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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (no fee required)
For the fiscal year ended March 31, 1996.
Commission File Number: 0-016072
DECORA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0003300
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 MILL STREET
FORT EDWARD, NEW YORK 12828
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (518) 747-6255
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
- ------------------- ---------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $ .01 PAR VALUE
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained to the best of 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.
Yes X No
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As of June 21, 1996, the Registrant had 34,469,390 shares of Common
Stock outstanding. The aggregate market value of the Common Stock held
by nonaffiliates as of June 21, 1996, was approximately $45,155,000
based on the average of the closing bid and asked prices on that date.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain exhibits filed to the following are incorporated by reference in Part IV
- - Exhibits, Financial Statement Schedules and Reports on Form 8-K hereof (See
Exhibit list on Page 30):
<TABLE>
<CAPTION>
<S> <C>
(1) Report on Form 10-K for the fiscal year ended March 31, 1988.
(2) Report on Form 8-K dated April 18, 1990.
(3) Report on Form 8-K dated April 6, 1992.
(4) Report on Form 10-K for the fiscal year ended March 31, 1992.
(5) Report on Form 8-K dated November 5, 1992.
(6) Report on Form 10-K for the fiscal year ended March 31, 1993.
(7) Report on Form 10-K for the fiscal year ended March 31, 1994.
(8) Report on Form 10-Q for the fiscal quarter ended December 31, 1994.
(9) Report on Form 8-K dated March 2, 1995.
(10) Report on Form 10-K for the fiscal year ended March 31, 1995.
(11) Report on Form 10-Q for the fiscal quarter ended December 31, 1995.
</TABLE>
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PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Decora Industries, Inc. (the "Company"), a holding company, is a Delaware
corporation operating through its sole operating subsidiary, Decora Incorporated
("Decora"). The main emphasis of Decora is the development, manufacture and sale
of self-adhesive consumer decorative products and of specialty industrial
products, utilizing its proprietary pressure-sensitive adhesive and release
systems and its Wearlon(R) coating technologies.
HISTORY OF THE COMPANY
The Company, as presently structured, stems from a 1988 change in control
effected by a group of investors who completed a management change and new
strategic plan. In March 1992, the Company, formerly named Utilitech,
Incorporated, changed its name to reflect the strategic decision of management
to place future emphasis on consumer decorative products as well as specialized
industrial products derived from its proprietary coating, laminating, adhesive
and release technologies. In 1988, the Company was a diversified holding company
with a number of subsidiaries operating various businesses, including industrial
lighting, utility repair, utility software, and pipe manufacture. Management
evaluated these businesses and determined that the majority of these businesses
either did not possess sufficient growth potential or did not fit with the
Company's strategic direction. From late 1989 to 1990, the Company engaged in
the divestiture of these entities and meanwhile sought other opportunities.
On April 18, 1990, the Company's Decora Incorporated subsidiary acquired the
assets of the Decora Division of United Merchants and Manufacturers, Inc. (a
NYSE company). The Decora Division had been in business since 1945 and was the
originator of the pressure-sensitive, stylized, decorative covering material
bearing the brand name Con-Tact(R). Concurrent with the acquisition, Decora
entered into an exclusive five-year manufacturing and distribution agreement
(the "Manufacturing Agreement") with Rubbermaid Incorporated ("Rubbermaid")
which has since been extended to 1999, whereby decorative self-adhesive vinyl
and related products are exclusively manufactured for and distributed by
Rubbermaid under their Con-Tact(R) brand name. The Con-Tact(R) manufacturing and
adhesive technology is owned by Decora and, along with the trademark originally
established by Decora, enabled the company in the 1950's to establish its
continued market leadership position in the industry. Decora has continued to
invest in and improve the coating and adhesive technology involved in the
manufacture of these products, and in conjunction with the development of its
Wearlon(R) technology, has recently developed a new group of proprietary
products that are now being distributed by Rubbermaid and other new strategic
partners.
In May 1988, right before the change in control, the Company acquired ComTel
Industries (then known as Utility Marketing and Development Corporation), a
privately held, fully integrated telecommunications enterprise which engaged in
installing, refurbishing and servicing new and used telecommunications equipment
and systems. In July 1990 and September 1991, respectively ComTel's 80%-owned
subsidiary, ComTel Metals, Inc., acquired the Siemens-Stromberg Carlson metal
manufacturing divisions in El Paso,
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Texas and Sanford, Florida. In April 1994, as a result of its desire to focus
resources on its core Decora subsidiary, the Company made the decision to sell
the operations of ComTel, which was completed in June 1995 (see "Discontinued
Operations" below).
In December 1989, the Company acquired all of the stock of Yorkville Industries,
Inc. ("Yorkville"), a nationwide distributor of specialty light bulbs and
lighting products which was then severely undercapitalized. The Company at that
time had another lighting subsidiary and intended to expand its lighting
business. Following the acquisition, the Company intended to raise working
capital by selling Yorkville's real estate holdings; however, a recessionary
decrease in the value of the real estate delayed its divestiture which was
required for working capital thereby impacting the planned turn-around strategy.
After reviewing the deteriorating financial condition of Yorkville, and its
overall business and growth plan, the Company discontinued substantially all of
the operations of Yorkville and completed the liquidation of assets as of June
1992.
NARRATIVE DESCRIPTION OF THE BUSINESS
GENERAL
Decora Industries, Inc. is a holding company operating through its subsidiary,
Decora Incorporated. The "Company" as used herein shall refer to the holding
company and "Decora" shall refer to its subsidiary unless the context indicates
otherwise.
Decora is in the business of developing, manufacturing and selling self-adhesive
consumer decorative products and specialty industrial products. It develops and
manufactures these products utilizing its proprietary pressuresensitive adhesive
and release systems technologies, including its technology known as Wearlon(R).
At the time of the acquisition in 1990, the majority of Decora's revenues were
from sales of its core Con-Tact(R) and related products under a single exclusive
manufacturing agreement with Rubbermaid. Following the acquisition, management
began to seek growth and diversification opportunities in order to complement
Decora's mature core business. During the fiscal 1996, 1995 and 1994, revenues
under the Rubbermaid contract have been 90%, 93% and 94%, respectively, of total
revenues (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations"). Management's main focus in the development of long-term
growth strategies has been:
- To maximize its strategic alliance with Rubbermaid and its consumer
products distribution network;
- To utilize its modular product components and technologies to create
self-adhesive products for new applications and market segments;
- To establish additional strategic relationships for distribution of new
products in segments, channels and geographic areas not served by
Rubbermaid; and
- To compliment its consumer products with other applications and
products for the industrial coatings and substrates markets.
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Significant resources have been invested in research and initiating new product
programs arising from Decora's base self-adhesive technology. The development
program has resulted in a new generation of decorative consumer products
including several for its core business that are distributed by Rubbermaid, as
well as others for other new markets and strategic distributors. Several new
consumer products were introduced during the past two fiscal years and Decora
continues to invest in research efforts; however, primary emphasis is now placed
on the commercialization and refinement of new products and the expansion of
marketing relationships and distribution channels. As a compliment to Decora's
consumer products business, Decora also introduced new industrial release
coating and coated substrate products based upon its Wearlon(R) technology of
adhesive and release coating systems.
PRODUCTS AND SERVICES - CONSUMER DECORATIVE PRODUCTS GROUP
Decora manufactures proprietary decorative self-adhesive products for sale into
an increasing number of market segments including housewares, arts and crafts,
wall covering and hardware. Such products are produced with a modular system of
varying substrates, coatings, finishes and packaging depending on the
requirements of the application, distribution channel and end user. Decora's
goal is to maximize this modular system through the development and sale of
self-adhesive products for as many household applications and through as many
market segments as possible.
Decora's traditional and primary consumer product is Con-Tact(R), a
repositionable, self-adhesive, vinyl decorative covering material which is used
for do-it-yourself shelf decorations, surface protection, arts and crafts and
other applications. Con-Tact(R) is manufactured by Decora utilizing its
proprietary and patented repositionable adhesive technology and is sold in roll
form with a wide range of finishes including printed patterns, solid colors, and
clear vinyl. All of Decora's Con-Tact(R) production is purchased by Rubbermaid
under an expanded manufacturing agreement (the "Manufacturing Agreement") which
was signed in April 1995 and currently expires in 1999. Rubbermaid markets and
sells Con-Tact(R) and other specialty products which Decora has developed for
Rubbermaid primarily in the housewares departments of mass merchandisers in the
U.S., including WalMart, K-Mart, Target and others.
Under the Manufacturing Agreement, Decora provides Rubbermaid with 100% of its
worldwide product needs according to periodically negotiated pricing levels
which are adjusted primarily based on changes in raw material costs and volume.
Historically, product was shipped by Decora in unfinished roll form to
Rubbermaid for finished packaging and distribution. Under the recently expanded
Manufacturing Agreement, Decora now performs the additional consumer packaging
steps of the manufacturing process which expansion has enhanced its ability to
produce consumer products for other lines of decorative products.
In July 1994, Decora established a distribution relationship for a range of its
decorative products in Europe with the signing of a License Agreement with
Friedola Debr. Holzapfel GmbH & Co. KG ("Friedola") under which Friedola
purchases from Decora self-adhesive decorative products for exclusive
distribution throughout western Europe under the Friedola(R) brand name. In
conjunction with Friedola, Decora expanded its product offerings with a new
range of decorative designs, substrates and finishes. In addition to its
European activities, Decora is also selling decorative products internationally
to customers in South America, the Middle
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East and the Far East through its own direct efforts and through manufacturer's
representative relationships it has developed.
Decora also recently introduced new self-adhesive thin film products for the
wall covering and home decorating market based on a new, proprietary thin film
technology (patent pending) developed over the last three years. These new
products are very thin, yet durable and removable and they blend almost
seamlessly onto most smooth or textured surfaces. They are printed in a variety
of accents and stencil-like decorative designs and configurations including a
line specifically targeted for decorative use on kitchen and bathroom tiles. In
1994, Decora signed a five-year supply agreement which was amended in July 1995
with North American Decorative Products, Inc. ("Norwall"), a wall covering
manufacturer, for the manufacture and supply of such thin film decorative
products which are being marketed under the Art Works and Tile Works product
names.
In addition to the thin film products, Decora has developed a patented system
utilizing its Wearlon(R) technology through which a conventional wallpaper
substrate is converted into a self-wound, self-adhesive and removable wall
covering product. Decora is selling such products to various distributors and is
pursuing a licensing arrangement for the manufacture of such products.
Management believes these new products and marketing efforts broaden Decora's
potential consumer products revenue base beyond housewares and across new market
segments such as hardware, paint and sundries, arts and crafts and wall
covering, both in the U.S. and internationally. Decora plans to continually
introduce new consumer products through its principal distributors and to pursue
its growth plan both domestically and internationally.
PRODUCTS AND SERVICES - INDUSTRIAL PRODUCTS GROUP
Decora has developed an industrial coatings business which markets proprietary
products under the Wearlon(R) brand name to users of specialty industrial
coatings. These unique non-stick, yet abrasion-resistant coatings are
water-based and cure at room temperature, providing the industrial market with
an environmentally friendly coating system for a wide range of specialized
applications. These include industrial maintenance easy-to-clean and non-stick
applications such as machinery valves, paint booths and clean rooms, marine foul
release, and other specialized OEM product and process applications. Decora has
established a sales network in North America, consisting of manufacturer's
representatives and qualified professional applicators through which the product
is marketed and applied for a variety of such applications. To date, the
coatings have been sold through this network on a limited basis for use in the
automotive, marine, paper, petroleum and food processing industries both for
repeat users as well as for ongoing pilot programs in a variety of applications.
In addition to these programs, in November 1994, Decora signed a License and
Technology Development and Cooperation Agreement with The B.F. Goodrich Company
for the development of specialty coatings for its various divisions utilizing
Wearlon(R). Decora is actively engaged in research and development under this
agreement.
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The necessity of long-term evaluation and testing programs required for various
technically oriented industrial applications and related long selling cycle
result in a slower growth of revenue opportunities than is achievable with
certain of Decora's consumer products. The high performance nature of the
coating, the costs associated with installing such coatings in large projects
and testing for specific applications may take months, and in some cases years,
and requires application refinements in response to testing results. Management
continues to believe that liquid coating products hold significant opportunity
for Decora. Revenues from all coating products have not yet been material to
Decora's overall business to date, however, they have started to be recognized
by industry participants as a coating with unique properties.
In addition to the products summarized above, Decora's Industrial Products Group
also markets various other products, including commercial laminating, coating
and printing services and a line of high quality hazardous marking tapes and
electrical tapes sold under Decora's Cobra(R) tradename.
For fiscal 1996, industrial products represented 1.5% of Decora's revenues.
Ongoing technology development and commercialization efforts may generate
additional revenues in the future both through its own direct development and
selling efforts and through domestic and international strategic relationships.
MANUFACTURING
The majority of the products sold by Decora are produced at its facility in Fort
Edward, New York. Management believes that the plant currently has available
capacity which will be utilized in connection with the proposed expansion of
existing and new decorative self-adhesive products and industrial products.
Decora also utilizes outside suppliers when required for certain printing,
coating and finishing purposes for which it does not currently have industrial
capabilities as well as for temporary warehousing requirements. Management
anticipates making significant capital expenditures in the future in order to
increase operating efficiencies and to add additional capacity as warranted by
product demand and mix. During fiscal 1996, Decora invested significant capital
on the installation and start-up of finished consumer packaging machinery in its
Fort Edward facility for its Con-Tact(R) product line pursuant to the
Manufacturing Agreement. While such investment did not increase overall
capacity, it added an additional step to its process which had previously been
performed by Rubbermaid.
The primary raw materials used in Decora Incorporated's products are paper,
vinyl, adhesives, inks, silicone and other chemicals. Decora uses two primary
suppliers for its vinyl and relations with such suppliers are good. Decora
believes that it has alternative sources of its significant and primary raw
materials.
MARKETING, RESEARCH AND DEVELOPMENT
Decora's strategy for its consumer products is to develop and sell products and
marketing programs through strategic partners with existing distribution
capabilities. Such distribution partners may have broad market impact such as
Rubbermaid, or more focus in a particular market segment, such as the wall
covering manufacturer. Accordingly, for the majority of sales of product covered
by the Manufacturing Agreement and other supply agreements, Decora does not
incur what might otherwise be typical distribution and selling
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expenses relating to consumer decorative products and has relied on the services
of third party sales and marketing consultants when deemed necessary. Decora has
taken a similar strategy for international sales of its Consumer Decorative
Products as reflected by its new distributor agreement with Friedola and by
relationships it has developed with other international manufacturer's
representatives.
For its Industrial Products Group, Decora utilizes varying strategies for
different markets. As noted above, for its industrial coatings, Decora has
established a manufacturer's representative network in the U.S. and with this
network has developed relationships with carefully selected professional
applicators across the country to market and apply its Wearlon(R) coatings in
industrial maintenance, OEM and marine applications. Decora is also actively
pursuing opportunities for strategic relationships in other specific niche
markets where Wearlon(R) coatings are believed by management to have the most
potential, such as it has in the architectural and aviation markets. As
described above, due to the nature of these products, the development process
for the industrial products is expected to span a significant duration.
With regard to research and development, Decora maintains a small internal
research group which has made significant progress in producing various new
products based on Wearlon(R) and the rest of its proprietary adhesive and
coating technologies. The majority of recent efforts have been placed on the
refinement and enhancement of products already developed; however, that group
also continues to focus its efforts on the pursuit of new consumer and
industrial products and applications. In addition, Decora has been seeking other
entities which have development expertise in certain niche areas to complement
Decora's commercialization efforts such as B.F. Goodrich. This strategy will
allow Decora to conserve its existing resources.
Given its desire to grow beyond one market and one customer, from fiscal 1992
through fiscal 1995, Decora significantly increased its expenditures on
marketing and product development as it expanded its product lines through the
commercialization of new products and technology in the consumer and industrial
markets. Total expenditures on marketing, research and product and process
development amounted to approximately $2.3 million, $4.0 million and $2.8
million in fiscal 1996, 1995 and 1994, respectively. Management anticipates
continued expenditures at the same or lower levels per dollar of revenue on
products, program and process development while continuing to de-emphasize pure
research as new distribution relationships are developed, new product
applications and programs are explored and developed, and international
marketing channels are opened. As new products have recently been
commercialized, a portion of these resources have been invested on the
development of strategic marketing relationships and distribution channels as
preparation for expansion of production and sales activities (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations").
PROPRIETARY RIGHTS
Decora owns the rights to the pressure sensitive adhesive technology used in the
manufacturing of its self-adhesive Con-Tact(R) products, although the tradename
is now owned by Rubbermaid. In addition, it owns the Cobra(R) and Wearlon(R)
trade names and has recently been issued a patent on its new self-wound
self-adhesive wall covering product. Decora has also applied for tradename and
patent protection for certain of its other
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new products including the protective and decorative thin film products and
Wearlon(R) liquid coatings and coating additives.
Several of Decora's new products utilize variations of Wearlon(R) technology as
a component of their construction. Decora's rights to Wearlon(R) were formalized
in fiscal 1992 and the technology is the result of more than a decade of
research and development in adhesive and coating systems. Wearlon(R) includes a
water-based polymer which management believes is a breakthrough in coatings
requiring extraordinary non-stick and slip-lubricity properties combined with
high levels of resistance to corrosion, abrasion, chemicals and solvents. It
also provides the ability to control surface release characteristics across a
broad spectrum for a variety of applications and cures at room temperature.
Decora believes that its commercial position is enhanced by the patents it owns
as well as the know-how and trade secrets it has developed and maintains. Decora
has also applied for foreign protection for certain of its established and new
technologies and trademarks. In the interests of product development and
establishment of a distribution network, certain of its technologies have been
licensed to third parties. Decora has executed trade secret and confidentiality
agreements with its licensees and others to protect its proprietary rights as
part of its overall secrecy protection program.
CUSTOMERS
During fiscal 1996, sales to Rubbermaid represented 90% of Decora's revenues.
Con-Tact(R) and other related products are distributed through Rubbermaid on a
nationwide basis to consumers in conjunction with the extensive product lines of
Rubbermaid. Decora also has supply agreements with Norwall and Friedola and
international manufacturer's representative relationships which have the future
potential of becoming significant contributors to Decora's business. Decora has
approximately 50 customers in addition to Rubbermaid, Norwall and Friedola,
primarily for its Industrial Products Group but also for international
decorative product sales. Decora plans to develop strategic distribution
relationships for its industrial products, similar to the relationship it has
with Rubbermaid for its consumer products.
COMPETITION
Although Con-Tact(R) and associated products are not sold by Decora to the
ultimate consumer, competition experienced by Rubbermaid affects the purchase
requirements under the Manufacturing Agreement and Decora's ultimate revenues.
Management believes that the Con-Tact(R) product dominates the U.S. market for
its class of decorative material as well as miscellaneous end-use surface
protection applications. There are several similar products, including a low
cost shelf liner produced and sold by Rubbermaid, which, in management's
opinion, have not significantly penetrated the market; however, availability of
retail shelf space (and thus potential product sales) in an extremely
competitive retail environment can be impacted by products serving different
utilities than Decora's products. Management believes that Decora (and
ultimately Rubbermaid) compete effectively on the basis of price and the
superior quality of their product.
Domestic and international markets for self-adhesive decorative products and
industrial coating products are very competitive with competitors who are larger
and have more financial resources than Decora. Management believes that the
formulation and performance characteristics of Wearlon(R)-based products are
unique, and that
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the proprietary technology utilized in several new products may provide a
competitive advantage in certain applications. Management intends to focus on
such specific applications. Other than Con-Tact(R) sold in the U.S., Decora does
not yet have any significant market share in its various other consumer
decorative or industrial coating products.
SEASONALITY
Decora generally experiences higher earnings in its first two fiscal quarters
due to the purchase requirements of Rubbermaid to meet larger consumtion of
Con-Tact(R) during the late spring and summer months. During fiscal 1996, Decora
experienced an abnormal decline in volume relative to historical trends as a
result of Rubbermaid's absorption of excess inventory which was created as a
result of the consolidation of finished packaging operations in Decora's
facility. There is no identified seasonality for Decora's other products.
EMPLOYEES
At March 31, 1996, the Company employed 169 people of which 166 were in Decora
and three were employed in the Company's corporate office. As of the same date,
115 of Decora's employees were represented by a labor union. The contract with
such union which had an expiration date in April 1996 was renegotiated and now
expires in March 1999. There have been no major work stoppages in recent years
and the Company believes that its relations with its labor force are good.
DISCONTINUED OPERATIONS
COMTEL INDUSTRIES, INC.
In April 1994, the Company decided to sell the operations of its last non-core
subsidiary, ComTel Industries, Inc. ("ComTel"), headquartered in Tampa, Florida.
ComTel was a full service telecommunications company which manufactured, sold
and serviced new and used telephone equipment and proprietary accessories. The
first step in the plan to divest the operations was completed in June 1994 with
the sale of ComTel's El Paso, Texas manufacturing operation to a third party.
The second phase was completed on March 31, 1995 with the sale of the Secondary
Market and Services Division which was headquartered in Tampa, Florida, and the
final phase was completed with the sale of the remaining manufacturing operation
located in Sanford, Florida on June 14, 1995 (see "Management's Discussion and
Analysis - Discontinued Operations").
ITEM 2. PROPERTIES
Decora owns its 220,000 square foot facility located on approximately 12 acres
in Fort Edward, New York. The Company's corporate headquarters are located
within this facility.
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Management of the Company believes that the facilities of the Company and its
subsidiary are adequate for present and foreseeable future needs.
ITEM 3. LEGAL PROCEEDINGS
In May 1996, Sun Financial Group, Inc. ("Sun") filed a complaint against the
Company and ComTel Industries, Inc. in Hillsborough County Circuit Court. The
complaint seeks enforcement of amounts allegedly due under an Asset Purchase
Agreement entered into in May 1993. The amount allegedly due is approximately
$200,000. The Company believes that it has defenses to the claims and intends to
defend the matter vigorously.
In July 1993, the Company's Decora Incorporated subsidiary was notified by the
Environmental Protection Agency ("EPA") that a site in which it disposed of
hazardous waste has been named a Superfund site and that it is a potentially
responsible party. It is likely that Decora Incorporated will be required to
contribute to the cost of the cleanup of the site. The final amount of such
cleanup cost cannot be quantified at this time although the Company has reserved
an estimated amount based upon available information.
In July 1995, a complaint was filed in the Supreme Court of the State of New
York against the Company and its Decora Incorporated subsidiary by a former
consultant of such subsidiary. The complaint alleges various breaches of a
consulting agreement, including failure to pay sums due for services,
misrepresentations, deceptive trade practices and wrongful termination of
services. Discovery in this matter has not commenced. The Company and Decora
believe these claims are without merit and intend to defend the matter
vigorously.
The Company and its subsidiaries are defendants in other pending actions, which,
in the opinion of management of the Company, are not material to the Company's
financial condition or results of operations. Although no assurances can be
given regarding the ultimate outcome of such matters, the Company has accrued
amounts for defense and settlement costs which the Company considers adequate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
a. Market Information
The Company's Common Stock trades over the counter and is quoted on NASDAQ
("Small Cap").
b. Stock Price Information
The following table reflects actual transactions, without retail markup,
markdown or commissions for Fiscal 1996 and inter-dealer quotations, without
retail markup, markdown or commissions for Fiscal 1995 and 1994.
Inter-dealer quotations may not necessarily represent actual transactions.
The high and low sales and bid prices of the Common Stock for the dates
indicated have been provided by the National Quotation Bureau, Inc.
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Common Stock
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Sales Prices
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High Low
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Fiscal 1996:
First Quarter 1 3/8 1 5/16
Second Quarter 1 7/16 1
Third Quarter 1 3/16 1 1/16
Fourth Quarter 1 3/8 29/32
<CAPTION>
Bid Prices
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Fiscal 1995:
First Quarter 1 5/16 15/16
Second Quarter 2 3/32 1 1/8
Third Quarter 1 13/32 1 7/16
Fourth Quarter 1 1/4 15/16
Fiscal 1994:
First Quarter 2 1/8 1 1/2
Second Quarter 2 1/32 1 7/16
Third Quarter 1 5/8 1 7/16
Fourth Quarter 1 9/16 1
</TABLE>
On June 21, 1996, the closing sales price for the shares in the over-the-counter
market was $1.31, as reported by the National Quotation Bureau, Inc. The Company
has also authorized a class of preferred stock, although no shares of preferred
stock have been issued.
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c. Approximate Number of Holders of Common Stock.
There were 861 holders of record of Common Stock as of June 21, 1996.
d. Dividends
The Company has never paid a cash dividend and intends to retain earnings,
if any, for use in its business. The Company's agreements with its lenders
restrict the ability of the Company to pay cash dividends and the Company
does not presently intend to pay any cash dividends on its Common Stock for
the foreseeable future.
ITEM 6. SELECTED FINANCIAL INFORMATION.
The following selected financial data of the Company as to the five fiscal years
ended March 31, 1996 are derived from the consolidated financial statements that
have been audited by Price Waterhouse LLP as to all years.
The following table should be read in conjunction with the Company's financial
statements and the notes thereto. Unless otherwise indicated, none of the
information in the table includes discontinued operations of the Company. See
Note 2 of the financial statements. See also Item 7, "Management's Discussion
and Analysis of Financial Condition".
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DECORA INDUSTRIES, INC.
SELECTED FINANCIAL DATA
For the five years ended March 31, 1996
(In thousands except per share data)
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $38,828 $40,414 $39,955 $38,543 $40,751
Operating Income 4,108 3,895 4,192 3,107 3,291
Income (Loss) from Continuing Operations 2,919 2,408 1,629 623 (428)
Income (Loss) from Discontinued Operations - (1,297) (1,481) 68 (8,673)
------ ------- ------- ------- --------
Net Income (Loss) $2,919 $ 1,111 $ 148 $ 691 ($9,101)
====== ======= ======= ======= ========
Income (Loss) Per Share(1):
Continuing Operations $ 0.09 $ 0.08 $ 0.06 $ 0.02 $ -
Discontinued Operations - (0.04) (0.05) 0.01 ( 0.44)
------ ------- ------- ------- --------
Income (Loss) Per Share(1) $ 0.09 $ 0.04 $ 0.01 $ 0.03 ($ 0.44)
====== ======= ======= ======= ========
Balance Sheet Data:(3)
Total Assets $36,157 $31,021 $30,023 $34,952 $34,165
Working capital (deficit) $ 1,460 $ 238 $ 515 ($1,904) ($5,605)
Long-term Obligations $20,299 $18,163 $18,473 $18,883 $19,358
Stockholders Equity: $10,139 $ 4,396 $ 2,577 $ 1,666 ($2,838)
Cash Dividends per common share(2) - - - - -
</TABLE>
- -----------------------
(1) Includes shares issuable upon exercise of outstanding warrants and options
to purchase Common Stock if their inclusion is dilutive.
(2) The Company has not paid dividends during the five years ended March 31,
1996 and does not anticipate paying cash dividends in the foreseeable
future.
(3) Historical balance sheet data has not been restated for discontinued
operations in years prior to the year in which the relevant measurement date
occurred.
12
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
During the fiscal year ended March 31, 1996, Decora Industries, Inc. (the
"Company") and it's sole operating subsidiary, Decora Incorporated ("Decora")
achieved several operational and financial goals which have strengthened its
competitive position and laid the groundwork for anticipated growth in the
coming years. From an operational point of view, it signed an expanded exclusive
manufacturing agreement (the "Manufacturing Agreement") with its largest
customer, Rubbermaid Incorporated ("Rubbermaid"), and completed the integration
of manufacturing operations assumed from them. It successfully introduced an
enhanced self-adhesive product offering to the European market as well as
additional proprietary decorative products to the U.S. wall coverings and arts &
crafts markets. It refocused with Rubbermaid the program of decorative
Con-Tact(R) products in the housewares market thereby allowing Decora to pursue
specialty products in other markets. Decora also reached a more mature market
acceptance of its Wearlon(R) liquid coating system thereby enabling strategic
distribution discussions with various potential partners in several markets.
Management continues to emphasize such growth in its mix of products in
anticipation of the maturing of its core product line.
From a financial point of view, the Company completed the sale of its last
remaining non-core business, ComTel Industries, and retired all debt obligations
associated with that subsidiary. It negotiated the extension of a $1.5 million
note which had been due in November 1995 and a new repayment schedule beginning
in April 1997 for Decora's repayment of $7.0 million of subordinated notes which
had been scheduled to begin in April 1996. In conjunction with establishing a
new repayment schedule, the Company also restructured the warrants which the
subordinated lender held for 20% of the stock of the Company's Decora
subsidiary. Such warrants were exchanged for a note and common stock of the
Company and thereby removed the "put" obligation which the lender had for such
warrants beginning in April 1997 (see "Liquidity and Capital Resources" below).
During the first half of fiscal 1996, Decora completed a significant expansion
of its manufacturing operations in order to fulfill the requirements of the
expanded Manufacturing Agreement with its largest customer, Rubbermaid, which
was signed on April 17, 1995. With the new operations, Decora now performs final
consumer packaging steps for Con-Tact(R) decorative products. These operations
had previously taken place at a Rubbermaid facility in North Carolina.
Absorption of these operations required significant capital investment, higher
operating expenses and reduced interim production volume. Management believes
that such expansion and integration of finishing steps will add to its control
over the cost of the products making them more competitive in the market and
contributing to Decora's overall growth and profitability. As a result of the
consolidation of all manufacturing steps in one location, during the year, goods
previously sold to Rubbermaid and located in their facilities as buffer
inventories were sold to customers at the expense of additional production by
Decora. In addition to this factor, further inventory was contracted by
Rubbermaid which contributed to significantly reduced volume during the year.
The impact of such volume reduction was partially offset by the increased value
added by Decora to the Con-Tact(R) product line and volume-related price
adjustments contained in the manufacturing agreement with Rubbermaid.
13
<PAGE> 17
In addition to the manufacturing expansion described above, during the first
half of the year Decora redefined its product offering to Rubbermaid under which
a more focused decorative covering and shelf liner product line for the
housewares market was adopted, allowing Decora to expand sales of products
targeted to other markets through other distribution alternatives while focusing
new product introductions for Rubbermaid in the housewares segment. As a result,
sales of specialty products to Rubbermaid declined in the recent year; however,
this was partially offset by increased sales to its other strategic
distributors.
RESULTS OF CONTINUING OPERATIONS
While revenues for the year were lower than those experienced in the prior year,
a portion of such decline can be attributed to the one-time inventory absorption
by Rubbermaid related to the relocation of manufacturing operations to Decora's
facilities. In addition, certain of Decora's new product lines grew
significantly over the prior year helping to offset lower core revenues and
management took steps to reduce costs in the face of such lower volume.
FISCAL 1996 VS. FISCAL 1995 AND FORWARD LOOKING INFORMATION
Revenue of the Company was $38,828,000 for the year ended March 31, 1996
compared with $40,414,000, or 3.9% lower, in the prior year. Several factors
contributed to the reduction in revenue which were related solely to Decora's
core business customer, Rubbermaid, while the decline was partially offset by
advances in new business areas. Most significant was the decline in orders from
Rubbermaid as a result of their absorption of buffer inventories of products
purchased from Decora which are no longer required as a result of the
integration of product finishing operations at Decora's Fort Edward facility. In
addition to inventory reductions at Rubbermaid associated with the operational
consolidation, continuing efforts by Rubbermaid to reduce overall inventory
levels negatively impacted Decora's order levels during the recent year. The
reduced volume of products sold to Rubbermaid also resulted from Rubbermaid's
move to focus on Con-Tact(R) shelving and decorative products for the housewares
market, and to discontinue non-housewares specialty products, including Decora's
Cushion(TM) products, FabriArt(TM) self-adhesive textile products and
KidScape(TM) juvenile border and mural products. While Decora now has the
ability to take these products to new distribution channels, in the short term,
reduced sales of such products to Rubbermaid during the recent year resulted in
$1.6 million lower sales from the levels experienced in the prior year's period.
All of these factors contributed to a 18% reduction in unit volume of products
sold to Rubbermaid during fiscal 1996 versus the prior year. Such decline was
partially offset by the additional value added to the products by the
operational consolidation since June and volume related price adjustments
pursuant to the Manufacturing Agreement with Rubbermaid, resulting in a net
revenue decline of 7% with Rubbermaid.
Revenue from international sales of self adhesive decorative products for the
year ended March 31, 1996 increased by $1,131,000, or 100% over the same period
last year primarily as a result of significantly increased sales of Decora's new
European line to its distribution partner, Friedola, primarily during the third
and fourth quarters of the year. Such products were successfully reintroduced at
the Heimtextil trade fair
14
<PAGE> 18
in January 1996 and Decora has received additional reorders for such products
during the first quarter of fiscal 1997.
Sales of self-adhesive wall covering and thin film products were $1,154,000
during the year ended March 31, 1996, a 30% increase over $887,000 of sales for
such products in the prior year. This resulted primarily from increased sales
of Decora's Wearlon(R)-based decorative products, including Decora's
proprietary thin film. Such increases more than offset lower revenues from
certain self-adhesive wall covering products which were discontinued for
profitability reasons during the year.
Revenues from industrial products for fiscal 1996 were $563,000, or $374,000
lower than for the same period last year, primarily the result of a $570,000
reduction in revenue from the discontinuance of a release liner product line in
September 1994. This decline, in addition to a decline in revenues of Decora's
Cobra(R) tape line, was partially offset by an increase in sale of Wearlon(R)
liquid coating sales and sales of other industrial products.
Management believes that international sales and revenues for its products will
continue to grow during fiscal 1997. Management also believes that no further
inventory contraction by Rubbermaid will be required, however, management
remains uncertain pertaining to Rubbermaid inventory trends. Management is
actively working with Rubbermaid on housewares-targeted new product
introductions as well as on certain new product promotional programs in an
effort to increase product volume. Management also continues to place efforts on
broadening its product offering to more diversified consumer market segments
including the reintroduction of products recently discontinued by Rubbermaid
with potential distribution partners having critical emphasis in the arts and
crafts, do-it-yourself and juvenile decorative covering market segments and
continued growth of its new wall covering, thin film and international products.
Gross profit for year ended March 31, 1996 was $10,584,000 or $1,032,000 lower
than the prior year's gross profit of $11,616,000. The Company's gross margin
percentage declined from 28.7% in the prior year to 27.3% in the recent fiscal
year as a result of installation costs and start-up inefficiencies of the new
manufacturing operations, reduced overall manufacturing volumes relative to
fixed costs and the inclusion of certain expenses in costs of good sold which
had been developmental expenses in the prior year. The impact of reduced volumes
was partially offset by volume price adjustments pursuant to the Manufacturing
Agreement. Gross margins are impacted by many factors including production
volume, product mix, changes in raw material prices and product pricing. Based
on evaluation of these factors, management anticipates that over the near term,
gross margins will remain at levels similar to those experienced in fiscal 1996.
