<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
RAINFOREST CAFE, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
RAINFOREST CAFE, INC.
- -------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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:
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<PAGE> 2
RAINFOREST LOGO
720 SOUTH FIFTH STREET
HOPKINS, MINNESOTA 55343
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 29, 1997
------------------------
TO THE SHAREHOLDERS OF RAINFOREST CAFE, INC.:
Please take notice that the Special Meeting of Shareholders of Rainforest
Cafe, Inc. (the "Company") will be held, by order of the Board of Directors of
the Company, at the Hopkins House, 1501 Highway 7, Hopkins, Minnesota 55305 on
September 29, 1997 at 8:00 a.m., or at any adjournment or adjournments thereof,
for the purpose of considering and taking appropriate action with respect to the
following:
1. To approve and adopt the Company's 1997 Directors' Stock Option Plan.
2. To approve an amendment to the Company's 1995 Stock Option and
Compensation Plan to increase the number of shares of Common Stock
reserved for issuance thereunder by 1,000,000 shares.
Pursuant to due action of the Board of Directors, shareholders of record on
August 25, 1997, will be entitled to vote at the meeting or any adjournments
thereof.
A proxy for the meeting is enclosed herewith. You are requested to fill in
and sign the proxy, which is solicited by the Board of Directors, and mail it
promptly in the enclosed envelope.
By Order of the Board of Directors
RAINFOREST CAFE, INC.
Kenneth W. Brimmer, Secretary
August 28, 1997
<PAGE> 3
RAINFOREST CAFE, INC.
720 SOUTH FIFTH STREET
HOPKINS, MINNESOTA 55343
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
SEPTEMBER 29, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Rainforest Cafe, Inc. (the "Company") to be
used at the Special Meeting of Shareholders of the Company to be held September
29, 1997. The approximate date on which this Proxy Statement and the
accompanying proxy were first sent or given to shareholders was August 28, 1997.
Each shareholder who signs and returns a proxy in the form enclosed with this
Proxy Statement may revoke the same at any time prior to its use by giving
notice of such revocation to the Company in writing, in open meeting or by
executing and delivering a new proxy to the Secretary of the Company. Unless so
revoked, the shares represented by each proxy will be voted at the meeting and
at any adjournments thereof. Presence at the meeting of a shareholder who has
signed a proxy does not alone revoke that proxy. Only shareholders of record at
the close of business on August 25, 1997 (the "Record Date") will be entitled to
vote at the meeting or any adjournments thereof.
PROPOSAL TO ADOPT THE
RAINFOREST CAFE, INC.
1997 DIRECTOR STOCK OPTION PLAN
The Board of Directors has adopted, subject to shareholder approval, the
Rainforest Cafe, Inc. 1997 Director Stock Option Plan (the "1997 Director
Plan"). The Board of Directors believes that the grant of stock options is a
desirable and useful means to strengthen further the non-employee directors'
linkage with shareholder interests and retain and recruit qualified non-employee
directors.
The 1997 Director Plan provides that each director who is not an employee
of the Company or one of its subsidiaries (a "Non-Employee Director") is
entitled to receive a non-qualified stock option to purchase shares of the
Company's Common Stock at an option exercise price equal to the fair market
value of the shares on such grant date. The amount of shares granted pursuant to
the option and the vesting schedule of such option will be determined by the
Company's Board of Directors. Each option under the 1997 Director Plan will have
a ten-year term and will generally vest in equal annual installments as
determined by the Board of Directors.
The total number of shares of Common Stock that may be subject to options
issued pursuant to the 1997 Director Plan is 200,000. The number and the terms
of outstanding options are subject to automatic adjustment in the event of
reorganization, merger, consolidation, recapitalization, stock splits,
combination or exchange of shares, stock dividends or other similar events. The
1997 Director Plan will have a ten-year term and will be administered by the
Board of Directors.
The Board of Directors presently intends to grant, pursuant to the 1997
Director Plan, options to purchase 25,000 shares to Kenneth W. Brimmer. Such
options, when granted, would vest on pro rata basis over a three year period
beginning on the first anniversary of the date of grant. The exercise price of
such options will be the closing sales price of the Company's Common Stock as
reported on the Nasdaq National Market on the date of grant.
The Company will receive no consideration upon the grant of options under
the 1997 Director Plan. The exercise price of an option must be paid in full
upon exercise. Payment may be made in cash, check or, in whole or in part, in
the Common Stock of the Company already owned by the person exercising the
option, valued at fair market value.
Under the current law, the federal income tax consequences to Non-Employee
Directors and the Company under the proposed 1997 Director Plan should generally
be as follows: A director to whom a non-qualified stock option is granted will
not recognize income at the time of grant of such option. When a director
exercises the stock option, the director will recognize ordinary compensation
income equal to the difference, if any, between the exercise price paid and the
fair market value, as of the date of option exercise, of the shares the director
receives. The tax basis of such shares to the director will equal the exercise
price paid plus the amount includable in the director's gross income as
compensation, and the director's holding period for such shares will commence on
the day on which the director recognizes taxable income in respect of such
shares. Subject to applicable provisions of the Internal Revenue code of 1986,
as amended, and regulations thereunder (the "Code"), the Company will generally
be entitled to a federal income tax deduction in respect of non-qualified stock
options in an amount equal to the ordinary compensation income recognized by the
director as described above.
<PAGE> 4
The discussion set forth above does not purport to be a complete analysis
of the potential tax consequences relevant to recipients of options or to the
Company or to describe tax consequences based on particular circumstances. It is
based on federal income tax law and interpretational authorities as of the date
of this Proxy Statement, which are subject to change at any time.
A complete copy of the 1997 Director Plan is set forth in Annex A to this
Proxy Statement, and the preceding discussion of the 1997 Director Plan is
qualified in its entirety by reference to it.
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of the
outstanding shares of Common Stock of the Company present and entitled to vote
on the adoption and approval of the 1997 Director Plan or (b) a majority of the
voting power of the minimum number of shares entitled to vote that would
constitute a quorum for transaction of business at the meeting, is required for
adoption of the 1997 Director Plan. A shareholder who abstains with respect to
adoption of 1997 Director Plan is considered to be present and entitled to vote
on the Plan at the meeting, and is in effect casting a negative vote, but a
shareholder (including a broker) who does not give authority to a Proxy to vote,
or withholds authority to vote, on the adoption of the 1997 Director Plan shall
not be considered present and entitled to vote. Unless instructed to the
contrary, all proxies will be noted for the approval and adoption of the 1997
Director Plan.
PROPOSAL TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE
UNDER THE COMPANY'S 1995 STOCK OPTION AND COMPENSATION PLAN
Subject to the approval of the shareholders, on August 14, 1997 the Board
of Directors amended the Plan (the "Employee Plan") to increase the number of
shares of Common Stock reserved for issuance pursuant to the Employee Plan by
1,000,000 shares. The brief summary of the Employee Plan which follows is
qualified in its entirety by reference to the complete text, a copy of which is
attached to this Proxy Statement as Annex B.
GENERAL
The purpose of the Employee Plan is to increase shareholder value and to
advance the interests of the Company by furnishing a variety of economic
incentives ("Incentives") designed to attract, retain and motivate employees of
the Company. For example, the Company has undertaken a search to fill the
position of President and Chief Operating Officer. The Board of Directors of the
Company believes that any prospective candidate for such position will require
options in excess of those currently reserved for issuance under the Employee
Plan.
The Employee Plan provides that a committee composed of at least two
members of the Board of Directors of the Company (the "Compensation Committee")
who have not received Incentives under the Employee Plan may grant Incentives to
employees in the following forms: (a) stock options; (b) stock appreciation
rights; (c) stock awards; (d) restricted stock; (e) performance shares; and (f)
cash awards. Incentives may be granted only to employees of the Company
(including officers and directors of the Company, but excluding directors of the
Company who are not also employees of or consultants to the Company) selected
from time to time by the Compensation Committee.
The number of shares of Common Stock which may be issued under the Employee
Plan if this amendment is approved may not exceed 2,500,000 shares, subject to
adjustment in the event of a merger, recapitalization or other corporate
restructuring. This represents approximately 14.4% of the outstanding shares of
Common Stock on August 25, 1997. On August 25, 1997, the last sale price of the
Common Stock as reported on the Nasdaq National Market was $25.5625 per share.
