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., 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 5, 1998,
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; and
(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 9, 1998 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, 1998
<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 5, 1998, 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 3, 1998.
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; and (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 9,
1998, will be entitled to notice of and to vote at the Annual
Meeting. On January 9, 1998, 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 shares of 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. Assuming the
presence of a quorum, the affirmative vote of the holders on the
record date of a plurality of the shares of Common Stock outstanding,
represented in person or by proxy at the Annual Meeting, is required
to elect directors for the Company.
<PAGE>
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 9, 1998, the number of shares of
Common Stock of the Company set forth opposite each such person's
name in the table below:
<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 1,083,590 (2) 31.2%
5400 LBJ Freeway, Suite 1375
Dallas, Texas 75240
Common Stock Franklin Resources, Inc. 265,500 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
- ------------------
(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 California partnership of which Mr. Upfield is a
general partner.
</TABLE>
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, 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 9, 1998.
<TABLE>
<CAPTION>
Amount and
Name or Identity Title of Nature of Bene- Percent
of Group Class ficial Ownership (1) of Class
- ---------------- ------- -------------------- --------
<S> <C> <C> <C>
James E. Upfield Common Stock 1,083,590 (2) 31.2%
E. R. Buford Common Stock 109,062 (3) 3.1%
Joseph V. Mariner, Jr. Common Stock 6,725 (4) *
-2-
<PAGE>
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 27,543 (6) 1.0%
All present executive officers
and directors as a group
(7 persons) Common Stock 1,267,920 (7) 36.5%
__________
* Denotes less than 1%
(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 of which Mr. Upfield is a general
partner.
(3) Includes 60,000 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
investment 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 5,000 shares of Common Stock issuable upon
the exercise of options granted under the 1990 Plan.
(7) Includes 86,000 shares of Common Stock issuable upon
the exercise of options granted under the 1990 Plan and the
Outside Director Plan.
-3-
<PAGE>
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 one meeting during the twelve
months ended August 31, 1997.
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, 1997.
During the twelve months ended August 31, 1997, the full Board of
Directors held three 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 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.
-4-
<PAGE>
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 77 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 Hunter
Resources, Inc. which is engaged in the sale
of oil, gas and oilfield services.
E. R. Buford 62 1973 President and Chief Executive Officer of the
Company for more than the past five years;
President and director of Temco Fireplace
Products, Inc., a wholly-owned subsidiary of
the Company, for more than the past five
years.
Joseph V. 77 1979 Retired as Chairman and Chief Executive
Mariner, Jr. 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; and Renters Choice,
Inc., which operates Rent-To-Own Stores.
Larry J. Parsons 68 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.
-5-
<PAGE>
Scott K. Upfield 38 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 59 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 of
rigid foam roofing and sheathing insulation
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>
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, 1997. 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 62, for more than the past five
years, has been Vice President-Finance, Secretary, Treasurer and
Chief Financial Officer of the Company.
-6-
<PAGE>
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 $100,000 in
1997.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------
Annual Compensation Awards Payouts
------------------------- ----------------------- -------
Other Securities All
Annual Restricted Underlying LTIP Other
Name and Compen- Stock Options Pay- Compen-
Principal Fiscal Salary Bonus sation Awards /SARs outs sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E.R. Buford 1995 205,300 -0- N/A -0- -0- -0- N/A
Chief Executive Officer 1996 213,500 -0- N/A -0- -0- -0- N/A
and President 1997 221,000 -0- N/A -0- -0- -0- N/A
- --------------------------------------------------------------------------------------------------------
James E. Upfield 1995 150,000 -0- N/A -0- -0- -0- N/A
Chairman of 1996 150,000 -0- N/A -0- -0- -0- N/A
the Board 1997 150,000 -0- N/A -0- -0- -0- N/A
- --------------------------------------------------------------------------------------------------------
R. N. Stivers 1995 107,800 -0- N/A -0- -0- -0- N/A
Chief Financial 1996 112,000 -0- N/A -0- -0- -0- N/A
Officer and Vice 1997 116,000 -0- N/A -0- -0- -0- N/A
President-Finance
- --------------------------------------------------------------------------------------------------------
Other annual compensation did not exceed the lesser of either $50,000
or 10% of total salary as disclosed in the Summary Compensation
Table.
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 422(a) 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 1990 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
-7-
<PAGE>
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. A total of
195,000 shares of Common Stock are issuable under the 1990 Plan with
an 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 not to exceed 25,000.
Option Grants During 1997 Fiscal Year
- -------------------------------------
There were no stock options granted to the Company's executive
officers named in the Summary Compensation Table during fiscal year
1997.
-8-
<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>
<TABLE>
<CAPTION>
Value of
Unexercised In-
Number of Securities the-Money
Underlying Unexercised Options/SARs
Options/SARs at FY-End 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 60,000 $109,500
Unexercisable 10,000 -0- (1)
J. E. Upfield -0- -0- -0- -0-
R. N. Stivers 10,000 $11,850 Exercisable 5,000 -0- (1)
Unexercisable 5,000 -0- (1)
</TABLE>
- -----------------
(1) The Company's stock price at August 31, 1997 was below the
option exercise price.
