<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 240.14a-11(c) or 240.14a-12
Atlantic Richfield Company
- --------------------------------------------------------------------------------
(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
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:
---------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------
<PAGE> 2
ARCO (LOGO)
ATLANTIC RICHFIELD COMPANY
NOTICE OF 1997
ANNUAL MEETING
OF STOCKHOLDERS
AND PROXY STATEMENT
PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY PROMPTLY
MONDAY, MAY 5, 1997
AT 11:00 A.M.
AT ARCO'S OFFICES
2300 WEST PLANO PARKWAY
PLANO, TEXAS
<PAGE> 3
ARCO (LOGO)
ATLANTIC RICHFIELD COMPANY
515 South Flower Street
Los Angeles, California 90071
March 17, 1997
Dear Stockholder:
It is a pleasure to invite you to join us at the 1997 Annual Meeting of
Stockholders in Plano, Texas on May 5.
It is important that your shares be voted whether or not you plan to be present
at the meeting. Please complete, sign, date and return the enclosed form of
proxy promptly. If you attend the meeting and wish to vote your shares
personally, you may revoke your proxy.
This booklet includes the notice of the meeting and the Proxy Statement, which
contains information about the formal business to be acted upon by the
stockholders. The meeting will also feature a report on the operations of your
Company, followed by a question and discussion period.
Sincerely,
/s/ MIKE R. BOWLIN
Chairman of the Board and
Chief Executive Officer
<PAGE> 4
ARCO (LOGO)
ATLANTIC RICHFIELD COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 5, 1997
The Annual Meeting of Stockholders of Atlantic Richfield Company will be held in
the Company's offices, 2300 West Plano Parkway, Plano, Texas, on Monday, May 5,
1997, at 11:00 a.m., local time, for the following purposes:
(1) To elect fourteen directors to hold office for a one-year term;
(2) To amend the 1985 Executive Long-Term Incentive Plan;
(3) To approve the appointment of Coopers & Lybrand L.L.P. as independent
auditors for the year 1997;
(4) If properly presented, to consider and act upon the stockholders' proposal
set forth beginning on page 26, which is opposed by the Board of Directors;
and
(5) To transact such other business as may properly come before the meeting.
Stockholders entitled to vote at the meeting are holders of record of the
Preference Stocks and of the Common Stock at the close of business on March 7,
1997.
IT WILL BE HELPFUL TO US IF YOU WILL READ THE PROXY STATEMENT, THEN COMPLETE,
SIGN AND DATE THE FORM OF PROXY AND RETURN IT IN THE ENCLOSED SELF-ADDRESSED
POSTPAID ENVELOPE.
Each stockholder of record will receive a single form of proxy pertaining to all
classes of voting stock registered in his or her name. Each participant in any
of the various employee benefit plans will also receive a form of proxy
pertaining to shares credited to his or her accounts in all plans.
/s/ BRUCE G. WHITMORE
<TABLE>
<S> <C>
BRUCE G. WHITMORE Los Angeles, California
Senior Vice President, March 17, 1997
General Counsel and
Corporate Secretary
</TABLE>
<PAGE> 5
ATLANTIC RICHFIELD COMPANY
515 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
------------------------
PROXY STATEMENT
MARCH 17, 1997
------------------------
INTRODUCTION
The accompanying proxy is solicited by the Board of Directors of Atlantic
Richfield Company ("ARCO" or
the "Company") for the Annual Meeting of Stockholders. The proxy may be revoked
by the stockholder at any time prior to the time it is voted by giving notice of
such revocation either personally or in writing to the General Counsel and
Corporate Secretary of ARCO. When a proxy is returned properly dated and signed,
the shares represented thereby will be voted by the persons named as proxies in
accordance with each stockholder's directions. Stockholders may specify their
choices by marking the appropriate boxes on the enclosed proxy. If a proxy is
dated, signed and returned without specifying choices, the shares will be voted
as recommended by the directors of the Company. As to other items of business
which may come before the meeting, the proxies will vote in accordance with
their best judgment. ARCO has adopted a policy of confidential voting. All
proxies, ballots and voting tabulations that identify stockholders shall be kept
secret by the independent third party tabulator except in specified
circumstances where it is important to protect the interests of the Company and
its stockholders.
VOTING SECURITIES
All stockholders of record at the close of business on March 7, 1997 are
entitled to vote on all business of the meeting. The Company's $3.00 Preference
Stock ("$3.00 Preference Stock") is entitled to eight votes per share; the
Company's $2.80 Preference Stock ("$2.80 Preference Stock") is entitled to two
votes per share; and the Company's Common Stock ("Common Stock") is entitled to
one vote per share, all shares voting together as one class. The Company had
59,510 shares of $3.00 Preference Stock, 662,751 shares of $2.80 Preference
Stock and 161,138,056 shares of Common Stock outstanding on such record date.
Fractional shares will not be voted. The presence, in person or by proxy, of
stockholders entitled to cast at least a majority of the votes which all
stockholders are entitled to cast shall constitute a quorum.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following is the only group known by the Company to own beneficially more
than five percent of any class of the Company's voting securities as of February
12, 1997:
<TABLE>
<CAPTION>
TITLE OF
CLASS NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
- ------------- ---------------------------------- ---------------- ----------------
<C> <S> <C> <C>
Common Stock The Capital Group Companies, Inc. 11,977,870(a) 7.5%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- ------------------------
(a) According to Schedule 13G filed with the Company on February 13, 1997, The
Capital Group Companies, Inc., is the parent holding company of a group of
investment management companies that hold investment power and, in some
cases, voting power over the securities reported in the schedule. The
investment management companies, which include a "bank" as defined in
Section 3(a)6 of the Securities Exchange Act of 1934 and several investment
advisers registered under Section 203 of the Investment Advisers Act of
1940 (the "1940 Act"), provide investment advisory and management services
for their respective clients which include registered investment companies
and institutional accounts. Capital Research and Management Company, an
investment adviser registered under Section 203 of the 1940 Act and
wholly-owned subsidiary of The Capital Group Companies, Inc., is the
beneficial owner of 11,246,000 shares or 7% of the Common Stock believed to
be outstanding as a result of acting as investment adviser to various
investment companies registered under Section 8 of the 1940 Act.
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table and the footnotes thereto set forth the number of shares of
Common Stock, the number of shares of common stock ("ARCO Chemical Stock") of
ARCO Chemical Company ("ARCO Chemical"), the number of shares of common stock
("Vastar Stock") of Vastar Resources, Inc. ("Vastar") and the number of shares
of common stock ("Lyondell Stock") of Lyondell Petrochemical Company
("Lyondell") owned beneficially as of February 1, 1997 by each director, each
named executive officer and all directors and executive officers as a group. At
February 1, 1997, ARCO owned 80,000,001 shares of ARCO Chemical Stock, which
represented 82.7% of the outstanding ARCO Chemical Stock. At February 1, 1997,
ARCO owned 80,000,001 shares of Vastar Stock, which represented 82.3% of the
outstanding Vastar Stock. At February 1, 1997, ARCO owned 39,921,400 shares of
Lyondell Stock, which represented 49.9% of the outstanding Lyondell Stock. In
August 1994, ARCO completed an offering of Exchangeable Notes which, upon their
September 1997 maturity date, at ARCO's option, can be exchanged into Lyondell
Stock or cash of an equal value. If ARCO elects to deliver its shares of
Lyondell Stock at maturity, ARCO's equity interest in Lyondell will be
substantially reduced or eliminated. Except as disclosed herein, none of the
directors, named executive officers or directors and executive officers as a
group owned any other equity securities of the Company, ARCO Chemical, Vastar or
Lyondell. As of February 1, 1997, the percentage of shares of any class of
equity securities of the Company, ARCO Chemical, Vastar or Lyondell,
beneficially owned by any director, any named executive officer or all directors
and executive officers as a group, was less than 1% of the class so owned.
Unless otherwise noted, each individual has sole voting and investment power for
the shares indicated below.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
OWNED BENEFICIALLY AS OF
NAME FEBRUARY 1, 1997(A)
- ---------------------------------------------------------------------------------------------
<S> <C>
Frank D. Boren................................................... 4,174(b)(c)
Mike R. Bowlin................................................... 257,196(d)(e)
Lodwrick M. Cook................................................. 179,683(b)(c)
Richard H. Deihl................................................. 4,916(b)(c)(f)
Anthony G. Fernandes............................................. 108,039(d)
John Gavin....................................................... 3,494(b)(c)
Hanna H. Gray.................................................... 1,451(b)
Philip M. Hawley................................................. 4,329(b)(c)
Marie L. Knowles................................................. 39,750(d)(f)
Kent Kresa....................................................... 2,550(b)(c)
David T. McLaughlin.............................................. 2,406(b)(c)(f)
William C. Rusnack............................................... 64,509(d)(g)
John B. Slaughter................................................ 2,243(b)(c)
William E. Wade, Jr. ............................................ 128,098(d)
Henry Wendt...................................................... 4,122(b)(c)
All directors and executive officers as a group.................. 1,139,611(f)(g)(h)(i)(j)
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Includes shares held by the trustees under the Atlantic Richfield Capital
Accumulation Plan II and the Atlantic Richfield Savings Plan II for the
accounts of participants.
(b) The amounts shown for each outside director include 1,000 shares that may
be acquired within 60 days following February 1, 1997 through the exercise
of stock options pursuant to the Stock Option Plan for Outside Directors
(the "Outside Directors' Stock Option Plan"). See "Compensation --
Compensation of Outside Directors." The amount shown for Mr. Cook, also
includes options granted prior to his retirement as an officer of ARCO
pursuant to the 1985 Executive Long-Term Incentive Plan (the "LTIP"). See
"Compensation -- Compensation of Executive Officers." The amounts also
include the number of shares (which are issuable in respect of dividend
share credits allocable under each of the Outside Directors' Stock Option
Plan and the LTIP to the related options
(Footnotes continued on following page)
2
<PAGE> 7
upon the exercise, surrender or expiration of such options) as follows: Mr.
Boren, 351; Mr. Cook, 30,156; Mr. Deihl, 351; Mr. Gavin, 351; Mrs. Gray,
351; Mr. Hawley, 351; Mr. Kresa, 186; Mr. McLaughlin, 214; Dr. Slaughter,
351; and Mr. Wendt, 351.
(c) Includes shares of Restricted Stock equal to the present value of the
outside directors' accrued retirement benefits as of December 31, 1996,
granted as of January 1, 1997, upon termination of the Retirement Plan for
Outside Directors. See "Compensation -- Compensation of Directors."
(d) The amounts shown include shares that may be acquired within 60 days
following February 1, 1997 through the exercise of stock options by each of
the named executives, as follows: Mr. Bowlin, 210,731; Mr. Fernandes,
88,434; Mrs. Knowles, 30,030; Mr. Wade, 105,766; and Mr. Rusnack, 51,338.
Also includes the number of shares issuable in respect of dividend share
credits allocable to the related options upon the exercise, surrender, or
expiration of such related options, as follows: Mr. Bowlin, 34,514; Mr.
Fernandes, 17,495; Mrs. Knowles, 5,617; Mr. Wade, 20,552; and Mr. Rusnack,
11,723. The options and related dividend share credits were granted
pursuant to the LTIP. See "Compensation -- Compensation of Executive
Officers."
(e) Includes 10,000 shares of Restricted Common Stock granted in June 1992
pursuant to the LTIP. This grant of Restricted Stock includes voting rights
and the right to receive dividends.
(f) As of February 1, 1997, Mr. Deihl, Mrs. Knowles and Mr. McLaughlin owned,
respectively, 2,500 shares, 100 shares and 68 shares of ARCO Chemical
Stock, and all directors and executive officers as a group owned 28,434
shares of ARCO Chemical Stock.
(g) As of February 1, 1997, Mr. Rusnack owned 1 share of Lyondell Stock and all
directors and executive officers as a group owned a total of 11 shares of
Lyondell Stock.
(h) As of February 1, 1997, two executive officers owned 400 shares of Vastar
Stock.
(i) Includes 11,014 shares owned jointly by spouses which are subject to shared
voting and investment power and 4,276 shares owned beneficially by spouses
or family members. Does not include 1,057 shares owned by adult children or
other relatives, as to which shares beneficial ownership is disclaimed.
(j) Includes 899,175 shares that may be acquired within 60 days following
February 1, 1997 through the exercise of stock options. Also includes
shares issuable in respect of dividend share credits allocable to the
related options upon exercise, surrender or expiration of such options.
3
<PAGE> 8
ELECTION OF DIRECTORS
Item 1 on Proxy Card
Effective at the date hereof, the number of directors constituting the whole
Board is fixed at fourteen. The Board of Directors has selected the fourteen
members currently serving on the Board as nominees for election at the 1997
Annual Meeting of Stockholders. These nominees were recommended by the Corporate
Governance Committee.
Frank D. Boren
Mike R. Bowlin
Lodwrick M. Cook
Richard H. Deihl
Anthony G. Fernandes
John Gavin
Hanna H. Gray
Philip M. Hawley
Marie L. Knowles
Kent Kresa
David T. McLaughlin
John B. Slaughter
William E. Wade, Jr.
Henry Wendt
Directors elected at the annual meeting will hold office for a one-year term and
until their successors are elected and qualified. Unless authority to vote for
directors is withheld in the proxy, the persons named in the accompanying proxy
intend to vote for the election of the fourteen nominees listed above.
All nominees have indicated a willingness to serve as directors, but if any of
them should decline or be unable to act as a director, the persons named in the
proxy will vote for the election of another person or persons as the Board of
Directors recommends.
4
<PAGE> 9
- --------------------------------------------------------------------------------
The following biographical information is furnished with respect to each of the
fourteen nominees for election at the annual meeting. The information includes
age as of the date of the meeting, present position, if any, with ARCO, period
served as director, and other business experience during the past five years.
Unless otherwise indicated, the description of offices held by the persons below
refer to offices with ARCO.
FRANK D. BOREN, 62
[Picture Director since 1990. President of Sustainable Conservation since
of Boren] June 1992. President, The Nature Conservancy (January
1987-January 1990), Partner, McNeill Enterprises (real estate)
(1980-1986 and January 1990-Present) and Partner in the law firm
of Paul, Hastings, Janofsky & Walker (1968-1980).
MIKE R. BOWLIN, 54
Chairman of the Board, Chief Executive Officer and President
[Picture Director since 1992. Chairman of the Board since July 1995,
of Bowlin] Chief Executive Officer since July 1994 and President since June
1993. Executive Vice President (June 1992-May 1993) and Senior
Vice President (July 1985-June 1992). Officer of ARCO since
1984. Chairman of the Board of ARCO Chemical Company and a
director of Wells Fargo and Company.
LODWRICK M. COOK, 68
[Picture Director since 1980. Retired Chairman of the Board (January
of Cook] 1986-June 1995). Chief Executive Officer (October 1985-June
1994), President (October 1985-December 1985), Chief Operating
Officer-Products (May 1984-October 1985) and Executive Vice
President (June 1980-May 1984). Director of Bank One, Louisiana
and Castle & Cooke Inc.
RICHARD H. DEIHL, 68
[Picture Director since 1987. Former Chairman of the Board (1986-1995),
of Deihl] Chief Executive Officer (1983-1993) and President (1983-1986) of
H. F. Ahmanson & Company (bank holding company). Chairman of the
Board (1983-1993), Chief Executive Officer (1967-1993) and
President (1967-1983) of Home Savings of America (bank).
ANTHONY G. FERNANDES, 51
Executive Vice President
[Picture Director since 1994. Executive Vice President since September
of Fernandes] 1994. Senior Vice President (July 1990-September 1994) and Vice
President and Controller (July 1987-July 1990). Officer of ARCO
since 1987. Director of ARCO Chemical Company.
