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SECURITIES AND EXCHANGE COMMISSION
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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TESORO PETROLEUM CORPORATION
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(Name of Registrant as Specified in Its Charter)
The Stockholders' Committee for New Management of
Tesoro Petroleum Corporation
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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The Committee for New Management
of Tesoro Petroleum Corporation
c/o Whelan Management Corp.
8 Holley Street
Lakeville CT 06039
860 435 5020 fax 860 435 5025
March 28, 1996
TO: Clients of
Institutional Shareholder Services
RE: Tesoro Petroleum Corporation
You may have received a "Proxy Analysis" from Institutional
Shareholder Services ("ISS") recommending that you support the current
board of Tesoro Petroleum Corporation ("Tesoro") against the Consent
Solicitation initiated by The Committee for New Management of Tesoro
Petroleum Corporation (the "Committee") seeking to replace the current
board of directors of Tesoro.
With all due respect to ISS, we obviously believe ISS has reached the
wrong conclusion, and has merely accepted at face value Tesoro
Management's oft-repeated promise that "we will do better in the
future". To those of us who are long-suffering holders of Tesoro
stock, this "promise" sounds all too familiar - and hollow.
We firmly believe, despite Management's promises and cosmetic changes,
that if this Board (or a slight variation thereof) is returned to
office, it will just be business as usual at Tesoro, with little or no
hope for any increase in value to stockholders.
We find it interesting that both ISS and the only director that
represents any significant amount of stock (Steven Grapstein; see
pages 14-15 of ISS's Analysis) credit the efforts of Kevin Flannery
and/or the Committee with causing the Board to make some changes in
the direction of the company - but yet they would still have you keep
essentially the old Board in place, giving it free rein to do as it
wishes once the Committee goes away. While ISS and Management point
to proposed changes in the Board, there is as of now only one new
outside director since the last annual meeting - Mr. Patrick Ward.
You have seen our solicitation materials and press releases. We urge
you to replace the current board with the Committee's Nominees.
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March 28, 1996
Page 2
I am taking this opportunity to set forth our comments on what we
believe are the most significant aspects of ISS's analysis that need
correction or clarification.
* The problems we attribute to ineffective management over the
past several years were mainly in the E&P and corporate
finance departments, areas that were then under the
direction of Bruce Smith; we have not blamed Mike Burke's
stewardship as ISS implies (ISS Analysis page 8, 2nd para.,
last sentence).
* Regarding Mr. Burke's severance payment of $4.25 million
(page 12): We have a copy of Mr. Burke's employment
contract for anyone who wants to see it. We are unable to
see how the Company was obligated to pay that amount of
money under this agreement.
* ISS repeats Bruce Smith's claim that he and Tennessee Gas
had negotiated a settlement of the gas contract litigation
but that Tennessee Gas "would not sign the agreement because
of Mr. Flannery's involvement with the company and his
efforts to replace the board of directors" (page 12). This
statement contrasts with what then-Chairman of the Executive
Committee Steven Grapstein told us: Mr. Smith held out for
$130 million (including approximately $30 million in
receivables from Tennessee Gas, then covered by a court-
ordered bond), whereas Tennessee Gas had offered to settle
for "only" $100 million.
* ISS says that "Wall Street responded favorably" to the sale
of 5.4 million shares of common stock to retire preferred
stock in June 1994 (page 12 under "Debt"). Quite the
contrary - the stock had moved up in the first quarter of
1994 to a high of $12 3/8 on March 14th well before the
announcement on May 12th (when the stock closed at $11 1/4)
and the subsequent sale on June 22nd of 5.4 million shares
of common stock at $10 3/8. The stock fell further to as
low as $8 1/2 in August 1994.
ISS may take Tesoro management's promises for change in the future at
face value, but we long-term stockholders have a problem with that,
and feel more strongly than ever that now is the time for change.
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March 28, 1996
Page 3
After you have had a chance to review our comments we would like a few
minutes of your time to discuss our position in more detail.
Very truly yours,
/s/ Kevin S. Flannery
Kevin S. Flannery, on behalf of
The Stockholders' Committee for
New Management of Tesoro Petroleum
Corporation
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