AMENDMENT NO. 5
TO
ATLANTIC RICHFIELD COMPANY
ANNUAL INCENTIVE PLAN
___________________________
Pursuant to authority contained in resolutions adopted by the
Board of Directors on July 28, 1997, the following amendment is
hereby made to the Atlantic Richfield Company Annual Incentive
Plan (the "Plan"), effective July 28, 1997.
1. Paragraphs 2(m), 2(y) and 2(z) of the Plan are amended to
read as follows:
"(m) "Company" means ARCO and its Subsidiaries.
(y) "Salary Grade" means the classification assigned to
an Employee by ARCO.
(z) "Subsidiary" means any corporation, the majority of
the voting stock of which, or any partnership or joint
venture, the majority of the profits interest or capital
interest of which, is owned directly or indirectly by ARCO or
a Corporation, as applicable."
2. Subsections (bb), (cc), (dd), (ee), (ff), (gg), (hh), (ii) and
(jj) are added to Section 2 of the Plan to read as follows:
"(bb) "Anticipatory Change of Control" means (1) the
execution of an agreement or a written document which, if the
subject thereof were consummated, would result in a Change of
Control; (2) a public announcement by any Person, including
ARCO, of an intent to take an action(s) which, if
consummated, would result in a Change of Control; or (3) the
delivery of a signed, written statement to the Trustee of the
Change of Control Trust and ARCO's Independent Auditor by the
Chief Financial Officer of ARCO and General Counsel of ARCO
that an Anticipatory Change of Control is in effect, provided
that, with respect to any of the above three circumstances,
the Anticipatory Change of Control shall not be effective until
approved by either the Board or the Executive Committee of the
Board.
(cc) "ARCO" means Atlantic Richfield Company, its
successors and assigns.
(dd) "Benefit Trigger Window" means the 24-month period
commencing on the date that a Change of Control occurs.
(ee) "Change of Control" means:
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(1) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of ARCO (a "Business
Combination"), unless, in each case, following such Business
Combination:
(i) All or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the then outstanding shares of common stock
(the "Outstanding Common Stock") of ARCO and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors (the
"Outstanding Voting Securities") of ARCO immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 60 percent of, respectively, the then
Outstanding Common Stock and the combined voting power of the
then Outstanding Voting Securities entitled to vote generally
in the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which, as a
result of such transaction, owns ARCO or all or substantially
all of ARCO's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of
the Outstanding Common Stock and Outstanding Voting
Securities, as the case may be;
(ii) No Person (excluding any corporation
resulting from such Business Combination or any employee
benefit plan (or related trust) of ARCO or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 25 percent or more of, respectively,
the then Outstanding Common Stock of such corporation
resulting from such Business Combination or the combined
voting power of the then Outstanding Voting Securities of
such corporation, except to the extent that such ownership
existed immediately prior to the Business Combination; and
(iii) At least a majority of the members
of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business
Combination; or
(2) The acquisition by any Person of beneficial
ownership (within the meaning of Rule 13d-3 or Rule 13d-5
promulgated under the Exchange Act) of 25 percent or more of
either (i) the Outstanding Common Stock of ARCO or (ii) the
Outstanding Voting Securities of ARCO; provided, however,
that for purposes of this Subsection (2), the following shall
not constitute a Change of Control: (A) any acquisition by
any employee benefit plan (or related trust) sponsored or
maintained by ARCO or any corporation controlled by ARCO; (B)
any acquisition by ARCO or any increase in beneficial
ownership resulting solely from an acquisition by ARCO; (C)
any acquisition by any corporation pursuant to a Business
Combination which complies with clauses (i), (ii) and (iii)
of Subsection (1); or (D) any acquisition directly from ARCO
pursuant to a transaction (other than a Business Combination)
approved by the Board after July 28, 1997; and provided,
further, that in any event, without regard to the manner in
which the level of ownership is attained, the ownership by
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any Person of 40 percent or more of the Outstanding Common
Stock of ARCO or Outstanding Voting Securities of ARCO shall
constitute a Change of Control; or
(3) Individuals who, as of July 28, 1997,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to such date whose election, or nomination for
election by ARCO's stockholders, was approved by a vote of at
least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, except that any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by
or on behalf of a Person shall not be considered an Incumbent
Director; or
(4) Approval by the stockholders of ARCO of a
complete liquidation or dissolution of ARCO.
