<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:
[ ] 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
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.
9805 WILLOWS ROAD
REDMOND, WASHINGTON 98052
April 7, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Trendwest Resorts, Inc. (the "Company") which will be held at our headquarters,
9805 Willows Road, Redmond, Washington, at 1:00 p.m., Thursday, June 3, 1999. I
look forward to greeting as many of our shareholders 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, to adopt the Employee
Stock Purchase Plan and to ratify the selection of KPMG LLP as independent
auditors. Information about the nominees for election to the Board of Directors
and the other matters is included in the accompanying Notice of Annual Meeting
of Shareholders and the Proxy Statement. Your Board of Directors recommends that
you vote "FOR" the Board of Director nominees, the adoption of Employee Stock
Purchase Plan and the selection of KPMG 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 Shareholders.
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 PEARE
William F. Peare
President and Chief Executive Officer
<PAGE> 3
TRENDWEST RESORTS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 7, 1999
------------------------
The Annual Meeting of Shareholders of Trendwest Resorts, Inc. (the
"Company") will be held our headquarters, 9805 Willows Road, Redmond,
Washington, at 1:00 p.m., Thursday, June 3, 1999, for the following purposes:
1. To elect three directors to hold office until the 2002 Annual Meeting of
Shareholders and until their successors are elected and qualified;
2. Adoption of the Employee Stock Purchase Plan;
3. Ratification of KPMG LLP as independent auditors; and
4. 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 5, 1999, 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 7, 1999
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 SHAREHOLDERS
TO BE HELD JUNE 3, 1999
------------------------
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 Shareholders
to be held at 1:00 p.m. on June 3, 1999, 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 Shareholders on or about April 7,
1999.
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 2002 Annual Meeting of Shareholders and, in each case,
until his or her successor is elected and qualified; to approve the Employee
Stock Purchase Plan and to ratify KPMG LLP as independent auditors.
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 and for each of the other
proposals. A Shareholder 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 9805 Willows Road,
Washington, 98052, on or before June 2, 1999 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 Shareholders of record at the close of business on April 5, 1999 (the
"Record Date") will be entitled to vote at the Annual Meeting. At the close of
business on the Record Date, there were 17,158,766 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. Shareholders 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 2002, 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. Approval of each of the other proposals
require that more votes favor the proposal than oppose it. In determining
whether a voting matter has received the requisite number of affirmative votes,
abstentions and broker non-votes will have no effect on the election of
directors or on either proposal.
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 Shareholders, 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 SHAREHOLDERS
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 5, 1999.
<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 79.99%
3250 Lakeport Blvd
Klamath Falls, Oregon 97601
</TABLE>
The following table sets forth information regarding the beneficial
ownership of Common Stock on April 5, 1999 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
BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED PERCENT OF CLASS
------------------------------------ ------------ ----------------
<S> <C> <C>
William F. Peare.......................................... 323,060(6) 1.9%
Jeffery P. Sites.......................................... 103,812(6) *
William G. Brown.......................................... 4,500(6) *
Ronald A. Buzard.......................................... 5,095(6) *
Gerald T. Lynch........................................... 31,647(6) *
Jerol E. Andres........................................... 6,000 *
Douglas P. Kintzinger..................................... 5,533(1)(5) *
Roderick C. Wendt......................................... 630,015(2)(5) 3.7%
Michael P. Hollern........................................ 6,000(3) *
Harry L. Demorest......................................... 23,000(4) *
Linda M. Tubbs............................................ 2,000 *
All directors and executive officers as a group (19
persons)................................................ 1,241,784(7) 7.2%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 1,200 shares held by Mr. Kintzinger's wife.
(2) Includes 4,117 shares held by Mr. Wendt's minor children and 612,008 shares
held by R&R Vista, an Oregon general partnership of which Mr. Wendt is a 50%
owner.
(3) Includes 6,000 shares held by Hollybank & Co., a nominee partnership holding
shares in a trust of which Mr. Hollern is a beneficiary.
(4) Includes 23,000 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.
(6) Includes 4,000 exercisable options.
(7) Includes 46,200 exercisable options.
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 II expires at the 1999 Annual
Meeting. The Board of Directors has nominated Messrs. Hollern, Kintzinger and
Sites for election as directors to serve a term of three years ending at the
Company's Annual Meeting of Shareholders in 2002 and until their successors have
been duly elected and qualified.