The Compensation Committee of the Board of Directors presently intends to
grant, pursuant to the Employee Plan, options to purchase 300,000 shares of
Common Stock to Lyle Berman, Chairman of the Board and Chief Executive Officer,
75,000 shares each to Steven W. Schussler, Senior Vice President -- Marketing
and Development and Ercu Ucan, Senior Vice President -- Retail, 50,000 to
Gregory C. Carey, Senior Vice President -- Operations, 40,000 to Mark S.
Robinow, Senior Vice President and Chief Financial Officer and 35,000 to Mark
Bartholomay, Senior Vice President -- International, respectively. Such options,
when granted, would vest on a pro rata basis over a three year period beginning
on the first anniversary of the date of grant. The exercise price of such
options will be the closing sales price of the Company's Common Stock as
reported on the Nasdaq National Market on the date of grant.
STOCK OPTIONS
Under the Employee Plan, the Compensation Committee may grant non-qualified
and incentive stock options to eligible employees to purchase shares of Common
Stock from the Company. The Employee Plan confers on the Compensation Committee
discretion, with respect to any such stock option, to determine the number and
purchase price of the shares subject to the option, the term of each option and
the time or times during its term when the
2
<PAGE> 5
option becomes exercisable. The purchase price for incentive stock options may
not be less than the fair market value of the shares subject to the option on
the date of grant. The number of shares subject to an option will be reduced
proportionately to the extent that the optionee exercises a related Stock
Appreciation Right ("SAR"). The term of a non-qualified option may not exceed 10
years and one day from the date of grant and the term of an incentive stock
option may not exceed 10 years from the date of grant. Any option shall become
immediately exercisable in the event of specified changes in corporate ownership
or control. The Compensation Committee may accelerate the exercisability of any
option or may determine to cancel stock options in order to make a participant
eligible for the grant of an option at a lower price. The Compensation Committee
may approve the purchase by the Company of an unexercised stock option for the
difference between the exercise price and the fair market value of the shares
covered by such option.
The option price may be paid in cash, check, bank draft or by delivery of
shares of Common Stock valued at their fair market value at the time of purchase
or by withholding shares from the shares issuable upon exercise of such options
valued at their fair market value or as otherwise authorized by the Compensation
Committee.
In the event that an optionee ceases to be an employee of the Company for
any reason, including death, any stock option or unexercised portion thereof
which was otherwise exercisable on the date of termination of employment shall
expire at the time or times established by the Compensation Committee.
STOCK APPRECIATION RIGHTS
A stock appreciation right or SAR is a right to receive, without payment to
the Company, a number of shares, cash or any combination thereof, the amount of
which is determined pursuant to the formula described below. A SAR may be
granted with respect to any stock option granted under the Employee Plan, or
alone, without reference to any stock option. A SAR granted with respect to any
stock option may be granted concurrently with the grant of such option or at
such later time as determined by the Compensation Committee and as to all or any
portion of the shares subject to the option.
RESTRICTED STOCK
Restricted stock consists of the sale or transfer by the Company to an
eligible employee of one or more shares of Common Stock which are subject to
restrictions on their sale or other transfer by the employee. The price at which
restricted stock will be sold will be determined by the Compensation Committee,
and it may vary from time to time and among employees and may be less than the
fair market value of the shares at the date of sale. All shares of restricted
stock will be subject to such restrictions as the Compensation Committee may
determine. Subject to these restrictions and the other requirements of the
Employee Plan, a participant receiving restricted stock shall have all of the
rights of a shareholder as to those shares.
STOCK AWARDS
Stock awards consist of the transfer by the Company to an eligible employee
of shares of Common Stock, without payment, as additional compensation for
services to the Company. The number of shares transferred pursuant to any stock
award will be determined by the Compensation Committee.
PERFORMANCE SHARES
Performance shares consist of the grant by the Company to an eligible
employee of a contingent right to receive cash or payment of shares of Common
Stock. The performance shares shall be paid in shares of Common Stock to the
extent performance objectives set forth in the grant are achieved. The number of
shares granted and the performance criteria will be determined by the
Compensation Committee.
CASH AWARDS
A cash award consists of a monetary payment made by the Company to an
eligible employee as additional compensation for his services to the Company.
Payment may depend on the achievement of specified performance objectives. The
amount of any monetary payment constituting a cash award shall be determined by
the Compensation Committee.
NON-TRANSFERABILITY OF MOST INCENTIVES
No stock option, SAR, performance share or restricted stock granted under
the Employee Plan will be transferable by its holder, except in the event of the
holder's death, by will or the laws of descent and distribution. During an
employee's lifetime, an Incentive may be exercised only by him or her or by his
or her guardian or legal representative.
3
<PAGE> 6
AMENDMENT OF THE EMPLOYEE PLAN
The Board of Directors may amend or discontinue the Employee Plan at any
time. However, no such amendment or discontinuance may, subject to adjustment in
the event of a merger, recapitalization, or other corporate restructuring, (a)
change or impair, without the consent of the recipient thereof, an Incentive
previously granted, (b) materially increase the maximum number of shares of
Common Stock which may be issued to all employees under the Employee Plan, (c)
materially change or expand the types of Incentives that may be granted under
the Employee Plan, (d) materially modify the requirements as to eligibility for
participation in the Employee Plan, or (e) materially increase the benefits
accruing to participants. Certain Employee Plan amendments require shareholder
approval, including amendments which would materially increase benefits accruing
to participants, increase the number of securities issuable under the Employee
Plan, or change the requirements for eligibility under the Employee Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion sets forth certain United States income tax
considerations in connection with the ownership of Common Stock. These tax
considerations are stated in general terms and are based on the Code. This
discussion does not address state or local tax considerations with respect to
the ownership of Common Stock. Moreover, the tax considerations relevant to
ownership of the Common Stock may vary depending on a holder's particular
status.
Under existing Federal income tax provisions, an employee who receives a
stock option or performance shares or a SAR under the Employee Plan or who
purchases or receives shares of restricted stock under the Employee Plan which
are subject to restrictions which create a "substantial risk of forfeiture"
(within the meaning of section 83 of the Code) will not normally realize any
income, nor will the Company normally receive any deduction for federal income
tax purposes in the year such Incentive is granted. An employee who receives a
stock award under the Employee Plan consisting of shares of Common Stock will
realize ordinary income in the year of the award in an amount equal to the fair
market value of the shares of Common Stock covered by the award on the date it
is made, and the Company will be entitled to a deduction equal to the amount the
employee is required to treat as ordinary income. An employee who receives a
cash award will realize ordinary income in the year the award is paid equal to
the amount thereof, and the amount of the cash will be deductible by the
Company.
When a non-qualified stock option granted pursuant to the Employee Plan is
exercised, the employee will realize ordinary income measured by the difference
between the aggregate purchase price of the shares of Common Stock as to which
the option is exercised and the aggregate fair market value of shares of the
Common Stock on the exercise date, and the Company will be entitled to a
deduction in the year the option is exercised equal to the amount the employee
is required to treat as ordinary income.
Options which qualify as incentive stock options are entitled to special
tax treatment. Under existing federal income tax law, if shares purchased
pursuant to the exercise of such an option are not disposed of by the optionee
within two years from the date of granting of the option or within one year
after the transfer of the shares to the optionee, whichever is longer, then (i)
no income will be recognized to the optionee upon the exercise of the option;
(ii) any gain or loss will be recognized to the optionee only upon ultimate
disposition of the shares and, assuming the shares constitute capital assets in
the optionee's hands, will be treated as long-term capital gain or loss; (iii)
the optionee's basis in the shares purchased will be equal to the amount of cash
paid for such shares; and (iv) the Company will not be entitled to a federal
income tax deduction in connection with the exercise of the option. The Company
understands that the difference between the option price and the fair market
value of the shares acquired upon exercise of an incentive stock option will be
treated as an "item of tax preference" for purposes of the alternative minimum
tax. In addition, incentive stock options exercised more than three months after
retirement are treated as non-qualified options.
The Company further understands that if the optionee disposes of the shares
acquired by exercise of an incentive stock option before the expiration of the
holding period described above, the optionee must treat as ordinary income in
the year of that disposition an amount equal to the difference between the
optionee's basis in the shares and the lesser of the fair market value of the
shares on the date of exercise or the selling price. In addition, the Company
will be entitled to a deduction equal to the amount the employee is required to
treat as ordinary income.
