<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
(AMENDMENT NO. 1)
Under the Securities Exchange Act of 1934*
TESORO PETROLEUM CORPORATION
________________________________________________________________________________
(Name of Issuer)
Common Stock, par value $0.16-2/3 per share
________________________________________________________________________________
(Title of Class of Securities)
881609101
________________________________________________________________________________
(CUSIP Number)
John M. Huggins, Esq.
Baker & Botts, L.L.P.
885 Third Avenue, Suite 1900
New York, New York 10022
(212) 705-5000
________________________________________________________________________________
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
December 26, 1995
________________________________________________________________________________
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with this statement [ ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of less than five percent of such class.
See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page should be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
NOTE: THIS STATEMENT CONSTITUTES AMENDMENT NO. 1 TO THE SCHEDULE 13D OF EACH OF
THE REPORTING PERSONS (AS DEFINED IN THE SCHEDULE 13D).
<PAGE>
CUSIP No. 881609101
________________________________________________________________________________
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
Kevin S. Flannery
________________________________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
________________________________________________________________________________
(3) SEC Use Only
________________________________________________________________________________
(4) Source of Funds
PF, AF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States/Republic of Ireland
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0 shares
Shares Bene- ------------------------------------------
ficially (8) Shared Voting Power 366,972 shares
Owned by ------------------------------------------
Each Report- (9) Sole Dispositive Power 0 shares
ing Person ------------------------------------------
With (10) Shared Dispositive Power 366,972 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
366,972 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [X]
See Item 5
________________________________________________________________________________
(13) Percent of Class Represented by Amount in Row (11)
1.5 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
IN
Page 2
<PAGE>
CUSIP No. 881609101
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
Whelan Management Corp.
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC, AF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0 shares
Shares Bene- -----------------------------------------------------
ficially (8) Shared Voting Power 340,615 shares
Owned by -----------------------------------------------------
Each Report- (9) Sole Dispositive Power 0 shares
ing Person -----------------------------------------------------
With (10) Shared Dispositive Power 340,615 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
340,615 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
1.4 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
CO
Page 3
<PAGE>
CUSIP No. 881609101
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
George F. Baker
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
PF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 110,000 shares
Shares Bene- ------------------------------------------------
ficially (8) Shared Voting Power 0 shares
Owned by ------------------------------------------------
Each Report- (9) Sole Dispositive Power 110,000 shares
ing Person ------------------------------------------------
With (10) Shared Dispositive Power 0 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
110,000 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0.4 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
IN
Page 4
<PAGE>
CUSIP No. 881609101
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
Alan Kaufman
________________________________________________________________________________
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
PF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 581,500 shares
Shares Bene- ------------------------------------------------
ficially (8) Shared Voting Power 20,000 shares
Owned by ------------------------------------------------
Each Report- (9) Sole Dispositive Power 581,500 shares
ing Person ------------------------------------------------
With (10) Shared Dispositive Power 20,000 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
601,500 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [X]
See Item 5
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
2.4 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
IN
Page 5
<PAGE>
CUSIP No. 881609101
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
Kaufman Children's Trust
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC, AF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
Indiana
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0 shares
Shares Bene- ------------------------------------------------------
ficially (8) Shared Voting Power 20,000 shares
Owned by ------------------------------------------------------
Each Report- (9) Sole Dispositive Power 0 shares
ing Person ------------------------------------------------------
With (10) Shared Dispositive Power 20,000 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
20,000 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0.1 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
00
Page 6
<PAGE>
CUSIP No. 881609101
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
James H. Stone
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
PF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 156,000 shares
Shares Bene- ------------------------------------------------
ficially (8) Shared Voting Power 0 shares
Owned by ------------------------------------------------
Each Report- (9) Sole Dispositive Power 156,000 shares
ing Person ------------------------------------------------
With (10) Shared Dispositive Power 0 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
156,000 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0.6 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
IN
Page 7
<PAGE>
CUSIP No. 881609101
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
Robert S. Washburn
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
PF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
United States
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0 shares
Shares Bene- ------------------------------------------------
ficially (8) Shared Voting Power 233,336 shares
Owned by ------------------------------------------------
Each Report- (9) Sole Dispositive Power 0 shares
ing Person ------------------------------------------------
With (10) Shared Dispositive Power 233,336 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
233,336 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0.9 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
IN
Page 8
<PAGE>
CUSIP No. 881609101
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
Robert S. and Suzanne P. Washburn Revocable Trust
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC, AF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
California
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0 shares
Shares Bene- ---------------------------------------------------
ficially (8) Shared Voting Power 39,545 shares
Owned by ---------------------------------------------------
Each Report- (9) Sole Dispositive Power 0 shares
ing Person ---------------------------------------------------
With (10) Shared Dispositive Power 39,545 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
39,545 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0.2 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
00
Page 9
<PAGE>
CUSIP No. 881609101
- --------------------------------------------------------------------------------
(1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above
Persons
Robert S. Washburn, Trustee for the Robert S. Washburn Money Purchase,
Pension and Profit Sharing Keogh Plan Trusts
- --------------------------------------------------------------------------------
(2) Check the Appropriate Box if a Member of a Group
(a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
(3) SEC Use Only
- --------------------------------------------------------------------------------
(4) Source of Funds
WC, AF
- --------------------------------------------------------------------------------
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
(6) Citizenship or Place of Organization
California
- --------------------------------------------------------------------------------
Number of (7) Sole Voting Power 0 shares
Shares Bene- ---------------------------------------------------
ficially (8) Shared Voting Power 193,791 shares
Owned by ---------------------------------------------------
Each Report- (9) Sole Dispositive Power 0 shares
ing Person ---------------------------------------------------
With (10) Shared Dispositive Power 193,791 shares
- --------------------------------------------------------------------------------
(11) Aggregate Amount Beneficially Owned by Each Reporting Person
193,791 shares
- --------------------------------------------------------------------------------
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
(13) Percent of Class Represented by Amount in Row (11)
0.8 %
- --------------------------------------------------------------------------------
(14) Type of Reporting Person (See Instructions)
00
Page 10
<PAGE>
The undersigned hereby amend and supplement the Schedule 13D originally
filed with the Securities and Exchange Commission on December 26, 1995, with
respect to the undersigneds' beneficial ownership of shares (the "Shares") of
Common Stock, par value $0.16 2/3 per share ("Common Stock"), of Tesoro
Petroleum Corporation, a Delaware corporation (the "Company"). Capitalized
terms not defined herein have the meanings assigned to them in the original
Schedule 13D.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 of the original Schedule 13D is hereby amended and restated in its
entirety to read as follows:
Each of the Reporting Persons acquired its respective Shares and options to
purchase Shares in order to obtain an equity position in the Company. As more
fully explained below, the Reporting Persons plan to seek to acquire control of
the Company through the replacement of the Company's current Board of Directors
with the Committee Nominees.
On December 14, 1995, certain of the Reporting Persons formed the Committee
in order to take concerted action to enhance shareholder value of the Company.
In the opinion of the Committee, the Shares are currently undervalued, and the
Committee believes that the Board of Directors of the Company should be
evaluating all alternatives available to the Company to maximize the value of
the Company for all shareholders. The Committee believes, however, that the
current Board of Directors and incumbent management have exhibited a sustained
inability or unwillingness to take the actions necessary to enhance shareholder
value.
The Committee has determined to commence a consent solicitation to remove
the existing members of the Board of Directors and replace them with a slate of
nominees (the "Committee Nominees") consisting of Baker, Kaufman, Stone, Gale L.
Galloway ("Galloway") and Douglas Thompson ("Thompson"). Galloway is the
Chairman of the Board and Chief Executive Officer of GLG Energy, Inc., an
independent oil and gas operator. Thompson is the Chairman of Digicon, Inc., a
Delaware corporation based in Houston, Texas engaged in worldwide geophysical
services. The Committee will shortly file preliminary solicitation materials
with the Securities and Exchange Commission with respect to the removal of the
existing Board, the election of the Committee Nominees and various related
matters. Each Reporting Person intends to execute written consents supporting
the actions proposed by the Committee.
