<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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 paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF ATLANTIC RICHFIELD COMPANY]
Atlantic Richfield Company
Notice of 1999
Annual Meeting
of Stockholders
and Proxy Statement
PLEASE COMPLETE, SIGN, DATE AND RETURN
YOUR PROXY PROMPTLY
Monday, May 3, 1999
11:00 A.M.
ARCO Center
The Auditorium, Concourse Level
333 South Hope Street
Los Angeles, California
<PAGE>
LETTER TO STOCKHOLDERS
[LOGO OF ATLANTIC RICHFIELD COMPANY]
Atlantic Richfield Company
333 South Hope Street
Los Angeles, California 90071
March 26, 1999
Dear ARCO Stockholder:
You are cordially invited to join us at the 1999 Annual Meeting of Stockholders
in Los Angeles, California on May 3.
Enclosed with this Proxy Statement are your voting instructions and the 1998
Annual Report. I would like to take this opportunity to remind you that your
vote is important.
This year the Annual Meeting will be held in the auditorium at ARCO's new
headquarters building in Los Angeles. Because space is limited, attendance will
be limited.
Whether or not you plan to attend the Annual Meeting in person, we strongly
encourage you to designate the proxies shown on the enclosed card to vote your
shares. A description of alternative voting procedures can be found on page 3.
For up to date information about ARCO, we encourage you to visit our site on
the Worldwide Web at www.arco.com.
Sincerely,
/s/ Mike R. Bowlin
Chairman of the Board and
Chief Executive Officer
<PAGE>
NOTICE OF MEETING
[LOGO OF ATLANTIC RICHFIELD COMPANY]
Atlantic Richfield Company
Notice of Annual Meeting of Stockholders
Date: May 3, 1999 MATTERS TO BE VOTED UPON:
Time: 11:00 a.m. 1. Election of ten directors
Place: ARCO Center 2. Ratification of the
The Auditorium, Concourse Level appointment of
333 South Hope Street PricewaterhouseCoopers LLP
Los Angeles, CA 90071 3. Stockholders' proposal to
abandon drilling in ANWR
Record Date: March 8, 1999
IF YOU PLAN TO ATTEND:
Please note that space limitations make it necessary to limit attendance to
stockholders, and guests if space permits. Admission to the meeting will be on
a first-come, first-served basis. Registration and seating will begin at 10:00
a.m. Each stockholder may be asked to present valid picture identification,
such as a driver's license or passport. Stockholders holding stock in brokerage
accounts ("street name" holders) will need to bring a copy of a brokerage
statement reflecting stock ownership as of March 8, 1999. Parking is available
in the building. Cameras, recording devices and other electronic devices will
not be permitted at the meeting.
It will be helpful to us if you will read the Proxy Statement and the voting
instructions on the proxy card, and then vote (1) by filling out, signing and
dating the proxy card and returning it by mail, or (2) by calling the 800
number listed on the proxy card, or (3) via the internet.
/s/ Bruce G. Whitmore
BRUCE G. WHITMORE Los Angeles, California
Senior Vice President, March 26, 1999
General Counsel and
Corporate Secretary
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
No.
- --------------------------------------------------------------------------- ----
<S> <C>
PROPOSALS TO BE VOTED ON................................................... 1
PROXY STATEMENT............................................................ 2
QUESTIONS AND ANSWERS...................................................... 3
BOARD OF DIRECTORS......................................................... 6
Election of Directors (Item 1 on Proxy Card).............................. 6
Committees of the Board During 1998....................................... 10
Board Compensation........................................................ 12
STOCK OWNERSHIP............................................................ 13
Stock Owned by Directors and Executive Officers .......................... 13
Compliance with Section 16(a) of the Securities Exchange Act of 1934...... 14
Voting Stock Owned by "Beneficial Owner".................................. 14
EXECUTIVE COMPENSATION..................................................... 15
Summary Compensation Table................................................ 15
Committee Report on Executive Compensation................................ 19
Option Grants for 1998 ................................................... 23
Aggregated Option Exercises in 1998 and Year-End Option Values............ 24
1985 Executive Long-Term Incentive Plan Contingent Awards for 1998........ 25
Estimated Retirement Benefits............................................. 25
Change of Control Arrangements ........................................... 26
Five-Year Performance Graph .............................................. 27
INDEPENDENT AUDITORS....................................................... 28
Proposal to Approve the Appointment of PricewaterhouseCoopers
(Item 2 on Proxy Card)................................................... 28
STOCKHOLDERS' PROPOSAL..................................................... 29
Abandonment of ANWR Drilling Plans (Item 3 on Proxy Card)................. 29
OTHER INFORMATION.......................................................... 32
Stockholder Proposals and Nominations for 2000 Annual Meeting............. 32
Additional Information Available.......................................... 32
</TABLE>
i
<PAGE>
PROPOSALS TO BE VOTED ON
1. Election of Directors
Item 1 on proxy card
Nominees for re-election are the ten members currently serving on the board.
Each nominee has consented to serve for a one-year term. You can find the
biographies of each nominee beginning on page 7.
The Board recommends a vote FOR each of the nominees.
2. Approval of the appointment of PricewaterhouseCoopers LLP
Item 2 on proxy card
PricewaterhouseCoopers LLP, formerly known as Coopers & Lybrand L.L.P., have
been appointed to serve as the company's independent auditors for 1999.
The Board recommends a vote FOR approval of the appointment of
PricewaterhouseCoopers LLP.
3. Stockholders' proposal for abandonment of ANWR drilling plans
Item 3 on proxy card
The proposal is described on page 29.
The Board recommends a vote AGAINST this stockholders' proposal.
4. Other Business
The Board knows of no other business to be presented at the meeting. If any
other matters are properly presented for consideration at the meeting, the
proxies designated on the proxy card, Allan Comstock, Terry Dallas and
Bruce Whitmore, will vote, or otherwise act, on your behalf in accordance with
their judgment on such matters.
1
<PAGE>
PROXY STATEMENT
Your Board of Directors is soliciting proxies for the 1999 Annual Meeting of
Stockholders. This Proxy Statement contains important information for you to
consider when deciding how to vote on the matters brought before the meeting.
Please read it carefully.
The Board set March 8, 1999 as the record date for the meeting. Stockholders
who owned Preference Stocks and common stock of record on that date are
entitled to vote at and attend the meeting. Holders of common stock are
entitled to one vote per share. Holders of the $3.00 Preference Stock are
entitled to 16 votes per share. Holders of the $2.80 Preference Stock are
entitled to 4 votes per share. Fractional shares, such as those held in the
benefit plans and in the dividend reinvestment plans, may not be voted. All
shares of common and Preference Stocks vote together as one class.
Voting materials, which include the Proxy Statement, proxy card and 1998 Annual
Report, are being mailed to stockholders beginning March 26, 1999.
2
<PAGE>
QUESTIONS AND ANSWERS
Q: Why am I receiving this Proxy Statement and proxy card?
A: You are receiving a Proxy Statement and proxy card from us because you own
shares of stock in ARCO. This Proxy Statement describes issues on which we
would like you, as a stockholder, to vote. It also gives you information on
these issues so that you can make an informed decision.
When you cast your vote using the proxy card, you also appoint Allan Comstock,
Terry Dallas and Bruce Whitmore as your representatives, or proxies, at the
meeting. They will vote your shares at the meeting as you have instructed them
on the proxy card. This way, your shares will be voted whether or not you
attend the Annual Meeting. Even if you plan to attend the meeting, it is a good
idea to cast your vote in advance of the meeting in case your plans change.
If an issue comes up for vote at the meeting that is not on the proxy card,
Messrs. Comstock, Dallas and Whitmore will vote your shares, under your proxy,
in accordance with their best judgment.
Q: What am I voting on?
A: Three proposals. Item numbers refer to item numbers on proxy card.
Item 1. Election of ten directors
Item 2. Ratification of appointment of PricewaterhouseCoopers as independent
auditors of the company
Item 3. Abandonment of ANWR drilling plans
Q: Who can vote?
A: All stockholders of record at the close of business on March 8, 1999 are
entitled to vote together as one class. All shares of common and Preference
Stocks vote together as one class.
Q: Who can attend the meeting?
A: All stockholders as of the record date, or their duly appointed proxies, may
attend the meeting. Seating, however, is limited. You will be admitted on a
first-come, first served basis. If you hold your shares in "street name" (that
is, through a broker or other nominee), you will need to bring a copy of a
brokerage statement reflecting your stock ownership as of the record date.
Everyone must check in at the registration desk at the meeting. You may be
asked to present valid picture identification.
Q: How do I vote?
A: You may choose one of three ways to cast your vote:
1. By mail: Complete, date, sign and mail the proxy card in the enclosed
postage pre-paid envelope.
2. By telephone: Call 1-800-652-8683 toll free from the US and Canada.
3. Via the internet: Access the Worldwide Web site at www.vote-by-net.com.
Voting by telephone and via the internet is available 24 hours a day, 7 days a
week.
You may vote in person at the meeting. We will pass out written ballots to
anyone who wants to vote at the meeting. If you hold your shares in street
name, you must request a legal proxy from your stockbroker in order to vote at
the meeting.
Q: What happens if I do not indicate my preference for one of the items?
A: If you do not indicate how you wish to vote for one or more of the nominees
for director, the proxies will vote FOR election of all the nominees for
Director (Item 1). If you "withhold" your vote for any of the nominees, that
vote will be counted for purposes of determining the presence or absence of a
quorum, but will have no other legal effect. If you leave Item 2 blank, the
proxies will vote FOR ratification of the
3
<PAGE>
QUESTIONS AND ANSWERS
appointment of PricewaterhouseCoopers (Item 2). If you do not mark a preference
regarding the stockholders' proposal, the proxies will vote AGAINST adoption of
this proposal (Item 3).
Q: What if I vote and then change my mind?
A: You can revoke your proxy by writing to us, by voting again via mail,
telephone or the internet, or by attending the meeting and casting your vote in
person. Your last vote will be the vote that is counted.
Q: How many votes do you need to hold the meeting?
A: Shares are counted as present at the meeting if the stockholder either:
. is present and votes in person at the meeting, or
. has properly voted by mail, telephone or internet.
A majority of the company's outstanding shares as of the record date must be
present at the meeting in order to hold the meeting and conduct business. This
is called a quorum.
