-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WaN2s5DZYjog002srizw9a2WF2SlETubc+oG+zTLg9Q11D6jIKvYrgUWmCVwslRO IFtSsrtTMpeB9C/ksjYKtw== 0000320678-98-000008.txt : 19980428 0000320678-98-000008.hdr.sgml : 19980428 ACCESSION NUMBER: 0000320678-98-000008 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980529 FILED AS OF DATE: 19980427 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARCH PETROLEUM INC /NEW/ CENTRAL INDEX KEY: 0000320678 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 830248900 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-09976 FILM NUMBER: 98601634 BUSINESS ADDRESS: STREET 1: 777 TAYLOR ST STE II-A CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173329209 MAIL ADDRESS: STREET 1: 777 TAYLOR STREET SUITE II-A STREET 2: 777 TAYLOR STREET SUITE II-A CITY: FT WORTH STATE: TX ZIP: 76102 DEF 14A 1 May 4, 1998 To Our Shareholders: You are cordially invited to attend the Annual Meeting of Shareholders of Arch Petroleum Inc. The meeting will be held on the 11th Floor of the Fort Worth Club Building, 777 Taylor Street, Fort Worth, Texas at 4:00 p.m. on May 29, 1998. The Notice of Meeting and Proxy Statement on the following pages cover the formal requirements for the business of the meeting. Whether or not you find it possible to attend the meeting personally, we hope you will have your stock represented by signing your proxy exactly as your name appears thereon and returning it promptly. We will have a social period after the meeting, beginning at 4:30 p.m. to provide an opportunity for shareholders to talk informally with our Officers and Directors. Sincerely yours, Larry Kalas Chief Executive Officer ARCH PETROLEUM INC. 777 Taylor Street, Suite II-A Fort Worth, Texas 76102 NOTICE OF ANNUAL MEETING THURSDAY, MAY 29, 1998 4:00 P.M. TO THE SHAREHOLDERS OF ARCH PETROLEUM INC.: Notice is hereby given that the annual meeting of the shareholders of Arch Petroleum Inc., a Delaware corporation, will be held at 4:00 p.m., Friday, May 29, 1998, on the 11th floor of the Fort Worth Club Building, 777 Taylor Street, Fort Worth, Texas, for the following purposes: 1. To elect a board of six (6) directors to serve until the next Annual Meeting of Shareholders when their respective successors shall be elected and qualified. 2. To transact such other business as may properly be brought before the meeting or any adjournments or postponements thereof. Only shareholders of record at the close of business on April 17, 1998, are entitled to notice of and to vote at the meeting or any adjournments or postponements thereof. Shareholders are invited to attend the meeting. Whether or not you expect to attend, WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the meeting, you may vote your shares in person, after revoking your proxy. If your shares are held of record by a broker, bank or other nominee and you wish to attend the meeting, you should obtain a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares and bring it to the meeting. In order to vote your shares at the meeting, you must obtain from the record holder a proxy issued in your name. Regardless of how many shares you own, your vote is very important. Please SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY. BY ORDER OF THE BOARD OF DIRECTORS Randall W. Scroggins Secretary Fort Worth, Texas May 4, 1998 TABLE OF CONTENTS SOLICITATION OF PROXIES ..................................... 1 THE MEETING ................................................. 1 ELECTION OF DIRECTORS ....................................... 2 OUTSTANDING VOTING SECURITIES OF THE COMPANY AND CERTAIN SHAREHOLDERS........................................... 4 COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS ............ 6 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .............. 11 INCORPORATION OF FINANCIAL INFORMATION BY REFERENCE ......... 11 OTHER MATTERS ............................................... 12
ARCH PETROLEUM INC. 777 Taylor Street, Penthouse Suite II-A Fort Worth, Texas 76102 ---------------- PROXY STATEMENT ---------------- ANNUAL MEETING OF SHAREHOLDERS May 29, 1998 SOLICITATION OF PROXIES This Proxy Statement is furnished by Arch Petroleum Inc., a Delaware corporation (the "Company"), to the holders of outstanding shares of the Common Stock, par value $0.01 per share, of the Company (the "Common Stock") in connection with the solicitation of proxies by the Company for use at the annual meeting of shareholders (the "Meeting") to be held on May 29, 1998, and at any and all adjournments or postponements thereof. This Proxy Statement and the enclosed proxy card are first being mailed to shareholders on or about May 4, 1998. THE MEETING Record Date, Quorum and Voting The Board of Directors (the "Board") has established the close of business on April 17, 1998 as the record date (the "Record Date") for determining shareholders entitled to notice of and to vote at the Meeting or any adjournments or postponements thereof. At the close of business on such record date, there