Texaco Inc.

Mar. 26, 1986

INQUIRY LETTER 1

Texaco Inc.

2000 Westchester Avenue

White Plains, NY 10650

February 26, 1986

Securities and Exchange Commission

Judiciary Plaza

450 Fifth Street, N.W.

Washington, D.C. 20549

Attention: Office of Chief Counsel

Division of Corporation Finance

Gentlemen:

Pursuant to Rule 14a-8(d) under the Securities Exchange Act of 1934, enclosed herewith are five copies of:

1.Shareholder proposal from Mr. Gorham L. Cross transmitted to Texaco Inc. ("Texaco") by letter dated December 11, 1985.

2.Opinion of Counsel of even date herewith setting forth the legal bases for our conclusion that the enclosed proposal may properly be omitted from Texacos proxy materials for its 1986 annual meeting of stockholders.

Also enclosed herewith are four copies of this letter.

Texaco intends to omit the proposal from its proxy materials pursuant to Rule 14a-8(c) under the Securities Exchange Act of 1934 based upon the following conclusions (which are discussed in greater detail in the enclosed opinion of counsel):

1.The proposal may be omitted pursuant to Rule 14a-8(c)(6) since the proposal deals with a matter beyond the issuers power to effectuate in view of Texacos complex legal and financial situation.

2.The proposal may be omitted pursuant to Rule 14a-8(c)(2) since the transaction contemplated by the proposal could only be implemented in violation of law.

3.The proposal may be omitted pursuant to Rule 14a-8(c)(1) since, under the laws of Texacos domicile (Delaware), it is not a proper subject for action by security holders.

4.The proposal may be omitted pursuant to Rule 14a-8(c)(3) since the proposal, taken together with the supporting statement, is contrary to the Commissions proxy rules and regulations, including Rule 14a-9, which prohibits false or misleading statements in proxy soliciting materials because the proposal, among other things, omits to state its true purpose and intent as well as the legal and practical impediments associated therewith and consequences thereof.

5.The proposal may be omitted pursuant to Rule 14a-8(c)(7) since the proposal implicitly addresses a resolution of Texacos pending litigation with Pennzoil Company, which is a matter relating to the conduct of the ordinary business operations of the issuer.

Accordingly, Texaco requests that the Commission concur with our conclusion that the proposal may properly be omitted from Texacos proxy materials for its 1986 annual meeting of stockholders, and state that it will take no action in such event.

By letter dated the date hereof, Texaco is also requesting that the Commission concur in the omission from such proxy materials of a proposal received from Mr. Howard C. Lipsitz. In the event such request is denied, Texaco hereby requests that the Commission concur with our conclusion that the Proposal of Mr. Cross may be omitted from such proxy materials pursuant to Rule 14a-8(c)(11), since the proposal of Mr. Cross is substantially duplicative of the proposal of Mr. Lipsitz.

The timing of our submission of this request for no action has necessarily been impacted by the timing of Texacos litigation with Pennzoil Company. As discussed in the enclosed opinion of counsel, the decision of the Court of Appeals for the Second Circuit in the matter of Texaco Inc. v. Pennzoil Company was rendered on February 20, 1986. Also, Texacos motion for a new trial in the Texas trial court, which if granted would have removed some of Texacos objections to the Proposal, was pending until February 23, 1986. Texaco intends to file preliminary copies of its proxy statement and form of proxy for its 1986 annual meeting of stockholders with the Commission pursuant to Rule 14a-6(a) on or about March 7, 1986. Texacos 1986 annual meeting of stockholders is currently scheduled for May 13, 1986. In view of the foregoing, Texaco hereby requests, in accordance with Rule 14a-8(d), that this no-action request be filed later than 60 days prior to the date the preliminary copies of Texacos proxy materials for its 1986 annual meeting are filed with the Commission so that Texaco will not be required to delay the filing of its preliminary proxy materials with the Commission and the date of its 1986 annual meeting.

By copy of this letter to the Proponent, accompanied by the enclosed opinion of counsel, we are notifying the Proponent that we intend to omit his proposal from our proxy materials for the reasons stated herein and therein.

Very truly yours,

Carl B. Davidson

CBD:kd

Enclosures

cc: Mr. Gorham L. Cross

499 Grove Street

Needham, MA 02192

INQUIRY LETTER 2

Texaco Inc.