As of the record date, March 8, 1999, the company had 50,462 shares of $3.00
Preference Stock, 565,179 shares of $2.80 Preference Stock and 321,852,832
shares of common stock outstanding. The holders of the Preference Stocks have
the right to cast a total of 3,068,108 votes, and the holders of common stock
have the right to cast a total of 321,852,832 votes. 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 constitutes a quorum for adopting
the proposals at the Annual Meeting. If you have properly designated the
proxies and indicated your voting preferences by mail, by telephone or via the
internet, you will be considered part of the quorum, and the proxies will vote
your shares as you have instructed them.
Q: Is my vote confidential?
A: Yes. Proxy cards, ballots and voting tabulations that identify individual
shareholders are kept confidential except in certain circumstances where it is
important to protect the interests of the company and its shareholders.
Generally, only the employees of First Chicago Trust Company of New York, our
transfer agent, processing the votes will have access to your name. They will
not disclose your name as the author of any comments you include on the proxy
card unless you ask that your name be disclosed to management.
Q: Who will count the votes?
A: Employees of First Chicago will tabulate the votes and act as the inspectors
of the election.
Q: What does it mean if I get more than one proxy card?
A: It means you have multiple accounts at the transfer agent and/or with
stockbrokers. Please sign and return all proxy cards to ensure that all your
shares are voted. We encourage you to register all of your brokerage accounts
in the same name and address for better shareholder service. You may do this by
contacting our transfer agent, First Chicago, at 1-800-756-8200.
Q: What happens if I do not vote at all?
A: If your shares are held in street name, your brokerage firm, under certain
circumstances, may vote your shares.
Brokerage firms have authority under New York Stock Exchange rules to vote
customers' unvoted shares on certain "routine" matters, including election of
directors.
If you do not vote your proxy, your brokerage firm may either:
. vote your shares on routine matters, or
. leave your shares unvoted.
4
<PAGE>
QUESTIONS AND ANSWERS
We encourage you to provide instructions to your brokerage firm by voting your
proxy. This ensures your shares will be voted at the meeting.
When a brokerage firm votes its customers' unvoted shares on routine matters,
these shares are counted for purposes of establishing a quorum to conduct
business at the meeting. A brokerage firm cannot vote customers' shares on non-
routine matters. Accordingly, these shares are considered not entitled to vote
on non-routine matters, rather than as a vote against the matter.
You may have granted to your stockbroker discretionary voting authority over
your account. In that case, your stockbroker may be able to vote your shares
depending on the terms of the agreement you have with your stockbroker.
If you are a participant in any of ARCO's dividend reinvestment plans or in
ARCO's defined contribution employee benefit plans, the trustee, under certain
circumstances, may vote your shares.
The trustee for each plan may vote shares you hold if the trustee does not
receive voting instructions from you. Your unvoted shares will be voted in the
same proportion as the shares voted by other participants in the applicable
plan.
However, if you hold shares formerly held in the ARCO PAYSOP and now held in
one of the employee savings plans of ARCO or Vastar, the trustee will not vote
those shares of common stock in the absence of your voting instructions unless
ARCO or Vastar, as applicable, instructs the trustee.
Q: Where do I find the voting results of the meeting?
A: We will announce preliminary voting results at the meeting. We will publish
the final results in our quarterly report on Form 10-Q for the first quarter of
1999. We will file that report with the Securities and Exchange Commission. You
can get a copy by contacting the Securities and Exchange Commission at (800)
SEC-0330 for the location of the nearest public reference room, or through the
EDGAR system at www.sec.gov or on our internet Web page at www.arco.com.
Q: How much did this proxy solicitation cost?
A: We have retained D. F. King & Co., Inc. to solicit proxies from shareholders
at an estimated fee of $20,000, plus expenses. (Note that this fee does not
include the costs of printing and mailing the proxy statements.) Some of the
officers and other employees of ARCO also may solicit proxies personally, by
telephone and by mail. ARCO will also reimburse brokerage houses and other
custodians for their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to the beneficial owners of common stock and Preference
Stocks.
Q: Whom can I call with any questions?
A: You may call First Chicago at 1-800-756-8200 or visit their website at
www.fctc.com.
5
<PAGE>
BOARD OF DIRECTORS
This section gives biographical information about our directors and describes
their membership on board committees, their attendance at meetings and their
compensation.
ELECTION OF DIRECTORS
Item 1 on Proxy Card
The number of directors constituting the whole Board is currently ten. The
Board of Directors has selected all ten of the members currently serving on the
Board as nominees for election at the 1999 Annual Meeting of Stockholders. All
of the nominees were recommended by the Corporate Governance Committee.
Frank D. Boren
Mike R. Bowlin
John Gavin
Kent Kresa
Arnold G. Langbo
David T. McLaughlin
John B. Slaughter
Gary L. Tooker
Henry Wendt
Gayle E. Wilson
Directors elected at the Annual Meeting will hold office for a one-year term.
Unless you withhold authority to vote for one or more of the nominees, the
persons named as proxies intend to vote for the election of the ten nominees.
All nominees have consented to serve as directors. The Board of Directors has
no reason to believe that any of the nominees will be unable to act as a
director. However, if any director is unable to stand for re-election, the
Board may either reduce the size of the Board or designate a substitute. If a
substitute nominee is named, the proxies will vote for the election of the
substitute.
The information includes the age of each nominee as of the date of the meeting.
6
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
FRANK D. BOREN, 64
Director of ARCO since 1990. President of Sustainable
[PHOTO APPEARS HERE] Conservation since 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, 56
Chairman of the Board and Chief Executive Officer of
ARCO
Director since 1992. Chairman of the Board since July
[PHOTO APPEARS HERE] 1995 and Chief Executive Officer since July 1994.
President (June 1993-January 1998), Executive Vice
President (June 1992-May 1993) and Senior Vice
President (July 1985-June 1992). Officer of ARCO
since 1984. Director of Wells Fargo and Company.
- --------------------------------------------------------------------------------
JOHN GAVIN, 68
Director of ARCO since 1989. Chairman of Gamma
Holdings (international capital and consulting) since
[PHOTO APPEARS HERE] January 1990 and Partner/Managing Director of Hicks,
Muse, Tate & Furst Latin America since 1995. Former
United States Ambassador to Mexico. Director of Apex
Mortgage Capital, International Wire Holdings,
Krause's Furniture, Inc., Pinkerton's, Inc., and
Hotchkis & Wiley Funds, a Merrill-Lynch Company.
- --------------------------------------------------------------------------------
KENT KRESA, 61
Director of ARCO since 1993. Chairman, President and
[PHOTO APPEARS HERE] Chief Executive Officer of Northrop Grumman
Corporation (aerospace) since 1990. President and
Chief Operating Officer of Northrop Corporation
(1987-1990). Director of Avery Dennison Corporation.
- --------------------------------------------------------------------------------
7
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
ARNOLD G. LANGBO, 62
Director of ARCO since 1998. Director of Kellogg
Company (cereal products) since 1990 and Chairman of
[PHOTO APPEARS HERE] the Board and Chief Executive Officer since 1992,
President and Chief Operating Officer (1990-1992).
Director of Johnson & Johnson and Whirlpool
Corporation.
- --------------------------------------------------------------------------------
DAVID T. McLAUGHLIN, 67
Director of ARCO since 1993. Chairman and Chief
Executive Officer of Orion Safety Products (formerly
Standard Fusee Corporation) since 1988, Retired
[PHOTO APPEARS HERE] President and Chief Executive Officer of The Aspen
Institute (1988-1997). President Emeritus
of Dartmouth College (1981-1987). Chairman of the
Board, CBS, Chairman of the Board, PartnerRe Ltd.,
Director of Atlas Air.
- --------------------------------------------------------------------------------
JOHN B. SLAUGHTER, 64
Director of ARCO since 1989. President of Occidental
College since 1988. Chancellor, University of
[PHOTO APPEARS HERE] Maryland (1982-1988). Director of Avery Dennison
Corporation, International Business Machines
Corporation, Northrop Grumman Corporation and
Solutia, Inc.
- --------------------------------------------------------------------------------
GARY L. TOOKER, 59
Director of ARCO since January 1998. Chairman of the
Board of Motorola, Inc. (manufacturer of electronics
[PHOTO APPEARS HERE] equipment) since 1997, Vice Chairman and Chief
Executive Officer (1993-1996) and President and Chief
Operating Officer (1990-1993). Director of Eaton
Corporation.
- --------------------------------------------------------------------------------
8
<PAGE>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
HENRY WENDT, 65
Director of ARCO since 1987. Chairman of Global
Health Care Partners of DLJ Merchant Banking
Partners, a Donaldson, Lufkin & Jenrette Company
[PHOTO APPEARS HERE] (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).
Director of Allergan, Inc. and West Marine Corp.
- --------------------------------------------------------------------------------
GAYLE E. WILSON, 56
Director of ARCO since January 1999. Trustee of the
California Institute of Technology since 1995,
Trustee of the Center for Excellence in Education
[PHOTO APPEARS HERE] since 1986 (Chairperson 1992-1994), Board member of
Children's Institute International since 1985,
Chairperson, Advisory Committee for California Court
Appointed Special Advocates since 1992, Board member
of the Center Theatre Group since 1998, and Board
member of Children's Hospital Los Angeles Foundation
since 1998.
- --------------------------------------------------------------------------------
Required Vote
Nominees will be elected who receive a vote equal to a plurality of the shares
of stock represented at the meeting. Your Board recommends a vote FOR the
nominees listed above. Votes withheld for directors will be counted for
purposes of determining the presence or absence of a quorum, but have no other
legal effect.
The Board of Directors recommends that you vote FOR the nominees listed above.
Proxies solicited by the Board of Directors will be so voted unless you specify
otherwise.
