<PAGE>
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 Section240.14a-11(c) or
Section240.14a-12
THE ROTTLUND COMPANY, 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
THE ROTTLUND COMPANY, INC.
2681 LONG LAKE ROAD
ROSEVILLE, MINNESOTA 55113
August 1, 1998
Dear Shareholder of The Rottlund Company, Inc.:
You are cordially invited to attend the Annual Meeting of Shareholders of
The Rottlund Company, Inc. (the "Company"), to be held at the Crowne Plaza
Northstar Hotel, 618 Second Avenue South, Minneapolis, Minnesota, on Thursday,
September 10, 1998 at 3:30 p.m.
At the Annual Meeting you will be asked to elect directors, to approve an
amendment to the Company's 1992 Stock Option Plan to increase the number of
shares reserved for issuance thereunder from 1,000,000 to 1,300,000, to approve
an amendment to the Company's Employee Stock Purchase Plan increasing the number
of shares reserved for issuance thereunder from 125,000 to 250,000, and to
ratify the appointment by the Board of Directors of Arthur Andersen LLP as the
Company's independent public accountants for the fiscal year ending March 31,
1999.
I encourage you to vote FOR each of the nominees for director, FOR the
amendment to the Company's 1992 Stock Option Plan, FOR the amendment to the
Company's Employee Stock Purchase Plan, and FOR ratification of the appointment
of Arthur Andersen LLP. Whether or not you are able to attend the Annual Meeting
in person, I urge you to complete, sign, and date the enclosed proxy card and
return it promptly in the enclosed envelope. If you do attend the meeting in
person, you may withdraw your proxy and vote personally on any matters brought
properly before the meeting.
Very truly yours,
THE ROTTLUND COMPANY, INC.
[SIGNATURE]
David H. Rotter
PRESIDENT
<PAGE>
THE ROTTLUND COMPANY, INC.
2681 LONG LAKE ROAD
ROSEVILLE, MINNESOTA 55113
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
THE ROTTLUND COMPANY, INC.
---------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of The
Rottlund Company, Inc. (the "Company") will be held at 3:30 p.m. on Thursday,
September 10, 1998 at the Crowne Plaza Northstar Hotel, 618 Second Avenue South,
Minneapolis, Minnesota, for the following purposes, as more fully described in
the accompanying proxy statement:
1. To elect seven directors of the Company, each for a term of one year and
until their successors shall be elected and duly qualified;
2. To approve an amendment to the Company's 1992 Stock Option Plan to
increase the number of shares reserved for issuance thereunder from
1,000,000 to 1,300,000;
3. To approve an amendment to the Company's employee Stock Purchase Plan
increasing the number of shares reserved for issuance thereunder from
125,000 to 250,000;
4. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending March 31, 1999;
and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on July 21, 1998, are
entitled to notice of and to vote at the meeting.
Whether or not you expect to attend the meeting in person, please complete,
date, and sign the enclosed proxy exactly as your name appears thereon and
promptly return it in the envelope provided, which requires no postage if mailed
in the United States. Proxies may be revoked at any time and if you attend the
meeting in person, your executed proxy will be returned to you upon request.
By Order of the Board of Directors
[SIGNATURE]
David H. Rotter
PRESIDENT
Roseville, Minnesota
August 1, 1998
<PAGE>
THE ROTTLUND COMPANY, INC.
2681 LONG LAKE ROAD
ROSEVILLE, MINNESOTA 55113
------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
SEPTEMBER 10, 1998
---------------------
INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Rottlund Company, Inc. (the "Company")
for use at the Annual Meeting of Shareholders to be held at the Crowne Plaza
Northstar Hotel, 618 Second Avenue South, Minneapolis, Minnesota, on Thursday,
September 10, 1998 at 3:30 p.m., and at any adjournment thereof.
