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                                                                   EXHIBIT 10.16

                                OPTION AGREEMENT


        THIS AGREEMENT is made effective as of August 8, 1996 by and between
Roger Grafftey-Smith (hereinafter referred to as "Optionee"), and Decora
Industries, Inc., a Delaware corporation (hereinafter referred to as
"Optionor").

                                    RECITALS:

        WHEREAS, Optionee has performed numerous valuable services to the
Optionor, including serving as a director.

        WHEREAS, to compensate Optionee for his services to Optionor, Optionor
desires to grant to Optionee and Optionee is desirous of acquiring an option to
purchase shares of the common stock of Optionor, subject to the terms and
conditions hereinafter set forth;

        NOW, THEREFORE, the parties hereby agree as follows:

        1. Incorporation of Recitals. The parties hereby incorporate by this
reference the recitals set forth above.

        2. Grant of Option. Subject to the terms and conditions hereinafter set
forth, Optionor hereby gives and grants to Optionee the right and option to
purchase theretofore authorized but unissued common shares of Optionor at such
time and for the purchase price specified below.

            A. From August 8, 1996, and up until and including August 7, 2001,
Optionee shall have the right and option to purchase, at $1.15 per share, and
Optionor shall have the obligation to issue to Optionee, 100,000 shares of the
authorized but unissued common shares of Optionor. Options shall vest if at any
time during the option period the average closing stock price is $2.00 per
share.

        3. Exercise of Option. Optionee may exercise any option granted
hereunder by notifying Optionor in writing of its intention to exercise such
option. A closing date shall then be agreed to in good faith no later than 30
days after the notice, at which time Optionee shall pay the purchase price of
the Shares being purchased, and Optionor shall deliver to Optionee the
certificates for shares duly endorsed. Optionee may purchase all or any part of
the Shares subject to options granted hereby.

        4. Representations. Optionor represents and warrants to Optionee that
Optionee, upon proper exercise, shall receive good and marketable title to the
shares of Optionor underlying the options being granted hereby, free of all
pledges, liens and encumbrances, except as stated in paragraph 5.


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        5. Representations and Warranties of Optionee. Optionee hereby
represents and warrants that:

               A.     The options granted hereby and the Shares which will be
                      purchased by and delivered to Optionee upon exercise of
                      such options are being acquired by Optionee for his own
                      account and not with a view to resale or other disposition
                      thereof.

               B.     Optionee will not sell, transfer, or make any other
                      disposition of any option or the shares to be purchased
                      and delivered to Optionee hereunder upon the exercise of
                      such option unless and until (a) such option or shares, as
                      applicable, are included in a registration statement or a
                      post-effective amendment under the Securities Act which
                      has been filed by the Optionor and declared effective by
                      the Securities and Exchange Commission (the "SEC"), or (b)
                      in the opinion of counsel for the Optionor, no such
                      registration statement or post-effective amendment is
                      required, or (c) the SEC has first issued a "no action"
                      letter regarding any such proposed disposition of any
                      option or the shares.

        6. Federal and State Securities Law Requirements. The obligation of the
Optionor to deliver and transfer the shares to the Optionee upon any exercise of
any option shall be subject to the following:

               A.     Optionor may require Optionee, as an additional condition
                      of its obligation to deliver the shares upon exercise of
                      any option hereunder, to make any representations and
                      warranties (including without limit those set forth in
                      Paragraph 5 hereof) with respect to the shares as may, in
                      the opinion of counsel to Optionor, be required to ensure
                      compliance with the Securities Act, the securities laws of
                      any state, or any other applicable law, regulation, or
                      rule of any governmental agency.

               B.     Each certificate representing the shares issued pursuant
                      to this Agreement shall bear whatever legends are required
                      by federal or state law or by any governmental agency. In
                      particular, unless an appropriate registration statement
                      is filed pursuant to the Securities Act with respect to
                      the shares, each certificate representing such shares
                      shall be endorsed on its face with the following legend or
                      its equivalent:

                      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
                      BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
                      SECURITIES MAY BE SOLD OR TRANSFERRED ONLY IF THEY HAVE
                      BEEN REGISTERED UNDER SAID ACT OR THERE EXISTS AN
                      EXEMPTION FROM REGISTRATION UNDER SAID ACT OR THE RULES
                      AND REGULATIONS THEREUNDER EVIDENCED BY A NO-ACTION LETTER
                      OR AN OPINION OF COUNSEL TO THE ISSUER

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                      OR TO THE HOLDER HEREOF REASONABLY SATISFACTORY TO THE
                      ISSUER.


        7. Restrictions. Optionee:

               A.     Shall not be entitled to any type of dividend declared by
                      Optionor, unless and until an option is exercised; and

               B.     Shall not be entitled to any voting rights by virtue of an
                      option; and

               C.     Acknowledges that the options granted hereby are personal
                      to Optionee and that Optionee may not sell, assign,
                      transfer or otherwise dispose of such options to any other
                      person.