9
<PAGE>
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
COMMITTEES OF THE BOARD
- --------------------------------------------------------------------------------------
Name of Committee Number of Meetings
and Members Functions of Committee in 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Executive
Mike R. Bowlin (1) . can act for the full Board when Board 1
John Gavin is not in session
Kent Kresa
John B. Slaughter
Henry Wendt
- --------------------------------------------------------------------------------------
Organization and
Compensation
Frank D. Boren . determines compensation for named 5
John Gavin executive offices
Kent Kresa . sets annual and long-term
Arnold G. Langbo performance goals for named
David T. McLaughlin executive officers
John B. Slaughter . reviews and administers executive
Gary L. Tooker compensation and benefit plans (3)
Henry Wendt (1)
Gayle E. Wilson (2)
- --------------------------------------------------------------------------------------
Corporate Governance
John Gavin (1) . recommends candidates to fill Board 3
Kent Kresa vacancies and nominees for annual
Gary L. Tooker meeting
Henry Wendt . recommends policies concerning
committee size and membership,
director compensation, director
share ownership guidelines, and
retirement and resignation policies
. evaluates Board performance and
effectiveness
. reviews corporate governance issues
. considers nominations made by
shareholders
- --------------------------------------------------------------------------------------
Audit
Frank D. Boren . confers with independent 3
Arnold G. Langbo accountants and internal auditors
David T. McLaughlin (1) regarding scope of examinations
John B. Slaughter . reviews reports of independent
Gayle E. Wilson (2) accountants and internal auditors
. reviews recommendations about
internal controls
. recommends selection of independent
accountants to the Board
. oversees compliance with conflicts
of interest policy and with
federal, state and local laws and
regulations
- --------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
Name of Committee Number of Meetings
and Members Functions of Committee in 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Environment, Health and
Public Policy (4)
Frank D. Boren . reviews environmental, health and See note (4).
John Gavin (1) safety policies, procedures and
John B. Slaughter practices
Gayle E. Wilson (2) . monitors compliance with federal,
state and local environmental,
health and safety laws and
regulations
. reviews environmental, health and
safety goals and objectives
. reviews policies and strategies
involving political, governmental
and social issues
. reviews stockholder proposals
concerning social and political
issues
. reviews charitable and political
programs and contributions
. reviews employee diversity and
workplace issues and policies
. reviews policies and procedures to
promote business ethics
- --------------------------------------------------------------------------------
Finance (5)
Kent Kresa (1) . reviews financial structure and See note (5).
Arnold G. Langbo policies
David T. McLaughlin . reviews policies and programs for
Gary L. Tooker management of financial risk,
Henry Wendt including insurance
. reviews and makes recommendations
regarding financial implications of
proposed mergers and substantial
acquisitions and divestitures
- --------------------------------------------------------------------------------
</TABLE>
(1) Chairperson
(2) Mrs. Wilson was elected to the Board and began service on these committees
in 1999.
(3) The Compensation Subcommittee approves awards under the Executive Long-Term
Incentive Plan.
(4) Beginning in January 1999, the Environment, Health and Safety Committee and
the Public Policy Committee were consolidated to create the Environment,
Health and Public Policy Committee. The old Environment, Health and Safety
Committee met 3 times in 1998; the old Public Policy Committee met twice.
(5) The newly created Finance Committee met in January 1999. It reviewed, along
with the Company's financial management, the Company's financial structure
and policies.
Number of Board Meetings
The Board of Directors met eleven times during 1998. Each of ARCO's directors
attended 87% or more of all Board and relevant Committee meetings during 1998.
11
<PAGE>
BOARD OF DIRECTORS
BOARD COMPENSATION
Directors' Fees
Directors' fees, paid only to directors who are not ARCO employees, are as
follows:
<TABLE>
<S> <C>
Annual board retainer fee $52,000
Annual committee chair retainer fee $10,000
Fee for each board and committee meeting attended $ 1,000
</TABLE>
At least 65% of the annual retainer fee is paid in restricted stock as
described below.
Restricted Stock Plan for Outside Directors
Under the Company's Restricted Stock Plan for Outside Directors, each non-
employee director is required to receive at least 65% of the cash value of the
annual retainer fee in the form of restricted stock. A director may elect to
receive the entire value of the annual retainer and other fees in restricted
stock. In February of each year, the applicable number of shares of restricted
stock to be issued to each non-employee director is calculated and the shares
are deposited in an account maintained by First Chicago Trust Company.
When the Restricted Stock Plan was adopted as of January 1, 1997, the
retirement plan for outside directors was terminated, and each participant
received a grant of restricted stock during 1997 equal to the value of the
director's accrued retirement benefits. In addition, participants on March 31,
1997 were given the opportunity for a one-time conversion of their cash
deferral plan account balances into restricted stock.
All dividends are reinvested in shares of restricted stock. The restrictions
are lifted following the director's normal retirement from the Board of
Directors.
No member of the Board of Directors serves on the committee administering this
plan.
Stock Option Plan for Outside Directors
Under the Stock Option Plan for Outside Directors, each newly elected director
is granted ten-year options to purchase 5,000 shares of common stock at the
fair market value of the stock on the date of grant; the option vests 30 days
following the grant.
Prior to 1997, each director received a one-time grant of options to purchase
1,000 shares of common stock. These pre-1997 options (now options for 2,000
shares following the 1997 stock split) also carry with them the right to
receive dividend share credits. Dividend share credits are described on page
16.
No member of the Board of Directors serves on the committee administering this
plan.
Deferral Plan for Outside Directors
Under the Deferral Plan for Outside Directors, non-employee directors may defer
some or all of the cash portion of their compensation. In 1998, outside
directors with deferral accounts had accrued interest exceeding 120% of a
specified IRS rate as follows: Mr. Gavin: $7,862; Mr. Kresa: $303; Mr. Langbo:
$44; Mr. McLaughlin: $2,440; Dr. Slaughter: $85; Mr. Tooker: $231; and
Mr. Wendt: $227.
12
<PAGE>
STOCK OWNERSHIP
This section describes how much stock our directors and executive officers own.
It also describes the one institution that owns more than 5% of our voting
stock.
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
This table indicates the number of shares of common stock owned by the
executive officers and directors as of February 1, 1999. This number includes
options exercisable within 60 days of February 1, 1999 and dividend share
credits accrued with respect to options granted prior to 1997. The total number
of shares owned by all directors and executive officers is less than 1%. Unless
otherwise noted in a footnote, each individual has sole voting and investment
power for the shares indicated below. None of the executive officers or
directors owns any shares of the Preference Stocks.
The column on the far right shows the total number of shares owned by each
individual. In addition to the amounts listed in the first three columns, the
total includes:
. shares held directly
. shares held by the trustees under ARCO's employee savings plans
. shares held by the transfer agent in a dividend reinvestment account and
. shares held in family trusts.
<TABLE>
<CAPTION>
Amount and Nature of Shares Beneficially Owned as of February 1, 1999
- ---------------------------------------------------------------------------------------------------
Right to Acquire
---------------------------------------------
Aggregate
Dividend Share Restricted Number of Shares
Name Options Credits Stock Beneficially Owned
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank D. Boren 2,000 (1) 926 (1) 3,019 (3) 7,945
- -----------------------------------------------------------------------------------------
Mike R. Bowlin 561,875 (2) 115,590 (2) 19,014 (4) 701,788
- -----------------------------------------------------------------------------------------
John Gavin 2,000 (1) 926 (1) 3,711 (3) 8,637
- -----------------------------------------------------------------------------------------
Marie L. Knowles (5)(6) 122,181 (2) 17,345 (2) 7,409 (4) 148,015
- -----------------------------------------------------------------------------------------
Kent Kresa 2,000 (1) 569 (1) 6,484 (3) 11,053
- -----------------------------------------------------------------------------------------
Arnold G. Langbo 5,000 (1) 0 (1) 448 (3) 5,448
- -----------------------------------------------------------------------------------------
David T. McLaughlin 2,000 (1) 630 (1) 8,450 (3) 11,308
- -----------------------------------------------------------------------------------------
John B. Slaughter 2,000 (1) 926 (1) 3,165 (3) 6,091
- -----------------------------------------------------------------------------------------
J. Kenneth Thompson 89,632 (2) 12,812 (2) 4,096 (4) 107,651
- -----------------------------------------------------------------------------------------
Gary L. Tooker 5,000 (1) 0 (1) 471 (3) 6,471
- -----------------------------------------------------------------------------------------
Donald R. Voelte, Jr. 87,326 (2) 0 (2) 2,821 (4) 90,302
- -----------------------------------------------------------------------------------------
Henry Wendt 2,000 (1) 926 (1) 15,568 (3) 21,806
- -----------------------------------------------------------------------------------------
Michael E. Wiley (5) 37,324 (2) 0 (2) 4,879 (4) 43,948
- -----------------------------------------------------------------------------------------
Gayle E. Wilson 5,000 (1) 0 (1) 554 (3) 5,554
- -----------------------------------------------------------------------------------------
All Directors and
Executive Officers as
a Group 1,208,427 193,375 97,574 1,533,420 (7)
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Granted pursuant to the Stock Option Plan for Outside Directors. This plan
is described on page 12.
(2) The options and related dividend share credits were granted pursuant to the
Executive Long-Term Incentive Plan. The number of dividend share credits
accrued are related to options granted prior to 1997. See footnote (2)
beginning on page 15 for more details regarding dividend share credits.
13
<PAGE>
STOCK OWNERSHIP
(3) Granted pursuant to the Restricted Stock Plan for Outside Directors. This
plan is described on page 12.
(4) Restricted stock is granted to the executive officers and other key
employees pursuant to the Executive Long-Term Incentive Plan. The total
shown includes additional shares of restricted stock acquired through the
automatic reinvestment of dividends through the February 12, 1999 record
date. For more details regarding restricted stock, see footnote (3)
beginning on page 16.
(5) Three of ARCO's executive officers are directors of the company's 82%-owned
subsidiary, Vastar Resources, Inc. As of the date of this table, these
officers owned the number of shares of or options to purchase common stock
of Vastar shown below.
<TABLE>
<S> <C>
Mr. Dallas 605 shares
Mrs. Knowles 400 shares
Mr. Wiley 296,578 shares
</TABLE>
(6) Does not include 11,542 shares owned by her spouse, as to which shares she
disclaims beneficial ownership.
(7) Includes 6,312 shares owned jointly by spouses which are subject to shared
voting and investment power.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Executive officers and directors and "beneficial owners" of more than ten
percent of the common stock or either class of the Preference Stocks must file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission ("SEC") and the New York Stock Exchange
pursuant to Section 16(a).
We have reviewed the reports and written representations from the executive
officers and directors. Based on this review, the company believes that all
filing requirements were met during 1998.
VOTING STOCK OWNED BY "BENEFICIAL OWNER"
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 11, 1999:
<TABLE>
<CAPTION>
Number of Percent of
Title of Class Name and Address Shares Class
- --------------------------------------------------------------------------
<C> <S> <C> <C>
Common Stock Capital Research and Management 25,402,000(*) 7.9%
Company
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
* The number of shares is based on information contained in a report on
Form 13-G filed with the SEC by Capital Research and Management Company.