If the exercise price of an option is paid by surrender of previously owned
shares, the basis of the shares received in replacement of the previously owned
shares is carried over. If the option is a nonstatutory option, the gain
recognized on exercise is added to the basis. If the option is an incentive
stock option, the optionee will recognize gain if the shares surrendered were
acquired through the exercise of an incentive stock option and have not been
held for the applicable holding period. This gain will be added to the basis of
the shares received in replacement of the previously owned shares.
4
<PAGE> 7
PROXIES AND VOTING
The affirmative vote of the holders of the greater of (a) a majority of the
outstanding shares of Common Stock of the Company present and entitled to vote
on the proposed Employee Plan amendment or (b) a majority of the voting power of
the minimum number of shares entitled to vote that would constitute a quorum for
transaction of business at the meeting, is required to approve the proposal to
increase the number of shares of common stock reserved for issuance under the
Employee Plan. A shareholder who abstains with respect to the proposed Employee
Plan amendment is considered to be present and entitled to vote at the meeting,
and is in effect casting a negative vote, but a shareholder (including a broker)
who does not give authority to a Proxy to vote on the proposed Employee Plan
amendment shall not be considered present and entitled to vote on the proposed
amendment. All shares represented by proxies will be voted for approval of the
proposed Employee Plan amendment unless a contrary choice is specified.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
The Company has outstanding one class of voting securities, Common Stock,
no par value, of which 17,319,392 shares were outstanding as of the close of
business on the Record Date. Each share of Common Stock is entitled to one vote
on all matters put to a vote of shareholders.
The following table sets forth as of August 15, 1997 certain information
regarding the beneficial ownership of shares of Common Stock by each director of
the Company, each of the executive officers listed in the Summary Compensation
Table, each person known to the Company to be the beneficial owner of more than
5% of the outstanding shares and all directors and executive officers as a
group. Except as otherwise indicated, each shareholder has sole voting and
investment power with respect to the shares beneficially owned. Unless otherwise
indicated, the address of the directors and executive officers is 720 South
Fifth Street, Hopkins, Minnesota 55343.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE
------------------------ ------ ----------
<S> <C> <C>
Lyle Berman(1).............................................. 1,016,500 5.9%
Steven W. Schussler(2)...................................... 672,333 3.9
Ercu Ucan(3)................................................ 288,833 1.6
Mark S. Robinow(4).......................................... 32,624 *
Kenneth W. Brimmer(5)....................................... 58,333 *
David L. Rogers(6).......................................... 55,000 *
Joel N. Waller(7)........................................... 68,125 *
Martin J. O'Dowd(8)......................................... 128,500 *
Fidelity Management & Research Company(9)................... 948,600 5.5
All directors and executive officers as a group (eight
persons).................................................. 2,320,248 13.0
</TABLE>
- -------------------------
* Less than 1%.
(1) Mr. Berman has disclaimed beneficial ownership of 60,000 shares of Common
Stock owned by Mr. Berman's spouse. The address of such reporting person is
13705 First Avenue North, Plymouth, Minnesota 55441.
(2) Includes 26,000 shares not outstanding but deemed beneficially owned by
virtue of Mr. Schussler's right to acquire such shares within 60 days.
(3) Includes 287,500 shares not outstanding but deemed beneficially owned by
virtue of Mr. Ucan's right to acquire such shares within 60 days.
(4) Includes 31,500 shares not outstanding but deemed beneficially owned by
virtue of Mr. Robinow's right to acquire such shares within 60 days.
(5) Includes 8,333 shares not outstanding but deemed beneficially owned by
virtue of Mr. Brimmer's right to acquire such shares within 60 days.
(6) Includes 25,000 shares not outstanding but deemed beneficially owned by
virtue of Mr. Rogers' right to acquire such shares within 60 days.
(7) Includes 25,000 shares not standing but deemed beneficially owned by virtue
of Mr. Waller's right to acquire such shares within 60 days.
(8) Includes 128,000 shares not outstanding but deemed beneficially owned by
virtue of Mr. O'Dowd's right to acquire such shares within 60 days. Mr.
O'Dowd resigned as Director, President and Chief Operating Officer in April
1997.
(9) Based on the most recent Schedule 13G filed on February 14, 1997 with the
Securities and Exchange Commission. The address of Fidelity Management &
Research Company is 82 Devonshire Street, Boston, Massachusetts 02109.
5
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation from
February 3, 1994 (inception) through December 29, 1996 awarded to or earned by
the Chief Executive Officer and the four most highly compensated executive
officers other than the Chief Executive Officer:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
FISCAL SALARY OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR $ COMPENSATION $ OPTIONS (#)
--------------------------- ------ ------ -------------- -----------
<S> <C> <C> <C> <C>
Lyle Berman............................................. 1996 $ 0 $ 0 0
Chairman of the Board and 1995 0 0 0
Chief Executive Officer 1994 0 0 0
Martin J. O'Dowd(1)..................................... 1996 166,923 35,000 0
President/Chief Operating Officer 1995 95,385(2) 19,077 300,000
Steven W. Schussler..................................... 1996 129,231 28,000 0
Executive Vice President -- 1995 110,769 22,514 75,000
Development 1994 21,153 66,308(3) 0
Ercu Ucan............................................... 1996 129,231 28,000 0
Executive Vice President -- Retail 1995 115,000 23,000 75,000
1994 41,857 59,231(3) 262,500
Mark S. Robinow......................................... 1996 113,692 23,600 0
Chief Financial Officer 1995 6,346(4) 4,231 90,000
</TABLE>
- -------------------------
(1) Mr. O'Dowd resigned as President, Chief Operating Officer and director of
the Company on April 28, 1997. Kenneth W. Brimmer, a director of the
Company, assumed the position of President on such date.
(2) Mr. O'Dowd began his employment with the Company on May 15, 1995.
(3) Includes amounts paid to Messrs. Schussler and Ucan pursuant to consulting
arrangements prior to each becoming employees of the Company.
(4) Mr. Robinow began his employment with the Company on November 27, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
There were no grants of stock options to the Company's executive officers
named in the Summary Compensation Table during the last fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table summarizes information with respect to options held by
the executive officers named in the Summary Compensation Table and the value of
the options held by such persons at the end of fiscal 1996:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FY-END (#) FY-END ($)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lyle Berman....................... -- -- -- -- -- --
Martin J. O'Dowd.................. 12,000 307,200 108,000 180,000 2,170,800 3,618,000
Steven W. Schussler............... 24,000 518,400 1,000 50,000 20,100 1,005,000
Ercu Ucan......................... -- -- 200,000 137,500 4,613,250 3,060,375
Mark S. Robinow................... -- -- 36,000 54,000 356,400 534,600
</TABLE>
DIRECTOR COMPENSATION
Directors receive no fees for serving as directors. The Company granted
options in February 1995 to each of Messrs. Rogers and Waller to acquire 37,500
shares of Common Stock at an exercise price of $3.40 per share. The Company
granted options in August 1996 to acquire 25,000 shares of Common Stock at an
exercise price of $24.65 per share to Mr. Brimmer. All director options vest on
a pro-rata basis on the first, second and third anniversaries of the date of
grant.
6
<PAGE> 9
EMPLOYMENT AGREEMENT
In February 1995, the Company entered into a three-year employment
agreement with Steven W. Schussler pursuant to which Mr. Schussler serves the
Company as Executive Vice President-Development. Pursuant to such agreement, Mr.
Schussler currently receives an annual salary of $175,000 and has the
opportunity to earn performance-related bonuses. Pursuant to such agreement, Mr.
Schussler may not disclose confidential information about the Company and has
agreed not to compete with the Company for a one-year period after any
termination of employment. Mr. Schussler may terminate his employment upon 30
days' written notice to the Board of Directors. If Mr. Schussler is terminated
by the Company without "good cause," Mr. Schussler is entitled to receive his
base salary and benefits for 12 months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Stock Option and Compensation Committee (the "Compensation
Committee") consists of David L. Rogers and Joel N. Waller. Messrs. Rogers and
Waller are directors and executive officers of Wilsons. Lyle Berman, Chairman of
the Board and Chief Executive Officer of the Company is a director of Wilsons.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives generally have been
made by the Compensation Committee of the Board. Each member of the Compensation
Committee is a non-employee director. All decisions by the Compensation
Committee relating to the compensation of the Company's executive officers are
reviewed by the full Board. Pursuant to rules designed to enhance disclosure of
the Company's policies toward executive compensation, set forth below is a
report prepared by the Compensation Committee addressing the compensation
policies for the Company for the year ended December 29, 1996 as they affected
the Company's executive officers.
