<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
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:
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5) Total fee paid:
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[ ] 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.
<PAGE> 2
1) Amount Previously Paid:
------------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------
3) Filing Party:
----------------------------------------------------
4) Date Filed:
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<PAGE> 3
DECORA INDUSTRIES, INC.
-----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 26, 1999
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 Albany Marriott Hotel, located
at 189 Wolf Road, Albany, New York, on October 26, 1999, at 10:00 a.m., local
time, and any adjournments thereof (the "Annual Meeting"), to consider and act
upon the following matters:
(1) The election of five directors;
(2) Ratification of the Decora Industries, Inc. 1999 Stock Option Plan;
(3) Ratification of the selection of PricewaterhouseCoopers LLP as the
Company's independent certified public accountants for fiscal year 2000; and
(4) The transaction of such other business as may properly come before the
Annual Meeting.
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 September 14,
1999, 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 Annual Meeting.
By Order of the Board of Directors
Timothy N. Burditt
Secretary
Fort Edward, New York
September 15, 1999
<PAGE> 4
DECORA INDUSTRIES, INC.
1 MILL STREET
FORT EDWARD, NY 12828
-----------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 26, 1999
-----------------------
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 October 26, 1999 (the "Annual
Meeting"), 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, 1999 and
its Annual Report on Form 10-K for the fiscal year ended March 31, 1999,
including audited financial statements, are being mailed to you on or about
September 15, 1999 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 Annual Meeting by notice to the Company's Secretary and, if
you attend the Annual 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 Annual Meeting.
Only stockholders of record at the close of business on September 14, 1999
will be entitled to vote at the Annual Meeting. At the close of business on
September 14, 1999, there were 7,823,886 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. 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
Annual Meeting is required for approval of Proposals 1, 2 and 3. 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, 2 and 3.
The Company has been advised by its directors and officers that they intend
to vote the 232,750 shares of Common Stock which they hold, representing 3% 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."
<PAGE> 5
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 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 47 Director, Chairman, 1988
Chief Executive Officer
Roger Grafftey-Smith 68 Director 1988
Gabriel B. Thomas 58 Director 1991
Stephen H. Verchick 58 Director 1993
Ronald A. Artzer 55 Director 1994
Timothy N. Burditt 45 Executive Vice President, --
Administration and Business
Development; Secretary
Robert L. Macdonald 52 Chief Financial Officer --
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C> <C> <C>
Earl A. Wearsch 54 Executive Vice President; --
President and General Manager
of Decora, Incorporated
subsidiary ("Decora")
Rolf J. Gemmersdorfer 47 Executive Vice President; --
Chairman of Konrad Hornschuch
AG subsidiary ("Hornschuch")
Management Board
Richard A. DeCoste 60 Executive Vice President; --
Director of Operations
of Decora
</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. In 1998, Mr. Artzer co-founded Tak-a-Sample Marketing, Inc., a
promotional and marketing firm. Since August 1997, Mr. Artzer has also worked as
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.
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 three formal meetings during fiscal 1999.
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 of Directors does not have a Nominating
Committee.
3
<PAGE> 7
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
(Chairman), Gabriel Thomas and Stephen Verchick. In 1999, the Audit Committee
did not convene a formal meeting, as the results of the audit for the fiscal
year ended March 31, 1999 were reviewed by the entire membership of the Board of
Directors.
The Compensation Committee establishes salary and bonus 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 1999 and also conferred by telephone and took action
several times by written consent.
COMPENSATION OF DIRECTORS
Effective April 1, 1999, directors are paid $20,000 per year. Directors may
also receive stock options pursuant to a new stock option plan known as the
Decora Industries, Inc. 1999 Stock Option Plan which was adopted by the Board of
Directors on June 8, 1999. The plan, as described in Proposal 2 and which
remains subject to stockholder approval at the Annual Meeting, reserves for
grant and issuance to employees, directors and consultants 1,000,000 shares of
the Company's Common Stock. In addition, directors may also receive options 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.
EXECUTIVE OFFICERS
TIMOTHY N. BURDITT. Mr. Burditt was named Executive Vice President,
Administration and Business Development of the Company in June 1999. From 1993
through June 1999, Mr. Burditt was Executive Vice President, Administration and
Finance of the Company. Mr. Burditt has also been Secretary of the Company since
August 1993.
ROBERT L. MACDONALD. Mr. Macdonald was named Chief Financial Officer of the
Company in June 1999. From 1995 through June 1999, Mr. Macdonald was Chief
Financial Officer of BIC S.A., a French branded consumer products maker. Mr.
Macdonald served as Vice President Finance of BIC's North American Group from
1993 through 1995.
EARL A. WEARSCH. Mr. Wearsch was named Executive Vice President of the
Company and President and General Manager of Decora 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 Hornschuch's Management Board in August 1998.
From 1995 through 1997, Mr. Gemmersdorfer was General Manager of Oral-B
Laboratories GmbH, a subsidiary of the Gillette Company. From 1992 through 1994,
Mr. Gemmersdorfer was a general manager of the largest division of VP.
Schickedanz, Inc.
RICHARD A. DECOSTE. Mr. DeCoste joined Decora in January 1993. In February
1994, Mr. DeCoste became President of Decora's Consumer Decorative Products
Group. In November 1994, he became Executive Vice President of the Company and
in June 1997 he became Director of Operations of Decora.
4
<PAGE> 8
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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities ("reporting
persons"), to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Reporting persons
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
reports and amendments thereto on Forms 3, 4 and 5 furnished to the Company by
reporting persons during, and with respect to, its fiscal year ended March 31,
1999, and on a review of written representations from reporting persons to the
Company that no other reports were required to be filed for such fiscal year,
all Section 16(a) filing requirements applicable to the Company's directors,
executive officers and greater than ten percent beneficial owners during such
period were satisfied in a timely manner, except that State Street Bank & Trust
Company, Trustee for the Textron Master Trust ("Textron"), a shareholder which
beneficially owned in excess of 10% of the Company's Common Stock until August
1999, failed to file one required report.
5
<PAGE> 9
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth, as of September 9, 1999, 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 executive 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>
Robert W. Johnson, IV....................... 388,416(3) 385,000 773,416 9.4%
The Johnson Company
630 Fifth Avenue, Suite 1510
New York, NY 10111
State Street Bank & Trust................... 400,000 0 400,000 5.1%
Company, Trustee
Textron Master Trust
One Enterprise Drive
Master Trust -- W6C
North Quincy, MA 02171
Nathan Hevrony.............................. 150,750 430,000 580,750 7.0%
Roger Grafftey-Smith........................ 75,000 112,400 187,400 2.4%
Gabriel B. Thomas........................... 0 142,400 142,400 1.8%
Stephen H. Verchick......................... 0 75,000 75,000 (4)
Ronald A. Artzer............................ 0 70,000 70,000 (4)
Timothy N. Burditt.......................... 2,000 65,000 67,000 (4)
Earl A. Wearsch............................. 1,000 80,000 81,000 1.0%
Rolf J. Gemmersdorfer....................... 0 24,000 24,000 (4)
Richard A. DeCoste.......................... 4,000 55,000 59,000 (4)
All directors and executive officers as a
group, including the named persons (10
persons).................................... 232,750 1,053,800 1,286,550 14.5%
</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.