5
<PAGE> 10
- --------------------------------------------------------------------------------
JOHN GAVIN, 66
[Picture Director since 1989. Chairman of Gamma Services International
of Gavin] (international consulting services) since January 1990 and
Managing Director (Latin America) for Hicks, Muse, Tate and
Furst since 1995. President of Univisa Satellite Communications
(May 1987-December 1989). Vice President of ARCO (May 1986-May
1987). United States Ambassador to Mexico (April 1981-May 1986).
Director of Dresser Industries, KAP Resources (Canadian),
International Wire Holdings, Krause's Furniture, Inc.,
Pinkerton's, Inc., and Hotchkis and Wiley Mutual Funds.
HANNA H. GRAY, 66
[Picture Director since 1982. President Emeritus and Harry Pratt Judson
of Gray] Distinguished Professor of History of the University of Chicago
since July 1993. President and Professor of History (1978-1993).
Director of American Information Technologies (Ameritech),
Cummins Engine Company, and J. P. Morgan & Company/Morgan
Guaranty Trust Company of New York.
PHILIP M. HAWLEY, 71
[Picture Director since 1975. Chairman of the Board and CEO of Krause's
of Hawley] Furniture, Inc. since August 1996. Former Chairman of the Board
and Chief Executive Officer of Carter Hawley Hale Stores, Inc.
(department stores) (1983-1993) and President (1977-1983).
Director of Johnson & Johnson, and Weyerhaeuser Company.
MARIE L. KNOWLES, 50
[Picture Director since 1996. Executive Vice President and Chief
of Knowles] Financial Officer since July 1996. Senior Vice President (June
1993-July 1996) and Vice President and Controller (July 1990-May
1993). Officer of ARCO since 1990. Director of ARCO Chemical
Company, Vastar Resources, Inc. and Phelps Dodge Corporation.
KENT KRESA, 59
[Picture Director since 1993. Chairman, President and Chief Executive
of Kresa] Officer of Northrop Grumman Corporation (aerospace) since 1990.
President and Chief Operating Officer of Northrop Corporation
(1987-1990). Director of Chrysler Corporation.
6
<PAGE> 11
- --------------------------------------------------------------------------------
DAVID T. MCLAUGHLIN, 65
[Picture Director since 1993. Chief Executive Officer and President since
of McLaughlin] 1988 and Chairman (1987-1995) of The Aspen Institute
(not-for-profit institute). President of Dartmouth College
(1981-1987). Director of Atlas Air, Partnerre Re Holdings Ltd.,
Standard Fusee Corporation and Westinghouse Electric
Corporation.
JOHN B. SLAUGHTER, 63
[Picture Director since 1989. President of Occidental College since 1988.
of Slaughter] Chancellor, University of Maryland (1982-1988). Director of
Avery Dennison Corporation, International Business Machines
Corporation, Monsanto Company and Northrop Grumman Corporation.
WILLIAM E. WADE, JR., 54
Executive Vice President
[Picture Director since 1993. Executive Vice President since June 1993.
of Wade] Senior Vice President (May 1987-May 1993). Officer of ARCO since
1985.
HENRY WENDT, 63
[Picture Director since 1987. Chairman of Global Health Care Partners of
of Wendt] DLJ Merchant Banking Partners, a Donaldson, Lufkin & Jenrette
Company (private equity investment) since January 1997. Former
Chairman of the Board of SmithKline Beecham, PLC and its USA
subsidiary SmithKline Beecham Corporation (health care products)
(1989-1994), Chairman of the Board and Chief Executive Officer
of SmithKline Beckman Corporation (1987-1989), President and
Chief Executive Officer (1982-1987), and President and Chief
Operating Officer (1976-1982). Director of Allergan, Inc. and
Aviall, Inc.
7
<PAGE> 12
COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------ --------------------------
OTHER RESTRICTED ALL
ANNUAL STOCK OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
NAME & POSITION YEAR ($) ($) ($) (#) (#) ($)
- ------------------------------ ---- -------- -------- ------------ ---------- ------------ ------------
(a) (b) (c) (d)
<S> <C> <C> <C> <C> <C> <C> <C>
Mike R. Bowlin 1996 $955,000 $960,000 $131,911 13,036 41,508 $122,236
Chairman of the Board 1995 $835,577 $670,000 $ 62,540 -- 44,500 $103,480
Chief Executive Officer 1994 $715,731 $600,000 $117,689 -- 86,800 $ 96,532
President
Anthony G. Fernandes 1996 $532,308 $365,000 $ 35,716 1,577 21,555 $ 90,622
Executive Vice President 1995 $490,385 $330,000 $173,200 -- 22,150 $ 75,630
1994 $374,171 $265,000 $ 30,364 -- 35,700 $ 62,293
Marie L. Knowles 1996 $385,962 $237,000 $ 18,511 1,183 32,775 $ 63,761
Executive Vice President 1995 $323,077 $175,000 $ 10,767 -- 8,925 $ 51,118
Chief Financial Officer 1994 $315,000 $155,000 $ 20,255 -- 6,880 $ 49,629
William E. Wade, Jr. 1996 $559,230 $399,000 $ 47,365 1,773 24,244 $ 92,652
Executive Vice President 1995 $541,962 $350,000 $ 31,190 -- 22,150 $ 82,475
1994 $525,000 $400,000 $ 59,474 -- 17,600 $ 80,038
William C. Rusnack 1996 $409,769 $183,000 $ 21,634 698 9,554 $ 67,377
Senior Vice President 1995 $389,693 $177,500 $ 12,869 -- 11,516 $ 60,125
1994 $380,000 $195,000 $ 32,881 -- 8,600 $ 58,491
Ronald J. Arnault 1996 $689,321 $488,600 $ 19,228 -- -- $761,747
Retired Executive 1995 $665,229 $480,000 $ 21,044 -- 22,150 $140,829
Vice President(e) 1994 $654,654 $500,000 $ 28,794 -- 17,600 $123,944
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes imputed income in respect of interest on relocation loans, tax
gross-ups in respect of relocation expense and financial counseling
reimbursements and other miscellaneous items, and the amount of incremental
interest accrued under the Executive Deferral Plan that exceeds 120% of a
specified IRS rate. The relocation expense and financial counseling
reimbursements are increased by an amount to cover the state and federal
income tax obligations of the recipient associated with the reimbursements,
including an additional amount, based on maximum applicable federal and
state income tax rates.
(b) On February 24, 1997, the Compensation Subcommittee of the Board of
Directors made the following awards of Restricted Stock in connection with
the amendments to the Company's LTIP described on page 23 hereof (the
"Amended LTIP"). The value of such awards, based on the fair market value
("FMV") of $127.25 per share of Common Stock on the date of grant, for each
grantee is as follows: Mr. Bowlin, $386,331; Mr. Fernandes, $200,673; Mrs.
Knowles, $150,537; Mr. Wade, $225,614; and Mr. Rusnack, $88,821. The number
in the table for Mr. Bowlin also includes 10,000 shares of Restricted Stock
issued in June 1992. The 10,000 shares have a value of $1,325,000, based on
the FMV of $132.50 per share as of December 31, 1996. The grant of 10,000
shares vests as of June 27, 1997. Dividends are paid on the 10,000 shares
in cash. Dividends on the February 24, 1997 grants of Restricted Stock are
reinvested in additional shares of Restricted Stock. Neither the valuation
of the February 24, 1997 grants of Restricted Stock nor the valuation of
the 10,000 shares held by Mr. Bowlin give effect to the diminution of value
attributable to the restrictions on such stock.
8
<PAGE> 13
(c) Includes option grants under the LTIP made in February 1997, 1996 and 1995,
respectively, based on the Company's performance for 1996, 1995 and 1994,
respectively. Includes additional option grants made in July 1994 to Mr.
Bowlin upon the occasion of his election to the office of Chief Executive
Officer. Also includes additional option grants made in July 1996 to Mrs.
Knowles upon the occasion of her election to the offices of Chief Financial
Officer and Executive Vice President and to Mr. Fernandes upon his election
to the office of Executive Vice President in 1994. Prior to the amendments
adopted on February 24, 1997, the LTIP provided for the award of stock
options and related dividend share credits. Option grants made on and after
February 24, 1997 do not include rights to dividend share credits. The
option grants shown for the years 1994 and 1995 include the right to
dividend share credits; the recent option grants for 1996 do not. Dividend
share credits are allocated to an optionee's account in respect of options
granted prior to February 24, 1997 whenever dividends are declared on
shares of Common Stock. The number of dividend share credits to be
allocated on each record date to an optionee's account is computed by
multiplying the dividend rate per share of Common Stock by the sum of (i)
the number of shares subject to outstanding options and (ii) the number of
dividend share credits then credited to the optionee's account and dividing
the resulting figure by the FMV on such dividend record date. Subject to
certain exceptions, when stock options are exercised, surrendered or
cancelled, the optionee has the right to receive the value of the dividend
share credits (FMV of a share of Common Stock on the exercise date
multiplied by the number of dividend share credits) allocated to such
options. In no event do dividend share credits have any ascertainable
market value until the date on which the options in respect of which such
credits have been allocated are exercised. Dividend share credits are
cancelled upon an optionee's termination of employment under certain
specified circumstances. Under the Amended LTIP, on and after April 1,
1997, the value of the dividend share credits payable to the optionee will
be delivered in the form of shares of Common Stock in an amount equal to
the number of dividend share credits allocable to the options being
exercised, surrendered or cancelled; however, the optionee has the right to
elect to cause the Company to sell some or all of such shares (at no cost
to the optionee), and receive an equivalent cash payment.
(d) Includes contributions to the Executive Supplementary Savings Plan,
incremental executive medical plan premiums, financial counseling
reimbursements, certain amounts in respect of the Executive Life Insurance
Plan, and imputed income in respect of the Long-Term Disability Plan, as
follows:
<TABLE>
<CAPTION>
MR. MR. MRS. MR. MR. MR.
YEAR BOWLIN FERNANDES KNOWLES WADE RUSNACK ARNAULT
----- ------- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Executive Supplementary 1996 $76,400 $42,585 $30,877 $44,738 $32,782 $55,146
Savings Plan 1995 $66,846 $39,231 $25,846 $43,357 $31,176 $53,218
1994 $57,258 $29,934 $25,200 $42,000 $30,386 $52,372
Incremental Executive 1996 $ 9,907 $ 9,907 $ 9,907 $ 9,907 $ 9,907 $ 9,907
Medical Plan premiums 1995 $ 8,554 $ 8,554 $ 8,554 $ 8,554 $ 8,554 $ 8,554
1994 $ 8,554 $ 8,554 $ 8,554 $ 8,554 $ 8,554 $ 8,554
Financial Counseling 1996 $ 8,224 $ 8,000 $ 8,000 $ 8,000 $ 6,200 $ --
reimbursements 1995 $ 7,300 $ 7,300 $ 5,700 $ 7,300 $ 5,700 $14,600
1994 $11,901 $ 5,700 $ 5,700 $ 7,300 $ 5,700 $ --
Executive Life Insurance Plan 1996 $23,130 $20,934 $10,660 $20,404 $13,940 $64,769
1995 $16,205 $15,857 $ 7,250 $13,661 $10,147 $55,085
1994 $14,376 $13,550 $ 6,752 $12,713 $ 9,436 $53,778
Long-Term Disability Plan 1996 $ 4,575 $ 9,196 $ 4,317 $ 9,603 $ 4,548 $ 9,372
1995 $ 4,575 $ 4,688 $ 3,768 $ 9,603 $ 4,548 $ 9,372
1994 $ 4,443 $ 4,555 $ 3,423 $ 9,471 $ 4,415 $ 9,240
</TABLE>
In addition to the dollar amounts shown in the column, the number of
dividend share credits accrued to the accounts of the named executives
during 1996, 1995 and 1994, respectively, in respect of option grants made
prior to February 24, 1997, are as follows: Mr. Bowlin: 11,909; 10,887;
7,997; Mr. Fernandes: 5,010;
(Footnotes continued on following page)
9
<PAGE> 14
4,267; 2,930; Mrs. Knowles: 2,039; 1,375; 1,067; Mr. Wade: 6,697; 6,202;
5,358; Mr. Rusnack: 3,260; 2,902; 2,556; and Mr. Arnault: 3,787; 5,171;
6,115.
(e) Mr. Arnault served as a Director and an Executive Vice President through
December 31, 1996 and retired as an employee on that date. In connection
with his retirement, Mr. Arnault also received special supplementary
benefits under the Supplementary Executive Retirement Plan ("SERP"). He
received a termination payment of $622,553, comprised primarily of a
special payment for 36 weeks pay and six weeks' vacation pay (based on
normal Company policy for retiring executives). Upon reaching eligible
retirement age, Mr. Arnault will receive enhanced retirement benefits,
increasing the value of his retirement benefit by $2.9 million. Mr. Arnault
was also permitted the right to exercise his stock option grants made in
the years 1987 to 1996 until their normal expiration date. In addition,
upon reaching eligible retirement age, he will become entitled to regular
benefits under the Company's retirement plans. Examples of the regular
benefits are shown in the table captioned "Estimated Retirement Benefits"
on page 18.
OPTION GRANTS FOR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(a) POTENTIAL REALIZABLE VALUE AT
---------------------------------------------------------------- ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK PRICE
OPTIONS OPTIONS GRANTED EXERCISE APPRECIATION FOR OPTION TERM(b)
GRANTED TO EMPLOYEES PRICE EXPIRATION -----------------------------------
NAME (#) FOR 1996 ($/SH) DATE 5% 10%
- --------------------- ------- ---------------- -------- ------------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mike R. Bowlin 41,508 6.6% $127.25 February 24, 2007 $ 3,321,885 $ 8,417,822
Anthony G. Fernandes 21,555 3.4% $127.25 February 24, 2007 $ 1,725,047 $ 4,371,354
Marie L. Knowles 16,175 2.6% $127.25 February 24, 2007 $ 1,294,485 $ 3,280,290
16,600 (c) 2.6% $118.625 July 22, 2006 $ 1,471,673 $ 3,509,655
William E. Wade, Jr. 24,244 3.9% $127.25 February 24, 2007 $ 1,940,247 $ 4,916,683
William C. Rusnack 9,554 1.5% $127.25 February 24, 2007 $ 764,607 $ 1,937,551
Ronald J. Arnault -- -- -- -- -- --
Stock Price
2/24/97 Grant(d) $ 207.28 $ 330.05
All Stockholders(d) $12,891,396,000 $32,667,438,000
</TABLE>
- ------------
(a) The ten-year options were granted on February 24, 1997 pursuant to the LTIP
at an exercise price equal to the FMV on date of grant. These option grants
were awarded based on Company and individual performance in 1996. Each
option will become exercisable as to one-third of the total shares granted
on February 24, 1998, as to one-third on February 24, 1999 and as to the
remaining one-third on February 24, 2000. Additionally, options were
granted on July 22, 1996 to Mrs. Knowles at an exercise price equal to the
FMV on date of grant. Options become exercisable as to 50% of the total
shares granted on July 22, 1997; the remaining 50% will become exercisable
on July 22, 1998. These options carry with them the rights to dividend
share credits. The exercisability of options may be accelerated upon a
change of control. Options are cancelled upon an optionee's termination of
employment under certain specified circumstances.
(b) These columns present hypothetical future values of the stock obtainable
upon exercise of the options net of the option's exercise price, assuming
that the market price of the Company's common stock appreciates at a five
and ten percent compound annual rate over the ten-year term of the options.
The five and ten percent rates of stock price appreciation are presented as
examples pursuant to the Proxy Rules and do not necessarily reflect
management's assessment of the Company's future stock price performance.
The potential realizable values presented are not intended to indicate the
value of the options.
(c) These option grants on July 22, 1996 to Mrs. Knowles were special grants
made upon her election to the offices of Executive Vice President and Chief
Financial Officer.
(d) Based on total number of common shares outstanding on December 31, 1996 of
161,082,043 and purchase price of $127.25.