All shares represented by properly executed proxies received in time will be
voted at the meeting as follows, unless otherwise specified by the shareholder
in the proxy: (i) in favor of the election as directors of all of the nominees
listed herein; (ii) in favor of the amendment to the Company's 1992 Stock Option
Plan to increase the number of shares reserved for issuance thereunder from
1,000,000 to 1,300,000; (iii) in favor of the amendment to the Company's
Employee Stock Purchase Plan increasing the number of shares reserved for
issuance thereunder from 125,000 to 250,000; (iv) in favor of the selection of
Arthur Andersen LLP as the independent public accountants of the Company; and
(v) in accordance with the judgment of the persons named in the proxy as to such
other matters as may properly come before the meeting. If an executed proxy card
is returned and the shareholder has abstained from voting on any matter, the
shares represented by such proxy will be considered present at the meeting for
purposes of determining a quorum and for purposes of calculating the vote, but
will not be considered to have been voted in favor of such matter. If an
executed proxy is returned by a broker holding shares in street name which
indicates that the broker does not have discretionary authority as to certain
shares to vote on one or more matters, such shares will be considered present at
the meeting for purposes of determining a quorum, but will not be considered to
be represented at the meeting for purposes of calculating the vote with respect
to such matter.
Any shareholder who executes and returns a proxy may revoke it at any time
prior to the voting of the proxies by giving written notice to the Secretary of
the Company, by executing a later-dated proxy, or by attending the meeting and
giving oral notice to the Secretary of the Company.
The Board of Directors of the Company has fixed the close of business on
July 21, 1998 as the record date for determining the holders of outstanding
shares of common stock entitled to notice of, and to vote at, the Annual
Meeting. On that date, there were 5,772,413 shares of common stock issued and
outstanding. Each such share of common stock is entitled to one vote at the
meeting. The Notice of Annual Meeting, this proxy statement and the form of
proxy are first being mailed to shareholders of the Company on or about August
1, 1998.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership of
the Company's common stock as of July 1, 1998, by (i) each person known to the
Company to own beneficially more than 5% of its common stock, (ii) each director
of the Company, (iii) each officer named in the executive compensation table of
this proxy statement, and (iv) all directors and officers as a group. Unless
otherwise indicated, each person in the table has sole voting and investment
power as to the shares shown.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- ----------------------------------------------------------- ----------------------- -----------
<S> <C> <C>
David H. Rotter............................................ 2,184,639(2)(3)(4)(5) 36.0%
2681 Long Lake Road
Roseville, MN 55113
Bernard J. Rotter.......................................... 2,153,639(3)(4)(5) 35.4%
2681 Long Lake Road
Roseville, MN 55113
Heartland Advisors, Inc.................................... 510,600(6) 8.8%
790 North Milwaukee Street
Milwaukee, WI 53202
Todd M. Stutz.............................................. 103,314(5) 1.7%
Lawrence B. Shapiro........................................ 97,982(5) 1.6%
John J. Dierbeck, III...................................... 82,202(5) 1.4%
Dennis J. Doyle............................................ 2,000(5) *
Scott D. Rued.............................................. 9,000(5) *
All directors and officers as a group (7 persons).......... 4,632,776(2)(3)(5) 76.1%
</TABLE>
- ------------------------
* Indicates ownership of less than 1 % of the Company's outstanding common
stock.
(1) The securities "beneficially owned" by a person are determined in accordance
with the definition of "beneficial ownership" set forth in the regulations
of the Securities and Exchange Commission and accordingly may include
securities owned by or for, among others, the spouse, children or certain
other relatives of such person as well as other securities as to which the
person has or shares voting or investment power or has the right to acquire
within 60 days after July 1, 1998. The same shares may be beneficially owned
by more than one person.
(2) Includes 806,500 shares held in constructive trust for the benefit of Mr.
David H. Rotter's former spouse, Shirley A. Rotter.
(3) Includes an aggregate of 522,000 shares held by children of Mr. David H.
Rotter and an aggregate of 525,000 shares held by the children of Mr.
Bernard J. Rotter and 100 shares held by the former spouse of Mr. David H.
Rotter and 100 shares held by the spouse of Mr. Bernard J. Rotter.