(2) The amounts shown reflect shares of Common Stock underlying stock options,
convertible notes or warrants which are exercisable within 60 days. The
amounts shown do not reflect a total of 360,000 shares of Common Stock
underlying options granted, effective as of May 1, 1999, by the Board of
Directors under the Decora Industries, Inc. 1999 Stock Option Plan to the
following persons: Ronald Artzer (25,000); Roger Grafftey-Smith (25,000);
Gabriel Thomas (25,000); Stephen Verchick (25,000); Nathan Hevrony
(150,000); Timothy Burditt (55,000) and Earl Wearsch (55,000). These
options are not included in the beneficial ownership table because their
grant is contingent upon approval of the Decora Industries, Inc. 1999 Stock
Option Plan by the Company's stockholders.
(3) Mr. Johnson disclaims beneficial interest in 27,000 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.
6
<PAGE> 10
EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Hevrony. The current
employment agreement is in effect until May 31, 2000. The agreement provides for
payment of an annual salary of $375,000 (subject to periodic increase at the
discretion of the Compensation Committee) plus performance bonuses. Mr.
Hevrony's salary was adjusted by the Compensation Committee to its current level
in January 1999 after considering the evaluation of Buck Consultants, an
international compensation consulting firm engaged to review the Company's
compensation programs.
Performance bonuses include awards made under the Company's Acquisition
Incentive Plan. The Company's Acquisition Incentive Plan was established by the
Compensation Committee early in fiscal 1998 in order to further the Company's
objective of building shareholder value through key acquisitions by rewarding
participants for their role in completing such acquisitions. In implementing the
plan, the Company sought to provide an incentive to senior management to pursue
acquisition opportunities which would transform the Company from a contract
manufacturer to a company with its own sales, marketing and distribution system,
and thus a greater ability to control brand identity and potential business
opportunities. The Acquisition Incentive Plan includes Mr. Hevrony and other key
officers named below and has been reviewed on behalf of the Compensation
Committee by Buck Consultants. Officers covered under the plan were entitled to
payment of a bonus based on the ratio of the acquired company's earnings before
interest, taxes, depreciation and amortization (EBITDA) to the Company's EBITDA
for the 1998 fiscal year, multiplied by a designated percentage of the
participant's base salary. The application of these criteria resulted in a bonus
to Mr. Hevrony of $391,625 during the 1999 fiscal year in connection with his
role in negotiating, structuring and obtaining financing (through a $112.75
million bond offering) for the Company's acquisition in April 1998 of the
Decorative Coverings Group of Rubbermaid Incorporated (the "Rubbermaid
Acquisition"). The Rubbermaid Acquisition completed the transformation of the
Company from a contract manufacturer of products for others to its current
position as one of the world's largest vertically integrated manufacturers and
marketers of branded consumer self-adhesive products. Going forward, the
Compensation Committee has decided to replace the Acquisition Incentive Plan
with the Executive Incentive Plan, as described below.
In October 1998, the Compensation Committee adopted an Executive Incentive
Plan to award bonuses calculated with respect to the Company's financial
performance to key executive officers, including Mr. Hevrony and the officers
named below. These officers are eligible to receive awards pursuant to the terms
of the Executive Incentive Plan if the Company meets objectives for EBITDA and
operating profit which are set annually by the Compensation Committee. Based on
the Company's achievement of objectives for the fiscal year ended March 31,
1999, Mr. Hevrony was awarded an incentive bonus of $340,500 in August 1999
pursuant to the terms of this plan which was paid in fiscal 2000.
The Company has an employment agreement with Mr. Burditt, its Executive
Vice President, Administration and Business Development, until June 30, 2001.
The agreement was amended in January 1999 to provide minimum annual compensation
in the amount of $210,000. In August 1999, Mr. Burditt was awarded a bonus of
$143,010 pursuant to the terms of the Company's Executive Incentive Plan, based
on the Company's achievement of financial objectives for the fiscal year ended
March 31, 1999. This bonus was paid to Mr. Burditt in fiscal 2000. During fiscal
year 1999, Mr. Burditt was awarded a bonus of $247,925 pursuant to the terms of
the Company's Acquisition Incentive Plan for his role in the Rubbermaid
Acquisition. 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.
7
<PAGE> 11
The Company has a three-year employment agreement with Mr. DeCoste,
Decora's Director of Operations, 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 twelve months or to the end
of the term. As part of his 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.
As of January 8, 1998, Decora entered into a three-year employment
agreement with Mr. Wearsch, its President and General Manager. The agreement was
amended in January 1999 to provide minimum annual compensation in the amount of
$210,000. During fiscal year 1999, Mr. Wearsch was awarded a bonus of $54,000
pursuant to the terms of the Acquisition Incentive Plan for his role in the
Rubbermaid Acquisition. In August 1999, Mr. Wearsch was awarded a bonus of
$25,197 pursuant to the terms of the Company's Executive Incentive Plan, based
on the Company's achievement of financial objectives for the fiscal year ended
March 31, 1999. This bonus was paid to Mr. Wearsch in fiscal 2000. The Company
also awarded to Mr. Wearsch in August 1999 a special bonus in the amount of
$66,600 for his performance in connection with the transition of manufacturing
operations and sales, distribution and information systems after the Rubbermaid
Acquisition. As part of his 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 twelve 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 twelve months following the
resignation.
Hornschuch has a five year employment agreement with Mr. Gemmersdorfer
which expires in July 2003. Pursuant to the agreement, Mr. Gemmersdorfer is the
Chairman of Hornschuch's Management Board. The agreement provides for annual
base compensation of DM 500,000 plus an annual bonus of up to DM 200,000 in 1999
and DM 250,000 in years 2000 through 2003. The actual amount of the bonus in any
year depends on the achievement of certain enumerated financial targets. In the
event that such financial targets are exceeded in any year, Mr. Gemmersdorfer
will be entitled to receive for such year, in addition to the bonus described
above, an additional bonus based on a formula, although the total combined bonus
payments in any year shall not exceed the base compensation payable in such
year. In case of premature termination of the employment agreement during the
first three years, Mr. Gemmersdorfer will be entitled to remuneration in the
maximum amount of two times his annual salary.
8
<PAGE> 12
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 four other most highly compensated executive officers during the
fiscal years ended March 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
FISCAL --------------------- COMPENSATION SHARES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS(1)
- --------------------------- ------ --------- -------- ---------------------
<S> <C> <C> <C> <C>
Nathan Hevrony........................... 1999 $326,423 $391,625 --
Chairman and Chief Executive Officer 1998 $217,644(2) $400,000 300,000
1997 $185,000(2) -- --
Timothy N. Burditt....................... 1999 $190,865 $247,925 --
Executive Vice President, 1998 $141,592 $275,000 60,000
Administration and Business 1997 $120,000 $ 15,000 --
Development
Earl A. Wearsch.......................... 1999 $179,962 $ 54,000 --
Executive Vice President and 1998 $ 37,269 -- 120,000
President and General Manager 1997 -- -- --
of Decora
Rolf J. Gemmersdorfer.................... 1999 $191,504 -- 120,000(3)
Executive Vice President and 1998 -- -- --
Chairman of Hornschuch Management 1997 -- -- --
Board
Richard A. DeCoste....................... 1999 $140,000 $ 6,000 --
Executive Vice President 1998 $140,000 -- 50,000
Director of Operations of Decora 1997 $125,000 $ 5,000 --
</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) Of these options, 12,000 vested immediately upon grant, 48,000 will vest
over a period of four years (12,000 per year), and the remaining 60,000
will vest upon the achievement of certain performance objectives over the
course of four years.