Messrs. Hollern, Kintzinger and Sites have indicated that they are willing
and able to serve as directors. If any of Messrs. Hollern or Kintzinger or Sites
are 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. Hollern, Kintzinger and
Sites.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS
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................................. 61 1989 2000
Jeffery P. Sites................................. 42 1991 1999
Jerol E. Andres.................................. 55 1989 2001
Douglas P. Kintzinger............................ 38 1994 1999
Roderick C. Wendt................................ 44 1993 2001
Harry L. Demorest................................ 56 1997 2000
Michael P. Hollern............................... 60 1997 1999
Linda M. Tubbs................................... 51 1997 2001
</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, until
January, 1999, as President of WorldMark, The Club ("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, from 1996 to present, 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 met
one time in 1998.
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 1998.
During 1998, the Company's Board of Directors met nine times. Except for
Mr. Demorest, 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, 1998 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 1998 (collectively, together with the CEO, the "Named Executive
Officers").
<TABLE>
<CAPTION>
OTHER ANNUAL OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED
--------------------------- ---- -------- -------- --------------- -------
<S> <C> <C> <C> <C> <C>
William F. Peare..................... 1998 $105,000 $225,778 $14,474 4,000
President and Chief 1997 100,000 197,340 12,055 20,000
Executive Officer 1996 96,000 192,013 18,860 -0-
William G. Brown..................... 1998 50,000 239,073 21,418 3,000
Vice President -- California 1997 50,000 226,151 17,077 20,000
Sales 1996 50,000 181,910 11,200 -0-
Ronald A. Buzard..................... 1998 50,000 229,097 10,671 3,000
Vice President -- Sales 1997 50,000 230,442 10,551 20,000
1996 50,000 198,544 11,200 -0-
Jeffery Sites........................ 1998 80,000 166,615 13,779 4,000
Executive Vice President and 1997 75,000 159,145 15,919 20,000
Chief Operating Officer 1996 70,000 139,991 17,153 -0-
Gerald T. Lynch...................... 1998 50,000 183,132 11,203 3,000
Vice President -- Marketing 1997 50,000 179,326 9,385 20,000
1996 50,000 170,005 11,200 -0-
</TABLE>
- ---------------
(1) Other annual compensation is comprised of various items such as Company
401(k) contributions and auto allowance.
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 $105,000, and Mr. Sites will receive a base annual salary of $80,000,
and each will have the opportunity to receive performance bonuses. The
agreements will contain a covenant not to compete for a period of two years in
the event of termination of employment for any reason. If employment is
terminated by the Company without cause, the employee will receive his base
salary for a period of one year following the date of termination plus the
amount of bonus earned during the preceding twelve months.
5
<PAGE> 9
GRANTS OF STOCK OPTIONS
The following table sets forth information on stock option grants during
fiscal 1998 to the Named Executive Officers. The options set forth in the table
below were granted on November 12, 1998, as part of recipient's 1998
compensation.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF PERCENT OF APPRECIATION FOR
SECURITIES TOTAL OPTIONS EIGHT YEAR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---- ----------- ------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
William F. Peare.............. 4,000 3.27 $11.375 11/12/06 21,700 52,000
William G. Brown.............. 3,000 2.45 11.375 11/12/06 16,300 39,000
Ronald A. Buzard.............. 3,000 2.45 11.375 11/12/06 16,300 39,000
Jeffery P Sites............... 4,000 3.27 11.375 11/12/06 21,700 52,000
Gerald T. Lynch............... 3,000 2.45 11.375 11/12/06 16,300 39,000
</TABLE>
- ---------------
(1) Each of the options reflected in this table was granted to the respective
Named Executive Officer pursuant to the Company's 1997 Option Plan. The
exercise price of each option is equal to the fair market value of the
Common Stock on the date of grant. The options vest ratably over five years
beginning on the first anniversary of the date of grant.
(2) These assumed rates of appreciation are provided in order to comply with the
requirements of the Securities and Exchange Commission (the "SEC") and do
not represent the Company's expectation or projection as to the actual rate
of appreciation of the Common Stock. These gains are based on assumed rates
of annual compound stock price appreciation of 5% and 10% from the date the
options were granted over the full option term. The actual value of the
options will depend on the performance of the Common Stock and may be
greater or less than the amounts shown.
