Exhibit 10.3

 

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SUNOCO, INC.

 

EXECUTIVE LONG-TERM STOCK INVESTMENT PLAN

 

(Amended as of February 5, 2003)

 

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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 entity that 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 Business Combination—shall have the meaning provided herein at Section
1.5(c).

 

1.5 Change in Control—shall mean the occurrence of any of the following events:

 

(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (1) the then-outstanding shares of common stock of
Sunoco, Inc. (the “Outstanding Company Common Stock”) or (2) the combined voting
power of the then-outstanding voting securities of Sunoco, Inc. entitled to vote
generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that, for purposes of this Section (a), the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from Sunoco, Inc., (B) any acquisition by Sunoco, Inc., (C)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by Sunoco, Inc. or any company controlled by, controlling or under
common control with Sunoco, Inc., or (D) any acquisition by any entity pursuant
to a transaction that complies with Sections (c)(1), (c)(2) and (c)(3) of this
definition;

 

(b) Individuals who, as of September 6, 2001, constitute the Board of Directors
(the “Incumbent Board”) cease for any reason to constitute at least a majority
of the Board of Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the shareholders of Sunoco, Inc., was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board of Directors;

 

(c) Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving Sunoco, Inc. or any of
its subsidiaries, a sale or other disposition of all or substantially all of the
assets of Sunoco, Inc., or the acquisition of assets or stock of another entity
by Sunoco, Inc. or any of its subsidiaries (each, a “Business Combination”), in
each case unless, following such Business Combination, (1) all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially

 

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own, directly or indirectly, more than 60% of the then-outstanding shares of
common stock and the combined voting power of the then-outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation that, as a result of such transaction, owns
Sunoco, Inc. or all or substantially all of the assets of Sunoco, Inc., either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business Combination of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (2) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of Sunoco, Inc. or such corporation resulting from such Business
Combination or any of their respective subsidiaries) beneficially owns, directly
or indirectly, 20% or more of, respectively, the then-outstanding shares of
common stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (3) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board of Directors providing for such Business
Combination; or

 

(d) Approval by the shareholders of Sunoco, Inc. of a complete liquidation or
dissolution of Sunoco, Inc.

 

1.6 Code—shall mean the Internal Revenue Code of 1986, as amended.

 

1.7 Committee—shall mean the committee appointed to administer this Plan by the
Board of Directors, 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 Exchange Act, and Section 162(m) of the Code.

 

1.8 Common Stock—shall mean the authorized and unissued or treasury shares of
common stock of Sunoco, Inc.

 

1.9 Common Stock Units—shall have the meaning provided herein at Section 8.1.

 

1.10 Company—shall mean Sunoco, Inc. and any Affiliate.

 

1.11 CSU Payout Date—shall have the meaning provided herein at Section 8.9.

 

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 8.3.

 

1.14 Dividend Equivalent Account—shall have the meaning provided herein at
Section 8.3.

 

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1.15 Employment Termination Date—shall mean the date on which the employment
relationship between the Participant and the Company is terminated.

 

1.16 Exchange Act—shall mean the Securities Exchange Act of 1934, as amended.

 

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 published in the Wall Street Journal under the caption “New York
Stock Exchange Composite Transactions” 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 Incentive Stock Options—shall have the meaning provided herein at Article
IV.

 

1.20 Incumbent Board—shall have the meaning provided herein at Section 1.5(b).

 

1.21 Just Cause—shall mean, for any Participant who is a participant in the
Sunoco, Inc. Special Executive Severance Plan, “Just Cause” as defined in such
plan, and for any other Participant:

 

(a) the willful and continued failure of the Participant to perform
substantially the Participant’s duties with the Company (other than any such
failure resulting from incapacity due to physical or mental illness or following
notice of employment termination by the Participant pursuant to Section 1.34),
after a written demand for substantial performance is delivered to the
Participant by the Board of Directors or any employee of the Company with
supervisory authority over the Participant that specifically identifies the
manner in which the Board of Directors or such supervising employee believes
that the Participant has not substantially performed the Participant’s duties,
or

 

(b) the willful engaging by the Participant in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.

