<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 1997
Commission File Number 0-16072
DECORA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0003300
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE MILL STREET
FORT EDWARD, NY 12828
(address of principal executive office) (Zip code)
Registrant's telephone number (518) 747-6255
(including area code)
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 30 days.
Yes [X] No [ ]
At August 8, 1997 there were 35,719,390 shares of Common Stock of the registrant
outstanding. This document consists of 11 pages.
<PAGE> 2
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Consolidated Balance Sheet
as of June 30, 1997 and March 31, 1997 3 - 4
Consolidated Statement of Income for the
Quarters endedJune 30, 1997 and 1996 5
Consolidated Statement of Cash Flows for the
Quarters EndedJune 30, 1997 and 1996 6
Notes to Unaudited Consolidated
Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II OTHER INFORMATION 10
SIGNATURES 11
- 2 -
<PAGE> 3
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DECORA INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
unaudited
<TABLE>
<CAPTION>
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 287 $ 243
Accounts receivable, less allowances 6,603 6,168
Inventories 6,284 5,439
Prepaid expenses and other current assets 1,114 847
------- -------
Total current assets 14,288 12,697
Property and equipment, net 7,694 7,781
Notes receivable 1,397 1,468
Intangibles, net 10,820 10,924
Other non-current assets, net 324 357
Deferred income taxes 4,043 4,227
------- -------
Total Assets $38,566 $37,454
======= =======
</TABLE>
(continued)
See accompanying notes to unaudited consolidated financial statements.
- 3 -
<PAGE> 4
FORM 10-Q
DECORA INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
unaudited
<TABLE>
<CAPTION>
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,865 $ 2,267
Accrued liabilities 1,540 1,867
Current portion of long-term debt 6,617 2,310
-------- --------
Total current liabilities 11,022 6,444
Long-term debt 12,396 16,507
-------- --------
Total liabilities 23,418 22,951
-------- --------
Shareholders' equity:
Preferred stock, $.01 par value; 5,000 shares
authorized at June 30, 1997 and March 31, 1997 -- --
Common stock, $.01 par value; 45,000 shares authorized;
35,719 and 35,469 shares issued and outstanding at
June 30, 1997 and March 31, 1997, respectively 357 355
Additional paid-in capital 31,922 31,862
Accumulated deficit (17,131) (17,714)
-------- --------
Total shareholders' equity 15,148 14,503
-------- --------
Total Liabilities and Shareholders' Equity $ 38,566 $ 37,454
======== ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
- 4 -
<PAGE> 5
FORM 10-Q
DECORA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
unaudited
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
-------------------------
1997 1996
------- -------
<S> <C> <C>
Net sales $ 9,147 $10,138
Cost of goods sold 6,556 7,694
------- -------
Gross profit 2,591 2,444
Marketing, general and administrative
expenses 1,340 1,262
------- -------
Operating income 1,251 1,182
Interest expense 416 633
------- -------
Income before taxes 835 549
Provision for income taxes 251 29
------- -------
Net income $ 584 $ 520
======= =======
Net income per common share $ 0.02 $ 0.02
======= =======
Average shares of common stock used in
computation of income per share 35,678 34,464
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
- 5 -
<PAGE> 6
FORM 10-Q
DECORA INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
unaudited
<TABLE>
<CAPTION>
QUARTER ENDED JUNE 30,
-------------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 584 $ 520
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 564 552
Amortization of debt discount 16 17
Net change in deferred tax asset 185 --
Net changes in current assets and liabilities (1,278) (1,826)
------- -------
Net cash provided (used) by operating activities 71 (737)
------- -------
Cash flows from investing activities:
Purchase of fixed assets (341) (8)
Reductions in (additions to) notes receivable 72 (11)
------- -------
Net cash used by investing activities (269) (19)
------- -------
Cash flows from financing activities:
Long-term borrowings 757 1,162
Repayment of debt (577) (427)
Proceeds from issuance of common stock 62 30
------- -------
Net cash provided by financing activities 242 765
------- -------
Net increase in cash and cash equivalents 44 9
Cash at beginning of period 243 188
------- -------
Cash at end of period $ 287 $ 197
======= =======
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES:
During the quarter ended June 30, 1996, common stock in the amount of $656 and
notes payable in the amount of $874 were issued upon the conversion of $1,642 of
warrants in subsidiary.