EXERCISE OF STOCK OPTIONS
The following table sets forth information on the exercise of stock options
during fiscal year 1998 by each of the Named Executive Officers and the value of
unexercised options at December 31, 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William F. Peare............. -- -- 4,000 20,000 -- 4,250
William G. Brown............. -- -- 4,000 20,000 -- 3,188
Ronald A. Buzard............. -- -- 4,000 20,000 -- 3,188
Jeffery P Sites.............. -- -- 4,000 20,000 -- 4,250
Gerald T. Lynch.............. -- -- 4,000 20,000 -- 3,188
</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
Shareholder 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 1998 was
determined in accordance with the employment agreement. Mr. Peare's base
compensation is set at $105,000 and he is eligible to receive a performance
bonus, based primarily on the Company's annual sales, up to approximately two
times his base salary. For 1998, Mr. Peare's bonus was $225,778 The Compensation
Committee also awarded Mr. Peare a grant of options to acquire 4,000 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 Shareholder 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
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
TRENDWEST RESORTS, INC. PEER GROUP S & P 500
----------------------- ---------- ---------
<S> <C> <C> <C>
'8/97' 100.00 100.00 100.00
'12/97' 127.08 102.43 96.40
'12/98' 69.44 131.70 66.93
</TABLE>
PEER GROUP DETAIL
<TABLE>
<S> <C>
AMERICAN SKIING
BRISTOL HOTEL CO
CHOICE HOTELS CO
EXECUSTAY CORP
FAIRFIELD COMMUNITIES
FOUR SEASON HOTELS
HOST MARRIOTT CORP
INTRAWEST CORP
LODGIAN, INC (SERVICO INC)
PROMUS HOTEL CO
RED ROOF INNS INC
SHOLODGE INC
SUNTERRA CORP (SIGNATURE RESORTS)
SILVERLEAF RESORTS
SUBURBAN LODGES
SUNBURST HOSPITALITY CORP
SUPERTEL HOSPITALITY INC
VISTANA INC
</TABLE>
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
RELATIONSHIP WITH JELD-WEN, INC.
Background. JELD-WEN, inc. ("Parent" or "JELD-WEN") owns 79.99% 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 35.7%, 2.1% 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 its Parent, the Company has
incurred costs of approximately $5,869,000 in 1998 related to the project. All
costs incurred have been reimbursed by the Parent.
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 $2,182,000 in 1998 to include the
Company's employees within the JELD-WEN plan. JELD-WEN also self-insures its
worker's compensation liability and the Company also participates in that plan.
The Company paid JELD-WEN approximately $442,000 in 1998 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 of $10 million which 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 1998 was approximately $6,170,000. To
the extent the Company has excess funds available to loan JELD-WEN, such loans
earn interest at prime minus one percent. The maximum month-end outstanding
lending to JELD-WEN during the year was $2,022,000. 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 June 30, 1998,
Eagle Crest limited its sales activities with respect to Vacation Credits in
WorldMark to Upgrade Sales only. The Company retains 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 $2,709,000. 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%. During 1998, the Company purchased 25 units at a cost
of $3,462,000. During 1998, The Company purchased Notes Receivable from Running
Y in the principal amount of approximately $2,537,000. The
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Company retains the full face interest on the contracts financed and sold to the
Company with full recourse to Running Y for any unpaid principal amounts. 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 1998, I&I Holdings, Ltd.
purchased Notes Receivables with outstanding balances of approximately $7,000.
The Company repurchased Notes Receivable from I&I Holdings at face value plus
accrued interest of approximately $843,000 in 1998.
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 1998, R & R Vista
purchased Notes Receivable with outstanding balances of approximately $928,000.
Also during 1998, the Company repurchased notes receivable from R&R Vista at
face value plus accrued interest of approximately $11,308,000.
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.
RELATIONSHIP WITH WORLDMARK
WorldMark, The Club ("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. Hensley
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 1998 were approximately
$1,707,000.
RELATIONSHIP WITH SAGE SYSTEMS
Background. The Company and Sage Systems (a subsidiary of Interval Resort
and Financial Services) and Sage Escrow, a licensed escrow company, are parties
to several administrative agreements. Woodrow O'Rourke, Vice President of
Operations of Sage Systems and Co-Owner of Sage Escrow, 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 Escrow 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 $667,000 in
1998.
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Servicing of Accounts. The Company and Sage Systems 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 $1.75 per account serviced by Sage. Under the Service
Agreement, the Company paid Sage approximately $925,000 in 1998.
Software. The Company, Sage Systems 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 1998.
