SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]

For the fiscal year ended: December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from __________________ to ____________________

Commission File No. 0-27432

CLEAN DIESEL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)

Delaware 06-1393453
- -------------------------------------------------------------- ---------------------------------------
(State or other jurisdiction of incorporation of organization) (I.R.S. Employer Identification Number)

Suite 702, 300 Atlantic Street
Stamford, CT 06901
(203) 327-7050
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(Address and telephone number of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act:

Common Stock $0.05 par value per share
--------------------------------------

(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

Aggregate market value of the voting stock held by non-affiliates of the
registrant based on the average bid and asked prices of March 18, 1997:
$10,695,830.

Indicate number of shares outstanding of each of the registered classes of
common stock at March 18, 1997: 2,516,666 shares Common Stock, $0.05 par value.

Documents incorporated by reference:
Certain portions of the registrant's 1996 Annual Report to stockholders and of
the registrant's Proxy Statement for the annual meeting of stockholders to be
held in 1997 described in Parts II, III, and IV hereof are incorporated by
reference in this report.

PART I

Forward-Looking Statements

Statements in this Form 10-K which are not historical facts, so-called
"forward-looking statements," are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that all forward-looking statements involve risks and uncertainties, including
those detailed in the Company's filings with the Securities and Exchange
Commission. See Item 1 "Risk Factors of the Business" and also Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Item 1. Business

General

The Company, a Delaware corporation with a principal place of business at
300 Atlantic Street, Stamford, Connecticut 06901, was formed in January 1994 as
a wholly-owned subsidiary of Fuel-Tech N.V. ("Fuel Tech") to further develop and
commercialize platinum fuel catalysts ("PFCs"). Fuel Tech saw market
opportunities develop after the passage of the Clean Air Act Amendments of 1990
("CAAA") and in 1992 Fuel Tech focused its research and development efforts on
the PFCs as an integral part of a diesel engine emission control program. The
rights to the PFCs were transferred by license agreements to the Company by Fuel
Tech and Platinum Plus, Inc. (an affiliate of Fuel Tech), effective October 28,
1994 (together, "the License Agreements"). In December 1995, Fuel Tech caused
1,810,853 (72.0%) of the Company's 2,516,666 outstanding shares of Common Stock,
$0.05 par value (the "Common Stock") to be publicly sold in a rights offering to
Fuel Tech stockholders. Fuel Tech retains the balance of the Common Stock.

Further information required by this item is set forth (a) on the inside
front cover of the Company's Annual Report to Stockholders for the year ended
December 31, 1996, exhibit 19 to this Report on Form 10-K (the "Annual Report"),
under the captions "Platinum Fuel Catalyst (PFC)" and "NOx Control Products,"
and (b) on page 1 and 2 of the Annual Report under the caption "Chairman's
Letter" and is incorporated by reference herein.

Regulations
Both federal and state environmental regulations in recent years have
demanded reduced emission levels from engines. Smog is a problem in a number of
industrialized areas and is caused by pollutants from engines, principally NOx
and volatile organic compounds. Particulate emissions have consistently been
linked to respiratory ailments. To address these pollution concerns, CAAA
require states to reduce NOx emissions in these areas from both stationary
sources, such as compressor engines and turbines, and mobile sources, such as
automobiles, buses and trucks. Specific regulations under Title II of the
CAAA-Provisions Relating to Mobile Sources pertain to the control of NOx and
particulates from diesel engines. These regulations also limit the sulfur
content of diesel fuel and establish new registration requirements for fuels and
fuel additives. Existing urban buses in major metropolitan areas were required
to reduce particulate emissions as of January 1995, and beginning in 1998 there
will be new NOx level standards in place for urban buses and new diesel engines.
In July 1995, the Environmental Protection Agency (the "EPA"), California Air
Resources Board and major diesel engine manufacturers signed a Statement of
Principles directed towards the development of new low NOx engines by 2004.
Under the CAAA there are so far only retrofit regulations for particulate
emissions from urban buses. EPA has, however, recently proposed further
tightening of ambient levels of ozone and particulates.

Products and Markets
Information required by this item (a) for the Company's PFC products is
set forth in the text from page 3 through page 4 of the Annual Report under the
caption "Platinum Fuel Catalysts" and the subcaptions "Platinum Plus - Europe
and Asia," "Platinum Plus - The Americas," "PFCs for Particulate Traps and
Catalytic Oxidizers," "Premium Diesel," "Total Market for PFCs," and "Health
Effects and the Use of Metallic Additives," and (b) for the Company's NOx
control products in the text from page 4 through page 5 of the Annual Report
under the caption "NOx Reduction Systems and Additives" and the subcaptions "NOx
Reduction for Heavy-Duty Diesel Engines," "Retrofit NOx Reduction for Heavy-Duty
Diesel-Engines" and "Market for NOx Reduction Systems and Additives," and (c)
with respect to marketing strategy generally, in the text of the second
paragraph under the caption "Business Structure" on page 5 of the Annual Report,
all of which information is incorporated by reference herein.