If elected, the Committee Nominees intend to conduct a detailed review of
the Company and its assets, corporate structure, dividend policy,
capitalization, operations, properties, policies and personnel. The Committee
Nominees will consider alternative strategies to enhance stockholder value,
including, among other things, changes in the Company's business policies and
plans or corporate structure, along with sales of certain assets and operations.
Based on the Committee's current knowledge of the Company, the Committee expects
that the Committee Nominees, once elected, will adopt a strategic plan to
enhance the value of the Company which will include as a principal element the
prompt disposition of the Company's refinery business in order to enable the
Company to focus on its core exploration and production business.
On December 26, 1995, the members of the Committee commenced a lawsuit in
the United States District Court for the Western District of Texas, San Antonio
Division, against the Company and its Chief Executive, Bruce A. Smith. The
action seeks, among other relief, a
Page 11
<PAGE>
judgment (i) declaring that the Company's Rights Agreement dated December 16,
1985 (the Company's "poison pill") does not apply to the efforts of the
Committee to solicit consents from other stockholders of the Company; (ii)
declaring that the Company's By-laws permit removal of directors through
stockholder action by written consent; (iii) enjoining the Company from delaying
or otherwise unlawfully interfering with the efforts of the Committee to solicit
consents from other stockholders; and (iv) declaring that the actions and
disclosures of the Committee with regard to their effort to solicit consents are
and have been in compliance with the Securities Exchange Act of 1934, as
amended. A copy of the Committee's amended complaint is attached as Exhibit 7 to
this Schedule 13D.
On December 26, 1995, the Committee issued the press release attached as
Exhibit 8 hereto.
The Reporting Persons intend to review on a continuing basis their
respective investments in the Shares and may, subject to the continuing
evaluation of the factors discussed herein, acquire from time to time additional
Shares in the open market or in privately negotiated transactions. Depending on
the factors discussed herein, the Reporting Persons may, from time to time,
retain or sell all or a portion of their respective holdings of the Shares in
the open market or in privately negotiated transactions. In addition certain
Reporting Persons may, from time to time, elect to acquire Shares through the
exercise of options. Any open market or privately negotiated purchases or sales
or option exercises may be made at any time without further prior notice. Each
of the Reporting Persons reserves the right to cease his or its participation in
a group with the other Reporting Persons.
Any action that any of the Reporting Persons might undertake with respect
to the Shares, including the exercise of options to purchase Shares currently
held by certain Reporting Persons, will be dependent upon its or his individual
review of numerous factors, including, among other things, the availability of
Shares for purchase and the price levels of such Shares, general market and
economic conditions, ongoing evaluation of the Company's business, financial
condition, operations and prospects, the relative attractiveness of alternative
business and investment opportunities, the actions of the management and the
Board of Directors of the Company, and other future developments.
Although the foregoing reflects activities currently contemplated by the
Reporting Persons with respect to the Company, the foregoing is subject to
change at any time, and there can be no assurance that any of the Reporting
Persons will purchase additional Shares or take any of the other actions
referred to above. Except as set forth above and in Item 6, none of the
Reporting Persons has any present plans or intentions that would result in or
relate to any of the transactions described in subparagraphs (a) through (j) of
Item 4 of Schedule 13D.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Item 7 of the original Schedule 13D is hereby amended and restated in its
entirety to read as follows (items marked with an * have been previously filed):
*1. Written Agreement among the Reporting Persons regarding Joint Filing of
Schedule 13D and Powers of Attorney.
Page 12
<PAGE>
*2. Option Agreement, dated as of December 14, 1995, between Whelan and
Stone.
*3. Option Agreement, dated as of December 14, 1995, between Whelan and
Baker.
*4. Agreement, dated as of December 14, 1995, between Whelan and Washburn.
*5. Option Agreements with various affiliates of Ardsley Advisory
Partners.
6. Engagement Letter with Morrow & Co., Inc.
7. Amended Complaint in the action Kevin S. Flannery, Alan Kaufman,
Robert S. Washburn, James H. Stone and George F. Baker, individually
and as members of the Stockholders Committee for New Management of
Tesoro Petroleum Corporation vs. Tesoro Petroleum Corporation and
Bruce A. Smith, filed on December 28, 1995, in the United States
District Court for the Western District of Texas, San Antonio.
8. Press Release, dated December 26, 1995.
Page 13
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of his knowledge and belief, each of
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: December 28, 1995
/s/ Kevin S. Flannery
---------------------
Kevin S. Flannery
WHELAN MANAGEMENT CORP.
By: /s/ Kevin S. Flannery
----------------------
Name: Kevin S. Flannery
Title: President
*
-------------------------
George F. Baker
*
-------------------------
Alan Kaufman
KAUFMAN CHILDREN'S TRUST
By: *
----------------------
Name: Alan Kaufman
Title: Trustee
*
-------------------------
James H. Stone
Page 14
<PAGE>
*
----------------------------
Robert S. Washburn
ROBERT S. AND SUZANNE P.
WASHBURN REVOCABLE TRUST
By: *
-------------------------
Name: Robert S. Washburn
Title: Co-Trustee
ROBERT S. WASHBURN MONEY PURCHASE, PENSION
AND PROFIT SHARING KEOGH PLAN TRUSTS
By: *
-------------------------
Name: Robert S. Washburn
Title: Trustee
*By: /s/ Kevin S. Flannery
-----------------------
Kevin S. Flannery
Attorney In Fact
Page 15
<PAGE>
SCHEDULE II
Schedule II of the original Schedule 13D is hereby amended and
restated in its entirety to read as follows:
The following tables set forth all transactions in the Shares effected
by the Reporting Persons since October 16, 1995. Price per Share excludes
brokerage commissions.
<TABLE>
<CAPTION>
FLANNERY ENTITIES
WHELAN MANAGEMENT CORP.
-----------------------
TYPE OF NUMBER
TRANSACTION DATE OF SHARES PRICE PER SHARE LOCATION
- ----------- ---- --------- --------------- --------
<S> <C> <C> <C> <C>
Purchase 10/16/95 7,500 7 1/2 Exchange
Purchase 10/16/95 8,000 7 5/8 Exchange
Sale 10/18/95 3,000 8 Exchange
Sale 10/18/95 7,000 7 7/8 Exchange
Sale 10/25/95 8,000 8 3/8 Exchange
Sale 10/25/95 42,000 8 1/4 Exchange
Purchase 10/27/95 900 8 3/8 Exchange
Purchase 10/27/95 2,000 8 1/2 Exchange
Purchase 10/30/95 45,000 8 1/4 Exchange
Purchase 11/15/95 500 7 7/8 Exchange
Purchase of 11/16/95 400,000 (1) Private
Option
Purchase (2) 11/20/95 12,000 7 1/2 Exchange
Purchase 12/01/95 1,000 8 3/8 Exchange
Sale 12/07/95 7,500 8 1/2 Exchange
Sale 12/08/95 10,500 8 1/2 Exchange
Sale 12/11/95 13,000 8 1/2 Exchange
Grant of Option 12/14/95 100,000 (3) Private
Grant of Option 12/14/95 100,000 (3) Private
- ---------------
</TABLE>
/1/ The options are exercisable at a price of $8.25 per Share. The total
purchase price for the options was $36,000.
Page 16
<PAGE>
/2/ Shares purchased upon exercise of call options. The price per share has
not been adjusted to reflect the price paid for the option contracts.
/3/ The options are exercisable at a price of $8.25 per Share. The total sale
price of the options was $18,000.