See accompanying notes to unaudited consolidated financial statements.
- 6 -
<PAGE> 7
FORM 10-Q
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Integration of Financial Statements Reported on Form 10-K
The accompanying unaudited condensed consolidated financial statements should be
read in conjunction with the Company's audited consolidated financial statements
included in its Form 10-K for the fiscal year ended March 31, 1997, filed with
the Securities and Exchange Commission (File No. 0-16072) (the "Form 10-K"). In
the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (consisting of normal recurring accruals) necessary to
present fairly the Company's financial position as of June 30, 1997 and March
31, 1997, and the results of its operations and its cash flows for the periods
presented. Certain reclassifications of prior year amounts have been made to
conform to current year's presentation.
NOTE 2 - Inventories
Inventories at June 30, 1997 and March 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 1997 MARCH 31, 1997
------------- --------------
(In thousands)
<S> <C> <C>
Raw Materials $2,809 $3,194
Work-in-Process 1,589 1,035
Finished Goods 1,886 1,210
------ ------
$6,284 $5,439
====== ======
</TABLE>
NOTE 3 - Net Income per Share
The number of shares of common stock and common stock equivalents used in the
computation of net income per common share for each period is the weighted
average number of shares outstanding during the periods and, if dilutive, common
stock options, warrants and convertible securities which are considered common
stock equivalents.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 128, Earnings Per Share, which is
required to be adopted by the Company in the 3rd or 4th quarter of fiscal 1998
with all prior periods being restated. The Company does not believe that
adoption of such Statement will have a significant impact on net income per
share reported for the quarter ended June 30, 1997.
- 7 -
<PAGE> 8
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The financial statements include the consolidated financial position at June 30,
1997 and March 31, 1997 and the consolidated results of operations for the three
months ended June 30, 1997 and 1996 of Decora Industries, Inc. and its
subsidiaries (the "Company"). The Company operates through its wholly-owned
subsidiary, Decora Incorporated, which is the Company's core business and sole
operating subsidiary.
This quarterly report on Form 10-Q (the "10-Q") includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.
All statements other than statements of historical facts, including, without
limitation, the statements under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and located elsewhere herein
regarding industry prospects and the Company's financial position are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. Important
factors that could cause actual results to differ materially from the Company's
expectations are disclosed in the 10-Q and in the Company's Form 10-K for the
year ended March 31, 1997, including, without limitation, in conjunction with
the forward-looking statements included in this 10-Q.
RESULTS OF CONTINUING OPERATIONS AND FORWARD LOOKING INFORMATION
Net sales were $9,147,000 for the quarter ended June 30, 1997 compared to
$10,138,000 for the same period in the prior year. Such decrease resulted
primarily from inventory reductions of Con-Tact(R) products implemented by the
Company's principal customer, Rubbermaid Incorporated ("Rubbermaid") reflecting
the continued emphasis by retailers and wholesalers to minimize inventory levels
throughout the distribution chain and to deliver on a just-in-time basis based
on consumer demand. As a result, net sales to Rubbermaid were $855,000 less than
during the same period in the prior year. International sales outside of Europe
increased but were offset by a decline in sales of products to Europe. European
sales were impacted by timing differences in orders and by an inventoy build
which had occured in the prior year's first quarter. As a result, intenational
sales during the first quarter of fiscal 1998 were $239,000 lower than in the
prior year period. Sales of non-core products increased by $79,000 reflecting
increased sales of Wearlon(R) coating products and Cobra(R) industrial tape
products.
Gross profit for the quarter ended June 30, 1997 was $2,591,000 versus
$2,444,000 in last year's first quarter reflecting an increase in gross profit
margin from 24.1% to 28.3%. Gross margin in the current quarter was favorably
impacted by changes in sales mix with established product lines generating a
greater percentage of sales and greater manufacturing efficiencies. The prior
year first quarter gross margin was also negatively impacted by raw material
price changes.