Sources of Supply

Information required by this item is set forth in the first paragraph of
text in the Annual Report on page 5 under the caption "Business Structure" and
is incorporated by reference herein.

Research and Development

The Company employs six individuals, including three executive officers,
in engineering and product development as of the date of this report. During the
years ended December 31, 1996, 1995, and 1994, the Company's research and
development expenses exclusive of patent costs totaled approximately $1,747,000,
$796,000, and $441,000 respectively. The Company expenses all development costs
as incurred.

Protection of Proprietary Information

Under the license agreement with Fuel Tech, the Company holds the rights
to a number of patents and patent applications pending. There can be no
assurance that pending patent applications will be approved or that the issued
patents or pending applications will not be challenged or circumvented by
competitors. Certain critical technology incorporated in the Company's products
is protected by trademark and trade secret laws and confidentiality and
licensing agreements. There can be no assurance that such protection will prove
adequate or that the Company will have adequate remedies for disclosure of its
trade secrets or violations of its intellectual property rights.

Insurance
The Company maintains coverage for the customary risks inherent in its
operations. Although the Company believes its insurance policies to be adequate
in the amount and coverage for its current operations, no assurance can be given
that this coverage will, in fact, be or will continue to be available in
adequate amounts or at a reasonable cost or that such insurance will be adequate
to cover any future claims against the Company.

Employees
The Company has nine full-time employees. In addition, two executive
officers of Fuel Tech provide management, administrative, financial, and legal
services for the Company pursuant to a Management and Services Agreement between
Fuel Tech and the Company on an as-needed basis. The Company also retains three
outside technical consultants on specific projects related to platinum, engines,
and NOx reduction.

Risk Factors of the Business
Investors in the Company should be mindful of the following risk factors
relative to the Company's business.

Competition
Competition in the diesel fuel additive market will come from other large
additive suppliers. The Company is not currently in competition with other fuel
additive manufactures. When active marketing of the Company's PFCs is in
progress, the Company anticipates competing on the basis of price, proprietary
technology, effectiveness and ease of use of the PFCs and in efficiency of
distribution. To the Company's knowledge, it does not compete against any major
gasoline companies in the PFC market. While the company intends to seek
collaborative arrangements with additive suppliers and oil companies, there are
no assurances that these arrangements can be negotiated. Competition may also
come from alternative fuels including methanol and natural gas as well as from
mechanized adjustments to engines, new injector designs and engine rebuilds.
While the Company believes its patent position produces a strong competitive
barrier to entry, other platinum-based compounds could be developed outside the
Company's issued patents. To this end the Company is seeking collaborative
arrangement with specific platinum manufacturers.

Competition in the NOx control market will come from other suppliers of
reagent-based post-combustion NOx control systems including large,
well-established catalyst and engine manufacturing companies. The Company has
formed certain alliances to support its efforts to commercialize NOx control
products but there are no assurances that these alliances will be sufficient or
be maintained.

Lack of a Viable Product; Need for Additional Research and Development

The Company was incorporated in January 1994 and, to date, has engaged
solely in research and development related to its PFC process and NOx reduction
technologies. The Company's PFC process will require substantial additional
research, development and testing in order to determine its commercial
viability. The Company has not proven its PFC technology other than in a limited
number of trials and demonstrations. If the Company successfully field tests its
PFC technology, the commercialization of the technology will require significant
additional time and expenditures. The commercialization of the technology will
depend on the Company's success in achieving cost effective production of the
PFCs, maintaining registration status with the EPA and other regulatory bodies,
and on forming strategic alliances for marketing and distribution of PFCs. The
accomplishment of some or all of these objectives may be delayed or may never
occur. If the accomplishment of any of these objectives is delayed, the Company
may require additional capital to continue the development and commercialization
of the PFC technology, and there can be no assurance that such capital will be
available.

