<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Arch Petroleum Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
March 26, 1997
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Arch Petroleum Inc. The meeting will be held on the 11th Floor of the Fort
Worth Club Building, 777 Taylor Street, Fort Worth, Texas at 4:00 p.m. on May 8,
1997.
The Notice of Meeting and Proxy Statement on the following pages cover the
formal requirements for the business of the meeting. WHETHER OR NOT YOU FIND IT
POSSIBLE TO ATTEND THE MEETING PERSONALLY, WE HOPE YOU WILL HAVE YOUR STOCK
REPRESENTED BY SIGNING YOUR PROXY EXACTLY AS YOUR NAME APPEARS THEREON AND
RETURNING IT PROMPTLY.
We will have a social period after the meeting, beginning at 4:30 p.m. to
provide an opportunity for shareholders to talk informally with our Officers and
Directors.
Sincerely yours,
Larry Kalas
Chief Executive Officer
<PAGE>
ARCH PETROLEUM INC.
777 Taylor Street, Suite II-A
Fort Worth, Texas 76102
NOTICE OF ANNUAL MEETING THURSDAY, MAY 8, 1997
4:00 P.M.
TO THE SHAREHOLDERS OF ARCH PETROLEUM INC.:
Notice is hereby given that the annual meeting of the shareholders of Arch
Petroleum Inc., a Delaware corporation, will be held at 4:00 p.m., Thursday, May
8, 1997, on the 11th floor of the Fort Worth Club Building, 777 Taylor Street,
Fort Worth, Texas, for the following purposes:
1. To elect a board of six (6) directors to serve until the next Annual
Meeting of Shareholders when their respective successors shall be
elected and qualified.
2. To transact such other business as may properly be brought before the
meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on March 10, 1997, are
entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
Shareholders are invited to attend the meeting. Whether or not you expect
to attend, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the meeting, you may vote your
shares in person, after revoking your proxy.
If your shares are held of record by a broker, bank or other nominee and
you wish to attend the meeting, you should obtain a letter from the broker, bank
or other nominee confirming your beneficial ownership of the shares and bring it
to the meeting. In order to vote your shares at the meeting, you must obtain
from the record holder a proxy issued in your name.
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
BY ORDER OF THE BOARD OF DIRECTORS
Randall W. Scroggins
Secretary
Fort Worth, Texas
March 26, 1997
<PAGE>
TABLE OF CONTENTS
SOLICITATION OF PROXIES............................................ 1
THE MEETING........................................................ 1
ELECTION OF DIRECTORS.............................................. 2
OUTSTANDING VOTING SECURITIES OF THE COMPANY AND CERTAIN
SHAREHOLDERS................................................... 4
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS................... 6
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................... 10
INCORPORATION OF FINANCIAL INFORMATION BY REFERENCE................ 10
OTHER MATTERS...................................................... 11
<PAGE>
ARCH PETROLEUM INC.
777 TAYLOR STREET, PENTHOUSE SUITE II-A
FORT WORTH, TEXAS 76102
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 1997
SOLICITATION OF PROXIES
This Proxy Statement is furnished by Arch Petroleum Inc., a Delaware
corporation (the "Company"), to the holders of outstanding shares of the Common
Stock, par value $0.01 per share, of the Company (the "Common Stock") in
connection with the solicitation of proxies by the Company for use at the annual
meeting of shareholders (the "Meeting") to be held on May 8, 1997, and at any
and all adjournments or postponements thereof. This Proxy Statement and the
enclosed proxy card are first being mailed to shareholders on or about March 26,
1997.