9
<PAGE> 13
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
- -------------------------------------------------------------------------------------- REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM
OPTIONS IN THE FISCAL EXERCISE EXPIRATION ----------------------
NAME GRANTED YEAR PRICE DATE 5% 10%
- ---- ---------- ------------- -------- ---------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Rolf J. Gemmersdorfer 120,000(1) 30.8% $8.00 7/31/2003 $201,677 $501,172
</TABLE>
- ----------
(1) The options will vest as follows: 12,000 vested immediately on the date of
grant, 48,000 will vest over a period of four years (12,000 per year) and
the remaining 60,000 will vest upon achievement of certain performance
criteria over the course of four years.
AGGREGATED MARCH 31, 1999 YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SHARES UNDERLYING 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..................... 430,000 100,000 $335,000 $100,000
Timothy N. Burditt................. 65,000 20,000 $45,000 $20,000
Earl A. Wearsch.................... 80,000 40,000 $90,000 $45,000
Richard A. DeCoste................. 55,000 10,000 $40,000 $5,000
Rolf J. Gemmersdorfer.............. 12,000 108,000 $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 Common Stock on March 31, 1999.
During the year ended March 31, 1999, none of the executive officers
exercised any outstanding stock options. The only unexercised options held by
such executive officers as of March 31, 1999 are shown in the table above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Company's fiscal year ended March 31, 1999, all decisions
concerning executive officer compensation were made by the Compensation
Committee of the Board of Directors. The members of the Compensation Committee
were Ronald A. Artzer (Chairman), Gabriel B. Thomas, Roger Grafftey-Smith and
Stephen H. Verchick, all of whom are non-employee directors. See "Directors and
Executive Officers."
10
<PAGE> 14
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 ensure 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 Business Development),
Richard DeCoste (Executive Vice President), Rolf J. Gemmersdorfer (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 pursuant to the terms of the Acquisition Incentive Plan, as described
below under the caption entitled "Annual Incentives." In January 1999, after
considering the evaluation of Buck Consultants, the Compensation Committee
increased Mr. Hevrony's annual salary to $375,000. When entering into the
agreement, the Compensation Committee reviewed the Company's prior and current
earnings and considered
- ----------
(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.
11
<PAGE> 15
Mr. Hevrony's efforts to restructure the Company's debt and other operations,
as well as his success in 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 acquisition of Hornschuch and
Rubbermaid's Decorative Coverings Group. 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.
For fiscal 1999, incentive programs were used to reward executives for
performance in connection with acquisitions (the Acquisition Incentive Plan) and
financial results (the Executive Incentive Plan). Early in fiscal 1998, the
Compensation Committee established an Acquisition Incentive Plan to focus on the
Company's objective of building shareholder value through key acquisitions and
to reward participants for their role in completing such acquisitions. The
Acquisition Incentive Plan provided for payment of a bonus based on the ratio of
the acquired company's earnings before interest, taxes, depreciation and
amortization (EBITDA) to the Company's EBITDA for the 1998 fiscal year,
multiplied by a designated percentage of the participant's base salary. The
application of these criteria resulted in a bonus to Mr. Hevrony of $391,625
during the 1999 fiscal year in connection with the completion of the Rubbermaid
Acquisition. Buck Consultants has reviewed both the terms of the Acquisition
Incentive Plan and the award issued thereunder to Mr. Hevrony in connection with
the Rubbermaid Acquisition and has advised the Compensation Committee that such
award was reasonable. Going forward, the Compensation Committee has decided to
replace the Acquisition Incentive Plan with the Executive Incentive Plan, as
described below.
In October 1998, the Compensation Committee adopted an Executive Incentive
Plan to award bonuses to key executive officers, including Mr. Hevrony, with
respect to the Company's financial performance. Officers are eligible to receive
awards pursuant to the terms of the Executive Incentive Plan if the Company
meets objectives for EBITDA and operating profit which are set annually by the
Compensation Committee. Based on the Company's achievement of such objectives
for the fiscal year ended March 31, 1999, Mr. Hevrony was awarded a bonus of
$340,500 pursuant to the terms of the Executive Incentive Plan in August 1999
which was paid in fiscal 2000.
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. In June 1999, the Board of Directors adopted the
Decora Industries, Inc. 1999 Stock Option Plan and granted thereunder, effective
May 1, 1999, a total of 360,000 options to executive officers and directors of
the Company, including 150,000 options granted to Mr. Hevrony at an exercise
price of $6.50 per share. The grant of these options is contingent upon approval
of the Decora Industries, Inc. 1999 Stock Option Plan by the Company's
stockholders. Mr. Hevrony's options shall vest immediately upon stockholder
approval. The exercise price of stock options granted pursuant to the terms of
the Decora Industries, Inc. 1999 Stock Option Plan must equal or exceed the
market value of the Company's Common Stock at the time of the grant. Options may
vest immediately upon grant or over a period of time. Options granted pursuant
to the terms
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<PAGE> 16
of the Decora Industries, Inc. 1999 Stock Option Plan are exercisable for a
maximum period of ten years, although the Company has granted options outside
the Plan with different vesting periods. Buck Consultants has reviewed the grant
of options under the Decora Industries, Inc. 1999 Stock Option Plan to Mr.
Hevrony and the other directors and has advised the Compensation Committee that
such grant was reasonable.
During fiscal 1999, 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.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE
<S> <C>
Ronald A. Artzer, Chairman Gabriel B. Thomas
Roger Grafftey-Smith Stephen H. Verchick
</TABLE>
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, 1994 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 YEARS ENDING
PERIOD ----------------------------------------------
COMPANY/INDEX MAR94 MAR 95 MAR 96 MAR 97 MAR 98 MAR 99
- ------------- ------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
DECORA INDS INC 100 97.24 97.24 69.42 101.10 115.56
S&P 500 INDEX 100 115.57 152.67 182.93 270.74 320.72
HOUSEHOLD PDS (NON-DURA)--500 100 126.90 164.98 224.96 318.13 355.01
</TABLE>
13
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 8, 1999, the Board of Directors of the Company approved, subject to
the approval of the Company's stockholders at the Annual Meeting, the Decora
Industries, Inc. 1999 Stock Option Plan (the "Plan"). The Plan reserves for
grant and issuance to employees, directors and consultants 1,000,000 shares of
the Company's Common Stock. Simultaneously with its approval of the Plan, the
Board of Directors approved the issuance under the Plan, effective May 1, 1999,
of options to directors and executive officers as follows: Ronald Artzer
(25,000); Roger Grafftey-Smith (25,000); Gabriel Thomas (25,000); Stephen
Verchick (25,000); Nathan Hevrony (150,000); Timothy Burditt(55,000) and Earl
Wearsch (55,000).
On August 1, 1998, the Board of Directors granted to Rolf J. 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
up to an additional 60,000 shares of Common Stock at an exercise price of $8.00
per share depending on achievement of certain performance targets in 1999
through 2002. 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 until the first to occur of July
31, 2003 or the third anniversary of such vesting.
On April 29, 1998, as part of a refinancing associated with the Rubbermaid
Acquisition, the Company paid off in full an $18,000,000 subordinated loan to
Textron. In connection with that loan, Textron was issued warrants in October
1997 which upon exercise enabled it to purchase up to 1,818,447, or
approximately 19.7%, of the outstanding Common Stock of the Company. In August
1999, the Company and Textron entered into an agreement pursuant to which these
warrants were exchanged for 400,000 shares of the Company's Common Stock and a
cash payment of $750,000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1
PROPOSAL 2
APPROVAL OF 1999 STOCK OPTION PLAN
On June 8, 1999, the Board of Directors of the Company unanimously adopted a
resolution recommending to the stockholders the adoption of the Decora
Industries, Inc. 1999 Stock Option Plan (the "Plan").
