<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Trendwest Resorts, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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> 2
TRENDWEST RESORTS, INC.
12301 N.E. 10TH PLACE
BELLEVUE, WASHINGTON 98005
April 27, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Trendwest Resorts, Inc. (the "Company") which will be held at the Bellevue
Doubletree Hotel, Newport Room, 300 112th Street SE, Bellevue, Washington, at
2:00 p.m., Thursday, May 28, 1998. I look forward to greeting as many of our
stockholders as possible.
At the annual meeting, holders of Company common stock will be asked to
vote to elect three directors to the Board of Directors and to ratify the
selection of KPMG Peat Marwick LLP as independent auditors. Information about
the nominees for election to the Board of Directors is included in the
accompanying Notice of Annual Meeting of Stockholders and the Proxy Statement.
Your Board of Directors recommends that you vote "FOR" the Board of Director
nominees and the selection of KPMG Peat Marwick LLP.
In addition to the specific matters to be acted upon, there will be a
report on the progress of the Company and an opportunity to ask questions of
general interest to stockholders.
Whether or not you attend the annual meeting it is important that your
shares be represented and voted. Therefore, I urge you to sign, date and
promptly return the enclosed proxy in the enclosed postage-paid envelope. If you
decide to attend the annual meeting and vote in person, you will, of course,
have that opportunity.
Sincerely,
/s/ WILLIAM F. PEARE
William F. Peare
President and Chief Executive Officer
<PAGE> 3
TRENDWEST RESORTS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 28, 1998
------------------------
The Annual Meeting of Stockholders of Trendwest Resorts, Inc. (the
"Company") will be held at the Bellevue Doubletree Hotel, Newport Room, 300
112th Street SE, Bellevue, Washington, at 2:00 p.m., Thursday, May 28, 1998, for
the following purposes:
1. To elect three directors to hold office until the 2001 Annual Meeting of
Stockholders and until their successors are elected and qualified;
2. Ratification of KPMG Peat Marwick LLP as independent auditors; and
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The above matters are more fully described in the Proxy Statement, which
follows. Only holders of shares of the Company common stock of record at the
close of business on April 10, 1998, are entitled to notice of, and to vote at,
this annual meeting and any and all adjournments thereof.
By Order of the Board of Directors,
/s/ WILLIAM F. PEARE
William F. Peare
President and Chief Executive Officer
Seattle, Washington
April 27, 1998
IMPORTANT
Whether or not you expect to attend in person, we urge you to sign, date,
and return the enclosed proxy at your earliest convenience. This will ensure the
presence of a quorum at the meeting. PROMPTLY SIGNING, DATING, AND RETURNING THE
PROXY WILL SAVE THE COMPANY THE EXPENSE AND EXTRA WORK OF ADDITIONAL
SOLICITATION. An addressed envelope for which no postage is required if mailed
in the United States is enclosed for that purpose. Sending in your proxy will
not prevent you from voting your stock at the meeting if you desire to do so, as
your proxy is revocable at your option in the manner described in the Proxy
Statement.
<PAGE> 4
TRENDWEST RESORTS, INC.
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
The enclosed proxy is solicited by the Board of Directors of Trendwest
Resorts, Inc. (the "Company") to be voted at the Annual Meeting of Stockholders
to be held at 2:00 p.m. on May 28, 1998, and any adjournments thereof (the
"Annual Meeting"). The persons named as proxies are William F. Peare and Jeffery
P. Sites. The accompanying notice of meeting, this Proxy Statement and the
accompanying proxy are being first sent to stockholders on or about April 28,
1998.
At the Annual Meeting, holders of the Company's common stock, no par value
per share (the "Common Stock"), will be asked to elect three directors, each to
hold office until the 2001 Annual Meeting of Stockholders and, in each case,
until his or her successor is elected and qualified.
All shares represented by proxies that are properly executed and returned
will be voted in accordance with the instructions noted thereon. In the absence
of voting instructions, the shares of Common Stock will be voted for the
nominees for director listed herein and on the proxy. A stockholder giving a
proxy has the power to revoke it at any time before it is voted. The proxy may
be revoked by written notice to the Secretary of the Company received at the
Company's offices at 12301 N.E. 10th Place, Bellevue, Washington, 98005, on or
before May 27, 1998, or by written notice delivered in person at the Annual
Meeting to the Secretary prior to the commencement of the Annual Meeting.
Attendance at the Annual Meeting will not, in itself, constitute revocation of a
previously granted proxy.
Only stockholders of record at the close of business on April 10, 1998 (the
"Record Date") will be entitled to vote at the Annual Meeting. At the close of
business on the Record Date, there were 17,593,366 shares of Common Stock
outstanding, which represent all of the voting securities of the Company. Each
share of Common Stock is entitled to one vote. Stockholders do not have
cumulative voting rights in the elections of directors.
The holders of a majority of the Common Stock issued and outstanding and
entitled to vote at the Annual Meeting, if present in person or represented by
proxy, constitute a quorum for purposes of acting on the election of directors.
Abstentions and shares held by brokers that are present but not voted because
brokers were prohibited from exercising discretionary authority will be counted
as present for the purposes of determining if a quorum is present.
Under applicable law and the Company's articles of incorporation and
bylaws, and assuming that a quorum is present, in the election of the three
directors for terms ending in 2001, the persons elected will be the three
persons receiving the largest number of votes cast at the Annual Meeting by
shares present in person or by proxy. In determining whether a voting matter has
received the requisite number of affirmative votes, abstentions and broker
non-votes will have no effect as they will not have been cast in favor of any
nominee.