2000 Westchester Avenue

White Plains, NY 10650

February 26, 1986

Securities and Exchange Commission

Judiciary Plaza

450 Fifth Street, N.W.

Washington, D.C. 20549

Attention: Office of Chief Counsel

Division of Corporation Finance

Gentlemen:

Mr. Gorham L. Cross has submitted to Texaco Inc. ("Texaco") a proposal (the "Proposal") for inclusion in managements proxy soliciting materials for Texacos 1986 annual meeting of stockholders. A copy of the Proponents letter, which includes the Proposal and his statement in support thereof, is attached.

The Proposal reads as follows:

"RESOLVED: That the stockholders recommend that the Board of Directors of Texaco, Inc. act to divide the properties of Texaco into several separate, independent, publicly traded business entities including more than one refining/marketing company and more than two exploration and production companies and to distribute all of the shares of those entities to Texaco stockholders."

The management of Texaco intends to omit the Proposal from its proxy materials, and requests that it be advised whether the staff of the Commission would recommend to the Commission that it take any action against Texaco in such event.

The management of Texaco intends to omit the Proposal from its proxy materials under Rule 14a-8(c)(6) (as pertaining to a matter beyond the issuers power to effectuate), Rule 14a-8(c)(2) (as pertaining to a proposal which, if implemented, would require the issuer to violate law), Rule 14a-8(c)(1) (as pertaining to a subject improper for action by security holders), Rule 14a-8(c)(3) (as pertaining to a proposal containing false and misleading statements) and Rule 14a-8(c)(7) (as pertaining to ordinary business operations).

A. Rule 14a-8(c)(6)--Beyond Issuers Power to Effectuate. The feasibility of the transactions contemplated by the Proposal must be considered in the context of Texacos current litigation with Pennzoil Company. On December 10, 1985, the District Court of Harris County, Texas, 151st Judicial District, in the matter of Pennzoil Company v. Texaco Inc. (the "State Action"), entered a judgment against Texaco in the amount of approximately $11.12 billion plus costs and post-judgment interest. Paragraph 7 of such judgment expressly prohibits any dispositions by Texaco of its assets (other than in the routine and ordinary course of business) during the pendency of the matter before such court (which pendency is expected to expire on or about March 25, 1986). On January 10, 1986, in the matter of Texaco Inc. v. Pennzoil Company (the "Federal Action"), the United States District Court for the Southern District of New York granted a preliminary injunction enjoining and restraining Pennzoil Company from taking any action of any kind to enforce or attempt to enforce such judgment and required Texaco to provide security in the amount of $1 billion to secure the preliminary injunction. On February 20, 1986, the United States Court of Appeals for the Second Circuit affirmed the grant of such preliminary injunction, but allowed Pennzoil leave to contest the adequacy of the security provided in the event of changed circumstances.

The Second Circuit warned, however, that:

"There is no evidence that Texaco, a publicly held corporation, would seek to encumber its property other than as would be necessary in the ordinary course of business or that it would transfer any of its assets to defraud Pennzoil. If any such evidence were adduced, Pennzoil would be justified in moving before the district court for a modification of the injunction." Texaco Inc. v. Pennzoil Company, supra at 48.

It is clear, therefore, that attempts to transfer substantially all of Texacos assets to its subsidiaries to be followed by distributions of shares of those subsidiaries would jeopardize the preliminary injunction which protects Texacos stockholders and creditors.

The feasibility of the transactions contemplated by the Proposal must also be considered in the context of Texacos current capitalization. Texaco has approximately $7 billion in long-term debt securities currently outstanding, including guaranteed subsidiary debt securities, in many cases under indentures or guarantees restricting Texaco from transferring its properties substantially as an entirety to another person unless that person assumes all the obligations of Texaco with respect to such debt securities.

Accordingly, in order to accomplish a plan of liquidation of the type contemplated by the Proposal, Texaco would be required to (i) provide some manner of liquidating trust or other arrangement for the benefit of Pennzoil Company and other contingent creditors and (ii) retire the aforementioned debt securities (which it is not now entitled to do) or otherwise provide for payment of the same. In order to legally accomplish such a liquidation, Texaco would require very large amounts of cash to provide for its contingent and actual creditors. A liquidation of Texaco as contemplated by the Proposal without adequate provision for its contingent and actual creditors would violate numerous state fraudulent conveyance laws (e.g., New York Debtor and Creditor Law, Sections 270-281). See Paragraph B below. A liquidation of Texaco as contemplated by the Proposal would also invite further court action in the Federal Action (including potential demands by Pennzoil Company for injunctive relief and/or substantially increased collateral to secure the aforementioned preliminary injunction) and/or the State Action which could have a devastating detrimental impact on Texaco. See Paragraph E below.