Marketing, general and administrative expenses were $6,476,000 during fiscal
1996, or $1,245,000 lower than the prior year's expenses of $7,721,000,
primarily as a result of lower research and product development expenditures,
the transition of certain new product processes from the developmental stage in
the prior year to ordinary costs of goods sold in the current year and workforce
reduction. Marketing, general and administrative expenses during the fiscal year
ended March 31, 1996 also include a one-time charge of $282,000 related to an
early retirement program which was accepted by twelve of its employees. The
charge represents the present value of future benefits and payments to be made
to the retired employees over a 70-
15
<PAGE> 19
month time period and management anticipates that Decora will achieve
approximately $1,000,000 in net savings over the same period as a result of the
program. To further reduce costs in the face of lower business volume during the
fourth quarter of the most recent year, management implemented a workforce
reduction. Research and development activities were at lower levels than in
previous years as Management is now placing more focus on the sale and marketing
of products derived from Decora's established technologies. As a result of the
above changes, operating income for the fiscal year ended March 31, 1996
increased to $4,108,000 from $3,895,000 during the prior year.
Income from continuing operations for the fiscal year ended March 31, 1996 was
$2,919,000 versus $2,408,000 for the same period in the prior year. Interest
expense increased $17,000 over the prior year primarily as a result of a
$217,000 increase in the accrual for the warrants in subsidiary which was
credited to interest expense. Such increase was partially offset by favorable
borrowing rates. Income from continuing operations was impacted favorably by a
tax benefit of $1,500,000 resulting from net operating loss carry forwards which
had not previously been given value on the Company's financial statements (see
Note 9 to the financial statements). The final disposition of non-core
subsidiaries and the historical profitability of continuing operations resulted
in the recognition of this benefit under accounting principles applicable to a
portion of the Company's net operating loss carry forwards. The remaining
unrecognized net operating loss carry forwards will be reviewed periodically and
credited to income when their recognition is considered to be more likely than
not. No loss from discontinued operations was recorded during the year ended
March 31, 1996 resulting in net income for the year ended March 31, 1996 of
$2,919,000 or $0.09 per share, versus $1,111,000, or $0.04 per share for the
year ended March 31, 1995.
For the fourth quarter of fiscal 1996, revenues of the Company were lower by
$518,000 (5%) as compared to the comparable period of the prior year primarily
as a result of a 15% reduction in revenues from its major customer Rubbermaid.
Management believes that such reduction was a result of inventory reductions
throughout the distribution chain as well as the impact of severe winter weather
on retail sales and increased competition from non-adhesive shelf lining
products in certain markets. Such impact continued to be felt during the first
two months of Fiscal 1997 while order volume in June 1996 has returned to near
historical levels. Partially offsetting such decline were significant increases
in sales of international and wall covering products which together increased
319% over the levels experienced in the prior year's quarter. The impact of
lower core product volume was also offset by volume related price adjustments
pursuant to the Manufacturing Agreement, by cost reductions implemented by
Decora in the face of lower volume and by lower interest expense. As a result,
pre-tax income for the final quarter of Fiscal 1996 was $243,000 versus a
pre-tax loss of $139,000 for the fourth quarter of Fiscal 1995.
The Company's near term growth is anticipated by Management to come primarily
from increased product sales to international markets and the sale of
proprietary self-adhesive wall covering and decorative thin film products.
Longer term growth is also anticipated to be derived from these products as well
as from sales of Wearlon(R) liquid coatings both in the industrial maintenance
and other niche markets and from sales of new products being developed for
Rubbermaid. It is anticipated that such products and marketing activities will
add growth to the relatively flat revenues anticipated from the mature domestic
Con-Tact(R) business.
16
<PAGE> 20
FISCAL 1995 VS. FISCAL 1994
Revenues of the Company increased by 1.1% or $459,000 from $39,955,000 in fiscal
1994 to $40,414,000 in fiscal 1995. Revenues from its traditional Con-Tact(R)
product line decreased by 4.5% or $1,615,000 and discontinued industrial release
liner product revenue decreased $850,000. These declines were offset by a
$2,054,000 increase in sales of recently introduced, and newly developed,
self-adhesive products for Rubbermaid including Con-Tact(R) Ultra, Con-Tact(R)
Cushion(TM) and FabriArt(TM) and a $1,105,000 increase of other consumer
decorative products to other customers in the wall covering and decorative
markets including North American Decorative Products, Inc. ("Norwall") and
Friedola Gebr. Holzapfel GmbH & Co. KG ("Friedola"). While not yet significant,
sales of Wearlon(R) liquid coatings in the industrial maintenance market also
increased over the prior year.
During the first quarter of fiscal 1995, Decora signed two five year exclusive
license and supply agreements with Norwall for (a) proprietary coating and
laminating services for the conversion of Norwall's standard wall covering
products into repositionable, removable, self-adhesive products and (b) the
manufacture and supply of decorative thin film coordinated accents. These
agreements contain minimum purchase volumes in order for Norwall to retain
exclusivity in addition to royalties to be paid based on the sale of such
products. In addition to the Norwall agreements, during fiscal 1995 Decora
signed a License and Supply Agreement with Friedola under which Friedola will
purchase from Decora a wide variety of its consumer and commercial decorative
products for exclusive distribution throughout western Europe. Based in Germany,
Friedola is a 105-year-old manufacturer and wholesaler of housewares and home
furnishing products with annual revenues in excess of $100 million. This
agreement also contains minimum purchase volumes in order to retain exclusivity.
Initial sales under Decora's new supply agreements with Norwall and Friedola
occurred primarily during the third and fourth quarters of the fiscal year ended
March 31, 1995 as a result of initial market introductions. While these new
products generated interest in the marketplace, Decora concentrated on upgrading
production from small lots to commercial production and experienced start-up
manufacturing inefficiencies and shipping delays with certain products. As a
result, initial minimum volumes under the agreements were not achieved and the
customers refined product programs based on market feedback from the initial
introduction.
Gross profit of the Company increased by $1,230,000 during the current fiscal
year from $10,386,000 in fiscal 1994 to $11,616,000 in fiscal 1995 reflecting a
combination of increased sales volume, discontinuance of certain less profitable
industrial products and manufacturing cost reductions.
Operating income of the Company decreased $297,000 during the current fiscal
year from $4,192,000 in fiscal 1994 to $3,895,000 in fiscal 1995. Higher gross
profit was offset by new product manufacturing development and start-up costs.
These additional costs which were mainly a result of manufacturing process
development as well as market development resulted primarily from existing and
new consumer products being distributed by Rubbermaid as well as those for
Decora's new additional strategic supply relationships with Norwall and
Friedola. Certain expenditures in fiscal 1995 were non-recurring costs
associated with initiating the commercial production of new technology-based
products. Research and development spending decreased
17
<PAGE> 21
from $1,364,000 in fiscal 1994 to $1,067,000 in fiscal 1995 with such decrease
being more than offset by increases in sales and marketing and production
activities.
Interest expense increased 8% from $2,451,000 in fiscal 1994 to $2,658,000 in
fiscal 1995. While total liabilities decreased by $821,000 during the year, such
decrease was offset by increased interest rates on floating rate debt and
increased amortization of the debt discount related to the CIGNA Subordinated
notes as a result of the extension of the first sinking fund payment from April
1995 to April 1996.
Income from continuing operations was impacted favorably by a tax benefit of
$1,400,000 resulting from net operating loss carry forwards which had not
previously been given value on the Company's financial statements (see Note 9 to
the financial statements). The final disposition of non-core subsidiaries and
the historical profitability of continuing operations resulted in the
recognition of this benefit under accounting principles applicable to a portion
of the Company's net operating loss carry forwards.
RESULTS OF DISCONTINUED OPERATIONS
On June 14, 1995, the Company completed the sale of the remaining operations of
ComTel Industries, Inc. with the sale of its ComTel Metals manufacturing assets.
The selling price for these remaining assets was $1,370,000 (consisting of
$1,100,000 cash and a note for $270,000) plus the assumption of approximately
$75,000 of liabilities. As of March 31, 1996, $198,000 of the note had been
repaid and the Company is pursuing legal action against the purchaser with
respect to collecting the remaining balance of the note.
With regard to liabilities not assumed by the buyers of the operations, during
fiscal 1996, all remaining debt obligations of ComTel were paid in full while
certain trade payables have been settled for less than face value. The Company
is also defending a complaint filed by Sun Financial Group relating to amounts
allegedly due under an Asset Purchase Agreement entered into in May 1993 (see
"Legal Proceedings" above). While the Company is in the process of defending
such litigation and settling any remaining trade liabilities of its former
ComTel business, no operations remain and no further losses are expected to be
incurred with respect to the ComTel operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net working capital as reflected on its consolidated balance sheet
increased from $238,000 as of March 31, 1995 to $1,460,000 as of March 31, 1996.
Accounts receivable increased $1,210,000 reflecting additional receivables
related to international sales and receivables associated with contractual
year-end price adjustments with Decora's largest customer. Inventories increased
by $1,074,000 reflecting additional raw materials required for international
product sales and increased finished goods inventory related to such sales.
Prepaid and other current assets increased by $193,000 primarily as a result of
prepaid interest associated with the $1,500,000 convertible note which was
extended until May 1998 (see Note 5 to the financial statements) as well as
miscellaneous timing differences. Accounts payable decreased by $713,000
reflecting timing differences with certain vendors and reduced purchases of raw
materials in the fourth quarter of fiscal 1996. No significant changes occurred
regarding accrued liabilities while current portion of long term
18
<PAGE> 22
debt increased by $2,653,000 reflecting the extension and repayment of
$2,050,000 of debt which was current in the prior year offset by the addition of
Decora's revolving line of credit in the amount of $4,002,000 which currently
has an expiration date of July 31, 1996. The Company is in active discussions
with its primary lender regarding the renewal of such line of credit and fully
anticipates that such renewal will be attained in the ordinary course of
business.
Consolidated cash balances as of March 31, 1996 were $188,000 which are limited
by certain security agreements and debt covenants as to use. The holding company
therefore has limited cash resources. During recent fiscal periods, the Company
and its subsidiaries generated cash from operations which was utilized primarily
to fund working capital requirements and repay debt. During the current fiscal
year Decora generated positive operating cash flow while the holding company,
due to administrative expenses, litigation settlements and current debt
maturities had negative cash flow which was funded through management fees,
through a private placement of equity securities and through the conversion of
debt into equity securities (see Note 5 to the financial statements).
In July 1994, Decora's revolving credit line was increased to $6,000,000 and
extended to July 31, 1996. In addition, the remaining term loan balance of
$2,000,000 as of the closing date was refinanced together with an additional
$6,000,000 of new debt in a five-year term loan facility which was used to repay
debt of the holding company. While the revolving line of credit currently
expires on July 31, 1996 and Management expects that such line of credit will be
extended in the ordinary course of business. As of March 31, 1996, the
outstanding balance of the term loan and the revolving line of credit were
$6,501,000 and $4,002,000, respectively. As part of the same debt refinancing,
Decora established an additional $1,000,000 of availability under the term loan
facility (if required) to fund capital expenditures until July 31, 1995. In July
1995, Decora borrowed $500,000 under such facility to fund capital improvements
and in September 1995 borrowed an additional $375,000 of low interest debt
through a Federal H.U.D. program administered by a local development corporation
in order to help fund the costs of the expansion of operations. As of March 31,
1996, the outstanding balances of these two facilities were $438,000 and
$342,000, respectively. Additionally, during fiscal 1996, the Company borrowed
$650,000 from it's primary lender under a two-year business purpose note in
order to repay certain liabilities of its former ComTel Industries subsidiary.
As of March 31, 1996, the outstanding balance of this note remained $650,000.
In connection with the acquisition of the Decora division by the Company in
April 1990, Decora issued $7,000,000 principal amount of subordinated notes, of
which $2,500,000 was due April 15, 1995 and $1,500,000 on each April 15
thereafter through 1998. The lender (CIGNA) and Decora have agreed to extend the
first payment until April 15, 1997 at which time a total of $3,500,000 will be
due. These notes had been issued with warrants which included certain put
features which may have been payable in May 1997. In March 1996 the Company and
CIGNA agreed to exchange such warrants for a non-interest bearing two-year note
in the amount of $1,000,000 and 1,000,000 shares of the Company's common stock.
If the note is not repaid prior to April 15, 1997, then the amount due will
increase by 20% and if the shares of common stock do not have a market value of
at least $3.00 per share as of April 15, 1998, then the Company will issue
additional shares to make up any deficiency. This transaction was closed on June
28, 1996 and any gain or loss, if any, will be charged to shareholders equity
during the first quarter ending June 30, 1996.
19
<PAGE> 23
During the third quarter of fiscal 1996, the Company successfully negotiated an
extension of a convertible note in the amount of $1,500,000 which was due on
November 3, 1995. Such note was extended until May 1998 at the same interest
rate. Interest for the two and one-half year period and an extension fee were
prepaid at closing through the issuance of 782,089 shares of stock. The lender
also received warrants for the purchase of 1,700,000 shares of common stock
which are exercisable at a price of $0.78 per share only in the event that the
note is paid in full without conversion. A second convertible note in the amount
of $550,000 which was due on January 1, 1996 was satisfied during the third
quarter through partial conversion and repayment of the balance with cash. In
order to satisfy such obligation as well as a litigation settlement, during the
third quarter the Company raised $550,000 in a private placement of common
stock.
Capital expenditures for the fiscal year ended March 31, 1996 were approximately
$2,700,000. Such expenditures were primarily related to the installation and
start-up of the new finishing operations acquired from Rubbermaid and do not
represent a typical year. Such expenditures were financed during the year
through operating cash flow, the borrowing of $875,000 under two debt facilities
noted above, reimbursement of certain expenditures by Rubbermaid and borrowings
under Decora's revolving line of credit. The Company is currently pursuing
alternative financing sources in order to refinance a portion of its revolving
line of credit with a long term financing. The Company is also evaluating
alternative financing sources which may be required to repay the $3,500,000 to
CIGNA which is due on April 15, 1997 as well as the $1,000,000 note due to CIGNA
which was exchanged for the warrants which CIGNA held in the Company's sole
operating subsidiary. Such plans include refinancing term debt which has been
repaid since 1994 and refinancing a portion of Decora's revolving line of credit
on a long term basis based on the increased value of the fixed assets purchased
during Fiscal 1996. Management believes that, along with the extension of
Decora's revolving line of credit, Decora's cash flow from operations and
lending facilities will be adequate to meet its debt service and fund its
working capital requirements while the repayment of the Cigna note may require
alternative financing sources. Cash flow requirements of the Company will be
satisfied through existing cash balances, management fee income from its
subsidiary and private placements of debt and/or equity if required.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is submitted in response to Part IV
hereof. See the Index to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
20
<PAGE> 24
PART III
DIRECTORS AND EXECUTIVE OFFICERS
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF
THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information, present occupation,
and business experience for the past five years of each director and executive
officer, including those persons nominated to serve on the Board of Directors:
<TABLE>
<CAPTION>
Year First
Became
Name Age Position Director
---- --- -------- --------
<S> <C> <C> <C>
Nathan Hevrony 44 Director, Chairman, 1988
Chief Executive Officer
Roger Grafftey-Smith 64 Director 1988
Gabriel Thomas 54 Director 1991
Stephen H. Verchick 55 Director 1993
Ronald A. Artzer 52 Director 1994
Timothy N. Burditt 41 Executive Vice President, -
Administration and Finance,
Secretary
Richard A. DeCoste 57 Executive Vice President, -
Decora Industries; Director of
Manufacturing, Decora Incorporated
Frank J. Nolfi, Jr. 64 Vice President-Finance, -
Decora Incorporated
John F. Tattersall 38 Chief Operating Officer, -
Decora Incorporated
</TABLE>
21
<PAGE> 25
DIRECTORS
NATHAN HEVRONY. Mr. Hevrony has served as a director and secretary of the
Company since August 1988. He was elected Chief Executive Officer and Chairman
of the Board during Fiscal 1990. He was a Director of two publicly traded
companies, until June 1988 while he was employed as a Director of Planning and
Development at a publicly traded holding Company from June 1986 to June 1988.
ROGER GRAFFTEY-SMITH. Mr. Grafftey-Smith has served as a director of the Company
since August 1988 and has been a managing partner of Grafftey-Smith & Associates
since 1981, an international financial consulting firm. Mr. Grafftey-Smith also
serves as a director of Americanino Capital Corporation, a publicly-traded
corporation.
GABRIEL THOMAS. Mr. Thomas has served as a director of the Company since June
1991. He has served as President and Director of Unilab Corporation since
December 1989. During the period from 1986 to 1991, Mr. Thomas has been a
consultant in international marketing and management. In 1985 to 1986, he was a
consultant to Frankfurt Consult, the mergers and acquisitions subsidiary of BHF
Bank, Frankfurt, Germany.
STEPHEN H. VERCHICK. Mr. Verchick was elected to the Board of Directors in
October 1993. He has been engaged in the private practice of law as President of
Stephen H. Verchick & Associates, Professional Corporation, in Beverly Hills,
California, for the past 24 years. Mr. Verchick is also President of Warner
Capital Associates, a Los Angeles based venture capital firm.
RONALD A. ARTZER. Mr. Artzer was elected to the Board of Directors in May 1994.
In March 1994, Mr. Artzer became President and Chief Executive Officer of
SoPakCo Foods, a food processing and packaging company. From 1991 to 1993, Mr.
Artzer served as President and Chief Executive Officer of Design Foods, a
Division of Sara Lee Corporation. From 1988 to 1991, he was President of STP
Consumer Services, Inc., a subsidiary of First Brands Corporation. From 1984 to
1988 he was President of Toddle House Restaurants, Inc., a subsidiary of Carson
Pirie Scott & Company. Prior thereto, he served in various Executive Officer
capacities of Sambo's Restaurants, Pepsi-Cola Company and General Foods
Corporation.
Directors of the Company hold office until the next annual meeting of
shareholders, until successors are elected and qualified or until their earlier
resignation or removal.
EXECUTIVE OFFICERS
TIMOTHY N. BURDITT. Mr. Burditt was named as Executive Vice President,
Administration and Finance in April 1993 and was named Secretary in August 1993.
From 1991 until his employment with the Company, Mr. Burditt was President and
Chief Operating Officer of Monitor Television, Inc., a Boston area cable and
broadcasting television station and worldwide shortwave radio network. Prior to
his employment with Monitor, Mr. Burditt was Vice President, Investment Banking,
of Fleet Associates, Inc., an investment banking firm, from 1988 through 1991,
Senior Associate for Investment Banking for the First Boston Corporation from
1986 to 1987 and held various positions with GE Capital, Inc. from 1983 to 1986.
22
<PAGE> 26
JOHN F. TATTERSALL. Mr. Tattersall was named as Chief Operating Officer of the
Company's Decora Incorporated subsidiary in June 1995. From 1984 until his
employment with Decora Incorporated, Mr. Tattersall held several key executive
positions with General Electric Company including Business Manager from 1991 to
1995 and Product Manager from 1989 to 1991.
RICHARD A. DECOSTE. Mr. DeCoste was named Director of Manufacturing in December
1995. He had joined the Company as President of the Company's Decora
Incorporated subsidiary in January 1993. In February 1994, Mr. DeCoste became
President of its Consumer Decorative Products Group. In November 1994, he became
Executive Vice President of the Company. From 1989 through 1991 Mr. DeCoste was
President of Plural Technologies, a manufacturer of commercial coatings. In
addition, he has owned DeCoste Remodeling/Design, a building materials company
since 1987.
FRANK J. NOLFI, JR. Mr. Nolfi has served as Vice-President Finance of the
Company's Decora Incorporated subsidiary since the Company's acquisition in
April 1990. He served in the same position for the Uniglass Industries division
of the prior owner, United Merchants and Manufacturers, Inc.
Officers of the Company are elected by the Board of Directors and hold office
until their successors are chosen and qualified, until their death or until they
resign or have been removed from office. All corporate officers serve at the
discretion of the Board of Directors. There are no family relationships between
any director or executive officer of the Company and any other director or
executive officer of the Company. Richard DeCoste was an officer of Plural
Technologies, Inc. when it filed a petition for bankruptcy under Chapter 7 of
the Bankruptcy Code in September 1991.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors convened three formal meeting during fiscal 1996. In
addition, the Board took action numerous times during the fiscal year by
unanimous written consent. Management confers frequently with its directors on
an informal basis to discuss Company affairs.
The Board of Directors has two standing committees: an Audit Committee and a
Compensation Committee. The Board does not have a Nominating Committee.
The function of the Audit Committee is to review and approve the selection of
and all services performed by the Company's independent accountants, to meet and
consult with, and to receive reports from the Company's independent accountants
and its financial and accounting staff and to review and act or report to the
Board of Directors with respect to the scope of audit procedures, accounting
practices, and internal accounting and financial controls of the Company. The
current members of the Audit Committee are Roger Grafftey-Smith, Gabriel Thomas,
Stephen Verchick and Ronald Artzer. The Audit Committee held one meeting during
fiscal 1996 and took action by written consent.
The Compensation Committee is generally authorized to review and recommend to
the Board the compensation to be paid to the Company's principal officers and to
administer the Company's 1987 Stock Option Plan. The current members of the
Compensation Committee are Roger Grafftey-Smith (Chairman),
23
<PAGE> 27
Gabriel Thomas, Stephen Verchick and Ronald Artzer. The Compensation Committee
held three meetings during fiscal 1996 but took action several times by written
consent.
COMPENSATION OF DIRECTORS
Directors are paid $2,500 for each Board meeting which they attend, and $500 for
each committee meeting which they attend. Directors may also receive stock
options under the Company's 1987 Stock Option Plan, or by other grant by the
Company. The Company reimburses directors for reasonable expenses incurred in
connection with their attendance at meetings and other Company related
functions.
ITEM 11. EXECUTIVE COMPENSATION
The tables and discussion below set forth information about the compensation
awarded to, earned by, or paid to the Company's Chief Executive Officer and to
its most highly compensated executive officers during the fiscal years ended
March 31, 1996, 1995 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------- ----------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS STOCK OPTIONS
- --------------------------- ---- --------- ----- -------------
<S> <C> <C> <C> <C>
Nathan Hevrony 1996 $185,000(4) - -
Chief Executive Officer 1995 $180,000 $25,000 400,000(2)
1994 $125,000 $25,000 -
Timothy N. Burditt 1996 $120,000 $15,000 25,000
Executive Vice President, 1995 $ 90,000 $27,000 -
Administration & Finance 1994 $ 81,000 - 100,000
John F. Tattersall 1996 $ 99,000 - 200,000(3)
Chief Operating Officer, 1995 - - -
Decora Incorporated 1994 - - -
Richard A. DeCoste 1996 $125,000 - -
Director of Manufacturing, 1995 $128,000 - -
Decora Incorporated 1994 $116,000 - 75,000
</TABLE>
- ---------------
(1) Messrs. Hevrony, Tattersall, and Burditt were compensated pursuant to
employment agreements. See "Employment Agreements" below.
24
<PAGE> 28
(2) The options vest as follows: 150,000 vest if the share price is $3.00 or
more for 30 consecutive days and 250,000 shall vest if the share price is
$4.00 or more for 30 consecutive days any time until May 31, 1997. None of
these options are vested at this time.
(3) Options vest as follows: 50,000 on date of grant and 50,000 on each
anniversary of date of grant over three years.
(4) The Company also paid the premium for term life insurance for the benefit of
Mr. Hevrony of $17,665.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Mr. Hevrony, its Chief
Executive Officer which has been extended until May 31, 1997. The extended
agreement provides for an annual salary of $185,000 and a cash bonus of up to
$60,000 for the fiscal year ended March 31, 1995 with future years bonus
compensation to be determined by the Board of Directors. The maximum of $60,000
shall be paid if the Company's earnings per share from continuing operations are
twice the prior year's earnings. Mr. Hevrony was paid a $25,000 bonus for the
fiscal year ended March 31, 1995 and no action has been taken by the Board with
respect to bonus compensation for the year ended March 31, 1996. In addition,
during August 1994, Mr. Hevrony received an option to purchase up to 400,000
shares at $2.00 per share. The options vest as follows: 150,000 vest if the
share price is $3.00 or more for 30 consecutive days and 250,000 shall vest if
the share price is $4.00 or more for 30 consecutive days any time until May 31,
1997. None of these options are vested at this time. The employment agreement
shall terminate upon breach of a material term of the agreement or upon the
permanent disability of Mr. Hevrony. In the event of termination without cause
(as defined in such agreement), Mr. Hevrony is entitled to receive compensation
for the remainder of the term of the agreement (through May 31, 1997) and an
additional 24 month period.
The Company entered into a three-year employment agreement with Mr. Burditt
which provides for a minimum annual compensation in the amount of $90,000 and an
annual bonus of $27,000. In 1995 such agreement was modified to provide minimum
annual compensation in the amount of $120,000 with an annual bonus subject to
performance and the discretion of the compensation committee. This agreement was
automatically renewed for a new three year term beginning June 1996. Upon
termination without cause, Mr. Burditt is entitled to receive any earned but
unpaid bonuses on a pro-rata basis, plus compensation in the amount of twelve
months during the first year of the term, nine months compensation during the
thirteenth to eighteenth months of the term and the lesser of six months or
until the end of the term if terminated after the eighteenth month. Such
agreement was extended to May 1999.
In June 1995 the Company has entered into a three year employment agreement with
Mr. Tattersall which initially provides for minimum annual compensation in the
amount of $130,000. In addition, such agreement provides for an annual bonus of
up to half his salary contingent upon certain performance criteria. Upon
termination without cause, Mr. Tattersall is entitled to receive compensation
for the greater of 12 months or the remainder of the term of his agreement.
25
<PAGE> 29
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK PRICE
GRANTED TO EXERCISE PRICE APPRECIATION FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION --------------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 0% 5% 10%
- ---- ------- ------------ ------------- ---------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
John F. Tattersall 200,000(2) 89% $1.03 6/28/98 $ -0- $32,471 $68,186
Timothy N. Burditt 25,000(3) 11% $1.08 7/ 1/03 $ -0- $10,992 $25,615
</TABLE>
- ---------------
(1) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only, compounded on an annual basis. Actual gains, if any, on
stock option exercises are dependent on the future performance of the Common
Stock and overall stock conditions. The amounts reflected in this table may
not necessarily be achieved.
(2) Options were granted at $1.03 per share. The options vest as follows: 50,000
vested on date of grant and 50,000 additional options vest on each
anniversary of the date of grant over three years. 50,000 of these options
are vested at this time.
(3) Options were granted at $1.08 per share and all were vested as of the date
of grant.
AGGREGATED MARCH 31, 1996 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(3)
---- ----------- ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Nathan Hevrony 750,000 400,000 $ -0- $ -0-
Timothy N. Burditt 125,000(1) -0- $ -0- $ -0-
Richard A. DeCoste 75,000(1)(2) -0- $ -0- $ -0-
John F. Tattersall 50,000 150,000 $- 0- $ -0-
</TABLE>
- ---------------
(1) Options were granted at 85% of market value (closing bid price for the
Company's Common Stock as reported by NASDAQ) at date of grant.
(2) Options have a term of ten years, subject to termination upon the
termination of employment. Unvested options are subject to acceleration upon
a consolidation or merger in which the Company is not the surviving
corporation or which results in the acquisition of substantially all of the
Company's outstanding stock by a single person or entity (unless the terms
of such agreement specifically provide for the assumption of such options),
or in the event of the sale or transfer of substantially all of the
Company's assets.
26
<PAGE> 30
(3) Value of unexercised in-the-money options was calculated using the average
of the bid and asked price for the Company's stock on March 31, 1996.
During fiscal 1996 none of the executive officers exercised any outstanding
stock options. The only unexercised options held by such executive officers as
of March 31, 1996, are shown in the table above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth as of June 15, 1996, certain information with
respect to the Common Stock of the Company which may be deemed to be
beneficially owned by each stockholder who is known by the Company to own more
than 5% of the outstanding Common Stock, by each director of the Company and by
all directors and officers as a group.
<TABLE>
<CAPTION>
NAME AND PERCENT
ADDRESS OF COMMON OTHER OF
BENEFICIAL OWNER(1) STOCK SECURITIES TOTAL CLASS
------------------- ----- ---------- ----- -----
<S> <C> <C> <C> <C>
Nathan Hevrony 753,750 750,000(2) 1,503,750 4.2%
1 Mill Street
Fort Edward, NY 12828
Gabriel Thomas -0- 412,000(2) 412,000 1.2%
1 Mill Street
Fort Edward, NY 12828
Roger Grafftey-Smith 375,000 262,000(2) 637,000 1.8%
1 Mill Street
Fort Edward, NY 12828
Stephen H. Verchick -0- 75,000(2) 75,000 (4)
21550 Oxnard Street
Suite 300
Woodland Hills, CA 91367
Ronald A. Artzer -0- 50,000(2) 50,000 (4)
315 Mullins Street
Mullins, South Carolina 29574
</TABLE>
27
<PAGE> 31
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Timothy N. Burditt -0- 125,000(2) 125,000 (4)
1 Mill Street
Fort Edward, NY 12828
John F. Tattersall -0- 100,000(2) 50,000 (4)
1 Mill Street
Fort Edward, NY 12828
Richard A. DeCoste -0- 75,000(2) 75,000 (4)
1 Mill Street
Fort Edward, NY 12828
Frank J. Nolfi, Jr. -0- -0- -0- (5)
1 Mill Street
Fort Edward, NY 12828
Robert W. Johnson, IV(6) 2,006,325(3) 1,207,353(2)(5) 3,213,678 9.1%
The Johnson Company
630 Fifth Avenue, Suite 918
New York, NY 10111
All directors and officers as
a group including the named
persons (9 persons) 1,128,750 1,849,000 2,977,750 8.4%
</TABLE>
- --------------------------
(1) Unless otherwise indicated, each person included in the table has sole
investment power and sole voting power with respect to the securities
beneficially owned.
(2) The amounts shown reflect shares of common stock underlying stock options,
convertible notes or warrants which are exercisable within 60 days of June
15, 1996.
(3) Mr. Johnson disclaims beneficial interest in 185,000 shares which are held
by trusts for which he is a trustee.
(4) Each of these persons owns less than 1% of the outstanding common stock of
the Company.
(5) Includes 882,353 shares issuable upon the conversion of the Johnson Note in
the principal amount of $1,500,000 at the rate of $1.70 per share. Does not
include a warrant to purchase 1,700,000 shares which can only be exercised
if the Johnson Note is paid in full without conversion.
(6) Pursuant to the terms of a Note and Warrant Agreement, dated November 3,
1992, by and between the Company and Mr. Johnson, as amended, the Company is
obligated to name Mr. Johnson as a director nominee. Mr. Johnson has
indicated to the Company that he does not intend to exercise such right at
the present time.
- --------------------------
28
<PAGE> 32
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. See Index to Consolidated Financial Statements.
2. Financial Statement Schedules. See Index to Consolidated Financial
Statements.
3. Exhibits.
The following exhibits are filed or incorporated by reference as part of this
Report.
(3) Articles of Incorporation and By-Laws
3.1 Certificate of Incorporation filed on March 27, 1992. (8)
3.2 By-laws. (8)
(4) Instruments Defining the Rights of Security Holders
4.1 Certificate of Incorporation (see Exhibits 3.1-3.2).
4.2 Form of Specimen Certificate.
(10) Material Contracts
10.1 Utilitech, Incorporated, 1987 Stock Option Plan. (1)
10.2 Management Agreement dated as of April 18, 1990 by and between
Utilitech and Decora Incorporated.(2)
10.3 Loan and Security Agreement dated as of April 18, 1990 by and
between Decora Incorporated, Utilitech and Norstar Bank of
Upstate NY ("Norstar").(2)
10.4 Mortgage dated as of April 18, 1990 by and between Decora
Incorporated and Norstar.(2)
10.5 Guaranty of Utilitech to Norstar dated as of April 18, 1990. (2)
10.6 Secured Revolving Line of Credit Agreement dated as of April 18,
1990 by and between Decora Incorporated and Norstar. (2)
29
<PAGE> 33
10.7 Form of Warrant to Purchase Common Stock of Decora Incorporated
expiring April 15, 1998 dated as of April 18, 1990 by and between
Decora and CIGNA Mezzanine Partners II, L.P., CIGNA Property and
Casualty Insurance Company and Zande and Co. (2)
10.8 Forms of 14% Senior Subordinated Notes due April 15, 1998 dated
as of April 18, 1990 in the amounts of $3,206,480.21,
$1,327,732.26, $1,138,055.27 and $1,327,732.26 to CIGNA Mezzanine
Partners II, L.P., CIGNA Property and Casualty Property and
Casualty Insurance Company and Zande and Co. (2)
10.9 Securities Purchase Agreement dated as of April 15, 1990 by and
between Utilitech, Decora Incorporated and Purchasers of 14%
Senior Subordinated Notes due 1998 and Warrants to Purchase
Common Stock of Decora Incorporated. (2)
10.10 Agreement and Plan of Merger by and between Decora Industries,
Inc. and Utilitech, Incorporated dated March 3, 1992. (3)
10.11 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Nathan Hevrony. (4)
10.12 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Roger Grafftey-Smith. (4)
10.13 Option Agreement dated as of January 7, 1992, by and between
Utilitech, Incorporated and Gabriel Thomas. (4)
10.14 Note and Warrant Purchase Agreement by and between Decora
Industries, Inc. and Robert W. Johnson IV, dated November 3,
1992. (5)
10.15 Convertible Negotiable Promissory Note by and between Decora
Industries, Inc. and Robert W. Johnson IV, dated November 3,
1992. (5)
10.16 Series A Warrant to Purchase Common Stock of Decora Industries,
Inc., dated November 3, 1992 issued to Robert W. Johnson IV. (5)
10.17 Series B Warrant to Purchase Common Stock of Decora Industries,
Inc., dated November 3, 1992 issued to Robert W. Johnson IV. (5)
10.18 License Agreement dated August 9, 1991, by and between the
Company and John Smith.(6)
10.19 Form of Option Agreement dated as of January 11, 1993, by and
between Richard A. DeCoste and the Company.(6)
10.20 Asset Purchase Agreement date May 14, 1993 by and among ComTel
Industries, Inc., the Company and Sun Financial Group, Inc.(6)
30
<PAGE> 34
10.21 Employment Agreement, dated as of July 1, 1993, by and between
the Company and Timothy N. Burditt.(6)
10.22 1988 Employee Stock Purchase Plan.(6)
10.23 Second Amendment to Secured Revolving Line of Credit Agreement
dated as of July 29, 1993 by and between Decora and Fleet Bank of
New York (successor to Norstar).(7)
10.24 Labor Agreement, effective June 9, 1992, by and between Decora
Incorporated and Local #13 United Paperworkers International
Union.(7)
10.25 Manufacturing Agreement dated as of February 18, 1994, by and
Between Decora Industries, Inc., Decora Incorporated and
Rubbermaid Incorporated.(7)(11)
10.26 Promissory Note in the amount of $8,500,000 by and between Decora
Incorporated and Fleet Bank of New York dated July 20, 1994.(7)
10.27 Amendment No. 1 to Loan and Security Agreement between Decora
Incorporated and Fleet Bank of New York dated July 20, 1994.(7)
10.28 Promissory Note in the amount of $1,000,000 by and between Decora
Incorporated and Fleet Bank of New York dated July 20, 1994.(7)
10.29 Loan and Security Agreement in the amount of $1,000,000 by and
between Decora Incorporated and Fleet Bank of New York dated July
20, 1994.(7)
10.30 Revolving Line of Credit Note in the amount of $6,000,000 by and
between Decora Incorporated and Fleet Bank of New York dated July
20, 1994.(7)
10.31 Third Amendment to Secured Revolving Line of Credit Agreement by
and between Decora Incorporated and Fleet Bank of New York dated
July 20, 1994.(7)
10.32 Asset Purchase Agreement by and among ComTel Metals, Inc., ComTel
Industries, Inc. and Keptel, Inc. dated June 28, 1994.(7)
10.33 Amendment to License Agreement dated March 31, 1994 by and among
Decora Industries, Inc., Decora Incorporated and John R.