(4) Messrs. David H. Rotter and Bernard J. Rotter (the "Controlling
Shareholders") and their respective spouses, former spouses and children
have entered into a Shareholders' Agreement intended by them to preserve
continuity of ownership and control of the Company. Pursuant to a divorce
decree with respect to the divorce of Mr. David H. Rotter and his former
spouse, Ms. Shirley A. Rotter, 806,500 shares are being held in constructive
trust for Ms. Rotter. The divorce decree states that Mr. David H. Rotter's
rights pursuant to the Shareholders' Agreement are to remain in full force
and effect. The Shareholders' Agreement divides the Rotter families who own
shares into two groups the "DR Group" and the "BR Group." The members of the
groups, who own collectively 4,316,666 shares of common stock, so long as
they own their respective shares, have agreed to vote their shares in favor
of the election of Messrs. David H. Rotter and Bernard J. Rotter to the
Board of Directors of the
2
<PAGE>
Company and members of the respective groups have further agreed to certain
restrictions upon their ability to transfer or otherwise dispose of their
shares to third parties in the event of certain voluntary lifetime
transfers, upon death and in the case of involuntary transfers if any of the
members in the DR Group desire to dispose of their shares without the
consent of Mr. David H. Rotter, such member must first offer the shares to
Mr. David H. Rotter, and if he does not elect to acquire such shares, then
to Mr. Bernard J. Rotter. Similarly, if any member of the BR Group desires
to dispose of his or her shares without the consent of Mr. Bernard J.
Rotter, such member must first offer such shares to Mr. Bernard J. Rotter,
and if he does not elect to purchase such shares, then to Mr. David H.
Rotter. Messrs. David H. Rotter and Bernard J. Rotter have agreed that they
will offer their respective shares to the other in the event of proposed
lifetime transfers, and each has given to the other the option to purchase
his shares upon death, disability or in the event of an involuntary
transfer. The Shareholders' Agreement will terminate upon: (i) the entry of
an order of relief with respect to the Company under the Federal Bankruptcy
Code, the execution by the Company of any assignment for the benefit of
creditors or the appointment of a receiver of the Company; (ii) voluntary or
involuntary dissolution of the Company; (iii) upon the written agreement or
vote of the Controlling Shareholders to dissolve the Company; (iv) upon the
written agreement of the Controlling Shareholders, or if there shall be only
one surviving Controlling Shareholder, upon notice by such Controlling
Shareholder to the remaining parties to the Shareholders' Agreement; or (v)
upon the deaths of the Controlling Shareholders.
(5) Includes the right to acquire the following shares within 60 days upon
exercise of stock options: Mr. David Rotter, 34,639; Mr. Bernard Rotter,
34,639; Mr. Stutz, 95,840; Mr. Dierbeck, 81,802; Mr. Shapiro, 80,850; Mr.
Doyle, 2,000; and Mr. Rued, 4,000.
(6) This information is based on a Schedule 13G filed with the Securities and
Exchange Commission by Heartland Advisors, Inc. on February 6, 1998.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's Chief
Executive Officer and the four other most highly paid executive officers for the
three fiscal years ended March 31, 1998.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)
- --------------------------------- ---- ---------- --------- ------------
<S> <C> <C> <C> <C>
David H. Rotter.................. 1998 250,000 -0- -0-
President 1997 250,000 64,487 37,647
1996 250,000 103,726 32,634
Bernard J. Rotter................ 1998 250,000 -0- -0-
Vice President, Treasurer 1997 250,000 64,487 37,647
1996 250,000 103,726 32,634
Todd M. Stutz.................... 1998 85,000 23,018 -0-
Executive Vice President 1997 85,000 65,829 26,424
1996 85,000 140,703 15,612
John J. Dierbeck, III............ 1998 100,000 50,000 -0-
Executive Vice President 1997 100,000 36,850 16,890
1996 85,000 59,272 14,910
Lawrence B. Shapiro.............. 1998 100,000 -0- -0-
Chief Financial Officer 1997 100,000 36,850 16,890
1996 85,000 59,272 13,868
</TABLE>
3
<PAGE>
AGGREGATED FISCAL YEAR-END OPTION VALUES
The following table provides information with respect to the named executive
officers and the value of such officers' unexercised options at March 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS AT FISCAL YEAR-END VALUE OF UNEXERCISED IN-THE-MONEY
(#) OPTIONS AT FISCAL YEAR-END ($)(1)
--------------------------- ---------------------------------------
NAME (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
- --------------------------- ------------ ------------ ---------------- --------------------
<S> <C> <C> <C> <C>
David H. Rotter............ 34,639 35,641 -0- -0-
Bernard J. Rotter.......... 34,639 35,641 -0- -0-
Todd M. Stutz.............. 95,840 24,575 -0- -0-
John J. Dierbeck, III...... 81,802 18,873 -0- -0-
Lawrence B. Shapiro........ 80,850 18,375 -0- -0-
</TABLE>
- ------------------------
(1) The closing price of the Company's common stock on March 31, 1998 as
reported on AMEX was $4.00.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY
STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND THE PERFORMANCE GRAPH
CONTAINED HEREIN SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
4
<PAGE>
BOARD REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") determined the compensation
arrangements for the Company's executive officers for fiscal 1998 in June of
1997. The members of the Committee are the two outside directors of the Company,
Messrs. Doyle and Rued.