THE MEETING
RECORD DATE, QUORUM AND VOTING
The Board of Directors (the "Board") has established the close of
business on March 10, 1997 as the record date (the "Record Date") for
determining shareholders entitled to notice of and to vote at the Meeting or any
adjournments or postponements thereof. At the close of business on such record
date, there were an aggregate of 17,171,804 shares of Common Stock and shares of
Convertible Preferred Stock representing an aggregate of 7,272,730 shares of
Common Stock (on an as converted basis) issued and outstanding. Each holder of
Common Stock will be entitled to one vote for each share of Common stock held by
him at the close of business on such Record Date and each holder of Convertible
Preferred Stock will be entitled to one vote for each share of Common Stock into
which such holder's Convertible Preferred Stock may be converted at the close of
business on such Record Date. The holders of issued and outstanding shares
having a majority of the votes entitled to be cast at the Meeting must be
represented in person or by proxy in order to constitute a quorum.
Shares represented by the enclosed proxy card will be voted in
accordance with the directions indicated thereon, or, if no direction is
indicated, in accordance with the recommendations of the Board contained in this
Proxy Statement as to all shares represented by that proxy card. Any shareholder
executing and delivering the enclosed proxy card may revoke such action prior to
the Meeting by duly executing a later-dated proxy or an instrument expressly
revoking the proxy, or by declaring its revocation at the Meeting. The persons
named as proxies in the proxy card were selected by the Board and are currently
directors of the Company.
Management knows of no matters to be presented for action at the
Meeting other than those specified in this Proxy Statement and the accompanying
Notice of Annual Meeting. Should any other matter properly come before the
Meeting, proxies will be voted upon these other matters in accordance with the
best judgement of the persons voting such proxies.
The Company will bear all costs related to the solicitation of proxies
pursuant to this statement.
1
<PAGE>
ELECTION OF DIRECTORS
Directors of the Company may be elected by vote of the holders of a
majority of the outstanding Common Stock who are represented at the meeting in
person or by proxy, as long as a quorum is present. A shareholder's abstention
from voting or a non-vote by such shareholder's broker will therefore be counted
in determining whether such a majority vote was cast only if such shareholder is
so represented (either in person or by proxy) at the Meeting. Abstentions or
broker non-votes by or on behalf of shareholders not so represented will be
disregarded. Each director nominee so elected will hold office until such
nominee's successor has been elected and qualified. The proxies given to the
persons named in the enclosed proxy card will be voted for the election of the
nominees listed below. In case of the inability of any of the nominees to
serve, such proxies will be voted for the balance of those named and for
substitute nominees, but the Board now knows of no reason to anticipate that any
substitutions will occur. Directors elected at the Meeting cannot be removed
prior to the next annual meeting except by a majority vote of the shareholders
at any meeting at which a quorum of shareholders is present.
The Board of Directors unanimously recommends a vote FOR the nominees
listed below.
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, although it
is not involved in day-to-day operations. During 1996, the Board held two
meetings.
The Board of Directors has an Audit Committee including two non-
employee directors, Messrs. Harris, Hill, and Mr. Kalas. This committee will be
responsible for matters relating to accounting policies and practices, financial
reporting and internal controls. Each year it will recommend to the Board the
appointment of a firm of independent accountants to audit the financial
statements of the Company. The Committee will review with representatives of
the independent accountants the scope of the audit of the Company's financial
statements, results of that audit and any recommendations with respect to
internal controls and financial matters. In fulfilling its responsibility, it
will periodically meet with and receive reports from the Company's management.
The Company has no standing nominating committee of the Board or committees
serving similar functions.
All members of the Board of Directors attended the first meeting of the Board.
One director was unable to attend the second meeting of the Board.
The names of the Board's director nominees, the year that each nominee first
became a Director and certain other information about each nominee are set forth
below:
<TABLE>
<CAPTION>
FIRST
NAME, AGE AND PRINCIPAL OCCUPATION ELECTED
BUSINESS ADDRESS DURING THE LAST FIVE YEARS DIRECTOR
- ---------------- -------------------------- --------
<S> <C> <C>
Johnny Vinson (65) Chairman of the Board of the Company; July 1986
Arch Petroleum Inc. served as President of the Company from
777 Taylor Street, Suite II November 1987 to June 1988; Chairman of
Fort Worth, TX 76102 the Board of Threshold Development
Company ("TDC") since 1975. TDC is an
oil and gas exploration company which
owned 15.50% of Arch's common stock at
Record Date.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FIRST
NAME, AGE AND PRINCIPAL OCCUPATION ELECTED
BUSINESS ADDRESS DURING THE LAST FIVE YEARS DIRECTOR
- ---------------- -------------------------- --------
<S> <C> <C>
Larry Kalas (47) Director, President and Chief Executive June 1988
Arch Petroleum Inc. Officer of the Company; served as Vice
777 Taylor Street, Suite II President-Administration of the Company
Fort Worth, TX 76102 from July 1986 to June 1988 when he was
named President and CEO.