In addition to the foregoing transactions by Whelan, the following table
sets forth transactions effected by Whelan in call option contracts during the
past two years. All such transactions were effected on a national securities or
option exchange through a broker and reflect the trade date of each such
transaction. Each call option contract represents the right to buy 100 shares
of Common Stock at a price and until the date specified in the option contract,
and the exercise price of each such option was $7.50 per Share. Price per Option
Contract excludes brokerage commissions.
<TABLE>
<CAPTION>
TYPE OF NUMBER OF PRICE PER OPTION
TRANSACTION DATE CALL OPTIONS CONTRACT
- --------------- ---- ------------ ----------------
<S> <C> <C> <C>
Purchase 10/17/95 46 $ 87.50
Sale 10/19/95 50 $125
Sale 10/20/95 50 $106.25
Purchase 10/26/95 120 $112.50
</TABLE>
<TABLE>
<CAPTION>
FLANNERY
TYPE OF NUMBER
TRANSACTION DATE OF SHARES PRICE PER SHARE LOCATION
----------- ---- --------- --------------- --------
<S> <C> <C> <C> <C>
Sale 10/16/95 8,000 7 5/8 Exchange
Sale 12/19/95 10,000 8 3/8 Exchange
</TABLE>
SEAN KENRICK FLANNERY TRUST
The following table sets forth all transactions in securities of the
Company effected by the Sean Kenrick Flannery Trust within the past two years:
<TABLE>
<CAPTION>
TYPE OF NUMBER
TRANSACTION DATE OF SHARES PRICE PER SHARE LOCATION
----------- ---- --------- --------------- --------
<S> <C> <C> <C> <C>
Purchase 11/14/95 500 $7 7/8 Exchange
Purchase 11/15/95 500 $7 7/8 Exchange
</TABLE>
In addition to the foregoing transactions in Shares, the following table
sets forth transactions effected by the Sean Kenrick Flannery Trust in call
option contracts since October 16, 1995. All such transactions were effected on
a national securities or option exchange through a broker and reflect the trade
date of each such transaction. Each call option contract represents the right
to buy 100 Shares at a price and until the date specified in the option
contract, and the
Page 17
<PAGE>
exercise price of each such option was $7.50 per Share. Price per Option
Contract excludes brokerage commissions.
<TABLE>
<CAPTION>
TYPE OF NUMBER
TRANSACTION DATE OF SHARES PRICE PER SHARE
- ------------ ---- --------- ---------------
<S> <C> <C> <C>
Purchase 10/26/95 80 $112.50
Sale 11/17/95 80 $ 50
Purchase 11/17/95 80 $ 1
</TABLE>
BAKER
<TABLE>
<CAPTION>
TYPE OF NUMBER
TRANSACTION DATE OF SHARES PRICE PER SHARE LOCATION
- ------------ ---- --------- --------------- --------
<S> <C> <C> <C> <C>
Purchase of 12/14/95 100,000 /1/ Private
Option
- ---------------
/1/ The options are exercisable at a price of $8.25 per Share. The total purchase price for the
options was $9,000.
</TABLE>
KAUFMAN
The following table sets forth all transactions in the Shares affected by
Kaufman since October 16, 1995 (prices marked with an * reflect commissions).
<TABLE>
<CAPTION>
TYPE OF NUMBER
TRANSACTION DATE OF SHARES PRICE PER SHARE LOCATION
- ------------ ---- --------- --------------- --------
<S> <C> <C> <C> <C>
Purchase 10/16/95 10,000 $7.675* Exchange
Sale 10/20/95 12,500 $8.125 Exchange
Sale 10/23/95 20,000 $8.48* Exchange
Sale 10/25/95 5,000 $8.06* Exchange
Purchase 10/31/95 2,000 $7.875 Exchange
Purchase 11/1/95 5,000 $8.05* Exchange
Purchase 11/9/95 2,700 $7.94* Exchange
Purchase 11/15/95 5,000 $7.8* Exchange
Purchase 11/16/95 4,500 $7.75 Exchange
</TABLE>
STONE
<TABLE>
<CAPTION>
TYPE OF NUMBER
TRANSACTION DATE OF SHARES PRICE PER SHARE LOCATION
- ------------ ---- --------- --------------- --------
<S> <C> <C> <C> <C>
Purchase of 12/14/95 100,000 /1/ Private
Option
Exercise of 12/16/95 11,000 8.37 Exchange
Option
- ---------------
</TABLE>
/1/ The options are exercisable at a price of $8.25 per Share. The total
purchase price for the options was $9,000.
Page 18
<PAGE>
WASHBURN ENTITIES
WASHBURN TRUSTS
<TABLE>
<CAPTION>
TYPE OF NUMBER
TRANSACTION DATE OF SHARES PRICE PER SHARE LOCATION
----------- ---- --------- --------------- --------
<S> <C> <C> <C> <C>
Sale 10/18/95 15,000 $8.375 Exchange
Sale 10/24/95 4,000 $8.375 Exchange
Purchase 12/4/95 3,100 $8.25 Exchange
Purchase 12/7/95 1,900 $8.25 Exchange
</TABLE>
WASHBURN REVOCABLE TRUST
None
Page 19
<PAGE>
EXHIBIT INDEX
*Exhibit 1 Written Agreement among the Reporting Persons regarding Joint
Filing of Schedule 13D and Powers of Attorney
*Exhibit 2 Option Agreement, dated as of December 14, 1995, between
Whelan and Stone
*Exhibit 3 Option Agreement, dated as of December 14, 1995, between
Whelan and Baker
*Exhibit 4 Agreement, dated as of December 14, 1995, between Whelan and
Washburn
*Exhibit 5 Option Agreements with various affiliates of Ardsley
Advisory Partners
Exhibit 6 Engagement Letter with Morrow & Co., Inc.
Exhibit 7 Amended Complaint in the action Kevin S. Flannery, Alan
Kaufman, Robert S. Washburn, James H. Stone and George F.
Baker, individually and as members of the Stockholders
Committee for New Management of Tesoro Petroleum Corporation
vs. Tesoro Petroleum Corporation and Bruce A. Smith, filed on
December 28, 1995, in the United States District Court for the
Western District of Texas, San Antonio
Exhibit 8 Press Release, dated December 26, 1995
___________________
* Previously filed.
<PAGE>
Exhibit 6
[Morrow & Co., Inc. Letterhead]
December 22, 1995
The Stockholders' Committee for
New Management of Tesoro Petroleum Corporation
This letter will serve as the agreement under which you will retain us to
solicit consents from shareholders of Tesoro Petroleum Corporation.
The services we will perform on your behalf will include the consultation and
preparation in connection with your solicitation, as well as the actual
solicitation of consents from brokers, banks, nominees, non-objecting beneficial
owners (NOBOs) and individual holders of record.
For the above services our fee will be $150,000.00. One third the fee
($50,000.00), plus an advance against disbursements of $10,000.00 is due upon
the signing of this agreement. The balance of our fee will be payable upon the
conclusion of the solicitation. Included in our disbursements will be our
charges for the telephone solicitation of holders of record and non-objecting
beneficial owners (NOBOs). Our charge for this service will be $5.00 per
shareholder, such charge will include labor, directory assistance and all
related telephone expenses.
This agreement covers the period through March 15, 1996. Thereafter, this
agreement may be extended for a mutually agreed upon fee.
You agree to indemnify and hold us harmless against any loss, damage, expense
(including reasonable legal fees and expenses), liability or claim relating to
or arising out of our performance of this agreement except where we, or our
employees fail to comply with this agreement; provided, however, that you shall
not be obliged to indemnify us or hold us harmless against any such loss,
damage, expense, liability, or claim, which results from gross negligence, bad
faith or willful misconduct on our part or of any of our employees. At your
election you may assume the defense of any such action. We shall advise you in
writing of any such liability or claim promptly after receipt of any notice of
any action or claim for which we may be entitled to indemnification hereunder.
This agreement shall be construed and enforced in accordance with the laws of
the State of New York and shall inure to the benefit of, and the obligations
created hereby shall be binding upon, the successors and assigns of the parties
hereto.
