Extra arc.exe or arc.bat files. Attempting to run the arc.exe before the batch files have had a chance to make the settings will cause this error.
Solution
Use the Windows File Manager to search for those arc.exe and arc.bat. There should be only one arc.exe in the c:\arcexe\programs directory, and two arc.bat files; one in the c:\arcexe\cmd directory and another in the c:\arcexe\cpllib directory.