SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934, as amended
(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
TEMTEX 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)(4)
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:*
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
* Set forth amount on which the filing is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
TEMTEX INDUSTRIES, INC.
5400 LBJ Freeway, Suite 1375
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of Temtex Industries, Inc.:
The Annual Meeting of Stockholders of Temtex Industries, Inc. (the
"Company"), will be held at the Lincoln City Club, 5440 LBJ
Freeway, 3rd Floor, Dallas, Texas 75240, Terrace Room, at 10:00
a.m. on March 6, 1997, for the following purposes:
(a) To elect six (6) directors to serve until the next Annual
Meeting of Stockholders and until their respective
successors shall be elected and shall qualify;
(b) To transact such other business as may properly come
before the meeting.
Only holders of Common Stock of record at the close of business on
January 10, 1997 are entitled to notice of or to vote at the
meeting.
YOU ARE INVITED TO ATTEND THIS MEETING IN PERSON. HOWEVER, IF YOU
ARE UNABLE TO DO SO, PLEASE COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY AT YOUR EARLIEST CONVENIENCE. NO POSTAGE WILL BE
REQUIRED IF MAILED WITHIN THE UNITED STATES.
By Order of the Board of Directors
James E. Upfield
Chairman of the Board
Dallas, Texas
February 3, 1997
<PAGE>
TEMTEX INDUSTRIES, INC.
5400 LBJ Freeway, Suite 1375
Dallas, Texas 75240
PROXY STATEMENT
A proxy in the accompanying form is being solicited on behalf of
the Board of Directors of Temtex Industries, Inc. (the "Company"),
for use at the Company's Annual Meeting of Stockholders to be held
at the Lincoln City Club, 5440 LBJ Freeway, 3rd Floor, Dallas,
Texas 75240, Terrace Room, at 10:00 a.m., central time zone, on
March 6, 1997, and at any adjournment(s) thereof. The Company will
bear the cost of such solicitation. In addition to solicitations
by mail, officers and regular employees of the Company may, to a
limited extent and without additional remuneration, solicit proxies
personally or by telephone or telegraph. Proxies, together with
copies of this Proxy Statement, are first being mailed to
stockholders of the Company on or about February 5, 1997.
Execution and return of the enclosed proxy will not in any way
affect a stockholder's right to attend the meeting and to vote in
person, and any stockholder giving a proxy has the power to revoke
it at any time before it is voted by filing with the Secretary of
the Company a written revocation or duly executed proxy bearing a
later date. A proxy, when executed and not revoked, will be voted
in accordance with the instructions thereon. In the absence of
specific instructions, proxies will be voted by those named in the
proxy (i) "FOR" the election as directors of those nominees named
in the Proxy Statement; (ii) in accordance with their best judgment
on all other matters that may properly come before the meeting.
VOTING SECURITIES AND QUORUM
Only stockholders of record at the close of business on January 10,
1997, will be entitled to notice of and to vote at the Annual
Meeting. On January 10, 1997, the Company had issued and
outstanding 3,477,141 shares of $0.20 par value Common Stock (the
"Common Stock"), which is the only class of its capital stock
outstanding. Each share of common stock is entitled to one vote on
each matter presented to the stockholders.
The presence, in person or by proxy, of the holders of a majority
of the issued and outstanding Common Stock is necessary to
constitute a quorum at the Annual Meeting. Abstentions and broker
non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions
are counted in the tabulations of votes cast on proposals presented
to stockholders, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The Company knows of no person owning beneficially more than 5% of
the Company's Common Stock, except for the following persons who
beneficially owned, as of January 10, 1997, the number of shares of
Common Stock of the Company set forth opposite each such person's
name in the table below:
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature
Title of Name and Address of Beneficial Percent
Class of Beneficial Owner Ownership (1) of Class
- -------- ------------------- ------------------ ---------
<S> <C> <C> <C>
Common Stock James E. Upfield 1,072,850 (2) 30.9%
5400 LBJ Freeway, Suite 1375
Dallas, Texas 75240
Common Stock Franklin Resources, Inc. 265,000 7.6%
777 Mariners Island Blvd.
San Mateo, California 94404
Common Stock Dimensional Fund Advisors, Inc. 188,000 5.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
</TABLE>
(1) The nature of the beneficial ownership of the shares by
the respective persons or group is sole voting and
investment power unless otherwise indicated.
(2) Includes 24,750 shares of Common Stock over which Mr.
Upfield has shared voting and investment power owned by
HUTCO, a partnership comprised of Mr. Upfield and Mr.
Howard, a former director of the Company.