Simultaneously with the adoption of the Plan, the Board of Directors
approved the issuance under the Plan, effective May 1, 1999, of options to
purchase the Company's Common Stock to directors and executive officers as set
forth in the table below. All of the options described in the table shall vest
immediately upon stockholder approval and shall expire within five years. The
closing price of the Company's Common Stock on The Nasdaq Stock Market as of
September 9, 1999 was $4.5625 per share.
14
<PAGE> 18
DECORA INDUSTRIES, INC.
1999 STOCK OPTION PLAN
OPTION GRANT SUMMARY
<TABLE>
<CAPTION>
OPTIONS EXERCISE
NAME POSITION GRANTED PRICE
---- -------- ------- -----
<S> <C> <C> <C>
Nathan Hevrony Director, Chairman and Chief Executive 150,000 $6.50
Officer
Timothy N. Burditt Executive Vice President Administration and 55,000 $6.50
Business Development
Earl A. Wearsch Executive Vice President and President and 55,000 $6.50
General Manager of Decora
Ronald A. Artzer Director 25,000 $6.50
Roger Grafftey-Smith Director 25,000 $6.50
Gabriel B. Thomas Director 25,000 $6.50
Stephen H. Verchick Director 25,000 $6.50
All Current Executive 260,000 $6.50
Officers as a Group
Each Nominee for 250,000 $6.50
Director
All current directors who 100,000 $6.50
are not executive officers
as a group
All employees as a group 45,000 $6.50
(not including executive
officers and directors)
</TABLE>
Below is a summary of the principal provisions of the Plan. The summary is
not necessarily complete, and reference is made to the full text of the Plan, as
amended, attached as an Appendix to this Proxy Statement.
Description of the Plan. The following summary of the Plan is qualified in
its entirety by reference to the complete text of the Plan, which is attached
hereto as Appendix A. Capitalized terms used, but not defined herein, shall have
the same meaning as set forth in the Plan.
General. The purpose of the Plan is to provide incentives to attract, retain
and motivate eligible persons whose present and potential contributions are
important to the success of the Company and its subsidiaries and affiliates, by
offering them an opportunity to participate in the Company's future performance
through awards of options. Under the Plan, stock options ("Plan Options") may be
granted to certain directors, officers, employees, consultants, independent
contractors and advisers of the Company or its subsidiaries or affiliates. By
encouraging stock ownership, the Company seeks to attract, retain and motivate
such persons and to encourage such employees and persons to devote their best
efforts to the business and financial success of the
15
<PAGE> 19
Company. The Company also believes that stock incentive programs, such as the
Plan, are commonly employed by companies as an important element of a total
compensation program. It is intended that the Plan will comply with the
requirements of Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 16b-3 promulgated thereunder. The Company believes
that compliance with these rules is beneficial to recipients of Plan Options
because of the favorable treatment of such options under the "short-swing"
profit rules of Section 16 of the 1934 Act.
Subject to adjustment in certain circumstances as discussed below, the Plan
authorizes up to 1,000,000 shares of Common Stock for issuance pursuant to Plan
Options granted under the terms of the Plan. If and to the extent Plan Options
expire or are terminated for any reason without being exercised, the shares of
Common Stock subject to such Plan Options again will be available for purposes
of the Plan.
Administration of the Plan. The Plan will be administered by a committee of
the Board ("the Committee") or the Board acting as the Committee. The Committee
will have the sole discretion, subject to certain limitations, to interpret the
Plan; to select Plan participants; to determine the type, size, terms and
conditions of awards under the Plan; to authorize the grant of such awards; and
to adopt, amend and rescind rules relating to the Plan. While the Committee will
have full power to implement and carry out the Plan, grants of Plan Options to
directors must be carried out in accordance with the terms of the Plan, as
discussed below. All determinations of the Committee will be conclusive. All
expenses of administering the Plan will be borne by the Company.
Grants. Grants under the Plan may consist of: (i) options intended to
qualify as incentive stock options ("ISOs") within the meaning of the Internal
Revenue Code of 1986, as amended (the "Code"), (ii) so-called "non-qualified
stock options" that are not intended to so qualify ("NQSOs"), or (iii) a
combination thereof.
United States Federal Income Tax Information. The following is a brief
summary of the U.S. federal income tax consequences of transactions under the
Plan based on federal income tax laws in effect on the date of this Proxy
Statement. This summary is not intended to be exhaustive and does not address
all matters that may be relevant to a particular participant based on his or her
specific circumstances. The summary addresses only current U.S. federal income
tax law and expressly does not discuss the income tax laws of any state,
municipality, non-U.S. taxing jurisdiction or gift, estate or other tax laws
other than federal income tax law. The Company advises all participants to
consult their own tax advisor concerning the tax implications of option grants
and exercises and the disposition of stock acquired upon such exercises, under
the Plan.
Options granted under the Plan may be either an ISO, which are intended to
qualify for the special tax treatment provided by Section 422 of the Code, or a
NQSO, which will not qualify. If an option granted under the Plan is an ISO, the
participant will recognize no income upon grant of the ISO and will incur no tax
liability due to the exercise, except to the extent that such exercise causes
the participant to incur alternative minimum tax. (See discussion below.) The
Company will not be allowed a deduction for federal income tax purposes as a
result of the exercise of an ISO regardless of the applicability of the
alternative minimum tax. Upon the sale or exchange of the shares more than two
years after grant of an ISO and one year after its exercise by the participant,
any gain will be treated as a long-term capital gain. If both of these holding
periods are not satisfied, the participant will recognize ordinary income equal
to the difference between the exercise price and the lower of the fair market
value of the Common Stock on the date of the option exercise or the sale price
of the Common Stock. The Company will be entitled to a deduction in the same
amount as the ordinary income recognized by the participant. Any gain or loss
recognized on a disposition of the shares prior to completion of both of the
above holding periods in excess of the amount treated as ordinary income will be
characterized as long-term capital gain if the sale occurs more than one year
after exercise of the option or as short-term capital gain if the sale is made
earlier. For individual taxpayers, the current U.S. federal income tax rate on
long-term
16
<PAGE> 20
capital gains is 20% whereas the maximum rate on other income is 39.6%. Capital
losses for individual taxpayers are allowed in full against capital gains plus
$3,000 of other income.
All other options which do not qualify as an ISO are referred to as a NQSO.
A participant will not recognize any taxable income at the time he or she is
granted a NQSO. However, upon its exercise, the participant will recognize
ordinary income for tax purposes measured by the excess of the fair market value
of the shares over the exercise price. In certain circumstances, where the
shares are subject to a substantial risk of forfeiture when acquired, the date
of taxation may be deferred unless the participant files an election with the
Internal Revenue Service under Section 83(b) of the Code. The income recognized
by a participant who is also an employee of the Company will be subject to
income and employment tax withholding by the Company by payment in cash by the
participant or out of the participant's current earnings. Upon the sale of such
shares by the participant, any difference between the sale price and the fair
market value of the shares as of the date of exercise of the option will be
treated as capital gain or loss, and will qualify for long-term capital gain or
loss treatment depending on whether the shares have been held for more than one
year from date of exercise.