All proxy soliciting expenses will be paid by the Company in connection
with the solicitation of votes for the Annual Meeting. In addition to mailing
this material to stockholders, the Company has asked banks and brokers to
forward copies to persons for whom they hold shares of the Company and request
authority for execution of the proxies. The Company will reimburse the banks and
brokers for their reasonable out-of-pocket expenses in doing so. Officers and
regular employees of the Company may also, without being additionally
compensated, solicit proxies by mail, telephone, telegram, facsimile or personal
contact.
<PAGE> 5
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding ownership of the
Common Stock by each person known to the Company to own more than 5% of the
outstanding shares of the Common Stock on April 10, 1998.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
------------------------------------ ------------------ ----------------
<S> <C> <C>
JELD-WEN, inc........................................ 13,725,821 78.0%
3250 Lakeport Blvd
Klamath Falls, Oregon 97601
</TABLE>
The following table sets forth information regarding the beneficial
ownership of Common Stock on April 10, 1998 by (i) each director and nominee for
director, (ii) the Company's Chief Executive Officer and the other executive
officers named in the executive compensation table set forth herein and (iii)
all directors and executive officers as a group. The following is based on
information furnished by such owners. Each of the persons named below has sole
voting and investment power with respect to the shares shown, except as noted
below.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
------------------------------------ ------------------ ----------------
<S> <C> <C>
William F. Peare..................................... 319,060 1.8%
Jeffery P. Sites..................................... 89,812 *
William G. Brown..................................... -0- *
Ronald A. Buzard..................................... 10,095 *
Gerald T. Lynch...................................... 27,647 *
Jerol E. Andres...................................... 6,000 *
Douglas P. Kintzinger................................ 3,733(1)(5) *
Roderick C. Wendt.................................... 14,740(2)(5) *
Michael Hollern...................................... 6,000(3) *
Harry Demorest....................................... 6,000(4) *
Linda Tubbs.......................................... -0- *
All directors and executive officers as a group (19
persons)........................................... 551,509 3.1%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 400 shares held by Mr. Kintzinger's wife.
(2) Includes 850 shares held by Mr. Wendt's minor children.
(3) Includes 6,000 shares held by Hollybank & Co., a company controlled by Mr.
Hollern.
(4) Includes 6,000 shares held by Mr. Demorest's wife.
(5) Messrs. Kintzinger and Wendt are executive officers and directors of
JELD-WEN, inc. and disclaim any beneficial ownership in the shares of the
Company owned by JELD-WEN, inc.
2
<PAGE> 6
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of eight directors
who are divided into three classes, as nearly equal in number as possible. The
members of each class serve three-year terms, with one class elected annually.
The term of office of the directors in Class I expires at the 1998 Annual
Meeting. The Board of Directors has nominated Messrs. Andres and Wendt and Ms.
Tubbs for election as directors to serve a term of three years ending at the
Company's Annual Meeting of Stockholders in 2001 and until their successors have
been duly elected and qualified.
Messrs. Andres and Wendt and Ms. Tubbs have indicated that they are willing
and able to serve as directors. If any of Messrs. Andres or Wendt or Ms. Tubbs
becomes unable or unwilling to serve, the accompanying proxy may be voted for
the election of such other person as shall be designated by the Board of
Directors. The three directors will be elected by a plurality of the votes cast,
in person or by proxy, at the Annual Meeting, assuming a quorum is present.
Unless instructions to the contrary are specified in a properly signed and
returned proxy, the proxies will be voted in favor of Messrs. Andres and Wendt
and Ms. Tubbs.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE NOMINEES.
DIRECTORS
The following table sets forth information regarding each nominee for
election as a director and each director whose term of office will continue
after the Annual Meeting. Except as otherwise indicated, each director has been
engaged in the principal occupation described below for at least five years.
<TABLE>
<CAPTION>
COMPANY EXPIRATION OF
NAME AGE DIRECTOR SINCE TERM AS DIRECTOR
---- --- -------------- ----------------
<S> <C> <C> <C>
William F. Peare................................. 59 1989 2000
Jeffery P. Sites................................. 41 1991 1999
Jerol E. Andres.................................. 54 1989 1998
Douglas P. Kintzinger............................ 37 1994 1999
Roderick C. Wendt................................ 44 1993 1998
Harry L. Demorest................................ 55 1997 2000
Michael P. Hollern............................... 58 1997 1999
Linda M. Tubbs................................... 50 1997 1998
</TABLE>
William F. Peare has served as its President and Chief Executive Officer,
and as a director, since 1989. Mr. Peare also serves as a director and as
President of WorldMark. Mr. Peare developed the WorldMark concept and attracted
key management personnel to the Company. From 1987 to 1989, Mr. Peare served as
a management consultant for Eagle Crest Resort in Redmond, Oregon ("Eagle
Crest") and for Elkhorn Resort in Sun Valley, Idaho. From 1985 to 1987, Mr.
Peare was a Senior Vice President of Horizon Airlines. From 1983 to 1985, Mr.
Peare served as Chief Executive Officer of All Seasons Resorts, Inc. ("All
Seasons"), a publicly-traded membership campground company. From 1975 to 1982,
Mr. Peare served as President of Thousand Trails Inc. ("Thousand Trails"), the
nation's largest membership campground company.