The dollar magnitude of the aforementioned judgment, combined with the dollar amount outstanding of the aforementioned debt securities, would require a sale by Texaco for cash of a very substantial part of its assets, virtually dismembering Texaco, as a condition to liquidation. Accordingly, any liquidation of Texaco simply could not be accomplished through the "spin-off" of "separate, independent, publicly traded business entities" as contemplated by the Proposal. The Proposal therefore deals with a matter beyond the issuers power to effectuate and may be omitted pursuant to Rule 14a-8(c)(6).

B. Rule 14a-8(c)(2)--Require Violation of Law. In view of the financial constraints discussed in Paragraph A above, any plan of liquidation of the type contemplated by the Proposal could only be effected in violation of law, including breach of (i) fiduciary duties of the directors of Texaco to effectuate any such liquidation with due care and (ii) state fraudulent conveyance laws. In addition, such a plan of liquidation would invite preventative court action in the Federal Action and/or the State Action, as discussed in Paragraph A above.

A massive transfer of substantially all of Texacos assets as required by the Proposal without adequate provision for contingent and actual creditors of Texaco would certainly be viewed as a fraudulent conveyance under the laws of at least 26 states, including New York (New York Debtor and Creditor Law, §§ 270 to 281), which have adopted the Uniform Fraudulent Conveyance Act, since such transfer would render Texaco insolvent and would unfairly prejudice Texacos creditors.

The transaction contemplated by the Proposal, therefore, if implemented by Texaco, would require the issuer to violate law, and may be omitted pursuant to Rule 14a-8(c)(2).

C. Rule 14a-8(c)(1)--Improper Subject for Action by Security Holders. The Proposal is phrased in terms of a stockholder recommendation to the Board of Directors of Texaco. I note, in this connection, that even though the Proposal is cast in precatory form, I believe that it is not a proper subject for stockholder action under Delaware law. A note to Rule 14a-8(c)(1) indicates that under certain states laws "a proposal that mandates certain action by the issuers board of directors may not be a proper subject for shareholder action, while a proposal recommending such action of the board may be proper under such state law."

This note was revised in the 1983 amendments to Rule 14a-8, "to make clear that whether the nature of the proposal, mandatory or precatory, affects its includability is solely a matter of state law, and to dispel any mistaken impression that the Commissions application of paragraph (c)(1) is based on the form of the proposal." Release No. 34-20091, Fed. Sec. L.Rep. (CCH) 83,417 (August 16, 1983).

I believe that the principle which has found its way into the note to Rule 14a-8(c)(1) is not based on Delaware law, but on a decision of the New York Court of Appeals interpreting the law of that State. See Auer v. Dressel, 306 N.Y. 427 (1954). I am not aware of any decision suggesting that Delaware law, which is applicable here because Texaco is a Delaware corporation, looks otherwise than to the subject matter of a stockholder proposal or holds that a precatory format will transform a matter within managements exclusive province into a proper subject for stockholder action. See Trans World Corporation (February 28, 1984).

Section 275 of the Delaware General Corporation Law expressly provides that a liquidation proposal shall only be submitted for stockholder approval after the board of directors has adopted a resolution to the effect that it is "deemed advisable in the judgment of the board of directors of _the corporation that it should be dissolved" (unless all shareholders shall consent in writing to such liquidation). Accordingly, the laws under which Texaco is organized acknowledge that plans of liquidation of a corporation are so complex that, absent unanimous consent of the shareholders of such corporation, they should only be initiated by the board of directors of such corporation. The Proposal, therefore, is, under the laws of the issuers domicile, not a proper subject for action by security holders prior to action by the Board of Directors, and may be omitted pursuant to Rule 14a-8(c)(1).