The Committee's principal responsibility is to ensure the Company's
executive compensation plans are aligned with and support the Company's business
objectives. The Committee continually evaluates the overall design and
administration of the executive compensation plans in order to fulfill its
responsibility. To ensure the objectivity and independence of the Committee, it
is composed entirely of outside directors.
COMPENSATION PHILOSOPHY
Currently, the primary elements of the executives' total compensation
program are base salary, annual incentives, and long-term incentives. In
general, the compensation program promotes a pay-for-performance philosophy by
placing a significant portion of total compensation "at risk" while providing
compensation opportunities which are comparable to market levels.
The Company's executive compensation package consists of three main
components: (i) base salary; (ii) annual bonuses based on Company performance;
and (iii) stock options. The base salary of each of the named executive officers
is determined annually after considering the compensation levels of personnel
with similar responsibilities at other companies within the home construction
industry and after considering the responsibilities and performance of the
individual officer. Under the Company's annual bonus program, cash bonuses are
paid annually to the named executive officers and other officers and employees
from a bonus pool. The size of the bonus pool is derived from a pre-determined
formula of percentages of levels of pre-tax profits of the Company. The officers
and employees participating in the annual bonus program receive a percentage of
the bonus pool which is established based on the same considerations as were
used to determine the base salary of each such officer and employee. Under the
annual bonus program each executive officer's compensation for fiscal 1998 was
tied directly to the financial performance of the Company, except for Mr. Todd
M. Stutz, whose bonus is tied directly to the financial performance of the
Company's Minnesota operations. For the annual bonus program in fiscal 1998, no
bonus was paid to Mr. David H. Rotter, Chief Executive Officer of the Company,
and the aggregate bonuses paid to all of the named executive officers of the
Company, as a group, including the Chief Executive Officer, represents
approximately 8.6% of the group's total fiscal 1998 compensation. The purpose of
the stock option program is to align the long-term interests of the Company's
executives and its shareholders and, through the use of vesting periods, to
assist in the retention of executives. In determining the compensation package
for Mr. David H. Rotter, the Committee applied the compensation policies
described above.
COMPENSATION COMMITTEE INTERLOCKS
As stated above, Messrs. Doyle and Rued comprise the Compensation Committee
of the Board of Directors. No member of the Compensation Committee of the Board
of Directors was an officer, former officer or employee of the Company or any of
its subsidiaries during fiscal 1998. No executive officer of the Company served
as a member of the compensation committee or board of directors of another
entity, one of whose executive officers served on the Company's Compensation
Committee or Board of Directors during fiscal 1998.
5
<PAGE>
COMPANY STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on $100
invested in the common stock of the Company for the last five fiscal years with
the cumulative total return on the same amount invested in the Dow Jones Equity
Market Index and Dow Jones Home Construction Index for the same periods.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
RH DJEMI DJHCI
<S> <C> <C> <C>
10/29/92 $100.00 $100.00 $100.00
3/31/93 145.45 106.58 108.91
3/31/94 161.36 110.54 116.90
3/31/95 118.18 127.02 101.72
3/31/96 124.08 169.02 145.20
3/31/97 94.25 205.45 128.09
3/31/98 73.56 251.68 165.88
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires directors and
executive officers of the Company, and persons who own more than 10% of the
Company's common stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the
Company's common stock and to furnish the Company with copies of these reports.
Initial reports are required to be filed within ten days of an individual
becoming a director, executive officer or owner of 10% of the Company's common
stock and reports of changes in ownership are required to be filed within the
first ten days of the month succeeding the month in which such change occurred.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, all Section 16(a) filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were timely made during fiscal 1998.
1. ELECTION OF DIRECTORS
Each of the seven nominees for director is currently a member of the Board
of Directors and was elected by the shareholders. All nominees have agreed to
stand for election at the Annual Meeting. If, prior to the Annual Meeting, the
Board of Directors learns that any nominee will be unable to serve by reason of
death, incapacity, or other unexpected occurrence, the proxies which would have
otherwise been voted for such nominee will be voted for a substitute nominee, if
any, elected by the Board.