The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with the
Company's annual objectives and long-term goals, reward above-average corporate
performance, recognize individual achievements, and assist the Company in
attracting and retaining qualified executives. Executive compensation is set at
levels that the Compensation Committee believes to be consistent with others in
the Company's industry.
There are three elements in the Company's executive compensation program,
all determined by individual and corporate performance.
- Base salary compensation
- Annual incentive compensation
- Stock options
Total compensation opportunities are competitive with those offered by
employers of comparable size, growth and profitability in the Company's
industry.
Base salary compensation is determined by the potential impact the
individual has on the Company, the skills and experiences required by the job,
and the performance and potential of the incumbent in the job.
Annual incentive compensation for executives of the Company is based
primarily on corporate operating earnings and revenue growth and the Company's
positioning for future results, but also includes an overall assessment by the
Compensation Committee of executive management's performance, as well as market
conditions.
Awards of stock grants under the Stock Option and Compensation Plan (the
"Plan") are designed to promote the identity of long-term interests between the
Company's executives and its shareholders and assist in the retention of
executives and other key employees. The Plan also permits the Committee to grant
stock options to key personnel. In October 1996, the Compensation Committee
adopted a policy whereby the Company's President is authorized to make grants to
non-executive employees, subject to established criteria by the Compensation
Committee and subject to the Compensation Committee's ratification. Options
become exercisable based upon criteria established by the Company.
The Compensation Committee surveys employee stock option programs of
companies with similar capitalization to the Company prior to recommending the
grant of options to executives. While the value realizable from exercisable
options is dependent upon the extent to which the Company's performance is
reflected in the market price of the Company's common stock at any particular
point in time, the decision as to whether such value will be realized in any
particular year is determined by each individual executive and not by the
Compensation Committee. Accordingly, when the Committee recommends that an
option be granted to an executive, that recommendation does not take into
account any gains realized that year by that executive as a result of his or her
individual decision to exercise an option granted in a previous year.
To date, no executive officer of the Company has received compensation that
exceeds $1 million per year.
DAVID L. ROGERS
JOEL N. WALLER
7
<PAGE> 10
STOCK PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company include in
this Proxy Statement a line-graph presentation comparing cumulative, five-year
return to the Company's shareholders (based on appreciation of the market price
of the Company's Common Stock) on an indexed basis with (i) a broad equity
market index and (ii) an appropriate published industry or line-of-business
index, or peer group index constructed by the Company. The following
presentation compares the Company's Common Stock price in the period from April
7, 1995 (the date of the Company's initial public offering) to December 29,
1996, to the S&P 500 Stock Index and to a "peer group" index created by the
Company over the same period. The "peer group" index consists of the common
stock of: Applebee's International, The Cheesecake Factory, Brinker
International, Cracker Barrel, Dave & Buster's, Landry's Seafood Restaurant,
Lone Star Steakhouse & Saloon, Rock Bottom Restaurants, Show Biz Pizza Time and
Uno Restaurant Corp. These corporations are involved in various aspects of the
restaurant industry. The presentation assumes that the value of an investment in
each of the Company's Common Stock, the S&P 500 Index, and the peer group index
was $100 on April 7, 1995, and that any dividends paid were reinvested in the
same security.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD RAINFOREST PEER GROUP S&P 500
(FISCAL YEAR COVERED) CAFE INC.
<S> <C> <C> <C>
4/7/95 100.00 100.00 100.00
6/30/95 245.45 107.73 108.22
12/29/95 547.73 99.54 123.84
6/28/96 909.09 131.80 136.34
12/31/96 640.90 116.67 152.26
</TABLE>
SOLICITATION
The Company will bear the cost of preparing, assembling and mailing the proxy,
Proxy Statement and other material which may be sent to the shareholders in
connection with this solicitation. Brokerage houses and other custodians,
nominees and fiduciaries may be requested to forward soliciting material to the
beneficial owners of stock, in which case they will be reimbursed by the Company
for their expenses in doing so. Proxies are being solicited primarily by mail,
but, in addition, officers and regular employees of the Company may solicit
proxies personally, by telephone, by telegram or by special letter.
PROPOSALS OF SHAREHOLDERS
All proposals of shareholders intended to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company at its executive offices
on or before December 19, 1997.
By Order of the Board of Directors
RAINFOREST CAFE, INC.
Kenneth W. Brimmer,
Secretary
8
<PAGE> 11
ANNEX A
RAINFOREST CAFE, INC.
1997 DIRECTOR STOCK OPTION PLAN
1. PURPOSE. The purpose of the Rainforest Cafe, Inc. 1997 Director Stock
Option Plan (the "Plan") is to advance the interests of Rainforest Cafe, Inc.
(the "Company") and its shareholders by encouraging share ownership by members
of the Board of Directors of the Company (the "Board") who are not employees of
the Company or any of its subsidiaries, in order to promote long-term
shareholder value through continuing ownership of the Company's common stock.
2. ADMINISTRATION. The plan shall be administered by the Board. The Board
shall have all the powers vested in it by the terms of the Plan, such powers to
include authority (within the limitations described herein) to prescribe the
form of the agreement embodying awards of nonqualified stock options made under
the Plan ("Options"). The Board shall, subject to the provisions of the Plan,
grant Options under the Plan and shall have the power to construe the Plan, to
determine all questions arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. Any
decisions of the Board in the administration of the Plan, as described herein,
shall be final and conclusive. The Board may act only by a majority of its
members in office, except that the members thereof may authorize any one or more
of their number or any other officer of the Company to execute and deliver
documents on behalf of the Board. No member of the Board shall be liable for
anything done or omitted to be done by him or by any other member of the Board
in connection with the Plan, except for his own willful misconduct or as
expressly provided by statute.
3. PARTICIPATION. Each member of the Board who is not an employee of the
Company or any of its subsidiaries (a "Non-Employee Director") shall be eligible
to receive an Option in accordance with Paragraph 5 below.
4. AWARDS UNDER THE PLAN.
(a) Awards under the Plan shall include only Options, which are rights
to purchase common stock of the Company having no par value (the "Common
Stock"). Such Options are subject to the terms, conditions and restrictions
specified in Paragraph 5 below.
(b) There may be issued under the Plan pursuant to the exercise of
Options an aggregate of not more than 200,000 shares of Common Stock,
subject to adjustment as provided in Paragraph 6 below. If any Option is
canceled, terminates or expires unexercised, in whole or in part, any
shares of Common Stock that would otherwise have been issuable pursuant
thereto will be available for issuance under new Options.
(c) A Non-Employee Director to whom an Option is granted (and any
person succeeding to such a Non-Employee Director's rights pursuant to the
Plan) shall have no rights as a shareholder with respect to any Common
Stock issuable pursuant to any such Option until the date of the issuance
of a stock certificate to him for such shares. Except as provided in
Paragraph 6 below, no adjustment shall be made for dividends, distributions
or other rights (whether ordinary or extraordinary, and whether in cash,
securities or other property) for which the record date is prior to the
date such stock certificate is issued.
5. NONQUALIFIED STOCK OPTIONS. Each Option granted under the Plan shall be
evidenced by an agreement in such form as the Board shall prescribe from time to
time in accordance with the Plan and shall comply with the following terms and
conditions:
(a) The Option exercise price shall be the "Fair Market Value" (as
herein defined) of the Common Stock subject to such Option on the date the
Option is granted. Fair Market Value shall be the closing sales price of a
share of Common Stock on the date of grant as reported on the Nasdaq
National Market or, if the Nasdaq National Market is closed on that date,
on the last preceding date on which the Nasdaq National Market was open for
trading, but in no event will such Option exercise price be less than the
par value of the Common Stock.
(b) The Board shall determine the number of shares of Common Stock
subject to each Option granted to Non-Employee Directors and, subject to
Section 5(d) hereof, the vesting schedule of each such Option.
Notwithstanding the foregoing, once such Options become outstanding, a
Non-Employee Director will still be entitled to the anti-dilution
adjustments provided for in Section 6 hereof.
(c) The Option shall not be transferable by the optionee otherwise
than by will or the laws of descent and distribution, and shall be
exercisable during his lifetime only by him.
(d) Options shall not be exercisable:
(i) except pursuant to the vesting schedule established by the
Board of Directors and after the expiration of ten years from the date
it is granted. Notwithstanding anything to the contrary herein, an
Option shall automatically become immediately exercisable in full: (i)
upon the removal of the Non-Employee Director from the Board without
cause; or (ii) in the event of a "change in control" of the Company, as
defined in any existing agreements between the Company and its senior
officers.