were an aggregate of 17,321,804 shares of Common Stock and shares of Convertible Preferred Stock representing an aggregate of 7,272,730 shares of Common Stock (on an as converted basis) and shares of Convertible Subordinated Notes representing an aggregate of 1,818,179 shares of Common Stock (on an as converted basis) issued and outstanding. Each holder of Common Stock will be entitled to one vote for each share of Common stock held by him at the close of business on such Record Date and each holder of Convertible Preferred Stock and Convertible Subordinated Notes will be entitled to one vote for each share of Common Stock into which such holder's Convertible Preferred Stock and Convertible Subordinated Notes may be converted at the close of business on such Record Date. The holders of issued and outstanding shares having a majority of the votes entitled to be cast at the Meeting must be represented in person or by proxy in order to constitute a quorum. Shares represented by the enclosed proxy card will be voted in accordance with the directions indicated thereon, or, if no direction is indicated, in accordance with the recommendations of the Board contained in this Proxy Statement as to all shares represented by that proxy card. Any shareholder executing and delivering the enclosed proxy card may revoke such action prior to the Meeting by duly executing a later-dated proxy or an instrument expressly revoking the proxy, or by declaring its revocation at the Meeting. The persons named as proxies in the proxy card were selected by the Board and are currently directors of the Company. Management knows of no matters to be presented for action at the Meeting other than those specified in this Proxy Statement and the accompanying Notice of Annual Meeting. Should any other matter properly come before the Meeting, proxies will be voted upon these other matters in accordance with the best judgement of the persons voting such proxies. The Company will bear all costs related to the solicitation of proxies pursuant to this statement. ELECTION OF DIRECTORS Directors of the Company may be elected by vote of the holders of a majority of the outstanding Common Stock who are represented at the meeting in person or by proxy, as long as a quorum is present. A shareholder's abstention from voting or a non-vote by such shareholder's broker will therefore be counted in determining whether such a majority vote was cast only if such shareholder is so represented (either in person or by proxy) at the Meeting. Abstentions or broker non-votes by or on behalf of shareholders not so represented will be disregarded. Each director nominee so elected will hold office until such nominee's successor has been elected and qualified. The proxies given to the persons named in the enclosed proxy card will be voted for the election of the nominees listed below. In case of the inability of any of the nominees to serve, such proxies will be voted for the balance of those named and for substitute nominees, but the Board now knows of no reason to anticipate that any substitutions will occur. Directors elected at the Meeting cannot be removed prior to the next annual meeting except by a majority vote of the shareholders at any meeting at which a quorum of shareholders is present. The Board of Directors unanimously recommends a vote FOR the nominees listed below. The Board of Directors has the responsibility for establishing broad corporate policies and for the overall performance of the Company, although it is not involved in day-to-day operations. During 1997, the Board increased the authorized number of Directors on the Board from six to seven and appointed Mr. Dale R. Haley of BJ Services Company, U.S.A. to the Board, (see below). The Board of Directors has an Audit Committee including two non-employee directors, Messrs. Harris, Hill, and Mr. Kalas. This committee will be responsible for matters relating to accounting policies and practices, financial reporting and internal controls. Each year it will recommend to the Board the appointment of a firm of independent accountants to audit the financial statements of the Company. The Committee will review with representatives of the independent accountants the scope of the audit of the Company's financial statements, results of that audit and any recommendations with respect to internal controls and financial matters. In fulfilling its responsibility, it will periodically meet with and receive reports from the Company's management. The Company has no standing nominating committee of the Board or committees serving similar functions. All members of the Board of Directors attended the sole meeting of the Board in 1997 with one exception. Consistent with internal policies of Travelers Investment Group, John F. Gilsenan will not stand for re-election to the Board of Directors of the Company in 1998. Mr. Gilsenan has served the Company well since October 1994 and the Company acknowledges his contribution. The names of the Board's director nominees, the