareholder.
3.7 Retirement or Disability. Upon termination of the Optionee's
employment by reason of retirement or Disability (as each is determined by the
Committee), the Optionee may, within sixty (60) months from the date of
termination, exercise any Stock Options to the extent such options are
exercisable during such 60-month period.
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3.8 Termination for Other Reasons. Except as provided in Sections
3.7 and 3.9, or except as otherwise determined by the Committee, upon
termination of an Optionee's employment, all Stock Options shall terminate:
(a) immediately, in the case of an Optionee terminated by the Company
for Just Cause; or
(b) upon the expiration of ninety (90) calendar days following the
date of termination of an Optionee's employment other than for Just Cause;
provided, however, that the Limited Rights awarded in tandem with such Stock
Options shall not terminate and such Limited Rights shall remain exercisable
during the Exercise Period for any Optionee whose employment relationship with
the Company has been terminated as a result of any Qualifying Termination.
3.9 Death of Optionee. Any rights in respect of Stock Options to the
extent exercisable on the date of the Optionee's death may be exercised by the
Optionee's estate or by any person that acquires the legal right to exercise
such Stock Option by bequest, inheritance, or otherwise by reason of the death
of the Optionee. Any such exercise to be valid must occur within the remaining
option term of the Stock Option. The foregoing provisions of this Section 3.9
shall apply to an Optionee who dies while employed by the Company and to an
Optionee whose employment may have terminated prior to death; provided, however,
that:
(a) an Optionee who dies while employed by the Company will be
treated as if the Optionee had retired on the date of death. Accordingly,
the Optionee's estate or a person who acquires the right to exercise such
Stock Option by bequest or inheritance will have the right to exercise the
Stock Option in accordance with Section 3.7; or
(b) the estate or a person who acquires the right to exercise a Stock
Option by bequest or inheritance from an Optionee who dies after
terminating employment with the Company will have the remainder of any
exercise period provided under Sections 3.7 and 3.8.
3.10 Acceleration of Options. Notwithstanding any provisions to the
contrary in agreements evidencing Options granted thereunder, each outstanding
Option shall become immediately and fully exercisable upon the occurrence of any
Change in Control of Sunoco, Inc.
3.11 Effect of Exercise. The exercise of any Stock Options shall
cancel that number of related Limited Rights, if any, which is equal to the
number of shares of Common Stock purchased pursuant to said options.
ARTICLE IV
Incentive Stock Options
4.1 Award of Incentive Stock Options. The Committee, from time to
time, and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any Participant in the Plan
one or more incentive stock options ("Incentive Stock Options") (intended to
qualify as such under the provisions of Section 422 of the Internal
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Revenue Code of 1986, as amended (the "Code")) to purchase for cash or shares
the number of shares of Common Stock allotted by the Committee. The date an
Incentive Stock Option is granted shall mean the date selected by the Committee
as of which the Committee allots a specific number of options to a Participant
pursuant to the Plan. Notwithstanding the foregoing, Incentive Stock Options
shall not be granted to any owner of ten percent (10%) or more of the total
combined voting power of the Company and its subsidiaries.
4.2 Incentive Stock Option Agreements. The grant of an Incentive
Stock Option shall be evidenced by a written Incentive Stock Option Agreement,
executed by the Company and the holder of an Incentive Stock Option stating the
number of shares of Common Stock subject to the Incentive Stock Option evidenced
thereby, and in such form as the Committee may from time to time determine.
4.3 Incentive Stock Option Price. The Option Price per share of
Common Stock deliverable upon the exercise of an Incentive Stock Option shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
date the Incentive Stock Option is granted.
4.4 Term and Exercise. Each Incentive Stock Option shall be fully
exercisable six (6) months from the date of its grant and unless a shorter
period is provided by the Committee or another Section of this Plan, may be
exercised during a period of ten (10) years from the date of grant thereof. No
Incentive Stock Option shall be exercisable after the tenth anniversary of the
date of its grant.
4.5 Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the date
of grant with respect to which Incentive Stock Options are exercisable for the
first time by an Optionee during any calendar year, under this Plan or any other
stock option plan of the Company exceeds One Hundred Thousand Dollars
($100,00.00), then the option, as to the excess shall be treated as a non-
qualified stock option. An Incentive Stock Option shall not be granted to any
person who is not an "employee" of the Company (within the meaning of Section
424(f) of the Code).
4.6 Retirement or Disability. Upon the termination of the Optionee's
employment by reason of retirement or Disability (as each is determined by the
Committee), the Optionee may, within sixty (60) months from the date of such
termination of employment, exercise any Incentive Stock Options to the extent
such Incentive Stock Options are exercisable during such 60-month period.
Notwithstanding the foregoing, the tax treatment available pursuant to Section
422 of the Internal Revenue Code of 1986 upon the exercise of an Incentive Stock
Option will not be available to an Optionee who exercises any Incentive Stock
Option more than:
(a) twelve (12) months after the date of termination of
employment due to Disability; or
(b) three (3) months after the date of termination of employment
due to retirement.
4.7 Termination for Other Reasons. Except as provided in Sections
4.6 and 4.8, or except as otherwise determined by the Committee, upon
termination of an Optionee's employment, all Incentive Stock Options shall
terminate:
(a) immediately, in the case of an Optionee terminated by the
Company for Just Cause; and
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(b) upon the expiration of ninety (90) calendar days following
the date of termination of an Optionee's employment other than for
Just Cause;
provided, however, that the Limited Rights awarded in tandem with such Stock
Options shall not terminate and such Limited Rights shall remain exercisable
during the Exercise Period for any Optionee whose employment relationship with
the Company has been terminated as a result of any Qualifying Termination.
4.8 Death of Optionee. Any rights in respect of Incentive Stock
Options to the extent exercisable on the date of the Optionee's death may be
exercised by the Optionee's estate or by any person that acquires the legal
right to exercise such Stock Option by bequest, inheritance, or otherwise by
reason of the death of the Optionee. Any such exercise to be valid must occur
within the remaining option term of the Incentive Stock Option. The foregoing
provisions of this Section 4.8 shall apply to an Optionee who dies while
employed by the Company and to an Optionee whose employment may have terminated
prior to death; provided, however, that:
(a) an Optionee who dies while employed by the Company will be
treated as if the Optionee had retired on the date of death.
Accordingly, the Optionee's estate or a person who acquires the right
to exercise such Incentive Stock Option by bequest or inheritance will
have the right to exercise the Incentive Stock Option in accordance
with Section 4.6; or
(b) the estate or a person who acquires the right to exercise a
Stock Option by bequest or inheritance from an Optionee who dies after
terminating employment with the Company will have the remainder of any
exercise period provided under Section 4.6 and 4.7.
4.9 Applicability of Stock Options Selections. The following Sections
of this Plan that apply to Stock Options shall apply equally to Incentive Stock
Options:
(a) Section 3.5 (Manner of Payment);
(b) Section 3.6 (Issuance and Delivery of Shares);
(c) Section 3.10 (Acceleration of Options); and
(d) Section 3.11 (Effect of Exercise).
Said Sections are incorporated by reference in this Article IV as
though fully set forth herein.
ARTICLE V
Reload Options
5.1 Authorization of Reload Options. Concurrently with the award of
Stock Options and/or the award of Incentive Stock Options to any Participant in
the Plan, the Committee may authorize reload options ("Reload Options") to
purchase for cash or shares a number of shares of Common Stock. The number of
Reload Options shall equal:
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(a) the number of shares of Common Stock used to exercise the
underlying Stock Options or Incentive Stock Options; and
(b) to the extent authorized by the Committee, the number of
shares of Common Stock used to satisfy any tax withholding requirement
incident to the exercise of the underlying Stock Options or Incentive
Stock Options.
The grant of a Reload Option will be effected upon the exercise of
underlying Stock Options, Incentive Stock Options or Reload Options through the
use of shares of Common Stock held by the Optionee for at least twelve (12)
months. Notwithstanding the fact that the underlying Option may be an Incentive
Stock Option, a Reload Option is not intended to qualify as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986.
5.2 Reload Option Amendment. Each Stock Option Agreement and
Incentive Stock Option Agreement shall state whether the Committee has
authorized Reload Options with respect to the underlying Stock Options and/or
Incentive Stock Options. Upon the exercise of an underlying Stock Option,
Incentive Stock Option or other Reload Option, the Reload Option will be
evidenced by an amendment to the underlying Stock Option Agreement or Incentive
Stock Option Agreement.
5.3 Reload Option Price. The Option Price per share of Common Stock
deliverable upon the exercise of a Reload Option shall be the Fair Market Value
of a share of Common Stock on the date of grant of the Reload Option.
5.4 Term and Exercise. Each Reload Option is fully exercisable six
(6) months from the effective date of grant. The term of each Reload Option
shall be equal to the remaining option term of the underlying Stock Option
and/or Incentive Stock Option. No additional Reload Options may be authorized
in connection with the award of Stock Options or Incentive Stock Options on or
after October 1, 1996.
5.5 Termination of Employment. No additional Reload Options shall be
granted to an Optionee when Stock Options, Incentive Stock Options and/or Reload
Options are exercised pursuant to the terms of this Plan following termination
of such Optionee's employment.
5.6 Applicability of Stock Options Sections. The following Sections
of this Plan that apply to Stock Options shall apply equally to Reload Options:
(a) Section 3.5 (Manner of Payment);
(b) Section 3.6 (Issuance and Delivery of Shares);
(c) Section 3.7 (Retirement or Disability);
(d) Section 3.8 (Termination for Other Reasons);
(e) Section 3.9 (Death of Optionee); and
(f) Section 3.11 (Effect of Exercise).
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Said Sections are incorporated by reference in this Article V as
though fully set forth herein.
ARTICLE VI
Alternate Appreciation Rights
6.1 Award of Alternate Appreciation Rights. Concurrently with or
subsequent to the award of any Stock Option, Incentive Stock Option or Reload
Option to purchase one or more shares of Common Stock, the Committee may,
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the Optionee with respect to each share of
Common Stock, a related stock appreciation right ("Alternate Appreciation
Right"), permitting the Optionee to be paid the appreciation on the Option in
lieu of exercising the Option.
6.2 Alternate Appreciation Rights Agreement. Alternate Appreciation
Rights shall be evidenced by written agreements in such form as the Committee
may from time to time determine.
6.3 Exercise. An Optionee who has been granted Alternate
Appreciation Rights may, from time to time, in lieu of the exercise of an equal
number of Options, elect to exercise one or more Alternate Appreciation Rights
and thereby become entitled to receive from the Company payment in Common Stock
the number of shares determined pursuant to Sections 6.4 and 6.5 hereof.
Alternate Appreciation Rights shall be exercisable only to the same extent and
subject to the same conditions as the Options related thereto are exercisable,
as provided in this Plan. The Committee may, in its discretion, prescribe
additional conditions to the exercise of any Alternate Appreciation Rights.
6.4 Amount of Payment. The amount of payment to which an Optionee
shall be entitled upon the exercise of each Alternate Appreciation Right shall
be equal to 100% of the amount, if any, by which the Fair Market Value of a
share of Common Stock on the exercise date exceeds the Fair Market Value of a
share of Common Stock on the date the Option related to said Alternate
Appreciation Right was granted.
6.5 Form of Payment. The number of shares to be paid shall be
determined by dividing the amount of payment determined pursuant to Section 6.4
by the Fair Market Value of a share of Common Stock on the exercise date of such
Alternate Appreciation Rights. As soon as practicable after exercise, the
Company shall deliver to the Optionee a certificate or certificates for such
shares of Common Stock. All such shares shall be issued with the rights and
restrictions specified in Section 3.6 of this Plan.
6.6 Effect of Exercise. The exercise of any Alternate Appreciation
Rights shall cancel an equal number of Stock Options, Incentive Stock Options,
Reload Options and Limited Rights, if any, related to said Alternate
Appreciation Rights.
6.7 Retirement or Disability. Upon termination of the Optionee's
employment by reason of retirement or Disability (as each is determined by the
Committee), the Optionee may, within six (6) months from the date of such
termination, exercise any Alternate Appreciation Rights to the extent such
Alternate Appreciation Rights are exercisable during such six-month period.
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6.8 Death of Optionee or Termination for Other Reasons. Except as
provided in Section 6.7, or except as otherwise determined by the Committee, all
Alternate Appreciation Rights shall terminate upon the termination of the
Optionee's employment or upon the death of the Optionee.
ARTICLE VII
Limited Rights
7.1 Award of Limited Rights. Concurrently with or subsequent to the
award of any Option, the Committee may, subject to the provisions of the Plan
and such other terms and conditions as the Committee may prescribe, award to the
Optionee with respect to each Option, a related limited right permitting the
Optionee, during a specified limited time period, to be paid the appreciation on
the Option in lieu of exercising the Option ("Limited Right").
7.2 Limited Rights Agreement. Limited Rights granted under the Plan
shall be evidenced by written agreements in such form as the Committee may from
time to time determine.
7.3 Exercise Period. Limited Rights are immediately exercisable in
full upon grant for a period of up to seven (7) months following the date of a
Change in Control (the "Exercise Period").
7.4 Amount of Payment. The amount of payment to which an Optionee
shall be entitled upon the exercise of each Limited Right shall be equal to 100%
of the amount, if any, which is equal to the difference between the Option Price
of the related Option and the Market Price of a share of such Common Stock.
Market Price is defined to be the greater of:
(a) the highest price per share of Common Stock paid, in
connection with any Change in Control, during the period from the date
of occurrence of a Potential Change in Control through the ninetieth
(90th day following the subsequent related Change in Control; and
(b) the highest price per share of Common Stock reflected in the
consolidated trading tables of The Wall Street Journal (presently the
New York Stock Exchange Composite Transactions quotations) during the
60-day period prior to the Change in Control.
7.5 Form of Payment. Payment of the amount to which an Optionee is
entitled upon the exercise of Limited Rights, as determined pursuant to Section
7.4, shall be made solely in cash.
7.6 Effect of Exercise. If Limited Rights are exercised, the Options
and Alternate Appreciation Rights, if any, related to such Limited Rights cease
to be exercisable to the extent of the number of shares with respect to which
the Limited Rights were exercised. Upon the exercise or termination of the
Options and Alternate Appreciation Rights, if any, related to such Limited
Rights, the Limited Rights granted with respect thereto terminate to the extent
of the number of shares as to which the related Options and/or Alternate
Appreciation Rights were exercised or terminated; provided, however, that with
respect to Options and/or Alternate Appreciation Rights that are terminated as a
result of the termination of the Optionee's employment status, the Limited
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Rights awarded in tandem therewith shall not terminate and such Limited Rights
shall remain exercisable during the Exercise Period for any Optionee whose
employment relationship with the Company has been terminated as a result of any
Qualifying Termination.
7.7 Retirement or Disability. Upon termination of the Optionee's
employment by reason of Disability or retirement (as each is determined by the
Committee), the Optionee may, within six (6) months from the date of
termination, exercise any Limited Rights to the extent such Limited Right is
exercisable during such six-month period.
7.8 Death of Optionee or Termination for Other Reasons. Except as
provided in Sections 7.7 and 7.9 or except as otherwise determined by the
Committee, all Limited Rights granted under the Plan shall terminate upon the
termination of the Optionee's employment or upon the death of the Optionee.
7.9 Termination Related to a Change in Control. The requirement that
an Optionee be terminated by reason of retirement or Disability or be employed
by the Company at the time of exercise pursuant to Sections 7.7 and 7.8
respectively, is waived during the Exercise Period as to any Optionee whose
employment relationship with the Company has been terminated as a result of any
Qualifying Termination.
ARTICLE VIII
Common Stock Units
8.1 Award of Common Stock Units. The Committee, from time to time,
and subject to the provisions of the Plan, may grant to any Participant in the
Plan rights to receive shares of Common Stock which are subject to a risk of
forfeiture by the Participant ("Common Stock Units"). At the time it grants any
Common Stock Units, the Committee shall determine whether the payment of such
Common Stock Units shall be conditioned upon either:
(a) the Participant's continued employment with the Company
throughout a stated period (Section 8.4); or
(b) the attainment of certain predetermined performance
objectives during a stated period (Section 8.5).
The date Common Stock Units are granted shall mean the date selected
by the Committee as of which the Committee allots a specific number of Common
Stock Units to a Participant pursuant to the Plan.
8.2 Common Stock Unit Agreements. Common Stock Units granted under
the Plan shall be evidenced by written agreements stating the number of Common
Stock Units evidenced thereby or in such form and as the Committee may from time
to time determine.
8.3 Dividend Equivalents. A holder of Common Stock Units will be
entitled to receive payment from the Company in an amount equal to each cash
dividend ("Dividend Equivalent") the Company would have paid to such holder had
he, on the record date for payment of such dividend, been the holder of record
of shares of Common Stock equal to the number of Common Stock Units which had
been awarded to such holder as of the close of business on such record
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date. The Company shall establish a bookkeeping account on behalf of each
Participant in which the Dividend Equivalents that would have been paid to the
holder of Common Stock Units ("Dividend Equivalent Account") shall be credited.
The Dividend Equivalent Account will not bear interest.
8.4 Performance Period. Upon making an award, the Committee shall
determine (and the Common Stock Unit Agreement shall state) the length of the
applicable period during which employment must be maintained or certain
performance targets must be attained (the "Performance Period"). Performance
Periods will normally be from three to five years; provided, however, the
Committee at its sole discretion may establish other time periods.
8.5 Performance Goals. Common Stock Units and the related Dividend
Equivalent Account earned may be based upon the attainment of Performance Goals
established by the Committee in accordance with Section 162(m). Within the
first ninety (90) days of the Performance Period, the Committee shall establish,
in writing, the weighted Performance Goals and related Performance Factors for
various goal achievement levels for the Company. In establishing the weighted
Performance Goals, the Committee shall take the necessary steps to insure that
the Company's ability to achieve the pre-established goals is uncertain at the
time the goals are set. The established written Performance Goals, assigned
weights, and Performance Factors shall be written in terms of an objective
formula, whereby any third party having knowledge of the relevant Company
performance results could calculate the amount to be paid. Such Performance
Goals may vary by Participant and by grant.
The number of Common Stock Units and Dividend Equivalents earned will
be equal to the amounts awarded multiplied by the Performance Factor. However,
the Committee shall have the discretion, by Participant and by grant, to reduce
(but not to increase) some or all of the amount that would otherwise be payable
by reason of the satisfaction of the Performance Goals. In making any such
determination, the Committee is authorized to take into account any such factor
or factors it determines are appropriate, including but not limited to Company,
business unit and individual performance.
8.6 Payment of Common Stock Units and Dividend Equivalent Account.
Payment in respect of Common Stock Units earned (as determined under Sections
8.4 and 8.5) shall be made to the holder thereof within ninety (90) days after
the Performance Period for such units has ended, but only to the extent the
Committee determines that the continuing employment and/or any applicable
performance targets have been met.
Payment for Common Stock Units earned shall be made in shares of
Common Stock, except as provided in Section 8.9. The number of shares paid
shall be equal to the number of Common Stock Units earned. The holder may elect
to reduce this amount by the number of shares of Common Stock which have, on the
date the Common Stock Units are paid, a fair market value equal to the
applicable federal, state and local withholding tax due on the receipt of Common
Stock, in lieu of making a cash payment equal to the amount of such withholding
tax due. A holder of Common Stock Units will be entitled to receive payment
from the Company at the end of the Performance Period an amount in cash equal to
the Dividend Equivalent Account earned (as determined under Sections 8.4 and
8.5) by the holder minus applicable federal, state and local withholding tax
due.
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8.7 Death, Disability or Retirement.
(a) Upon the termination of Participant's employment by reason
of death, or permanent disability or retirement (as each is determined
by the Committee) prior to the end of the Performance Period:
(1) in the case of an award of Common Stock Units made
pursuant to Section 8.1(a) hereof and conditioned upon the
Participant's continued employment, the conditions to payout, if
any, shall be determined by the Committee and shall be as set
forth in the agreement granting the Common Stock Units.
(2) in the case of an award of Common Stock Units made
pursuant to Section 8.1(b) hereof and conditioned upon the
attainment of certain predetermined performance objectives, no
portion of the Participant's Common Stock Unit and the Dividend
Equivalent Account related to such award shall be forfeited, and
the Common Stock Units, together with related Dividend
Equivalents, shall be paid out as though such Participant
continued in the employment of the Company through any applicable
Performance Period, and as, if, and when the applicable
Performance Goals have been met.
8.8 Termination of Employment. Except as provided in Sections 8.7
and 8.9, or as determined by the Committee, 100% of all Common Stock Units of a
Participant under the Plan shall be forfeited and the Dividend Equivalent
Account shall be forfeited upon termination of the Participant's employment with
the Company prior to the end of the Performance Period, and in such event the
Participant shall not be entitled to receive any Common Stock or any payment of
the Dividend Equivalent Account regardless of the level of Performance Goals
achieved for the respective Performance Periods.
8.9 Change in Control. The number of Common Stock Units earned by
the Participant shall be determined by multiplying:
(a) the total number of all the Participant's granted and
outstanding Common Stock Units; by
(b) a percentage equal to:
(1) the number of full and partial calendar months which the
Common Stock Units have been outstanding as of the date of the
Change in Control; divided by
(2) the number of full and partial calendar months in the
applicable Performance Period.
In the event of a Change in Control, the Common Stock Units earned by
the Participant shall be payable to the Participant in cash or stock, as
follows:
(c) if pooling of interests accounting treatment is to be used
with respect to such Change in Control, the Participant will receive
shares of Common Stock equal in number to the number of Common Stock
Units earned by such Employee; or
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(d) if pooling of interests accounting treatment is not to be
used with respect to such Change in Control, the Participant will be
paid an amount in cash equal to the number of Common Stock Units
earned by such Participant outstanding multiplied by the Market Price
as defined in Section 7.4. Such amount will be reduced by the
applicable federal, state and local withholding taxes due.
The cash or stock, as the case may be, shall be paid out to the
Participant no later than ninety (90) days following the date of occurrence of
such Change in Control (the "CSU Payout Date"), regardless of whether the
applicable Performance Period has expired or whether performance targets have
been met. There will be no adjustment for any Performance Factors described in
Section 8.5.
On or before the CSU Payout Date, and regardless of whether pooling of
interests accounting treatment is to be used with respect to such Change in
Control, the Participant will be paid an amount in cash equal to the value of
the amounts accrued in the Participant's Dividend Equivalent Account immediately
preceding the Change in Control. Payout of Common Stock Units and the Dividend
Equivalent Account shall be made to each Participant:
(e) who is employed by the Company on the CSU Payout Date; or
(f) whose employment relationship with the Company is terminated:
(1) as a result of any Qualifying Termination prior to the
CSU Payout Date; or
(2) as a result of death or permanent disability or
retirement (as each is determined by the Committee), that has
occurred prior to the CSU Payout Date.
The Committee may establish, at the time of the grant of Common Stock
Units, other conditions which must be met for payout to occur. These conditions
shall be set forth in the Committee's resolution granting the Common Stock Units
and in the Agreement with the holder.
ARTICLE IX
Miscellaneous
9.1 General Restriction. Each award under the Plan shall be subject
to the requirement that, if at any time the Committee shall determine that:
(a) the listing, registration or qualification of the shares of
Common Stock subject or related thereto upon any securities exchange
or under any state or Federal law; or
(b) the consent or approval of any government regulatory body; or
(c) an agreement by the recipient of an award with respect to the
disposition of shares of Common Stock,
is necessary or desirable as a condition of, or in connection with, the granting
of such award or the issue or purchase of shares of Common Stock thereunder,
then such award may not be
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consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
9.2 Accounting and Tax Treatment for Change in Control.
Notwithstanding anything in this Plan to the contrary, in the event of a Change
in Control, the Committee shall not have the right to take any actions described
in the Plan that would make the Change in Control ineligible for pooling of
interests accounting treatment or that would make the Change in Control
ineligible for desired tax treatment if, in the absence of such right, the
Change in Control would qualify for such treatment and the Company intends to
use such treatment with respect to the Change in Control.
9.3 Non-Assignability. Awards under the Plan shall not be assignable
or transferable by the recipient thereof, except by will or by the laws of
descent and distribution except as otherwise determined by the Committee.
Accordingly, during the life of the recipient, such award shall be exercisable
only by such person or by such person's guardian or legal representative, unless
the Committee determines otherwise.
9.4 Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any Participant
the right to continue in the employment of the Company or effect any right which
the Company may have to terminate the employment of such Participant.
9.5 Non-Uniform Determinations. The Committee's determinations under
the Plan (including without limitation, determinations of the persons to receive
awards, the form, amount and timing of such awards, the terms and provisions of
such awards, and the agreements evidencing same) need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan, whether or not such persons are similarly situated.
9.6 Rights as a Shareholder. The recipient of any award under the
Plan shall have no rights as a shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued on behalf of such recipient.
9.7 Leaves of Absence. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the Plan in
respect of any leave of absence taken by the recipient of any award. Without
limiting the generality of the foregoing, the Committee shall be entitled to
determine:
(a) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan; and
(b) the impact, if any, of any such leave of absence on awards
under the Plan theretofore made to any recipient who takes such leaves
of absence.
9.8 Newly Eligible Employees. The Committee shall be entitled to
make such rules, regulations, determinations and awards as it deems appropriate
in respect of any employee who becomes eligible to participate in the Plan or
any portion thereof after the commencement of an award or incentive period.
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9.9 Adjustments. In any event of any change in the outstanding
Common Stock by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the like,
the Committee may appropriately adjust the number of shares of Common Stock
which may be issued under the Plan, the number of shares of Common Stock subject
to Options theretofore granted under the Plan, the Option Price of Options
theretofore granted under the Plan, the number of Common Stock Units theretofore
awarded under the Plan and any and all other matters deemed appropriate by the
Committee.
9.10 Amendment of the Plan.
(a) The Committee may, without further action by the shareholders
and without receiving further consideration from the Participants,
amend this Plan or condition or modify awards under this Plan in
response to changes in securities or other laws or rules, regulations
or regulatory interpretations thereof applicable to this Plan or to
comply with stock exchange rules or requirements;
(b) The Committee may at any time, and from time to time, modify
or amend the Plan in any respect, except that without shareholder
approval the Committee may not:
(1) increase the maximum number of shares of Common Stock
which may be issued under the Plan (other than increases pursuant
to Section 9.9);
(2) extend the term during which any award may be granted or
exercised; or
(3) extend the term of the Plan.
The termination or any modification or amendment of the Plan, except
as provided in Section 9.10(a) above, shall not without the consent of a
Participant, affect the Participant's rights under an award previously granted.
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Exhibit 10.3
================================================================================
SUNOCO, INC.
LONG-TERM INCENTIVE PLAN
(Amended and Restated as of June 30, 1999)
================================================================================
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ARTICLE I
Definitions
As used in this Plan, the following terms shall have the meanings
herein specified:
1.1 Affiliate - shall mean any person or entity which directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with Sunoco, Inc.
1.2 Alternate Appreciation Rights - shall have the meaning provided
herein at Section 4.1.
1.3 Board of Directors - shall mean the Board of Directors of
Sunoco, Inc.
1.4 Change in Control - shall mean the occurrence of any of the
following events or transactions:
(a) Continuing Directors cease, within one year of a Control
Transaction, to constitute a majority of the Board of Directors of
Sunoco, Inc. (or of the Board of Directors of any successor to Sunoco,
Inc. or to all or substantially all of its assets), or
(b) any entity, person or Group acquires shares of Sunoco, Inc.
in a transaction or series of transactions that result in such entity,
person or Group directly or indirectly owning beneficially more than
20% of the outstanding voting shares.
1.5 Code - shall mean the Internal Revenue Code of 1986, as amended.
1.6 Committee - shall mean the committee appointed to administer
this Plan by the Board of Directors of the Company, as constituted from time to
time. The Committee shall consist of at least two (2) members of the Board of
Directors, each of whom shall meet applicable requirements set forth in the
pertinent regulations under Section 16 of the Securities Exchange Act of 1934,
as amended, and Section 162(m) of the Code.
1.7 Common Stock - shall mean the authorized and unissued or
treasury shares of common stock of Sunoco, Inc.
1.8 Company - shall mean Sunoco, Inc., a Pennsylvania corporation.
The term "Company" shall include any successor to Sunoco, Inc., any Subsidiary
or Affiliate which has adopted the Plan, or a corporation succeeding to the
business of Sunoco, Inc., or any Subsidiary or Affiliate by merger,
consolidation, liquidation or purchase of assets or stock or similar
transaction.
1.9 Continuing Director - shall mean a Director who was a member of
the Board of Directors immediately prior to a Control Transaction which results
in a Change in Control.
1.10 Control Transaction - shall mean any of the following
transactions or any combination thereof:
(a) any tender offer for or acquisition of capital stock of
Sunoco, Inc.;
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(b) any merger, consolidation, or sale of all or substantially
all of the assets of Sunoco, Inc.; or
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or a Group of shareholders
in a proxy solicitation or otherwise.
1.11 Disability - shall mean any illness, injury or incapacity of
such duration and type as to render a Participant eligible to receive long-term
disability benefits under the applicable broad-based long-term disability
program of the Company.
1.12 Dividend Equivalents - shall have the meaning provided herein at
Section 6.5.
1.13 Employment Termination Date - shall mean the date on which the
employment relationship between the Participant and the Company is terminated.
1.14 Exercise Period - shall have the meaning provided herein at
Section 5.3.
1.15 Fair Market Value - shall mean, as of any date and in respect of
any share of Common Stock, the opening price on such date of a share of Common
Stock (which price shall be the closing price on the previous trading day of a
share of Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape, and as reflected in the consolidated trading tables of the
Wall Street Journal or any other publication selected by the Committee). If
there is no sale of shares of Common Stock on the New York Stock Exchange for
more than ten (10) days immediately preceding such date, or if deemed
appropriate by the Committee for any other reason, the fair market value of the
shares of Common Stock shall be as determined by the Committee in such other
manner as it may deem appropriate. In no event shall the fair market value of
any share of Common Stock be less than its par value.
1.16 Group - shall mean persons who act in concert as described in
Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as
amended.
1.17 Just Cause - shall mean:
(a) a judicial determination that the Participant has committed
fraud, misappropriation, or embezzlement against the Company; or
(b) a non-appealable conviction of, or entry of a plea of nolo
contendere for, an act by the Participant constituting a felony which,
as determined by the Company in good faith, constitutes a crime
involving moral turpitude and has resulted in material harm to the
Company, its subsidiaries and affiliates taken as a whole.
No termination of employment shall be deemed an effective
termination for Just Cause unless accompanied by a copy of a
resolution duly adopted by the affirmative vote of not less than a
majority of the Continuing Directors at a meeting of the Board of
Directors which was called and held for the purpose of considering
such termination, or if there are no Continuing Directors, then by at
least three quarters (3/4) of the entire Board of Directors (after
reasonable notice to the Participant and an opportunity for the
Participant, together with the Participant's counsel, to be heard
before the Board of Directors) finding that, in the good faith opinion
of the Board of Directors, the Participant was guilty of conduct set
forth in the preceding sentence, and specifying the particulars
thereof in detail.
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In any deliberations or votes by the Board of Directors concerning a
determination under this Section, the Participant shall recuse himself
from such deliberations and votes.
1.18 Limited Rights - shall have the meaning provided herein at
Article V.
1.19 Option Price - shall mean the purchase price per share of Common
Stock deliverable upon the exercise of an Option.
1.20 Optionee - shall mean the holder of an Option.
1.21 Participant - shall have the meaning provided herein at Section
2.4(a).
1.22 Plan - shall have the meaning provided herein at Section 2.2.
1.23 Potential Change in Control - shall mean the occurrence of any
of the following events or transactions:
(a) any person (other than Sunoco, Inc., or any affiliate or
subsidiary thereof) makes a tender offer for capital stock of Sunoco,
Inc.;
(b) any person becomes the beneficial owner, directly or
indirectly, of capital stock of Sunoco, Inc. in an amount which
requires the filing of Schedule 13D or its equivalent form pursuant to
the Rules and Regulations under the Securities Exchange Act of 1934 as
from time to time amended;
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or Group of shareholders in
a proxy solicitation or otherwise which, in its judgment, the Board of
Directors determines by adoption of a resolution within thirty (30)
days of such submission, might result in a Change in Control of
Sunoco, Inc.;
(d) any person files a pre-merger notification for the
acquisition of capital stock of Sunoco, Inc. pursuant to the Hart-
Scott-Rodino Act; or
(e) the Board of Directors in its judgment determines by adoption
of a resolution that a Potential Change in Control of Sunoco, Inc. for
purposes of this Plan has occurred.
1.24 Qualifying Termination - shall mean, with respect to the
employment of any Participant, the following:
(a) a termination of employment by the Company within seven (7)
months after a Change in Control, other than for Just Cause, death or
Disability; provided, however, that any Participant who also is
eligible to receive benefits under the Sunoco, Inc. Executive
Involuntary Severance Plan shall not receive benefits thereunder, but
shall instead receive the Benefits provided under this Plan;
(b) a termination of employment by the Participant within two (2)
years after a Change in Control for one or more of the following
reasons:
(1) the assignment to such Participant of any duties
inconsistent in a way adverse to such Participant, with such
Participant's positions, duties,
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responsibilities and status with the Company immediately prior to
the Change in Control, or a reduction in the duties and
responsibilities held by the Participant immediately prior to the
Change in Control; a change in the Participant's reporting
responsibilities, title or offices as in effect immediately prior
to the Change in Control that is adverse to the Participant; or
any removal of the Participant from or any failure to re-elect
the Participant to any position with the Company that such
Participant held immediately prior to the Change in Control
except in connection with such Participant's:
(i) assignment to a new position at a higher combined
annual base salary and guideline (target) bonus; or
(ii) termination of employment by the Company for Just
Cause; or
(2) with respect to any Participant who is a member of the
Board of Directors immediately prior to the Change in Control,
any failure of the shareholders of the Company to elect or
reelect, or of the Company to appoint or reappoint, the
Participant as a member of the Board of Directors;
(3) a reduction by the Company in either of the
Participant's annual base salary or guideline (target) bonus as
in effect immediately prior to the Change in Control; the failure
by the Company to continue in effect, or the taking of any action
by the Company that would adversely affect such Participant's
participation in or significantly reduce such Participant's
benefits under, any employee benefit plan or compensation plan in
which such Participant was participating immediately prior to the
Change in Control, provided, however, that in the aggregate such
actions by the Company significantly reduce the Participant's
total compensation (i.e., the sum of Participant's annual base
salary, guideline (target) bonus, and the aggregate value to the
Participant of all employee benefit and compensation plans); or
the failure by the Company, without the Participant's consent, to
pay to the Participant any portion of the Participant's current
compensation, or to pay to the Participant any portion of an
installment of deferred compensation under any deferred
compensation program of the Company; or
(4) The Company requires the Participant to be based
anywhere other than the Participant's present work location or a
location within thirty-five (35) miles from the present location;
or the Company requires the Participant to travel on Company
business to an extent substantially more burdensome than such
Participant's travel obligations during the period of twelve (12)
consecutive months immediately preceding the Change in Control;
provided, however, that in the case of any such termination of
employment by the Participant under this subparagraph (b), such
termination shall not be deemed to be a Qualifying Termination unless
the termination occurs within 120 days after the occurrence of the
event or events constituting the reason for the termination; or
(c) a termination of employment by the Company other than a
termination for Just Cause, or a termination of employment by the
Participant for one of the reasons set forth in (b) above, following a
Potential Change in Control, if the Participant can demonstrate that
such termination or circumstance in (b) above leading to termination:
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(1) was at the request of a third party with which the
Company had entered into negotiations or an agreement with regard
to a Change in Control; or
(2) otherwise occurred in connection with, or in
anticipation of, a Change in Control;
provided, however, that in either such case, such Change in Control
actually occurs within one (1) year following the Employment
Termination Date.
1.25 Restricted Stock Unit - shall have the meaning provided herein
at Section 6.1.
1.26 Restriction Period - shall have the meaning provided herein at
Section 6.4.
1.27 RSU Payout Date - shall have the meaning provided herein at
Section 6.11.
1.28 Stock Option - shall have the meaning provided herein at Section
3.1.
1.29 Subsidiary - shall mean any corporation of which, at the time
more than fifty percent (50%) of the shares entitled to vote generally in an
election of directors are owned directly or indirectly by Sunoco, Inc. or any
subsidiary thereof.
ARTICLE II
Background, Purpose and Term of Plan; Participation & Eligibility
for Benefits
2.1 Background. Effective on December 31, 1986, no further awards
shall be made under the Sunoco, Inc. Executive Long-Term Incentive Plan adopted
in June, 1978 provided, however, that any rights theretofore granted under that
plan shall not be affected.
2.2 Purpose of the Plan. The purposes of this Sunoco, Inc. Long-Term
Incentive Plan (the "Plan") are to:
(a) more closely associate the interests of the Company with the
shareholders by relating capital accumulation with increases in
shareholder value;
(b) encourage management success by providing capital
accumulation as an incentive;
(c) maintain competitive compensation levels; and
(d) provide an incentive to management for continuous employment
with the Company.
It is intended that most awards made under the Plan qualify as
performance-based compensation under Section 162(m) of the Code.
2.3 Term of the Plan. This Plan became effective upon approval by
the holders of a majority of the votes present, in person or represented by
proxy, at the 1986 Annual Meeting of
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Shareholders of the Company. No awards will be made under the Plan after
December 31, 1991. The Plan and all awards made under the Plan prior to such
date shall remain in effect until such awards have been satisfied or terminated
in accordance with the Plan and the terms of such awards.
2.4 Administration. The Plan shall be administered by the Committee
which shall have the authority, in its sole discretion and from time to time to:
(a) designate the employees or classes of employees eligible to
participate in the Plan (each such employee being, a "Participant");
(b) grant awards provided in the Plan in such form and amount as
the Committee shall determine;
(c) impose such limitations, restrictions and conditions upon
any such award as the Committee shall deem appropriate; and
(d) interpret the Plan, adopt, amend and rescind rules and
regulations relating to the Plan, and make all other determinations
and take all other action necessary or advisable for the
implementation and administration of the Plan.
The decisions and determinations of the Committee on all matters
relating to the Plan shall be in its sole discretion and shall be conclusive.
No member of the Committee shall be liable for any action taken or not taken or
decision made or not made in good faith relating to the Plan or any award
thereunder.
2.5 Eligibility for Participation. Participants in the Plan shall be
the officers and other key employees of the Company who occupy responsible
managerial or professional positions and who have the capability of making a
substantial contribution to the success of the Company. In making this selection
and in determining the amount of awards, the Committee shall consider any
factors deemed relevant, including the individual's functions, responsibilities,
value of services to the Company and past and potential contributions to its
profitability and sound growth.
2.6 Types of Awards Under the Plan. Awards under the Plan may be in
the form of any one or more of the following:
(a) Stock Options, as described in Article III;
(b) Alternate Appreciation Rights, as described in Article IV;
(c) Limited Rights, as described in Article V; and/or
(d) Restricted Stock Units, as described in Article VI.
2.7 Aggregate Limitation on Awards. Shares of stock which may be
issued under the Plan shall be Common Stock. The maximum number of shares of
Common Stock which may be issued under the Plan shall be three million
(3,000,000). For purposes of calculating the maximum number of shares of Common
Stock which may be issued under the Plan:
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(a) all the shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when cash
is used as full payment for shares issued upon exercise of a Stock
Option;
(b) only the shares issued (including the shares, if any,
withheld for tax withholding requirements) net of shares of Common
Stock used as full or partial payment for such shares upon exercise of
a Stock Option, shall be counted; and
(c) only the shares issued (including the shares, if any,
withheld for tax withholding) upon vesting and payment of the
Restricted Stock Units, shall be counted.
In addition to shares of Common Stock actually issued pursuant to the
exercise of Stock Options, there shall be deemed to have been issued a number of
shares equal to the number of shares of Common Stock in respect of which
Alternate Appreciation Rights and Limited Rights shall have been exercised.
Shares tendered by a Participant as payment for shares issued upon exercise of a
Stock Option, shall be available for issuance under the Plan. Any shares of
Common Stock subject to a Stock Option, which for any reason is terminated
unexercised or expires shall again be available for issuance under the Plan, but
shares subject to a Stock Option which are not issued as a result of the
exercise of Alternate Appreciation Rights or Limited Rights shall not be
available for issuance under the Plan.
ARTICLE III
Stock Options
3.1 Award of Stock Options. The Committee, from time to time, and
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, may grant to any Participant in the Plan one or more
options to purchase for cash or shares the number of shares of Common Stock
("Stock Options") allotted by the Committee. The date a Stock Option is granted
shall mean the date selected by the Committee as of which the Committee allots a
specific number of options to a Participant pursuant to the Plan.
3.2 Stock Option Agreements. The grant of a Stock Option shall be
evidenced by a written Stock Option Agreement, executed by the Company and the
holder of a Stock Option, stating the number of shares of Common Stock subject
to the Stock Option evidenced thereby, and in such form as the Committee may
from time to time determine.
3.3 Stock Option Price. The Option Price per share of Common Stock
deliverable upon the exercise of a Stock Option shall be not less than 100% of
the Fair Market Value of a share of Common Stock on the date the Stock Option is
granted.
3.4 Term and Exercise. Except as provided in Section 3.10 hereof,
and unless otherwise determined by the Committee, each Stock Option granted
under the Plan shall become exercisable with respect to twenty-five percent
(25%) of the shares subject thereto on the first anniversary of the date of
grant thereof, and with respect to an additional twenty-five percent (25%) of
such shares on each of the second, third and fourth anniversaries of such date
of grant. Stock Options may be partially exercised from time to time within such
percentage limitations. Stock Options granted under the Plan shall be
exercisable during such period or periods as the Committee shall determine;
provided, however, that no Stock Option shall be exercisable more than ten (10)
years after the date of grant thereof.
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3.5 Manner of Payment. Each Stock Option Agreement shall set forth
the procedure governing the exercise of the Stock Option granted thereunder, and
shall provide that, upon such exercise in respect of any shares of Common Stock
subject thereto, the Optionee shall pay to the Company, in full, the Option
Price for such shares with cash or with previously owned Common Stock.
Notwithstanding the foregoing, if previously owned Common Stock is used in
payment of the Option Price, the Optionee may not use the shares received upon
such exercise to immediately satisfy the exercise price of additional Stock
Options.
3.6 Issuance and Delivery of Shares. As soon as practicable after
receipt of payment, the Company shall deliver to the Optionee a certificate or
certificates for such shares of Common Stock. The Optionee shall become a
shareholder of the Company with respect to Common Stock represented by share
certificates so issued and as such shall be fully entitled to receive dividends,
to vote and to exercise all other rights of a shareholder.
3.7 Retirement or Disability. Upon termination of the Optionee's
employment by reason of retirement or Disability (as each is determined by the
Committee), the Optionee may, within sixty (60) months from the date of
termination, exercise any Stock Options to the extent such options are
exercisable during such 60-month period.
3.8 Termination for Other Reasons. Except as provided in Sections
3.7 and 3.9, or except as otherwise determined by the Committee, upon
termination of an Optionee's employment; all Stock Options shall terminate:
(a) immediately, in the case of an Optionee terminated by the
Company for Just Cause; and
(b) upon the expiration of ninety (90) calendar days following
the date of termination of an Optionee's employment other than for Just Cause;
provided, however, that the Limited Rights awarded in tandem with such Stock
Options shall not terminate and such Limited Rights shall remain exercisable
during the Exercise Period for any Optionee whose employment relationship with
the Company has been terminated as a result of any Qualifying Termination.
3.9 Death of Optionee. Any rights in respect of Stock Options to
the extent exercisable on the date of the Optionee's death may be exercised by
the Optionee's estate or by any person that acquires the legal right to exercise
such Stock Option by bequest, inheritance, or otherwise by reason of the death
of the Optionee. Any such exercise to be valid must occur within the remaining
option term of the Stock Option. The foregoing provisions of this Section 3.9
shall apply to an Optionee who dies while employed by the Company and to an
Optionee whose employment may have terminated prior to death; provided, however,
that:
(a) an Optionee who dies while employed by the Company will be
treated as if the Optionee had retired on the date of death.