A-1
<PAGE> 12
(ii) unless payment in full is made for the shares of Common Stock
being acquired thereunder at the time of exercise, such payment shall be
made in United States dollars by cash or check, or in lieu thereof, by
tendering to the Company Common Stock owned by the person exercising the
Option and having a Fair Market Value equal to the cash exercise price
applicable to such Option, or by a combination of United States dollars
and Common Stock as aforesaid; and
(iii) unless the person exercising the Option has been at all times
during the period beginning with the date of grant of the Option and
ending on the date of such exercise, a Non-Employee Director of the
Company, except that
(A) if such person shall cease to be such a Non-Employee
Director for reasons other than death, while holding an Option that
has not expired and has not been fully exercised, such person may, at
any time within three years of the date he ceased to be a
Non-Employee Director (but in no event after the Option has expired
under the provisions of subparagraph 5(d)(i) above), exercise the
Option with respect to any Common Stock as to which he could have
exercised on the date he ceased to be such a Non-Employee Director;
or
(B) if any person to whom an Option has been granted shall die
holding an Option that has not expired and has not been fully
exercised, his executors, administrators, heirs or distributees, as
the case may be, may, at any time within one year after the date of
such death (but in no event after the Option has expired under the
provisions of subparagraph 5(d)(i) above), exercise the Option with
respect to any shares subject to the Option.
6. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding Common Stock of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of substantially all of its assets, any
distribution to shareholders other than a normal cash dividend, or other
extraordinary or unusual event, the number or kind of shares that may be issued
under the Plan pursuant to subparagraph 4(b) above, and the number or kind of
shares subject to, and the Option price per share under, all outstanding Options
shall be automatically adjusted so that the proportionate interest of the
participant shall be maintained as before the occurrence of such event; such
adjustment in outstanding Options shall be made without change in the total
Option exercise price applicable to the unexercised portion of such Options and
with a corresponding adjustment in the Option exercise price per share, and such
adjustment shall be conclusive and binding for all purposes of the Plan.
7. IMMEDIATE ACCELERATION OF OPTIONS. Notwithstanding any provision in the
Plan, all outstanding Options will become exercisable immediately if any of the
following events occur:
(1) any person or group of persons becomes the beneficial owner of 30%
or more of any equity security of the Company entitled to vote for the
election of directors;
(2) a majority of the members of the Board of Directors of the Company
is replaced within the period of less than two years by directors not
nominated and approved by the Board of Directors; or
(3) the shareholders of the Company approve an agreement to merge or
consolidate with or into another corporation or an agreement to sell or
otherwise dispose of all or substantially all of the Company's assets
(including a plan of liquidation).
For purposes of this Section 7, beneficial ownership by a person or group
of persons shall be determined in accordance with Regulation 13D (or any similar
successor regulation) promulgated by the Securities and Exchange Commission
pursuant to the 1934 Act. Beneficial ownership of more than 30% of an equity
security may be established by any reasonable method, but shall be presumed
conclusively as to any person who files a Schedule 13D report with the
Securities and Exchange Commission reporting such ownership. If the restrictions
and forfeitability periods are eliminated by reason of provision (1), the
limitations of this Plan shall not become applicable again should the person
cease to own 30% or more of any equity security of the Company.
8. MISCELLANEOUS PROVISIONS.
(a) Except as expressly provided for in the Plan, no Non-Employee
Director or other person shall have any claim or right to be granted an
Option under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any Non-Employee Director any right to be
retained in the service of the Company.
(b) A participant's rights and interest under the Plan may not be
assigned or transferred, hypothecated or encumbered in whole or in part
either directly or by operation of law or otherwise (except in the event of
a participant's death, by will or the laws of descent and distribution),
including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner, and no such right or
interest of any participant in the Plan shall be subject to any obligation
or liability of such participant.
A-2
<PAGE> 13
(c) Common Stock shall not be issued hereunder unless counsel for the
Company shall be satisfied that such issuance will be in compliance with
applicable federal, state, local and foreign securities, securities
exchange and other applicable laws and requirements.
(d) It shall be a condition to the obligation of the Company to issue
Common Stock upon exercise of an Option, that the participant (or any
beneficiary or person entitled to act under subparagraph 5(d)(iii)(B)
above) pay to the Company, upon its demand, such amount as may be requested
by the Company for the purpose of satisfying any liability to withhold
federal, state, local or foreign income or other taxes. If the amount
requested is not paid, the Company may refuse to issue such Common Stock.
(e) The expenses of the Plan shall be borne by the Company.
(f) By accepting any Option or other benefit under the Plan, each
participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of,
and consent to, any action taken under the Plan by the Company or the
Board.
(g) The appropriate officers of the Company shall cause to be filed
any reports, returns or other information regarding Options hereunder or
any Common Stock issued pursuant hereto as may be required by Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended, or any other
applicable statute, rule or regulation.
9. AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any time and
from time to time by the Board as the Board shall deem advisable; provided,
however, that no amendment shall become effective without shareholder approval
if such shareholder approval is required by law, rule or regulation, and in no
event shall the Plan be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code of 1986, as amended, the
Employee Retirement Income Security Act or the rules thereunder. No amendment of
the Plan shall materially and adversely affect any right of any participant with
respect to any Option theretofore granted without such participant's written
consent.
10. TERMINATION. This Plan shall terminate upon the earlier of the
following dates or events to occur upon the adoption of a resolution of the
Board terminating the Plan or ten years from the date the Plan is initially
approved and adopted by the shareholders of the Company. No termination of the
Plan shall materially and adversely affect any of the rights or obligations of
any person, without his consent, under any Option theretofore granted under the
Plan.
11. EFFECTIVE DATE OF PLAN. The Plan will become effective on the date that
it is approved by the affirmative vote of the holders of the greater of (a) a
majority of the outstanding shares of Common Stock of the Company present and
entitled to vote or (b) a majority of the voting power of the minimum number of
shares entitled to vote that would constitute a quorum for transaction of
business at the Company's Annual Meeting of Shareholders.
A-3
<PAGE> 14
ANNEX B
RAINFOREST CAFE, INC.
1995 STOCK OPTION AND
COMPENSATION PLAN
(AS AMENDED)
1. Purpose. The purpose of the 1995 Stock Option and Compensation Plan (the
"Plan") of Rainforest Cafe, Inc. (the "Company") is to increase shareholder
value and to advance the interests of the Company by furnishing a variety of
economic incentives ("Incentives") designed to attract, retain and motivate
employees. Incentives may consist of opportunities to purchase or receive shares
of Common Stock, no par value, of the Company ("Common Stock"), monetary
payments or both on terms determined under this Plan.
2. Administration. The Plan shall be administered by the stock option
committee (the "Committee") of the Board of Directors of the Company. The
Committee shall consist of not less than two directors of the Company and shall
be appointed from time to time by the Board of Directors of the Company. Each
member of the Committee shall be a "disinterested person" within the meaning of
Rule 16b-3 of the Securities Exchange Act of 1934, and the regulations
promulgated thereunder (the "1934 Act"). The Board of Directors of the Company
may from time to time appoint members of the Committee in substitution for, or
in addition to, members previously appointed, and may fill vacancies, however
caused, in the Committee. The Committee shall select one of its members as its
chairman and shall hold its meetings at such times and places as it shall deem
advisable. A majority of the Committee's members shall constitute a quorum. All
action of the Committee shall be taken by the majority of its members. Any
action may be taken by a written instrument signed by majority of the members
and actions so taken shall be fully effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may appoint a
secretary, shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable. The
Committee shall have complete authority to award Incentives under the Plan, to
interpret the Plan, and to make any other determination which it believes
necessary and advisable for the proper administration of the Plan. The
Committee's decisions and matters relating to the Plan shall be final and
conclusive on the Company and its participants.
3. Eligible Employees. Employees of the Company (including officers and
directors, but excluding directors of the Company who are not also full-time
employees of the Company) shall become eligible to receive Incentives under the
Plan when designated by the Committee. Employees may be designated individually
or by groups or categories (for example, by pay grade) as the Committee deems
appropriate. Participation by officers of the Company and any performance
objectives relating to such officers must be approved by the Committee.