Jeffery P. Sites has served as Executive Vice President, Chief Operating
Officer, and Secretary of the Company since 1989, and served as Treasurer from
1989 to January 1997. Mr. Sites has been a director of the Company since 1991.
Prior to 1998, Mr. Sites served as a director and as Treasurer of WorldMark. Mr.
Sites oversees the day-to-day operations of the Company. From 1987 to 1989, Mr.
Sites was Chief Financial Officer of OMT, Inc., a holding company with a variety
of businesses including an interval ownership project in Sun Valley, Idaho. From
1985 to 1987, Mr. Sites was Executive Vice President and co-founder of Venture
Out Resorts, a regional membership campground company. From 1983 to 1985, Mr.
Sites was the Controller for All Seasons.
3
<PAGE> 7
Jerol E. Andres has served as a director of the Company since 1989. Since
1988, Mr. Andres has served as Chief Executive Officer and President of Eagle
Crest. From 1984 to 1988, Mr. Andres founded and was Chief Executive Officer and
President of Happy Trails Resort. Since 1993, Mr. Andres has served as a
director of Bank of the Cascades, a publicly-traded bank company. Mr. Andres
served on the board of ARDA for 11 years, serving as Chairman from 1984 to 1986.
From 1978 to 1984, Mr. Andres served as a Vice President of Thousand Trails.
Douglas P. Kintzinger has served as a director of the Company since 1994.
Mr. Kintzinger has been Senior Vice President of Jeld-Wen since 1997 and is
responsible for the accounting, data processing, legal, employee benefits, risk
management, insurance, corporate services, treasury and corporate development of
Jeld-Wen. Mr. Kintzinger was first employed by Jeld-Wen in 1987 and served as
special projects manager, corporate counsel, manager of corporate development
and in 1994 vice president of administration and corporate development. He has
been a director of Jeld-Wen since 1994 and Jeld-Wen's corporate secretary since
1992. Mr. Kintzinger has also been an officer/director of various Jeld-Wen
affiliates and subsidiaries, including Eagle Crest G.P. Inc., Running Y Resort,
Inc., West One Automotive Group, Inc. and Brooks Resources Corporation. Mr.
Kintzinger also has served as a director of South Valley State Bank since 1991
and as a Regent of Luther College since 1990.
Roderick C. Wendt has served as a director of the Company since 1993. Mr.
Wendt has been President of Jeld-Wen since 1992 and is responsible for the
overall day-to-day performance of Jeld-Wen. Mr. Wendt was first employed by
Jeld-Wen in 1980 and served as corporate counsel, Vice President and Senior Vice
President prior to becoming President. He has been a director of Jeld-Wen since
1985. Mr. Wendt has also been an officer and/or director of various Jeld-Wen
affiliates and subsidiaries, including Eagle Crest G.P. Inc., Running Y Resort,
Inc., Windmill Inns of America, inc., West One Automotive Group, Inc., Frank
Paxton Company and Brooks Resources Corporation. Mr. Wendt also served as a
director of South Valley State Bank from 1983 to 1994 and has served as a
director of the High Desert Museum since 1994.
Harry L. Demorest has served as Chief Executive Officer of Columbia Forest
Products, Inc. since March 1996. He served as President of Columbia Forest
Products, Inc. from March 1994 to April 1996, and as Executive Vice President
from April 1992 to February 1994. Prior to his employment by Columbia Forest
Products, Inc., Mr. Demorest was a partner with Arthur Andersen & Co., serving
as Office Managing partner for the Portland, Oregon office from 1981 to 1991 and
as Partner-in-charge of the tax division of the Portland office from 1979 to
1985. Mr. Demorest also serves on the boards of directors of several civic and
charitable organizations.
Michael P. Hollern has served as Chairman of the Board of Directors of
Brooks Resources Corporation since 1970, and has served as president of Brooks
Resources since 1983. Mr. Hollern served as President of Brooks-Scanlon, Inc.
from 1970 until its sale to Diamond International in June 1980. Mr. Hollern also
serves on the boards of directors of several corporate, civic and charitable
organizations.
Linda M. Tubbs retired April 1, 1998 as an Executive Vice President of
Wells Fargo Bank, serving as its Division Manager for the Northwest Commercial
Banking Group since Wells Fargo's merger with First interstate Bank in April
1996. Prior to the merger, Ms. Tubbs served as Senior Vice President and Manager
of First Interstate's Portland, Oregon Commercial Banking Administration and
served in various other capacities at First Interstate since 1972, including her
appointment in March 1990 as Senior Vice President and Manager of the Oregon
head office. Ms. Tubbs also serves on the boards of directors of several civic
and charitable organizations.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee reviews the Company's accounting practices, internal
accounting controls and financial results and oversees the engagement of the
Company's independent auditors. The current members of the Company's Audit
Committee are Messrs. Sites, Demorest and Kintzinger. The Audit Committee did
not meet in 1997.
4
<PAGE> 8
The Compensation Committee reviews and recommends to the Board of Directors
salaries, bonuses and other forms of compensation for executive officers of the
Company and administers the Company's stock option plan. The current members of
the Compensation Committee are Messrs. Hollern and Kintzinger and Ms. Tubbs. The
Compensation Committee met two times in 1997.
During 1997, the Company's Board of Directors met five times. Except for
Messrs. Demorest and Hollern, each member of the Board of Directors attended at
least 75% of the aggregate number of meetings of the Board of Directors and
committees on which such director served.