Accordingly, the Optionee's estate or a person who acquires the right
to exercise such Stock Option by bequest or inheritance will have the
right to exercise the Stock Option in accordance with Section 3.7; or
(b) the estate or a person who acquires the right to exercise a
stock option by bequest or inheritance from an Optionee who dies after
terminating employment with the Company will have the remainder of any
exercise period provided under Sections 3.7 and 3.8.
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3.10 Acceleration of Options. Notwithstanding any provisions to the
contrary in agreements evidencing Options granted thereunder, each outstanding
Option shall become immediately and fully exercisable upon the occurrence of any
Change in Control of Sunoco, Inc.
3.11 Effect of Exercise. The exercise of any Stock Options shall
cancel that number of related Alternate Appreciation Rights, if any, and Limited
Rights, if any, which is equal to the number of shares of Common Stock purchased
pursuant to said options.
ARTICLE IV
Alternate Appreciation Rights
4.1 Award of Alternate Appreciation Rights. Concurrently with or
subsequent to the award of any Stock Option to purchase one or more shares of
Common Stock, the Committee may, subject to the provisions of the Plan and such
other terms and conditions as the Committee may prescribe, award to the Optionee
with respect to each share of Common Stock, a related stock appreciation right
("Alternate Appreciation Right"), permitting the Optionee to be paid the
appreciation on the Stock Option in lieu of exercising the Stock Option.
4.2 Alternate Appreciation Rights Agreement. Alternate Appreciation
Rights shall be evidenced by written agreements in such form as the Committee
may from time to time determine.
4.3 Exercise. An Optionee who has been granted Alternate
Appreciation Rights may, from time to time, in lieu of the exercise of an equal
number of Stock Options, elect to exercise one or more Alternate Appreciation
Rights and thereby become entitled to receive from the Company payment in Common
Stock the number of shares determined pursuant to Sections 4.4 and 4.5 hereof.
Alternate Appreciation Rights shall be exercisable only to the same extent and
subject to the same conditions as the Stock Options related thereto are
exercisable, as provided in this Plan. The Committee may, in its discretion,
prescribe additional conditions to the exercise of any Alternate Appreciation
Rights.
4.4 Amount of Payment. The amount of payment to which an Optionee
shall be entitled upon the exercise of each Alternate Appreciation Right shall
be equal to 100% of the amount, if any, by which the Fair Market Value of a
share of Common Stock on the exercise date exceeds the Fair Market Value of a
share of Common Stock on the date the Stock Option related to said Alternate
Appreciation Right was granted.
4.5 Form of Payment. The number of shares to be paid shall be
determined by dividing the amount of payment determined pursuant to Section 4.4
by the Fair Market Value of a share of Common Stock on the exercise date of such
Alternate Appreciation Rights. As soon as practicable after exercise, the
Company shall deliver to the Optionee a certificate or certificates for such
shares of Common Stock. All such shares shall be issued with the rights and
restrictions specified in Section 3.6 of this Plan.
4.6 Effect of Exercise. The exercise of any Alternate Appreciation
Rights shall cancel an equal number of Stock Options and Limited Rights, if any,
related to said Alternate Appreciation Rights.
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4.7 Retirement or Disability. Upon termination of the Optionee's
employment by reason of retirement or Disability (as each is determined by the
Committee), the Optionee may, within six (6) months from the date of such
termination, exercise any Alternate Appreciation Rights to the extent such
Alternate Appreciation Rights are exercisable during such six-month period.
4.8 Death of Optionee or Termination for Other Reasons. Except as
provided in Section 4.7, or except as otherwise determined by the Committee, all
Alternate Appreciation Rights shall terminate upon the termination of the
Optionee's employment or upon the death of the Optionee.
ARTICLE V
Limited Rights
5.1 Award of Limited Rights. Concurrently with or subsequent to the
award of any Stock Option and Alternate Appreciation Rights, the Committee may,
subject to the provisions of the Plan and such other terms and conditions as the
Committee may prescribe, award to the Optionee with respect to each Stock
Option, a related limited right permitting the Optionee, during a specified
limited time period, to be paid the appreciation on the Stock Option in lieu of
exercising the Stock Option ("Limited Right").
5.2 Limited Rights Agreement. Limited Rights granted under the Plan
shall be evidenced by written agreements in such form as the Committee may from
time to time determine.
5.3 Exercise Period. Limited Rights are immediately exercisable in
full upon grant for a period of up to seven (7) months following the date of a
Change in Control (the "Exercise Period").
5.4 Amount of Payment. The amount of payment to which an Optionee
shall be entitled upon the exercise of each Limited Right shall be equal to 100%
of the amount, if any, which is equal to the difference between the Option Price
of the related Stock Option and the Market Price of a share of such Common
Stock. Market Price is defined to be the greater of:
(a) the highest price per share of Common Stock paid, in
connection with any Change in Control, during the period from the date
of occurrence of a Potential Change in Control through the ninetieth
(90th) day following the subsequent related Change in Control; and
(b) the highest price per share of Common Stock reflected in the
consolidated trading tables of The Wall Street Journal (presently the
New York Stock Exchange Composite Transactions quotations) during the
60-day period prior to the Change in Control.
5.5 Form of Payment. Payment of the amount to which an Optionee is
entitled upon the exercise of Limited Rights, as determined pursuant to Section
5.4, shall be made solely in cash.
5.6 Effect of Exercise. If Limited Rights are exercised, the Stock
Options, if any, related to such Limited Rights cease to be exercisable to the
extent of the number of shares with respect to which the Limited Rights were
exercised. Upon the exercise or termination of the Stock
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Options, if any, related to such Limited Rights, the Limited Rights granted with
respect thereto terminate to the extent of the number of shares as to which the
related Stock Options were exercised or terminated; provided, however, that with
respect to Stock Options that are terminated as a result of the termination of
the Optionee's employment status, the Limited Rights awarded in tandem therewith
shall not terminate and such Limited Rights shall remain exercisable during the
Exercise Period for any Optionee whose employment relationship with the Company
has been terminated as a result of any Qualifying Termination.
5.7 Retirement or Disability. Upon termination of the Optionee's
employment by reason of Disability or retirement (as each is determined by the
Committee), the Optionee may, within six (6) months from the date of
termination, exercise any Limited Rights to the extent such Limited Right is
exercisable during such six-month period.
5.8 Death of Optionee or Termination for Other Reasons. Except as
provided in Sections 5.7 and 5.9 or except as otherwise determined by the
Committee, all Limited Rights granted under the Plan shall terminate upon the
termination of the Optionee's employment or upon the death of the Optionee.
5.9 Termination Related to a Change in Control. The requirement that
an Optionee be terminated by reason of retirement or permanent disability or be
employed by the Company at the time of exercise pursuant to Sections 5.7 and 5.8
respectively, is waived during the Exercise Period as to any Optionee whose
employment relationship with the Company has been terminated as a result of any
Qualifying Termination.
ARTICLE VI
Restricted Stock Units
6.1 Award of Restricted Stock Units. The Committee may from time to
time, and subject to the provisions of the Plan and such other terms and
conditions as the Committee may prescribe, grant to any Participant in the Plan
rights to receive shares of Common Stock which are subject to a risk of
forfeiture by the Participant ("Restricted Stock Units"). At the time it grants
any Restricted Stock Units, the Committee shall determine whether the payment of
such Restricted Stock Units shall be conditioned solely upon the Participant's
continued employment with the Company throughout the Restriction Period or upon
the attainment of certain performance targets.
6.2 Restricted Stock Unit Agreements. Restricted Stock Units granted
under the Plan shall be evidenced by written agreements in such form as the
Committee may from time to time determine.
6.3 Number of Restricted Stock Units. Upon making an award, the
Committee shall determine (and the Restricted Stock Unit Agreement shall state)
the number of Restricted Stock Units granted to the grantee. The initial number
of Restricted Stock Units granted may be adjusted by a performance factor, in
accordance with Section 6.8, to be applied at the conclusion of the Restriction
Period to determine the final number of Restricted Stock Units to be paid.
6.4 Length of Restriction Period. Upon making an award, the
Committee shall determine (and the Restricted Stock Unit Agreement shall state)
the length of the Restriction Period. Restriction Periods will normally be from
three (3) to five (5) years; however, the Committee may establish other time
periods in its sole discretion.
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6.5 Dividend Equivalents. At the Committee's discretion, each holder
of Restricted Stock Units will be entitled to receive payment from the Company
in an amount equal to each cash dividend ("Dividend Equivalent") the Company
would have paid to such holder had he or she, on the record date for payment of
such dividend, been the holder of record of shares of Common Stock equal to the
number of Restricted Stock Units which had been awarded to such holder as of the
close of business on such record date. Payment of Dividend Equivalents is
expressly conditioned on continued employment with the Company at the time of
payment. Each such payment shall be made by the Company on the payment date of
the cash dividend in respect of which it is to be made, or as soon as
practicable thereafter.
6.6 Payment of Restricted Stock Units.
(a) Payment in respect of Restricted Stock Units conditioned
solely upon the Participant's continued employment with the Company
throughout the Restriction Period shall be made within ninety (90)
days after the Restriction Period for such Restricted Stock Units has
ended;
(b) Payment in respect of Restricted Stock Units conditioned
upon the attainment of performance targets shall be made to the
grantee thereof within ninety (90) days after the Restriction Period
for such Restricted Stock Units has ended, but only to the extent the
Committee determines that the applicable performance targets have been
met and subject to any adjustment made to the number of Restricted
Stock Units which shall be paid, pursuant to Section 6.8(b) hereof.
6.7 Form of Payment. Payment for Restricted Stock Units shall be
made in shares of Common Stock, except as provided in Section 6.11 hereof. The
number of shares paid shall be equal to the number of Restricted Stock Units
earned. The holder may elect to reduce this amount by the number of shares of
Common Stock which have, on the date the Restricted Stock Units are paid, a fair
market value equal to the applicable federal, state and local withholding tax
due on the receipt of Common Stock, in lieu of making a cash payment equal to
the amount of such withholding tax due.
6.8 Performance Targets.
(a) Upon the award of Restricted Stock Units, the Committee may
establish (and the Restricted Stock Unit Agreement shall state) the
performance targets to be attained within the Restriction Period as a
condition of such Restricted Stock Units being earned out. Performance
targets may be based entirely on each participant's business unit
goals, or partially on business unit goals and partially on corporate
goals, or entirely on corporate goals. Goals may include qualitative
as well as quantitative measures. Performance targets may be adjusted
during the Restriction Period, at the Committee's sole discretion, to
reflect extraordinary events beyond management's control;
(b) Attainment by the participant of performance targets in
respect of a Restriction Period will result in 100% of the Restricted
Stock Units being earned out. Attainment of performance below the
performance targets in respect of a Restriction Period shall result in
a proportionate amount of the value of the Restricted Stock Units (on
a scale from 0 to 100%) being earned out, as determined by the
Committee.
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6.9 Termination of Employment. Except as provided in Sections 6.10
and 6.11, or except as otherwise determined by the Committee, all Restricted
Stock Units granted to a Participant under the Plan shall terminate upon
termination of the Participant's employment with the Company prior to the end of
the Restriction Period applicable to such Restricted Stock Units, and in such
event the Participant shall not be entitled to receive any payment in respect
thereof.
6.10 Death, Disability or Retirement. In the event that the
employment of a Participant who has been granted Restricted Stock Units under
the Plan shall terminate during a Restriction Period by reason of death,
Disability (as determined by the Committee), or retirement, such Participant
shall be entitled, in the sole discretion of the Committee, to receive upon the
expiration of the Restriction Period payment in respect of said Restricted Stock
Units; provided, however, that such Restricted Stock Units shall be adjusted by
multiplying the amount thereof by a fraction, the numerator of which shall be
the number of full and partial calendar months between the date of award of the
Restricted Stock Units and the date that employment terminated, and the
denominator of which shall be the number of full and partial calendar months
from the date of award to the end of the Restriction Period.
6.11 Change in Control. In the event of a Change in Control, all the
Participant's outstanding Restricted Stock Units shall be payable to the
Participant in cash or stock, as follows:
(a) if pooling of interests accounting treatment is to be used
with respect to such Change in Control, the Participant will receive
shares of Common Stock equal in number to the total number of
Restricted Stock Units granted to such Participant; or
(b) if pooling of interests accounting treatment is not to be
used with respect to such Change in Control, the Participant will be
paid an amount in cash equal to the number of Restricted Stock Units
outstanding multiplied by the Market Price as defined in Section 5.4.
Such amount will be reduced by the applicable federal, state and local
withholding taxes due.
The cash or stock, as the case may be, shall be paid out to the
Participant no later than ninety (90) days following the date of occurrence of
such Change in Control (the "RSU Payout Date"), regardless of whether the
applicable Restriction Period has expired or whether performance targets have
been met. There will be no adjustment for any performance factors described in
Section 6.8.
On or before the RSU Payout Date, and regardless of whether pooling of
interests accounting treatment is to be used with respect to such Change in
Control, the Participant will be paid an amount in cash equal to the value of
the related accrued Dividend Equivalents immediately preceding the Change in
Control. Payout of Restricted Stock Units and the related Dividend Equivalents
shall be made to each Participant:
(c) who is employed by the Company on the RSU Payout Date; or
(d) whose employment relationship with the Company is terminated:
(1) as a result of any Qualifying Termination prior to the
RSU Payout Date; or
(2) as a result of death or Disability following the
occurrence of any Change in Control but prior to the RSU Payout
Date.
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The Committee may establish, at the time of the grant of Common Stock
Units, other conditions which must be met for payout to occur. These conditions
shall be set forth in the Committee's resolution granting the Common Stock Units
and in the Agreement with the holder.
ARTICLE VII
Miscellaneous
7.1 General Restriction. Each award under the Plan shall be subject
to the requirement that, if at any time the Committee shall determine that:
(a) the listing, registration or qualification of the shares of
Common Stock subject or related thereto upon any securities exchange
or under any state or Federal law; or
(b) the consent or approval of any government regulatory body,
or
(c) an agreement by the recipient of an award with respect to the
disposition of shares of Common Stock,
is necessary or desirable as a condition of, or in connection with, the granting
of such award or the issue or purchase of shares of Common Stock thereunder,
such award may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Committee.
7.2 Accounting and Tax Treatment for Change in Control.
Notwithstanding anything in this Plan to the contrary, in the event of a Change
in Control, the Committee shall not have the right to take any actions described
in the Plan that would make the Change in Control ineligible for pooling of
interests accounting treatment or that would make the Change in Control
ineligible for desired tax treatment if, in the absence of such right, the
Change in Control would qualify for such treatment and the Company intends to
use such treatment with respect to the Change in Control.
7.3 Non-Assignability. Awards under the Plan shall not be assignable
or transferable by the recipient thereof, except by will or by the laws of
descent and distribution. During the life of the recipient, such award shall be
exercisable only by such person or by such person's guardian or legal
representative.
7.4 Right to Terminate Employment. Nothing in the Plan or in any
agreement entered into pursuant to the Plan shall confer upon any Participant
the right to continue in the employment of the Company or effect any right which
the Company may have to terminate the employment of such Participant.
7.5 Non-Uniform Determinations. The Committee's determinations under
the Plan (including without limitation, determinations of the persons to receive
awards, the form, amount and timing of such awards, the terms and provisions of
such awards, and the agreements evidencing same) need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan, whether or not such persons are similarly situated.
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7.6 Rights as a Shareholder. The recipient of any award under the
Plan shall have no rights as a shareholder with respect thereto unless and until
certificates for shares of Common Stock are issued on behalf of such recipient.
7.7 Leaves of Absence. The Committee shall be entitled to make such
rules, regulations and determinations as it deems appropriate under the Plan in
respect of any leave of absence taken by the recipient of any award. Without
limiting the generality of the foregoing, the Committee shall be entitled to
determine (i) whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan and (ii) the impact, if
any, of any such leave of absence on awards under the Plan theretofore made to
any recipient who takes such leaves of absence.
7.8 Newly Eligible Employees. The Committee shall be entitled to
make such rules, regulations, determinations and awards as it deems appropriate
in respect of any employee who becomes eligible to participate in the Plan or
any portion thereof after the commencement of an award or incentive period.
7.9 Adjustments. In any event of any change in the outstanding
Common Stock by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the like,
the Committee may appropriately adjust the number of shares of Common Stock
which may be issued under the Plan, the number of shares of Common Stock subject
to Stock Options theretofore granted under the Plan, the Option Price of Options
theretofore granted under the Plan, the number of Restricted Stock Units
theretofore awarded under the Plan and any and all other matters deemed
appropriate by the Committee.
7.10 Amendment of the Plan.
(a) The Committee may, without further action by the
shareholders and without receiving further consideration from the
Participants, amend this Plan or condition or modify awards under this
Plan in response to changes in securities or other laws or rules,
regulations or regulatory interpretations thereof applicable to this
Plan or to comply with stock exchange rules or requirements.
(b) The Committee may at any time, and from time to time, modify
or amend the Plan in any respect, except that without shareholder
approval the Committee may not:
(1) increase the maximum award levels established in
Section 2.7, including the maximum number of shares of Common
Stock which may be issued under the Plan (other than increases
pursuant to Section 7.9);
(2) extend the term during which any Stock Option may be
exercised beyond ten (10) years from the date of grant; or
(3) extend the term of the Plan, except that the Board
may extend the period during which awards may be made in
accordance with Section 2.3.
The termination or any modification or amendment of the Plan, except
as provided in Section 7.10(a) above, shall not without the consent of a
Participant, affect the Participant's rights under an award previously granted.
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7.11 Withholding Taxes. Whenever the Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the Company shall
have the right to require the grantee to remit to the Company an amount
sufficient to satisfy any Federal, state and/or local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares. Whenever under the Plan payments are to be made in cash, such payments
shall be net of an amount sufficient to satisfy any Federal, state and/or local
withholding tax requirements.
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Exhibit 10.4
================================================================================
DIRECTORS' DEFERRED COMPENSATION PLAN
Amended and Restated
as of
February 3, 2000
================================================================================
<PAGE>
ARTICLE I
Definitions
As used in this Plan, the following terms shall have the meanings herein
specified:
1.1 Cash Unit - shall mean the entry in a Deferred Compensation Account of
a credit equal to One Dollar ($1.00).
1.2 Change in Control - shall mean the occurrence of any of the following
events or transactions:
(a) Continuing Directors cease, within one year of a Control
Transaction, to constitute a majority of the Board of Directors of Sunoco,
Inc. (or of the Board of Directors of any successor to Sunoco, Inc. or to
all or substantially all of its assets); or
(b) any entity, person or Group acquires shares of Sunoco, 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 Sunoco, Inc.
1.3 Committee - shall mean the Governance Committee of the Board of
Directors of Sunoco, Inc.
1.4 Company - shall mean Sunoco, Inc., a Pennsylvania corporation. The
term "Company" shall include any successor to Sunoco, Inc., any subsidiary or
affiliate which has adopted the Plan, or a corporation succeeding to the
business of Sunoco, Inc., or any subsidiary or affiliate by merger,
consolidation, liquidation or purchase of assets or stock or similar
transaction.
1.5 Compensation - shall mean those fees and retainers payable by the
Company to a Participant in consideration for his or her service as a Director.
1.6 Continuing Director - shall mean a Director who was a member of the
Board of Directors immediately prior to a Control Transaction which results in a
Change in Control.
1.7 Control Transaction - shall mean any of the following transactions or
any combination thereof:
(a) any tender offer for or acquisition of capital stock of Sunoco,
Inc.;
(b) any merger, consolidation, or sale of all or substantially all of
the assets of Sunoco, Inc.; or
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or a Group of shareholders in a
proxy solicitation or otherwise.
1.8 Deferred Compensation Account - shall mean, with respect to any
Participant, the total amount of the Company's liability for payment of
voluntary deferred compensation to the Participant under this Plan, including
any accumulated interest and/or Dividend Equivalents.
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1.9 Deferred Payment Election Form - shall mean and refer to the written
election by a Participant, in the form prescribed by the Committee, to
voluntarily defer the payment of all or a portion of such Participant's
Compensation under this Plan pursuant to Article II hereof.
1.10 Director - shall mean a member of the Board of Directors of Sunoco,
Inc.
1.11 Dividend Equivalent - shall mean the entry in a Deferred Compensation
Account or a Restricted Deferred Compensation Account of a dividend credit with
respect to a Share Unit, each Dividend Equivalent being equal to the dividend
paid from time to time on a Share.
1.12 Form of Continuing Deferral - shall mean and refer to the written
commitment by a Participant, in the form prescribed by the Committee, to
mandatorily defer the payment of all of the Yearly Credit awarded to such
Participant under this Plan pursuant to Article IV hereof.
1.13 Group - shall mean persons who act in concert as described in
Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as
amended.
1.14 Interest Equivalent - shall mean the entry in a Deferred Compensation
Account of an interest credit with respect to a Cash Unit, compounded on the
basis of the balance in the Participant's Deferred Compensation Account,
applying the interest factor approved by the Committee each year for such
purpose.
1.15 Participant - shall mean a Director who has elected to defer the
receipt of compensation or a Director who is required to defer the receipt of
the Restricted Share Units in accordance with the terms of this Plan.
1.16 Plan - shall mean this Directors' Deferred Compensation Plan, as it
may be amended from time to time.
1.17 Restricted Deferred Compensation Account - shall mean, with respect to
any Participant, the total amount of the Company's liability for payment of
Restricted Share Units to the Participant under this Plan.
1.18 Restricted Share Unit - shall mean the entry in a Restricted Deferred
Compensation Account of a credit equal to one Share that will be restricted
until death, retirement or termination of Board service.
1.19 Share - shall mean a share of the Company's authorized voting Common
Stock ($1.00 par value per share) and any share or shares of stock of the
Company hereafter issued or issuable in substitution or exchange for each such
share.
1.20 Share Unit - shall mean the entry in a Deferred Compensation Account
of a credit equal to one Share.
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ARTICLE II
Voluntary Deferral of Directors' Compensation
2.1 Election to Defer. Prior to the beginning of any calendar quarter, a
Participant may elect to defer all or a portion of the Compensation that would
otherwise be paid to the Participant in the next succeeding calendar quarter, by
filing a written notice of election with the Committee on the form(s) prescribed
by the Committee. Any such deferral election shall apply only to Compensation to
be earned on or after the first day of the calendar quarter following the
calendar quarter in which the election is received by the Committee. An election
to defer, made in accordance with this Article II shall be irrevocable. The
deferral election form(s) also will permit the Participant to specify:
(a) the percentage of Compensation to be deferred;
(b) the form of deferral, being either Cash Units, Share Units, or a
combination of the two and the percentage allocations of such;
(c) the selection of a method of payment as set forth in Article III;
and
(d) the designation of a beneficiary as set forth in Article V.
Without any further action by Participant, the choices specified in the
Participant's Deferred Payment Election Form regarding the percentage of
Compensation deferred, the form of deferral, the designation of a beneficiary,
and the method of payment shall each continue and be applied from calendar
quarter to calendar quarter to amounts yet to be deferred. Until further express
written notification, on a form prescribed by the Committee, to the contrary,
these choices shall continue to be applied to amounts to be credited to such
Deferred Compensation Account balance prospectively.
2.2 Subsequent Change in Method of Payment Election.
(a) Change in Method of Payment Prior to Commencement of Distribution
or Payment. With the approval of the Committee, and at any time not later
than twelve (12) months prior to the commencement of any payment or
distribution of the amounts credited to the Participant's Deferred
Compensation Account, a Participant in this portion of the Plan may file a
written request with regard to the method of payment (i.e., a series of
installments versus lump-sum payout), on a form prescribed by the
Committee, which will revoke all such earlier or prior elections with
regard to the method of payment (i.e., a series of installments versus
lump-sum payout), and such new choice as to method of payment will be
applied both to amounts previously credited to the Participant's current
Deferred Compensation Account balance, as well as to amounts to be credited
to such Deferred Compensation Account balance prospectively. Any such new
or subsequent election that is made less than twelve (12) months prior to
the commencement of any payment or distribution of the amounts credited to
the Participant's Deferred Compensation Account, will be null and void, and
the Participant's next preceding timely election will be reinstated.
(b) Change in Method of Payment Following Commencement of
Distribution or Payment. After payment or distribution of amounts credited
to the Participant's Deferred
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Compensation Account has commenced, the Participant may not change the
period of time for which such amounts are payable. However the Participant
may convert installment payments to a lump sum distribution subject to a
penalty equal to a five percent (5%) reduction in the balance of the
Participant's Deferred Compensation Account, which shall be forfeited to
the Company.
2.3 Amount of Deferral The amount of Compensation to be deferred shall be
designated by the Participant as a percentage of the Director's Compensation in
multiples of five percent (5%) but shall not be less than ten percent (10%).
2.4 Time of Election Except as otherwise determined by the Committee in
its sole discretion, an election to defer must be filed and received by the
Committee by the end of the calendar quarter preceding the calendar quarter in
which the Compensation is to be earned. A new Director may also elect to defer
Compensation prior to the commencement of his or her term in office.
ARTICLE III
Voluntary Deferred Compensation Accounts
3.1 Creation of Voluntary Deferred Compensation Accounts. Compensation
deferred hereunder shall be credited to a Deferred Compensation Account
established by the Company for each Participant. The Participant must elect to
convert the deferred compensation to either Cash Units or Share Units, which
shall be credited to a Participant's Deferred Compensation Account as set forth
in the Plan.
3.2 Crediting Share Units. Share Units shall be credited to a
Participant's Deferred Compensation Account at the time the Compensation would
otherwise have been paid had no election to defer been made. The number of Share
Units to be credited to the Deferred Compensation Account shall be determined by
dividing the Compensation by the average closing price for Shares as published
in the Wall Street Journal under the caption "New York Stock Exchange Composite
Transactions" for the ten (10) day period prior to the day on which the
Compensation would otherwise have been paid. Any fractional Share Units shall
also be credited to a Participant's Deferred Compensation Account. The number of
Share Units in a Deferred Compensation Account shall be appropriately adjusted
by the Committee in the event of changes in the Company's outstanding common
stock by reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, and such
adjustments shall be conclusive. Share Units shall not entitle any person to the
rights of a stockholder.
3.3 Crediting Cash Units. Cash Units shall be credited to a Participant's
Deferred Compensation Account at the time Compensation would otherwise have been
paid had no election to defer been made.
3.4 Crediting Dividend Equivalents. For Share Units, the Company shall
credit the Participant's Deferred Compensation Account with Dividend Equivalents
being equal to the dividends declared on the Company's Shares. The crediting
shall occur as of the date on which said dividends are paid. The number of Share
Units to be credited to the Deferred Compensation Account shall be calculated by
dividing the Dividend Equivalents by the average closing price for
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<PAGE>
Shares as published in the Wall Street Journal under the caption "New York Stock
Exchange Composite Transactions" for the period of ten (10) trading days prior
to the day on which the dividends are paid on the Company's Shares. Any
fractional Share Units shall also be credited to a Participant's Deferred
Compensation Account.
3.5 Crediting Interest Equivalents. For Cash Units credited to their
Deferred Compensation Accounts, the Company shall credit the Participant's
Deferred Compensation Account on a quarterly basis with an Interest Equivalent.
3.6 Share Unit Conversion. Immediately upon termination of Board service,
and so prior to the commencement of any payout or distribution of any amounts
hereunder, a Participant may make a one-time election to convert to Cash Units
all or a portion of the balance of Share Units in such Participant's Deferred
Compensation Account. Any Share Units so converted to Cash Units as a result of
this one-time conversion election shall be valued at the average closing price
for Shares as published in the Wall Street Journal under the caption "New York
Stock Exchange Composite Transactions" for the ten (10) day period immediately
prior to such one-time conversion election.
3.7 Time of Payment.
(a) Election of Benefit Commencement Date. Except as provided in
Section 2.2 hereinabove, and in Article VII hereof, all payments of a
Participant's Deferred Compensation Account shall be made at, or shall
commence on, the date selected by the Participant in accordance with the
terms of this Section 3.7. The date of payment or distribution must be
irrevocably specified by the Participant in his or her most recently filed
written Deferred Payment Election Form. If the Participant fails to
designate a time of payment, payment shall commence on the first day of the
calendar year following termination of Board membership. The Participant
may elect to defer the receipt of his or her Compensation to:
(1) the first day of any calendar quarter, provided such date is
at least six (6) months after the end of the calendar quarter in which
the Compensation is earned; or
(2) the first day of the calendar year following the date of:
(i) retirement as a Director;
(ii) termination of Board membership; or
(iii) death. Upon the death of a Director or former
Director, prior to the final payment of all amounts
credited to his or her Deferred Compensation Account,
the balance of the Deferred Compensation Account shall
be paid in accordance with Article V, commencing on
the first day of the calendar year following the year
of death.
Notwithstanding the foregoing provisions of this Section 3.7, and except as
provided in Article VII, in no event shall any payment or distribution be made
within six (6) months of the Compensation being earned or awarded. The benefit
commencement date may not be later than the third calendar year following the
attainment of mandatory retirement age for Directors.
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(b) Acceleration of Benefit Commencement Date Prior to Payment. At
any time prior to the commencement of any payment or distribution of a
Participant's Deferred Compensation Account, such Participant may request
in writing to accelerate the receipt of all or a specified portion of such
deferred Compensation amounts to the first day of any calendar quarter;
provided, however, that such date is at least six (6) months after the end
of the quarter in which the Compensation is earned. Any such acceleration
will be subject to a penalty equal to a five percent (5%) reduction in the
balance of the Participant's Deferred Compensation Account, which shall be
forfeited to the Company;
3.8 Method of Payment. A Participant in this portion of the Plan shall
have the option of:
(a) selecting a lump-sum payment;
(b) selecting a series of approximately equivalent annual
installments (adjusted as necessary to reflect Dividend Equivalents and/or
Interest Equivalents accrued during the installment payout period) in such
number of installments as the Participant shall specify (not exceeding ten
(10) installments); or
(c) not selecting a method of payment at the time the Deferred
Payment Election Form is prepared. If the Participant does not select a
method of payment, he or she must, at least twelve (12) months prior to the
time the deferral amount is scheduled to be paid, notify the Corporate
Secretary as to the specific method of payment which will be either in a
lump sum or in approximately equivalent annual installments, and such
election shall be subject to the consent of the Committee. Failure to
provide appropriate notification to the Corporate Secretary will result in
a lump sum payment on the deferral payment date.
Participant shall receive in cash all deferred compensation credited to
such Participant's Deferred Compensation Account. Share Units credited to the
Participant's Deferred Compensation Account shall be valued at the average
closing price for Shares as published in the Wall Street Journal under the
caption "New York Stock Exchange Composite Transactions" for the ten (10) day
period prior to each new calendar year.
ARTICLE IV
Restricted Deferred Compensation Accounts
4.1 Creation of Restricted Deferred Compensation Accounts. Compensation
deferred under this Article IV shall be credited to a Restricted Deferred
Compensation Account established by the Company for each Participant. The
Restricted Deferred Compensation Accounts will be initialized as of February 15,
1996 by transferring to the Plan the present value of the accrued benefits of
each Participant in the Non-Employee Directors' Retirement Plan. The present
value of these accrued benefits will then be converted into Restricted Share
Units. The number of Restricted Share Units to be credited to the Restricted
Deferred Compensation Account of each Participant will be determined by using
the average closing price for Shares as published in the Wall Street Journal
under the caption "New York Stock Exchange Composite Transactions" for the ten
(10) business days prior to February 15, 1996. Payout of these Restricted Share
Units shall not commence until death, retirement or the termination of Board
service.
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4.2 Crediting Share Units. If the Committee elects to do so, each year in
conjunction with either the Participant's election or re-election to the Board,
a yearly dollar amount ("Yearly Credit") will be credited to a Participant's
Restricted Deferred Compensation Account in the form of Restricted Share Units.
The number of Restricted Share Units credited to a Participant's Restricted
Deferred Compensation Account shall be determined by dividing the Yearly Credit
by the average closing price for Shares as published in the Wall Street Journal
under the caption "New York Stock Exchange Composite Transactions" ten (10) day
period prior to the Company's annual meeting. Any fractional Restricted Share
Units shall also be credited to a Participant's Restricted Deferred Compensation
Account. The number of Restricted Share Units in a Restricted Deferred
Compensation Account shall be appropriately adjusted by the Committee in the
event of changes in the Company's outstanding common stock by reason of a stock
dividend or distribution, recapitalization, merger, consolidation, split-up,
combination, exchange of shares or the like, and such adjustments shall be
conclusive. Restricted Share Units shall not entitle any person to the rights of
a stockholder.
4.3 Crediting Dividend Equivalents. The Company shall credit the
Participant's Restricted Deferred Compensation Account with Dividend Equivalents
being equal to the dividends declared on the Company's Shares. The crediting
shall occur as of the date on which said dividends are paid. The number of
Restricted Share Units to be credited to the Restricted Deferred Compensation
Account shall be calculated by dividing the Dividend Equivalents by the average
closing price for Shares as published in the Wall Street Journal under the
caption "New York Stock Exchange Composite Transactions" for the period of ten
(10) trading days prior to the day on which the dividends are paid on the
Company's Shares. Any fractional Restricted Share Units shall also be credited
to a Participant's Restricted Deferred Compensation Account.
4.4 Restricted Share Unit Conversion. Immediately upon termination of
Board service, and so prior to the commencement of any payout or distribution of
any amounts hereunder, a Participant may make a one-time election to convert to
Cash Units all or a portion of the balance of Restricted Share Units in such
Participant's Restricted Deferred Compensation Account. Any Restricted Share
Units so converted to Cash Units as a result of this one-time conversion
election shall be valued at the average closing price for Shares as published
in the Wall Street Journal under the caption "New York Stock Exchange Composite
Transactions" for the ten (10) day period immediately prior to such one-time
conversion election.
4.5 Time of Payment.
(a) Benefit Commencement Date for Restricted Deferred Compensation
Account. All payments of a Participant's Restricted Deferred Compensation
Account shall be made at, or shall commence on, the date selected by the
Participant in accordance with the terms of this Article IV. The date of
payment or distribution must be specified by the Director in his or her
written Form of Continuing Deferral unless such election is revoked. A
Participant's revocation must be submitted to the Corporate Secretary in
writing. If the Participant selects a new election with regard to the date
of payment or distribution, such election will apply only prospectively to
any additional Restricted Share Units to be credited to a Director's
Restricted Deferred Compensation Account. If the Participant fails to
designate a time of payment, payment shall commence on the first day of the
calendar year following termination of Board service. The Participant may
elect to defer the receipt of his or her Compensation to the first day of
the year following the date of:
(a) retirement as a Director;
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(b) termination of Board service; or
(c) death. Upon the death of a Director or former Director,
prior to the final payment of all amounts credited to his or her
Account, the balance of the Restricted Deferred Compensation
Account shall be paid in accordance with Article V, commencing on
the first day of the calendar year following the year of death.
Notwithstanding the foregoing provisions of this Section 4.5, in no
event, however, shall any payment or distribution be made within the six
(6) months of the Compensation being earned. The benefit commencement date
may not be later than the third calendar year following the attainment of
mandatory retirement age for Participants.
(b) Acceleration of Benefit Commencement Date Prior to Payment. At
any time prior to the commencement of any payment or distribution of a
Participant's Restricted Deferred Compensation Account, such Participant
may request in writing to accelerate the receipt of all or a specified
portion of such Restricted Deferred Compensation Account amounts to the
first day of any calendar quarter; provided, however, that such date is at
least six (6) months after the end of the quarter in which the Compensation
is earned. Any such acceleration will be subject to a penalty equal to a
five percent (5%) reduction in the balance of the Participant's Restricted
Deferred Compensation Account, which shall be forfeited to the Company.
4.6 Method of Payment. Participant shall have the option of:
(a) selecting a lump sum payment;
(b) selecting a series of approximately equivalent annual
installments (adjusted as necessary to reflect Dividend Equivalents and/or
Interest Equivalents accrued during the installment payout period) in such
number of installments as the Participant shall specify (not exceeding ten
(10) installments); or
(c) not selecting a method of payment at the time the Form for
Continuing Deferral is prepared. If the Participant does not select a
method of payment, he or she must, at least twelve months prior to the time
the deferral amount is scheduled to be paid, notify the Corporate Secretary
as to the specific method of payment which will be either in a lump sum or
in approximately equivalent annual installments, and such election shall be
subject to the consent of the Committee. Failure to provide appropriate
notification to the Corporate Secretary will result in a lump sum payment
on the deferral payment date.
Share Units credited to the Participant's Restricted Deferred
Compensation Account shall be valued at the average closing price for
Shares as published in the Wall Street Journal under the caption "New York
Stock Exchange Composite Transactions" for the ten (10) day period prior to
each new calendar year.
4.7 Subsequent Change in Method of Payment Election.
(a) Change in Method of Payment Prior to Commencement of Distribution
or Payment. With the approval of the Committee, and at any time not later
than twelve (12) months
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prior to the commencement of any payment or distribution of the amounts
credited to the Participant's Restricted Deferred Compensation Account, a
Participant in this portion of the Plan may file a written request with
regard to the method of payment (i.e., a series of installments versus
lump-sum payout), on a form prescribed by the Committee, which will revoke
all such earlier or prior elections with regard to the method of payment
(i.e., a series of installments versus lump-sum payout), and such new
choice as to method of payment will be applied both to amounts previously
credited to the Participant's current Restricted Deferred Compensation
Account balance, as well as to amounts to be credited to such Restricted
Deferred Compensation Account balance prospectively. Any such new or
subsequent election that is made less than twelve (12) months prior to the
commencement of any payment or distribution of the amounts credited to the
Participant's Restricted Deferred Compensation Account, will be null and
void, and the Participant's next preceding timely election will be
reinstated.
(b) Change in Method of Payment Following Commencement of
Distribution or Payment. After payment or distribution of amounts credited
to the Participant's Restricted Deferred Compensation Account has
commenced, the Participant may not change the period of time for which such
amounts are payable. However the Participant may convert installment
payments to a lump sum distribution subject to a penalty equal to a five
percent (5%) reduction in the balance of the Participant's Restricted
Deferred Compensation Account, which shall be forfeited to the Company.
ARTICLE V
Designation of Beneficiaries
5.1 Designation of Beneficiary. The Participant shall name one or more
beneficiaries and contingent beneficiaries to receive any payments due
Participant at the time of death. No designation of beneficiaries shall be valid
unless in writing signed by the Participant, dated and filed with the Committee
during the lifetime of such Participant. A subsequent beneficiary designation
will cancel all beneficiary designations signed and filed earlier under this
Plan, and such new beneficiary designation shall be applied to all amounts
previously credited to the Participant's Deferred Compensation Account (or
Restricted Deferred Compensation Account, as the case may be), as well as to any
amounts to be credited to such Participant's Deferred Compensation Account (or
Restricted Deferred Compensation Account, as the case may be), prospectively. In
case of a failure of designation, or the death of the designated beneficiary
without a designated successor, distribution shall be paid in one lump sum to
the estate of the Participant.
5.2 Spouse's Interest. The interest in any amounts hereunder of a spouse
who has predeceased the Participant shall automatically pass to the Participant
and shall not be transferable by such spouse in any manner, including but not
limited to such spouse's will, nor shall such interest pass under the laws of
intestate succession.
5.3 Survivor Benefits. Upon the Participant's death, any balances in the
Participant's Deferred Compensation Account and Restricted Deferred Compensation
Account shall be paid in accordance with the method and form elected by the
Participant; provided, however, that the balance of the Participant's Deferred
Compensation Account and Restricted Deferred
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Compensation Account may be paid out as a lump sum at the request of the
designated beneficiary, and with the consent of the Committee.
ARTICLE VI
Source of Payments
All payments of deferred compensation shall be paid in cash from the
general funds of the Company and the Company shall be under no obligation to
segregate any assets in connection with the maintenance of a Deferred
Compensation Account or Restricted Deferred Compensation Account, nor shall
anything contained in this Plan nor any action taken pursuant to the Plan create
or be construed to create a trust of any kind, or a fiduciary relationship
between the Company and Participant. Title to the beneficial ownership of any
assets, whether cash or investments, which the Company may designate to pay the
amount credited to the Deferred Compensation Account or a Restricted Deferred
Compensation Account shall at all times remain in the Company and Participant
shall not have any property interest whatsoever in any specific assets of the
Company. Participant's interest in the Deferred Compensation Account or a
Restricted Deferred Compensation Account shall be limited to the right to
receive payments pursuant to the terms of this Plan and such rights to receive
shall be no greater than the right of any other unsecured general creditor of
the Company.
ARTICLE VII
Change in Control
7.1 Acceleration of Payment Upon Change in Control. The terms of this
Section 7.1 shall immediately become operative, without further action or
consent by any person or entity, upon a Change in Control, and once operative
shall supersede and control over any other provisions of this Plan. Upon the
occurrence of a Change in Control, and for twelve (12) months thereafter, each
Participant, whether or not he or she is still a Director, shall have the right
to withdraw, in a single lump-sum cash payment, an amount equal to ninety-five
percent (95%) of the balance of each of his or her Deferred Compensation Account
and Restricted Deferred Compensation Account, as of the valuation date
immediately preceding the date of withdrawal; provided, however, that if this
option is exercised, such Participant will forfeit to the Company the remaining
five percent (5%) of the balance of each such account (as of the valuation date
immediately preceding the date of withdrawal) from which the funds are withdrawn
as a penalty. Payments under this Section 7.1 shall be made as soon as
practicable, but no later than thirty (30) days after the Participant notifies
the Committee in writing that he/she is exercising his/her right to withdraw
pursuant to this Section 7.1.
7.2 Amendment on or after Change in Control. On or after a Change in
Control, no action, including by way of example and not of limitation, the
amendment, suspension or termination of the Plan, shall be taken which would
affect the rights of any Participant or the operation of this Plan with respect
to the balance in the Participant's Accounts.
7.3 Attorney's Fees. The Company shall pay all legal fees and related
expenses incurred by a Participant in seeking to obtain or enforce any payment,
benefit or right such Participant may be entitled to under the plan after a
Change in Control. The Participant shall reimburse the Company
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for such fees and expenses at such time as a court of competent jurisdiction, or
another independent third party having similar authority, determines that the
Participant's claim was frivolously brought without reasonable expectation of
success on the merits thereof.
ARTICLE VIII
Nonalienation of Benefits
Participant shall not have the right to sell, assign, transfer or otherwise
convey or encumber in whole or in part the right to receive any payment under
this Plan except in accordance with Article V.
ARTICLE IX
Acceptance of Terms
The terms and conditions of this Plan shall be binding upon the heirs,
beneficiaries and other successors in interest of Participant to the same extent
that said terms and conditions are binding upon the Participant.
ARTICLE X
Administration of the Plan
The Plan shall be administered by the Committee which may make such rules
and regulations and establish such procedures for the administration of this
Plan as it deems appropriate. In the event of any dispute or disagreements as to
the interpretation of this Plan or of any rule, regulation or procedure or as to
any questioned right or obligation arising from or related to this Plan, the
decision of the Committee shall be final and binding upon all persons.
ARTICLE XI
Termination and Amendment
The Plan may be terminated at any time by the Board of Directors of Sunoco,
Inc. and may be amended at any time by the Committee provided, however, that no
such amendment or termination shall adversely affect the rights of Participants
or their beneficiaries with respect to amounts credited to Deferred Compensation
Accounts or Restricted Deferred Compensation Accounts prior to such amendment or
termination, without the written consent of the Participant.
ARTICLE XII
Construction
In the case any one or more of the provisions contained in this Plan shall
be invalid, illegal or unenforceable in any respect the remaining provisions
shall be construed in order to effectuate
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the purposes hereof and the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
ARTICLE XIII
Governing Law
This Plan shall be construed in accordance with and governed by the laws of
the Commonwealth of Pennsylvania.
