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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Western Atlas Inc.
(Name of Issuer)
Common Stock, $1.00 par value per share
(Title of Class of Securities)
957674 10 4
(CUSIP Number)
Lawrence O'Donnell, III, Esq.
Baker Hughes Incorporated
3900 Essex Lane, Suite 1200
Houston, Texas 77027
(713) 439-8600
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 10, 1998
(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 that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g),
check the following box. [ ]
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits, See Section 240.13d-7(b) for
other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for 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).
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SCHEDULE 13D
CUSIP No. 957674 10 4
<TABLE>
<S> <C> <C>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Baker Hughes Incorporated ("Baker Hughes")
76-0207995
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
BK; WC; OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEMS 2(d) OR 2(E)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF 10,905,763*
SHARES ----------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 0
EACH ----------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 10,905,763*
WITH ----------------------------------------------
10 SHARED DISPOSITIVE POWER
0
----------------------------------------------
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
10,905,763*
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.6%**
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14 TYPE OF REPORTING PERSON
CO
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</TABLE>
* The shares of common stock, par value $1.00 per share ("Western Atlas Common
Stock"), of Western Atlas Inc. ("Western Atlas") covered by this item are
purchasable by Baker Hughes upon exercise of an option granted by Western
Atlas to Baker Hughes on May 10, 1998 and described in Item 4 of this
Statement. Prior to the exercise of the option, Baker Hughes is not entitled
to any rights as a stockholder of Western Atlas as to the shares of Western
Atlas Common Stock covered by the option. The option may be exercised only
upon the happening of certain events referred to in Item 4, none of which has
occurred as of the date hereof. Baker Hughes expressly disclaims any
beneficial ownership of the shares of Western Atlas Common Stock purchasable
by Baker Hughes upon exercise of the option, because the option is
exercisable only in the circumstances referred to in Item 4, none of which
has occurred as of the date hereof, and Baker Hughes has no present
investment or dispositive power with respect to such shares. If the option
were exercised, Baker Hughes would have the sole right to vote or to dispose
of the shares of Western Atlas Common Stock issued as a result of such
exercise.
** Beneficial ownership percentages set forth herein assume that at May 10,
1998, there were 54,802,834 shares of Western Atlas Common Stock outstanding.
Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended,
shares deemed to be beneficially owned by the reporting person as a result of
the option are also deemed to be outstanding for purposes of computing these
percentages.
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Schedule 13D
of
Baker Hughes Incorporated
Item 1: Security and Issuer.
This Statement on Schedule 13D relates to shares of common stock, par
value $1.00 per share ("Western Atlas Common Stock"), of Western Atlas Inc., a
Delaware corporation ("Western Atlas"). The address of Western Atlas' principal
executive office is 10205 Westheimer Road, Houston, Texas 77042.
Item 2: Identity and Background
The reporting person, Baker Hughes Incorporated ("Baker Hughes"), is a
provider of products and services to the oil, gas and process industries and is
incorporated under the laws of the State of Delaware. The address of Baker
Hughes' principle executive office is 3900 Essex Lane, Houston, Texas 77027.
The names of the directors and executive officers of Baker Hughes and
their respective business addresses or residences, citizenship and present
principal occupations or employment, as well as the names, principal businesses
and addresses of any corporation or other organizations in which such
employment is conducted, are set forth in Annex A to this Statement and are
specifically incorporated herein by reference. Other than Baker Hughes'
executive officers and directors, there is no corporation or other person
ultimately controlling Baker Hughes.
(d)-(e) During the last five years, neither Baker Hughes nor, to the
knowledge of Baker Hughes, any of the persons listed on Annex A hereto,
(i) has been convicted in any criminal proceeding (excluding traffic
violations and similar misdemeanors) or (ii) has been a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, United States federal or state securities laws or finding
any violation with respect to such laws.
Item 3: Source and Amount of Funds or Other Consideration
The Option (as defined below) was granted as an inducement to and in
consideration of entering into the Merger Agreement (as defined below) and
Baker Hughes' granting a reciprocal option to Western Atlas. Baker Hughes did
not pay any cash consideration in respect of the Option and has not purchased
any shares of Western Atlas Common Stock thereunder.