No Revenues to Date; Continuing Operating Losses
The Company has had no revenues through December 31, 1996. The Company
expects to continue to incur operating losses through at least 1997. There can
be no assurance that the Company will achieve or sustain significant revenues or
profitability in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

No Assurances of Additional Funding
The Company may in the future seek additional funding in the form of a
public or private offering of additional shares of the Company's Common Shares.
Any offering of the Company's Common Shares may result in immediate and
significant dilution to the stockholders of the Company. The ability of the
Company to consummate a public offering or to obtain other financing will depend
on the status of the Company's research and development and marketing programs
and clinical trials, as well as conditions then prevailing in the relevant
capital markets. There can be no assurance that such funding will be available
when needed or on terms acceptable to the Company. In the event that the Company
is unable to raise additional funds, the Company may be required to delay, scale
back or severely curtail its development efforts or otherwise impede its ongoing
clinical trials, which could have a material adverse effect on the Company's
business, operating results, financial condition and long-term prospects. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Limited Marketing Experience
The Company intends to enter into strategic alliances with marketing
partners. In addition to its supply agreement with Holt Lloyd International
Ltd., it is currently engaged in cooperative development and test programs with
potential marketing partners and is in discussion with others with a view
towards conducting similar programs. The Company is targeting to have one or
more additional strategic alliance agreements for marketing purposes concluded
within 1997; however, there can be no assurance that the Company will
successfully implement its sales and marketing plan.

Possible Volatility of Stock Price
There has been significant volatility in the market prices of
publicly-traded shares of emerging growth technology companies. Factors such as
announcements of technical developments, establishment of strategic alliances,
changes in governmental regulation, and developments in patent or proprietary
rights may have a significant effect on the market price of the Company's Common
Shares.

Relationship with Fuel Tech; Conflicts of Interest
Directors and officers of Fuel Tech and its subsidiaries who are also
directors and officers of the Company, and Fuel Tech as the Company's largest
stockholder, are in positions involving the possibility of conflicts of interest
with respect to transactions concerning the Company. The Company currently has
only one independent director, but may seek some in the future. See Item 13,
"Certain Relationships and Related Transactions".

Lack of Diversification
The Company is engaged in only one principal business, involving the
development and commercialization of technology to control emissions from
internal combustion engines through the manufacturing and marketing of its PFCs
and by other products, such as emulsions and urea SCR systems. The Company does
not expect to have any material sources of revenues from other than the PFCs in
the foreseeable future. An adverse development in the Company's business as a
result of competition, technological change, government regulation, or any other
factor could have a significantly greater impact than if the Company maintained
diverse operations.

Expansion into New Markets
The Company's strategy is to expand beyond PFCs to other types of
emission control products for combustion engines, particularly for NOx control.
There can be no assurance that the Company will be successful in manufacturing
its PFCs cost-effectively or meet the future demand for emission-reducing fuel
additives or NOx control products. Failure to gain market acceptance (either in
the engineering or regulatory communities or in the general public) would have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business --- Markets."

Dependence upon Third Party Technology
While the PFCs may be used alone for moderate levels of emission control,
it is expected that the product will be integrated into other systems using
third party technology to achieve higher levels of control. The adoption of the
use of PFCs in such systems will depend on the effectiveness of third party
technology, the ability of third parties to market their products, and the
compatibility of the PFCs and NOx control products with their systems. Failure
of these third party systems to gain market acceptance or failure of the PFCs
and NOx control products to prove compatible and effective with third party
systems could have an adverse effect on the Company's business, operating
results, and financial condition. See "Business --- Markets."

Uncertainty of Market Acceptance
The commercial success of the Company's products will depend upon
acceptance by the fuel additive, oil and engine industries, and acceptance by
governmental regulatory bodies. This market acceptance will in turn depend upon
competitive developments and the Company's ability to demonstrate the efficacy,
cost-effectiveness, safety and ease of use of PFCs and NOx control products of
the Company. The failure by the Company to receive market acceptance for PFCs
and NOx control products would have an adverse effect on the Company's business,
operating results and financial condition. See "Business --- Markets."

No Assurance of Necessary Regulatory Approvals
The Company's products and manufacturing activities are subject to
governmental regulation, principally by the EPA and corresponding foreign and
state agencies. The EPA administers the CAAA. The Company is subject to the
standards and procedures contained in such act and the regulations promulgated
thereunder, as well as similar standards, procedures, and regulations of
international regulatory authorities, and is subject to inspection by the EPA
and other regulatory bodies for compliance with such standards, procedures, and
regulations. Failure to receive appropriate approvals or to comply with EPA and
similar foreign regulations could result in civil monetary or criminal
sanctions, restrictions on or injunction against marketing of the Company's
products as well as seizure or recall of the Company's products, or other
regulatory actions. PFCs received registration from the EPA to be used as an
aftermarket treatment of individual vehicles and in bulk fuel supplies for
diesel. CDT has recently received registration status under EPA fuel additive
regulations for three additional PFCs with the original PFCs. CDT currently has
until May 1997 to submit information regarding the potential health impacts of
additive emissions under Federal regulations issued in May 1994 pertaining to
all fuel and fuel additives. The Company has received assurance from the U.K.
Government that the PFCs are not allergenic and emissions would be below levels
causing human toxicity. See "Business --- General."