Capital Research and Management Company, an investment adviser registered
under Section 203 of the Investment Advisers Act of 1940, is the beneficial
owner of 25,402,000 shares or 7.9% 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. Capital Research does
not own any of the shares of ARCO for its own account. It has sole
dispositive power, but no voting power, either shared or sole, over the
shares.
14
<PAGE>
EXECUTIVE COMPENSATION
This section contains charts that show the amount of compensation earned by our
five most highly paid executive officers, as well as the amounts earned by two
retired officers, as required by SEC proxy rules. It also contains the
performance graph comparing our company's performance relative to its peer
group and the report of our compensation committee explaining the compensation
philosophy for our most highly paid officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
---------------------
Annual Compensation Awards Payouts
--------------------------------------- ------- ----------
Other Annual All Other
Compensation Options Restricted Compensation
Name & Position Year Salary Bonus ($) (#) Stock (#) ($)
($) ($) (1) (2) (3) (4)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mike R. Bowlin 1998 $ 980,000 $ 740,000 $167,131 131,986 3,036 $117,722
Chairman of the Board 1997 $1,017,693 $1,249,500 $121,584 122,098 12,144 $128,788
Chief Executive Officer 1996 $ 955,000 $ 960,000 $131,911 83,016 26,072(5) $122,236
- -----------------------------------------------------------------------------------------------------
Michael E. Wiley (6) 1998 $ 525,769 $ 332,500 $ 42,984 140,902 1,183 $ 59,553
President 1997 $ 497,692 $ 450,000 $ 18,879 85,698 4,732 $ 81,750
Chief Operating Officer 1996 $ 380,000 $ 290,000 $ 9,536 -- -- $ 62,027
- -----------------------------------------------------------------------------------------------------
Marie L. Knowles 1998 $ 500,000 $ 310,000 $ 47,437 46,571 1,183 $ 67,069
Executive Vice President 1997 $ 509,615 $ 475,000 $ 31,490 59,098 4,732 $ 73,279
Chief Financial Officer 1996 $ 385,962 $ 237,000 $ 18,511 65,550(7) 2,366 $ 63,761
- -----------------------------------------------------------------------------------------------------
J. Kenneth Thompson 1998 $ 449,231 $ 265,000 $185,166 82,961(8) 654 $ 59,391
Executive Vice 1997 $ 368,654 $ 350,000 $ 24,352 26,868 2,616 $ 60,898
President 1996 $ 351,106 $ 185,000 $ 14,051 17,924 1,308 $ 61,134
- -----------------------------------------------------------------------------------------------------
Donald R. Voelte, Jr. 1998 $ 414,173 $ 230,000 $ 37,027 75,690(9) 684 $ 44,409
Executive Vice 1997 $ 306,154 $ 270,000 $713,197 142,019 2,736 $ 27,601
President 1996 $ -- $ -- $ -- -- -- $ --
- -----------------------------------------------------------------------------------------------------
William E. Wade, Jr.
(10) 1998 $ 616,721 $ 280,000 $ 98,173 -- 1,773 $ 92,324
Retired President 1997 $ 584,010 $ 500,000 $ 53,761 66,497 7,092 $ 91,586
1996 $ 559,230 $ 399,000 $ 47,365 48,488 3,546 $ 92,652
- -----------------------------------------------------------------------------------------------------
Anthony G. Fernandes
(11) 1998 $ 540,000 $ 260,000 $ 68,506 -- 1,577 $ 85,312
Retired Executive 1997 $ 560,769 $ 500,000 $ 44,898 63,834 6,308 $ 92,767
Vice President 1996 $ 532,308 $ 365,000 $ 35,716 43,110 3,154 $ 90,622
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1) Other Annual Compensation. "Other Annual Compensation" includes the
following categories of income:
. income imputed under IRS rules that represents imputed interest on
relocation loans
. amounts of tax gross-ups for
. relocation expense
. financial counseling reimbursements
. certain other items reported under IRS rules as imputed income
. amount of interest accrued under Executive Deferral Plan that exceeds
120% of a specified IRS rate.
. special payments in lieu of salary increases and a 1997 sign-on bonus
to Mr. Voelte.
(2) Types of Option Grants. Two types of option grants are made under the
Executive Long-Term Incentive Plan:
. regular annual option grants made in February of each year for the
preceding fiscal year
. special grants upon promotions and other special circumstances.
15
<PAGE>
EXECUTIVE COMPENSATION
Special grants. Special grants were as follows:
<TABLE>
<S> <C> <C>
Mrs. Knowles
Chief Financial Officer and
Executive Vice President.................... 33,200 options July 1996
Mr. Thompson
Executive Vice President.................... 36,390 options January 1998
Mr. Voelte
Senior Vice President....................... 119,000 options April 1997
Executive Vice President.................... 41,150 options October 1998
Mr. Wiley
Executive Vice President.................... 26,600 options March 1997
President and Chief Operating Officer....... 82,300 options October 1998
</TABLE>
Number of Dividend Share Credits. The number of dividend share credits
accrued during each year with respect to options granted prior to 1997 are
shown below:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Mr. Bowlin 22,150 21,149 23,818
Mr. Wiley none none none
Mrs. Knowles 4,475 4,526 4,079
Mr. Thompson 2,974 3,198 1,832
Mr. Voelte none none none
Mr. Wade 10,462 10,659 13,394
Mr. Fernandes 9,230 9,043 10,020
</TABLE>
Computation of Dividend Share Credits. Dividend share credits are allocated
to an optionee's account whenever dividends are declared on common stock.
The number of credits is computed by
. multiplying the dividend rate per share times
(1) the number of eligible options plus
(2) the number of dividend share credits then accrued
. and dividing the resulting number by the fair market value of the
common stock on the dividend record date.
The value of the accrued dividend share credits is not fixed until the
eligible options are exercised, surrendered or canceled. The value, which is
received in shares of stock or cash, is equal to the number of accrued
credits allocated to the options being exercised multiplied by the fair
market value of the common stock on the date of exercise. Until the option
exercise date the optionee has no right to their value.
(3) Restricted Stock Awards. The Executive Long-Term Incentive Plan was amended
in 1997 to provide for grants of restricted stock. Participants may earn
restricted stock based on ARCO's total return to shareholders as measured
against that of a peer group. Provisions relating to grants of restricted
stock are described in more detail on page 21 as part of the Committee
Report on Executive Compensation. This table shows the original grants for
each of the years listed, before the re-investment of dividends.
1998 Grant Date Values. The value of the awards for 1998 (issued on February
22, 1999), based on the fair market value of $56.81 per share on the date of
issuance, for each named officer is shown below:
<TABLE>
<S> <C> <C> <C>
Mr. Bowlin $172,475 Mr. Voelte $ 38,858
Mr. Wiley $ 67,206 Mr. Wade $100,724
Mrs. Knowles $ 67,206 Mr. Fernandes $ 89,589
Mr. Thompson $ 37,154
</TABLE>
16
<PAGE>
EXECUTIVE COMPENSATION
Year-End Values for 1996 and 1997 Grants. The value of the shares of
restricted stock awarded for the years 1996 and 1997, based on the fair
market value of $65.375 per share on December 31, 1998, for each named
officer is shown below:
<TABLE>
<S> <C> <C> <C>
Mr. Bowlin $2,498,371 Mr. Voelte $178,866
Mr. Wiley $ 309,355 Mr. Wade $695,459
Mrs. Knowles $ 464,032 Mr. Fernandes $618,578
Mr. Thompson $ 256,532
</TABLE>
The year-end valuation of the restricted stock includes quarterly dividends
reinvested in restricted stock following the grant date.
None of these year end or grant date values gives effect to the diminution
in value attributable to the restrictions on such stock.
(4) All Other Compensation includes the amounts shown below:
<TABLE>
<CAPTION>
Mr. Mr. Mrs. Mr. Mr. Mr. Mr.
Year Bowlin Wiley Knowles Thompson Voelte Wade Fernandes
---- ------- ------- ------- -------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Executive 1998 $78,400 $42,061 $40,000 $ 35,938 $33,134 $49,338 $43,200
Supplementary 1997 $81,416 $39,815 $40,769 $ 29,492 $ 9,846 $46,721 $44,862
Savings Plan 1996 $76,400 $30,400 $30,877 $ 28,089 $ -- $44,738 $42,585
contributions
Incremental 1998 $ -- $ -- $ -- $ -- $ -- $ -- $ --
Executive Medical 1997* $ 5,309 $ 4,496 $ 5,309 $ 5,309 $ 2,654 $ 5,309 $ 5,309
Plan premiums* 1996 $ 9,907 $ 8,554 $ 9,907 $ 9,907 $ -- $ 9,907 $ 9,907
Financial 1998 $ 8,000 $ -- $ 8,000 $ 6,200 $ 4,650 $15,000 $12,000
Counseling 1997 $ 8,000 $12,400 $ 8,000 $ 6,200 $10,600 $ 8,000 $ 8,000
reimbursements 1996 $ 8,224 $ -- $ 8,000 $ 6,200 $ -- $ 8,000 $ 8,000
Executive Life 1998 $27,509 $10,455 $15,312 $ 10,919 $ 2,888 $24,172 $22,107
Insurance Plan** 1997 $29,488 $16,595 $14,692 $ 12,305 $ 1,885 $26,560 $24,990
1996 $23,130 $14,629 $10,660 $ 9,549 $ -- $20,404 $20,934
Long-Term Disability 1998 $ 3,813 $ 7,037 $ 3,757 $ 6,333 $ 3,737 $ 3,814 $ 8,005
Plan imputed 1997 $ 4,575 $ 8,444 $ 4,509 $ 7,592 $ 2,616 $ 4,996 $ 9,606
income 1996 $ 4,575 $ 8,444 $ 4,317 $ 7,390 $ -- $ 9,603 $ 9,196
</TABLE>
* Represents premium for period ended July 1, 1997, when this plan was
terminated.
** SEC rules require the reporting of value received in respect of executive
life insurance. These numbers have been calculated pursuant to SEC
rules.
(5) Of this number, 20,000 shares were issued in 1992 and vested in 1997.
Following the vesting date, Mr. Bowlin disposed of 18,650 shares; Mr.
Bowlin continues to own the remaining 1,350, which are included in the
aggregate shares owned column for Mr. Bowlin on the Stock Ownership chart
on page 13.
(6) Mr. Wiley's salary for the year 1996 and the first three months of 1997
was paid to him by Vastar where he held the position of Chief Executive
Officer and President. He now serves as Chairman of the Board of Vastar.