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
The following table sets forth the beneficial ownership (as defined
by the rules of the Securities and Exchange Commission) of Common
Stock of the Company by the incumbent directors, nominees for
director, each of the named officers in the Summary Compensation
table below and all directors and officers as a group, together
with the percentage of the outstanding shares which such ownership
represents. Information is stated as of January 10, 1997.
<TABLE>
<CAPTION>
Amount and
Name or Identity Title of Nature of Bene- Percent of
of Group Class ficial Ownership (1) Class
- ---------------- --------- --------------------- -----------
<S> <C> <C> <C>
James E. Upfield Common Stock 1,072,850 (2) 30.9%
E. R. Buford Common Stock 104,062 (3) 3.0%
Joseph V. Mariner, Jr. Common Stock 6,725 (4) *
Larry J. Parsons Common Stock 7,000 (4) *
Scott K. Upfield Common Stock 29,500 (5) 1.0%
Richard W. Griner Common Stock 4,500 (5) *
R. N. Stivers Common Stock 25,043 (6) 1.0%
All present executive
officers and directors
as a group (7 persons) Common Stock 1,249,680 (7) 35.9%
_________________________
* Denotes less than 1%
/table>
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<PAGE>
(1) The nature of the beneficial ownership of the shares by
the respective persons or group is sole voting and
investment power unless otherwise indicated.
(2) Includes 24,750 shares of Common Stock over which Mr.
Upfield has shared voting and investment power owned by
HUTCO, a partnership comprised of Mr. Upfield and Mr.
Howard, a former director of the Company.
(3) Includes 55,000 shares of Common Stock issuable upon the
exercise of options granted under the 1990 Stock Plan for
key employees of Temtex Industries, Inc. and its
subsidiaries (the "1990 Plan"). Includes 5,000 shares of
Common Stock over which Mr. Buford has shared voting and
investments power owned by Virginia H. Buford, Mr.
Buford's spouse.
(4) Includes 6,500 shares of Common Stock issuable upon the
exercise of options granted under the Outside Director
Stock Option Plan (the "Outside Director Plan").
(5) Includes 4,000 shares of Common Stock issuable upon the
exercise of options granted under the Outside Director
Plan.
(6) Includes 2,500 shares of Common Stock issuable upon the
exercise of options granted under the 1990 Plan.
(7) Includes 78,500 shares of Common Stock issuable upon the
exercise of options granted under the 1990 Plan and the
Outside Director Plan.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board of Directors has two standing committees: the Audit
Committee and the Compensation Committee. The Company has no
formal nominating committee.
The Audit Committee recommends to the Board of Directors the
engagement of the Company's independent auditors and reviews with
the auditors the plan and scope of their audit for each year, the
results of the audit when completed and their fees for services
performed. The Audit Committee also reviews the Company's policies
and procedures designed to avoid improper conflicts of interest.
The Audit Committee is composed exclusively of directors who are
not officers or employees of the Company. The present members of
the Audit Committee are Messrs. S. K. Upfield (Chairman), Parsons
and Griner. The Audit Committee held two meetings during the
twelve months ended August 31, 1996.
The Compensation Committee recommends to the Board of Directors
salaries and other compensation payable to certain officers of the
Company. The present members of the Compensation Committee are Mr.
Griner (Chairman) and Messrs. Parsons, J. E. Upfield, S. K. Upfield
and Mariner. The Compensation Committee held two meetings during
the twelve months ended August 31, 1996.
During the twelve months ended August 31, 1996, the full Board of
Directors held four meetings. Each incumbent director attended
more than 75% of the aggregate of (1) the total number of meetings
of the Board of Directors (held during the period for which he was
a director) and (2) the total number of meetings of all committees
of the Board on which he served (during the periods that he
served).
ELECTION OF DIRECTORS
(Item 1)
Six (6) directors will be elected at the Annual Meeting of
Stockholders by the holders of the Common Stock. Each director is
elected for a term of one year to serve until the next Annual
Meeting of Stockholders and until his successor is elected and has
qualified. The accompanying proxy (unless otherwise directed) will
be voted for the election of directors of the Company of the six
(6) persons named below. If any nominee shall be unable to
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<PAGE>
serve, the accompanying proxy will be voted for a substitute
nominee and for the other nominees named below. The management of
the Company has no reason to believe that any nominee will be
unable to serve.