Participation by others and any performance objectives relating to others may be
approved by groups or categories (for example, by pay grade) and authority to
designate participants who are not officers and to set or modify such targets
may be delegated.
4. Types of Incentives. Incentives under the Plan may be granted in any one
or a combination of the following forms: (a) incentive stock options and
non-statutory stock options (section 6); (b) stock appreciation rights ("SARs")
(section 7); (c) stock awards (section 8); (d) restricted stock (section 8); (e)
performance shares (section 9); and (f) cash awards (section 10).
5. Shares Subject to the Plan.
5.1. Number of Shares. Subject to adjustment as provided in Section
11.6, the number of shares of Common Stock which may be issued under the
Plan shall not exceed 2,500,000 shares of Common Stock, subject to approval
by the shareholders of the Company at the next meeting of shareholders.
5.2. Cancellation. To the extent that cash in lieu of shares of Common
Stock is delivered upon the exercise of a SAR pursuant to Section 7.4, the
Company shall be deemed, for purposes of applying the limitation on the
number of shares, to have issued the greater of the number of shares of
Common Stock which it was entitled to issue upon such exercise or on the
exercise of any related option. In the event that a stock option or SAR
granted hereunder expires or is terminated or canceled unexercised as to
any shares of Common Stock, such shares may again be issued under the Plan
either pursuant to stock options, SARs or otherwise. In the event that
shares of Common Stock are issued as restricted stock or pursuant to a
stock award and thereafter are forfeited or reacquired by the Company
pursuant to rights reserved upon issuance thereof, such forfeited and
reacquired shares may again be issued under the Plan, either as restricted
stock, pursuant to stock awards or otherwise. The Committee may also
determine to cancel, and agree to the cancellation of, stock options in
order to make a participant eligible for the grant of a stock option at a
lower price than the option to be canceled.
5.3. Type of Common Stock. Common Stock issued under the Plan in
connection with stock options, SARs, performance shares, restricted stock
or stock awards, may be authorized and unissued shares.
B-1
<PAGE> 15
6. Stock Options. A stock option is a right to purchase shares of Common
Stock from the Company. Each stock option granted by the Committee under this
Plan shall be subject to the following terms and conditions:
6.1. Price. The option price per share shall be determined by the
Committee, subject to adjustment under Section 11.6.
6.2. Number. The number of shares of Common Stock subject to the
option shall be determined by the Committee, subject to adjustment as
provided in Section 11.6. The number of shares of Common Stock subject to a
stock option shall be reduced in the same proportion that the holder
thereof exercises a SAR if any SAR is granted in conjunction with or
related to the stock option.
6.3. Duration and Time for Exercise. Subject to earlier termination as
provided in Section 11.4, the term of each stock option shall be determined
by the Committee but shall not exceed ten years and one day from the date
of grant. Each stock option shall become exercisable at such time or times
during its term as shall be determined by the Committee at the time of
grant. No stock option may be exercised during the first twelve months of
its term. Except as provided by the preceding sentence, the Committee may
accelerate the exercisability of any stock option. Subject to the foregoing
and with the approval of the Committee, all or any part of the shares of
Common Stock with respect to which the right to purchase has accrued may be
purchased by the Company at the time of such accrual or at any time or
times thereafter during the term of the option.
6.4. Manner of Exercise. A stock option may be exercised, in whole or
in part, by giving written notice to the Company, specifying the number of
shares of Common Stock to be purchased and accompanied by the full purchase
price for such shares. The option price shall be payable in United States
dollars upon exercise of the option and may be paid by cash; uncertified or
certified check; bank draft; by delivery of shares of Common Stock in
payment of all or any part of the option price, which shares shall be
valued for this purpose at the Fair Market Value on the date such option is
exercised; by instructing the Company to withhold from the shares of Common
Stock issuable upon exercise of the stock option shares of Common Stock in
payment of all or any part of the option price, which shares shall be
valued for this purpose at the Fair Market Value or in such other manner as
may be authorized from time to time by the Committee. Prior to the issuance
of shares of Common Stock upon the exercise of a stock option, a
participant shall have no rights as a shareholder.
6.5. Incentive Stock Options. Notwithstanding anything in the Plan to
the contrary, the following additional provisions shall apply to the grant
of stock options which are intended to qualify as Incentive Stock Options
(as such term is defined in Section 422A of the Internal Revenue Code of
1986, as amended):
(a) The aggregate Fair Market Value (determined as of the time the
option is granted) of the shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by any
participant during any calendar year (under all of the Company's plans)
shall not exceed $100,000.
(b) Any Incentive Stock Option certificate authorized under the
Plan shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain all
provisions required in order to qualify the options as Incentive Stock
Options.
(c) All Incentive Stock Options must be granted within ten years
from the earlier of the date on which this Plan was adopted by Board of
Directors or the date this Plan was approved by the shareholders.
(d) Unless sooner exercised, all Incentive Stock Options shall
expire no later than 10 years after the date of grant.
(e) The option price for Incentive Stock Options shall be not less
than the Fair Market Value of the Common Stock subject to the option on
the date of grant.
(f) No Incentive Stock Options shall be granted to any participant
who, at the time such option is granted, would own (within the meaning
of Section 422A of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the employer
corporation or of its parent or subsidiary corporation.
7. Stock Appreciation Rights. A SAR is a right to receive, without payment
to the Company, a number of shares of Common Stock, cash or any combination
thereof, the amount of which is determined pursuant to the formula set forth in
Section 7.4. A SAR may be granted (a) with respect to any stock option granted
under this Plan, either concurrently with the grant of such stock option or at
such later time as determined by the Committee (as to all or any portion of the
shares of Common Stock subject to the stock option), or (b) alone, without
reference to any related stock option. Each SAR granted by the Committee under
this Plan shall be subject to the following terms and conditions:
7.1. Number. Each SAR granted to any participant shall relate to such
number of shares of Common Stock as shall be determined by the Committee,
subject to adjustment as provided in Section 11.6. In the case of an SAR
granted with respect to a stock option, the number of shares of Common
Stock to which the SAR pertains shall be reduced in the same proportion
that the holder of the option exercises the related stock option.
B-2
<PAGE> 16
7.2. Duration. Subject to earlier termination as provided in Section
11.4, the term of each SAR shall be determined by the Committee but shall
not exceed ten years and one day from the date of grant. Unless otherwise
provided by the Committee, each SAR shall become exercisable at such time
or times, to such extent and upon such conditions as the stock option, if
any, to which it relates is exercisable. No SAR may be exercised during the
first twelve months of its term. Except as provided in the preceding
sentence, the Committee may in its discretion accelerate the exercisability
of any SAR.
7.3. Exercise. A SAR may be exercised, in whole or in part, by giving
written notice to the Company, specifying the number of SARs which the
holder wishes to exercise. Upon receipt of such written notice, the Company
shall, within 90 days thereafter, deliver to the exercising holder
certificates for the shares of Common Stock or cash or both, as determined
by the Committee, to which the holder is entitled pursuant to Section 7.4.
7.4. Payment. Subject to the right of the Committee to deliver cash in
lieu of shares of Common Stock (which, as it pertains to officers and
directors of the Company, shall comply with all requirements of the 1934
Act), the number of shares of Common Stock which shall be issuable upon the
exercise of a SAR shall be determined by dividing:
(a) the number of shares of Common Stock as to which the SAR is
exercised multiplied by the amount of the appreciation in such shares
(for this purpose, the "appreciation" shall be the amount by which the
Fair Market Value of the shares of Common Stock subject to the SAR on
the exercise date exceeds (1) in the case of a SAR related to a stock
option, the purchase price of the shares of Common Stock under the stock
option or (2) in the case of a SAR granted alone, without reference to a
related stock option, an amount which shall be determined by the
Committee at the time of grant, subject to adjustment under Section
11.6); by
(b) the Fair Market Value of a share of Common Stock on the
exercise date.
In lieu of issuing shares of Common Stock upon the exercise of a SAR, the
Committee may elect to pay the holder of the SAR cash equal to the Fair Market
Value on the exercise date of any or all of the shares which would otherwise be
issuable. No fractional shares of Common Stock shall be issued upon the exercise
of a SAR; instead, the holder of the SAR shall be entitled to receive a cash
adjustment equal to the same fraction of the Fair Market Value of a share of
Common Stock on the exercise date or to purchase the portion necessary to make a
whole share at its Fair Market Value on the date of exercise.