If any provision of this agreement shall be held illegal, invalid or
unenforceable by any court, this agreement shall be construed and enforced as if
that provision had not been contained herein and shall be deemed an agreement
among us to the full extent permitted by applicable law.
<PAGE>
Please acknowledge receipt of this agreement and confirm the arrangements herein
provided by signing and returning the enclosed copy to the undersigned,
whereupon this agreement and your acceptance of the terms and conditions herein
provided shall constitute a binding agreement among us.
Very truly yours
The Stockholders' Committee for MORROW & CO., INC.
New Management of
Tesoro Petroleum Corporation:
By: /s/ Kevin S. Flannery By: /s/ Thomas W. Ball
---------------------- ------------------
Title: Title: Exec V.P.
------------------ ---------------
Date: 12-22-95
<PAGE>
EXHIBIT 7
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
KEVIN S. FLANNERY, (S)
ALAN KAUFMAN, (S)
ROBERT S. WASHBURN, (S)
JAMES H. STONE, (S)
and GEORGE F. BAKER, (S)
individually and as members of (S)
THE STOCKHOLDERS' COMMITTEE FOR (S)
NEW MANAGEMENT OF TESORO (S)
PETROLEUM CORPORATION, (S)
(S)
(S)
Plaintiffs, (S) Civil Action No. SA-95-CA-1298
(S)
vs. (S)
(S)
TESORO PETROLEUM CORPORATION (S)
and BRUCE A. SMITH, (S)
(S)
Defendants. (S)
AMENDED COMPLAINT
Plaintiffs Kevin S. Flannery, Alan Kaufman, Robert S. Washburn, James
H. Stone, and George F. Baker, individually and as members of The Stockholders'
Committee for New Management of Tesoro Petroleum Corporation, allege, upon
knowledge with respect to themselves and their own acts, and upon information
and belief with respect to all other persons and matters, as follows:
<PAGE>
Nature of the Action
1. Plaintiffs bring this action to ensure that their fellow
stockholders in Tesoro Petroleum Corporation are permitted to consider and, if
they choose, effect a fundamental change in the management and direction of
their company.
2. For at least a decade, Tesoro has been a company adrift. It has
suffered through years of internal turmoil, poor or marginal operating results,
and stagnant or declining stock market values. Thousands of its stockholders
have lost tens of millions of dollars on their investments. Through these
travails only one constituency at Tesoro has managed to prosper -- its directors
and top managers. Yet even now, Tesoro has no clear plan for the future.
3. Plaintiffs believe that a change is essential. Today they have
filed proxy materials with regulatory authorities that outline three simple
proposals they intend to present to other Tesoro stockholders, all to take the
initial steps toward a new beginning for their company: first, the amendment of
the company's By-laws to facilitate a change in management; second, the removal
of the incumbent Tesoro board; and last, the election of a slate of seasoned,
qualified directors who have the incentive and experience to make the changes
necessary to revitalize Tesoro and enhance its value for its owners.
4. Unfortunately for plaintiffs and their fellow stockholders, the
board and the management of Tesoro are unwilling to give up the substantial
benefits they receive each year from the company. Already they have erected a
series of devices, and they appear poised to take additional measures, that may
operate to prevent Tesoro stockholders even from considering the plaintiffs'
proposals. These devices and measures are designed not to achieve stockholder
value, but rather to further entrench and enrich the directors and executives of
Tesoro.
2
<PAGE>
5. Accordingly, plaintiffs seek declaratory and injunctive relief
from the Court to prevent defendants from depriving stockholders of a voice in
the direction of their company. This Complaint seeks a judgment (i) declaring
that the company's newly-extended poison pill does not apply to the plaintiffs'
effort to solicit written consents from other stockholders; (ii) declaring that
the By-laws of Tesoro permit removal of directors through stockholder action by
written consent; (iii) declaring that the actions and disclosures of plaintiffs
with regard to their effort to solicit consents are and have been in compliance
with the federal securities laws; and (iv) enjoining defendants from delaying or
otherwise unlawfully interfering with plaintiffs' efforts to solicit consents.
Parties
6. Plaintiffs are independent, experienced businessmen who have made
long term -- and substantial -- investments in the common stock of Tesoro.
a. Kevin S. Flannery is president of an investment advisory firm,
Whelan Management Corp., among his other endeavors. A resident of
New York, he beneficially owns over 350,000 shares, including
options, of Tesoro common stock.
b. Alan Kaufman has been a practicing neurosurgeon for over 25
years and is an investor in a number of companies. A resident of
Indiana, he beneficially owns over 600,000 shares of Tesoro common
stock.
c. Robert S. Washburn has a background in law, real estate, and
investment banking and currently manages his private investment
portfolio. A resident of California, he beneficially owns over 200,000
shares of Tesoro common stock.
3
<PAGE>
d. James H. Stone is chairman and chief executive of an oil and
gas exploration and development company, Stone Energy Corp. A resident
of Louisiana, he beneficially owns over 150,000 shares, including
options, of Tesoro common stock.
e. George F. Baker is president of an investment advisory firm,
Cambridge Capital Holdings, among his other endeavors. A resident of
New York, he beneficially owns over 100,000 shares, including options,
of Tesoro common stock.
7. Plaintiffs invested in Tesoro because they saw, and still see,
fundamental values in the company that eventually should be reflected through
higher stock prices. Their patience (Flannery, Washburn, Stone, and Dr. Kaufman
have been Tesoro stockholders for at least four years) has not been rewarded,
however. Time and again, plaintiffs have been disappointed and frustrated by
the decisions and actions of Tesoro's board and management, which increasingly
have been more intent on entrenching their positions and expanding their
compensation benefits than on improving stockholder returns.
8. Consequently, plaintiffs have joined together to seek to change
the direction, and fortunes, of Tesoro. To that end, they have formed The
Stockholders' Committee for New Management of Tesoro Petroleum Corporation (the
"Committee"). In this Complaint, plaintiffs collectively will be referred to as
the Committee.
9. Defendants. Tesoro is a Delaware corporation with its principal
place of business in this District. It may be served with process through its
registered agent for service, CT Corp. System, 811 Dallas Avenue, Houston, Texas
77002.
4
<PAGE>
10. Bruce A. Smith is the chief executive and president and a
director of Tesoro. He may be served with process at his place of business, 8700
Tesoro Drive, San Antonio, Texas 78217, or at his residence, 301 Morningside
Drive, San Antonio, Texas 78209.
11. Smith became a director of Tesoro in July 1995 and its president
and chief executive in September 1995. Previously, he had been the company's
executive vice president, chief operating officer, and chief financial officer.
Smith has received substantial financial benefits from Tesoro. According to the
company's most recent proxy statement, Smith was paid over $730,000 in salary,
bonuses, and other compensation in 1994, and he also received options for 71,000
shares of Tesoro common stock.
Jurisdiction and Venue
12. The Court has jurisdiction over of this action pursuant to 28
U.S.C. (S)(S) 1331, 1332, and 2201, Section 27 of the Securities Exchange Act of
1934 (the "Exchange Act"), 15 U.S.C. (S) 78aa, and principles of supplemental
jurisdiction.
13. Venue is proper in this District pursuant to 28 U.S.C. (S) 1391
and Section 27 of the Exchange Act, 15 U.S.C. (S) 78aa.
Background on the Company
14. Tesoro describes itself as a natural resource company engaged in
petroleum refining and marketing, natural gas exploration and production, and
wholesale marketing of fuel and lubricants. It has two principal lines of
business: petroleum refining and marketing in Alaska and natural gas
exploration and production in Texas and elsewhere.