Operating income of the Company increased 5.8% from $1,182,000 in the prior
year's quarter to $1,251,000 for the quarter ended June 30, 1997 as increased
gross profit was partially offset by a $78,000 increase in marketing, general
and administrative expenses. Interest expense decreased from $633,000 during the
first quarter of fiscal 1997 to $416,000 during the first quarter of fiscal 1998
as a result of lower borrowings and
- 8 -
<PAGE> 9
lower overall interest rates on outstanding debt. These factors resulted in a
52.1% increase in income before taxes from $549,000 during the quarter ended
June 30, 1996 to $835,000 for the quarter ended June 30, 1997.
The increase in income before taxes was partially offset by a $222,000 increase
in the provision for income taxes. The Company anticipates that its cash
payments for taxes during fiscal 1998 will remain at historical levels due to
the use of net operating loss carryforwards to offset taxable income. The first
quarter tax provision reflects what management expects to be the "effective" tax
rate going forward following the release of the remaining net operating loss
valuation allowance benefit in fiscal 1997. Refer to Note 8 of the Form 10-K for
the fiscal year ended March 31, 1997 for further details.
As a result of the increased provision for income taxes, net income for the
quarter ended June 30, 1997 was $584,000, or $0.02 per share, as compared with
$520,000, or $0.02 per share, for the quarter ended June 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net working capital was $3,266,000 as of June 30, 1997 versus
$6,253,00 as of March 31, 1997 reflecting the reclassification of the remaining
$2,900,000 due to Cigna in April 1998 and the $1,500,000 convertible note due in
May 1998 from long term debt to current portion of long term debt. This increase
was partially offset by seasonal increases in accounts receivable, inventories
and other current assets which totaled $1,547,000. Seasonal changes in accounts
payable and accrued liabilities resulted in a $271,000 reduction of net working
capital during the recent quarter. Cash balances increased from $243,000 as of
March 31, 1997 to $287,000 as of June 30, 1997 and were limited by certain debt
covenants as to use. The Company is evaluating several sources of capital in
order to meet the debt obligations noted above in April and May of 1998
including operating cash flow, existing debt facilities, new debt facilities
and/or equity.
Capital expenditures for the fiscal quarter ended June 30, 1997 were
approximately $341,000. Management anticipates maintaining similar levels of
capital expenditures during the remainder of fiscal 1998.
SUMMARY
Management believes that short term liquidity needs will be satisfied through
operations and existing debt facilities and is evaluating financing alternatives
for the $2,900,000 and $1,500,000 debt payments due in April 1998 and May 1998,
respectively.
- 9 -
<PAGE> 10
FORM 10-Q
DECORA INDUSTRIES, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A description of the Company's legal proceedings is included in the Company's
Annual Report on Form 10- K for the year ended March 31, 1997. There have been
no new material developments in the Company's existing litigation.
The Company and its subsidiaries are defendants in 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 2. CHANGES IN SECURITIES.
Not Applicable.
ITEM 3. DEFAULTS BY THE COMPANY ON ITS SENIOR SECURITIES
Not Applicable
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Form of Employment Agreement dated as of June 1, 1997 by and
between Decora, Incorporated and Richard DeCoste.
10.2 Form of Employment Agreement dated as of June 1, 1997 by and
between Decora Industries, Inc. and Timothy N. Burditt.
(b) Reports on Form 8-K
None
- 10 -
<PAGE> 11
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DECORA INDUSTRIES, INC.
(REGISTRANT)
BY/s/ Timothy N. Burditt
- -----------------------------------
TIMOTHY N. BURDITT
EVP ADMINISTRATION & FINANCE
DATED: August 13, 1997
- 11 -
<PAGE> 1
Exhibit
EMPLOYMENT AGREEMENT
This Agreement is effective as of the 1st day of June, 1997, by and
between Richard DeCoste (hereinafter referred to as "Employee"), and Decora,
Incorporated (dba Decora Manufacturing), a Delaware Corporation, (hereinafter
referred to as "Employer").