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 1998,
Frederick C. Peare received a salary (based on commissions) and Company 401(k)
contributions of $193,771. Scott Sites, the brother of Mr. Jeffery Sites, is
employed by the Company in a sales capacity. During 1998, Scott Sites received a
salary (based on commissions), bonus and Company 401(k) contributions of
$172,673. Thomas F. Sites, the brother of Mr. Jeffery Sites, is employed by the
Company in an administrative capacity. During 1998, Thomas Sites received a
salary, bonus and Company 401(k) contributions of $181,125.
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 1998, such SEC
filing requirements were satisfied, except that Mr. Kintzinger filed a late Form
4 reporting a single transaction by his spouse.
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PROPOSAL 2
ADOPTION OF THE TRENDWEST RESORTS, INC.
EMPLOYEE STOCK PURCHASE PLAN
Effective February 24, 1999, the Board adopted the Trendwest Resorts, Inc.,
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan"). In order to
receive favorable tax treatment under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), shareholder approval of the Employee Stock
Purchase Plan is required. A summary of the material features of the Employee
Stock Purchase Plan follows. This summary is qualified in its entirety by
reference to the full text of the Employee Stock Purchase Plan, which is set
forth in Exhibit A hereto and incorporated by reference herein.
The Employee Stock Purchase Plan provides eligible employees of the Company
with an opportunity to acquire shares of the Company's Common Stock and thereby
acquire an interest in the future of the Company. The maximum number of shares
of Common Stock to be issued by the Company and purchased under the Employee
Stock Purchase Plan, in the aggregate, is 500,000. Employees eligible to
participate in the Employee Stock Purchase Plan include each employee of the
Company if the employee is full-time (working more than 20 hours per week) and
employed 90 days prior to the offering period without a break in service over 30
days. Nonemployee directors, leased employees, and independent contractors are
not eligible to participate in the Employee Stock Purchase Plan.
The Plan shall consist of 20 separate consecutive three month Offering
periods ("Offering"). The first Offering shall commence on July 1, 1999
("Commencement Date") and end on September 30, 1999. Thereafter, Offerings shall
commence on each subsequent January 1, April 1, July 1 and October 1 and end on
each subsequent March 31, June 30, September 30 or December 31 ("Ending Date").
The final Offering under the Plan shall commence on April 1, 2004 and terminate
on June 30, 2004.
An eligible employee may participate in an Offering by authorizing payroll
deductions of up to 10% of compensation per pay period. Amounts withheld will be
held for the credit of the participant as part of the Company's general funds
and will not accrue any interest. On the Ending Date, the entire account balance
of a participating employee is applied to purchase shares of the Company's
Common Stock at a purchase price equal to 85% of the fair market value of the
Common Stock on the Ending Date. In no event, however, is an employee permitted
to purchase more Common Stock than the lessor of $2,500 or 2.5% of his or her
annual compensation in any one Offering period. An employee who is not eligible
to participate in the Plan on the effective date of an Offering but who becomes
eligible during the term of the Offering may not participate in the Offering.
Any employee who does not elect to participate in an Offering within the period
for initial enrollment may not subsequently elect to participate in the
Offering. An employee may not change the rate of his or her withholding during
an Offering. An employee may withdraw participation from an Offering and receive
a refund of contributions made during the Offering.
In the event of any change in the outstanding Common Stock of the Company
due to reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, offering of rights or any other
change in the structure of the Common Stock, adjustments may be made in the
number, kind and price of shares available for purchase under the Employee Stock
Purchase Plan and in the minimum and maximum number of shares which an
individual employee is entitled to purchase.
The Company has the right to terminate or amend the Employee Stock Purchase
Plan at any time without shareholder approval unless shareholder approval is
required by Section 423 of the Code or another law or regulation. If not
previously terminated by the Company, the Employee Stock Purchase Plan will
terminate on the date as of which participants have exercised options to
purchase a number of shares equal to or greater than the number of shares
subject to the Plan.
The Plan shall be administered by the Board, which may engage a qualified
stock brokerage or other financial services firm to assist in the administration
of the Plan. The Board shall be vested with full authority to make, administer,
and interpret such rules and regulations as it deems necessary to administer the
Plan, and any determination, decision, or action of the Board in connection with
the construction, interpretation, administration or application of the Plan
shall be final, conclusive, and binding upon all Participants and any
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and all persons that claim rights or interests under or through a Participant.
The Board may delegate any or all of its authority hereunder to a committee of
the Board, as it may designate.
A participant's contributions through payroll deductions are not tax
deductible but will constitute a part of the cost basis of the Common Stock
purchased under the Employee Stock Purchase Plan.