10
<PAGE> 15
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END OPTION VALUES
(AS OF DECEMBER 31, 1996)
<TABLE>
<CAPTION>
VALUE OF IN-THE-MONEY
NUMBER OF UNEXERCISED UNEXERCISED OPTIONS AT
SHARES OPTIONS AT YEAR-END(a) YEAR-END(b)(c)
ACQUIRED VALUE ---------------------------- ----------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ------------------------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
M. R. Bowlin....... 17,941 $ 632,301(d) 170,081 62,900 $ 4,102,364 $ 1,302,931
A. G. Fernandes.... 2,331 $ 111,165(e) 68,559 30,950 $ 1,879,665 $ 640,109
M. L. Knowles...... 686 $ 11,105(f) 22,127 28,965 $ 496,820 $ 485,760
W. E. Wade, Jr..... 17,399 $ 832,384(g) 85,891 30,950 $ 1,844,058 $ 640,109
W. C. Rusnack...... 5,670 $ 318,015(h) 41,280 15,816 $ 985,769 $ 326,332
R. J. Arnault...... 81,875 $1,505,466(i) -0- 30,950 $ -0- $ 640,109
</TABLE>
- ------------
(a) Each of these options carries with it the right to a potential payment in
respect of dividend share credits. See footnote (c) to the Summary
Compensation Table.
(b) Closing price of ARCO Common Stock on December 31, 1996 was $132.50.
(c) For illustrative purposes only, Registrant has calculated the hypothetical
aggregate values of both in-the-money options and out-of-the-money options,
including the value of the dividend share credits. These calculations assume
these options were exercised on December 31, 1996 at the closing price.
<TABLE>
<CAPTION>
YEAR-END OPTION VALUES, INCLUDING
DIVIDEND SHARE CREDIT VALUES
--------------------------------------------
EXERCISABLE OPTIONS UNEXERCISABLE OPTIONS
------------------- ---------------------
<S> <C> <C>
Mr. Bowlin $ 8,026,245 $ 1,713,138
Mr. Fernandes $ 3,901,007 $ 840,218
Mrs. Knowles $ 1,132,412 $ 614,146
Mr. Wade $ 4,242,281 $ 840,218
Mr. Rusnack $ 2,376,851 $ 427,245
Mr. Arnault $ -0- $ 840,218
</TABLE>
(d) Mr. Bowlin also received a payment of $975,170 for dividend share credits
allocable to the options exercised.
(e) Mr. Fernandes also received a payment of $170,504 for dividend share credits
allocable to the options exercised.
(f) Mrs. Knowles also received a payment of $38,077 for dividend share credits
allocable to the options exercised.
(g) Mr. Wade also received a payment of $1,078,886 for dividend share credits
allocable to the options exercised.
(h) Mr. Rusnack also received a payment of $414,021 for dividend share credits
allocable to the options exercised.
(i) Mr. Arnault also received a payment of $1,980,452 for dividend share
credits allocable to the options exercised.
11
<PAGE> 16
1985 EXECUTIVE LONG-TERM INCENTIVE PLAN
CONTINGENT AWARDS FOR 1996
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER POTENTIAL FUTURE PAYOUTS
CONTINGENT PERIOD NUMBER OF SHARES
SHARES OF UNTIL ------------------------------
RESTRICTED MATURATION MINIMUM TARGET MAXIMUM
NAME STOCK OR PAYOUT (#) (#) (#)
- ----------------------------------- ----------- ----------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Mike R. Bowlin 9,110 1997-1999 0 9,110 27,330
3,036 1997-1998 0 3,036 9,108
3,036 1997 0 3,036 9,108
Anthony G. Fernandes 4,731 1997-1999 0 4,731 14,193
1,577 1997-1998 0 1,577 4,731
1,577 1997 0 1,577 4,731
Marie L. Knowles 3,550 1997-1999 0 3,550 10,650
1,183 1997-1998 0 1,183 3,549
1,183 1997 0 1,183 3,549
William E. Wade, Jr. 5,320 1997-1999 0 5,320 15,960
1,773 1997-1998 0 1,773 5,319
1,773 1997 0 1,773 5,319
William C. Rusnack 2,095 1997-1999 0 2,095 6,285
698 1997-1998 0 698 2,094
698 1997 0 698 2,094
Ronald J. Arnault(a) -- 1997-1999 -- -- --
-- 1997-1998 -- -- --
-- 1997 -- -- --
All current Executive 39,025 1997-1999 0 39,025 117,075
Officers as a Group 13,003 1997-1998 0 13,003 39,009
13,003 1997 0 13,003 39,009
All current Non-Executive 55,662 1997-1999 0 55,662 166,986
Officers and other Employees Group 18,516 1997-1998 0 18,516 55,548
18,516 1997 0 18,516 55,548
</TABLE>
- --------------------------------------------------------------------------------
On February 24, 1997, the Board of Directors adopted the Amended LTIP, which
amendments are summarized on pages 23-24 hereof. The terms "Contingent
Restricted Stock," "Restricted Period," and "Performance Period" are defined in
such summary. On such date, in connection with these amendments, the
Compensation Subcommittee made certain transition awards of Restricted Stock and
Contingent Restricted Stock. Grants of Restricted Stock, having a Restricted
Period of two years were issued as set forth in the Summary Compensation Table
on page 8 to the named executive officers; 13,003 shares of Restricted Stock
were issued to all executive officers as a group; and 18,516 shares were issued
to all non-executive officers and employees as a group. In addition, two
phase-in awards and one regular award of Contingent Restricted Stock, with
Performance Periods of one, two and three years, respectively, were made as
described in the chart above to the named executive officers. In addition,
awards were granted to the other executive officers and to certain other key
employees as set forth in the chart above.
- ---------------
(a) Following Mr. Arnault's retirement from the Company on December 31, 1996, he
was not eligible for awards under the LTIP.
12
<PAGE> 17
PERFORMANCE GRAPH(1)
The graph below compares the cumulative total stockholder return of the Company
with the cumulative return on the S&P 500 Stock Index, the S&P Domestic Oil
Index and a peer group (the "Comparison Group"). The Comparison Group is
composed of eight companies with whom the Company competes and whose aggregate
asset profile includes extensive domestic and international exploration and
production operations. The Company believes its overall performance goals and
international expansion goals make the Comparison Group an appropriate
benchmark. The Company also believes that currently its asset profile
corresponds more closely to the aggregate asset profile of S&P Domestic Oil
Index and therefore includes this index as an additional reference.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN(2)
[Performance Graph appears here]
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
ARCO $100.0 $112.9 $108.7 $110.9 $126.6 $158.5
COMPARISON
GROUP(3) $100.0 $104.0 $120.3 $127.6 $167.2 $206.8
S&P DOMESTIC
OIL W/O
ARCO(4) $100.0 $99.1 $107.3 $113.1 $128.5 $160.5
S&P 500 $100.0 $107.6 $118.4 $120.0 $165.0 $203.0
</TABLE>
- ---------------
(1) Pursuant to the Proxy Rules, this section of the proxy statement is not
deemed "filed" with the SEC and is not incorporated by reference into the
Company's Report on Form 10-K.
(2) Assumes the value of the investment in ARCO Common Stock and each index was
$100 on December 31, 1991 and that all dividends were reinvested.
(3) Comparison Group includes Amoco, Chevron, Exxon, Mobil, Occidental,
Phillips, Texaco and Unocal, weighted for market capitalization as of the
beginning of each year of the five-year period.
(4) Standard & Poor's Domestic Integrated Oil Index, adjusted to exclude
Company, which consists of Amerada Hess, Ashland Oil, Kerr-McGee, LL&E,
Occidental, Pennzoil, Phillips, Sun, Unocal, and USX-Marathon.
13
<PAGE> 18
COMMITTEE REPORT ON EXECUTIVE COMPENSATION*
The Organization and Compensation Committee of ARCO's Board of Directors
administers ARCO's executive compensation program. At the meeting held on
February 24, 1997, the Compensation Subcommittee, consisting of those directors
who have served as neither an employee nor officer of the Company ("the
Committee"), met to determine the Company's 1997 executive compensation program.
During the last year, the Committee and senior management initiated a
comprehensive examination of the Company's executive compensation program with
the assistance of an independent consulting firm. As a direct result of this
process, ARCO will introduce a redesigned compensation program for performance
year 1997 that will increase executives' focus on providing superior returns to
shareholders through exceptional and sustainable growth.
COMPENSATION PHILOSOPHY
ARCO's executive compensation philosophy is designed to attract, retain, and
motivate the best managerial talent available according to three central themes:
Alignment, Accountability, and Attraction.
- Alignment with the long-term interests of our shareholders;
- Accountability for results by linking executives to Company, business
unit and individual performance; and
- Attraction, motivation and retention of critical talent.
The Committee annually conducts a full review of the performance of ARCO and its
executives in determining compensation levels. For 1996, the Committee
considered various qualitative and quantitative indicators of Company and
individual performance in determining the level of compensation for ARCO's Chief
Executive Officer ("CEO") and its other executive officers. The review has
included an evaluation of ARCO's performance both on a short- and long-term
basis. The Committee's review included an analysis of quantitative measures,
such as Total Shareholder Return ("TSR"), Return on Shareholders' Equity
("ROSE"), Return on Capital Employed ("ROCE"), reserve replacement and finding
costs, and percent change in operating and net income. The Committee also
considered qualitative measures such as leadership, experience, strategic
direction, community representation and social responsibility. The Committee has
been sensitive to management's maintaining a balance between actions that foster
long-term value creation, as well as short-term performance.
The Committee evaluates total executive compensation in light of the operational
and financial performance and compensation practices of an oil industry
comparison group ("Comparison Group") comprised of Amoco, Chevron, Exxon, Mobil,
Occidental, Phillips, Texaco, and Unocal. The Committee uses the Comparison
Group as a standard for executive compensation since it is composed of large,
integrated petroleum companies against which the Company directly competes for
executive talent. The Comparison Group is used as the reference standard for
establishing award levels under the Company's Annual Incentive Plan ("AIP") and
will also be used as the reference standard under the new Long-Term Incentive
Plan ("LTIP") being introduced in 1997.
Depending on the Company's performance and individual performance, the Committee
determines appropriate base salary, annual incentive award and long-term
incentive award levels for the Company's executives. In 1996, the Committee did
not apply any specific quantitative formulae in arriving at its compensation
decisions on base salary and long-term incentive awards. The Committee did apply
specific quantitative formulae, as described below, in arriving at its annual
incentive award decisions for 1996 performance.
- ---------------
* Pursuant to the Proxy Rules, this section of the proxy statement is not deemed
"filed" with the SEC and is not incorporated by reference into the Company's
Report on Form 10-K.
14
<PAGE> 19
COMPONENTS OF EXECUTIVE COMPENSATION
Base Salary
For 1996, base salaries were targeted slightly above the market of the
Comparison Group and were set at levels considered appropriate in light of the
scope of responsibilities of each executive officer's position. Base salaries
are reviewed each year and generally adjusted relative to individual performance
and competitive salaries within the Comparison Group.
Beginning in 1997, base salaries will be targeted at the market (50th
percentile) of the Comparison Group in order to increase the at-risk,
performance orientation of the compensation program and to better align the
fixed compensation costs of the Company with industry practice. A 4% lump sum
payment to all executives in 1997 will allow for management of base salaries
toward market levels. Only 15% of executives will receive a market adjustment to
their base salaries. Actual salaries will continue to be set according to the
scope of the responsibilities of each executive officer's position.
Annual Incentive Plan
The CEO and the other executive officers may receive annual incentive
compensation awards, under the Company's AIP, that are intended to reward the
executives for their contribution to the Company's short-term performance. For
1996, AIP awards were determined by a performance-based formula that used ARCO's
three-year simple average ROSE as the performance criterion. The Company
considers ROSE an important performance measure aligned with long-term value
creation for shareholders and, by linking AIP awards to it, the Company believes
a clear incentive is provided to executives to improve the Company's ROSE
performance. A three-year simple average ROSE recognizes the longer-term
investment structure of the oil industry and also mitigates the effects of sharp
swings in year-to-year results.
Target AIP awards levels are set for each participant, expressed as a percentage
of base salary, at approximately the 50th percentile of the Comparison Group
bonus awards. The target bonus awards for all participants establish a target
bonus pool, which is then adjusted upward or downward based on actual Company
performance. The actual bonus pool is determined based on ARCO's three-year ROSE
as compared to the simple average of the three-year ROSE of the Comparison Group
("Comparison Group ROSE"). To the extent that ARCO's ROSE exceeds the Comparison
Group ROSE, the Company's target bonus pool earned is adjusted proportionately
upward; to the extent ARCO's ROSE is less than the Comparison Group ROSE, the
target award pool is reduced proportionately. The AIP also limits the funding
pool available for award payments to 2% of the Company's adjusted net income.
After the bonus pool has been calculated according to the above methodology, the
Committee reviews the award calculated for each named executive officer in light
of both Company and individual performance. For 1996, the Committee had no
discretion to increase award payments to the executives listed in the Summary
Compensation Table above the calculated amounts, but did retain discretion to
lower award payments for these positions.
Beginning in 1997, the AIP has been amended to include two additional measures
that also have a strong correlation with TSR. In the new AIP formula, equal
weighting will be given to three-year average reserve replacement (adjusted by
reserve replacement costs), the annual percent change in adjusted net income,
and the three-year average ROSE. Awards will be based on ARCO's rank on each
measure versus the companies in the Compensation Group. The Committee believes
the redesigned AIP more closely aligns executive compensation with value
creation for shareholders.
Long-Term Incentive Plan
The CEO and the other executive officers may also receive incentive compensation
awards under the Company's Long-Term Incentive Plan ("LTIP"). The existing LTIP
authorizes the Committee to make awards of stock options with dividend share
credits and awards of restricted stock. To date, stock options with dividend
share credits have been the primary long-term incentive vehicle. In determining
15
<PAGE> 20
grants under the Company's LTIP, the Committee establishes a target investment
value to be granted to each executive based on competitive long-term incentive
grant practices of the Comparison Group.
Beginning in 1997, the target investment value to be delivered under the ongoing
program will be divided into awards of stock options, without dividend share
credits, and performance-based restricted stock. The Committee believes that
stock options encourage management to focus on the stock price appreciation that
is a substantial component of TSR for most companies.
Performance-based restricted stock is a new element of compensation that allows
participants to earn shares of restricted stock based on ARCO's total
shareholder return relative to the companies in the Comparison Group. Contingent
performance shares are awarded at the beginning of each performance measurement
period. The number of performance shares is adjusted at the end of the
performance measurement period based on the Company's relative TSR, with actual
awards ranging from zero to three times the number of contingent performance
shares. The performance shares are converted into an equivalent number of
restricted shares at the end of the performance measurement period. Typically,
the restricted shares will vest fully after two additional years of service,
during which time dividends will be reinvested in ARCO stock.
Under the performance-based restricted stock plan, the typical performance
measurement period will last three years. However, to begin the new plan, the
1997 award is divided into three contingent share grants which cover separate
performance measurement periods as follows: a three-year period, a two-year
period, and a one-year period. The program also included a direct grant of
restricted stock to reward executives for the Company's improved relative TSR
performance in 1996. The Committee believes the performance-based restricted
stock plan will further align the interests of executives with those of
shareholders by providing them an opportunity to share more directly in the
creation of Company value.
COMPENSATION OF NAMED EXECUTIVE OFFICERS
Mike R. Bowlin served as the Company's Chairman, CEO and President during 1996.
In evaluating the compensation for Mr. Bowlin, the Committee recognized that
ARCO experienced strong performance in 1996, its best year since 1990, in light
of mixed market conditions. Crude oil and natural gas prices and product margins
increased on a year-to-year basis, while chemical margins declined during the
same period. Despite the mixed conditions, ARCO's adjusted net income in 1996
rose to $1,663 million from $1,331 million in 1995, an increase of 25%.
Additionally, ARCO continued to have strong ROSE and ROCE performance on a one-
and five-year basis. While the Company experienced good one-year TSR results,
the five-year TSR performance was disappointing.
