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 4, 1999,
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 22, 1999 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 9, 1999
<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 4, 1999, 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 facsimile. Proxies, together with copies of this Proxy
Statement, are first being mailed to stockholders of the Company on
or about February 9, 1999.
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 22,
1999 will be entitled to notice of and to vote at the Annual Meeting.
On January 22, 1999, 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>
<TABLE>
<CAPTION>
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 22, 1999, the number of shares of Common Stock of the Company set forth
opposite each such person's name in the table below:
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 1,081,090 (2) 31.1%
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 . 196,000 5.6%
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>
-2-
<PAGE>
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 22, 1999.
<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 1,081,090 (2) 31.1%
E. R. Buford Common Stock 14,062 (3) 3.3%
Joseph V. Mariner, Jr. Common Stock 6,725 (4) *
Larry J. Parsons Common Stock 7,000 (4) *
Scott K. Upfield Common Stock 31,500 (5) 1.0%
Richard W. Griner Common Stock 4,500 (5) *
R. N. Stivers Common Stock 30,043 (6) 1.0%
All present executive officers
and directors as a group
(7 persons) Common Stock 1,274,920 (7) 36.7%
__________
* 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 65,000 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").
-3-
<PAGE>
(5 Includes 4,000 shares of Common Stock issuable upon the exercise
of options granted under the Outside Director Plan.
(6) Includes 7,500 shares of Common Stock issuable upon the exercise
of options granted under the 1990 Plan.
(7) Includes 93,500 shares of Common Stock issuable upon the exercise
of options granted under the 1990 Plan and the Outside Director Plan.
</TABLE>
-4-
<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 two
meetings during the twelve months ended August 31, 1998.
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, 1998.
During the twelve months ended August 31, 1998, 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
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.
-5-
<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:
Positions and Offices with
First Company, Business Experience
Became a During Past Five Years and
Name Age Director in Other Directorships
- ------------ --- ----------- ----------------------------
James E. Upfield 78 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 63 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. 78 1979 Retired as Chairman and
Mariner, Jr. 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;
and Renters Choice, Inc.,
the largest operator in the
U.S. rent-to-own industry,
currently operating over
2,000 company owned stores.
Larry J. Parsons 69 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.
-6-
<PAGE>
Scott K. Upfield 39 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 60 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.
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 5, 1998. 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 63, has
been Vice President-Finance, Secretary, Treasurer and Chief
Financial Officer of the Company, for more than the past five
years.
-7-
<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
$100,000 in 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation ----------------------
--------------------------- Awards Payouts
-------- --------
Other Securities All
Annual Restricted Underlying LTIP Other
Name of Compen- Stock Options Pay Compen-
Principal Fiscal Salary Bonus sation Awards /SAR's outs sation
Position Year ($) ($) ($) ($) (#) ($) ($)
- --------- -------- -------- ------- ------- ---------- ------------ ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E. R. Buford 1996 213,500 -0- N/A -0- -0- -0- N/A
Chief Executive 1997 221,000 -0- N/A -0- -0- -0- N/A
Officer
and President 1998 225,000 -0- N/A -0- -0- -0- N/A
- ---------------------------------------------------------------------------------------------------
James E. Upfield 1996 150,000 -0- N/A -0- -0- -0- N/A
Chairman of 1997 150,000 -0- N/A -0- -0- -0- N/A
the Board 1998 150,000 -0- N/A -0- -0- -0- N/A
- ---------------------------------------------------------------------------------------------------
R. N. Stivers 1996 112,000 -0- N/A -0- -0- -0- N/A
Chief Financial 1997 116,000 -0- N/A -0- -0- -0- N/A
Officer and Vice 1998 118,100 -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.
STOCK PLAN FOR KEY EMPLOYEES
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, as amended (the "Code"), 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 exercise price and duration of each option
and other matters in connection with the administration of the 1990
Plan and the
-8-
<PAGE>
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 1998 FISCAL YEAR
There were no stock options granted to the Company's executive
officers named in the Summary Compensation Table during fiscal year
1998.