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, 1997, ten 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 years after retirement (or to the
beneficiary or estate of a participant for a period of ten 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
-9-
<PAGE>
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 the age of fifty and ten 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 and ten years of service but before normal
retirement will be assigned his insurance policy without any payment
being required.
Executive Officer's Employment 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 1997 Mr. Buford had a base salary of $225,000 and Mr.
Stivers had a base salary of $118,000. 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 30
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
-10-
<PAGE>
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 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 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.
-11-
<PAGE>
The following table shows stock options granted and presently
exercisable to outside directors from May 23, 1990 to August 31,
1997:
<TABLE>
<CAPTION>
Options
Granted and Value of Unexercised
Presently Exercise In-The-Money Options
Exercisable Price/Sh. At Fiscal Year End
------------- ------------ --------------------
<S> <C> <C> <C>
Joseph V. Mariner, Jr. 2,500 $2.00 $ 3,450
2,500 $1.44 4,850
1,500 $3.31 105
----- -------
6,500 $ 8,405
===== =======
Larry J. Parsons 2,500 $2.00 $ 3,450
2,500 $1.44 4,850
1,500 $3.31 105
----- -------
6,500 $ 8,405
===== =======
Scott K. Upfield 2,500 $1.44 $ 4,850
1,500 $3.31 105
----- -------
4,000 $ 4,955
===== =======
Richard W. Griner 2,500 $4.81 $ -0- (1)
1,500 $3.31 105
----- -------
4,000 $ 105
===== =======
- -----------------
(1) The Company's stock price at August 31, 1997 was below the option price.
</TABLE>
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 "MANAGEMENT TRANSACTIONS".
Board Compensation Committee Report on Executive Compensation
- -------------------------------------------------------------
The Compensation Committee of the Board of Directors consists of Mr. Richard
W. Griner (Chairman), Mr. Larry J. Parsons, Mr. James E. Upfield, Mr. Scott
K. Upfield and Mr. Joseph V. Mariner, Jr. 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
-12-
<PAGE>
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 1990 Plan, or any other compensation benefits. The
Compensation Committee noted that while fiscal 1996 performance did not meet
target levels in all categories, cost of living increases of approximately 4%
were generally appropriate. Mr. E. R. Buford (the Chief Executive Officer of
the Company, and Mr. Roger Stivers, have employment agreements with the
Company which fix 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 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 such factors and a report of independent financial
consultants dated January 23, 1997, which concluded that a salary increase in
the range of 4% for the Chief Executive Officer was appropriate, the
Compensation Committee recommended that Mr. Buford's base salary be increased
to $225,000 per annum. Neither the report of the independent financial
consultants nor the Compensation Committee recommended that a bonus be paid
for fiscal 1997.
Mr. Richard W. Griner
Mr. Joseph V. Mariner, Jr.
Mr. James E. Upfield
Mr. Scott K. Upfield
Mr. Larry J. Parsons
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<PAGE>
Performance Graph
- -----------------
The following table compares the performance of the Company's Common Stock
with certain comparable indices:
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
TEMTEX INDUSTRIES, INC. .. $100.00 $710.40 $860.00 $375.00 $290.40 $270.40
Dow Jones Industrial ..... $100.00 $115.41 $127.09 $153.83 $191.74 $265.10
Dow Jones Furnishings &
Appliances ............. $100.00 $162.57 $149.13 $151.63 $175.24 $216.97
</TABLE>
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<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. James E. 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 $3.13 if computed as of January 9, 1998.
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
-15-
<PAGE>
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
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, (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 Mr.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 his 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"), 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 is a general partner.
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 provided 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.
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<PAGE>
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 own more than ten percent
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission and the NASDAQ Stock Market initial
reports of ownership and reports of changes in ownership of the Company's
Common Stock. Officers, directors and greater than ten percent stockholders
are required by the regulations of the Securities and Exchange Commission to
furnish the Company with copies of all Section 16(a) forms they file. 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, 1997 all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
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 1999 must submit such proposals so as to be received by the Company at
5400 LBJ Freeway, Suite 1375, Dallas, Texas 75240 on or before October 9,
1998.
MISCELLANEOUS
The Board of Directors has appointed Ernst & Young LLP as the independent
auditors of the Company for the fiscal year ending August 31, 1998. Ernst &
Young acted as the Company's independent auditors for the fiscal year ended
August 31, 1997. A representative of Ernst & Young will attend the annual
meeting of stockholders to be held March 5, 1998, 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, 1998
<PAGE>
TEMTEX INDUSTRIES, INC
Proxy Solicited on Behalf of the Board of Directors
For Annual Meeting of Stockholders,
March 5, 1998
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 5, 1998, 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.
(1) Election of Names of Nominees:
Directors James E. Upfield, E. R. Buford,
Joseph V. Mariner, Jr., Larry
J. Parsons, Scott K. Upfield,
Richard W. Griner (Instruction:
For [ ] All Withhold [ ] To withhold authority to vote
nominees named Authority to for any individual nominee,
(except as vote for all write the nominee's name on the
marked to the nominess named following line.)
contrary) ______________________________
(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.