Under the Company's performance-based AIP for 1996, ARCO's three-year ROSE was
first among the Comparison Group. For the period ended December 31, 1996, ARCO's
three-year ROSE was 19.1% compared to the Comparison Group ROSE of 14.4%. Final
AIP awards were calculated based on the Company's relative ROSE performance,
resulting in an AIP adjustment factor of 1.33.
Based on the Company's performance and compensation philosophy, the Committee
approved the following compensation for Mr. Bowlin and guidelines for the other
Named Executive Officers ("NEOs") listed in the Summary Compensation Table:
MR. BOWLIN
- For 1997, Mr. Bowlin did not receive a salary increase. As with other
executives, he received a lump sum payment equal to 4% of his base
salary. Mr. Bowlin's salary of $980,000 is positioned slightly below the
market of the Comparison Group's CEOs' salaries.
16
<PAGE> 21
- Pursuant to the Company's ROSE-based AIP effective in 1996, Mr. Bowlin
was awarded a bonus of $960,000, which was 1.33 times his target award of
$722,000.
- In recognition of the Company's 1996 performance, Mr. Bowlin received a
long-term award at approximately the 70th percentile of the Comparison
Group's long-term incentive awards. He was awarded 41,508 stock options,
3,036 shares of restricted stock, 9,110 contingent shares of restricted
stock with a three-year performance measurement period, 3,036 contingent
shares of restricted stock with a two-year performance measurement
period, and 3,036 contingent shares of restricted stock with a one-year
performance measurement period.
Other Named Executive Officers
The Committee approved, for executive officers serving in 1997, a lump sum
payment equal to 4% of salary. In addition, a base salary increase was approved
for one NEO, whose base salary was low compared to comparable positions within
the Comparison Group. The Committee also approved bonus awards pursuant to the
formula prescribed by the AIP, and LTIP awards that result in total compensation
at approximately the 60th to 75th percentiles of the Comparison Group's total
compensation.
DEDUCTIBLE COMPENSATION LIMITATION
Section 162(m) of the Internal Revenue Code limits the deductibility to the
Company of cash compensation in excess of $1 million paid to the CEO and the
four highest compensated NEOs during any taxable year, unless such compensation
meets certain requirements. The Company believes its AIP and LTIP for 1996
comply with the rules under Section 162(m) for treatment as performance-based
compensation, allowing the Company to fully deduct compensation paid to
executives under these two plans. At the February 24, 1997 meeting, the
Committee certified the attainment of the performance goals for the 1996
performance year.
Awards under the redesigned AIP to be implemented in 1997 are not intended to
qualify as performance-based compensation due to the Committee's ability to
apply upward or downward discretion based on a subjective evaluation of
performance. The Company believes that better alignment of the interests of
executives with those of shareholders will be achieved by allowing the Committee
to determine awards within the guidelines of the AIP. Any reduction in tax
deductibility from award payments is not expected to be material to the results
of the Company in any year.
The Company intends its redesigned LTIP, consisting of stock options and
performance-based restricted stock, to comply with the rules under Section
162(m) for treatment as performance-based compensation, and accordingly is
submitting the amended LTIP to shareholders for approval. Such compliance will
allow the Company to deduct compensation paid to executives under the long-term
plans. The actual grant of restricted stock made in 1997 will not qualify for
treatment as performance-based compensation under Section 162(m). However, the
Company believes that this grant was necessary to reward strong 1996 performance
and to assist in the implementation of the new compensation program, and expects
no material impact from any reduction in deductibility on this restricted stock
grant.
<TABLE>
<S> <C> <C>
HENRY WENDT, CHAIRMAN HANNA H. GRAY DAVID T. MCLAUGHLIN
FRANK D. BOREN PHILIP M. HAWLEY JOHN B. SLAUGHTER
RICHARD H. DEIHL KENT KRESA
</TABLE>
February 24, 1997
17
<PAGE> 22
Estimated Retirement Benefits
The following table shows estimated annual regular pension benefits payable to
officers and other key employees upon retirement on January 1, 1997 at age 65
under the provisions of the Atlantic Richfield Retirement Plan II and the
Supplementary Executive Retirement Plan currently in effect (collectively, the
"Retirement Plan").
<TABLE>
<CAPTION>
AVERAGE FINAL EARNINGS
(AVERAGE OF HIGHEST THREE APPROXIMATE ANNUAL BENEFIT FOR YEARS OF
CONSECUTIVE YEARS OF MEMBERSHIP SERVICE INDICATED(a)(b)
BASE SALARY PLUS ANNUAL -------------------------------------------------------------------------------
INCENTIVE PLAN AWARDS) 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS
- ------------------------- -------- -------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 2,250,000 $519,000 $691,000 $864,000 $1,037,000 $1,210,000 $1,373,000
2,000,000 461,000 614,000 768,000 922,000 1,075,000 1,220,000
1,750,000 403,000 537,000 672,000 806,000 941,000 1,067,000
1,500,000 345,000 460,000 576,000 691,000 806,000 915,000
1,250,000 288,000 383,000 479,000 575,000 671,000 762,000
1,000,000 230,000 306,000 383,000 460,000 536,000 609,000
750,000 172,000 229,000 287,000 344,000 402,000 456,000
500,000 114,000 152,000 191,000 229,000 267,000 303,000
250,000 57,000 75,000 94,000 113,000 132,000 150,000
</TABLE>
- ------------
(a) The amounts shown in the above table are necessarily based upon certain
assumptions, including retirement of the employee on January 1, 1997 and
payment of the benefit under the basic form of allowance provided under the
Retirement Plan (payment for the life of the employee only with a guaranteed
minimum payment period of 60 months). The amounts will change if the payment
is made under any other form of allowance permitted by the Retirement Plan,
or if an employee's immediate retirement occurs after January 1, 1997,
because the Social Security Integration Level of such employees (one of the
factors used in computing the annual retirement benefits) may change during
the employee's subsequent years of membership service. The benefits shown
are not subject to deduction for Social Security benefits or other offset
amounts.
(b) As of December 31, 1996, the credited years of service under the Retirement
Plan for the six named executive officers were: Mr. Bowlin, 28.000; Mr.
Fernandes, 28.333; Mrs. Knowles, 23.000; Mr. Wade, 28.583; Mr. Rusnack,
30.500 and Mr. Arnault, 27.666.
18
<PAGE> 23
COMPENSATION OF DIRECTORS
Directors' Fees
Directors who are employees of the Company are not paid any fees or additional
compensation for service as members of the Board or any Board committee.
Directors who are not employees of ARCO, including former officers of ARCO who
are directors, received an annual retainer fee of $40,000 and $1,000 for each
Board or committee meeting attended. In addition, the Chairmen of the Audit,
Organization and Compensation, Public Policy, Corporate Governance and
Environment, Health and Safety Committees each received an additional $18,000
retainer for their service as committee chairmen.
As part of a comprehensive review of the directors' compensation program,
beginning in 1997, the annual retainer for all outside directors was increased
to $52,000. The committee chair retainer was decreased to $10,000. Meeting
attendance fees remain at $1,000. A portion of the retainer fees will be paid in
Restricted Stock as described below.
Restricted Stock Plan for Outside Directors
The Atlantic Richfield Company Restricted Stock Plan for Outside Directors (the
"Outside Directors Restricted Stock Plan"), which became effective January 1,
1997, provides for the issuance of Common Stock in the form of Restricted Stock.
The Outside Directors Restricted Stock Plan provides for an initial grant of
Restricted Stock in respect of the directors' accrued retirement benefits. It
also provides for the issuance of Restricted Stock in respect of the directors'
retainer fees.
Effective January 1, 1997, the Atlantic Richfield Company Retirement Plan for
Outside Directors was terminated. The present value of the directors' accrued
retirement benefits as of December 31, 1996 was calculated and shares of
Restricted Stock of equal value were issued to the directors as of January 1,
1997. However, any director within six months of maximum credited years of
service was permitted to defer the issuance of Restricted Stock until the
maximum credited years of service were attained.
Each director is required to receive at least 65% of his or her retainer fees in
Common Stock in the form of Restricted Stock and may elect to receive up to 100%
of these fees in Restricted Stock. Shares of Restricted Stock equal to the cash
value of each director's annual retainer percentage election (at least 65%) were
deposited in each director's account on February 24, 1997. The remaining
percentage, to be paid in cash, will be paid in monthly installments over the
year, along with each director's meeting attendance fees.
These shares were deposited in accounts maintained by First Chicago Trust
Company. The restricted period for all shares in a director's account will lapse
upon that director's retirement at age 72, except in certain limited
circumstances described in the Plan. Dividends are reinvested in shares of
Restricted Stock.
Stock Option Plan for Outside Directors
The Atlantic Richfield Company Stock Option Plan for Outside Directors (the
"Outside Directors' Option Plan") provided, when the plan was adopted in
December 1990, that ten-year nonqualified stock options to purchase 1,000 shares
of Common Stock be granted to each outside director at an exercise price per
share equal to the fair market value of Common Stock on the date of grant.
Thereafter, each newly elected outside director has been granted ten-year
options to purchase 1,000 shares of Common Stock. The number of shares of Common
Stock reserved for issuance under the Outside Directors' Option Plan is 40,000.
No options may be granted after December 31, 2000.
19
<PAGE> 24
Dividend share credits have been and will continue to be allocated in respect of
outstanding options on the same terms on which they have been allocated under
the LTIP. See "Compensation of Executive Officers -- Summary Compensation
Table," footnote (c). Beginning in 1997, each newly elected outside director
will be granted ten-year options to purchase 2,500 shares of Common Stock. There
will be no accrual of dividend share credits with respect to these options. The
Outside Directors' Option Plan is administered by the Outside Director Stock
Option Plan Committee appointed by the Board of Directors. No member of the
Board of Directors serves on this committee.
Deferral Plan for Outside Directors
The Atlantic Richfield Company Deferral Plan for Outside Directors (the "Outside
Directors' Deferral Plan") was adopted in 1990 to permit outside directors to
defer up to 100% of their annual cash retainer and meeting fees to which they
are entitled. In 1996 the outside directors with deferral accounts and the
amount of accrued interest exceeding 120% of a specified IRS rate were: Mr.
Gavin: $6,634; Mr. Kresa: $2,740; Mr. McLaughlin: $6,702; Dr. Slaughter: $74;
and Mr. Wendt: $8,767.
20
<PAGE> 25
BOARD OF DIRECTORS
DIRECTORS' MEETINGS
The Board of Directors met eight times during 1996. All of ARCO's directors
attended 75% or more of the aggregate of all meetings of the Board of Directors
and committees on which they served during 1996.
COMMITTEES OF THE BOARD
EXECUTIVE COMMITTEE
The Executive Committee has and may exercise all the authority of the Board of
Directors in the management of the business of ARCO in the interim between
meetings of the Board of Directors. The Committee did not meet in 1996.
The Executive Committee presently consists of Mr. Bowlin, Chairman, Mrs.
Knowles, and Messrs. Cook, Deihl, Fernandes, Gavin, Hawley, Kresa, Slaughter and
Wade.
ORGANIZATION AND COMPENSATION COMMITTEE
The Organization and Compensation Committee of the Board of Directors makes
recommendations to the Board as to management succession plans and is
responsible for setting annual and long-term performance goals for the Chairman
of the Board and Chief Executive Officer. The Compensation Subcommittee reviews
and administers all executive compensation and benefit plans and approves the
annual executive compensation levels and awards under such plans. This
Committee, formerly named the Management Development and Compensation Committee,
met eight times in 1996.
The Organization and Compensation Committee presently consists of Mr. Wendt,
Chairman, Mrs. Gray and Messrs. Boren, Cook, Deihl, Gavin, Hawley, Kresa,
McLaughlin and Slaughter. The Compensation Subcommittee consists of Mr. Wendt,
Chairman, Mrs. Gray and Messrs. Boren, Deihl, Hawley, Kresa, McLaughlin and
Slaughter.
CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee of the Board of Directors considers and makes
recommendations to the Board concerning the appropriate size and needs of the
Board, including the annual nomination of directors and names of candidates to
fill vacant Board positions. The Committee reviews and makes recommendations
concerning other policies related to the Board and directors, including
committee composition, structure and size, director compensation and share
ownership requirements, and retirement and resignation policies. The Committee
periodically evaluates Board performance to determine ways to enhance Board
effectiveness. The Committee is responsible for the periodic review of ARCO's
Corporate Governance Principles and other corporate governance issues and
trends. No member of the Committee is an officer or employee of the Company. The
Committee will consider nominees for director recommended by stockholders. Such
recommendations should be submitted to the Corporate Secretary. The Committee
met four times in 1996.
The Corporate Governance Committee presently consists of Mr. Hawley, Chairman,
and Messrs. Deihl, Kresa, McLaughlin and Wendt.
AUDIT COMMITTEE
The objectives of the Audit Committee are to assist the Board of Directors in
fulfilling its fiduciary responsibilities relating to the Company's financial
reporting standards and practices, to determine the adequacy of and promote the
Company's continued emphasis on managerial and financial control systems, to
maintain open, continuing and direct communication between the Board of
Directors and both the Company's independent public accountants and its internal
auditors, and to instigate any special investigations of conflicts of interest
and compliance with federal, state and local laws and
21
<PAGE> 26
regulations, including the Foreign Corrupt Practices Act, as may be warranted.
The independent accountants and the internal auditors have full and free access
to the Audit Committee and meet with it, with and without management being
present, to discuss appropriate matters. No member of the Committee is an
officer or employee of the Company. The Committee met three times in 1996.
The Audit Committee presently consists of Mr. Deihl, Chairman, Mrs. Gray and
Messrs. Gavin, Hawley and McLaughlin.
ENVIRONMENT, HEALTH AND SAFETY COMMITTEE
The Environment, Health and Safety Committee of the Board of Directors reviews
and assesses the Company's policies, procedures and practices relating to (i)
the protection of the environment and the health and safety of employees,
customers, contractors and the public, (ii) compliance with applicable laws and
regulations and (iii) development of Company environmental, health and safety
goals and objectives. The Committee also makes recommendations to the Board as
to such policies, procedures and practices. The Committee met three times in
1996.
The Environment, Health and Safety Committee presently consists of Mr. Boren,
Chairman, and Messrs. Cook, Kresa, Slaughter and Wendt.
PUBLIC POLICY COMMITTEE
The Public Policy Committee of the Board of Directors reviews the Company's (i)
domestic and international policies, programs and strategies involving
political, governmental and social issues and trends, (ii) stockholder proposals
concerning social and political issues, (iii) charitable, civic, cultural and
educational contribution programs including the level of funding and focus of
efforts, (iv) political action programs and political contributions, (v)
policies and procedures concerning issues of business ethics and (vi) policies
and practices involving equal employment opportunity, affirmative action, non-
discrimination and other workplace issues. The Committee met four times in 1996.
The Public Policy Committee presently consists of Mr. Gavin, Chairman, Mrs. Gray
and Messrs. Boren, Cook and Slaughter.
22
<PAGE> 27
PROPOSAL TO AMEND THE LTIP
Item 2 on Proxy Card
In order to align payouts under the LTIP more closely with the long-term
interests of stockholders, the Board of Directors amended the LTIP on February
24, 1997, effective as to awards made on and after February 24, 1997. In order
for certain of the benefits payable to the five most highly compensated officers
of the Company -- primarily the awards of Performance-Based Restricted
Stock -- to qualify for Internal Revenue Code Section 162(m) treatment,
stockholders must approve the amendments. In addition, certain types of
amendments, by the terms of the LTIP currently in effect, require stockholder
approval. Accordingly, to meet both these requirements, the Board of Directors
is requesting stockholders to approve certain amendments to the LTIP, as amended
through February 24, 1997 (the "Amended LTIP"). In addition to the amendments
summarized below, certain other conforming changes have been made to implement
the principal amendments. A copy of the Amended LTIP is included in the Appendix
to the Proxy Statement. The following summary describes the principal amendments
to the LTIP, which summary is qualified in its entirety by reference to the
Appendix.
