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EXHIBIT 10(f)
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Description of The 1995
Incentive Compensation Program
[FINA LOGO]
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Presentation Outline
- - Introduction & Overview
- - Compensation Philosophy
- - The ICP Model
- Individual Performance Targets
- Corporate & Line-of-Business Factors
- - Illustrations Using 1994 Financial Results
- - Other Issues
- - Q&A
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Mission
Link business with Human Resources
strategy
- - Strategic Vision
- - Human Resources Strategies
- - Performance Measurement Systems
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Strategic Vision
- - Five year planning process
- - Annual business planning process
- - Individual objective setting process
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Human Resources Strategies
- - Staffing/organizational planning strategy
- - Compensation strategy
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Performance Measurement Systems
- - Investment community expectations
- - Shareholder expectations
- - Internal financial measures
- - Competitive benchmark measures
- - Individual performance measures
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Incentive Compensation Program
Strategic
Vision Human
Resources
Strategies Performance
Measurement
Systems
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Your 1995 Incentive Compensation Program
- - Designed to more closely link your overall cash compensation with
Company performance
- - Provides the opportunity to earn top quartile compensation
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No Change to Base Pay!
- - ICP does not affect base pay
- - Simply an "add-on" to your base pay
- - Base pay rates will continue to be set at market average
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Eligibility
In order to be eligible for a 1995 ICP award you must be:
- - A salaried exempt employee
- - Rated 3.0 or higher for calendar year l995
- - Hired before the fourth quarter of 1995
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Total Cash Compensation
+ Incentive =
Compensation
Total Cash
Base Compensation
Pay (TCC)
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Base Pay Philosophy
Our base compensation is designed to provide competitive pay based on:
- - Average Market Rates
- - Relevant Work Experience
- - Individual Performance
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Incentive Pay Philosophy
The ICP is designed to provide the opportunity for top quartile compensation
based on:
- - Company performance
- - LOB performance
- - Individual performance
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How is the ICP Calculated?
Your Individual Incentive
Target
X
Your Corporate/LOB
Performance Factor
=
Your Incentive
Compensation Award
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What are the Individual Incentive Targets?
Individual
Market - = Incentive
Total Cash Targets
Compensation (TCC) @ Average
Top Quartile Market
Base
Pay
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What is the Corporate/LOB Factor?
The Corporate/LOB Factor is derived from our financial results.
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What is considered a line-of-business?
This program measures the results of the following LOBs:
- - Chemicals
- - Exploration & Production
- - Natural Gas
- - Southeastern Business Unit
- - Southwestern Business Unit
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Other Groups
Employees that work in the following groups will have their LOB factor derived
from a combination of the primary LOBs:
- - G&A (General & Administrative)
- - Research & Development
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What Are the Measures?
The Corporate and LOB measures are divided into Absolute and Relative
categories.
Corporate
Absolute (37.5%)
Corporate
Relative (37.5%)
LOB
Absolute (12.5%) LOB
Relative (12.5%)
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What is the Absolute Factor?
Actual performance against ROCE targets based on business plan objectives and
the cost of capital.
Corporate
Absolute (37.5%) Return on Capital
Employed
(ROCE)
LOB
Absolute (12.5%)
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What is the Relative Factor?
Our actual financial results as ranked relative to a group of Corporate and LOB
competitors.
Corporate
Return on Capital Relative (37.5%)
Employed
(ROCE)
Return on Assets
(ROA)
LOB
Relative (12.5%)
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Corporate Absolute Factor
- - Measurement is Return on Capital Employed (ROCE)
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Corporate Absolute Factor
Return on Capital Employed (ROCE)
- - ROCE measures the return investors receive on all capital invested in a
business.
- - Capital is measured in terms of the total equity (shareholder
interest) and borrowing (debt) invested in our business.
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Corporate Absolute Factor
- - Measurement is ROCE
- - ROCE target is based on Cost of Capital
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Corporate Absolute Factor
- - Measurement is ROCE.
- - ROCE target is based on the Cost of Capital
- The Cost of Capital is used by the financial markets to determine
the expected return an investor should receive relative to alternate
investments.
- The calculation of the Cost of Capital takes into consideration
industry risk and current interest rates.