No Assurance of Protection of Patents and Proprietary Rights
The Company holds licenses to a number of patents and has patent
applications pending. There can be no assurance that pending patent applications
will be approved or that the issued patents or pending applications will not be
challenged or circumvented by competitors. Certain critical technology
incorporated in the Company's products is protected by trademark and trade
secret laws and confidentiality and licensing agreements. There can be no
assurance that such protection will prove adequate or that the Company will have
adequate remedies for disclosure of its trade secrets or violations of its
intellectual property rights. See "Business --- Patents; Protection of
Proprietary Information."

Platinum Price Volatility
The cost of platinum will have a direct impact on the future pricing and
profitability of PFCs. Although the Company intends to minimize this risk
through various purchasing and hedging strategies, there can be no assurance
that the Company will be able to do so. A significant increase in the price of
platinum could have a material adverse effect on the Company's business,
operating results and financial condition.

Dependence on Attracting and Retaining Personnel
The success of the Company will depend, in large part, on the Company's
ability (i) to retain current key personnel, (ii) to attract and retain
additional qualified management, scientific and manufacturing personnel, and
(iii) to develop and maintain relationships with research institutions and other
outside consultants and luminaries. The loss of key personnel or the inability
of the Company to hire or retain qualified personnel, or the failure to
assimilate effectively such personnel could have a material adverse effect on
the Company's business, operating results and financial condition. See "Business
- --- Employees."

No Dividends
The Company has to date not paid dividends on its Common Stock and does
not intend to pay any dividends to its stockholders in the foreseeable future.
The Company currently intends to reinvest earnings, if any, in the development
and expansion of its business. See Item 5, "Market for Registrant's Common
Equity and Related Stockholder Matters."

Item 2. Properties

Facilities
The Company has leased for administrative purposes 2,900 square feet of
office space at 300 Atlantic Street, Stamford, Connecticut effective February 1,
1996 through February 28, 1999. Annual base rent under this lease is $65,250.

Patents and Licenses
The Company's technology is comprised of patents, patent applications,
trade or service marks, data and know-how. This technology is held under two
license agreements effective as of October 28, 1994 from Fuel Tech, for use
outside the U.S., and from Platinum Plus, Inc., a subsidiary of Fuel Tech, Inc.,
which is a direct subsidiary of Fuel Tech, for use in the U.S. These agreements,
which expire in 2008, each provide the Company with an exclusive license,
including the right to sublicense the technology. They provide for running
royalties commencing in 1998 of 2.5% of gross revenues derived from the PFCs.
The Company may at any time purchase legal title to the technology and terminate
the agreements by payment of the aggregate amount of $12,000,000 to the
licensors. The agreements require the Company to maintain the technology at its
expense. Neither party to either agreement may promote or sell within the
defined territory of each agreement any other metallic fuel additive competitive
with the defined technology. Either party to either agreement may terminate such
agreement upon a material breach of the other party which remains uncured for 45
days after notice. A material breach of the Company would include failure to
render payments when due or the bankruptcy or insolvency of the Company.

The Company has, under its exclusive license from Fuel Tech, nine U.S.
and sixteen foreign patents for PFCs. Fourteen patent applications are also
pending in the U.S. and sixty foreign applications are pending, including five
applications filed under the patent cooperation treaty. The key aspect of these
patents, which were filed for diesel and gasoline applications and have claims
concerning platinum group metals compositions, manufacturing methods and
applications, is the protection of the platinum group metal compounds which are
soluble and stable in the fuel and actively catalyze the combustion of the fuel.

Item 3. Legal Proceedings
The Company is not involved in legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1996, no matters were submitted to a vote of
the Company's security holders.

Part II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Information required by this Item is set forth under the caption
"Stockholder Information" on the inside back cover of the Annual Report and is
incorporated by reference herein. The Company's Common Stock became first
publicly traded on December 26, 1995.

Item 6. Selected Financial Data

Information required by this Item is set forth under the caption
"Selected Financial Data" on page 8 of the Annual Report and is incorporated by
reference herein.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Information required by this Item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on page 6 of the Annual Report and is incorporated by reference
herein.