RECITALS
WHEREAS, Employer desires to engage Employee to perform services on its
behalf on a full time basis as an employee under the terms and conditions of
this Agreement which, except as otherwise stated herein, shall supersede any
other understandings and agreements between the parties concerning employment;
NOW, THEREFORE, it is mutually agreed as follows:
1. INCORPORATION OF RECITALS: The parties hereby incorporate by this
reference the recitals set forth above.
2. EMPLOYMENT: Employer hereby employs Employee and Employee hereby
accepts employment on the terms and conditions of this Agreement.
3. SERVICES:
(a) Employee shall have the title of Vice President of Operations
of Employer which duties shall include, without limitation, the management of
all aspects of Employer's manufacturing, including without limitation:
production, quality control, purchasing, engineering, scheduling and product
development. Each year, Employee shall be responsible for meeting the objectives
of Employer's Operating Plan for such year. The Board of Directors of Employer
shall be entitled to change Employee's duties at its discretion based upon the
needs of Employer.
(b) Employee agrees that he will at all times faithfully,
industriously and to the best of his ability, experience and talents, perform to
the reasonable satisfaction of Employer all of the duties that may be assigned
to him hereunder and shall devote such time to the performance of these duties
as may be reasonably necessary therefor.
(c) During the term of the Agreement, Employee shall be available
on a full-time basis, to perform the duties assigned him, in accordance with the
prevailing policies of Employer. Expenditures of reasonable amounts of time for
personal, business, charitable and other activities shall not be deemed a breach
of this Agreement, provided that such activities do not interfere with the
services required to be rendered to Employer hereunder.
<PAGE> 2
(d) Executive agrees that during the period of his employment,
Executive shall provide services exclusively pursuant to this Agreement, and
Executive will not, without the prior written consent of the Company (which
consent may be granted or withheld in the sole and absolute discretion of the
Company), directly or indirectly:
i) plan or organize any business activity competitive with
the business or planned business of the Company or its affiliates, or combine,
participate, or conspire with other employees of the Company or its affiliates
or other persons or entities for the purpose of organizing any such competitive
business activity; or
ii) divert or take away, or attempt to divert or take
away, any of the customers or potential customers of the Company or its
affiliates, either for himself or for any other person, firm, partnership,
corporation or other business entity.
4. EMPLOYER'S AUTHORITY: Employee agrees to observe and comply with
Employer's rules and regulations as adopted by Employer's board of directors
regarding performance of his duties and to carry out and to perform orders,
directions, and policies stated by Employer to him periodically, either orally
or in writing.
5. TERM: The term of this Agreement shall be three (3) years (the
"Term"). The Term of this Agreement shall, however, in any event, be subject to
prior termination as provided hereinbelow in Paragraph 10.
6. COMPENSATION:
(a) Salary. Employer agrees to pay to Employee a base salary of
$140,000 per year. Employee's salary shall be reviewed from time to time. Such
salary shall be payable in installments in accordance with the general practice
of Employer.
(b) Performance Compensation. For the fiscal year April 1, 1997
to March 31, 1998, the Executive shall be entitled to performance compensation
in accordance with the provisions of the Management Performance Incentive Plan
and the Salaried Employee Incentive Plan to be adopted by the Compensation
Committee of the Board of Directors of Decora Industries, Inc., subject to the
reservation by such committee contained in such plans of the right to amend or
terminate such Plans.
-2-
<PAGE> 3
7. TAXES:
(a) DEDUCTIONS. All compensation shall be subject to the
customary withholding tax and other employment taxes as required with respect to
compensation paid by a corporation to an employee.
8. EMPLOYEE BENEFITS: In addition to the compensation set forth
above, Employer agrees to grant Employee the following benefits for the Term:
(a) An annual vacation with pay of three (3) weeks;
(b) Sick leave and personal leave with pay in accord with the
prevailing policies of Employer;
(c) Health and medical benefit insurance as granted by Employer
to employees performing similar services, except that any waiting period which
Employer can waive shall be waived;
(d) Any other benefits not specifically set forth herein as may
be granted by Employer, in its sole and absolute discretion, including without
limitation, its 401(k) plan, life insurance and pension plan to employees
performing similar services; and
(e) An automobile allowance of $500 per month.