6
<PAGE>
BUSINESS EXPERIENCE
DAVID H. ROTTER, age 51, is a founder of the Company and has been a member
of its Board of Directors since its inception. He served as the Company's Vice
President from 1973 through March 1990 and has served as its President from
April 1990 through the present. He has also served as the Company's Secretary
since its inception. He is the brother of Bernard J. Rotter.
BERNARD J. ROTTER, age 55, has served as Chairman of the Board, Vice
President and Treasurer of the Company since July 1984. He is the brother of
David H. Rotter.
TODD M. STUTZ, age 40, was elected a Director of the Company in August 1992
and has served as Executive Vice President since June 1991. He joined the
Company in April 1989 and served as its Land Development Manager until June
1991. Between April 1980 and March 1989 he was employed by the Housing and
Redevelopment Authority of the City of Columbia Heights, Minnesota as Executive
Director.
JOHN J. DIERBECK, III, age 52, was elected Executive Vice President in May
1996. Prior to becoming an Executive Vice President he served as Vice President
of Sales and Marketing of the Company since August 1992. He served as the
Company's sales manager since March 1990. Mr. Dierbeck was elected a director of
the Company in August 1992.
LAWRENCE B. SHAPIRO, age 42, was elected Chief Financial Officer and a
Director of the Company in August 1992. He has served as the Company's
Controller since January 1989.
SCOTT D. RUED, age 41, was elected as a Director of the Company effective
December 10, 1993. Mr. Rued has served as Executive Vice President and Chief
Financial Officer of Hidden Creek Industries (a management company) since
January 1, 1994, as Vice President--Finance and Corporate Development of Hidden
Creek from June 1989 to December 1993 and as Vice President and Director of
Tower Automotive, Inc. (a producer of automotive parts) since April 1993.
DENNIS J. DOYLE, age 46, was elected as a Director of the Company on April
23, 1996. For more than the last five years Mr. Doyle has been President and
Chief Executive Officer of Welsh Companies, Inc. (a full service real estate
company). Mr. Doyle is also a director of Grow Biz International.
REQUIRED VOTE
Election of each nominee requires the affirmative vote of the holders of a
majority of the shares of common stock represented at the meeting.
COMMITTEES
The Board of Directors held three meetings in fiscal 1998. Each of the
incumbent directors attended at least 75% of the meetings of the Board and each
Committee of which he is a member held during fiscal 1998.
The members of the Audit Committee are Dennis J. Doyle and Scott D. Rued.
The Audit Committee is empowered by the Board of Directors to review the
financial books and records of the Company in consultation with the Company's
accounting and auditing staff and its independent auditors and to review with
the accounting staff and independent auditors any questions raised with respect
to accounting and auditing policy and procedure. The Audit Committee held one
meeting during fiscal 1998.
The members of the Compensation Committee are Dennis J. Doyle and Scott D.
Rued. The Compensation Committee is authorized by the Board of Directors to
establish general levels of compensation for all employees of the Company, to
set the annual salary of each of the executive officers of the Company, to grant
options to employees under the Company's option plans, and to review and approve
compensation and benefit plans of the Company. The Compensation Committee held
two meetings during fiscal 1998.
7
<PAGE>
Directors of the Company who are not employees of the Company receive $8,000
per year of service, reimbursement of the out-of-pocket expenses incurred on
behalf of the Company and they participate in the Company's Director Stock
Option Plan.
2. AMENDMENT TO THE 1992 STOCK OPTION PLAN
BACKGROUND AND SUMMARY OF PLAN
On July 21, 1998, the Board of Directors, subject to shareholder approval,
amended the Company's 1992 Stock Option Plan (the "Plan") to increase the number
of shares of common stock reserved for issuance pursuant to the Plan from
1,000,000 to 1,300,000. The purpose of the Plan is to strengthen the Company's
ability to attract and retain key employees and to furnish additional incentives
to such persons by encouraging them to become owners of common stock. The Plan
provides for the granting of options to designated employees, non-employees and
consultants of the Company. A proposal to approve the amendment will be
presented to shareholders at the Annual Meeting of Shareholders.