Mr. Wiley was elected Executive Vice President of ARCO on March 31, 1997,
and was elected President and Chief Operating Officer in October 1998.
(7) Mrs. Knowles was elected Executive Vice President in July 1996. She
previously was a Senior Vice President of ARCO.
(8) Mr. Thompson was elected Executive Vice President in January 1998. He was
previously a Senior Vice President of ARCO.
(9) Mr. Voelte was elected Executive Vice President in October 1998. He joined
ARCO as a Senior Vice President in April 1997.
17
<PAGE>
EXECUTIVE COMPENSATION
(10) Mr. Wade served as President of ARCO through September 28, 1998, and will
retire as an employee on March 31, 1999. In connection with his
retirement, Mr. Wade's retirement benefit will be enhanced pursuant to the
Global Cost Reduction Severance Program, thereby increasing the lump-sum
value of his retirement benefit by $2,704,574. Mr. Wade will also receive
a special payment of $429,264, which represents 1.5 weeks pay for every
year of service. In addition, Mr. Wade will become entitled to regular
retirement benefits for executives, which are payable, at the election of
the executive, in the form of annuities or a lump sum. Examples of the
regular retirement benefit are shown in the table captioned "Estimated
Retirement Benefits" on page 25.
(11) Mr. Fernandes served as Executive Vice President of ARCO through September
28, 1998, and will retire as an employee on June 30, 1999. In connection
with his retirement, Mr. Fernandes' retirement benefit will be enhanced
pursuant to the Global Cost Reduction Severance Program, thereby
increasing the lump-sum value of his retirement benefit by $2,911,200. Mr.
Fernandes will also receive a special payment of $373,846, which
represents 1.5 weeks pay for every year of service. In addition, Mr.
Fernandes will become entitled to regular retirement benefits for
executives, which are payable, at the election of the executive, in the
form of annuities or a lump sum. Examples of the regular retirement
benefit are shown in the table captioned "Estimated Retirement Benefits"
on page 25.
18
<PAGE>
EXECUTIVE COMPENSATION
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 22, 1999, the Compensation Subcommittee ("the Committee"), consisting
of those directors who have neither served as an employee nor officer of the
company, met to determine the company's 1999 executive compensation program.
Compensation Philosophy
ARCO's executive compensation philosophy is designed to attract, retain, and
motivate the best managerial talent available in line with three central
themes:
. 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 1998, 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
Committee evaluated ARCO's performance on both 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 believes that
management should maintain a balance between actions that foster long-term
value creation, as well as short-term performance. The Committee also
considered qualitative measures such as leadership, experience, strategic
direction, community representation and social responsibility.
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") composed of large, integrated
petroleum companies against which the company directly competes for executive
talent. The Comparison Group used for purposes of determining 1998 awards
consisted of Amoco, Chevron, Exxon, Mobil, Occidental, Phillips, Texaco and
Unocal. The Comparison Group is used as the reference standard for
establishing award levels under the company's Annual Incentive Plan ("AIP")
and Long-Term Incentive Plan ("LTIP"). Beginning January 1, 1999, because of
Amoco's merger with British Petroleum, the Comparison Group will be comprised
of Chevron, Conoco, Exxon, Mobil, Occidental, Phillips, Texaco and Unocal.
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 1998, the
Committee did not apply any specific quantitative formulae in arriving at its
compensation decisions on base salary awards and long-term incentive awards.
The Committee did apply specific quantitative formulae, as described below, in
arriving at its annual incentive award decisions for 1998 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.
19
<PAGE>
EXECUTIVE COMPENSATION
Components of Executive Compensation
Base Salary
For 1998, base salaries were 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. Base salaries are reviewed each year and
generally adjusted relative to individual performance and competitive salaries
within the Comparison Group. Given our current positioning versus our target,
there will not be a general add-to-base program for 1999. 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 Annual Incentive Plan (AIP), that are
intended to reward the executives for their contribution to the company's
short-term performance. Under the plan, AIP awards are determined by a
performance-based formula that includes the company's three-year average ROSE,
three-year average reserve replacement (adjusted by finding, development and
acquisition costs), and the annual percent change in adjusted net income. All
three performance measures are assessed on a relative basis versus performance
of the Comparison Group.
Target AIP award 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. Each performance measure is weighted equally and awards are based
on ARCO's rank on each measure versus the companies in the Comparison Group.
Actual awards can range from zero to three times the target award. The AIP was
amended in 1999 to eliminate the provision which automatically precluded the
Awards fund from exceeding 2% of the company's adjusted net income. Hereafter,
the Committee in its discretion, may reduce the funding pool available for
award payment for any reason it deems appropriate including the size of the
funding pool and its relationship to the company's adjusted net income.
The plan also includes business unit goals. For executives assigned to business
units, 60% of their potential AIP award is tied to business unit performance.
The business unit portion of the total AIP fund is redistributed among the
business units based on their relative performance, including accomplishment of
AIP goals and balance between near and long-term results.
After the adjusted bonus pool has been calculated according to the above
methodology, the Committee reviews the target award calculated for each named
executive officer and adjusts awards as appropriate in light of both company
and individual performance. AIP awards for all executives are adjusted for
individual performance.
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
LTIP has two components, the stock option plan and the performance-based
restricted stock plan. The Committee believes that the stock option and the
performance-based restricted stock plans align the interests of executives with
those of shareholders by encouraging management to focus on TSR and providing
them an opportunity to share more directly in the creation of company value.
20
<PAGE>
EXECUTIVE COMPENSATION
In determining grants under the company's LTIP, the Committee applies a target
investment value prescribed under the LTIP for each executive grade level based
on its evaluation of competitive long-term incentive compensation practices of
the Comparison Group. The actual grant size to an executive will be based on
individual performance. The target investment value granted is divided into
awards of stock options and contingent restricted stock under these two plans.
Under the performance-based restricted stock plan, participants may earn shares
of restricted stock based on ARCO's TSR relative to the companies in the
Comparison Group. Shares of contingent restricted stock are awarded at the
beginning of each performance measurement period. The number of contingent
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 restricted stock shares. The contingent shares are
converted into performance-based restricted stock shares at the end of a three-
year 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. Option grants are set based on the remaining
target investment value.
Compensation of Named Executive Officers
In evaluating the compensation for the Executive Officers, the Committee
recognized that ARCO performed at below average levels in 1998. Compared to
1997, earnings decreased by 66% caused primarily by lower crude prices. Lower
earnings, in turn, led to decreases in the company's ROSE and ROCE to 7.1% and
5.8%, respectively. Finally, the company's TSR performance was (15.3%).
Under the company's AIP for 1998, awards were determined based on the ranking
of the three performance measures relative to those of the Comparison Group.
ARCO's three-year average reserve replacement was 166% which ranked #1 relative
to the Comparison Group. Adjusting the reserve replacement for finding,
development and acquisition costs ("FD&A") reduced the relative payout for this
category by 25%. ARCO's three-year ROSE was 17% which ranked #3 relative to the
Comparison Group. ARCO's one-year income growth was (66%) which ranked
#7 relative to the Comparison Group. The resulting AIP award multiple was 1.17.
However, the total AIP award level exceeded 2% of the company's adjusted net
income. AIP awards were prorated so as not to exceed the 2% adjusted net income
cap. This reduction adjusted the 1.17 multiplier down to 0.89.
Based on the company's performance and compensation philosophy, the Committee
approved the following compensation for the Chairman and CEO, Mr. Bowlin, and
guidelines for the other Named Executive Officers ("NEOs") listed in the
Summary Compensation Table:
Mr. Bowlin
. For 1999, Mr. Bowlin did not receive a salary increase. Mr. Bowlin's
salary of $980,000 is positioned at the market of the Comparison Group's
CEOs' salaries.
. Pursuant to the company's AIP for performance year 1998, Mr. Bowlin was
awarded a bonus of $740,000, which was 0.89 times his target award of
$833,000. Compared to last year, Mr. Bowlin's AIP award decreased by 41%.
. The target for LTIP awards was the median of industry awards. In setting
LTIP awards at this level, Mr. Bowlin's total compensation was targeted
at below the industry median which the Committee believes is an
appropriate result given the company's performance. Under this approach,
Mr. Bowlin was awarded 131,986 stock options and 35,918 shares of
contingent restricted stock with a three-year performance measurement
period.
21
<PAGE>
EXECUTIVE COMPENSATION
. For the performance period January 1, 1997 through December 31, 1998, using
a 21 day average stock price at the beginning and end of the period as
dictated by the plan, ARCO's TSR of 2.1% placed the company sixth relative
to the Comparison Group. The resulting award multiple for the two-year
contingent restricted stock shares was 0.5. Mr. Bowlin's two-year contingent
restricted stock grant was converted to 3,036 shares of performance-based
restricted stock with a two-year vesting period.
Other Named Executive Officers
The Committee approved a base salary increase for Mr. Wiley given his
relatively low salary when compared to other COOs in the industry. No other
base salary increases were granted to Named Executive Officers. The Committee
also approved bonus awards pursuant to the formula prescribed by the AIP, and
LTIP awards targeted at the industry median that result in total compensation
below the Comparison Group median.
Deductible Compensation Limitation
Section 162(m) of the Internal Revenue Code limits the deductibility to the
company of cash compensation in excess of $1 million paid to the CEO and the
four highest compensated NEOs during any taxable year, unless such compensation
meets certain requirements. The company is allowed to fully deduct compensation
paid to executives under the long-term plans. At the January 25, 1999 meeting,
the Committee certified ARCO's performance relative to the Comparison Group for
the 1998 performance year.
Awards under the AIP are not intended to qualify as performance-based
compensation for purposes of Section 162(m) due to the Committee's ability to
apply upward or downward discretion based on a subjective evaluation of
performance. The company believes that better alignment of the interests of
executives with those of shareholders will be achieved by allowing the
Committee to determine awards within the guidelines of the AIP. Any reduction
in tax deductibility from award payments is not expected to be material to the
results of the company in any year.