No tax liability results on the purchase of Common Stock. The employee
becomes liable for Federal income tax on the disposition of the Common Stock. In
order to receive the beneficial treatment provided under Section 423 of the
Code, a participant must hold the Common Stock for two years from the Offer
Date, or one year from the Purchase Date, whichever is later.
If an employee disposes of shares acquired under the Employee Stock
Purchase Plan after the holding period, or if an employee dies while holding any
shares acquired under the Employee Stock Purchase Plan, the employee must
include in gross income, as compensation, in the taxable year of disposition or
death, an amount with respect to each share equal to the lesser of (i) the
excess of the fair market value of the share at the time of the disposition or
death over the amount paid for the share, or (ii) the excess of the fair market
value of the share on the first day of the Offer over 85 percent of the fair
market value of the share on the first day of the Offer. The Company will not be
allowed a corresponding deduction for the amount treated as ordinary income.
Except in the case of death, the basis of the shares in the employee's
hands at the time of the disposition will equal the price paid for the shares
increased by the amount, if any, included in the employee's gross income as
compensation. Any additional gain recognized will be treated as short-term or
long-term capital gain depending on the holding period of such shares. In the
case of death of the employee, the basis of the shares to the employee's estate
or heirs will be determined under Section 1014 of the Code.
If an employee disposes of any of the shares purchased under the Employee
Stock Purchase Plan before the expiration of the required holding period, the
employee must include in gross income, as compensation, an amount with respect
to each share equal to the excess of the fair market value of the share on the
last trading day prior to the date of purchase over the price paid for such
share pursuant to the Employee Stock Purchase Plan. Such amount will be
includible in the gross income of the employee for the employee's taxable year
in which the disposition occurs. The Company will be allowed a corresponding
deduction in the same year and in the same amount required to be included in
gross income by the employee if and to the extent such amount is an ordinary and
necessary business expense and satisfies the test of reasonable compensation,
provided that the Company's deduction with respect to certain officers may be
limited by Section 162(m) of the Code.
The basis of the shares in the hands of the employee will be the amount
paid for the shares plus the amount, if any, included in the employee's gross
income as compensation. Any gain or loss will be short-term or long-term capital
gain or loss depending on the holding period for such shares. The holding period
for the shares will commence on the date the option is exercised with respect to
such shares.
The foregoing is intended as a summary of certain Federal income tax
consequences associated with the Employee Stock Purchase Plan and it does not
purport to be a complete statement of such consequences. It is recommended that
employees eligible to participate in the Employee Stock Purchase Plan consult
their own tax advisors for counseling. Tax treatment under foreign, state, local
or other law, including estate tax law, is not covered in this summary.
The affirmative vote of the holders of a majority of the shares of Common
Stock present, in person or represented by proxy, and entitled to vote at the
Annual Meeting is required to approve the Employee Stock Purchase Plan. The
Board believes the Employee Stock Purchase Plan is in the best interests of the
Company and its shareholders and is important in order to help assure the
ability of the Company to continue to recruit and retain highly qualified
employees.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE ADOPTION OF PROPOSAL 2.
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PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP ("KPMG") as the Company's
independent auditors for the fiscal year ending December 31, 1999.
Representatives of KPMG LLP are expected to attend the Annual Meeting and will
have an opportunity to make a statement or to respond to appropriate questions
from Shareholders. 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 LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR THE 1999 FISCAL YEAR.
The Company engaged KPMG 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, Shareholders'
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, Shareholders'
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 under the new Note Receivable over the part of the bifurcated
payment attributable to the extended balance
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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 1998 Annual Report to Shareholders, 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, 9805 Willows Road, Redmond, Washington 98052.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented at the Company's 2000 Annual
Meeting of Shareholders must be received by the Secretary of the Company no
later than December 9, 1999 for inclusion in the Company's Proxy Statement
relating to the 2000 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 7, 1999
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TRENDWEST RESORTS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
Trendwest Resorts, Inc. (the "Company") does hereby establish its 1999
Employee Stock Purchase Plan (the "Plan") as follows:
1. Purpose of the Plan. The Plan is intended to provide a method whereby
eligible employees of the Company and its Subsidiaries will have an opportunity
to acquire a proprietary interest in the Company through the purchase of shares
of common stock of the Company. The Company believes that employee participation
in the ownership of the Company is of benefit to both the employees and the
Company. The Company intends to have the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Code. The provision of the Plan shall,
accordingly, be construed so as to extend and limit participation in a manner
that is consistent with the requirements of that Section of the Code.