Randall W. Scroggins (46) Director, Executive Vice President and July 1986
Arch Petroleum Inc. Secretary of the Company; served as Vice
777 Taylor Street, Suite II President since April 1990 and Secretary
Fort Worth, TX 76102 since July 1986; Director of TDC since
1975; He is the son-in-law of Johnny Vinson.
Richard O. Harris (68) Retired banker and oil and gas entrepreneur; June 1992
807 Indiana Until 1990, Senior Vice-President of First
Wichita Falls, TX 76301 National Bank of Amarillo, Texas.
C. Randall Hill (38) Attorney and oil and gas entrepreneur; December 1992
Vista Resources, Inc. Chairman of the Board and Chief Executive
550 W. Texas, Suite 700 Officer of Vista Resources, Inc. (an oil and
Midland, Texas 79701 gas exploration and production company);
prior to October 1992, practiced law with the
firm of Weil, Gotshal & Manges in Dallas,
Texas.
John F. Gilsenan (50) Attorney; Second Vice-President of the October 1994
The Travelers Companies Travelers (since 1986) responsible for private
One Tower Square, #9 PB and public investments in regulated
Hartford, CT 06183 industries, energy, project finance and
chemical sectors. Joined the Travelers in
1973.
</TABLE>
COMPLIANCE WITH SECTION 16 (a) OF THE SECURITIES EXCHANGE ACT
Section 16 (a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. ("NASD"). Officers, directors and greater than ten percent shareowners are
required by SEC regulation to furnish the Company with copies of all Forms 3, 4
and 5 they file.
Based solely on the Company's review of the copies of such forms it
has received and written representations from certain reporting persons that
they were not required to file Form 5 for specified fiscal years, the Company
believes that all its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1996.
3
<PAGE>
OUTSTANDING VOTING SECURITIES OF THE COMPANY
AND CERTAIN SHAREHOLDERS
The following table provides information as to the beneficial
ownership of the Company's Common Stock as of the Record Date by each director,
named executive officer, all directors and executive officers as a group, and
each other person who is known to the Company to beneficially owns 5% or more of
the outstanding Common Stock as of the Record Date. The percent of class
figures are calculated on the basis of the amount of outstanding securities plus
securities deemed outstanding pursuant to Rule 13D-3(d)(1) under the Exchange
Act (Item 403, Regulation S-K). These rules provide that each person listed in
this table be shown at their maximum voting power as if that person had
exercised and converted all their possible securities and no other person listed
in this table had maximized their position.
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature of Percent
of Class of Beneficial Owner Beneficial Ownership (1) of Class
- ---------- ------------------- ------------------------ --------
<S> <C> <C> <C>
Directors and Executive Officers
- --------------------------------
Common Stock Johnny Vinson (2).................... 3,344,160 19.51%
Common Stock Larry Kalas.......................... 566,786 3.31%
Common Stock Randall W. Scroggins (2)............. 2,998,610 17.49%
Common Stock Fred Cantu (3)....................... 130,000 *
Common Stock Richard O. Harris (4)................ 34,000 *
Common Stock C. Randall Hill (5).................. 20,000 *
Common Stock All Directors and Officers
of the Company as a Group
(6 persons) (2)(3)(4)(5)............ 4,429,946 25.71%
Holders of More Than 5% of any Class of Voting Securities:
- ---------------------------------------------------------
Common Stock Threshold Development Company........ 2,663,610 15.54%
777 Taylor Street
Penthouse Suite II-D
Fort Worth, Texas 76102
Common Stock Amon G. Carter Foundation............ 900,000 5.25%
500 West 7th Street, Suite 1212
Fort Worth, Texas 76102
Attention: Pat Harris
Common Stock The Travelers Indemnity.............. 5,454,547 24.11%
Company (6),(8)