The names of the directors and nominees for the office of director
and information about them, as furnished by the directors and
nominees themselves, are set forth below:
</TABLE>
<TABLE>
<CAPTION>
First Positions and Offices with Company, Business
Became a Experience During Past Five Years and Other
Name Age Director in Directorships
----- ----- ------------- -----------------------------------------------
<S> <C> <C> <C>
James E. Upfield 76 1969 Chairman of the Board of the Company for more than the
past five years; also Chairman of the Board of Temco
Fireplace Products, Inc., a wholly-owned subsidiary of
the Company; serves as a director of Magnum Petroleum,
Inc. (formerly Hunter Resources, Inc.) which is engaged
in the sale of oil, gas and oilfield services.
E. R. Buford 61 1973 President of the Company for more than five years and was
elected Chief Executive Officer of the Company in
February, 1986; President and director of Temco Fireplace
Products, Inc., a wholly-owned subsidiary of the Company,
for more than the past five years.
Joseph V. Mariner, Jr. 76 1979 Retired as Chairman and Chief Executive Officer of Hydro-
Metals, Inc., when it was acquired by Wallace Murray
Corporation, a manufacturer of plumbing ware and cutting
tools; serves as a director of Peerless MFG Co., a
manufacturer of separators and filters used for removing
liquids and solids from gases and air; the Dyson-Kissner-
Moran Corporation, a New York based privately owned
investment company; Kearney National, Inc., a
manufacturer of electrical power distribution products;
El Chico Restaurants, Inc., a Mexican restaurant chain;
Renters Choice, Inc., operates Rent-To-Own Stores; and
Industrial Flexible Materials, Inc., a manufacturer of
rubber crumbs from recycled tires.
Larry J. Parsons 67 1989 Retired in 1988 as partner of Ernst & Whinney, (now
known as Ernst & Young LLP) an international public
accounting firm. Mr. Parsons was a partner for
more than five years before his retirement and
holds no other directorships.
Scott K. Upfield 37 1992 President, Treasurer and a director of Insurance
Technologies Corporation, a company principally
engaged in developing and marketing software to the
insurance industry for more than the past five
years.
Richard W. Griner 58 1995 Director, President and Chief Operating
Officer of the Hart Group, a privately owned
company which supplies managerial services to
privately owned Rmax, Inc. a manufacturer and
distributor of insulation wall board for more
than five years; director and President of HC
Industries, Inc. and of HC Industries NV.,
Inc. subsidiaries of Rmax and director of
Axon, Inc. a multifaceted contracting and
service company. Mr. Griner is also a
director and President of Rmax.
</TABLE>
-4-
<PAGE>
Each of the above named nominees is a member of the present Board
of Directors and was elected to such office at the Annual Meeting
of Stockholders held March 6, 1996. There are no family
relationships among any of the directors or among any of the
directors and any officers of the Company except Messrs. James E.
Upfield and Scott K. Upfield who are father and son.
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
The executive officers of the Company are Messrs. James E. Upfield,
E. R. Buford and R. N. Stivers. Messrs. Upfield and Buford
positions are described above, Mr. Stivers, age 61, for more than
the past five years, has been Vice President-Finance, Secretary,
Treasurer and Chief Financial Officer of the Company.
The following table provides certain disclosure of all compensation
awarded to, earned by or paid to the chief executive officer of the
Company and to each of the Company's two most highly compensated
executive officers (other than the chief executive officer) whose
total salary and bonus exceed $100,000. The Company had no other
executive officer whose base salary and bonus exceeded $100,000 in
1996.
SUMMARY COMPENSATION TABLE
----------------------------
<TABLE>
<CAPTION>
Long Term Compensation
------------------------
Annual Compensation Awards Payouts
-------------------------- ----------------------------- ---------
Other Securities All
Annual Restricted Underlying LTIP Other
Name and Compen- Stock Options Pay- Compen-
Principal Fiscal Salary Bonus sation Awards /SARs outs sation
Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
E.R.Buford 1994 195,000 150,000 N/A -0- -0- -0- N/A
Chief Executive Officer 1995 205,300 -0- N/A -0- -0- -0- N/A
and President 1996 213,500 -0- N/A -0- -0- -0- N/A
- ----------------------------------------------------------------------------------------------------------------------
James E. Upfield 1994 145,000 25,000 N/A -0- -0- -0- N/A
Chairman of 1995 150,000 -0- N/A -0- -0- -0- N/A
the Board 1996 150,000 -0- N/A -0- -0- -0- N/A
- ----------------------------------------------------------------------------------------------------------------------
R. N. Stivers 1994 102,500 30,000 N/A -0- -0- -0- N/A
Chief Financial 1995 107,800 -0- N/A -0- -0- -0- N/A
Officer and Vice 1996 112,000 -0- N/A -0- -0- -0- N/A
President-Finance
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Other annual compensation did not exceed the lesser of either
$50,000 or 10% of total salary as disclosed in the Summary
Compensation Table.