Copies of the Plan are available for examination at the corporate
headquarters of the Company in Roseville, Minnesota, and will be mailed at no
charge to any shareholder who requests a copy. A copy of the Plan will also be
available for examination at the meeting.
The closing price of the Company's common stock on July 21, 1998, as
reported on AMEX was $4.12.
PROPOSED PLAN AMENDMENT
Of the 1,000,000 shares reserved by the Company for grant pursuant to the
Plan, 905,102 were subject to options as of the date of this proxy statement.
Because few additional options to purchase shares may be granted under the Plan,
the Board of Directors recommends that the shareholders approve the amendment to
increase the shares available for issuance pursuant to the Plan.
ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board of
Directors, which consists exclusively of non-employee directors. The
Compensation Committee has the authority to grant options, determine the terms
of options, select the employees to whom options are granted, promulgate rules
relating to the Plan and to take other actions necessary or advisable for the
administration of the Plan. Under the Plan, options may be granted at not less
than 100% (110% in the case of incentive stock options granted to shareholders
owning 10% or more of the Company's common stock) of the fair market value of
the Company's common stock on the date of grant. Options may be granted under
the Plan no later than August 30, 2002, the Plan's termination date. Options
granted under the Plan may not exceed 10 years in duration (five years for 10%
or more shareholders). Options may not be transferred except by will or the laws
of descent and distribution and must be exercised, if at all, within three
months after termination of employment for any reason other than death or
disability, and within six months after termination of employment due to death
or disability.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Under the Plan, stock options may be issued (1) as incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, (2) as non-statutory stock options that do not qualify as incentive
stock options, or (3) a combination of both. There is no taxable income to a
participant as a result of the grant of an incentive stock option or the
exercise of an incentive stock option if the participant does not dispose of the
acquired stock for certain time periods. However, the difference between the
fair market value of the shares under the option at the time of exercise and the
option price will generate a tax preference item that could result in an
alternative minimum tax liability for the employee. Upon sale of the shares, the
difference between the sale price and the option price will generally
8
<PAGE>
be taxable income. The Company is not entitled to a federal income tax deduction
upon the grant or exercise of incentive stock options. Generally, there is no
taxable income to a participant as a result of the grant of a non-statutory
stock option. However, upon exercise, the participant will realize taxable
income equal to the difference between the fair market value of the common stock
at the time of exercise and the option price. The Company is not entitled to a
tax deduction upon the grant of a non-statutory stock option, but is entitled to
a tax deduction equal to the participant's taxable income realized upon the
exercise of the stock option. The foregoing statements are based on current
federal income tax laws and regulations and are subject to changes in such tax
laws and regulations, or interpretations thereof.
REQUIRED VOTE
Approval of the amendment requires the affirmative vote of the holders of a
majority of the shares of common stock represented at the meeting. The Board of
Directors recommends that you vote in favor of the proposal.
3. AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN
BACKGROUND AND SUMMARY OF PLAN
On July 21, 1998, the Board of Directors, subject to shareholder approval,
amended the Company's employee stock purchase plan (the "Purchase Plan") to
increase the number of shares of Common Stock reserved for issuance thereunder
from 125,000 to 250,000. The Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended, is administered by
the Board of Directors of the Company or by a committee appointed by the Board
of Directors. Employees are eligible to participate if they are employed by the
Company for at least 20 hours per week and more than five months per year. The
Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 10% of an employee's compensation at
85% of the lower of the fair market value of the Common Stock as determined by
the Board of Directors at the beginning or at the end of each annual offering
period. Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically on termination of
employment with the Company.
PROPOSED PLAN AMENDMENT
Of the 125,000 shares originally reserved by the Company for issuance
pursuant to the Purchase Plan, 123,516 were issued as of the date of this proxy
statement. Because few additional shares may be issued under the Purchase Plan,
the Board of Directors recommends that the shareholders approve the amendment to
increase the shares available for issuance pursuant to the Purchase Plan.
REQUIRED VOTE
Approval of the amendment requires the affirmative vote of the holders of a
majority of the shares of common stock represented at the meeting. The Board of
Directors recommends that you vote in favor of the proposal.
4. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Arthur Andersen LLP as independent
public accountants for the Company for the year ending March 31, 1999. A
proposal to ratify that appointment will be presented to shareholders at the
Annual Meeting. Representatives of Arthur Andersen LLP will be present at the
Annual Meeting, will have an opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions from
shareholders in attendance. The Board of Directors recommends that you vote in
favor of the proposal.