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Exhibit 10.5
================================================================================
SUNOCO, INC.
DEFERRED COMPENSATION PLAN
(Amended and Restated as of February 2, 2000)
================================================================================
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ARTICLE I
Definitions
1.1 Cash Unit - shall mean the entry in a Deferred Compensation Account of
a credit equal to One Dollar ($1.00).
1.2 Change in Control - shall mean the occurrence of any of the
following events or transactions:
(a) Continuing Directors cease, within one year of a Control
Transaction, to constitute a majority of the Board of Directors of Sunoco,
Inc. (or of the Board of Directors of any successor to Sunoco, Inc. or to
all or substantially all of its assets), or
(b) any entity, person or Group acquires shares of Sunoco, Inc. in a
transaction or series of transactions that result in such entity, person or
Group directly or indirectly owning beneficially more than twenty percent
(20%) of the outstanding voting shares.
1.3 Committee - shall mean the Compensation Committee of the Board of
Directors of Sunoco, Inc.
1.4 Company - shall mean Sunoco, Inc., a Pennsylvania corporation. The term
"Company" shall include any successor to Sunoco, Inc., any subsidiary or
affiliate which has adopted the Plan, or a corporation succeeding to the
business of Sunoco, Inc., or any subsidiary or affiliate by merger,
consolidation, liquidation or purchase of assets or stock or similar
transaction.
1.5 Continuing Director - shall mean a Director who was a member of
the Board of Directors immediately prior to a Control Transaction which results
in a Change in Control.
1.6 Control Transaction - shall mean any of the following transactions
or any combination thereof:
(a) any tender offer for or acquisition of capital stock of Sunoco,
Inc.;
(b) any merger, consolidation, or sale of all or substantially all of
the assets of Sunoco, Inc.; or
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or a group of shareholders in a
proxy solicitation or otherwise.
1.7 Deferred Bonus Account - shall mean, with respect to any Participant,
the total amount of the Company's liability for payment of deferred compensation
to the Participant under this Plan, including any accumulated Interest
Equivalents and/or Dividend Equivalents.
1.8 Dividend Equivalent - shall mean the entry in a Participant's
Deferred Bonus Account of a dividend credit with respect to a Share Unit, each
Dividend Equivalent being equal to the dividend paid from time to time on a
Share.
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1.9 Executive Resource Employee - shall mean any individual employed
by the Company who has been designated by the Company as a member of the
Company's executive resources group. Generally such group shall include
employees in Grades 14-20 and all employees subject to Section 16 of the
Securities Exchange Act of 1934, as amended.
1.10 Group - shall mean persons who act in concert as described in
Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as
amended.
1.11 Incentive Plan - shall mean the Sunoco, Inc. Executive Incentive
Plan. The Incentive Plan provides that the Board of Directors may pay bonuses
annually, as additional compensation to such employees as the Board determines
have principally contributed to the profitability of the Company.
1.12 Interest Equivalent - shall mean the entry in a Participant's
Deferred Bonus Account of an interest credit with respect to a Cash Unit,
compounded on the basis of the balance in the Participant's Deferred
Compensation Account, applying the interest factor approved by the Committee
each year for such purpose.
1.13 Non-Cash Bonus - shall have the meaning set forth herein at
Section 4.1.
1.14 Participant - shall mean any Executive Resource Employee who meets the
eligibility requirements of the Incentive Plan and who is participating in this
Plan.
1.15 Permanent and Total Disability - shall mean, with respect to any
Participant, that such Participant is eligible to receive benefits under the
applicable long-term disability plan of such Participant's employer.
1.16 Plan - shall mean the Deferred Compensation Plan set forth herein
and as it may be amended from time to time.
1.17 Retirement - shall mean the date on which a Participant is retired in
accordance with the applicable retirement plan, program, or policy of such
Participant's employer.
1.18 Share - shall mean a share of the Company's authorized voting Common
Stock ($1.00 par value per share) and any share or shares of stock of the
Company hereafter issued or issuable in substitution or exchange for each such
share, except for the Company's Series A Preference Stock.
1.19 Share Unit - shall mean the entry in a Participant's Deferred Bonus
Account of a credit equal to one Share.
1.20 Subsidiaries - shall mean corporations in which the Company, directly
or indirectly owns fifty percent (50%) or more of the outstanding voting stock.
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ARTICLE II
Background and Purpose of Plan
2.1 Purpose. The Company has established this Deferred Compensation Plan
to provide Executive Resource Employees who are participants in the Incentive
Plan with the option to irrevocably defer the receipt of all or a portion of the
bonus to which such participants would otherwise be entitled, subject to the
terms and conditions hereinafter set forth.
2.2 Creation of Deferred Bonus Account. Each of the following shall
be credited to a Deferred Bonus Account established by the Company for each
Participant:
(a) any bonus amounts voluntarily deferred by the Participant
pursuant to Article III (Deferral of Bonuses by Participant) hereof; and/or
(b) any Non-Cash Bonus amounts deferred in the discretion of the
Committee pursuant to Article IV (Deferral of Bonuses by Committee) hereof.
Any bonus amounts voluntarily deferred by the Participant will be
credited to a Participant's Deferred Bonus Account in the form of Cash Units or
Share Units, in the discretion of the Participant, as set forth in the Plan.
The deferral of any Non-Cash Bonus amounts caused by action of the Committee
will be credited to a Participant's Deferred Bonus Account in the form of Cash
Units or Share Units as the Committee, in its sole discretion, may decide in
accordance with the Plan.
ARTICLE III
Deferral of Bonuses by Participant
3.1 Participant's Election to Defer. A Participant voluntarily may
elect to defer, in the form of Cash Units or Share Units, all or a portion of
his or her bonus to be awarded under the Incentive Plan by filing a written
election with the Committee on forms prescribed by the Committee. Such election
must include the following:
(a) percentage of bonus to be deferred;
(b) the form of deferral, being either Cash Units, Share Units or a
combination of the two and the percentage allocations of such;
(c) a designation of beneficiary as set forth in Article VI
(Designation of Beneficiaries); and
(d) an irrevocable election of a method of payment as set forth in
Section 3.10 hereof.
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Any such voluntary election by the Participant shall apply only to bonuses
for the year specified in the election.
3.2 Amount of Deferral The amount of bonus to be deferred in any year
shall be designated by the Participant as a percentage of such Participant's
bonus in multiples of five percent (5%) but shall not be less than ten percent
(10%).
3.3 Time of Election. A separate election to defer must be filed for
each year and must be received by the Company no later than forty-five (45) days
before the end of the year in which the bonus is earned. Any election by a
Participant with respect to a bonus in a given year will not preclude a
different action with respect to bonuses in subsequent years, consistent with
the provisions of this Article III with respect to the giving of notice of
deferral election.
3.4 Crediting Share Units. Share Units shall be credited to a
Participant's Deferred Bonus Account at the time the bonus otherwise would have
been paid had no election to defer been made. The number of Share Units to be
credited to the Deferred Bonus Account shall be determined by dividing the
portion of bonus to be deferred by the average closing price for Shares as
reported on the New York Stock Exchange-Composite Transactions for the ten (10)
day period prior to the day on which the bonus otherwise would have been paid.
Any fractional Share Units shall also be credited to a Participant's Deferred
Bonus Account. Share Units shall not entitle any person to the rights of a
shareholder.
3.5 Crediting Dividend Equivalents. For Share Units, the Company
shall credit the Participant's Deferred Bonus Account with Dividend Equivalents
being equal to the dividends declared on the Company's Shares. The crediting
shall occur as of the date on which said dividends are paid. The number of Share
Units to be credited to the Deferred Bonus Account shall be calculated by
dividing the Dividend Equivalents by the average closing price for Shares as
reported on the New York Stock Exchange-Composite Transactions for the period of
ten (10) trading days prior to the day on which the dividends are paid on the
Company's Shares. Any fractional Share Units shall also be credited to a
Participant's Deferred Bonus Account.
3.6 Crediting Cash Units. Cash Units shall be credited to a
Participant's Deferred Bonus Account at the time the bonus would otherwise have
been paid had no election to defer been made.
3.7 Crediting Interest Equivalents. For Cash Units credited to a
Participant's Deferred Bonus Account, the Company shall credit such
Participant's Deferred Bonus Account on a quarterly basis with an Interest
Equivalent.
3.8 Share Unit Conversion. Immediately upon termination of the
Participant's employment with the Company, and so prior to the commencement of
any payout or distribution of any amounts hereunder, the Participant may make a
one-time election to convert to Cash Units all or a portion of the balance of
Share Units in such Participant's Deferred Bonus Account. Any Share Units so
converted to Cash Units as a result of this one-time conversion election shall
be valued at the average closing price for Shares as reported on the New York
Stock Exchange - Composite Transactions for the ten (10) day period immediately
prior to such one-time conversion election.
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3.9 Time of Payment. Except as provided in Article V ("Change in
Control") hereof, all payments of a Participant's Deferred Bonus Account shall
be made at, or shall commence on, the date selected by the Participant in
accordance with the terms of this Article III.
(a) Election of Benefit Commencement Date. The date of payment or
distribution must be irrevocably specified by the Participant in his or her
written notice of election. The Participant may elect to defer the receipt
of all or a specified portion of such Participant's bonus to:
(1) the first day of any calendar year provided such date is
at least six (6) months after the end of the quarter in which the
bonus is earned; or
(2) the first day of the calendar year following the date of:
(i) the Participant's retirement;
(ii) final determination that the Participant has a
Permanent and Total Disability;
(iii) termination of the Participant's employment with the
Company;
(iv) death of the Participant. Upon the death of a
Participant prior to the final payment of all amounts
credited to his or her Deferred Bonus Account, the
balance of the Deferred Bonus Account shall be paid in
accordance with Article VI ("Designation of
Beneficiaries") hereof, commencing on the first day of
the calendar year following the year of death.
Notwithstanding the foregoing provisions of this Section 3.9, and except as
provided in Article V ("Change in Control") hereof, in no event shall any
payment or distribution be made within six (6) months of the bonus being earned
or awarded. The benefit commencement date may not be later than the third
calendar year following the date of: (i) Participant's retirement, or (ii)
termination of Participant's employment.
(b) Acceleration of Benefit Commencement Date Prior to Payment. At
any time prior to the commencement of any payment or distribution of a
Participant's Deferred Bonus Account, such Participant may request in
writing to accelerate the receipt of all or a specified portion of such
deferred bonus amounts to the first day of any calendar year; provided,
however, that such date is at least six (6) months after the end of the
quarter in which the bonus is earned. Any such acceleration will be subject
to a penalty equal to a five percent (5%) reduction in the balance of the
Participant's Deferred Bonus Account, which shall be forfeited to the
Company.
3.10 Method of Payment. A Participant in this portion of the Deferred
Compensation Plan shall have the option of:
(a) selecting a lump-sum payment;
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(b) selecting a series of approximately equivalent annual
installments (adjusted as necessary to reflect Dividend Equivalents and/or
Interest Equivalents accrued during the installment payout period) in such
number of installments as the Participant shall specify (not exceeding ten
(10) installments); or
(c) not selecting a method of payment at the time the Form for
Deferred Payment Election/Designation of Beneficiary is prepared. If the
Participant does not select a method of payment, he or she must, at least
twelve (12) months prior to the time the deferral amount is scheduled to be
paid, notify the Company as to the specific method of payment which will be
either in a lump sum or in approximately equivalent annual installments.
Failure to provide appropriate notification to the Company will result in a
lump sum payment on the deferral payment date.
Participant shall receive in cash all deferred compensation credited to
such Participant's Deferred Compensation Account. Share Units credited to the
Participant's Deferred Compensation Account shall be valued at the average
closing price for Shares as reported on the New York Stock Exchange-Composite
Transactions for the ten (10) day period prior to each new calendar year.
3.11 Subsequent Change in Method of Payment Election.
(a) Change in Method of Payment Prior to Commencement of Distribution
or Payment. With the approval of the Committee, and at any time not later
than twelve (12) months prior to the commencement of any payment or
distribution of the amounts credited to the Participant's Deferred Bonus
Account, a Participant in this portion of the Plan may file a written
request with regard to the method of payment (i.e., a series of
installments versus lump-sum payout), on a form prescribed by the
Committee, which will revoke all such earlier or prior elections with
regard to the method of payment (i.e., a series of installments versus
lump-sum payout), and such new choice as to method of payment will be
applied both to amounts previously credited to the Participant's current
Deferred Bonus Account balance, as well as to amounts to be credited to
such Deferred Bonus Account balance prospectively. Any such new or
subsequent election that is made less than twelve (12) months prior to the
commencement of any payment or distribution of the amounts credited to the
Participant's Deferred Bonus Account, will be null and void, and the
Participant's next preceding timely election will be reinstated.
(b) Change in Method of Payment Following Commencement of
Distribution or Payment. After payment or distribution of amounts credited
to the Participant's Deferred Bonus Account has commenced, the Participant
may not change the period of time for which such amounts are payable.
However the Participant may convert installment payments to a lump sum
distribution subject to a penalty equal to a five percent (5%) reduction in
the balance of the Participant's Deferred Bonus Account, which shall be
forfeited to the Company.
3.12 Hardship Distribution. Participant may request a modification in the
payment terms hereunder only in the event of severe financial hardship and only
to the extent reasonably necessary to eliminate the hardship. Such request shall
specify in detail the grounds for the requested modification and shall be
referred to the Committee. A qualifying severe financial
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hardship must be caused by accident, illness, or event beyond the control of the
Participant. The decision of the Committee with respect to the requested
modification shall be solely at the discretion of the Committee and in
accordance with its evaluation of the exigencies of the situation. Such decision
shall be binding on the Company and Participant.
ARTICLE IV
Deferral of Bonuses by Committee
4.1 Committee's Election to Defer. Each year in conjunction with the
award of any bonus to the Participant, the Committee, in its sole discretion,
may cause to be credited to a Participant's Deferred Bonus Account in the form
of either Cash Units or Share Units, a specified dollar amount representing all
or a portion of such Participant's bonus for that year (the "Non-Cash Bonus").
4.2 Crediting Share Units. Share Units shall be credited to a
Participant's Deferred Bonus Account at the time the bonus would otherwise have
been paid had no Committee action to defer been taken. The number of Share Units
credited to the Participant's Deferred Bonus Account shall be determined by
dividing the Non-Cash Bonus by the average closing price for Shares as reported
on the New York Stock Exchange-Composite Transactions for the ten (10) day
period prior to the date such bonus otherwise would have been paid had no
Committee action been taken. Any fractional Share Units shall also be credited
to such Participant's Deferred Bonus Account. Share Units shall not entitle any
person to the rights of a stockholder.
4.3 Crediting Dividend Equivalents. The Company shall credit the
Participant's Deferred Bonus Account with Dividend Equivalents being equal to
the dividends declared on the Company's Shares. The crediting shall occur as of
the date on which said dividends are paid. The number of Share Units to be
credited to the Deferred Bonus Account shall be calculated by dividing the
Dividend Equivalents by the average closing price for Shares as reported on the
New York Stock Exchange-Composite Transactions for the period of ten (10)
trading days prior to the day on which the dividends are paid on the Company's
Shares. Any fractional Share Units shall also be credited to a Participant's
Deferred Bonus Account.
4.4 Crediting Cash Units. Cash Units shall be credited to a Participant's
Deferred Bonus Account at the time the bonus otherwise would have been paid had
no Committee action to defer been taken.
4.5 Crediting Interest Equivalents. For Cash Units credited to a
Participant's Deferred Bonus Account, the Company shall credit such
Participant's Deferred Bonus Account on a quarterly basis with an Interest
Equivalent.
4.6 Share Unit Conversion. Immediately upon termination of the
Participant's employment with the Company, and so prior to the commencement of
any payout or distribution of any amounts hereunder, the Participant may make a
one-time election to convert to Cash Units all or a portion of the balance of
Share Units in such Participant's Deferred Bonus Account. Any Share Units so
converted to Cash Units as a result of this one-time conversion election shall
be valued at the average closing price for Shares as reported on the New York
Stock Exchange - Composite Transactions for the ten (10) day period immediately
prior to such one-time conversion election.
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4.7 Time of Payment.
(a) Benefit Commencement Date Specified by Committee. The Committee
will specify in writing its election of the earliest date of payment or
distribution, and such election shall remain effective until revoked in
writing by the Committee. If the Committee elects a new date with regard to
payment or distribution, such election will apply only prospectively to any
additional Share Units and/or Cash Units to be credited to such
Participant's Deferred Bonus Account by Committee action in accordance with
this Article IV. If the Committee fails to designate a time of payment,
payment shall commence on the first day of the calendar year following the
termination of such Participant's employment. Notwithstanding the foregoing
provisions of this Section 4.7, in no event, however, shall the payment
date be later than the third calendar year following the date of: (i)
Participant's retirement, or (ii) termination of Participant's employment.
(b) Acceleration of Benefit Commencement Date Prior to Payment. At
any time prior to the commencement of any payment or distribution of a
Participant's Deferred Bonus Account, such Participant may request in
writing to accelerate the receipt of all or a specified portion of such
deferred bonus amounts to the first day of any calendar year; provided,
however, that such date is at least six (6) months after the end of the
quarter in which the bonus is earned. Any such acceleration will be subject
to a penalty equal to a five percent (5%) reduction in the balance of the
Participant's Deferred Bonus Account, which shall be forfeited to the
Company.
4.8 Method of Payment. The Participant must select a method of payment at
least twelve (12) months prior to the time the deferral amount is scheduled to
be paid, by notifying the Company as to whether the method of payment will be
either:
(a) a lump sum payment; or
(b) a series of approximately equivalent annual installments
(adjusted as necessary to reflect Dividend Equivalents accrued during the
installment payout period), in such number of installments as the
Participant shall specify (not exceeding ten (10) installments).
If no election is made, payment or distribution of any amounts deferred by
Committee action pursuant to this Article IV (together with the Dividend
Equivalents and/or Interest Equivalents, as the case may be, accrued thereon)
shall be made in a single lump sum on the earliest payment date permitted by the
Committee as provided under Section 4.7 hereof. Share Units credited to the
Participant's Deferred Bonus Account shall be valued at the average closing
price for Shares as reported on the New York Stock Exchange-Composite
Transactions for the ten (10) day period prior to each new calendar year.
4.9 Subsequent Change in Method of Payment Election.
(a) Change in Method of Payment Prior to Commencement of Distribution
or Payment. With the approval of the Committee, and at any time not later
than twelve (12)
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months prior to the commencement of any payment or distribution of the
amounts credited to the Participant's Deferred Bonus Account, a Participant
in this portion of the Plan may file a written request with regard to the
method of payment (i.e., a series of installments versus lump-sum payout),
on a form prescribed by the Committee, which will revoke all such earlier
or prior elections with regard to the method of payment (i.e., a series of
installments versus lump-sum payout), and such new choice as to method of
payment will be applied both to amounts previously credited to the
Participant's current Deferred Bonus Account balance, as well as to amounts
to be credited to such Deferred Bonus Account balance prospectively. Any
such new or subsequent election that is made less than twelve (12) months
prior to the commencement of any payment or distribution of the amounts
credited to the Participant's Deferred Bonus Account, will be null and
void, and the Participant's next preceding timely election will be
reinstated.
(b) Change in Method of Payment Following Commencement of
Distribution or Payment. After payment or distribution of amounts credited
to the Participant's Deferred Bonus Account has commenced, the Participant
may not change the period of time for which such amounts are payable.
However the Participant may convert installment payments to a lump sum
distribution subject to a penalty equal to a five percent (5%) reduction in
the balance of the Participant's Deferred Bonus Account, which shall be
forfeited to the Company.
ARTICLE V
Change in Control
5.1 Acceleration of Payment Upon Change in Control. The terms of this
Section 5.1 shall immediately become operative, without further action or
consent by any person or entity, upon a Change in Control, and once operative
shall supersede and control over any other provisions of this Plan. Upon the
occurrence of a Change in Control, and for twelve (12) months thereafter, each
Participant, whether or not he or she is still an employee of the Company, shall
have the right to withdraw, in a single lump-sum cash payment, an amount equal
to ninety-five percent (95%) of the balance of such Participant's Deferred Bonus
Account, as of the valuation date immediately preceding the date of withdrawal;
provided, however, that if this option is exercised, such Participant will
forfeit to the Company the remaining five percent (5%) of the balance of each
such account (as of the valuation date immediately preceding the date of
withdrawal) from which the funds are withdrawn as a penalty. Payments under this
Section 5.1 shall be made as soon as practicable, but no later than thirty (30)
days after the Participant notifies the Company in writing that he/she is
exercising his/her right to withdraw pursuant to this Section 5.1.
5.2 Amendment on or after Change in Control. On or after a Change in
Control, no action, including by way of example and not of limitation, the
amendment, suspension or termination of the Plan, shall be taken which would
affect the rights of any Participant or the operation of this Plan with respect
to the balance in the Participant's Accounts.
5.3 Attorney's Fees. The Company shall pay all legal fees and related
expenses incurred by a Participant in seeking to obtain or enforce any payment,
benefit or right such Participant may be entitled to under the plan after a
Change in Control. The Participant shall reimburse the
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Company for such fees and expenses at such time as a court of competent
jurisdiction, or another independent third party having similar authority,
determines that the Participant's claim was frivolously brought without
reasonable expectation of success on the merits thereof.
ARTICLE VI
Designation of Beneficiaries
The Participant shall name a beneficiary to receive any payments due such
Participant at the time of death, with the right to change such beneficiary at
any time. In case of a failure of designation or the death of the designated
beneficiary without a designated successor, distribution shall be made to the
person or persons designated as beneficiary in the designation most recently
filed under the Sunoco, Inc. Capital Accumulation Plan, or if no such
designation has been made or the Participant is not participating in such plan,
the surviving spouse of a deceased Participant, or, if there is no surviving
spouse, the children of the Participant in equal shares (the share of any child
who predeceases the Participant to go in equal shares to the issue of such
deceased child), or if there is no surviving spouse, child, or issue of such
children, the estate of the Participant. No designation of beneficiaries shall
be valid unless in writing signed by the Participant, dated and filed with the
Company. Upon the Participant's death, any balance in the Participant's Deferred
Bonus Account is payable under the method elected by the Participant or in such
other manner as the Committee may determine in its sole discretion.
ARTICLE VII
Miscellaneous
7.1 Source of Payments. All payments of deferred bonuses shall be paid in
cash from the general funds of the Company and the Company shall be under no
obligation to segregate any assets in connection with the maintenance of the
Deferred Bonus Account, nor shall anything contained in this Plan nor any action
taken pursuant to the Plan create or be construed to create a trust of any kind,
or a fiduciary relationship between the Company and Participant. Title to the
beneficial ownership of any assets, whether cash or investments, which the
Company may designate to pay the amount credited to the Deferred Bonus Account
shall at all times remain in the Company and Participant shall not have any
property interest whatsoever in any specific assets of the Company.
Participant's interest in the Deferred Bonus Account shall be limited to the
right to receive payments pursuant to the terms of this Plan and such rights to
receive shall be no greater than the right of any other unsecured general
creditor of the Company.
7.2 Nonalienation of Benefits. Participant shall not have the right to
sell, assign, transfer or otherwise convey or encumber in whole or in part the
right to receive any payment under this Plan except in accordance with Article
VI (Designation of Beneficiaries) hereof.
7.3 Acceptance of Terms. The terms and conditions of this Plan shall be
binding upon the heirs, beneficiaries, and other successors in interest of
Participant to the same extent that said terms and conditions are binding upon
the Participant. This Plan shall not be construed in any
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way as an employment contract requiring the Company or Participant to continue
the employment relation.
7.4 Administration of the Plan. The Plan shall be administered by the
Committee which may make such rules and regulations and establish such
procedures for the administration of this Plan as it deems appropriate. In the
event of any dispute or disagreements as to the interpretation of this Plan or
of any rules, regulation, or procedure or as to any questioned right or
obligation arising from or related to this Plan, the decision of the Committee
shall be final and binding upon all persons.
7.5 Adjustments for Changes in Capitalization. The number of Share Units
in the Participant's Deferred Bonus Account shall be appropriately adjusted by
the Committee in the event of changes in the Company's outstanding common stock
by reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, and such
adjustments shall be conclusive.
7.6 Termination and Amendment. The Plan may be terminated at any time by
the Board of Directors of Sunoco, Inc., and may be amended at any time by the
Committee provided, however, that no such amendment or termination shall
adversely affect the rights of Participants or their beneficiaries with respect
to amounts credited to Deferred Bonus Accounts prior to such amendment or
termination, without the written consent of the Participant.
7.7 Notices. To be effective, all notices, requests and demands to or
upon the Company or the Participant, as the case may be, shall be in writing, by
facsimile, by overnight courier or by registered or certified mail, postage
prepaid and return receipt requested, and shall be deemed to have been duly
given or made upon:
(a) delivery by hand;
(b) one business day after being sent by overnight courier;
(c) four business days after being deposited in the United States
mail, postage prepaid; or
(d) in the case of transmission by facsimile, when confirmation of
receipt is obtained.
Such communications shall be addressed and directed as listed below (or to
such other address or recipient for a party as may be hereafter notified by such
party hereunder), to the Company or the Participant, respectively:
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If to the Company, to:
SUNOCO, INC.
Human Resources Department
Ten Penn Center - 20th Floor
1801 Market Street
Philadelphia, PA 19103-1699
Attn: Director, Compensation & Benefits
FAX: (215) 246-8498
Confirm: (215) 246-8392
If to Participant, to:
The most recent address for Participant appearing in the books and
records of the Company.
7.8 Construction. The captions and headings used for the various Articles
and Sections of this Plan are for convenience of reference only and are not to
affect the construction hereof or be taken into consideration in the
interpretation hereof.
7.9 Severability. In the case of any one or more of the provisions
contained in this Plan shall be invalid, illegal, or unenforceable in any
respect the remaining provisions shall be construed in order to effectuate the
purposes hereof and the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
7.10 Governing Law. This Plan shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
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Exhibit 10.7
SUNOCO, INC.
SAVINGS RESTORATION PLAN
(Amended and Restated as of February 3, 2000)
I. STRUCTURE OF THE PLAN
The Sunoco, Inc. Savings Restoration Plan ("Plan") is established for the
purpose of providing for certain employees benefits which otherwise would
be lost by reason of the restrictive provisions of Section 401(a)(17) and
Section 415 of the Internal Revenue Code of 1986, as amended (the "Code")
applicable to the Sunoco, Inc. Capital Accumulation Plan ("SunCAP"). This
Plan is the result of the merger of the Sun Company, Inc. Savings
Restoration Plan II ("Plan II") into the Plan, effective December 21, 1995.
The provisions of the Plan and Plan II prior to the effective date of the
merger will remain effective with regard to those contributions.
This Plan is an unfunded plan maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees within the meaning of Sections 3(36), 201(2),
301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of
1974.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator (as this term is defined in SunCAP), or its
delegate, ("Plan Administrator") shall administer the Plan. The Plan
Administrator shall have full authority to determine all questions arising
in connection with the Plan. The Plan Administrator will also interpret the
Plan, adopt procedural rules, and may employ and rely on such legal
counsel, such actuaries, such accountants and such agents as it may deem
advisable to assist in the administration of the Plan. Decisions of the
Plan Administrator shall be conclusive and binding on all persons.
III. PARTICIPATION IN THE PLAN
The Plan Administrator shall select the employees eligible to participate
in the Plan for the next succeeding calendar year from among the
participants in SunCAP whose employing corporation participates in SunCAP
and adopts this Plan (hereinafter referred to as a "participating employer"
which term also includes Sunoco, Inc. (the "Company")). The participants
in SunCAP selected for participation in this Plan shall be those SunCAP
participants that the Plan Administrator reasonably
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believes will have compensation in excess of the limitations on
compensation imposed under the terms of SunCAP by reason of Sections
401(a)(17) of the Code (the "Compensation Cap") and/or will exceed the
limitations on contributions imposed under the terms of SunCAP by reason of
Section 415 of the Code ("Annual Additions Limit") during the succeeding
calendar year.
IV. BENEFITS PROVIDED UNDER THE PLAN
1. Participant Contributions
A. Compensation Cap Limitation. If a participant's Basic
Contributions (as this term is defined in SunCAP) to SunCAP may
be limited due to the imposition of the Compensation Cap, the
participant may elect, before the beginning of the calendar year
during which the participant is subject to the Compensation Cap,
to contribute on a pretax basis to the participating employer by
which the participant is employed, any remaining percentage of
such Basic Contributions which the participant was otherwise
prevented from making.
B. Annual Additions Limitation. If a participant's Basic
Contributions to SunCAP may be limited due to the imposition of
the Annual Additions Limit, the participant may elect, before the
beginning of the calendar year during which the Annual Addition
Limit is reached, to contribute on a pretax basis to the
participating employer by which the participant is employed, any
remaining percentage of such Basic Contributions which the
participant was otherwise prevented from making.
C. Method of Making Participant Contributions. Participant
contributions, as determined above, will be withheld from the
compensation payable to the participant for services rendered to
the participating employer after the date of the election and
credited to a book account maintained for the participant by or
on behalf of the participating employer as of the date such
contributions would have been made to SunCAP. In determining the
percentage of a participant's compensation to be contributed on a
pretax basis under this Plan, no change in a participant's Basic
Contributions during a calendar year for purposes of SunCAP shall
be effective with respect to this Plan until the calendar year
following the calendar year in which the change is made.
Notwithstanding the foregoing, an election made by a participant
under this Plan will be void if made after the beginning of the
calendar
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year to which the election relates or the participant reduces his
Basic Contributions during the calendar year to which the
election relates.
2. Participating Employer Contribution
A participant's participating employer shall maintain, or cause to be
maintained, a book account for such participant to which the
participating employer shall credit an amount equal to the Matching
Employer Contributions (as this term is defined in SunCAP) that the
participating employer would have made on the participant's behalf to
SunCAP had the participant's Basic Contributions continued to be made
to SunCAP, instead of to the participating employer under this Plan.
3. Nonforfeitability of and Earnings on Book Accounts
A. Nonforfeitability. All amounts credited to book accounts on
behalf of participants shall be nonforfeitable.
B. Earnings. Participant and participating employer contributions
will be credited to book accounts as of the date such
contributions would have been made to SunCAP. All amounts
credited to book accounts shall be deemed to have been invested
in Fund C established under SunCAP and such book accounts shall
be revalued monthly as if they had been invested in Fund C,
except as provided in the following sentence. Effective January
1, 1996, all amounts credited to book accounts shall be deemed to
have been invested in any of the Funds established under SunCAP,
and may be transferred among the Funds, in accordance with the
elections made by the participant under this Plan, pursuant to
procedures and limitations in effect under SunCAP.
V. DISTRIBUTIONS
1. Lump-Sum Distribution
Each participating employer shall distribute to each participant in
the Plan employed by it for whom it maintains book accounts or his
beneficiary under SunCAP an amount in cash equal to 100% of the value
of his book account(s) attributable to all participant contributions
and employer contributions made for calendar years prior to 1996 (and
investment earnings on such contributions), and attributable to all
participant contributions and employer contributions for calendar
years after 1995 (and investment
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earnings on such contributions) for which an election has not been
made pursuant to Section 2 of this Article V, upon the termination of
employment of such participant under circumstances entitling him or
his beneficiary to a distribution of the participant's interest in
SunCAP whether or not a distribution is made at that time for SunCAP.
2. Ten-Year Certain Option
Each participant may irrevocably elect, prior to the time a lump-sum
distribution is required to be made pursuant to Section 1 of Article
V, with respect to the value of the participant's book account(s)
attributable to all participant contributions and employer
contributions (and investment earnings on such contributions) for all
years of the Plan, to waive the right to receive a lump-sum
distribution of such contributions (and investment earnings on such
contributions) (the "Ten-Year Certain Amounts") at termination of
employment as provided in Section 1 of this Article V, and to receive
a distribution of all Ten-Year Certain Amounts as determined under
this Section 2.
The Ten-Year Certain Amounts shall be distributed commencing no later
than two months after the time lump-sum amounts are distributable
pursuant to Section 1 of this Article V, in a series of annual
distributions. The participant will select the number (not to exceed
ten) of such annual distributions. The amount of each annual
distribution shall be equal to the value of the account balance on the
distribution date, divided by the number of annual distributions
remaining as of the date the participant's account is valued for the
annual distribution. The final annual distribution shall include 100%
of the value of the participant's book account(s).
Undistributed Ten-Year Certain Amounts shall remain credited to the
participant's book account(s) and shall be deemed to be invested in
accordance with the provisions of Section 3 of Article IV. In the
event of the death of the participant prior to distribution of all
Ten-Year Certain Amounts, any undistributed Ten-Year Certain Amounts
shall be paid to the participant's beneficiary under SunCAP as soon as
is administratively feasible.
3. Acceleration of Payment upon Change in Control
A. Right to Withdraw.
The terms of this Section 3 of Article V shall immediately become
operative, without further action or consent by any
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person or entity, upon a Change in Control, and once operative
shall supersede and control over any other provisions of this
Plan. Upon a Change in Control, and for twelve (12) months
thereafter, each participant, whether or not he is still an
employee of the Company, shall have the right to withdraw, in a
single lump-sum cash payment, an amount equal to ninety-five
percent (95%) of the value of his book accounts under the Plan;
provided, however, that if this option is exercised, such
participant will forfeit to the Company the remaining five
percent (5%) of the value of his book accounts as of the time of
the withdrawal. Payments under this Section 3 shall be made as
soon as practicable, but no later than 30 days after the
participant notifies the Plan that he is exercising his right to
withdraw.
(i) On or after a Change in Control, no action, including by way
of example and not of limitation, the amendment, suspension
or termination of the Plan, shall be taken which would
affect the rights of any participant or the operation of the
Plan with respect to all amounts credited to book accounts
on behalf of participants on the date of the Change in
Control.
(ii) The Company shall pay all reasonable legal fees and related
expenses incurred by a participant in seeking to obtain or
enforce any payment, benefit or other right such participant
may be entitled to under the Plan after a Change in Control;
provided, however, that the participant shall be required to
repay any such amounts to the Company to the extent a court
of competent jurisdiction issues a final and non-appealable
order setting forth the determination that the position
taken by the participant was frivolous or advanced in bad
faith.
B. Definitions.
"Change in Control" shall be deemed to have occurred if:
(i) Continuing Directors cease, within one year of a Control
Transaction, to constitute a majority of the Board of
Directors of Sunoco, Inc. (or of the Board of Directors of
any successor to Sunoco, Inc. or to all or substantially all
of its assets) or
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(ii) any entity, person or Group acquires shares of Sunoco, Inc.
in a transaction or series of transactions that result in
such entity, person or Group directly or indirectly owning
beneficially more than twenty percent (20%) of the
outstanding voting shares.
As used herein, "Control Transaction" shall mean any of the
following transactions or any combination thereof: (1) any tender
offer for or acquisition of capital stock of Sunoco, Inc., (2)
any merger, consolidation, or sale of all or substantially all of
the assets of Sunoco, Inc., or (3) the submission of a nominee or
nominees for the position of director of the Company by a
shareholder or a Group of shareholders in a proxy solicitation or
otherwise. As used herein, "Continuing Director" shall mean a
Director who was a member of the Board of Directors of Sunoco,
Inc. immediately prior to a Control Transaction which results in
a Change in Control. As used herein, "Group" shall mean persons
who act in concert as described in Sections 13(d)(3) and/or
14(d)(2) of the Securities Exchange Act of 1934, as amended.
4. Change in Method of Payment Following Commencement of Distribution or
Payment.
After payment or distribution of the value of the participant's book
account(s) attributable to all participant contributions and employer
contributions (and investment earnings on such contributions) for all
years of the Plan, has commenced, the participant may not change the
period of time for which such amounts are payable. However the
participant may convert installment payments (i.e., the "Ten-Year
Certain Amounts" determined pursuant to Section 2 of this Article V)
to a lump sum distribution, subject to a penalty equal to a five
percent (5%) reduction in the balance of the value of the
participant's book account(s) attributable to all participant
contributions and employer contributions (and investment earnings on
such contributions) for all years of the Plan.
VI. GENERAL PROVISIONS
1. Right to Terminate
This Plan may be terminated at any time by the Company. The Company
or any participating employer may terminate this Plan with respect to
its employees participating in SunCAP. If a participating employer
shall terminate SunCAP with respect to its
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employees the amounts to their credit in their book accounts
established under this Plan shall be distributed to such participants
in a single sum in accordance with the provisions of SunCAP applicable
in the event of termination of SunCAP or the complete discontinuance
of contribution thereto.
2. Right to Amend
This Plan may be amended at any time by the Board of Directors of the
Company, except that no such amendment shall reduce for any
participant the amount then credited to his book account established
under this Plan.
3. Nonalienation of Benefits
No right to payment or any other interest under this Plan shall be
assignable or subject to attachment, execution, or levy of any kind.
4. Employment Relationships
Nothing in this Plan shall be construed as giving any employee the
right to be retained in the employ of any participating employer.
Each participating employer in the Plan expressly reserves the right
to dismiss any employee at any time without regard to the effect which
such dismissal might have upon him under the Plan.
5. Plan not Funded
Benefits payable under this Plan shall not be funded and shall be made
out of the general funds of the participating employers.
6. Construction
This Plan shall be construed, administered and enforced according to
the laws of the state of Pennsylvania.
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Exhibit 10.9
==========================================================================
SUNOCO, INC.
EXECUTIVE RETIREMENT PLAN
(Amended and Restated as of January 1, 2000)
=========================================================================
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ARTICLE I
Definitions
1.01 Actuarial Equivalent - shall mean, except as otherwise provided in
this Section, a benefit of equivalent value to the benefit which would otherwise
have been provided to the Participant, determined on the same basis as
determined under the Sunoco, Inc. Retirement Plan. Notwithstanding the preceding
sentence, for purposes of determining the Actuarial Equivalent lump-sum value
for payment for benefits under Section 3.07, the mortality table described in
Treasury Regulation Section 1.417(e)-1(d)(2) and the applicable interest rate
described in Treasury Regulation Section 1.417(e)-1(d)(3) as specified for the
second month preceding the calendar quarter in which the annuity starting date
occurs (or if a larger lump-sum value results, and if the annuity starting date
is during the period beginning January 1, 2000, and ending December 31, 2000,
the applicable interest rate described in Treasury Regulation Section 1.417(e)-
1(d)(3) as specified for the second month preceding the calendar month in which
the annuity starting date occurs) shall be used. For purposes of determining the
lump-sum Actuarially Equivalent value of retirement income pursuant to Section
3.02, 3.04 or 3.06, the value of early retirement and survivor benefits under
the Plan shall be reflected in such lump-sum amounts.
1.02 Affiliated Company - shall mean the Company and:
(a) Any other corporation which is included within a "controlled
group of corporations" within which Sunoco, Inc., is also included as
determined under Section 1563 of the 1954 Internal Revenue Code without
regard to subsections (a)(4) and (e)(3)(C) of said Section 1563;
(b) Any other trades or businesses (whether or not incorporated)
which, based on principles similar to those defining a "controlled group of
corporations" for purposes of (a) above, are under common control; and
(c) Any other organization so designated by the Board Committee.
1.03 Affiliated Company Benefit - shall mean the monthly amount of Benefit
(or the Actuarial Equivalent of such Benefit) to which a Participant and/or
Spouse is or was entitled under any qualified or nonqualified defined
contribution or defined benefit plan that is or was maintained by an Affiliated
Company as the primary source of employer-provided retirement income for
participants of such plan, including the Base Plan; provided, however, that in
the case of a defined contribution plan, the value of such Benefit will be
determined based on the aggregate contributions made on behalf of the
Participant (whether or not subsequently withdrawn by the Participant),
accumulated at a rate or rates of interest as determined by the Plan
Administrator, which determination will be made in a uniform and consistent
manner.
1.04 Base Plan - shall mean the Sunoco, Inc. Retirement Plan.
1.05 Beneficiary - shall mean the person or persons, other than a
contingent annuitant, designated by a Participant or retired Participant
pursuant to Article IV.
1.06 Board of Directors - shall mean the Board of Directors of Sunoco, Inc.
1.07 Board Committee - shall mean those individual Directors who have been
appointed by the Board of Directors with the powers and responsibilities
specified in Article VIII and to which has been delegated any fiduciary
responsibilities of the Board of Directors with respect to the Plan.
1.08 Cause - shall mean termination of a Participant's employment by the
Company, due to:
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(a) the Participant's indictment for a criminal offense (other than a
traffic offense) including, without limitation, a crime involving moral
turpitude or common law fraud;
(b) excessive absenteeism by the Participant, unrelated to any
illness; or
(c) the Company's reasonable determination that the Participant has
either:
(1) committed an act of fraud, embezzlement, theft, or
misappropriation of funds in connection with such Participant's duties in
the course of his employment with the Company; or
(2) engaged in mismanagement, negligence, or misconduct in the course
of his employment with the Company.
1.09 Change in Control - shall be deemed to have occurred if:
(a) continuing Directors cease within one year of such Control
Transaction, to constitute a majority of the Board of Directors of Sunoco,
Inc. (or of the Board of Directors of any successor to Sunoco, Inc. or to
all or substantially all of its assets) or
(b) any entity, person or Group acquires shares of Sunoco, Inc. in a
transaction or series of transactions that result in such entity, person or
Group directly or indirectly owning beneficially more than twenty percent
(20%) of the outstanding voting shares.
1.10 Company - shall mean Sunoco, Inc. or any corporation which succeeds to
the position of Sunoco, Inc. as common parent of the Sunoco Affiliated Group,
within the meaning of regulations issued under the Internal Revenue Code.
1.11 Credited Service - subject to the limitations hereinafter described,
shall mean the sum of the following:
(a) the actual amount, in completed years and months, of the
Participant's Service; and
(b) an additional one month for each full year of such Service
completed at the time the determination is being made; provided, however,
that:
(1) the maximum number of months credited under this provision
will be thirty-six (36);
(2) when the Participant attains his 62nd birthday, the number
of months credited under this provision will automatically become
thirty-six (36), regardless of the length of the Participant's
Service; and
(3) after the Participant's 62nd birthday, the number of months
credited under this provision will be reduced from month to month so
that at any time a determination is being made, the maximum number of
months credited under this provision will not exceed the number of
months remaining until the Participant's 65th birthday.
Credited Service will not include any Service after a Participant's
Normal Retirement Date, nor will it include periods of employment with an
Affiliated Company before or after it becomes or ceases to be an Affiliated
Company.
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1.12 Continuing Director - shall mean a Director who was a member of the
Board of Directors of Sunoco, Inc. immediately prior to a Control Transaction
which results in a Change in Control.
1.13 Control Transaction - shall mean any of the following transactions or
any combination thereof:
(a) any tender offer for or acquisition of capital stock of Sunoco,
Inc.;
(b) any merger, consolidation, or sale of all or substantially all of
the assets of Sunoco, Inc.; or
(c) the submission of a nominee or nominees for the position of
director of the Company by a shareholder of a Group of shareholders in a
proxy solicitation or otherwise.
1.14 Earnings - shall mean:
(a) For periods beginning after December 31, 1997, the sum of:
(1) base salary paid or payable to a Participant by the Company
or an Affiliated Company; and
(2) the actual incentive awards granted to a Participant
pursuant to the Sunoco, Inc. Executive Incentive Plan (the "EIP") or
the equivalent thereof pursuant to an incentive plan sponsored by the
Company or an Affiliated Company; or
(b) For periods beginning prior to January 1, 1998, the sum of:
(1) base salary paid or payable to a Participant by the Company
or an Affiliated Company, and
(2) the actual incentive awards granted to a Participant
pursuant to the EIP, up to the Participant's unadjusted annual
guideline bonus in effect for the Participant under such Plan, or the
equivalent thereof pursuant to an incentive plan sponsored by the
Company or an Affiliated Company.
1.15 Effective Date - shall mean January 1, 1980, and as to any amendment,
the effective date specified by the Board of Directors.
1.16 Employee - shall mean any individual who is employed by the Company or
an Affiliated Company.