Smith.(7)
10.34 Assignment of Ownership dated June 30, 1994 by and among Decora
Industries, Inc., Decora Incorporated and John R. Smith relating
to License Agreement.(7)
10.35 Form of InterEast Warrant dated May 4, 1994 to purchase common
stock of Decora.(7)
31
<PAGE> 35
10.36 Warrant to Confidesa AG to Purchase 100,000 Shares of Common
Stock dated June 29, 1993.(7)
10.37 Form of Warrant to Confidesa AG to Purchase 50,000 shares of
Common Stock dated June 1994.(7)
10.38 Form of Convertible Promissory Note dated June 1994, in the
amount of $550,000 by and between Confidesa AG and Decora
Industries, Inc.(7)
10.39 Letter of Fleet Bank to Decora Industries dated July 29, 1994
regarding the extension of the line of credit of ComTel
Industries, Inc.(7)
10.40 Amendment to Securities Purchase Agreement dated as of July 19,
1994 by and between Decora, Incorporated and Cigna Mezzanine
Partners, Inc., Cigna Property and Casualty and Insurance Company
of North America.(7)
10.41 General Mutual Releases, Settlement Agreement and Covenants for
Peace from Further Litigation, Proceedings, Claims, Purported
Advocacy of Claims and Unwanted Publicity, by and between
Jacqueline B. Cotsen and Decora Industries, Inc., dated July 20,
1994.(7)
10.42 Assignment Agreement by and among Chase Manhattan Bank, N.A.,
Decora Industries, Inc., and Winslow Bank Limited, dated July 20,
1994.(7)
10.43 Restated Settlement and Release Agreement by and between Stanley
Rabinowitz, Milton Rabinowitz, the Estate of Solomon Rabinowitz,
the Estate of Clara Rabinowitz, Sherri Rabinowitz Sussman,
Suzanne Rabinowitz, Jeffrey Rabinowitz, Laurence Rabinowitz and
Barbie Rabinowitz Lieber, on the one hand, and Decora Industries,
Inc., and Yorkville Industries, Inc., on the other hand, dated
July 20, 1994.(7)
10.44 Agreement and Release by and between InterEast Capital Limited
and Decora Industries, Inc., dated July 20, 1994.(7)
10.45 Promissory Note in the amount of $6,000,000 dated as of July 20,
1994 by and between Decora Industries as borrower and Decora
Incorporated as lender.(7)
10.46 Form of Employment Agreement dated as of June 1, 1994 by and
between Decora Industries, Inc. and Nathan Hevrony.(7)
10.47 Form of Option Agreement dated as of July 5, 1994 by and between
Decora Industries, Inc. and Stephen Verchick.(7)
10.48 Form of Option Agreement dated as of July 5, 1994 by and between
Decora Industries, Inc. and Ronald Artzer.(7)
32
<PAGE> 36
10.49 Form of Option Agreement dated as of August 15, 1994 by and
between Decora Industries, Inc. and Nathan Hevrony.(8)
10.50 Letter dated November 18, 1994 from Fleet Bank to Richard J.
Winslow, President, ComTel Industries, Inc. re extension of
revolving working capital line of credit in the amount of
$2,000,000 until January 31, 1995.(8)
10.51 Modification, Extension and Restatement Agreements by and between
Fleet Bank and ComTel.(9)
10.52 Asset Purchase Agreement dated as of March 31, 1995 by and
between ComTel Systems Corporation and ComTel Industries,
Inc.(10)
10.53 Secured Promissory Note I dated as of March 31, 1995 in the
amount of $850,000 by and between ComTel Systems Corporation, as
Debtor, and ComTel Industries, Inc., as Lender.(10)
10.54 Secured Promissory Note II dated as of March 31, 1995 in the
amount of $710,000 by and between ComTel Systems Corporation, as
Debtor, and ComTel Industries, Inc., as Lender.(10)
10.55 Amendment to Securities Purchase Agreement dated as of April 1,
1995, by and among Decora, Incorporated and Cigna Mezzanine
Partners II, L.P., Cigna Property and Casualty Insurance Company
and Insurance Company of North America.(10)
10.56 Manufacturing Agreement dated April 12, 1995 by and among Decora
Industries, Inc., Decora, Incorporated and Rubbermaid
Incorporated. (10)(11)
10.57 Agreement of Purchase and Sale of Assets dated June 13, 1995, by
and between DMX Integration, Inc. and ComTel Metals, Inc.(10)
10.58 Secured Promissory Note dated June 13, 1995, in the amount of
$270,809.90 by and between DMX Integration, Inc., as Debtor and
ComTel Metals, Inc., as Lender.(10)
10.59 Guaranty of Datamax Corporation dated June 13, 1995.(10)
10.60 Employment Agreement dated June 28, 1995 by and between John
Tattersall and Decora Incorporated.(10)
10.61 Option Agreement dated June 28, 1995 by and between John
Tattersall and Decora Industries, Inc.(10)
10.62 Option Agreement dated July 6, 1995 by and between Gabriel Thomas
and Decora Industries, Inc.(10)
33
<PAGE> 37
10.63 Amended and Restated Note and Warrant Purchase Agreement by and
between Decora and Johnson.(12)
10.64 Amended and Restated Convertible Negotiable Promissory Note in
the amount of $1,500,000 by and between Decora as payor and
Johnson as holder.(12)
10.65 Series C Warrant to Purchase Common Stock of Decora Industries,
Inc.(12)
10.66 Business Purpose Note dated January 24, 1996 in the amount of
$650,000 by and between Decora Industries, Inc. As payor and
Fleet Bank.
10.67 Promissory Note dated September 20, 1995 in the amount of
$375,000 by and between Decora Incorporated as the borrower and
the Washington County Local Development Corporation .
10.68 Loan Agreement dated September 20, 1995 between Decora
Incorporated and the Washington County Local Development
Corporation.
10.69 Form of Amendment NO. 3 to the Securities Purchase Agreement
dated as of March 31, 1996 by and among Decora Incorporated,
Cigna Mezzanine Partners, Inc., Cigna Property and Casualty and
Insurance Company of North America.
10.70 Form of Exchange Agreement dated March 31, 1996 by and among
Decora Incorporated, Cigna Mezzanine Partners, Inc., Cigna
Property and Casualty and Insurance Company of North America.
(22) Subsidiaries of the Registrant(7)
(24) Consents of Experts and Counsel
24.1 Consent of Price Waterhouse LLP.
- ----------------------------------
Notes
(1) Previously filed as Exhibits to the Company's Annual Report on Form
10-K for the fiscal year ended March 31, 1988.
(2) Previously filed as Exhibits to the Company's Report on Form 8-K dated
April 18, 1990.
34
<PAGE> 38
(1) Previously filed as Exhibits to the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1988.
(2) Previously filed as Exhibits to the Company's Report on Form 8-K dated
April 18, 1990.
(3) Previously filed as Exhibit to the Company's Report on Form 8-K dated April
6, 1992.
(4) Previously filed as Exhibits to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1992.
(5) Previously filed as Exhibits to the Company's Report on Form 8-K dated
November 5, 1992.
(6) Previously filed as Exhibit to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1993.
(7) Previously filed as Exhibit to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1994.
(8) Previously filed as Exhibit to the Company's Report on Form 10-Q for the
fiscal quarter ended December 31, 1994.
(9) Previously filed as Exhibit to the Company's Report on Form 8-K dated March
2, 1995.
(10) Previously filed as Exhibit to the Company's Report on Form 10-K for the
fiscal year ended March 31, 1995.
(11) Confidential treatment requested.
(12) Previously filed as Exhibit to the Company's Report on Form 10-Q for the
fiscal quarter ended December 31, 1995.
(b) REPORTS ON FORM 8-K
None
35
<PAGE> 39
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
DECORA INDUSTRIES, INC.
By: /s/ Nathan Hevrony
-----------------------------------
Nathan Hevrony
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) THE SECURITIES ACT
OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ /Roger Grafftey-Smith Director June 28, 1996
- ----------------------------------
Roger Grafftey-Smith
/s/ Gabriel Thomas Director June 28, 1996
- ----------------------------------
Gabriel Thomas
/s/ Nathan Hevrony Chief Executive Officer June 28, 1996
- ---------------------------------- and Director (Principal
Nathan Hevrony Executive Officer)
/s/ Stephen H. Verchick Director June 28, 1996
- ----------------------------------
Stephen H. Verchick
/s/ Ronald A. Artzer Director June 28, 1996
- ----------------------------------
Ronald A. Artzer
/s/ Timothy N.Burditt Executive Vice President, June 28, 1996
- ---------------------------------- Administration and Finance
Timothy N. Burditt (Principal Financial and
Accounting Officer)
</TABLE>
36
<PAGE> 40
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Financial Statements Page
- -------------------- ----
<S> <C>
The following Consolidated Financial Statements
Of Decora Industries, Inc., and Report of Independent
Accountants are filed as part of this report:
Report of Independent Accountants F-2
Consolidated Balance Sheet of March 31, 1996 and 1995 F-3
Consolidated Statement of Operations for the Years
Ended March 31, 1996, 1995 and 1994 F-5
Consolidated Statement of Cash Flows for the Years
Ended March 31, 1996, 1995 and 1994 F-6
Consolidated Statement of Shareholders' Equity (Deficit)
For the Years Ended March 31, 1996, 1995 and 1994 F-7
Notes to Consolidated Financial Statements F-8
</TABLE>
Financial Statement Schedules:
Schedules not listed above have been omitted because they are not required or
are not applicable, or the required information is shown in the financial
statements or notes thereto.
F - 1
<PAGE> 41
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Decora Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
shareholders' equity (deficit) present fairly, in all material respects, the
financial position of Decora Industries, Inc. and its subsidiaries at March 31,
1996 and 1995 and the results of their operations and their cash flows for each
of the three years in the period ended March 31, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Syracuse, New York
June 28, 1996
F - 2
<PAGE> 42
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 188 $ 309
Accounts receivable, less allowance for
doubtful accounts of $202 and $189 at
March 31, 1996 and 1995, respectively (Note 11) 4,151 2,941
Inventories (Notes 1 and 3) 6,003 4,929
Prepaid expenses and other current assets 641 448
Net current assets of discontinued operations-ComTel (Note 2) 1 -
----------- -----------
Total current assets 10,984 8,627
Property and equipment, net (Notes 1 and 4) 8,944 7,646
Notes receivable (Note 2) 1,758 1,560
Intangibles, net (Note 1) 11,571 11,788
Deferred income taxes (Note 9) 2,900 1,400
----------- -----------
Total assets $ 36,157 $ 31,021
=========== ===========
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
F - 3
<PAGE> 43
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable $ 2,127 $ 2,840
Accrued liabilities (Note 6) 1,587 1,791
Current portion of long-term debt (Note 5) 5,810 3,157
Net current liabilities of discontinued
operations - ComTel (Note 2) - 601
----------- ------------
Total current liabilities 9,524 8,389
Long-term debt (Note 5) 14,489 15,006
Net non-current liabilities of discontinued
operations - Yorkville (Note 2) - 1,520
Other non-current liabilities 363 285
----------- ------------
Total liabilities 24,376 25,200
----------- ------------
Warrants in subsidiary (Note 5) 1,642 1,425
----------- ------------
Shareholders' equity:
Preferred stock, $.01 par value; 5,000 shares
authorized at March 31, 1996 and 1995 - -
Common stock, $.01 par value; 45,000 shares authorized;
34,429 and 30,718 shares issued and outstanding at
March 31, 1996 and 1995, respectively (Note 7) 344 307
Additional paid-in capital 31,075 28,288
Accumulated deficit (21,280) (24,199)
----------- ------------
Total shareholders' equity 10,139 4,396
----------- ------------
Commitments and contingencies (Note 10)
----------- ------------
Total liabilities and shareholders' equity $ 36,157 $ 31,021
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F - 4
<PAGE> 44
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995 1994
<S> <C> <C> <C>
Revenues (Note 11) $ 38,828 $ 40,414 $ 39,955
Cost of goods sold 28,244 28,798 29,569
--------- --------- ---------
Gross profit 10,584 11,616 10,386
Marketing, general and administrative
expense 6,476 7,721 6,194
--------- --------- ---------
Operating income 4,108 3,895 4,192
Interest expense 2,675 2,658 2,451
--------- --------- ---------
Income from continuing
operations before taxes 1,433 1,237 1,741
Provision (benefit) for taxes (Notes 1 and 9) (1,486) (1,171) 112
--------- --------- ---------
Income from continuing operations 2,919 2,408 1,629
--------- --------- ---------
Discontinued operations (Note 2):
Loss from operations - (875) (1,269)
Provision for discontinued operations - (422) (212)
--------- --------- ---------
Income (loss) from discontinued operations - (1,297) (1,481)
--------- --------- ---------
Net income $ 2,919 $ 1,111 $ 148
========= ========= =========
Income (loss) per common share (Note 1):
Continuing operations $ 0.09 $ 0.08 $ 0.06
Discontinued operations - (0.04) (0.05)
--------- --------- ---------
Income per common share $ 0.09 $ 0.04 $ 0.01
========= ========= =========
Average shares of common stock used in
computation of income per share (Note 1) 32,280 30,357 29,690
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F - 5
<PAGE> 45
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended March 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,919 $ 1,111 $ 148
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,222 1,623 1,534
Amortization of debt discount 17 489 261
Loss on disposal of fixed assets 98 75 -
Provision for loss on disposal of
discontinued operations - 422 212
Stock issued for services - 176 -
Deferred income tax benefit (1,500) (1,400) -
Net changes in current assets and
liabilities, exclusive of acquisitions and
dispositions of subsidiaries (Note 12) (3,316) (1,724) 555
-------- -------- -------
Net cash provided by (used in) operating activities (560) 772 2,710
-------- -------- -------
Cash flows from investing activities:
Proceeds from sale of discontinued operations - 1,090 -
Additions to notes receivable (198) (1,560) -
Cash of discontinued operations - (180) (66)
Purchase of fixed assets (2,699) (920) (1,275)
Retirements of fixed assets 154 - -
Increase (decrease) in liabilities - discontinued
operations (601) 1,054 (376)
-------- -------- -------
Net cash used in investing activities (3,344) (516) (1,717)
-------- -------- -------
Cash flows from financing activities:
Proceeds from additional borrowings 3,889 226 1,050
Repayment of debt (1,420) (875) (2,600)
Proceeds from exercise of stock options - 50 -
Proceeds from issuance of common stock 550 - -
Stock issued in connection with
debt restructuring 500 150 230
Stock issued to pay interest expense 47 182 133
Stock issued in acquisition - - 400
Addition (reduction) of warrants in subsidiary 217 - (200)
Other - - (52)
-------- -------- -------
Net cash provided by (used in)
financing activities 3,783 (267) (1,039)
-------- -------- -------
Net decrease in cash (121) (11) (46)
Cash at beginning of period 309 320 366
-------- -------- -------
Cash at end of period $ 188 $ 309 $ 320
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F - 6
<PAGE> 46
Decora Industries, Inc.
Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts in 000's
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------
ADDITIONAL ACCUM-
PAR PAID-IN ULATED
SHARES VALUE CAPITAL DEFICIT
<S> <C> <C> <C> <C>
Balance at March 31, 1993 29,389 $ 294 $ 26,830 $ (25,458)
Interest paid in common shares 96 1 132 -
Common shares issued in acquisition 200 2 398 -
Common shares issued in debt restructure 174 2 228 -
Net income - - - 148
------ ---------- -------- ---------
Balance at March 31, 1994 29,859 299 27,588 (25,310)
------ ---------- -------- ---------
Interest paid in common shares 258 2 180 -
Conversion of debentures 131 1 149 -
Common shares issued in debt restructuring 125 1 149 -
Stock options exercised 50 1 49 -
Common shares issued to
settle outstanding obligations 295 3 173 -
Net income - - - 1,111
------ ---------- -------- ---------
Balance at March 31, 1995 30,718 307 28,288 (24,199)
------ ---------- -------- ---------
Conversion of note payable 574 6 344 -
Common shares issued for
interest and debt restructuring 900 9 538 -
Common shares issued to
settle outstanding obligations (Note 2) 1,336 13 1,364 -
Common shares issued in
private placement 901 9 541 -
Net income - - - 2,919
------ ---------- -------- ---------
Balance at March 31, 1996 34,429 $ 344 $ 31,075 $ (21,280)
====== ========== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F - 7
<PAGE> 47
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Decora Industries, Inc. (the "Company") is a holding company primarily
engaged in the development, manufacture, and sale of consumer decorative
products and of specialty industrial products, utilizing its proprietary
pressure-sensitive, self-adhesive, release and protective technologies.
The Company operates through its wholly-owned subsidiary, Decora
Incorporated. In April 1994, management decided to discontinue the
operations of a second wholly-owned subsidiary, ComTel Industries, Inc.
("ComTel"), which manufactured, installed and serviced
telecommunications equipment and systems (see Note 2). Accordingly, the
continuing operations of the Company now comprise the various divisions
of Decora Incorporated, which constitute a single significant business
segment.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Decora
Industries, Inc., its operating subsidiary and the discontinued
subsidiary. All significant intercompany accounts and transactions have
been eliminated in consolidation.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating fair value disclosure for financial instruments. All
financial instruments are held for purposes other than trading. The
estimated fair values of cash, accounts receivable, accounts payable and
accruals approximate carrying value.
Notes receivable
The carrying amount of the Company's notes receivable approximates fair
value, which is estimated by discontinuing the future cash flows using
current interest rates at which similar loans would be made to borrowers
with similar credit ratings for the same remaining maturities.
Long-term debt
The carrying amount, which approximates fair value of the Company's
senior subordinated notes, is based on discounting future cash flows
using interest rates at which similar loans would be made to borrowers
with similar credit ratings for the same remaining maturities. The
carrying amount of the Company's remaining debt approximates fair value.
CASH AND CASH EQUIVALENTS
The Company invests surplus cash in highly liquid debt instruments which
have original maturities of less than three months and are considered to
be cash equivalents.
F - 8
<PAGE> 48
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
PRODUCT AND SERVICE REVENUES
Revenues from sales of products and services are recognized when
products are shipped and services are performed.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market. Cost includes materials, labor and manufacturing overhead.
PROPERTY AND EQUIPMENT
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, generally five to thirty years.
INTANGIBLES
The excess of the aggregate purchase price over the fair market value of
the net assets of businesses acquired has been recorded as goodwill and
is being amortized on a straight-line basis over forty years. Trademarks
are being amortized over twenty years. At each balance sheet date, the
Company evaluates the recoverability of its intangible assets based on
estimated future gross cash flows. Based upon its most recent analysis,
the Company believes that there was no impairment of its intangible
assets at March 31, 1996. The Company has experienced sales declines
related to certain products sold under the "Cobra" trademark. Management
has developed a plan to reverse such decline and to recoup the value of
the trademark through future cash flows. In the event that the plan is
not successful, it is possible that an impairment write down of the
intangible asset related to "Cobra" would be required. The unamortized
balance of the "Cobra" trademark at March 31, 1996 is $1,600,000.
INCOME PER SHARE
Income per share of common stock is based on the average number of
shares and equivalents of common stock outstanding during each period.
Fully diluted income per share is not presented for each of the periods
since the reduction from primary income per share is less than 3%.
INCOME TAXES
Income taxes are provided based on the liability method of accounting
pursuant to the Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109"). Deferred income taxes are
recorded to reflect expected future tax consequences of events that have
been recognized in a company's financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined
based on the difference between
F - 9
<PAGE> 49
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
the financial statement carrying amounts and tax bases of assets and
liabilities using enacted tax rates in the years in which the
differences are expected to reverse.
RESEARCH AND DEVELOPMENT
Company-sponsored research and development costs related to both present
and future products are expensed currently. Research and development
expenses amounted to $302,000, $1,067,000 and $1,364,000 in fiscal 1996,
1995 and 1994, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and revenues and expenses during the reporting period.
Actual results may differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to prior period amounts in
order to conform with the current year presentation.
NEW ACCOUNTING PRONOUNCEMENTS
In Fiscal 1996 the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." At each year-end, the
Company reviews its long-lived assets (including goodwill) for
impairment based on estimated future nondiscounted cash flows
attributable to the assets. In the event such cash flows are not
expected to be sufficient to recover the recorded value of the assets,
the assets are written-down to their estimated fair values.
In October 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation." SFAS 123 defines a fair value
based method of accounting for an employee stock option. Under the fair
value based method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service
period. A company may elect to adopt SFAS 123 or to elect to continue
accounting for its stock option or similar equity awards using the
intrinsic method, where compensation cost is measured at the date of
grant based on the excess of the market value of the underlying stock
over the exercise price. If a company elects not to adopt the fair value
method defined by SFAS 123, then it must provide pro forma disclosures
of net income and earnings per share, as if the fair value based method
had been applied. SFAS No. 123 is effective for transactions entered
into for fiscal years that begin after December 15, 1995. It is
currently anticipated that the Company will continue to account for
stock-based compensation plans under the intrinsic method and therefore,
SFAS
F - 10
<PAGE> 50
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
123 will have no effect on the Company's consolidated financial position
or results of operations.
2. DISCONTINUED OPERATIONS
ComTel Industries, Inc. - In April 1994, management of the Company
decided to divest its telecommunications services and manufacturing
operations ("ComTel"). In its March 31, 1994 consolidated financial
statements, the Company included a provision for discontinued operations
of $212,000, which reflected the then expected loss on disposal of the
related assets of ComTel.
On June 28, 1994, the Company sold the El Paso division of its
telecommunications business for $840,000 cash and assumption by the
buyer of the long-term lease on a facility. The transaction resulted in
a loss approximating $212,000 with respect to the book value of the
related assets at that date.
On March 31, 1995, the Company sold the telecommunications assets of
ComTel for $1,810,000 (consisting of cash of $250,000 and notes
receivable of $1,560,000) plus the assumption of $1,700,000 of
liabilities. The notes receivable are secured by the assets of the
purchaser and are guaranteed by the purchaser's parent company and bear
interest at 7% with principal payments beginning March 31, 1998 and
continuing thereafter until maturity on March 31, 2002.
On June 14, 1995, the Company completed the sale of the fixed assets and
inventory related to the manufacturing division of ComTel's business.
The selling price was $1,370,000 (consisting of $1,100,000 cash and a
note for $270,000) plus the assumption of $75,000 of liabilities. The
transactions resulted in a loss approximating $540,000 with respect to
the book value of the related assets at that date which was accrued for
as of March 31, 1995. As of March 31, 1996, the outstanding balance of
the note receivable for the manufacturing division was $72,000.
The results of operations of ComTel have been reported as discontinued
operations in the accompanying financial statements and consist of the
following ($000's):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenues $ 9,221 $ 11,603
Operating Loss $ (875) $ (1,269)
Net Loss $ (1,297) $ (1,481)
</TABLE>
F - 11
<PAGE> 51
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The net assets and liabilities of these operations have been included in
net assets or liabilities of discontinued operations based on the
appropriate balance sheet classifications.
The composition of net assets of discontinued operations for ComTel are
as follows ($000's):
<TABLE>
<CAPTION>
MARCH 31,
1996 1995
<S> <C> <C>
Cash $ 26 $ 180
Receivables 43 437
Inventories - 1,279
Property and equipment, net - 1,108
Other assets - 51
Current portion of long-term debt - (1,806)
Other current liabilities (68) (1,850)
------- --------
Net assets (liabilities) of discontinued
operations $ 1 $ (601)
======= ========
</TABLE>
Yorkville Industries, Inc. - In January 1992, the Company sold
substantially all of Yorkville's inventory and other fixed assets to an
unrelated third party and concurrent with the sale, Yorkville ceased
operations. Yorkville had been acquired by the Company in December 1989.
In July 1994, the Company entered into a court stipulation with the
former owners of Yorkville (the "Former Yorkville Owners") requiring
cash payments and the registration and issuance of the common stock of
the Company to the Former Yorkville Owners. Required cash payments were
made during the fiscal year ended March 31, 1995 and the remaining
obligation was satisfied through the issuance and registration of
1,336,000 shares of common stock of the Company on August 2, 1995.
3. INVENTORIES
<TABLE>
<CAPTION>
MARCH 31,
1996 1995
Inventories consist of ($000's):
<S> <C> <C>
Raw materials $ 3,838 $ 2,648
Work-in-process 687 1,250
Finished goods 1,478 1,031
-------- --------
$ 6,003 $ 4,929
======== ========
</TABLE>
F - 12
<PAGE> 52
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consist of the following ($000's):
<TABLE>
<CAPTION>
MARCH 31,
1996 1995
<S> <C> <C>
Land and buildings $ 4,701 $ 4,020
Vehicles and related equipment 38 33
Machinery and equipment 8,271 7,632
Furniture and fixtures 353 322
Leasehold improvements 1,708 617
------- --------
15,071 12,624
Less accumulated depreciation (6,127) (4,978)
------- --------
$ 8,944 $ 7,646
======= ========
</TABLE>
Depreciation expense was $1,234, $1,098 and $1,145 for the years ended
March 31, 1996, 1995 and 1994, respectively.
5. DEBT
Debt consists of the following ($000's):
<TABLE>
<CAPTION>
MARCH 31,
1996 1995
<S> <C> <C>
Decora Industries, Inc. Note (a) $ 650 $ -
Decora Incorporated Term Loans (b) 7,280 7,625
Decora Incorporated Line of Credit (b) 4,002 1,704
Decora Incorporated Senior Subordinated Note (c) 7,000 7,000
Convertible Notes (d)(e) 1,500 2,050
------- ---------
20,432 18,379
Less: Amounts due within one year (5,810) (3,157)
Unamortized Debt Discount (133) (216)
------- ---------
$14,489 $ 15,006
======= =========
</TABLE>
F - 13
<PAGE> 53
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
Amounts maturing within the next five years are: $5,810, $5,309, $6,491,
$2,774 and $48.
(a) In January 1996 the Company borrowed $650,000 from its primary bank
lender in the form of a three year business purpose note. The note bears
interest at prime plus 1 1/2% and is payable in quarterly installments
beginning in September 1996. The note is secured by all the assets of
the parent company.
(b) Both the Decora Incorporated term loan and the line of credit facility
were extended and modified in July 1994. The term loan matures in May
1999, bears interest at 7.84% and is secured by certain of Decora
Incorporated's accounts receivable, inventory and property and
equipment. In July 1994 an additional $1,000,000 of availability was
established under the term loan if required to fund capital expenditures
until July 1995. Decora borrowed $500,000 under such facility in July
1995. The loan matures in May 1999 and bears interest at prime plus
1 1/2%. Decora Incorporated also has a revolving line of credit of up to
$6,000,000 which matures in July 1996 and is secured by various accounts
receivable, inventory and equipment. The amount outstanding under the
facility bears interest at prime plus 1 1/4%. Availability under this
credit facility is limited by specified percentages of receivables and
inventories and the amount available under the line of credit was
$1,998,000 at March 31, 1996. The Company expects to extend the maturity
date of the revolving line of credit in the normal course of business.
On September 20, 1995, Decora Incorporated borrowed $375,000 from the
Washington County Local Development Corporation. The five-year note
bears interest at 5.00% and is payable in monthly installments ending
September 1, 2000. It is secured by certain of Decora Incorporated's
property and equipment.
(c) Decora Incorporated issued $7,000,000 of 14% senior subordinated notes,
interest payable semi-annually. The Company and the lender agreed to
extend the repayment terms of the notes to include payments of
$3,500,000 on each of April 15, 1997 and April 15, 1998. Concurrently,
the Company and the lender agreed to exchange the Warrants held by the
lender to purchase 20% of Decora Incorporated's common stock for (i) a
two-year, non-interest bearing, promissory note for $1,000,000 (the "new
note") due April 15, 1998 and (ii) 1,000,000 shares of the Company's
common stock (the "new common"). The new note requires a premium payment
equal to 20% of the value of the new note if not repaid prior to April
15, 1997 and the new common contains a provision (the "guaranty") which
requires the issuance of additional shares to the lender if the market
price of the Company's common stock does not exceed $3.00 per share by
April 1998. Prior to such agreement, the Warrants had a "put" provision
beginning in April 1997 based on the earnings and financial condition
F - 14
<PAGE> 54
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
of Decora Incorporated. These transactions were closed on June 28, 1996.
The gain or loss, if any, on the exchange of the Warrants for the new
note, the new common and the guaranty will be charged to shareholders'
equity in the quarter ending June 30, 1996.
At March 31, 1995, the warrants were valued at $1,425,000 and at March
31, 1996, the warrants were valued at $1,642,000 pending issuance of the
note and shares to the lender. Prior to the recent agreement, changes in
the value of the warrants based upon results of operations and financial
position of Decora Incorporated were charged or credited to interest
expense. During the years ended March 31, 1996, 1995 and 1994, $217,000
was charged, $0 and $200,000 were credited, respectively. The note is
recorded net of unamortized discount of $133,000 and $216,000 at March
31, 1996 and 1995, respectively.
(d) On November 3, 1992, the Company borrowed $1,500,000 from a private
lender and issued a convertible note. As part of the transaction, the
Company also issued 89,000 shares of its common stock, warrants to
purchase 225,000 shares of common stock at $1.40 per share and warrants
for an additional 100,000 shares of common stock at prices contingent
upon the future market price of the Company's common stock. The
convertible note bears interest at 12% per annum, payable in the form of
the Company's common stock and was due November 3, 1995. In November
1995 the Company and the lender agreed to extend the note until May 3,
1998. Interest for the period and a closing fee were paid at the time of
extension through the issuance of 782,000 shares of the Company's common
stock and warrants to purchase an additional 818,000 common shares at
$0.78 per share exercisable only in the event that the note is paid in
full without conversion.
(e) In June 1993, the Company borrowed $550,000 from a private lender and
issued a convertible note which carried 12% interest payable in shares
of the Company's common stock. During March 1995, the note was extended
to December 31, 1995 at which time the note was fully satisfied through
the payment of $200,000 cash and the issuance of 574,000 shares of the
Company's common stock.
6. RETIREMENT ALLOWANCE
During the year ended March 31, 1996, the Company offered an early
retirement program to all of its employees age 59 and over. Such program
was accepted by twelve employees which provides them with monthly cash
payments and medical coverage through age 65. In the fourth quarter of
fiscal 1996, the Company took a one-time charge through marketing,
general and administrative expense of $282,000 equal to the present
value of such future payments and established an accrued liability equal
to the same amount to be applied against such
F - 15
<PAGE> 55
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
payments as they are incurred over a 6 year period. As of March 31,
1996, the remaining balance of such allowance was $226,000.
7. COMMON STOCK
At March 31, 1996, the Company had an aggregate of 4,999,000 shares of
common stock reserved for: (1) Options for the purchase of 4,024,000
shares of common stock, and (2) exercise of warrants for common stock of
450,000 at $0.25 per share and 525,000 at a range of $0.50-$1.40 per
share. On October 5, 1988, the shareholders of the Company approved the
Decora Industries, Inc. 1988 Employee Stock Purchase Plan pursuant to
which a total of 500,000 shares of the Company's common stock may be
issued to participants during the term of the Plan at an issue price of
85% of fair market value at the date of purchase. No shares have been
purchased pursuant to the Plan.
8. STOCK OPTIONS
The Company has a Stock Option Plan covering the directors and employees
of the Company and its subsidiaries adopted in 1987 ("1987 Plan") under
which 1,700,000 shares of common stock are available for grant. The Plan
is administered by a committee of the Board of Directors of the Company
who are not covered by the Plan. All options granted under the 1987 Plan
terminate either five years or ten years after the date of grant and
those granted vest quarterly subsequent to the grant date over a
three-year period unless modified by the Company. Options for 730,000
shares of common stock have been exercised to date.
The following summarizes the Company's stock option activity for the
years ended March 31, 1996 and 1995 (000's except per share data):
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995
NUMBER OF PRICE NUMBER OF PRICE
OPTIONS PER SHARE OPTIONS PER SHARE
<S> <C> <C> <C> <C>
Beginning balance 4,013 $.50 - $2.00 3,999 $.50 - $1.86
Options granted 225 $1.03 - $1.08 1,175 $1.03 - $2.00
Options exercised - - (50) $1.00
Options expired (214) $.50 - $1.50 (1,111) $.75 - $1.86
----- ------------ ------- ------------
Ending balance 4,024 $.75 - $2.00 4,013 $.50 - $2.00
===== ============ ======= ============
</TABLE>
F-16
<PAGE> 56
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Exercisable 3,389 3,406
===== =====
</TABLE>
9. INCOME TAXES
The provision (benefit) for income taxes charged to continuing
operations for the years ended March 31, 1996, 1995 and 1994 were as
follows ($000's):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current tax expense (benefit):
Federal $ 45 $ (3) $ 31
State (31) 232 81
------- -------- ------
Total current 14 229 112
Deferred tax benefit (1,500) (1,400) -
------- -------- ------
Provision (benefit) for income taxes $(1,486) $(1,171) $ 112
======= ======== ======
</TABLE>
Deferred tax liabilities (assets) are comprised of the following at
March 31, 1996 and 1995 ($000's):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Depreciation $ 572 $ 244
Discontinued operations 368 378
Deferred expenses 324 137
--------- -------
1,264 759
--------- -------
Net operating loss carryforwards (5,500) (6,178)
Inventory valuation allowance (15) (81)
Loss on sale of ComTel assets - (154)
Deferred compensation liability (6) (106)
Valuation reserves (105) (93)
Other (233) (126)
--------- -------
(5,859) (6,738)
--------- -------
Deferred tax assets valuation allowance 1,695 4,579
--------- -------
Deferred taxes, net $ 2,900 $ 1,400
========= =======
</TABLE>
F - 17
<PAGE> 57
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
The provision (benefit) for income taxes for the three years ended March
31, 1996 differs from the amount of income tax determined by applying
the applicable U.S. statutory federal income tax rate to pretax income
from continuing operations as a result of the following ($000's):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Pretax income at statutory rate $ 491 $ 13 $ 106
State tax expense (benefit) (31) 232 81
Effect of net operating loss (446) (16) (75)
Change in valuation allowance (1,500) (1,400) -
--------- -------- --------
Provision (benefit) for income taxes $ (1,486) $(1,171) $ 112
========= ======== ========
</TABLE>
Approximately $15,715,000 of the company's loss carryforwards remain
available at March 31, 1996. Their use is limited to future taxable
earnings of the Company. The carryforwards expire over the period 1999
through 2007.
Management believes that it is more likely than not that it will
generate taxable income sufficient to realize a portion of the tax
benefit associated with future deductible temporary differences and the
net operating loss carryforwards prior to their expiration. This belief
is based upon, among other factors, changes in operations that have
occurred during 1994, 1995 and 1996. Specifically, cost savings
associated with capital investments in and strategic realignment of
Decora Incorporated have improved operating results as well as the
discontinuance of less profitable non-core businesses. As described in
Note 2, the Company divested itself of its ComTel subsidiary, which had
generated significant operating losses in 1994 and 1995.
Management believes that the valuation allowance is appropriate given
the current estimates of future taxable income. If the Company is unable
to generate sufficient taxable income in the future through operating
results, increases in the valuation allowance will be required through a
charge to expense. However, if the Company achieves sufficient
profitability to utilize a greater portion of the deferred tax asset,
the valuation allowance will be reduced through a credit to income.