One Tower Square, #9 Plaza
Hartford, Connecticut 06183-2030
Attention: Allen Cantrell
Common Stock CIGNA Investments, Inc. (7),(8)...... 3,636,362 17.48%
900 Cottage Grove Rd.
Hartford, Connecticut 06152-2307
Attention: Tom Shea
</TABLE>
4
<PAGE>
Holders of More Than 5% of any Class of Voting Securities (cont.):
- ---------------------------------------------------------
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature of Percent
of Class of Beneficial Owner Beneficial Ownership (1) of Class
- ---------- ------------------- ------------------------ --------
<S> <C> <C> <C>
Convertible The Travelers Indemnity Company...... 436,364 60.00%
Preferred Stock One Tower Square, #9 Plaza
Hartford, Connecticut 06183-2030
Attention: Allen Cantrell
Convertible CIGNA Investments, Inc. (9).......... 290,909 40.00%
Preferred Stock 900 Cottage Grove Rd.
Hartford, Connecticut 06152-2307
Attention: Tom Shea
</TABLE>
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Unless and to the extent otherwise indicated below, the figures presented
in this column represent shares of stock owned directly of record by the
indicated holders.
(2) Includes 2,663,610 shares of Common Stock owned directly of record by
Threshold Development Company ("TDC"). Messrs. Vinson and Scroggins, by
virtue of their ownership of shares of TDC and their positions as officers
or directors of TDC, share the power to vote or direct the voting and to
dispose of or direct the disposition of such shares of Common Stock held of
record by TDC, and are therefore deemed to beneficially own those shares.
(3) Includes options exercisable for an aggregate of 40,000 shares of Common
Stock.
(4) Includes options exercisable for an aggregate of 16,690 shares of Common
Stock.
(5) Includes options exercisable for an aggregate of 20,000 shares of Common
Stock.
(6) Includes 4,363,640 shares of Common Stock issuable upon conversion of
Convertible Preferred Stock held of record by the Travelers Indemnity
Company ("Travelers"), 109,090 shares of Common Stock issuable upon
conversion of 9.75% Series A Convertible Subordinated Notes due 2004
("Series A Notes") issued to The Travelers Life and Annuity Company
("TLAC") and 981,817 shares of Common Stock issuable upon conversion of
Adjustable Rate Series B Notes due 2004 ("Series B Notes") issued to TLAC.
(7) Includes 1,034,545 shares of Common Stock issuable upon conversion of
Convertible Preferred Stock held of record by Connecticut General Life
Insurance Company ("CGLIC"), 25,855 shares of Common Stock issuable upon
conversion of Series A Notes issued to CGLIC, 232,690 shares of Common
Stock issuable upon conversion of Series B Notes issued to CGLIC, 1,874,545
shares of Common Stock issuable upon conversion of Convertible Preferred
Stock issued to CIGNA Mezzanine Partners III, L.P. ("Mezzanine"), 46,873
shares of Common Stock issuable upon conversion of Series A Notes issued to
Mezzanine and 421, 854 shares of Common Stock issuable upon conversion of
Series B Notes issued to Mezzanine.
(8) The beneficial shares of Travelers, TLAC, CGLIC and Mezzanine arose from a
combined private placement transaction on October 20, 1994. As a group,
the maximum voting power of the collective entities is 34.6%.