Alternative Minimum Tax. The exercise of an ISO may subject the participant
to the alternative minimum tax under Section 55 of the Code. The alternative
minimum tax is calculated by applying a tax rate of 26% to alternative minimum
taxable income of joint filers up to $175,000 ($87,500 for married taxpayers
filing separately) and 28% to alternative minimum taxable income above that
amount. Alternative minimum taxable income is equal to (i) taxable income
adjusted for certain items, plus (ii) items of tax preference less (iii) an
exemption amount of $45,000 for joint returns, $33,750 for unmarried individual
returns and $22,500 in the case of married taxpayers filing separately (which
exemption amounts are phased out for upper income taxpayers).
Alternative minimum tax will be due if the tax determined under the
foregoing formula exceeds the regular tax of the taxpayer for the year.
In computing alternative minimum taxable income, shares purchased upon
exercise of an ISO are treated as if they had been acquired by the participant
pursuant to exercise of a NQSO. As a result, the participant recognizes
alternative minimum taxable income equal to the excess of the fair market value
of the Common Stock on the date of exercise over the option exercise price.
Because the alternative minimum tax calculation may be complex, participants
should consult their own tax advisors prior to exercising an ISO.
If a participant pays alternative minimum tax, the amount of such tax may be
carried forward as a credit against any subsequent year's regular tax in excess
of the alternative minimum tax for such year.
The foregoing does not purport to be a complete summary of the effect of
federal income taxation upon holders of options or upon the Company and does not
address the federal income tax consequences to taxpayers with special tax
status. It also does not reflect provisions of the income tax laws of any
municipality, state or foreign country in which a participant may reside, and
does not discuss estate, gift or other tax consequences other than income tax
consequences.
Eligibility. Employees, officers, consultants, independent contractors,
advisers and certain directors of the Company and its subsidiaries and
affiliates will be eligible to receive NQSOs under the Plan. Employees are also
eligible to receive ISOs under the Plan. Directors who are not employees of the
Company will be entitled to receive only NQSOs under the Plan.
Options to Non-Director Participants. The Plan permits the Committee to
grant Plan Options either as ISOs or as NQSOs, and allows the Committee to
establish, as to any participant, the number of Plan Options, exercise price,
exercise term (subject to a maximum of five years for grants of an ISO to a ten
percent
17
<PAGE> 21
stockholder, and ten years for all other Plan Options), and other terms and
conditions. Subject to the foregoing, the option exercise price for each share
covered by a Plan Option may not be less than 100% of the fair market value of a
share of Common Stock on the date of grant of such Plan Option; and in the case
of an ISO granted to a ten percent stockholder, the exercise price will be no
less than 110% of the fair market value of the Common Stock on the date of
grant. The recipient may pay the exercise price by (i) cash, (ii) cancellation
of indebtedness of the Company to the participant, (iii) surrender of shares of
the Company's Common Stock that have been owned by the participant for more than
six months and have been paid for within the meaning of Rule 144 promulgated
under the Securities Act of 1933, as amended, or were obtained by the
Participant in the public market and are clear of all liens, claims,
encumbrances and security interests; (iv) waiver of compensation due to the
Participant for services rendered; (v) provided a public market exists for the
Company's stock, through a same day sale of the shares acquired upon exercise of
a Plan Option, or through a "margin" commitment from the Participant, in each
case, subject to applicable securities laws; and (vi) any combination of the
foregoing. Notwithstanding the foregoing, directors who are not employees of the
Company may pay the exercise price for Plan Options only by (i) cash, (ii)
cancellation of indebtedness of the Company to such director, or a combination
of the foregoing.
Amendment and Termination of the Plan. The Board may amend or terminate the
Plan at any time; provided, however, that the Board may not, without the
approval of stockholders, amend the Plan in any manner that requires such
stockholder approval pursuant to the Code as such provisions apply to ISOs or
pursuant to the 1934 Act or Rule 16b-3 thereunder, and the terms and conditions
of any awards to directors shall not be amended more than once every six months,
other than to comply with changes in the Code or the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). According to its terms, the Plan
will terminate ten years from the effective date.
Adjustment Provisions. In the event of a stock split, stock dividend,
combination or exchange of shares, merger, consolidation, reorganization,
recapitalization or similar transaction, an appropriate adjustment shall be made
to the number of shares of Common Stock (and the exercise price per share)
subject to the unexercised portion of any outstanding Plan Option; provided,
however, that in the event of a merger, consolidation, liquidation or sale of
the Company in a transaction in which the Company is not to be the surviving
entity, the Board has the right to accelerate vesting of all options so that
they become exercisable within the 30-day period preceding the merger,
consolidation, liquidation or sale.
The following resolution will be offered at the Annual Meeting:
RESOLVED, that the Decora Industries, Inc. 1999 Stock Option Plan in
the form attached hereto as Appendix A be adopted by the Company.
The affirmative vote of the holders of a majority of shares of Common Stock
entitled to vote at the Annual Meeting is required to approve the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" PROPOSAL 2
18
<PAGE> 22
PROPOSAL 3
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 fiscal year
ended March 31, 2000. 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 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 Annual Meeting:
RESOLVED, that PricewaterhouseCoopers LLP be and hereby is appointed as the
independent certified public accountants of the Company for fiscal year
2000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3
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, 2000) must file such resolutions with the Company not later
than May 14, 2000.
ADDITIONAL INFORMATION
This Proxy Statement is accompanied by the Company's Annual Report for the
fiscal year ended March 31, 1999 and the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1999. 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
September 15, 1999
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<PAGE> 23
APPENDIX A
DECORA INDUSTRIES, INC.
1999 STOCK OPTION PLAN
1. PURPOSE
The purpose of the Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company and its Subsidiaries and Affiliates,
by offering them an opportunity to participate in the Company's future
performance through awards of Options.
Capitalized terms not defined in the text are defined in Section
20.
2. SHARES SUBJECT TO THE PLAN
2.1 NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2 and
14, the total number of Shares reserved and available for grant and issuance
pursuant to the Plan shall be One Million (1,000,000) Shares, provided however,
that the maximum number of Shares that may be issued under the Plan to each
Participant who is subject to Section 162(m) of the Code shall be limited to
Five Hundred Thousand (500,000) Shares. Subject to Sections 2.2 and 14, Shares
reserved for issuance pursuant to Options granted under this Plan shall again be
available for grant and issuance, in connection with future Options under the
Plan, that: (a) are subject to issuance upon exercise of an Option, but cease to
be subject to such Option for any reason other than exercise of such Option, or
(b) are subject to an Option that otherwise terminates without such Shares being
issued and for which the participant did not receive any benefits of ownership.
2.2 ADJUSTMENT OF SHARES. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then: (a) the number of Shares reserved for issuance
under the Plan, and (b) the Exercise Prices of and number of Shares subject to
outstanding Options, shall be proportionately adjusted, subject to any required
action by the Board or the stockholders of the Company and compliance with
applicable securities laws; provided, however, that fractions of a Share shall
not be issued, but shall either be paid in cash at Fair Market Value or shall be
rounded up to the nearest Share, as determined by the Committee; and provided,
further, that the Exercise Price of any Option may not be decreased to below the
par value of the Shares.
