Exhibit 10.1

 

Sunoco, Inc. Director Compensation Summary Sheet

(as amended September 1, 2005, effective October 1, 2005)

 

The corporate governance practices of Sunoco, Inc. (“Sunoco”) are designed so
that qualified independent directors are elected. Recognizing that corporate
governance is of critical importance to Sunoco and its shareholders, the
Governance Committee of Sunoco’s Board of Directors (the “Committee”) believes
that the compensation program for the independent directors should be designed
to attract highly qualified directors; provide appropriate compensation for
their time, efforts, commitment and contributions to Sunoco and Sunoco’s
shareholders; and align the interests of the independent directors and Sunoco’s
shareholders. The Committee’s compensation philosophy includes providing a
competitive level of compensation necessary to attract experienced and qualified
individuals. The Committee directly engages a third-party compensation
consultant to advise it on an annual basis as to the “best practices” and
emerging trends in director compensation. The compensation consultant also
benchmarks Sunoco’s director compensation compared to the proxy performance peer
group, the oil industry generally and general industry data. As discussed in
Sunoco’s Corporate Governance Guidelines (a copy of which can be found at
Sunoco’s Internet web site, www.SunocoInc.com), Sunoco’s directors are
compensated partially in Sunoco common stock or stock equivalents to better
align their interests with those of Sunoco shareholders. Currently, equity-based
compensation represents a substantial portion of the total compensation package.
The Chief Executive Officer is not paid for his services as a director. The
following table summarizes the annual compensation of Sunoco’s directors,
effective October 1, 2005.

 

Type of Compensation

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   Value

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Annual Retainer (Cash Portion)

   $ 50,000

Annual Retainer (Stock-Based Portion)

   $ 40,000

Annual Restricted Share Credit under Directors’ Deferred Compensation Plan

   $ 60,000     

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TOTAL (excluding Committee Chair Retainer, Committee Chair Fee, and meeting
fees)

   $ 150,000     

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Annual Retainer for Committee Chair

   $ 5,000

Committee Chair Fee (per meeting attended for which a director serves as chair)

   $ 500

Board or Committee Attendance Fee (per meeting attended)1

   $ 2,000

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NOTE TO TABLE:

 

1 A fee of $2,000 per day is also paid in cash for special meetings.

 

Directors’ Deferred Compensation Plan: The Directors’ Deferred Compensation Plan
permits independent directors to defer a portion of their compensation. Payments
of compensation deferred under this plan are restricted in terms of the earliest
and latest dates that payments may begin. Deferred compensation is designated as
share units, cash units, or a combination of both. Cash units accrue interest at
a rate based upon Sunoco’s cost of borrowing. A share unit is treated as if it
was invested in shares of Sunoco common stock, but it does not have voting
rights. If share units are chosen, dividend equivalents are credited in the form
of additional share units. Share units are settled in cash, based upon the fair
market value of Sunoco common stock at the time of payment. The Plan also
provides for the annual crediting of restricted share units, which is a portion
of the directors’ compensation package. The restricted share units are not
payable until death or other termination of Board service, or in the event of a
change in control of the Company.

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Directors’ Retainer Stock Plan: The Retainer Stock Plan for independent
directors allows for the payment of a portion of the independent directors’
annual retainer in stock. The retainer is granted to each director after the
annual meeting. Any shares issued are restricted, prohibiting the transfer or
sale of such shares for one year from the date of issue. The holder of the
shares receives quarterly dividend equivalents equal to the dividends declared
on the Company’s shares. A director may defer receipt of these shares pursuant
to the Directors’ Deferred Compensation Plan in share units.

 

Long-Term Performance Enhancement Plan II: The Long-Term Performance Enhancement
Plan II provides that stock option awards under the plan may be made to
independent directors of the Company. The options generally have a ten-year term
and are generally exercisable two years after the date of grant. The purchase
price payable upon exercise of an option will not be less than the fair market
value of a share of Sunoco common stock on the date the option was granted. The
purchase price may be paid in cash or in shares of common stock. In 2003, the
Company discontinued granting stock options to the Company’s independent
directors.

 

The Directors’ Retainer Stock Plan and the Long-Term Performance Enhancement
Plan II, which are equity compensation plans, were approved by the shareholders.

 

Directors’ Deferred Compensation and Benefits Trust: In the event of a change in
control, the Directors’ Deferred Compensation and Benefits Trust may be funded
to provide the source of funds for the Company to meet its liabilities under
certain benefit plans and arrangements, including the Directors’ Deferred
Compensation Plan. Assets held by the Trust are subject to the claims of the
Company’s general creditors under federal and state law in the event of
insolvency.

 

Other Compensation and Benefits: As part of their compensation package, the
directors are also reimbursed for their expenses related to their attendance at
Sunoco meetings, including, room, meals, and transportation to and from board
and committee meetings (e.g., commercial flights, trains, cars and parking). At
times, a director may travel to and from Sunoco meetings on Sunoco corporate
aircraft. When traveling on Sunoco business, a director may be accompanied by
his or her spouse at Sunoco’s expense. As a member of the Board of Directors,
the directors are automatically covered by the following insurance plans –
travel accident insurance coverage of $250,000, which protects them whenever
they travel on Sunoco business, and life insurance, which is provided to
independent directors in the amount of $50,000 until the director’s Board
service terminates. Also as part of their compensation package, the directors
are reimbursed for attendance at qualified third-party director education
programs.

 

Directors’ Stock Ownership Guidelines: Each independent director is expected to
own Sunoco common stock with a market value equal to at least 5 times the total
annual retainer. Included in the determination of stock ownership for purposes
of these guidelines are all shares beneficially owned and any share units held
in the Directors’ Deferred Compensation Plan. New directors are allowed a
five-year phase-in period to comply with the guidelines. As of December 31,
2004, all independent directors were in compliance with the guidelines or, in
the case of directors elected during the past five years, on track to achieve
compliance with the guidelines within the five-year period.

 

Directors’ & Officers’ Indemnification Agreements: Sunoco’s bylaws require that
Sunoco indemnify its directors and officers, to the extent permitted by
Pennsylvania law, against any costs, expenses (including attorneys’ fees) and
other liabilities to which they may become subject by reason of their service to
Sunoco. Sunoco has purchased liability insurance for its directors and officers
and has entered into indemnification agreements with its directors and certain
key executive officers and other management personnel. This insurance and the
indemnification agreements supplement the provisions in Sunoco’s Articles of
Incorporation which eliminate the potential monetary liability of directors and
officers to Sunoco or its shareholders in certain situations as permitted by
law.