<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DECORA INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Board of Directors of Decora Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------
3) Filing Party:
-------------------------------------------------------
4) Date Filed:
---------------------------------------------------------
<PAGE> 2
DECORA INDUSTRIES, INC.
-----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 28, 1998
-----------------------
To the Stockholders of
Decora Industries, Inc.:
The Annual Meeting of Stockholders of Decora Industries, Inc., a Delaware
corporation (the "Company"), will be held at the Desmond Hotel, located at 660
Albany Shaker Road, Albany, New York, on September 28, 1998, at 9:00 a.m., local
time, and any adjournments thereof, to consider and act upon the following
matters:
(1) The election of five directors;
(2) Ratification of the selection of PricewaterhouseCoopers LLP as the
Company's independent certified public accountants for fiscal year 1999;
and
(3) The transaction of such other business as may properly come before the
meeting and any adjournments thereof.
The subject matter of each of the above proposals is described within the
accompanying Proxy Statement.
The Board of Directors has fixed the close of business on August 17, 1998,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting.
In order to constitute a quorum for the conduct of business at the Annual
Meeting, holders of a majority of all outstanding shares of Common Stock must be
present in person or be represented by proxy.
Whether or not you expect to attend the Annual Meeting in person, please
date, sign and mail the enclosed Proxy in the postage-paid return envelope
provided as promptly as possible. The Proxy is revocable and will not affect
your right to vote in person if you attend the meeting.
By Order of the Board of Directors
Timothy N. Burditt
Secretary
Fort Edward, New York
August 20, 1998
<PAGE> 3
DECORA INDUSTRIES, INC.
1 MILL STREET
FORT EDWARD, NY 12828
-----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 28, 1998
-----------------------
To Our Stockholders:
Your Board of Directors furnishes this Proxy Statement in connection with
its solicitation of your Proxy in the form enclosed to be used at the Company's
Annual Meeting of Stockholders to be held on September 28, 1998, at the time and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders.
The Company's Annual Report for the fiscal year ended March 31, 1998 and its
Annual Report on Form 10-K for the fiscal year ended March 31, 1998, including
audited financial statements, are being mailed to you on or about August 25,
1998 with this Proxy Statement.
We cordially invite you to attend the Annual Meeting. Whether or not you
plan to attend, please date, sign and return your Proxy promptly in the postage
paid return envelope provided. You may revoke your Proxy at any time prior to
its exercise at the meeting by notice to the Company's Secretary and, if you
attend the meeting, you may vote your shares in person. You may also revoke your
Proxy by returning a duly executed Proxy bearing a later date. If no instruction
is given, the proxy will be voted FOR each of the proposals described herein.
The named proxies may vote in their discretion upon such other matters as may
properly come before the meeting.
Only stockholders of record at the close of business on August 17, 1998 will
be entitled to vote at the meeting. At the close of business on August 17, 1998,
there were 7,331,354 shares of Common Stock of the Company outstanding, with
each share of Common Stock being entitled to one vote on each matter to be voted
upon. This is covered by the more general statement in the last sentence of this
paragraph. There is no right to cumulate votes as to any matter. Unless
otherwise stated, all share and per share amounts have been restated to reflect
the one-for-five reverse split which was effective December 29, 1997.
An affirmative vote of a majority of the shares present and voting at the
meeting is required for approval of Proposals 1 and 2. For purposes of
determining whether a matter has received a majority vote either of shares
present or of all outstanding shares, abstentions will be included in the vote
totals, with the result that an abstention has the same effect as a negative
vote. In instances where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned a proxy (so-called "broker
nonvotes"), those shares will not be included in the vote totals and therefore
will have no effect on the vote on Proposals 1 and 2.
The Company has been advised by its directors and officers that they intend
to vote the 225,750 shares of Common Stock which they hold, representing 3.1% of
the total shares outstanding as of the record date, in favor of the proposals
presented in this Proxy Statement. See "Beneficial Ownership of Securities."
The entire cost of soliciting proxies will be borne by the Company,
including expenses in connection with preparing and mailing proxy solicitation
materials. In addition to use of the mails, proxies may be solicited by
officers, directors and regular employees of the Company, without extra
compensation, by telephone, telegraph or
1
<PAGE> 4
personal solicitation, and no additional compensation will be paid to such
persons. If requested, the Company will reimburse brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses incurred in
mailing proxy material to their principals.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, management will present as nominees and recommend to
the stockholders that each of the first five persons listed below (the current
directors) be elected to serve as directors for a term of one year or until
their successors are duly elected and qualified. Each nominee has agreed to
serve if elected.
