<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)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[RAINFOREST LOGO]
720 SOUTH FIFTH STREET
HOPKINS, MINNESOTA 55343
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 17, 1999
------------------------
TO THE SHAREHOLDERS OF RAINFOREST CAFE, INC.:
Please take notice that the Annual Meeting of Shareholders of Rainforest
Cafe, Inc. (the "Company") will be held, pursuant to due call by the Board of
Directors of the Company, at the Marriott Minneapolis Southwest Hotel, 5801 Opus
Parkway, Minnetonka, Minnesota on May 17, 1999 at 9:00 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 elect six directors.
2. To transact any other business as may properly come before the meeting
or any adjournments thereof.
Pursuant to due action of the Board of Directors, shareholders of record on
March 29, 1999, 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
April 8, 1999
<PAGE> 3
RAINFOREST CAFE, INC.
720 SOUTH FIFTH STREET
HOPKINS, MINNESOTA 55343
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
MAY 17, 1999
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 Annual Meeting of Shareholders of the Company to be held May 17,
1999. The approximate date on which this Proxy Statement and the accompanying
proxy were first sent or given to shareholders was April 8, 1999. 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, by attending the Annual Meeting and
voting in person 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 March 29, 1999 (the "Record
Date") will be entitled to vote at the meeting or any adjournments thereof.
VOTING SECURITIES AND
PRINCIPAL HOLDERS THEREOF
The Company has outstanding one class of voting securities, Common Stock,
no par value, of which 24,548,304 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 March 29, 1999 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)........................................... 1,922,250 7.8%
Steven W. Schussler(2)................................... 676,728 2.8%
Ercument Ucan(3)......................................... 428,977 1.7%
Kenneth W. Brimmer(4).................................... 109,549 *
David L. Rogers(5)....................................... 106,563 *
Joel N. Waller(6)........................................ 103,750 *
Mark Bartholomay(7)...................................... 10,817 *
All directors and executive officers as a group (seven
persons)............................................... 3,358,634 13.7%
</TABLE>
- -------------------------
* Less than 1%.
(1) The address of such reporting person is 130 Cheshire Lane, Minnetonka,
Minnesota 55305. Includes 225,000 shares not outstanding but deemed
beneficially owned by virtue of Mr. Berman's right to acquire such shares
within 60 days.
(2) Includes 76,500 shares not outstanding but deemed beneficially owned by
virtue of Mr. Schussler's right to acquire such shares within 60 days.
<PAGE> 4
(3) Includes 423,750 shares not outstanding but deemed beneficially owned by
virtue of Mr. Ucan's right to acquire such shares within 60 days.
(4) Includes 90,000 shares not outstanding but deemed beneficially owned by
virtue of Mr. Brimmer's right to acquire such shares within 60 days.
(5) Includes 61,563 shares not outstanding but deemed beneficially owned by
virtue of Mr. Roger's right to acquire such shares within 60 days.
(6) Includes 61,563 shares not outstanding but deemed beneficially owned by
virtue of Mr. Waller's right to acquire such shares within 60 days.
(7) Includes 9,750 shares not outstanding but deemed beneficially owned by
virtue of Mr. Bartholomay's right to acquire such shares within 60 days.
2
<PAGE> 5
ELECTION OF DIRECTORS
Six directors are to be elected at the meeting, each director to hold
office until the next Annual Meeting of Shareholders, or until his successor is
elected and qualified. All of the persons listed below are now serving as
directors of the Company. All of the persons listed below have consented to
serve as a director, if elected. The Board of Directors proposes for election
the nominees listed below:
LYLE BERMAN, age 57, has been Chairman of the Board and Chief Executive
Officer of the Company since its incorporation in February 1994. Mr. Berman has
been Chairman of the Board of Lakes Gaming, Inc. since June 1998. Mr. Berman had
been Chairman of the Board of Grand Casinos, Inc. from October 1990 through
December 1998 and Chief Executive Officer through February 1998. Mr. Berman was
Chief Executive Officer of Stratosphere Corporation from July 1994 through July
1997 and Chairman of Stratosphere Corporation from July 1996 through July 1997.
Stratosphere Corporation filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code in January 1997. Mr. Berman is also a director of G-III Apparel
Group Ltd., Innovative Gaming Corporation of America, New Horizon Kids Quest,
Inc., Park Place Entertainment Corporation and Wilsons -- The Leather Experts,
Inc. ("Wilsons").
KENNETH W. BRIMMER, age 43, has been a director of the Company since August
1996, Treasurer of the Company since May 1995 and President and Secretary of the
Company since April 1997. Mr. Brimmer was employed by Grand Casinos, Inc. from
October 1990 as Special Assistant to the Chairman and Chief Executive Officer,
Lyle Berman through December 1997. Mr. Brimmer is also a director of
Hypertension Diagnostics, Inc., New Horizons Kids Quest, Inc. and Oxboro Medical
International, Inc.