DIRECTOR FEES
Directors who are not employees of the Company or Jeld-Wen receive a fee of
$1,000 for each Board meeting attended. All non-employee directors are
reimbursed for out of pocket expenses for each Board meeting attended.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table and related notes set forth all compensation received
from the Company for the three fiscal years ended December 31, 1997 by the
Company's Chief Executive Officer ("CEO") and the four most highly paid
executive officers (other than the CEO) who were serving as executive officers
at the end of 1997 (collectively, together with the CEO, the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ------------
OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION GRANTED COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William F. Peare................ 1997 $100,000 $197,340 $12,055 20,000 -0-
President and Chief 1996 96,000 192,013 18,860 -0- -0-
Executive Officer
Ronald A. Buzard................ 1997 50,000 230,442 10,551 20,000 -0-
Vice President -- Sales 1996 50,000 198,544 11,200 -0- -0-
William G. Brown................ 1997 50,000 226,151 17,077 20,000 -0-
Vice President of 1996 50,000 181,910 11,200 -0- -0-
California Sales
Jeffery Sites................... 1997 75,000 159,145 15,919 20,000 -0-
Executive Vice President and 1996 70,000 139,991 17,153 -0- -0-
Chief Operating Officer
Gerald T. Lynch................. 1997 50,000 179,326 9,385 20,000 -0-
Vice President -- Marketing 1996 50,000 170,005 11,200 -0- -0-
</TABLE>
EMPLOYMENT, TERMINATION AND CHANGE OF CONTROL AGREEMENTS
Messrs. Peare and Sites have entered into employment agreements with the
Company. Under the employment agreements, Mr. Peare will receive a base annual
salary of $100,000, and Mr. Sites will receive a base annual salary of $75,000,
and each will have the opportunity to receive performance bonuses. The
agreements will contain a covenant not to compete for a period of two years in
the event of termination of employment for any reason. If employment is
terminated by the Company without cause, the employee will receive his base
salary for a period of one year following the date of termination plus the
amount of bonus earned during the preceding twelve months.
5
<PAGE> 9
GRANTS OF STOCK OPTIONS
The following table sets forth information on stock option grants during
fiscal 1997 to the Named Executive Officers. The options set forth in the table
below were granted on October 23, 1997, as part of recipient's 1997
compensation.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION FOR
SECURITIES TOTAL OPTIONS EIGHT YEAR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- ----------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William F. Peare................ 20,000 4.07 $26.875 10/23/05 $256,600 $614,600
Ronald A. Buzard................ 20,000 4.07 26.875 10/23/05 256,600 614,600
William G. Brown................ 20,000 4.07 26.875 10/23/05 256,600 614,600
Jeffery P Sites................. 20,000 4.07 26.875 10/23/05 256,600 614,600
Gerald T. Lynch................. 20,000 4.07 26.875 10/23/05 256,600 614,600
</TABLE>
- ---------------
(1) Each of the options reflected in this table was granted to the respective
Named Executive Officer pursuant to the Company's 1997 Option Plan. The
exercise price of each option is equal to the fair market value of the
Common Stock on the date of grant. The options vest ratably over five years
beginning on the first anniversary of the date of grant.
(2) These assumed rates of appreciation are provided in order to comply with the
requirements of the Securities and Exchange Commission (the "SEC") and do
not represent the Company's expectation or projection as to the actual rate
of appreciation of the Common Stock. These gains are based on assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
options were granted over the full option term. The actual value of the
options will depend on the performance of the Common Stock and may be
greater or less than the amounts shown.
EXERCISE OF STOCK OPTIONS
The following table sets forth information on the exercise of stock options
during fiscal year 1997 by each of the Named Executive Officers and the value of
unexercised options at December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William F. Peare............. -- -- -- 20,000 -- --
Ronald A. Buzard............. -- -- -- 20,000 -- --
William G. Brown............. -- -- -- 20,000 -- --
Jeffery P Sites.............. -- -- -- 20,000 -- --
Gerald T. Lynch.............. -- -- -- 20,000 -- --
</TABLE>
6
<PAGE> 10
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is responsible for
establishing policies and programs which govern compensation for executive
officers and for administering these programs to determine bonus amounts and
option awards.
COMPENSATION POLICY
The Company's executive compensation policy is designed to attract, reward
and retain management who will achieve the business objectives of the Company.
The Company's compensation policy seeks to align executive compensation with
corporate performance, both on a short-term and long-term basis. In this regard,
the base salaries of executives are established at levels which are considered
lower than might otherwise be warranted in light of the duties and scope of
responsibilities of each officer's position. Executive officers are afforded the
opportunity to substantially increase their income through a bonus system that
is based primarily on the Company's annual sales. A smaller portion of the bonus
of executive officers is based on the Company's net income exceeding a 20%
annual return on equity.
The Compensation Committee also awarded stock options to various executive
officers following the Company's initial public offering. The purpose of these
awards was to provide key officers with an equity incentive in the Company to
reinforce management's commitment to enhancement of profitability and
stockholder value. These options granted were based primarily on the executive
officer's level of responsibility within the Company and the length of time such
officer had been employed by the Company.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. William Peare, the Company's Chief Executive Officer, is a party to an
employment agreement with the Company and his compensation for 1997 was
determined in accordance with the employment agreement. Mr. Peare's base
compensation is set at $100,000 and he is eligible to receive a performance
bonus, based primarily on the Company's annual sales, of up to $200,000. For
1997, Mr. Peare's bonus was $197,340. The Compensation Committee also awarded
Mr. Peare a grant of options to acquire 20,000 shares of Common Stock. As with
the other grants to executive officers, Mr. Peare's grant was based on his
position as chief executive officer and his length of service with the Company.