1.17 Executive - shall mean any Employee who is employed by the Company as
a principal officer, or in a job which, in accordance with the Company's job
evaluation program, has been assigned 1400 or more Hay points, and any other
Employee who is designated by the Board Committee as being an Executive for
purposes of this Plan.
1.18 Executive Service - shall mean that part of a Participant's Service
which was rendered while he was an Executive.
1.19 Final Average Earnings - shall mean the greater of:
(a) the arithmetic average of the Participant's aggregate Earnings
during the thirty-six (36) calendar months of the last 120-consecutive
calendar month period of Service immediately preceding the earlier of
actual retirement, Termination Date or the Participant's
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62nd birthday (or the actual number of such months if less than thirty-six
(36)) which produces the highest average; or
(b) the Transition Final Average Earnings.
1.20 Group - shall mean persons who act in concert as described in
Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as
amended.
1.21 Just Cause - shall mean:
(a) a judicial determination that the Participant has committed
fraud, misappropriation, or embezzlement against the Company; or
(b) a non-appealable conviction of, or entry of a plea of nolo
contendere for, an act by the Participant constituting a felony which, as
determined by the Company in good faith, constitutes a crime involving
moral turpitude and has resulted in material harm to the Company, its
subsidiaries and affiliates taken as a whole.
No termination of employment shall be deemed an effective termination for Just
Cause unless accompanied by a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the Continuing Directors at a
meeting of the Board of Directors which was called and held for the purpose of
considering such termination, or if there are no Continuing Directors, then by
at least three quarters (3/4) of the entire Board of Directors (after reasonable
notice to the Participant and an opportunity for the Participant, together with
the Participant's counsel, to be heard before the Board of Directors) finding
that, in the good faith opinion of the Board of Directors, the Participant was
guilty of conduct set forth in the preceding sentence, and specifying the
particulars thereof in detail. In any deliberations or votes by the Board of
Directors concerning a determination under this Section, the Participant shall
recuse himself from such deliberations and votes.
1.22 Nonaffiliated Employer Benefit - shall mean the monthly amount of
Benefit, (or the Actuarial Equivalent of such Benefit) to which a Participant
and/or Spouse is or was entitled as a result of prior employment with any
employer other than the Company or an Affiliated Company under any qualified or
nonqualified defined contribution or defined benefit retirement plan that is or
was maintained by such employer as the primary source of employer-provided
retirement income for participants of such plan; provided, however, that in the
case of a defined contribution plan, the value of such Benefit will be
determined based on the aggregate contributions made on behalf of the
Participant (whether or not subsequently withdrawn by the Participant),
accumulated at a rate or rates of interest as determined by the Plan
Administrator, which determination will be made in a uniform and consistent
manner.
1.23 Normal Retirement Date - shall mean the first day of the calendar
month coincident with or next following the Participant's 65th birthday.
1.24 Participant - shall mean any Employee who is a Participant in the
Sunoco, Inc. Retirement Plan, who has not waived his rights to participate in
this Plan, and who is either:
(a) an Executive; or
(b) designated as a Participant by the Board Committee.
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Except as provided in Sections 6.01, 6.02 or 6.04, if any Participant
ceases to be an Executive, he will thereupon cease to be a Participant (unless
otherwise designated by the Board Committee), and will forfeit all rights to
benefits under this Plan.
1.25 Plan - shall mean the Sunoco, Inc. Executive Retirement Plan as set
forth in this document and as it may from time to time be amended.
1.26 Plan Administrator - shall mean the individual or entity designated as
such by the Board Committee pursuant to Article VIII.
1.27 Plan Year - shall mean the annual period beginning on January 1 of any
year and ending on the following December 31.
1.28 Potential Change in Control - shall mean the occurrence of any of the
following events or transactions:
(a) any person (other than Sunoco, Inc. or any affiliate or
subsidiary thereof) makes a tender offer for capital stock of Sunoco, Inc.
(b) any person becomes the beneficial owner, directly or indirectly,
of capital stock of Sunoco, Inc. in an amount which requires the filing of
Schedule 13D or its equivalent form pursuant to the Rules and Regulations
under the Securities Exchange Act of 1934 as from time to time amended;
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or Group of shareholders in a
proxy solicitation or otherwise which, in its judgment, the Board of
Directors determines by adoption of a resolution within thirty (30) days of
such submission, might result in a Change in Control of Sunoco, Inc.
(d) any person files a pre-merger notification for the acquisition of
capital stock of Sunoco, Inc. pursuant to the Hart-Scott-Rodino Act; or
(e) the Board of Directors in its judgment determines by adoption of
a resolution that a Potential Change in Control of Sunoco, Inc. for
purposes of this Plan has occurred.
1.29 Preretirement Spouse's Death Benefit - shall mean the benefit payable
upon the Participant's death to the Spouse of a Participant pursuant to
Section 5.01.
1.30 Qualifying Termination of the employment of a Participant - shall mean
any of the following:
(a) a termination of employment by the Company within two (2) years
after a Change in Control, other than for Just Cause, death or disability;
(b) a termination of employment by the Participant within two (2)
years after a Change in Control for one or more of the following reasons:
(1) the assignment to such Participant of any duties
inconsistent in a way adverse to such Participant, with such
Participant's positions, duties, responsibility and status with the
Company immediately prior to the Change in Control, or a reduction in
the duties and responsibilities held by the participant immediately
prior to the Change in Control; a change in the Participant's
reporting responsibilities, title or offices as in effect immediately
prior to the Change in Control that is adverse to the Participant; or
any removal of the Participant from or any failure to re-elect the
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Participant to any position with the Company that such Participant
held immediately prior to the Change in Control except in connection
with such Participant's:
(i) assignment to a new position at a higher annual base salary
and guideline bonus; or
(ii) termination of employment by the Company for Just Cause; or
(2) With respect to any Participant who is a member of the Board
of Directors immediately prior to the Change in Control, any failure
of the shareholders of the company to elect or reelect, or of the
Company to appoint or reappoint, the Participant as a member of the
Board of Directors;
(3) A reduction by the Company in the Participant's base annual
salary or guideline (target) bonus as in effect immediately prior to
the Change in Control; the failure by the Company to continue in
effect, or the taking of any action by the Company that would
adversely affect such Participant's participation in or materially
reduce such Participant's benefits under, any employee benefit plan or
compensation plan in which such Participant was participating
immediately prior to the Change in Control; provided, however, that in
the aggregate such actions by the Company significantly reduce the
Participant's total compensation (i.e., the sum of Participant's
annual base salary, guideline (target) bonus, and the aggregate value
to the Participant of all employee benefit or compensation plans); or
the failure by the Company, without the Participant's consent, to pay
to the Participant any portion of the Participant's current
compensation, or to pay to the Participant any portion of an
installment of deferred compensation under any deferred compensation
program of the Company or
(4) the Company requires the Participant to be based anywhere
other than the Participant's present work location or a location
within thirty-five (35) miles from the present location; or the
Company requires the Participant to travel on Company business to an
extent substantially more burdensome than such Participant's travel
obligations during the period of twelve (12) consecutive months
immediately preceding the Change in Control; provided, however, that
in the case of any such termination of employment by the Participant
under this subsection 1.30(b), such termination shall not be deemed to
be a Qualifying Termination unless the termination occurs within 120
days after the occurrence of the event or events constituting the
reason for the termination; or
(c) a termination of employment by the Company other than termination
for Just Cause, or a termination of employment by the Participant for one
of the reasons set forth in subsection 1.30(b) above, following a Potential
Change in Control, if the Participant can demonstrate that such termination
or circumstance in subsection 1.30(b) above leading to termination:
(1) was at the request of a third party with which the Company
had entered into negotiations or an agreement with regard to a Change
in Control; or
(2) otherwise occurred in connection with, or in anticipation
of, a Change in Control, provided that, in either such case, such
Change in Control actually occurs within one (1) year following the
Termination Date.
1.31 Service - shall mean the completed years and months of an Employee's
employment by the Company or an Affiliated Company, whether or not continuous.
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1.32 Social Security Benefit - shall mean the Primary Insurance Amount to
which a Participant becomes entitled at age sixty-five (65) under Social
Security legislation in effect on the earliest of his Normal Retirement Date,
early retirement date or Termination Date.
1.33 Spouse - shall mean the individual who is the legally married husband
or wife of a Participant.
1.34 Statutory Benefit - shall mean the monthly amount of any benefit (or
the Actuarial Equivalent of such benefit) from any country other than the United
States to which a Participant, upon proper application, is or would be entitled.
1.35 Termination Date - shall mean the date on which a Participant ceases
to be an Employee.
1.36 Transition Earnings - shall mean:
(a) For periods beginning on or after September 1, 1997, and ending
on or before December 31, 1998, the sum of:
(1) base salary paid or payable to a Participant by the Company
or an Affiliated Company; and
(2) the Participant's unadjusted annual guideline bonus in
effect for the Participant under the EIP or successor plans pro rated
over the applicable period (e.g., for computation of Earnings for a
one-month period, the unadjusted annual guideline bonus would be
divided by twelve (12)); or
(b) For periods ending prior to September 1, 1997, the sum of:
(1) base salary paid or payable to a Participant by the Company
or an Affiliated Company (including an amount equal to the value on
the date of grant of any restricted stock units ("RSUs") designated as
base salary, and not as short-term or long-term incentives, under the
Sunoco, Inc. Long-Term Incentive Plan or the Sunoco, Inc. Executive
Long-Term Stock Investment Plan; provided, however, that such RSUs
become vested and payable); and
(2) the dollars represented by:
(i) the Participant's unadjusted guideline incentive
percentage in effect under the EIP during such period; multiplied
by
(ii) the Participant's base salary paid or payable (as
defined in subsection 1.35(b)(1) herein).
1.37 Transition Final Average Earnings - shall mean the arithmetic average
of the Participant's aggregate Transition Earnings during the thirty-six (36)
calendar months of the 120-consecutive calendar month period of Service ending
on the earlier of December 31, 1998, actual retirement or Termination Date (or
the actual number of such months if less than thirty-six (36)) which produces
the highest average.
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ARTICLE II
Contributions
2.01 Employer Contributions. All benefits payable under this Plan will be
paid by the Company. A Participant will have no right, title, or interest
whatsoever in or to any investments which the Company may make to aid in meeting
such obligations as may arise under the Plan. Nothing contained in the Plan, nor
any action taken pursuant to its provisions, will create or be construed to
create a trust or a fiduciary relationship between the Company and any
Participant or any other person. To the extent that any person acquires a right
to benefits under this Plan, such right will be no greater than the right of an
unsecured general creditor of the Company. All payments to be made under the
Plan will be paid from the general funds of the Company and no special or
separate fund will be established and no segregation of assets will be made to
assure payment of such amounts.
2.02 Participant Contributions. No contributions by Participant will be
required or permitted under this Plan.
2.03 Expenses of Administration. All expenses of administering this Plan
will be paid by the Company.
ARTICLE III
Retirement Benefits
3.01 Normal Retirement. Except as provided in Section 3.05, each
Participant will be retired on his Normal Retirement Date.
3.02 Normal Retirement Income. Subject to the provisions of Sections 3.03
and 3.04, a Participant who retires on or after his Normal Retirement Date and
after the completion of five years of Executive Service will be entitled to a
monthly normal retirement income, payable in the normal form of payment pursuant
to Section 3.07, equal to the excess of (a) over (b), where:
(a) equals the sum of:
(1) 1-2/3% of his Final Average Earnings multiplied by his
Credited Service up to a maximum of 30 years, plus
(2) 3/4% of his Final Average Earnings multiplied by his
Credited Service in excess of 30 years, and
(b) equals the sum of:
(1) 1-2/3% of his Social Security Benefit multiplied by his
Service up to a maximum of 30 years,
(2) 100% of his Affiliated Company Benefit, plus
(3) 100% of his Statutory Benefit;
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<PAGE>
provided, however, that the requirement that the Participant have completed at
least five years of Executive Service will be waived in the case of any
Participant who is an Executive on January 1, 1980 and who has then attained his
55th birthday.
3.03 Maximum Normal Retirement Income.
(a) The monthly normal retirement income which a Participant would
otherwise be entitled to receive under Section 3.02 will not exceed fifty
percent (50%) of his Final Average Earnings less 100% of his Affiliated
Company and Statutory Benefits.
(b) Section 3.03(a) shall not apply to limit that part of the benefit
attributable to incentive compensation under subsection 1.19(b) to the
extent that the Participant made an election to defer incentive
compensation pursuant to the Sunoco, Inc. Deferred Compensation Plan.
3.04 Minimum Normal Retirement Income. Notwithstanding the foregoing, the
monthly normal retirement income which a Participant would otherwise be entitled
to receive under Section 3.02 will not be less than the excess of (a) over (b),
where
(a) equals 3-1/3% of his Final Average Earnings multiplied by the
number of complete years of his Service up to a maximum of twelve (12) such
years, and
(b) equals the sum of:
(1) 100% of his Affiliated Company Benefit,
(2) 100% of his Nonaffiliated Employer Benefit, plus
(3) 100% of his Statutory Benefit.
3.05 Early Retirement Date. A Participant will be eligible to retire on an
early retirement date which will be the first day of any calendar month
coincident with or next following his 55th birthday if he has then completed at
least five (5) years of Executive Service.
3.06 Early Retirement Income. The monthly early retirement income payable
to the Participant commencing on his early retirement date will be equal to the
monthly normal retirement income that would otherwise be applicable under
Sections 3.02, 3.03 and 3.04, adjusted as follows:
(a) The Social Security Benefit referred to in Sections 3.02 and 3.04
will be determined by projecting the Participant's Service to his Normal
Retirement Date and assuming constant Earnings, at his last rate in effect,
to Normal Retirement Date, and will then be multiplied by a fraction, the
numerator of which will be his Service to the date of actual retirement and
the denominator of which will be his projected Service to Normal Retirement
Date.
(b) The amount calculated in subsection 3.02(a) will be reduced by
5/12% for each full month by which actual retirement precedes Normal
Retirement Date by more than five (5) years, and the offset for Social
Security Benefits calculated in Sections 3.02(b) and 3.04 will be reduced
by 7/12% for each full month that actual retirement precedes Normal
Retirement Date during the five-year period immediately preceding Normal
Retirement Date, and 7/24% for each full month that actual retirement
precedes Normal Retirement Date by more than five (5) years.
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3.07 Normal Form of Benefit. Except as provided in Article IV, retirement
benefits under this Plan will be in the form of a lump sum payment of the
Actuarial Equivalent of the retirement income determined under Sections 3.02,
3.03, 3.04 and 3.06, whichever is applicable.
3.08 Time of Payment. The payment of a Participant's retirement benefits
shall be made or commence no later than the last day of the calendar month in
which the Participant retires.
3.09 Increase in Monthly Benefits. Effective July 1, 1998, the monthly
benefits of
(a) retirees who retired prior to January 1, 1981, as a result of
normal retirement under Section 3.01 or early retirement under Section 3.05,
(b) surviving Spouses, contingent annuitants or Beneficiaries of the
retirees described in subsection 3.09(a) who are receiving benefits on July 1,
1998, or
(c) surviving Spouses who began receiving surviving Spouse's benefits
under Section 5.04 or Section 5.05 prior to January 1, 1990,
shall be increased by the amount determined in the following sentence, subject,
however, to the limitation that the combined increases under the Base Plan and
the Plan effective July 1, 1998, shall not exceed $85.00.
The monthly benefit increase shall be the excess of the sum of twenty
percent (20%) of the combined monthly benefit under the Base Plan and the Plan
up to $250.00, ten percent (10%) of the combined monthly benefit under the Base
Plan and the Plan in excess of $250.00 up to $500.00, three percent (3%) of the
combined monthly benefit under the Base Plan and the Plan in excess of $500.00
up to $750.00, and one percent (1%) of the combined monthly benefit under the
Base Plan and the Plan in excess of $750.00 up to $1,000, over the monthly
benefit increase effective July 1, 1998 under the Base Plan. Benefits payable on
account of disability shall not be increased. Fifty percent (50%) of these
retiree benefit increases shall be continued to the surviving Spouse; provided,
however, that any such increases in retirement income shall not be subject to
adjustments in effect at the time of the election or retirement reflecting the
cost of benefit increases under this Section.
ARTICLE IV
Optional Forms of Retirement Income
4.01 Election of an Optional Form of Payment. Not later than thirty (30)
days prior to a Participant's retirement date, a Participant may elect, in lieu
of the normal form of retirement benefits, an optional form of retirement
income. A Participant may not change or revoke an elected option unless such
change is made thirty (30) days prior to the Participant's retirement date. Each
election, designation and revocation of an option will be made in writing and in
conformity with such rules as may be prescribed by the Plan Administrator.
Notwithstanding the foregoing, a Spouse may not elect an optional form of
receiving any benefit payable under Article V.
4.02 Monthly Annuity Option. A Participant may elect to receive an annuity
which is equal to the monthly normal retirement income determined under Sections
3.02, 3.03, 3.04 and 3.06, whichever is applicable.
4.03 Contingent Annuity Option. A Participant may elect to receive a
reduced retirement income, the amount of which will be determined by application
of appropriate Actuarially Equivalent
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factors adopted by the Plan Administrator for the age and sex of the Participant
and the contingent annuitant. The contingent annuity option provides:
(a) payments to the Participant for life; and
(b) continuation of such payments, or any part of them designated by
the Participant, to the contingent annuitant, if surviving, for life.
4.04 Ten-Year Certain Option. A Participant may elect to receive a
retirement income of Actuarially Equivalent value payable for life, provided
that such income will be paid to such Participant or to the Beneficiary of such
Participant for ten (10) years after the Participant's retirement regardless of
whether the Participant or Beneficiary survives such period. At the discretion
of the Plan Administrator, any benefit payable hereunder to a Beneficiary may be
commuted and paid in one sum.
4.05 Other Forms of Pension. A Participant may elect to receive a benefit
payable over a period not less than the remaining lifetime of such Participant
and, if the Participant so further elects, thereafter to the designated
Beneficiary for as long as such designated Beneficiary survives the Participant
in such other form having an Actuarially Equivalent value as may be approved by,
and be subject to such conditions as may be prescribed by, the Plan
Administrator.
4.06 Rules Applicable to Contingent Annuity Option.
(a) If the Participant should die before the effective date of the
contingent annuity option, no benefit will be payable to the contingent
annuitant.
(b) If the contingent annuitant should die before the effective date
of the contingent annuity option, the option will automatically be
cancelled and the normal monthly retirement income will be payable to the
Participant as if the option had not been elected.
(c) If the contingent annuitant should die before the Participant but
after the effective date of the contingent annuity option, benefits will be
payable or continue to be paid to the Participant on the reduced basis;
provided, however, that if the contingent annuitant should die during the
first four years following commencement of the retirement income payments
to the Participant, the amount of the reduced retirement income payable to
the surviving retired Participant will be increased by restoring a
percentage of the reduction amount as follows:
Death of Contingent Percentage of
Annuitant During Discount Restored
------------------- -----------------
First Year 80%
Second Year 60%
Third Year 40%
Fourth Year 20%
Fifth and Subsequent Years 0%
(d) If the retirement date is earlier than the effective date of the
contingent annuity option, retirement benefits commencing at the actual
retirement date will be made on the
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normal form of retirement income. If the Participant and the contingent
annuitant are living on such effective date, the retirement benefit will be
adjusted to provide retirement income on and after such date in the
optional form.
4.07 Acceleration of Annuity Options. Notwithstanding the foregoing, if the
Internal Revenue Service makes a determination that the Participant must include
any amounts from the Plan in the taxable income of such Participant in a taxable
year prior to the year in which the Participant actually receives those amounts,
the Participant shall receive the Actuarial Equivalent of the remainder of the
benefit determined under Sections 3.02, 3.03, 3.04 and 3.06, whichever is
applicable. Such distribution shall be made no later than the last day of the
calendar year in which the Participant informs the Plan Administrator that the
Internal Revenue Service has made such a determination.
ARTICLE V
Death Benefits
5.01 Preretirement Spouse's Death Benefit. In the event of the death of a
Participant during active employment and after having become eligible to elect
an early retirement date, the Participant's Spouse will be entitled to a death
benefit payable in the normal form of payment pursuant to Section 5.02 in the
amount hereinafter set forth. The amount of such monthly income will be twenty-
five percent (25%) of the monthly early retirement income that would have been
payable to the Participant under Section 3.06 had he retired on the date of his
death; provided, however, that:
(a) the reduction specified in Section 3.02(b)(2) with respect to the
Participant's Affiliated Company Benefit will not be applicable;
(b) the early retirement reduction percentage described in subsection
3.06(b) will be applied only to the offset for Social Security Benefits;
(c) the monthly income payments to the Spouse will be reduced by 1/2%
for each year that the Spouse is more than ten (10) years younger than the
Participant; and
(d) the amount payable to the Spouse will be reduced by any amount of
Affiliated Company Benefits that are attributable to Affiliated Company
contributions and that are payable to such Spouse.
5.02 Normal Form of Preretirement Spouse's Death Benefit. Except as
otherwise elected pursuant to Section 5.03, the Preretirement Spouse's Death
Benefit will be in the form of a lump sum payment of the Actuarial Equivalent of
the Preretirement Spouse's Death Benefit determined under Section 5.01 payable
no later than the last day of the calendar month following the month in which
the Participant died.
5.03 Election of Optional Form of Preretirement Spouse's Death Benefit. A
Participant who is eligible to elect an early retirement date may:
(a) elect to have the Preretirement Spouse's Death Benefit paid in an
annuity pursuant to Section 5.04;
(b) elect the optional preretirement spouse's death benefit annuity
pursuant to Section 5.05; or
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(c) elect to have the optional Preretirement Spouse's Death Benefit
annuity pursuant to Section 5.05 in a lump sum payment pursuant to Section
5.06.
A Participant may change or revoke an elected option at any time prior to
his actual retirement. Each election, designation and revocation of an option
will be made in writing and in conformity with such rules as may be prescribed
by the Plan Administrator.
5.04 Preretirement Spouse's Death Benefit Annuity. If this form of payment
is elected by the Participant, the Participant's Spouse shall receive a
Preretirement Spouse's Death Benefit in the form of monthly payments commencing
no later than the last day of the calendar month following the month in which
the Participant died, payable over the lifetime of such Spouse.
5.05 Optional Preretirement Spouse's Death Benefit Annuity.
(a) Amount of Benefit. If this form of payment is elected by the
Participant, the Participant's Spouse shall receive a death benefit in the
form of monthly payments commencing no later than the last day of the
calendar month following the month in which the Participant died, payable
over the lifetime of such Spouse in the amount hereinafter set forth. The
amount of each such monthly income payment will be the sum of the monthly
income payment under Section 5.04 and twenty-five percent (25%) of the
monthly early retirement income that would have been payable to the
Participant under Section 3.06 had he retired on the date of his death;
provided, however, that;
(1) the reduction specified in subsection 3.02(b)(2) with
respect to the Participant's Affiliated Company Benefit will not be
applicable;
(2) the early retirement reduction percentage described in
subsection 3.06(b) will be applied only to the offset for Social
Security Benefits;
(3) the monthly income payments to the Spouse will be reduced by
1/2% for each year that the Spouse is more than ten years younger than
the Participant; and
(4) the amount payable to the Spouse will be reduced by any
amount of Affiliated Company Benefits that are attributable to
Affiliated Company contributions and that are payable to such Spouse.
(b) Reduction of Other Benefits. If this form of payment is elected
by the Participant, the monthly amount of retirement benefit that becomes
payable to either the Participant or Spouse under the plan will be reduced
by an amount equal to 1/4% of:
(1) 100% the monthly amount of early retirement income that
would have been payable to the Participant under Section 3.06,
determined as of his retirement date or, if earlier, as of his date of
death on the assumption he had retired on that date; provided,
however, that:
(i) the reduction specified in subsection 3.02(b)(2) with
respect to the Participant's Affiliated Company Benefits will not
be applicable;
(ii) the early retirement reduction percentage described in
subsection 3.06(b) will be applied only to the offset for Social
Security Benefits; and
(iii) any amount of Affiliated Company Benefits that are or
would have been payable to the Spouse and that are attributable
to Affiliated Company
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contributions will be subtracted from the monthly amount of
income otherwise determined; multiplied by
(2) the number of full calendar years and any partial calendar
year during which the Participant and his Spouse were living and the
optional Preretirement Spouse's Death Benefit was in effect.
This reduction shall also be in effect if the Participant chooses an
optional preretirement lump sum death benefit pursuant to Section 5.06 of
the Plan.
(c) When Coverage Will Take Effect. Unless otherwise specified by the
Plan Administrator, the optional Preretirement Spouse's Death Benefit
coverage will not take effect until the later of the date on which the
Participant has met the age and Service requirements of Section 3.05 and
the first day of the calendar month coincident with or next following the
date the Participant's election was received by the Plan Administrator,
provided that the Participant is alive, employed by the Company or an
Affiliated Company and has not attained his Normal Retirement Date on the
day such coverage would otherwise become effective.
(d) Revocation of Election. A Participant will have the right to
revoke his election at any time before his actual retirement. Such election
will be revoked automatically if the Participant ceases to have a Spouse;
provided, however, that if such Participant subsequently acquires another
Spouse, the coverage will automatically be reinstated unless revoked by the
Participant.
(e) End of Coverage. The death benefit coverage provided for under
this Section 5.05 will end upon the Participant's Normal or early
Retirement Date.
5.06 Optional Preretirement Lump Sum Death Benefit. If this form of payment
is elected by the Participant, the Participant's Spouse shall receive a death
benefit in the form of a lump sum payment of the Actuarial Equivalent of the
optional Preretirement Spouse's Death Benefit annuity determined under Section
5.05 payable no later than the last day of the calendar month following the
month in which the Participant died.
5.07 Postretirement Spouse's Death Benefit. In the event a Participant who
has elected to receive a retirement benefit in one of the optional forms
outlined in Article IV, dies after retiring or after attaining Normal Retirement
Date, the Spouse at the time of commencement of the distribution of such
retirement benefit will receive a monthly retirement income payable for the
lifetime of such Spouse in an amount equal to fifty percent (50%) of the
retirement income being paid or payable to the Participant (before giving effect
to any reduction in income required by the election of an optional form of
payment under Article IV); provided, however, that:
(a) the reduction specified in Section 3.02(b)(2) with respect to the
Participant's Affiliated Company Benefit will not be applicable;
(b) the monthly income payable to the Spouse will be reduced by 1/2%
for each year that the Spouse is more than ten years younger than the
Participant; and
(c) the amount payable to the Spouse will be reduced by any amount of
Affiliated Company Benefits that are attributable to Affiliated Company
contributions and that are payable to such Spouse.
The Spouse's death benefit payable under this Section 5.07 will be in
addition to any benefits otherwise payable under Article IV.
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ARTICLE VI
Termination of Employment or Status as Executive; Re-employment
6.01 Termination of Employment.
(a) Voluntary Termination. A Participant whose employment is
terminated for any reason other than death or retirement, including early
retirement, will not be entitled to benefits under this Plan, except as
provided in subsection 6.01(b) and Section 6.04 hereof.
(b) Involuntary Termination. Notwithstanding any other provision of
the Plan (and except as discussed herein), a Participant whose employment
is involuntarily terminated prior to his Early Retirement Date, other than
for Just Cause, and who executes a release and discharge of the Company
from any and all claims, demands or causes of action other than as to
amounts or benefits due to the Participant under any plan, program or
contract provided by, or entered into with, the Company will be entitled to
benefits in accordance with this subsection 6.01(b). Such release and
discharge shall be in such form as prescribed by the Committee and shall be
executed prior to the payment of any benefits due hereunder. In addition,
no benefits due hereunder shall be paid to a Participant who is required by
Company guidelines to execute an agreement governing the assignment of
patents or the disclosure of confidential information unless an executed
copy of such agreement is on file with the Company. The benefits under this
subsection 6.01(b) shall consist of a nonforfeitable percentage in the
benefits calculated under Section 3.06 (including the minimum benefit
defined under Section 3.04) equal to 1-2/3% times the number of completed
months of Executive Service. Such benefits shall commence coincident with
or next following the first day of the calendar month in which the
Participant attains age fifty-five (55), or if the Participant elects, the
benefit will be paid no later than thirty (30) days after the Termination
Date, in a lump sum payment of the Actuarial Equivalent of the age fifty-
five (55) retirement income determined under Section 3.06, with an
additional reduction of such benefit by discounting it to the date of
payment using the interest rate used in Section 1.01. Any participant who
also is eligible to receive benefits under Section 6.04 shall not receive
benefits hereunder but shall instead receive the benefits under Section
6.04.
6.02 Termination of Executive Status. If a Participant remains employed by
the Company or an Affiliated Company but ceases to be an Executive, he will
forfeit the right to all benefits under this Plan unless otherwise designated to
remain as a Participant by the Board Committee or unless he had attained his
55th birthday and completed at least five (5) years of Executive Service at the
time he ceased to be an Executive; provided, however, that the requirement that
the Participant have completed at least five years of Executive Service will be
waived in the case of any Participant who is an Executive on January 1, 1980 and
who has then attained his 55th birthday. If any such participant is designated
at the Board Committee as being eligible to remain a Participant even though no
longer an Executive, the Participant will continue as such for all purposes of
this Plan. If the Participant is not so designated by the Board Committee but
has attained his 55th birthday and, except for a Participant who was an
Executive on January 1, 1980 and who had then attained his 55th birthday, has
completed at least five years of Executive Service, he will remain a
Participant, but will be entitled to benefits based only upon his Service,
Credited Service and Final Average Earnings as of the date he ceased to be an
Executive.
6.03 Reemployment. If a retired Participant is reemployed by the Company or
an Affiliated Company, his benefits will thereupon cease, and upon again
becoming such an Employee he will have his prior period of Service, Credited
Service and Executive Service restored to him. If he had made an election of an
optional form of payment, such election will continue on file with the Plan
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Administrator, but no payment will be due under such option in the event of his
death before he again retires. Upon subsequent retirement his retirement income
will be based on his Service and Credited Service which was restored under this
Section 6.03 plus any Service and Credited Service rendered while employed as an
Executive after the time of his reemployment.
6.04 Change in Control.
(a) Notwithstanding any other provisions in the Plan (including any
minimum age and/or length of service requirements for vesting of benefits),
a Participant shall become fully and irrevocably vested upon the earlier of
a Qualifying Termination or a Change in Control of the Company and, upon
either:
(1) the subsequent termination of this Plan, or any amendment
to reduce any benefit due hereunder; or
(2) the subsequent termination of Participant's employment
with the Company for any reason other than Just Cause,
such Participant shall be entitled to benefits calculated as follows:
(i) Except for purposes of Section 1.11(b), Service and
Credited Service shall be increased by 36 months, with the number of
months credited under this Section 6.04(a)(i) reduced by one month for
each completed month of Service of the Participant after the date of
the Change in Control, but not below zero.
(ii) If at the Termination Date, the Participant has attained
his Normal Retirement Date, he shall be entitled to a benefit
calculated in accordance with Section 3.02
(iii) If at the Termination Date, the Participant has not
attained his Normal Retirement Date, or has not attained his Early
Retirement Date, he shall be entitled to benefits calculated under
Section 3.06 (including the minimum benefit defined under Section
3.04).
(iv) Final Average Earnings shall be determined using the
greater of:
(A) the amount determined under Section 1.19 without
reference to this Section 6.04(a)(iv);
(B) Earnings for the first full calendar month preceding
the Termination Date; or
(C) Earnings for the first full calendar month preceding
the date of a Change in Control.
(v) In the case of a Participant who has not attained his
Early Retirement Date at the Termination Date, such benefits shall
commence coincident with, or next following the first day of, the
calendar month in which the Participant attains age fifty-five (55),
or if the Participant elects, the benefit will be paid no later than
thirty (30) days after the Termination Date, in a lump sum payment of
the Actuarial Equivalent of the age fifty-five (55) retirement income
determined under Section 3.06 with additional reduction of such
benefit by discounting it to the date of payment using the interest
rate used in Section 1.01.
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(b) Notwithstanding any other provisions in the Plan, upon a Change
in Control and for a period of twelve (12) months thereafter, any retired
Participant or Beneficiary who is receiving an optional form of retirement
income pursuant to Article IV hereof, shall have the right to elect to
receive in a single lump-sum cash payment an amount equal to ninety-five
percent (95%) of the Actuarial Equivalent of the payments of such
retirement income to which the Participant or Beneficiary is entitled for
all future periods under the Plan; provided, however, that if this option
is exercised, such retired Participant or Beneficiary will forfeit to the
Company the remaining five percent (5%) of the Actuarial Equivalent of such
payments. Payments under this Section 6.04(b) shall be made as soon as
practicable, but no later than thirty (30) days after the retired
Participant or Beneficiary notifies the Plan that he is exercising this
right to withdraw.
(c) The Company shall pay all reasonable legal fees and related
expenses incurred by a Participant in seeking to obtain or enforce any
payment, benefit or other right such Participant may be entitled to under
the Plan after a Change in Control; provided, however, that the Participant
shall be required to repay any such amounts to the Company to the extent a
court of competent jurisdiction issues a final and non-appealable order
setting forth the determination that the position taken by the Participant
was frivolous or advanced in bad faith.
ARTICLE VII
Disability Benefits
7.01 Participants Receiving Disability Benefits. A Participant receiving
disability benefits under the Sun Executive Disability Income Program will
remain a Participant. Such a Participant will be entitled to a monthly normal
retirement income, to commence at his Normal Retirement Date, computed in
accordance with Sections 3.02, 3.03 or 3.04 as applicable, assuming constant
Earnings and guideline bonus to Normal Retirement Date, Social Security benefits
as calculated under the Social Security Act in effect on the Participant's date
of disability, and including as Service, Credited Service and Executive Service,
the period during which he qualifies for and receives disability benefits under
the Sun Executive Disability Income Program. Such determination will be made as
of Normal Retirement Date. The normal form for the payment of retirement income
to the Participant will be as set forth in Section 3.07.
7.02 Status During Disability. A Participant receiving Sun Executive
Disability Income Program benefits prior to his Normal Retirement Date will be
entitled to benefits under Section 5.01 and, if applicable, Section 5.02. After
his Normal Retirement Date, he will be deemed to have retired. Such a
Participant, if otherwise eligible, may also elect to retire early under the
provisions of Section 3.05.
ARTICLE VIII
Administration of the Plan
8.01 Allocation and Delegation of Fiduciary Responsibilities. Fiduciary
responsibilities with respect to the Plan are to be allocated as set forth in
this Article VIII. A fiduciary will have only those specific powers, duties,
responsibilities and obligations as are specifically given him under this Plan.
It is intended that each fiduciary be responsible for the proper exercise of his
own powers, duties, responsibilities and obligations under this Plan, and
generally will not be responsible for any act or failure to act of another
fiduciary. A fiduciary may delegate to any person or entity, who may or may not
be a fiduciary, any of its powers or duties under the Plan.
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8.02 Powers and Responsibilities of the Board of Directors. The Board of
Directors has the following powers and responsibilities;
(a) To authorize amendments to the Plan;
(b) To terminate the Plan; and
(c) To appoint and remove members of the Board Committee, as set
forth in Section 8.03, below.
8.03 Board Committee.
(a) The Board Committee will consist of at least three Directors who
will be appointed by and serve at the pleasure of the Board of Directors.
The Board of Directors will also appoint one member of the Board Committee
to act as Chairman of such Committee. Vacancies will be filled in the same
manner as appointments. Any member of the Board Committee may resign by
delivering a written resignation to the Board of Directors, to become
effective upon delivery or at any other date specified therein.
(b) The members of the Board Committee will appoint a Secretary who
may, but need not be, a member of the Board Committee. The Board Committee
may, in writing, delegate some or all of its powers and responsibilities as
specified in subsection 8.03(d) to any other person or entity, who may or
may not be a fiduciary.
(c) The Board Committee will hold meetings upon such notice, at such
time or times, and at such place or places as it may determine. The
majority of the members of the Board Committee at the time in office will
constitute a quorum for the transaction of business at all meetings and a
majority vote of those present at any meeting will be required for action.
The Board Committee will also act by written consent of a majority of its
members.
(d) The Board Committee will have the following powers and
responsibilities:
(1) To prepare periodic administration reports to the Board of
Directors which will show, in reasonable detail, the administrative
operations of the Plan;
(2) To appoint and remove the Plan Administrator; and
(3) To appoint and remove other fiduciaries.
8.04 Plan Administrator.
(a) The Plan Administrator will be appointed by and serve at the
pleasure of the Board Committee. The Plan Administrator may resign by
delivering a written resignation to the Board Committee, to be effective on
delivery or at any other date specified therein. Upon the resignation or
removal of the Plan Administrator, a successor Plan Administrator will be
appointed by the Board Committee.
(b) The Plan Administrator may, in writing, delegate some or all of
his powers and responsibilities as set forth in subsection 8.04(c) to any
other person or entity, who may or may not be a fiduciary.
(c) The Plan Administrator will adopt such rules for administration
of the Plan as he considers desirable, provided they do not conflict with
the Plan. Records of administration
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of the Plan will be kept, and Participants and their Spouses, Beneficiaries
and contingent annuitants may examine records pertaining directly to
themselves. The Plan Administrator will have the following powers and
responsibilities:
(1) To select and terminate an actuary for the Plan.
(2) To establish and maintain claims review procedures.
(3) To construe the Plan, correct defects, supply omissions and
reconcile inconsistencies to the extent necessary to administer the Plan,
with any instructions or interpretation of the Plan made in good faith by
the Plan Administrator to be final and conclusive for all purposes.
(4) To comply with any requirements of the Employee Retirement Income
Security Act of 1974 with respect to filing reports with governmental
agencies.
(5) To provide Employees with any and all information required by the
Employee Retirement Income Security Act of 1974.
(6) To approve any actuarial assumptions.
(7) To coordinate any necessary audit process with respect to reports
on administration data.
(8) To conduct routine Plan administration.
8.05 Employment of Agents. The fiduciaries may retain such counsel,
actuarial, medical, accounting, clerical and other services as they may require
to carry out the provisions and purposes of the Plan.
8.06 Reliance on Reports and Certificates. Fiduciaries under the Plan and
the officers and managers and Employees of the Company and any Affiliated
Company will be entitled to rely upon all tables, valuations, certificates and
reports furnished by any duly appointed actuary, insurance company, or by any
duly appointed accountant, and upon all opinions given by any duly appointed
legal counsel.
8.07 Compensation. Fiduciaries under the Plan will not receive any
compensation for their services as such.
8.08 Fiduciary's Own Participation. A fiduciary may not act, vote or
otherwise influence a decision specifically relating to his own participation
under the Plan.
8.09 Liability for Administration of the Plan. In the administration of the
Plan, neither a fiduciary, not any officers, directors or employees of the
Company or any Affiliated Company or their agents will be liable jointly or
severally for any loss due to his or its error or acts of omission or
commission, except for his or its own individual misconduct. The Company will
indemnify each fiduciary, officer, director or employee of the Company and any
Affiliated Company from any and all expenses arising out of his or its
responsibilities under the Plan, excepting such expenses and liabilities arising
out of his or its own individual willful misconduct.
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ARTICLE IX
General Provisions
9.01 Right to Amend or Terminate. The Company expects and intends to
continue the Plan indefinitely, but necessarily reserves the right, by action of
the Board of Directors, to amend, alter, suspend or terminate the Plan in whole
or in part, and at any time.
9.02 Alienation of Benefits. No benefits payable under the Plan will be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any action by way of anticipating,
alienating, selling, transferring, assigning, pledging, encumbering or charging
the same will be void and of no effect nor will any such benefit be in any
manner liable for or subject to the debts, contracts, liabilities, engagements
or torts of the person entitled to such benefit.
9.03 Payment to Minors and Incompetents. If a Participant, Spouse,
contingent annuitant or Beneficiary entitled to receive any benefits hereunder
is a minor, or is deemed by the Plan Administrator or is adjudged to be legally
incapable of giving a valid receipt and discharge for such benefits, they will
be paid to the duly appointed guardian or committee of such minor or
incompetent, or they may be paid to such person or persons who the Plan
Administrator believes is or are caring for or supporting such minors or
incompetents. Any such payments, to the extent thereof, will be a complete
discharge for the payment of such benefit.
9.04 Unclaimed Benefit. If any benefit under the Plan had been payable to
and unclaimed by any person for a period of four years since the whereabouts or
existence of such person was last known to the Plan Administrator, the Plan
Administrator may direct that all rights of such person to payments accrued and
to future payments be terminated absolutely, provided that if such person
subsequently appears and identifies himself to the satisfaction of the Plan
Administrator, then the liability will be reinstated.
9.05 Plan Voluntary. The Plan is purely voluntary on the part of the
Company. Neither the establishment of the Plan, nor any amendment thereto, nor
the creation of any fund or account, nor the payment of any benefit will be
construed as conferring upon any Employee or Participant the right to be
retained in the employ of the Company or any Affiliated Company, and all
Employees and Participants will remain subject to discharge, discipline or
termination to the same extent as if the Plan had never been established.
9.06 Gender. Whenever used herein, the masculine pronoun will include the
feminine and the singular the plural, unless a different meaning is plainly
required by the context.
9.07 Construction. The Plan will be construed, enforced and administered
according to the laws of the Commonwealth of Pennsylvania. In the event any
provision of the Plan is held illegal or invalid for any reason, it will not
affect the remaining provisions of the Plan, but the Plan will be construed and
enforced as if such illegal and invalid provision had not been included therein.
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Exhibit 10.10
================================================================================
SUNOCO, INC.
SPECIAL EXECUTIVE SEVERANCE PLAN
(Amended and Restated as of July 1, 1999)
================================================================================
<PAGE>
ARTICLE I
DEFINITIONS
Section 1.1 "Annual Compensation" shall mean a Participant's annual base
salary and applicable guideline (target) annual bonus amount in effect on his or
her Employment Termination Date, or, if greater, the annual base salary and
applicable guideline (target) annual bonus amount on the date of the Change in
Control.
Section 1.2 "Auditor" shall have the meaning provided herein at Section
4.7(b).
Section 1.3 "Benefit" or "Benefits" shall mean any or all of the benefits
that a Participant is entitled to receive pursuant to Article IV of the Plan.
Section 1.4 "Benefit Extension Period" shall mean:
(a) for the Company's Chief Executive Officer, Chief Operating
Officer, and Chief Financial Officer, three years;
(b) for an Executive Resource Employee in Grade 17 or above, two
years; and
(c) for each other Executive Resource Employee, one year and six
months.
Section 1.5 "Board of Directors" shall mean the Board of Directors of
Sunoco, Inc. or any successor thereto.
Section 1.6 "Change in Control" shall mean the occurrence of any of the
following events or transactions:
(a) Continuing Directors cease, within one year of a Control
Transaction, to constitute a majority of the Board of Directors of Sunoco,
Inc. (or of the Board of Directors of any successor to Sunoco, Inc. or to
all or substantially all of its assets), or
(b) any entity, person or Group acquires shares of Sunoco, 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 Sunoco, Inc.
Section 1.7 "Chief Executive Officer" shall mean the individual serving as
the Chief Executive Officer of Sunoco, Inc. as of the date of reference.
Section 1.8 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.9 "Committee" shall mean the administrative committee designated
pursuant to Article VI of the Plan to administer the Plan in accordance with its
terms.
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Section 1.10 "Company" shall mean Sunoco, Inc., a Pennsylvania
corporation. The term "Company" shall include any successor to Sunoco, Inc., any
subsidiary or affiliate which has adopted the Plan, or a corporation succeeding
to the business of Sunoco, Inc., or any subsidiary or affiliate by merger,
consolidation, liquidation or purchase of assets or stock or similar
transaction.
Section 1.11 "Company Service" shall mean, for purposes of determining
Benefits available to any Participant in this Plan, the total aggregate recorded
length of such Participant's service with: Sunoco, Inc.; any subsidiary or
affiliate of Sunoco, Inc. (whether by merger, consolidation or liquidation or
purchase of assets or stock or similar transaction) which has adopted the Plan;
and/or any corporation succeeding to the business of Sunoco, Inc.