STEVEN W. SCHUSSLER, age 43, has been Senior Vice President -- Marketing
and Development of the Company since its incorporation in February 1994 and a
director of the Company since January 1995.
ERCUMENT UCAN, age 43, has been Senior Vice President -- Retail of the
Company since its incorporation in February 1994 and a director of the Company
since January 1995.
DAVID L. ROGERS, age 56, has been a director of the Company since January
1995. Since April 1992, Mr. Rogers has been President and Chief Operating
Officer of Wilsons. Mr. Rogers is also a director of Lakes Gaming, Inc.
JOEL N. WALLER, age 59, has been a director of the Company since January
1995. Mr. Waller has been Chairman and Chief Executive Officer of Wilsons since
March 1992. Mr. Waller is also a director of Lakes Gaming, Inc. and of Damark
International, Inc.
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 election of directors 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 election to the Board of
each of the six nominees named above. A shareholder who abstains with respect to
the election of directors is considered to be present and entitled to vote on
the election of directors 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 election of directors,
shall not be considered present and entitled to vote on the election of
directors.
All shares represented by proxies will be voted FOR the election of the
foregoing nominees unless a contrary choice is specified. If any nominee should
withdraw or otherwise become unavailable for reasons not presently known, the
proxies which would have otherwise been voted for such nominee will be voted for
such substitute nominee as may be selected by the Board of Directors.
3
<PAGE> 6
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation from
January 1, 1996 through January 3, 1999 awarded to or earned by the Chief
Executive Officer and the four most highly compensated executive officers other
than the Chief Executive Officer during such period:
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....................................... 1998 0 $ 0 750,000(1)
Chairman of the Board and Chief Executive 1997 0 0 450,000(2)
Officer 1996 0 0 0
Kenneth W. Brimmer(3)............................. 1998 162,500 0 300,000(1)
President 1997 0 0 37,500(2)
1996 0 0 37,500(2)
Steven W. Schussler............................... 1998 171,538 0 125,000(1)
Senior Vice President -- Development 1997 149,231 26,877 112,500(2)
1996 129,231 28,000 0
Ercument Ucan..................................... 1998 171,538 0 125,000(1)
Senior Vice President -- Retail 1997 149,231 27,068 112,500(2)
1996 129,231 28,000 0
Mark Bartholomay(4)............................... 1998 131,923 71,560 130,000(1)
Senior Vice President -- International 1997 102,855 18,750
1996 0 0
</TABLE>
- -------------------------
(1) Includes options granted in exchange for previously granted options which
were canceled in connection with the issuance of replacement grants in
Fiscal 1998. See "Option Grants in Fiscal 1998."
(2) These options have been canceled in connection with the issuance of
replacement grants in Fiscal 1998. See "Option Grants in Fiscal 1998."
(3) Prior to January 1, 1998, the Company paid Grand Casinos, Inc. consulting
fees for the services of Mr. Brimmer. Effective January 1, 1998, Mr. Brimmer
became a full-time employee of the Company.
(4) Mr. Bartholomay joined the Company in February 1997.
4
<PAGE> 7
OPTION GRANTS IN FISCAL 1998
The following table sets forth certain information concerning the grant of
stock options to the Company's executive officers named in the Summary
Compensation Table during Fiscal 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
TOTAL OPTIONS TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OR OPTION TERM (1)
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
- ---- --------------- ------------- ----------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Lyle Berman............ 382,500(2) 7.2% $16.00 4/15/2008 $3,537,309 $9,257,651
750,000(3) 14.1 8.50 10/16/2008 802,317 5,053,678
Kenneth W. Brimmer..... 31,875(2) 0.6 16.00 4/15/2008 294,776 771,471
200,000(4) 3.8 15.00 4/30/2008 1,937,505 4,862,152
300,000(3) 5.7 8.50 10/16/2008 320,927 2,021,471
Mark Bartholomay....... 44,625(2) 0.8 16.00 4/15/2008 412,686 1,080,059
130,000(3) 2.5 8.50 10/16/2008 139,068 875,971
Steven W. Schussler.... 95,625(2) 1.8 16.00 4/15/2008 884,327 2,314,413
125,000(3) 2.4 8.50 10/16/2008 133,719 842,280
Ercument Ucan.......... 95,625(2) 1.8 16.00 4/15/2008 884,327 2,314,413
125,000(3) 2.4 8.50 10/16/2008 133,719 842,280
</TABLE>
- -------------------------
(1) Amounts shown in these columns have been derived by multiplying the exercise
price by the annual appreciation rate shown (compounded for the term of the
options), multiplying the result by the number of shares covered by the
options, and subtracting the aggregate exercise price of the options. The
dollar amount set forth under this heading are the result of calculations at
the 5% and 10% rates set by the Securities and Exchange Commission, and
therefore are not intended to forecast possible future appreciation, if any,
of the Company's stock price.