 

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 Outstanding Company Common Stock—shall have the meaning provided herein at
Section 1.5(a).

 

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1.28 Outstanding Company Voting Securities—shall have the meaning provided
herein at Section 1.5(a).

 

1.29 Participant—shall have the meaning provided herein at Section 2.4(a).

 

1.30 Performance Factors—shall mean the various payout percentages related to
the attainment levels of one or more Performance Goals, as determined by the
Committee.

 

1.31 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.

 

1.32 Performance Period—shall have the meaning provided herein at Section 8.4.

 

1.33 Person—shall have the meaning provided herein at Section 1.5(a).

 

1.34 Qualifying Termination—shall mean, with respect to the employment of any
Participant who is a participant in the Sunoco, Inc. Special Executive Severance
Plan, a “Qualifying Termination” as defined in such plan, and with respect to
the employment of any other 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
significantly 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 significant reduction in the duties and responsibilities
held by the Participant immediately prior to the Change in Control, in each case
except in connection with such Participant’s termination of employment by the
Company for Just Cause; or

 

(2) a reduction by the Company in the Participant’s combined annual base salary
and guideline (target) bonus as in effect immediately prior to the Change in
Control; or

 

(3) 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;

 

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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) before a Change in Control, 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, if the affected
Participant can demonstrate that such termination or circumstance in (b) above
leading to the 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 a Change in Control;

 

provided, however, that in either such case, a Change in Control actually occurs
within one (1) year following the Employment Termination Date.

 

1.35 Reload Options—shall have the meaning provided herein at Section 5.1.

 

1.36 Stock Options—shall have the meaning provided herein at Section 3.1.

 

1.37 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.

 

1.38 Sunoco, Inc.—shall mean Sunoco, Inc., a Pennsylvania corporation, and any
successor thereto by merger, consolidation, liquidation or purchase of assets or
stock or similar transaction.

 

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

 

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(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 Sunoco, Inc. 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 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;

 

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(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 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.

 

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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 otherwise provided in Section 3.10, 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
Sunoco, Inc. 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 Disability or retirement (as 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; 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

 

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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.

 

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 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
Sunoco, Inc. and its subsidiaries (within the meaning of Section 424(f) of the
Code).

 

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.

 

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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 Sunoco, Inc. and its subsidiaries (within the meaning of Section 424(f)
of the Code) exceeds One Hundred Thousand Dollars ($100,000.00), 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 Disability or retirement (as 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

 

(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

 

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(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:

 

(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.

 

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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).

 

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

 

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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 Disability or retirement (as 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.

 

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”).

 

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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 sixtieth (60th) calendar day
immediately prior to the Change in Control through the ninetieth (90th) calendar
day following the Change in Control; and

 

(b) the highest trading 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
immediately 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 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 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.

 

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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”) Sunoco, Inc. 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.

 

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.

 

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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.

 

8.7 Death, Disability or Retirement.

 

(a) Upon the termination of Participant’s employment by reason of death,
Disability or retirement (as 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

 

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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 determined
by the Committee prior to the Change in Control, as follows:

 

(c) if the Participant is to receive stock, the Participant will receive shares
of Common Stock equal in number to the total number of Common Stock Units
granted to such Participant; or

 

(d) if the Participant is to receive cash, 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 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, 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, Disability or retirement (as determined by the
Committee), that has occurred prior to the CSU 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 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 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 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.

 

9.3 Right to Terminate Employment; Effect of Disaffiliation. 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. If an Affiliate ceases to be an Affiliate as a result of the sale
or other disposition by Sunoco, Inc. or one of its continuing Affiliates of its
ownership interest in the former Affiliate, or otherwise, then individuals who
remain employed by such former Affiliate thereafter shall be considered for all
purposes under the Plan to have terminated their employment relationship with
the Company.

 

9.4 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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9.5 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.

 

9.6 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.

 

9.7 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.

 

9.8 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.

 

9.9 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 9.8);

 

(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 9.9(a) above, shall not without the consent of a Participant, affect
the Participant’s rights under an award previously granted.

 

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