Proxies will be voted for the election of the five nominees named below
unless instructions are given to the contrary. Proxies cannot be voted for a
greater number of persons than the number of nominees named. Should any nominee
become unable to serve as a director, the persons named in the enclosed form of
Proxy will, unless otherwise directed, vote for the election of such other
person as the present Board of Directors may recommend to fill that position.
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 46 Director, Chairman, 1988
Chief Executive Officer
Roger Grafftey-Smith 67 Director 1988
Gabriel B. Thomas 57 Director 1991
Stephen H. Verchick 57 Director 1993
Ronald A. Artzer 54 Director 1994
Timothy N. Burditt 44 Executive Vice President, --
Administration and Finance,
Secretary
Earl A. Wearsch 53 Executive Vice President; --
President and General Manager
of Decora Manufacturing
("Decora") subsidiary
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Rolf J. Gemmersdorfer 46 Executive Vice President; --
Chairman of Konrad
Hornschuch AG ("Hornschuch")
subsidiary Management Board
Bernhard Muller 40 Executive Vice President; --
Member of Hornschuch
subsidiary Management Board
Richard A. DeCoste 59 Executive Vice President --
Frank J. Nolfi, Jr. 66 Vice President - Finance, --
Decora subsidiary
</TABLE>
NATHAN HEVRONY. Mr. Hevrony has served as a director of the Company since
August 1988 and as Chief Executive Officer and Chairman of the Board since
October 1989.
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, an international financial consulting firm, since 1981. Mr.
Grafftey-Smith also serves as a director of Americanino Capital Corporation, a
publicly-traded corporation.
GABRIEL B. THOMAS. Mr. Thomas has served as a director of the Company since
June 1991. He has served as President and Director of Unilab Corporation, a
clinical laboratory services company, since December 1989.
STEPHEN H. VERCHICK. Mr. Verchick has served as a director of the Company
since 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 has served as a director of the Company since
May 1994. Since August 1997, he has been a self-employed management consultant.
From March 1994 to August 1997, Mr. Artzer served as 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.
Directors of the Company hold office until the next annual meeting of
stockholders, until successors are elected and qualified or until their earlier
resignation or removal.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors convened 16 formal meetings during fiscal 1998. In
addition, the Board took action numerous times during the fiscal year by
unanimous written consent. Management confers frequently with 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
3
<PAGE> 6
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 (Chairman), Gabriel Thomas and Stephen Verchick. The Audit
Committee held one meeting during fiscal 1998.
The Compensation Committee is generally authorized to review and recommend
to the Board the compensation to be paid to the Company's principal officers.
The current members of the Compensation Committee are Ronald Artzer (Chairman),
Roger Grafftey-Smith, Gabriel Thomas and Stephen Verchick. The Compensation
Committee held three meetings during fiscal 1998 and also took action several
times by written consent.
COMPENSATION OF DIRECTORS
Directors are paid $10,000 per year and $500 for each committee meeting
which they attend. Directors may also be granted stock options for the purchase
of the Company's common stock. The Company reimburses directors for reasonable
expenses incurred in connection with their attendance at meetings and other
Company related functions.
EXECUTIVE OFFICERS
TIMOTHY N. BURDITT. Mr. Burditt was named Executive Vice President,
Administration and Finance in April 1993 and was named Secretary in August 1993.
EARL A. WEARSCH. Mr. Wearsch was named Executive Vice President of the
Company and President and General Manager of its Decora subsidiary in January
1998. From 1983 to 1997, Mr. Wearsch served in various senior management and
sales/marketing positions with Glidden, a manufacturer of paint and coatings.
ROLF J. GEMMERSDORFER. Mr. Gemmersdorfer was named Executive Vice President
of the Company and Chairman of the Management Board of its 76% owned Hornschuch
subsidiary in August 1998. From January 1995 through December 1997, Mr.
Gemmersdorfer was General Manager of Oral-B Laboratories GmbH, a subsidiary of
the Gillette Company. From April 1992 through December 1994, he served as
Managing Director and Speaker of the Board for the Household Hygiene division of
VP. Schickedanz, Inc.