The Compensation Subcommittee
<TABLE>
<C> <C> <S>
Henry Wendt, Chairman Arnold G. Langbo Gary L. Tooker
Frank D. Boren David T. McLaughlin Gayle E. Wilson
Kent Kresa John B. Slaughter
</TABLE>
February 22, 1999
22
<PAGE>
EXECUTIVE COMPENSATION
OPTION GRANTS FOR 1998
<TABLE>
<CAPTION>
Individual Grants(1)
---------------------------------------------
% of
Total Potential Realizable Value at
Options Assumed Annual Rates of Stock
Granted Price Appreciation for Option
Options to Exercise Term(2)
Granted Employees Price -------------------------------
Name (#) for 1998 ($/Sh) Expiration Date 5% 10%
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M. R. Bowlin 131,986 9.5% $56.81 February 22, 2009 $4,715,860 $11,950,012
- ------------------------------------------------------------------------------------------------------
M. E. Wiley (3) 58,602 4.2% $56.81 February 22, 2009 $2,093,849 $5,305,825
82,300 5.9% $69.03 October 1, 2008 $3,572,643 $9,054,646
- ------------------------------------------------------------------------------------------------------
M. L. Knowles 46,571 3.3% $56.81 February 22, 2009 $1,663,982 $4,216,538
- ------------------------------------------------------------------------------------------------------
J. K. Thompson (4) 46,571 3.3% $56.81 February 22, 2009 $1,663,982 $4,216,538
36,390 2.6% $74.44 January 26, 2008 $1,703,416 $4,317,310
- ------------------------------------------------------------------------------------------------------
D. R. Voelte, Jr. (5) 34,540 2.5% $56.81 February 22, 2009 $1,234,114 $3,127,252
41,150 3.0% $69.03 October 1, 2008 $1,786,322 $4,527,323
- ------------------------------------------------------------------------------------------------------
Appreciated Per Share Stock Price (6) $95.80 $152.54
- ------------------------------------------------------------------------------------------------------
Estimated Value to All Stockholders (6) $11,885,455,425 $30,116,889,349
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) General. Option grants were made pursuant to the Executive Long-Term
Incentive Plan. These options:
. are granted at an exercise price equal to 100% of the fair market value
on the date of grant,
. become exercisable over a three-year period
. may become exercisable immediately upon a change of control and
. expire in ten years.
Specific. The options having an exercise price of $56.81 were granted on
February 22, 1999 based on individual and company performance for 1998. They
vest in three equal portions on February 22, 2000, February 22, 2001 and
February 22, 2002.
(2) We are required by the SEC to use a 5% and a 10% assumed rate of
appreciation over the ten-year option term. This does not represent the
company's estimate or projection of future common stock performance. If the
company's common stock does not appreciate in value, the named executive
officers will not receive any benefit from the options.
(3) Mr. Wiley's grant of 82,300 options was made on October 1, 1998 upon his
election to the office of President and Chief Operating Officer. These
options will become exercisable as follows: 27,433 options on October 1,
1999; 27,433 options on October 1, 2000; and 27,434 options on October 1,
2001.
(4) Mr. Thompson's grant of 36,390 options was made on January 26, 1998 upon
his election to the office of Executive Vice President. On January 26,
1999, 12,130 options became exercisable; 12,130 will become exercisable on
January 26, 2000 and 12,130 will become exercisable on January 26, 2001.
(5) Mr. Voelte's grant of 41,150 options was made on October 1, 1998 upon his
election to the office of Executive Vice President. These options will
become exercisable as follows: 13,716 options on October 1, 1999; 13,717
options on October 1, 2000; and 13,717 options on October 1, 2001.
(6) Based on total number of common shares outstanding on December 31, 1998 of
321,315,367 and the 1998 weighted average grant price of $58.81.
23
<PAGE>
EXECUTIVE COMPENSATION
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
(AS OF DECEMBER 31, 1998)
<TABLE>
<CAPTION>
Total Number Value of in-the-Money
of Unexercised Options Unexercised Options at
Shares at Year-End(1) Year-End(2)(3)
Acquired Value ------------------------- -------------------------
on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Name (#)(4) ($) (#) (#) ($) ($)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M. R. Bowlin -0- $ -0- 493,357 177,719 $5,045,515 $97,337
- ------------------------------------------------------------------------------------------
M. E. Wiley -0- $ -0- 8,778 159,220 $ -0- $ -0-
- ------------------------------------------------------------------------------------------
M. L. Knowles 21,180 $246,259 91,680 80,772 $ 845,461 $37,930
- ------------------------------------------------------------------------------------------
J. K. Thompson 8,072 $ 47,170 62,663 75,267 $ 621,143 $21,016
- ------------------------------------------------------------------------------------------
D. R. Voelte, Jr. -0- $ -0- 39,270 143,899 $ -0- $ -0-
- ------------------------------------------------------------------------------------------
W. E. Wade, Jr. -0- $ -0- 233,753 117,174 $2,166,316 $56,852
- ------------------------------------------------------------------------------------------
A. G. Fernandes -0- $ -0- 205,902 92,718 $2,180,552 $50,547
- ------------------------------------------------------------------------------------------
</TABLE>
(1) Options awarded prior to 1997 carry with them the right to a potential
payment in respect of dividend share credits. See footnote (2) to the
Summary Compensation Table on pages 15-16.
(2) Closing price of ARCO common stock on December 31, 1998 was $65.375.
(3) For illustrative purposes only, set forth below are the hypothetical
aggregate values of both in-the-money exercisable options and unexercisable
options, including the value of the dividend share credits accrued through
December 31, 1998 in respect of options granted prior to 1997. These
calculations assume these options were exercised on December 31, 1998 at
the closing price of $65.375. All unexercisable in-the-money options were
granted in 1997 or later and therefore do not carry with them the right
to dividend share credits.
<TABLE>
<CAPTION>
Year-End In-the-Money
Option Values, Including
Dividend Share Credit Values
-----------------------------------------
Exercisable Options Unexercisable Options
------------------- ---------------------
<S> <C> <C>
Mr. Bowlin $12,153,035 $97,337
Mr. Wiley $ -0- $ -0-
Mrs. Knowles $ 1,895,179 $37,930
Mr. Thompson $ 1,405,016 $21,016
Mr. Voelte $ -0- $ -0-
Mr. Wade $ 5,675,367 $56,852
Mr. Fernandes $ 5,305,583 $50,547
</TABLE>
(4) Represents number of options exercised; underlying shares were sold for
"value realized."
24
<PAGE>
EXECUTIVE COMPENSATION
1985 EXECUTIVE LONG-TERM INCENTIVE PLAN
CONTINGENT AWARDS FOR 1998
Set forth below are the grants of shares of Contingent Restricted Stock made on
February 22, 1999.
<TABLE>
<CAPTION>
Performance Potential Future
Number of or Other Payouts
Shares of Period Number of Shares
Contingent Until ----------------------
Restricted Maturation Minimum Target Maximum
Name Stock or Payout (#) (#) (#)
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mike R. Bowlin 35,918 1999-2001 0 35,918 107,754
- ----------------------------------------------------------------------
Michael E. Wiley 15,948 1999-2001 0 15,948 47,844
- ----------------------------------------------------------------------
Marie L. Knowles 12,674 1999-2001 0 12,674 38,022
- ----------------------------------------------------------------------
J. Kenneth Thompson 12,674 1999-2001 0 12,674 38,022
- ----------------------------------------------------------------------
Donald R. Voelte, Jr. 9,400 1999-2001 0 9,400 28,200
- ----------------------------------------------------------------------
</TABLE>
ESTIMATED RETIREMENT BENEFITS
The following table shows estimated annual regular pension benefits payable to
officers and other key employees upon retirement on January 1, 1999 at age 65
under the provisions of ARCO's qualified pension plan as well as its non-
qualified supplementary retirement plan, based on remuneration and years of
service.
<TABLE>
<CAPTION>
Average final
earnings (average of
highest three
consecutive years of Approximate annual benefit for years of
base salary plus membership service indicated(1)(2)
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
1,750,000 403,000 537,000 672,000 806,000 940,000 1,067,000
1,500,000 345,000 460,000 576,000 691,000 806,000 914,000
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
750,000 172,000 229,000 287,000 344,000 401,000 456,000
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>
(1) The amounts shown are based upon a number of assumptions, including:
. Retirement date of January 1, 1999.
. Payment option: benefit for the life of employee, with a minimum
payment period of 60 months. If a lump sum or other payment option is
elected, the amount will change.
. Benefits are not subject to deduction for Social Security benefits or
other offsets.
25
<PAGE>
EXECUTIVE COMPENSATION
(2) Credited years of service at December 31, 1998:
<TABLE>
<S> <C>
Mr. Bowlin 30 years
Mr. Wiley 26 years 8 months
Mrs. Knowles 25 years
Mr. Thompson 25 years
Mr. Voelte 1 year 8 months
Mr. Wade 30 years 7 months
Mr. Fernandes 30 years 4 months
</TABLE>
CHANGE OF CONTROL ARRANGEMENTS
The Board of Directors has adopted certain arrangements that apply generally to
employees, including the named executive officers, which become operative only
upon a change of control of the company.*
In the event of a change of control, unvested stock options and restricted
stock will become immediately vested. Holders of dividend share credits will be
vested in respect of any prospective dividend share credits. In addition,
subject to certain other conditions, shares of stock representing a pro rata
portion of the contingent restricted stock awards will be issued.
If an eligible employee is terminated under specified conditions within two
years following a change of control, the employee will be entitled either to
severance benefits under severance plans existing at the time or to a benefit
ranging from 1/2 times to 3 times base salary plus cash bonus, if any,
depending on the employee's grade level. The named executive officers will
receive three times an amount equal to their current base salary plus the
highest of the last three years' bonus, and an amount equal to the pro rata
target bonus for the year in which the termination occurs. These officers will
also receive payment from the company for the amount of any excise tax
liability imposed pursuant to Internal Revenue Code Section 4999 with respect
to any benefits paid in connection with a change of control.
Employees will also receive 18 to 36 months of coverage under the company-
sponsored health, dental and life insurance plans. The named executive officers
will receive 36 months of coverage.
- ---------
* A "Change of Control" is defined as any one of four events: (1) any person or
group (other than the Company or its benefit plans) acquires 25% of the
Company's then outstanding voting securities (other than pursuant to an
acquisition from the Company of up to 40% that is approved by the Board of
Directors); (2) Incumbent Directors (directors as of July 28, 1997 and
directors recommended or approved by a majority of then Incumbent Directors)
no longer comprise a majority of the board; (3) shareholder approval of a
merger, reorganization or sale of substantially all the Company's assets,
provided that if such shareholders constitute over 60% of the shareholders of
the resulting entity and Incumbent Directors comprise a majority of the board
of directors of, and no person owns 25% or more of, the resulting entity,
then such event will not be deemed a Change of Control; and (4) shareholder
approval of a plan of complete liquidation of the Company. In the case of a
Change of Control, in order for benefits relating to Contingent Restricted
Stock to be paid as common stock and unaccrued DSCs to be credited, certain
additional events must have occurred: the percentage of stock acquired by
another person in clause (1) must be 40%; clause (2) is not applicable; and,
in the case of clause (3), consummation of such merger or other transaction
must have occurred.