(2) Such options were issued as replacement grants in April 1998 in exchange for
options previously issued. These replacement grants were issued at an
exercise price greater than the fair market value of the Company's Common
Stock on such date. In each case, the replacement grant of options were
subject to a new three year vesting schedule beginning on the first
anniversary of the date of grant and required the optionee to forfeit an
amount of options previously granted to such optionee. These options were
canceled in connection with the issuance of replacement grants in October
1998.
(3) Includes options that were issued as replacement grants in October 1998 in
exchange for options previously issued. These options were issued at an
exercise price greater than the fair market value of the Company's Common
Stock on such date. These options vest in five equal annual increments
beginning on the first anniversary of the date of grant except that options
equal to 7.5% of the total number of options granted vested immediately for
each year of such optionee's employment with the Company.
(4) Options issued upon Mr. Brimmer becoming President of the Company and vest
in five equal annual increments beginning on the first anniversary of the
date of grant. These options were canceled in connection with the issuance
of replacement grants in October 1998.
5
<PAGE> 8
AGGREGATED OPTION EXERCISES IN FISCAL 1998 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 the year ended January 3, 1999
("Fiscal 1998").
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FY-END (#) FY-END ($)(1)
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lyle Berman................ 0 0 225,000 525,000 0 0
Kenneth W. Brimmer......... 0 0 90,000 210,000 0 0
Steven W. Schussler........ 0 0 76,500 87,500 147,927 0
Ercu Ucan.................. 0 0 423,750 87,000 2,205,634 0
Mark Bartholomay........... 0 0 9,750 120,250 0 0
</TABLE>
- -------------------------
(1) Based upon the closing sales price as reported on the Nasdaq National Market
System, of the Company's Common Stock on December 31, 1998.
TEN YEAR OPTION REPRICINGS
The following table summarizes stock options granted to the executive
officers of the Company that have been issued as replacement grants in exchange
for options previously issued.
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF ORIGINAL
SECURITIES MARKET PRICE OF EXERCISE PRICE NEW OPTION TERM
UNDERLYING OPTIONS STOCK AT TIME AT TIME OF EXERCISE REMAINING AT DATE
NAME DATE REPRICED(#) OF REPRICING($) REPRICING($) PRICE($) OF REPRICING
- ---- ---- ------------------ --------------- -------------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Lyle Berman........... 4/15/98 382,500 $15.50 $21.42 $16.00 9 yrs. 5 mos.
10/16/98 382,500 5.875 16.00 8.50 9 yrs. 6 mos.
Kenneth W. Brimmer.... 4/15/98 31,875 15.50 21.42 16.00 9 yrs. 6 mos.
10/16/98 31,875 5.875 16.00 8.50 9 yrs. 6 mos.
10/16/98 200,000 5.875 15.00 8.50 9 yrs. 6 mos.
Mark S. Robinow....... 4/15/98 51,000 15.50 21.42 16.00 9 yrs. 5 mos.
10/16/98 51,000 5.875 16.00 8.50 9 yrs. 6 mos.
Steven W. Schussler... 4/15/98 95,625 15.50 21.42 16.00 9 yrs. 5 mos.
10/16/98 95,625 5.875 16.00 8.50 9 yrs. 6 mos.
Ercument Ucan......... 4/15/98 95,625 15.50 21.42 16.00 9 yrs. 5 mos.
10/16/98 95,625 5.875 16.00 8.50 9 yrs. 6 mos.
Mark Bartholomay...... 4/15/98 44,625 15.50 21.42 16.00 9 yrs. 5 mos.
10/16/98 44,625 5.875 14.71 8.50 8 yrs. 4 mos.
Charly Robinson....... 4/15/98 25,500 15.50 16.92 16.00 8 yrs. 7 mos.
10/16/98 25,500 5.875 16.00 8.50 9 yrs. 4 mos.
</TABLE>
The Company's Compensation Committee of the Board of Directors (the
"Compensation Committee") decided to offer employees of the Company, including
the named executive officers above, the option of exchanging existing options
issued to such optionee for new options with new terms in April and October
1998. In each case, the replacement grants were issued at an exercise price
greater than the fair market value of the Company's Common Stock on such date.