BERNHARD MULLER. Dr. Muller was named Executive Vice President of the
Company in February 1998. Since April 1997, Dr. Muller has been one of two
members of the Management Board of Hornschuch. From June 1993 to March 1997, Mr.
Muller was part of management of Fresenius Ltd., a company which produces
disposable materials for the medical industry.
RICHARD A. DECOSTE. Mr. DeCoste joined the Company's Decora 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 and from June 1997 through July 1998 he also held the position of
Vice President of Operations of the Company's Decora subsidiary.
FRANK J. NOLFI, JR. Mr. Nolfi has served as Vice-President Finance of the
Company's Decora subsidiary since its acquisition by the Company 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.
4
<PAGE> 7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon the Company's review of the reports and amendments on Forms 3, 4
and 5 furnished to the Company pursuant to Section 16 of the Securities Exchange
Act of 1934, all such reports were filed in a timely manner by reporting
persons.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth, as of August 17, 1998, 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 and executive officer
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(2) TOTAL CLASS
- ------------------- ----- ------------- ----- --------
<S> <C> <C> <C> <C>
State Street Bank & Trust ................... 0 1,818,447 1,818,447 19.9%
Company, Trustee
Textron Master Trust
One Enterprise Drive
Master Trust -- W6C
North Quincy, MA 02171
Robert W. Johnson, IV(3) .................... 388,416(4) 385,000 773,416 10.0%
The Johnson Company
630 Fifth Avenue, Suite 1510
New York, NY 10111
Cumberland Associates ....................... 563,900(5) 0 563,900 7.7%
1114 Avenue of the Americas
New York, NY 10035
Nathan Hevrony .............................. 150,750 250,000 400,750 5.3%
Roger Grafftey-Smith ........................ 75,000 112,400 187,400 2.5%
Gabriel B. Thomas ........................... 0 142,400 142,400 1.9%
Stephen H. Verchick ......................... 0 75,000 75,000 1.0%
Ronald A. Artzer ............................ 0 70,000 70,000 (6)
Timothy N. Burditt .......................... 0 45,000 45,000 (6)
Earl A. Wearsch ............................. 0 40,000 40,000 (6)
Rolf J. Gemmersdorfer ....................... 0 12,000 12,000 (6)
Bernhard Muller ............................. 0 0 0 (6)
Richard A. DeCoste .......................... 0 45,000 45,000 (6)
Frank J. Nolfi, Jr .......................... 0 13,333 13,333 (6)
All directors and executive officers as a
group, including the named persons (11
persons) .................................... 225,750 805,133 1,030,883 12.7%
</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. The address of each director and officer listed is 1
Mill Street, Fort Edward, New York 12828.
5
<PAGE> 8
(2) The amounts shown reflect shares of common stock underlying stock options,
convertible notes or warrants which are exercisable within 60 days.
(3) 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 while the note
described therein is outstanding (the "Johnson Note"). The Johnson Note was
repaid in full on May 3, 1998.
(4) Mr. Johnson disclaims beneficial interest in 27,000 shares which are held
by trusts for which he is a trustee.
(5) Of this total, Cumberland Associates has sole voting and investment power
with respect to 437,100 shares, and shares such power with respect to
126,800 shares.
(6) Each of these persons owns less than 1% of the outstanding common stock of
the Company.
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Hevrony until May 31, 2000
which provides for payment of annual salary, performance bonuses and incentive
bonuses under the Company's 1998 Acquisition Incentive Plan (the "Acquisition
Incentive Plan"). The Acquisition Incentive Plan was established by the Company
to reward participants for any acquisition completed during fiscal 1998. Under
the terms of Mr. Hevrony's employment agreement, his annual salary was adjusted
to $325,000 by the Compensation Committee in February 1998. In August 1997, a
performance bonus of $50,000 was paid to Mr. Hevrony based upon his role in the
favorable restructuring of the Company's outstanding loans and in developing new
technologies during fiscal 1997. For fiscal 1998, no performance bonuses were
paid by the Company since its principal business objective was to complete an
acquisition. Based on Mr. Hevrony's role in completing the acquisition of
Hornschuch in October 1997 (the "Hornschuch Acquisition"), Mr. Hevrony was
awarded an incentive bonus of $350,000 under the Acquisition Incentive Plan,
$87,500 of which was paid in fiscal 1998. See "Committee Report to Stockholders
Regarding Executive Compensation." Mr. Hevrony's employment agreement will
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, 2000) and an additional
24-month period.