8. Stock Awards and Restricted Stock. A stock award consists of the
transfer by the Company to a participant of shares of Common Stock, without
other payment therefor, as additional compensation for services to the Company.
A share of restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant. The transfer of
Common Stock pursuant to stock awards and the transfer and sale of restricted
stock shall be subject to the following terms and conditions:
8.1. Number of Shares. The number of shares to be transferred or sold
by the Company to a participant pursuant to a stock award or as restricted
stock shall be determined by the Committee.
8.2. Sale Price. The Committee shall determine the price, if any, at
which shares of restricted stock shall be sold to a participant, which may
vary from time to time and among participants and which may be below the
Fair Market Value of such shares of Common Stock at the date of sale.
8.3. Restrictions. All shares of restricted stock transferred or sold
hereunder shall be subject to such restrictions as the Committee may
determine, including, without limitation any or all of the following:
(a) a prohibition against the sale, transfer, pledge or other
encumbrance of the shares of restricted stock, such prohibition to lapse
at such time or times as the Committee shall determine (whether in
annual or more frequent installments, at the time of the death,
disability or retirement of the holder of such shares, or otherwise);
(b) a requirement that the holder of shares of restricted stock
forfeit, or (in the case of shares sold to a participant) resell back to
the Company at his cost, all or a part of such shares in the event of
termination of his employment during any period in which such shares are
subject to restrictions;
(c) such other conditions or restrictions as the Committee may deem
advisable.
8.4. Escrow. In order to enforce the restrictions imposed by the
Committee pursuant to Section 8.3, the participant receiving restricted
stock shall enter into an agreement with the Company setting forth the
conditions of the grant. Shares of restricted stock shall be registered in
the name of the participant and
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<PAGE> 17
deposited, together with a stock power endorsed in blank, with the Company.
Each such certificate shall bear a legend in substantially the following
form:
The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions (including
conditions of forfeiture) contained in the 1995 Stock Option and
Compensation Plan of Rainforest Cafe, Inc. (the "Company"), and an
agreement entered into between the registered owner and the Company. A
copy of the Plan and the agreement is on file in the office of the
secretary of the Company.
8.5. End of Restrictions. Subject to Section 11.5, at the end of any
time period during which the shares of restricted stock are subject to
forfeiture and restrictions on transfer, such shares will be delivered free
of all restrictions to the participant or to the participant's legal
representative, beneficiary or heir.
8.6. Shareholder. Subject to the terms and conditions of the Plan,
each participant receiving restricted stock shall have all the rights of a
shareholder with respect to shares of stock during any period in which such
shares are subject to forfeiture and restrictions on transfer, including
without limitation, the right to vote such shares. Dividends paid in cash
or property other than Common Stock with respect to shares of restricted
stock shall be paid to the participant currently.
9. Performance Shares. A performance share consists of an award which shall
be paid in shares of Common Stock, as described below. The grant of performance
share shall be subject to such terms and conditions as the Committee deems
appropriate, including the following:
9.1. Performance Objectives. Each performance share will be subject to
performance objectives for the Company or one of its operating units to be
achieved by the end of a specified period. The number of performance shares
granted shall be determined by the Committee and may be subject to such
terms and conditions, as the Committee shall determine. If the performance
objectives are achieved, each participant will be paid in shares of Common
Stock or cash. If such objectives are not met, each grant of performance
shares may provide for lesser payments in accordance with formulas
established in the award.
9.2. Not Shareholder. The grant of performance shares to a participant
shall not create any rights in such participant as a shareholder of the
Company, until the payment of shares of Common Stock with respect to an
award.
9.3. No Adjustments. No adjustment shall be made in performance shares
granted on account of cash dividends which may be paid or other rights
which may be issued to the holders of Common Stock prior to the end of any
period for which performance objectives were established.
9.4. Expiration of Performance Share. If any participant's employment
with the Company is terminated for any reason other than normal retirement,
death or disability prior to the achievement of the participant's stated
performance objectives, all the participants rights on the performance
shares shall expire and terminate unless otherwise determined by the
Committee. In the event of termination of employment by reason of death,
disability, or normal retirement, the Committee, in its own discretion may
determine what portions, if any, of the performance shares should be paid
to the participant.
10. Cash Awards. A cash award consists of a monetary payment made by the
Company to a participant as additional compensation for his services to the
Company. Payment of a cash award will normally depend on achievement of
performance objectives by the Company or by individuals. The amount of any
monetary payment constituting a cash award shall be determined by the Committee
in its sole discretion. Cash awards may be subject to other terms and
conditions, which may vary from time to time and among participants, as the
Committee determines to be appropriate.
11. General.
11.1. Effective Date. The Plan will become effective upon its approval
by the affirmative vote of the holders of a majority of the voting power of
the shares of the Company's Common Stock present and entitled to vote at a
meeting of its shareholders. Unless approved within one year after the date
of the Plan's adoption by the Board of Directors, the Plan shall not be
effective for any purpose.
11.2. Duration. The Plan shall remain in effect until all Incentives
granted under the Plan have either been satisfied by the issuance of shares
of Common Stock or the payment of cash or been terminated under the terms
of the Plan and all restrictions imposed on shares of Common Stock in
connection with their issuance under the Plan have lapsed. No Incentives
may be granted under the Plan after the tenth anniversary of the date the
Plan is approved by the shareholders of the Company.
11.3. Non-transferability of Incentives. No stock option, SAR,
restricted stock or performance award may be transferred, pledged or
assigned by the holder thereof (except, in the event of the holder's death,
by will or the laws of descent and distribution to the limited extent
provided in the Plan or in the Incentive) and the
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<PAGE> 18
Company shall not be required to recognize any attempted assignment of such
rights by any participant. During a participant's lifetime, an Incentive
may be exercised only by him or by his guardian or legal representative.
11.4. Effect of Termination of Employment or Death. In the event that
a participant ceases to be an employee of the Company for any reason,
including death, any Incentives may be exercised or shall expire at such
times as may be determined by the Committee.
11.5. Additional Condition. Notwithstanding anything in this Plan to
the contrary: (a) the Company may, if it shall determine it necessary or
desirable for any reason, at the time of award of any Incentive or the
issuance of any shares of Common Stock pursuant to any Incentive, require
the recipient of the Incentive, as a condition to the receipt thereof or to
the receipt of shares of Common Stock issued pursuant thereto, to deliver
to the Company a written representation of present intention to acquire the
Incentive or the shares of Common Stock issued pursuant thereto for his own
account for investment and not for distribution; and (b) if at any time the
Company further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document) of any
Incentive or the shares of Common Stock issuable pursuant thereto is
necessary on any securities exchange or under any federal or state
securities or blue sky law, or that the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of,
or in connection with the award of any Incentive, the issuance of shares of
Common Stock pursuant thereto, or the removal of any restrictions imposed
on such shares, such Incentive shall not be awarded or such shares of
Common Stock shall not be issued or such restrictions shall not be removed,
as the case may be, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Company.
11.6. Adjustment. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations,
there shall be substituted for each of the shares of Common Stock then
subject to the Plan, including shares subject to restrictions, options, or
achievement of performance share objectives, the number and kind of shares
of stock or other securities to which the holders of the shares of Common
Stock will be entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock split, combination of shares or
other change in the Common Stock, the number of shares of Common Stock then
subject to the Plan, including shares subject to restrictions, options or
achievements of performance shares, shall be adjusted in proportion to the
change in outstanding shares of Common Stock. In the event of any such
adjustments, the purchase price of any option, the performance objectives
of any Incentive, and the shares of Common Stock issuable pursuant to any
Incentive shall be adjusted as and to the extent appropriate, in the
discretion of the Committee, to provide participants with the same relative
rights before and after such adjustment.
11.7. Incentive Plans and Agreements. Except in the case of stock
awards or cash awards, the terms of each Incentive shall be stated in a
plan or agreement approved by the Committee. The Committee may also
determine to enter into agreements with holders of options to reclassify or
convert certain outstanding options, within the terms of the Plan, as
Incentive Stock Options or as non-statutory stock options and in order to
eliminate SARs with respect to all or part of such options and any other
previously issued options.
11.8. Withholding.
(a) The Company shall have the right to withhold from any payments
made under the Plan or to collect as a condition of payment, any taxes
required by law to be withheld. At any time when a participant is
required to pay to the Company an amount required to be withheld under
applicable income tax laws in connection with a distribution of Common
Stock or upon exercise of an option or SAR, the participant may satisfy
this obligation in whole or in part by electing (the "Election") to have
the Company withhold from the distribution shares of Common Stock having
a value up to the amount required to be withheld. The value of the
shares to be withheld shall be based on the Fair Market Value of the
Common Stock on the date that the amount of tax to be withheld shall be
determined ("Tax Date").