Company Service shall commence with the Participant's initial date of
employment with the Company, and shall end with such Participant's death,
retirement, or termination for any reason. Company Service also shall include:
(a) all periods of approved leave of absence (civil, family, medical,
military, or Olympic); provided, however, that the Participant returns to
work within the prescribed time following the leave;
(b) any break in service of thirty (30) days or less; and
(c) any service credited under applicable Company policies with
respect to the length of a Participant's employment by any non-affiliated
entity that is subsequently acquired by, and becomes a part of, the
Company's operations.
Section 1.12 "Continuing Director" shall mean a director who was a member
of the Board of Directors immediately prior to a Control Transaction which
results in a Change in Control.
Section 1.13 "Control Transaction" shall mean any of the following
transactions or any combination thereof:
(a) any tender offer for or acquisition of capital stock of Sunoco,
Inc.;
(b) any merger, consolidation, or sale of all or substantially all of
the assets of Sunoco, Inc.; or
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or a Group of shareholders in a
proxy solicitation or otherwise.
Section 1.14 "Disability" shall mean any illness, injury or incapacity of
such duration and type as to render a Participant eligible to receive long-term
disability benefits under the applicable broad-based long-term disability
program of the Company.
Section 1.15 "Employment Termination Date" shall mean the date on which
the employment relationship between the Participant and the Company is
terminated.
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Section 1.16 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
Section 1.17 "Excise Tax" shall have the meaning provided herein at
Section 4.7(a).
Section 1.18 "Executive Resource Employee" shall mean any individual
employed by the Company who has been designated by the Company as a member of
the Company's executive resources group. Generally, such group shall include
employees in Grades 14-20 and all other employees subject to Section 16 of the
Securities Exchange Act of 1934, as amended.
Section 1.19 "Gross-Up Payment" shall have the meaning provided herein at
Section 4.7(a).
Section 1.20 "Group" shall mean persons who act in concert as described in
Sections 13(d)(3) and/or 14(d)(2) of the Securities Exchange Act of 1934, as
amended.
Section 1.21 "Just Cause" shall mean:
(a) a judicial determination that the Participant has committed fraud,
misappropriation, or embezzlement against the Company; or
(b) a non-appealable conviction of, or entry of a plea of nolo
contendere for, an act by the Participant constituting a felony which, as
determined by the Company in good faith, constitutes a crime involving
moral turpitude and has resulted in material harm to the Company, its
subsidiaries and affiliates taken as a whole.
No termination of employment shall be deemed an effective termination for
Just Cause unless accompanied by a copy of a resolution duly adopted by the
affirmative vote of not less a majority of the Continuing Directors at a meeting
of the Board of Directors which was called and held for the purpose of
considering such termination, or if there are no Continuing Directors, then by
at least three quarters (3/4) of the entire Board of Directors (after reasonable
notice to the Participant and an opportunity for the Participant, together with
the Participant's counsel, to be heard before the Board of Directors) finding
that, in the good faith opinion of the Board of Directors, the Participant was
guilty of conduct set forth in the preceding sentence, and specifying the
particulars thereof in detail. In any deliberations or votes by the Board of
Directors concerning a determination under this Section, the Participant shall
recuse himself from such deliberations and votes.
Section 1.22 "Participant" shall mean any Executive Resource Employee who
is employed by the Company on or before the occurrence of any Change in Control.
In addition, for purposes of Sections 4.6 and 4.7 of this Plan, each former
Executive Resource Employee shall be a Participant.
Section 1.23 "Payment Date" shall have the meaning provided herein at
Section 4.7(a).
Section 1.24 "Plan" shall mean the Sunoco, Inc. Special Executive
Severance Plan, as set forth herein, and as the same may from time to time be
amended.
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Section 1.25 "Potential Change in Control" shall mean the occurrence of
any of the following events or transactions:
(a) any person (other than Sunoco, Inc., or any affiliate or
subsidiary thereof) makes a tender offer for capital stock of Sunoco, Inc.;
(b) any person becomes the beneficial owner, directly or indirectly,
of capital stock of Sunoco, Inc. in an amount which requires the filing of
Schedule 13D or its equivalent form pursuant to the Rules and Regulations
under the Securities Exchange Act of 1934 as from time to time amended;
(c) the submission of a nominee or nominees for the position of
director of Sunoco, Inc. by a shareholder or Group of shareholders in a
proxy solicitation or otherwise which, in its judgment, the Board of
Directors determines by adoption of a resolution within thirty (30) days of
such submission, might result in a Change in Control of Sunoco, Inc.;
(d) any person files a pre-merger notification for the acquisition of
capital stock of Sunoco, Inc. pursuant to the Hart-Scott-Rodino Act; or
(e) the Board of Directors in its judgment determines by adoption of a
resolution that a Potential Change in Control of Sunoco, Inc. for purposes
of this Plan has occurred.
Section 1.26 "Qualifying Termination" of the employment of a Participant
shall mean any of the following:
(a) a termination of employment by the Company within two (2) years
after a Change in Control, other than for Just Cause, death or Disability;
provided, however, that any Participant who also is eligible to receive
benefits under the Sunoco, Inc. Executive Involuntary Severance Plan shall
not receive benefits thereunder, but shall instead receive the Benefits
provided under this Plan;
(b) a termination of employment by the Participant within two (2)
years after a Change in Control for one or more of the following reasons:
(1) the assignment to such Participant of any duties inconsistent
in a way adverse to such Participant, with such Participant's
positions, duties, responsibilities and status with the Company
immediately prior to the Change in Control, or a reduction in the
duties and responsibilities held by the Participant immediately prior
to the Change in Control; a change in the Participant's reporting
responsibilities, title or offices as in effect immediately prior to
the Change in Control that is adverse to the Participant; or any
removal of the Participant from or any failure to re-elect the
Participant to any position with the Company that such Participant
held immediately prior to the Change in Control except in connection
with such Participant's:
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(i) assignment to a new position at a higher combined annual
base salary and guideline (target) bonus; or
(ii) termination of employment by the Company for Just Cause; or
(2) with respect to any Participant who is a member of the Board of
Directors immediately prior to the Change in Control, any failure of the
shareholders of the Company to elect or reelect, or of the Company to
appoint or reappoint, the Participant as a member of the Board of
Directors;
(3) a reduction by the Company in either of the Participant's annual
base salary or guideline (target) bonus as in effect immediately prior to
the Change in Control; the failure by the Company to continue in effect, or
the taking of any action by the Company that would adversely affect such
Participant's participation in or significantly reduce such Participant's
benefits under, any employee benefit plan or compensation plan in which
such Participant was participating immediately prior to the Change in
Control, provided, however, that in the aggregate such actions by the
Company significantly reduce the Participant's total compensation (i.e.,
the sum of Participant's annual base salary, guideline (target) bonus, and
the aggregate value to the Participant of all employee benefit and
compensation plans); or the failure by the Company, without the
Participant's consent, to pay to the Participant any portion of the
Participant's current compensation, or to pay to the Participant any
portion of an installment of deferred compensation under any deferred
compensation program of the Company; or
(4) The Company requires the Participant to be based anywhere other
than the Participant's present work location or a location within thirty-
five (35) miles from the present location; or the Company requires the
Participant to travel on Company business to an extent substantially more
burdensome than such Participant's travel obligations during the period of
twelve (12) consecutive months immediately preceding the Change in Control;
provided, however, that in the case of any such termination of employment
by the Participant under this subparagraph (b), such termination shall not be
deemed to be a Qualifying Termination unless the termination occurs within 120
days after the occurrence of the event or events constituting the reason for the
termination; or
(c) a termination of employment by the Company other than a termination for
Just Cause, or a termination of employment by the Participant for one of the
reasons set forth in (b) above, following a Potential Change in Control, if the
Participant can demonstrate that such termination or circumstance in (b) above
leading to termination:
(1) was at the request of a third party with which the Company had
entered into negotiations or an agreement with regard to a Change in
Control; or
(2) otherwise occurred in connection with, or in anticipation of, a
Change in Control;
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provided, however, that in either such case, such Change in Control
actually occurs within one (1) year following the Employment Termination
Date.
Section 1.27 "Tax Counsel" shall have the meaning provided herein at
Section 4.7(b).
Section 1.28 "Total Payments" shall have the meaning provided herein at
Section 4.7(a).
ARTICLE II
BACKGROUND, PURPOSE AND TERM OF PLAN
Section 2.1 Background. Sunoco, Inc. maintains this Plan for the purpose
of providing severance allowances to Executive Resource Employees whose
employment is terminated in connection with or following a Change in Control.
The Plan shall be effective as of September 4, 1997.
Section 2.2 Purpose of the Plan. The Plan, as set forth herein, has been
adopted by the Board of Directors of the Company, or a committee thereof,
delegated such responsibility, acting in its sole discretion, in recognition
that the possibility of a major transaction or a change in control of the
Company exists and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of key management personnel to the detriment of the Company. The Board of
Directors has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of Participants, as key members
of Company's management, to their assigned duties without distraction. The Plan
is not intended to be included in the definitions of "employee pension benefit
plan" and "pension plan" set forth under Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). Rather, this Plan is intended
to meet the descriptive requirements of a plan constituting a "severance pay
plan" within the meaning of regulations published by the Secretary of Labor at
Title 29, Code of Federal Regulations, Section 2510.3-2(b). Accordingly, the
benefits paid by the Plan are not deferred compensation.
Section 2.3 Term of the Plan. The Plan will continue until such time as
the Board of Directors, or a committee thereof, delegated such responsibility,
acting in its sole discretion, elects to modify, supersede or terminate it;
provided, however, that effective upon a Change in Control, no such action may
terminate or reduce the benefits or prospective benefits of any Participant on
the date of reference without the express written consent of the Participant.
ARTICLE III
PARTICIPATION AND ELIGIBILITY FOR BENEFITS
Section 3.1 General Requirements. Each Executive Resource Employee shall
become a Participant upon confirmation of his/her official title or employment
grade by election by the Board of Directors or appointment by the Company.
Except with respect to the benefits and
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payments under Sections 4.7 and 4.8, in order to receive a Benefit under this
Plan, a Participant's employment must have been terminated as a result of a
Qualifying Termination.
Section 3.2 Qualifying Termination. The Committee shall determine whether
any termination of a Participant is a Qualifying Termination. The Participant
shall follow the procedures described in Article IX for presenting his or her
claim for Benefits under this Plan.
ARTICLE IV
BENEFITS
Section 4.1 Amount of Immediate Cash Benefit; Qualifying Termination. In
the event of a termination of employment that would qualify the Participant for
Benefits that is a Qualifying Termination, the cash amount to be paid to a
Participant eligible to receive Benefits under Section 3.1 hereof shall be paid
in a lump sum as provided in Section 5.1 hereof and shall equal the sum of the
following:
(a) An amount equal to the Participant's earned vacation (as
determined under the Company's applicable vacation policy as in effect at
the time of the Change in Control) through his or her Employment
Termination Date;
(b) (1) for the Chief Executive Officer, Chief Operating Officer, and
Chief Financial Officer, Annual Compensation multiplied by three (3);
(2) for an Executive Resources Employee in Grade 17 or above,
Annual Compensation multiplied by two (2);
(3) for each other Executive Resources Employee, Annual
Compensation multiplied by one and one-half (1-1/2).
Section 4.2 Executive Severance Benefits. In the event that Benefits are
paid under Section 4.1, the Participant shall continue to be entitled, through
the end of his/her Benefit Extension Period, to those employee benefits, based
upon the amount of coverage or benefits provided at the Change in Control,
listed below:
(a) death benefits as follows:
(1) for Participants who became Executive Resource Employees on
or after January 1, 1985, an amount equal to one (1) times annual base
salary at the Employment Termination Date; and
(2) for Participants who became Executive Resource Employees
before January 1, 1985, an amount equal to two (2) times the sum of
annual base salary and guideline bonus at the Employment Termination
Date;
Any supplemental coverages elected under the Sunoco, Inc. Death
Benefits Plan (or any similar plan of any of the following: a subsidiary or
affiliate which has adopted
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this Plan; a corporation succeeding to the business of Sunoco, Inc.; and/or
any subsidiary or affiliate, by merger, consolidation, liquidation,
purchase of assets or stock, or similar transaction) will be discontinued
under the terms of such plan or plans; and
(b) medical plan benefits (excluding dental coverage), including COBRA
continuation coverage following the Benefit Extension Period (i.e., COBRA
continuation eligibility will begin as of the end of the Benefit Extension
Period, except as provided hereinbelow at Section 4.3).
In each case, when contributions are required of all Executive Resource
Employees at the time of the Participant's Employment Termination Date, or
thereafter, if required of all other active Executive Resource Employees, the
Participant shall continue to be responsible for making the required
contributions during the Benefit Extension Period in order to be eligible for
the coverage. In lieu of the coverages provided under clauses (a) and (b) above,
the Company may pay, at the time payment is otherwise to be made of cash
Benefits pursuant to Section 5.1 hereof, the Participant an amount (as adjusted
for taxes) equal to the then present value of the Company's cost of such
coverages, or the Company may provide the Participant with comparable coverage
under a policy of insurance. The Participant also shall be entitled to
outplacement services during the Benefit Extension Period, at no cost to the
Participant, from an experienced third-party vendor selected by the Committee
and consistent with vendors used in connection with the Sunoco, Inc. Involuntary
Termination Plan at the Change in Control.
Section 4.3 Special Medical Benefit. In the event Benefits are paid to the
Participant under Section 4.1:
(a) Participants who are fifty (50) or more years of age on the
Employment Termination Date, with ten (10) or more years of Company
Service, shall have medical (but not dental) benefits available under the
same terms and conditions as other employees not yet eligible for Medicare
coverage who retire under the terms of a Company retirement plan.
(b) Participants who were fifty (50) or more years of age on the
Employment Termination Date, but with fewer than ten (10) years of Company
Service, nonetheless shall have Company medical plan benefits (excluding
dental coverage) available following the Severance Benefit Period, at a
cost to such Participant that is equal to the full premium cost of such
coverage.
Such benefits continue until such time as the Participant becomes first
eligible for Medicare, or the Participant voluntarily cancels coverage,
whichever is earliest.
Section 4.4 Retirement Plans. This Plan shall not govern and shall in no
way affect the Participant's interest in, or entitlement to benefits under, any
of the Company's "qualified" or supplemental retirement plans and any payments
received under any such plans shall not affect a Participant's right to any
Benefit hereunder.
Section 4.5 Minimum Benefit. Notwithstanding the provisions of Sections
4.1, 4.2 and 4.3 hereof, the Benefits available under this Plan shall not be
less than those determined in accordance with the provisions of the Sunoco, Inc.
Special Employee Severance Plan. If the
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Participant determines that the benefits under the Sunoco, Inc. Special Employee
Severance Plan are more valuable to the Participant than the comparable Benefits
set forth in this Plan, then the provisions used to calculate the Benefits
available to the Participant under this Plan shall not apply, and the Benefits
available to the Participant under this Plan shall be calculated using only the
applicable provisions of the Sunoco, Inc. Special Employee Severance Plan.
Section 4.6 Effect on Other Benefits. There shall not be drawn from the
continued provision by the Company of any of the aforementioned Benefits any
implication of continued employment or of continued right to accrual of
retirement benefits under the Company's qualified or supplemental retirement
plans, nor shall a terminated employee, except as otherwise provided under the
terms of the Plan, accrue vacation days, paid holidays, paid sick days or other
similar benefits normally associated with employment for any part of the Benefit
Extension Period during which benefits are payable under this Plan. A
Participant shall have no duty to mitigate with respect to Benefits under this
Plan by seeking or accepting alternative employment. Further, the amount of any
payment or benefit provided for in this Plan shall not be reduced by any
compensation earned by the Participant as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Participant to the Company, or otherwise.
Section 4.7 Parachute Payments.
(a) Whether or not the Participant becomes entitled to Benefits under
Section 4.1, if any payment or benefit received or to be received by the
Participant in connection with a Change in Control or the termination of
the Participant's employment (all such payments and benefits, including the
Benefits under Sections 4.1, 4.2 and 4.3, being hereinafter the "Total
Payments"), whether pursuant to the terms of:
(1) this Plan; or
(2) any other plan, arrangement or agreement with:
(i) the Company;
(ii) any person whose actions result in a Change in
Control; or
(iii) any person affiliated with the Company or with any
person whose actions result in a Change in Control;
will be subject (in whole or part) to the excise tax under section 4999 of
the Code (the "Excise Tax"), then the Company shall pay to the Participant
an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Participant, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and employment tax and
Excise Tax upon the Gross-Up-Payment, shall be equal to the Total Payments.
For purposes of determining the amount of the Gross-Up Payment, the
Participant shall be deemed to pay federal income and employment taxes at
the highest marginal rate of federal income and employment taxation in the
calendar year in which the Gross-Up Payment is to be made (the "Payment
Date") and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the
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Participant's residence on the Payment Date, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such
state and local taxes.
(b) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax:
(1) all of the Total Payments shall be treated as "parachute
payments" within the meaning of section 280G(b)(2) of the Code, unless
in the opinion of tax counsel (the "Tax Counsel") reasonably
acceptable to the Participant and selected by the accounting firm (the
"Auditor") which was, immediately prior to the Change in Control, the
Company's independent auditor, such other payments or benefits (in
whole or in part) do not constitute parachute payments, including by
reason of section 280G(b)(4)(A) of the Code;
(2) all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax
unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or part) represent reasonable compensation for services
actually rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the "base amount" within the meaning set forth in
section 280G(b)(3) of the Code allocable to such reasonable
compensation, or are otherwise not subject to the Excise Tax; and
(3) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Auditor in accordance with the
principles of section 280G(d)(3) and (4) of the Code.
Prior to the payment date set forth in Section 4.7(d) hereof, the
Company shall provide the Participant with its calculation of the amounts
referred to in this Section 4.7(b) and such supporting materials as are
reasonably necessary for the Participant to evaluate the Company's
calculations. If the Participant disputes the Company's calculations (in
whole or in part), the reasonable opinion of Tax Counsel with respect to
the matter in dispute shall prevail.
(c) In the event that:
(1) amounts are paid to the Participant pursuant to Section
4.7(a) above; and
(2) the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of the
Participant's employment,
the Participant shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined, the portion
of the Gross-Up Payment attributable to such reduction plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the Payment Date (including by
reason of any payment the existence or amount of which cannot be
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determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment to the Participant in respect of such excess
(plus any interest, penalties or additions payable by the Participant with
respect to such excess and such portion) at the time that the amount of
such excess is finally determined.
(d) The payments provided for in subsections (a) and, if applicable,
(c) of this Section 4.7 shall be made not later than the ninetieth (90th)
day following the Change in Control if payments are due at that time, or
the Employment Termination Date, if payments are then due; provided,
however, that if the amounts of such payments, or, if applicable, the
Excise Tax, cannot be finally determined on or before such day, the Company
shall pay to the Participant on such day an estimate, as determined in good
faith by the Participant, of the minimum amount of such payments to which
the Participant is clearly entitled and shall pay the remainder of such
payments (together with interest at the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined
but in no event later than the thirtieth (30th) day after the date payment
is due. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Participant, payable on the fifth
(5th) business day after demand by the Company (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section, the Company shall provide the
Participant with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received
from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
(e) All of the fees and expenses of the Tax Counsel and Auditor in
performing the determinations referred to in subsections (b) and (c) above
shall be borne solely by the Company. The Company agrees to indemnify and
hold harmless the Tax Counsel and Auditor of and from any and all claims,
damages and expenses resulting from or relating to its determinations
pursuant to subsections (b) and (c) above, except for claims, damages or
expenses resulting from the gross negligence or willful misconduct of the
Tax Counsel or Auditor.
Section 4.8 Legal Fees and Expenses. The Company also shall pay to the
Participant all legal fees and expenses incurred by the Participant:
(a) in disputing in good faith any issue relating to the termination
of the Participant's employment following a Change in Control as a result
of a Qualifying Termination entitling the Participant to Benefits under
this Plan (including a termination of employment following a Potential
Change in Control if the Participant alleges in good faith that such
termination will be or is a Qualifying Termination pursuant to Section 1.18
hereof, and the Change in Control actually occurs within one (1) year
following the Employment Termination Date); or
(b) in seeking in good faith to obtain or enforce any benefit or right
provided by this Plan (or the payment of any Benefits through any trust
established to fund Benefits under this Plan) or in connection with any tax
audit or proceeding to the extent
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attributable to the application of section 4999 of the Code to any payment
or benefit provided hereunder.
Such payments shall be made as such fees and expenses are incurred by the
Participant, but in no event later than five (5) business days after delivery of
the Participant's written requests for payment accompanied with such evidence of
fees and expenses incurred as the Company reasonably may require. The
Participant shall reimburse the Company for such fees and expenses at such time
as a court of competent jurisdiction, or another independent third party having
similar authority, determines that the Participant's claim was frivolously
brought without reasonable expectation of success on the merits thereof.
ARTICLE V
METHOD AND DURATION OF BENEFIT PAYMENTS
Section 5.1 Method of Payment. The cash Benefits to which a
Participant is entitled, as determined pursuant to Article IV hereof, shall be
paid in a lump sum. Payment shall be made by mailing to the last address
provided by the Participant to the Company. In general, payment shall be made
within fifteen (15) days after the Participant's Employment Termination Date but
in no event later than thirty (30) days thereafter. In the event the Company
should fail to pay when due the amounts described in Article IV, the Participant
shall also be entitled to receive from the Company an amount representing
interest on any unpaid or untimely paid amounts from the due date, as determined
under Section 4.7(d), to the date of payment at a rate equal to the prime rate
of Citibank, N.A. as in effect from time to time after such due date.
Section 5.2 Payments to Beneficiary(ies). Each Executive Resource
Employee shall designate a beneficiary(ies) to receive any Benefits due
hereunder in the event of the Participant's death prior to the receipt of all
such Benefits. Such beneficiary designation shall be made in the manner, and at
the time, prescribed by the Company in its sole discretion. In the absence of
an effective beneficiary designation hereunder, the Participant's estate shall
be deemed to be his or her designated beneficiary.
ARTICLE VI
ADMINISTRATION
Section 6.1 Appointment of the Committee. The Committee shall consist of
three (3) or more persons appointed by the Chief Executive Officer. Committee
members may be, but need not be, employees of Sunoco, Inc.
Section 6.2 Tenure of the Committee. Committee members shall serve at the
pleasure of the Chief Executive Officer. Committee members may resign at any
time on ten (10) days' written notice, and Committee members may be discharged,
with or without cause, at any time by the Chief Executive Officer.
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Section 6.3 Authority and Duties. It shall be the duty of the Committee,
on the basis of information supplied to it by the Company, to determine the
eligibility of each Participant for Benefits under the Plan, to determine the
amount of Benefit to which each such Participant may be entitled, and to
determine the manner and time of payment of the Benefit consistent with the
provisions hereof. In addition, the exercise of discretion by the Committee
need not be uniformly applied to similarly situated Participants. The Company
shall make such payments as are certified to it by the Committee to be due to
Participants. The Committee shall have the full power and authority to
construe, interpret and administer the Plan, to correct deficiencies therein,
and to supply omissions. Except as provided in Section 9.2, all decisions,
actions and interpretations of the Committee shall be final, binding and
conclusive upon the parties.
Section 6.4 Action by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business at a meeting
of the Committee. Any action of the Committee may be taken upon the affirmative
vote of a majority of the members of the Committee at a meeting, or at the
direction of the chairperson, without a meeting by mail, telegraph, telephone or
electronic communication device; provided that all of the members of the
Committee are informed of their right to vote on the matter before the Committee
and of the outcome of the vote thereon.
Section 6.5 Officers of the Committee. The Chief Executive Officer shall
designate one of the members of the Committee to serve as chairperson thereof.
The Chief Executive Officer shall also designate a person to serve as Secretary
of the Committee, which person may be, but need not be, a member of the
Committee.
Section 6.6 Compensation of the Committee. Members of the Committee shall
receive no compensation for their services as such. However, all reasonable
expenses of the Committee shall be paid or reimbursed by the Company upon proper
documentation. The Company shall indemnify members of the Committee against
personal liability for actions taken in good faith in the discharge of their
respective duties as members of the Committee and shall provide coverage to them
under the Company's Liability Insurance program(s).
Section 6.7 Records, Reporting and Disclosure. The Committee shall keep
all individual and group records relating to Participants and former
Participants and all other records necessary for the proper operation of the
Plan. Such records shall be made available to the Company and to each
Participant for examination during business hours except that a Participant
shall examine only such records as pertain exclusively to the examining
Participant and to the Plan. The Committee shall prepare and shall file as
required by law or regulation all reports, forms, documents and other items
required by ERISA, the Internal Revenue Code, and every other relevant statute,
each as amended, and all regulations thereunder (except that the Company, as
payor of the Benefits, shall prepare and distribute to the proper recipients all
forms relating to withholding of income or wage taxes, Social Security taxes,
and other amounts which may be similarly reportable).
Section 6.8 Actions of the Chief Executive Officer. Whenever a
determination is required of the Chief Executive Officer under the Plan, such
determination shall be made solely at the discretion of the Chief Executive
Officer. In addition, the exercise of discretion by the Chief Executive Officer
need not be uniformly applied to similarly situated Participants and shall
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be final and binding on each Participant or beneficiary(ies) to whom the
determination is directed.
Section 6.9 Benefits of the Chief Executive Officer. The Board of
Directors (or any committee thereof delegated such responsibility) shall make
all determinations with respect to the amounts, timing and eligibility for any
Benefits provided hereunder to the Chief Executive Officer. In addition, if the
Chief Executive Officer is serving on the Committee, the Chief Executive Officer
shall not participate on any matter that directly pertains to, or affects, the
Chief Executive Officer. Whenever a determination is required of the Chief
Executive Officer as to any matter that directly pertains to, or affects, the
Chief Executive Officer under the Plan, such determination with respect to the
Chief Executive Officer shall be made and approved by a majority of the
Continuing Directors, or, if there are no Continuing Directors, then by at least
three quarters (3/4) of the entire Board of Directors.
Section 6.10 Bonding. The Committee shall arrange any bonding that may be
required by law, but no amount in excess of the amount required by law (if any)
shall be required by the Plan.
ARTICLE VII
AMENDMENT AND TERMINATION
Section 7.1 Amendment, Suspension and Termination. The Company, acting
through the Board of Directors, retains the right, at any time and from time to
time, to amend, suspend or terminate the Plan in whole or in part, for any
reason, and without either the consent of or the prior notification to any
Participant. Notwithstanding the foregoing, effective upon a Change in Control,
no such action may terminate or reduce the benefits or prospective benefits of
any Participant on the date of reference without the express written consent of
the Participant. No such amendment, suspension or termination shall give the
Company the right to recover any amount paid to a Participant prior to the date
of such amendment or to cause the cessation and discontinuance of payments of
Benefits to any person or persons under the Plan already receiving Benefits.
The Board of Directors shall have the right to delegate its authority and powers
hereunder, or any portion thereof, to any committee of the Board of Directors,
and shall have the right to rescind any such delegation in whole or in part.
ARTICLE VIII
DUTIES OF THE COMPANY
Section 8.1 Records. The Company shall supply to the Committee all
records and information necessary to the performance of the Committee's duties.
Section 8.2 Payment. The Company shall make payments from its general
assets to Participants and shall provide the Benefits described in Article IV
hereof in accordance with the terms of the Plan, as directed by the Committee.
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ARTICLE IX
CLAIMS PROCEDURES
Section 9.1 Application for Benefits. Benefits shall be paid by the
Company following an event that qualifies the Participant for Benefits. In the
event a Participant believes himself/herself eligible for Benefits under this
Plan and Benefit payments have not been initiated by the Company, the
Participant may apply for such Benefits by requesting payment of Benefits in
writing from the Committee.
Section 9.2 Appeals of Denied Claims for Benefits. In the event that any
claim for benefits is denied in whole or in part, the Participant (or
beneficiary, if applicable) whose claim has been so denied shall be notified of
such denial in writing by the Committee, within thirty (30) days following
submission by the Participant (or beneficiary, if applicable) of such claim to
the Committee. The notice advising of the denial shall specify the reason or
reasons for denial, make specific reference to pertinent Plan provisions,
describe any additional material or information necessary for the claimant to
perfect the claim (explaining why such material or information is needed), and
shall advise the Participant of the procedure for the appeal of such denial.
All appeals shall be made by the following procedure:
(a) The Participant whose claim has been denied shall file with the
Committee a notice of desire to appeal the denial. Such notice shall be
filed within sixty (60) days of notification by the Committee of the claim
denial, shall be made in writing, and shall set forth all of the facts upon
which the appeal is based. Appeals not timely filed shall be barred.
(b) The Committee shall, within thirty (30) days of receipt of the
Participant's notice of appeal, establish a hearing date on which the
Participant may make an oral presentation to the Committee in support of
his/her appeal. The Participant shall be given not less than ten (10)
days' notice of the date set for the hearing.
(c) The Committee shall consider the merits of the claimant's written
and oral presentations, the merits of any facts or evidence in support of
the denial of benefits, and such other facts and circumstances as the
Committee shall deem relevant. If the claimant elects not to make an oral
presentation, such election shall not be deemed adverse to his/her
interest, and the Committee shall proceed as set forth below as though an
oral presentation of the contents of the claimant's written presentation
had been made.
(d) The Committee shall render a determination upon the appealed
claim, within sixty (60) days of the hearing date, which determination
shall be accompanied by a written statement as to the reasons therefor.
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ARTICLE X
MISCELLANEOUS
Section 10.1 Nonalienation of Benefits. None of the payments, benefits or
rights of any Participant shall be subject to any claim of any creditor, and, in
particular, to the fullest extent permitted by law, all such payments, benefits
and rights shall be free from attachment, garnishment, trustee's process, or any
other legal or equitable process available to any creditor of such Participant.
No Participant shall have the right to alienate, anticipate, commute, pledge,
encumber or assign any of the benefits or payments which he/she may expect to
receive, contingently or otherwise, under this Plan.
Section 10.2 No Contract of Employment. Neither the establishment of the
Plan, nor any modification thereof, nor the creation of any fund, trust or
account, nor the payment of any benefits shall be construed as giving any
Participant, or any person whosoever, the right to be retained in the service of
the Company, and all Participants shall remain subject to discharge to the same
extent as if the Plan had never been adopted.
Section 10.3 Severability of Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and this Plan shall be construed
and enforced as if such provisions had not been included.
Section 10.4 Successors, Heirs, Assigns, and Personal Representatives.
This Plan shall be binding upon the heirs, executors, administrators, successors
and assigns of the parties, including each Participant, present and future.
Section 10.5 Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of the
Plan, and shall not be employed in the construction of the Plan.
Section 10.6 Gender and Number. Except where otherwise clearly indicated
by context, the masculine and the neuter shall include the feminine and the
neuter, the singular shall include the plural, and vice-versa.
Section 10.7 Unfunded Plan. The Plan shall not be funded. A
Participant's right to receive payment of Benefits hereunder shall be no greater
than the right of any unsecured creditor of the Company. The Company may, but
shall not be required to, set aside or earmark an amount necessary to provide
the Benefits specified herein (including the establishment of trusts). In any
event, no Participant shall have any right to, or interest in, any assets of the
Company which may be applied by the Company to the payment of Benefits except as
may be provided pursuant to the terms of any trust established by the Company to
provide Benefits.
Section 10.8 Payments to Incompetent Persons, Etc. Any Benefit payable to
or for the benefit of a minor, an incompetent person or other person incapable
of receipting therefor shall be deemed paid when paid to such person's guardian
or to the party providing or reasonably appearing to provide for the care of
such person, and such payment shall fully discharge the Company, the Committee
and all other parties with respect thereto.
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Section 10.9 Lost Payees. A Benefit shall be deemed forfeited if the
Committee is unable to locate a Participant to whom a Benefit is due. Such
Benefit shall be reinstated if application is made by the Participant for the
forfeited Benefit while this Plan is in operation.
Section 10.10 Controlling Law. This Plan shall be construed and enforced
according to the laws of the Commonwealth of Pennsylvania to the extent not
preempted by federal law.
Section 10.11 Successor Employer. The Company shall require any successor
or assignee, whether direct or indirect, by purchase, merger, consolidation or
otherwise, to all or substantially all the business or assets of the Company,
expressly and unconditionally to assume and agree to perform the Company's
obligations under this Plan, in the same manner and to the same extent that the
Company would be required to perform if no such succession or assignment had
taken place. In such event, the term "Company" shall mean the Company and any
successor or assignee to the business or assets which by reason hereof becomes
bound by the terms and provisions of this Plan.
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Exhibit 10.13
AMENDED SCHEDULE TO
INDEMNIFICATION AGREEMENT
The Indemnification Agreements between Sunoco, Inc. and the directors and
executive officers named below are identical in all material respects.
Officer Date of Agreement
Robert M. Aiken February 1, 1996
Robert H. Campbell February 1 1996
Michael H. R. Dingus January 11, 1999
John G. Drosdick February 1, 1997
Bruce G. Fischer January 11, 1999
Jack L. Foltz February 1, 1996
Deborah M. Fretz February 1, 1996
Thomas W. Hofmann February 1, 1996
David E. Knoll February 1, 1996
Joseph P. Krott July 1, 1998
Michael J. McGoldrick January 11, 1999
Ann C. Mule' February 1, 1996
Rolf D. Naku January 11, 1999
Robert W. Owens February 6, 1997
Malcolm I. Ruddock, Jr. February 1, 1996
David C. Shanks February 17, 1997
Sheldon L. Thompson February 1, 1996
Charles K. Valutas January 11, 1999
Director Date of Agreement
Raymond E. Cartledge February 1, 1996
Robert E. Cawthorn February 1, 1996
Mary J. Evans February 1, 1996
Thomas P. Gerrity February 1, 1996
Rosemarie B. Greco May 7, 1998
James G. Kaiser February 1, 1996
Robert D. Kennedy February 1, 1996
Norman S. Matthews May 12, 1999
R. Anderson Pew February 1, 1996
William F. Pounds February 1, 1996
G. Jackson Ratcliffe May 7, 1998
Alexander B. Trowbridge February 1, 1996
<PAGE>
Exhibit 10.15
SUNOCO, INC.
First Amendment
to
Deferred Compensation and Benefits Trust Agreement
This First Amendment to Deferred Compensation and Benefits Trust Agreement,
dated as of September 3, 1999 (the "First Amendment"), is by and among SUNOCO,
INC., a Pennsylvania corporation (the "Company"), BANKERS TRUST COMPANY, a New
York banking corporation (the "Trustee"), and TOWERS, PERRIN, FORSTER & CROSBY,
INC., a Pennsylvania corporation (the "Recordkeeper"). Initially capitalized
terms used herein and not otherwise defined shall have the respective meanings
assigned to such terms pursuant to that certain Deferred Compensation and
Benefits Trust Agreement, dated as of January 11, 1999, by and among the
Company, the Trustee, and the Recordkeeper (the "Trust").
W I T N E S S E T H
WHEREAS, the Company previously has established the Trust, in order to:
(1) provide an alternative source of funds to assist the Company in
meeting its obligations, under certain employee benefit plans, agreements,
or other arrangements, to make payments to Plan Participants and their
beneficiaries; and
(2) assure that future payment of such amounts would not be
improperly withheld in the event of a change in control of the Company; and
WHEREAS, it is the intention of the parties to amend the Trust in order to:
(1) limit the level of funding of the Special Employee Severance Plan
so that, upon the occurrence of any Potential Change in Control, only the
benefits for those employees then in grades 11 through 13 will be fully
funded;
(2) make the Trust more difficult to amend following any Potential
Change in Control; and
(3) provide that the Trust shall become irrevocable upon the
occurrence of any Potential Change in Control.
WHEREAS, Bankers Trust Company is willing to act as Trustee of the Trust,
and Towers Perrin is willing to act as Recordkeeper of the Trust, upon all of
the terms and conditions contained in the Trust, as amended hereinafter by this
First Amendment.
NOW THEREFORE, in consideration of the mutual terms, covenants, and
conditions herein contained, the mutual benefits to be derived hereunder, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, the parties hereto agree
as follows:
A. Effective as of September 3, 1999, the Trust is amended as follows:
(1) by deleting the current Section 2.1 of the Trust in its entirety,
and replacing it with the following text:
1
<PAGE>
"2.1 Plans & Agreements Subject to Trust. The plans,
agreements, and other arrangements that are subject to this Trust
(each a "Plan" and, collectively the "Plans") are listed on
Schedule 2.1 hereto. Prior to a Potential Change in Control of the
Company, the Compensation Committee of the Board of Directors of
the Company (the "Compensation Committee") may from time to time
designate additional such plans, agreements, and other
arrangements to be subject to this Trust, or delete any Plan from
this Trust. The Company shall immediately notify the Trustee and
the Recordkeeper in writing of any such changes. "
(2) by deleting the current Section 3.2 of the Trust in its entirety,
and replacing it with the following text:
"3.2 Term and Revocability. The Trust hereby established is
revocable by the Company, but shall become irrevocable upon the
occurrence of a Potential Change in Control. At any time following
the occurrence of a Potential Change in Control of the Company,
this Trust may not be terminated either by the Company or the
Board of Directors (or any member or committee thereof). Upon or
after a Change in Control of the Company, this Trust shall not
terminate until the date on which Plan Participants and their
beneficiaries are no longer entitled to benefits pursuant to the
terms of the Plans. Upon termination of the Trust any assets
remaining in the Trust shall be returned to the Company."
(3) by deleting the current Section 7.3 of the Trust in its entirety,
and replacing it with the following text:
"7.3 Company Information. As soon as practicable, but in no
event later than fifteen (15) days, following the occurrence of
any Potential Change in Control, the Recordkeeper shall identify
to the Company in writing the information deemed necessary to
enable the Recordkeeper to determine the amount of benefits
payable to or with respect to each Plan Participant in each Plan,
including any benefits payable after the Plan Participant's death,
and the recipient. As soon as reasonably practicable after
receiving such communication from the Recordkeeper following any
Potential Change in Control, the Company shall furnish the
information needed by the Recordkeeper in order to determine the
amount of any such benefit, and shall deliver to the Recordkeeper
a letter of instructions:
(a) describing the terms of each Plan;
(b) enclosing a copy of each Plan;
(c) listing the names, addresses, and Hay points or grade
levels under the salary administration program then in
effect, for the Plan Participants (and beneficiaries)
covered by each Plan;
(d) setting forth the timing, form of distributions, and
formula or other methodology for determining the amounts to
be paid to each Plan Participant and beneficiary under each
Plan; and
(e) instructing the Recordkeeper how and from whom to get
any other information needed to compute benefits under each
Plan.
Thereafter, the Company shall regularly, at least annually,
furnish revised updated information to the Recordkeeper. In the
event the Company refuses or neglects to provide updated Plan
Participant information, as contemplated herein, the Recordkeeper
shall be entitled to rely upon the most recent information
furnished to it by the Company."
(4) by deleting the current Section 7.4 of the Trust in its entirety,
and replacing it with the following text:
2
<PAGE>
"7.4 Payment Schedule. Within forty-five (45) days following
a Change in Control or Potential Change in Control (or when the
Company otherwise makes contributions to the Trust), the
Recordkeeper, on behalf of the Company, shall deliver to the
Trustee a schedule (the "Payment Schedule") that indicates:
(a) in the case of all Plans, except the Special Employee
Severance Plan, the amounts payable (including the fees and
expenses incurred by the Plans) in respect of each Plan
Participant (and his or her beneficiaries); and
(b) in the case of the Special Employee Severance Plan, the
amount reasonably expected to be payable thereunder, in order
to fully fund the benefits due to those Participants then in
grades 11 through 13, together with an explanation of the
assumptions used by the Recordkeeper in performing its
calculation.
The Payment Schedule shall be updated by the Recordkeeper as
necessary, but on at least an annual basis, in order to reflect
changes therein. Upon the termination of employees entitled to
benefits under the Plans, the Company will notify the
Recordkeeper, and the Recordkeeper will update the Payment
Schedule to indicate those Plan Participants to whom benefits have
become payable. Except as otherwise provided herein, the Trustee
shall make payments to the Plan Participants and their
beneficiaries in accordance with such Payment Schedule and shall
pay such fees and expenses, unless paid by the Company. The
Trustee shall make provision for the reporting and withholding of
any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the
terms of the Plans and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts have
been reported, withheld and paid by the Company."
(5) by deleting the current Section 14.3 of the Trust in its entirety,
and replacing it with the following text:
"14.3 Amendment or Waiver.
(a) Amendment Prior to Potential Change in Control. Prior
to the occurrence of any Potential Change in Control, this
Trust Agreement may be amended only by a written instrument
executed by the Trustee, the Recordkeeper and the Company. In
case of conflict between the terms of this Trust Agreement and
the terms of the Plans, the terms of the Trust Agreement shall
control; provided, however, that:
(1) provisions that, in the determination of the
Company, affect solely the Trustee may, at the option of
both the Trustee and the Company, be amended by a writing
executed only by the Company and the Trustee, with a copy
of such writing being provided to the Recordkeeper; and
(2) provisions that, in the determination of the
Company, affect solely the Recordkeeper may, at the option
of both the Recordkeeper and the Company, be amended by a
writing executed only by the Company and the Recordkeeper,
with a copy of such writing being provided to the Trustee.
(b) Amendment Following Potential Change in Control. Upon
and after the occurrence of any Potential Change in Control,
and unless otherwise required by applicable statute or
regulation, the following rules will govern amendments and
waivers:
3
<PAGE>
(1) this Trust Agreement may not be amended except by an instrument
in writing signed on behalf of the parties hereto together with the
written consent of at least eighty percent (80%) of the Plan Participants
then entitled to receive payments hereunder;
(2) the parties hereto, together with the consent of not less than
eighty percent (80%) of the Plan Participants then entitled to receive
payments hereunder, may at any time waive compliance with any of the
agreements or conditions contained herein; and
(3) any agreement on the part of a party hereto or a Plan
Participant to any such waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party or Plan
Participant."; and
B. Effective as of September 3, 1999, the current Schedule 2.1 to the Trust is
deleted in its entirety, and replaced with the following text:
"Schedule 2.1 to the Deferred Compensation and Benefits Trust Agreement
Benefit Plans and Other Arrangements Subject to Trust
(1) Sunoco, Inc. Executive Retirement Plan ("SERP");
(2) Sunoco, Inc. Deferred Compensation Plan;
(3) Sunoco, Inc. Pension Restoration Plan;
(4) Sunoco, Inc. Savings Restoration Plan.
(5) Sunoco, Inc. Special Executive Severance Plan;
(6) Executive Employment Agreements with:
(a) John G. Drosdick (c) David C. Shanks
(b) Robert W. Owens
(7) The funding of the Sunoco, Inc. Special Employee Severance Plan necessary
to provide full benefits in accordance with the terms of such Plan to only those
employees then in grades 11 through 13.
(8) The entire funding for all the Indemnification Agreements with the
executives set forth below shall be Five Million Dollars ($5,000,000) in the
aggregate:
(a) Robert H. Campbell (j) Michael J. McGoldrick
(b) John G. Drosdick (k) Ann C. Mule'
(c) Michael H. R. Dingus (l) Rolf D. Naku
(d) Bruce G. Fischer (i) Robert W. Owens
(e) Jack L. Foltz (j) Malcolm I. Ruddock, Jr.
(f) Deborah M. Fretz (k) David C. Shanks
(g) Thomas W. Hofmann (l) Sheldon L. Thompson
(h) David E. Knoll (m) Charles K. Valutas."
(i) Joseph P. Krott
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment as of
the date first written above.
ATTEST: SUNOCO, INC.