The Company has an employment agreement with Mr. Burditt until June 30, 2001
which provides for payment of annual salary, performance bonuses and incentive
bonuses under the Acquisition Incentive Plan. Under the terms of the agreement,
Mr. Burditt's annual salary was adjusted to $185,000 by the Compensation
Committee in February 1998. A bonus of $25,000 was paid to Mr. Burditt in August
1997 based upon the Company's performance during fiscal 1997. For fiscal 1998,
Mr. Burditt was awarded an incentive bonus of $250,000 under the Acquisition
Incentive Plan for his role in completing the Hornschuch Acquisition, $62,500 of
which was paid in fiscal 1998. Upon termination without cause, Mr. Burditt is
entitled to receive any earned but unpaid bonuses on a pro-rata basis, plus
compensation for the greater of twelve months from the date of termination or
the remainder of the term.
The Company has a three-year employment agreement with Richard DeCoste until
May 30, 2000 which provides for annual compensation of $140,000. Upon
termination without cause, Mr. DeCoste is entitled to receive compensation for
the lesser of 12 months or to the end of the term. As part of his recent
employment agreement, Mr. DeCoste was granted an option to purchase 20,000
shares of the Company's common stock at $5.00 per share. All of such options are
currently vested.
Hornschuch has an employment agreement with Dr. Bernhard Muller until
December 31, 2000 which was amended on February 20, 1998. Pursuant to the
agreement, Dr. Muller is a member of Hornschuch's Management Board and an
Executive Vice President of the Company. The agreement provides for annual base
compensation
6
<PAGE> 9
of DM335,000 with an annual bonus consisting of a cash component of up to
DM250,000 in 1998 and DM200,000 in 1999 and 2000 and incentive stock options
subject to performance. Additional compensation is payable if other performance
compensation targets are met.
As of January 8, 1998, Decora entered into a three-year employment agreement
with Earl A. Wearsch which provides for annual compensation of $170,000,
$185,000 and $200,000, respectively, for the first, second and third year of the
term. As part of the employment agreement, Mr. Wearsch was awarded an option to
purchase 60,000 shares of the Company's common stock at $4.75 per share. Upon
termination without cause, Mr. Wearsch is entitled to receive compensation for
12 months from the date of termination. Upon the occurrence of certain "change
of control" events, Mr. Wearsch shall be entitled to resign his position and
receive compensation for 12 months following the resignation.
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 its
three other most highly compensated executive officers during the fiscal years
ended March 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
FISCAL ----------------------------- SHARES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Nathan Hevrony .......................... 1998 $217,644(2) $400,000 300,000
Chief Executive Officer 1997 $185,000(2) $ 40,000 --
1996 $185,000(2) -- --
Timothy N. Burditt ...................... 1998 $141,592 $275,000 60,000
Executive Vice President, 1997 $120,000 $ 15,000 --
Administration and Finance 1996 $120,000 $ 20,000 5,000
Hans-Georg Stahmer(3) ................... 1998 $108,132 $ 39,714 60,000(3)
President & Member of Hornschuch 1997 -- -- --
Management Board 1996 -- -- --
Richard A. DeCoste ...................... 1998 $140,000 $ -- 50,000
Executive Vice President 1997 $125,000 $ 5,000 --
1996 $125,000 -- --
</TABLE>
- ----------
(1) The option share totals reflect the one-for-five reverse stock split which
was effective December 29, 1997.
(2) The Company also paid the premium of $17,665 for term life insurance for the
benefit of Mr. Hevrony.
(3) Mr. Stahmer resigned effective July 31, 1998. The 60,000 options granted to
Mr. Stahmer in fiscal 1998 expired upon his resignation.
7
<PAGE> 10
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM
- ------------------------------------------------------------------------------------ ---------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SHARES GRANTED TO
UNDERLYING EMPLOYEES IN
OPTIONS THE FISCAL EXERCISE EXPIRATION
NAME GRANTED(1) YEAR PRICE DATE 0% 5% 10%
- -------------------- ----------- ------------ --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Nathan Hevrony 300,000(2) 44.8% $ 5.50 2-18-2003 $-0- $ 120,000 $ 585,000
Timothy N. Burditt 60,000(2) 9.0% $ 5.50 2-18-2003 $-0- $ 24,000 $ 117,000
Richard A. DeCoste 30,000(2) 4.5% $ 6.00 2-18-2003 $-0- $-0- $ 43,500
20,000(3) 3.0% $ 5.00 5-31-2000 $-0- $-0- $ 30,800
Hans-Georg Stahmer 60,000(4) 9.0% $ 5.00 6-30-2004 $-0- $-0- $ 92,400
</TABLE>
- ----------
(1) Option share totals reflect the one-for-five reverse stock split that was
effective December 29, 1997.