-5-
<PAGE>
STOCK PLAN FOR KEY EMPLOYEES
In 1990, the Company adopted the 1990 Stock Plan for Key Employees
of Temtex Industries, Inc. and its Subsidiaries (the "1990 Plan").
The 1990 Plan provides for the grant of stock options, including
"incentive stock options" within the meaning of Section 422a of the
Internal Revenue Code of 1986 and "non-qualified stock options"
which do not constitute incentive stock options, the grant of stock
appreciation rights in connection therewith, and the allotment of
shares of restricted stock, to key employees of the Company.
The 1990 Plan is intended to attract, retain and provide incentives
for eligible key employees. The 1990 Plan is administered by a
committee of the Board of Directors not eligible to receive awards
under the 1990 Plan. Presently the Compensation Committee
administers the Plan. Such committee has authority, in its
discretion, to determine the individuals to whom, and the time or
times at which restricted stock will be allotted or options or
stock appreciation rights will be granted, the number of shares to
be subject to each allotment of restricted stock, stock options and
appreciation rights, the option price for the duration of each
option and other matters in connection with the administration of
the 1990 Plan and the grant of awards thereunder. The exercise
price of any option granted under the 1990 Plan may not be less
than the fair market value of the Common Stock at the date of
grant. Options and stock appreciation rights may be granted and
restricted stock allotted under the 1990 Plan from time to time
until December 31, 1999, on which date such 1990 Plan will
terminate, unless it is sooner terminated as provided therein.
The stockholders at the annual meeting held March 7, 1995, approved
a proposal increasing the shares eligible for issuance pursuant to
the 1990 Plan from 95,000 shares to 195,000 shares of Common Stock
and the aggregate number of options (including stock appreciation
rights) or shares of restricted stock which may be issued to any
one employee in any fiscal year shall not exceed 25,000.
OPTION GRANTS DURING 1996 FISCAL YEAR
There were no stock options granted to the Company's executive
officers named in the Summary Compensation Table during fiscal year
1996.
-6-
<PAGE>
OPTION EXERCISE AND VALUE
The following table includes the number of shares received upon
exercise, or if no shares were received, the number of securities
with respect to which the options were exercised, the aggregate
dollar value realized upon exercise and the total value of
unexercised options held at the end of the last completed fiscal
year for each of the Company's executive officers named in the
Summary Compensation Table.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
------------------------------------------------------
<TABLE>
<CAPTION>
Value of
Number of Securities Unexercised In-
Underlying Unexercised the-Money
Options/SARs at FY-End Options/SARS at
(#) FY-End ($)
----------------------- ------------------
Shares Acquired Value Realized Exercisable / Exercisable /
Name on Exercise (#) ($) Unexercisable Unexercisable
- ------- ---------------- -------------- ----------------------- ------------------
<S> <C> <C> <C> <C>
E. R. Buford -0- -0- Exercisable 50,000 $122,000
Exercisable 5,000 -0- (1)
Unexercisable 15,000 -0- (1)
J. E. Upfield -0- -0- -0- -0-
R. N. Stivers -0- -0- Exercisable 10,000 (2) $ 24,400
Exercisable 2,500 -0- (1)
Unexercisable 7,500 -0- (1)
</TABLE>
(1) The Company's stock price at August 31, 1996 was below the
option price.
(2) Mr. Stivers exercised 10,000 shares during December 1996.
SELECT MANAGEMENT EMPLOYEE SECURITY PLAN
Except for the Company's Select Management Employee Security Plan,
(the "Security Plan") the Company does not have any plans that
could be deemed long-term incentive plans or defined benefit or
actuarial plans under which benefits are determined primarily by
reference to final compensation. The Security Plan provides
certain death and retirement benefits to key employees of the
Company. During the fiscal year ended August 31, 1996, ten (10)
employees were participating in the Security Plan (including the
three named executive officers in the Summary Compensation Table
above). The Company's Compensation Committee has discretion to
select additional employees (not more frequently than annually) to
participate in the Security Plan.
The Security Plan provides for benefits to be paid to each
participant for a period of ten (10) years after retirement (or to
the beneficiary or estate of a participant for a period of ten (10)
years following the date of death of a participant) in an amount
during each such year equal to approximately 50% of the
participant's salary at the date of retirement or death. All
required benefit payments are provided by individual life
insurance, retirement insurance or annuity type policies. Pursuant
to the Security Plan, the Company makes all contributions to fund
the aggregate amount of insurance premiums required to purchase and
maintain all applicable insurance or annuity type policies.