(the "Company")
By: /s/ ELEANOR HARTMAN By: /s/ MALCOLM I. RUDDOCK
------------------------ -----------------------------
Name: Eleanor Hartman Name: Malcolm I. Ruddock
Title: Secretary Title: Treasurer
ATTEST: BANKERS TRUST COMPANY
(the "Trustee")
By: /s/ PHAEDRA BOER By: /s/ LAURA L. VANNATA-SIMONE
------------------------ -----------------------------
Name: Phaedra Boer Name: Laura L. Vannatta-Simone
Title: Assistant Vice President Title: Vice President
ATTEST: TOWERS, PERRIN, FORSTER & CROSBY, INC.
(the "Recordkeeper")
By: /s/ EILEEN T. LUTZ By: /s/ CLYDE BEERS
------------------------- -----------------------------
Name: Eileen T. Lutz Name: Clyde Beers
Title: Adm. Asst. Title: Principal
5
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss. :
COUNTY OF PHILADELPHIA )
On the 29th day of November, in the year one thousand nine hundred and ninety-
nine (1999), before me personally came Malcolm I. Ruddock to me known, who being
by me duly sworn, did depose and say: that he/she resides in Philadelphia; that
he/she is the Treasurer of SUNOCO, INC., the corporation described in and which
executed the above instrument; that he/she knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation, and that he/she
signed his/her name thereto by like order.
/s/ JEAN M. JONES
-------------------------
Notary Public
(Seal)
STATE OF NEW YORK )
) ss. :
COUNTY OF NEW YORK )
On the 24th day of December, in the year one thousand nine hundred and ninety-
nine (1999), before me personally came Laura Vanatta-Simone to me known, who
being by me duly sworn, did depose and say: that he/she resides in Hoboken, NJ;
that he/she is the Vice President of BANKERS TRUST COMPANY, the corporation
described in and which executed the above instrument; that he/she knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he/she signed his/her name thereto by like order.
/s/ GINA SICONOLFI
---------------------------
Notary Public
(Seal)
COMMONWEALTH OF PENNSYLVANIA )
) ss. :
COUNTY OF PHILADELPHIA )
On the 29th day of November, in the year one thousand nine hundred and ninety-
nine (1999), before me personally came Clyde Beers to me known, who being by me
duly sworn, did depose and say: that he/she resides in Philadelphia; that he/she
is the Principal of TOWERS PERRIN, the corporation described in and which
executed the above instrument; that he/she knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the Board of Directors of said corporation, and that he/she
signed his/her name thereto by like order.
/s/ EILEEN T. LUTZ
--------------------------
Notary Public
(Seal)
6
<PAGE>
Exhibit 12
STATEMENT RE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(a)
Sunoco, Inc. and Subsidiaries
(Millions of Dollars Except Ratio)
- --------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year
Ended
December 31, 1999
-----------------
(UNAUDITED)
<S> <C>
Fixed Charges:
Consolidated interest cost and debt expense $ 84
Interest allocable to rental expense(b) 38
-----
Total $ 122
=====
Earnings:
Consolidated income before income tax expense $ 150
Proportionate share of income tax expense of
50 percent owned but not controlled affiliated
companies 4
Equity in income of less than 50 percent owned
affiliated companies (14)
Dividends received from less than 50 percent
owned affiliated companies 7
Fixed charges 122
Interest capitalized (2)
Amortization of previously capitalized interest 9
-----
Total $ 276
=====
Ratio of Earnings to Fixed Charges 2.26
=====
</TABLE>
- ----------------
(a) The consolidated financial statements of Sunoco, Inc. and subsidiaries
contain the accounts of all subsidiaries that are controlled (generally
more than 50 percent owned) except for Radnor Corporation, the Company's
wholly owned real estate development subsidiary, which is accounted for as
an investment held for sale. Affiliated companies over which the Company
has the ability to exercise significant influence but that are not
controlled (generally 20 to 50 percent owned) are accounted for by the
equity method.
(b) Represents one-third of total operating lease rental expense which is
that portion deemed to be interest.
<PAGE>
EXHIBIT 13
<PAGE>
- --------------------------------------------------------------------------------
Selected Financial Data
<TABLE>
<CAPTION>
(Millions of Dollars Except Per Share Amounts) 1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales and other
operating revenue
(including consumer
excise taxes) $9,889 $8,413 $10,464 $11,233 $9,834
Income (loss) from
continuing operations
before cumulative
effect of change in
accounting principle* $97 $280 $263 $(281) $(8)
Income from discontinued
operations** $-- $-- $-- $166 $235
Cumulative effect of
change in accounting
principle*** $-- $-- $-- $-- $(87)
Net income (loss) $97 $280 $263 $(115) $140
- -------------------------------------------------------------------------------------------------------------
Per Share Data:
Income (loss) from
continuing operations
before cumulative effect
of change in accounting
principle:
Basic $1.07 $3.09 $3.03 $(4.43) $(.33)
Diluted $1.07 $2.95 $2.70 $(4.43) $(.33)
Net income (loss):
Basic $1.07 $3.09 $3.03 $(2.17) $1.29
Diluted $1.07 $2.95 $2.70 $(2.17) $1.29
Cash dividends on
preference stock+ $-- $1.6516 $3.60 $3.60 $1.80
Cash dividends on common
stock+ $1.00 $1.00 $1.00 $1.00 $1.40
Shareholders' equity++ $16.76 $16.75 $15.40 $14.69 $17.16
- -------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Total assets $5,196 $4,849 $4,667 $5,025 $5,085
Long-term debt $878 $823 $824 $835 $888
Shareholders' equity $1,506 $1,514 $1,462 $1,438 $1,699
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes after-tax provisions for write-down of assets and other matters
totalling $1, $38, $21, $254 and $61 million for 1999, 1998, 1997, 1996 and
1995, respectively, after-tax gains on settlement of insurance litigation
totalling $47 and $38 million for 1999 and 1998, respectively, and a $13
million tax benefit resulting from a change in tax election for 1998. (See
Notes 4, 5 and 14 to the consolidated financial statements.)
** Includes after-tax gains on divestment of discontinued operations and dis-
posal of exploration and production properties totalling $125 and $157 mil-
lion for 1996 and 1995, respectively.
*** Consists of impact of the cumulative effect of a change in the method of
accounting for impairment of long-lived assets in 1995.
+ Effective in the third quarter of 1995, Sunoco began paying quarterly divi-
dends on preference stock at a rate of $.90 per share and reduced its quar-
terly common stock dividend from $.45 to $.25 per share. On May 28, 1998,
the Company redeemed all of its outstanding shares of preference stock. The
cash dividends per share of preference stock for 1998 represent the divi-
dends paid through the redemption date. (See Note 15 to the consolidated
financial statements.)
++ Prior to 1998, assumes redemption of preference shares for common stock
utilizing a ratio of two shares of common stock for each outstanding pref-
erence share. The actual redemption of the preference shares occurred on
May 28, 1998. (See Note 15 to the consolidated financial statements.)
9
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Those statements in the Management's Discussion and Analysis that are not his-
torical in nature should be deemed forward-looking statements that are inher-
ently uncertain. See "Forward-Looking Statements" on page 24 for a discussion
of the factors which could cause actual results to differ materially from those
projected.
Outlook
Sunoco's profitability is primarily determined by refined product margins and
the reliability and efficiency of Company operations. Beginning in the second
half of 1998, margins in Sunoco's principal refining centers in the Northeast
and Midwest and many of its value-added businesses declined significantly. The
decline was primarily due to high industry refined product inventory levels and
a dramatic and persistent run-up in crude oil prices throughout most of 1999.
The high inventory levels (primarily gasoline and distillates) resulted from
lower demand caused by two consecutive warm winters and a market structure that
provided incentives to build inventory in anticipation of higher future prices.
These factors had a particularly adverse impact on Sunoco due to the Company's
relatively high level of distillate production and its concentration of refin-
ing operations in the Northeast and Midwest where nearly all of the excess in-
ventory in the United States was held. A significant decline in crude oil
prices during 1998 led OPEC and other crude oil producers to reduce production
which ultimately resulted in crude oil prices more than doubling during 1999.
This had an adverse impact on Sunoco's margins as product prices were unable to
keep pace with the crude oil price increases.
Despite this poor margin environment, the Company believes margins should im-
prove during 2000 as a result of:
.Lower than normal inventory levels for gasoline and distillates as the year
2000 begins;
.Continued growth in demand for gasoline and distillate products;
.Tightening of supply due to changes in reformulated gasoline product specifi-
cations;
.An improvement in margins for certain petrochemical products; and
.Expected flat to declining crude oil prices for the year 2000.
Notwithstanding the Company's expectation that margins should improve in the
future, given continued competitive market pressures and the highly volatile
and uncertain margin environment, Sunoco is committed to improving its results
by:
.Increasing production levels and realizing other efficiencies at each of the
Company's manufacturing facilities;
.Continuing to improve retail marketing through ongoing programs, including the
reimaging of Company outlets;
.Prudently managing expenses and capital spending; and
.Diversifying, upgrading and growing its asset portfolio through strategic ac-
quisitions and investments that are synergistic and accretive to earnings.
10
<PAGE>
Results of Operations
Earnings Profile of Sunoco Businesses (after tax)
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Sun Northeast Refining $(29) $ 65 $ 75
Sunoco Northeast Marketing 54 69 73
Sunoco Chemicals 37 40 77
Sun Lubricants (34) 12 1
Sunoco MidAmerica Marketing & Refining (5) 32 40
Sunoco Logistics 51 52 51
Sun Coke 60 57 38
Corporate expenses (23) (23) (23)
Net financing expenses and other (60) (37) (48)
- ------------------------------------------------------------------------------
51 267 284
- ------------------------------------------------------------------------------
Special items:
Gain on settlement of insurance
litigation 47 38 --
Benefit from change in tax election -- 13 --
Provision for write-down of assets and
other matters (1) (38) (21)
- ------------------------------------------------------------------------------
Consolidated net income $ 97 $280 $263
- ------------------------------------------------------------------------------
</TABLE>
Analysis of Earnings Profile of Sunoco Businesses
In 1999, Sunoco, Inc. and its subsidiaries earned $97 million, or $1.07 per
share of common stock on a diluted basis compared to $280 million, or $2.95 per
share in 1998 and $263 million, or $2.70 per share in 1997. Excluding the spe-
cial items shown separately in the Earnings Profile of Sunoco Businesses, Su-
noco earned $51 million in 1999, compared to $267 million in 1998 and $284 mil-
lion in 1997.
The $216 million decrease in earnings before special items in 1999 was primar-
ily due to significantly lower wholesale fuels margins in each of Sunoco's re-
fining centers. Also contributing to the decline were lower margins for lubri-
cants and retail gasoline, higher depreciation expense and the absence of $12
million of after-tax benefits related to the settlement of income tax issues
with the Internal Revenue Service during 1998. Partially offsetting these nega-
tive factors were higher sales volumes in Sunoco's Northeast refining and mar-
keting operations, higher non-gasoline income in Northeast Marketing and added
income from Sun Coke's Indiana Harbor cokemaking facility which began operation
in late March 1998. Lower chemical margins for aromatics and propylene were
offset by additional earnings from a cumene plant expansion completed in the
third quarter of 1998.
In 1998, the $17 million decrease in earnings before special items was primar-
ily due to significantly lower chemical margins, lower average retail and
wholesale gasoline margins and a greater amount of scheduled and unscheduled
downtime at the Company's refining facilities. Partially offsetting these nega-
tive factors were higher margins for lubricants, waxes and residual fuels, a
favorable foreign sweet crude oil market, and income from the Indiana Harbor
cokemaking facility and from the Philadelphia phenol facility acquired in mid-
1998. Also offsetting the decline were the favorable impact of the 1998 income
tax settlement discussed above and recognition in 1998 of $7 million of after-
tax earnings from the receipt of cash distributions from petroleum industry in-
surance consortia in which Sunoco participates.
11
<PAGE>
Sun Northeast Refining
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) (millions of dollars) $(29) $65 $75
Capital employed (millions of dollars) $655 $726 $578
Wholesale margin* (per barrel) $2.35 $3.18 $3.25
Wholesale sales (thousands of barrels
daily):
To unaffiliated customers:
Gasoline 113.1 104.9 101.4
Middle distillates 175.0 166.7 169.9
Residual fuel 52.0 53.0 53.9
Other 25.5 29.2 33.2
- ----------------------------------------------------------------------------
365.6 353.8 358.4
To affiliates (primarily gasoline) 197.5 186.1 182.9
- ----------------------------------------------------------------------------
563.1 539.9 541.3
- ----------------------------------------------------------------------------
Crude unit capacity (thousands of
barrels daily) at December 31 505.0 482.0 482.0
Crude unit capacity utilized 93% 98% 100%
Conversion capacity** (thousands of
barrels daily) at December 31 210.0 191.0 191.0
Conversion capacity utilized 95% 95% 96%
- ----------------------------------------------------------------------------
</TABLE>
* Wholesale sales price less cost of crude oil, other feedstocks and purchased
refined products.
** Represents capacity to upgrade low-value petroleum products into higher-
value products through catalytic cracking.
Sun Northeast Refining operating results decreased $94 million in 1999 primar-
ily due to significantly lower realized margins for wholesale fuels. Partially
offsetting the lower margins was a 5.1 million barrel, or 3 percent, increase
in production levels. Overall production increased in 1999 despite a voluntary
cutback in production of low-value products in response to the low margin envi-
ronment. In addition, a week-long shutdown of a 200,000-barrels-per-day crude
unit at the Philadelphia refinery due to flooding caused by Hurricane Floyd ad-
versely impacted production. Production in 1998 was affected by a substantial
amount of scheduled and unscheduled downtime (see discussion below).
Sun Northeast Refining operating results decreased $10 million in 1998 due to
lower realized margins for wholesale fuels and a 4.3 million barrel decline in
gasoline and distillate production, partially offset by benefits from a favora-
ble foreign sweet crude oil market and a $10 million pretax reduction in oper-
ating expenses. The production decline was caused by the substantial amount of
scheduled and unscheduled refinery downtime during 1998. The most significant
of this downtime was at a 73,000-barrels-per-day catalytic cracking unit at the
Philadelphia refinery. It included a 29-day shutdown due to an emergency power
interruption by the local utility and related start-up problems and a subse-
quent scheduled six-week turnaround and modernization. With the completion of
this work in July 1998, all three of Sunoco's catalytic cracking units in the
Northeast had been modernized during the 1997-98 period. Scheduled maintenance
activity during 1998 also included a 23-day turnaround of the 200,000-barrels-
per-day crude unit at the Philadelphia refinery.
During 1998, Sunoco added $26 million after tax to an accrual it established on
December 31, 1996 for estimated losses expected to be realized from an off-take
agreement to purchase MTBE. This provision is reported as part of the Provision
for Write-Down of Assets and Other Matters shown separately in the Earnings
Profile of Sunoco Businesses (see Notes 4 and 14 to the consolidated financial
statements).
12
<PAGE>
Sunoco Northeast Marketing
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $54 $69 $73
Capital employed (millions of dollars) $371 $351 $402
Gasoline margin* (per barrel) $4.53 $4.99 $5.40
Sales (thousands of barrels daily):
Gasoline 161.9 155.8 152.3
Middle distillates 23.7 18.2 17.3
- ---------------------------------------------------------------------------
185.6 174.0 169.6
- ---------------------------------------------------------------------------
Retail gasoline outlets 2,647 2,625 2,655
- ---------------------------------------------------------------------------
</TABLE>
* Retail sales price less wholesale price. The retail sales price is the
weighted average price received through the various branded marketing distri-
bution channels.
Sunoco Northeast Marketing operating results declined $15 million in 1999 as a
4 percent increase in retail gasoline sales volumes and higher non-gasoline in-
come were more than offset by lower retail gasoline margins, which were down
approximately 1 cent per gallon versus 1998, and a $13 million pretax increase
in marketing and administrative expenses. The increase in expenses was largely
attributable to the higher sales volumes, higher depreciation expense and ex-
penditures supporting a retail site reimaging program.
The $4 million decline in Sunoco Northeast Marketing operating results in 1998
was primarily due to lower retail gasoline margins, which were down approxi-
mately 1 cent per gallon versus 1997. Partially offsetting this negative factor
was a 2 percent increase in retail gasoline sales volumes. Operating results
also benefited from a 4 percent improvement in average gasoline throughput at
the Company's direct sites and a 10 percent increase in average merchandise
sales per convenience store.
Sunoco Chemicals
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $37 $40 $77
Capital employed (millions of dollars) $584 $543 $356
Petrochemicals margin* (per barrel) $19.87 $20.21 $25.01
Petrochemical sales (thousands of barrels
daily):
Phenol and acetone** 14.7 6.8 --
Aromatics*** 4.6 7.4 10.8
Propylene 11.2 10.5 10.8
Ethylene/ethylene oxide 2.8 3.0 2.8
- ------------------------------------------------------------------------------
33.3 27.7 24.4
- ------------------------------------------------------------------------------
</TABLE>
* Wholesale sales price less the cost of feedstocks and product purchases.
** Sunoco Chemicals sold 13.5 thousand barrels daily of phenol and acetone in
1998 subsequent to the June 30, 1998 acquisition of the Philadelphia phenol
facility. The amount in the table for 1998 reflects the 2.49 million bar-
rels sold during the second half of 1998 divided by 365 days.
*** Reflects reductions of 2.3 and 2.8 thousand barrels daily of cumene sales
during 1999 and 1998, respectively. With the acquisition of the phenol fa-
cility, all cumene production is now used in the production of phenol and
acetone.
Sunoco Chemicals income decreased $3 million in 1999 primarily due to lower
margins for aromatics and polymer-grade propylene and higher expenses resulting
from unplanned maintenance activities. Partially offsetting these negative fac-
tors were additional earnings from a cumene plant expansion at the Philadelphia
refinery completed in July 1998. After completion of this project, the facility
produced cumene at an annualized rate of 1,012 million pounds during the fif-
teen-month period ended December 31, 1999, which
13
<PAGE>
is well in excess of the 850 million pounds per year capacity that was origi-
nally projected for the expanded facility. In 1997, 573 million pounds of
cumene were produced.
Income from Sunoco Chemicals decreased $37 million in 1998 due to significantly
lower margins, particularly for polymer-grade propylene (down over 50 percent)
and cumene. Partially offsetting these negative factors was $11 million of af-
ter-tax income from operations at the Philadelphia phenol facility acquired
from AlliedSignal Inc. ("Allied") on June 30, 1998. The phenol facility cur-
rently has the capacity to produce annually more than one billion pounds of
phenol and 620 million pounds of acetone. In connection with this acquisition,
Sunoco Chemicals has entered into a long-term contract to supply Allied with
approximately 740 million pounds of phenol annually at a price based on the
market value of cumene feedstock plus an amount approximating other phenol pro-
duction costs.
Sun Lubricants
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) (millions of dollars) $(34) $12 $1
Capital employed (millions of dollars) $351 $391 $363
Wholesale margin* (per barrel):
Specialty oils** $37.51 $41.90 $37.27
Base oils $11.44 $17.08 $14.90
Fuels and waxes $.80 $2.01 $1.51
Wholesale sales (thousands of barrels
daily):
To unaffiliated customers:
Specialty oils** 11.0 11.0 11.7
Base oils 7.8 6.9 7.1
- ----------------------------------------------------------------------------
18.8 17.9 18.8
Gasoline 16.7 17.9 26.2
Middle distillates 29.8 30.3 36.9
Residual fuel 11.8 13.5 22.8
Lubes extracted feedstocks 12.1 8.4 .7
Waxes and other 12.9 12.8 12.9
- ----------------------------------------------------------------------------
102.1 100.8 118.3
To affiliates*** 4.6 9.5 17.8
- ----------------------------------------------------------------------------
106.7 110.3 136.1
- ----------------------------------------------------------------------------
</TABLE>
* Wholesale sales price less cost of crude oil, other feedstocks and pur-
chased refined products.
** Comprised principally of transportation and industrial lubricants.
*** Comprised principally of "lubes-extracted" feedstocks which are transported
to the Toledo refinery for further processing.
The $46 million decline in Sun Lubricants operating results in 1999 was primar-
ily due to margin declines for all products manufactured by Sun Lubricants. The
base oil and specialty oil margin declines reflect the inability of wholesale
and retail lubricant prices to keep pace with the significant crude oil price
increases during 1999. Partially offsetting the margin declines were higher
base oil lubricant sales and production volumes and lower operating and admin-
istrative expenses as higher depreciation charges were more than offset by
lower cash expenses.
Sun Lubricants results improved $11 million in 1998 primarily due to higher
margins for lubricants, waxes and residual fuels and a $10 million pretax de-
cline in operating expenses. Production volumes and earnings during 1998 were
limited by a 59-day maintenance turnaround at the Puerto Rico refinery as well
as by a two-week shutdown of this
14
<PAGE>
facility resulting from Hurricane Georges. Sun Lubricants operating results for
1998 exclude a $13 million tax benefit attributable to a change in tax election
concerning the Puerto Rico possession tax credit. The tax benefit is shown sep-
arately in the Earnings Profile of Sunoco Businesses.
Sunoco MidAmerica Marketing & Refining
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) (millions of dollars) $(5) $32 $40
Capital employed (millions of dollars) $283 $288 $329
- ----------------------------------------------------------------------------
Retail Marketing:
Gasoline margin* (per barrel) $3.45 $3.47 $3.28
Sales (thousands of barrels daily):
Gasoline 54.7 52.8 49.5
Middle distillates 5.2 4.6 4.6
- ----------------------------------------------------------------------------
59.9 57.4 54.1
- ----------------------------------------------------------------------------
Retail gasoline outlets 891 907 937
- ----------------------------------------------------------------------------
Refining and Wholesale Marketing:
Wholesale margin** (per barrel):
Fuels $2.80 $3.76 $4.18
Petrochemicals $4.97 $5.95 $7.53
Wholesale sales (thousands of barrels
daily):
To unaffiliated customers:
Gasoline 39.3 41.8 42.6
Middle distillates 25.1 21.5 20.1
Residual fuel 4.2 4.3 3.4
Petrochemicals 9.1 10.1 10.8
Other 9.6 7.5 7.9
- ----------------------------------------------------------------------------
87.3 85.2 84.8
To Sunoco MidAmerica Retail Marketing 60.3 57.7 55.2
- ----------------------------------------------------------------------------
147.6 142.9 140.0
- ----------------------------------------------------------------------------
Crude unit capacity (thousands of
barrels daily) at December 31 140.0 130.0 125.0
Crude unit capacity utilized 96% 102% 106%
Conversion capacity (thousands of
barrels daily) at December 31 88.0 88.0 86.0
Conversion capacity utilized 89% 92% 97%
- ----------------------------------------------------------------------------
</TABLE>
* Retail sales price less wholesale price. The retail sales price is the
weighted average price received through the various branded marketing dis-
tribution channels.
** Wholesale sales price of fuels or petrochemicals less cost of crude oil,
other feedstocks and purchased refined products.
Sunoco MidAmerica Marketing & Refining results decreased $37 million in 1999
primarily due to a significant decline in realized wholesale fuels margins.
Lower petrochemical margins and an increase in operating and administrative ex-
penses also contributed to the decline in earnings. Overall production in-
creased slightly in 1999 despite both planned and unplanned refinery mainte-
nance activities and voluntary production cuts due to the low margins. Produc-
tion in 1998 was also adversely impacted by a substantial amount of scheduled
and unscheduled downtime (see discussion below).
15
<PAGE>
Sunoco MidAmerica Marketing & Refining results decreased $8 million in 1998
primarily due to lower wholesale gasoline and petrochemical margins. Partially
offsetting these negative factors were higher retail gasoline margins and 7
percent higher retail gasoline volumes. Production levels were essentially un-
changed compared to 1997 despite a one-month scheduled turnaround of one of the
Toledo refinery's crude oil units and a one-week shutdown of the refinery
caused by a regional electricity emergency.
Sunoco Logistics
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $51 $52 $51
Capital employed (millions of dollars) $224 $197 $181
Pipeline throughput (thousands of barrels
daily):
Unaffiliated customers 721 672 682
Affiliated customers 981 931 932
- ------------------------------------------------------------------------------
1,702 1,603 1,614
- ------------------------------------------------------------------------------
</TABLE>
Sunoco Logistics income decreased $1 million in 1999 as improved results in
Sunoco's Southwestern logistics operations were more than offset by higher op-
erating and administrative expenses. The improvement in Southwestern operations
was due in part to the income attributable to the crude transportation and mar-
keting operations acquired from Pride Companies, L.P. on October 5, 1999. In
1998, Sunoco Logistics income increased $1 million primarily due to improved
results from Sunoco's Southwestern logistics operations and higher throughput
in the Eastern product pipeline system.
Sun Coke
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Income (millions of dollars) $60 $57 $38
Capital employed (millions of dollars) $224 $249 $189
Coke production (thousands of tons) 1,910 1,473 664
- ---------------------------------------------------------------------------
</TABLE>
Sun Coke income increased $3 million in 1999 due to an increase in income from
the Company's Indiana Harbor cokemaking facility in East Chicago, IN, which
commenced operations in late March 1998, and to a $7 million after-tax gain
from the divestment in February 1999 of Shamrock Coal Company ("Shamrock"), Sun
Coke's steam coal mining operation located in Kentucky. Earnings from Shamrock
were $5 million for the full year 1998. With this divestment, Sun Coke ceased
steam coal mining activities. Partially offsetting these positive factors were
lower earnings from the Jewell cokemaking operation in Vansant, VA, lower earn-
ings from Shamrock and the absence of a $2 million tax benefit recorded in 1998
related to the settlement of an income tax issue with the Internal Revenue
Service. In 1998, Sun Coke income increased $19 million primarily due to the
income contribution from the Indiana Harbor cokemaking facility.
Net Financing Expenses and Other--Net financing expenses and other increased
$23 million in 1999 after decreasing $11 million in 1998. The fluctuation dur-
ing the 1997-99 period was largely due to the recognition in 1998 of $7 million
of after-tax earnings from cash distributions received from petroleum industry
insurance consortia in which Sunoco participates and $10 million of after-tax
interest income related to income tax settlements. Lower capitalized interest
and higher interest expense due to a higher average debt level also contributed
to the increase during 1999.
16
<PAGE>
Gain on Settlement of Insurance Litigation--In 1999 and 1998, Sunoco recognized
$47 and $38 million, respectively, of after-tax gains in connection with the
settlement of several insurance claims. The claims related to certain environ-
mental matters of Sunoco, including its predecessor companies and subsidiaries,
arising from ownership and operation of its businesses. (See Note 14 to the
consolidated financial statements.)
Benefit from Change in Tax Election--During 1998, Sunoco revoked its election
under the Internal Revenue Code concerning the Puerto Rico possession tax cred-
it. This change resulted in a $13 million tax benefit, which is attributable to
Sun Lubricants. (See Note 5 to the consolidated financial statements.)
Provision for Write-Down of Assets and Other Matters--During 1999, Sunoco re-
corded a $9 million after-tax charge in connection with the settlement of liti-
gation concerning the May 1998 redemption of the Company's depositary shares
and recorded an $8 million after-tax favorable adjustment to a market valuation
reserve established in 1998 for MTBE inventory of Sun Northeast Refining.
During 1998, Sunoco added $40 million ($26 million after tax) to the accrual it
established on December 31, 1996 for estimated losses expected to be realized
by Sun Northeast Refining from an off-take agreement to purchase MTBE. In addi-
tion, in 1998, Sunoco recorded an $8 million after-tax provision to write-down
the MTBE inventory of Sun Northeast Refining to market value, increased the es-
timated net realizable value of a previously written down asset held for sale
by Sun Northeast Refining by $8 million after tax, established a $7 million af-
ter-tax accrual for environmental remediation activities principally in Sunoco
Northeast Marketing and recorded a $5 million after-tax provision to write-off
certain assets primarily in Sunoco Chemicals.
In 1997, Sunoco established a $32 million accrual ($21 million after tax) for
approximately 320 involuntary employee terminations and related costs. The em-
ployee reductions were throughout Sunoco's six refining and marketing business
units and also included senior management and support staff.
For a further discussion of the provisions for write-down of assets and other
matters recorded during the 1997-99 period, see Notes 4, 14 and 15 to the con-
solidated financial statements.
Analysis of Consolidated Statements of Income
Revenues--Total revenues were $10.1 billion in 1999, $8.6 billion in 1998 and
$10.5 billion in 1997. The 17 percent increase in 1999 was primarily due to
higher refined product prices and sales volumes. In 1998, the 18 percent de-
crease was primarily due to lower refined product prices.
Costs and Expenses--Total pretax costs and expenses were $9.9 billion in 1999,
$8.2 billion in 1998 and $10.1 billion in 1997. The 21 percent increase in 1999
was primarily due to higher crude oil and refined product acquisition costs
largely as a result of the increase in crude oil prices. In 1998, the 19 per-
cent decrease was primarily due to lower crude oil and refined product acquisi-
tion costs largely as a result of lower crude oil prices.
17
<PAGE>
Financial Condition
Capital Resources and Liquidity
Cash and Working Capital--At December 31, 1999, Sunoco had cash and cash equiv-
alents of $87 million compared to $38 million at December 31, 1998 and had a
working capital deficit of $310 million compared to $204 million at December
31, 1998. Sunoco's working capital position is considerably stronger than indi-
cated because of the relatively low historical costs assigned under the LIFO
method of accounting for most of the inventories reflected in the consolidated
balance sheets. The current replacement cost of all such inventories exceeds
their carrying value at December 31, 1999 by $763 million. Inventories valued
at LIFO, which consist of crude oil and refined products, are readily market-
able at their current replacement values. Management believes that the current
levels of Sunoco's cash and working capital are adequate to support Sunoco's
ongoing operations.
Cash Flows and Financial Capacity--In 1999, Sunoco's net cash provided by oper-
ating activities ("cash generation") was $499 million compared to $352 million
in 1998 and $452 million in 1997. The $147 million increase in cash generation
in 1999 was largely due to a decrease in working capital uses pertaining to op-
erating activities and the receipt of proceeds from settlement of several in-
surance claims, partially offset by a decline in income before special items
and lower deferred income tax expense. The $100 million decrease in cash gener-
ation in 1998 was largely due to a decline in income before special items and a
reduction in noncash charges.
Divestment activities have also been a source of cash. During the 1997-99 peri-
od, proceeds from divestments totalled $392 million.
In early 1998, Sunoco transferred an interest in its Indiana Harbor cokemaking
operation in East Chicago, IN, to a third party in exchange for $200 million in
cash. The investor is entitled to 95 percent of the cash flows and tax benefits
from this cokemaking operation until certain cumulative return targets have
been met. After this preferential return period, which is expected to end in
2002, the third party will be entitled to a variable minority interest in the
cash flows and tax benefits from the Indiana Harbor cokemaking operation rang-
ing from 5 to 23 percent. Sunoco did not recognize any gain or loss on this
transaction.
Management believes that future cash generation will be sufficient to satisfy
Sunoco's capital requirements and to pay the current level of cash dividends on
Sunoco's common stock. However, from time to time, the Company's short-term
cash requirements may exceed its cash generation due to various factors includ-
ing volatility in crude oil and refined product markets and increases in capi-
tal spending and working capital levels. During those periods, the Company may
supplement its cash generation with proceeds from financing activities.
The Company has a $500 million revolving credit agreement ("Agreement") with
commercial banks that provides access to short-term financing through September
2002. The Company can borrow directly from the participating banks under this
Agreement or use it to support the issuance of commercial paper. (See Note 10
to the consolidated financial statements.)
18
<PAGE>
The following table sets forth amounts outstanding related to Sunoco's
borrowings:
<TABLE>
<CAPTION>
December 31
-----------------------
(Millions of Dollars) 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C>
Short-term borrowings:
Commercial paper $ 150 $ --
Bank borrowings under revolving credit agreement -- 120
Current portion of long-term debt 1 69
Long-term debt 878 823
- -------------------------------------------------------------------------
Total borrowings $1,029 $1,012
- -------------------------------------------------------------------------
</TABLE>
Sunoco's ratio of debt (net of available cash) to total capital was 38.5 per-
cent at December 31, 1999 compared to 39.1 percent at December 31, 1998. Man-
agement believes there is sufficient borrowing capacity available to pursue
strategic investment opportunities as they arise. No commitments have been made
with respect to any investment opportunity which would require the use of a
significant portion of Sunoco's unused financial capacity. In addition, the
Company has the option of issuing additional common or preference stock as a
means of increasing its equity base; however, there are no current plans to do
so.
Capital Expenditures
<TABLE>
<CAPTION>
(Millions of Dollars) 2000 Plan 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sun Northeast Refining $107 $ 85 $130 $ 81
Sunoco Northeast Marketing 121 99 74 46
Sunoco Chemicals 45 54 53* 37
Sun Lubricants 32 28 39 22
Sunoco MidAmerica Marketing
& Refining 85 57 57 29
Sunoco Logistics 48 41** 39 32
Sun Coke 6 10 65 133
- -------------------------------------------------------------------------------
Consolidated capital
expenditures $444 $374 $457 $380
- -------------------------------------------------------------------------------
</TABLE>
* Excludes $157 million purchase of the Philadelphia phenol facility.
** Excludes $36 million purchase of the crude oil transportation and marketing
operations of Pride Companies, L.P.
In 1999, in addition to the $36 million acquisition of the Pride crude oil
transportation and marketing operations, major capital outlays included: $29
million to complete the turnaround and the first phase of an oxidizer unit re-
placement project at the Philadelphia phenol facility acquired in 1998, $68
million primarily to upgrade or acquire additional Sunoco(R) retail marketing
locations in the Northeast and $35 million related to an ongoing reimaging pro-
gram at the Company's retail service station network. As part of the reimaging
program, the Company's Sunoco(R) logo has been updated and its retail outlet
image has been redesigned to provide a more contemporary appearance.
In 1998, in addition to the $157 million acquisition of the Philadelphia phenol
facility and the $12 million of capital outlays at this facility subsequent to
the acquisition, major capital outlays included: $58 million to complete the
construction of the Indiana Harbor cokemaking facility that commenced opera-
tions in the first quarter of 1998; $30 million to complete the expansion of
the Philadelphia refinery's cumene production facilities; $94 million for the
scheduled turnaround and modernization of numerous units throughout the
Company's refinery network; and $44 million to upgrade or acquire Sunoco(R) re-
tail marketing locations in the Northeast.
19
<PAGE>
In 1997, major capital expenditures included: $118 million for the then ongoing
construction of the Indiana Harbor cokemaking facility; $25 million to begin
the expansion of the Philadelphia refinery's cumene production capacity; $17
million for the scheduled turnaround of various units at the Philadelphia re-
finery including a catcracker, a crude unit and a gasoline reformer; and $46
million largely for service station modernization activities in the Northeast.
The 2000 capital expenditure plan is comprised of $235 million for base infra-
structure and legally required spending, $91 million for turnarounds at the
Company's Philadelphia, Marcus Hook and Toledo refineries and $118 million for
growth projects. The growth projects include expenditures to improve refinery
efficiency, grow Sunoco's retail marketing network, increase chemicals produc-
tion and expand certain logistics assets.
Environmental Matters
Sunoco is subject to numerous federal, state and local laws which regulate the
discharge of materials into the environment or that otherwise relate to the
protection of the environment. These laws have required, and are expected to
continue to require, Sunoco to make significant expenditures of both a capital
and expense nature. The following table summarizes Sunoco's expenditures for
environmental projects and compliance activities:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Pollution abatement capital* $ 33 $ 35 $ 23
Remediation 35 34 38
Operations, maintenance and administration 155 173 188
- -------------------------------------------------------------------------------
$223 $242 $249
- -------------------------------------------------------------------------------
</TABLE>
* Capital expenditures for pollution abatement are expected to approximate $25
and $35 million in 2000 and 2001, respectively.
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 also requires refiners to market cleaner-burning gasoline
that reduces emissions of certain toxic and conventional pollutants. The Com-
pany has implemented the first two phases of the reformulated gasoline regula-
tions which require an increase in the minimum quantity of oxygen for certain
non-attainment areas, a reduction in benzene content, and a reduction in sum-
mertime Reid Vapor Pressure ("RVP"). Sunoco expects to implement the more
stringent final phase of these regulations in the spring of 2000.
Pursuant to the Clean Air Act, in December 1999 the U.S. Environmental Protec-
tion Agency ("EPA") issued a final rule to require more stringent emissions
standards ("Tier 2 Standards") for new passenger cars and light duty trucks.
The final rule mandates significant reductions in the sulfur levels in reformu-
lated and conventional gasoline commencing in 2004. The rule includes a banking
and trading credit system, which could provide refiners compliance flexibility
until 2006. Sunoco currently has gasoline sulfur levels which are below the in-
dustry average and idle assets which may be used to help meet this new require-
ment. Analysis of the rule to determine its impact and to identify compliance
alternatives by the required dates is ongoing. The rule could have a signifi-
cant impact on Sunoco and its operations, primarily with respect to the capital
and operating expenditures at the Philadelphia, Marcus Hook and Toledo refin-
eries. The capital spending is likely to begin in early 2003 while the higher
operating costs will be incurred when production of the low-sulfur gasoline
commences. The ultimate impact of the rule cannot be determined at this time,
and may be affected by such factors as technology selection, the effectiveness
of the banking and trading credit system, timing uncertainties created by per-
mitting requirements and construction schedules and any effect on prices cre-
ated by changes in the level of gasoline production.
20
<PAGE>
In order to obtain a secure supply of oxygenates, Sunoco entered into an off-
take agreement with Belvieu Environmental Fuels ("BEF"), a joint venture in
which Sunoco is a one-third partner, whereby Sunoco agreed to purchase all of
the MTBE from BEF's production facility. At December 31, 1999, the Company had
a $55 million investment in this operation. In 1998 and 1996, Sunoco recorded
pretax provisions amounting to $40 and $130 million, respectively, for esti-
mated purchase commitment losses expected to be realized with respect to the
off-take agreement. During 1999, 1998 and 1997, actual losses attributable to
this agreement amounting to $39, $47 and $65 million, respectively, were
charged against the loss accrual. The accrual has a remaining balance of $19
million as of December 31, 1999. (See Note 14 to the consolidated financial
statements.)
In November 1998, the EPA convened an advisory Panel on Oxygenate Use in Gaso-
line (the "Panel"). The purpose of the Panel was to review public health and
environmental issues that have been raised by the use of MTBE in gasoline, and
specifically by the discovery of MTBE in water supplies. The Panel made its
recommendations to the EPA on July 27, 1999. The recommendations call for the
improved protection of drinking water from MTBE contamination, a substantial
reduction in the use of MTBE, and action by Congress to remove the oxygenate
requirements for reformulated gasoline under the Clean Air Act. State and fed-
eral environmental agencies could implement the majority of the recommenda-
tions; however, some would require Congressional legislative action. While the
Panel recommended that certain public and private funding options be explored
for the clean up of contaminated sites, it made no specific recommendations
concerning such funding options. However, private parties are seeking clean-up
remedies primarily from East and West Coast gasoline marketers, including Suno-
co. California has acted to ban MTBE use by December 31, 2002. In connection
with the MTBE ban, California has requested a waiver from the EPA of its oxy-
genate requirements. Other states are also reviewing the use of MTBE in gaso-
line. MTBE is the primary oxygenate used by Sunoco and throughout the industry
to meet the reformulated gasoline requirements under the Clean Air Act. While
phase-outs or restrictions on the use of MTBE or any required clean up of MTBE
could have a significant impact on Sunoco and its results of operations, the
ultimate impact cannot be determined at this time.
The Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") and the Solid Waste Disposal Act as amended by the Resource Conser-
vation and Recovery Act ("RCRA"), and related federal and state laws subject
Sunoco to the potential obligation to remove or mitigate the environmental ef-
fects of the disposal or release of certain pollutants at Sunoco's facilities
and at third-party or formerly-owned sites. Under CERCLA, Sunoco 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, 1999, Sunoco had been named as a PRP at 52 sites identified or
potentially identifiable as "Superfund" sites under CERCLA. Sunoco has reviewed
the nature and extent of its involvement at each site and other relevant cir-
cumstances and, based upon the other parties involved or Sunoco's negligible
participation therein, believes that its potential liability associated with
such sites will not be significant.
Under various environmental laws, including RCRA, Sunoco has initiated correc-
tive remedial action at its facilities, formerly-owned facilities and third-
party sites and could be required to undertake similar actions at various other
sites. The cost of such remedial actions could be significant but is expected
to be incurred over an extended period of time.
Sunoco 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. For a discussion of the accrued liabili-
ties and charges against income related to these activities, see Note 14 to the
consolidated financial statements.
21
<PAGE>
On October 4, 1996, Sunoco filed a complaint in Los Angeles County Superior
Court, Jalisco Corporation, Inc., et al. v. Argonaut Insurance Company, et al.
(Case No. BC 158441), naming more than 45 insurance companies as defendants and
seeking recovery under numerous insurance policies for certain environmental
matters of Sunoco, including its predecessor companies and subsidiaries, aris-
ing from the ownership and operation of its businesses. In 1999 and 1998, the
Company entered into several settlements which resolved most of these claims.
As a result, the Company received net cash proceeds totalling $4 million in
1998, $96 million in 1999 and $28 million in early 2000. Pretax gains of $73
million ($47 million after tax) and $58 million ($38 million after tax) were
recognized in 1999 and 1998, respectively, in connection with these settle-
ments.
Total future costs for environmental remediation activities will depend upon,
among other things, the identification of any additional sites, the determina-
tion of the extent of the contamination at each site, the timing and nature of
required remedial actions, the technology available and needed to meet the var-
ious existing legal requirements, the nature and extent of future environmental
laws, inflation rates and the determination of Sunoco'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 the matters discussed
above are likely to be significant but are expected to be incurred over an ex-
tended period of time and to be funded from Sunoco's net cash provided by oper-
ating 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 Sunoco's consolidated financial position or,
over an extended period of time, on Sunoco's cash flows or liquidity.
Year 2000 Information Processing
During the 1997-99 period, Sunoco assessed, remediated or replaced, tested and
implemented computer systems and applications in order that they would be able
to operate and properly process information dated after December 31, 1999. As a
result of these efforts, the Company has not experienced any Year 2000 failures
of its key computer systems and applications. Likewise, the Company's key cus-
tomers and suppliers have been able to continue to meet their obligations to
the Company.
The cost to Sunoco during the 1997-99 period of achieving Year 2000 compliant
systems totaled $37 million. Such amount consisted of $21 million of expense
incurred remediating and testing existing software and hardware and $16 million
of capital expenditures to replace two key non-compliant systems with newly
purchased systems that, in addition to being compliant, provide enhanced busi-
ness functionality.
Although unlikely, the possibility still exists that interruptions to Company
and/or key customer and supplier operations or business activities could occur
as a result of lingering Year 2000 Issues. Such interruptions, if they were to
occur, could have a material adverse impact on Sunoco's consolidated results of
operations or financial condition.
Derivative Instruments
Sunoco uses futures and forward contracts to achieve ratable pricing of its
crude oil purchases and to convert certain refined product sales from fixed to
floating price. In addition, price collars, swaps and option contracts are used
to lock in a portion of the Company's electricity and natural gas costs. Sunoco
also uses swaps, price collars and other contracts from time to time to hedge
against significant increases in crude oil prices and to lock in what Sunoco
considers to be acceptable margins for various refined products. At December
31, 1999, margins for approximately 14 million barrels (6 percent of the
Company's expected 2000 wholesale fuels sales) had been locked in.
22
<PAGE>
Sunoco is at risk for possible changes in the market value of all of its deriv-
ative contracts; however, such risk would be mitigated by price changes in the
underlying hedged transactions. At December 31, 1999, Sunoco had a net deferred
gain of $13 million on its outstanding derivative contracts. The potential de-
crease in this gain from a hypothetical 10 percent adverse change in the year-
end market prices of commodities that were being hedged by derivative contracts
at December 31, 1999 was estimated to be $10 million. This hypothetical de-
crease in the gain was estimated by multiplying the difference between the hy-
pothetical and the actual year-end market prices of the underlying commodities
by the contract volume amounts.