(2) The options vest as follows: one third on the date of grant, one third on
February 19, 1999 and one third on February 19, 2000.
(3) The options vested on the date of grant.
(4) Mr. Stahmer resigned effective July 31, 1998. The 60,000 options granted to
Mr. Stahmer in fiscal 1998 expired upon his resignation.
AGGREGATED MARCH 31, 1998 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END(1) AT FISCAL YEAR END(2)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Nathan Hevrony ............ 250,000 280,000 $32,000 $37,600
Timothy N. Burditt ........ 45,000 40,000 $ 5,200 $ 7,520
Richard A. DeCoste ........ 45,000 20,000 $13,760 $ 0
Hans-Georg Stahmer(3) ..... 0 60,000 $ 0 $ 0
</TABLE>
- ----------
(1) Option share totals reflect the one-for-five reverse stock split which was
effective December 29, 1997.
(2) Value of unexercised in-the-money options was calculated using the closing
sales price for the Company's stock on March 31, 1998.
(3) Mr. Stahmer resigned effective July 31, 1998. His 60,000 options expired
upon his resignation.
During the year ended March 31, 1998, none of the executive officers
exercised any outstanding stock options. The only unexercised options held by
such executive officers as of March 31, 1998 are shown in the table above.
8
<PAGE> 11
COMMITTEE REPORT TO STOCKHOLDERS REGARDING EXECUTIVE COMPENSATION
The Compensation Committee has furnished the following report on executive
compensation: (1)
The Compensation Committee believes that compensation to the Company's
executive officers should be designed to encourage and reward management's
efforts to further strengthen the Company's business and to create added
value for stockholders. Such a compensation program helps to achieve the
Company's business and financial objectives and also provides incentives
needed to attract and retain well-qualified executives. The Company operates
in a competitive marketplace and needs to attract and retain highly
qualified senior management and executive personnel in order to assist the
Company in its goals of developing new products, business and technologies.
To this end, the Company has developed a compensation program with three
primary components: base salary, annual incentives and long-term incentives.
The Compensation Committee has considered the total compensation (earned or
potentially available) of each executive officer in establishing each
element of compensation. The Compensation Committee has engaged the services
of Buck Consultants, an international compensation consulting firm, in order
to ensure that the compensation paid to the Company's executive officers is
competitive with companies of equivalent size, geographical scope and
technological complexity.
Base Salary. The base salary levels of the Company's executive officers
are established by the Compensation Committee so as to be competitive with
the salaries of executives of other public companies of the same size and/or
industry who perform similar or comparable functions, in order to insure the
continued services of such key individuals. Where applicable, the
Compensation Committee may also consider the particular past performance of
such person, which may be based either upon specific performance measures or
upon more subjective criteria, and it may also take the Company's overall
financial position and the general economic climate into consideration in
establishing levels of compensation. Except in the case of long-term
employment agreements which have pre-set salary levels, the Compensation
Committee annually reviews executive base salaries and may make changes
based upon either an increase in the individual's contributions to the
Company or an increase in the median base salaries of executives of
similarly situated companies within the Company's industry.
The Company has entered into employment agreements with certain of its
executive officers, including Nathan Hevrony (Chief Executive Officer),
Timothy N. Burditt (Executive Vice President, Administration and Finance),
Richard DeCoste (Executive Vice President), Rolf J. Gemmersdorfer (Executive
Vice President), Dr. Bernhard Muller (Executive Vice President) and Earl
Wearsch (Executive Vice President). Entering into such agreements is done to
formalize long-term relationships with those persons whose continued
involvement with the Company is key to its success.