15. Tesoro's refining business has been erratic and generally
unprofitable in recent years. Judging from the first nine months (and excluding
nonrecurring items), the refining business
5
<PAGE>
in 1995 will suffer its third annual operating loss in the past four years. In
addition, Tesoro has made large capital infusions into the business and given it
significant management attention, with little apparent effect on the bottom
line. In contrast, the exploration and production ("E&P") business has been a
strong financial performer for Tesoro. It has been consistently profitable, and
increasingly so -- E&P operating profit was $64 million in 1994, $41 million in
1993, and $13 million in 1992.
16. The weak performance of Tesoro's refining business has been an
obvious and continuing drag on the company's overall operating results.
Nevertheless, Tesoro's board and management show no inclination to focus the
company's efforts on its profitable E&P operations in Texas and overseas.
Indeed, earlier this year, Tesoro chose to sell a substantial part of its rights
in the valuable Bob West field in south Texas, reportedly one of the largest
domestic natural gas finds in decades.
17. The refining business has not been Tesoro's only problem in recent
years. In particular, the company has had ongoing and bitter disputes with its
own stockholders.
18. In the most publicized dispute, Tesoro stockholders sued the
company for $1 billion for alleged stock manipulation by management. According
to the suit, when federal authorities began probing Tesoro's overseas dealings,
its executives attempted to conceal their activities with a secret plan to go
private. Tesoro prevailed in the suit, but according to Business Week, it "had
its image tarnished by testimony that it had hired prostitutes for foreign
government officials" and there was an FBI investigation into reported "jury
tampering" in the suit. Moreover, the Republic of Trinidad and Tobago later was
to sue Tesoro for conspiracy, fraud, commercial bribery, and RICO violations
arising out of the same controversy.
6
<PAGE>
19. Tesoro also has become embroiled in major disputes with
stockholders over the direction of the company. In fact, stockholders have
challenged the incumbent board twice in the past two years.
20. In 1994, Tesoro's common stock price declined after the company
announced a restructuring of its outstanding debt and preferred stock.
Thereafter, an alternate slate of directors was nominated from the floor at the
1994 annual meeting. The effort received support from stockholders. Ultimately,
however, opposition to the effort by the incumbent Tesoro board and management
prevailed, the bid was defeated, and the stock price dropped.
21. A similar situation arose this year. In a deal publicly
attributed to defendant Smith, the company announced it would sell a substantial
part of its rights in an important south Texas gas field. This led stockholders
to question, again, management's direction and plan for the company. Despite
solid stockholder support for change at the 1995 annual meeting, a proposed
alternate slate of board nominees was defeated, and the incumbent directors were
seated following an election process disputed by stockholders.
22. The company's performance demonstrates its need for
reorganization and revitalization. Just a few years ago, Tesoro was on the
edge of bankruptcy. Its share price plummeted to below $3, a price over 80%
lower than what the stock was trading at in the late 1980s. Even its then-chief
executive had to admit that the company needed a change, after losing money for
six of the prior seven years. It took a complete restructuring and
recapitalization of the company to avoid liquidation.
7
<PAGE>
23. Since at least 1994, Tesoro's performance in terms of stockholder
return has been, by any measure, lackluster. Apparent political infighting has
contributed to the problem -- the company has had four chief executives in the
1990s. In fact, industry experts are openly questioning the direction of
Tesoro. Just last September, the San Antonio Express-News reported analyst
disappointment with the company's reported boardroom battles and lack of clear
agenda: "When the board of directors and the chairman don't have uniformity of
strategy and objectives, that in itself is a problem. . . . But if I had to
choose between Michael Burke [the company's past CEO] resigning and changing
the board of directors, I think the wrong development happened."
Defendants' History of Defensive Measures and Entrenchment
24. Tesoro's board and management have long resisted efforts to change
the control and direction of the company. Over the years, Tesoro has attracted a
number of merger and other offers, rebuffing them all. In fact, as early as
1986, Tesoro's obstinance to change prompted one suitor reportedly to complain
of "the continued desire of Tesoro's management to entrench itself in office and
not to adequately consider bona fide offers to purchase Tesoro, which are in the
best interests of Tesoro and it's shareholders." A similar comment was also
expressed by a later bidder, who complained that Tesoro's board and management
"ha[ve] no sincere intention of selling the company or maximizing shareholder
value."
25. Tesoro's board has done more than just say "no" to change: it has
built elaborate barriers to prevent it. One prime example is the company's
Rights Agreement, more commonly known as a poison pill (the "Poison Pill"). The
board adopted the Poison Pill in 1985 to ward off future bidders, which it since
has resisted successfully. As reported in the Wall Street Journal, two years
later:
8
<PAGE>
In the past, Tesoro has fought vigorously to preserve its
independence. . . . Any hostile takeover of Tesoro could be
difficult. . . . Tesoro has resisted various takeover attempts
and in 1985 established provisions designed to make an acquisition
prohibitively expensive without board approval.
26. This same defensive mentality is reflected by more recent actions
taken by the board:
a. Approving agreements with Tesoro's creditors that make a
change in control of the company an event of default, with "change in
control" to include in one instance the election of directors not approved by
the incumbent board;
b. Approving or continuing "golden parachute" severance
arrangements for certain Tesoro executives, providing for termination
payments if the officers' employment is terminated following a change in
control, which includes the election of directors not approved by the current
board; the officers would receive generous compensation packages, even if
they were fired for outright negligence or neglect of duties;
c. Adopting amendments to the company's By-laws that could
increase the difficulty and expense of stockholder efforts to exercise their
fundamental right to choose and change the members of the board and to exert
control over management and direction of the company; and
d. Extending the Poison Pill without seeking or obtaining
stockholder approval.
27. At the same time, Tesoro's board has been rewarding its members
and management through significant compensation and benefits. According to the
company's most recent proxy statement, these benefits to non-employee board
members include the following:
9
<PAGE>
. Every director is paid an annual retainer of $18,000, plus $2,000 a
meeting, with the chairman being paid $100,000 a year. Non-employee
directors also receive various insurance benefits, which for at least one
director have provided significant benefits.
. Every qualified director will receive annual retirement payments for the
same number of years that they serve on the board. For some current
directors, these payments could last literally for decades.
. Every participating director may defer some or all of his director fees for
the ensuing year, which amounts will be credited to an interest-bearing
account held by the company and, in the event of a "change in control,"
paid in a single lump sum.
. Every director was given options this year for 5,000 shares of Tesoro
common stock and will receive options for 1,000 more each year thereafter.
Similarly, in 1994, Tesoro executives received substantial salary increases, as
well as bonuses that doubled the salaries of its top officers. These awards
admittedly were based on the board's subjective assessments.
28. These actions evidence the incumbent board's preoccupation with
its own enrichment and entrenchment to the detriment of Tesoro stockholders.
The Committee's Proposals
29. On December 26, 1995, the Committee filed materials with the SEC
necessary to solicit stockholder consent for the approval of By-law amendments
and other actions, all to achieve the specific goal of maximizing stockholder
value. The By-law amendments would (i) decrease the size of the board from
eight directors to five; (ii) confirm stockholders' right to remove directors,
with or without cause, through action by written consent; and (iii) provide that
10
<PAGE>
vacancies on the board may be filled only by stockholder action, not simply by
the majority vote of the remaining directors. The consent solicitations also
seek removal of the incumbent directors and the election of the following
nominees proposed by the Committee: Gale L. Galloway, Douglas B. Thompson,
George F. Baker, Alan Kaufman, and James H. Stone.
30. The Committee's purpose in distributing the consent solicitations
is to obtain stockholder approval to reorganize and revitalize Tesoro. If other
Tesoro stockholders share the concerns and discontent of the Committee, the
Committee will be able to take positive and significant steps to try to increase
the value of Tesoro stock.
31. Even though a change in management would be in the best interests
of Tesoro's stockholders, the Committee expects that defendants will try to
thwart full and fair consideration of the consent solicitations. In particular,
considering their history of defensive devices, it is likely that defendants
will resort to the sort of entrenchment measures that incumbent management
typically use, including the filing of unjustified lawsuits challenging, for
example, the sufficiency of the Committee's disclosures under the federal
securities laws. The purpose of this action is to ensure that defendants do not
deprive Tesoro stockholders, the owners of the company, of their fundamental
right to choose its management and direction.