Sunoco also is exposed to credit risk in the event of nonperformance by
counterparties. Management believes this risk is negligible as its
counterparties are either regulated by exchanges or are major international fi-
nancial institutions with high credit ratings. (See Note 17 to the consolidated
financial statements.)
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS No. 133") was issued.
SFAS No. 133, which Sunoco expects to adopt effective January 1, 2001 when
adoption is mandatory, changes the method of accounting for derivative instru-
ments. The Company has not yet determined the impact that the new standard will
have on its results of operations and financial position. For a further discus-
sion concerning SFAS No. 133, see Note 1 to the consolidated financial state-
ments.
Cash Dividends and Share Redemption and Repurchases
The Company has paid cash dividends on a regular quarterly basis since 1904.
During the 1997-99 period, the quarterly cash dividend paid on common stock
amounted to $.25 per share ($1.00 per year). The Company expects to continue to
sustain the quarterly common stock cash dividend at its current level. Cash
dividends paid on depositary shares totalled $1.80 per share in 1997 and $.8258
per share in 1998 prior to their redemption (see below).
On May 28, 1998, the Company redeemed all of its 24,067,520 then outstanding
depositary shares. Each depositary share represented ownership of one-half
share of the Company's Series A cumulative preference stock. Under the terms of
redemption, established when the depositary shares were issued, each depositary
share was redeemed in exchange for 0.949837 share of Sunoco's common stock plus
accrued and unpaid dividends of $.3758. The depositary-to-common stock exchange
ratio represented the call price of $40 per depositary share payable in Sunoco
common stock valued at $42.1125 per common share--the average of the closing
prices for Sunoco common stock on the New York Stock Exchange, as reported on
the consolidated tape, for the five consecutive trading days from April 20 to
April 24, 1998, inclusive. At the exchange ratio of 0.949837 share of common
stock for each depositary share, 22,859,633 shares of Sunoco common stock held
in treasury were reissued. In connection with this redemption, a lawsuit was
filed alleging that Sunoco incorrectly calculated the exchange ratio and should
have issued an additional 1.36 million shares of Sunoco common stock. While the
Company believes the exchange ratio was correctly calculated, in the fourth
quarter of 1999 it agreed to settle the lawsuit, subject to court approval. Ac-
cordingly, a $14 million charge ($9 million after tax) was recorded in 1999 in
connection with the settlement. This charge is reported as part of the Provi-
sion for Write-Down of Assets and Other Matters shown separately in the Earn-
ings Profile of Sunoco Businesses.
23
<PAGE>
During the 1997-99 period, the Company repurchased 8,260,950 shares of its com-
mon stock and 853,580 of its depositary shares for $335 million. At December
31, 1999, the Company had a remaining authorization from its Board of Directors
to purchase up to $136 million of Company stock in the open market or through
privately negotiated transactions from time to time depending on prevailing
market conditions.
Forward-Looking Statements
Statements and financial discussion and analysis contained in the Management's
Discussion and Analysis that are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions of the Private Securi-
ties Litigation Reform Act of 1995. Such statements generally will be accompa-
nied by words such as "anticipate," "believe," "estimate," "expect," "fore-
cast," "intend," "possible," "potential," "predict," "project," or other simi-
lar words that convey the uncertainty of future events or outcomes. Although
Sunoco believes these forward-looking statements are reasonable, they are based
upon a number of assumptions concerning future conditions, any or all of which
may ultimately prove to be inaccurate. Forward-looking statements involve a
number of risks and uncertainties. Important factors that could cause actual
results to differ materially from the forward-looking statements include, with-
out limitation:
.Changes in industry-wide refining margins;
.Variation in commodity prices and crude oil supply;
.Volatility in the marketplace which may affect market supply and demand for
Sunoco's products;
.Increased competition;
.Changes in the reliability and efficiency of the Company's operating facili-
ties;
.Changes in the level of operating expenses and hazards common to operating fa-
cilities (including equipment malfunction, explosions, fires, oil spills, and
the effects of severe weather conditions);
.Changes in the expected level of environmental remediation spending;
.Delays related to work on facilities and the issuance of applicable permits;
.Changes in product specifications;
.Availability and pricing of oxygenates such as MTBE;
.Phase-outs or restrictions on the use of MTBE;
.Political and economic conditions in international markets in which the Com-
pany operates;
.Changes in the availability of debt and equity financing resulting in in-
creased costs or reduced liquidity;
.Risks related to labor relations;
.Nonperformance by major customers;
.General economic, financial and business conditions which could affect
Sunoco's financial condition and results of operations;
.Changes in applicable statutes and government regulations or their interpreta-
tions;
.Claims of the Company's noncompliance with statutory and regulatory require-
ments;
24
<PAGE>
.Changes in the status of litigation to which the Company is a party; and
.Potential effects of Year 2000 computer issues.
The factors identified above are believed to be important factors (but not nec-
essarily all of the important factors) that could cause actual results to dif-
fer materially from those expressed in any forward-looking statement made by
Sunoco. Unpredictable or unknown factors not discussed herein could also have
material adverse effects on forward-looking statements. All forward-looking
statements included in this Annual Report to Shareholders are expressly quali-
fied in their entirety by the foregoing cautionary statements. The Company un-
dertakes no obligation to update publicly any forward-looking statement (or its
associated cautionary language) whether as a result of new information or fu-
ture events.
25
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Statements of Income Sunoco, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Millions of Dollars and Shares Except
Per Share Amounts)
- --------------------------------------------------------------------------------
For the Years Ended December 31 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Sales and other operating revenue
(including consumer excise taxes) $ 9,889 $8,413 $10,464
Interest income (Note 2) 7 23 7
Other income (Note 3) 172 147 60
- --------------------------------------------------------------------------------
10,068 8,583 10,531
Costs and Expenses
Cost of products sold and operating
expenses 7,365 5,646 7,610
Consumer excise taxes 1,583 1,559 1,563
Selling, general and administrative
expenses 533 521 533
Depreciation, depletion and amortization 276 257 259
Payroll, property and other taxes 77 82 78
Provision for write-down of assets and
other matters (Note 4) 2 58 32
Interest cost and debt expense 84 77 78
Interest capitalized (2) (6) (7)
- --------------------------------------------------------------------------------
9,918 8,194 10,146
Income before income tax expense 150 389 385
Income tax expense (Note 5) 53 109 122
- --------------------------------------------------------------------------------
Net Income 97 280 263
Dividends on preference stock -- (20) (44)
- --------------------------------------------------------------------------------
Net income applicable to common
shareholders $ 97 $ 260 $ 219
- --------------------------------------------------------------------------------
Net Income Per Share of Common Stock
(Note 6):
Basic $1.07 $3.09 $3.03
Diluted $1.07 $2.95 $2.70
- --------------------------------------------------------------------------------
Weighted Average Number of Shares
Outstanding:
Basic 90.3 84.2 72.3
Diluted 91.0 95.0 97.4
- --------------------------------------------------------------------------------
Cash Dividends Paid Per Share:
Preference stock (Note 15) $-- $1.6516 $3.60
Common stock $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------
</TABLE>
(See Accompanying Notes)
26
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Balance Sheets Sunoco, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Millions of Dollars)
- -----------------------------------------------------------------------------
At December 31 1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 87 $ 38
Accounts and notes receivable, net 833 537
Inventories (Note 7) 403 483
Deferred income taxes (Note 5) 133 122
- -----------------------------------------------------------------------------
Total Current Assets 1,456 1,180
- -----------------------------------------------------------------------------
Investments and long-term receivables (Note 8) 118 108
Properties, plants and equipment, net (Note 9) 3,415 3,346
Deferred charges and other assets 207 215
- -----------------------------------------------------------------------------
Total Assets $5,196 $4,849
- -----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $1,038 $ 589
Accrued liabilities 437 488
Short-term borrowings (Note 10) 150 120
Current portion of long-term debt (Note 11) 1 69
Taxes payable 140 118
- -----------------------------------------------------------------------------
Total Current Liabilities 1,766 1,384
- -----------------------------------------------------------------------------
Long-term debt (Note 11) 878 823
Retirement benefit liabilities (Note 12) 415 449
Deferred income taxes (Note 5) 237 175
Other deferred credits and liabilities (Notes 13 and
14) 394 504
Commitments and contingent liabilities (Note 14)
Shareholders' Equity (Notes 15 and 16)
Common stock, par value $1 per share
Authorized--200,000,000 shares;
Issued, 1999--132,171,591 shares;
Issued, 1998--132,026,021 shares 132 132
Capital in excess of par value 1,397 1,393
Earnings employed in the business 1,615 1,608
- -----------------------------------------------------------------------------
3,144 3,133
Less common stock held in treasury, at cost
1999--42,302,919 shares; 1998--41,621,835 shares 1,638 1,619
- -----------------------------------------------------------------------------
Total Shareholders' Equity 1,506 1,514
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $5,196 $4,849
- -----------------------------------------------------------------------------
</TABLE>
(See Accompanying Notes)
27
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows Sunoco, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Millions of Dollars)
- --------------------------------------------------------------------------------
For the Years Ended December 31 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Increases (Decreases) in Cash and Cash
Equivalents
Cash Flows from Operating Activities:
Net income $ 97 $ 280 $ 263
Adjustments to reconcile net income to
net cash provided by operating
activities:
Gain on settlement of insurance
litigation, net of cash received (23) (54) --
Provision for write-down of assets and
other matters 2 58 32
Gain on divestments (16) (14) (12)
Depreciation, depletion and
amortization 276 257 259
Deferred income tax expense 50 95 131
Changes in working capital pertaining
to operating activities:
Accounts and notes receivable (271) 186 203
Inventories 103 (43) 45
Accounts payable and accrued
liabilities 354 (361) (383)
Taxes payable 11 19 (51)
Other (84) (71) (35)
- --------------------------------------------------------------------------------
Net cash provided by operating
activities 499 352 452
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures (374) (457) (380)
Acquisitions, net of seller financing
of $5 in 1999 and $109 in 1998 (Note
18) (31) (48) --
Proceeds from divestments 74 136 182
Other (21) 9 11
- --------------------------------------------------------------------------------
Net cash used in investing activities (352) (360) (187)
- --------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net proceeds from short-term borrowings 30 108 --
Proceeds from issuance of long-term
debt 200 12 --
Repayments of long-term debt (218) (53) (53)
Proceeds from transferred interest in
cokemaking operation -- 200 --
Cash dividend payments (90) (102) (117)
Purchases of preference stock for
retirement -- (1) (27)
Purchases of common stock for treasury (19) (144) (144)
Proceeds from issuance of common stock
under management incentive and
employee option plans 4 13 48
Other (5) (20) (6)
- --------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (98) 13 (299)
- --------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 49 5 (34)
Cash and cash equivalents at beginning
of year 38 33 67
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 87 $ 38 $ 33
- --------------------------------------------------------------------------------
</TABLE>
(See Accompanying Notes)
28
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Statements of Changes in Shareholders' Equity
Sunoco, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in Millions,
Shares in Thousands)
- ------------------------------------------------------------------------------------------------------------
Cumulative
Preference Stock Common Stock Earnings Common Stock
---------------------- ------------------ Capital in Employed Held in Treasury
Number of Liquidation Number of Par Excess of in the ------------------
Shares Value Shares Value Par Value Business Shares Cost
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
At December 31, 1996 12,461 $ 748 129,872 $130 $1,316 $1,284 56,880 $2,040
Net income -- -- -- -- -- 263 -- --
Cash dividend payments -- -- -- -- -- (117) -- --
Purchases for retirement (404) (25) -- -- (2) -- -- --
Purchases for treasury -- -- -- -- -- -- 3,864 144
Issued under management
incentive and employee
option plans -- -- 1,698 2 46 -- -- --
Other -- -- 3 -- 1 -- -- --
- ------------------------------------------------------------------------------------------------------------
At December 31, 1997 12,057 $ 723 131,573 $132 $1,361 $1,430 60,744 $2,184
Net income -- -- -- -- -- 280 -- --
Cash dividend payments -- -- -- -- -- (102) -- --
Purchases for retirement (23) (1) -- -- -- -- -- --
Purchases for treasury -- -- -- -- -- -- 3,728 144
Redemption of preference
stock in exchange for
common stock (Note 15) (12,034) (722) -- -- 13 -- (22,860) (709)
Issued under management
incentive and employee
option plans -- -- 453 -- 13 -- -- --
Other -- -- -- -- 6 -- 10 --
- ------------------------------------------------------------------------------------------------------------
At December 31, 1998 -- $-- 132,026 $132 $1,393 $1,608 41,622 $1,619
Net income -- -- -- -- -- 97 -- --
Cash dividend payments -- -- -- -- -- (90) -- --
Purchases for treasury -- -- -- -- -- -- 669 19
Issued under management
incentive and employee
option plans -- -- 145 -- 4 -- -- --
Other -- -- 1 -- -- -- 12 --
- ------------------------------------------------------------------------------------------------------------
At December 31, 1999 -- $-- 132,172 $132 $1,397 $1,615 42,303 $1,638
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(See Accompanying Notes)
29
<PAGE>
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements Sunoco, Inc. and Subsidiaries
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements of Sunoco, Inc. and subsidiaries
(collectively, "Sunoco" or the "Company") contain the accounts of all
operations that are controlled (generally more than 50 percent owned).
Affiliated companies over which the Company has the ability to exercise
significant influence but that are not controlled (generally 20 to 50 percent
owned) are accounted for by the equity method.
Use of Estimates
Certain amounts included in the accompanying consolidated financial statements
and related footnotes reflect the use of estimates based on assumptions made by
management. Actual amounts could differ from these estimates.
Cash Equivalents
Sunoco considers all highly liquid investments with a remaining maturity of
three months or less at the time of purchase to be cash equivalents. These cash
equivalents consist principally of time deposits and certificates of deposit.
Inventories
Inventories are valued at the lower of cost or market. The cost of crude oil
and refined product inventories is determined using the last-in, first-out
method ("LIFO"). The cost of materials, supplies and other inventories is de-
termined using principally the average cost method.
Depreciation and Retirements
Plants and equipment are generally depreciated on a straight-line basis over
their estimated useful lives. Gains and losses on the disposals of fixed assets
are generally reflected in income.
Environmental Remediation
Sunoco accrues environmental remediation costs for work at identified sites
where an assessment has indicated that cleanup costs are probable and reasona-
bly estimable. Such accruals are undiscounted and are based on currently avail-
able information, estimated timing of remedial actions and related inflation
assumptions, existing technology and presently enacted laws and regulations.
Maintenance Shutdowns
Maintenance and repair costs in excess of $500 thousand incurred in connection
with major maintenance shutdowns are capitalized when incurred and amortized
over the period benefited by the maintenance activities.
Derivative Instruments
Sunoco uses swaps, options, futures, forwards and other off-balance sheet com-
modity-based financial and nonfinancial derivative instruments to hedge its ex-
posure to crude oil, refined product, electricity and natural gas price vola-
tility. Such contracts, which effectively meet the Company's risk reduction and
correlation criteria, are accounted for using hedge accounting as prescribed
principally by Statement of Financial Accounting Standards No. 80, "Accounting
for Futures Contracts" ("existing hedge accounting"). Effectiveness is measured
based upon the correlation between the gains and losses on the derivative con-
tracts and the corresponding offsetting changes in the market value of the
items being hedged. Under existing hedge accounting, gains or losses on deriva-
tive contracts (including positions which have been closed) are deferred and
recognized in cost of products sold and operating expenses in the same periods
as the items being hedged. In the event an open derivative contract were to be-
come ineffective as a hedge or if an anticipated transaction being hedged were
no longer likely to occur, any related unrealized derivative gain or loss would
be recognized in net income at such time. The cash flows from hedge contracts
are included in operating activities in the consolidated statements of cash
flows. Sunoco does not hold or issue derivative instruments for trading purpos-
es.
In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS No. 133") was issued.
Sunoco expects to adopt SFAS No. 133 effective January 1, 2001 when adoption is
mandatory. It will require the Company to recognize all derivative contracts on
the balance sheet at their fair value. Changes in fair value of derivative con-
tracts that are not hedges will be recognized in net income as they occur. If
the derivative contracts are hedges, depending on their nature, changes in
their fair values will either be offset in net income against the changes in
the fair values of the items being hedged or reflected initially as a separate
component of shareholders' equity and subsequently recognized in net income
when the hedged items are recognized in net income. The ineffective portions of
changes in the fair values of derivative contracts designated as hedges will be
immediately recognized in net income. The Company has not yet determined the
impact that SFAS No. 133 will have on its results of operations or its finan-
cial position.
30
<PAGE>
Stock-Based Compensation
The Company follows the method of accounting for employee stock compensation
plans prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB No. 25").
Reclassifications
Certain amounts in the prior years' financial statements have been reclassified
to conform to the current year presentation.
2. Settlement of Income Tax Disputes
In 1998, Sunoco settled certain income tax disputes with the Internal Revenue
Service related to deductions claimed in prior years. These settlements, which
include the recognition of $15 million of interest income, increased 1998 net
income by $12 million.
3. Other Income
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Gain on settlement of insurance litigation (Note 14) $ 73 $ 58 $--
Equity in earnings of affiliated companies 21 26 25
Gain on divestments 16 14 12
Other 62 49 23
- --------------------------------------------------------------------------------
$172 $147 $60
- --------------------------------------------------------------------------------
</TABLE>
4. Write-Down of Assets and Other Matters
The following table sets forth summary information regarding the provisions for
write-down of assets and other matters:
<TABLE>
<CAPTION>
Pretax After-Tax
(Millions of Dollars) Provisions Provisions
- --------------------------------------------------------------
<S> <C> <C>
1999
Litigation settlement $ 14 $ 9
MTBE inventory adjustment (12) (8)
- --------------------------------------------------------------
$ 2 $ 1
- --------------------------------------------------------------
1998
MTBE purchase commitment $ 40 $26
Other 18 12
- --------------------------------------------------------------
$ 58 $38
- --------------------------------------------------------------
1997
Employee terminations and related costs $ 32 $21
- --------------------------------------------------------------
</TABLE>
During 1999, Sunoco recorded a charge in connection with the settlement of lit-
igation concerning the May 1998 redemption of the Company's preference stock
(Note 15) and recorded a favorable adjustment to a market valuation reserve for
MTBE inventory established in 1998.
During 1998, Sunoco added to the accrual it established on December 31, 1996
for estimated losses expected to be realized from an off-take agreement to pur-
chase MTBE (Note 14). In addition, during 1998, Sunoco established an accrual
for environmental remediation activities, increased the estimated net realiz-
able value of a previously written down asset held for sale and recorded provi-
sions to write-down its MTBE inventory to market value and to write-off certain
assets primarily in its refining and marketing business.
During the first quarter of 1997, Sunoco established an accrual for approxi-
mately 320 involuntary employee terminations and related costs. The employee
reductions were throughout the organization and included senior management,
support staff and operations personnel. As of December 31, 1999, all of this
accrual has been paid.
5. Income Taxes
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Income taxes currently payable:
U.S. federal $-- $ 12 $ (9)
State and other 3 2 --
- -------------------------------------------------------------
3 14 (9)
- -------------------------------------------------------------
Deferred taxes:
U.S. federal 49 96 130
State and other 1 (1) 1
- -------------------------------------------------------------
50 95 131
- -------------------------------------------------------------
$53 $109 $122
- -------------------------------------------------------------
</TABLE>
The reconciliation of income tax expense at the U.S. statutory rate to the in-
come tax expense is as follows:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense at U.S. statutory rate of 35
percent $53 $136 $135
Increase (reduction) in income taxes resulting
from:
State income taxes net of Federal income tax
effects 2 1 --
Puerto Rico possession tax credit -- (13)* --
Dividend exclusion for affiliated companies (3) (3) (4)
Nonconventional fuel credit -- (2) --
Other 1 (10) (9)
- -------------------------------------------------------------------------------
$53 $109 $122
- -------------------------------------------------------------------------------
</TABLE>
* During 1998, Sunoco revoked its election under the Internal Revenue Code con-
cerning the Puerto Rico possession tax credit. The $13 million tax benefit
resulted primarily from recognition of additional deferred tax benefits asso-
ciated with a write-down of assets recorded in 1996 in connection with a
project to reconfigure the Company's Puerto Rico refinery.
31
<PAGE>
The tax effects of temporary differences which comprise the net deferred income
tax liability are as follows:
<TABLE>
<CAPTION>
December 31
--------------
(Millions of Dollars) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Retirement benefit liabilities $ 133 $ 142
Environmental remediation liabilities 56 63
Other liabilities not yet deductible 203 251
Federal net operating loss carryforward* 70 --
Alternative minimum tax credit carryforward** 76 67
Other 100 85
Valuation allowance*** (32) (32)
- -------------------------------------------------------------------------------
606 576
- -------------------------------------------------------------------------------
Deferred tax liabilities:
Properties, plants and equipment (661) (581)
Other (49) (48)
- -------------------------------------------------------------------------------
(710) (629)
- -------------------------------------------------------------------------------
Net deferred income tax liability $(104) $ (53)
- -------------------------------------------------------------------------------
* The Federal net operating loss carryforward totals $200 million at December
31, 1999 and is comprised of $88 million which expires in 2011 and $112
million which expires in 2019.
** Alternative minimum tax credit carryforwards may be carried forward indefi-
nitely.
*** The valuation allowance reduces certain state net operating loss
carryforwards to the amount that will more likely than not be realized.
The net deferred income tax liability is classified in the consolidated balance
sheets as follows:
<CAPTION>
December 31
--------------
(Millions of Dollars) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Current asset $ 133 $ 122
Noncurrent liability (237) (175)
- -------------------------------------------------------------------------------
$(104) $ (53)
- -------------------------------------------------------------------------------
</TABLE>
Cash payments for (refunds of) income taxes were $4, $(6) and $26 million in
1999, 1998 and 1997, respectively.
6. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings
per share ("EPS") for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
(In Millions, Except Per Share Amounts) 1999 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net income applicable to common
shareholders (basic EPS numerator) $97 $260 $219
Add: Dividends on preference stock -- 20 44
- --------------------------------------------------------------------------
Net income (diluted EPS numerator) $97 $280 $263
- --------------------------------------------------------------------------
Weighted average number of common shares
outstanding (basic EPS denominator) 90.3 84.2 72.3
Add effect of dilutive securities:
Redeemable preference shares (Note 15) -- 9.8 24.6
Stock incentive awards .7 1.0 .5
- --------------------------------------------------------------------------
Weighted average number of shares (diluted EPS
denominator) 91.0 95.0 97.4
- --------------------------------------------------------------------------
Basic EPS $1.07 $3.09 $3.03
Diluted EPS $1.07 $2.95 $2.70
- --------------------------------------------------------------------------
</TABLE>
7. Inventories
<TABLE>
<CAPTION>
December 31
---------------
(Millions of Dollars) 1999 1998
- ----------------------------------------------
<S> <C> <C>
Crude oil $158 $184
Refined products 163 219
Materials, supplies and other 82 80
- ----------------------------------------------
$403 $483
- ----------------------------------------------
</TABLE>
The current replacement cost of all inventories valued at LIFO exceeded their
carrying value by $763 and $205 million at December 31, 1999 and 1998, respec-
tively. During 1999, Sunoco reduced certain inventory quantities which were
valued at lower LIFO costs prevailing in prior years. The effect of this reduc-
tion in inventory was to increase 1999 net income by $11 million.
8. Investments and Long-Term Receivables
<TABLE>
<CAPTION>
December 31
---------------
(Millions of Dollars) 1999 1998
- --------------------------------------------------------------------
<S> <C> <C>
Investments in and advances to affiliated companies $ 95 $ 80
Accounts and notes receivable 23 16
Other investments -- 12
- --------------------------------------------------------------------
$118 $108
- --------------------------------------------------------------------
</TABLE>
Dividends received from affiliated companies amounted to $14, $15 and $13 mil-
lion in 1999, 1998 and 1997,
32
<PAGE>
respectively. Earnings employed in the business at December 31, 1999 include
$61 million of undistributed earnings of affiliated companies.
9. Properties, Plants and Equipment
<TABLE>
<CAPTION>
Accumulated
Depreciation,
(Millions of Gross Depletion
Dollars) Investment and Net
December 31 at Cost Amortization Investment
- ---------------------------------------------------
<S> <C> <C> <C>
1999
Refining and
marketing* $6,051 $2,893 $3,158
Cokemaking 393 136 257
- ---------------------------------------------------
$6,444 $3,029 $3,415
- ---------------------------------------------------
1998
Refining and
marketing* $5,782 $2,709 $3,073
Cokemaking 466 193 273
- ---------------------------------------------------
$6,248 $2,902 $3,346
- ---------------------------------------------------
</TABLE>
* Includes gross amounts leased to third parties totalling $566 and $529 mil-
lion at December 31, 1999 and 1998, respectively. Related accumulated depre-
ciation totalled $262 and $229 million at December 31, 1999 and 1998, respec-
tively.
Annual future minimum rentals due Sunoco, as lessor, on noncancelable operating
leases at December 31, 1999 are as follows (in millions of dollars):
<TABLE>
- ----------------------------------
<S> <C>
Year ending December 31:
2000 $39
2001 26
2002 14
2003 7
2004 4
Thereafter 1
- ----------------------------------
$91
- ----------------------------------
</TABLE>
10. Short-Term Borrowings and Credit Facilities
The Company has a $500 million revolving credit agreement ("Agreement") with
commercial banks that provides access to short-term financing through September
2002 bearing interest based on selected reference rates. The Company can borrow
directly from the participating banks under this Agreement or use it to support
the issuance of commercial paper. The Agreement is subject to commitment fees,
the amounts of which are not material. Under the terms of the Agreement, Sunoco
is required to maintain consolidated net worth of at least $1.0 billion. At De-
cember 31, 1999, the Company's consolidated net worth was $1.5 billion. The
Agreement also requires that Sunoco's ratio of debt to capital, as those terms
are defined in the Agreement, not exceed .55 to 1. At December 31, 1999, this
ratio was .41 to 1. The following table sets forth amounts outstanding related
to the above short-term borrowing arrangements:
<TABLE>
<CAPTION>
December 31
------------
(Millions of Dollars) 1999 1998
- --------------------------------------------
<S> <C> <C>
Commercial paper $150 $ --
Bank borrowings under
revolving credit agreement -- 120
- --------------------------------------------
$150 $ 120
- --------------------------------------------
</TABLE>
The commercial paper outstanding had a weighted average interest rate of 6.74
percent at December 31, 1999, while the interest rate on the bank borrowings
was 5.84 percent at December 31, 1998.
11. Long-Term Debt
<TABLE>
<CAPTION>
December 31
--------------
(Millions of Dollars) 1999 1998
- ----------------------------------------------
<S> <C> <C>
9 3/8% debentures due 2016 $200 $200
9% debentures due 2024 100 100
8 1/8% notes paid in 1999 -- 150
7.95% notes due 2001 150 150
7 3/4% notes due 2009 200 --
7.60% environmental
industrial revenue bonds
due 2024 100 100
7 1/8% notes due 2004 100 100
6 3/4% convertible
debentures due 2012 (Note
15) 10 10
Non-interest bearing seller
financing -- 68
Other 22 17
- ----------------------------------------------
882 895
Less:unamortized discount 3 3
current portion 1 69
- ----------------------------------------------
$878 $823
- ----------------------------------------------
</TABLE>
The aggregate amount of long-term debt maturing and sinking fund requirements
in the years 2000 through 2004 is as follows (in millions of dollars):
- ----------------------------------------------
<TABLE>
<S> <C> <C> <C>
2000 $ 1 2003 $ 1
2001 $151 2004 $100
2002 $ 1
- ----------------------------------------------
</TABLE>
Cash payments for interest related to short-term borrowings and long-term debt
(net of amounts capitalized) were $75, $69 and $75 million in 1999, 1998 and
1997, respectively.
12. Retirement Benefit Plans
Defined Benefit Pension Plans and Postretirement Health Care and Life Insurance
Plans
Sunoco has noncontributory defined benefit pension plans ("defined benefit
plans") which provide retirement benefits for the majority of its employees.
Sunoco also has plans which provide health care and life insurance benefits for
substantially all of its retirees ("postretirement benefit plans"). The
postretirement benefit plans are unfunded and the costs are shared by Sunoco
and its retirees.
33
<PAGE>
Pension and postretirement health care and life insurance expense (benefit)
consisted of the following components:
<TABLE>
<CAPTION>
Defined Postretirement
Benefit Plans Benefit Plans
------------------------- ------------------------
(Millions of Dollars) 1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost (cost of
benefits earned during
the year) $ 28 $ 26 $ 26 $ 5 $ 5 $ 4
Interest cost on benefit
obligations 87 87 92 22 23 23
Expected return on plan
assets (112) (108) (105) -- -- --
Amortization of:
Net transition asset (9) (9) (9) -- -- --
Prior service cost
(benefit) 3 1 1 (9) (8) (8)
Unrecognized losses 3 2 2 -- -- --
Curtailment (gains)
losses* -- -- 2 -- -- (5)
- ------------------------------------------------------------------------------
$ -- $ (1) $ 9 $18 $20 $14
- ------------------------------------------------------------------------------
</TABLE>
* Recognized in connection with the employee termination program implemented
during 1997 (Note 4).
The following tables set forth the components of the changes in benefit obliga-
tions and fair value of plan assets during 1999 and 1998 as well as the funded
status and amounts both recognized and not recognized in the consolidated bal-
ance sheets at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Defined Postretirement
Benefit Plans Benefit Plans
-------------- ----------------
(Millions of Dollars) 1999 1998 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Benefit obligations at beginning of year* $1,281 $1,268 $ 348 $ 336
Service cost 28 26 5 5
Interest cost 87 87 22 23
Actuarial (gains) losses (81) 24 (36) 8
Acquisitions -- 17 -- 3
Benefits paid (141) (141) (32) (28)
Premiums paid by participants -- -- 4 4
Other 15 -- (1) (3)
- -------------------------------------------------------------------------------
Benefit obligations at end of year* $1,189 $1,281 $ 310 $ 348
- -------------------------------------------------------------------------------
Fair value of plan assets at beginning of
year** $1,350 $1,277
Actual return on plan assets 214 172
Employer contributions 3 13
Acquisitions -- 15
Benefits paid from plan assets (128) (127)
- -------------------------------------------------------------------------------
Fair value of plan assets at end of year** $1,439 $1,350
- -------------------------------------------------------------------------------
Benefit obligations (in excess of) less than
plan assets at end of year $ 250 $ 69 $(310) $ (348)
Unrecognized net transition asset (1) (10) -- --
Unrecognized prior service cost (benefit) 23 11 (38) (47)
Unrecognized net (gain) loss (288) (101) (17) 19
- -------------------------------------------------------------------------------
Net liability recognized in balance sheet at
end of year $ (16) $ (31) $(365) $ (376)
- -------------------------------------------------------------------------------
* Represents the projected benefit obligations for defined benefit plans and
the accumulated postretirement benefit obligations ("APBO") for
postretirement benefit plans.
** Less than 1 percent of plan assets was invested in Company stock.
The net liability recognized in the consolidated balance sheets at December 31,
1999 and 1998 is classified as follows:
<CAPTION>
Defined Postretirement
Benefit Plans Benefit Plans
-------------- ----------------
(Millions of Dollars) 1999 1998 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Retirement benefit liabilities $ (50) $ (73) $(365) $(376)
Deferred charges and other assets* 34 42 -- --
- -------------------------------------------------------------------------------
$ (16) $ (31) $(365) $(376)
- -------------------------------------------------------------------------------
</TABLE>
* Represents an intangible asset for which an equivalent additional minimum li-
ability is included in retirement benefit liabilities.
34
<PAGE>
Certain of the Company's defined benefit plans have accumulated benefit obliga-
tions in excess of the fair value of plan assets. The total projected benefit
obligations, accumulated benefit obligations and fair value of plan assets of
such plans were $125, $121 and $-- million, respectively, as of December 31,
1999 and $255, $234 and $106 million, respectively, as of December 31, 1998.
The following weighted average assumptions were used during 1999 and 1998 in
accounting for the plans:
<TABLE>
<CAPTION>
Defined Postretirement
Benefit Plans Benefit Plans
------------- ---------------
(Millions of Dollars) 1999 1998 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate 7.75% 6.75% 7.75% 6.75%
----------------
Long-term rate of return on plan assets 9.00% 9.00%
Rate of compensation increase 4.00% 4.00%
- ----------------------------------------------------------------------
</TABLE>
The health care cost trend assumptions used at December 31, 1999 and 1998 to
compute the APBO for the postretirement benefit plans were 6.3 and 6.8 percent,
respectively, which are assumed to decline gradually to 5.5 percent in 2001 and
to remain at that level thereafter.
A one-percentage point change each year in assumed health care cost trend rates
would have the following effects at December 31, 1999:
<TABLE>
<CAPTION>
1-Percentage 1-Percentage
(Millions of Dollars) Point Increase Point Decrease
- ---------------------------------------------------
<S> <C> <C>
Effect on total
of service and
interest cost
components of
postretirement
benefits
expense $1 $(1)
Effect on APBO $4 $(4)
- ---------------------------------------------------
</TABLE>
Defined Contribution Pension Plans
Sunoco has defined contribution pension plans which provide retirement benefits
for most of its employees. Sunoco's contributions, which are principally based
on a percentage of employees' annual base compensation and are charged against
income as incurred, amounted to $16, $18 and $17 million in 1999, 1998 and
1997, respectively.
Sunoco's principal defined contribution plan is SunCAP. Sunoco matches 100 per-
cent of employee contributions to this plan up to 5 percent of an employee's
base compensation. SunCAP is a combined profit sharing and employee stock own-
ership plan which contains a provision designed to permit SunCAP, only upon ap-
proval by the Company's Board of Directors, to borrow in order to purchase
shares of Company common stock. As of December 31, 1999, no such borrowings had
been approved.
13. Transferred Interests in Cokemaking Operations
In 1998, Sunoco transferred an interest in its Indiana Harbor cokemaking opera-
tion in East Chicago, IN, to a third party for $200 million in cash. In 1995,
Sunoco transferred an interest in its Jewell cokemaking
operation in Vansant, VA, to another third party for $95 million in cash. The
investors in each operation are entitled to 95 percent of the cash flows and
tax benefits from the respective cokemaking operations until certain cumulative
return targets have been met. After these preferential return periods, which
are expected to end in 2002 and 2000, respectively, the third parties will be
entitled to variable minority interests in the cash flows and tax benefits from
the respective operations ranging from 5 to 25 percent. Sunoco did not recog-
nize any gain or loss on these transactions. The outstanding balance attribut-
able to the transferred interests in these operations totalled $175 and $226
million at December 31, 1999 and 1998, respectively, and is reflected in other
deferred credits and liabilities in the consolidated balance sheets.
14. Commitments and Contingent Liabilities
Sunoco, as lessee, has noncancelable operating leases for marine transportation
time charters and for service stations, office space and other property and
equipment. Total rental expense for such leases for the years 1999, 1998 and
1997 amounted to $115, $118 and $107 million, respectively. Approximately 8
percent of total rental expense was recovered through related sublease rental
income during 1999.
The aggregate amount of future minimum annual rentals applicable to noncancel-
able operating leases are as follows (in millions of dollars):
<TABLE>
- ----------------------------------
<S> <C>
Year ending December 31:
2000 $ 59
2001 71
2002 78
2003 66
2004 44
Thereafter 202
- ----------------------------------
$520
- ----------------------------------
</TABLE>
A wholly owned subsidiary of the Company is a one-third partner in Belvieu En-
vironmental Fuels ("BEF"), a joint venture formed for the purpose of construct-
ing, owning and operating a methyl tertiary butyl ether ("MTBE") production fa-
cility in Mont Belvieu, Texas. At December 31, 1999, the Company had a $55 mil-
lion investment in this operation.
35
<PAGE>
In order to obtain a secure supply of oxygenates for the manufacture of refor-
mulated gasoline, Sunoco entered into an off-take agreement with BEF whereby
Sunoco agreed to purchase all of the MTBE production from the plant. From May
1997 through May 2000, for the first 14,000 barrels daily of production, Sunoco
agreed to pay BEF a price based on then-existing MTBE prices in the contract
market (the "contract market price"). Sunoco also agreed to pay BEF the current
spot market price for production above 14,000 barrels daily. In addition, the
price to be paid by Sunoco for the first 12,600 barrels daily of MTBE produc-
tion from May 1997 through May 2000, at a minimum, generally will equal the sum
of BEF's annual raw material and cash operating costs associated with that pro-
duction plus BEF's debt service payments (collectively, the "minimum price") if
the minimum price per gallon exceeds the contract market price. Sunoco has been
paying the minimum price under this agreement since May 1997. After May 2000,
Sunoco and BEF will negotiate a new price for the last four years of the agree-
ment based upon the market conditions existing at that time.
Sunoco's total MTBE purchases under this agreement were $192, $182 and $235
million during 1999, 1998 and 1997, respectively. During the fourth quarter of
1996, spot market prices for MTBE were less than the prices paid by Sunoco un-
der the off-take agreement with BEF. At that time, the Company expected this
adverse relationship to continue into the future. Accordingly, a $130 million
accrual ($85 million after tax) was established at December 31, 1996 for the
estimated purchase commitment loss expected to be realized with respect to this
agreement.
The $130 million loss accrual was based primarily on the Company's marketplace
assumptions concerning the worldwide supply and demand for MTBE through May
2000. At December 31, 1996, the Company believed that MTBE demand would in-
crease in 1999 largely as a result of various jurisdictions electing to volun-
tarily comply with (or opt into) the reformulated gasoline requirements of the
Clean Air Act by the end of 1998. At December 31, 1998, the number of "opt ins"
was lower than what the Company had originally anticipated and certain other
jurisdictions were considering "opting out" of the voluntary reformulated fuel
requirements. As a result of these and other market factors, management be-
lieved that MTBE demand would not increase as previously anticipated. Accord-
ingly, an additional $40 million ($26 million after tax) was added to the ac-
crual in December 1998 for incremental losses expected to be realized with re-
spect to this agreement. During 1999, 1998 and 1997, actual MTBE purchase costs
in excess of spot market prices totalling $39, $47 and $65 million, respective-
ly, were charged against the accrual. The accrual has a remaining balance of
$19 million as of December 31, 1999.
In November 1998, the EPA convened an advisory Panel on Oxygenate Use in Gaso-
line (the "Panel"). The purpose of the Panel was to review public health and
environmental issues that have been raised by the use of MTBE in gasoline, and
specifically by the discovery of MTBE in water supplies. The Panel made its
recommendations to the EPA on July 27, 1999. The recommendations call for the
improved protection of drinking water from MTBE contamination, a substantial
reduction in the use of MTBE, and action by Congress to remove the oxygenate
requirements for reformulated gasoline under the Clean Air Act. State and fed-
eral environmental agencies could implement the majority of the recommenda-
tions; however, some would require Congressional legislative action. While the
Panel recommended that certain public and private funding options be explored
for the clean up of contaminated sites, it made no specific recommendations
concerning such funding options. However, private parties are seeking clean-up
remedies primarily from East and West Coast gasoline marketers, including Suno-
co. California has acted to ban MTBE use by December 31, 2002. In connection
with the MTBE ban, California has requested a waiver from the EPA of its oxy-
genate requirements. Other states are also reviewing the use of MTBE in gaso-
line. MTBE is the primary oxygenate used by Sunoco and throughout the industry
to meet the reformulated gasoline requirements under the Clean Air Act. While
phase-outs or restrictions on the use of MTBE or any required clean up of MTBE
could have a significant impact on Sunoco and its results of operations, the
ultimate impact cannot be determined at this time.
Sunoco is a party under agreements which provide for future payments to secure
wastewater treatment services at its Toledo refinery and coal handling services
at its Indiana Harbor cokemaking facility. The fixed and determinable amounts
of the obligations under these agreements are as follows (in millions of dol-
lars):
<TABLE>
- --------------------------------------------
<S> <C>
Year ending December 31:
2000 $ 10
2001 10
2002 10
2003 9
2004 8
2005 through 2018 86
- --------------------------------------------
Total 133
Less: Amount representing interest 53
- --------------------------------------------
Total at present value $ 80
- --------------------------------------------
</TABLE>
36
<PAGE>
Payments under these agreements, including variable components, commenced in
mid-1998 and totalled $16 and $8 million in 1999 and 1998, respectively.
Sunoco is contingently liable under various arrangements which guarantee debt
of affiliated companies and others aggregating approximately $26 million at De-
cember 31, 1999 and maturing at various dates through 2014.
Sunoco is subject to numerous federal, state and local laws which regulate the
discharge of materials into the environment or that otherwise relate to the
protection of the environment. These laws result in liabilities and loss con-
tingencies for remediation at Sunoco's facilities and at third-party or former-
ly-owned sites. The accrued liability for environmental remediation is classi-
fied in the consolidated balance sheets as follows:
<TABLE>
<CAPTION>
December 31
----------------------
(Millions of Dollars) 1999 1998
- ---------------------------------------------
<S> <C> <C>
Accrued liabilities $ 46 $ 56
Other deferred credits and
liabilities 114 126
- ---------------------------------------------
$160 $182
- ---------------------------------------------
</TABLE>
Pretax charges against income for environmental remediation totalled $11, $13
and $6 million in 1999, 1998 and 1997, respectively. Claims for recovery of en-
vironmental liabilities that are probable of realization totalled $2 million at
December 31, 1999 and are included in deferred charges and other assets in the
consolidated balance sheets.
On October 4, 1996, Sunoco filed a complaint in Los Angeles County Superior
Court, Jalisco Corporation, Inc., et al. v. Argonaut Insurance Company, et al.
(Case No. BC 158441), naming more than 45 insurance companies as defendants and
seeking recovery under numerous insurance policies for certain environmental
matters of Sunoco, including its predecessor companies and subsidiaries, aris-
ing from the ownership and operation of its businesses. In 1999 and 1998, the
Company entered into several settlements which resolved most of these claims.
As a result, the Company received net cash proceeds totalling $4 million in
1998, $96 million in 1999 and $28 million in early 2000. Pretax gains of $73
million ($47 million after tax) and $58 million ($38 million after tax) were
recognized in other income in 1999 and 1998, respectively, in connection with
these settlements.
Total future costs for environmental remediation activities will depend upon,
among other things, the identification of any additional sites, the determina-
tion of the extent of the contamination at each site, the timing and nature of
required remedial actions, the technology available and needed to meet the var-
ious existing legal requirements, the nature and extent of future environmental
laws, inflation rates and the determination of Sunoco's liability at multi-
party sites, if any, in light of the number, participation levels and financial
viability of other parties.
Many other legal and administrative proceedings are pending against Sunoco. The
ultimate outcome of these proceedings and the matters discussed above cannot be
ascertained at this time; however, it is reasonably possible that some of them
could be resolved unfavorably to Sunoco. Management believes that any expendi-
tures attributable to these matters will be incurred over an extended period of
time and will be funded from Sunoco's net cash flows from operating activities.
Although the ultimate impact of these matters could have a significant impact
on results of operations for any one year, management of Sunoco believes that
any additional liabilities which may arise pertaining to such matters would not
be material in relation to the consolidated financial position of Sunoco at De-
cember 31, 1999.
15. Shareholders' Equity
Each share of Company common stock is entitled to one full vote. The $10 mil-
lion of outstanding 6 3/4 percent debentures are convertible into shares of Su-
noco common stock at any time prior to maturity at a conversion price of $40.81
per share and are redeemable at the option of the Company. At December 31,
1999, there were 242,981 shares of common stock reserved for this potential
conversion (Note 11).
On May 28, 1998, the Company redeemed all of its 12,033,760 then outstanding
shares of preference stock. Each share of preference stock was evidenced by two
depositary shares. Under the terms of redemption, established when the shares
of preference stock were issued, each preference share was redeemed in exchange
for 1.899674 shares of Sunoco's common stock plus accrued and unpaid dividends
of $.7516. The preference-to-common stock exchange ratio represented the call
price of $80 per preference share payable in Sunoco common stock valued at
$42.1125 per common share--the average of the closing prices for Sunoco common
stock on the New York Stock Exchange, as reported on the consolidated tape, for
the five consecutive trading days from April 20 to April 24, 1998, inclusive.