F - 18
<PAGE> 58
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
10. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, the ultimate
resolution of which, in the opinion of management of the Company, will
not have a material impact on the financial condition or results of
operations of the Company.
11. BUSINESS AND CREDIT CONCENTRATIONS
Decora Incorporated's primary customer is Rubbermaid Inc., who accounted
for $34,983,000 (90%), $37,764,000 (93%) and $37,327,000 (94%) of net
sales in fiscal 1996, 1995 and 1994, respectively. Gross accounts
receivable with Rubbermaid at March 31, 1996 and 1995 were $2,482,000
(57%) and $1,601,000 (63%), respectively. The Company believes there are
no significant credit risks with respect to these accounts receivable.
12. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in current assets and liabilities, exclusive of acquisitions and
dispositions of subsidiaries, were as follows ($000's):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
(Increase) decrease in
accounts receivable $ (1,210) $ 966 $ (1,055)
Increase in inventory (1,074) (1,866) (306)
(Increase) decrease in other assets (193) (42) 322
Increase (decrease) in
accounts payable ( 713) (909) 1,342
Increase (decrease) in accrued liabilities ( 126) 127 252
--------- -------- ---------
$ (3,316) $(1,724) $ 555
========= ======== ==========
Supplemental cash flow information is as follows ($000's):
Cash paid during the year for interest $ 2,218 $ 1,731 $ 1,519
========= ======== ==========
</TABLE>
F - 19
<PAGE> 59
Decora Industries, Inc.
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cash paid during the year for
income taxes $ 45 $ 235 $ 133
======== ======= ==========
</TABLE>
13. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1996
1ST 2ND 3RD 4TH
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 9,702 $ 9,500 $ 10,247 $ 9,379
Gross profit $ 2,648 $ 2,240 $ 3,060 $ 2,636
Net income $ 401 $ 165 $ 580 $ 1,773
Income per share $ .01 $ .01 $ .02 $ .05
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995
1ST 2ND 3RD 4TH
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $ 11,017 $ 10,545 $ 8,955 $ 9,897
Gross profit $ 2,857 $ 2,785 $ 3,026 $ 2,948
Income from continuing
operations $ 543 $ 547 $ 216 $ 1,102
Discontinued operations:
Income (loss) from operations $ (90) $ 2 $ (195) $ (592)
Provision for discontinued
operations $ - $ - $ - $ (422)
Net income $ 453 $ 549 $ 21 $ 88
Income (loss) per share:
Continuing operations $ .02 $ .02 $ .01 $ .03
Discontinued operations - - (.01) (.03)
Income per share $ .02 $ .02 $ - $ -
</TABLE>
F - 20
<PAGE> 1
EXHIBIT 10.66
BUSINESS PURPOSE NOTE
$650,000.00 Albany, New York
January 24, 1996
FOR VALUE RECEIVED, the undersigned, DECORA INDUSTRIES, INC., a
Delaware corporation authorized to do business in the State of New York with its
principal place of business at One Mill Street, Fort Edward, New York 12828 (the
"Borrower") promises to pay to the order of FLEET BANK, (herein called the
"Lender") at the office of the Lender in Albany, New York or at such other place
as may be designated from time to time by the Lender, the sum of Six Hundred
Fifty Thousand and no/100 Dollars ($650,000.00) and to pay interest on the
disbursed, unpaid principal, from the date hereof, computed on a 360 day year
basis, but chargeable on actual days, at a per annum rate equal to one and
one-half percent (1.50%) above the "Fleet Bank Prime Rate" adjusted as of the
date said "Fleet Bank Prime Rate" is changed at the Lender. The "Fleet Bank
Prime Rate" is that rate announced from time to time by the Lender as a
reference point for determining interest rates charged on certain loans and is
not necessarily the lowest rate at which the Lender lends.
The Borrower promises to pay the principal and interest as follows:
(a) Accrued interest to be paid on the 1st day of February,
1996 and on the same day of each succeeding month thereafter during the
term hereof.
(b) Principal to be paid in quarterly payments as
follows:
<TABLE>
<CAPTION>
Payment Date Payment Amount
------------ --------------
<S> <C>
June 1, 1996 $57,500.00
September 1, 1996 $57,500.00
December 1, 1996 $107,000.00
March 1, 1997 $107,000.00
June 1, 1997 $107,000.00
September 1, 1997 $107,000.00
December 1, 1997 $107,000.00
</TABLE>
The entire unpaid balance of principal together with accrued interest
to be paid to the Lender on the 1st day of December, 1997.
All amounts paid pursuant to this paragraph shall be applied first to
the payment of interest to the date of payment, then to
- 1 -
<PAGE> 2
any unpaid fees, then to the reduction of principal and finally to any unpaid
"late charge" (as hereinafter defined). If an Event of Default occurs hereunder
(as hereinafter defined), the Lender may apply any payments received to any sums
due hereunder in such manner as it deems appropriate.
In the event that any payment shall become overdue for a period in
excess of ten (10) days, a "late charge" of five cents ($.05) for each dollar
($1.00) so overdue will be charged by the Lender and such late charges are also
secured by the Loan Documents (as hereinafter defined).
This Note is subject to the terms, covenants and conditions set forth
in a Security Agreement (Accounts and/or Chattel Paper, Contract Rights, General
Intangibles) and an Assignment, Pledge and Security Agreement (collectively the
"Loan Documents") given by the Borrower to the Lender on even date herewith and
all such terms, covenants and conditions of such Loan Documents are all hereby
incorporated in this Note, with the same force and effect as though said terms,
covenants and conditions were fully set forth herein.
DEFAULT. Upon the occurrence of one or more events of default as
provided below (an "Event of Default"), the entire principal and interest on
this Note shall, upon written demand of the Lender, become immediately due and
payable without presentment or protest or other notice or demand, all of which
are expressly waived by the Borrower. Any one or more of the following shall
constitute an Event of Default:
(a) Upon the failure of the Borrower to pay any part of the
principal or interest on this Note when due and payable and continuance
of such failure for ten (10) days.
(b) Any default pursuant to the terms and conditions of any of
the Loan Documents.
(c) Any default pursuant to the terms and conditions of any
other loan, now or in the future, by the Lender to either the Borrower
or Decora, Incorporated.
d) Dissolution, cessation of business and/or transfer
of a material part of the assets of the Borrower.
e) institution of bankruptcy proceedings or other proceedings
of any kind for the relief of or collection of debts by or against the
Borrower, including, without limitation, assignments for the benefit of
creditors, appointment of trustees, receivers or custodians for a
material part of the Borrower's assets, levies upon or attachment of
assets, filing of judgments not fully insured,
- 2 -
<PAGE> 3
bonded or removed within thirty days or a filing of tax liens.
f) Filing of litigation or proceedings before any court or
governmental entity against the Borrower not fully covered by
insurance, and if adversely determined would have a material adverse
effect on the financial condition or normal manner of doing business of
the Borrower and its related entities.
g) The Lender shall, for reasonable cause, consider
the prospect of timely repayment to be impaired.
The powers and remedies given hereby and by the aforesaid Loan
Documents shall not be exclusive of any other powers and remedies available to
the Lender. No course of dealings between the Borrower and the Lender and no
delay on the part of the Lender in exercising any rights with respect to any
default shall operate as a waiver of any rights of the Lender. Failure on the
part of the Lender to exercise any rights with respect to any default shall not
operate as a waiver of any rights with respect to any other default.
Interest after maturity (whether by acceleration or otherwise) shall
continue to be payable at the rate set forth herein until this Note is paid in
full.
If any provision of this Note or the application of it to any person or
circumstance, shall be invalid or unenforceable, the remainder of this Note or
the application of that provision to persons or circumstances other than those
as to which it is held invalid or unenforceable, shall not be effected and every
other provision of this Note shall be valid and fully enforceable.
This Note may not be waived, changed, modified or discharged orally,
but only by agreement in writing signed by the party against whom any
enforcement of any waiver, change, modification or discharge is sought.
This Note, and all rights of the Lender hereunder, may be assigned by
the Lender, but this Note may not be assigned by the Borrower. The purchaser,
assignee, transferee, or pledgee of this Note shall be entitled to all rights of
the Lender hereunder as if said purchaser, assignee, transferee, or pledgee were
originally named in this Note.
The Borrower agrees to pay all costs and expenses incurred by the
holder hereof in enforcing this Note, including without limitation, actual
attorneys fees and legal expenses.
Principal and interest on this Note may be prepaid at any time by the
Borrower without penalty.
3
<PAGE> 4
THE BORROWER WAIVES TRIAL BY JURY OF ANY CLAIMS OR PROCEEDINGS WITH
RESPECT TO THIS NOTE, OF THE OBLIGATIONS RELATED
4
<PAGE> 5
HERETO, TO THE FULLEST EXTENT ALLOWED BY LAW.
Decora Industries, Inc.
By: _________________________
Name: Timothy Burditt
Title: Executive Vice
President, Administration and
Finance/Secretary
5
<PAGE> 1
EXHIBIT 10.67
PROMISSORY NOTE
U.S. $375,000.00 Fort Edward, New York
Dated September 20, 1995
FOR VALUE RECEIVED, DECORA INCORPORATED, (the "Borrower") promises to
pay to the order of the WASHINGTON COUNTY LOCAL DEVELOPMENT CORPORATION, a
not-for-profit corporation under the laws of the State of New York (the "LDC")
having an office at Upper Broadway, Fort Edward, New York 12828, the principal
sum of THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($375,000.00) with interest
thereon and payable as follows:
One payment of interest only on the 1st day of October, 1995, of all
interest which has accrued on the outstanding principal balance from the date
hereof, at a rate of five (5%) percent per annum and thereafter beginning on the
1st day of September 1995, a payment of principal and interest in the amount of
Seven Thousand Eighty-Nine Dollars and Nineteen Cents (S7,089.19) and an
identical payment on the first day of every month thereafter with each payment
being applied first to any expenses incurred pursuant to the Loan Documents
which are to be paid by Borrower, then to late fees, if any, then to interest
accrued to the date of receipt of said payment and the balance, if any, applied
to principal. On the 1st day of September, 2000, the entire principal balance
and any unpaid accrued interest will be due and owing.
Interest will continue to accrue at a rate of five percent
(5(degree)/O) on the outstanding principal balance until the entire principal
balance is paid in full or until the Default Interest Rate becomes due and
payable. There will be no prepayment penalty.
If the Borrower fails to make any payment within fifteen (15) days of
the due date thereof, Borrower promises to pay the LDC a late charge equal to
six percent (6%) of such late payment. The Borrower waives any notice or demand
for payment and further agrees that if there should be an Event of Default, the
interest rate, without notice, shall increase to sixteen percent (16%) per annum
and remain at this Default Interest Rate until all principal is paid.
All payments received from any source whatsoever will be applied first
to any costs and expenses incurred by the LDC and permitted to be recovered by
the LDC pursuant to the terms of this note or any Loan Document, then to late
charges, then to accrued unpaid interest and the balance if any to principal.
1. LIABILITY OF BORROWER: Borrower is unconditionally and without
regard to the liability of any other person, liable for the payment and
performance of this Note and such liability shall not be affected by an
extension of time, renewal waiver or modification of this Note or the release,
substitution or addition of collateral for this Note. The Borrower signing this
Note consents to any and all extensions of time, renewals, waivers or
modifications as well as to
<PAGE> 2
release, substitution or addition of guarantors or collateral security, without
notice to the Borrower and without affecting the Borrower's liabilities
hereunder. The LDC is entitled to the benefits of any agreements, guarantees,
security agreements, assignments or other documents which are directly related
and which provide security for the debt evidenced by this Note and all which are
collectively referred to as "Loan Documents" as they now exist, may exist in the
future, have existed and as they may be amended, modified, renewed or
substituted.
The Borrower acknowledges that this Note is secured by a
certain Security Agreement made by Borrower to the LDC.
2. EVENTS OF DEFAULT: Each of the following shall be an "Event of
Default" hereunder: (a) the nonpayment when due of any amount payable under this
Note or under any other obligation of the Borrower to the LDC now or hereafter
existing within fifteen (15) days of the date such payment is due and payable;
(b) if any information or signature furnished to the LDC at any time in
connection with the loan evidenced by this Note or any other Loan Documents, or
in connection with any Guarantee or surety agreement applicable hereto is
materially false or incorrect; or 0 Borrower fails to cure any of the following
within thirty (30) days of notice and demand from the LDC: (I) the failure of
the Borrower to observe or perform any present or future agreement of any nature
whatsoever with the LDC, including, but not limited to, those contained in this
Note or in any of the Loan Documents; (ii) if the Borrower makes an assignment
for the benefit of creditors, or if any petition is filed by or against any
Borrower under any provision of any state or federal law or statute alleging
that such Borrower is insolvent or unable to pay debts as they mature or under
any provision of the Federal Bankruptcy Code; (iii) the entry of any judgment
against the Borrower or any of Borrower's property for an amount in excess of
$50,000.00 which remains unsatisfied; (iv) the issuing of any attachment, levy
or garnishment against any property of any Borrower; (v) the occurrence of any
substantial change in the financial condition of any Borrower which, in the
sole, reasonable good faith judgment of the LDC is materially adverse; (vi) the
sale of all or substantially all of the assets, or the dissolution or
liquidation and (vii) if any information or signature furnished to the LDC at
any time in connection with the loan evidenced by this Note or any other Loan
Documents, or in connection with any guaranty or surety agreement applicable
hereto is materially false or incorrect.
3. LDC'S RIGHTS UPON DEFAULT: Upon the occurrence of any Event of
Default, the LDC may do any or all of the following concurrently or separately;
(a) accelerate the maturity of this Note and demand immediate payment of all
outstanding principal and accrued interest due under this Note; (b) exercise the
LDC's right of set-off against the account(s) of each Borrower and the exercise
all of the rights, privileges and remedies of a secured party under the New York
Uniform Commercial Code and all of LDC's rights and remedies under any of the
Loan Documents. Interest will continue to accrue on the unpaid principal and any
arrearages and
2
<PAGE> 3
other charges, which include but are not limited to, attorney's fees, as
described in this Note until the principal balance, any arrearages and other
charges are paid in full.
4. MISCELLANEOUS: (a) Borrower hereby waives protest, notice of
protest, presentment, dishonor and demand. (b) Borrower agrees to reimburse LDC
for alt costs, including court costs and reasonable attorney's fees incurred by
LDC in connection with the collection and enforcement hereof. The rights and
privileges of LDC under this Note shall inure to the benefit of its successors
and assigns. All obligations of Borrower in connection with this Note shall bind
Borrower's representatives, successors and assigns. (d) If any provision of this
Note shall for any reason be held to be invalid or unenforceable such invalidity
or unenforceability shall not affect any other provision hereof, but this Note
shall be construed as if such invalid or unenforceable provision had never been
contained herein. (e) The waiver of any Event of Default or the failure of LDC
to exercise any right or remedy to which it may be entitled shall not be deemed
a waiver of any subsequent Event of Default or LDC's right to exercise that or
any other right or remedy to which LDC is entitled. (f) This Note has been
delivered to and accepted by LDC in and shall be governed by the laws of the
State of New York. The parties agree to the jurisdiction of the federal and
state courts located in New York in connection with any matter arising hereunder
including the collection and enforcement hereof.
5. NO MODIFICATION: This Note may not be waived, changed, modified or
discharged orally, but only by agreement in writing signed by the party against
whom any enforcement of any waiver, change, modification or discharge is sought.
DECORA INCORPORATED
By: _________________________________
Timothy Burditt, Vice President
Address: 1 Mill Street
Fort Edward, New York
3
<PAGE> 1
EXHIBIT 10.68
LOAN AGREEMENT
LOAN AGREEMENT dated as of the 20th day of September, 1995, between
DECORA INCORPORATED, a corporation having its principal place of business at 1
Mill Street, Fort Edward, New York (hereinafter called the "Borrower"), DECORA
INDUSTRIES, INC., a Delaware corporation having a place of business at 1 Mill
Street, Fort Edward, New York (hereinafter called the "Guarantor") and the
WASHINGTON COUNT\LOCAL DEVELOPMENT CORPORATION, a private not-for-profit
corporation under the Laws of the State of New York, having its principal place
of business at the County Office Building, Upper Broadway, Fort Edward, New York
(hereinafter called the "Lender").
SECTION 1 - LOAN AND SECURITY
1.1. PROMISSORY NOTE: The Lender agrees that pursuant to the terms and
conditions hereof to advance funds under a promissory note m the amount of
$375,000.00 made by the Borrower to the Lender and dated the same date as this
agreement.
1.2. USE OF PROCEEDS: The Borrower shall use the proceeds of this loan
for working capital and training costs for the operation of its business at its
principal place of business in Fort Edward New York A second security interest
will be placed and given to Lender pursuant to a Security Agreement dated the
same date as this Agreement upon certain equipment at that place of business.
1.3. SECURITY: As security for the repayment of said loan, the Borrower
has given Lender a second security interest in equipment as identified in a
certain Security Agreement of even date herewith.
1.4. GUARANTEES: The loan will further be secured by the unconditional
guarantee of the Guarantor.
1.5. METHOD OF LOAN ADVANCES: Loan proceeds will be disbursed when the
specified expenditures have been made and satisfactory proof of those
expenditures have been provided to Lender. Lender may request an execution of a
formal requisition form, if it so desires.
SECTION 2 - REPRESENTATIONS
The Borrower represents and warrants as follows:
2.1. That there are no actions at law, or suits in equity pending or
threatened to be brought against the Borrower or Guarantor for which there is
any liability on the part of the
<PAGE> 2
Borrower or the Guarantor. There have been no material adverse changes in the
financial conditions or operations o(pound) (a) the Borrower since the closing
date of the latest financial statement furnished by the Borrower to the Lender,
(b) The Guarantor since the closing date of the latest financial statement
furnished by the Guarantor to the Lender.
2.2. That the Borrower is not an endorser or guarantor of any
indebtedness or obligation of another not described in the loan application or
the financial statement previously furnished to the Lender.
2.3. The Borrower and Guarantor are not in default in the payment of
any municipal, state or federal tax, and no assets of the Borrower or Guarantor
are pledged for the payment of any indebtedness except as shown on the financial
statements furnished by the Borrower and Guarantor to the Lender as referred to
in Paragraph 2.1 hereof(pound)
2.4. The Borrower and Guarantor have full power to enter into this
agreement, to make the borrowing hereunder, to execute the instruments provided
for in this agreement, and to incur the obligations provided for herein, all of
which have been duly authorized by all proper and necessary corporate action. No
consent of public authorities is required. The execution of the agreement and
the instruments provided in it and the creation of the obligations on the
Borrower do not constitute an event of default under any agreement to which the
Borrower is party.
2.5. The collateral securing repayment of the Loan shall at the time of
the Lender's perfection of its security therein be free and clear of all liens
and encumbrances except as herein stated.
SECTION 3 - CONDITIONS OF LENDING
The obligation of the Lender to make advances of the Loan is subject to
the following precedent to each advance unless waived by the Lender but a waiver
of any and all such precedents for a single advance will not constitute a waiver
for any future advances.
3.1. At the time of the making of the loan advance, the Borrower and
the Guarantor shall have complied, and then be in compliance, with all the
terms, conditions, covenants, representations and warranties herein set forth,
and there shall exist no event of default under any agreement executed by and
between the Lender, the Borrower and the Guarantor evidencing or securing the
loan.
3.2. The Lender shall at the time of the making of the loan, have
received copies of all papers evidencing all corporate action taken by the
Borrower, and all legal matters incident to the loan shall be satisfactory to
the counsel for the Lender.
2
<PAGE> 3
3.3. Counsel for the Borrower and the Guarantor shall have delivered to
the Lender, in form and substance satisfactory to the Lender and its counsel, an
opinion that the Borrower and Guarantor have the power to execute and deliver
the documents required under this agreement, that all corporate action has been
properly authorized and that no by-law, stock restriction or agreement to which
the Borrower or Guarantor are a party prevents such corporate action.
3.4. The Borrower would have executed a manufacturing agreement with
Rubbermaid as described in Borrower's loan application and a copy of said fully
executed agreement will be delivered to Lender.
3.5. All documents required by this agreement and the Lender's counsel
which evidence and secure the loan shall have been executed and delivered to the
Lender.
3.6. If all loan funds have not been fully advanced by the Lender on or
before December 31, 1995 pursuant to the terms of this agreement, then the
Lender may refuse to make any further advances and the existing principal
balance will be paid according to the terms of the Promissory Note.
3.7. Borrower shall have delivered to Lender a copy of a letter
evidencing negotiations between Fleet Bank and Borrower concerning a Letter of
Credit in conjunction with the issuance and sale of S2,7SO,OOO.OO Industrial
Revenue Bond as more particularly described in the loan application submitted by
Borrower.
3.8. Borrower shall have received and submitted to Lender written proof
that all necessary consents of other obligors of Borrower or Guarantor or any
secured party has consented to and agreed to the security interests and
obligations described herein.
SECTION 4 - AFFIRMATIVE COVENANTS
So long as any indebtedness under this agreement is outstanding and
unpaid, and so long as the Borrower shall have the right to borrow under it, the
Borrower covenants and agrees as follows:
4.1. FINANCIAL STATEMENTS AND INFORMATION: The Borrower shall furnish
to the Lender:
(a) Copies of all financial statements and form 10-K submitted
to the SEC within thirty (30) days after submission of such forms to the SEC.
Along with such financial statements the Borrower shall deliver a certificate of
such accountant stating that in making the examination necessary for the
preparation of such financial statements they have obtained no
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knowledge of any default by the Borrower in the performance of or compliance
with any of the terms of this agreement, or if they shall have obtained
knowledge of any default and its nature.
(b) Borrower will also furnish to Lender annually a copy of
its 10K Report.
(c) Borrower will provide quarterly financial statements.
(d) Guarantor will supply to Lender the same information
described in 4.1 (a) and (b).
4.2. CORPORATE EXISTENCE AND INSURANCE: The Borrower and Guarantor
shall each maintain: (a) its corporate existence and authority to do business in
New York State, (b) its properties in good condition and repair and (c) to the
same extent and in such amounts and manner as do companies engaged in similar
lines of business under similar circumstances, insurance on its fixed assets,
inventory and other properties, workmen's compensation or similar insurance
against claims for personal injury, death or property damage arising out of its
facilities or operations.
4.3. INSPECTION BY LENDER: At any reasonable time and from time to time
the Borrower and Guarantor shall allow the Lender or any agents or
representatives thereof to examine and make copies or an abstract from its
records and books of accounts, to inspect its properties and to discuss its
affairs, finances and accounts with any of its officers or directors
4.4. TAXES: The Borrower and Guarantor shall pay and discharge all
taxes, assessments and governmental charges or levies imposed upon it or on its
income or profits or on any of its property prior to the date on which any
penalties attach thereto, provided that neither the Borrower nor Guarantor shall
be required by this to pay any such tax, assessment, charge or levy the payment
of which is being contested in good faith and by proper proceedings.
4.5. LITIGATION: The Borrower shall promptly give notice in writing to
the Lender of all material litigation and of all material proceedings before any
governmental or regulatory agency against the Borrower, or any subsidiary, or
any of their properties, except litigation or proceedings not materially
affecting the financial condition of the Borrower or any subsidiary.
4.6. BORROWER TO NOTIFY LENDER OF MATTERS AFFECTING THE LOAN: The
Borrower shall do the following:
(a) Keep the Lender fully informed as to all matters that may
affect the Lender's security interests in the property securing repayment of the
loan or the ability of the Borrower to perform the obligations under the Loan
Documents.
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(b) Furnish to the Lender as soon as possible, and in any
event within five days after the occurrence of any Event of Default under this
Agreement, the statement in writing of any authorized representative of the
Borrower setting forth the details of such Event of Default and the action which
the Borrower proposes to take with respect thereto.
(c) Furnish to the Lender such other information respecting
the condition or operations, financial or otherwise, of the Borrower as the
Lender may from time to time reasonably request.
4.7. COMPLIANCE WITH FEDERAL LAW AND STATE LAW: The Borrower shall
comply with, if applicable, abide by, and cause all contractors and
subcontractors providing labor or services to comply with the following:
(a) Title VI of the Civil Rights Act of 1964 {42 U.S.C. 2000d
et seq. }, which provides that no person in the United States shall on the
ground of race, color, or national origin, be excluded from participation in, be
denied the benefits of, or be subjected to discrimination under any program or
activity receiving Federal financial assistance.
(b) Title VIII of the Civil Rights Act of 1968 {42 U.S.C. 3601
et seq.}, also known as the Fair Housing Act, which provides that it is the
policy of the United States to provide, within constitutional limitations, for
fair housing throughout the United States and prohibits any person from
discriminating in the sale or rental of housing, the financing of housing, or
the provision of brokerage services, including otherwise making unavailable or
denying a dwelling to any person, because of race, color, religion, sex, or
national origin.
(c) Section 109 of the Housing and Community Development Act
of 1974 (the "Act"), as amended, which requires that no person in the united
States shall on the ground of race, color, national origin or sex, be excluded
from participation in, be denied the benefits of, or be subjected to
discrimination under, any program or activity funded in whole or in part with
community development funds made available pursuant to the Act. Section 109 of
the Act further provides for the prohibition of discrimination on the basis of
age under the Age Discrimination Act of 1975 {42 U.S.C. 6101 et seq. }, or with
respect to an otherwise qualified handicapped person as provided in section 504
of the Rehabilitation Act of 1973 {29 U.S.C. 794}. The Developer shall also
cause compliance with Section 109 of the Act by all contractors and
subcontractors providing labor or services to the Project.
(d) Section 110 of the Act, which requires that all laborers
and mechanics employed by contractors or subcontractors on construction work
financed in whole or in part with assistance received under the Act shall be
paid wages at rates not less than those prevailing on similar construction in
the locality as determined by the Secretary of Labor in accordance with
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the Davis-Bacon Act, as amended {40 U.S.C. 276a to a-S}, and which further
requires compliance with the Contract Work Hours and Safety Standards Act {40
U.S.C. 327 et seq. }.
(e) The Federal Statutes popularly referred to as the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CHURCHLY), the Superfund Amendments and Reauthorization Act of 1986 (SARA), the
Resource Conservation and Recovery Act (RCRA), and Article 17 and 23 of the New
York State Environmental Conservation Law.
(f) The flood insurance purchase requirements of Section
102(a) of the Flood Disaster Protection Act of 1973 {42 U.S.C. 4012a}.
(g) Executive Order 11246, as amended by Executive Order
12086, and the regulations issued pursuant thereto {41 CFR Chapter 60}which
provide that no person shall be discriminated against on the basis of race,
color, religion, sex, or national origin in all phases of employment during the
performance of Federal or federally assisted construction contracts. The
Developer's compliance shall include causing all contractors and subcontractors
providing labor or services for the Project to comply with the provisions of
Executive Order 11246, as amended by Executive Order 12086.
(h) Section 3 of the Housing and Urban Development Act of 1968
{12 U.S.C. 1701u}, which requires that to the greatest extent feasible
opportunities for training and employment be given to low and moderate income
persons residing in the area in which the project is located, and that contracts
for work in connection with the project be awarded to eligible business concerns
which are located in, or owned in substantial part by persons residing in the
same area as the project.
(i) The requirements of the American's with Disabilities Act
of 1990 as amended.
(j) 24 CFR 570.609 which prohibits the use of CDBG funds to
employ, award contracts to, or otherwise engage the service of any contractor
during a period of the contractor's debarment, suspension, or placement in
ineligibility status under the provisions of 24 CFR Part 24.
(k) The Housing and Community Development Act of 1974, as
amended, and the implementing regulations at 24 CFR Part 570.Comply with, if
applicable, abide by and cause all contractors and subcontractors providing
labor or services to comply with the Copeland Act, the Davis Bacon Act, title
VII of the Civil Rights Act of 1964 as amended by the Equal Employment Act of
1972, Executive Order 11,246, the Rules and Regulations of the Secretary
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of Labor (29 CFR 5.3-5.8) and the Rules and Regulations of the Director of the
Office of Federal Compliance Programs (41 CFR 60 et seq.).
4.8. CROSS DEFAULT AGREEMENT: Borrower agrees that if it should at any
time be in default of its obligations to any other lender including, but not
limited to, any issuer of a letter of credit, estate or bondholder existing
because of the Industrial Revenue Bond funding described in paragraph 3.7
herein, such default will constitute a default under the Borrower's obligation
under this agreement and the aforedescribed Promissory Note and Security
Agreement. If any default should occur, Borrower agrees to immediately notify
Lender of such default. Such a default will immediately and without further
notice or demand from Lender constitute a default under all obligations due and
owing from Borrower to Lender.
SECTION 5 - EMPLOYMENT
5.1. COMPLIANCE WITH FEDERAL REQUIREMENTS: The Borrower acknowledges
that the loan evidenced by this Agreement is subject to the requirements of
Federal statute and regulation relative to the use of Community Development
Block Grant funds, and that Borrower's agreement to accept the loan funds
pursuant to this Agreement requires Borrower's compliance with regulations set
forth in 24 CFR Part 570, and policies and procedures implemented thereunder by
the United States Department of Housing and Urban Development, the Untied States
Department of Labor, and such other Federal agencies as are or may in the future
be charged with the responsibility of monitoring both the Borrower's and the
Lender's compliance with low and moderate income benefit requirements.
5.2. JOB RECORD KEEPING: The Borrower shall comply with the
requirements of the Lender's Employment Monitoring Program for the life of the
loan. A description of the Program including report forms to be used by the
Borrower, have been supplied to Borrower and a list of the positions to be
created is annexed hereto as Schedule C.
The obligations of Borrower set forth in the Employment
Monitoring Program are material obligations the breach of which shall constitute
an Event of Default under this agreement and are guaranteed by Guarantor.
5.3. COVERED JOBS: Borrower agrees to make a minimum of 51% of the
positions described in Schedule C available to low and moderate income persons.
This requirement shall apply not only to those jobs listed in Schedule C annexed
hereto but also to any other employment positions created as a direct result of
the funds advanced by Lender to Borrower.
SECTION 6 - NEGATIVE COVENANTS
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The Borrower shall not, without the consent of the Lender which consent
shall not be unreasonably withheld, do the following:
6.1. MATERIAL CHANGE IN BUSINESS: Borrower shall not engage in any line
of business or type of business venture other than the business in which
Borrower currently engages, together with activities related or incidental
thereto.
6.2. RELOCATION OF BUSINESS: The Borrower shall not relocate the
location of any of the equipment covered by the Security Agreement or any of the
jobs described herein from 1 Mill Street, Fort Edward, New York to any other
location without the written consent of the Lender and further agrees to
continue to operate the business currently being conducted by DECORA, INC. at 1
Mill Street, Fort Edward, New York during the term of this agreement. Borrower
and Guarantor, joint and severally, acknowledge that this is a material
condition for this loan and the failure to comply with this condition will
constitute a default hereunder.
SECTION 7 - DEFAULTS
7.1. EVENTS OF DEFAULT: Failure to comply with all the terms and
conditions, representations and covenants of this agreement and any other
agreement with the Lender, including but not limited to, all agreements under
Security Agreements, the Promissory Note and Guarantee hereinbefore described
shall constitute an Event of Default under this Agreement and Borrower agrees
will also constitute an Event of Default under every other Loan Document as
described in the Promissory Note. Upon the occurrence of an Event of Default,
all sums due and owing from the Borrower to the Lender will immediately be due
and payable without further notice or demand by Lender.
SECTION 8 - MISCELLANEOUS
8.1. This agreement may not be altered, modified or changed in any way
except in a writing signed by the Lender, the Borrower and the Guarantor.
Notwithstanding this agreement, any waivers or consents expressed in the
Guarantee of the Guarantor dated the same date as this agreement, will authorize
the amendment of this agreement or any relating agreements including, but not
limited to, the Promissory Note by Borrower and Lender without the knowledge or
consent of the Guarantor as expressed in said Guarantee;
8.2. This agreement and/or note required to be executed hereby are to
be construed in accordance with the laws of the State of New York.
8.3. All representations, warranties, agreements, covenants and
obligations herein, or any certificate or statement delivered by any part of the
Lender, are all hereby declared to be material and the parties hereby expressly
agree and acknowledge that the same have been, and
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will be, relied upon by the Lender, and all such shall survive the execution of
this agreement, and the closing of the transaction, and shall not merge with the
performance of any agreement by any party hereto.
8.4. All notices, requests, demands or other communications hereunder
shall be deemed to have been duly given if delivered, or mailed by certified
mail, to the party entitled to receive the same at its address hereinabove set
forth in this agreement, or to such other address as such party may hereafter
direct, in writing, by registered mail.
8.5. The Borrower and Guarantor will pay (a) all recording fees and
taxes, (b) all reasonable attorney's fees involved in the enforcement of this
agreement or any other of the financing documents and c) expenses incurred by
Lender in perfecting its security interests authorized herein together with
actual expenses incurred by Lender in periodically inspecting such secured
assets.
8.6. No delay by the Lender in exercising any power or right shall
operate as a waiver of such power or right, nor shall any single or partial
exercise of any power or right preclude the exercise of any other power or
right.
8.7. This agreement and the agreements described herein represent the
final agreement between Borrower, Guarantor and Lender and may not be
contradictory by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties.
8.8. Lender acknowledges and agrees that the security interest given by
the Security Agreement in the equipment described therein is a second security
interest and will remain subordinate to any interest that Fleet Bank may have in
the equipment as security for existing or future indebtedness due and owing from
Borrower and/or Guarantor to Fleet Bank.
DECORA INCORPORATED
By:__________________________________
Timothy Burditt, Vice President
DECORA INDUSTRIES, INC.
By:__________________________________
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Timothy Burditt, Executive Vice President
WASHINGTON COUNTY LOCAL
DEVELOPMENT CORPORATION
By:___________________________________________
Robert Banks, Vice President
[NOTARIES]
10
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EXHIBIT 10.69
AMENDMENT NO. 3 TO SECURITIES PURCHASE AGREEMENT
AMENDMENT NO. 3 TO SECURITIES PURCHASE AGREEMENT (this
"Amendment"), dated as of March 31, 1996, by and among DECORA, INCORPORATED, a
Delaware corporation authorized to do business in the State of New York as
Decora Manufacturing (the "Company"), DECORA INDUSTRIES, INC., a Delaware
corporation, successor by merger to Utilitech, Incorporated, a California
corporation (the "Guarantor"), and each of the HOLDERS referred to below.
PRELIMINARY STATEMENTS.
A. Pursuant to the Securities Purchase Agreement dated as of
April 15, 1990, as amended by the Amendment to Securities Purchase Agreement and
Warrants dated as of July 19, 1994 and the Amendment to Securities Purchase
Agreement dated as of April 1, 1995 (the "Securities Purchase Agreement"), among
the Company, the Guarantor, and CIGNA Mezzanine Partners II, L.P., CIGNA
Property and Casualty Insurance Company, and Insurance Company of North America
(collectively, the "Purchasers"), the Company issued and the Purchasers
purchased $7,000,000 in aggregate principal amount of the Company's 14% Senior
Subordinated Notes due 1998 (the "Notes"), guaranteed by the Guarantor, and
Warrants to purchase shares of common stock of the Company (the "Warrants").
B. The entities listed in Schedule 1 to this Amendment (the
"Holders") hold the Notes and Warrants as of the date hereof.
C. The parties to the Securities Purchase Agreement
concurrently will enter into an Exchange Agreement dated as of the date hereof
(the "Exchange Agreement") pursuant to which the Warrants shall be exchanged
initially for (i) non-interest bearing Senior Subordinated Notes (the "Exchange
Notes") issued by the Company in the aggregate principal amount of $1,000,000
and (ii) one million (1,000,000) shares of common stock issued by the Guarantor,
and, accordingly, upon the Effective Date (as defined herein), the Warrants
shall cease to exist.