The first amendment would extend the term from the year 2000 to the year 2007.
Accordingly, effective upon the approval by stockholders, the Amended LTIP will
provide that no grants can be made thereunder after February 24, 2007.
The second amendment limits the aggregate number of stock options and shares of
Restricted Stock that may be awarded in any single calendar year to any one
individual employee to no more than 250,000.
The third amendment eliminates the award of dividend share credits in respect of
options granted on and after February 24, 1997, and requires, effective April 1,
1997, the value of dividend share credits accruing in respect of options granted
prior to February 24, 1997 to be paid in shares of Common Stock. See footnote
(c) to the Summary Compensation Table on page 9.
The fourth amendment relates to the Performance-Based Restricted Stock program
authorized under the Amended LTIP and provides for contingent awards of
Restricted Stock ("Contingent Restricted Stock"). Previous grants made under the
LTIP generally had a five-year restricted period and vested in full upon
expiration of that period, so long as the grantee remained in the continuous
employment of the Company following the date of grant. During the restricted
period, transfers of the Restricted Stock were prohibited subject to certain
exceptions, and the grantee had full voting and dividend rights during the
restricted period. Upon expiration of the restricted period, the grantee had
unrestricted ownership of the shares.
Under the terms of the Amended LTIP, awards of Contingent Restricted Stock will
be granted at the commencement of a Performance Period and may be converted to
an actual award of Performance-Based Restricted Stock. At the end of each
performance measurement period specified at the time of the grant of Contingent
Restricted Stock (the "Performance Period"), the Compensation Subcommittee will
evaluate the Company's performance pursuant to criteria prescribed under the
Plan to determine the number of shares of Performance-Based Restricted Stock
earned. The Company's performance will be determined by Total Shareholder Return
("TSR"), compared with the TSR of each of the companies included in the
Comparison Group that is described in the Committee Report on Executive
Compensation on page 14. "TSR" means the sum of the dividends paid and the stock
price appreciation or depreciation over the Performance Period. The beginning
and ending stock price used in calculating the TSR for each of the companies,
including the Company, is the average of the closing price on the ten trading
days prior to the last trading day of the calendar year, the last trading day of
the calendar year, and the ten trading days following the last trading day of
the calendar year. Depending on the Company's ranking relative to each Company
within the Comparison Group, as determined by the Compensation Subcommittee, the
grantee will receive that number of shares of Performance-Based Restricted Stock
calculated pursuant to the Performance-Based Restricted Stock Payment Schedule,
subject to certain exceptions (as described on pages 2-3 of the Appendix). The
number of shares may range from zero to three times the number of shares of
Contingent Restricted Stock. These shares will be
23
<PAGE> 28
subject to a restricted period prescribed at the time of the initial award (the
"Restricted Period") during which the grantee must remain in the continuous
employment of the Company. During the Restricted Period, the grantee will have
no right to assign or transfer the shares, subject to certain exceptions, but
will have full voting rights and will earn dividends that will be automatically
reinvested in additional shares of Restricted Stock. During the Restricted
Period, the shares, including those issued upon the reinvestment of dividends,
will be held in a custodial account administered by the Company's Transfer
Agent. Upon expiration of the Restricted Period, all restrictions will be lifted
from the shares of Restricted Stock in the grantee's account, including those
shares issued upon the reinvestment of dividends.
Upon transfer of the shares to the grantee following the end of the Restricted
Period, the grantee will be required to pay Federal income tax based on the
value of the shares at the time of transfer. For accounting purposes, the value
of Common Stock to be issued as Performance-Based Restricted Stock is estimated
and averaged over the Performance Period, and the pro rata share of the expense
will be reflected on the Company's income statement for each of the years of the
period.
As further described on page 12, the Compensation Subcommittee made certain
transition awards of Restricted Stock and Contingent Restricted Stock.
In the event stockholders do not approve the Amended LTIP, the awards will
remain in effect and the Amended LTIP will remain in effect (but the term of the
plan will not be extended past the year 2000). In addition, the Company will no
longer be able to take advantage of the exclusion under section 162(m) of the
Internal Revenue Code in the event the total applicable compensation for any
named executive exceeds one million dollars for any calendar year.
The Board of Directors believes it is in the best interests of the Company to
align management's compensation with the long-term interests of the stockholders
and, accordingly urges stockholders to approve the Amended LTIP.
Required Vote
The proposal will be approved if it receives the affirmative vote of a majority
of the shares of Common Stock and Preference Stock of the Company represented in
person or by proxy at the meeting, voting together as one class.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL. PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
OTHERWISE.
24
<PAGE> 29
PROPOSAL TO APPROVE THE APPOINTMENT OF INDEPENDENT AUDITORS
Item 3 on Proxy Card
The Board of Directors has appointed Coopers & Lybrand L.L.P., Certified Public
Accountants, to audit the financial statements of ARCO and its consolidated
subsidiaries for the year 1997. Coopers & Lybrand L.L.P. has acted in this
capacity for many years. Since June 1987 Coopers & Lybrand L.L.P. has also acted
as the independent auditor for ARCO Chemical. In addition, since July 1988
Coopers & Lybrand L.L.P. has acted as the independent auditor for Lyondell and
since October 1993 for Vastar. From time to time Coopers & Lybrand L.L.P. also
performs consulting work for ARCO and its subsidiaries. The firm has no other
relationship with ARCO or any of its subsidiaries except the existing
professional relationship as Certified Public Accountants.
Representatives of Coopers & Lybrand L.L.P. will be present at the meeting and
will have the opportunity to make a statement if they desire to do so. These
representatives will also be available to respond to appropriate questions.
Required Vote
The proposal will be approved if it receives the affirmative vote of a majority
of the shares of Common Stock and Preference Stock of the Company represented in
person or by proxy at the meeting, voting together as one class.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE APPOINTMENT
OF COOPERS & LYBRAND L.L.P. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE.
25
<PAGE> 30
STOCKHOLDERS' PROPOSAL
The following stockholders' proposal has been submitted for a vote of the
stockholders at the Annual Meeting. This proposal is substantially similar to
the one submitted by some of the same proponents for approval at the Annual
Meeting of Stockholders held on May 6, 1996. The proposal is set forth below
along with the Company's reasons for recommending a vote AGAINST the proposal.
The proponents did not submit any separate statement in support of their
proposal. To be adopted, a proposal must be approved by the affirmative vote of
the majority of shares present in person or represented by proxy at the Annual
Meeting.
GUIDELINES FOR COUNTRY SELECTION
Item 4 on Proxy Card
Management has been advised that Catholic Healthcare West, holding 100 shares of
Common Stock, and the Franklin Research & Development Corporation, holding 150
shares of Common Stock, along with six co-filers (American Friends Service
Committee, Women's Division of the General Board of Global Ministries of the
United Methodist Church, Mennonite Mutual Aid, The Sisters of the Sorrowful
Mother, and United States Trust Company Boston), holding a total of 135,851
shares of Common Stock, intend to submit the following proposal at the meeting:
WHEREAS: Levi Strauss & Co. bases its decision on whether to do business in
certain countries based on criteria that include whether:
"Brand image would be adversely affected by a country's perception or
image among our customers and/or consumers"
"Human rights environment would prevent us from conducting business
activities in a manner that is consistent with the Global Sourcing
Guidelines and other Company policies"
"Political, economic and social environment would threaten the Company's
reputation and/or commercial interests"
Nobel Peace Prize Laureate and Burmese democracy movement leader Aung San
Suu Kyi has specifically called for economic sanctions on Burma;
In its editorial of 5/30/96, the Wall Street Journal noted that, as the
Burmese military junta arrested more than 250 elected representatives, ARCO
President Roger Truitt was photographed in government newspapers with the
chief of secret police and a member of the junta who had the previous week
threatened to annihilate Aung San Suu Kyi;
ARCO has paid several million dollars to an oil company owned by the
Burmese military junta for seismic data and exploration rights to two
off-shore blocks;
It is reasonable to assume that, if ARCO discovers gas, ARCO will connect
its gas field to the gas pipeline leading to Thailand that is currently
being built by Total and Unocal;
Human rights organizations based on the Thai/Burmese border have documented
not only numerous human rights abuses committed by Burmese troops deployed
to secure the Total/Unocal pipeline area but also the use of forced labor
by the Burmese military on infrastructure related to the pipeline project;
On September 3, 1996, the democratically elected government-in-exile of
Burma filed a lawsuit in U.S. federal court seeking a court order halting
Unocal's role in the Yadana pipeline and seeking compensatory and punitive
damages. On October 3, 1996, a similar additional lawsuit was filed on
behalf of victims of human rights abuses in Burma;
Ten cities -- Ann Arbor (MI), Berkeley (CA), Boulder (CO), Carrboro (NC),
Chapel Hill (NC), Madison (WI), Oakland (CA), San Francisco (CA), Santa
Monica (CA), Takoma Park (MD) -- and Alameda County (CA) and the
Commonwealth of Massachusetts have enacted laws that effectively prohibit
municipal or state purchases of products from companies, including ARCO,
that do business in Burma. Similar Burma-related legislation is pending in
other cities, including New York City, and in the states of California and
Connecticut.
26
<PAGE> 31
In September 1996, President Clinton signed into law a measure that
included a conditional ban on new U.S. investment in Burma despite lobbying
by ARCO and other companies;
ARCO also does business in other countries with controversial human rights
records: China and Algeria.
BE IT RESOLVED: the stockholders request the Board to review and develop
guidelines for country selection and report these guidelines to
shareholders and employees by September 1997. In its review, the Board
shall develop guidelines on maintaining investments in or withdrawing from
countries where:
- there is a pattern of ongoing and systematic violation of human rights
- a government is illegitimate
- there is a call by human rights advocates, pro-democracy organizations or
legitimately elected representatives for economic sanctions against their
country
RECOMMENDATION OF DIRECTORS AGAINST THE PROPOSAL
THE BOARD OF DIRECTORS ASKS THAT YOU VOTE NO ON THIS PROPOSAL. All of ARCO's
investments must meet internal investment criteria and be in the best interests
of all its stockholders. Among the factors considered in connection with a
non-United States investment are a host government's policies toward private
investment, local working conditions, and the political, economic and social
stability of the area in question.
Moreover, the Company recently adopted the "Standards of Business Conduct For
International Operations," which are summarized in its Annual Report to
Stockholders that accompanies this Proxy Statement and which are set forth in
full below:
In keeping with the continuing globalization of the economy, ARCO has steadily
increased the level of its international investments and operations. As an
energy company, ARCO must explore for and develop oil and gas reserves in places
where the geology indicates a reasonable chance for success. Although the
international arena presents enormous opportunities for enhancing shareholder
value, it also poses special challenges for ARCO -- a company that conducts
business with a high regard for health, safety, the environment, ethics and
social responsibility. The standards listed below reflect not only ARCO's
current practices, but its continuing expectations. They transcend national
boundaries. ARCO is firmly committed to these standards, wherever it operates.
BUSINESS ETHICS AND LEGAL COMPLIANCE. ARCO employees will conduct Company
business in a scrupulous and ethical manner and in full compliance with ARCO's
published Principles of Business Conduct. ARCO will comply with all local laws
and regulations applicable to its operations and will comply with U.S. laws that
apply overseas, such as those concerning boycotts, trade practices and exports.
ENVIRONMENT, HEALTH AND SAFETY. Each ARCO operating company will identify and
adhere to a comprehensive set of environmental, health and safety standards in
its foreign operations. These standards will be in writing and will form the
basis for environmental, health and safety reviews and regulatory compliance
audits. ARCO's basic objective is to protect the environment by minimizing the
impact of its operations. The Company will work with host governments to achieve
this goal. In joint ventures where ARCO does not control operations, the Company
will nonetheless encourage the venture's management to adopt appropriate EH&S
policies and procedures.
EMPLOYEES. ARCO employees, wherever located, will be treated with respect and
dignity and with due regard to their working conditions. ARCO will actively
assess the potential risk to the safety of its employees located abroad and
exercise the same high degree of care for them as it does in the U.S.
27
<PAGE> 32
INVESTMENT CRITERIA. In evaluating a country for potential new or expanded
investment opportunities, management will take into consideration the host
government's policies toward private investment. In addition, the Company will
consider the political, economic and social stability of the country. ARCO
believes that human rights issues in foreign venues can be extremely complex. As
a result, it is the Company's position that such issues usually should be
resolved in the public arena. It is the Company's experience and belief,
however, that investment in a foreign country and involvement with its local
employees and communities can make a positive difference in both the economic
well-being of the people and the eventual betterment of their society. It is for
these reasons that the Company favors a flexible and constructive, rather than
isolationist, approach to making foreign investment decisions.
FINANCIAL ACCOUNTABILITY. In light of ARCO's legal obligations as a publicly
traded company, and in accordance with the U.S. Foreign Corrupt Practices Act,
management shall assure that transactions are properly recorded and assets
adequately safeguarded. These requirements shall be met by keeping accurate
accounting records in reasonable detail, by implementing solid internal control
systems, and by performing audits as necessary.
ARCO has a long-standing tradition of conducting business ethically both in the
U.S. and abroad. Management and employees are expected to honor and enhance this
tradition by adhering to these principles.
The Company believes that these principles provide sufficient guidance and does
not believe that it is appropriate to adopt additional guidelines. Within these
parameters, management believes the Company must have the flexibility to make
investment decisions based on the facts applicable to each investment
opportunity in order to enhance the competitive position and value of the
Company for all of its stockholders.
Required Vote
The proposal will be approved if it receives the affirmative vote of a majority
of the shares of Common Stock and Preference Stock of the Company represented in
person or by proxy at the meeting, voting together as one class.
FOR THESE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE
PROPOSAL. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE SO VOTED UNLESS
STOCKHOLDERS SPECIFY OTHERWISE.
28
<PAGE> 33
OTHER BUSINESS
The Board of Directors is not aware of any other matters to be presented at the
meeting. If any other matters should properly come before the meeting, the
persons named in the enclosed proxy form will vote the proxies in accordance
with their best judgment.
VOTING PROCEDURES
The vote required for the election of directors is the affirmative vote of the
plurality of votes of the shares represented at the meeting. Unless authority to
vote for any director is withheld in the proxy, votes will be cast in favor of
election of the nominees. Votes withheld from election of directors are counted
as votes "against" election of directors. The vote required for the approval of
the stockholders' proposal is the affirmative vote of a majority of votes of the
shares represented at the meeting. If no vote is marked with respect to a matter
listed in the proxy, the shares will be voted in accordance with the Board of
Directors' recommendations. Broker non-votes, if any, will not be counted as
shares present at the meeting in respect of each matter voted upon. The percent
of votes cast as to each matter is calculated by dividing the number of each of
the votes "for," "against," and "abstaining" by the total number of shares
represented at the meeting. All shares of Common Stock and Preference Stocks
vote together as one class.
Certain of ARCO's employee benefit plans, including the Atlantic Richfield
Capital Accumulation Plan II and the Atlantic Richfield Savings Plan II, in
which officers have account balances, permit plan participants to direct the
plan trustees how to vote the Common Stock allocated to their accounts. The
trustee for each such plan will vote all shares of Common Stock for which no
participant directions are received in the same proportion as all those shares
of Common Stock for which directions are received. As to shares formerly held in
the ARCO PAYSOP and currently held under one of the capital accumulation plans
of ARCO, of ARCO Chemical, of Vastar or of Lyondell, the trustee will not vote
those shares of Common Stock for which participant voting instructions are not
received unless instructed as to how to vote such shares by the Company, ARCO
Chemical, Vastar or Lyondell, as the case may be.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, if any, to file with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of equity
securities of the Company. Such persons are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, during the fiscal year ended December 31, 1996, two
Senior Vice Presidents of the Company, Mr. John B. Cheatham and Mr. J. Kenneth
Thompson, due to inadvertent oversights, each failed to timely file a single
Form 4 reporting his exercise of options under the LTIP in November 1996. In Mr.