D. Rule 14a-8(c)(3)--False and Misleading Statements. The Proposal is dated the day following the entry of the judgment in the State Action. The result, and perhaps the intent, of the Proposal would be to avoid or reduce the potential liability of Texaco to Pennzoil Company in the State Action. The statement in support of the Proposal provides, for example, that "The Pennzoil legal challenge might not have been so threatening if the large resources of Texaco were not owned by a single corporation. If Texaco were several independent corporations, it is not likely after awhile that the same lawsuit would be filed against each part". The aforementioned statement is not merely untrue, it also implies that the purpose of the Proposal is to defraud Pennzoil as a judgment creditor of Texaco by way of liquidating the entity against which the judgment in the State Action runs. In view of the Proposals misstatements of fact and omission to state material facts pertaining to the State Action, the Federal Action and the infeasibility of a plan of liquidation of Texaco in the manner contemplated by the Proposal at this time, the Proposal is contrary to the Commissions proxy rules and regulations, including Rule 14a-9, which prohibits false or misleading statements in proxy soliciting material, and may be omitted pursuant to Rule 14a-8(c)(3).

E. Rule 14a-8(c)(7)--Ordinary Business Operations. The defense of a lawsuit falls within the ordinary business operations of a corporation, in view of the complexity of the issues and procedures typically involved. Texaco has pursued and will continue to pursue all appropriate legal action in connection with the State Action and the Federal Action. As discussed in Paragraph A above, the transaction contemplated by the Proposal would invite further court action in the Federal Action and/or the State Action, which could have a devastating detrimental impact on Texaco.

The Federal Action relieved Texaco from complying with the extraordinarily burdensome lien and bond provisions of Texas state law in connection with the judgment entered in the State Action. Texaco now may pursue it appeal in the Texas state courts of the judgment in the State Action, having already posted the $1 billion of collateral required in connection with the preliminary injunction granted in the Federal Action. Texaco believes that it is essential that it be able to pursue its appeal of the unwarranted and unprecedented judgment in the State Action. The Proposal would threaten to disturb the balance struck by the preliminary injunction granted in the Federal Action, and might well trigger events that would require Texaco to take drastic action in order to preserve its rights to appeal in Texas.

Inasmuch as the Proposal implicitly and expressly addresses the problem presented by the judgment in the State Action and proposes a manner of dealing with such problem in a way that might disturb the balance struck by the Federal Action, the Proposal interferes with the conduct by Texaco of its litigation. Accordingly, the Proposal deals with a matter relating to the conduct of the ordinary business operations of Texaco and may be omitted pursuant to Rule 14a-8(c)(7).

Conclusion

Accordingly, it is my opinion that the Proposal may be omitted from Texacos proxy statement and form of proxy for its 1986 annual meeting of stockholders pursuant to Rule 14a-8(c) under the Securities Exchange Act of 1934.

Very truly yours,

Michael H. Rudy

MHR:kd

GORHAM L. CROSS SHAREHOLDER PROPOSAL FOR TEXACO, INC.

RESOLVED: That the stockholders recommend that the Board of Directors of Texaco, Inc. act to divide the properties of Texaco into several separate, independent, publicly traded business entities including more than one refining/marketing company and more than two exploration and production companies and to distribute all of the shares of those entities to Texaco stockholders.

REASONS: The problem seems to be that Texaco stock appears to be too cheap in relation to the value of its properties. The whole appears to be worth less than the sum of the parts. Recall that Texaco paid $128 a share for Getty. A year earlier Getty stock was about $53 and Texaco stock about $31 a share. In an unrelated transaction after acquiring Getty, Texaco repurchased almost 26 million Texaco shares for almost $1.3 billion for a price of about $50 a share.

It is not obvious why the stock price of Texaco shares is not higher, but one reason may be sheer size. Particularly with the acquisition of Getty, Texaco appears to have grown well beyond the threshold for economies of scale in refining and exploration. Instead the risks have become much higher. Only a few people at the top allocate huge capital resources. Mistakes become magnified. The Pennzoil legal challenge might not have been so threatening if the large resources of Texaco were not owned by a single corporation. If Texaco were several independent corporations, it is not likely after awhile that the same lawsuit would be filed against each part.

Integration, or the combination of refining/marketing with exploration and production in the same company may also be part of the explanation of why Texacos stock appears priced so low. When Unocal and Sun formed Union Exploration Partners and Sun Energy Partners, the implied stock market value of the new limited partnerships concentrated on exploration and production exceeded that of all of Unocal and Sun. Perhaps perceived overinvestment in refining/marketing by integrated companies makes investors feel that cash flow from oil and gas properties will not be reinvested properly in the future and values will be eroded.