The Company entered into an employment agreement as of June 1, 1997
with Mr. Hevrony which expires May 31, 2000. The agreement originally
provided for payment of a $197,500 annual salary (which may be increased
periodically at the discretion of the Compensation Committee) plus
performance bonuses and incentive bonuses under the Acquisition Incentive
Plan. In February 1998, the Compensation Committee increased Mr. Hevrony's
salary to $325,000. When entering into the agreement, the Compensation
Committee reviewed the Company's prior and current earnings and considered
Mr. Hevrony's efforts to restructure the Company's debt and other
operations, as well as his success in
- --------
(1) This report shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates this report by
reference, and shall not otherwise be deemed filed under such Acts.
9
<PAGE> 12
developing new technologies. When increasing Mr. Hevrony's salary, the
Compensation Committee also considered the significantly increased
responsibilities that Mr. Hevrony was required to undertake in managing the
much larger, more complex and more international business operations of the
Company following the October 1997 Hornschuch Acquisition. Although no
specific weight or value was given to these factors, the Compensation
Committee compared Mr. Hevrony's salary with those of other executives of
similarly sized companies and believes that each of the salary levels
established under his employment agreement was appropriate.
Annual Incentives. The Compensation Committee believes that annual
incentives should be offered to executives which are directly related to
improvements in Company performance which yield increased value for
stockholders. The Compensation Committee may award annual incentives in the
form of cash performance bonuses, the amount of which may be determined in
accordance with predetermined threshold levels relating to some or all of
the following: increased revenue related to certain products or
technologies, increased profits, earnings per share or upon other specific
performance criteria to be established by the Compensation Committee. Such
bonuses may be related to the Company's overall levels of performance or to
areas related to the specific individual's duties and efforts. The
employment agreements between the Company and its executive officers provide
for the payment of performance bonuses, the specific amounts of which are
determined at the discretion of the Compensation Committee. In August 1997,
a performance bonus of $50,000 was paid to Mr. Hevrony based upon his role
in the favorable restructuring of the Company's outstanding loans and in
developing new technologies during fiscal 1997. For fiscal 1998, no
performance bonuses were paid. Early in fiscal 1998, the Compensation
Committee established the Acquisition Incentive Plan to focus on the
Company's primary objective for the year of building shareholder value
through key acquisitions and to reward participants for their role in
completing such acquisitions. Based on Mr. Hevrony's significant efforts and
success in completing the Hornschuch Acquisition, he was awarded an
incentive bonus of $350,000 under the Acquisition Incentive Plan, the amount
of which was based on increased profitability of the Company following the
acquisition.
Long-Term Incentives. Long-term incentives are provided to executives
primarily through grants of stock options. This form of compensation is
intended to help retain executives and motivate them to improve the
Company's long-term performance and hence long-term stock market
performance. Conditional stock options have been granted in the past and may
be granted in the future to certain employees which vest only upon the
Company or its subsidiaries achieving certain performance levels. Stock
options may be granted at the prevailing market value or at 85% of market
value. Options may vest immediately upon grant or over a period of time.
Options that were granted under the Company's 1987 Stock Option Plan are
exercisable for a period of ten years, although the Company has granted
options outside the Plan with different vesting periods. Under terms
established by the Compensation Committee, on February 19, 1998, Mr. Hevrony
was granted options to purchase 300,000 shares of the Company's common stock
at an exercise price of $5.50 per share. One third of these options vested
on the date of grant, one third will vest one year after the date of grant
and the remaining one third will vest two years after the date of grant. The
options are exercisable for five years.
During fiscal 1998, the Compensation Committee reviewed the
compensation of the Company's executive officers, based upon the
recommendation of its Chief Executive Officer, Nathan Hevrony, giving
particular attention to base salary, cash bonuses and the grant of stock
options. Such compensation will be matched with the executives' performance
in determining future compensation arrangements.
COMPENSATION COMMITTEE
Ronald A. Artzer, Chairman Gabriel B. Thomas
Roger Grafftey-Smith Stephen H. Verchick
10
<PAGE> 13
STOCK PRICE PERFORMANCE
The stock price performance graph below compares cumulative total return of
the Company's Common Stock against the cumulative total return of the Standard
and Poor's 500 Index and the Standard & Poor's Household Products Index. The
graph assumes that the value of the investment in the Company's Common Stock and
each index was $100 on March 31, 1993 and that all dividends were reinvested.
The stock performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this graph
by reference, and shall not otherwise be deemed filed under such acts.