At the exchange ratio of 1.899674 shares of common stock for each share
37
<PAGE>
of preference stock, 22,859,633 shares of Sunoco common stock held in treasury
were reissued. In connection with this redemption, a lawsuit was filed alleging
that Sunoco incorrectly calculated the exchange ratio and should have issued an
additional 1.36 million shares of Sunoco common stock. While the Company be-
lieves the exchange ratio was correctly calculated, in the fourth quarter of
1999 it agreed to settle the lawsuit, subject to court approval. Accordingly, a
$14 million charge ($9 million after tax) was recorded in 1999 in connection
with the settlement.
During the 1997-99 period, the Company repurchased 8,260,950 shares of its com-
mon stock and 853,580 of its depositary shares for $335 million. At December
31, 1999, the Company has a remaining authorization from its Board of Directors
("Board") to purchase up to $136 million of Company stock in the open market or
through privately negotiated transactions from time to time depending on pre-
vailing market conditions.
The Company's Articles of Incorporation authorize the issuance of up to
15,000,000 shares of preference stock without par value, subject to approval by
the Board. The Board also has authority to fix the number, designation, rights,
preferences and limitations of these shares, subject to applicable laws and the
provisions of the Articles of Incorporation.
On February 1, 1996, the Company adopted a shareholder rights plan and desig-
nated 1,743,019 shares of its preference stock as Series B participating cumu-
lative preference stock. Pursuant to the plan, the Company declared a dividend
of one stock purchase right ("Right") for each share of common stock outstand-
ing on February 12, 1996. A Right will be granted for each share of common
stock issued after such date and prior to the expiration date of the rights
plan. The Rights are attached to the common stock until they become exercis-
able. Generally, the Rights become exercisable a specified period after a party
acquires 15 percent or more of the aggregate outstanding common stock or an-
nounces a tender offer for 15 percent or more of the common stock. Each Right
initially entitles a holder to purchase one one-hundredth of a share of the Se-
ries B participating cumulative preference stock for $100. After a party has
acquired 15 percent or more of the common stock, each Right will entitle a
holder to pay $100 for the number of shares of Company common stock (or in cer-
tain 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 Company common stock for each Right at any time after a party has ac-
quired at least 15 percent but less than 50 percent of the common 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 common
stock. In general, none of the benefits of the Rights will be available to a
holder of 15 percent or more of the common stock. The Rights will expire on
February 12, 2006, unless earlier exchanged or redeemed.
The Employee Option Plan ("EOP") provides for the award of stock options to all
employees (other than executives) of the Company and certain subsidiaries. The
awards have a ten-year term, are not exercisable until two years after the date
of grant and permit optionees to purchase Company common stock at its fair mar-
ket value on the date of grant. Since its adoption, stock option awards for
1,963,280 shares were made to eligible employees under EOP.
16. Management Incentive Plans
Sunoco's principal management incentive plans are the Executive Incentive Plan
("EIP") and the Long-Term Performance Enhancement Plan ("LTPEP"). The EIP pro-
vides for the payment of annual cash incentive awards while the LTPEP, which
succeeded the Executive Long-Term Stock Investment Plan in May 1997, provides
for the award of stock options, common stock units and related rights to offi-
cers and other key employees of Sunoco. The option awards under LTPEP have a
ten-year term, are not exercisable until two years after the date of grant and
permit optionees to purchase Company common stock at the fair market value on
the date of grant. No awards may be granted under LTPEP after December 31,
2001, unless the Board extends this date to a date no later than December 31,
2006. Aggregate charges against income for Sunoco's principal management incen-
tive plans for 1999, 1998 and 1997 were $2, $13 and $17 million, respectively.
38
<PAGE>
The following table summarizes information with respect to common stock option
awards under the EOP (Note 15) and Sunoco's management incentive plans:
<TABLE>
<CAPTION>
Management Incentive
Employee Option Plan Plans
----------------------- ------------------------
Weighted
Average
Shares Option Shares Option
Under Price Under Price
Option Per Share Option Per Share
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, December 31,
1996 1,487,475 $28.00 3,989,800 $28.96
Granted -- 557,840 $39.88
Exercised (647,127) $28.00 (1,109,732)* $28.64
Canceled (128,910) $28.00 (56,130) $28.99
- -----------------------------------------------------------------------------
Outstanding, December 31,
1997 711,438 $28.00 3,381,778 $30.87
Granted -- 822,640 $32.88
Exercised (131,719) $28.00 (413,413)* $29.62
Canceled (9,600) $28.00 (15,803) $34.79
- -----------------------------------------------------------------------------
Outstanding, December 31,
1998 570,119 $28.00 3,775,202 $31.43
Granted -- 1,024,580 $25.25
Exercised (24,630) $28.00 (81,575) $29.31
Canceled (10,315) $28.00 (133,140) $40.15
- -----------------------------------------------------------------------------
Outstanding, December 31,
1999 535,174 $28.00 4,585,067 $29.83
- -----------------------------------------------------------------------------
Exercisable, December 31
- -----------------------------------------------------------------------------
1997 711,438 $28.00 2,723,938 $29.31
1998 570,119 $28.00 2,398,752 $28.98
1999 535,174 $28.00 2,741,447 $30.63
- -----------------------------------------------------------------------------
Available for Grant,
December 31
- -----------------------------------------------------------------------------
1997 417,030 3,334,250
1998 426,630 2,419,660
1999 436,945 1,311,880
- -----------------------------------------------------------------------------
</TABLE>
* Includes 124,260 and 144,116 options in 1998 and 1997, respectively, canceled
due to the exercise of related alternate appreciation rights which resulted
in the issuance of 22,859 and 81,735 shares, respectively. Alternate appreci-
ation rights permit the optionee to receive in cash or common stock an amount
equal to the appreciation in value of Company common stock from the date of
grant.
The following table provides additional information concerning the options out-
standing at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------- -----------------------
Weighted
Average
Remaining Weighted Weighted
Shares Contractual Average Shares Average
Range of Under Life Exercise Under Exercise
Exercise Prices Option (Years) Price Option Price
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$23.25 - $25.25 1,447,574 9 $24.97 422,994 $24.30
$27.25 - $28.00 1,320,152 4 $27.76 1,320,152 $27.76
$30.19 - $32.88 1,808,715 6 $31.67 989,675 $30.68
$39.88 543,800 8 $39.88 543,800 $39.88
- ----------------------------------------------------------------------------
$23.25 - $39.88 5,120,241 7 $29.64 3,276,621 $30.20
- ----------------------------------------------------------------------------
</TABLE>
39
<PAGE>
Common stock unit awards entitle the holder to receive Company common stock
upon completion of a restriction period or upon attainment of predetermined
performance targets. The following table summarizes information with respect to
common stock unit awards under Sunoco's management incentive plans:
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------
<S> <C> <C> <C>
Outstanding at
beginning of
year 305,986 219,829 125,440
Granted 97,810 96,870 107,910
Matured (38,583) (8,933) (3,600)
Canceled (1,000) (1,780) (9,921)
- -----------------------------------------------
Outstanding at
end of year 364,213 305,986 219,829
- -----------------------------------------------
</TABLE>
The Company follows the method of accounting for employee stock compensation
plans prescribed by Accounting Principles Board Opinion No. 25. In accordance
with APB No. 25, the Company has not recognized compensation expense for stock
options because the exercise price of the options equals the market price of
the underlying stock on the date of grant, which is the measurement date. Had
the alternative method of accounting for employee stock compensation plans pre-
scribed by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" been followed, the pro forma impact on Sunoco's net
income and net income per share of common stock on a diluted basis would have
been as follows:
<TABLE>
<CAPTION>
(Millions of Dollars,
Except Per
Share Amounts) 1999 1998 1997
- ------------------------------------------
<S> <C> <C> <C>
Net income:
As reported $97 $ 280 $ 263
Pro forma $91 $ 278 $ 262
Net income per share:
As reported $1.07 $2.95 $2.70
Pro forma $1.00 $2.93 $2.69
- ------------------------------------------
</TABLE>
The pro forma amounts above are based upon the estimated fair values of $6.12,
$7.52 and $10.59 per option granted during 1999, 1998 and 1997, respectively.
These values are calculated using the Black-Scholes option pricing model based
on the following weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------
<S> <C> <C> <C>
Expected life
(years) 6 6 6
Risk-free
interest rate 6.5% 4.8% 5.8%
Dividend yield 4.0% 3.0% 2.5%
Expected
volatility 27.0% 24.5% 24.3%
- --------------------------------------------
</TABLE>
17. Financial Instruments
The estimated fair value of financial instruments has been determined based on
the Company's assessment of available market information and appropriate valua-
tion methodologies. However, these estimates may not necessarily be indicative
of the amounts that the Company could realize in a current market exchange.
Sunoco's current assets (other than inventories and deferred income taxes) and
current liabilities are financial instruments. The estimated fair value of
these financial instruments approximates their carrying amounts. At December
31, 1999 and 1998, the estimated fair values of Sunoco's long-term debt were
$898 and $917 million, respectively, compared to carrying amounts of $878 and
$823 million, respectively. Long-term debt which is publicly traded was valued
based on quoted market prices while the fair value of other debt issues was es-
timated by management based upon current interest rates available to Sunoco at
the respective balance sheet dates for similar issues.
The Company guarantees the debt of affiliated companies and others (Note 14).
Due to the complexity of these guarantees and the absence of any market for
these financial instruments, the Company does not believe it is practicable to
estimate their fair value.
Sunoco uses a variety of off-balance sheet commodity-based financial and nonfi-
nancial derivative instruments for hedging purposes. Sunoco is at risk for pos-
sible changes in the market value for these derivative instruments. However, it
is anticipated that such risk would be mitigated by price changes in the under-
lying hedged transactions. In addition, Sunoco is exposed to credit risk in the
event of nonperformance by counterparties. Management believes this risk is
negligible as its counterparties are either regulated by exchanges or are major
international financial institutions with high credit ratings. Market and
credit risks associated with all of Sunoco's derivative contracts are reviewed
regularly by management.
Sunoco uses futures and forward contracts to achieve ratable pricing of its
crude oil purchases and to convert certain refined product sales from fixed to
floating price. In addition, price collars, swaps and option contracts are used
to lock in a portion of the Company's electricity and natural gas costs. Sunoco
also uses swaps, price collars and other option contracts from time to time to
hedge against significant increases in crude oil prices and to lock in what Su-
noco considers to be acceptable wholesale margins for various refined products.
At December 31, 1999, margins for approximately 14 million barrels (6 percent
of the Company's expected 2000 wholesale fuels sales) had been locked in.
40
<PAGE>
The following table sets forth summary information concerning Sunoco's finan-
cial and nonfinancial derivative instruments at December 31, 1999:
<TABLE>
<CAPTION>
Deferred
(Millions of Dollars) Gain (Loss) Fair Value*
- -----------------------------------------------
<S> <C> <C>
Swaps $12 $12
Options (1) (1)
Futures and
forwards 2 2
- -----------------------------------------------
$13 $13
- -----------------------------------------------
</TABLE>
* Based on various indices or dealer quotes.
The above contracts vary in duration but do not extend beyond 2000.
18. Acquisition of Phenol Facility
On June 30, 1998, Sunoco acquired the Philadelphia phenol facility of
AlliedSignal Inc. ("Allied") for $157 million. Of this amount, $48 million was
paid on the acquisition date, $41 million was paid in the second half of 1998
and the remaining $68 million was paid in 1999. In connection with this acqui-
sition, Sunoco has entered into a long-term contract to supply Allied with
approximately 740 million pounds of phenol annually at a price based on the
market value of cumene feedstock plus an amount approximating other phenol
production costs.
The acquisition has been accounted for as a purchase. The results of operations
of the phenol facility have been included in the consolidated statements of in-
come since the date of acquisition. The purchase price has been allocated to
the assets acquired and liabilities assumed based on their relative fair market
values at the acquisition date. The following is a summary of the effects of
this transaction on Sunoco's consolidated financial position as of the acquisi-
tion date:
<TABLE>
<CAPTION>
(Millions of Dollars)
- -----------------------------------------------
<S> <C>
Allocation of purchase price:
Inventories $ 20
Properties, plants and equipment 155
Other assets 4
Accounts payable and accrued
liabilities (1)
Retirement benefit liabilities (5)
Other liabilities (16)
- -----------------------------------------------
157
- -----------------------------------------------
Seller financing:
Short-term borrowings and current
portion of long-term debt (74)
Long-term debt (35)
- -----------------------------------------------
(109)
- -----------------------------------------------
Cash paid on acquisition date $ 48
- -----------------------------------------------
</TABLE>
The unaudited pro forma net income and net income per share of common stock on
a diluted basis of Sunoco for the years ended December 31, 1998 and 1997, as if
the acquisition of the phenol facility had occurred on January 1, 1997, were
$294 million ($3.09 per share) and $280 million ($2.87 per share), respective-
ly. The pro forma information does not purport to be indicative of the results
that actually would have been obtained if the combined operations had been con-
ducted during the periods presented and is not intended to be a projection of
future results.
19. Business Segment Information
Sunoco is principally a petroleum refiner and marketer with interests in
cokemaking. Sunoco's operations are organized into seven business segments.
The Northeast Refining segment manufactures petroleum products and petrochemi-
cal feedstocks at Sunoco's Marcus Hook and Philadelphia refineries and sells
these products to other Sunoco businesses and to wholesale and industrial cus-
tomers. The Northeast Marketing segment sells gasoline and middle distillates
at retail and operates convenience stores in the Mid-Atlantic and New England
states. The Chemicals segment manufactures base commodity and intermediate pet-
rochemicals primarily at Sunoco's Marcus Hook and Philadelphia refineries and
at its Philadelphia phenol facility, its Brandenburg, KY, ethylene/ethylene ox-
ide plant and its Mont Belvieu, TX, joint venture MTBE facility. This segment
also distributes and markets these products. The Lubricants segment manufac-
tures, blends, packages and markets a broad line of paraffinic and aromatic lu-
bricating and specialty oils produced at Sunoco's Tulsa and Puerto Rico refin-
eries and manufactures and markets at wholesale the related fuels produced at
these facilities. The MidAmerica Marketing & Refining segment sells gasoline
and middle distillates at retail and operates convenience stores in the Mid-
west. It also manufactures and markets fuels and petrochemicals produced at
Sunoco's Toledo refinery. The Logistics segment operates crude oil and refined
product pipelines and engages in domestic lease crude oil acquisition and re-
lated trucking operations, crude oil and product terminalling and petroleum
transport operations. Logistics operations are conducted primarily in the
Northeast, Midwest and South Central regions of the United States. The Coke
segment makes high-quality coke at Sunoco's Indiana Harbor facility in East
Chicago, IN, and its Jewell facility in Vansant, VA, and produces coal from
mines in Virginia primarily for use at the Jewell cokemaking facility. Substan-
tially all of the coke sales are made under long-term contracts with two cus-
tomers.
41
<PAGE>
Segment Information
<TABLE>
<CAPTION>
MidAmerica
Northeast Northeast Marketing
(Millions of Dollars) Refining Marketing Chemicals Lubricants & Refining Logistics Coke Consolidated
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated customers $3,039 $3,297 $530 $1,085 $1,672 $ 54 $212 $9,889
- --------------------------------------------------------------------------------------------------------------------
Intersegment $1,700 $ -- $ -- $ 35 $ -- $117 $ -- $ --
- --------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ (43) $ 84 $ 49 $ (53) $ (9) $ 65 $ 93 $ 186
Equity income -- -- 8 1 1 11 -- 21
Income tax (expense)
benefit 14 (30) (20) 18 3 (25) (33) (73)
- --------------------------------------------------------------------------------------------------------------------
Profit contribution
(loss) $ (29) $ 54 $ 37 $ (34) $ (5) $ 51 $ 60 134
- ---------------------------------------------------------------------------------------------------
Special items (after
taxes) 46*
Corporate expenses
(after taxes) (23)
Net financing expenses
and other (after taxes) (60)
---------
Net income $ 97
---------
Depreciation, depletion
and amortization $ 77 $ 73 $ 30 $ 32 $ 37 $ 14 $ 13 $ 276
- --------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 85 $ 99 $ 54 $ 28 $ 57 $ 41** $ 10 $ 374
- --------------------------------------------------------------------------------------------------------------------
Investments in and
advances to affiliated
companies $ -- $ -- $ 55 $ 9 $ 12 $ 19 $ -- $ 95
- --------------------------------------------------------------------------------------------------------------------
Identifiable assets $1,427 $ 875 $676 $ 595 $ 653 $497 $325 $5,196***
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Consists of a $47 million after-tax gain on settlement of insurance litiga-
tion and a $1 million after-tax provision for write-down of assets and other
matters (Notes 4 and 14).
** Excludes $36 million acquisition of the crude oil transportation and market-
ing operations of Pride Companies, L.P.
*** After elimination of intersegment receivables. Identifiable assets also in-
clude Sunoco's $133 million consolidated deferred income tax asset and $120
million attributable to corporate activities of which $36 million relates
to a receivable from settlement of insurance litigation.
42
<PAGE>
Segment Information
<TABLE>
<CAPTION>
MidAmerica
Northeast Northeast Marketing
(Millions of Dollars) Refining Marketing Chemicals Lubricants & Refining Logistics Coke Consolidated
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated customers $2,483 $2,826 $412 $1,002 $1,409 $ 56 $225 $8,413
- ------------------------------------------------------------------------------------------------------------------------------
Intersegment $1,300 $-- $ -- $ 55 $ -- $115 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------
Operating profit $ 101 $ 107 $ 53 $ 19 $ 44 $ 62 $ 70 $ 456
Equity income (loss) -- -- 10 (1) 5 12 -- 26
Income tax expense (36) (38) (23) (6) (17) (22) (13) (155)
- ------------------------------------------------------------------------------------------------------------------------------
Profit contribution $ 65 $ 69 $ 40 $ 12 $ 32 $ 52 $ 57 327
- -------------------------------------------------------------------------------------------------------------
Special items (after
taxes) 13*
Corporate expenses
(after taxes) (23)
Net financing expenses
and other (after taxes) (37)
---------
Net income $ 280
---------
Depreciation, depletion
and amortization $ 71 $ 69 $ 22 $ 28 $ 37 $ 13 $ 17 $ 257
- ------------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 130 $ 74 $ 53** $ 39 $ 57 $ 39 $ 65 $ 457
- ------------------------------------------------------------------------------------------------------------------------------
Investments in and
advances to affiliated
companies $ -- $-- $ 47 $ 9 $ 3 $ 21 $ -- $ 80
- ------------------------------------------------------------------------------------------------------------------------------
Identifiable assets $1,375 $ 817 $627 $ 561 $ 524 $441 $345 $4,849***
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Consists of a $38 million after-tax gain on settlement of insurance litiga-
tion, a $13 million tax benefit from change in tax election and a $38 mil-
lion after-tax provision for write-down of assets and other matters (Notes
4, 5 and 14).
** Excludes $157 million acquisition of a phenol facility in Philadelphia
(Note 18).
*** After elimination of intersegment receivables. Identifiable assets also in-
clude Sunoco's $122 million consolidated deferred income tax asset and $113
million attributable to corporate activities of which $64 million relates
to a receivable from settlement of insurance litigation.
43
<PAGE>
Segment Information
<TABLE>
<CAPTION>
MidAmerica
Northeast Northeast Marketing
(Millions of Dollars) Refining Marketing Chemicals Lubricants & Refining Logistics Coke Consolidated
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997
Sales and other
operating revenue
(including consumer
excise taxes):
Unaffiliated customers $3,476 $3,216 $424 $1,429 $1,712 $ 56 $151 $10,464
- ---------------------------------------------------------------------------------------------------------------------------
Intersegment $1,838 $-- $-- $ 135 $ -- $112 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------------------
Operating profit $ 116 $ 113 $110 $ -- $ 60 $ 58 $ 45 $ 502
Equity income -- -- 9 1 2 13 -- 25
Income tax expense (41) (40) (42) -- (22) (20) (7) (172)
- ---------------------------------------------------------------------------------------------------------------------------
Profit contribution $ 75 $ 73 $ 77 $ 1 $ 40 $ 51 $ 38 355
- -----------------------------------------------------------------------------------------------------------
Provision for employee
terminations and
related costs (after
taxes) (Note 4) (21)
Corporate expenses
(after taxes) (23)
Net financing expenses
and other (after taxes) (48)
--------
Net income $ 263
--------
Depreciation, depletion
and amortization $ 79 $ 74 $ 14 $ 25 $ 42 $ 13 $ 12 $ 259
- ---------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 81 $ 46 $ 37 $ 22 $ 29 $ 32 $133 $ 380
- ---------------------------------------------------------------------------------------------------------------------------
Investments in and
advances to affiliated
companies $ -- $ -- $ 40 $ 11 $ 4 $ 22 $ -- $ 77
- ---------------------------------------------------------------------------------------------------------------------------
Identifiable assets $1,347 $ 850 $389 $ 654 $ 618 $425 $262 $ 4,667*
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* After elimination of intersegment receivables. Identifiable assets also in-
clude Sunoco's $113 million consolidated deferred income tax asset and $102
million attributable to corporate activities.
Income tax amounts give effect to the tax credits earned by each segment. Over-
head expenses that can be identified with a segment have been included as de-
ductions in determining the segment's operating profit and profit contribution.
Net financing expenses and other consist principally of interest cost, debt and
other financing expenses less interest income and interest capitalized.
Intersegment revenues are accounted for based on the prices negotiated by the
segments which approximate market. Identifiable assets are those assets that
are utilized within a specific segment.
The following table sets forth Sunoco's sales to unaffiliated customers and
other operating revenue by product or service:
<TABLE>
<CAPTION>
(Millions of Dollars) 1999 1998 1997
- -------------------------------------------------
<S> <C> <C> <C>
Gasoline $3,733 $2,993 $ 4,021
Middle
distillates 2,091 1,623 2,276
Residual fuel 392 328 504
Petrochemicals 633 516 565
Lubricants 459 438 500
Other refined
products 391 350 438
Other products
and services 395 349 344
Resales of
purchased crude
oil -- 32 102
Coke and coal 212 225 151
Consumer excise
taxes 1,583 1,559 1,563
- -------------------------------------------------
$9,889 $8,413 $10,464
- -------------------------------------------------
</TABLE>
44
<PAGE>
- -----------------------------------------------------------------
Report of Management
To the Shareholders of Sunoco, Inc.
The accompanying consolidated financial statements of Sunoco, Inc. and its
subsidiaries ("Sunoco") and the related information are the responsibility of
management. The financial statements, which include amounts based on informed
estimates and judgments, were prepared using generally accepted accounting
principles deemed appropriate in the circumstances. Management believes that
these financial statements present fairly, in all material respects, Sunoco's
financial position, results of operations and cash flows. Other financial in-
formation presented in this Annual Report is consistent with that in the finan-
cial statements.
To fulfill its responsibility for the financial statements, Sunoco maintains a
system of internal controls which in management's opinion provides reasonable
assurance of achieving the objectives of internal control. These objectives in-
clude safeguarding of assets from loss through unauthorized use or disposition
and maintaining reliable records permitting the preparation of financial state-
ments and accountability for assets. The system of internal controls is subject
to ongoing evaluation of its continuing effectiveness.
Sunoco's independent auditors, Ernst & Young LLP, have expressed an opinion on
the fairness of management's financial statements in the report presented on
this page.
The Audit Committee of the Board of Directors, which met eight times during
1999, is comprised of directors who meet the independence requirements of the
New York Stock Exchange. It assists the Board of Directors in discharging its
duties relating to accounting and reporting practices and internal controls,
and it assesses the performance and recommends the appointment of independent
auditors. Both the independent auditors and Sunoco's internal auditors have un-
restricted access to the Committee to discuss audit findings and other finan-
cial matters.
/s/ Robert H. Campbell
Robert H. Campbell
Chairman & Chief Executive Officer
/s/ John G. Drosdick
John G. Drosdick
President & Chief Operating Officer
/s/ Thomas W. Hofmann
Thomas W. Hofmann
Vice President & Chief Financial Officer
Report of Independent Auditors
To the Shareholders and Board of Directors,
Sunoco, Inc.
We have audited the accompanying consolidated balance sheets of Sunoco, Inc.
and subsidiaries at December 31, 1999 and 1998, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our responsibil-
ity is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test ba-
sis, evidence supporting the amounts and disclosures in the financial state-
ments. An audit also includes assessing the accounting principles used and sig-
nificant estimates made by management, as well as evaluating the overall finan-
cial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sunoco, Inc. and
subsidiaries at December 31, 1999 and 1998 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally ac-
cepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 10, 2000
45
<PAGE>
- --------------------------------------------------------------------------------
Supplemental Financial and Operating Information (Unaudited)
Refining and Marketing Data
<TABLE>
<CAPTION>
Refinery
Utilization* 1999 1998 1997
- ---------------------------------------------
<S> <C> <C> <C>
Refinery crude
unit capacity at
December 31 730.0 697.0 692.0
- ---------------------------------------------
Total input to
crude units:
Crude oil 673.2 669.0 670.5
Other feedstocks 10.4 16.8 25.5
- ---------------------------------------------
683.6 685.8 696.0
- ---------------------------------------------
Refinery crude
unit capacity
utilized 94% 98% 101%
- ---------------------------------------------
</TABLE>
* Thousands of barrels daily except percentages. Reflects the shutdown on March
6, 1997 of an 85.0 thousand barrels-per-day crude unit in connection with a
project to reconfigure the Puerto Rico refinery to process reduced crude oil
instead of conventional crude oil. The crude oil inputs in 1997 prior to
March 6 and the reduced crude oil processed at this facility after the
reconfiguration (approximately 35,000 barrels per day) are excluded from the
table above. The reconfiguration has resulted in a significant reduction in
fuels production while fully maintaining the lubricants manufacturing capa-
bilities of the facility.
<TABLE>
<CAPTION>
Refined Product
Sales* 1999 1998 1997
- --------------------------------------------
<S> <C> <C> <C>
Gasoline:
Wholesale 169.1 164.6 170.2
Retail 216.6 208.6 201.8
Middle
distillates 258.8 241.3 248.8
Residual fuel 68.0 70.8 80.1
Petrochemicals 42.4 37.8 35.2
Lubricants 18.8 17.9 18.8
Other 60.1 57.9 54.7
- --------------------------------------------
833.8 798.9 809.6
- --------------------------------------------
</TABLE>
* Thousands of barrels daily to third parties.
<TABLE>
<CAPTION>
Refined Product
Margin
Information* 1999 1998 1997
- --------------------------------------------
<S> <C> <C> <C>
Average sales
price $25.30 $21.42 $28.10
Average cost of
products sold** 20.38 15.50 22.09
- --------------------------------------------
$ 4.92 $ 5.92 $ 6.01
- --------------------------------------------
</TABLE>
* Dollars per barrel.
** Consists of crude oil, other purchased feedstocks and refined products.
<TABLE>
<CAPTION>
Inventories* 1999 1998 1997
- --------------------------------------------
<S> <C> <C> <C>
Crude oil 19.2 21.3 18.6
Refined products 18.9 21.8 21.4
- --------------------------------------------
</TABLE>
* Millions of barrels at December 31.
<TABLE>
<CAPTION>
Retail Gasoline
Outlets 1999 1998 1997
- ---------------------------------------------
<S> <C> <C> <C>
Direct outlets:
Company owned or
leased 1,309 1,323 1,334
Dealer owned 532 519 499
- ---------------------------------------------
Total direct
outlets 1,841 1,842 1,833
Distributor
outlets 1,697 1,690 1,759
- ---------------------------------------------
3,538 3,532 3,592
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Throughput per
Direct Outlet* 1999 1998 1997
- --------------------------------------------
<S> <C> <C> <C>
Company owned or
leased 108.5 102.7 98.7
Dealer owned 80.7 77.7 76.2
- --------------------------------------------
Average-total
direct outlets 100.5 95.8 92.4
- --------------------------------------------
</TABLE>
* Thousands of gallons of gasoline monthly.
<TABLE>
<CAPTION>
Pipeline
Shipments* 1999 1998 1997
- --------------------------------------------
<S> <C> <C> <C>
Crude oil 49.4 53.8 58.9
Refined products 32.0 30.6 29.7
- --------------------------------------------
</TABLE>
* Billions of barrel miles. Includes Sunoco's proportionate share of shipments
in pipelines in which it has an ownership interest.
Cokemaking Data*
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------
<S> <C> <C> <C>
Coke production 1,910 1,473 664
Coke sales 1,854 1,361 701
- -------------------------------------------
</TABLE>
* Thousands of tons. Reflects the start-up of the Indiana Harbor operation in
the first quarter of 1998.
46
<PAGE>
- --------------------------------------------------------------------------------
Quarterly Financial and Stock Market Information (Unaudited)
(Millions of Dollars Except Per Share Amounts and Common Stock Prices)
<TABLE>
<CAPTION>
1999 1998
----------------------------------------- ---------------------------------------
First Second Third Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and other
operating revenue
(including consumer
excise taxes) $1,882 $2,328 $2,628 $3,051 $2,086 $2,166 $2,107 $2,054
Gross profit* $142 $156 $166 $163 $197 $265 $234 $212
Net income $19** $26*** $14+ $38++ $56+++ $92 $80# $52##
Earnings per share of
common stock:
Basic $.21 $.29 $.15 $.42 $.64 $1.05 $.86 $.56
Diluted $.21 $.28 $.15 $.42 $.58 $.97 $.85 $.55
Cash dividends per share
of preference stock### $-- $-- $-- $-- $.90 $.7516 $-- $--
Cash dividends per share
of common stock $.25 $.25 $.25 $.25 $.25 $.25 $.25 $.25
Common stock price@
--high $37.81 $39.44 $34.94 $28.25 $44.31 $43.19 $40.19 $37.25
--low $30.38 $29.00 $27.06 $22.88 $37.63 $36.38 $30.75 $29.50
--end of period $36.06 $30.19 $27.38 $23.50 $40.94 $38.81 $32.00 $36.06
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Gross profit equals sales and other operating revenue less cost of products
sold and operating expenses; depreciation, depletion and amortization; and
consumer excise, payroll and other applicable taxes.
** Includes a $7 million after-tax gain on divestment of the Company's steam
coal mining operation and a $7 million after-tax gain on settlement of in-
surance litigation.
*** Includes a $16 million after-tax gain on settlement of insurance litiga-
tion.
+ Includes a $1 million after-tax gain on settlement of insurance litigation.
++ Includes a $23 million after-tax gain on settlement of insurance litiga-
tion, an $11 million after-tax profit due to the reduction in certain in-
ventory quantities valued at LIFO and a $1 million after-tax provision for
write-down of assets and other matters.
+++ Includes a $9 million after-tax benefit from the settlement of an income
tax dispute and a $5 million after-tax gain from a cash distribution made
to Sunoco by an insurance consortium in which the Company participates.
# Includes a $13 million tax benefit resulting from a change in tax election.
## Includes a $38 million after-tax provision for write-down of assets and
other matters and a $38 million after-tax gain on settlement of insurance
litigation.
### On May 28, 1998, the Company redeemed all of its outstanding shares of
preference stock. The cash dividends per share of preference stock for the
second quarter of 1998 represent the accrued dividends paid in connection
with the redemption.
@ The Company's common stock is principally traded on the New York Stock Ex-
change, Inc. under the symbol "SUN." The Company had approximately 31,000
holders of record of common stock as of January 31, 2000.
47
<PAGE>
Exhibit 21
50.10% DECEMBER 31, 1999
SUNOCO, INC.
d/b/a Herr Gas & Oil Co. (PA)
d/b/a Kelly Oil Company (PA)
d/b/a Mahaffey Oil Company (PA)
d/b/a Montour Oil Service Company (PA)
SUBSIDIARIES OF THE REGISTRANT
COMPANY NAME: INC./REG.
- ------------- ---------
Helios Capital Corporation DE
- ---Beneco Leasing Two, Inc. OH
- ---Sunoco Leasing, Inc. DE
- ------Heleasco Twenty, Inc. DE
- ------Heleasco Twenty-Three, Inc. DE
- ------Jalisco Corporation CA
- ---Sun Leasing Company DE
Marine Investment Company of Delaware DE
- ---Sun Transport, Inc. DE
Mascot Petroleum Company, Inc. DE
Mohawk Valley Oil, Inc. NY
- ---Marcy Valley Oil Company, Inc. DE
Radnor Corporation PA
d/b/a Almont Developers PA)
d/b/a Ray Jones Co. (PA)
- ---Radnor/California Service Corporation DE
- ---Radnor/Credit Corporation DE
- ---Radnor/Dutton Mill Corporation PA
- ---Radnor/Edgewater, Inc. DE
- ---Radnor/Fulton Industrial Corporation DE
- ---Radnor/Grand Oaks Corporation DE
- ---Radnor/Green Meadows Corporation DE
- ---Radnor/Investment Corporation DE
- ---Radnor/Island Corporation DE
- ---Radnor/Lakeside Corporation DE
- ---Radnor/Loudoun Corporation DE
- ---Radnor/Main St. Corporation DE
- ---Radnor/Murrieta Corporation DE
- ---Radnor/North Corporation DE
- ---Radnor/Parke East Corporation DE
- ---Radnor/Plantation Corporation DE
PAGE .... 1
<PAGE>
50.10% DECEMBER 31, 1999
SUNOCO, INC.
SUBSIDIARIES OF THE REGISTRANT
COMPANY NAME: INC./REG.
- ------------- ---------
- ---Radnor/Plymouth Corporation PA
- ---Radnor/Sarasota Corporation DE
- ------Laurel Oak Realty Corporation DE
- ---Radnor/Spring Ridge Corporation DE
- ------Radnor/Frederick Corporation DE
- ---Radnor/Spring Valley Corporation DE
- ---Radnor/Sun Village Construction Corporation DE
- ---Radnor/Sun Village Corporation DE
- ---Radnor Suncoast Corporation DE
- ---Radnor/Vail Ranch Corporation DE
- ---Radnor/Vanguard Corporation DE
- ---Radnor/Victorville Corporation DE
- ---Radnor/Villa Trinidad Corporation DE
- ---Radnor/Vista Mar Corporation DE
- ---Radnor/Willoughby Corporation DE
- ---Radnor/Yorba Linda-I Corporation DE
Sun Alternate Energy Corporation DE
Sun Atlantic Refining and Marketing Company DE
- ---Sun Atlantic Refining and Marketing B.V., Inc. DE
- ---Sun Atlantic Refining and Marketing B.V NL
- ------Atlantic Petroleum Corporation DE
- ---------Atlantic Pipeline Corp. DE
- ---------Atlantic Refining & Marketing Corp. DE
Sun Canada, Inc. DE
- ---Helios Assurance Company Limited BA
- ---Petrosun Limited EN
- ---Sun International Limited BA
- ---Sun Mexico One, Inc. DE
- ------Sunoco de Mexico, S.A. de C.V. MX
- ---Sun Mexico Two, Inc. DE
- ---Sunoco Limited EN
Sun Coal & Coke Company DE
- ---Bearcat Coke Company DE
- ---Elk River Minerals Corporation DE
- ---Indiana Harbor Coke Company DE
- ---Indiana Harbor Coke Corporation IN
- ---Jewell Coke Company DE
PAGE .... 2
<PAGE>
50.10% DECEMBER 31,1999
SUNOCO, INC.
SUBSIDIARIES OF THE REGISTRANT
COMPANY NAME: INC./REG.
- ------------- ---------
- ---Jewell Resources Corporation VA
- ------Dominion Coal Corporation VA
- ------Jewell Coal & Coke Company, Inc. VA
- ------Jewell Smokeless Coal Corporation VA
- ------Oakwood Red Ash Coal Corporation VA
- ------Vansant Coal Corporation VA
Sun Coke Company DE
Sun Company, Inc. DE
(Name Saver Company)
Sun Company, Inc. PA
(Name Saver Company)
Sun Executive Services Company PA
Sun Geologic and Seismic, Inc. DE
Sun Ocean Ventures, Inc. DE
Sun Oil Argentina Limited BA
Sun Oil Argentina Limited S.A. ARG.
Sun Oil Company DE
(Name Saver Company)
Sun Oil Company (U.K.) Ltd. DE
Sun Oil Export Company DE
Sun Oil International, Inc. DE
Sun Oil Shabwa Yemen Limited BA
Sun Oil (Thailand) Limited TH
Sun Oil Trading Company DE
(Name Saver Company)
PAGE .... 3
<PAGE>
50.10% DECEMBER 31, 1999
SUNOCO, INC.
SUBSIDIARIES OF THE REGISTRANT
COMPANY NAME: INC./REG.
- ------------- ---------
Sun Pipe Line Company of Delaware DE
- ---Mid-Continent Pipe Line Company OK
- ---Mid-Valley Pipeline Company OH
- ---Sun Oil Line Company of Michigan MI
- ---Sun Pipe Line Company PA
- ---Sun Pipe Line Services Co. DE
- ------Sun Borger Pipe Line Company DE
Sun Refining and Marketing Company DE
(Name Saver Company)
Sun Services Corporation PA
Sun Ship, Inc. PA
- ---Lesley Corporation DE
Sun-Del Services, Inc. DE
Sunoco Caribbean, Inc. DE
(Name Saver Company)
Sunoco, Inc. (R&M) PA
d/b/a Mohawk Valley Oil (NY)
d/b/a Sonshine Fuels (NY)
d/b/a Sun Gas Company (PA)
d/b/a Sun Gas Services (LA/PA/TX)
d/b/a Sun Petroleum Products Company (PA)
d/b/a Sunmark Industries (PA)
d/b/a Sun Mart (PA)
d/b/a Y's Buy Oil Co. (DE/NJ/PA)
- ---Mid-State Oil Company DE
d/b/a Mid-State Lubricants (NC/TN)
- ---Puerto Rico Sun Oil Company DE
- ---Sun Lubricants and Specialty Products Inc. QU
- ---Sun Petrochemicals, Inc. DE
d/b/a Sun Petrochemicals Company (PA)
- ---Sunmarks, Inc. DE
- ---Sunoco Power Marketing L.L.C. PA
PAGE .... 4
<PAGE>
50.10% DECEMBER 31, 1999
SUNOCO, INC.
SUBSIDIARIES OF THE REGISTRANT
COMPANY NAME: INC./REG.
- ------------- ---------
Sunoco Overseas, Inc. DE
- ---Lugrasa, S.A. PN
The Claymont Investment Company DE
Triad Carriers, Inc. PA
- ---BBQ, Inc. PA
- ---Carrier Systems Motor Freight, Inc. DE
PAGE .... 5
<PAGE>
Exhibit 23
CONSENT OF ERNST & YOUNG LLP
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Sunoco, Inc. of our report dated February 10, 2000, included in the
1999 Annual Report to Shareholders of Sunoco, Inc.
Our audits also included the financial statement schedule of Sunoco, Inc.
for the years ended December 31, 1999, 1998 and 1997, listed in Item 14(a). The
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
We also consent to the incorporation by reference of this report on the
financial statement schedule and our report dated February 10, 2000 with respect
to the consolidated financial statements of Sunoco, Inc. incorporated by
reference in this Annual Report (Form 10-K) for the year ended December 31,
1999, in the following registration statements:
Sunoco, Inc. Capital Accumulation Plan Form S-8 Registration Statement
(Registration No. 33-9931);
Sunoco, Inc. Long-Term Performance Enhancement Plan Form S-8 Registration
Statement (Registration No. 333-30941);
Sunoco, Inc. Long-Term Incentive Plan Form S-8 Registration Statement
(Registration No. 33-10055);
Sunoco, Inc. and Subsidiaries Stock Supplement Plan Form S-8 Registration
Statement (Registration No. 2-53283);
Sunoco, Inc. Executive Long-Term Stock Investment Plan Form S-8
Registration Statement (Registration No. 33-44059);
Sunoco, Inc. Employee Option Plan Form S-8 Registration Statement
(Registration No. 33-49275);
Sunoco, Inc. Shareholder Access and Reinvestment Plan Form S-3 Registration
Statement (Registration No. 333-78881);
<PAGE>
Sunoco, Inc. Form S-3 Registration Statement (Registration No. 33-53717);
Sunoco, Inc. Dividend Reinvestment Plan Form S-3 Registration Statement
(Registration No. 33-39834); and
Sunoco, Inc. Dividend Reinvestment Plan Form S-3 Registration Statement
(Registration No. 33-52615).
s/ERNST & YOUNG LLP
- -------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
March 2, 2000
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That the undersigned officers and/or
directors of Sunoco, Inc., a Pennsylvania corporation, do and each of them does,
hereby constitute and appoint Thomas W. Hofmann, Jack L. Foltz and Joseph P.
Krott, his or her true and lawful attorneys-in-fact and agents, and each of them
with full power to act without the others, for him or her and in his or her
name, place and stead, to sign the Sunoco, Inc. Form 10-K for the year ending
December 31, 1999 and any and all future amendments thereto; and to file said
Form 10-K and any such amendments with all exhibits thereto, and any and all
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and seals
this 2nd day of March, 2000.
s/ROBERT H. CAMPBELL s/JAMES G. KAISER
Robert H. Campbell James G. Kaiser
Chairman of the Board, Chief Director
Executive Officer and Director
(Principal Executive Officer) s/ROBERT D. KENNEDY
Robert D. Kennedy
s/RAYMOND E. CARTLEDGE Director
Raymond E. Cartledge
Director s/JOSEPH P. KROTT
Joseph P. Krott
s/JOHN G. DROSDICK Comptroller
John G. Drosdick (Principal Accounting Officer)
President, Chief Operating
Officer and Director s/NORMAN S. MATTHEWS
Norman S. Matthews
s/MARY JOHNSTON EVANS Director
Mary Johnston Evans
Director s/R. ANDERSON PEW
R. Anderson Pew
s/THOMAS P. GERRITY Director
Thomas P. Gerrity
Director s/WILLIAM F. POUNDS
William F. Pounds
s/ROSEMARIE B. GRECO Director
Rosemarie B. Greco
Director s/G. JACKSON RATCLIFFE
G. Jackson Ratcliffe
s/THOMAS W. HOFMANN Director
Thomas W. Hofmann
Vice President & Chief Financial s/ALEXANDER B. TROWBRIDGE
Officer Alexander B. Trowbridge
(Principal Financial Officer) Director
<PAGE>
EXHIBIT 24.2
I, Ann C. Mule, Secretary of Sunoco, Inc., a Pennsylvania corporation,
hereby certify that the following is a full, true and complete copy of a
resolution adopted at a meeting of the Board of Directors of Sunoco, Inc., duly
called and held on March 2, 2000, at which a quorum was present and acting
throughout and that no action has been taken to rescind or amend said resolution
and that the same is now in full force and effect:
RESOLVED, That the Sunoco, Inc. Annual Report to the Securities and
Exchange Commission on Form 10-K, for the year ended December 31, 1999, is
approved in the form presented to this meeting, subject to such changes or
amendments as may be approved (as so amended, the "Form 10-K") by any one
of the following officers of the Company: the Chairman and Chief Executive
Officer, the President and Chief Operating Officer, the Vice President and
Chief Financial Officer, or the Vice President and General Counsel;
FURTHER RESOLVED, That each of the above-named officers and the
Comptroller (collectively, the "Authorized Officers") is authorized to sign
and file, or cause to be filed, on behalf of the Corporation, the Form 10-
K, together with any such other certificates, documents, instruments or
notices as may be necessary or as any such officer may deem necessary or
desirable in order to effectuate or carry out the purposes and intent of
the foregoing resolutions, and that all such actions heretofore taken by
any one or more of the Authorized Officers in order to effectuate or carry
out the purposes and intent of the foregoing resolutions are hereby
ratified, adopted and approved.
(Corporate Seal) /s/ ANN C. MULE'
----------------------------
Ann C. Mule'
Secretary
March 2, 2000
Philadelphia, Pennsylvania
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