year that each nominee first became a Director and certain other information about each nominee are set forth below: First Name, Age and Principal Occupation Elected Business Address During the Last Five Years Director Johnny Vinson (66) Chairman of the Board of July 1986 Arch Petroleum Inc. the Company; served as 777 Taylor Street, President of the Company Suite II from November 1987 to June Fort Worth, TX 1988; Chairman of the 76102 Board of Threshold Development Company ("TDC") since 1975. TDC is an oil and gas exploration company which owned 13.9% of Arch's common stock at Record Date. Larry Kalas (48) Director, President and June 1988 Arch Petroleum Inc. Chief Executive Officer of 777 Taylor Street, the Company; served as Suite II Vice President- Fort Worth, TX Administration of the 76102 Company from July 1986 to June 1988 when he was named President and CEO. Randall W. Director, Executive Vice July 1986 Scroggins (47) President and Secretary of Arch Petroleum Inc. the Company; served as 777 Taylor Street, Vice President since April Suite II 1990 and Secretary since Fort Worth, TX July 1986; Director of TDC 76102 since 1975; He is the son- in-law of Johnny Vinson. Richard O. Retired banker and oil and June 1992 Harris (69) gas entrepreneur; Until 807 Indiana 1990, Senior Vice-President Wichita Falls, TX of First National Bank of 76301 Amarillo, Texas. C. Randall Hill (39) Attorney and oil and gas December Vista Resources Inc. entrepreneur; Chairman of 1992 550 W. Texas, Suite the Board and Chief 700 Executive Officer of Vista Midland, TX 79701 Resources, Inc. (an oil and gas exploration and production company); prior to October 1992, practiced law with the firm of Weil, Gotshal & Manges in Dallas, Texas. Dale R. Haley (61) Senior Vice-President, December BJ Services Industry Relations of BJ 1997 Company, U.S.A. Services Company, U.S.A.; 309 W. 7th Street, prior to 1995, same Suite 1520 position for the Western Fort Worth, TX Company. 76102
Compliance With Section 16 (a) Of the Securities Exchange Act Section 16 (a) of the Securities Exchange Act requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission ("SEC") and the National Association of Securities Dealers, Inc. ("NASD"). Officers, directors and greater than ten percent shareowners are required by SEC regulation to furnish the Company with copies of all Forms 3, 4 and 5 they file. Based solely on the Company's review of the copies of such forms it has received and written representations from certain reporting persons that they were not required to file Form 5 for specified fiscal years, the Company believes that all its officers, directors, and greater than ten percent beneficial owners complied with all filing requirements applicable to them with respect to transactions during fiscal 1997. OUTSTANDING VOTING SECURITIES OF THE COMPANY AND CERTAIN SHAREHOLDERS The following table provides information as to the beneficial ownership of the Company's Common Stock as of the Record Date by each director, named executive officer, all directors and executive officers as a group, and each other person who is known to the Company to beneficially owns 5% or more of the outstanding Common Stock as of the Record Date. The percent of class figures are calculated on the basis of the amount of outstanding securities plus securities deemed outstanding pursuant to Rule 13D-3(d)(1) under the Exchange Act (Item 403, Regulation S-K). These rules provide that each person listed in this table be shown at their maximum voting power as if that person had exercised and converted all their possible securities and no other person listed in this table had maximized their position. Title Name and Address Amount and Nature Percent of Class of Beneficial Owner of Beneficial of Class Ownership (1) Directors and Executive Officers Common Stock Johnny Vinson (2) .......... 3,061,464 17.67% Common Stock Larry Kalas ................ 556,786 3.21% Common Stock Randall W. Scroggins (2) ... 2,730,914 15.77% Common Stock Fred Cantu (3) ............. 130,000 * Common Stock Troy Welch (5) ............. 25,500 * Common Stock Richard O. Harris (4) ...... 34,000 * Common Stock C. Randall Hill (5) ........ 20,000 * Common Stock Dale R. Haley ............. 7,900 * Common Stock All Directors and Officers of the Company as a Group (8 persons) (2)(3)(4)(5) ... 4,165,650 23.92%
Title Name and Address Amount and Nature of Percent of Class of Beneficial Owner Beneficial Ownership (1) of Class Holders of More Than 5% of any Class of Voting Securities: Common Threshold Development 2,400,914 13.86% Stock Company 777 Taylor Street Penthouse Suite II-D Fort Worth, Texas 76102 Common Amon G. Carter Foundation 900,000 5.20% Stock 500 West 7th Street, Suite 1212 Fort Worth, Texas 76102 Attention: Pat Harris Common The Travelers Indemnity Stock Company (6),(8) 5,454,547 23.95% One Tower Square, #9 Plaza Hartford, Connecticut 06183-2030 Attention: Allen Cantrell Common CIGNA Investments, Stock Inc. (7),(8) 3,636,362 17.35% 900 Cottage Grove Rd. Hartford, Connecticut 06152-2307 Attention: Tom Shea Convertible The Travelers Indemnity Preferred Company 436,364 60.00% Stock One Tower Square, #9 Plaza Hartford, Connecticut 06183-2030 Attention: Allen Cantrell Convertible CIGNA Investments, Inc. (9) 290,909 40.00% Preferred 900 Cottage Grove Rd. Stock Hartford, Connecticut 06152-2307 Attention: Tom Shea