2. Definitions.
Account means the funds that are accumulated with respect to each
individual Participant as a result of payroll deductions for the purpose of
purchasing Shares under the Plan. The funds that are allocated to a
Participant's account shall at all times remain the property of that
Participant, but such funds will be commingled with the general funds of the
Company and will not accrue interest.
Board means the Board of Directors of the Company.
Code means the Internal Revenue Code of 1986, as amended.
Commencement Date means the January 1, April 1, July 1, or October 1 as the
case may be, on which the particular Offering begins.
Compensation means wages and all other compensation, excluding
reimbursements, expense allowance, fringe benefits, moving expenses, deferred
compensation and welfare benefits.
Ending Date means the March 31, June 30, September 30, December 31, or
nearest prior business day as the case may be, on which the particular Offering
concludes.
ESPP Broker means a qualified stock brokerage or other financial services
firm that has been designated by the Company.
Holding Period means the holding period that is set forth in Section 423(a)
of the Code, which, as of the date that the Company's Board of Directors adopted
this Plan, is both (a) that two (2) year period after the Commencement Date and
(b) that one (1) year period after transfer to a Participant of any Shares under
the Plan.
Participant means an employee who, pursuant to Section 3, is eligible to
participate in the Plan and has complied with the requirements of Section 7.
Pay Period means the payroll cycle of the Participant, which can be weekly,
bi-weekly or bi-monthly.
Offerings means the twenty separate consecutive three month offerings for
the purchase and sale of Shares under the Plan. Each one of the Offerings shall
be referred to as an "Offering."
Shares means shares of the Company's common stock, without par value, that
will be sold to Participants under the Plan.
Subsidiaries means any present or future domestic or foreign corporation
that: (i) would be a "subsidiary corporation" of the Company as that term is
defined in Section 424 of the Code, and (ii) whose employees have been
designated by the Board to be eligible, subject to Section 3, to be Participants
under the Plan.
Withdrawal Notice means a notice, in a form designated by the Company, that
a Participant who wishes to withdraw from an Offering must submit to the Company
pursuant to Section 22 prior to the Ending Date.
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3. Employees Eligible to Participate. Any regular employee of the Company
or any of its Subsidiaries who (a) is in the employ of the Company or any of its
Subsidiaries on the Commencement Date, (b) has been so employed for at least
ninety days, without a break in service of over 30 days and (c) has worked an
average of twenty (20) hours per week during such employment is eligible to
participate in the Plan, except officers of the Company within the meaning of
Rule 16a-1 promulgated by the Securities and Exchange Commission under Section
16 of the Securities Exchange Act of 1934, as amended.
4. Offerings. The Plan shall consist of twenty separate consecutive three
month Offerings. The first Offering shall commence on July 1, 1999. Thereafter,
Offerings shall commence on each subsequent January 1, April 1, July 1, and
October 1, and the final Offering under the Plan shall commence on April 1, 2004
and terminate on June 30, 2004.
5. Price. The purchase price per Share shall be 85 percent of the fair
market value of the stock on the Ending Date. Fair market value shall mean the
average of high and low closing bid price as reported on the National
Association of Securities Dealers Automated Quotation System or, if the stock is
traded on a stock exchange, the closing price for the stock on the principal of
such exchange.
6. Number of Shares Reserved Under the Plan. The maximum number of Shares
that will be issued and offered under the Plan is 500,000. If, on any date, the
total number of Shares for which purchase rights are to be granted pursuant to
Section 9 exceeds the number of Shares then available under this Section 6,
(after deduction of all Shares (a) that have been purchased under the Plan, and
(b) for which rights to purchase are then outstanding), the Company shall make a
pro rata allocation of the Shares that remain available in as nearly a uniform
manner as shall be practicable and as it shall determine, in its sole judgement,
to be equitable. In such event, each Participant's payroll deductions shall be
reduced accordingly and the Company shall give to each Participant a written
notice of such reduction.
7. Participant. An eligible employee may become a Participant by completing
the Enrollment Agreement that shall be provided by the Company and filing it
with the Company prior to the Commencement Date of the Offering to which it
relates, Participation in one Offering under the Plan shall neither limit, nor
require, participation in any other Offering. The period for enrollment into the
Plan shall terminate 10 days prior to the next Commencement Date.
8. Participant Contributions. At the time the Enrollment Agreement is filed
with the Company, each Participant shall authorize the Company to make payroll
deductions of either (a) a fixed dollar amount per pay period or (b) a whole
percentage (not partial or fractional) of Compensation; provided, however, that
no payroll deduction shall exceed 10 percent of Compensation per Pay Period nor
exceed $2,500 during any Offering. The amount of the minimum fixed dollar
deduction may be adjusted by the Board of Directors from time to time; provided,
however, that a Participant's existing rights under any Offering that has
already commenced may not be adversely affected thereby.