Irreparable Harm
32. Unless preliminary and permanent injunctive relief and
declaratory relief is granted as requested, plaintiffs believe that defendant
Smith and other members of Tesoro's board
11
<PAGE>
and management will continue to entrench and maintain themselves in office and
act inequitably and unlawfully to deprive the Committee members of their right
to try to maximize stockholder value. Further, the Committee will be subjected
to unjustified and needless confusion, delay, and litigation resulting from the
operation of the Poison Pill and certain By-laws, as well as defendants' other
improper and unlawful entrenchment measures.
33. Further, Tesoro's stockholders will be irreparably harmed by
losing their right to fully and fairly consider the Committee's proposals on
their merits. Only this Court can prevent and defeat the improper and unlawful
attempts of defendants to frustrate this fundamental right of stockholders.
34. The Committee has no adequate remedy at law. Only through the
exercise of this Court's equitable powers can the Committee and Tesoro's other
stockholders be fully protected from the immediate and irreparable injury which
defendants' actions threaten to inflict.
First Cause of Action
(Inapplicability of the Poison Pill)
35. The Committee realleges the allegations in the preceding
paragraphs of this Complaint.
36. Knowing that plaintiffs were dissatisfied with Tesoro's
direction, Smith and the others members of the board extended the term of the
company's Poison Pill on December 15, 1995. The Poison Pill otherwise would
have expired.
37. The Poison Pill deems a person to be the "beneficial owner" of
any securities which the person has "the right to vote pursuant to any
agreement, arrangement or understanding."
12
<PAGE>
However, the terms of the Poison Pill addressing the scope of "beneficial owner"
specifically exclude persons holding the power to vote shares by reason of the
grant of a proxy:
[T]he power to vote shares at any meeting of shareholders by reason of
a grant of proxies to any Person who shall have obtained such proxies
pursuant to and a result of a solicitation subject to and conducted in
accordance with Regulation 14A of the Securities Exchange Act of 1934,
as amended, shall not be deemed to constitute such Person the
"Beneficial Owner" of such shares.
(Pertinent pages of the Poison Pill document are attached as Exhibit A to this
Complaint.)
38. In order that the stockholders of Tesoro may consider the
Committee's proposals, and freely make their own decisions pertaining to their
economic self-interest, the Committee requests that the Court enter judgment
declaring that the provisions of the company's Poison Pill exempt, are not
triggered by, and otherwise do not apply to or affect the Committee's efforts to
solicit written consents from fellow stockholders.
Second Cause of Action
(Clarification of By-Laws Regarding Removal of Directors)
39. The Committee realleges the allegations in the preceding
paragraphs of this Complaint.
40. Section 228 of the Delaware General Corporation Law provides that
any action required to be taken at any annual or special meeting of stockholders
may be taken by written consent -- that is, without a meeting, without prior
notice, and without a vote through consents in writing setting forth the action,
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote were present and voted. This
statute controls unless otherwise provided in the company's certificate of
incorporation.
13
<PAGE>
41. Tesoro's certificate of incorporation does not impair this basic
stockholder right under Delaware law. Tesoro's By-laws do provide, however,
that directors may be removed at a special meeting of stockholders called for
that specific purpose:
At any special meeting of the stockholders duly called for the purpose
of removing a director or directors as provided in these By-laws, any
director or directors may, by the affirmative vote of the holders of
the shares representing a majority of the votes of all the shares of
stock outstanding and entitled to vote for the election of directors,
be removed from office, either for or without cause. Such vacancy
shall be filled by the directors as provided in Section 2.2.
The By-laws do not address the issue of removal of directors through stockholder
action by written consent. (Pertinent pages of the By-laws are attached as
Exhibit B to this Complaint.)
42. In order that the stockholders of Tesoro may consider the
Committee's proposals, and freely make their own decisions pertaining to their
economic self-interest, the Committee requests that the Court enter judgment
declaring that the company's By-laws permit stockholders to remove any or all
directors, with or without cause, whether at an annual or special meeting or by
written consent.
Third Cause of Action
(Compliance With Section 13 of the Exchange Act)
43. The Committee realleges the allegations in the preceding
paragraphs of this Complaint.
44. Section 13(d) of the Exchange Act, 15 U.S.C. (S) 78m(d), and the
rules and regulations promulgated under it require that any person acquiring
more than five percent of any class of shares that are registered under Section
12 of the Exchange Act shall file a Schedule 13D
14
<PAGE>
with the Securities and Exchange Commission ("SEC"). The schedule is to
disclose specified information with respect to the identity of the owners and
the amount of the shares they own.
45. On December 26, 1995, the Committee filed a Schedule 13D with the
SEC. (A copy of the schedule is attached as Exhibit C to this Complaint.) The
schedule contains all material information required by applicable law to be
disclosed.
46. Management and directors of public corporations sometimes erect,
as Tesoro has done, protective devices to discourage or resist changes in
control, even if those changes are fair and in the best interests of corporate
stockholders, in order to entrench themselves. Among other tactics, it is
typical for such corporations to commence legal proceedings -- in a multiplicity
of forums or inappropriate forums -- against those who challenge their
management, complaining about the completeness and accuracy of disclosures
required by the securities laws.
47. As set forth above, defendants have already undertaken various
entrenchment actions. There is, accordingly, a strong likelihood and reasonable
apprehension that, although the Committee's proposals are in the best interests
of Tesoro's stockholders, defendants will resist, including by instituting
spurious litigation under Section 13(d) of the Exchange Act and its implementing
rules and regulations.
48. In order that the stockholders of Tesoro may consider the
Committee's proposals, and freely make their own decisions pertaining to their
economic self-interest, the Committee requests that the Court declare that the
Committee has complied in all material respects with Section 13 of the Exchange
Act and its implementing rules and regulations.
15
<PAGE>
Fourth Cause of Action
(Compliance with Section 14 of the Exchange Act)
49. The Committee realleges the allegations in the preceding
paragraphs of this Complaint.
50. Section 14(a) of the Exchange Act, 15 U.S.C. (S) 78n(a), and the
rules and regulations promulgated under it govern the solicitation of proxies
with respect to the voting stock of a public company like Tesoro. In general,
the statute and rules specify the information required to be provided to
stockholders in conjunction with a solicitation, the manner in which the
information is provided, and the solicitation materials required to be filed
with the SEC, as well as prohibit material misrepresentations or omissions in
connection with the solicitation.
51. On December 26, 1995, the Committee filed preliminary consent
materials under Section 14(a) with the SEC for review. (A copy of these
materials is attached as Exhibit D to this Complaint.) These materials contain
all material information required by applicable law to be disclosed.
52. As discussed above, there is a strong likelihood and reasonable
apprehension that, although the Committee's proposals are in the best interest
of Tesoro's stockholders, defendants will resist, including by instituting
spurious litigation under Section 14(a) of the Exchange Act and its implementing
rules and regulations.
53. In order that the stockholders of Tesoro may consider the
Committee's proposals, and freely make their own decisions pertaining to their
economic self-interest, the Committee requests that the Court declare that the
Committee has complied in all material respects with Section 14 of the Exchange
Act and its implementing rules and regulations.
16
<PAGE>
Fifth Cause of Action
(Invalidity of Measures Impeding Stockholder Action by Consent)
54. The Committee realleges the allegations in the preceding
paragraphs of this Complaint.
55. Section 213 of the Delaware General Corporation Law provides
that, if a record date has not been fixed already by the board of directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board is required,
will be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the company. In September
1995, however, the Tesoro board amended its By-laws (without stockholder
involvement) to provide that a stockholder seeking to have the stockholders of
the company authorize or take corporate action by written consent is required to
request the board to fix a record date. The Committee believes that this
amendment was adopted and may be used to frustrate stockholder action by written
consent, with the improper objective of self-entrenchment by defendants.