COMPENSATION COMMITTEE
Michael P. Hollern
Douglas P. Kintzinger
Linda M. Tubbs
7
<PAGE> 11
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return (stock
price appreciation plus dividends) on the Common Stock with the cumulative total
return of the S&P 500 Index and the group of peer companies set forth below
(based on weighted market capitalization) selected by the Company.
COMPARED CUMULATIVE TOTAL RETURN AMONG
TRENDWEST RESORTS, INC., S&P 500 INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD TRENDWEST
(FISCAL YEAR COVERED) RESORTS, INC. PEER GROUP S & P 500
<S> <C> <C> <C>
AUG-97 100 100 100
1997 127 94 102
</TABLE>
PEER GROUP DETAIL
<TABLE>
<S> <C>
AMERICAN SKIING
BRISTOL HOTEL CO
CAPSTAR HOTEL CO
CHOICE HOTELS CO
EXECUSTAY CORP
FAIRFIELD COMMUNITIES
FOUR SEASON HOTELS
HOST MARRIOTT CORP
INTRAWEST CORP
LA QUINTA INNS
PROMUS HOTEL CO
RED ROOF INNS INC
SERVICO INC
SHOLODGE INC
SIGNATURE RESORTS
SILVERLEAF RESORTS
SUBURBAN LODGES
SUNBURST HOSPITALITY CORP
SUPERTEL HOSPITALITY INC
VISTANA INC
</TABLE>
8
<PAGE> 12
CERTAIN RELATIONSHIPS AND TRANSACTIONS
RELATIONSHIP WITH JELD-WEN, INC.
Background. JELD-WEN, inc. ("Jeld-Wen") owns 78.02% of the outstanding
shares of the Company's Common Stock. Roderick Wendt and Douglas Kintzinger are
directors of the Company and Richard Wendt was a director of the Company until
March 1997. Richard Wendt, Roderick Wendt and Douglas Kintzinger are all
directors of Jeld-Wen. In addition, Richard Wendt, Roderick Wendt and Douglas
Kintzinger own 38.2%, 1.4% and 0.5%, respectively, of the outstanding shares of
Jeld-Wen. Jeld-Wen has established the Jeld-Wen Foundation, which is a
charitable foundation of which Richard Wendt, Roderick Wendt and William Early,
an officer and director of Jeld-Wen, are members of the Foundation's Board of
Directors. Eagle Crest, Inc. ("Eagle Crest"), a wholly-owned subsidiary of
Jeld-Wen, is developing the Eagle Crest Resort. Running Y Resort, Inc. ("Running
Y"), a wholly-owned subsidiary of Eagle Crest, is developing the Running Y
Resort.
The Company is developing a resort in central Washington known as
MountainStar in conjunction with Jeld-Wen. Jeld-Wen owns the land and the
Company is acting as the developer. On behalf of Jeld-Wen, the Company has
incurred approximately $4.5 million in costs related to the project, all of
which will be reimbursed by Jeld-Wen.
Administrative Services. Jeld-Wen provides a self-insured health, life and
disability benefits plan to its employees, in which the Company participated.
The Company paid Jeld-Wen approximately $1,487,000 in 1997 to include the
Company's employees within the Jeld-Wen plan. Jeld-Wen also self-insures its
workmen's compensation liability and the Company also participates in that plan.
The Company paid Jeld-Wen approximately $378,000 in 1997 to include the
Company's employees within the Jeld-Wen plan.
Credit Facility. The Company maintains an unsecured, open, revolving credit
line with Jeld-Wen. The credit line was capped at $10 million after the
Company's initial public offering in August 1997 and is payable on demand. The
Company pays Jeld-Wen interest at prime plus one percent. The maximum month-end
balance of the line outstanding to Jeld-Wen during 1997 was approximately
$37,306,000. To the extent the Company has excess funds available to loan
Jeld-Wen, such loans earn interest at prime minus one percent. The terms of the
line of credit are the same as Jeld-Wen provides to its other subsidiaries and
divisions. The Company believes that the terms of the line of credit as a whole
are no less favorable than could be obtained from an unaffiliated third party.
Agreement with Eagle Crest. The Company has an agreement with Eagle Crest
whereby the Company has assigned to Eagle Crest the nonexclusive right to sell
Vacation Credits in WorldMark at Eagle Crest's resort in Redmond, Oregon and to
retain the gross proceeds from such sales. Eagle Crest must transfer condominium
units to WorldMark at no cost to WorldMark. Eagle Crest cannot sell more
Vacation Credits than has been allocated to the condominium units transferred to
WorldMark. Trendwest determines the number of Vacation Credits allocated to
those condominium units transferred to WorldMark using the same basis as other
resort units transferred by Trendwest to WorldMark. Effective September 1, 1997,
the agreement required Eagle Crest to pay the Company a fee equal to 3% of net
sales of Vacation Credits sold at Eagle Crest. Subsequently, the agreement was
amended to allow the Company to retain the full face interest on the contracts
financed and sold to the Company with full recourse to Eagle Crest for any
unpaid principal amounts. In addition, the Company purchases Notes Receivable
from Eagle Crest at face value plus accrued interest. During the year, the
Company purchased Notes Receivable in the principal amount of approximately
$7,134,000. The terms of the agreement with Eagle Crest were negotiated between
the managements of the Company and Eagle Crest.