Each Participant's payroll deductions shall be credited to that
Participant's Account. A Participant's payroll deductions shall begin on the
Commencement Date, and shall end on the Ending Date unless the Participant
elects to withdraw pursuant to Section 13. A Participant may discontinue
participation in the Plan as provided in Section 13, but no other change may be
made during an Offering and, specifically, a Participant may not alter the
amount or rate of payroll deductions during an Offering.
9. Granting of Right to Purchase. On the Commencement Date, the Plan shall
be deemed to have granted automatically to each Participant a right to purchase
as many Shares (including fractional Shares) as may be purchased with such
Participant's Account on the Ending Date.
10. Purchase of Shares. On the Ending Date, each Participant who has not
otherwise withdrawn from an Offering shall be deemed to have carried out the
right to purchase, and shall be deemed to have purchased at the purchase price
set forth in Section 5, the number of Shares (including fractional Shares) that
may be purchased with such Participant's Account.
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11. Participant's Rights as a Shareholder. No Participant shall have any
rights of a shareholder with respect to any Shares until the Shares have been
purchased in accordance with Section 10 and issued by the Company.
12. Evidence of Ownership of Shares.
12.1 Promptly following the Ending Date of each Offering, the Shares
that are purchased by each Participant shall be deposited into an account that
is established in the Participant's name with the ESPP Broker.
12.2 A Participant may direct, by written notice to the Company prior
to the Ending Date of the pertinent Offering, that the ESPP Broker account be
established in the names of the Participant and one such other person as may be
designated by the Participant as joint tenants with right of survivorship,
tenants in common, or community property, to the extent and in the manner
permitted by applicable law. Unless otherwise directed, the account will be
established as joint tenants with right of survivorship.
12.3 A Participant shall be free to undertake a disposition, as that
term is defined in Section 424(c) of the Code (which generally includes any
sale, exchange, gift or transfer of legal title), of Shares in the Participant's
ESPP Broker account at any time, whether by sale, exchange, gift or other
transfer of title. Subject to Section 12.4 below, in the absence of such a
disposition of the Shares, however, the Shares must remain in the Participant's
account at the ESPP Broker until the Holding Period has been satisfied. With
respect to Shares for which the Holding Period has been satisfied, a Participant
may move such Shares to an account at another brokerage firm of the
Participant's choosing or request that a certificate that represents the Shares
be issued and delivered to the Participant.
13. Withdrawal.
13.1 A Participant may withdraw from an Offering, in whole but not in
part, at any time prior to the Ending Date by delivering a Withdrawal Notice to
the Company, in which event the Company shall refund the Participant's entire
Account as soon as practicable thereafter.
13.2 An employee who has previously withdrawn from the Plan may
re-enter by complying with the requirements of Section 7. Upon compliance with
such requirements, an employee's re-entry into the Plan will become effective on
the Commencement Date of the next Offering following withdrawal.
14. Continuation. At the conclusion of each Offering, the Company shall
automatically re-enroll each Participant in the next Offering unless otherwise
instructed.
15. Interest. No interest shall be paid or allowed on a Participant's
Account.
16. Rights Not Transferable. No Participant shall be permitted to sell,
assign, transfer, pledge, or otherwise dispose of or encumber such Participant's
Account or any rights to purchase or to receive Shares under the Plan other than
by will or the laws of descent and distribution, and such rights and interests
shall not be liable for, or subject to, a Participant's debts, contracts, or
liabilities. If a Participant purports to make a transfer, or a third party
makes a claim in respect of a Participant's rights or interests, whether by
garnishment, levy, attachment or otherwise, such purported transfer or claim
shall be treated as a withdrawal election under Section 13.
17. Termination of Employment. As soon as practicable upon termination of a
Participant's employment with the Company for any reason whatsoever, including
but not limited to death or retirement, the Participant's Account shall be
returned to the Participant or the Participant's estate, as applicable.
18. Amendment or Discontinuance of the Plan. The Board shall have the right
to amend, modify or terminate the Plan at any time without notice, provided that
(i) subject to Sections 19 and 23.1(b), no Participant's existing rights under
any Offering that is in progress may be adversely affected thereby, and (ii)
subject to Section 19, in the event that the Board desires to retain the
favorable tax treatment under Section 421 and 423 of the Code, no such amendment
of the Plan shall increase the number of Shares that were reserved for issuance
hereunder unless the Company's shareholders approve such an increase.