(ff) "Change of Control Trust" means the trust
established by ARCO to provide for the payment of any
benefits, in whatever form is required, under this Plan on
and after a Change of Control.
(gg) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(hh) "Person" means any individual, corporation, firm,
partnership, governmental body, entity or group and shall
include any person within the meaning of 13(d)(3) or
14(d)(2) of the Exchange Act.
(ii) "Special Plan Administrator" means the entity
designated in the Change of Control Trust, which shall have
full administrative powers under Section 3 of this Plan on
and after a Change of Control, including, but not limited to,
all interpretive and decision powers reserved to the
Committee or the Subcommittee prior to a Change of Control.
(jj) "Surviving Entity" means the entity which exists
following a Change of Control and which employs the individuals who
were Employees eligible for participation under Subsection 2(v) and
Section 4 immediately prior to the Change of Control."
3. Sections 6 through 10 are renumbered as Sections 7 through 11
and a new Section 6 is added to the Plan to read as follows:
"Section 6. Change of Control
(a) If an Employee in Grade classification E0 through
9 (or the equivalent thereof) as of the date of a Change of
Control terminates employment from
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the Surviving Entity after the Change of Control under any of
the circumstances described in Subsection 6(b), a cash payment
shall be made to such Employee as described in Subsection 6(c).
(b) Termination of Employment shall mean termination of
employment during the Benefit Trigger Window by the Surviving Entity,
other than for cause, and with respect to Grades E0 through E3 shall
also mean the Employee's voluntary termination following the Surviving
Entity's request to accept a (1) demotion to a lesser job, (2) reduction
in Base Salary plus Salary Grade Target Award described under Subsection
5(b) of ten percent or more, or (3) relocation of the principal place of
work which would constitute a deductible moving expense under 217 of the
Internal Revenue Code. With respect to Grades E4, 10 and 9, only
Clauses (2) and (3) shall apply.
(c) In the event of a Termination of Employment under Subsection
6(b), as soon as possible following such termination, the Employee will
be paid an Award equal to the Salary Grade Target Award described under
Subsection 5(b) multiplied by a fraction, the numerator of which is the
number of months (or fraction thereof) the Employee was employed during
the Performance Year prior to termination of employment in conjunction
with the Change of Control and the denominator of which is twelve."
4. Subsection 9(a) of the Plan is amended to read as follows:
"(a) ARCO intends to establish a grantor trust to aid in
accumulating the amounts necessary to pay any amount awarded
to a Participant for a Performance Year, or an Award deferred
pursuant to Section 7 or any interest credited thereon. All
Awards, and any interest credited thereon, shall be paid from
the general funds of the Company to the extent not paid from
the grantor trust. Under no circumstances shall a Participant
or other person have any interest whatsoever in any
particular property or assets of the Company as a result of
this Plan or an Award made thereunder."
5. Section 10 of the Plan is amended to read as follows:
"Section 10. Amendment, Suspension or Termination
(a) Except as provided under Subsections 10(b) and (c),
the Board may suspend, terminate or amend the Plan.
Amendment, suspension or termination of the Plan shall not
alter the amount or payment of an Award made prior to such
amendment, suspension or termination.
(b) The Plan may not be amended during an Anticipatory
Change of Control, except that the Board may amend the Plan
during such a period as it may deem reasonably necessary,
upon advice of counsel, to further the interest of the
Company and its shareholders regarding any legal requirements
and, provided further, that any such amendment which reduces,
or could reduce, the value of any
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benefit of a Participant, as determined in the sole discretion
of the Special Plan Administrator, shall provide substantially
equivalent value in replacement thereof to the Participant.
(c) The Plan may not be amended or terminated on or
after a Change of Control until all payments that may be due
pursuant to Subsection 6(c) of the Plan, as determined in the
sole discretion of the Special Plan Administrator of the
Change of Control Trust, have been made."
Executed this 27th day of March, 1998
ATTEST ATLANTIC RICHFIELD COMPANY
/s/ ARMINEH AIMONIAN /s/ JOHN H. KELLY
BY: ______________________ BY: _________________________
John H. Kelly
Senior Vice President
Human Resources