9. BUSINESS EXPENSES: Employee may incur, on behalf of and for the
convenience of Employer, certain reasonable business expenses including travel
and entertainment and other miscellaneous expenses. Expenses of Employee
incurred on behalf of Employer, other than personal car expenses will be
reimbursed by Employer and it shall be the responsibility of Employee to retain
vouchers and other proof of proper expenditures. The decision as to whether an
expense incurred by Employee is for the benefit of Employer shall be in the sole
discretion of Employer, and all expenses not deemed to be incurred for the
benefit of Employer shall be paid by Employee.
10. TERMINATION:
(a) This Agreement shall terminate at the option of the Employer:
i) Immediately upon the death or permanent disability of
Employee, "permanent disability" being defined as the inability of Employee to
perform his duties as required hereunder as a result of physical or mental
illness for a continuous period in excess of sixty (60) days.
-3-
<PAGE> 4
ii) At the election of the Employer, immediately upon the
dismissal of Employee by the Employer for cause. "Cause", as used in this
section, shall include, without limitation, any one or more of the following:
(1) The breach by Employee of any material term or
condition of this Agreement after written notice by Employer and failure of
Employee to satisfactorily cure the breach within 90 days;
(2) The refusal or failure to perform duties assigned
in accordance with the terms of this Agreement, if such refusal shall continue
for a 90 day period after written instructions to perform such duties have been
given under the authority of the Board of Directors of the Employer;
(3) Engaging in one or more acts constituting a
felony;
(4) Engaging in one or more acts involving fraud or
serious moral turpitude;
(5) Misappropriating Employer's assets or engaging in
gross misconduct materially injurious to the Employer or its affiliates or
subsidiaries; or
(6) Breach of any trade secrets and confidentiality
agreement with Employer, including without limitation the Trade Secrets and
Confidentiality Agreement dated as of the date hereof ("Secrecy Agreement") ;
(b) The compensation paid upon termination shall be determined as
follows:
i) In the event of termination of this Agreement prior to
completion of the Term as set forth in Paragraph 10(a)(i) or 10(a)(ii), Employee
shall be entitled to receive only accrued, but unpaid compensation up to the
date of termination.
ii) In the event of any other termination of the Agreement
prior to the completion of the Term, Employee shall be entitled to receive his
compensation and benefits as set forth in this Agreement for the lesser of
twelve months from the date of termination or the remainder of the Term.
Employer shall have the option of paying such amount in accordance with its
regular payroll practices.
11. STOCK OPTIONS: Employee shall be granted an option to purchase up
to 100,000 shares of Decora Industries, Inc. common stock pursuant to that Stock
Option Agreement attached as Exhibit "A". The option shall be exercisable at an
exercise price equal
-4-
<PAGE> 5
to $1.00 per share. All such options shall be vested and shall be exercisable
for a period of three years.
12. NOTICE: All notices and demands of every kind shall be personally
delivered or sent by first class mail to the parties at their last known address
or at such other addresses as either party may designate in writing. Any such
notice or demand shall be effective immediately upon personal delivery or five
days after deposit in the United States mail, as the case may be.
13. ARBITRATION: Any claim arising out of this Employment Agreement
shall be settled by binding arbitration in New York, New York in accordance with
the Commercial Rules of the American Arbitration Association. The arbitrator
shall be an active member of the New York bar. The arbitrator shall prepare an
award in writing which shall include factual findings and any legal conclusions
on which the decision is based. Judgement upon an award so rendered may be
entered in any court having jurisdiction.
14 REPRESENTATION: Employee acknowledges that he has been advised to
retain independent counsel and that he has not been represented by Miller &
Holguin.
15. MISCELLANEOUS:
(a) This Agreement shall be governed and construed in accordance
with the substantive laws of the State of New York.
(b) No change in the terms of this Agreement shall be effective
unless made in writing and signed by the Employee and a duly authorized
representative of Employer.