Cheatham's Form 5 for the year ended December 31, 1996, he reported the
exercise, on November 18, 1996, of 2,946 options and the sale of the underlying
shares at $131.1694 per share in a broker-assisted exercise and sale. In Mr.
Thompson's Form 5 for the year ended December 31, 1996, he reported the
exercise, on November 4, 1996, of 2,224 options and the sale of the underlying
shares at $131.125 per share in a broker-assisted exercise and sale.
29
<PAGE> 34
PROXY SOLICITATION
The expense of soliciting proxies will be paid by ARCO. The Company has retained
D.F. King & Co., Inc. to solicit proxies at an estimated fee of $20,000, plus
expenses. Some of the officers and other employees of ARCO also may solicit
proxies personally, by telephone and by mail, if deemed appropriate.
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 1998 ANNUAL MEETING
Stockholder proposals for the 1998 Annual Meeting must be received by November
17, 1997, to be considered for inclusion in the Company's 1998 proxy statement.
Such proposals should be addressed to the Corporate Secretary. Under the
Company's Certificate of Incorporation, notice of any stockholder nomination for
director must be given by mail or by personal delivery to the Corporate
Secretary no later than 120 days in advance of the annual meeting, or by
January 5, 1998 assuming the annual meeting for 1998 will be held May 4, 1998;
stockholders wishing to make nominations should contact the Corporate Secretary
as to information required to be supplied in such notice.
ADDITIONAL INFORMATION AVAILABLE
THE COMPANY FILES AN ANNUAL REPORT ON FORM 10-K WITH THE SECURITIES AND EXCHANGE
COMMISSION. STOCKHOLDERS MAY OBTAIN A COPY OF THIS REPORT (WITHOUT EXHIBITS),
WITHOUT CHARGE, BY WRITING TO THE INVESTOR RELATIONS DEPARTMENT, 515 SOUTH
FLOWER STREET, LOS ANGELES, CA 90071 (TELEPHONE (213) 486-3710).
By order of the Board of Directors
/s/ BRUCE G. WHITMORE
Bruce G. Whitmore
Senior Vice President,
General Counsel and
Corporate Secretary
Los Angeles, California
March 17, 1997
30
<PAGE> 35
APPENDIX
ARCO
- --------------------------------------------------------------------------------
1985 EXECUTIVE LONG-TERM
INCENTIVE PLAN
AS AMENDED THROUGH
FEBRUARY 24, 1997
<PAGE> 36
ARCO
1985 EXECUTIVE LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C> <C>
ARTICLE I. GENERAL PROVISIONS
Section 1 Purposes of the Plan................................................. 1
Section 2 Definitions.......................................................... 1
Section 3 Administration of the Plan........................................... 3
ARTICLE II. STOCK OPTIONS
Section 1 Grant of Stock Options............................................... 4
Section 2 Terms and Conditions of Stock Options................................ 4
ARTICLE III. RESTRICTED STOCK
Section 1 Grant of Contingent Restricted Stock................................. 6
Section 2 Grant of Restricted Stock............................................ 6
Section 3 Grant of Performance-Based Restricted Stock.......................... 6
Section 4 Waiver of Restrictions............................................... 6
Section 5 Termination of Employment............................................ 7
ARTICLE IV. PERFORMANCE-BASED DIVIDEND SHARE CREDITS
Section 1 Cancellation of Credits Upon Exercise, Expiration or Surrender of
Stock Option......................................................... 7
Section 2 Performance-Based Criterion For Dividend Share Credits............... 8
Section 3 Calculation For Payment.............................................. 8
ARTICLE V. MISCELLANEOUS PROVISIONS
Section 1 Option and Restricted Stock Limits................................... 8
Section 2 Adjustment in Terms of Award......................................... 8
Section 3 Governmental Regulations............................................. 9
Section 4 No Guaranty of Employment............................................ 9
Section 5 Relation to Benefit Plans............................................ 9
Section 6 Assignment or Transfer............................................... 9
Section 7 Rights as Shareholder................................................ 9
Section 8 Withholding Taxes.................................................... 10
Section 9 Amendment and Discontinuance of the Plan............................. 10
Section 10 Effective Date....................................................... 10
Section 11 Term of Plan......................................................... 10
</TABLE>
i
<PAGE> 37
ARTICLE I
GENERAL PROVISIONS
SECTION 1. PURPOSES OF THE PLAN
The purposes of the Plan are to provide a select group of management and
other key employees with a specific incentive to work for the long-range growth
and success of the Company and to enable the Company to attract, retain and
motivate employees of superior capability.
SECTION 2. DEFINITIONS
As used herein, the following terms shall have the following meanings:
(a) "Base Salary" means the annualized regular biweekly wages of an
Eligible Employee.
(b) "Change of Control" means Change of Control as defined in the Atlantic
Richfield Supplemental Executive Benefit Plans Trust Agreement between Atlantic
Richfield Company and the State Street Bank and Trust Company, effective as of
July 1, 1994.
(c) "Committee" means the Organization and Compensation Committee of the
Board of Directors of the Company.
(d) "Common Stock" means the common stock of Atlantic Richfield Company
having a par value of $2.50 per share.
(e) "Company" means Atlantic Richfield Company, its successors and assigns,
and its Subsidiaries.
(f) "Comparison Group" means Amoco Corporation, Chevron Corporation, Exxon
Corporation, Mobil Corporation, Occidental Corporation, Phillips Petroleum
Company, Texaco, Inc. and Unocal Corporation.
(g) "Compensation Subcommittee" or "Subcommittee" means the members of the
Committee who qualify as outside directors under Section 162(m) of the Internal
Revenue Code of 1986, and as "Non-Employee Directors" within the meaning of
Section 16 of the 1934 Exchange Act, as amended, and are empowered to establish,
and certify to the attainment of, performance criteria prescribed under the
Plan.
(h) "Contingent Restricted Stock" means a contingent grant of shares of
Performance-Based Restricted Stock under the terms and conditions set forth in
Article III, Section 1, that has no indicia of ownership of Common Stock, that
is granted at the commencement of a Performance Period and will be converted to
an actual award of Performance-Based Restricted Stock, if any, pursuant to the
Performance-Based Restricted Stock Payment Schedule.
(i) "Dividend Rights" means, as of any date, (i) the total number of shares
of Common Stock subject to all outstanding and unexercised Stock Options held by
an optionee pursuant to the Plan, and (ii) the total number of Dividend Share
Credits credited to an optionee on such date.
(j) "Dividend Share Credits" means, with respect to a Stock Option granted
prior to February 24, 1997, the total number of credits allocated to an optionee
on any date. The number of Dividend Share Credits credited as of any record date
for cash dividends declared on Common Stock shall be the aggregate number
derived by (i) multiplying the dividend rate declared per share of Common Stock
by the number of Dividend Rights held by an optionee as of the dividend record
date, and then (ii) dividing the resulting figure by the Fair Market Value of a
share of Common Stock on such record date. Dividend Share Credits attributable
to exercised, expired or surrendered Stock Options shall be canceled upon such
exercise, expiration or surrender and their treatment shall be as provided in
Article IV of the Plan.
1
<PAGE> 38
(k) "Eligible Employee" means a member of a select group of management or
other key employee of Atlantic Richfield Company who, in the opinion of the
Committee, is in a position to contribute significantly to long-term profit and
growth objectives; provided, however, that no member of the Committee nor any
person owning stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company shall be an Eligible
Employee.
(l) "Employment" means continuous employment with the Company.
(m) "Fair Market Value" of a share of Common Stock means the mean between
the highest and lowest sales prices, or the closing sales price of a share of
Common Stock, whichever is higher, on the date in question as reported on the
composite tape for issues listed on the New York Stock Exchange. If no
transaction was reported on the composite tape in the Common Stock on such date,
the prices used shall be the prices reported on the nearest day preceding the
date in question. If the Common Stock should not then be listed or admitted to
trading on such Exchange, Fair Market Value shall be the mean between the
closing bid and asked prices on the date in question as furnished by any member
firm of the New York Stock Exchange selected from time to time by the Committee
for that purpose.
(n) "Performance Period" means the period of time established by the
Subcommittee at the time of a grant of Contingent Restricted Stock over which
the Company's Performance Ranking will be determined.
(o) "Performance Ranking" means the ranking of the Company in Total
Shareholder Return as measured among the Comparison Group over the applicable
Performance Period.
(p) "Performance-Based Restricted Stock" means restricted Common Stock
which is granted by the Compensation Subcommittee following its determination of
the Company's Performance Ranking in relation to a grant of Contingent
Restricted Stock and calculation of the payment pursuant to the
Performance-Based Restricted Stock Payment Schedule. Such Performance-Based
Restricted Stock shall be non-transferable and non-assignable during the
applicable Restriction Period and shall be forfeited if there is a termination
of Employment during the Restriction Period for reasons specified in the Plan.
(q) "Performance-Based Restricted Stock Payment Schedule" means the
schedule which is used to calculate the amount of Performance-Based Restricted
Stock available to pay Eligible Employees as determined by multiplication of the
amount of a grant of Contingent Restricted Stock by the Award Multiple relating
to the Company's Performance Ranking as follows:
(i) General Calculation:
<TABLE>
<CAPTION>
COMPANY PERFORMANCE AWARD
RANKING MULTIPLE
----------------------------------- --------
<S> <C>
1................. 3.0
2................. 2.5
3................. 2.0
4................. 1.5
5................. 1.0
6................. 0.5
7................. 0
8................. 0
9................. 0
</TABLE>
(ii) Special Adjustments:
(1) If one or more companies in the Comparison Group is within one
percentage point of the Company's TSR, the Company's TSR rank Award
Multiple shall be the average of the Company's Award Multiple and the
Award Multiple that would be applicable to such other companies.
2
<PAGE> 39
(2) If the Company's TSR is within one percentage point of the
average of the Comparison Group, weighted for market capitalization, the
Award Multiple shall be the greater of the Company's TSR rank Award
Multiple or 1.0. The Subcommittee retains discretion to lower the Award
Multiple.
(r) "Plan" means this 1985 Executive Long-Term Incentive Plan, including
any amendments hereof and rules and regulations hereunder.
(s) "Restriction Period" means the period specified by the Subcommittee at
the time of grant of Restricted Stock or Performance-Based Restricted Stock
during which the restriction and forfeitability conditions apply.
(t) "Restricted Stock" means Common Stock awarded under the Plan which is
subject to certain forfeiture and transferability restrictions as provided in
the Plan, in regulations of the Committee promulgated thereunder, and in the
agreement evidencing the grant of such Restricted Stock.
(u) "Salary Grade Level" means the classification assigned to an Eligible
Employee, based on salary and grade ranking, by Atlantic Richfield Company.
(v) "Stock Options" means options to purchase Common Stock under the terms
and conditions set forth in Article II of the Plan. Such options shall not be
"Incentive Stock Options" as defined in Section 422(b) of the Internal Revenue
Code of 1986, as amended.
(w) "Subsidiary" means any corporation, the majority of the voting stock of
which, or any partnership or joint venture, the majority of the profits interest
or capital interest of which, is owned directly or indirectly by the Company.
(x) "Target Investment Value" means one-half of the Total Investment Value.
(y) "Total Investment Value" means, with respect to each Salary Grade
Level, that value which represents the 50th percentile of long-term compensation
payable by the Comparison Group, determined annually based on an analysis of
market data.
(z) "Total Shareholder Return" or "TSR" means the sum of the dividends and
appreciation or depreciation of the price of a share of Common Stock over the
established measurement period. The beginning and ending stock price, as
applicable, used to calculate the Total Shareholder Return shall be the average
of the closing price on the ten trading days prior to the last trading day of
the calendar year, on the last trading day of the calendar year, and on the ten
trading days following the last trading day of the calendar year.
SECTION 3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee or, where specified
herein, by the Subcommittee. The Committee or Subcommittee, as applicable, is
authorized to interpret the Plan, to adopt such rules and regulations as may
from time to time be deemed necessary for the effective operation of the Plan,
and to act upon all matters relating to the granting of awards under the Plan.
Any determination, interpretation, construction or other action made or taken
pursuant to the provisions of the Plan by or on behalf of the Committee or
Subcommittee, as applicable, shall be final, binding and conclusive for all
purposes and upon all persons including, without limitation, the Company, the
Company's shareholders and Eligible Employees and their respective successors in
interest.
(b) No member of the Committee or Subcommittee, as applicable, shall be
personally liable by reason of any contract or other instrument executed by such
member, or on such member's behalf, in such member's capacity as a member of the
Committee or Subcommittee nor for any mistake of judgment made in good faith,
and the Company shall indemnify and hold harmless each member of the Committee
or Subcommittee, as applicable, and each other officer, employee or director of
the Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated, against any cost or expense
(including counsel fees) or liability (including any sum paid in
3
<PAGE> 40
settlement of a claim with the approval of the Committee or Subcommittee)
arising out of any act or omission in connection with the Plan unless arising
out of such person's own fraud or bad faith.
(c) Subject to the terms and limitations of Subsection 1(a) of Article II
and Section 1 of Article III of the Plan, the Committee or Subcommittee, as
applicable, may at the time of the annual grants, make adjustments within the
Total Investment Value applicable to all Eligible Employees provided that any
reallocation resulting from changes in individual grants may be made only to
Eligible Employees in the same Salary Grade Level as the affected individuals,
so that the Total Investment Value by Salary Grade Level may not be exceeded.
ARTICLE II
STOCK OPTIONS
SECTION 1. GRANT OF STOCK OPTIONS
(a) Regular Grants. The Committee may make an annual grant of Stock Options
to Eligible Employees in an aggregate amount equal to the Target Investment
Value (i.e., one-half of the Total Investment Value), subject to the terms and
conditions set forth in the Plan and on such other terms and conditions as are
not inconsistent with the purposes and provisions of the Plan, provided, that,
the Committee, in its sole discretion, may, at the time of the annual grant,
adjust such aggregate amount from zero to three times the Target Investment
Value.
(b) Special Grants. The Committee, in its sole discretion, may make grants
of Stock Options in amounts determined to be appropriate by the Committee to:
(i) Employees of the Company who are not regular Eligible Employees,
either at the same time as the regular, annual grant of Stock Options or at
other times, and
(ii) Eligible Employees at times other than the time of the regular,
annual grant of Stock Options due to special circumstances, such as
commencement of Employment or special achievement.
The Committee may, by resolution, delegate to the Chairman of the Board the
power to make special grants of Stock Options at times other than the regular,
annual grants. Any such grants of Stock Options by the Chairman of the Board
will be based upon the recommendations of the Senior Vice President, Human
Resources and shall be reported to (or, if necessary, ratified by) the
Subcommittee at its next meeting.
SECTION 2. TERMS AND CONDITIONS OF STOCK OPTIONS
All Stock Options granted under the Plan shall be subject to the following
terms and conditions:
(a) Option Price. The option price per share with respect to each Stock
Option shall be fixed by the Committee, but shall not be less than the Fair
Market Value of the Common Stock on the date the Stock Option is granted.
(b) Period of Option. A Stock Option shall expire and all rights thereunder
shall end at the expiration of such period (not exceeding ten years) after the
date the Stock Option is granted as shall be fixed by the Committee at the time
it grants the Stock Option.
4
<PAGE> 41
(c) Exercise of Option. Stock Options may be exercised during the remaining
term of the options in accordance with the following schedule, subject to the
provisions of Subsection 2(d) of this Article II:
<TABLE>
<CAPTION>
CONTINUOUS PORTION OF
EMPLOYMENT FOLLOWING GRANT
GRANT EXERCISABLE
-------------------------------- -----------
<S> <C>
1 year.............. 33 1/3%
2 years............. 66 2/3%
3 years............. 100%
</TABLE>
(d) Termination of Employment.