(b) Each Election must be made prior to the Tax Date. The Committee
may disapprove of any Election, may suspend or terminate the right to
make Elections, or may provide with respect to any Incentive that the
right to make Elections shall not apply to such Incentive. An Election
is irrevocable.
(c) If a participant is an officer or director of the Company
within the meaning of Section 16 of the 1934 Act, then an Election is
subject to the following additional restrictions:
(1) No Election shall be effective for a Tax Date which occurs
within six months of the grant of the award, except that this
limitation shall not apply in the event death or disability of the
participant occurs prior to the expiration of the six-month period.
(2) The Election must be made either six months prior to the Tax
Date or must be made during a period beginning on the third business
day following the date of release for publication of the
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<PAGE> 19
Company's quarterly or annual summary statements of sales and
earnings and ending on the twelfth business day following such date.
11.9. No Continued Employment or Right to Corporate Assets. No
participant under the Plan shall have any right, because of his or her
participation, to continue in the employ of the Company for any period of
time or to any right to continue his or her present or any other rate of
compensation. Nothing contained in the Plan shall be construed as giving an
employee, the employee's beneficiaries or any other person any equity or
interests of any kind in the assets of the Company or creating a trust of
any kind or a fiduciary relationship of any kind between the Company and
any such person.
11.10. Deferral Permitted. Payment of cash or distribution of any
shares of Common Stock to which a participant is entitled under any
Incentive shall be made as provided in the Incentive. Payment may be
deferred at the option of the participant if provided in the Incentive.
11.11. Amendment of the Plan. The Board may amend or discontinue the
Plan at any time. However, no such amendment or discontinuance shall,
subject to adjustment under Section 11.6, (a) change or impair, without the
consent of the recipient, an Incentive previously granted, (b) increase the
maximum number of shares of Common Stock which may be issued to all
participants under the Plan, (c) change or expand the types of Incentives
that may be granted under the Plan, (d) change the class of persons
eligible to receive Incentives under the Plan, or (e) materially increase
the benefits accruing to participants under the Plan.
11.12. Immediate Acceleration of Incentives. Notwithstanding any
provision in this Plan or in any Incentive to the contrary, (a) the
restrictions on all shares of restricted stock award shall lapse
immediately, (b) all outstanding options and SARs will become exercisable
immediately, and (c) all performance shares shall be deemed to be met and
payment made immediately, if subsequent to the date that the Plan is
approved by the Board of Directors of the Company, any of the following
events occur unless otherwise determined by the Board of Directors and a
majority of the Continuing Directors (as defined below):
(1) any person or group of persons becomes the beneficial owner of
30% or more of any equity security of the Company entitled to vote for
the election of directors;
(2) a majority of the members of the Board of Directors of the
Company is replaced within the period of less than two years by
directors not nominated and approved by the Board of Directors; or
(3) the shareholders of the Company approve an agreement to merge
or consolidate with or into another corporation or an agreement to sell
or otherwise dispose of all or substantially all of the Company's assets
(including a plan of liquidation).
For purposes of this Section 11.12, beneficial ownership by a person
or group of persons shall be determined in accordance with Regulation 13D
(or any similar successor regulation) promulgated by the Securities and
Exchange Commission pursuant to the 1934 Act. Beneficial ownership of more
than 30% of an equity security may be established by any reasonable method,
but shall be presumed conclusively as to any person who files a Schedule
13D report with the Securities and Exchange Commission reporting such
ownership. If the restrictions and forfeitability periods are eliminated by
reason of provision (1), the limitations of this Plan shall not become
applicable again should the person cease to own 30% or more of any equity
security of the Company.
For purposes of this Section 11.12, "Continuing Directors" are
directors (a) who were in office prior to the time any of provisions (1),
(2) or (3) occurred or any person publicly announced an intention to
acquire 20% or more of any equity security of the Company, (b) directors in
office for a period of more than two years, and (c) directors nominated and
approved by the Continuing Directors.
11.13. Definition of Fair Market Value. For purposes of this Plan, the
"Fair Market Value" of a share of Common Stock at a specified date shall,
unless otherwise expressly provided in this Plan, be the amount which the
Committee determines in good faith to be 100% of the fair market value of
such a share as of the date in question; provided, however, that
notwithstanding the foregoing, if such shares are listed on a U.S.
securities exchange or are quoted on the NASDAQ National Market System or
NASDAQ Small-Cap Stock Market ("NASDAQ"), then Fair Market Value shall be
determined by reference to the last sale price of a share of Common Stock
on such U.S. securities exchange or NASDAQ on the applicable date. If such
U.S. securities exchange or NASDAQ is closed for trading on such date, or
if the Common Stock does not trade on such date, then the last sale price
used shall be the one on the date the Common Stock last traded on such U.S.
securities exchange or NASDAQ.
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<PAGE> 20
RAINFOREST CAFE, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS -- SEPTEMBER 29, 1997
The undersigned, a shareholder of Rainforest Cafe, Inc., hereby
appoints Kenneth W. Brimmer and Mark S. Robinow, and each of them, as
proxies, with full power of substitution, to vote on behalf of the
undersigned the number of shares which the undersigned is then
entitled to vote, at the Special Meeting of Shareholders of Rainforest
Cafe, Inc. to be held at the Hopkins House, 1501 Highway 7, Hopkins,
Minnesota 55305 on September 29, 1997, at 8:00 a.m., and at any and
all adjournments thereof, with all the powers which the undersigned
would possess if personally present, upon:
1. To adopt the 1997 Director Stock Option Plan:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve an amendment to the Company's 1995 Stock Option and
Compensation Plan to increase the number of shares of Common
Stock reserved for issuance hereunder from 1,500,000 to
2,500,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE
1997 DIRECTOR STOCK OPTION PLAN AND FOR APPROVAL OF THE
AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION AND COMPENSATION PLAN
The undersigned hereby revokes all previous proxies relating to
the shares covered hereby and acknowledges receipt of the Notice and
Proxy Statement relating to the Special Meeting of Shareholders.
(Continued, and TO BE COMPLETED AND SIGNED on the reverse side)
(Continued from other side)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. When
properly executed, this proxy will be voted on the proposals set forth
herein as directed by the shareholder, but if no direction is made in
the space provided, this proxy will be voted FOR the adoption of the
1997 Director Stock Option Plan and for the approval of the Amendment
to the Company's 1995 Stock Option and Compensation Plan.
Dated _____________________, 1997
_________________________________
Signature
_________________________________
Signature if held jointly
(Shareholder must sign exactly
as the name appears at left.
When signed as a corporate
officer, executor,
administrator, trustee,
guardian, etc., please give
full title as such. Both joint
tenants must sign.)
<PAGE> 21
[RAINFOREST CAFE LOGO]
August 1997
Fellow Shareholders:
We have called for a special meeting of shareholders on September 29, 1997.
You are encouraged to review the enclosed proxy materials. The purpose of the
meeting is to present to you a proposal for a Director Stock Option Plan and to
present a proposal to increase the number of shares of common stock reserved
for issuance under the Company's 1995 employee stock option plan.
We want to comment to you on the proposal to increase the number of shares
reserved for employee stock options by 1,000,000 shares. The Company has
granted options to over 100 dedicated Rainforest Cafe employees currently
included in the plan. These existing option grants have consumed nearly all of
the 1,500,000 shares previously authorized. In a rapidly growing business,
stock options are an important element in attracting and retaining key
executives. Continued growth in our organization at all levels, together with
the need to recruit and retain senior executives, including the position of
president, requires us to bring this proposal to you at a special shareholder
meeting in advance of the regular annual meeting.
The board of directors is proposing to grant 300,000 employee stock options to
Lyle Berman, our chairman and chief executive officer. If awarded, these
options would be to purchase shares at the market price on the date of grant.
The options would vest over the next four years. Mr. Berman has served as
chairman and chief executive officer since the company's inception in 1993 and
has not been awarded compensation either in the form of salary or stock options
for serving in these capacities.
We appreciate your considering the enclosed proxy materials.
Sincerely,
THE BOARD OF DIRECTORS,
RAINFOREST CAFE, INC.
KENNETH W. BRIMMER
Secretary and President