5
<PAGE>
(9) Includes 103,454.5 shares of Convertible Preferred Stock held of record by
CGLIC and 187,454.5 shares of Convertible Preferred Stock held of record by
Mezzanine.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
TABLE OF SUMMARY COMPENSATION
The following table sets forth certain information regarding
compensation paid during each of the last three years to the Company's Chief
Executive Officer and each of the Company's other executive officers, based on
salary and bonus (in excess of $100,000) earned during 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND
PRINCIPAL POSITION YEAR SALARY BONUS
- -----------------------------------------------------------------
<S> <C> <C> <C>
Johnny Vinson (1) 1996 $175,000 $50,000
Chairman of the Board 1995 175,000 50,000
1994 125,000 -0-
Larry Kalas (2) 1996 150,000 50,000
President & Chief Executive Officer 1995 151,000 25,000
1994 114,000 -0-
Randall W. Scroggins (3) 1996 125,000 30,000
Vice President & Secretary 1995 125,000 20,000
1994 80,000 -0-
Fred Cantu 1996 75,000 25,000
Treasurer & Chief Financial Officer 1995 75,000 10,000
1994 65,000 -0-
Troy Welch 1996 95,000 25,000
Vice President 1995 74,900 -0-
1994 -0- -0-
</TABLE>
(1) Johnny Vinson entered into an employment contract with the Company
on July 19, 1996, amended on January 27, 1997, that contains terms to provide
him with certain severance pay upon termination. The value of this severance
package as of February 28, 1997 would be $350,000.
6
<PAGE>
(2) Larry Kalas entered into an employment contract with the Company
on July 19, 1996, amended on January 27, 1997, that contains terms to provide
him with certain severance pay upon termination. The value of this severance
package as of February 28, 1997 would be $300,000.
(3) Randall W. Scroggins entered into an employment contract with the
Company on July 19, 1996, amended on January 27, 1997, that contains terms to
provide him with certain severance pay upon termination. The value of this
severance package as of February 28, 1997 would be $250,000.
OPTION GRANTS AND OPTION EXERCISES DURING 1996
There were no stock options granted to nor any stock options exercised
by any of the executive officers in 1996.
COMPENSATION OF DIRECTORS
Directors are paid $600 each per directors' meeting attended and $600
per committee meeting attended as members of the Audit Committee.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee of the Board of Directors comprises all its
directors and has furnished the following report on executive compensation:
Under the supervision of the Compensation Committee of the Board of
Directors, the Company has developed and implemented compensation policies
and plans, which are intended to enhance the profitability of the Company,
and thus shareholder value, by aligning closely the financial interests of
its officers and key executives with those of its shareholders. To implement
these goals, annual salaries are based primarily upon a review of past and
present corporate and individual performance, with reference to salary data
in similar-sized corporations so that such salaries are generally
competitive. The Company also relies to a significant degree on annual
discretionary incentive compensation and the award of non-qualified stock
options to attract and retain Company officers and other key employees of
outstanding abilities and to motivate them to perform to the full extent of
their abilities. Both types of incentive compensation are variable and depend
upon corporate and individual performance so as to encourage a sharp and
continuing focus on building profitability and shareholder value. No specific
weighing, however, is given to Company or individual performance.
The Committee has complete discretion in determining all compensation
amounts (including whether any annual discretionary incentive payments or
stock option awards are made and, if so, the amounts thereof) regardless of
whether corporate or individual performance goals are achieved. The Committee
exercised its complete discretion in setting total compensation for 1996.
In evaluating corporation performance for purposes of setting the
salary and incentive compensation of the Chief Executive Officer and the
Company's other officers, the Committee has given first consideration to a
successful corporate-wide performance in terms of sales and earnings, and
secondarily has taken particular note of management's success in securing
additional market share during a period of prolonged depression in the oil
and gas industry. The Committee, as a matter of policy generally, and with
respect to 1996 in particular, viewed all the foregoing items as elements of
corporate, and not individual performance. Individual salary and other
compensation decisions for all officers are based primarily on overall
Company performance.
7
<PAGE>
The Committee has also taken into account, in its review of management
performance and compensation, management's consistent commitment to the long-
term success of the Company through the development of new oil and gas
properties and natural gas pipelines while monitoring improvement in the
Company's financial condition. In addition, in evaluating such commitment,
the Committee has also noted the increasing level of shareholdings of the
Company's officers.