(i) If an optionee's Employment is terminated prior to entitlement to
exercise all or a portion of a grant of Stock Options, the optionee will be
immediately entitled to exercise all of his or her outstanding Stock
Options during the remainder of the term of the Stock Options, if the
optionee's termination is due to (1) total and permanent disability, (2)
Change of Control, (3) termination, other than for cause, with a right to
an immediate allowance under a retirement plan of the Company, or (4)
involuntary termination, other than for cause.
(ii) If an optionee's Employment is terminated for cause, regardless of
retirement eligibility, or the optionee voluntarily terminates Employment
without a right to an immediate retirement allowance under a retirement
plan of the Company, any outstanding Stock Options which the optionee is
not entitled to exercise shall be canceled and, except as may be provided
under Subsection 2(d)(iii) of this Article II, the optionee will be
permitted to exercise any Stock Options which the optionee is entitled to
exercise immediately prior to his or her date of termination of Employment
only during the 60 calendar days following such Employment termination
date.
(iii) The Committee, in its sole discretion, may increase the portion of
a grant of Stock Options which an optionee who terminates Employment under
Subsection 2(d)(ii) of this Article II is entitled to exercise and/or the
post-termination of Employment period during which some or all of his or
her Stock Options may be exercised, provided that in no event may the
amount of exercisable Stock Options exceed the amount of the original grant
nor may the post-termination of Employment exercise period of such an
optionee be longer than 24 months following termination of Employment. The
Committee may, by resolution, delegate this power to the Chairman of the
Board of the Company, whose decisions shall be based upon the
recommendations of the Senior Vice President, Human Resources and shall be
reported to the Committee at its next meeting.
(e) Death. If an optionee dies prior to entitlement to exercise all or a
portion of a grant of Stock Options, the designated beneficiary of the optionee
or, absent a beneficiary designation, the executor or administrator of his or
her estate, will be entitled, commencing on the optionee's date of death, to
exercise all of the optionee's outstanding Stock Options during the remainder of
the period applicable to such Stock Options under Subsection 2(b) of this
Article II.
(f) Payment for Shares. Every share purchased through the exercise of a
Stock Option shall be paid for in full, in cash, within ten business days
following the time of exercise or, unless the Stock Option expressly provides
otherwise, at the time of exercise in shares of Common Stock valued at their
Fair Market Value on the date on which such Stock Option is exercised, or in a
combination of cash and such shares.
5
<PAGE> 42
ARTICLE III
RESTRICTED STOCK
SECTION 1. GRANT OF CONTINGENT RESTRICTED STOCK
The Subcommittee may make an annual grant of Contingent Restricted Stock to
Eligible Employees in an amount of contingent shares equal to the quotient of
the Target Investment Value divided by the Fair Market Value of a share of
Common Stock on the date of grant.
SECTION 2. GRANT OF RESTRICTED STOCK
The Subcommittee may grant Restricted Stock under the Plan to Eligible
Employees, and shall, in each case, determine the number of shares of Restricted
Stock to be granted and the terms or duration of the restrictions to be imposed
upon those shares.
SECTION 3. GRANT OF PERFORMANCE-BASED RESTRICTED STOCK
(a) The Subcommittee may grant Performance-Based Restricted Stock under the
Plan to Eligible Employees who have been granted Contingent Restricted Stock and
the Subcommittee shall in each case determine the number of shares to be granted
in accordance with the Performance-Based Restricted Stock Payment Schedule.
(b) Restrictions Applicable to Performance-Based Restricted Stock.
(i) Subject to the provisions of Subsections 3(b)(iii) and (iv) of this
Article III, shares of Performance-Based Restricted Stock shall become
vested 24 months following the date of grant, if the Participant remains in
Employment during this period.
(ii) During the period in which Performance-Based Restricted Stock is
not vested such stock shall be non-transferable and may not be pledged or
otherwise encumbered.
(iii) If a grantee's Employment is terminated within 24 months following
the grant of Performance-Based Restricted Stock due to (1) total and
permanent disability, (2) Change of Control, (3) involuntary termination,
other than for cause, (iv) termination, other than for cause, with a right
to an immediate retirement allowance under a retirement plan of the
Company, or (5) death, such stock shall be deemed vested.
(iv) If a grantee terminates Employment within 24 months following the
grant of Performance-Based Restricted Stock due to a reason other than
described under Subsection 3(b)(iii) of this Article III, all stock
pursuant to such grant will be forfeited unless the Subcommittee
accelerates the vesting of all or a portion of such stock upon its
determination that such vesting is in the best interest of the Company. The
Subcommittee may, by resolution, delegate this power to the Chairman of the
Board, whose decisions will be based upon the recommendations of the Senior
Vice President, Human Resources and shall be reported to the Subcommittee
at its next meeting.
(c) No grant of Performance-Based Restricted Stock may be made to a
"Covered Employee", as defined in proposed Treasury Regulations Section
1.162(m), unless the Subcommittee has certified in writing that the performance
criteria set forth in the Performance-Based Restricted Stock Payment Schedule
have been attained.
SECTION 4. WAIVER OF RESTRICTIONS
(a) Restrictions upon vesting and transferability of Restricted Stock may
be permitted to lapse as originally provided by the Subcommittee at the time of
grant, as provided in the Plan or otherwise as the Subcommittee may determine in
its sole discretion.
6
<PAGE> 43
(b) Restrictions upon vesting and transferability of Performance-Based
Restricted Stock shall lapse as provided in Section 3 of this Article III.
SECTION 5. TERMINATION OF EMPLOYMENT
(a) If a grantee of Contingent Restricted Stock commences Employment
following the beginning of a Performance Period, or terminates Employment prior
to the end of a Performance Period, as the case may be, except as provided
below, any actual award of Performance-Based Restricted Stock to which the
grantee would otherwise be entitled under the applicable Restricted Stock
Payment Schedule, shall be multiplied by a fraction, the numerator of which is
the number of months employed during the Performance Period and the denominator
of which is the number of months in such Performance Period, provided that in no
event may an award of Performance-Based Restricted Stock be made unless the
grantee has been in Employment for at least six months during the Performance
Period.
(b) If, prior to the end of a Performance Period, a grantee of Contingent
Restricted Stock terminates Employment due to (i) total and permanent
disability, (ii) Change of Control, (iii) involuntary termination, other than
for cause, or (iv) termination, other than for cause, with a right to an
immediate retirement allowance under a retirement plan of the Company, the
grantee shall be paid the value determined under Subsection 5(a) of this Article
III, in cash, at the end of the Performance Period.
(c) If, prior to the end of a Performance Period, a grantee of Contingent
Restricted Stock terminates Employment due to death, the designated beneficiary
of the grantee or, absent a beneficiary designation, his or her estate, shall be
paid the value determined under Subsection 5(a) of this Article III, in cash,
based on the Company's Performance Ranking for the year of the Performance
Period which ends closest to the grantee's death, with payment to be made as
soon as practicable following the end of such year of the Performance Period.
(d) If, prior to the end of a Performance Period, a grantee of Contingent
Restricted Stock terminates Employment for cause, regardless of retirement
eligibility, or voluntarily terminates Employment, other than with a right to an
immediate retirement allowance under a retirement plan of the Company, all such
Contingent Restricted Stock held by the grantee shall be canceled.
ARTICLE IV
PERFORMANCE-BASED DIVIDEND SHARE CREDITS
SECTION 1. CANCELLATION OF CREDITS UPON EXERCISE, EXPIRATION OR SURRENDER OF
STOCK OPTION
Dividend Share Credits shall be credited as provided in Article 1,
Subsection 2(j) of the Plan. Upon exercise of any Stock Option, in whole or in
part, the credited Dividend Share Credits attributable to the exercised Stock
Options shall be canceled. Upon expiration of any Stock Option at the end of its
original maximum term, the credited Dividend Share Credits attributable to the
expired Stock Options shall be canceled. An optionee may elect to surrender for
cancellation exercisable Stock Options in whole or in part. Upon surrender and
cancellation of any such Stock Options, the Dividend Share Credits attributable
to the surrendered Stock Options shall also be canceled.
The shares of Common Stock underlying Stock Options exercised, surrendered
or expired pursuant to this Section shall be referred to as the "affected
shares" for purposes of the application of the performance criterion set forth
in Section 2 of this Article IV. For purposes of the application of such
criterion, the date of exercise, surrender or expiration shall be referred to as
the "determination date."
7
<PAGE> 44
SECTION 2. PERFORMANCE-BASED CRITERION FOR DIVIDEND SHARE CREDITS
Upon the exercise, expiration or surrender of any Stock Option, the
Committee shall apply the following performance-based criterion to the Dividend
Share Credits allocable to the affected shares:
In order for the performance criterion to be attained, the
aggregate Fair Market Value of the canceled Dividend Share
Credits must exceed the aggregate option price of the affected
shares less their aggregate Fair Market Value on the
determination date.
The criterion shall be applied independently to each grant in the event of
the exercise, cancellation or surrender of Stock Options attributable to
multiple grants on the same date.
SECTION 3. CALCULATION FOR PAYMENT
If the performance criterion set forth in Section 2 of this Article IV is
attained, a payment in shares of Common Stock shall be made to the optionee,
which shall have a value equal to the Fair Market Value of a share of Common
Stock multiplied by the total number of any canceled Dividend Share Credits,
less the amount by which the aggregate option price of the affected shares
exceeds the aggregate Fair Market Value of underlying shares related to such
Stock Options on the determination date. The optionee may elect to receive a
cash payment in respect of such shares, in which case the shares of Common Stock
otherwise payable to the optionee shall be sold by the Company, at no cost to
the optionee, and the equivalent cash payment shall be made to the optionee.
No payment may be made to a "Covered Employee", as defined in proposed
Treasury Regulations Section 1.162(m), unless the Subcommittee has certified in
writing that the performance criterion set forth in Section 2 of this Article IV
has been attained.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 1. OPTION AND RESTRICTED STOCK LIMITS
(a) The number of shares of Common Stock upon which Stock Options may be
granted or which may be the subject of a grant of Restricted Stock or
Performance-Based Restricted Stock during a calendar year shall be eight-tenths
of one percent (0.8%) of the total issued and outstanding shares of Common Stock
as of December 31 of the next preceding calendar year. Any shares of Common
Stock available for grant that are not made the subject of a grant during a
calendar year, or portion thereof, will be available for grant in any subsequent
year, or portion thereof, until the end of the term of the Plan. The number of
available shares described in the preceding sentences is subject to adjustment
as provided in Section 2 of this Article V. The shares shall be made available
from authorized Common Stock, issued or unissued, or from Common Stock issued
and held in the treasury of the Company as shall be determined by the Committee.
Shares of Common Stock subject to Stock Options, shares of Restricted Stock and
shares of Performance-Based Restricted Stock that are canceled pursuant to
Subsection 2(d) of Article II, Section 2 of Article III or Section 5 of Article
III of the Plan may be reallocated under the Plan.
(b) No individual may be granted more than 250,000 shares of Restricted
Stock, Performance-Based Restricted Stock and/or Stock Options, regardless of
the combination, in any calendar year.
SECTION 2. ADJUSTMENT IN TERMS OF AWARD
In the event of a reorganization, recapitalization, stock split, stock
dividend, distribution of assets other than pursuant to a normal cash dividend,
combination of shares, merger, consolidation, rights offering, split-up,
split-off, spin-off or any other change in the corporate structure or shares of
the Company, the Committee may, in its discretion, after consultation with the
Chairman of the Board and the
8
<PAGE> 45
President, make appropriate adjustments to reflect such event in respect of
(a) the limitation in Section 1 of this Article V on the maximum number of
shares of Common Stock upon which Stock Options may be granted or which may be
the subject of a grant of Restricted Stock or Performance-Based Restricted
Stock, (b) the number of shares of Common Stock covered by, and the exercise
price per share applicable to, outstanding Stock Options, (c) the number of
shares of Common Stock covered by outstanding awards of Restricted Stock or
Performance-Based Restricted Stock, and (d) the number of outstanding Dividend
Share Credits allocated to optionees' accounts. In the event that the Committee,
after consultation with the Chairman of the Board and the President, determines
that, because of a change (other than a Change of Control) in the Company's
business, operations, corporate structure, capital structure, assets or manner
in which it conducts business, which it deems to be extraordinary and material,
the terms of awards theretofore made are no longer suitable to the objectives
which the Committee sought to achieve when it made such awards, it may modify
the terms of any or all of such awards in such manner as it may decide is
advisable; provided, however, that no award may be modified in a manner which
would be inconsistent with the intent of Subsection 1(b) or Section 9 of this
Article V, or which would result in an increase in the shares of
Performance-Based Restricted Stock.
SECTION 3. GOVERNMENTAL REGULATIONS
The Plan and the grant and exercise of Stock Options, the crediting and
payment of Dividend Share Credits and the award of Contingent Restricted Stock,
Restricted Stock and Performance-Based Restricted Stock hereunder, shall be
subject to all applicable rules and regulations of governmental or other
authorities.
SECTION 4. NO GUARANTY OF EMPLOYMENT
The grant of a Stock Option, credit of a Dividend Share Credit, or award of
Contingent Restricted Stock, Restricted Stock or Performance-Based Restricted
Stock under the Plan shall not confer upon a recipient any right to continue in
the employ of the Company nor shall it interfere with or restrict in any way the
right of the Company to discharge an Eligible Employee at any time for any
reason, with or without good cause.
SECTION 5. RELATION TO BENEFIT PLANS
Stock Options, Dividend Share Credits, Contingent Restricted Stock,
Restricted Stock and Performance-Based Restricted Stock will not be considered
as compensation for the purpose of any other benefit plans maintained by the
Company.
SECTION 6. ASSIGNMENT OR TRANSFER
No Stock Option, Dividend Share Credit or share of Contingent Restricted
Stock, Restricted Stock or Performance-Based Restricted Stock shall be
assignable or transferable by an Eligible Employee otherwise than by will or the
laws of descent and distribution.
SECTION 7. RIGHTS AS SHAREHOLDER
(a) An Eligible Employee under the Plan shall have no rights of a holder of
Common Stock by virtue of an award of Stock Option or Contingent Restricted
Stock hereunder, unless and until certificates for shares of Common Stock,
Restricted Stock or Performance-Based Restricted Stock are issued to him or her
pursuant to the Plan.
(b) Dividend Share Credits shall not be considered as dividends on Common
Stock for any purpose.
(c) An Eligible Employee who has received an award of Restricted Stock or
Performance-Based Restricted Stock shall have the right to vote such stock. All
dividends paid with respect to Restricted Stock or Performance-Based Restricted
Stock shall be reinvested in additional shares of Restricted
9
<PAGE> 46
Stock, subject to the same restrictions, including the date on which such
restrictions lapse, as the shares of Restricted Stock or Performance-Based
Restricted Stock with respect to which the dividends are paid. Stock received
with respect to an award of Restricted Stock or Performance-Based Restricted
Stock pursuant to a stock split, stock dividend or other change in the
capitalization of the Company will be held subject to the same restrictions on
transferability that are applicable to such shares of Restricted Stock or
Performance-Based Restricted Stock.
SECTION 8. WITHHOLDING TAXES
(a) The Company shall have the right to withhold from salary or otherwise
or to cause the employee (or the executor or administrator of his or her estate
or his or her distributee) to make payment of any federal, state, local or
foreign taxes required to be withheld with respect to any exercise of a Stock
Option, stock or cash settlement of a Dividend Share Credit, or award or vesting
or deemed vesting of Restricted Stock or Performance-Based Restricted Stock.
(b) In the case of an exercise of Stock Options, the payment in respect of
Dividend Share Credits allocable to the affected shares, or the vesting or
deemed vesting of Restricted Stock or Performance-Based Restricted Stock, an
Eligible Employee may elect to have the withholding obligation satisfied by
having the Company withhold shares of Common Stock received upon an exercise of
Stock Option, the payment in respect of Dividend Share Credits allocable to the
affected shares or the vesting or deemed vesting of Restricted Stock or
Performance-Based Restricted Stock, as the case may be.