26
<PAGE>
EXECUTIVE COMPENSATION
FIVE-YEAR PERFORMANCE GRAPH*
The graph below compares the cumulative total shareholder return ("TSR") 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 (1)
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period COMPARISON S&P DOMESTIC S&P
(Fiscal Year Covered) ARCO GROUP(2) OIL w/o ARCO(3) 500
- ------------------- ---------- --------- --------------- ----
<S> <C> <C> <C> <C>
Measurement Pt-12/31/93 $100.0 $100.0 $100.0 $100.0
FYE 12/31/94 $102.0 $106.1 $105.4 $101.3
FYE 12/31/95 $116.5 $139.0 $119.8 $139.3
FYE 12/31/96 $145.8 $171.9 $149.9 $171.3
FYE 12/31/97 $183.2 $208.4 $177.0 $228.4
FYE 12/31/98 $155.1 $245.9 $142.1 $293.7
</TABLE>
(1) Assumes the value of the investment in ARCO common stock and each index was
$100 on December 31, 1993 and that all dividends are reinvested.
(2) Comparison group includes Amoco, Occidental, Phillips, Unocal, Chevron,
Exxon, Mobil and Texaco, weighted for market capitalization as of the
beginning of each year of the five-year period. Beginning January 1, 1999,
because of the merger of Amoco into British Petroleum, Conoco will be
substituted for Amoco.
(3) 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.
- ---------
* 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.
27
<PAGE>
INDEPENDENT AUDITORS
PROPOSAL TO APPROVE THE APPOINTMENT OF PRICEWATERHOUSECOOPERS
Item 2 on Proxy Card
PricewaterhouseCoopers LLP (formerly known as Coopers & Lybrand), Certified
Public Accountants ("PWCoopers") have audited the financial statements of ARCO
and its consolidated subsidiaries for many years, and the Board has appointed
them for 1999. Since October 1993, PWCoopers has also acted as the independent
auditor for Vastar. From time to time PWCoopers 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. The Audit Committee and the Board believe that
PWCoopers' long-term knowledge of ARCO and its subsidiaries is valuable to the
company. Representatives of PWCoopers have direct access to members of the
Audit Committee and regularly attend their meetings.
Representatives of PWCoopers will attend the annual 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 Stocks 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 PricewaterhouseCoopers LLP. Proxies solicited by the Board of Directors will
be so voted unless you specify otherwise.
28
<PAGE>
STOCKHOLDERS' PROPOSAL
This section includes the single proposal submitted by stockholders for a vote
at the Annual Meeting.
Several stockholders have advised the company of their intent to present the
following proposal for a vote of the stockholders at the Annual Meeting.
The proposal is set forth below along with the company's reasons for
recommending a vote AGAINST the proposal. The Board of Directors and the
company accept no responsibility for the accuracy of either the proposal or the
proponents' supporting statement.
To be adopted, the proposal must be approved by the affirmative vote of the
majority of shares voting on the proposal present in person or represented by
proxy at the Annual Meeting.
ABANDONMENT OF ANWR DRILLING PLANS
Item 3 on Proxy Card
The Green Century Equity Fund, which indirectly has an interest in 48,200
shares of ARCO stock, the United States Trust Company of Boston, which holds
18,000 shares of ARCO stock, and Mercy Consolidated Asset Management Program,
which holds 1,100 shares of ARCO stock, have advised the company that they
intend to have a representative at the 1999 Annual Meeting to present the
following proposal:
WHEREAS: the Arctic National Wildlife Refuge (the "Refuge") is the only
conservation area in the nation that provides a complete range of Arctic
and sub-Arctic ecosystems balanced with a wide variety of wildlife
including large populations of caribou, muskoxen, brown, black and polar
bears, wolves, Dall sheep, snow geese and thousands of other migratory
birds;
Interior Secretary Bruce Babbitt has likened drilling for oil in the Refuge
to damming up the Grand Canyon; and
the Arctic Coastal Plain, 1002 Area--the biological heart of the Refuge--is
the only section of Alaska's entire North Slope not open for oil and gas
drilling;
RESOLVED, the Shareholders request that the Company unconditionally cancel
any future plans for oil drilling in the Coastal Plain, 1002 Area, of the
Arctic National Wildlife Refuge and immediately stop the expenditure of any
corporate funds targeted to achieve this objective.
Supporting Statement
"Ninety-five percent of Alaska's most promising oil-bearing lands are
already open for development, but it is imperative that we continue to
protect the wildlife, fish and wilderness that make up the rest of this
invaluable part of our American heritage."
--former President Jimmy Carter (1995)
The 125-mile long Coastal Plain is the only section of Alaska's 1,100-mile long
North Slope coastline not open for oil and gas drilling. Once part of the
largest intact wilderness area in the United States, the North Slope now hosts
one of the world's largest industrial complexes.
29
<PAGE>
STOCKHOLDERS' PROPOSAL
In fact, oil companies already have access to 95 percent of Alaska's North
Slope. More than 1,500 miles of roads and pipelines and thousands of acres of
industrial facilities sprawl over some 400 square miles of once pristine arctic
tundra. Oil operations on the North Slope annually emit roughly 43,000 tons of
oxides of nitrogen, which contribute to smog and acid rain.
The Coastal Plain is the biological heart of the Refuge, to which a vast herd
of caribou migrate each spring to give birth. The Department of Interior has
concluded that oil development in the Coastal Plain would result in major
adverse impacts on this caribou population. The Coastal Plain is also the most
important onshore denning area for the entire Beaufort Sea polar bear
population, and serves as crucial habitat for muskoxen and for more than 180
bird species that gather there for breeding, nesting and migratory activities.
Balanced against these priceless resources is the small potential for
economically recoverable oil in the Coastal Plain. In fact, the most recent
federal estimate predicted that only 2.6 billion barrels would be economically
recoverable in the Coastal Plain -- less than 6 months worth of use in the
United States.
Vote YES for this proposal which will improve our Company's reputation as a
leader in environmentally responsible energy recovery and help preserve a
unique and fragile ecosystem.
RECOMMENDATION OF DIRECTORS AGAINST THE PROPOSAL
The Board of Directors asks that you vote NO on this proposal.
Your Board of Directors supports responsible oil and gas exploration and
development on the Coastal Plain of the Arctic National Wildlife Refuge (ANWR).
ARCO has been operating on the Alaskan North Slope for more than thirty years.
Using new technologies designed to minimize disturbance to fish and wildlife,
we are confident that we could produce hydrocarbon resources from the Coastal
Plain of ANWR in a manner compatible with the long term maintenance of healthy
wildlife populations and habitats. Your Board believes that pursuit of the
area's potential petroleum reserves is in the national interest as well as that
of the company. Consequently, the Board recommends a vote AGAINST this
proposal.
At the present time, the President and Congress have made it clear that the
Coastal Plain is "off limits" to oil and gas exploration and development. If
the area were opened to petroleum activities, the petroleum industry's many
decades of exploration and production operations in the unique environment of
Arctic Alaska provide convincing evidence that these operations can be
compatible with the environment and wildlife in the area. Every year, tens of
thousands of waterfowl and thousands of caribou return to the North Slope to
raise their young. The Central Arctic Caribou herd, which uses the Prudhoe Bay
and Kuparuk oil fields as summer range, is six times larger than when field
development began. ARCO agrees with the conclusions of the "Section 1002 Final
EIS Report," issued in 1987 by the Secretary of the Interior after many years
of study, public hearings and comment. That report concluded that potential
impacts from exploration and drilling activities would be minor or negligible
on the wildlife resources in the 1002 Area of ANWR. Production activities, as
contemplated in the report, would be expected to affect less than 1 percent of
the 1002 Area surface acreage. And the Section 1002 Area occupies only about 8
percent of the total Arctic National Wildlife Refuge.
30
<PAGE>
STOCKHOLDERS' PROPOSAL
Moreover, there continue to be significant technology advances in Arctic
operations. All of ARCO's onshore exploration work is done during the winter.
Seismic crews use specially developed vehicles that do not damage the frozen
tundra. Ice roads and ice pads are constructed to support the drilling
operations. These melt in the spring, without damaging the tundra. Many wells
can now be drilled from a single gravel well pad, and elevated pipelines can
now be built without accompanying roads. In addition, many new developments in
the Arctic are being built as remote facilities without connecting access
roads. This technology allows field development that leaves only minimal
footprints.
Based on its technological abilities and experience, ARCO believes it could
conduct safe and environmentally sound exploration and development activities
anywhere in Alaska's Arctic, including within the ANWR, in a manner that would
be compatible with maintaining healthy wildlife populations. For these reasons,
if the U.S. Congress and the President were to authorize oil industry leasing
in the Coastal Plain, ARCO would participate in the lease sale. We believe such
participation is essential to meeting our obligations to the State of Alaska,
the nation, and to our shareholders.
Required Vote for Stockholder Proposal
The proposal will be approved if it receives the affirmative vote of a majority
of the shares of common stock and Preference Stocks of ARCO represented in
person or by proxy at the meeting, voting together as one class.
For the reasons stated above, the Board of Directors recommends a vote AGAINST
this stockholders' proposal. Proxies solicited by the Board of Directors will
be so voted unless you specify otherwise.
31
<PAGE>
OTHER INFORMATION
This section sets out other information you should know before you vote.
Stockholder Proposals and Nominations for 2000 Annual Meeting
Stockholder proposals for the 2000 Annual Meeting must be received by November
27, 1999, to be considered for inclusion in the Company's 2000 Proxy Statement.
Such proposals should be addressed to the Corporate Secretary. Under the
company's Certificate of Incorporation and By-laws, notice of any stockholder
nomination for director, or other proposal not to be considered for inclusion
in the company's proxy, 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 2, 2000, assuming the Annual Meeting for 2000 will be held May 1,
2000; 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 paper copy of this report
(without exhibits), without charge, by writing to the Investor Relations
Department, 333 South Hope Street, Los Angeles, CA 90071 (Telephone (213) 486-
3710).
Electronic copies of this Proxy Statement, the Annual Report to Shareholders
that accompany this Proxy Statement, and the Annual Report on Form 10-K are all
posted on ARCO's Home Page at www.arco.com.