If indeed the aggregate stock price for separate, independent pieces of Texaco is higher, although that cannot be assured, it could be a sign of healthier companies.

INQUIRY LETTER 3

GORHAM L.CROSS

499 GROVE STREET

NEEDHAM, MASSACHUSETTS 02192

March 03, 1986

Securities and Exchange Commission

Judiciary Plaza

450 Fifth Street, N.W.

Washington, D.C. 20549

Attn: Chief Counsel

Division of Corporation Finance

Dear Chief Counsel:

To me the enclosed is quite simple. I have not asked Texaco Inc. to do anything illegal. I have asked them to consider the company restructuring.

I made an honest proposal. I asked the management of Texaco to think about it. I did not suggest immediate implementation or any other illegal act. To me, its quite simple. Do I have the right to a voice in how my property is managed or disposed of? I want the stockholders of Texaco to see my proposal and for management to think about it. Thats all.

Sincerely,

Gorham L. Cross

GLC/ldb

P.S. Texaco Inc. has stonewalled me for almost three months on this proposal. Why should they now be allowed to file an objection after the dead line?

INQUIRY LETTER 4

Kurt H. Wulff

18 Hilltop Road

Short Hills, New Jersey

March 10, 1986

Federal Express

Securities and Exchange Commission

Judiciary Plaza

450 Fifth Street, N.W.

Washington, D.C. 20549

Attention: Chief Counsel

Division of Corporation Finance

Dear Chief Counsel:

Texaco is attempting to omit from its proxy statement a shareholder proposal by Mr. Gorham L. Cross, whom I have advised in my capacity as an independent oil investment analyst. I urge you to oppose Texacos action because their declaration of intention missed the 60 day deadline under Rule 14A-8(d) because similar proposals at two other large oil companies have been accepted for inclusion in a proxy statement and because Texacos imaginary objections, if upheld, would strip Mr. Cross of his rights to be heard as a shareholder.

Notification to admit a proposal is required not less than 60 days prior to the date the proxy material is filed. Considering Texacos plans to hold its meeting in May, that date would have fallen in early February. Instead, Texacos letter to the SEC is dated February 26th. Surely, had Mr. Cross proposal been submitted one day after the December 19th deadline, it would have been omitted with no further questions.

Two large companies similar to Texaco have agreed to carry shareholder resolutions like the one proposed here. Since proxy material is confidential, I shall not mention the names of the companies in this correspondence. I know of the resolutions because I have been consulted on them as with this one and I will provide names of the other companies if you cannot find them in your files.

Impugning Mr. Cross character, Texaco erroneously ascribes intentions to Mr. Cross that are then construed to violate subsections 1,2,3,6 and 7 of Rule 14-A(c).

Texaco asserts that the resolution is not a proper subject for action by security holders (1). Texaco concludes that the resolution is a proposal for liquidation and builds an elaborate argument as to why liquidation is not a proper subject. Nowhere in the proposal or its supporting statement does the word, liquidation, appear. The exact form of the proposed restructuring would be determined by the Board of Directors and management of Texaco. A likely approach could very well be a tax-free reorganization such as a spinoff. Several entities could be spunoff and the residual entity could continue as an ongoing corporation rather than be liquidated. The resolution makes no intention of pre-judging the optimum form of implementation.

Texaco says the resolution requires a violation of law (2). Again Texaco pre-judges that implementing the resolution would involve defrauding creditors. Therefore, such action would violate state fraudulent conveyance laws. Obviously, any change in corporate structure must satisfy creditors. Mr. Cross has a long, distinguished record as a successful businessman. For Texaco to assert that he intends to defraud assails his character.

The notion of fraud also permeates Texacos rationalization that the proposal is false and misleading (3). Texaco suggests that the purpose of the proposal is to defraud Pennzoil. Imagine how ludicrous it would appear if Texaco were to go to court to defend Pennzoil against Jerry Cross!

Because of the Pennzoil suit Texaco asserts that the resolution is beyond its power to effectuate (6). Suits come and go; annual meetings occur only once a year. At the time the proposal was written it was indeterminate whether the Pennzoil suit would still be outstanding. Obviously, the proposal cannot be implemented in such a way as to violate a court order. Either a form of implementation consistent with the order would have to be adopted or the whole issue postponed until the suit is settled.