The exercise of an irrevocable option (the "Option") held by Baker
Hughes pursuant to a Stock Option Agreement, dated as of May 10, 1998 (the
"Stock Option Agreement"), by and between Western Atlas (as issuer) and Baker
Hughes (as grantee), for the full number of shares of Western Atlas Common Stock
currently covered thereby would require (based on an Exercise Price (as
described below) of $98.70 per share) the payment of a maximum aggregate
Exercise Price of approximately $1.1 billion.
If the conditions precedent were satisfied to permit Baker Hughes to
exercise the Option and Baker Hughes so exercised the Option, Baker Hughes
expects that it would fund its purchase through the use of one or more of the
following sources: working capital of Baker Hughes, bank borrowings, other
borrowings or the issuance of debt securities.
Item 4: Purpose of Transaction
Merger Agreement
On May 10, 1998, Baker Hughes, Western Atlas and Baker Hughes Delaware
I, Inc., a Delaware corporation ("Merger Sub"), entered into an Agreement and
Plan of Merger (the "Merger Agreement"), whereby, subject to the conditions
stated therein, Merger Sub will merge (the "Merger") with and into Western
Atlas, and Western Atlas, as the surviving corporation, will become a direct,
wholly owned subsidiary of Baker Hughes. In the Merger, each share of Western
Atlas Common Stock outstanding immediately prior to the effective time of the
Merger will be converted automatically into the right to receive a number of
shares of the common stock of Baker Hughes, $1.00 par value per
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share (the "Baker Hughes Common Stock"), equal to the Exchange Ratio (as
defined in the Merger Agreement).
The closing of the Merger will occur on the first business day
immediately following the day on which all of the conditions to the Merger
contained in the Merger Agreement have been satisfied or waived or on such other
date as Baker Hughes and Western Atlas may agree. The closing of the Merger is
conditioned upon approval of the stockholders of both Baker Hughes and Western
Atlas as well as the receipt of all applicable regulatory approvals, including
the expiration or termination of the waiting period prescribed by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and other
customary conditions all as further described in the Merger Agreement.
Pursuant to the Merger Agreement, the Certificate of Incorporation of
Western Atlas and the Bylaws of Merger Sub will be the Certificate of
Incorporation and Bylaws, respectively, of the surviving corporation of the
Merger (the "Surviving Corporation"). The directors of Merger Sub and the
officers of Western Atlas immediately prior to the effective time of the Merger
(the "Effective time") will be the initial directors and officers,
respectively, of the Surviving Corporation.
Pursuant to the Merger Agreement, all shares of Western Atlas Common
Stock issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive a number of shares of Baker Hughes Common
Stock as described above. All such shares of Western Atlas Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist. Each issued and outstanding share of the
common stock of Merger Sub shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation. Merger Sub has
1,000 shares of common stock issued and outstanding.
The Merger Agreement provides for limitations on the solicitation by
Western Atlas and Baker Hughes and their respective directors, officers,
employees, agents, affiliates or other representatives of any proposal or offer
(other than by the other party) with respect to certain types of business
combinations and transactions. The Merger Agreement also provides for a
termination fee payable to Baker Hughes or Western Atlas by the other if the
Merger Agreement is terminated for certain reasons.
As a result of the Merger, Western Atlas Common Stock will no longer
be listed for trading on the NYSE.
Stock Option Agreement
General. In connection with, and as an inducement to, the execution and
delivery of the Merger Agreement, Baker Hughes and Western Atlas entered into
the Stock Option Agreement, pursuant to which Western Atlas granted to Baker
Hughes an option to purchase up to 10,905,763 shares of Western Atlas Common
Stock (or such number of shares of Western Atlas Common Stock as represents
19.9% of the then outstanding shares of Western Atlas Common Stock) at a price
per share equal to the lesser of (a) $98.70 ($41.125 multiplied by 2.4) and (b)
the Exchange Ratio multiplied by the closing price of Baker Hughes Common Stock
on the date of exercise of the option.
In connection with the execution of the Merger Agreement and the Stock
Option Agreement, Baker Hughes and Western Atlas entered into a reciprocal
stock option agreement pursuant to which Baker Hughes granted to Western Atlas
an option to purchase up to 33,772,146 shares of Baker Hughes Common Stock (or
such number of shares of Baker Hughes Common Stock as represents 19.9% of the
then outstanding shares of Baker Hughes Common Stock) at a price per share of
$41.125 (the last sales price of the Baker Hughes Common Stock on the New York
Stock Exchange, Inc. ("NYSE") on May 8, 1998).