-9-
<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.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
-----------------------------------------------------
AND FY-END OPTION/SAR VALUES
-----------------------------
Value of
Number of Securities Unexercised
Underlying Unexercised In-the-Money
Options/SARs at FY- Options/SARs
End at FY-End
(#) ($)
-------------------- --------------
Shares Value Exercisable/ Exercisable
Name Acquired Realized Unexercisable Unexercisable
- ---------- -------- -------- ------------- --------------
<S> <C> <C> <C> <C>
E. R. Buford -0- -0- Exercisable 50,000 $97,000
Exercisable 15,000 -0- (1)
Unexercisable 5,000 -0- (1)
James E.Upfield -0- -0- -0- -0-
R. N. Stivers -0- -0- Exercisable 7,500 -0- (1)
Unexercisable 2,500 -0- (1)
_________________
(1) The Company's stock price at August 31, 1998 was below the option exercise
price.
</TABLE>
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, 1998, 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
-10-
<PAGE>
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 the age of 50 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 50 and ten years of service but before normal
retirement will be assigned his insurance policy without any
payment being required.
EXECUTIVE OFFICERS' 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 1998 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 any 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 continue to pay the Executives their base
salaries effective at the time of termination for a period of two
and one half years for Mr. Buford and one year for Mr. Stivers.
If the Executives are involuntarily terminated, other than for
cause, in contemplation of, or within three years following, a
change of control (as defined in the agreements), 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.
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 Company's Chief Executive and Chief
Financial Officers and to approve the determinations of
compensation to be paid to certain other senior executives of the
Company. Salaries are reviewed at regular intervals,
approximately annually, depending on job classification and
competitive market levels. Mr. E. R. Buford (the Chief Executive
Officer of the Company) and Mr. Roger N. Stivers (the Chief
Financial Officer of the Company), 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). See "-Executive Officers' Employment
Agreements."
-11-
<PAGE>
In determining executive compensation, the Compensation Committee
reviews the performance of the specific executive, the operating
performance of the Company, the compensation for executives of
companies which are comparable to the Company and the performance
of the Company's Common Stock. Although the Compensation
Committee does not utilize any formal mathematical formulae or
objective thresholds, particular emphasis is given to the
operating results of the Company. The Compensation Committee
believes that specific formulae restrict flexibility and are too
rigid at this stage of the Company's development.
The Compensation Committee also 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.
In addition to the Compensation Committee's subjective
determination of the factors noted above, the committee has access
to, and reviews reports of, independent financial consultants who
assimilate and evaluate the compensation of executive officers
employed by companies which are generally comparable to the
Company. During this year's review, the Compensation Committee
considered the report, dated February 16, 1998, of a recognized
independent consulting firm used by the committee each of the
previous two years. The Compensation Committee seeks to establish
base salaries that generally approximate the median range for
comparable companies as set forth in the consultant's report. The
independent consulting firm considers a wide spectrum of durable
goods manufacturing companies to be "comparable" for this purpose;
however, adjustments are made to reflect the relative size of such
companies. The "Dow Jones Furnishings & Appliances" peer group
used in the performance chart on page 14 of this Proxy Statement
reflects a smaller group of the Company's competitors. The
Compensation Committee believes that the use of a broader group of
manufacturing companies for purposes of determining competitive
levels of executive pay is justified because the Company competes
with this larger group for the services of talented executives.
After a review of the factors discussed above, the Compensation
Committee determines whether 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. For fiscal 1997, the Compensation
Committee noted that, although comparable companies were generally
providing for modest increases to the base salaries of their
executive officers, the Company's performance during this period
did not meet expectations. As a result, the Compensation
Committee determined to maintain Mr. Buford's base salary at
$225,000 per annum. Neither the report of the independent
financial consultants nor the Compensation Committee recommended
that a bonus or other incentive payment be paid.