* Represents less than 1% of the outstanding shares of Common Stock. (1) Unless and to the extent otherwise indicated below, the figures presented in this column represent shares of stock owned directly of record by the indicated holders. (2) Includes 2,400,914 shares of Common Stock owned directly of record by Threshold Development Company ("TDC"). Messrs. Vinson and Scroggins, by virtue of their ownership of shares of TDC and their positions as officers or directors of TDC, share the power to vote or direct the voting and to dispose of or direct the disposition of such shares of Common Stock held of record by TDC, and are therefore deemed to beneficially own those shares. (3) Includes options exercisable for an aggregate of 40,000 shares of Common Stock. (4) Includes options exercisable for an aggregate of 16,690 shares of Common Stock. (5) Includes options exercisable for an aggregate of 20,000 shares of Common Stock. (6) Includes 4,363,640 shares of Common Stock issuable upon conversion of Convertible Preferred Stock held of record by the Travelers Indemnity Company ("Travelers"), 109,090 shares of Common Stock issuable upon conversion of 9.75% Series A Convertible Subordinated Notes due 2004 ("Series A Notes") issued to The Travelers Life and Annuity Company ("TLAC") and 981,817 shares of Common Stock issuable upon conversion of Adjustable Rate Series B Notes due 2004 ("Series B Notes") issued to TLAC. (7) Includes 1,034,545 shares of Common Stock issuable upon conversion of Convertible Preferred Stock held of record by Connecticut General Life Insurance Company ("CGLIC"), 25,855 shares of Common Stock issuable upon conversion of Series A Notes issued to CGLIC, 232,690 shares of Common Stock issuable upon conversion of Series B Notes issued to CGLIC, 1,874,545 shares of Common Stock issuable upon conversion of Convertible Preferred Stock issued to CIGNA Mezzanine Partners III, L.P. ("Mezzanine"), 46,873 shares of Common Stock issuable upon conversion of Series A Notes issued to Mezzanine and 421,854 shares of Common Stock issuable upon conversion of Series B Notes issued to Mezzanine. (8) The beneficial shares of Travelers, TLAC, CGLIC and Mezzanine arose from a combined private placement transaction on October 20, 1994. As a group, the maximum voting power of the collective entities is 34.4%. (9) Includes 103,454.5 shares of Convertible Preferred Stock held of record by CGLIC and 187,454.5 shares of Convertible Preferred Stock held of record by Mezzanine. COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS Table of Summary Compensation The following table sets forth certain information regarding compensation paid during each of the last three years to the Company's Chief Executive Officer and each of the Company's other executive officers, based on salary and bonus (in excess of $100,000) earned during 1997. Annual Compensation Name and Principal Year Salary Bonus Position Johnny Vinson (1) 1997 $175,000 $100,000 Chairman of the Board 1996 175,000 50,000 1995 175,000 50,000 Larry Kalas (2) 1997 150,000 75,000 President & Chief 1996 150,000 50,000 Executive Officer 1995 150,000 25,000 Annual Compensation Name and Principal Year Salary Bonus Position Randall W. Scroggins (3) 1997 $125,000 $40,000 Vice President & 1996 125,000 30,000 Secretary 1995 125,000 20,000 Fred Cantu (4) 1997 75,000 35,000 Treasurer & Chief 1996 75,000 25,000 Financial Officer 1995 75,000 10,000 Troy Welch 1997 95,000 35,000 Vice President 1996 95,000 25,000 1995 74,900 -0-
(1) Johnny Vinson entered into an employment contract with the Company on July 19, 1996, amended on January 27, 1997, that contains terms to provide him with certain severance pay upon termination. The value of this severance package as of February 28, 1998 would be $350,000. (2) Larry Kalas entered into an employment contract with the Company on July 19, 1996, amended on January 27, 1997, that contains terms to provide him with certain severance pay upon termination. The value of this severance package as of February 28, 1998 would be $300,000. (3) Randall W. Scroggins entered into an employment contract with the Company on July 19, 1996, amended on January 27, 1997, that contains terms to provide him with certain severance pay upon termination. The value of this severance package as of February 28, 1998 would be $250,000. (4) Fred Cantu entered into an employment contract with the Company on May 19, 1997 that contains terms to provide him with certain severance pay upon termination. The value of this severance package as of February 28, 1998 would be $75,000. Option Grants and Option Exercises During 1997 There were no stock options granted to