        8. Anti-Dilution. If prior to the exercise of any option granted
hereunder Optionor shall have effected one or more stock split-ups, stock
dividends, or other increases or reductions of the number of Shares of its
common stock outstanding without receiving compensation therefor in money,
services or property, the number of Shares of common stock subject to the
options hereby granted shall (a) if a net increase shall have been effected in
the number of outstanding shares of Optionor's common stock, be proportionately
increased and the cash consideration payable per Share shall be proportionately
reduced; and (b) if a net reduction shall have been effected in the number of
outstanding Shares of Optionor's common stock, be proportionately reduced and
the cash consideration payable per Share be proportionately increased.

        9. Piggyback Registration Rights.

               A.     The Optionor will permit any option shares subject to this
                      agreement to be included, at the request of the Optionee
                      in any registration of securities of the Optionor (other
                      than shares of Common Stock pursuant to the Optionor's
                      stock option plan or stock purchase plan) under a
                      registration statement filed by the Optionor under the
                      Securities Act. The Optionor shall provide written notice
                      to the Optionee at least 30 days prior to the filing of
                      any such registration statement sent by registered mail to
                      the address of record of the Optionee. If Optionee shall
                      deliver a written request to the Optionor within ten (10)
                      business days after the mailing of such notice, setting
                      forth the number of securities which he intends to sell in
                      the public offering (the "Registered Securities"), and
                      requesting inclusion of such Registered Securities
                      therein, the Optionor agrees to include the Registered
                      Securities in such registration statement and related
                      underwriting agreements (if any) or if the Optionor
                      eligible to use Form S-3 permit Optionee to utilize a
                      selling shareholders Registration Statement on Form S-3.
                      Notwithstanding the above, the Optionee may only have
                      option shares subject to this agreement so registered one
                      time.

               B.     The parties hereto agree that if the offering is
                      underwritten, the Registered Securities shall be for
                      purposes of the preceding sentence underwritten by the

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                      same underwriter or underwriters on terms no less
                      favorable than those applicable to the shares offered by
                      the Optionor or other stockholders pursuant to such
                      registration statement, and agree, at the request of the
                      Optionor or such other stockholders, to join with the
                      Optionor or such other stockholders in executing
                      appropriate underwriting agreements with such underwriter
                      or underwriters and to execute appropriate powers of
                      attorney and custodian agreements in forms acceptable to
                      the underwriter or underwriters, which agreements shall
                      not place any restrictions upon the sale or transfer of
                      the Registered Securities not otherwise placed on all
                      other shareholders whose shares are registered in such
                      registration statement. Optionee agrees that if, in spite
                      of the best efforts of the Optionor (which the Optionor
                      agrees to use), the inclusion of all of the Registered
                      Securities which he may desire to include in any such
                      registration statement shall not be acceptable to the
                      managing underwriter or underwriters of the offering
                      (acting reasonably and in good faith), some or all of his
                      Registered Securities may be excluded or withdrawn from
                      such registration statement in accordance with the
                      following provision: Optionee shall have the right to
                      include in such registration statement such number (but
                      only such number) of shares, as applicable, as shall bear
                      the same relationship to the total number of Units,
                      Warrants, or shares, as applicable, which the managing
                      underwriter or underwriters will permit to be included in
                      such registration statement by all holders of securities
                      who wish to register securities in such registration
                      statement.

               C.     Optionor shall pay all expenses associated with filing and
                      causing to become effective any registration statement and
                      with maintaining its effectiveness excepting only (i) the
                      underwriting discounts and commissions incurred directly
                      on the sale of any of Optionee's Registered Securities
                      included therein, and (ii) legal expense individually
                      incurred by Optionee, said discounts, commissions and
                      legal expenses with respect to the sale of Optionee's
                      shares to be borne by Optionee.

        10. Notice and Opportunity to Cure Default. In the event of a perceived
default of the provisions of this agreement, Optionor agrees to provide Optionee
and his counsel written notice of any default and Optionor shall have 10 days
from receipt of said notice to cure the stated default.

        11. Agreement to Perform Necessary Acts. The parties hereto agree to
cooperate fully with one another in executing all documents, certificates,
notices, filings and the like and performing all acts reasonably necessary to
carry out the intent of this agreement.

        12. Assignment and Transfer. No option granted hereby may be assigned by
Optionee without the prior written consent of Optionor.

        13. Amendments. This agreement may not be modified, amended or changed
except by an instrument in writing signed by the parties hereto.


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        14. Litigation and Attorneys' Fees. In the event of any litigation
between the parties to in connection with this Agreement or to enforce any
provision or right hereunder, the unsuccessful party to such litigation shall
pay to the successful party therein by such successful party, which costs,
expenses and attorneys' fees shall be included as a part of any judgment
rendered in such action in addition to any other relief to which the successful
party may be entitled.

        IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.

OPTIONOR                                          OPTIONEE
Decora Industries, Inc.

By: /s/ Timothy Burditt
    ----------------------------
Its: Secretary and EVP                            /s/ Roger Grafftey-Smith
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                                                  ROGER GRAFFTEY-SMITH


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