(c) A waiver of any term or condition of this Agreement shall not
be construed as a general waiver by Employer and Employer shall be free to
reinstate any such term or condition with or without notice to the other party.
(d) Employee's rights and obligations under this Agreement are
personal and not assignable.
(e) This Agreement contains the entire Agreement and
understanding between the parties and supersedes all other agreements or
understandings between the parties concerning employment, whether oral or
written. Neither party has relied on any representations other than those as
contained herein. This Agreement shall not affect Employee's existing Option
Agreement dated January 11, 1993 by and between Employee and Decora Industries,
Inc.
-5-
<PAGE> 6
(f) This Agreement shall be binding on and inure to the benefit
of the heirs, personal representatives, successors, and assigns of the parties;
subject, however, to the restrictions on assignment contained herein.
(g) The paragraph headings used in this Agreement are for
reference and convenience only, and shall not in any way limit or amplify the
terms and provisions hereof, nor enter into the interpretation of this
Agreement.
IN WITNESS WHEREOF, Employer has caused this Agreement to be signed by
their duly authorized officers and Employee has executed this Agreement
effective as of the day and year first above written.
EMPLOYER: EMPLOYEE:
DECORA MANUFACTURING
By:
-------------------------- --------------------------
RICHARD DECOSTE
Its:
-------------------------
-6-
<PAGE> 1
EMPLOYMENT AGREEMENT
This Agreement is effective as of the 1st day of July, 1997, by and
between Timothy N. Burditt, (hereinafter referred to as "Employee"), and Decora
Industries, Inc., a Delaware Corporation, (hereinafter referred to as the
"Company").
WHEREAS, the Company wishes to employ Employee and Employee wishes to
accept such employment on the terms and conditions set forth herein;
NOW, THEREFORE, the parties agree as follows:
1. TERM OF EMPLOYMENT: The Company hereby employs Employee and
Employee hereby accepts employment on the terms and conditions of this Agreement
for a term of three years commencing July 1, 1997 (the "Term"), subject to the
provisions of paragraph 8 below.
2. DUTIES: Employee shall have the title of Executive Vice
President, Administration and Finance, and be responsible for duties assigned to
him which shall include, without limitation:
Principal Financial Officer;
Administration of Corporate Agreements, Policies and
Procedures;
Contribution to Business Planning, Development, Mergers
and Acquisitions; and
Investor Relations including shareholders and lenders.
3. NECESSARY SERVICES:
(a) Performance of Duties. Employee agrees that he will at all
times faithfully, industriously and to the best of his ability, experience and
talents, perform to the reasonable satisfaction of the Company all of the duties
that may be assigned to him hereunder and shall devote such time to the
performance of these duties as may be reasonably necessary therefor.
(b) Full-Time Service. During the term of the Agreement, Employee
shall be available on a full-time basis, to perform the duties assigned him, in
accordance with the prevailing policies of the Company. Expenditures of
reasonable amounts of time for personal, business, charitable and other
activities shall not be deemed a breach of this Agreement, provided that such
activities do not interfere with the services required to be rendered to the
Company hereunder.
-1-
<PAGE> 2
(c) Exclusive Services. Executive agrees that during the period
of his employment, Executive shall provide services exclusively pursuant to this
Agreement, and Executive will not, without the prior written consent of the
Company (which consent may be granted or withheld in the sole and absolute
discretion of the Company), directly or indirectly:
i) plan or organize any business activity competitive with
the business or planned business of the Company or its affiliates, or combine,
participate, or conspire with other employees of the Company or its affiliates
or other persons or entities for the purpose of organizing any such competitive
business activity; or
ii) divert or take away, or attempt to divert or take
away, any of the customers or potential customers of the Company or its
affiliates, either for himself or for any other person, firm, partnership,
corporation or other business entity.
4. THE COMPANY'S AUTHORITY: Employee agrees to observe and comply
with the Company's rules and regulations as adopted by the Company's board of
directors regarding performance of his duties and to carry out and to perform
orders, directions, and policies stated by the Company to him periodically,
either orally or in writing.