Any participant in the Security Plan who ceases to be an employee
of the Company prior to attaining
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<PAGE>
the age of fifty (50) and ten (10) years of employment and before
normal retirement date may elect to purchase his insurance policy
for one-third of its cash value on the date of termination. Any
participant who ceases to be employed after attaining age fifty
(50) and ten (10) years of service but before normal retirement
will be assigned his insurance policy without any payment being
required.
EXECUTIVE OFFICERS EMPLOYMENT CONTRACT AGREEMENTS
The Company entered into three-year employment contracts with Mr.
E. R. Buford and Mr. R. N. Stivers (the "Executives") as of June 7,
1994. Under the terms of the agreements, Mr. Buford received an
initial annual base salary of $201,300 and Mr. Stivers received an
initial annual base salary of $105,000. During the term of the
agreements, the Company may increase the base salary of the
Executives, but cannot reduce the base amount of the salaries. In
calendar 1996 Mr. Buford had a base salary of $216,300 and Mr.
Stivers had a base salary of $113,580. The Executives will also be
eligible to participate in the regular employee benefit program now
or hereafter established by the Company.
On each anniversary of these agreements, the term shall be extended
for an additional period of one year unless the Board of Directors
elects, at the directors' meeting following the annual
stockholders' meeting, not to extend the agreements.
The agreements may be terminated by the Company without cause upon
thirty days prior written notice. In the event of termination
without cause, the Company shall for a period of two and one-half
years continue to pay Mr. Buford and for a period of one year
continue to pay Mr. Stivers their base respective salaries
effective at the time of termination.
If the Executives are involuntarily terminated, other than for
cause, in contemplation of, or within three years following, a
change of control, the Company shall pay the Executives (i) a lump
sum severance payment equal to two and one-half times such
Executive base salary in effect at the time of involuntary
termination, payable as a lump sum, and (ii) continuation of all
employee benefits, executive benefits and perquisites or benefits
reasonably equivalent thereto, for a period of two and one-half
years.
COMPENSATION OF DIRECTORS
DIRECTORS' REMUNERATION
Those directors who are regular salaried employees of the Company
receive no additional compensation for their services as directors
or as members of committees of the Board. Cash compensation
currently payable to the other directors for services in that
capacity consists of a retainer of $2,500 per year and a fee of
$750 (in addition to travel expenses) for each day of each meeting
of the Board of Directors attended. No additional retainers are
paid for serving on a committee; however, if one or more committee
meetings are held on a day other than one on which a Board meeting
is held, committee members are paid a fee of $750 (in addition to
travel expenses) for each day of such meeting or meetings.
Directors who are not regular salaried officers or employees who
render services to the Company in a capacity or capacities other
than that of a director (for example, as consultants or attorneys)
may be compensated for such other services, and such compensation
for other services shall not, except insofar as may be specified by
the Company in particular cases, affect the cash compensation
payable to such directors in their capacities as directors and
members of committees of the Board of Directors.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
In 1990, the Company also adopted the Outside Director Stock Option
Plan (the "Outside Director Plan"). The Outside Director Plan is
intended to encourage more extensive ownership of the Common Stock,
to provide incentives and to attract and retain eligible outside
directors of the Company. Under the Outside Director Plan, 30,000
shares of Common Stock were reserved and options exercisable for an
aggregate of 21,000 shares have been granted. The Outside Director
Plan is presently administered by the Board of Directors. The
Board of Directors has authority, in its discretion, to determine
the outside directors to whom, and the time or times in
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<PAGE>
which, options will be granted, the number of shares to be subject
to each option, and the purchase price of the shares covered by
each option. The exercise price of any option granted under the
Outside Director Plan may not be less than the fair market value of
the Common Stock at the date of the grant. Options granted under
the Outside Director Plan are non-qualified options for federal
income tax purposes.
The following table shows stock options granted and presently
exercisable to outside directors from May 23, 1990 to August 31,
1996:
<TABLE>
<CAPTION>
Options
Granted and Value of Unexercised
Presently Option In-The-Money Options
Exercisable Price At Fiscal Year End
------------ ------ ---------------------
<S> <C> <C> <C>
Joseph V. Mariner, Jr. 2,500 $2.00 $ 4,075
2,500 $1.44 5,475
----- -------
5,000 $ 9,550
===== =======
Larry J. Parsons 2,500 $2.00 $ 4,075
2,500 $1.44 5,475
----- -------
5,000 $ 9,550
===== =======
Scott K. Upfield 2,500 $1.44 $ 5,475
===== =======
Richard W. Griner 2,500 $4.81 -0- (1)
=====
</TABLE>
(1) The Company's stock price at August 31, 1996 was below the
option price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
James E. Upfield was, during the fiscal year, an officer of the
Company and a member of the Compensation Committee of the Board of
Directors. Mr. Upfield has engaged in certain transactions with
the Company described under the heading "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS".