3. ELIGIBILITY
3.1 ELIGIBILITY OF EMPLOYEES, CONSULTANTS AND INDEPENDENT
CONTRACTORS. ISOs (as defined in Section 5 below) may be granted only to
employees (including officers and directors who are also employees ) of the
Company or of a Subsidiary of the Company. NQSOs may be granted to employees,
officers, directors, consultants, independent contractors and advisers of the
Company or any Subsidiary or Affiliate of the Company; provided, however, that
such consultants, contractors and advisers render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted both ISOs and NQSOs under the Plan.
<PAGE> 24
4. ADMINISTRATION.
4.1 COMMITTEE AUTHORITY. The Plan shall be administered by
the Committee or the Board acting as the Committee. Subject to the purposes,
terms and conditions of the Plan, and to the direction of the Board, the
Committee shall have full power to implement and carry out the Plan. The
Committee shall have the authority to:
(a) construe and interpret the Plan, any Option
Agreement and any other agreement or document executed pursuant
to the Plan;
(b) prescribe, amend and rescind rules and
regulations relating to the Plan;
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares or other
consideration subject to Options;
(f) determine whether Options will be granted
singly, in combination or in tandem with, in replacement of, or
as alternatives to, other Options under the Plan or any other
incentive or compensation plan of the Company or any Subsidiary
or Affiliate of the Company;
(g) grant waivers of Plan or Option conditions;
(h) determine the vesting, exercisability and
payment of Options and to accelerate the vesting and/or
exercisability of Options, as provided herein;
(i) correct, any defect, supply any omission, or
reconcile any inconsistency in the Plan, any Option or any
Option Agreement;
(j) determine whether an Option has been earned; and
(k) make all other determinations necessary or
advisable for the administration of the Plan.
4.2 COMMITTEE DISCRETION. Any determination permitted to be
made by the Committee under the Plan with respect to any Option shall be made in
its sole discretion at the time of grant of the Option or, unless in
contravention of any express term of the Plan or Option, at any later time, and
such determination shall be final and binding on the Company and all persons
having an interest in any Option under the Plan.
4.3 COMPOSITION OF COMMITTEE. The Committee shall be
comprised of either (i) at least two members of the Board, all of whom are both
Outside Directors and Nonemployee Directors; or (ii) the Board acting as the
Committee. It is the intent of the Company that the Plan and Options hereunder
satisfy and be interpreted in a manner, that, in the case of Participants who
are or may be Insiders, satisfies the applicable requirements of Rule 16b-3 (or
its successor) of the Exchange Act. If any provision of the Plan or of any
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<PAGE> 25
Option would otherwise conflict with the intent expressed in this Section 4.3,
that provision, to the extent possible, shall be interpreted and deemed amended
so as to avoid such conflict.
5. GRANT AND EXERCISE OF OPTIONS
5.1 GRANT OF OPTIONS. Except as otherwise limited herein,
the Committee may grant Options to eligible persons pursuant to this Section 5.1
and shall determine whether such Options shall be Incentive Stock Options within
the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the
number of Shares subject to the Option, the Exercise Price of the Option, the
period during which the Option may be exercised, and all other terms and
conditions of the Option, subject to the following:
5.1.1 FORM OF OPTION GRANT. Each Option granted shall
be evidenced by an Option Agreement, which shall expressly identify the Option
as an ISO or NQSO ("Stock Option Agreement"), and be in such form and contain
such provisions (which need not be the same for each Participant receiving an
Option) as the Committee shall from time to time approve, and which shall comply
with and be subject to the terms and conditions of the Plan. The Committee may
in its discretion include in any NQSO granted under the Plan a condition that
the Participant shall agree to remain in the employ of, and to render services
to, the Company or any of its Subsidiaries for a period of time (specified in
the agreement) following the date the NQSO is granted.
5.1.2 DATE OF GRANT. The date of grant of an Option
shall be the date on which the Committee makes the determination to grant such
Option. The Stock Option Agreement and a copy of the Plan will be delivered to
the Participant within a reasonable time after the granting of such Option.
5.1.3 EXERCISE PERIOD. Options shall be exercisable
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement; provided, however:
(a) no Option shall be exercisable after the
expiration of ten (10) years from the date the Option is
granted;
(b) no ISO granted to a person who directly or by
attribution owns more than Ten Percent (10%) of the total
combined voting power of all classes of stock of the Company or
any Subsidiary of the Company ("Ten Percent Stockholder") shall
be exercisable after the expiration of five (5) years from the
date the Option is granted.
5.1.4 EXERCISE PRICE. The Exercise Price shall be
determined by the Committee when an Option is granted and may be not less than
the greater of (i) 100% of the Fair Market Value of the Shares on the date of
grant, or (ii) the par value of the Shares; provided, however, that the Exercise
Price of any ISO granted to a Ten Percent Stockholder shall not be less than
110% of the Fair Market Value of the Shares on the date of grant. Payment for
the Shares purchased may be made in accordance with Section 6 of the Plan.
5.1.5 METHOD OF EXERCISE. Options may be exercised
only by delivery to the Company of a written stock option exercise agreement
(the "Exercise Agreement") in a form approved by the Committee (which need not
be the same for each Participant receiving an Option pursuant to the Plan),
stating the number of Shares being purchased, the restrictions imposed on the
Shares, if any, and such representations
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<PAGE> 26
and agreements regarding Participant's investment intent, access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with payment in full of the
Exercise Price for the number of Shares being purchased.
5.1.6 TERMINATION. Notwithstanding the exercise
periods set forth in the Stock Option Agreement, exercise of an Option shall
always be subject to the following:
(a) If the Participant is Terminated for any reason
except death or Disability, then the Participant may exercise
such Participant's Options, only to the extent that such Options
would have been exercisable upon the Termination Date, no later
than ninety (90) days after the Termination Date, but in any
event, no later than the expiration date of the Options.
(b) If the Participant is terminated because of
death or Disability, then the Participant's Options which are
ISO=s may be exercised, only to the extent that such Options
would have been exercisable by Participant on the Termination
Date, and must be exercised by Participant (or Participant's
legal representative or authorized assignee) no later than one
hundred eighty (180) days after the Termination Date, but in any
event no later than the expiration date of the Options.
5.1.7 LIMITATIONS ON EXERCISE. The Committee may
specify a reasonable minimum number of Shares that may be purchased on any
exercise of an Option, provided that such minimum number will not prevent
Participant from exercising the Option for the full number of Shares for which
it is then exercisable.
5.1.8 LIMITATIONS ON ISOs. The aggregate Fair Market
Value (determined as of the date of grant) of Shares with respect to which ISOs
are exercisable for the first time by a Participant during any calendar year
(under the Plan or under any other incentive stock option plan of the Company or
any Affiliate or Subsidiary of the Company) shall not exceed $100,000. If the
Fair Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of the Plan to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to ISOs, such different
limit shall be automatically incorporated herein and shall apply to any Options
granted after the effective date of such amendment.
5.1.9 MODIFICATION, EXTENSION OR RENEWAL. The
Committee may modify, extend or renew outstanding Options, provided that any
such action may not, without the written consent of a Participant, impair any of
such Participant's rights under any Option previously granted, and provided
further, that the Committee may not reduce the Exercise Price of outstanding
Options. Any outstanding ISO that is modified, extended, renewed or otherwise
altered shall be treated in accordance with Section 424(h) of the Code.
5.1.10 NO DISQUALIFICATION. Notwithstanding any other
provision in the Plan, no term of the Plan relating to ISOs shall be
interpreted, amended or altered, nor shall any discretion or authority
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<PAGE> 27
granted under the Plan be exercised, so as to disqualify the Plan under Section
422 of the Code or, without the consent of the Participant affected, to
disqualify any ISO under Section 422 of the Code.