The following is a summary of certain provisions of the Stock Option
Agreement.
Exercise of the Option. The Option will be exercisable, in whole or in
part, at any time and from time to time following the occurrence of any event
(an "Exercise Event") giving rise to an obligation of Western Atlas to pay Baker
Hughes a fee of $50 million pursuant to the Merger Agreement, which obligation
arises upon the occurrence of the following events:
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(i) Western Atlas terminates the Merger Agreement after the Board
of Directors of Western Atlas both
(a) determines that proceeding with the Merger would be
inconsistent with its fiduciary obligations because
Western Atlas has received a third party's proposal
that is superior to the Merger Agreement to acquire,
or combine with, Western Atlas, and
(b) elects to terminate the Merger Agreement prior to the
date that the stockholders of Western Atlas have
approved the Merger Agreement and the Merger and the
stockholders of Baker Hughes have approved the
issuance of shares of Baker Hughes Common Stock
pursuant to the Merger Agreement, subject to certain
conditions;
(ii) Western Atlas or Baker Hughes terminates the Merger Agreement
after both
(a) the public announcement of a third party's proposal
that is superior to the Merger Agreement to acquire,
or combine with, Western Atlas, and
(b) a Western Atlas stockholders meeting (including
reconvened meetings after adjournments or
postponements thereof) has been held, and the
stockholders at that meeting failed to approve the
Merger and the Merger Agreement; and
(iii) Baker Hughes terminates the Merger Agreement after both
(a) the public announcement, or receipt by the Board of
Directors of Western Atlas, of a third party's
proposal that is superior to the Merger Agreement to
acquire, or combine with, Western Atlas, and
(b) the Board of Directors of Western Atlas has withdrawn
or materially modified, in a manner adverse to Baker
Hughes, the approval or recommendation of the Board
of Directors of Western Atlas or recommended the
superior proposal.
The Option will remain exercisable until the first anniversary of Baker
Hughes' receipt of written notice of the occurrence of the Exercise Event (the
"Option Term"). If the closing of the purchase and sale pursuant to the Option
cannot be effected because of the application of any law, regulation or order of
any governmental authority or the NYSE, the date of such closing will be
extended to the tenth business day following the expiration or termination of
the restriction imposed by such law, regulation or order (but not beyond nine
months after the date of exercise).
Repurchase at the Option of Baker Hughes. At the request of Baker Hughes
made at any time and from time to time after the occurrence of an Exercise Event
and prior to the earlier of (i) 120 days after the expiration of the Option Term
and (ii) 120 days after the conditions to the payment of the additional $150
million fee pursuant to the Merger Agreement have occurred (the "Put Period"),
Western Atlas will repurchase from Baker Hughes (a) any unexercised portion of
the Option (or any portion that has been exercised but as to which the closing
has not occurred) and (b) all or any portion of the shares of Western Atlas
Common Stock purchased by Baker Hughes pursuant to the Stock Option Agreement.
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The aggregate price of such repurchase will be equal to the sum of (i)
the aggregate exercise price paid for any shares sold; (ii) the excess of the
Applicable Price (defined below in this Item 5) over the exercise price paid by
Baker Hughes for each share sold; and (iii) the excess of (x) the Applicable
Price over (y) the exercise price multiplied by the number of shares subject to
the unexercised portion of the Option as to which Baker Hughes is exercising the
repurchase right. For purposes of the Stock Option Agreement, "Applicable Price"
means the highest of (i) the highest purchase price per share paid pursuant to a
third party's tender or exchange offer made for shares of Western Atlas Common
Stock, (ii) the price per share to be paid by any third person for shares of
Western Atlas Common Stock pursuant to the agreement for certain business
combination transactions, and (iii) the average of the closing prices of Western
Atlas Common Stock during a 10 trading day period (the "Current Market Price").
Repurchase at the Option of Western Atlas. To the extent Baker Hughes
has not previously exercised its repurchase rights, at the request of Western
Atlas made at any time during the 120-day period commencing at the expiration of
the Put Period, Western Atlas has the option to repurchase from Baker Hughes all
(but not less than all) of the shares of Western Atlas Common Stock acquired by
Baker Hughes pursuant to an exercise of the Option at a price per share equal to
the greater of (i) the Current Market Price and (ii) the exercise price per
share in respect of the shares so acquired.