9
<PAGE>
CERTAIN TRANSACTIONS
The Company has engaged Welsh Companies, Inc. to sell certain parcels of
commercial land located in Inver Grove Heights, Minnesota. Welsh Companies, Inc.
is owned by Dennis Doyle who is a director of the Company. The Company will pay
Welsh Companies, Inc. a 10% commission on the purchase price of any parcels
which are sold. The Company believes this commission rate is customary and that
the terms of this engagement are no less favorable to the Company than similar
transactions with unaffiliated third parties. The aggregate commission expected
to be paid under this engagement is between $200,000 and $800,000 depending on
the number and price of the parcels eventually sold.
OTHER MATTERS
The Board of Directors knows of no other matters that may be brought before
the meeting which require submission to a vote of the shareholders. If any other
matters are properly brought before the meeting, however, the persons named in
the enclosed proxy or their substitutes will vote in accordance with their best
judgment on such matters.
Expenses incurred in connection with the solicitation of proxies will be
paid by the Company. The proxies are being solicited principally by mail. In
addition, directors, officers and regular employees of the Company may solicit
proxies personally or by telephone, for which they will receive no consideration
other than their regular compensation. The Company will also request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
the beneficial owners of common stock of the Company and will reimburse such
persons for their expenses so incurred.
SHAREHOLDER PROPOSALS
Shareholders wishing to present proposals for action by the shareholders at
the next Annual Meeting must present such proposals at the principal offices of
the Company not later than March 28, 1999. Due to the complexity of the
respective rights of the shareholders and the Company in this area, any
shareholder desiring to propose such an action is advised to consult with his or
her legal counsel with respect to such rights. It is suggested that any such
proposals be submitted by certified mail, return receipt requested.
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to shareholders for the fiscal year
ended March 31, 1998, which contains the Company's Form 10-K, accompanies this
Notice of Annual Meeting, proxy statement and Proxy Card.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
David H. Rotter
PRESIDENT
Roseville, Minnesota
August 1, 1998
10
<PAGE>
THE ROTTLUND COMPANY, INC.
2681 LONG LAKE ROAD
ROSEVILLE, MINNESOTA 55113
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting of
Shareholders and the Proxy Statement, dated August 1, 1998, hereby appoints
David H. Rotter and Bernard J. Rotter as proxies (each with the power to act
alone and with the power of substitution and revocation), to represent the
undersigned and to vote, as designated below, all common shares of The Rottlund
Company, Inc. held of record by the undersigned on July 21, 1998, at the Annual
Meeting of Shareholders to be held on September 10, 1998 at 3:30 p.m. at the
Crowne Plaza Northstar Hotel, 618 Second Avenue South, Minneapolis, Minnesota,
and at any adjournments thereof.
i. To elect seven directors of the Company, each for a term of one year and
until their successors shall be elected and duly qualified.
<TABLE>
<S> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
DAVID H. ROTTER, BERNARD J. ROTTER, TODD M. STUTZ, JOHN J. DIERBECK, III
LAWRENCE B. SHAPIRO, SCOTT D. RUED, DENNIS J. DOYLE
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- --------------------------------------------------------------------------------
ii To approve an amendment to the Company's 1992 Stock Option Plan to increase
the number of shares reserved for issuance thereunder from 1,000,000 to
1,300,000.
/ / FOR / / AGAINST / / ABSTAIN
iii To approve an amendment to the Company's Employee Stock Purchase Plan
increasing the number of shares reserved for issuance thereunder from
125,000 to 250,000.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
iv. To ratify the appointment of Arthur Anderson LLP as the Company's
independent public accountants for the fiscal year ending March 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
v. To transact such other business as may properly come before the meeting or
any adjournment thereof.
/ / FOR / / AGAINST / / ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE
PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 THROUGH 5. ABSTENTIONS WILL BE COUNTED TOWARDS THE
EXISTENCE OF A QUORUM.
Please sign exactly as name
appears on this proxy. When shares
are held by joint tenants, both
should sign. If signing as
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If a
corporation, please sign in full
corporate name by president or
other authorized officer. If a
partnership, please sign in
partnership name by an authorized
person.
Dated:
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