Agreement with Running Y. The Company and Running Y are parties to an
agreement under which Running Y will develop at its expense condominium units at
the Running Y Resort. The Company will pay Running Y a purchase price for each
such unit equal to the number of Vacation Credits attributable to such unit (as
determined by the Company), multiplied by the then-current price per Vacation
Credit, multiplied by 26%. The Company has purchased 40 units through December
31, 1997 at a cost of $5,230,000, and is required to purchase an additional 60
units prior to April 2000. Effective September 1, 1997, the agreement
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required Running Y to pay the Company a fee equal to 3% of net sales of Vacation
Credits sold at Running Y. Subsequently, the agreement was amended to allow the
Company to retain the full face interest on the contracts financed and sold to
the Company with full recourse to Running Y for any unpaid principal amounts. In
addition, the Company purchased Notes Receivable from Running Y in the principal
amount of approximately $3,218,000 1997. The terms of the agreement with Running
Y were negotiated between the managements of the Company and Running Y.
Purchase of Notes Receivable. I&I Holdings, Ltd., a wholly-owned subsidiary
of Jeld-Wen, has purchased Notes Receivable from the Company at face value plus
accrued interest on a full recourse basis. During 1997, I&I Holdings, Ltd.
purchased Notes Receivables with outstanding balances of approximately $55,000.
R & R Vista, an Oregon general partnership comprised of Richard L. Wendt
and Roderick C. Wendt, has purchased Notes Receivable from the Company at face
value plus accrued interest on a full recourse basis. During 1997, R & R Vista
purchased Notes Receivable with outstanding balances of approximately $917,000.
The Jeld-Wen Foundation purchased Notes Receivable from the Company at face
value plus accrued interest on a full recourse basis. In 1997, the Company
purchased Notes Receivable from the Foundation with an outstanding balance of
$2,536,000.
The terms of the purchase of the Notes Receivable by the affiliated parties
were negotiated between the Company and the principals of R&R Vista. The Company
believes that the terms of such financing are no less favorable than could have
been obtained from an unaffiliated third party.
ACQUISITION OF FINANCE SUBSIDIARIES
Effective June 30, 1997, the Company acquired all of the shares of common
stock of TW Holdings, Inc. ("TW") and Trendwest Funding I, Inc. ("TFI"), which
were wholly-owned subsidiaries of Jeld-Wen, in exchange for 5,193,693 shares of
the Company's Common Stock. TW and TFI were formed to enable the Company to sell
Notes Receivable. The value of the shares of TW and TFI and the value of the
shares of Common Stock were determined in negotiations between Jeld-Wen and the
Company, based on a multiple of the historical earnings of the respective
companies.
RELATIONSHIP WITH WORLDMARK
WorldMark is a California nonprofit mutual benefit corporation that was
formed by Trendwest for the specific purposes of owning, operating and
maintaining the real property conveyed to it by Trendwest. Trendwest has the
exclusive, non-terminable right to contribute properties to WorldMark. The
Company contributes properties to WorldMark, free from all monetary
encumbrances, which are then added to the inventory of WorldMark Resort units
available for use by Owners. In return for the contribution of property to
WorldMark, Trendwest has the exclusive right to market and sell Vacation
Credits.
WorldMark is managed by a Board of Directors elected by the Owners, who
vote in proportion to the number of Vacation Credits owned. At present, three of
WorldMark's five Board members are executive officers of Trendwest, Mr. William
F. Peare, Mr. Gene F. Hensley and Mr. J. Michael Moyer. In addition, Mr. Peare
is the President of WorldMark.
The Company has a Management Agreement with WorldMark whereby it acts as
the exclusive manager and servicing agent of WorldMark and the vacation owner
program. The Company's responsibilities under the Management Agreement include
general management of WorldMark, overseeing the property management and service
levels of the resorts, and preparing financial forecasts and budgets for
WorldMark. The Management Agreement provides for automatic one-year renewals
unless such renewal is denied by a majority of the voting power of the Owners
(excluding Trendwest). As compensation for its services, the Company receives
the portion of total revenues received by WorldMark remaining after WorldMark
pays or reserves for its expenses plus reserves for repair and replacement of
WorldMark Resorts. This amount is subject to a ceiling equal to 15% of the
budgeted annual expenses and reserves of WorldMark (exclusive of management
fees). Management revenues from WorldMark during 1997 were approximately
$1,488,000.
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RELATIONSHIP WITH SAGE SYSTEMS
Background. The Company and Sage, a licensed escrow company, are parties to
several administrative agreements. Woodrow O'Rourke, the President of Sage, is
the brother-in-law of William F. Peare, a director and the President and Chief
Executive Officer of the Company.
Escrow. The Company and Sage are parties to an Escrow Agreement under which
contracts for the sale of Vacation Credits by the Company, and the funds
received from such sales, must be placed in escrow with Sage. The Company pays
Sage a fee of $35 to $40 per account for which Sage holds escrowed funds. Under
the Escrow Agreement, the Company paid Sage approximately $464,000 in 1997.
Servicing of Accounts. The Company and Sage are parties to a Service
Agreement under which Sage is responsible for maintaining a data processing
system to bill and receive monthly receivable payments. The Company pays Sage a
monthly fee of $1.70 per account serviced by Sage. Under the Service Agreement,
the Company paid Sage approximately $700,000 in 1997.