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Corporate Absolute Factor
- - Measurement is ROCE
- - ROCE target is based on the Cost of Capital
- Set during the planning cycle
- Target remains constant throughout the year
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Corporate Absolute Factor
Cost of Capital
- - A weighted average of debt and equity funding costs
- - 1994 = 9.64%
- - 1995 = 10.60%
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Corporate Absolute Factor
1994 Cost of Capital
Cost of Weighted
Class Funding % of Capital Cost
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Debt 4.82% 37.0% 1.78%
Equity 12.68% 63.0% 7.86%
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1994 Cost of Capital: 9.64%
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Corporate Absolute Factor
1995 Cost of Capital
Cost of Weighted
Class Funding % of Capital Cost
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Debt 5.33% 34.0% 1.81%
Equity 13.19% 66.0% 8.79%
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1995 Cost of Capital: 10.60%
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Corporate Absolute Factor
- - Threshold = 50% of ROCE Target
- - No CAP on this factor
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Corporate Absolute Factor
% of Absolute
- - Use this table to Target Factor*
estimate Corporate 150% 2.0
Absolute Factor 140% 1.8
130% 1.6
120% 1.4
- - GATEKEEPER: 50% of 110% 1.2
target is threshold 100% 1.0
any payout 90% 0.8
80% 0.6
- - No cap on this measure 70% 0.4
60% 0.2
50% 0.0
* adjusted to exact percent
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Corporate Absolute Factor
Corporate ROCE Calculations
1994
(in millions) Actual
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Net Earnings $102
Tax Effected Interest $33
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Adjusted Earnings $135
Avg. Capital Employed $1,836
ROCE 7.35%
ROCE Target (COC) 9.64%
% of Target 76.8%
Performance Factor 0.535
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Corporate Absolute Factor
Corporate ROCE Calculations
1994 YTD
(in millions) Actual June 1995*
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Net Earnings $102 $75
Tax Effected Interest $33 $15
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Adjusted Earnings $135 $90
Avg. Capital Employed $1,836 $1,811
ROCE 7.35% 9.92% annualized
ROCE Target (COC) 9.64% 10.60%
% of Target 76.8% 93.6%
Performance Factor 0.535 0.872
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Corporate Relative Factor
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Corporate Relative Factor
- - Measurement is ROCE.
- - Reflects performance compared to industry peer group (10 companies).
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Corporate Relative Factor:
Competitive Peer Group
- - Amerada Hess - Occidental
- - Ashland - Phillips
- - Coastal - Sun
- - Kerr McGee - Unocal
- - Murphy - USX-Marathon
These companies were selected for their operational
and financial profiles in comparison to FINA.
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Corporate Relative Factor
Industry Relative
- - Use this table to Rank Factor
determine Corporate
Relative Factor. 1 1.0
2 0.9
3 0.8
4 0.7
- - Fina ranked 5th in 1994. - 5 0.6
6 0.5
7 0.4
8 0.3
9 0.2
10 0.1
11 0.0
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LOB Absolute Factor
- - Measurement is based on ROCE.
- - Target determined by combination of business plan objective and Cost of
Capital.
- - 1995 Targets based on Business Plan plus 20% of the difference between
business plan ROCE and Cost of Capital (unless business plan ROCE >
Cost of Capital).
- - Must achieve 50% of target to receive LOB absolute credit.
- - LOB absolute measure capped at 1.0.
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LOB Absolute Factor
- - Use this table to estimate LOB % of Absolute
Absolute Factor Target Factor*
100% 1.0
- - Capped at 1.0 90% 0.8
80% 0.6
70% 0.4
- - ROCE targets vary by LOB 60% 0.2
50% 0.0
* adjusted to exact percent
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LOB Absolute Factor
1994 LOB ROCE Targets & Results
ROCE Cost of Target Actual % of Performance
LOB Objective Capital ROCE ROCE Target Factor
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Chemicals 13.1% 9.64% 13.1% 34.2% 261% 1.000
E&P 4.0% 9.64% 5.2% -0.8% 0% 0.000
SEBU 3.6% 9.64% 4.8% 2.9% 60% 0.226
SWBU 3.6% 9.64% 4.8% 2.1% 44% 0.000
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LOB Absolute Factor
1995 LOB ROCE Targets & YTD Results *
ROCE Cost of Target YTD % of Performance
LOB Objective Capital ROCE ROCE Target Factor
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Chemicals 36.7% 10.6% 36.7% 47.7% 130% 1.000
E&P 2.2% 10.6% 3.9% -3.4% 0% 0.000
Natural Gas 58.4% 10.6% 58.4% 64.8% 111% 1.000
SEBU 2.9% 10.6% 4.4% 1.8% 41% 0.000
SWBU 7.8% 10.6% 8.4% 2.2% 26% 0.000
* Through 6/30/95
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LOB Relative Factor
- - Measurement is Return on Assets (ROA)
- - ROCE not available at competitor LOB level
- - Reflects LOB performance compared to industry peer group (10 companies)
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LOB Relative Factor: Competitive Peer Group
Chemicals
- Amoco - Exxon
- ARCO Chemical - Mobil
- Chevron - Oxychem
- Dow - Phillips
- Eastman Chemical - Shell
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LOB Relative Factor: Competitive Peer Group
Exploration & Production
- Ashland - LL&E
- Cabot - Noble
- CNG - Pennzoil
- Equitable - Phillips
- Kerr-McGee - Santa Fe
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LOB Relative Factor: Competitive Peer Group
Southeastern Business Unit
- Ashland - Murphy Oil
- Clark Refining - Phillips
- Coastal - Sun Oil Co.