5. COMPENSATION:
(a) Salary. Subject to such deductions as the Company may from
time to time be required to make pursuant to law, governmental regulation or
order, the Company agrees to pay to Executive during the term hereof, and
Executive agrees to accept as payment in full for all services rendered by him
to or for the benefit of the Company, compensation in an amount equal to a
yearly rate of $132,000 payable in installments in accordance with the general
practice of the Company. Such salary shall be reviewed on an annual basis.
(b) Performance Compensation. For the fiscal year April 1, 1997
to March 31, 1998, the Executive shall be entitled to performance compensation
in accordance with the provisions of the Management Performance Incentive Plan
and the Salaried Employee Incentive Plan both to be adopted by the Compensation
Committee of the Board of Directors of the Company, subject to the reservation
by the Company contained in such plans of the right to amend or terminate such
plans at any time.
(c) Acquisition Compensation. For the fiscal year April 1, 1997
to March 31, 1998, the Executive shall be entitled to acquisition compensation
in accordance with the provisions of the Acquisition Incentive Plan to be
adopted by the Compensation Committee of the Board of Directors of the Company,
subject to the reservation by the Company contained in such plan of the right to
amend or terminate such plan at any time.
6. EMPLOYEE BENEFITS: In addition to the compensation set forth
above, Employee agrees to grant Employee the following benefits for the Term:
-2-
<PAGE> 3
(a) Annual accrued vacation in accordance with prevailing
policies of the Company, but not less than three (3) weeks per year;
(b) Sick leave and personal leave with pay in accord with the
prevailing policies of the Company;
(c) Health and medical benefit insurance as granted by the
Company to employees performing similar services;
(d) Car allowance of $500 a month;
(e) Any other benefits not specifically set forth herein as may
be granted by the Company, in its sole and absolute discretion, to employees
performing similar services.
7. BUSINESS EXPENSES: Employee may incur, on behalf of and for the
convenience of the Company, certain reasonable business expenses including
travel and entertainment and other miscellaneous expenses. Expenses of Employee
incurred on behalf of the Company will be reimbursed by the Company and it shall
be the responsibility of Employee to retain vouchers and other proof of proper
expenditures. The decision as to whether an expense incurred by Employee is for
the benefit of the Company shall be in the sole discretion of the Company, and
all expenses not deemed to be incurred for the benefit of the Company shall be
paid by Employee.
8. TERMINATION:
(a) This Agreement shall terminate at the option of the Company:
i) Immediately upon the death or permanent disability of
Employee, "permanent disability" being defined as the inability of Employee to
perform his duties as required hereunder as a result of physical or mental
illness for a continuous period in excess of ninety (90) days.
ii) At the election of the Company, immediately upon the
dismissal of Employee by the Company for cause. "Cause", as used in this
section, shall include, without limitation, any one or more of the following:
(1) The breach by Employee of any material term or
condition of this Agreement;
(2) The refusal or failure to perform duties assigned
in accordance with the terms of this Agreement, if such refusal shall continue
after written instructions to perform such duties have been given under the
authority of the Board of Directors of the Company.
-3-
<PAGE> 4
(3) Engaging in one or more acts constituting a
felony;
(4) Engaging in one or more acts involving fraud or
serious moral turpitude;
(5) Engaging in acts of insubordination towards any
officer or duly authorized representative of the Company;
(6) Misappropriating the Company's assets or engaging
in gross misconduct materially injurious to the Company or its affiliates or
subsidiaries; or
(7) Breach of any Trade Secrets and Confidentiality
Agreement with the Company, including without limitation the agreement dated
April 23, 1993.
iii) Upon written notice from the Company, without Cause.
(b) The Compensation paid upon termination shall be determined as
follows:
(1) In the event of termination of this Agreement prior to
completion of the Term as set forth in Paragraph 10(a)(1) or 10(a)(2), Employee
shall be entitled to receive only accrued, but unpaid compensation up to the
date of termination.
(2) In the event of any other termination of the Agreement
prior to the completion of the Term, Employee shall be entitled to receive his
compensation and benefits as set forth in this Agreement for the greater of
twelve months from the date of termination or the remainder of the Term.