5.2 ACCELERATED VESTING.
5.2.1 Notwithstanding Sections 5.1.3(b), the Committee shall
have the authority to accelerate the exercisability of Options granted pursuant
to the terms of this Plan, provided however, that the acceleration of
exercisability shall be conditioned upon inclusion in the Option agreements with
Participants of such provisions and restrictions as are necessary to permit
stock issued upon exercise of such Options to continue to qualify for the
exception from Section 16(b) of the Securities Act as is provided under Rule
16(b)(3)(a),(b) and (c).
5.2.2 Notwithstanding anything herein to the contrary, if a
Change in Control of the Company occurs or if the Committee determines in its
sole discretion that an Acceleration Event has occurred, then all Options shall
become fully exercisable as of the date such Change in Control occurred or the
Committee determines that an Acceleration Event has occurred, provided however,
that the acceleration of exercisability shall be subject to the imposition of
such restrictions on transferability of shares of Common Stock subject to such
Options, as are necessary to permit stock issued upon exercise of such Options
to continue to qualify for the exception from Section 16(b) of the Securities
Act as is provided under Rule 16(b)(3)(a),(b) and (c).
6. PAYMENT FOR SHARE PURCHASES
6.1 PAYMENT. Payment for Shares purchased pursuant to the
Plan may be made in cash (by check or equivalent) or, where expressly approved
by the Committee and permitted by law by:
(a) by cancellation of indebtedness of the Company
to the Participant;
(b) by surrender of shares of the Company's Common
Stock that either: (1) have been owned by Participant for more
than six (6) months and have been paid for within the meaning of
Rule 144 of the Securities Act; or were obtained by Participant
in the public market; and, (2) are clear of all liens, claims,
encumbrances or security interests;
(c) by waiver of compensation due or accrued to
Participant for services rendered;
(d) provided that a public market for the Company's
stock exists and subject to the ability of the Participant to
sell Shares in compliance with applicable securities laws:
(i) through a "same day sale" commitment
from the Participant and a broker-dealer that is a
member of the National Association of Securities Dealers
(an "NASD Dealer") whereby the Participant irrevocably
elects to exercise the Option and to sell a portion of
the Shares so purchased in order to pay the Exercise
Price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
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<PAGE> 28
(ii) through a "margin" commitment from the
Participant and an NASD Dealer whereby Participant
irrevocably elects to exercise the Option and to pledge
the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in
the amount of the Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares
to forward the Exercise Price directly to the Company;
or
(e) by any combination of the foregoing.
Notwithstanding the foregoing, the Exercise Price of an Option
held by a director who is not an employee shall be paid either (i) in cash; or
(ii) pursuant to subsection (a) of this Section 6.1, or (iii) by any combination
of the foregoing (i) and (ii).
7. WITHHOLDING TAXES
7.1 WITHHOLDING GENERALLY. Whenever Shares are to be issued
in satisfaction of Options granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares.
8. PRIVILEGES OF STOCK OWNERSHIP
8.1 VOTING AND DIVIDENDS. No Participant shall have any of
the rights of a stockholder with respect to any Shares until the Shares are
issued to the Participant. After Shares are issued to the Participant, the
Participant shall be a stockholder and have all the rights of a stockholder with
respect to such Shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such Shares.
8.2 FINANCIAL STATEMENTS. The Company shall provide
financial statements to each Participant annually during the period such
Participant has Options outstanding, provided, however, that the Company shall
not be required to provide such financial statements to Participants whose
services in connection with the Company assure them access to equivalent
information.
9. TRANSFERABILITY
Options granted under the Plan, and any interest therein, shall
not be transferable or assignable by Participant, and may not be made subject to
execution, attachment or similar process, otherwise than by will or by the laws
of descent and distribution or as consistent with the specific Plan and Option
Agreement provisions relating thereto. During the lifetime of the Participant,
an Option shall be exercisable only by the Participant, and any elections with
respect to an Option, may be made only by the Participant.
10. CERTIFICATES
All certificates for Shares or other securities delivered under
the Plan shall be subject to such stock transfer orders, legends and other
restrictions as the Committee may deem necessary or advisable, including
restrictions under any applicable federal, state or foreign securities law, or
any rules, regulations and
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<PAGE> 29
other requirements of the SEC or any stock exchange or automated quotation
system upon which the Shares may be listed.
11. EXCHANGE AND BUYOUT OF OPTIONS
The Committee may, at any time or from time to time, authorize
the Company, with the consent of the respective Participants, to issue new
Options in exchange for the surrender and cancellation of any or all outstanding
Options. The Committee may at any time buy from a Participant an Option
previously granted with payment in cash, Shares or other consideration, based on
such terms and conditions as the Committee and the Participant shall agree.
12. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE
An Option shall not be effective unless such Option is in
compliance with all applicable federal and state securities laws, rules and
regulations of any governmental body, and the requirements of any stock exchange
or automated quotation system upon which the Shares may then be listed, as they
are in effect on the date of grant of the Option and also on the date of
exercise or other issuance. Notwithstanding any other provision in the Plan, the
Company shall have no obligation to issue or deliver certificates for Shares
under the Plan prior to: (a) obtaining any approvals from governmental agencies
that the Company determines are necessary or advisable, and/or (b) completion of
any registration or other qualification of such Shares under any state or
federal law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company shall be under no obligation to register the
Shares with the SEC or to effect compliance with the registration, qualification
or listing requirements of any state securities laws, stock exchange or
automated quotation system, and the Company shall have no liability for any
inability or failure to do so.
13. NO OBLIGATION TO EMPLOY
Nothing in the Plan or any Option granted under the Plan shall
confer or be deemed to confer on any Participant any right to continue in the
employ of, or to continue any other relationship with, the Company, or any
Subsidiary or Affiliate of the Company or limit in any way the right of the
Company or any Subsidiary or Affiliate of the Company to terminate Participant's
employment or other relationship at any time, with or without cause.
14. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE
The existence of outstanding Options shall not affect in any way
the right or power of the Company or its stockholders to make or authorize all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any other corporate act or
proceeding, whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of
shares or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of its Common Stock outstanding,
without receiving compensation therefor in money, services or property, then (i)
the number, class, and per share price of Shares subject to outstanding Options
hereunder shall be
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<PAGE> 30
appropriately adjusted in such a manner as to entitle a Participant to receive
upon exercise thereof (and, if relevant, for the same aggregate cash
consideration), the same total number and class of shares as such Participant
would have received had such Participant exercised such Option in full
immediately prior to such event; and (ii) the number and class of shares with
respect to which Options may be granted under the Plan shall be adjusted by
substituting for the total number of shares of Common Stock then reserved that
number and class of shares of stock that would have been received by the owner
of an equal number of outstanding shares of Common Stock as the result of the
event requiring the adjustment.
After a merger of one or more corporations into the Company, or
after a consolidation of the Company and one or more corporations in which the
Company shall be the surviving corporation, each holder of an outstanding Option
shall, at no additional cost, be entitled to receive upon exercise of such
Option (subject to any required action by stockholders of the Company) in, lieu
of the number of Shares as to which such Option shall then be so exercisable,
the number and class of shares of stock or other securities to which such holder
would have been entitled pursuant to the terms of the agreement of merger or
consolidation if, immediately prior to such merger or consolidation, such holder
had been the holder of record of a number of shares of Common Stock equal to the
number of shares as to which such Option shall be so exercised.