Software. The Company, Sage and James McBride, Sr., an employee of Sage,
entered into a Software Transfer Agreement in August 1994, under which Sage and
Mr. McBride granted the Company an irrevocable, royalty-free license to use
certain computer software programs. Concurrently with the Software Transfer
Agreement, the Company and Sage entered into a Software Support and Maintenance
Agreement (the "Maintenance Agreement"), under which Sage provides
modifications, improvements and customer service to the Company in connection
with the licensed computer software programs. Under the Maintenance Agreement,
the Company paid Sage an initial fee of $12,000, a retainer of $2,000 per month,
and labor charges of $50 per hour for services in excess of ten hours per month.
Under the Maintenance Agreement, the Company has paid Sage approximately $35,000
in 1997.
The terms of the various agreements with Sage were negotiated between the
managements of the Company and Sage. The Company believes that the terms of such
agreements are no less favorable than could have been obtained from an unrelated
third party.
EMPLOYMENT RELATIONSHIPS
Frederick C. Peare, the brother of Mr. William Peare, is employed by the
Company as a director of one of the Company's sales offices. During 1997,
Frederick C. Peare received a salary (based on commissions) of $326,532. Scott
Sites, the brother of Mr. Jeffery Sites, is employed by the Company in a sales
capacity. During 1997, Scott Sites received a salary (based on commissions) and
Company 401(k) contributions of $162,806. Thomas F. Sites, the brother of Mr.
Jeffery Sites, is employed by the Company in an administrative capacity. During
1997, Thomas Sites received a salary and bonus of $61,864.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under SEC rules, the Company's directors, executive officers and beneficial
owners of more than 10% of any Trendwest equity security are required to file
periodic reports of their ownership, and changes in that ownership, with the
SEC. Based solely on its review of copies of these reports and representations
of such reporting persons, the Company believes during fiscal 1997, such SEC
filing requirements were satisfied, except that Mr. Kintzinger filed a late Form
5 reporting a single transaction and Mr. Wendt filed a late Form 5 reporting
gifts to his four minor children.
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PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG Peat Marwick LLP ("KPMG") as the
Company's independent auditors for the fiscal year ending December 31, 1998.
Representatives of KPMG Peat Marwick LLP are expected to attend the Annual
Meeting and will have an opportunity to make a statement or to respond to
appropriate questions from stockholders. Ratification of the selection of KPMG
requires the affirmative vote of a majority of the votes cast by the holders of
the Common Stock voting in person or by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR" THE
PROPOSAL TO RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE 1998 FISCAL YEAR.
The Company engaged KPMG Peat Marwick LLP ("KPMG") on March 12, 1997 as the
Company's independent accountants to report on the Company's balance sheets as
of December 31, 1996 and 1995, and the related combined statements of income,
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1996. The decision to appoint KPMG was approved by the
Company's Board of Directors.
Molatore, Peugh, McDaniel, Scroggin & Co. LLP ("MPMS") had acted as the
Company's independent accountants since 1992. None of such accountant's reports
on the Company's financial statements for any of the years reported on contained
an adverse opinion or disclaimer of opinion, nor were the opinions modified as
to uncertainty, audit scope or accounting principles, nor were there any events
of the type requiring disclosure under Item 304(a)(1)(v) of Regulation S-K under
the Securities act. There were no disagreements with MPMS, resolved or
unresolved, on any matter of accounting principles or practices, financial
disclosure, or auditing scope or procedure, which, if not resolved to MPMS's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its reports. MPMS was not retained to report
on the Company's 1996 financial statements.
In August 1996, the Company engaged Coopers & Lybrand LLP ("C&L") as the
Company's independent accountants to report on the Company's balance sheet as of
December 31, 1995 and 1994, and the related statements of income, stockholders'
equity and cash flow for each of the years in the three year period ended
December 31, 1995. C&L did not render any report on the Company's financial
statements and was dismissed as the Company's independent accountants on
February 10, 1997. The decision to retain and subsequently to dismiss C&L was
approved by the Company's Board of Directors.
During the period of C&L's engagement, disagreements arose over the
accounting treatment of the sales of additional Vacation Credits to existing
Owners ("Upgrade Sales"). The Company contended that Upgrade Sales could be
fully recognized as income under Financial Accounting Standards Board Statement
No. 66 ("SFAS 66") without an additional 10% cash down payment, provided that
the Owner had sufficient equity in previously purchased Vacation Credits
(including prior principal payments on the Note Receivable from the previous
purchases) and additional cash down payments, if any, at the time of the Upgrade
Sale, to satisfy the 10% down payment requirement for full profit recognition
under SFAS 66. C&L's position was that SFAS 66 and Emerging Issues Task Force
Issue No. 88-12 required each Upgrade Sale to have a separate 10% cash down
payment (without consideration of equity from previously purchased Vacation
Credits) before the full accrual of revenue could be recognized on such sale.
Prior to C&L's dismissal, the Company agreed to modify its revenue recognition
policies in accordance with C&L's position.