Right of the First Refusal. Subject to the repurchase rights described
above in this Item 4, at any time after the first occurrence of an Exercise
Event and prior to the second anniversary of the first purchase of shares
pursuant to the Option, if Baker Hughes desires to transfer or dispose of shares
or other securities acquired by it pursuant to the Option, it shall make an
offer to Western Atlas on the same terms and at the same price at which Baker
Hughes is proposing to transfer or dispose of such shares or other securities.
If Western Atlas fails or refuses to purchase all of such shares or other
securities, Baker Hughes may sell all, but not less than all, of such shares or
other securities to the proposed transferee at no less than the price specified
and on terms no more favorable than those offered to Western Atlas. The right of
first refusal shall not apply to certain dispositions provided for in the Stock
Option Agreement.
Registration Rights. Baker Hughes will have certain rights to require
the registration under the securities laws of any shares purchased pursuant to
the Option if necessary for Baker Hughes to be able to sell such shares.
Profit Limitation. The Stock Option Agreement limits the amount of
profit that Baker Hughes may be deemed to have received with respect to the
Option (which includes the amount of any termination fee paid or payable to
Baker Hughes) to $50 million (or $200 million if the condition to the payment
of the additional $150 million fee pursuant to the Merger Agreement has been
satisfied).
* * * *
The Merger Agreement and the Stock Option Agreement are filed herewith
as Exhibits 7.1 and 7.2, respectively, and incorporated herein by this
reference. Any summary of the agreements and transactions described in this
Statement are qualified in their entirety by the specific language of the Merger
Agreement and the Stock Option Agreement.
Except as set forth herein, Baker Hughes presently does not have any
plans or proposals that relate to or would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D.
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Item 5. Interest in Securities of the Issuer
(a)-(b) Based upon representations of Western Atlas to Baker Hughes
contained in the Merger Agreement, by virtue of having entered into the Stock
Option Agreement, Baker Hughes may be deemed to beneficially own 10,905,763
shares, or 16.6%, of the Western Atlas Common Stock. Baker Hughes expressly
disclaims any beneficial ownership in these shares because the Option is
exercisable only in the circumstances referred to in Item 4, none of which has
occurred as of the date hereof, and Baker Hughes has no present investment or
dispositive power with respect to these shares.
(b) Neither Baker Hughes nor, to the best of Baker Hughes' knowledge,
any of the individuals named in Annex A hereto, unless otherwise indicated
therein, owns any Western Atlas Common Stock.
(c) Neither Baker Hughes nor, to the best of Baker Hughes' knowledge,
any of the individuals named in Annex A hereto, has effected any transaction in
Western Atlas Common Stock during the past 60 days.
(d) So long as Baker Hughes has not purchased Western Atlas Common
Stock subject to the Option, Baker Hughes does not have the right to receive or
the power to direct the receipt of dividends from, or the proceeds from the sale
of, any shares of Western Atlas Common Stock.
(e) Not applicable.
Item 6: Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Except as provided in the Merger Agreement, the Stock Option Agreement
or as set forth in this Statement, neither Baker Hughes nor, to the best of
Baker Hughes' knowledge, any of the individuals named in Annex A hereto, has
any contracts, arrangements, understandings or relationships (legal or
otherwise) with any person with respect to any securities of Western Atlas,
including, but not limited to, transfer or voting of any of the securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or losses, or the giving or
withholding of proxies.
Item 7: Material to be Filed as Exhibits
7.1 Agreement and Plan of Merger dated as of May 10, 1998, among Baker
Hughes, Merger Sub and Western Atlas (incorporated by reference to
Exhibit 2.1 of the Current Report on Form 8-K of Baker Hughes filed
with the Securities and Exchange Commission (the "SEC") on May 20,
1998).
7.2 Stock Option Agreement dated as of May 10, 1998, between Western Atlas,
as issuer, and Baker Hughes, as grantee (incorporated by reference to
Exhibit 2.3 of the Current Report on Form 8-K of Baker Hughes filed
with the SEC on May 20, 1998).
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, correct and
complete.