Although, as stated above, the Committee considered corporate
performance as the primary factor in its compensation decisions, the
Committee also considered individual performance. The Committee, however,
does not quantify individual performance nor relate individual performance to
any specific goals or targets. The Committee has complete discretion in its
evaluation of individual performance.
Based on its evaluation of individual performance, the Committee
believes that the Company's officers are dedicated to achieving significant
improvements in long-term financial performance and that the compensation
policies, plans and methods the Company has implemented and administered have
contributed and will continue to contribute to achieving this management
focus. The Committee considered such dedication as an element of each
officer's past and present performance. The Committee believes that
dedication is an intangible element and cannot be measured; therefore, the
Committee does not apply any specific weighing to its views about the
dedication of each officer. The Committee considers total compensation, base
salary, annual incentive, and stock option grant, in establishing each
element of compensation. The Committee does not use any predetermined formula
or assign any specific weight to the various factors considered in awarding
bonuses.
Immediately prior to the end of each year, the Committee considers
the desirability of granting to the Chief Executive Officer and the Company's
other officers, as well as other key executives, awards under the Company's
stock option plan. The Committee believes that its past grants of such
options to purchase common stock of the Company, at the market price in
effect on the day prior to the date of such grant, has successfully focused
the Company's officers and other key executives on building profitability and
shareholder value. In determining the grants of stock options to the
officers, including the Chief Executive Officer, and to other key executives,
the Committee reviewed the recommended individual awards. The Committee does
not consider the number of options already outstanding in determining option
awards.
The foregoing report has been furnished by the members of the Board of
Directors' Compensation Committee.
The foregoing report of the Compensation Committee shall not be deemed
incorporated by reference in any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total shareholder return on the Company's Common Stock during the five years
ended December 31, 1996 with the cumulative total return on the NASDAQ Market
Index and the derived peer group index comprised of companies in the oil and gas
industry. The comparison assumes $100 was invested on December 31, 1991 in the
Company's Common Stock and in each of the foregoing indices and assumes
reinvestment of dividends.
8
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG ARCH PETROLEUM INC., THE NASDAQ STOCK MARKET-US INDEX AND THE PEER GROUP
[Arch Petroleum Graph Appears Here]
<TABLE>
<CAPTION>
- ---------------------------------------------------------
DECEMBER 31 1991 1992 1993 1994 1995 1996
=========================================================
<S> <C> <C> <C> <C> <C> <C>
Arch Petroleum Inc. 100 183 194 178 189 228
- ---------------------------------------------------------
NASDAQ US Index 100 116 134 131 185 227
- ---------------------------------------------------------
Peer Group 100 128 151 139 154 243
- ---------------------------------------------------------
</TABLE>
This index is based on the cumulative total return of each company, assuming
reinvestment of dividends, weighted according to the respective issuer's stock
market capitalization. The companies used in the peer group index are as
follows:
Callon Petroleum Co. Evergreen Resources Inc.
Coho Energy Inc. Lomak Petroleum Inc.
Comstock Resources Inc. National Energy Group Inc.
Dorchester Hugoton-LP Wilshire Oil of Texas
Enex Resources Corp.
The foregoing chart shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board of Directors of the Company has authorized notes receivable from
key employees and directors in a prior period for purposes of exercising stock
options. The notes bear interest at the Company's borrowing ("Revolver")
interest rate and all of the notes are secured by the stock certificates that
were issued upon exercise of the stock options by each employee. The balances
due to the Company in this regard, including interest, were $1,022,000 and
$965,000 at December 31, 1996 and 1995, respectively. These amounts are offset
against equity on the Company's consolidated balance sheet.
The Board of Directors of the Company also authorized cash advances to
certain officers in a prior period in exchange for notes receivable. These notes
also bear interest at the Revolver rate and are secured by stock certificates of
the Company owned by those individuals. The notes, including interest, total
$1,759,000 and $1,645,000 at December 31, 1996 and 1995, respectively. The
Company recognized interest income on its outstanding notes receivable from
officers, directors and key employees of $174,000, $188,000, and $150,000 during
1996, 1995 and 1994, respectively.