56. Further, the Committee anticipates that Tesoro will use this By-
law provision or other By-law provisions, or adopt new By-law provisions or
effect other defensive measures, in an effort to delay or otherwise unlawfully
interfere with the Committee's consent solicitation.
57. In order that the stockholders of Tesoro may consider the
Committee's proposals, and freely make their own decisions pertaining to their
economic self-interest, the Committee requests that the Court enjoin defendants
from delaying or otherwise unlawfully interfering with the efforts of the
Committee to solicit consents from other stockholders of Tesoro.
17
<PAGE>
Prayer
Therefore, the Committee prays that this Court enter an order:
A. Preliminarily and permanently enjoining defendants and their
assigns or successors, agents, employees, attorneys, and servants, and all
persons in active concert or participation with them, from commencing any
judicial proceeding, in any forum other than this Court, that would require
litigation of issues common to those raised in this Complaint, by way of claim,
defense, or counterclaim of any of the claims, defenses, or counterclaims which
have been or may be asserted in this litigation;
B. Declaring that the provisions of the company's Poison Pill exempt,
are not triggered by, and otherwise do not apply to or affect the Committee's
efforts to solicit written consents from Tesoro stockholders and preliminarily
and permanently enjoining defendants from implementing the Poison Pill in
response to the Committee's consent solicitations;
C. Declaring that the company's By-laws permit stockholders to remove
any and all directors, with or without cause, whether at an annual or special
meeting or by written consent;
D. Declaring that the Committee has complied in all material
respects with Section 13 of the Exchange Act and its implementing rules and
regulations;
E. Declaring that the Committee has complied in all material
respects with Section 14 of the Exchange Act and its implementing rules and
regulations;
F. Preliminarily and permanently enjoining defendants from taking
any action to delay or otherwise unlawfully interfere with the efforts of the
Committee to solicit consents from other stockholders of Tesoro;
18
<PAGE>
G. Awarding the Committee judgment against defendants, jointly and
severally, for all sums and amounts expended by the Committee as a consequence
of the conduct described in the Complaint, including costs and expenses, and
attorneys', accountants', experts' and other fees of this litigation; and
H. Granting the Committee such other and further relief, legal and
equitable, general and special, as this Court deems just and proper.
Respectfully submitted,
Of Counsel:
Joseph A. Cialone II R. Paul Yetter
Baker & Botts, L.L.P. State Bar No. 22154200
910 Louisiana Street 910 Louisiana Street
Houston, Texas 77002 Houston, Texas 77002
(713) 229-1234 (713) 229-1753
(713) 229-1522 (Fax)
Of Counsel:
/s/JAMES L. BRANTON
--------------------------
Branton & Hall, P.C. James L. Branton
711 Navarro Street State Bar No. 00000069
San Antonio, Texas 78205 711 Navarro Street
(210) 224-4474 San Antonio, Texas 78205
(210) 224-1928 (Fax) (210) 224-4474
Attorneys-in-Charge for Plaintiffs
19
<PAGE>
Exhibit A to Complaint
================================================================================
TESORO PETROLEUM CORPORATION
and
INTERFIRST BANK FORT WORTH, N.A.
Rights Agent
______________________
Rights Agreement
Dated as of December 16, 1985
================================================================================
<PAGE>
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates (as such term is hereinafter
defined) and Associates (as such term is hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is hereinafter defined) of
securities of the Company constituting a Substantial Block (as such term is
hereinafter defined) but shall not include (i) any employee benefit plan of the
Company or (ii) any Person who acquires a Substantial Block in connection with a
transaction or series of transactions approved prior to such transaction or
transactions by the Board of Directors.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect as of the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of any conversion,
exchange or purchase rights (other than these Rights), warrants or options,
or otherwise, provided, however, that a Person shall not be deemed the
"Beneficial Owner" of securities tendered pursuant to a tender offer made
by such Person or any such Person's Affiliates or Associates until such
tendered securities are accepted for
2
<PAGE>
payment or (B) the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any securities of the
Company;
provided, however, that the power to vote shares at any meeting of shareholders
by reason of the grant of proxies to any Person who shall have obtained such
proxies pursuant to and as a result of a solicitation subject to and conducted
in accordance with Regulation 14A of the Securities Exchange Act of 1934, as
amended, shall not be deemed to constitute such Person the "Beneficial Owner" of
such shares.
(d) "Business Day" shall mean any day other than a Saturday, Sunday, or day
on which banking institutions in the State of New York or the State of Texas are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., New York
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
(f) "Common Stock" shall mean the Common Stock, par value $.16-2/3 per
share, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the common stock with the greatest
voting power of such Person.
3
<PAGE>
(g) "Continuing Director" shall mean a director who either (i) was a member
of the Board of Directors of the Company immediately prior to the time an
Acquiring
4
<PAGE>
Exhibit B to Complaint
Adopted: September 22, 1971
Amended: May 31, 1973
November 20, 1974
November 1, 1975
September 29, 1976
September 29, 1979
August 27, 1980
November 22, 1988
April 14, 1989
June 28, 1989
January 2, 1992
September 29, 1992
February 9, 1994
February 23, 1995
July 26, 1995
September 27, 1995
BY-LAWS
OF
TESORO PETROLEUM CORPORATION
(As Amended September 27, 1995)
ARTICLE I
Meeting of Stockholders
Section 1.1 Annual Meetings. The annual meeting of the stockholders for
the election of directors and for the transaction of such other business as
properly may come before such meeting shall be held on such date, and at such
time and place within or without the State of Delaware, as may be designated by
the Board of Directors.
<PAGE>
Section 1.2. Special Meetings. Special meetings of the stockholders for
any proper purpose or purposes may be called at any time by the Board of
Directors, the Chairman of the Board of Directors, the Vice Chairman of the
Board of Directors, the President or any Vice President, to be held on such
date, and at such time and place within or without the State of Delaware, as the
Board of
[PAGE BREAK]
organization, for the election of officers and for the transaction of such other
business as may properly come before the meeting, within thirty days after each
annual election of directors.
The Board of Directors by resolution may provide for the holding of regular
meetings and may fix the times and places at which such meetings shall be held.
Notice of regular meetings shall not be required to be given, provided that
whenever the time or place of regular meeting shall be fixed or changed, notice
of such action shall be mailed promptly to each director who shall not have been
present at the meeting at which such action was taken, addressed to him at his
residence or usual place of business.
Special meetings of the Board of Directors may be called by the Chairman of
the Board of Directors, the Vice Chairman of the Board of Directors, the
President, any Vice President or any two directors. Except as otherwise
required by the statute, notice of each special meeting shall be mailed to each
director, addressed to him at his residence or usual place of business, or shall
be sent to him at such place by telegram, radio or cable, or telephoned or
delivered to him personally, not later than two days before the day on which the
meeting is to be held. Such notice shall state the time and place of such
meeting, but unless otherwise required by statue, the Certificate of
Incorporation of the Corporation or these By-laws need not state the purposes
thereof.
Notice of any meeting need not be given to any directors who shall attend
such meeting in person or who shall waive notice thereof, before or after such
meeting, in writing or by telegram, radio or cable.
Section 2.5 Quorum. One-third of the total number of members of the Board
of Directors as constituted from time to time, but not less than two, shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the absence of a quorum, a majority of those present at the time and place of
any meeting may adjourn the meeting from time to time until a quorum shall be
present, and the meeting may be held as adjourned without further notice of
waiver. A majority of those present at any meeting at which a quorum is present
may decide any question brought before such meeting, except as otherwise
provided by law, the Certificate of Incorporation or these By-laws.