SECTION 9. AMENDMENT AND DISCONTINUANCE OF THE PLAN
The Board of Directors of the Company may amend or discontinue the Plan as
it shall from time to time consider desirable, provided that:
(a) No amendment shall, without further approval by the holders of a
majority of the shares which are represented in person or by proxy and entitled
to vote on the subject at a meeting of shareholders of the Company, change the
terms of the Plan so as to increase the maximum number of shares upon which
Stock Options may be granted or which may be issued upon a grant of Restricted
Stock or Performance-Based Restricted Stock from the amounts described in
Subsections 1(a) and (b) of this Article V, reduce the minimum Stock Option
price, or extend the maximum Stock Option period; and
(b) No amendment, discontinuance or termination shall deprive persons who
hold shares of Contingent Restricted Stock, Restricted Stock or
Performance-Based Restricted Stock, or who are entitled to exercise Stock
Options, or to receive a settlement of a Dividend Share Credit pursuant to the
terms and provisions of the Plan, of their rights with respect thereto.
SECTION 10. EFFECTIVE DATE
The effective date of the Plan is May 28, 1985.
SECTION 11. TERM OF PLAN
No Stock Options or Contingent Restricted Stock, Restricted Stock or
Performance-Based Restricted Stock may be granted after May 27, 2000; provided,
however, that subject to shareholders approval of the extension of the term of
the Plan to February 24, 2007, to be solicited at the Annual Meeting of the
Company's shareholders to be held on May 5, 1997, no Stock Options or awards of
Contingent Restricted Stock, Restricted Stock or Performance-Based Restricted
Stock may be granted after February 24, 2007.
10
<PAGE> 47
ARCO (LOGO)
(LOGO) Printed on Recycled paper.
<PAGE> 48
- --------------------------------------------------------------------------------
ARCO [LOGO] ATLANTIC RICHFIELD COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING MAY 5, 1997
The undersigned hereby constitutes and appoints Allan L. Comstock,
P Terry G. Dallas and Bruce G. Whitmore, and each of them, true and
lawful agents and proxies with full power of substitution in each, to
R represent the undersigned at the Annual Meeting of Stockholders of
ATLANTIC RICHFIELD COMPANY to be held at the Company's offices, 2300
O West Plano Parkway, Plano, Texas on Monday, May 5, 1997, and at any
adjournments thereof, on all matters coming before said meeting,
X including (1) the election of fourteen directors, (2) the amendment of
the 1985 Executive Long-Term Incentive Plan, (3) the approval of the
Y appointment of Coopers & Lybrand L.L.P. as independent auditors for the
year 1997 and (4) the consideration of the stockholders' proposal.
<TABLE>
<S> <C>
Nominees for election as director: COMMENTS OR CHANGE OF ADDRESS
Frank D. Boren Philip M. Hawley ________________________________________________________
Mike R. Bowlin Marie L. Knowles ________________________________________________________
Lodwrick M. Cook Kent Kresa ________________________________________________________
Richard H. Deihl David T. McLaughlin ________________________________________________________
Anthony G. Fernandes John B. Slaughter ________________________________________________________
John Gavin William E. Wade, Jr. (If you have written in the above space, please mark the
Hanna H. Gray Henry Wendt corresponding box on the reverse side of this card.)
You are encouraged to specify your choices by marking the appropriate boxes, -----------------------
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in SEE REVERSE
accordance with the Board of Directors' recommendations. This Proxy cannot be SIDE
voted unless you sign and return it. -----------------------
</TABLE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Stockholder of Record card (white)
<PAGE> 49
<TABLE>
<S> <C>
[X] Please mark your 0184
votes as in this
example.
This proxy when properly executed will be voted in the manner directed herein. If no direction is made, this
proxy will be voted FOR election of directors, FOR proposals 2 and 3 and AGAINST proposal 4.
- -----------------------------------------------------------------------------------------------------------------------------------
The Board of Directors
The Board of Directors recommends a vote FOR proposals 2 and 3. recommends a vote AGAINST proposal 4.
- -----------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN 4. Stockholders' proposal FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Authorize [ ] [ ] [ ] requesting the review and [ ] [ ] [ ]
Directors. amendment of development of guidelines
(see reverse) the 1985 for country selection and
Executive report to stockholders.
Long-Term
Incentive Plan.
For, except vote withheld from the
following nominee(s): 3. Approval of [ ] [ ] [ ]
appointment of
Coopers & Lybrand
L.L.P. as independent
auditors.
- -----------------------------------------------------------------------------------------------------------------------------------
Please check here if you receive more than one [ ]
Annual Report and do not wish to receive the extra
copy(ies). This will not affect the distribution
of dividends or proxy statements.
Comments or change of address on reverse side. [ ]
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
---------------------------------------------------------
---------------------------------------------------------
SIGNATURE(S) DATE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- Please carefully detach here and return this proxy in the enclosed reply envelope -
</TABLE>
ARCO [LOGO] This is your proxy.
Your vote is important.
Dear Stockholder:
The annual meeting of stockholders of Atlantic Richfield Company will
be held on May 5, 1997. We urge you to promptly sign, date and return
the proxy card in the envelope provided.
<PAGE> 50
- --------------------------------------------------------------------------------
ARCO [LOGO] ATLANTIC RICHFIELD COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING MAY 5, 1997
The undersigned hereby constitutes and appoints Allan L. Comstock,
P Terry G. Dallas and Bruce G. Whitmore, and each of them, true and
lawful agents and proxies with full power of substitution in each, to
R represent the undersigned at the Annual Meeting of Stockholders of
ATLANTIC RICHFIELD COMPANY to be held at the Company's offices, 2300
O West Plano Parkway, Plano, Texas on Monday, May 5, 1997, and at any
adjournments thereof, on all matters coming before said meeting,
X including (1) the election of fourteen directors, (2) the amendment of
the 1985 Executive Long-Term Incentive Plan, (3) the approval of the
Y appointment of Coopers & Lybrand L.L.P. as independent auditors for the
year 1997 and (4) the consideration of the stockholders' proposal.
<TABLE>
<S> <C>
Nominees for election as director: COMMENTS OR CHANGE OF ADDRESS
Frank D. Boren Philip M. Hawley ________________________________________________________
Mike R. Bowlin Marie L. Knowles ________________________________________________________
Lodwrick M. Cook Kent Kresa ________________________________________________________
Richard H. Deihl David T. McLaughlin ________________________________________________________
Anthony G. Fernandes John B. Slaughter ________________________________________________________
John Gavin William E. Wade, Jr. (If you have written in the above space, please mark the
Hanna H. Gray Henry Wendt corresponding box on the reverse side of this card.)
You are encouraged to specify your choices by marking the appropriate boxes, -----------------------
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in SEE REVERSE
accordance with the Board of Directors' recommendations. This Proxy cannot be SIDE
voted unless you sign and return it. -----------------------
</TABLE>
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Employee Card - (white with blue stripe)
<PAGE> 51
<TABLE>
<S> <C>
[X] Please mark your 6015
votes as in this
example.
This proxy when properly executed will be voted in the manner directed herein. If no direction is made, this
proxy will be voted FOR election of directors, FOR proposals 2 and 3 and AGAINST proposal 4.
- -----------------------------------------------------------------------------------------------------------------------------------
The Board of Directors
The Board of Directors recommends a vote FOR proposals 2 and 3. recommends a vote AGAINST proposal 4.
- -----------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN 4. Stockholders' proposal FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Authorize [ ] [ ] [ ] requesting the review and [ ] [ ] [ ]
Directors. amendment of development of guidelines
(see reverse) the 1985 for country selection and
Executive report to stockholders.
Long-Term
Incentive Plan.
For, except vote withheld from the
following nominee(s): 3. Approval of [ ] [ ] [ ]
appointment of
Coopers & Lybrand
L.L.P. as independent
auditors.
- -----------------------------------------------------------------------------------------------------------------------------------
Please check here if you receive more than one [ ]
Annual Report and do not wish to receive the extra
copy(ies). This will not affect the distribution
of dividends or proxy statements.
Comments or change of address on reverse side. [ ]
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
---------------------------------------------------------
---------------------------------------------------------
SIGNATURE(S) DATE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- Please carefully detach here and return this proxy in the enclosed reply envelope -
</TABLE>
ARCO [LOGO] This is your proxy.
Your vote is important.
Dear Stockholder:
The annual meeting of stockholders of Atlantic Richfield Company will
be held on May 5, 1997. We urge you to promptly sign, date and return
the proxy card in the envelope provided.
<PAGE> 52
ARCO [LOGO]
P
R
O
X
Y
ATLANTIC RICHFIELD COMPANY
$3.00 CUMULATIVE CONVERTIBLE PREFERENCE STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING MAY 5, 1997
The undersigned hereby constitutes and appoints Allan L. Comstock, Terry G.
Dallas and Bruce G. Whitmore, and each of them, true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Stockholders of ATLANTIC RICHFIELD COMPANY to be held at
the Company's offices, 2300 West Plano Parkway, Plano, Texas on Monday, May 5,
1997, and at any adjournments thereof, on all matters coming before said
meeting, including (1) the election of fourteen directors, (2) the amendment of
the 1985 Executive Long-Term Incentive Plan, (3) the approval of the appointment
of Coopers & Lybrand L.L.P. as independent auditors for the year 1997 and (4)
the consideration of the stockholders' proposal.
Nominees for election as director:
Frank D. Boren Philip M. Hawley COMMENTS OR CHANGE OF ADDRESS
Mike R. Bowlin Marie L. Knowles -----------------------------
Lodwrick M. Cook Kent Kresa -----------------------------
Richard H. Deihl David T. McLaughlin -----------------------------
Anthony G. Fernandes John B. Slaughter -----------------------------
John Gavin William E. Wade, Jr. (If you have written in the
Hanna H. Gray Henry Wendt above space, please mark the
corresponding box on the reverse
side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THIS PROXY CANNOT BE
VOTED UNLESS YOU SIGN AND RETURN IT.
- ----------------
SEE REVERSE SIDE
- ----------------
BROKER CARD - $3.00 PREFERENCE (Light Yellow)
<PAGE> 53
Please mark your
[X] votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
directors, FOR proposals 2 and 3, and AGAINST proposal 4.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR election of directors and FOR
proposals 2 and 3.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Authorize amend- [ ] [ ] [ ]
Directors ment of the 1985
Executive Long-
Term Incentive
Plan.
For, except vote withheld from 3. Approval of [ ] [ ] [ ]
the following nominee(s): appointment of
Coopers & Lybrand
- -------------------------------- L.L.P., as independent
auditors.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 4.
- ------------------------------------------------------------
FOR AGAINST ABSTAIN
4. Stockholders' proposal requesting [ ] [ ] [ ]
the review and development of
guidelines for country selection
and report to stockholders.
- ------------------------------------------------------------
Comments or change of address on reverse side. [ ]
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
- ------------------------------------------------------------
1997
- ------------------------------------------------------------
SIGNATURE(S) DATE
<PAGE> 54
ARCO [LOGO]
P
R
O
X
Y
ATLANTIC RICHFIELD COMPANY - COMMON STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING MAY 5, 1997
The undersigned hereby constitutes and appoints Allan L. Comstock, Terry G.
Dallas and Bruce G. Whitmore, and each of them, true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Stockholders of ATLANTIC RICHFIELD COMPANY to be held at
the Company's offices, 2300 West Plano Parkway, Plano, Texas on Monday, May 5,
1997, and at any adjournments thereof, on all matters coming before said
meeting, including (1) the election of fourteen directors, (2) the amendment of
the 1985 Executive Long-Term Incentive Plan, (3) the approval of the appointment
of Coopers & Lybrand L.L.P. as independent auditors for the year 1997 and (4)
the consideration of the stockholders' proposal.
Nominees for election as director:
Frank D. Boren Philip M. Hawley COMMENTS OR CHANGE OF ADDRESS
Mike R. Bowlin Marie L. Knowles -----------------------------
Lodwrick M. Cook Kent Kresa -----------------------------
Richard H. Deihl David T. McLaughlin -----------------------------
Anthony G. Fernandes John B. Slaughter -----------------------------
John Gavin William E. Wade, Jr. (If you have written in the
Hanna H. Gray Henry Wendt above space, please mark the
corresponding box on the reverse
side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THIS PROXY CANNOT BE
VOTED UNLESS YOU SIGN AND RETURN IT.
- ----------------
SEE REVERSE SIDE
- ----------------
BROKER CARD - COMMON (White)
<PAGE> 55
Please mark your
[X] votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
directors, FOR proposals 2 and 3, and AGAINST proposal 4.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR election of directors and FOR
proposals 2 and 3.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Authorize amend- [ ] [ ] [ ]
Directors ment of the 1985
Executive Long-
Term Incentive
Plan.
For, except vote withheld from 3. Approval of [ ] [ ] [ ]
the following nominee(s): appointment of
Coopers & Lybrand
- -------------------------------- L.L.P., as independent
auditors.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 4.
- ------------------------------------------------------------
FOR AGAINST ABSTAIN
4. Stockholders' proposal requesting [ ] [ ] [ ]
the review and development of
guidelines for country selection
and report to stockholders.
- ------------------------------------------------------------
Comments or change of address on reverse side. [ ]
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
- ------------------------------------------------------------
1997
- ------------------------------------------------------------
SIGNATURE(S) DATE
<PAGE> 56
ARCO [LOGO]
P
R
O
X
Y
ATLANTIC RICHFIELD COMPANY
$2.80 CUMULATIVE CONVERTIBLE PREFERENCE STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY FOR THE ANNUAL MEETING MAY 5, 1997
The undersigned hereby constitutes and appoints Allan L. Comstock, Terry G.
Dallas and Bruce G. Whitmore, and each of them, true and lawful agents and
proxies with full power of substitution in each, to represent the undersigned at
the Annual Meeting of Stockholders of ATLANTIC RICHFIELD COMPANY to be held at
the Company's offices, 2300 West Plano Parkway, Plano, Texas on Monday, May 5,
1997, and at any adjournments thereof, on all matters coming before said
meeting, including (1) the election of fourteen directors, (2) the amendment of
the 1985 Executive Long-Term Incentive Plan, (3) the approval of the appointment
of Coopers & Lybrand L.L.P. as independent auditors for the year 1997 and (4)
the consideration of the stockholders' proposal.
Nominees for election as director:
Frank D. Boren Philip M. Hawley COMMENTS OR CHANGE OF ADDRESS
Mike R. Bowlin Marie L. Knowles -----------------------------
Lodwrick M. Cook Kent Kresa -----------------------------
Richard H. Deihl David T. McLaughlin -----------------------------
Anthony G. Fernandes John B. Slaughter -----------------------------
John Gavin William E. Wade, Jr. (If you have written in the
Hanna H. Gray Henry Wendt above space, please mark the
corresponding box on the reverse
side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THIS PROXY CANNOT BE
VOTED UNLESS YOU SIGN AND RETURN IT.
- ----------------
SEE REVERSE SIDE
- ----------------
BROKER CARD - $2.80 PREFERENCE (Light Blue)
<PAGE> 57
Please mark your
[X] votes as in this
example.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR election of
directors, FOR proposals 2 and 3, and AGAINST proposal 4.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR election of directors and FOR
proposals 2 and 3.
- --------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Authorize amend- [ ] [ ] [ ]
Directors ment of the 1985
Executive Long-
Term Incentive
Plan.
For, except vote withheld from 3. Approval of [ ] [ ] [ ]
the following nominee(s): appointment of
Coopers & Lybrand
- -------------------------------- L.L.P., as independent
auditors.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 4.
- ------------------------------------------------------------
FOR AGAINST ABSTAIN
4. Stockholders' proposal requesting [ ] [ ] [ ]
the review and development of
guidelines for country selection
and report to stockholders.
- ------------------------------------------------------------
Comments or change of address on reverse side. [ ]
Please sign exactly as name appears hereon. Joint owners
should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full
title as such.
- ------------------------------------------------------------
1997
- ------------------------------------------------------------
SIGNATURE(S) DATE