TOTAL SHAREHOLDER RETURNS
<TABLE>
<CAPTION>
BASE YEAR ENDING
PERIOD
COMPANY/INDEX MAR93 MAR94 MAR95 MAR96 MAR97 MAR98
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DECORA INDS INC 100 54.56 53.06 53.06 37.88 55.16
HOUSEHOLD PDS (NON-DURA)-500 100 101.37 128.64 167.24 228.04 322.49
S&P 500 INDEX 100 101.47 117.27 154.92 185.63 274.73
</TABLE>
11
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 1, 1997, the Company issued warrants (the "Textron Warrants") to
a pension fund known as the Textron Master Trust ("Textron") in connection with
an $18,000,000 subordinated loan from Textron to the Company (the "Textron
Loan"), the proceeds of which were used to repay existing indebtedness of Decora
and to help facilitate the Hornschuch Acquisition. The Textron Loan was paid in
full on April 29, 1998 as part of a refinancing associated with the acquisition
of the Decorative Coverings Group from Rubbermaid, Incorporated. The Textron
Warrants include (i) a warrant to purchase 427,307 shares of the Company's
common stock, (ii) a warrant to purchase 69,557 shares of Series A Preferred
Stock, with each share of Series A Preferred Stock to automatically convert to
20 shares of common stock, for a total of 1,391,140 shares of common stock, and
(iii) a contingent warrant to purchase a fixed percentage of certain additional
shares of common stock if issued by the Company in the future. All of the
Textron Warrants are exercisable until September 30, 2005 at an exercise price
of $5.00 per share and to date, no warrants have been exercised. See "Beneficial
Ownership of Securities." So long as any of the Textron Warrants are
outstanding, Textron shall have the right to nominate one person to the
Company's Board of Directors. Textron nominated Richard A. Watson, who served as
a member of the Board of Directors until his resignation on May 5, 1998
following the repayment of the Textron Loan. To date, Textron has exercised this
right only during the period that the Textron Loan was outstanding.
On June 1, 1997, the Board of Directors granted options to purchase 20,000
shares of common stock to Mr. DeCoste at an exercise price of $5.00 per share.
All such options were immediately vested and were exercisable for three years.
On January 8,1998, the Board of Directors granted options to purchase 60,000
shares of common stock to Mr. Wearsch at an exercise price of $4.75 per share.
On February 19, 1998, the Board of Directors granted an option to purchase
300,000 shares to Mr. Hevrony, an option to purchase 60,000 shares to Mr.
Burditt and an option to purchase 40,000 shares to each of Mr. Artzer, Mr.
Grafftey-Smith, Mr. Thomas and Mr. Verchick, all at an exercise price of $5.50
per share. On the same date, the Board of Directors granted an option to
purchase 30,000 shares to Mr. DeCoste, an option to purchase 60,000 shares to
Mr. Wearsch and an option to purchase 40,000 shares to Mr. Nolfi, all at an
exercise price of $6.00 per share. One third of these options vested on the date
of grant, one third will vest one year after the date of grant and the remaining
one third will vest two years after the date of grant. All such options granted
have an exercise price which was either equal to or greater than the market
price of the Company's common stock on the date of grant. All such options are
exercisable for five years except for those granted to Mr. Wearsch on January 8,
1998 which are exercisable for three years after vesting.
On February 20, 1998, the Board of Directors granted an option to purchase
50,000 shares of common stock to Dr. Muller at an exercise price of $5.00 per
share, with up to 16,666 or 16,667 of the options to vest in each of the next
three years depending on achievement of certain performance targets. All such
options granted have an exercise price which was either equal to or greater than
the market price of the Company's common stock on the date of grant. All such
options are exercisable for three years after vesting. On February 20, 1998, the
Board of Directors granted an option to purchase 60,000 shares of common stock
to Mr. Stahmer at an exercise price of $5.00 per share. These options expired
upon Mr. Stahmer's resignation effective July 31, 1998.
On August 1, 1998, the Board of Directors granted to Mr. Gemmersdorfer (i)
an option to purchase 60,000 shares of common stock at an exercise price of
$8.00 per share, with 12,000 options immediately vesting and 12,000 options to
vest on August 1 of each of the next four years, and (ii) an option to purchase
an additional 60,000 shares of common stock at an exercise price of $8.00 per
share, with 24,000 options to vest on June 1, 2000 and 12,000 options to vest on
June 1 of each of the next three years depending on achievement of certain
performance targets. All such options granted have an exercise price which was
either equal to or greater than the
12
<PAGE> 15
market price of the Company's common stock on the date of grant. All such
options are exercisable until the first to occur of July 31, 2003 or the third
anniversary of the date of vesting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1
PROPOSAL 2
APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors is recommending the ratification of its selection of
PricewaterhouseCoopers LLP as the Company's independent certified public
accountants to audit the financial statements of the Company for the 1999 fiscal
year. Although ratification of the choice of auditors is not legally required,
the Board believes such ratification to be in the best interests of the Company.