Item 8. Financial Statements

Information required by this Item is set forth on pages 9 through 18 of
the Annual Report and is incorporated by reference herein.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

Part III

Item 10. Directors and Executive Officers of the Registrant

Information regarding directors and executive officers of the Company
will be set forth under the captions "Election of Directors," and "Directors and
Executive Officers of the Company" in the Company's proxy statement related to
the 1997 annual meeting of stockholders (the "Proxy Statement") and is
incorporated by reference herein.

Item 11. Executive Compensation

Information required by this item will be set forth under the caption
"Executive Compensation" in the Proxy Statement and is incorporated by reference
herein excluding, however, the information under the captions "Report of the
Board of Directors on Executive Compensation" and "Performance Graph" which is
not incorporated by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information required by this item will be set forth under the caption
"Principal Stockholders and Stock Ownership of Management" in the Proxy
Statement and is incorporated by reference herein.

Item 13. Certain Relationships and Related Transactions

Information required by this item will be set forth under the captions
"Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Transactions" in the Proxy Statement and is
incorporated by reference herein.

Part IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a). (1) Financial Statements
The Financial Statements required by Part II, Item 8 of Form 10-K are
included in the Annual Report, pages 9 through 18 and are incorporated by
reference herein.

(2) Financial Statement Schedules
Schedules have been omitted because of the absence of the conditions
under which they are required or because the required information where
material is shown in the Financial Statements or the notes thereto.

(3) Exhibits

EXHIBIT NO. TITLE Page No.
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*3(i) Certificate of Incorporation, as amended.
*3(ii) By-Laws.
*4a Specimen Stock Certificate.
*10b License Agreement between Fuel Tech and the
Company, effective October 28, 1994.
*10c License Agreement between the Company and Platinum
Plus, Inc., effective October 28, 1994.
**10d The Company's 1994 Incentive Plan, as amended
through August 8, 1996.
****10e Management Services Agreement between the Company,
Fuel Tech, Inc. and Fuel Tech, dated as of June 1, 1996.
*10f Memorandum of Understanding between the Company and
Anglo American Platinum Corporation Ltd., dated August 15, 1995.
*10g Promissory Note of the Company to Fuel Tech, dated July 1, 1995.
***10h Office Premises Lease of January 26, 1996.
**10i Registration Rights Agreement between the Company and Fuel Tech
of March 17, 1997.
*14 Material Foreign Patents (filed with Exhibit 10b).
**19 Annual Report of the Company to Stockholders for the year 1996.
**23.1 Consent of Auditors, Ernst & Young LLP, dated March 28, 1997.
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* Previously filed as Exhibit to Registration Statement on Form S-1 of
August 16, 1995, No. 33-95840 and incorporated by reference herein.
** Filed herewith.
*** Previously filed as an Exhibit to Form 10-K for the year ended December
31, 1995, and incorporated by reference herein.
**** Previously filed as an Exhibit to Form 10-Q for the quarter ended
September 30, 1996, and incorporated by reference herein.

(b). Reports on Form 8-K

No reports on Form 8-K were filed by the Company for the fourth quarter
of 1996.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Clean Diesel Technologies, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

CLEAN DIESEL TECHNOLOGIES, INC.

March 28, 1997 By: /s/ Jeremy D. Peter-Hoblyn
------------------ --------------------------
Date Jeremy D. Peter-Hoblyn
Chief Executive Officer,
President and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed below by the following persons on behalf of Clean
Diesel Technologies, Inc. and in the capacities and on the dates indicated.

/s/ Ralph E. Bailey Director and Chairman of the Board of Directors March 28, 1997
-------------------------
Ralph E. Bailey

/s/ Jeremy D. Peter-Hoblyn Chief Executive Officer, President and Director March 28, 1997
------------------------- (principal executive officer)
Jeremy D. Peter-Hoblyn

/s/ Scott M. Schecter Chief Financial Officer, Vice President and March 28, 1997
------------------------- Treasurer (principal financial and accounting
Scott M. Schecter officer)

/s/ James M. Valentine Director, Chief Operating Officer, and March 28, 1997
------------------------- Executive Vice President
James M. Valentine

/s/ Kent D. S. Durr Director March 28, 1997
-------------------------
Kent D. S. Durr

/s/ John A. de Havilland Director March 28, 1997
-------------------------
John A. de Havilland

/s/ Charles W. Grinnell Director, Vice President and Corporate Secretary March 28, 1997
-------------------------
Charles W. Grinnell