D. The Company has requested that the Holders amend certain of
the Company's obligations under the Securities Purchase Agreement.
E. The Company and the Holders desire to enter into this
Amendment to effectuate the above-mentioned amendments.
F. Section 16.4 of the Securities Purchase Agreement provides
that the Securities Purchase Agreement may be amended after the Closing Date
with the written consent of the Company and, in certain circumstances, the
holders of all the Notes then outstanding.
<PAGE> 2
NOW, THEREFORE, in order to induce the Holders to grant the
amendments specified below, and in consideration of other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the Company and each of the Holders agree as follows:
SECTION 1. RELATION TO THE SECURITIES PURCHASE AGREEMENT; DEFINITIONS.
SECTION 1.1 RELATION TO SECURITIES PURCHASE AGREEMENT. This Amendment
constitutes an integral part of the Securities Purchase Agreement.
SECTION 1.2 CAPITALIZED TERMS. For all purposes of this Amendment,
capitalized terms used herein without definition shall have the meanings
specified in the Securities Purchase Agreement, as said agreement shall be in
effect on the Effective Date after giving effect to this Amendment.
SECTION 2. AMENDMENTS TO THE SECURITIES PURCHASE AGREEMENT.
SECTION 2.1 AMENDMENT TO SECTION 7.1 OF THE SECURITIES PURCHASE
AGREEMENT. Section 7.1 of the Securities Purchase Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
SECTION 7.1 REQUIRED PREPAYMENTS. The Company, without notice,
will prepay, without premium, commencing April 15, 1997, Notes in the
aggregate principal amounts as follows, in each case with interest
accrued on the amount to be prepaid to the date of prepayment:
<TABLE>
<CAPTION>
Principal Amount
Prepayment Date to be Prepaid
- --------------- ----------------
<S> <C>
April 15, 1997 $3,500,000
April 15, 1998 $3,500,000
</TABLE>
Notwithstanding anything contained in this Section 7.1, on the
maturity date of the Notes, the aggregate outstanding principal amount
of the Notes, together with interest accrued thereon, shall be due and
payable.
SECTION 2.2 AMENDMENT TO SECTION 12.1 OF THE SECURITIES PURCHASE
AGREEMENT. Section 12.1(a), (c) aND (e) of the Securities Purchase Agreement are
hereby amended by deleting such clauses in their entirety and replacing them, in
the order in which they appear, with the following:
(a) if any payment or prepayment of principal of or premium on
any Note, Exchange Note or Additional Note shall not be made when the
same becomes due and payable, whether at maturity, upon acceleration or
otherwise; or
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(b) any representation or warranty of Utilitech or the Company
contained in this Agreement, the Exchange Agreement or any agreement,
instrument, certificate, statement or other writing furnished in
connection herewith or therewith or pursuant hereto or thereto shall
prove to have been false or inaccurate in any material respect on the
date as of which such representation or warranty was made; or
(e) Utilitech or the Company shall default in the due and
punctual performance of or compliance with any other covenant,
condition or agreement to be performed or observed by it under any
provision hereof or under any provision of the Exchange Agreement and
any such failure shall continue unremedied for 30 days after the date
of occurrence of such default; or
SECTION 2.3 AMENDMENT TO SECTION 12.2 OF THE SECURITIES PURCHASE
AGREEMENT. Section 12.2 of the Securities Purchase Agreement is hereby amended
by deleting it in its entirety and replacing it with the following:
Section 12.2 Default Remedies. If an Event of Default shall
occur and be continuing, the holder of any Note or Other Note then
outstanding may exercise any right, power or remedy permitted to it by
law, either by suit in equity or by action at law, or both, whether for
specific performance of any covenant or agreement contained in this
Agreement or in such Note or Other Note or in aid of the exercise of
any power granted in this Agreement or in such Note or Other Note, or
may proceed to enforce payment of such Note or Other Note or to enforce
any other legal or equitable right of the holder of such Note or Other
Note. No remedy herein conferred upon any holder of a Note or Other
Note is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in
equity, by statute or otherwise. No course of dealing on the part of
any holder of any Note or Other Note, or any delay or failure on the
part of any holder of any Note or Other Note to exercise any right or
power, shall operate as a waiver of such right or power or otherwise
prejudice the rights, powers and remedies of such holder or of any
other holder. No failure to insist upon strict compliance with any
covenant, term, condition or other provision of this Agreement or the
Notes or the Other Notes shall constitute a waiver by any holder of any
of the Notes or the Other Notes of any such covenant, term, condition
or other provision or of any Default or Event of Default in connection
therewith. To the extent effective under applicable law, the Company
hereby agrees to waive, and does hereby absolutely and irrevocably
waive and relinquish, the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or that may
hereafter exist that, but for this provision, might be applicable to
any sale made under any judgment, order or decree of any court, or
otherwise, based on the Notes or the Other Notes or on any claim for
interest on the Notes or the Other Notes. If an Event of Default shall
occur, the Company will pay to the holders of the Notes or the Other
Notes, to the extent not prohibited by applicable law, such further
amount as shall be sufficient to cover the reasonable costs and
expenses of collection and of the taking of remedial actions and the
maintenance of enforcement proceedings, including, without limitation,
reasonable attorneys' fees and expenses. All sums payable by the
Company
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under the Notes or the Other Notes shall be paid without counterclaim,
setoff, deduction or defense and without abatement, suspension,
deferment, diminution or reduction.
SECTION 2.4 AMENDMENT TO SECTION 12.3 OF THE SECURITIES PURCHASE
AGREEMENT. Section 12.3 of the Securities Purchase Agreement is hereby amended
by deleting it in its entirety and replacing it with the following:
SECTION 12.3 NOTICE OF DEFAULT. If the holder of any Note or
Other Note or of any other evidence of Indebtedness exceeding $50,000
in aggregate original principal amount of the Company shall give any
notice or take any other action with respect to a claimed Default, the
Company shall forthwith give written notice thereof to all holders of
Notes or Other Notes then outstanding describing the notice or action
and the nature of the claimed Default.
SECTION 2.5 AMENDMENT TO SECTION 15.1 OF THE SECURITIES PURCHASE
AGREEMENT. (a) Section 15.1 of the Securities Purchase Agreement is hereby
amended by deleting the definition of "Rubbermaid Agreement" in its entirety and
replacing it with the following:
The term "Rubbermaid Agreement" shall mean the
Manufacturing Agreement dated February 18, 1994 by and among the
Company, the Guarantor and Rubbermaid Incorporated, an Ohio
corporation, as such agreement may be further amended or superseded
from time to time.
(b) Section 15.1 of the Securities Purchase Agreement is hereby amended
by adding, in alphabetical order, the following definitions:
The term "Additional Notes" shall have the meaning set forth
in the Exchange Agreement.
The term "Exchange Agreement" shall mean the Exchange
Agreement dated as of March 31, 1996 by and among the Company, Decora
Industries, Inc. and the Holders as set forth on Schedule 1 thereto.
The term "Exchange Notes" shall mean the non-interest bearing
Senior Subordinated Notes due April 15, 1998 issued pursuant to
Section 1.1 of the Exchange Agreement.
The term "Other Notes" shall mean, collectively, the Exchange
Notes and the Additional Notes.
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SECTION 3. CONDITIONS TO EFFECTIVENESS OF CERTAIN PROVISIONS.
SECTION 3.1 EFFECTIVE DATE. The provisions of Section 2 of
this Amendment shall become effective as of the date on which each of the
following conditions shall have been satisfied or waived by the Holders of all
of the outstanding Notes (the "Effective Date"):
(a) Execution of Counterparts. Counterparts of this Amendment
shall have been executed and delivered by each of the Company, the
Guarantor and the Holders.
(b) Representations True; No Event of Default. Each of the
Company and the Guarantor shall have delivered to the Holders an
Officer's Certificate, dated the Effective Date, certifying that the
representations and warranties of each of the Company and the
Guarantor, as the case may be, contained herein shall be true on and as
of the Effective Date and that there exists no Event of Default or
Default, assuming for this purpose that this Amendment had been
effective from and after the date hereof.
(c) Opinions of Special Counsel for the Holders. Each of the
Holders shall have received from Orrick, Herrington & Sutcliffe,
special counsel for each of the Holders ("Special Counsel"), an
opinion, dated the Effective Date, in form and substance satisfactory
to each of the Holders, to the effect set forth in Schedule 2-A hereto.
(d) Opinions of Special Counsel for the Company and the
Guarantor. (i) Each of the Holders and its Special Counsel shall have
received from Miller & Holguin, special counsel for the Company and the
Guarantor, an opinion, dated the Effective Date, in form and substance
satisfactory to each of the Holders and its Special Counsel, to the
effect specified in Schedule 2-B hereto, and covering such other
matters incident to the transactions contemplated hereby as each of the
Holders and its Special Counsel may reasonably request.
(e) Exchange Agreement. The Exchange Agreement, substantially
in the form annexed hereto as Exhibit A, and all other agreements,
instruments and arrangements among the Holders, the Guarantor and the
Company shall have been reduced to writing and furnished to the
Holders, and such agreements, instruments and arrangements shall be in
form and substance satisfactory to the Holders. The Holders shall have
received an Officer's Certificate of each of the Company and the
Guarantor attaching copies of the fully executed Exchange Agreement and
each of such other agreements and certifying that each such document is
a true, correct and complete copy thereof, that such documents are the
only agreements between such parties relating to the transactions
contemplated by the Exchange Agreement, that each such document is in
full force and effect without any term or condition thereof having been
amended, modified or waived or any exercise of rights with respect
thereto forborne without the Holders' prior written consent, that there
is no default thereunder and that each of the conditions set forth in
the Exchange Agreement to be satisfied prior to or on the Effective
Date shall have been satisfied (without any thereof having been
waived).
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(f) Consummation of Exchange. Concurrently with the
consummation of the transactions hereunder and in any event on the
Effective Date, the Exchange shall have been consummated in accordance
with the terms of the Exchange Agreement and with all applicable
statutes, laws, rules and regulations.
(g) No Material Adverse Change. There shall have been no
material adverse change in the business, earnings, prospects,
properties or condition (financial or otherwise) of either the Company
or the Guarantor since March 31, 1996.
(h) Fees and Disbursements of Special Counsel for the Holders.
The Holders' Special Counsel shall have received payment of the invoice
rendered for its fees and disbursements posted through the date of such
invoice (with the understanding that a supplemental statement for fees
and disbursements subsequently posted is to be rendered at a later
date) in connection with the consummation of the transactions
contemplated hereunder.
(i) Consents. Each of the Company and the Guarantor shall have
delivered to the Holders an Officer's Certificate, dated the Effective
Date, certifying that any necessary consents, waivers, approvals,
authorizations, registrations, filings and notifications in connection
with the authorization, execution and delivery of this Amendment have
been obtained or made and are in full force and effect.
(j) Bank Consent. The Holders shall have received the written
consent of the banks party to the Bank Agreement to the execution,
delivery and performance of this Amendment.
(k) Proceedings, Instruments, etc. All proceedings and actions
taken on or prior to the Effective Date in connection with the
transactions contemplated by this Amendment and all instruments
incident thereto shall be in form and substance satisfactory to each of
the Holders and its Special Counsel, and each of the Holders and its
Special Counsel shall have received copies of all documents that they
may request in connection with such proceedings, actions and
transactions (including, without limitation, copies of court documents,
certifications, and evidence of the correctness of the representations
and warranties contained herein and certifications and evidence of the
compliance with the terms and the fulfillment of the conditions of this
Amendment), in form and substance satisfactory to each of the Holders
and its Special Counsel.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1 ORGANIZATION AND AUTHORITY. The Company:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
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(b) has all requisite power and authority (corporate and
other) to own and operate its properties, to conduct its business as currently
conducted and as currently proposed to be conducted, to enter into this
Amendment and to perform its obligations under this Amendment; and
(c) has duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the failure to so qualify
could materially adversely affect its business, earnings, prospects, properties
or condition (financial or other).
SECTION 4.2 CORPORATE PROCEEDINGS; VALIDITY OF AMENDMENT. The
Company has taken all corporate action necessary to be taken by it to authorize
the execution and delivery of this Amendment. This Amendment has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
SECTION 4.3 NO DEFAULT OR EVENT OF DEFAULT. Giving effect to
the amendments set forth in Section 2 of this Amendment, no event has occurred
and no condition exists which constitutes a Default or an Event of Default.
SECTION 4.4 ALL OTHER REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in Section 2 of the
Exchange Agreement are true and correct on and as of the date hereof.
SECTION 5. GUARANTOR.
SECTION 5.1 CONSENT OF THE GUARANTOR. The Guarantor, as a guarantor
under Section 1.2 and Section 13 of the Securities Purchase Agreement, hereby
consents to the terms of this Amendment and hereby confirms and agrees that its
guaranty and all of its other obligations under Section 1.2 and Section 13 of
the Securities Purchase Agreement are, and shall continue to be, in full force
and effect and are hereby ratified and confirmed in all respects. The Company
and the Guarantor understand and agree that all references to "Utilitech" under
the Securities Purchase Agreement and under any other agreement contemplated
thereby shall mean and include Decora Industries, Inc.
SECTION 5.2 REPRESENTATION AND WARRANTIES OF THE GUARANTOR. (a) The
Guarantor:
(i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation;
(ii) has all requisite power and authority (corporate and
other) to own and operate its properties, to conduct its business as
currently conducted and as currently proposed to be conducted, to enter
into this Amendment and to perform its obligations under this
Amendment; and
7
<PAGE> 8
(iii) has duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the
failure to so qualify could materially adversely affect its business,
earnings, prospects, properties or condition (financial or other).
(b) The Guarantor has taken all corporate action necessary to
be taken by it to authorize the execution and delivery of this Amendment. This
Amendment has been duly executed and delivered by the Guarantor and constitutes
the legal, valid and binding obligation of the Guarantor, enforceable against
the Guarantor in accordance with its terms.
(c) Giving effect to the amendments set forth in Section 2 of
this Amendment, no event has occurred and no condition exists which constitutes
a Default or an Event of Default.
(d) The representations and warranties of the Guarantor
contained in Section 2 of the Exchange Agreement are true and correct on and as
of the date hereof.
SECTION 6. MISCELLANEOUS.
SECTION 6.1 CROSS-REFERENCES. References in this Amendment to
any Section (or "Section") are, unless otherwise specified, to such Section (or
"Section") of this Amendment.
SECTION 6.2 INSTRUMENT PURSUANT TO EXISTING SECURITIES
PURCHASE AGREEMENT; LIMITED AMENDMENT. This Amendment is executed pursuant to
Section 16.4 of the SecurITIES Purchase Agreement and shall (unless otherwise
expressly indicated herein) be construed, administered, and applied in
accordance with all of the terms and provisions of the Securities Purchase
Agreement, including Section 16.4 thereof. Except as expressly amended, any
conditions of the Securities Purchase Agreement shall remain unamended and
unwaived. The amendments set forth herein shall be limited precisely as provided
for herein to the provisions expressly amended herein and shall not be deemed to
be a waiver of, amendment of, consent to or modification of any other term or
provision of any other document or of any transaction or further action on the
part of the Company or the Guarantor which would require the consent of any
Holder under the Securities Purchase Agreement.
SECTION 6.3 SUCCESSORS AND ASSIGNS. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 6.4 COUNTERPARTS. This Amendment may be executed
simultaneously in two or more counterparts, each of which shall be deemed to be
an original but all of which shall constitute together but one and the same
instrument.
SECTION 6.5 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
8
<PAGE> 9
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 10
IN WITNESS WHEREOF, the undersigned have each caused this
Amendment to be duly executed and delivered by its respective, duly authorized
officer as of the date first above written.
COMPANY:
DECORA, INCORPORATED
By:_______________________________
Name:
Title:
GUARANTOR:
DECORA INDUSTRIES, INC.
By:_______________________________
Name:
Title:
HOLDERS:
CIGNA MEZZANINE PARTNERS II, L.P.
By CIGNA Investments, Inc., Agent
By:_______________________________
Name:
Title:
CIGNA PROPERTY AND CASUALTY
INSURANCE COMPANY
By Cigna Investments, Inc.
By:_______________________________
Name:
Title
10
<PAGE> 11
INSURANCE COMPANY OF NORTH
AMERICA
By CIGNA Investments, Inc.
By:_______________________________
Name:
Title
11
<PAGE> 12
SCHEDULE 1
HOLDERS
CIGNA Mezzanine Partners II, L. P.
CIGNA Property and Casualty Insurance Company
Insurance Company of North America
<PAGE> 13
SCHEDULE 2-A
[FORM OF OPINION OF SPECIAL COUNSEL TO THE HOLDERS]
The opinion of Orrick, Herrington & Sutcliffe, special counsel to the
Holders, shall be to the effect that:
1. Decora is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to enter into and perform its obligations under the
Amendment and the Exchange Agreement.
2. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to enter into and perform its obligations under
the Amendment and the Exchange Agreement and to issue the Notes.
3. Each of the Amendment and the Exchange Agreement and the execution,
delivery and performance thereof have been duly authorized by all necessary
corporate action on the part of each of Decora and the Company. Each of the
Amendment and the Exchange Agreement has been duly executed and delivered by
each of Decora and the Company and constitutes the legal, valid and binding
obligation of each of Decora and the Company, enforceable against each in
accordance with its terms.
4. All shares of the Common Stock have been duly authorized by all
necessary corporate action on the part of Decora and such shares have been
validly issued and are fully paid and nonassessable. The share certificates
representing the Common Stock have been duly executed, issued and delivered by
Decora.
5. The Exchange Notes and the offer, issuance, exchange delivery and
performance thereof have been duly authorized by all necessary corporate action
on the part of the Company. The Exchange Notes have been duly executed, issued
and delivered by the Company and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.
6. Neither the execution, delivery or performance of the Amendment or
the Exchange Agreement by Decora, nor consummation of the transactions
contemplated therein, nor the fulfillment by Decora of the terms, conditions or
provisions thereof, nor the execution, issuance or delivery of the Common Stock
by Decora, will be in conflict with the provisions of the certificate of
incorporation or the by-laws of Decora, as presently in effect.
7. Neither the execution, delivery or performance of the Amendment or
the Exchange Agreement by the Company, nor the consummation of the transactions
contemplated therein, nor the fulfillment by the Company of the terms,
conditions or provisions thereof, nor the execution,
<PAGE> 14
delivery or performance of the Other Notes by the Company, will be in conflict
with the provisions of the certificate of incorporation or the by-laws of the
Company, as presently in effect.
8. On the basis of the representations contained in Section 3.1 of the
Exchange Agreement, it is not necessary, in connection with the offering,
issuance and delivery of the Other Notes or the Common Stock to you under the
circumstances contemplated by the Exchange Agreement, to register the Other
Notes or the Common Stock under the Securities Act, or to qualify an indenture
with respect to the Other Notes under the Trust Indenture Act of 1939, as
amended.
The opinion of Miller & Holguin, special counsel for Decora
and the Company, dated the Effective Date and delivered to you pursuant to
Section 3.1(d) of the Amendment is satisfactory in form and scope to us and we
believe that you are justified in relying thereon.
Such special counsel shall, in addition, opine as to such
other matters as the Holders may reasonably request.
2-A-2
<PAGE> 15
SCHEDULE 2-B
[FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY AND THE GUARANTOR]
The opinion of Miller & Houlguin, special counsel to the Company and
the Guarantor, shall be to the effect that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to enter into and perform its obligations under
the Amendment and the Exchange Agreement and the Notes. The Company is duly
qualified to do business as a foreign corporation and is in good standing in the
State of New York as Decora Manufacturing, which is the only jurisdiction in
which the nature of its business as conducted and as proposed to be conducted
requires such qualification.
2. Decora is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to enter into and perform its obligations under the
Amendment and the Exchange Agreement. Decora is duly qualified to do business as
a foreign corporation in each jurisdiction in which the nature of its business
as conducted and as proposed to be conducted requires such qualification.
3. Each of the Amendment and the Exchange Agreement and the execution,
delivery and performance thereof have been duly authorized by all necessary
corporate action on the part of the Company and Decora. Each of the Amendment
and the Exchange Agreement has been duly executed and delivered by each of the
Company and Decora and constitutes the legal, valid and binding obligation of
the Company and Decora, enforceable against the Company and Decora in accordance
with its terms.
4. The Exchange Notes and the offer, issuance, sale, delivery and
performance thereof have been duly authorized by all necessary corporate action
on the part of the Company. The Exchange Notes have been duly executed, issued
and delivered by the Company and constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.
5. All shares of the Common Stock have been duly authorized by all
necessary corporate action on the part of Decora and such shares have been
validly issued and are fully paid and nonassessable. The share certificates
representing the Common Stock have been duly executed, issued and delivered by
Decora.
6. On the basis of the representations contained in Section 3.1 of the
Exchange Agreement, it is not necessary, in connection with the offering,
issuance and delivery of the Other Notes or Common Stock to you under the
circumstances contemplated by the Exchange Agreement, to register the Other
Notes or the Common Stock under the Securities Act of
2-B-1
<PAGE> 16
1933, as amended, or to qualify an indenture with respect to the Other Notes
under the Trust Indenture Act of 1939, as amended.
7. None of the transactions contemplated by the Exchange Agreement or
the Amendment will violate or result in a violation of Section 7 of the Exchange
Act or any regulations issued pursuant thereto, including, without limitation,
Regulation G (12 C.F.R., Part 207), as amended, Regulation T (12 C.F.R., Part
220), as amended, Regulation X (12 C.F.R. Part 220), as amended, and Regulation
U (12 C.F.R., Part 221), as amended, of the Board of Governors of the Federal
Reserve System.
8. Neither the execution, delivery or performance of the Exchange
Agreement or the Amendment by either the Company or Decora or the offer,
issuance, exchange, delivery or performance of the Other Notes by the Company,
nor the offer, issuance, exchange or delivery of the Common Stock by Decora,
does or will (A) conflict with or violate the charter or by-laws of the Company
or Decora, or (B) conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any Lien on any of the properties or assets of the Company or Decora
pursuant to the terms of, any evidence of Indebtedness, or any instrument or
agreement under or pursuant to which any evidence of Indebtedness has been
issued, or any other instrument or agreement referred to in Section 2.7 of the
Exchange Agreement to which the Company or Decora is a party or by which it is
bound.
9. Each of the Company and Decora is in compliance with all laws and
ordinances and all governmental rules and regulations to which it is subject,
the violation of which, either individually or in the aggregate, could
materially adversely affect the business, earnings, properties or condition
(financial or otherwise) of the Company or Decora or any of its Subsidiaries.
Neither the execution, delivery or performance of the Exchange Agreement or the
Amendment by the Company or Decora, the offer, issuance, exchange, delivery or
performance of the Other Notes by the Company, or the offer, issuance, exchange
and delivery of the Common Stock by Decora, nor the consummation of the
Exchange, does or will cause the Company or Decora to be in violation of any law
or ordinance, writ, injunction or decree or other action of any court or
governmental authority or arbitrator or any order, rule or regulation, of any
federal, state, county, municipal or other governmental or public authority or
agency.
10. Except as set forth in Schedule III to the Exchange Agreement, no
prior consent, approval or authorization of, registration, qualification,
designation, declaration or filing with, or notice to (a) any federal, state or
local governmental or public authority or agency, or (b) any stockholder,
creditor, lessor or other non-governmental person, is required for the valid
execution, delivery and performance of the Exchange Agreement or the Amendment
by the Company and Decora or the valid offer, issuance, exchange and delivery of
the Other Notes and the Common Stock by the Company or Decora, as the case may
be, or the performance of the Other Notes by the Company or the consummation of
the Exchange. Each of the Company and Decora has obtained all consents,
approvals or authorizations of, made all declarations or filings with or given
all notices to, all federal, state or local governmental or public authorities
or agencies which are necessary for the continued conduct
2-B-2
<PAGE> 17
by the Company and Decora of their respective businesses as now conducted or as
proposed to be conducted and which the failure to so obtain, make or give would
have a material adverse effect on the Company or Decora or any of its
Subsidiaries.
11. There are no applicable taxes, fees or other governmental charges
payable by the Company or Decora in connection with the execution or delivery of
the Amendment or the Exchange Agreement, or by the Company or Decora in
connection with the offer, issuance, exchange and delivery of the Other Notes
and the Common Stock.
12. There is no action at law, suit in equity or other proceeding or
investigation (whether or not purportedly on behalf of the Company or Decora) in
any court or by or before any other governmental or public authority or agency,
or any arbitrator or arbitration panel pending or, to the best of our knowledge,
threatened against or affecting the Company or Decora, or any of their
respective properties that, either individually or in the aggregate, (a) could
materially adversely affect the business, earnings, prospects, properties or
condition (financial or otherwise) of the Company or Decora or any of its
Subsidiaries or (b) could question the validity or enforceability of the
Exchange Agreement, the Amendment, the Other Notes or the validity of the Common
Stock. Neither the Company nor Decora is in default with respect to any order,
writ, injunction, judgment or decree of any court or other governmental or
public authority or agency or arbitrator or arbitration panel.
13. The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock, $.01 par value per share, of which 1,000 shares are
issued and outstanding. Such shares have been duly authorized and all
outstanding shares have been validly issued and are fully paid and nonassessable
and free of preemptive rights. Decora owns all of the issued and outstanding
stock of the Company, and all such shares are validly issued, fully paid and
nonassessable.
14. The authorized capital stock of Decora consists of 45,000,000
shares of Decora Common Stock, $.01 par value per share, of which 34,429,390
shares are issued and outstanding. All such outstanding shares have been validly
issued and are fully paid, nonassessable shares, free of preemptive rights. No
shares of Decora Common Stock are held on the date hereof in the treasury of
Decora. The issuance and sale of all such shares have been in full compliance
with all applicable federal and state securities laws. Except for the Warrants,
there are no subscriptions, options, warrants or calls relating to the issuance
by Decora of any shares of its capital stock, including any right of conversion
or exchange under any outstanding security or other instrument. There are no
voting trusts or other agreements or understandings with respect to the voting
of the capital stock of Decora. The Decora Common Stock is vested with all the
voting rights in Decora. Decora is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or any security convertible into or exchangeable for any of its
capital stock
15. Neither the Company nor Decora is an "investment company" or an
"affiliated person" of an "investment company" or a company "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended. Neither the Company nor Decora is an "investment adviser" or
an "affiliated person" of an
2-B-3
<PAGE> 18
"investment adviser" as such terms are defined in the Investment Advisers Act of
1940, as amended.
Such special counsel shall, in addition, opine as to such other mattes
as the Holders may reasonably request.
2-B-4
<PAGE> 19
EXHIBIT A
[FORM OF EXCHANGE AGREEMENT]
A-1
<PAGE> 1
EXHIBIT 10.70
================================================================================
DECORA, INCORPORATED
$1,000,000 IN AGGREGATE PRINCIPAL AMOUNT
OF
SENIOR SUBORDINATED NOTES DUE APRIL 15, 1998
AND
DECORA INDUSTRIES, INC.
1,000,000 SHARES OF COMMON STOCK
-----------------------------------------------
EXCHANGE AGREEMENT
-----------------------------------------------
Dated as of March 31, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1. ISSUANCE OF SECURITIES; EXCHANGE OF WARRANTS............................. 2
SECTION 1.1 AUTHORIZATION OF NOTES AND COMMON STOCK..................... 2
SECTION 1.2 EXCHANGE OF WARRANTS FOR NOTES AND COMMON STOCK............. 2
SECTION 1.3 DEFINITIONS................................................. 3
SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES................................... 3
SECTION 2.1 CAPITAL STOCK; SUBSIDIARIES................................. 3
SECTION 2.2 ORGANIZATION AND AUTHORITY.................................. 4
SECTION 2.3 FINANCIAL STATEMENTS AND OTHER INFORMATION; FINANCIAL
CONDITION................................................... 5
SECTION 2.4 NO MATERIAL ADVERSE CHANGE.................................. 5
SECTION 2.5 LICENSES, REGISTRATIONS, ETC................................ 5
SECTION 2.6 TITLE TO PROPERTIES; LEASES................................. 5
SECTION 2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC...................... 5
SECTION 2.8 NO MATERIALLY ADVERSE CONTRACTS, ETC........................ 6
SECTION 2.9 COMPLIANCE WITH LAW, ETC.................................... 6
SECTION 2.10 COMPLIANCE WITH ERISA....................................... 7
SECTION 2.11 PENDING LITIGATION, ETC..................................... 7
SECTION 2.12 TAXES....................................................... 8
SECTION 2.13 INVESTMENT COMPANY ACT...................................... 8
SECTION 2.14 NO MARGIN REGULATION VIOLATION.............................. 8
SECTION 2.15 OUTSTANDING SECURITIES...................................... 9
SECTION 2.16 CORPORATE PROCEEDINGS....................................... 9
SECTION 2.17 CONSENT, ETC................................................ 9
SECTION 2.18 NO EVENT OF DEFAULT......................................... 9
SECTION 2.19 SOLVENCY.................................................... 9
SECTION 2.20 COMPLIANCE WITH ENVIRONMENTAL LAWS.......................... 10
SECTION 2.21 VALIDITY OF COMMON STOCK.................................... 11
SECTION 2.22 VALIDITY OF AGREEMENTS AND NOTES............................ 11
SECTION 2.23 LABOR RELATIONS............................................. 11
SECTION 2.24 BROKER'S OR FINDER'S COMMISSIONS............................ 11
SECTION 2.25 INSURANCE................................................... 12
SECTION 2.26 FULL DISCLOSURE............................................. 12
SECTION 3. REPRESENTATIONS OF THE ORIGINAL HOLDERS.................................. 12
SECTION 3.1 INVESTMENT INTENT, ETC...................................... 12
SECTION 4. CONDITIONS TO OBLIGATION TO EXCHANGE WARRANTS............................ 12
SECTION 4.1 OPINION OF SPECIAL COUNSEL FOR YOU.......................... 12
SECTION 4.2 OPINIONS OF COUNSEL FOR THE COMPANY......................... 13
SECTION 4.3 PERFORMANCE OF OBLIGATIONS.................................. 13
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 4.4 REPRESENTATIONS TRUE; NO EVENT OF DEFAULT.............................. 13
SECTION 4.5 CERTIFICATE AS TO SOLVENCY, ETC........................................ 13
SECTION 4.6 CONSENTS AND APPROVALS................................................. 14
SECTION 4.7 AMENDMENT.............................................................. 14
SECTION 4.8 LEGALITY............................................................... 14
SECTION 4.9 ASSIGNMENT OF PRIVATE PLACEMENT NUMBER................................. 14
SECTION 4.10 PROCEEDINGS, INSTRUMENTS, ETC.......................................... 14
SECTION 5. EXPENSES............................................................................ 14
SECTION 6. CERTAIN SPECIAL RIGHTS.............................................................. 15
SECTION 6.1 HOME OFFICE PAYMENT.................................................... 15
SECTION 6.2 DELIVERY EXPENSES...................................................... 16
SECTION 6.3 ISSUANCE TAXES......................................................... 16
SECTION 7. NOTE PREPAYMENTS; ISSUANCE OF ADDITIONAL NOTES...................................... 16
SECTION 7.1 REQUIRED PREPAYMENTS................................................... 16
SECTION 7.2 OPTIONAL PREPAYMENTS; ISSUANCE OF ADDITIONAL NOTES..................... 16
SECTION 8. REGISTRATION, EXCHANGE AND REPLACEMENT OF
NOTES........................................................................................ 17
SECTION 8.1 REGISTRATION........................................................... 17
SECTION 8.2 EXCHANGE............................................................... 17
SECTION 8.3 REPLACEMENT............................................................ 18
SECTION 9. CERTAIN COVENANTS OF THE COMPANY.................................................... 18
SECTION 9.1 ISSUANCE OF ADDITIONAL COMMON STOCK; PAYMENT OF CASH................... 18
SECTION 9.2 RESERVATION OF SHARES.................................................. 19
SECTION 10. SUBORDINATION...................................................................... 19
SECTION 10.1 GENERAL................................................................ 19
SECTION 10.2 SENIOR DEBT............................................................ 19
SECTION 10.3 DEFAULT IN RESPECT OF SENIOR DEBT...................................... 19
SECTION 10.4 INSOLVENCY, ETC........................................................ 21
SECTION 10.5 ACCELERATION OF SUBORDINATED DEBT...................................... 21
SECTION 10.6 TURNOVER OF PAYMENTS................................................... 22
SECTION 10.7 OBLIGATIONS NOT IMPAIRED............................................... 22
SECTION 10.8 PAYMENT OF SENIOR DEBT; SUBROGATION.................................... 22
SECTION 10.9 RELIANCE OF HOLDERS OF SENIOR DEBT..................................... 23
SECTION 11. RESTRICTIONS ON TRANSFER OF THE SHARES;
REGISTRATION RIGHTS.......................................................................... 23
SECTION 11.1 RESTRICTIONS ON TRANSFER OF THE SHARES; OPINION OF COUNSEL............. 23
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 11.2 REGISTRATION OF ................................. 24
SECTION 11.2.1 REGISTRATION UPON REQUEST BY HOLDERS OF ADDITIONAL
COMMON STOCK........................................... 24
SECTION 11.2.2 "PIGGYBACK REGISTRATIONS".............................. 25
SECTION 11.2.3 DECORA'S OBLIGATIONS IN REGISTRATION................... 26
SECTION 11.2.4 PAYMENT OF REGISTRATION EXPENSES....................... 28
SECTION 11.2.5 INFORMATION FROM HOLDERS OF SHARES..................... 28
SECTION 11.2.6 INDEMNIFICATION........................................ 28
SECTION 11.2.7 NO CONFLICTING REGISTRATION RIGHTS..................... 31
SECTION 11.3 PUBLIC INFORMATION............................... 31
SECTION 12. INTERPRETATION OF AGREEMENT AND NOTES.............................. 32
SECTION 12.2 DIRECTLY OR INDIRECTLY........................... 38
SECTION 12.3 ACCOUNTING TERMS................................. 38
SECTION 12.4 GOVERNING LAW.................................... 38
SECTION 12.5 HEADINGS......................................... 38
SECTION 12.6 INDEPENDENCE OF COVENANTS........................ 38
SECTION 12.7 OTHER CAPITALIZED TERMS.......................... 38
SECTION 13. MISCELLANEOUS...................................................... 38
SECTION 13.1 NOTICES.......................................... 38
SECTION 13.2 SURVIVAL......................................... 38
SECTION 13.3 SUCCESSORS AND ASSIGNS........................... 39
SECTION 13.4 AMENDMENT AND WAIVER............................. 39
SECTION 13.5 COUNTERPARTS..................................... 40
</TABLE>
SCHEDULE I - ORIGINAL HOLDERS OF THE NOTES AND THE WARRANTS
SCHEDULE II - EXCHANGE OF WARRANTS FOR NOTES AND COMMON STOCK
SCHEDULE III - DOCUMENTS AND INFORMATION FURNISHED TO THE ORIGINAL HOLDERS
EXHIBIT A - FORM OF NOTE
EXHIBIT A-1 - FORM OF ADDITIONAL NOTE
EXHIBIT B - FORM OF COMMON STOCK CERTIFICATE
EXHIBIT C - FORM OF AMENDMENT
iii
<PAGE> 5
DECORA, INCORPORATED DECORA INDUSTRIES, INC.