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 26, 1999
32
<PAGE>
[LOGO OF ATLANTIC RICHFIELD COMPANY]
213-486-3511 www.arco.com NYSE Stock Symbol: ARC
[Recycle Logo] Printed on Recycled Paper
<PAGE>
[LOGO OF ATLANTIC RICHFIELD COMPANY]
P
R Atlantic Richfield Company
O
X Proxy Solicited on Behalf of the Board of Directors of
Y the Company for the Annual Meeting on May 3, 1999
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 ARCO Center, The Auditorium, 333 South Hope Street,
Los Angeles, California on Monday, May 3, 1999, and at any adjournments
thereof, on all matters coming before said meeting, including (1) the
election of ten directors, (2) the approval of the appointment of
PricewaterhouseCoopers LLP as independent auditors for the year 1999 and (3)
the consideration of the stockholders' proposal.
Nominees for election as director:
1. Frank D. Boren COMMENTS OR CHANGE OF ADDRESS
2. Mike R. Bowlin
3. John Gavin ___________________________________
4. Kent Kresa
5. Arnold G. Langbo ___________________________________
6. David T. McLaughlin
7. John B. Slaughter ___________________________________
8. Gary L. Tooker
9. Henry Wendt ___________________________________
10. Gayle E. Wilson (If you have written in the 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 SEE REVERSE
any boxes if you wish to vote in accordance with the Board SIDE
of Directors' recommendations. This Proxy cannot be voted -----------
unless you sign and return it.
- FOLD AND DETACH HERE -
STOCKHOLDERS OF RECORD and EMPLOYEE CARD - [WHITE]
<PAGE>
[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 proposal 2 and AGAINST proposal 3.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR
Election of Directors and FOR proposal 2.
- --------------------------------------------------------------------------------
1. Election of FOR WITHHELD
Directors [_] [_]
(see reverse)
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------
2. Approval of FOR AGAINST ABSTAIN
appointment of [_] [_] [_]
PricewaterhouseCoopers
LLP as independent
auditors.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 3.
- --------------------------------------------------------------------------------
3. Abandonment of ANWR Drilling Plans. FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
SPECIAL ACTION
- --------------------------------------------------------------------------------
Comments or change of address on reverse side. [_]
Receive future mailings via electronic mail. [_]
Will attend annual meeting. [_]
SIGNATURE(S) _______________________________________________ DATE ______________
NOTE: 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.
- Please carefully detach here and return this proxy in the enclosed
reply envelope -
[LOGO OF ATLANTIC RICHFIELD COMPANY]
Dear Stockholder:
The annual meeting of stockholders of Atlantic Richfield Company will
be held on May 3, 1999. We urge you to promptly complete, sign, date
and return the proxy card in the envelope provided OR take advantage
of new and convenient ways by which you can vote your shares either
by telephone or via the internet. This eliminates the need to return
the proxy card.
To vote your shares by telephone or via the internet, you must have
your proxy card and social security number available. The series of
numbers that appear on the top of your proxy card must be used to
access the system.
1. To vote by telephone: On a touch-tone telephone call 1-800-652-
8683 toll free from the US and Canada.
2. To vote via the internet: Access the World Wide Web site
http://www.vote-by-net.com.
Voting by telephone and via the internet is available 24 hours a day, 7 days a
week.
Your vote by telephone or via the internet authorizes the named proxies in the
same manner as if you completed, signed, dated and mailed the proxy card.
If you choose to vote your shares by telephone or via the internet, there is
no need for you to mail back your proxy card.
Your vote is important. Thank you for voting.
<PAGE>
[LOGO OF ATLANTIC RICHFIELD COMPANY]
P
R
O Atlantic Richfield Company -- Common Stock
X
Y Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting on May 3, 1999
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 ARCO Center, The Auditorium, 333 South Hope Street, Los Angeles,
California on Monday, May 3, 1999, and at any adjournments thereof, on all
matters coming before said meeting, including (1) the election of ten
directors, (2) the approval of the appointment of PricewaterhouseCoopers LLP
as independent auditors for the year 1999 and (3) the consideration of the
stockholders' proposal.
Nominees for election as director:
1. Frank D. Boren COMMENTS OR CHANGE OF ADDRESS
2. Mike R. Bowlin ----------------------------------
3. John Gavin ----------------------------------
4. Kent Kresa ----------------------------------
5. Arnold G. Langbo ----------------------------------
6. David T. McLaughlin (If you have written in the above
7. John B. Slaughter space, please mark the
8. Gary L. Tooker corresponding box on the reverse
9. Henry Wendt side of this card.)
10. Gayle E. Wilson
You are encouraged to specify your choices by marking the SEE
appropriate boxes, SEE REVERSE SIDE, but you need not mark REVERSE
any boxes if you wish to vote in accordance with the Board of SIDE
Directors' recommendations. This Proxy cannot be voted unless
you sign and return it.
Broker Card--Common Stock [white]
<PAGE>
[X] Please mark your
votes as in this
example.
<TABLE>
<S> <C>
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 proposal 2 and AGAINST proposal 3.
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Election of Directors and FOR proposal 2.
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Approval of [_] [_] [_]
Directors appointment of Pricewaterhouse-
(see reverse) Coopers LLP as
For, except vote withheld from the following nominee(s): independent auditors.
- -------------------------------------------------------
- ------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 3.
- ------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Abandonment of ANWR [_] [_] [_]
Drilling Plans.
- ------------------------------------------------------------------------
SPECIAL ACTION
- ------------------------------------------------------------------------
Comments or change of address on reverse side. [_]
Receive future mailings via electronic mail. [_]
Will attend annual meeting. [_]
- ----------------------------------------------------------------------
SIGNATURE(S) ______________________________________________________ DATE _____________
NOTE: 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.
</TABLE>
<PAGE>
[LOGO OF ATLANTIC RICHFIELD COMPANY]
P Atlantic Richfield Company
R $2.80 Cumulative Convertible Preference Stock
O
X Proxy Solicited on Behalf of the Board of Directors of
Y the Company for the Annual Meeting May 3, 1999
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 ARCO Center, The Auditorium, 333 South
Hope Street, Los Angeles, California on Monday, May 3, 1999, and at any
adjournments thereof, on all matters coming before said meeting,
including (1) the election of ten directors, (2) the approval of the
appointment of PricewaterhouseCoopers LLP as independent auditors for
the year 1999 and (3) the consideration of the stockholders' proposal.
Nominees for election as director:
1. Frank D. Boren COMMENTS OR CHANGE OF ADDRESS
2. Mike R. Bowlin ----------------------------------
3. John Gavin ----------------------------------
4. Kent Kresa ----------------------------------
5. Arnold G. Langbo ----------------------------------
6. David T. McLaughlin (If you have written in the above
7. John B. Slaughter space, please mark the
8. Gary L. Tooker corresponding box on the reverse
9. Henry Wendt side of this card.)
10. Gayle E. Wilson
You are encouraged to specify your choices by marking the SEE
appropriate boxes, SEE REVERSE SIDE, but you need not mark REVERSE
any boxes if you wish to vote in accordance with the Board of SIDE
Directors' recommendations. This Proxy cannot be voted unless
you sign and return it.
Broker Card--$2.80 Preference Stock [blue]
<PAGE>
[X] Please mark your
votes as in this
example.
<TABLE>
<S> <C>
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 proposal 2 and AGAINST proposal 3.
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Election of Directors and FOR proposal 2.
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Approval of [_] [_] [_]
Directors appointment of Pricewaterhouse-
(see reverse) Coopers LLP as
For, except vote withheld from the following nominee(s): independent auditors.
- -------------------------------------------------------
- ------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 3.
- ------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Abandonment of ANWR [_] [_] [_]
Drilling Plans.
- ------------------------------------------------------------------------
SPECIAL ACTION
- ------------------------------------------------------------------------
Comments or change of address on reverse side. [_]
Receive future mailings via electronic mail. [_]
Will attend annual meeting. [_]
- ----------------------------------------------------------------------
SIGNATURE(S) ______________________________________________________ DATE _____________
NOTE: 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.
</TABLE>
<PAGE>
[LOGO OF ATLANTIC RICHFIELD COMPANY]
P Atlantic Richfield Company
R $3.00 Cumulative Convertible Preference Stock
O
X Proxy Solicited on Behalf of the Board of Directors of
Y the Company for the Annual Meeting on May 3, 1999
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 ARCO Center, The Auditorium, 333 South
Hope Street, Los Angeles, California on Monday, May 3, 1999, and at any
adjournments thereof, on all matters coming before said meeting,
including (1) the election of ten directors, (2) the approval of the
appointment of PricewaterhouseCoopers LLP as independent auditors for
the year 1999 and (3) the consideration of the stockholders' proposal.
Nominees for election as director:
1. Frank D. Boren COMMENTS OR CHANGE OF ADDRESS
2. Mike R. Bowlin ----------------------------------
3. John Gavin ----------------------------------
4. Kent Kresa ----------------------------------
5. Arnold G. Langbo ----------------------------------
6. David T. McLaughlin (If you have written in the above
7. John B. Slaughter space, please mark the
8. Gary L. Tooker corresponding box on the reverse
9. Henry Wendt side of this card.)
10. Gayle E. Wilson
You are encouraged to specify your choices by marking the SEE
appropriate boxes, SEE REVERSE SIDE, but you need not mark REVERSE
any boxes if you wish to vote in accordance with the Board of SIDE
Directors' recommendations. This Proxy cannot be voted unless
you sign and return it.
Broker Card--$3.00 Preference Stock [yellow]
<PAGE>
[X] Please mark your
votes as in this
example.
<TABLE>
<S> <C>
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 proposal 2 and AGAINST proposal 3.
- ------------------------------------------------------------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Election of Directors and FOR proposal 2.
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [_] [_] 2. Approval of [_] [_] [_]
Directors appointment of Pricewaterhouse-
(see reverse) Coopers LLP as
For, except vote withheld from the following nominee(s): independent auditors.
- -------------------------------------------------------
- ------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST proposal 3.
- ------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Abandonment of ANWR [_] [_] [_]
Drilling Plans.
- ------------------------------------------------------------------------
SPECIAL ACTION
- ------------------------------------------------------------------------
Comments or change of address on reverse side. [_]
Receive future mailings via electronic mail. [_]
Will attend annual meeting. [_]
- ----------------------------------------------------------------------
SIGNATURE(S) ______________________________________________________ DATE _____________
NOTE: 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.
</TABLE>