The Company shall have the option of paying such amount in
accordance with its regular payroll practices.
9. NOTICES. All notices or demands of any kind which either party
hereto may be required or may desire to serve upon the other party under the
terms of this Agreement, shall be in writing and shall be served upon such other
party by personal service upon such other party or by leaving a copy of said
notice or demand, addressed to such other party at the address hereafter set
forth, whereupon such service shall be deemed complete, or by mailing a copy
thereof by registered or express mail, postage prepaid with return receipt
requested, addressed as follows:
IF TO THE COMPANY:
Decora Industries, Inc.
1 Mill Street
Fort Edward, New York 12828
-4-
<PAGE> 5
WITH A COPY TO:
Dale S. Miller, Esq.
Miller & Holguin
1801 Century Park East
7th Floor
Los Angeles, CA 90067
IF TO EMPLOYEE:
Mr. Timothy N. Burditt
72 Robinwood Drive
Clifton Park, New York 12065
In case of service by mail, service shall be deemed completed at the
expiration of the third day after the date of mailing. The addresses to which
notices and demands shall be delivered or sent may be changed from time to time
by written notice served as herein above provided by either party upon the other
party hereto.
10. ATTORNEYS' FEES: If either party sues the other to enforce any
of the terms of this Agreement, the prevailing party shall, in addition to all
other damages, be entitled to recover reasonable attorneys' fees.
11. LEGAL REPRESENTATION. Employee confirms that he is not
represented by Miller & Holguin and that he has been advised to seek the advice
of independent counsel in connection with the negotiation of this Agreement and
the transactions contemplated hereby.
12. MISCELLANEOUS:
(a) This Agreement shall be governed and construed in accordance
with the substantive laws of the State of New York.
(b) No change in the terms of this Agreement shall be effective
unless made in writing and signed by the Employee and a duly authorized
representative of the Company.
(c) A waiver of any term or condition of this Agreement shall not
be construed as a general waiver by the Company and the Company shall be free to
reinstate any such term or condition with or without notice to the other party.
(d) Employee's rights and obligations under this Agreement are
personal and not assignable.
-5-
<PAGE> 6
(e) This Agreement contains the entire Agreement and
understanding between the parties and supersedes all other agreements or
understandings between the parties concerning employment, whether oral or
written, including the Employment Agreement dated as of April 29, 1993. Neither
party has relied on any representations other than those as contained herein.
(f) This Agreement shall be binding on and inure to the benefit
of the heirs, personal representatives, successors, and assigns of the parties;
subject, however, to the restrictions on assignment contained herein.
(g) The paragraph headings used in this Agreement are for
reference and convenience only, and shall not in any way limit or amplify the
terms and provisions hereof, nor enter into the interpretation of this
Agreement.
IN WITNESS WHEREOF, he Company has caused this Agreement to be signed by
their duly authorized officers and Employee has executed this Agreement
effective as of the day and year first above written.
THE COMPANY: EMPLOYEE:
DECORA INDUSTRIES, INC.
By:--------------------- -----------------------------------
TIMOTHY N. BURDITT
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENTS OF OPERATIONS AND
CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTHS ENDED JUNE 30, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 287
<SECURITIES> 0
<RECEIVABLES> 7,098
<ALLOWANCES> 495
<INVENTORY> 6,284
<CURRENT-ASSETS> 14,288
<PP&E> 15,900
<DEPRECIATION> 8,206
<TOTAL-ASSETS> 38,566
<CURRENT-LIABILITIES> 11,022
<BONDS> 12,396
0
0
<COMMON> 357
<OTHER-SE> 14,791
<TOTAL-LIABILITY-AND-EQUITY> 38,566
<SALES> 9,147
<TOTAL-REVENUES> 9,147
<CGS> 6,556
<TOTAL-COSTS> 1,340
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 416
<INCOME-PRETAX> 835
<INCOME-TAX> 251
<INCOME-CONTINUING> 584
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 584
<EPS-PRIMARY> $0.02
<EPS-DILUTED> $0.02
</TABLE>