1 Mill Street 1 Mill Street
Fort Edward, New York 12828 Fort Edward, New York 12828
Telephone: (518) 747-0681 Telephone: (518) 747-6255
Telecopier: (518) 747-9425 Telecopier: (518) 747-5089
--------------------------------
EXCHANGE AGREEMENT
--------------------------------
Dated as of March 31, 1996
To the Original Holders of the
14% Senior Subordinated Notes due
1998 and Warrants to Purchase
Common Stock of Decora, Incorporated,
Named in Schedule I Hereto
Ladies and Gentlemen:
Each of the undersigned, Decora, Incorporated, a Delaware corporation
authorized to do business in the State of New York as Decora Manufacturing (the
"Company"), and Decora Industries, Inc., a Delaware corporation ("Decora"),
hereby agree with you as follows:
PRELIMINARY STATEMENTS.
A. Pursuant to the Securities Purchase Agreement dated as of
April 15, 1990, as amended by the Amendment to Securities Purchase Agreement and
Warrants dated as of July 19, 1994 and the Amendment to Securities Purchase
Agreement dated as of April 1, 1995 and as to be further amended by Amendment
No. 3 to Securities Purchase Agreement dated as of the date hereof, in the form
annexed hereto as Exhibit C, (the "Amendment") (as such agreement may from time
to time be further amended, supplemented or modified in accordance with its
terms, the "Securities Purchase Agreement") among the Company, Decora, and CIGNA
Mezzanine Partners II, L.P., CIGNA Property and Casualty Insurance Company, and
Insurance Company of North America (collectively, the "Purchasers"), the Company
issued and the Purchasers purchased $7,000,000 in aggregate principal amount of
the Company's 14% Senior Subordinated Notes due 1998 (the "Senior Subordinated
Notes"), guaranteed by Decora, and Warrants to purchase 250 shares of common
stock of the Company (the "Warrants").
B. The entities listed in Schedule I to this Agreement hold the
Senior Subordinated Notes and Warrants as of the date hereof (the "Original
Holders").
<PAGE> 6
C. The parties to the Securities Purchase Agreement have agreed
to consummate an exchange on the terms and conditions hereof (the "Exchange")
pursuant to which the Warrants shall be exchanged initially for (i) a
non-interest bearing senior subordinated note issued by the Company in the
aggregate principal amount of $1,000,000 and (ii) one million (1,000,000) shares
of common stock issued by Decora and, accordingly, upon the Effective Date, the
Warrants shall cease to exist.
D. The Company and the Original Holders desire to enter into this
Exchange Agreement to effectuate the above-mentioned transaction.
NOW, THEREFORE, in order to induce the Original Holders to enter into
the Exchange and the Amendment, and in consideration of other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the Company, Decora and each of the Original Holders agree as follows:
SECTION 1. ISSUANCE OF SECURITIES; EXCHANGE OF WARRANTS.
SECTION 1.1 AUTHORIZATION OF NOTES AND COMMON STOCK. (a) The Company
has duly authorized the issuance and delivery of up to $1,000,000 in aggregate
principal amount of its Senior Subordinated Notes due April 15, 1998,
substantially in the form annexed hereto as Exhibit A (the "Notes", which term
shall be deemed to include the Additional Notes in the event that Additional
Notes are issued pursuant to Section 7.2 hereof). Each Note shall not bear
interest, and shall have a stated maturity of April 15, 1998, subject to the
terms set forth herein.
(b) Decora has duly authorized the issuance and delivery of
1,000,000 shares of its Common Stock representing on the Closing Date
percent ( %)(1) of all classes and series of Decora Common Stock on a Fully
Diluted Basis (such shares being acquired by you on the Closing Date as Original
Holders under this Agreement being referred to herein as the "Common Stock") and
having the rights, preferences and restrictions set forth in the certificate of
incorporation of Decora. Such issuance and delivery shall be made pursuant to
the terms and conditions of this Agreement and a certificate or certificates
representing such shares of Common Stock shall be delivered on the Closing Date
and shall be substantially in the form annexed hereto as Exhibit B.
SECTION 1.2 EXCHANGE OF WARRANTS FOR NOTES AND COMMON STOCK. (a) Each
of the Company and Decora agrees to deliver to you, and upon and subject to the
terms and conditions hereof and in reliance upon the representations and
warranties of the Company and Decora contained herein, you agree to accept from
the Company and Decora, (i) Notes in the aggregate principal amount specified
opposite your name under the applicable heading in Schedule II hereto and (ii)
the number of shares of Common Stock specified opposite your name under the
applicable heading in Schedule II hereto, in exchange for the number of
- --------
(1) Company: Please provide.
2
<PAGE> 7
Warrants specified opposite your name under the applicable heading in Schedule
II hereto. The Warrants are to be surrendered and the Notes and Common Stock are
to be delivered at a closing to be held on June , 1996 at 10:00 A.M., New York
City time, or such other date and time as shall be agreed upon by you and the
Company, and in any event not later than June , 1996 (such date and time being
hereinafter called the "Closing Date"), at the offices of Orrick, Herrington &
Sutcliffe, 666 Fifth Avenue, New York, New York 10103. On the Closing Date, (i)
the Company will deliver to you one or more duly executed Notes dated the
Closing Date, registered in your name or the name of your nominee and in the
principal amount or amounts specified opposite your name under the applicable
heading in Schedule II hereto and (ii) Decora will deliver to you one or more
duly executed certificates evidencing the aggregate number of shares of Common
Stock specified opposite your name under the applicable heading in Schedule II
hereto, dated the Closing Date, registered in your name or the name of your
nominee, and you will surrender to the Company all of the Warrants held by you.
(b) If at the closing the Company or Decora shall fail to tender
any of the Notes or Common Stock, as applicable, to you as provided above in
this Section 1.2, or any of the conditions specified in Section 4 hereof shall
not have been fulfilled to your satisfaction, at your election you shall be
relieved of all obligations under this Agreement, without thereby waiving any
other rights you may have by reason of such failure or such nonfulfillment.
SECTION 1.3 DEFINITIONS. Certain capitalized terms used in this
Agreement are defined in Section 12.1 hereof; references to a "Schedule" or
"Exhibit" are, unless otherwise specified, to the Schedules and Exhibits
attached to this Agreement.
SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES.
The Company and Decora each hereby represents and warrants to you as
follows:
SECTION 2.1 CAPITAL STOCK; SUBSIDIARIES. (a) The authorized capital
stock of the Company consists of 20,000,000 shares of Company Common Stock, of
which 1,000 shares are issued and outstanding. All such outstanding shares have
been validly issued and are fully paid, nonassessable shares, free of preemptive
rights. No shares of the Company Common Stock are held on the date hereof in the
treasury of the Company. The issuance and sale of all such shares have been in
full compliance with all applicable federal and state securities laws. Except
for the Warrants, there are no subscriptions, options, warrants or calls
relating to the issuance by the Company of any shares of its capital stock,
including any right of conversion or exchange under any outstanding security or
other instrument. There are no voting trusts or other agreements or
understandings with respect to the voting of the capital stock of the Company.
The Company Common Stock is vested with all the voting rights in the Company.
The Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
security convertible into or exchangeable for any of its capital stock. The
Company is a wholly-owned subsidiary of Decora. In connection with the
transactions contemplated by the Bank Agreement, Decora has
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pledged the Common Stock of the Company as security for the loans made by the
Bank to the Company pursuant to the Bank Agreement.
(b) The Company has no Subsidiaries, other than those Subsidiaries
set forth in Item 2.1(b) of Schedule III hereto.
(c) The authorized capital stock of Decora consists of 45,000,000
shares of Decora Common Stock, of which 34,429,390 shares are issued and
outstanding. All such outstanding shares have been validly issued and are fully
paid, nonassessable shares, free of preemptive rights. No shares of Decora
Common Stock are held on the date hereof in the treasury of Decora. The issuance
and sale of all such shares have been in full compliance with all applicable
federal and state securities laws. Except as set forth in Item 2.1(c) of
Schedule III hereto, there are no subscriptions, options, warrants or calls
relating to the issuance by Decora of any shares of its capital stock, including
any right of conversion or exchange under any outstanding security or other
instrument. To the best of Decora's knowledge, there are no voting trusts or
other agreements or understandings with respect to the voting of the capital
stock of Decora. The Decora Common Stock is vested with all the voting rights in
Decora. Decora is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
security convertible into or exchangeable for any of its capital stock.
SECTION 2.2 ORGANIZATION AND AUTHORITY. The Company and Decora each:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has all requisite power and authority (corporate and other) to
own and operate its properties, to conduct its business as currently conducted
and as currently proposed to be conducted, and, in the case of the Company, to
offer, issue, exchange and deliver the Notes, to enter into this Agreement and
the Amendment and to perform its obligations under this Agreement, the Amendment
and the Notes, and in the case of Decora, to offer, issue, exchange and deliver
the Common Stock, to enter into this Agreement and the Amendment and to perform
its obligations under this Agreement and the Amendment;
(c) with respect to the Company, has duly qualified to do business
as a foreign corporation and is in good standing in the State of New York, where
the Company does business as Decora Manufacturing, and in every other
jurisdiction in which the failure to so qualify would materially and adversely
affect the business, earnings, prospects, properties or condition (financial or
otherwise) of the Company; and
(d) with respect to Decora, has qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
failure to so qualify would materially and adversely affect the business,
earnings, prospects, properties or condition (financial or otherwise) of Decora.
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SECTION 2.3 FINANCIAL STATEMENTS AND OTHER INFORMATION; FINANCIAL
CONDITION. The Company and Decora have heretofore furnished to you copies of:
(a) the financial statements referred to in Section 11.1 (a) through (d) of the
Securities Purchase Agreement; anD (B) the quarterly report on Form 10-Q for the
fiscal quarter ended December 31, 1995 filed by Decora with the SEC (the
financial statements and reports referred to in this Section 2.3 being
hereinafter referred to as the "Financial Statements"). The Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the respective periods. The Financial
Statements are complete and fairly present the financial position of Decora and
the Company as of the respective dates of the balance sheets included therein
and the results of operations of each of them for the respective periods covered
by the statements of operations and cash flows. Except as contemplated hereby,
neither Decora nor the Company has any material obligation or liability,
individually or in the aggregate, of the nature required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles that is not disclosed by the Financial Statements referred to in
clause (a) above. None of Decora, its Subsidiaries, the Company or the Decora
Division has any Indebtedness for Borrowed Money except as set forth in Item 2.3
of Schedule III.
SECTION 2.4 NO MATERIAL ADVERSE CHANGE. Since March 31, 1996, there has
bEEn no material adverse change in the business, earnings, prospects, properties
or condition (financial or otherwise) of the Company or Decora.
SECTION 2.5 LICENSES, REGISTRATIONS, ETC. Each of the Company and
Decora owns or possesses, and holds free from burdensome restrictions or known
conflicts with the rights of others, all licenses, registrations, permits,
copyrights, trademarks, service marks, trade names and patents and all rights
with respect to the foregoing, necessary for the conduct of its business as now
conducted and as proposed to be conducted.
SECTION 2.6 TITLE TO PROPERTIES; LEASES. Each of the Company and Decora
hAS good and valid title to the properties reflected as being owned by it on the
Financial Statements referred to in Section 2.3 hereof, as well as to the
properties acquired since said date (except property disposed of since said date
in the ordinary course of business). Except for Permitted Liens, there are no
Liens on any of such properties. Each of the Company and Decora has the right
to, and does, enjoy peaceful and undisturbed possession under all material
leases under which it is leasing property. All such material leases are valid,
subsisting and in full force and effect, and none of such leases is in default.
SECTION 2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the Company
nor Decora is (a) in violation of any term of its charter or by-laws or (b) in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in, and is not otherwise in default under, (i)
any evidence of Indebtedness for Money Borrowed or any instrument or agreement
under or pursuant to which any evidence of Indebtedness for Money Borrowed has
been issued or (ii) (A) any other evidence of Indebtedness or any other
instrument or agreement under or pursuant to which any evidence of Indebtedness
has been issued or (B) any other instrument or agreement to which it is a party
or by which it is bound or any of its properties are affected; which default
under this clause (ii)
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would materially adversely affect the business, earnings, prospects, properties,
or condition (financial or otherwise) of the Company or Decora or any of its
Subsidiaries. Other than as set forth in Item 2.7 of Schedule III hereto,
neither the Company nor Decora has defaulted in, nor has it failed to make at
the time contemplated, payment of any dividends or any mandatory redemption
payments of any preferred stock or any principal of, or premium or interest on,
any Indebtedness. Neither the execution, delivery or performance of this
Agreement or the Amendment by either the Company or Decora nor the offer,
issuance, exchange, delivery or performance of the Notes by the Company or the
offer, issuance, exchange or delivery of the Common Stock by Decora does or will
(A) conflict with or violate the charter or by-laws of the Company or Decora,
(B) conflict with or result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation of any
Lien on any of the properties or assets other than as contemplated hereby of the
Company or Decora pursuant to the terms of, any evidence of Indebtedness, or any
instrument or agreement under or pursuant to which any evidence of Indebtedness
has been issued, or any other instrument or agreement referred to in this
Section 2.7 to which the Company or Decora is a party or by which it is bound,
or (C) require the consent of, or other action by any trustee or any creditor
of, any lessor to or any investor in the Company or Decora which consent has not
been obtained.
SECTION 2.8 NO MATERIALLY ADVERSE CONTRACTS, ETC. (a) Neither the
Company nor Decora is a party to or bound by (nor is any of their respective
properties affected by) any contract or agreement, or subject to any order,
writ, injunction or decree or other action of any court or any governmental
department, commission, bureau, board or other administrative agency or
official, or any charter or other corporate or contractual restriction, which
materially and adversely affects, or in the future may (so far as the Company or
Decora can now reasonably foresee) materially and adversely affect, the
business, earnings, properties or condition (financial or otherwise) of the
Company or Decora.
(b) Except for the Management Agreement, neither the Company nor
Decora is a party to any contract or agreement with any Affiliate which contract
or agreement is on terms that are less favorable to it than would obtain in a
comparable arm's-length transaction with a Person other than an Affiliate.
SECTION 2.9 COMPLIANCE WITH LAW, ETC. Each of the Company and Decora is
in compliance with all laws and ordinances and all governmental rules and
regulations to which it is subject, the violation of which, either individually
or in the aggregate, could materially adversely affect the business, earnings,
properties or condition (financial or otherwise) of the Company or Decora or any
of its Subsidiaries. Neither the execution, delivery or performance of this
Agreement or the Amendment by the Company or Decora nor the offer, issuance,
exchange, delivery or performance of the Notes by the Company or, the offer,
issuance, exchange and delivery of the Common Stock by Decora, nor the
consummation of the Exchange, does or will cause the Company or Decora to be in
violation of any law or ordinance, writ, injunction or decree or other action of
any court or governmental authority or arbitrator or any order, rule or
regulation, of any federal, state, county, municipal or other governmental or
public authority or agency.
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SECTION 2.10 COMPLIANCE WITH ERISA; MULTIEMPLOYER PLANS. (a) Neither
the execution and delivery of this Agreement by the Company or Decora, the
offer, issuance, exchange or delivery of the Common Stock by Decora, the offer,
issuance, exchange and delivery of the Notes by the Company, the acquisition of
the Common Stock and the Notes by you, nor the consummation of any of the other
transactions contemplated by this Agreement will constitute or result in a
Prohibited Transaction. Item 2.10 of Schedule III hereto is a complete and
correct list of all Plans with respect to which the Company or Decora is a
"party in interest" (within the meaning of Section 3(14) of ERISA) or with
respect to which its securities are "employer securities" (within the meaning of
Section 407(d)(1) of ERISA), and each of the Company and Decora has provided
such other information with respect to the Plans of any ERISA Affiliate as has
been reasonably requested by you.
(b) Each Plan maintained by the Company, Decora or any ERISA
Affiliate is in compliance in all material respects with applicable provisions
of ERISA, the Code and applicable foreign law. Each of the Company and Decora
has made all contributions to the Plans required to be made by it.
(c) Except for liabilities to make contributions and to pay
administrative costs and as set forth in Item 2.10(c)-1 of Schedule III hereto,
none of the Company, Decora or any ERISA Affiliate has incurred any material
liability to or on account of any Plan under applicable provisions of ERISA, the
Code or applicable foreign law, and no condition exists which presents a
material risk to the Company, Decora or any ERISA Affiliate of incurring any
such liability. No proceedings have been instituted by the PBGC nor has any
other Person taken action to terminate any Pension Plan. The current fair market
value of all assets of each Pension Plan is not less than the aggregate present
value of all benefit liabilities under such Plan. Except as set forth in Item
2.10(c)-2 of Schedule III hereto, neither the Company nor Decora has any
liability for post-retirement health or other post-retirement welfare benefits,
other than as may be required under federal or state coverage continuation laws.
(d) Except for the Company's obligation to contribute to the Paper
Industry Labor-Management Pension Fund and as set forth in Item 2.10(d) of
Schedule III hereto, neither the Company, Decora nor any of their ERISA
Affiliates is obligated, nor has at any time within the last six years been
obligated, to make any contributions to any "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA). The consummation of the transactions
described in Section 2.10(a) hereof will not result in the imposition of any
withdrawal liability under Subtitle E of Title IV (Section 4201 et seq.) of
ERISA.
SECTION 2.11 PENDING LITIGATION, ETC. Except as set forth in Item 2.11
of Schedule III hereto, there is no action at law, suit in equity or other
proceeding or investigation (whether or not purportedly on behalf of the Company
or Decora) in any court or by or before any other governmental or public
authority or agency, or any arbitrator or arbitration panel pending or, to the
best knowledge of the Company or Decora, threatened against or affecting the
Company or Decora, or any of their respective properties that, either
individually or in the aggregate, (a) could materially adversely affect the
business, earnings, prospects, properties or condition (financial or otherwise)
of the Company or Decora or any of its Subsidiaries or (b) could question the
validity or enforceability of this Agreement, the Amendment or the Notes
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or the validity of the Common Stock. Neither the Company nor Decora is in
default with respect to any order, writ, injunction, judgment or decree of any
court or other governmental or public authority or agency or arbitrator or
arbitration panel.
SECTION 2.12 TAXES. All federal, state and other tax returns of the
Company and Decora required by law to be filed have been duly filed or a valid
extension for such filing has been obtained, and all federal, state and other
taxes, assessments, fees and other governmental charges upon the Company and
Decora or upon any of their respective properties, income or assets that are due
and payable have been paid, except where such failure to file or pay would not
materially adversely affect the properties, income, or assets of the Company or
Decora or any of its Subsidiaries. Except as set forth in Item 2.12 of Schedule
III hereto, no extensions of the time for the assessment of deficiencies have
been granted by the Company or Decora. Neither the Company nor Decora knows of
any proposed, asserted, or assessed tax deficiency against the Company or Decora
that would be material to the condition (financial or otherwise) of the Company
or Decora. Neither the Company nor Decora is a party to, bound by or obligated
under any tax sharing or similar agreement. There are no Liens on any properties
or assets of the Company or Decora imposed or arising as a result of the
delinquent payment or the non-payment of any tax, assessment, fee or other
governmental charge. Neither the Company nor Decora (a) has assumed and is
liable for any federal, state or other income tax liability of any other Person,
as a result of any purchase of assets or other business acquisition transaction,
and (b) has indemnified any other Person or otherwise agreed to pay on behalf of
any other Person any tax liability growing out of or which may be asserted on
the basis of any tax treatment adopted with respect to all or any aspect of any
business acquisition transaction. The charges, accruals and reserves, if any, on
the books of the Company or Decora in respect of federal, state and local
corporate franchise and income taxes for all fiscal periods to date are adequate
in accordance with generally accepted accounting principles, and neither the
Company nor Decora knows of any additional unpaid assessments for such periods
or of any basis therefor. There are no applicable taxes, fees or other
governmental charges payable by the Company or Decora in connection with the
execution and delivery of this Agreement or the Amendment or by the Company or
Decora in connection with the offer, issuance, exchange and delivery of the
Notes and the Common Stock.
SECTION 2.13 INVESTMENT COMPANY ACT. Neither the Company nor Decora is
an "investment company" or an "affiliated person" of an "investment company" or
a company "controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended. Neither the Company nor Decora
is an "investment adviser" or an "affiliated person" of an "investment adviser"
as such terms are defined in the Investment Advisers Act of 1940, as amended.
SECTION 2.14 NO MARGIN REGULATION VIOLATION. None of the transactions
contemplated by this Agreement or the Amendment will violate or result in a
violation of Section 7 of the Exchange Act or any regulations issued pursuant
thereto, including, without limitation, Regulation G (12 C.F.R., Part 207), as
amended, Regulation T (12 C.F.R., Part 220), as amended, Regulation U (12
C.F.R., Part 221), as amended and Regulation X (12 C.F.R., Part 224), as
amended, of the Board of Governors of the Federal Reserve System. The assets of
the Company and Decora do not include any "margin securities" within the
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meaning of such Regulation G, and neither the Company nor Decora has any present
intention of acquiring any such margin securities.
SECTION 2.15 OUTSTANDING SECURITIES. All securities (as defined in the
Securities Act) of the Company and Decora have been offered, issued, sold and
delivered in compliance with, or pursuant to exemptions from, all federal and
state laws, and the rules and regulations of federal and state regulatory bodies
governing the offering, issuance, sale and delivery of securities.
SECTION 2.16 CORPORATE PROCEEDINGS. (a) The Company has taken all
corporate action necessary to be taken by it to authorize the execution and
delivery of this Agreement, the offer, issuance, exchange and delivery of the
Notes, the consummation of the Exchange and the performance of all obligations
to be performed by it hereunder and thereunder.
(b) Decora has taken all corporate action necessary to be taken by
it to authorize the execution and delivery of this Agreement and the Amendment,
the offer, issuance, exchange and delivery of the Common Stock, the consummation
of the Exchange and the performance of all obligations to be performed by it
hereunder and thereunder.
SECTION 2.17 CONSENT, ETC. Except as set forth in Schedule III hereto,
no prior consent, approval or authorization of, registration, qualification,
designation, declaration or filing with, or notice to (a) any federal, state or
local governmental or public authority or agency, or (b) any stockholder,
creditor, lessor or other non-governmental person, is or was required for the
valid execution, delivery and performance of this Agreement or the Amendment by
the Company and Decora or the valid offer, issuance, exchange and delivery of
the Notes and the Common Stock by the Company or Decora, as the case may be, or
the performance of the Notes by the Company or the consummation of the Exchange.
Each of the Company and Decora has obtained all consents, approvals or
authorizations of, made all declarations or filings with or given all notices
to, all federal, state or local governmental or public authorities or agencies
which are necessary for the continued conduct by the Company and Decora of their
respective businesses as now conducted or as proposed to be conducted and which
the failure to so obtain, make or give would have a material adverse effect on
the Company or Decora or any of its Subsidiaries.
SECTION 2.18 NO EVENT OF DEFAULT. No event has occurred and is
continuing, and no condition exists, that, if the Notes or the Common Stock had
been issued and were outstanding on the date hereof, would constitute a Default
or an Event of Default.
SECTION 2.19 SOLVENCY. Each of the Company and Decora is and,
immediately after giving effect to the issue and exchange of the Notes and the
Common Stock and the consummation of the other transactions contemplated by this
Agreement, will be, Solvent.
For purposes of this Section 2.19, the term "Solvent" shall mean, with
respect to any Person, that:
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(a) the assets of such Person, at a fair valuation, exceed the
total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person;
(b) based on current projections, which are based on underlying
assumptions which provide a reasonable basis for the projections and which
reflect such Person's judgment based on present circumstances of the most likely
set of conditions and such Person's most likely course of action for the period
projected, such Person believes it has sufficient cash flow to enable it to pay
its debts as they mature; and
(c) such Person does not have an unreasonably small capital with
which to engage in its anticipated business.
For purposes of this Section 2.19, the "fair valuation" of the assets
of any Person shall be determined on the basis of the amount which may be
realized within a reasonable time, either through collection or sale of such
assets at the regular market value, conceiving the latter as the amount which
could be obtained for the property in question within such period by a capable
and diligent businessman from an interested buyer who is willing to purchase
under ordinary selling conditions.
SECTION 2.20 COMPLIANCE WITH ENVIRONMENTAL LAWS. (a) Each of the
Company and Decora is, and will continue to be, in compliance with all
applicable federal, state and local environmental laws, regulations and
ordinances governing its business, products, properties or assets with respect
to all discharges into the ground and surface water, emissions into the ambient
air and generation, accumulation, storage, treatment, transportation, labeling
or disposal of waste materials or process by-products for which failure to
comply could have a material adverse effect on the business, earnings,
prospects, properties or condition (financial or otherwise) of the Company or
Decora or any of its Subsidiaries and neither the Company nor Decora is liable
for any penalties, fines or forfeitures for failure to comply with any of the
foregoing, the failure to comply with which could have a material adverse effect
on the business, earnings, prospects, properties or condition (financial or
otherwise) of the Company or Decora or any of its Subsidiaries. All licenses,
permits or registrations required for the respective businesses of the Company
or Decora, as presently conducted and proposed to be conducted, under any
federal, state or local environmental laws, regulations or ordinances have been
secured (or application for, or application for transfer thereof, have been
made) and each of the Company and Decora is in substantial compliance therewith.
(b) No release, emission, or discharge into the environment of
hazardous substances, as defined under the Comprehensive Environmental Response,
Compensation, and Liability Act as amended, or hazardous waste as defined under
the Resource Conservation and Recovery Act, or air pollutants as defined under
the Clean Air Act, or pollutants as defined under the Clean Water Act, is
presently occurring or has in the past occurred on or from any property owned or
leased by the Company or Decora in excess of federal, state or local permitted
releases or reportable quantities, or other concentrations, standards or
limitations under the foregoing laws or any state law governing the protection
of health and the environment or under any other federal, state, or local laws
or regulations.
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(c) Each of the Company and Decora has never, except in accordance
with applicable laws or regulations and in a manner which would not, under
current laws and regulations, expose either the Company or Decora to any
liability, (i) owned, occupied or operated a site or structure on or in which
any hazardous substance was or is stored, transported or disposed of, (ii)
transported or arranged for the transportation of any hazardous substance or
(iii) except as set forth in Schedule III hereto, caused or been held legally
responsible for any release or threatened release of any hazardous substance, or
received notification from any federal, state or other governmental authority of
any release or threatened release, or to pay the costs or expenses incurred in
connection therewith for which the Company or Decora is or may be responsible,
of any hazardous substance from any site or structure owned, occupied or
operated by the Company or Decora.
SECTION 2.21 VALIDITY OF COMMON STOCK. All shares of Common Stock, when
issued and delivered in compliance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable.
SECTION 2.22 VALIDITY OF AGREEMENTS AND NOTES. Each of this Agreement
and the Amendment has been duly executed and delivered by the Company and Decora
and constitutes a legal, valid and binding obligation of each of the Company and
Decora, enforceable against the Company and Decora in accordance with its terms.
Upon receipt by the Original Holders of the Notes as provided in this Agreement,
the Notes will have been duly issued by the Company and will constitute legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
SECTION 2.23 LABOR RELATIONS. Neither the Company nor Decora is engaged
in any unfair labor practice which would have a material adverse effect on the
Company or Decora or any of its Subsidiaries. There is (a) no unfair labor
practice complaint pending or, to the best knowledge of the Company or Decora,
threatened against the Company or Decora before the National Labor Relations
Board and no grievance or arbitration proceedings arising out of or under
collective bargaining agreements is so pending or threatened, (b) no strike,
labor dispute, slowdown or stoppage pending or, to the best knowledge of the
Company or Decora, threatened against the Company or Decora and (c) no union
representation question existing with respect to the employees of the Company or
Decora and no union organizing activities are taking place with respect to any
thereof.
SECTION 2.24 BROKER'S OR FINDER'S COMMISSIONS. No broker's or finder's
placement fee or commission will be payable by the Company or Decora with
respect to the issuance and delivery of the Notes and the Common Stock or with
respect to any of the transactions contemplated hereby. Each of the Company and
Decora will hold you harmless from any claim, demand or liability for broker's
or finder's placement fees or commissions (other than any such fees or
commissions payable by or to you) whether or not payable by the Company or
Decora alleged to have been incurred in connection with this transaction.
SECTION 2.25 INSURANCE. Each of the Company and Decora has, with
respect to the properties and business of the Company and Decora, with
financially sound and reputable insurers, insurance against such casualties and
contingencies of such types and in such amounts
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as is customary in the case of corporations engaged in the same or a similar
business or having similar properties similarly situated.
SECTION 2.26 FULL DISCLOSURE. Neither this Agreement, or any report or
financial statement referred to in Section 2.3 hereof, nor any certificate,
report, statement or other writing furnished to the Original Holders by or on
behalf of the Company or Decora in connection with the negotiation of this
Agreement, or any agreement contemplated hereby, contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not misleading. There is no fact known to
the Company or Decora that has not been disclosed to the Original Holders in
writing that (a) materially adversely affects or in the future may (so far as or
the Company or Decora can now foresee) materially adversely affect the business,
earnings, prospects, properties or condition (financial or otherwise) of the
Company or Decora or any of its Subsidiaries or (b) adversely affects or in the
future may (so far as the Company or Decora can now reasonably foresee)
materially adversely affect the ability of the Company or Decora to perform its
obligations under this Agreement, the Amendment and the Notes.
SECTION 3. REPRESENTATIONS OF THE ORIGINAL HOLDERS.
SECTION 3.1 INVESTMENT INTENT, ETC. This Agreement is made with you in
reliance upon your representation to the Company and Decora, which by your
acceptance hereof you confirm, that you are acquiring the Notes and the Common
Stock for your own account for investment and not with a view to the
distribution thereof, and that you have no present intention of distributing any
of the same; provided, however, that the disposition of your property shall be
at all times within your own control, and that your right to sell or otherwise
dispose of all or any part of the Notes and the Common Stock acquired by you
pursuant to an effective registration statement under the Securities Act or
under an exemption from such registration available under the Securities Act and
in accordance with any applicable state securities law shall not be prejudiced.
Each of the Company, Decora and you acknowledge that the Notes and the Common
Stock are securities (as defined in the Securities Act and the Exchange Act).
SECTION 4. CONDITIONS TO OBLIGATION TO EXCHANGE WARRANTS.
Your obligation to exchange the Warrants for the Notes and the Common
Stock to be acquired by you hereunder on the Closing Date shall be subject to
the satisfaction, prior to or concurrently with such exchange, of the following
conditions:
SECTION 4.1 OPINION OF SPECIAL COUNSEL FOR YOU. You shall have received
from Orrick, Herrington & Sutcliffe, who are acting as special counsel for you
in connection with the transactions contemplated by this Agreement, an opinion,
dated the Closing Date, in form and substance satisfactory to you, to the effect
specified in Schedule 2-A to the Amendment.
SECTION 4.2 OPINIONS OF COUNSEL FOR THE COMPANY. You shall have
received from Miller & Holguin, counsel for the Company and Decora, an opinion,
dated the Closing
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Date, in form and substance satisfactory to you, to the effect specified in
Schedule 2-B to the Amendment.
SECTION 4.3 PERFORMANCE OF OBLIGATIONS. Each of the Company and Decora
shall have performed all its obligations to be performed hereunder prior to or
on the Closing Date, and you shall have received an Officer's Certificate from
each of the Company and Decora, dated the Closing Date, to such effect.
SECTION 4.4 REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. The
representations and warranties of each of the Company and Decora contained in
Section 2 hereof shall be true on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date. There shall exist on the Closing Date no Event of Default and
no condition or event which, with notice or lapse of time, would constitute an
Event of Default if the Notes and Common Stock had been outstanding at all times
from and after the date hereof. You shall have received an Officer's Certificate
from each of the Company and Decora, dated the Closing Date, to such effect.
SECTION 4.5 CERTIFICATE AS TO SOLVENCY, ETC. You shall have received a
certificate, dated the Closing Date, executed on behalf of each of the Company
and Decora by each of the President and the chief accounting and financial
officer of the Company and Decora, respectively, to the effect that as of the
Closing Date and after giving effect to the transactions contemplated by this
Agreement and the Exchange:
(a) the assets of each of the Company and Decora, at a fair
valuation, exceed the total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of the Company and Decora, as the case
may be;
(b) based on current projections, which are based on underlying
assumptions which provide a reasonable basis for the projections and which
reflect the Company's or Decora's judgment based on present circumstances of the
most likely set of conditions and the Company's or Decora's most likely course
of action for the period projected, each of the Company or Decora believes it
has sufficient cash flow to enable it to pay its debts as they mature; and
(c) each of the Company and Decora does not have an unreasonably
small capital with which to engage in its anticipated business.
For purposes of this Section 4.5, the "fair valuation" of the assets of
the Company or Decora, as the case may be shall be determined on the basis of
the amount which may be realized within a reasonable time, either through
collection or sale of such assets at the regular market value, conceiving the
latter as the amount which could be obtained for the property in question within
such period by a capable and diligent businessman from an interested buyer who
is willing to purchase under ordinary selling conditions.
SECTION 4.6 CONSENTS AND APPROVALS. Each of the Company and Decora
shall have delivered to you a certificate, dated the Closing Date and signed by
its President or one
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of its Vice Presidents, respectively, listing any necessary consents, waivers,
approvals, authorizations, registration, filings and notifications of the
character referred to in Section 2.17 hereof (including those disclosed in
Schedule III hereto), to which shall be attached evidence, satisfactory to you
that the same have been obtained or made and are in full force and effect.
SECTION 4.7 AMENDMENT. The Company shall have delivered to you fully
executed copies of the Amendment and all other documents delivered in connection
with the Amendment, and the Amendment shall be in full force and effect.
SECTION 4.8 LEGALITY. The Notes and Common Stock shall qualify as a
legal investment for you under all applicable laws (without resort to any
so-called "basket clause" of any such law), and your acquisition thereof shall
not cause you to be subject to any onerous or burdensome legal requirement or
penalty.
SECTION 4.9 ASSIGNMENT OF PRIVATE PLACEMENT NUMBER. The Company shall
have caused the CUSIP Service Bureau of Standard & Poor's Ratings Group to
assign to the Notes and the Common Stock a private placement number at its
expense and shall have delivered evidence thereof to you and your special
counsel.
SECTION 4.10 PROCEEDINGS, INSTRUMENTS, ETC. All proceedings and actions
taken on or prior to the Closing Date in connection with the transactions
contemplated by this Agreement and all instruments incident thereto shall be in
form and substance satisfactory to you and your special counsel, and you and
your special counsel shall have received copies of all documents that you or
they may reasonably request in connection with such proceedings, actions and
transactions (including, without limitation, copies of court documents,
certifications and evidence of the correctness of the representations and
warranties contained herein and certifications and evidence of the compliance
with the terms and the fulfillment of the conditions of this Agreement, in form
and substance satisfactory to you and your special counsel).
SECTION 5. EXPENSES.