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists of
Mr. Mariner (Chairman), Mr. Parsons, Mr. James E. Upfield, Mr.
Scott K. Upfield and Mr. Griner. The Compensation Committee's
primary function is to review the compensation awarded to the
executive officers of the Company.
In determining executive compensation, the Compensation Committee
reviews the performance of the specific executive, the operating
performance of the Company, the compensation of executives of
companies which are comparable to the Company and the performance
of the Company's Common Stock. Particular emphasis is given to the
operating results of the Company. The Company's Compensation
Committee has access to, and review reports of, independent
financial consultants who assimilate and evaluate the compensation
of executive officers employed by companies which are generally
comparable to the Company. The cumulative weight of all such
factors is then generally considered to determine whether or not a
particular executive should receive an increase in compensation, an
incentive bonus under the Company's Executive Bonus Plan, a stock
option or stock grant under the Company's Stock Option Plan for Key
Employees, or any other compensation benefits. Mr. E. R. Buford
(the Chief Executive Officer of the Company) and Mr. Roger Stivers
has previously entered into employment agreements with the Company
which fixed their annual salaries at certain minimum levels
($201,300 per annum for Mr. Buford and $105,000 per annum for Mr.
Stivers).
The Compensation Committee believes that in order for the Company
to succeed, it must attract and retain qualified executives who can
not only perform satisfactorily on an individual basis but who can
also retain and manage a quality staff of other executive officers
and key employees. Thus, in addition to applying the criteria
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<PAGE>
generally applicable to all executive officers, in determining the
compensation of the chief executive officer the Compensation
Committee may also be influenced to a significant extent by the
overall performance of the Company's other executives and key
employees. After a review of all of such factors and a report of
independent financial consultants dated February 5, 1996, which
opined that a base salary of $220,000 and total cash compensation
of $295,000 for the Chief Executive Officer would be "competitive",
the Compensation Committee recommended that the Chief Executive
Officer's base salary be increased to $216,320 per annum but did
not recommend that any bonus be paid for fiscal 1996.
Mr. Joseph V. Mariner, Jr.
Mr. James E. Upfield
Mr. Scott K. Upfield
Mr. Larry J. Parsons
Mr. Richard W. Griner
PERFORMANCE GRAPH
The following table compares the performance of the Company's
Common Stock with certain comparable indices:
[PERFORMANCE GRAPH COMPARISON OF FIVE YEAR
CUMULATIVE RETURN AMONG TEXTEX INDUSTRIES,
INC., DOW JONES INDUSTRIAL AND DOW JONES
FURNISHINGS & APPLIANCES]
<TABLE>
1991 1992 1993 1994 1995 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
TEMTEX INDUSTRIES, INC......$ 100.00 $ 125.00 $ 888.00 $1,075.00 $ 469.00 $ 363.00
Dow Jones Industrial........$ 100.00 $ 110.24 $ 127.23 $ 140.10 $ 169.59 $ 211.37
Dow Jones Furnishings &
Appliances................$ 100.00 $ 107.68 $ 175.05 $ 160.58 $ 163.27 $ 188.70
</TABLE>
-10-
<PAGE>
MANAGEMENT TRANSACTIONS
At the Annual Meeting of Stockholders of the Company held December
21, 1976, the Company's stockholders approved a Share Purchase
Agreement ("Agreement") among the Company, Mr. Upfield and Republic
National Bank of Dallas (succeeded by NationsBank of Texas, N.A.),
as trustee (the "Trustee"), pursuant to which the Company may
purchase, or may be required, following the death of Mr. Upfield,
to purchase from the estate of Mr. Upfield (the "Estate") up to
that maximum number of shares of Common Stock whose aggregate
purchase price (as computed below) does not exceed the lesser of
(a) the sum of (i) the estate, inheritance, legacy and succession
taxes (including any interest collected as a part of such taxes)
imposed because of Mr. Upfield's death and (ii) the amount of
funeral and administrative expenses allowable as deductions in
computing the taxable estate of Mr. Upfield under Section 2053 of
the Internal Revenue Code (the "Code"), or (b) the amount paid to
the Trustee pursuant to the Agreement upon and by reason of the
death of Mr. Upfield pursuant to a life insurance policy in the
amount of $500,000 carried by the Company on the life of Mr.
Upfield.
The purpose of the Agreement is to provide an orderly means for the
Estate to raise funds to pay all estate and inheritance taxes and
funeral and administrative expenses without necessitating the sale
of a large number of shares of Common Stock in the over-the-counter
market, an event which, in the opinion of the Company would have,
primarily because of the limited volume of trading in such shares,
a potentially serious adverse effect on the market price of the
Common Stock.