nor any stock options exercised by any of the executive officers in 1997. Compensation of Directors Directors are paid $600 each per directors' meeting attended and $600 per committee meeting attended as members of the Audit Committee. Report of the Compensation Committee of the Board of Directors on Executive Compensation The Compensation Committee of the Board of Directors comprises all its directors and has furnished the following report on executive compensation: Under the supervision of the Compensation Committee of the Board of Directors, the Company has developed and implemented compensation policies and plans, which are intended to enhance the profitability of the Company, and thus shareholder value, by aligning closely the financial interests of its officers and key executives with those of its shareholders. To implement these goals, annual salaries are based primarily upon a review of past and present corporate and individual performance, with reference to salary data in similar-sized corporations so that such salaries are generally competitive. The Company also relies to a significant degree on annual discretionary incentive compensation and the award of non-qualified stock options to attract and retain Company officers and other key employees of outstanding abilities and to motivate them to perform to the full extent of their abilities. Both types of incentive compensation are variable and depend upon corporate and individual performance so as to encourage a sharp and continuing focus on building profitability and shareholder value. No specific weighing, however, is given to Company or individual performance. The Committee has complete discretion in determining all compensation amounts (including whether any annual discretionary incentive payments or stock option awards are made and, if so, the amounts thereof) regardless of whether corporate or individual performance goals are achieved. The Committee exercised its complete discretion in setting total compensation for 1997. In evaluating corporation performance for purposes of setting the salary and incentive compensation of the Chief Executive Officer and the Company's other officers, the Committee has given first consideration to a successful corporate-wide performance in terms of sales and earnings, and secondarily has taken particular note of management's success in securing additional market share during a period of prolonged depression in the oil and gas industry. The Committee, as a matter of policy generally, and with respect to 1997 in particular, viewed all the foregoing items as elements of corporate, and not individual performance. Individual salary and other compensation decisions for all officers are based primarily on overall Company performance. The Committee has also taken into account, in its review of management performance and compensation, management's consistent commitment to the long-term success of the Company through the development of new oil and gas properties and natural gas pipelines while monitoring improvement in the Company's financial condition. In addition, in evaluating such commitment, the Committee has also noted the continued level of shareholdings of the Company's officers. Although, as stated above, the Committee considered corporate performance as the primary factor in its compensation decisions, the Committee also considered individual performance. The Committee, however, does not quantify individual performance nor relate individual performance to any specific goals or targets. The Committee has complete discretion in its evaluation of individual performance. Based on its evaluation of individual performance, the Committee believes that the Company's officers are dedicated to achieving significant improvements in long-term financial performance and that the compensation policies, plans and methods the Company has implemented and administered have contributed and will continue to contribute to achieving this management focus. The Committee considered such dedication as an element of each officer's past and present performance. The Committee believes that dedication is an intangible element and cannot be measured; therefore, the Committee does not apply any specific weighing to its views about the dedication of each officer. The Committee considers total compensation, base salary, annual incentive, and stock option grant, in establishing each element of compensation. The Committee does not use any predetermined formula or assign any specific weight to the various factors considered in awarding bonuses. Immediately prior to the end of each year, the Committee considers the desirability of granting to the Chief Executive Officer and the Company's other officers, as well as other key executives, awards under the Company's stock option plan. The Committee believes that its past grants of such options to purchase common stock of the Company, at the market price in effect on the day prior to the date of such grant, has -----END PRIVACY-ENHANCED MESSAGE-----