Whether or not the Notes and Common Stock shall be exchanged or this
Agreement shall be terminated, the Company and Decora jointly and severally
agree to pay, and to hold you harmless against liability for, all reasonable
costs and expenses relating to this Agreement, the Common Stock and the Notes,
and to any modification, amendment, alteration or enforcement of any of this
Agreement, the Common Stock or the Notes (whether or not the same shall have
come into effect), including, without limitation:
(a) the cost of preparing and reproducing this Agreement, the
Common Stock and the Notes, and every instrument of modification, amendment or
alteration hereof or thereof;
(b) the reasonable fees and disbursements of special counsel for
you, which fees and disbursements the Company and Decora will pay on the Closing
Date to the
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extent reflected on any invoices delivered on or prior to such date, and of
counsel for the Company and Decora;
(c) the cost of delivering to your home office, insured to your
reasonable satisfaction, the Notes and Common Stock purchased by you on the
Closing Date;
(d) all costs and expenses (including, without limitation, legal
fees and disbursements and other out-of-pocket expenses) relating to any
modifications, amendments, waivers or consents involving the provisions of this
Agreement, the Common Stock or the Notes, or relating to the enforcement of this
Agreement, the Common Stock or the Notes;
(e) the broker's or finder's fees of any Person in connection with
the exchange of the Notes and the Common Stock, it being represented and
warranted by the Company and Decora that any such Person acted solely as agent
for the Company and Decora and not as agent for you; and
(f) the fee of the CUSIP Service Bureau of Standard & Poor's
Ratings Group required in connection with the assignment of a private placement
number by it to the Notes and the Common Stock.
The obligations of the Company under this Section 5 shall survive the payment or
prepayment of the Notes, the Common Stock and the termination of this Agreement.
SECTION 6. CERTAIN SPECIAL RIGHTS.
SECTION 6.1 HOME OFFICE PAYMENT. (a) Notwithstanding any provision to
the contrary in this Agreement, the certificate of incorporation of Decora or
the Common Stock, Decora will punctually pay in immediately available funds by
11:00 A.M. New York City time on the date payment is due all amounts payable to
you with respect to any Common Stock held by you or your nominee (without the
necessity for any presentation or surrender thereof or any notation of such
payment thereon) in the manner and at the address for such purpose specified
below your name in Schedule I hereto, or at any other address as you may from
time to time direct in writing.
(b) Notwithstanding any provision to the contrary in this
Agreement or the Notes, the Company will punctually pay in immediately available
funds by 11:00 A.M. New York City time on the date payment is due all amounts
payable to you with respect to any Notes held by you or your nominee (without
the necessity for any presentation or surrender thereof or any notation of such
payment thereon) in the manner and at the address for such purpose specified
below your name in Schedule I hereto, or at any other address as you may from
time to time direct in writing. You agree that, as promptly as practicable after
the payment or prepayment in whole of any Note held by you or your nominee and
receipt by you of a written request from the Company to surrender such Note to
the Company for cancellation, you will surrender such Note at the office of the
Company maintained pursuant to Section 9.1 of the Securities Purchasing
Agreement. You agree that if you sell, assign or transfer any Note, you will,
prior to any such sale, assignment or transfer, make a proper notation
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thereon of the amount of principal paid thereon as of the date of such sale,
assignment or transfer.
SECTION 6.2 DELIVERY EXPENSES. If you shall surrender any certificate
representing Common Stock to Decora or any Note to the Company pursuant to this
Agreement, or if Decora or the Company shall issue any new security pursuant to
this Agreement, Decora or the Company, as the case may be, will pay all
reasonable costs and expenses of delivery of the surrendered security and any
security or securities issued in exchange or replacement for, or on registration
of transfer of, the surrendered security or any such new security, as the case
may be, in each case insured to your reasonable satisfaction. The obligations of
Decora and the Company under this Section 6.2 shall survive the payment or
prepayment of the Notes, the exercise of any rights with respect to the Common
Stock and the termination of this Agreement.
SECTION 6.3 ISSUANCE TAXES. Decora and the Company will pay all taxes
(including, without limitation, income taxes) in connection with the execution
and delivery of this Agreement, the issuance and exchange of the Common Stock
and the Notes by Decora and the Company, as the case may be, and any
modification of this Agreement or the Common Stock and the Notes issued by it,
and will save you and any subsequent holder of the Common Stock and the Notes
harmless, without limitation as to time, against any and all liabilities
(including, without limitation, any interest or penalty for nonpayment or delay
in payment, or any income taxes paid by you by reason of any reimbursement by
Decora or the Company, as the case may be, of any such taxes paid by you) with
respect to all such taxes. The obligations of Decora and the Company under this
Section 6.3 shall survive the payment or prepayment of the Notes, the exercise
of any rights with respect to the Common Stock and the termination of this
Agreement.
SECTION 7. NOTE PREPAYMENTS; ISSUANCE OF ADDITIONAL NOTES.
SECTION 7.1 REQUIRED PREPAYMENTS. The Company shall, without notice,
pay at maturity Notes in an aggregate principal amount of $1,000,000 (or such
lesser principal amount as may then be outstanding).
SECTION 7.2 OPTIONAL PREPAYMENTS; ISSUANCE OF ADDITIONAL NOTES. (a)
Upon the terms and subject to the conditions hereinafter set forth, the Company,
at its option, on or prior to April 15, 1997, upon notice as provided in
Section 7.2(b) hereof, may prepay the Notes, in whole (but not in part), at a
prepayment price equal to the aggregate principal amount of the Notes so to be
prepaid; provided, however, that in the event that the Company does not prepay
the Notes in whole on or prior to April 15, 1997, then the Company shall duly
authorize the issuance and delivery, and shall deliver to the holders, Pro-Rata,
$200,000 in aggregate principal amount of its senior subordinated notes due
April 15, 1998, substantially in the form annexed hereto as Exhibit A-1 (the
"Additional Notes"). Each Additional Note shall not bear interest, and shall
have a stated maturity of April 15, 1998. Additional Notes shall be delivered in
the aggregate principal amount specified opposite the name of each holder under
the applicable heading in Schedule II hereto.
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(b) Notice of any prepayment of Notes pursuant to this Section 7.2
shall be given to each holder of the Notes not less than thirty (30) nor more
than sixty (60) days before the date fixed for prepayment (the "Optional
Prepayment Date") and shall be accompanied by an Officer's Certificate of the
Company certifying as to: (i) the Optional Prepayment Date, (ii) the aggregate
principal amount of the Notes to be prepaid on such Optional Prepayment Date,
and (iii) the aggregate principal amount of the Notes and the principal amount
of each such Note held by such holder to be prepaid. Any notice of prepayment
pursuant to this Section 7.2 having been so given, the aggregate principal
amount of Notes specified in such notice shall become due and payable on such
Optional Prepayment Date.
(c) Any Additional Notes required to be delivered shall be
delivered at a closing to be held not later than ten (10) Business Days
following April 15, 1997, or such other date and time as shall be agreed upon by
the holders and the Company (such date and time being hereinafter called the
"Additional Note Closing Date"). On the Additional Note Closing Date, the
Company will deliver to the holders one or more duly executed Additional Notes
dated the Additional Note Closing Date, registered in the holder's name or the
name of the holder's nominee and in the principal amount or amounts specified
opposite the holder's name under the applicable heading in Schedule II hereto.
SECTION 8. REGISTRATION, EXCHANGE AND REPLACEMENT OF NOTES.
SECTION 8.1 REGISTRATION. The Notes issuable pursuant to this Agreement
shall be registered Notes. The Company will keep, at the office required to be
maintained pursuant to Section 9.1 of the Securities Purchase Agreement, books
for the registration and registration of transfer of Notes. Prior to
presentation of any Note for registration of transfer, the Company shall treat
the Person in whose name such Note is registered as the owner and holder of such
Note for all purposes whatsoever, whether or not such Note shall be overdue, and
the Company shall not be affected by notice to the contrary.
SECTION 8.2 EXCHANGE. The holder of any Note, at its option, may in
person or by duly authorized attorney surrender the same for exchange at the
office maintained pursuant to Section 9.1 of the Securities Purchase Agreement
and promptly thereafter and at the Company's expense, except as provided below,
receive in exchange therefor a new Note or Notes, as the case may be, each in
the denomination requested by such holder, dated the date to which interest
shall have been paid on the Note so surrendered or, if no interest shall have
yet been so paid, dated the date of the Note so surrendered and registered in
the name of such Person or Persons as shall have been designated in writing by
such holder or its attorney for the same principal amount as the then unpaid
principal amount of the Note so surrendered. Subject to Section 9.1 of the
Securities Purchase Agreement, the Company may require payment of a sum
sufficient to cover any stamp or other tax or governmental charge imposed in
respect of any transfer involved in such exchange.
SECTION 8.3 REPLACEMENT. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it; provided, however, that
if the holder of such Note is the original holder of the Note listed on
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Schedule II hereto or any Affiliate thereof or any Institutional Investor with
stated capital and surplus in excess of $50,000,000, its own agreement of
indemnity shall be deemed to be satisfactory; or (b) in the case of mutilation,
upon surrender thereof, the Company, at its expense, will execute and deliver in
lieu thereof a new Note executed in the same manner as the Note being replaced,
in the same principal amount as the unpaid principal amount of such Note and
dated the date to which interest shall have been paid on such Note or, if no
interest shall have yet been so paid, dated the date of such Note.
SECTION 9. CERTAIN COVENANTS OF THE COMPANY AND DECORA.
The Company and Decora each covenants and agrees that so long as any
Notes or Common Stock shall remain outstanding:
SECTION 9.1 ISSUANCE OF ADDITIONAL COMMON STOCK; PAYMENT OF CASH. (a)
In the event that on April 15, 1998 (or if April 15, 1998 is not a Business Day,
the Business Day immediately preceding such date; such date being referred to
herein as the "Valuation Date"), the Current Market Price of the Common Stock is
less than $3.00 per share, then on the Additional Common Stock Closing Date (as
defined below), Decora will, at its option, either (i) duly authorize the
issuance and delivery to the holders of Common Stock, and, will deliver to all
holders of Common Stock, Pro-Rata, such additional shares of Decora Common Stock
(such additional shares to be acquired by the holders under this Agreement being
referred to herein as the "Additional Common Stock", and the Additional Common
Stock together with the Common Stock being acquired by the Original Holders on
the Closing Date being referred to herein as the "Shares") so that the holders
of Common Stock, collectively, hold Decora Common Stock having a Current Market
Price of not less than $3,000,000 (measured as of the Valuation Date) or (ii)
deliver to all holders of Common Stock, Pro-Rata, by wire transfer, immediately
available funds or a combination of immediately available funds and Additional
Common Stock pursuant to clause (i) above, such that the holders of Common
Stock, collectively, hold Decora Common Stock (when added to such available
funds so transferred) having an aggregate Current Market Price of not less than
$3,000,000 (measured as of the Valuation Date). All deliveries of funds and/or
Additional Common Stock shall be made to each holder in accordance with Schedule
I hereto.
(b) If Decora shall be required by the terms of Section 9.1 hereof
to deliver to the holders Additional Common Stock or available funds, as the
case may be, Decora shall deliver to each such holder, within five (5) days
after the Valuation Date, written notice specifying the number of shares of
Additional Common Stock or the amount of available funds, as the case may be, to
be delivered to each such holder and the calculations thereof made by Decora.
The Additional Common Stock or available funds, as the case may be, is to be
delivered at a closing to be held not later than April 15, 1998 or other date
and time as shall be agreed upon by the holders and the Company and Decora (such
date and time being hereinafter called the "Additional Common Stock Closing
Date"). On the Additional Common Stock Closing Date, Decora will deliver to the
holders one or more duly executed certificates evidencing the aggregate number
of shares of Additional Common Stock specified by the above-referenced written
notice, dated the Additional Common Stock Closing Date, registered
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in the name of such holder or in the name of such holder's nominee or the amount
of available funds specified by the above-referenced notice.
SECTION 9.2 RESERVATION OF SHARES. Decora shall duly authorize and
reserve for issuance the Additional Shares issuable in accordance with the terms
of Section 9.1 hereof and such Additional Shares shall be free from preemptive
rights in favor of the holders of other shares of capital stock or other
securities of Decora. Notwithstanding anything herein to the contrary, if on the
Valuation Date, Decora has not duly authorized and reserved for issuance the
Additional shares pursuant to this Section 9.2, Decora shall immediately take
all further action necessary to duly authorize and reserve for issuance such
Additional Shares.
SECTION 10. SUBORDINATION.
SECTION 10.1 GENERAL. All principal of and premium, if any, on the
Notes and the Additional Notes ("Subordinated Debt") is subordinate and junior
in right of payment to all Senior Debt (as defined in Section 10.2) to the
extent provided in this Section 10.
SECTION 10.2 SENIOR DEBT. The term "Senior Debt" shall mean all
principal of and premium, if any, and interest on the Indebtedness of the
Company pursuant to the Bank Agreement, together with reasonable and customary
collection expenses which arise in connection with the collection thereof. The
Senior Debt shall continue to be Senior Debt and entitled to the benefits of
these subordination provisions irrespective of any amendment, modification or
waiver of any term of the Senior Debt or any extension or renewal of the Senior
Debt subject, however, to the provisions of Section 9.15 of the Securities
Purchase Agreement.
SECTION 10.3 DEFAULT IN RESPECT OF SENIOR DEBT. (a) In the event the
Company shall default in the payment of any principal of or premium, if any, or
interest on any Senior Debt when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise, then,
unless and until such default shall have been cured or waived or shall have
ceased to exist, no direct or indirect payment (in cash, property or securities
or by set-off or otherwise) shall be made or agreed to be made on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any redemption, retirement, purchase or other acquisition of any Subordinated
Debt, during any period:
(i) of 180 days after written notice of such default
shall have been given to the Company by any holder of Senior Debt,
provided that only one such notice may be given pursuant to the terms
of this subdivision (a)(i) in any 210-day period; or
(ii) in which any judicial proceeding shall be pending in
respect of such default, or in which an effective notice of
acceleration of the maturity of such Senior Debt shall have been
transmitted to the Company in respect of such default and such notice
remains in effect or in which notice of the failure to pay
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such Senior Debt upon its final maturity shall have been transmitted to
the Company and shall remain in effect.
(b) Upon the happening of any Specified Senior Nonpayment Default
(as defined herein), then, unless and until such default shall have been cured
or waived or shall have ceased to exist, no direct or indirect payment (in cash,
property or securities or by set-off or otherwise) shall be made or agreed to be
made on account of the principal of or premium, if any, on any Subordinated
Debt, or as a sinking fund for any Subordinated Debt, or in respect of any
redemption, retirement, purchase or other acquisition of any Subordinated Debt,
during any period:
(i) of 90 days after written notice of such default shall
have been given to the Company by any holder of Senior Debt, provided
that only one such notice shall be given pursuant to the terms of this
subdivision (b)(i) in any 120-day period; or
(ii) in which any judicial proceeding shall be pending in
respect of such default, or in which an effective notice of
acceleration of the maturity of such Senior Debt shall have been
transmitted to the Company in respect of such default and such notice
remains in effect, or in which notice of the failure to pay such Senior
Debt upon its final maturity shall have been transmitted to the Company
and shall remain in effect.
(c) No direct or indirect payment (in cash, property or securities
or by set-off or otherwise) shall be made or agreed to be made on account of the
principal of or premium, if any, on any Subordinated Debt, or as a sinking fund
for any Subordinated Debt, or in respect of any redemption, retirement, purchase
or other acquisition of any Subordinated Debt if and to the extent that,
immediately after giving effect to such payment, any event or condition would
result which would constitute an Event of Default or Default.
(d) The Company shall give prompt notice to each holder of
Subordinated Debt of its receipt of any notice under Section 10.3(a)(i) or (ii)
or Section 10.3(b)(i) or (ii).
(e) As used in this Section 10, the term "Specified Senior
Nonpayment Default" shall mean default by the Company in complying with its
covenants appearing in any of the following Sections of the Bank Agreement:
Section 3(d)(i)-(v), inclusive, and Section B(b).
SECTION 10.4 INSOLVENCY, ETC. In the event of
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Company, its creditors or its property,
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(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not involving
insolvency or bankruptcy proceedings,
(c) any assignment by the Company for the benefit of creditors, or
(d) any other marshalling of the assets of the Company, all Senior
Debt (including any interest thereon accruing at the contract rate after the
commencement of any such proceedings, but only to the extent allowed as a claim
in such proceedings) shall first be paid in full before any payment or
distribution, whether in cash, securities or other property, shall be made to
any holder of any Subordinated Debt on account of any Subordinated Debt. Any
payment or distribution, whether in cash, securities or other property (other
than securities of the Company or any other corporation provided for by a plan
of reorganization or readjustment the payment of which is subordinated, at least
to the extent provided in this Section 10 with respect to Subordinated Debt, to
the payment of all Senior Debt at the time outstanding and to any securities
issued in respect thereof under any such plan or reorganization or readjustment,
such securities being referred to herein as "Junior Securities"), which would
otherwise (but for this Section 10) be payable or deliverable in respect of
Subordinated Debt shall be paid or delivered directly to the holders of Senior
Debt in accordance with the priorities then existing among such holders until
all Senior Debt (including any interest thereon accruing at the contract rate
after the commencing of any such proceedings, but only to the extent allowed as
a claim in such proceedings) shall have been paid in full.
SECTION 10.5 ACCELERATION OF SUBORDINATED DEBT. In the event that any
Subordinated Debt shall be declared due and payable as the result of the
occurrence of any one or more defaults in respect thereof, under circumstances
when the terms of Section 10.4 do not prohibit payment on Subordinated Debt, no
payment shall be made in respect of any Subordinated Debt unless and until all
Senior Debt shall have been paid in full or such declaration and its
consequences shall have been rescinded and all such defaults shall have been
remedied or waived or shall have ceased to exist; provided, however, that
nothing contained in this Section 10.5 shall prevent any holder of Subordinated
Debt from exercising any remedies and receiving any payments if otherwise
permitted hereunder with respect to current and overdue payments of interest on
any Subordinated Debt, as well as scheduled payments of principal (excluding any
amounts of interest, premium, if any, and principal due and payable with respect
to any Subordinated Debt solely by reason of such declaration).
SECTION 10.6 TURNOVER OF PAYMENTS.
(a) If
(i) any payment or distribution of any kind or character
(whether in cash, property or securities) except for Junior Securities
shall be collected or received by any holders of Subordinated Debt in
contravention of any of the terms of this Section 10 and prior to the
payment in full of the Senior Debt at the time outstanding; and
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(ii) the Company or any holder of such Senior Debt shall
have notified such holders of Subordinated Debt of the facts by reason
of which such collection or receipt so contravenes this Section 10
within 180 days after any holder of Senior Debt shall have knowledge of
such facts;
such holders of Subordinated Debt will deliver such payment or distribution, to
the extent necessary to pay all such Senior Debt in full, to the holders of such
Senior Debt and, until so delivered, the same shall be held in trust by such
holders of Subordinated Debt as the property of the holders of such Senior Debt.
(b) If after any amount is delivered to the holders of Senior Debt
pursuant to this Section 10.6, whether or not such amount has been applied to
the payment of Senior Debt, the outstanding Senior Debt entitled to such amount
shall thereafter be paid in full by the Company or otherwise other than pursuant
to this Section 10.6, the holders of such Senior Debt shall return to such
holders of Subordinated Debt an amount equal to the amount delivered to such
holders of such Senior Debt pursuant to this Section 10.6.
SECTION 10.7 OBLIGATIONS NOT IMPAIRED. No present or future holder of
any Senior Debt shall be prejudiced in the right to enforce subordination of
Subordinated Debt by any act or failure to act on the part of the Company.
Nothing contained in this Section 10 shall impair, as between the Company and
any holder of Subordinated Debt, the obligation of the Company to pay to such
holder the principal thereof and premium, if any, as and when the same shall
become due and payable in accordance with the terms thereof, or prevent any
holder of any Subordinated Debt from exercising all rights, powers and remedies
otherwise permitted by applicable law or under any agreement under which such
Subordinated Debt was incurred, all subject to the rights of the holders of the
Senior Debt to receive cash, securities or other property otherwise payable or
deliverable to the holders of Subordinated Debt.
SECTION 10.8 PAYMENT OF SENIOR DEBT; SUBROGATION. Upon the payment in
full of all Senior Debt, the holders of Subordinated Debt shall be subrogated to
all rights of any holder of Senior Debt to receive any further payments or
distributions applicable to the Senior Debt until the Subordinated Debt shall
have been paid in full, and such payments or distributions received by the
holders of Subordinated Debt by reason of such subrogation, of cash, securities
or other property which otherwise would be paid or distributed to the holders of
Senior Debt, shall, as between the Company and its creditors other than the
holders of Senior Debt, on the one hand, and the holders of Subordinated Debt,
on the other hand, be deemed to be a payment by the Company on account of Senior
Debt and not on account of Subordinated Debt.
SECTION 10.9 RELIANCE OF HOLDERS OF SENIOR DEBT. Each holder of
Subordinated Debt by its acceptance thereof shall be deemed to acknowledge and
agree that the foregoing subordination provisions are, and are intended to be,
an inducement to and a consideration of each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the creation of
Subordinated Debt, and such holder of Senior Debt shall be deemed conclusively
to have relied on such subordination provisions in acquiring and holding, or in
continuing to hold, such Senior Debt.
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SECTION 11. RESTRICTIONS ON TRANSFER OF THE SHARES; REGISTRATION RIGHTS.
SECTION 11.1 RESTRICTIONS ON TRANSFER OF THE SHARES; OPINION OF
COUNSEL. (a) Notwithstanding any provision contained in this Agreement to the
contrary, the Shares shall not be transferable except pursuant to the provisions
of this Section 11, which provisions are intended, among other things, to ensure
compliance with the provisions of the Securities Act and applicable state law in
respect of the transfer of such Shares. Each holder of Shares, by its acceptance
thereof, agrees that it will not transfer its Shares unless:
(i) prior to such transfer, there is delivered to Decora
an opinion of counsel with respect to such transfer satisfying the
requirements of Section 11.1(b) hereof;
(ii) a registration of such Shares under the Securities
Act (pursuant to Section 11.2 hereof or otherwise) has become effective
and remains in effect at the time of such transfer;
(iii) such transfer has been effected pursuant to an
exemption from registration under the Securities Act and is made (A)
pursuant to Rule 144A or (B) solely to an Institutional Investor which
has agreed in writing to be bound by the provisions of this Section 11;
(iv) the transfer by such holder is (A) to one of its
nominees, Affiliates or a nominee thereof, (B) to a pension or
profit-sharing fund established and maintained for its employees or for
the employees of any such Affiliate, or a nominee thereof, or (C) from
a nominee of any of the aforementioned Persons to the beneficial owner
of such Shares; or
(v) Decora has agreed in writing to waive the
restrictions of this Section 11 prior to such notice.
(b) Each holder of any Shares, by its acceptance thereof, agrees
that, prior to any transfer of such Shares, other than a transfer of such Shares
otherwise permitted by clauses (ii) through (v) of Section 11.1 (a) hereof, it
will give written notice to Decora of its intention to effect such transfer,
together with a copy of an opinion of Orrick, Herrington & Sutcliffe, of counsel
employed by such holder or of such other counsel for such holder as shall be
reasonably acceptable to Decora, to the effect that the proposed transfer of
such Shares may be effected without registration under the Securities Act of
such Shares. Upon delivery of such notice and opinion to Decora, the holder of
such Shares shall be entitled to transfer such Shares in accordance with the
intended method of disposition specified in the notice delivered by such holder
to Decora; provided, however, that if such method or disposition would, in the
opinion of such counsel, require that Decora take any action and/or execute and
file with the SEC and/or any state securities authority with jurisdiction and/or
deliver to such holder or any other Person any form or document (other than a
registration statement under the Securities Act) in order to establish the
entitlement of such holder to take advantage of such method of
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disposition, Decora agrees promptly, at its expense, to take any such action
and/or execute and file and/or deliver any such form or document.
SECTION 11.2 REGISTRATION OF SHARES. The provisions of this Section
11.2 are intended to establish the circumstances under which and the terms and
conditions on which a holder of the Shares shall have the right to have Shares
registered under the Securities Act by Decora.
SECTION 11.2.1 REGISTRATION UPON REQUEST BY HOLDERS OF ADDITIONAL
COMMON STOCK.
(a) At any time after April 15, 1998, in the event that shares of
Additional Common Stock are required to be issued pursuant to Section 9.1
hereof, then, upon the written request of holders of a majority of the
Additional Common Stock then outstanding (a "Registration Request"), Decora
shall be obligated to effect one (1) registration under the Securities Act of
such Additional Common Stock, and to pay the costs and expenses in connection
therewith, in accordance with the following provisions of this Section 11.2.1.
(b) At such time as Decora shall be requested by holders of
Additional Common Stock, pursuant to this Section 11.2.1, to effect the
registration of any Additional Common Stock under the Securities Act, Decora
shall promptly give written notice of such proposed registration to all holders
of Additional Common Stock, informing them of their right to have any
outstanding Additional Common Stock owned by them included in such registration,
and thereupon shall, as expeditiously as possible, effect the registration under
the Securities Act of such Additional Common Stock and all other Additional
Common Stock which holders of Additional Common Stock have, within fifteen (15)
days after Decora has given such written notice, requested Decora to register,
all to the extent requisite to permit the disposition of Additional Common Stock
so registered by the holders thereof. Such registration shall be underwritten,
if requested by a majority of the requesting holders of Additional Common Stock
(by number of Additional Common Stock to be registered), by an underwriter or
underwriters named by Decora and reasonably acceptable to a majority of the
requesting holders of Additional Common Stock. Any Person who has a right to
request that the Decora Common Stock be included in a registration effected by
Decora shall have the right to have shares thereof included in such registration
and, if the offering is underwritten, Decora shall also have such right;
provided, however, that securities not held by holders of Additional Common
Stock may only be included in such registration pursuant to this sentence if, in
the written opinion of the underwriter or underwriters managing the offering,
the total amount of the securities to be so registered, when added to the total
number of Additional Common Stock to be registered, will not exceed the maximum
amount of securities of Decora which can then be marketed (i) at a price
reasonably related to their then current market value and (ii) without otherwise
materially and adversely affecting the feasibility of effecting the contemplated
offering on advantageous terms; and, provided, further, that Decora shall not
have the right to have any securities included in the registration if such
inclusion would require that the offering be registered on a registration
statement form which would entail more extensive textual disclosure in the
prospectus than would be required by the registration statement form which would
be available if no securities were included in the registration at the request
of Decora (as, for example, in a case in which the offering could be registered
on current registration
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statement Form S-3, but for the inclusion of securities to be sold for the
account of Decora, which would require the use of registration statement Form
S-1 or Form S-2) and which would significantly delay the registration requested
by holders of Additional Common Stock. To the extent that the amount of
securities to be registered must be reduced in order to obtain the written
opinion referred to in the preceding sentence, such reduction shall be achieved
by first omitting from the registration some or all of the securities to be
offered by Decora and, if such reduction is not sufficient, then by omitting
from the registration some or all of the securities to be offered by any other
Persons other than holders of Additional Common Stock.
(c) Not less than fifteen (15) days prior to the anticipated
filing date of a registration statement pursuant to this Section 11.2.1, Decora
shall notify each holder of Additional Common Stock of the information Decora
reasonably requires from each such holder (the "Requested Information") if they
elect to have any of their Additional Common Stock included in the registration.
If, within five (5) Business Days prior to the anticipated filing date, Decora
has not received the Requested Information from any of the holders (the
"Non-Responsive Holders"), Decora may file the registration statement without
including Additional Common Stock owned by the Non-Responsive Holders. At any
time subsequent to the date of filing of the registration statement and up to
the date that is five (5) Business Days prior to the anticipated effective date
of the registration, any Non-Responsive Holder may notify Decora that it elects
to have all or some of its Additional Common Stock included in the registration,
and Decora shall include in the registration the Additional Common Stock of any
such Non-Responsive Holder which has furnished to Decora all Requested
Information on or prior to the fifth (5th) Business Day prior to the anticipated
effective date of such registration.
SECTION 11.2.2 "PIGGYBACK REGISTRATIONS". (a) If at any time after
April 15, 1998, Decora at any time proposes to register or is caused to register
by a third party any of its equity securities (as defined in the Securities
Act), including, without limitation, Additional Common Stock, under the
Securities Act on Form S-1, S-2 or S-3 or any successor form (but not Form S-4
or S-8 or any successor form) or on any other form upon which may be registered
securities similar to the Decora Common Stock, whether or not for sale for the
account of Decora, at least thirty (30) days prior to the filing of any
registration statement in connection therewith it will give written notice to
all holders of outstanding Shares of its intention to do so. Such notice shall
specify the proposed date of the filing of the registration statement and advise
each holder of Shares of its right to participate therein. Upon the written
request of any holder of Shares given prior to the proposed date of filing set
forth in such notice, Decora will cause all Shares which Decora has been
requested to register by such holders of Shares to be registered under the
Securities Act, all to the extent required to permit the sale or other
disposition by such holders of the Shares so registered.
(b) If, in the written opinion of the underwriter or underwriters
managing the public offering which is the subject of a registration pursuant to
Section 11.2.2(a) hereof (or in the event that such distribution shall not be
underwritten, in the written opinion of an investment banking firm of recognized
standing reasonably satisfactory to the holders of a majority of the Shares
requesting registration), the total amount of the securities to be so
registered, when added to the total number of Shares which holders have
requested Decora to register pursuant to Section 11.2.2(a) hereof, will exceed
the maximum amount of securities of
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Decora which can be marketed (i) at a price reasonably related to their then
current market value or (ii) without otherwise materially and adversely
affecting the entire offering, then Decora shall have the right to exclude from
such registration such number of Shares which it would otherwise be required to
register pursuant to Section 11.2.2(a) hereof as is necessary to reduce the
total amount of securities to be so registered to the maximum amount of
securities which can be so marketed such that the number of Shares to be
registered pursuant to Section 11.2.2(a) hereof shall bear the same relationship
to the total amount of securities which the managing underwriter or underwriters
will permit to be included in such registration statement by all holders of
securities who wish to register securities in such registration statement;
provided, however, that if the securities (other than the Shares) to be so
registered for sale are to be offered for the account of Decora and Persons
other than Decora who, as of the date hereof are not party to an existing
registration rights agreement with Decora as set forth in Item 11.2.2(b) of
Schedule III hereto, Decora shall give priority to the holders of Shares and may
only exclude Shares after excluding all of the securities (other than the
Shares) so offered for the account of Decora and such other Persons.
SECTION 11.2.3 DECORA'S OBLIGATIONS IN REGISTRATION. If and whenever
Decora is obligated by the provisions of this Section 11.2 to effect the
registration of any Shares under the Securities Act, as expeditiously as
possible Decora will:
(a) prepare and file with the SEC a registration
statement with respect to such Shares and use its best efforts to cause
such registration statement to become and remain effective for a period
of six (6) months or such shorter period as shall be required for the
distribution of the securities covered by the registration statement;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period not less than nine (9) months and to
comply with the provisions of the Securities Act and the rules and
regulations of the SEC thereunder (such rules and regulations are
referred to in this Section 11.2 as the "Rules") with respect to the
disposition of all Shares covered by such registration statement in
accordance with the intended methods of disposition by the holders of
Shares set forth in such registration statement;
(c) furnish to the holders of Shares for whom such Shares
are registered or are to be registered and to any underwriter or
underwriters such numbers of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act and the Rules, and such other documents as such holders
may reasonably request in order to facilitate the disposition of such
Shares;
(d) use its best efforts to register or qualify the
Shares covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as the holders of
Shares for whom such Shares are registered or are to be registered
shall reasonably request (excluding any jurisdictions in which such
registration or qualification would require Decora to qualify to do
business therein), and do any and all other acts and things to so
register or qualify which may be reasonably necessary or
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advisable to enable such holders to consummate the disposition in such
jurisdictions of such Shares;
(e) furnish to the holders of Shares for which such
Shares are registered or are to be registered at the time of the
disposition of such shares by such holders an opinion of counsel for
Decora acceptable to such holders to the effect that (i) a registration
statement covering such Shares has been filed with the SEC under the
Securities Act and the Rules and has been made effective by order of
the SEC, (ii) such registration statement and the prospectus contained
therein appear on their faces to be appropriately responsive in all
material respects to the requirements of the Securities Act and the
Rules, and nothing has come to said counsel's attention which would
cause it to believe that either such registration statement or such
prospectus contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (iii) a prospectus meeting
the requirements of the Securities Act and the Rules is available for
delivery, (iv) no stop order has been issued by the SEC suspending the
effectiveness of such registration statement and, to the best of such
counsel's knowledge, no proceedings for the issuance of such a stop
order are threatened or contemplated, (v) the applicable provisions of
the securities or blue sky law of each jurisdiction in which Decora
shall be required, pursuant to Section 11.2.3(d) hereof, to register or
qualify such Shares have been complied with and (vi) such other matters
as such holders of Shares may reasonably request;
(f) if such registration is effected pursuant to a
request for registration by holders of Shares and is to be underwritten
as provided in Section 11.2.1 hereof, join with the holders for which
Shares are registered or are to be registered and the underwriter in
the execution and delivery of an underwriting agreement, which shall
include such representations and warranties and covenants of Decora and
such other provisions as are customary at the time in an underwriting
agreement for an underwritten secondary offering; provided, however,
that a provision which is included in a form underwriting agreement
maintained by such underwriter for use in similar transactions or which
has been included in two or more underwriting agreements previously
entered into by such underwriter in generally comparable transactions
shall be presumed to be customary;
(g) if an underwriter in a registration effected pursuant
to a request for registration by holders of Shares shall so request and
provide reasonable advance notice of the time and location thereof,
participate with members of senior management of Decora and pay the
costs incident to conducting "road shows" in at most three different
cities for the purpose of informing investment professionals and
institutional investors about Decora; and
(h) immediately notify each seller of any Shares (or
shares of Decora Common Stock related thereto) covered by such
registration statement, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act within the
appropriate period mentioned in paragraph (b) of this Section 11.2.3,
upon Decora becoming aware that the prospectus included in such
registration statement, as then in
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effect, includes an untrue statement of a material fact or omits to
state a material fact required to be so stated therein or necessary to
make the statements therein not misleading in light of the
circumstances then existing, and within five (5) days prepare and
furnish to all such sellers a reasonable number of copies of an amended
and supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Shares (or shares of related Decora
Common Stock), such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
SECTION 11.2.4 PAYMENT OF REGISTRATION EXPENSES. Other than
the underwriting discounts and commissions incurred directly on the sale of
Shares of any holder, the costs and expenses of all registrations and
qualifications under the Securities Act, and of all other actions Decora is
required to take or effect pursuant to this Section 11.2 shall be paid by Decora
(including, without limitation, all registration, qualification and filing fees,
printing expenses, expenses of distributing prospectuses and other documents,
fees and disbursements of counsel for Decora and special counsel for the holders
of the Shares, expenses of any special audits incident to or required in
connection with any such registration, and expenses incident to any "road show"
conducted pursuant to Section 11.2.3(g) hereof in connection therewith).
SECTION 11.2.5 INFORMATION FROM HOLDERS OF SHARES. Notices and
requests delivered by holders of Shares to Decora pursuant to this Section 11.2
shall contain such information regarding the Shares and the intended method of
disposition thereof as shall reasonably be required in connection with the
action to be taken.