If the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the surviving
corporation, or if the Company is liquidated, or sells or otherwise disposes of
substantially all its assets to another corporation while unexercised Options
remain outstanding under the Plan, (i) subject to the provisions of clause (ii)
below, after the effective date of such merger, consolidation or sale, as the
case may be, each holder of an outstanding Option shall be entitled to receive
upon exercise of such Option in lieu of shares of Common Stock, shares of such
stock or other securities, cash or property as the holders of shares of Common
Stock received pursuant to the terms of the merger, consolidation or sale; or
(ii) all outstanding Options may be canceled by the Board as of the effective
date of any such merger, consolidation, liquidation or sale provided that: (x)
notice of such cancellation shall be given to each holder of an Option, and (y)
each holder of an Option shall have the right to exercise such Option to the
extent that the same is then exercisable or, if the Board shall have accelerated
the time for exercise of all unexercised and unexpired Options, in full during
the 30-day period preceding the effective date of such merger, consolidation,
liquidation or sale.
Except as expressly provided above, the issue by the Company of
shares of stock of any class, securities convertible into shares of stock of any
class, for cash, property or services, either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares or obligations of the Company convertible into such shares or other
securities, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares then subject to outstanding
Options.
15. ADOPTION AND STOCKHOLDER APPROVAL
The Plan shall become effective on the date that it is adopted
by the Board (the "Effective Date"). The Company shall submit the Plan for
approval by the stockholders of the Company at the next annual meeting of
stockholders of the Company to obtain the advantages under NASD, IRS, Securities
and Exchange Commission and other regulations that approval of stockholders may
bestow, provided however, that Options granted under the Plan shall be
conditioned upon stockholder approval of the Plan within one year of adoption by
the Board.
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<PAGE> 31
16. TERM OF PLAN
The Plan will terminate ten (10) years from the Effective Date.
17. AMENDMENT OR TERMINATION OF PLAN
The Board may at any time terminate or amend the Plan in any
respect, including without limitation amendment of any form of Option Agreement
or instrument to be executed pursuant to the Plan; provided, however, that:
(a) the Board shall not, without the approval of the
stockholders of the Company, amend the Plan in any manner that requires
such stockholder approval pursuant to the Code or the regulations
promulgated thereunder as such provisions apply to ISO plans or pursuant
to the Exchange Act or Rule 16b-3 (or its successor), as amended,
thereunder; and
(b) the terms and conditions of any awards of Options to
Directors and the category of persons eligible to be awarded such shares
under the Plan shall not be amended more than once every six months,
other than to comply with changes in the Code or ERISA, or the rules and
regulations thereunder.
18. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board, the submission of
the Plan to the stockholders of the Company for approval, nor any provision of
the Plan shall be construed as creating any limitations on the power of the
Board to adopt such additional compensation arrangements as it may deem
desirable, including, without limitation, the granting of stock options and
bonuses otherwise than under the Plan, and such arrangements may be either
generally applicable or applicable only in specific cases.
19. GOVERNING LAW
The Plan and all agreements, documents and instruments entered
into pursuant to the Plan shall be governed by and construed in accordance with
the internal laws of the State of New York, excluding that body of law
pertaining to conflict of laws.
20. DEFINITIONS
As used in the Plan, the following terms shall have the
following meanings:
"ACCELERATION EVENT" means but is not limited to, any Change of
Control of the Company or other event determined in the discretion of the
Committee.
"AFFILIATE" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with" means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
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<PAGE> 32
"BOARD" means the Board of Directors of the Company.
"CHANGE IN CONTROL" means the occurrence of any of the following
events:
(A) when the Company acquires actual knowledge that any
person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is
or becomes the beneficial owner (as defined in Rule 13d-3 of the Exchange Act)
directly or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's then-outstanding securities;
(B) upon the first purchase of Common Stock pursuant to a
tender or exchange offer (other than a tender or exchange offer made by the
Company);
(C) upon the approval by the Company's shareholders of: (i)
a merger or consolidation of the Company with or into another corporation, which
does not result in any capital reorganization or reclassification or other
change in the Company's then-outstanding shares of Common Stock), (ii) a sale or
disposition of all or substantially all of the Company's assets, or (iii) a plan
of liquidation or dissolution of the Company;
(D) if during any period of two consecutive years, the
individuals who at the beginning of such period constitute the Board of
Directors of the Company cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the Company's
shareholders, of each new director is approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period; or
(E) if the Board of Directors or any designated committee
determines, in its sole discretion, that any person (such as that term is used
in Sections 13(d) and 14(d) of the Exchange Act) directly or indirectly
exercises a controlling influence over the management or policies of the
Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer the Plan, or if no committee is appointed, the Board.
"COMPANY" means Decora Industries, Inc., a corporation organized
under the laws of the State of Delaware, or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option, but in no event
shall such price be less than the par value of the Common Stock.
"FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
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<PAGE> 33
(a) if such Common Stock is then quoted on the
Nasdaq National Market System, its last reported sale price on
the Nasdaq National Market or, if no such reported sale takes
place on such date, the average of the closing bid and asked
prices;
(b) if such Common Stock is publicly traded and is
then listed on a national securities exchange, the last reported
sale price or, if no such reported sale takes place on such
date, the average of the closing bid and asked prices on the
principal national securities exchange on which the Common Stock
is listed or admitted to trading;
(c) if such Common Stock is publicly traded but is
not quoted on the Nasdaq National Market nor listed or admitted
to trading on a national securities exchange, the average of the
closing bid and asked prices on such date, as reported by the
Wall Street Journal, for the over-the-counter market; or
(d) if none of the foregoing is applicable, by the
Board of Directors of the Company in good faith.
"INSIDER" means an officer or director of the Company or other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"NONEMPLOYEE DIRECTOR" means an director of the Company defined
in Rule 16b-3(b)(i) of the Exchange Act.
"OPTION" means an option to purchase Shares of Common Stock of
the Company pursuant to Section 5.
"OPTION AGREEMENT" means, with respect to each Option, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Option.
"OUTSIDE DIRECTOR" means any outside director as defined in
Section 162(m) of the Code and the regulations issued thereunder.
"PARTICIPANT" means a person who receives an Option under the
Plan.
"PLAN" means this Decora Industries, Inc., 1999 Stock Option
Plan, as amended from time to time.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock, $0.01 par
value, reserved for issuance under the Plan, as adjusted pursuant to Sections 2
and 14, and any security issued in respect thereto or in replacement therefor.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
granting of the Option, each of the corporations other than the last corporation
in the unbroken chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
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"TERMINATION" or "TERMINATED" means, for purposes of the Plan
with respect to a Participant, that the Participant has ceased to provide
services as an employee, director, consultant, independent contractor or
adviser, to the Company or a Subsidiary or Affiliate of the Company, except in
the case of sick leave, military leave, or any other leave of absence approved
by the Committee, provided, that such leave is for a period of not more than
ninety (90) days, or reinstatement upon the expiration of such leave is
guaranteed by contract or statute. The Committee shall have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "Termination
Date").
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[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 October 26, 1999, at 10:00 a.m. local time, at the Albany
Marriott Hotel, located at 189 Wolf 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) Ratification of the Decora Industries, Inc. 1999 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) The approval and adoption of a resolution appointing
PricewaterhouseCoopers LLP as the Company's independent certified public
accountants for fiscal year 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) 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> 36
(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:____________________________________, 1999
________________________________________________
________________________________________________
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.