The purchase price of a share of Common Stock under the Agreement
is an amount equal to 90% of the mean between the highest and
lowest quoted selling price for a share of Common Stock in any
public securities exchange or market, if available, or otherwise
the mean between the bona fide closing bid and asked prices
therefor in said exchange or market, on the date of death of Mr.
Upfield, or if no such sales or bid and asked prices are available
on such date, then the weighted average of the mean between the
highest and lowest selling prices, or bona fide bid and asked
prices, as the case may be, for a share of Common Stock on the
nearest trading date before and the nearest trading date after the
date of death of Mr. Upfield (such average to be weighted inversely
by the respective number of trading dates between the selling dates
or the price quotation dates and such date of death in the same
manner used in determining the valuation of stock for federal
estate tax purposes as set forth in Treasury Regulation Section 20.2031-
2(d) promulgated by the Commissioner of Internal Revenue under
Section 2031 of the Code). Such purchase price would have been
$3.15 if computed as of January 10, 1997.
The Estate will not be obligated to sell any shares of Common Stock
under the Agreement unless prior to the closing of such sale the
Estate has obtained a ruling from the Internal Revenue Service, or
an opinion of counsel satisfactory in form and content to the
Estate, to the effect that the purchase by the Company will be
treated as a distribution in full payment and exchange therefor
under Section 302(b) of the Code. The Company will not be required
to purchase any shares of Common Stock under the Agreement if and
to the extent that such a purchase would result in an impairment of
its capital or would otherwise be in violation of applicable state
law relative to the Company's purchase of its shares of Common
Stock.
The Company, pursuant to the Agreement, has transferred to the
Trustee, as beneficiary, an existing life insurance policy on the
life of Mr. Upfield in the amount of $500,000. The Company is the
owner of such insurance policy; however, under certain conditions
described below, Mr. Upfield will have the right to purchase all,
or any part, of such policy. The premium payable by the Company
for such insurance policy is $21,049 per year. The premiums paid
by the Company are not deductible by it for federal income tax
purposes, and the proceeds of the policy when paid to the Trustee
and used to purchase the shares of Common Stock under the Agreement
or transferred to the Company will not constitute income to the
Company for federal income tax purposes.
The Trustee is to hold in its custody until the death of Mr.
Upfield or termination of the Agreement (in which event it is to
return to the Company) the insurance policy on the life of Mr.
Upfield. Upon and after the death of Mr. Upfield, the Trustee is
to make claim for, collect, hold, deposit or invest, and pay over
the proceeds of the insurance policy on the life of Mr. Upfield and
any deposits or investments thereof and interest earned thereon
-11-
<PAGE>
for the account of the Company. In the event the proceeds from
such insurance policy are greater than the amount required to
purchase the shares of Common Stock from the Estate, such excess
will be paid to the Company. The Company will reimburse the
Trustee for its expenses in carrying out the provisions of the
Agreement and will pay reasonable and customary compensation to the
Trustee for its services under the Agreement.
The Agreement may be terminated (a) upon the determination of
bankruptcy or the dissolution of the Company, 7(b) upon the
cessation of regular business of the Company, (c) at the option of
the Company, in the event the purchase price thereunder exceeds
200% of the book value of a share of Common Stock, determined as of
the end of the fiscal quarter immediately preceding the date of
Upfield's death, (d) at the option of the Estate, in the event the
purchase price thereunder is less than 75% of the book value of a
share of Common Stock, determined as of the end of the fiscal
quarter immediately preceding the date of Mr. Upfield's death or
(e) by the mutual written consent of Mr. Upfield or the Estate and
the Company. In addition, if Mr. Upfield disposes, during this
lifetime, of all of the Common Stock he owned as of the date of the
Agreement, the Agreement will be terminated.
The Agreement provides that if it is terminated during Mr.
Upfield's life, he will have the right to purchase from the Company
any part or all of the insurance policy on his life and then
subject to the Agreement. The purchase price of such insurance
policy will be equal to its cash surrender value, net of any policy
indebtedness, plus any unearned premium thereon at the date of
purchase.