SECTION 11.2.6 INDEMNIFICATION. (a) Decora's existing
Indemnification. In the event of any registration under the Securities Act of
any Shares pursuant to this Section 11.2, Decora hereby agrees to indemnify and
hold harmless each holder of Shares disposing of such Shares and each other
Person, if any, who controls such holder within the meaning of the Securities
Act and each other Person (including underwriters) who participates in the
offering of such shares against any losses, claims, damages or liabilities,
joint or several, and expenses to which such holder of Shares or controlling
Person or participating Person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such Shares
were registered under the Securities Act, in any preliminary prospectus, final
prospectus or summary prospectus contained therein, or in any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse such
holder of Shares or such controlling Person or participating Person for any
legal or any other expenses incurred by such holder or such controlling Person
or participating Person in connection with investigating or defending any such
loss, claim, damage, liability or proceeding; provided, however, that Decora
will not be liable in any such case to the extent that any such loss, claim,
damage or liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in such
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registration statement, said preliminary prospectus, final prospectus or summary
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to Decora in an instrument duly executed by
such holder or such controlling or participating Person, as the case may be,
specifically for use in the preparation thereof or (ii) an untrue statement or
alleged untrue statement, omission or alleged omission in a prospectus if such
untrue statement or alleged untrue statement, omission or alleged omission is
corrected in an amendment or supplement to the prospectus which amendment or
supplement is delivered to such holder and such holder of Shares thereafter
fails to deliver such prospectus as so amended or supplemented prior to or
concurrently with the sale of Shares to the Person asserting such loss, claim,
damage, liability or expense.
(b) Indemnification by Sellers of Shares. Decora may
require as a condition of Decora's obligation under this Section 11.2 to effect
any registration under the Securities Act of Shares that there shall have been
delivered to Decora an agreement or agreements duly executed by each holder of
Shares for whom Shares are to be so registered, whereby such holder agrees to
indemnify and hold harmless Decora, each other Person referred to in paragraphs
(1), (2) and (3) of Section 11(a) of the Securities Act in respect of such
registration statement and each other Person, if any, which controls Decora
within the meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which Decora, or such other Person or such
Person controlling Decora may become subject under the Securities Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which such
Shares were registered under the Securities Act, in any preliminary prospectus
or final prospectus contained therein or in any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, which, in each such case, has been made in or
omitted from such registration statement, said preliminary or final prospectus
or said amendment or supplement in reliance upon, and in conformity with,
written information furnished to Decora in an instrument duly executed by such
holder of Shares specifically for use in the preparation thereof. Decora shall
be entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to information
with respect to such Persons so furnished in writing by such Persons
specifically for inclusion in any prospectus or registration statement.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) unless, in such indemnified party's reasonable judgment, a conflict of
interest may exist between such indemnified and indemnifying parties with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party.
Whether or not such defense is assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). No
indemnifying party will consent to the entry of any judgment
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or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of the claim, will not be obligated to pay the fees and expenses of more than
one counsel for all parties indemnified by such indemnifying party with respect
to such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other such
indemnified parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional counsel
or counsels.
(d) Contribution. If for any reason the indemnification
provided for in Sections 11.2.6(a) and 11.2.6(b) hereof is unavailable to an
indemnified party as contemplated thereby, the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of fraudulent misrepresentation.
(e) Underwriting Agreement Indemnification Provisions.
Notwithstanding the provisions of Sections 11.2.6(a), 11.2.6(b) and 11.2.6(c)
hereof, if an underwriting agreement executed by Decora pursuant to Section
11.2.3(f) hereof shall contain indemnification, contribution and related
procedural provisions in a form customary to the managing underwriter (or one of
the managing underwriters) which are substantially to the same effect as the
provisions provided for in Sections 11.2.6(a), 11.2.6(b) and 11.2.6(c) hereof,
such customary indemnification provisions shall be incorporated in such
underwriting agreement in lieu of those provided for in Sections 11.2.6(a),
11.2.6(b) and 11.2.6(c) hereof.
(f) Other Indemnification. Indemnification similar to
that specified in the preceding subdivisions of this Section 11.2.6 (with
appropriate modifications) shall be given by Decora and sellers of Shares (or
Decora Common Stock related thereto) with respect to any required registration
or other qualification of securities under any federal or state law or
regulation or governmental authority other than the Securities Act.
SECTION 11.2.7 NO CONFLICTING REGISTRATION RIGHTS. Decora
covenants and agrees that if and so long as any Shares shall remain outstanding
and the holder or holders thereof shall have any rights under this Section 11.2,
it will not enter into any agreement with any Person creating any rights with
respect to any shares of Decora Common Stock or any other security in conflict
with or inconsistent with any rights retained by any holder of Shares pursuant
to this Section 11.2; provided, however, that nothing contained in this
Section 11.2.7 shall prevent in any way Decora's right to enter into other
registration rights agreements not in conflict with or inconsistent with the
rights of any such holder or Decora's existing obligations under other
registration rights agreements, which are set forth in Item 11.2.2(b) of
Schedule III hereto.
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SECTION 11.3 PUBLIC INFORMATION. Decora covenants and agrees
that if and so long as any class or series of Decora Common Stock shall be
registered under Section 12 of the Exchange Act, at any time when any holder of
Shares so entitled desires to make sales of any Shares in reliance on Rule 144
under the Securities Act, either (i) there will be available adequate current
public information with respect to Decora as required by paragraph (c) of said
Rule 144 (or any comparable provision of any superseding or substitute rule), or
(ii) if such information is not available, Decora will use its best efforts to
make such information available without delay. Without limiting the foregoing,
after the time of such registration Decora will timely file with the SEC all
reports required to be filed under Sections 13 and 15(d) of the Exchange Act and
will promptly furnish to any holder of Shares so requesting a written statement
that Decora has complied with all such reporting requirements. Decora also
covenants and agrees that it will provide the following information specified
below, at the time, under the circumstances and to the Persons specified
therein, in connection with any contemplated sale pursuant to Rule 144A under
the Securities Act of any Decora Common Stock or of any Shares by a holder
thereof: at any time that Decora is not subject to the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act, promptly upon the written
request of the holder of any Shares, (i)(x) a brief statement of the nature of
the business of Decora and its Subsidiaries and the products and services they
offer and (y) Decora's most recent balance sheet and profit and loss and
retained earnings statements, together with similar financial statements for its
two preceding fiscal years, in each case audited by an independent certified
public accountant; the most recent balance sheet to be as of a date less than
sixteen months prior to the date of such request and the profit and loss and
retained earnings statements to be for the twelve months preceding the date of
such balance sheet and, if such balance sheet is not as of a date less than six
months before the date of such request, it shall be accompanied by additional
statements of profit and loss and retained earnings for a period from the date
of such balance sheet to a date less than six months before the date of such
request, or (ii) such other information as shall then be required to permit a
resale of Notes by such holder pursuant to Rule 144A of the Securities Act (or
any superseding rule providing an exemption from registration under the
Securities Act for resales to Qualified Institutional Buyers (as such term is
defined in the Act)); provided, however, that, if such request shall so
indicate, the statement and financial statements or other information shall be
delivered to any named prospective purchaser of a Note as well as to the
requesting holder, so long as the request states that such holder reasonably
believes such prospective purchaser to be a Qualified Institutional Buyer (as
such term is defined in the Act).
SECTION 12. INTERPRETATION OF AGREEMENT AND NOTES.
SECTION 12.1 DEFINITIONS. Except as the context shall
otherwise require, the following terms shall have the following meanings for all
purposes of this Agreement (the definitions to be applicable to both the
singular and the plural form of the terms defined, where either such form is
used in this Agreement):
The term "Additional Common Stock" shall have the meaning set
forth in Section 9.1 hereof.
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The term "Additional Common Stock Closing Date" shall have the
meaning set forth in Section 9.1(b) hereof.
The term "Additional Notes" shall have the meaning set forth
in Section 7.2 (a) hereof.
The term "Additional Note Closing Date" shall have the meaning
set forth in Section 7.2(c) hereof.
The term "Affiliate", with respect to any Person (hereinafter
"such Person"), shall mean any other Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, such Person or another Affiliate of such Person, (ii) which
beneficially owns or holds 5% or more of the shares of any class of the Voting
Stock of such Person or (iii) 5% or more of the shares of any class of Voting
Stock of which is beneficially owned or held of record by such Person or any
Affiliate of such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Stock, by contract
or otherwise. The term "Affiliate", when used herein without reference to any
Person, shall mean an Affiliate of Decora or the Company as the context shall
require.
The term "Amendment" shall have the meaning set forth in the
preliminary statements hereof.
The term "Bank" shall have the meaning set forth in the
Securities Purchase Agreement.
The term "Bank Agreement" shall have the meaning set forth in
the Securities Purchase Agreement.
The term "Business Day" shall mean any day on which commercial
banks are not authorized or required to close in New York City.
The term "Closing Date" shall have the meaning set forth in
Section 1.2(a) hereof.
The term "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
The term "Company" shall have the meaning set forth in the
introductory paragraph hereof.
The term "Company Common Stock" shall mean the Common Stock,
$.01 par value, of the Company.
The term "Common Stock" shall have the meaning set forth in
Section 1.1(b) hereto.
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The term "Current Market Price" (per share of Common Stock at
any date) shall mean the average of the daily market prices over a period of 20
consecutive Business Days before such date. The market price for each such
Business Day shall be the last sale price on such day on the principal
securities exchange on which the Common Stock is then listed or admitted to
trading, or, if no sale takes place on such day on any such exchange, the
average of the closing bid and asked prices on such day as officially quoted on
any such exchange, or if the Common Stock is not then listed or admitted on any
stock exchange, the market price for each such Business Day shall be the last
sale price on such day, or, if no sale takes place on such day, the average of
the closing bid and asked prices on such day in the over-the-counter market, in
either case as reported through NASDAQ, or, if such prices are not at the time
so reported, as furnished by any member of the National Association of
Securities Dealers, Inc. selected by Decora. If and so long as there shall be no
exchange or over-the-counter market for the Common Stock during the 20 Business
Day period prior to the date on which Current Market Price is to be determined,
the Current Market Price shall be deemed to be the Fair Value of the Common
Stock.
The term "Decora" shall have the meaning set forth in the
introductory paragraph hereof.
The term "Decora Common Stock" shall mean the Common Stock,
$.01 par value, of Decora.
The term "Default" shall mean an event which, with the passage
of time or the giving of notice, or both, would become an Event of Default.
The term "Effective Date" shall have the meaning set forth in
the Amendment.
The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time. Reference to a specific
section of ERISA shall include such section, any regulations promulgated
thereunder and any comparable provision of any future legislation amending,
supplementing or superseding such section.
The term "ERISA Affiliate" shall mean any Person which is
under "common control" (within the meaning of Section 414(b) or (c) of the Code
or Section 4001(a)(14) of ERISA) with the Company, Decora or any Subsidiary
thereof.
The term "Event of Default" shall have the meaning set forth
in Section 12.1 of the Securities Purchase Agreement.
The term "Exchange" shall have the meaning set forth in the
preliminary statements hereof.
The term "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.
33
<PAGE> 38
The term "Fair Value" shall mean with respect to any security
or other property, the fair value thereof as of a date that is within fifteen
(15) days of the date as of which the determination is to be made, determined by
an investment banking firm, firm of certified public accountants or appraisal
firm (which investment banking firm, firm of certified public accountants or
appraisal firm shall own no securities of, and shall not be an Affiliate,
Subsidiary or related Person of, either the Company or Decora) of recognized
national standing retained by Decora and reasonably acceptable to the Required
Holders, and which determination is made (a) under the assumption that all
rights, warrants and options existing with respect to any such securities have
been exercised and (b) without regard to the absence of a liquid or ready market
for any such securities.
The term "Financial Statements" shall have the meaning set
forth in Section 2.3 hereof.
The term "Fully Diluted Basis" shall mean, as of any date,
with respect to calculations involving the capital stock of any Person (or an
individual class or series thereof), making the assumption that all securities
of such Person then outstanding which are convertible into such capital stock
(or shares of such class or series, as the case may be) were converted on such
date, that all options, warrants and similar rights to acquire shares of capital
stock of such Person (or shares of such class or series) were exercised on such
date.
The term "generally accepted accounting principles" or "GAAP"
shall mean, as of the date of any determination with respect thereto, generally
accepted accounting principles as used by the Financial Accounting Standards
Board and/or the American Institute of Certified Public Accountants,
consistently applied and maintained throughout the periods indicated.
The term "guaranty" shall have the meaning set forth in the
Securities Purchase Agreement.
The terms "hereof", "herein", "hereunder" and other words of
similar import shall be construed to refer to this Agreement as a whole and not
to any particular Section or other subdivision.
The term "holder", with respect to any Note, Additional Note
or Common Stock, shall mean the Person in whose name such security shall be
registered.
The term "Indebtedness" shall have the meaning set forth in
the Securities Purchase Agreement.
The term "Indebtedness for Money Borrowed" shall have the
meaning set forth in the Securities Purchase Agreement.
The term "Institutional Investor" shall mean any one or more
of the following Persons: (a) any bank, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity; (b) any charitable foundation; (c) any
34
<PAGE> 39
insurance company or Affiliate thereof or fraternal benefit association; (d) any
pension, retirement or profit-sharing trust or fund; or (e) any public
employees' pension or retirement system or any other governmental agency
supervising the investment of public funds.
The term "Junior Securities" shall have the meaning set forth
in Section 10.4 hereof.
The term "Lien" shall have the meaning set forth in the
Securities Purchase Agreement.
The term "Management Agreement" shall have the meaning set
forth in the Securities Purchase Agreement.
The term "Non-Responsive Holders" shall have the meaning set
forth in Section 11.2.1(c) hereof.
The term "Notes" shall have the meaning set forth in Section
1.1(a) hereof.
The term "Officer's Certificate" shall mean a certificate
executed on behalf of a corporation by any of its chief executive officer, the
President or the chief financial officer.
The term "Optional Prepayment Date" shall have the meaning set
forth in Section 7.2(a) hereof.
The term "Original Holders" shall have the meaning set forth
in the preliminary statements hereof.
The term "outstanding", with respect to the Notes, shall mean,
as of the date of determination, all Notes theretofore delivered pursuant to
this Agreement, except Notes theretofore cancelled or delivered for cancellation
and Notes in exchange or replacement for which other Notes have been delivered
pursuant to this Agreement; provided, however, that in determining whether the
holders of the requisite aggregate unpaid principal amount of Notes outstanding
have given any notice or taken any action hereunder, Notes held or owned,
directly or indirectly, by Decora or the Company, or by any Subsidiary or any
Affiliate of Decora or the Company, shall be disregarded and deemed not to be
outstanding.
The term "PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereof.
The term "Pension Plan" shall mean any Plan that is an
"employee pension benefit plan" (within the meaning of Section 3(2) of ERISA)
subject to Title IV of ERISA.
The term "Permitted Liens" shall have the meaning set forth in
the Securities Purchase Agreement.
35
<PAGE> 40
The term "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government (or any agency or political
subdivision thereof).
The term "Plan" shall mean any "employee benefit plan" (within
the meaning of Section 3(3) of ERISA) that the Company, Decora, any Subsidiary
or any ERISA Affiliate maintains, contributes to or is obligated to contribute
to for the benefit of employees or former employees of the Company, Decora, any
Subsidiary or any ERISA Affiliate.
The term "Prohibited Transaction" shall mean a non-exempt
prohibited transaction within the meaning of Sections 406 and 408 of ERISA or
Section 4975 of the Code.
The term "Pro-Rata", in reference to the holders, shall mean
the percentage designated as such holder's pro rata share set forth opposite the
name of such holder on Schedule II annexed hereto; provided that Schedule II
shall be amended and such holder's Pro Rata shares shall be adjusted from time
to time to give effect to the addition of any new holders. The sum of the Pro
Rata shares of all holders at any date of determination shall equal 100%.
The term "Purchasers" shall have the meaning set forth in the
preliminary statements hereof.
The term "Registration Request" shall have the meaning set
forth in Section 11.2.1(a) hereof.
The term "Requested Information" shall have the meaning set
forth in Section 11.2.1(c) hereof.
The term "Required Noteholders" shall mean the holders of 66
2/3% of the aggregate outstanding principal amount of Notes.
The term "Rules" shall have the meaning set forth in Section
11.2.3 hereof.
The term "SEC" shall mean the Securities and Exchange
Commission and any successor organization.
The term "Securities Act" shall mean the Securities Act of
1933, as amended from time to time.
The term "Securities Purchase Agreement" shall have the
meaning set forth in the preliminary statements hereof.
The term "Senior Subordinated Notes" shall have the meaning
set forth in the preliminary statements hereof.
36
<PAGE> 41
The term "Senior Debt" shall have the meaning set forth in
Section 10.2 hereof.
The term "Shares" shall have the meaning set forth in Section
9.1(a) hereof.
The term "Solvent" shall have the meaning set forth in Section
2.19 hereof.
The term "Specified Senior Non-Payment Default" shall have the
meaning set forth in Section 10.3 hereof.
The term "Subordinated Debt" shall have the meaning set forth
in Section 10.1 hereof.
The term "Subsidiary", with respect to any Person, shall mean
any corporation organized under the laws of the United States of America or a
jurisdiction thereof at least 80% of the outstanding shares of Voting Stock or
similar interest of which are owned, directly or indirectly, by such Person. The
term "Subsidiary", when used herein without reference to any particular Person,
shall mean a Subsidiary of Decora.
The term "this Agreement" shall mean this Exchange Agreement
(including the annexed Exhibits and Schedules), as it may from time to time be
amended, supplemented or modified in accordance with its terms.
The term "Valuation Date" shall have the meaning set forth in
Section 9.1(a) hereof.
The term "Voting Stock", with respect to a corporation, shall
mean the stock of such corporation the holders of which are ordinarily, in the
absence of contingencies, entitled to elect members of the Board of Directors
(or other governing body) of such corporation.
The term "Warrants" shall have the meaning set forth in the
preliminary statements hereof.
SECTION 12.2 DIRECTLY OR INDIRECTLY. Any provision in this
Agreement referring to action to be taken by any Person, or that such Person is
prohibited from taking, shall be applicable whether such action is taken
directly or indirectly by such Person.
SECTION 12.3 ACCOUNTING TERMS. All accounting terms used
herein that are not otherwise expressly defined shall have the respective
meanings given to them in accordance with generally accepted accounting
principles at the particular time.
SECTION 12.4 GOVERNING LAW. THIS AGREEMENT, THE WARRANTS AND
THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK.
SECTION 12.5 HEADINGS. The headings of the Sections and other
subdivisions of this Agreement have been inserted for convenience of reference
only, and shall not be deemed to constitute a part hereof.
37
<PAGE> 42
SECTION 12.6 INDEPENDENCE OF COVENANTS. Each covenant made by
Decora and/or the Company herein IS independent of each other covenant so made.
The fact that the operation of any such covenant permits a particular action to
be taken or condition to exist does not mean that such action or condition is
not prohibited, restricted or conditioned by the operation of the provisions of
any other covenant herein.
SECTION 12.7 OTHER CAPITALIZED TERMS. Capitalized terms
otherwise not defined herein shall have the meanings assigned in the Securities
Purchase Agreement.
SECTION 13. MISCELLANEOUS.
SECTION 13.1 NOTICES. (a) All communications under this
Agreement, the Common Stock or the Notes shall be in writing and shall be
delivered or mailed (i) if to you, to you at your address set forth in Schedule
I hereto, marked for attention as there indicated, or at such other address as
you may have furnished to the Company in writing, (ii) if to any other holder of
a Note, to it at its address listed in the books for the registration and
registration of transfer of Notes required to be maintained by the Company
pursuant to Section 9.1 of the Securities Purchase Agreement, or at such other
address as such holder shall have furnished to the Company in writing, and (iii)
if to Decora or the Company, to it at the address shown at the head of this
Agreement, or at such other address as it shall have furnished in writing to you
and all other holders of the Notes at the time outstanding.
(b) Any written communication so addressed and mailed by
certified mail, return receipt requested, shall be deemed to have been given
when so mailed. All other written communications shall be deemed to have been
given upon receipt thereof.
SECTION 13.2 SURVIVAL. All representations, warranties and
covenants made by the Company or Decora herein or by Decora, the Company or any
Subsidiary in any certificate or other instrument delivered under or in
connection with this Agreement shall be considered to have been relied upon by
you and shall survive the delivery to you of the Notes regardless of any
investigation made by you or on your behalf. All statements in any such
certificate or other instrument shall constitute representations and warranties
of Decora and the Company, as applicable hereunder.
SECTION 13.3 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the parties hereto and their respective successors and assigns, and
shall inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns permitted hereunder; provided, however, that
you shall not have any obligation to exchange Warrants of any Person other than
the Company. Whether or not expressly so stated and subject to the restrictions
set forth therein, the provisions of Sections 5 through 11 of this Agreement are
intended to be for your benefit and for the benefit of all holders from time to
time of the Notes, and shall be enforceable by you and any other such holder
whether or not an express assignment to such holder of rights under this
Agreement shall have been made by you or your successors or assigns; and
provided, further, that the provisions of Section 5 and Sections 6.2, and 6.3
hereof shall also be for the benefit of, and shall be enforceable by, any
Person, who shall
38
<PAGE> 43
no longer be a holder of any Note or Shares but who shall have incurred any
expense or been subjected to any liability referred to therein while, or on the
basis of being, such a holder.
SECTION 13.4 AMENDMENT AND WAIVER. (a) This Agreement and the
Notes may be amended or supplemented, and the observance of any term hereof or
thereof may be waived, with the written consent of the Company and Decora and
(i) on or prior to the Closing Date, you, and (ii) after the Closing Date, the
holders of 66-2/3% of the aggregate outstanding principal amount of the Notes;
provided, however, that no such amendment, supplement or waiver shall, without
the written consent of the holders of all the Notes then outstanding, (x)
change, with respect to the Notes, the amount or time of any required prepayment
or payment of principal or premium or the rate or time of payment of interest,
or change the funds in which any prepayment or payment on the Notes is required
to be made; (y) amend, supplement or waive any provision of Section 10 hereof;
or (z) amend, supplement or waive any default arising by reason of the failure
of the Company or Decora to comply with this Section 13.4.
(b) Notwithstanding the provisions of subsection
(a) of this Section 13.4, in the case of Section 11 hereof, there shall be no
amendment, supplement or waiver of any provision thereof without the prior
written consent of the Company, Decora, the holders of 66-2/3% of the aggregate
outstanding principal amount of the Notes and the holders of 66-2/3% of the
outstanding Shares. Any amendment, supplement or waiver effected in accordance
with this Section 13.4 shall be binding upon each holder of the Notes or Shares
at the time outstanding, each future holder of any Notes or Shares, the Company
and Decora. Notwithstanding any other provision of this Agreement, no consent to
any such amendment, supplement or waiver by any holder of a Note or Share, shall
have any effect for the purposes of this Section 13.4 if such amendment,
supplement or waiver was obtained in connection with or in anticipation of the
purchase by the Company, Decora, any Affiliate of either the Company or Decora
or any other Person of any Note or Share from the holder thereof, unless the
holder of each Note or Share at the time outstanding has executed an amendment,
supplement or waiver, as the case may be, to substantially the same effect as
the amendment, supplement or waiver obtained from such other holder.
SECTION 13.5 COUNTERPARTS. This Agreement may be executed and
delivered to you simultaneously in one or more counterparts, each of which shall
be deemed an original, but all such counterparts shall together constitute but
one and the same instrument.
39
<PAGE> 44
If the foregoing is satisfactory to you, please sign the form
of acceptance on the enclosed counterparts hereof and return the same to the
Company, whereupon this Exchange Agreement, as so accepted, shall become a
binding contract between you and each of the undersigned.
Very truly yours,
DECORA, INCORPORATED
By:___________________________________
Name:
Title:
DECORA INDUSTRIES, INC.
By:___________________________________
Name:
Title:
The foregoing Exchange
Agreement is hereby accepted.
CIGNA MEZZANINE PARTNERS II, L.P.
By CIGNA Investments, Inc., Agent
By:________________________
Name:
Title:
CIGNA PROPERTY AND CASUALTY
INSURANCE COMPANY
By CIGNA Investments, Inc.
By:________________________
Name:
Title:
INSURANCE COMPANY OF NORTH AMERICA
By CIGNA Investments, Inc.
By:________________________
Name:
40
<PAGE> 45
Title:
41
<PAGE> 46
SCHEDULE I
ORIGINAL HOLDERS OF THE NOTES AND THE WARRANTS
NAME AND ADDRESS
OF ORIGINAL HOLDERS
-------------------
CIGNA MEZZANINE PARTNERS II, L.P.
1. In the case of all payments on account of the Notes:
By crediting in the form of bank wire transfer of Federal or other
immediately available funds:
Chase Manhattan Bank, N.A.
Chase NYC/CTR/
BNF=CIGNA Private Placements/ AC=9009001802
ABA# 021000021
OBI=[name of company; description of security; interest rate; maturity
date; PPN; due date and application (as among principal, premium and
interest of the payment being made); contact name and phone]
2. In the case of all notices with respect to payments:
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2206
Attention: Securities Processing S-206
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
3. In the case of all other communications:
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division S-307
Fax: 860-726-7203
4. Tax Identification Number: 13-3574027
I-1
<PAGE> 47
NAME AND ADDRESS
OF ORIGINAL HOLDERS
-------------------
CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY
1. In the case of all payments on account of the Notes:
By crediting in the form of bank wire transfer of Federal or other
immediately available funds:
Chase Manhattan Bank, N.A.
Chase NYC/CTR/
BNF=CIGNA Private Placements/ AC=9009001802
ABA# 021000021
OBI=[name of company; description of security; interest rate; maturity
date; PPN; due date and application (as among principal, premium and
interest of the payment being made); contact name and phone]
2. In the case of all notices with respect to payments:
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2206
Attention: Securities Processing S-206
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
3. In the case of all other communications:
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division S-307
Fax: 860-726-7203
4. Tax Identification Number: 13-3574027
I-2
<PAGE> 48
NAME AND ADDRESS
OF ORIGINAL HOLDERS
-------------------
LIFE INSURANCE COMPANY OF NORTH AMERICA
1. In the case of all payments on account of the Notes:
By crediting in the form of bank wire transfer of Federal or other
immediately available funds:
Chase Manhattan Bank, N.A.
Chase NYC/CTR/
BNF=CIGNA Private Placements/ AC=9009001802
ABA# 021000021
OBI=[name of company; description of security; interest rate; maturity
date; PPN; due date and application (as among principal, premium and
interest of the payment being made); contact name and phone]
2. In the case of all notices with respect to payments:
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2206
Attention: Securities Processing S-206
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
3. In the case of all other communications:
CIG & Co.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division S-307
Fax: 860-726-7203
4. Tax Identification Number: 13-3574027
I-3
<PAGE> 49
SCHEDULE II
HOLDERS OF THE SENIOR SUBORDINATED NOTES DUE APRIL 15, 1998 OF
DECORA, INCORPORATED
PRIVATE PLACEMENT NUMBER 24359 * AB 3
AND
1,000,000 SHARES OF COMMON STOCK OF DECORA INDUSTRIES, INC.
PRIVATE PLACEMENT NUMBER 243593 10 0
<TABLE>
<CAPTION>
Number of
Warrants to be Principal
Pro Rata Exchanged for Amount
Share Common Principal of Additional Shares of
(Expressed as Stock Amount Notes, if any, Common
Name of Holder Percentage) and Notes of Notes to be Issued Stock
- -------------- ----------- --------- -------- ------------ -----
<S> <C> <C> <C> <C> <C>
Cigna Mezzanine
Partners II, L.P. 46% 115 $460,000 $92,000 460,000
(Notes and Shares To
Be Registered in The
Name of CIG & Co.)
Cigna Property and
Casualty Insurance 35% 88 $350,000 $70,000 350,000
Company (Notes and
Shares To Be Registered
in The Name of CIG &
Co.)
Life Insurance
Company of North 19% 47 $190,000 $38,000 190,000
America (Notes and
Shares To Be Registered
in The Name of CIG &
Co.)
</TABLE>
II-1
<PAGE> 50
SCHEDULE III
[DOCUMENTS AND INFORMATION FURNISHED TO ORIGINAL HOLDERS]
III-1
<PAGE> 51
EXHIBIT A
FORM OF NOTE
DECORA, INCORPORATED
Senior Subordinated Note
due April 15, 1998
PPN: 24359 * AB 3 ___________________, 19___
R- New York, New York
$
DECORA, INCORPORATED, (the "Company"), a Delaware corporation,
for value received, hereby promises to pay to ______________________ or
registered assigns, the principal sum of _____________ DOLLARS
($________________) on April 15, 1998. If the Company shall have paid any
interest or premium on this Note in excess of that permitted by law, then it is
the express intent of the Company and the holder hereof that all excess amounts
previously collected by the Company be credited on the principal balance of this
Note, and the provisions hereof immediately be deemed reformed and the amounts
thereafter collectable hereunder reduced, without the necessity of the execution
of any new document, so as to comply with the then applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder.
Payment of principal and premium, if any, shall be made to the
registered holder hereof in such coin or currency of the United States of
America as at that time of payment shall be legal tender for the payment of
public and private debts, at the office of the Company at 1 Mill Street, Fort
Edward, New York 12828, or at such other location designated pursuant to Section
9.1 of the Securities Purchase Agreement referred to below, in each case subject
to the right of the registered holder hereof under said Securities Purchase
Agreement to receive direct payment in immediately available funds.
This Note is one of a series of Notes issued in the aggregate
principal amount of $1,000,000 pursuant to the Exchange Agreement, dated as of
March 31, 1996, among the Company, Decora Industries Inc. and each of the
Original Holders of the Notes set forth in Schedule III thereto (the "Exchange
Agreement"; all capitalized terms not otherwise defined herein having the
meaning set forth therein) and is entitled to the benefits thereof and of the
Securities Purchase Agreement.
Under certain circumstances, as specified in the Securities
Purchase Agreement, the principal of and accrued interest, if any, on this Note
may be declared due and payable in the manner and with the effect provided in
the Securities Purchase Agreement.
A-1
<PAGE> 52
This Note has not been registered under the Securities Act of
1933, as amended, or the laws of any state and may be transferred in whole or in
part only pursuant to an effective registration statement under such Act and
applicable state laws or under an exemption from such registration available
under such Act and applicable state law. Subject to the foregoing, transfers of
this Note shall be registered upon registration books maintained for such
purpose by or on behalf of the Company as provided in the Exchange Agreement.
Prior to presentation of this Note for registration of transfer, the Company
shall treat the registered holder hereof as the owner and holder of this Note
for the purpose of receiving all payments of principal and interest hereon and
for all other purposes whatsoever, whether or not this Note shall be overdue,
and the Company shall not be affected by notice to the contrary.
The payment of the principal of and interest, if any, on this
Note is expressly subordinated, in the manner and to the extent provided in the
Exchange Agreement, to the payment of certain other indebtedness of the Company
(as more fully described in the Exchange Agreement), and by acceptance of this
Note the holder agrees, expressly for the benefit of the present and future
holders of such indebtedness, to be bound by the provisions of the Exchange
Agreement.
The Company agrees to perform and observe duly and punctually
each of the covenants and agreements set forth in each of the Exchange Agreement
and the Securities Purchase Agreement. All such covenants and agreements are
incorporated by reference in this Note, and this Note shall be interpreted and
construed as if all such covenants and agreements were set forth in full in this
Note at this place.
A-2
<PAGE> 53
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, Decora, Incorporated has caused this Note
to be duly executed.
DECORA, INCORPORATED
By:________________________
Name:
Title:
A-3
<PAGE> 54
EXHIBIT A-1
FORM OF ADDITIONAL NOTE
DECORA, INCORPORATED
Senior Subordinated Note
due April 15, 1998
PPN:
R- ___________________, 19___
$ New York, New York
DECORA, INCORPORATED, (the "Company"), a Delaware corporation,
for value received, hereby promises to pay to ______________________ or
registered assigns, the principal sum of _____________ DOLLARS
($________________) on April 15, 1998. If the Company shall have paid any
interest or premium on this Note in excess of that permitted by law, then it is
the express intent of the Company and the holder hereof that all excess amounts
previously collected by the Company be credited on the principal balance of this
Note, and the provisions hereof immediately be deemed reformed and the amounts
thereafter collectable hereunder reduced, without the necessity of the execution
of any new document, so as to comply with the then applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder.
Payment of principal and premium, if any, shall be made to the
registered holder hereof in such coin or currency of the United States of
America as at that time of payment shall be legal tender for the payment of
public and private debts, at the office of the Company at 1 Mill Street, Fort
Edward, New York 12828, or at such other location designated pursuant to Section
9.1 of the Securities Purchase Agreement referred to below, in each case subject
to the right of the registered holder hereof under said Securities Purchase
Agreement to receive direct payment in immediately available funds.
This Note is one of a series of Notes issued in the aggregate
principal amount of $200,000 pursuant to the Exchange Agreement, dated as of
March 31, 1996, among the Company, Decora Industries, Inc. and each of the
Original Holders of the Notes set forth in Schedule III thereto (the "Exchange
Agreement"; all capitalized terms not otherwise defined herein having the
meaning set forth therein) and is entitled to the benefits thereof and of the
Securities Purchase Agreement.
Under certain circumstances, as specified in the Securities
Purchase Agreement, the principal of and accrued interest, if any, on this Note
may be declared due and payable in the manner and with the effect provided in
the Securities Purchase Agreement.
A-1-1
<PAGE> 55
This Note has not been registered under the Securities Act of
1933, as amended, or the laws of any state and may be transferred in whole or in
part only pursuant to an effective registration statement under such Act and
applicable state laws or under an exemption from such registration available
under such Act and applicable state law. Subject to the foregoing, transfers of
this Note shall be registered upon registration books maintained for such
purpose by or on behalf of the Company as provided in the Exchange Agreement.
Prior to presentation of this Note for registration of transfer, the Company
shall treat the registered holder hereof as the owner and holder of this Note
for the purpose of receiving all payments of principal and interest hereon and
for all other purposes whatsoever, whether or not this Note shall be overdue,
and the Company shall not be affected by notice to the contrary.
The payment of the principal of and interest, if any, on this
Note is expressly subordinated, in the manner and to the extent provided in the
Exchange Agreement, to the payment of certain other indebtedness of the Company
(as more fully described in the Exchange Agreement), and by acceptance of this
Note the holder agrees, expressly for the benefit of the present and future
holders of such indebtedness, to be bound by the provisions of the Exchange
Agreement.
The Company agrees to perform and observe duly and punctually
each of the covenants and agreements set forth in each of the Exchange Agreement
and the Securities Purchase Agreement. All such covenants and agreements are
incorporated by reference in this Note, and this Note shall be interpreted and
construed as if all such covenants and agreements were set forth in full in this
Note at this place.
A-1-2
<PAGE> 56
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, Decora, Incorporated has caused this Note
to be duly executed.
DECORA, INCORPORATED
By:_________________________________
Name:
Title:
A-1-3
<PAGE> 57
EXHIBIT B
FORM OF COMMON STOCK CERTIFICATE
B-1
<PAGE> 58
EXHIBIT C
FORM OF AMENDMENT
C-1
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 (No. 33-42986) of
Decora Industries, Inc. of our report dated June 28, 1996 relating to the
consolidated financial statements of Decora Industries, Inc. which appears on
page F-2 of this Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
- --------------------------
PRICE WATERHOUSE LLP
Syracuse, New York
June 28, 1996
<TABLE> <S> <C>
<ARTICLE> CT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED
CASH FLOWS FOR THE FISCAL YEAR ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<TOTAL-ASSETS> 36,157
0
0
<COMMON> 344
<OTHER-SE> 9,795
<TOTAL-LIABILITY-AND-EQUITY> 36,157
<TOTAL-REVENUES> 38,828
<INCOME-TAX> (1,486)
<INCOME-CONTINUING> 2,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,919
<EPS-PRIMARY> $0.09
<EPS-DILUTED> $0.09
</TABLE>