- Crown Central - Tosco
- Kerr-McGee - USX-Marathon
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LOB Relative Factor: Competitive Peer Group
Southwestern Business Unit
- Ashland - Murphy Oil
- Clark Refining - Phillips
- Crown Central - Pride
- Diamond Shamrock - Total Petroleum
- Holly Corp. - USX-Marathon
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LOB Relative Factor
- - Use this table to estimate Industry Relative
LOB Relative Factor based Rank Factor
on ROA 1 1.0
2 0.9
3 0.8
- - 1994 Results: 4 0.7
5 0.6
6 0.5
- Chemicals = 1 7 0.4
8 0.3
- E&P = 11 9 0.2
10 0.1
- SEBU = 9 11 0.0
- SWBU = 9
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1994 Corporate Factor
Corporate Factor
.201 +.225 =.426
Corporate Absolute Corporate Relative
.535 x 37.5% =.201 .60 x 37.5% =.225
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Chemicals 1994 LOB Factor
LOB Absolute LOB Relative
1.0 x 12.5% =.125 l.0 x 12.5% =.125
LOB Factor
.125 +.125 =.25
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Chemicals 1994 Corp/LOB Factor
Overall Corporate Factor =.426
Overall LOB Factor =.250
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Corporate/LOB Factor =.676
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E&P 1994 LOB Factor
LOB Absolute LOB Relative
0.0 x 12.5% =.000 .0 x 12.5% =.000
LOB Factor
.000 +.000 =.000
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E&P 1994 Corp/LOB Factor
Overall Corporate Factor = .426
Overall LOB Factor = .000
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Corporate/LOB Factor = .426
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SEBU 1994 LOB Factor
LOB Absolute LOB Relative
.226 x 12.5% =.028 .20 x 12.5% =.025
LOB Factor
.028 +.025 =.053
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SEBU 1994 Corp/LOB Factor
Overall Corporate Factor = .426
Overall LOB Factor = .053
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Corporate/LOB Factor = .479
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SWBU 1994 LOB Factor
LOB Absolute LOB Relative
0.0 x 12.5% =.000 .20 x 12.5% =.025
LOB Factor
.000 +.025 =.025
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SWBU 1994 Corp/LOB Factor
Overall Corporate Factor = .426
Overall LOB Factor = .025
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Corporate/LOB Factor = .451
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G&A 1994 LOB Factor
LOB Absolute LOB Relative
Chemicals: l.0 x .25 = .250 Chemicals: l.0 x .25 = .250
E&P: 0.0 x .25 = .000 E&P: 0.0 x .25 = .000
SEBU:.226 x .25 = .057 SEBU: .20 x. 25 = .050
SWBU: 0.0 x .25 = 0.00 SWBU: .20 x .25 = .050
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Totals = .307 Totals = .350
x 12.5% x 12.5%
LOB Factor
= .038 = .044
.038 +.044 =.082
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G&A 1994 Corp/LOB Factor
Overall Corporate Factor = .426
[PIE GRAPH]
Overall LOB Factor = .082
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Corporate/LOB Factor = .508
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Research & Development 1994 LOB Factor
[PIE GRAPH]
LOB Absolute LOB Relative
Chemicals: 1.0 x .80 = .800 Chemicals: 1.0 x .80 = .800
SEBU: .226 x .10 = .023 SEBU:. .20 x .10 = .020
SWBU: 0.0 x .10 = 0.00 SWBU: .20 x .10 = .020
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Totals = .823 Totals = .840
x 12.5% x 12.5%
=.103 =.105
LOB Factor
.103 +.105 =.208
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Research & Development 1994 Corp/LOB Factor
Overall Corporate Factor =.426
[PIE GRAPH]
Overall LOB Factor =.208
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Corporate/LOB Factor =.634
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How is the ICP Calculated?
Your Individual
Incentive Target
X
Your Corporate/LOB
Performance Factor
=
Your Incentive
Compensation Award
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How is the ICP Calculated?
Your Individual Grade 38 - 3.5 rating
Performance Target $3,600
X X
Your Corporate/LOB G&A
Performance Factor .508
= =
Your Incentive $3,600 x.508
Compensation Award $1,828
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Other Issues
The ICP Award may be adjusted when:
- - An employee's base salary exceeds 114% of the salary reference band
midpoint.
- - ICP dollars exceed a cap based on shareholder dividends.
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Other Issues
- - You must be employed by Fina at the time the ICP checks are issued
in order to receive your ICP award. (unless retired after 12/31/95)
- - Transfers, promotions and demotions will be pro-rated from the first
day of the month following such event.
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1995 ICP Timellne
1994 1995 1st Qtr 1996 2nd Qtr 1996
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Goal Measurement Absolute Relative
Setting period results results
calculated obtained
Individual
performance ICP Awards
ratings issued
finalized
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Additional Information
- - LOB goals and objectives
- - Individual goals and objectives
- - Personal ICP illustrations
- - What you can do to make a difference
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