The Company rents, on an as-needed basis, an aircraft from TDC. Charges for
this service are billed to the Company based on time used. Rental charges
amounted to $20,000, $39,000 and $20,000 for the years ended December 31, 1996,
1995 and 1994, respectively. With the approval of the board of directors, on
April 11, 1995, the Company purchased 100,000 shares of common stock for its
treasury from TDC valued at $206,000 at the then current market price. Amounts
receivable from TDC at December 31, 1996 and 1995, are classified as long-term
and did not accrue interest. The increase in the receivable from TDC in 1996
primarily related to producing wells jointly owned by the related parties and
operated by TDC. TDC receives revenue from the purchase of the oil and gas and
pays related LOE associated with the wells. Under agreement with TDC, the
Company has the right of offset with TDC. Accordingly, the 1996 and 1995 TDC
balances are shown net in the financial statements. During 1996 revenue
exceeded LOE by TDC on Arch's behalf by approximately $651,000, accounting for
the largest portion of the increase in the amount due from TDC. Commencing
January 1, 1997, TDC will no longer offset revenue against related LOE and the
unpaid balance due to the Company by TDC will accrue interest at the Company's
commercial borrowing rate.
INCORPORATION OF FINANCIAL INFORMATION CONTAINED IN
ANNUAL REPORT ON FORM 10-K, QUARTERLY REPORTS
ON FORM 10-Q AND REPORT ON FORM 8-K
The financial statements and schedules (including the notes thereto) included
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, and Quarterly Reports on Form 10-Q for the three months ended March
31, 1996, June 30, 1996 and September 30, 1996 and all amendments thereto as
filed by the Company under the Securities Exchange Act of 1934, as amended, are
incorporated herein by reference. The Company will provide, without charge, to
each person to whom a Proxy Statement is delivered, upon written or oral request
of such person and by first class mail or other equally prompt means within one
business day of receipt of such request, a copy of any and all of the
information that has been incorporated by reference in this Proxy Statement (not
including the exhibits to such information unless such exhibits are explicitly
incorporated by reference into such information). Requests for such information
should be directed to Arch Petroleum Inc., 777 Taylor Street, Suite II-A, Fort
Worth, Texas 76102, Attention: Secretary of the Company, Telephone Number (817)
332-9209.
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OTHER MATTERS
THE SOLICITATION
The cost of solicitation of proxies will be borne by the Company. Proxies may
be solicited by mail, advertisement, telephone and in person. Directors and
employees of the Company may, without additional compensation, make
solicitations through personal contact or by telephone or telegraph, and
arrangements may be made with brokerage houses or other custodians, nominees and
fiduciaries to send proxy material to their principals. The Company will
reimburse any such persons for their reasonable expenses.
AUDITORS
Price Waterhouse has been the Company's independent public accountants for
the past ten years. Representatives of Price Waterhouse are expected to be
present at the Meeting and will be available to respond to appropriate
questions. They will have an opportunity to make a statement if they desire to
do so.
ANNUAL REPORT
A copy of the Company's 1996 Annual Report is being mailed to shareholders
contemporaneously with the mailing of this Proxy Statement.
PROPOSALS TO BE PRESENTED AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS
Any qualified shareholder of the Company wishing to present a proposal for
consideration by all shareholders at the annual meeting to be held in 1998, must
notify the Company by November 30, 1997 to have the proposal considered for
inclusion in the Proxy Statement and form of proxy related to that meeting. Any
such notification should be addressed to the Corporate Secretary, Randall W.
Scroggins, 777 Taylor Street, Suite II, Fort Worth, Texas 76102. Any such
proposal must comply in all respects with the rules and regulations of the
Securities and Exchange Commission.
By Order of the Board of Directors
Larry Kalas
Chief Executive Officer
March 26, 1997
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