-12-
<PAGE>
The Compensation Committee has reviewed the applicability of
Section 162(m) of the Code, which disallows a tax deduction for
compensation to an executive officer in excess of $1.0 million per
year. The Compensation Committee does not anticipate that
compensation subject to this threshold will be paid to any
executive officer of the Company in the foreseeable future. The
committee intends to periodically review the potential
consequences of Section 162(m) and may in the future structure the
performance-based portion of its executive officer compensation to
comply with certain exemptions provided in Section 162(m).
Mr. Richard W. Griner
Mr. Joseph V. Mariner, Jr.
Mr. James E. Upfield
Mr. Scott K. Upfield
Mr. Larry J. Parsons
-13-
<PAGE>
PERFORMANCE GRAPH
The following table compares the performance of the Company's Common Stock with
certain comparable indices:
[PERFORMANCE GRAPH OMITTED]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
TEMTEX INDUSTRIES, $100.00 $121.06 $ 52.82 $ 40.88 $ 38.06 $ 35.25
INC.
Dow Jones Industrial $100.00 $110.10 $133.27 $166.10 $229.66 $231.11
Dow Jones Furnishings
& Appliances $100.00 $ 91.73 $ 93.27 $107.80 $133.46 $115.94
</TABLE>
-14-
<PAGE>
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. For the year
ended August 31, 1998, the Company did not pay any additional
compensation for services rendered to or for the benefit of any
director, except as otherwise described in this Proxy Statement.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
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.
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The following table shows stock options granted and presently
exercisable to outside directors from May 23, 1990 to August 31,
1998:
Options
Granted and Value of Unexercised
Presently Exercise In-The-Money Options
Exercisable Price/Sh At Fiscal Year End
----------- -------- -------------------
Joseph V. Mariner, Jr. 2,500 $2.00 $ 2,825
2,500 $1.44 4,225
1,500 $3.31 -0- (1)
----- -------
6,500 $ 7,050
===== =======
Larry J. Parsons 2,500 $2.00 $ 2,825
2,500 $1.44 4,225
1,500 $3.31 -0- (1)
------ -------
6,500 $ 7,050
===== =======
Scott K. Upfield 2,500 $1.44 $ 4,225
1,500 $3.31 -0- (1)
----- -------
4,000 $4,225
===== ======
Richard W. Griner 2,500 $4.81 $ -0- (1)
1,500 $3.31 -0- (1)
----- -------
4,000 $ -0-
===== =======
_________________
(1) The Company's stock price at August 31, 1998 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 "MANAGEMENT TRANSACTIONS."
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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 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
20.2031-2(d) promulgated by the Commissioner of Internal Revenue
under Section 2031 of the Code). Such purchase price would have
been $3.16 if computed as of January 22, 1999.
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
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<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. As of the date of this Proxy Statement, the
amount payable under this Agreement by the Company to repurchase
shares of Common Stock from the Chairman's estate could not exceed
$500,000, all of which is payable from the proceeds of the life
insurance policy maintained by the Company for this purpose.
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 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, 1998 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 2000 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 6, 1999.
MISCELLANEOUS
The Board of Directors has appointed Ernst & Young LLP as the
independent auditors of the Company for the fiscal year ending
August 31, 1999. Ernst & Young acted as the Company's independent
auditors for the fiscal year ended August 31, 1998. A
representative of Ernst & Young will attend the annual meeting of
stockholders to be held March 4, 1999, 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 9, 1999
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<PAGE>
TEMTEX INDUSTRIES, INC
Proxy Solicited on Behalf of the Board of Directors
For Annual Meeting of Stockholders,
March 4, 1999
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 4, 1999,
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 Directors Names of Nominees:
James E. Upfield, E. R.
Buford; Joseph V.
Mariner, Jr.; Larry J.
Withhold [ ] Parsons; Scott K.
For [ ] All nominees Authority to Upfield; Richard W.
named (except as vote for all Griner (Instruction: To
marked to the nominees named withhold authority to
contrary) vote for any individual
nominee, write the
nominee's name on the
following line.)
________________________
(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.