In the event such approval of stockholders is not received, the Board will
select another firm to audit the Company's financial statements.
PricewaterhouseCoopers LLP has advised the Company that neither it nor any of
its partners or associates has any direct or indirect financial interest in or
any connection with the Company other than as accountants and auditors. A
representative of PricewaterhouseCoopers LLP is expected to be present and
available to answer appropriate questions at the Annual Meeting and will be
given the opportunity to make a statement if desired.
The following resolution will be offered at the meeting:
RESOLVED, that PricewaterhouseCoopers LLP be and hereby is appointed as the
independent certified public accountants of the Company for its 1999 fiscal
year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matter shall properly come
before the Annual Meeting, the proxy holders named in the proxy accompanying
this statement will have discretionary authority to vote all proxies in
accordance with their best judgment.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to present resolutions to be included in the
proxy statement for the Company's next Annual Meeting (for the fiscal year
ending March 31, 1999) must file such resolutions with the Company not later
than May 31, 1999.
ADDITIONAL INFORMATION
This Proxy Statement is accompanied by the Company's Annual Report for the
fiscal year ended March 31, 1998 and the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1998. The Securities and Exchange Commission
(the "Commission") maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Company's Annual Report on Form 10-K and exhibits thereto will
be made available to stockholders at no charge upon their written request to the
Company, Attention: Ms. Nancy Gallipeo, 1 Mill Street, Fort Edward,
New York 12828.
Fort Edward, New York By Order of the Board of Directors
August 20, 1998
13
<PAGE> 16
[Form of Proxy]
DECORA INDUSTRIES, INC.
1 MILL STREET, FORT EDWARD, NEW YORK 12828
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, as owner of shares of Common Stock of Decora Industries,
Inc., a Delaware corporation (the "Company"), hereby acknowledges receipt of the
Proxy Statement and the notice of the stockholders meeting to be held on
September 28, 1998, at 9:00 a.m. local time, at the Desmond Hotel, located at
660 Albany Shaker Road, Albany, New York, and hereby further revokes all
previous proxies and appoints Nathan Hevrony and Timothy N. Burditt, or either
of them, as proxy of the undersigned at said meeting and any adjournments
thereof with the same effect as if the undersigned were present and voting the
shares.
(1) For the election of the following persons as directors of the Company to
serve until the next annual meeting of stockholders or until their
respective successors shall have been elected and qualified.
<TABLE>
<S> <C> <C>
[ ] AUTHORITY GRANTED to [ ] AUTHORITY WITHHELD to Nominees:
vote for nominees listed at right, vote for all nominees listed Nathan Hevrony
except as indicated to the at right. Roger Grafftey-Smith
contrary below. Gabriel B. Thomas
Stephen H. Verchick
Ronald A. Artzer
</TABLE>
(INSTRUCTION: TO VOTE AGAINST ANY NOMINEE, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
---------------------------------------------------------------------
(2) The approval and adoption of a resolution appointing
PricewaterhouseCoopers LLP as the Company's independent certified public
accountants for fiscal year 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) In their discretion upon such other matters as may properly come before
the meeting and any adjournments thereof.
(continued and to be signed on reverse side)
<PAGE> 17
(continued from previous side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS YOU HAVE INDICATED ABOVE.
IF NO INDICATION HAS BEEN MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR THE ABOVE NOMINEES AND IN FAVOR OF SUCH PROPOSALS, AND AS SAID PROXY
DEEMS ADVISABLE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Dated: __________________________ , 1998
________________________________________
________________________________________
Sign exactly as your name appears on
your share certificate. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
title. If more than one trustee, all
should sign. All joint owners should
sign. If a corporation, sign in full
corporation name by president or other
authorized officer. If a partnership,
sign in partnership name by authorized
person. Persons signing in a fiduciary
capacity should indicate their full
title in such capacity.