Finally, Texaco states that the proposal would interfere with ordinary business operations (7). That conclusion rests on the idea that the proposal would interfere with the Pennzoil law suit. Law suits are part of ordinary operations, therefore, the proposal deals with ordinary operations. Rule 14-A-8(c)-7 appears designed to exclude matters from shareholder proposals that the Board of Directors would ordinarily not consider. Clearly a restructuring of the company is a matter beyond ordinary business operations and, therefore, does not fall under the rule. By Texacos interpretation, every proposal, if it so much as requires a secretary to open a letter, deals with ordinary business operations.

Those are my specific responses to the Texaco charges. Mr. Cross made his comments to me by telephone after reading Texacos letter (see attached).

Sincerely,

Kurt H. Wulff

KHW:rmc

Attachments

cc: Ms. Letty G. Lynn/SEC

Mr. Gorham L. Cross, Jr.

GORHAM L. CROSS SHAREHOLDER PROPOSAL FOR TEXACO, INC.

RESOLVED: That the stockholders recommend that the Board of Directors of Texaco, Inc. act to divide the properties of Texaco into several separate, independent, publicly traded business entities including more than one refining/marketing company and more than two exploration and production companies and to distribute all of the shares of those entities to Texaco stockholders.

REASONS: The problem seems to be that Texaco stock appears to be too cheap in relation to the value of its properties. The whole appears to be worth less than the sum of the parts. Recall that Texaco paid $128 a share for Getty. A year earlier Getty stock was about $53 and Texaco stock about $31 a share. In an unrelated transaction after acquiring Getty, Texaco repurchased almost 26 million Texaco shares for almost $1.3 billion for a price of about $50 a share.

It is not obvious why the stock price of Texaco shares is not higher, but one reason may be sheer size. Particularly with the acquisition of Getty, Texaco appears to have grown well beyond the threshold for economics of scale in refining and exploration. Instead the risks have become much higher. Only a few people at the top allocate huge capital resources. Mistakes become magnified. The Pennzoil legal challenge might not have been so threatening if the large resources of Texaco were not owned by a single corporation. If Texaco were several independent corporations, it is not likely after awhile that the same lawsuit would be filed against each part.

Integration, or the combination of refining/marketing with exploration and production in the same company may also be part of the explanation of why Texacos stock appears priced so low. When Unocal and Sun formed Union Exploration Partners and Sun Energy Partners, the implied stock market value of the new limited partnerships concentrated on exploration and production exceeded that of all of Unocal and Sun. Perhaps perceived overinvestment in refining/marketing by integrated companies makes investors feel that cash flow from oil and gas properties will not be reinvested properly in the future and values will be eroded.

If indeed the aggregate stock price for separate, independent pieces of Texaco is higher, although that cannot be assured, it could be a sign of healthier companies.

Gorham Crosss Response to Texacos Letter Asking the SEC

to Approve Omission of Mr. Crosss Stockholder Resolution

Telephone Conversation with Kurt Wulff, March 3, 1986

Well, I want to tell you that I heard from Texaco. My reply was that I sincerely believe that the company should be opened up into various units for the stockholders benefit; its a simple request, period. For 3 months Ive been stonewalled by Texaco. Yet I noticed that after all these months they asked for an extension from the Securities and Exchange Commission.

The question is, "Will I have a voice in how my property is administered and disposed of? Whether I had a voice in it, it was as simple as that.

The cloud of smoke from Texaco covered all these other things which to me did not seem important. I thought of rights. I thought of civil rights and not only whether somebody is a slave, but I think in more modern American terms and maybe even with other societies, civil rights also refers to what you own. To me this appeared to be my property and it appeared to me that I had a voice in what happened to my property.

I recall that in a conversation I had at one time with Thurgood Marshall in the Supreme Court. I asked him some questions on a civil rights case. I asked him, "It seems like there was a whole cloud put around this issue, that there was a lot of smoke..." His answer was very, very simple. He said, "Yes, youre absolutely correct." To me it was plainer than a goats ass going uphill. And thats what I told my colleagues on the Supreme Court."

And to me what we have here is plainer than a goats ass going uphill because what we have is a suggestion from a stockholder that perhaps the interest of the stockholders would be served if the various functions of this huge company were separated, organized in a different way and divided into various enterprises. What we have for a response is stonewalling and the stonewalling says we have complexities of litigation and finance Complexities of this and complexities of that and, hey, thats the ball game. I guess thats the problem. I guess thats what were up against. I guess thats what youve been helping me with.