Section 2.6 Resignation of Directors. Any director may resign at any time
by giving written notice of such resignation to the Board of Directors, the
Chairman of the Board of Directors, the Vice Chairman of the Board of Directors,
the President, any Vice President or the Secretary. Any such resignation shall
take effect at the time specified therein, or, if no time be specified, upon
receipt thereof by the Board of Directors or one of the above-named officers;
and, unless specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
<PAGE>
Section 2.7 Removal of Directors. At any special meeting of the
stockholders, duly called for the purpose of removing a director or directors as
provided in these By-laws, any director or directors may, by the affirmative
vote of the holders of shares representing a majority of the votes of all the
shares of stock outstanding and entitled to vote for the election of directors,
be removed from office, either for or without cause. Such vacancy shall be
filled by the directors as provided in Section 2.2.
Section 2.8 Compensation of Directors. Directors shall receive such
reasonable compensation for their service as such, whether in the form of salary
or a fixed fee for attendance at meetings, with expenses, if any, as the Board
of Directors may from time to time determine. Nothing herein contained shall be
construed to preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 2.9 Indemnification. The Corporation shall indemnity to the full
extent authorized or permitted by the laws of the State of Delaware any person
<PAGE>
Exhibit C to Complaint, the Schedule 13D of the filing persons identified herein
with respect to Tesoro Petroleum Corporation filed with the Securities and
Exchange Commission on December 26, 1995, is incorporated herein by reference.
Exhibit D to Complaint, the preliminary Schedule 14A of the Committee with
respect to Tesoro Petroleum Corporation filed with the Securities and Exchange
Commission on December 26, 1995, is incorporated herein by reference.
<PAGE>
Exhibit 8
CONTACT:
Kevin S. Flannery
(203)435-5020
FOR IMMEDIATE RELEASE
STOCKHOLDERS' COMMITTEE FOR NEW MANAGEMENT OF
TESORO PETROLEUM CORPORATION FORMED
NEW YORK, NEW YORK, December 26, 1995--Five stockholders of Tesoro Petroleum
Corporation announced that they have today filed with the Securities and
Exchange Commission a Schedule 13D reporting the formation of The Stockholders'
Committee For New Management of Tesoro Petroleum Corporation.
The Committee intends to solicit consents from Tesoro's stockholders
to remove the existing members of Tesoro's Board of Directors and replace them
with a slate of the Committee's nominees. If elected as directors, the
Committee's nominees intend to consider alternative strategies to enhance
stockholder value, including, among other things, changes in Tesoro's business
policies and plans or corporate structure, along with sales of certain assets
and operations or Tesoro as a whole. Based on the Committee's current knowledge
of Tesoro, the Committee expects that the Committee's nominees, once elected,
will adopt a strategic plan to enhance the value of Tesoro which will include as
a principal element the prompt disposition of Tesoro's refinery business in
order to enable Tesoro to focus on its core exploration and production business.
The Committee announced that it had filed preliminary consent solicitation
materials with the Securities and Exchange Commission, but that the solicitation
will not begin until definitive solicitation materials are filed with the
Commission.
The Committee's members are George F. Baker, Kevin S. Flannery, Dr.
Alan Kaufman, James H. Stone and Robert S. Washburn. The Committee's nominees
are Mr. Baker, Dr. Kaufman, Mr. Stone, Gale L. Galloway and Douglas B. Thompson.
Mr. Baker, age 56, has been President of Cambridge Capital Holdings,
an investment advisory firm, since 1987, and a General Partner of Baker, Nye
L.P., an investment partnership, since 1967. Mr. Baker also is Chairman,
President and Chief Executive Officer of Whitehall Corporation, a New York Stock
Exchange company in the electronics, aerospace and earth sciences fields. He is
a director of Digicon, Inc., an American Stock Exchange company engaged
primarily in the business of collecting, processing and interpreting geophysical
data for the oil and gas exploration and development industry.
Mr. Flannery, age 51, is the President, a director and the principal
shareholder of Whelan Management Corp., an investment advisory firm, and of
Whelan Securities, Inc., a securities broker-dealer. From September 1991 until
April 1993 he was Senior Vice President and head equity trader at George Weiss
Associates, Inc., a money management and brokerage firm in Hartford,
Connecticut. From 1975 until September 1991 Mr. Flannery was with Bear, Stearns
& Co., Inc. as Senior Managing Director and head of the block trading desk.
<PAGE>
Mr. Galloway, age 65, has had a long career in the oil and natural gas
industry, and currently is Chairman of the Board and Chief Executive Officer of
GLG Energy, Inc., an independent oil and gas producer. He also is Chairman and
Chief Executive Officer of LIG Acquisition Corporation and Gas Transmission U.K.
Limited, companies engaged in the acquisition and operation of pipeline systems,
as well as an owner and a member of the board of Prodevco S.A., a project
development company involved principally in the refining industry in South
America.
Dr. Kaufman, age 68, has been a practicing neurosurgeon for over 25
years and an investor in a number of companies. Since 1987, he has been a
director of Newpark Resources, Inc., a New York Stock Exchange company engaged
primarily in providing oilfield services.
Mr. Stone, age 70, is Chairman and Chief Executive Officer of Stone
Energy Corporation, a New York Stock Exchange company engaged primarily in oil
and natural gas exploration and development. He also is a director and member
of the executive committee of the Board of Directors of Newpark Resources, Inc.
(described in Dr. Kaufman's biographical information above) and a director and
member of the executive Committee of the Board of Directors of Hibernia Corp., a
bank holding company listed on the New York Stock Exchange, and of its
subsidiary, Hibernia National Bank.
Mr. Thompson, age 46, has been a director of Digicon, Inc. (described
in Mr. Baker's biographical information above) since 1991 and Digicon's Chairman
of the Board since 1994. Since 1989, he also has served as President of Jupiter
Management Company.
Mr. Washburn, age 64, has a background in law, real estate development
and investment banking, and currently is a private investor. From 1974 to 1987,
Mr. Washburn was a general partner of Montgomery Securities, a New York Stock
Exchange member firm, serving as head of its investment banking activities and
as Chairman of its Executive Committee for several of those years.
Certain of the Committee's members were active in unsuccessful efforts
to elect dissident slates to Tesoro's Board at the 1994 and 1995 annual
stockholders' meetings. According to the Committee, those efforts involved
nominations from the floor of the annual meetings, and did not involve
solicitation of proxies from Tesoro's stockholders generally; nonetheless, the
dissidents came close to electing three of their nominees at the 1995 meeting.
Mr. Flannery stated that the Committee had reached its decision to engage in an
expensive and difficult consent solicitation to replace Tesoro's Board because,
in the view of the Committee's members, the current Board of Directors has
exhibited a sustained inability or unwillingness to take the actions necessary
to enhance stockholder value, and that its consent solicitation materials, when
available, will describe the Committee's case against the incumbent directors.
In addition, the Committee intends to commence a lawsuit today in the
United States District Court for the Western District of Texas, San Antonio
Division, against Tesoro and its Chief Executive, Bruce A. Smith. The action
will seek, among other relief, a judgment (i) declaring that Tesoro's "poison
pill" does not apply to the efforts of the Committee to solicit consents from
other stockholders of Tesoro; (ii) declaring that Tesoro's By-laws permit
removal of directors through stockholder action by written consent; (iii)
enjoining Tesoro from delaying or otherwise unlawfully interfering with the
efforts of the Committee to solicit consents from
<PAGE>
other stockholders; and (iv) declaring that the actions and disclosures of the
Committee with regard to their effort to solicit consents are and have been in
compliance with the federal securities laws.
Tesoro Petroleum Corporation is a natural resource company engaged in
petroleum refining and marketing in Alaska and on the U.S. West Coast, natural
gas exploration and production in Texas and Bolivia, and wholesale marketing of
fuel and lubricants on the Texas and Louisiana Gulf Coast. Tesoro's Common
Stock is listed for trading on the New York and Pacific Stock Exchanges.
# # #