Upon an Upgrade Sale, any existing Note Receivable is cancelled and a new
Note Receivable with a seven year term is executed for the balance of the
existing Note Receivable and the financed amount of the Upgrade Sale. The
Company and C&L discussed the allocation of payments on the new Note Receivable
for the purpose of profit recognition on the Upgrade sale. The Company's view is
that the payment due on the new Note Receivable could be bifurcated between the
amount attributable to the Upgrade Sale and the amount attributable to the
extended balance of the previous Note Receivable, and that the excess of the
payment due
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under the new Note Receivable over the part of the bifurcated payment
attributable to the extended balance of the previous Note Receivable could be
allocated to the financed portion of the Upgrade Sale without affecting the
accounting for the previous sale. Profit on the Upgrade Sale would be recognized
on the installment method until allocated principal payments equal to 10% of the
Upgrade Sale are received. Profit would then be recognized on the accrual
method. C&L recommended that the concurrence of the Securities and Exchange
Commission ("Commission") staff with this methodology be obtained prior to the
filing of this Registration Statement. C&L was prepared to accept the Company's
view, provided that the Commission staff concurred. Accordingly, at the time of
C&L's dismissal, with the exception of the issue of profit recognition on the
new Note Receivable and the effect of the allocation of principal payments on
the new Note Receivable on the recognition of profit on the previous sale, the
Company does not believe that there were any unresolved disagreements with C&L
on any matter of accounting principles or practices, financial disclosure, or
auditing scope or procedure, which, if not resolved to C&L's satisfaction, would
have caused it to make reference to the subject matter of the disagreements in
connection with its reports. C&L discussed each of these issues with members of
the Board of Directors of the Company and of the board of directors of the
Company's parent, Jeld-Wen. The Company had authorized C&L to respond fully to
the inquiries of KPMG concerning each of the disagreements.
In addition, C&L advised the Company of two matters that, if further
considered in connection with its audit of the financial statements, could
materially impact the fairness of the financial statements. The matters related
to the adequacy of the Company's allowance for doubtful accounts for receivables
from the sale of Vacation credits and the method of calculating gains on the
sale of such receivables. Due to their dismissal, C&L did not complete the audit
procedures and inquiries necessary to conclude on these matters.
Prior to the engagement of KPMG, the Company met with representatives of
KPMG at a meeting on January 22, 1997 to discuss KPMG's experience in the
Company's industry and industry accounting practices in connection with Upgrade
sales. At that meeting, the disagreements between the Company and C&L were
discussed. KPMG orally advised the Company that they believed that C&L's view on
the revenue recognition principles applicable to the required down payment on
the Upgrade Sales was the correct interpretation of SFAS 66. KPMG did not
express any views on the other area of discussion between the Company and C&L,
the recognition of revenue from Upgrade Sales based on an allocation of
principal payments on Notes Receivable. The Company did not request, nor did it
receive, any oral or written reports from KPMG concerning the subject of the
unresolved disagreements with C&L. The Company did not consult C&L regarding the
issues which were the subject of the disagreement following the date of
dismissal. KPMG did discuss with C&L the subject matter of the disagreements and
other matters relevant to the audit of the Company's financial statements prior
to KPMG's agreement to the engagement as the Company's auditors.
ANNUAL REPORT
A copy of the Company's 1997 Annual Report to Stockholders, including the
Annual Report to the SEC on Form 10-K and the financial statements, is enclosed.
Additional copies of the Company's Annual Report may be obtained by writing to
Investor Relations, 12301 N.E. 10TH Place, Bellevue, Washington 98005.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals intended to be presented at the Company's 1999 Annual
Meeting of Stockholders must be received by the Secretary of the Company no
later than December 31, 1998 for inclusion in the Company's Proxy Statement
relating to the 1999 Annual Meeting.
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OTHER MATTERS
As of the date of this Proxy Statement, management knows of no business
that will be presented for consideration at the Annual Meeting other than the
matters set forth in this Proxy Statement. If any other business properly comes
before the Annual Meeting, it is intended that the shares represented by proxies
will be voted in accordance with the judgment of the persons voting such
proxies.
By Order of the Board of Directors,
/s/ WILLIAM F. PEARE
William F. Peare
President and Chief Executive Officer
April 27, 1998
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TRENDWEST RESORTS, INC.
12301 N.E. 10TH PLACE, BELLEVUE, WASHINGTON 98005
PROXY FOR THE MAY 28, 1998 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF TRENDWEST RESORTS, INC.
The undersigned stockholder(s) of Trendwest Resorts, Inc. (the
"Company") hereby appoints William F. Peare and Jeffery P. Sites, and each of
them, as proxies, each with the power of substitution to represent and to vote,
as designated below, all the shares of Common Stock of the Company held of
record by the undersigned on April 10, 1998 at the Annual Meeting of
Stockholders to be held on May 28, 1998, and at any and all adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR the nominees listed below.
[ ] WITHHOLD AUTHORITY to vote for any of the nominees listed below
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE OUT THE
NAME OF SUCH NOMINEE).
Nominees (Term Will Expire in 2001): Jerol E. Andres
Roderick C. Wendt
Linda Tubbs
2. RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Shares represented by properly executed proxies will be voted in
accordance with instructions appearing on the proxy and in the discretion of the
proxy holders as to any other matter that may properly come before the Annual
Meeting of Stockholders. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
NOMINEES LISTED IN ITEM 1. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS, PROXIES WILL
BE VOTED FOR THE NOMINEES LISTED IN ITEM 1, AND IN THE DISCRETION OF THE PROXY
HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING
OF STOCKHOLDERS.
Dated: _______________________, 1998
____________________________________
Signature(s)
____________________________________
Please sign as name(s) appears on
this proxy and date this proxy. If a
joint account, each joint owner must
sign. If signing for a corporation
or partnership or as agent, attorney
or fiduciary, indicate the capacity
in which you are signing.
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