Date: May 20, 1998 By: /s/ Lawrence O'Donnell, III
-----------------------------------
Lawrence O'Donnell, III
Vice President and General Counsel
of Baker Hughes Incorporated
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ANNEX A
DIRECTORS AND EXECUTIVE OFFICERS
OF BAKER HUGHES INCORPORATED
For each director and executive officer of Baker Hughes, the following
table sets forth the name, business address and present principal occupation or
employment and the organization in which such employment is conducted. Unless
otherwise indicated below, each such person is a citizen of the United States
of America, the business address of each such person is c/o Baker Hughes
Incorporated, 3900 Essex Lane, Suite 1200, Houston, Texas 77027, and each
listed position is with Baker Hughes.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME BUSINESS ADDRESS
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<S> <C>
Max L. Lukens Chairman of the Board, President and Chief Executive
Officer.
Lester M. Alberthal, Jr. Director. Mr. Alberthal serves as the Chairman of
the Board and Chief Executive Officer of Electronic
Data Systems Corporation, an information technology
service company. His business address is Electronic
Data Systems, 5400 Legacy Dr., Plano, Texas
75024-3199.
Paul M. Anderson Director. Mr. Anderson serves as President and
Chief Operating Officer of Duke Energy Corporation,
a diversified energy company. His business address
is 5400 Westheimer Court, Houston Texas 77056.
Victor G. Beghini Director. Mr. Beghini serves as Vice Chairman -
Marathon Group, USX Corporation and as the President
of Marathon Oil Company, an oil and gas exploration
company. His business address is Marathon Oil
Company, 5555 San Felipe, Houston, Texas 77056-3128.
Eunice M. Filter Director. Ms. Filter serves as the Vice President,
Treasurer and Secretary of Xerox Corporation, an
office equipment provider. Her business address is
Xerox Corporation, 800 Long Ridge Rd., Stamford,
Connecticut 06904-1600.
</TABLE>
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Joe B. Foster Director. Mr. Foster serves as Chairman of the Board
and Chief Executive Officer of Newfield Exploration
Company, an oil and gas exploration company. His
business address is Newfield Exploration Company, 363
N. Sam Houston Freeway, Suite 2020, Houston, Texas
77060-2409.
Richard D. Kinder Director. Mr. Kinder serves as the Chairman and Chief
Executive Officer of Kinder Morgan Energy Partners,
L.P., which owns and operates pipeline systems. His
business address is Kinder Morgan Energy Partners,
L.P., 1301 McKinney, Suite 3450, Houston, Texas 77010.
John F. Maher Director. Mr. Maher is the retired President and Chief
Executive Officer of Great Western Financial
Corporation, a financial services company. His
business address is 650 North Sepulveda Boulevard,
Los Angeles, California 90049-2108.
James F. McCall Director. General McCall serves as the Executive
Director of the American Society of Military
Comptrollers. General McCall also serves as the
Chairman of the Board of Enterprise Bancorp Inc. and
Enterprise Federal Savings Bank. His business address
is American Society of Military Comptrollers, 225
Reinekers Lane, Suite 250, Alexandria, Virginia 22314.
H. John Riley, Jr. Director. Mr. Riley serves as the Chairman, President
and Chief Executive Officer of Cooper Industries,
Inc., a diversified manufacturer. His business address
is Cooper Industries, Inc., Texas Commerce Tower, 600
Travis Street, Suite 5800, Houston, Texas 77002.
Charles L. Watson Director. Mr. Watson serves as the Chairman and Chief
Executive Officer of NGC Corporation, a diversified
energy company. His business address is 1000 Louisiana,
Suite 5800, Houston, Texas 77002.
Max P. Watson, Jr. Director. Mr. Watson serves as the Chairman, President
and Chief Executive Officer of BMC Software, Inc., a
computer systems management software company. His
business address is 2101 City West Boulevard, Houston,
Texas 77042-2827.
David H. Barr Vice President.
M. Glen Bassett Vice President.
Joseph F. Brady Vice President.
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<TABLE>
<S> <C>
James E. Braun Vice President and Controller.
Matthew G. Dick Vice President. Mr. Dick is a citizen of the United Kingdom.
George S. Finley Senior Vice President and Chief Administrative Officer.
Roger P. Herbert Vice President.
Edwin C. Howell Vice President.
Eric L. Mattson Senior Vice President and Chief Financial Officer.
Lawrence O'Donnell, III Vice President and General Counsel.
Timothy J. Probert Vice President.
Andrew J. Szescila Senior Vice President. Mr. Szescila beneficially owns
1,000 shares of Western Atlas Common Stock.
Douglas J. Wall Vice President. Mr. Wall is a citizen of Canada.
</TABLE>
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