Im not sophisticated in these matters but I get very upset because I think the management of Texaco, Inc. regard me as an interloper, regard me as an outsider trying to put forth my views on their company when, as a matter-of-fact, they are running my company--more, our company.

Theres a vital difference and I think theyve lost it. I think the fact theyve lost it is a function of size. A function of size as the Russian Empire and the Soviet Union is a function of size, of unresponsiveness. Its like all big companies, everything just sort of tumbles.

I dont know how to handle it. I look to experts who can see this in this enterprise and that in that enterprise, see where theyre working at cross-purposes and can see this is where the stockholders interest would be served.

I only can look at a company that has a fantastic book value, which probably has an even more exhilarating actual value in terms of assets. This is just plain underachievement. The underachievement in todays vibrant stock market becomes more and more appalling. I ask for something to be done about it.

Those people at the Securities and Exchange Commission are supposed to make the difference, you know. Theyre supposed to make me as tall as Texaco, Inc. And if they do it, then terrific. Its very, very difficult for them to do but thats their job; they know it. Theyre going to do it if they can do it. Theyre good guys there. theyre trying to do their best and hopefully they will come down on our side.

We havent asked Texaco to split up the company; we havent asked Texaco to do this; weve asked Texaco to think about it. If they say, today we have litigation.." In company practice you have to think of tomorrow. There are constraints today that wont be there tomorrow. There are constraints tomorrow that wont be there today. I want them to think ahead about the resolution that I turned in.

And were not bad guys; we dont want to cut off their salaries. What the top people of Texaco get is peanuts; it is minuscule compared to the planned progress of the whole company. Everyone can be accommodated and we want a good deal for everybody and we hope for the best.

There are lots of good guys in big business. Terrific guys. I wouldnt call these guys bad guys. I think the management of Texaco. Inc. is doing an excellent management job-fine management job. But I dont think that theyre up to par on planning, strategic planning. And I think the reason is not because theyre inadequate per se, but because they have so much to do and so much pressure. I think that it is the function of a stockholder to say, "Look guys, quit doing it that way, putting out fires; step back and take a look and see whats best for all of us. You top executives that want to retire, youve been working for 30 years, youre risen to the top, youve given your blood for the company, I dont object to large compensation. I dont object to anything you have coming to you, but I hope youll think about these things in an imaginative way because thats done so much for so many other companies."

STAFF REPLY LETTER

Carl B. Davidson, Secretary

Texaco Inc.

2000 Westchester Avenue

White Plains, NY 10650

Dear Mr. Davidson:

This is in response to your letter of February 26, 1986 concerning a shareholder proposal submitted by Mr. Gorham L. Cross We also received correspondence dated March 3 and 10, 1986 setting forth the views of the proponent concerning this matter. Our response is attached to the enclosed photocopy of your correspondence. By doing this, we avoid having to recite or summarize the facts set forth in the correspondence. Copies of all of the correspondence also will be provided to the proponent.

In connection with the foregoing, your attention is directed to the enclosure, which sets forth a brief discussion of the Divisions informal procedures regarding shareholder proposals.

Sincerely,

William E. Morley

Chief Counsel

Enclosures

cc: Gorham L. Cross

499 Grove Street

Needham, Massachusetts 02192

RESPONSE OF THE OFFICE OF CHIEF COUNSEL

DIVISION OF CORPORATION FINANCE

MAR 26 1986

Re: Texaco Inc. (the "Company")

Incoming letter dated February 26, 1986

The proposal relates to dividing the Companys properties among several independent subsidiaries and distributing all shares of those entities to Company shareholders.

This Division does not concur in your opinion as to the applicability of paragraphs (c)(1), (c)(2), (c)(6), (c)(7) and (c)(11) of Rule 14a-8 to the proposal. Accordingly, we do not believe that the Company may rely on any of these provisions as a basis for omitting the proposal.

This Division does not concur in your opinion that the proposal and supporting statement may be omitted in their entirety under Rule 14a-8(c)(3). However, there appears to be some basis for your opinion that the last sentence of the second paragraph of the supporting statement may be excluded under that provision, unless cast as the opinion as the opinion of the proponent. Accordingly, unless the proponent promptly revises that last sentence of the second paragraph of the supporting statement as indicated, this Division will not recommend any enforcement action to the Commission if the Company omits that sentence from its proxy material.

Sincerely,

Cecilia D. Blye

Special Counsel