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19. Changes in Capitalization. In the event of reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, offerings or rights, or any other change in the capital structure
of the Company, the Board may make such adjustment, if any, as it may deem
appropriate in the number, kind, and the price of the Shares that are available
for purchase under the Plan, and in the number of Shares that an employee is
entitled to purchase.
20. Share Ownership. Notwithstanding anything herein to the contrary, no
Participant shall be permitted to subscribe for any Shares under the Plan if
such Participant, immediately after such subscription, owns shares that account
for (including all shares that may be purchased under outstanding subscriptions
under the Plan) five percent or more of the total combined voting power or value
of all classes of shares of the Company or its Subsidiaries. For the foregoing
purposes the rules of Section 424(d) of the Code shall apply in determining
share ownership. In addition, no Participant shall be allowed to subscribe for
any Shares under the Plan that permit such Participant's rights to purchase
Shares under all "employee stock purchase plans" of the Company and its
Subsidiaries to accrue at a rate that exceeds $25,000 of the fair market value
of such shares (determined at the time such right to subscribe is granted) for
each calendar year in which such right to subscribe is outstanding at any time.
21. Administration. The Plan shall be administered by the Board, which may
engage the ESPP Broker to assist in the administration of the Plan. The Board
shall be vested with full authority to make, administer, and interpret such
rules and regulations as it deems necessary to administer the Plan, and any
determination, decision, or action of the Board in connection with the
construction, interpretation, administration or application of the Plan shall be
final, conclusive, and binding upon all Participants and any and all persons
that claim rights or interests under or through a Participant. The Board may
delegate any or all of its authority hereunder to a committee of the Board, as
it may designate.
22. Notices. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, that is designated by the Company from time to time for the receipt
thereof, and, in the absence of such a designation, the Company's Staff Services
Department; Attn: Director, shall be authorized to receive such notices.
23. Termination of the Plan.
23.1 This Plan shall terminate at the earliest of the following:
(a) June 30, 2004;
(b) The date of the filing of a Statement of Intent to Dissolve by the
Company or the effective date of a merger or consolidation wherein the
Company is not to be the surviving corporation, which merger or
consolidation is not between or among corporations related to the Company.
Prior to the occurrence of either of such events, on such date as the
Company may determine, the Company may permit a Participant to carryout the
right to purchase, and to purchase at the purchase price set forth in
Section 5, the number of Shares that may be purchased with that
Participant's Account;
(c) The date the Board acts to terminate the Plan in accordance with
Section 18 above; and
(d) The date when all of the Shares that were reserved for issuance
hereunder have been purchased.
23.2 Upon termination of the Plan, the Company shall refund to each
Participant the balance of each Participant's Account.
24. Limitations on Sale of Stock Purchased Under the Plan. The Plan is
intended to provide Shares for investment and not for resale. The Company does
not, however, intend to restrict or influence the conduct of any employee's
affairs. An employee, therefore, may sell Shares that are purchased under the
Plan at any time, subject to compliance with any applicable federal or state
securities laws. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE
PRICE OF THE SHARES.
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25. Governmental Regulation. The Company's obligation to sell and deliver
Shares under this Plan is subject to any governmental approval that is required
in connection with the authorization, issuance, or sale of such Shares.
26. No Employment Rights. The Plan does not, directly or indirectly, create
any right for the benefit of any employee or class of employees to purchase any
Shares under the Plan, or create in any employee or class of employees any right
with respect to continuation of employment by the Company, and it shall not be
deemed to interfere in any way with the Company's right to terminate, or
otherwise modify, an employee's employment at any time.
27. Governing Law. The law of the state of Oregon shall govern all matters
that relate to this Plan except to the extent it is superseded by the laws of
the United States.
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TRENDWEST RESORTS, INC.
9805 WILLOWS ROAD, REDMOND WASHINGTON 98052
PROXY FOR THE JUNE 3, 1999 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF TRENDWEST RESORTS, INC.
The undersigned Shareholder(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 5, 1999 at the Annual Meeting of Shareholders to be
held on June 3, 1999, 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 2002): Michael P. Hollern
Douglas P. Kintzinger
Jeffery P. Sites
2. ADOPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF KPMG 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 Shareholders. 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 SHAREHOLDERS.
Dated: _______________________, 1999
____________________________________
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.
18