Temco Fireplace Products, Inc. ("TFPI"), formally Temtex Products,
Inc., a subsidiary of the Company, leases a manufacturing plant and
related real property in Manchester, Tennessee from HUTCO, a
California partnership of which Mr. Upfield and a former director
are the general partners. The Manchester facility, which was
originally subject to a five-year lease with an option to purchase
between TFPI and the former owner, was acquired by HUTCO upon the
assignment to it of TFPI's option to purchase following TFPI's
inability to secure financing upon acceptable terms. The lease
between TFPI and HUTCO was for a twenty-five year term commencing
November 15, 1989 and provided for monthly rental payments of
$13,020 (subject to certain scheduled rent escalations based upon
increases in the consumer price index). During the 1994 fiscal
year, the Company entered into a new twenty-five year lease
agreement with HUTCO. The new lease agreement provides for a
30,000 square foot expansion to the facility with monthly rental
payments of $21,500 that commenced on January 1, 1996. The new
lease is subject to certain scheduled rent escalations based upon
increases in the consumer price index.
In the opinion of management of the Company, the lease of the TFPI
manufacturing facility from HUTCO was consummated on terms and
conditions as favorable to the Company as terms and conditions
obtainable from non-affiliated parties.
-12-
<PAGE>
SECTION 16(a) REPORTING
Section 16(a) of the Exchange Act requires the Company's directors
and executive officers, and persons who own more than 10% of the
Company's Common Stock to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and
greater than 10% stockholders. To the Company's knowledge, based
solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were
required, during the fiscal year ended August 31, 1996, all Section
16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with except that
Messrs. Scott Upfield (with respect to one report for one
transaction), Griner (with respect to one report for one
transaction), Buford (with respect to one report for four
transactions), Parsons (with respect to one report for one
transaction), Stivers (with respect to one report for four
transactions) and Mariner (with respect to one report for one
transaction) each filed Form 5's on January 28, 1997 with respect
to stock options previously granted. The grants of all of such
stock options were previously and timely reported on Form 3 as
opposed to Form 4.
STOCKHOLDER PROPOSALS FOR
ANNUAL MEETING
Under current rules of the Securities and Exchange Commission,
stockholders wishing to submit proposals for inclusion in the Proxy
Statement of the Board of Directors for the Annual Meeting of
Stockholders of the Company to be held in 1998 must submit such
proposals so as to be received by the Company at 5400 LBJ Freeway,
Suite 1375, Dallas, Texas 75240 on or before November 24, 1997.
MISCELLANEOUS
The Board of Directors has appointed Ernst & Young LLP as the
independent auditors of the Company for the fiscal year ending
August 31, 1997. Ernst & Young acted as the Company's independent
auditors for the fiscal year ended August 31, 1996. A
representative of Ernst & Young will attend the annual meeting of
stockholders to be held March 6, 1997, will have an opportunity to
make a statement, and will respond to appropriate questions from
stockholders.
OTHER MATTERS
It is intended that, as to any other matter of business which may
be brought before the meeting, a vote may be cast pursuant to the
accompanying proxy in accordance with the discretion of the person
or persons voting the same.
Management of the Company does not know of any such other matters
of business.
By Order of the Board of Directors
James E. Upfield
Chairman of the Board
February 3, 1997
-13-
<PAGE>
TEMTEX INDUSTRIES, INC.
Proxy Solicited on Behalf of the Board of Directors
For Annual Meeting of Stockholders,
March 6, 1997
The undersigned hereby constitutes and appoints James E. Upfield
and E. R. Buford, and either of them, each with full power of
substitution and revocation, as the true and lawful attorneys and
proxies of the undersigned, to attend the Annual Meeting of
Stockholders of Temtex Industries, Inc. (the "Company"), to be held
at the Lincoln City Club, 5440 LBJ Freeway, 3rd Floor, Dallas,
Texas 75240, Terrace Room, at 10:00 a.m. on March 6, 1997, and any
adjournments thereof, and to vote the shares of Common Stock of the
Company standing in the name of the undersigned with all powers the
undersigned would possess if personally present at the meeting.
<TABLE>
<S> <C> <C>
(1) Election of Directors Names of Nominees:
James E. Upfield, E. R. Buford,
Joseph V. Mariner, Jr., Larry J. Parsons,
Scott K. Upfield, Richard W. Griner
For [ ] All nominees named Withhold [ ] (Instruction: To withhold authority
(except as marked to the Authority to vote for all to vote for any individual nominee, write
contrary) nominees named the nominee's name on the following line.)
___________________________________
</TABLE>
(2) In their discretion to vote upon such other business as
may properly come before the meeting.
(continued and to be signed on reverse)
<PAGE>
Please sign exactly as name appears below. When signing as
executor, administrator, attorney, trustee or guardian, please give
full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: _____________ Signature ______________________________
________________________________________
Signature (if held jointly)
No postage is required if returned in the
enclosed envelope and mailed in the
United States.
Stockholders who are present at the
meeting may withdraw their proxy and vote
in person if they so desire.