The April 1998 replacement grants required optionees to receive 15% fewer
options than previously granted and were subject to a new three year vesting
schedule. The October 1998 replacement grants were subject to a five year
vesting schedule, provided that an amount of options equal to 7.5% of the number
of options granted became immediately vested for each year of such optionee's
employment with the Company. These offers by the Compensation Committee were in
response to a precipitous decrease in the market price of the Company's Common
Stock to a level which, in the opinion of the Compensation Committee, had the
effect of eliminating substantially all the incentive value of such stock
options. The Compensation Committee concluded, that short-term financial
performance considerations should not unduly influence long-term compensation
strategies. The Compensation Committee believes that stock options play an
extremely important role in attracting and retaining talented executives, and
motivating
6
<PAGE> 9
them to perform up to their full potential, particularly where stock options are
an important component of an executive's compensation package. Accordingly, the
Compensation Committee determined that the issuance of replacement options at or
above the current market value was both necessary and consistent with its
strategy of providing executives with tangible long-term performance incentives.
DIRECTOR COMPENSATION
Directors receive no fees for serving as directors. Pursuant to the
Company's 1997 Director Stock Option Plan, the Company granted options in
November 1997 to each of Messrs. Rogers and Waller to acquire 18,750 shares of
Common Stock at an exercise price of $24.08 per share. In February 1995, the
Company granted to each of Messrs. Rogers and Waller options to acquire 56,250
shares of Common Stock at an exercise price of $2.27 per share. All director
options vest on a pro-rata basis on the first, second and third anniversaries of
the date of grant. In April 1998, Messrs. Rogers and Waller exchanged the
options granted in November 1997 for 15,938 options each exercisable at $16.00
per share, which exceeded the market price of the Company's Common Stock on the
date such replacement options were issued.
In August 1996, the Company granted director options to Mr. Brimmer to
acquire 37,500 shares of Common Stock at an exercise price of $16.43 per Share.
In September 1997, the Company granted to Mr. Brimmer options pursuant to the
1997 Director Stock Option Plan to acquire 37,500 shares of Common Stock at an
exercise price of $21.42 per share.
In April 1998, the 37,500 options granted to Mr. Brimmer at $21.42 per
share were exchanged for 31,875 replacement options at $16.00 per share. In
October 1998, these 31,875 options were canceled as director options and, in
combination with the cancellation of 200,000 employee stock options granted in
April 1998 at $15.00 per share, were exchanged for 300,000 employee stock
options at $8.50 per share. As of fiscal year-end, Mr. Brimmer had no
outstanding director stock options and 300,000 outstanding employee stock
options.
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 presently composed of David L.
Rogers and Joel N. Waller, each nonemployee directors of the Company. 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 Fiscal 1998 as they
affected the Company's executive officers.
Compensation Committee
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.
7
<PAGE> 10
Executive Officer Compensation
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.
Cash Compensation
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. To date, no
executive officer of the Company has received compensation that exceeds $1
million per year.
Annual incentive compensation for executives of the Company is based
primarily on corporate operating earnings, 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.
Stock Options
Awards of stock grants under the Company's 1995 Stock Option and
Compensation Plan (the "1995 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 1995 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. In March 1998, the Board also adopted the
1998 Non-Executive Stock Option Plan (the "1998 Plan") pursuant to which
1,000,000 shares were reserved for issuance for grants to Company employees who
are not executive officers of 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 Compensation 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.
In April 1998, the Compensation Committee approved a plan pursuant to which
employees, including executive officers, having options granted under the 1995
Plan were entitled to cancel and exchange such options for 15% fewer options
having an exercise price of $16.00 per share, which exceeded the average closing
price of the Company's Common Stock on the date of exchange of $15.50 per share.
Additionally, each April 1998 replacement grant of options contained a new
vesting schedule pursuant to which options would vest in a pro rata portion on
the first, second and third anniversary of the grant. Options to purchase
1,255,502 shares of Common Stock were exchanged for options to purchase
1,067,177 shares of Common Stock pursuant to this plan.
In October 1998, the Compensation Committee approved a plan pursuant to
which employees, including executive officers, were entitled to cancel and
exchange previously issued stock options having an exercise
8
<PAGE> 11
price of $8.50 per share, which exceeded the average closing price of the
Company's Common Stock on the date of exchange of $5.875. Such options vested
over a five year period beginning one year after the date of exchange, except
that a portion equal to 7.5% of the options granted vested immediately for each
year of service. Options to purchase 2,050,277 shares of Common Stock were
exchanged for options to purchase 2,050,277 shares of Common Stock pursuant to
this plan.
The Compensation Committee believes that, given the Company's salary
structure, stock options are a critical component of the compensation offered by
the Company to promote long-term retention of key employees, motivate high
levels of performance and recognize employee contributions to the success of the
Company. Prior to the issuing replacement grants, the exercise price of a
majority of the outstanding options held by employees was in excess of the
market price, and the Committee believed that such options were no longer an
effective tool to encourage employee retention or to motivate high levels of
performance. The replacement grant program was generally available to all
executive officers and employees of the Company.
CEO Compensation
In September 1997, the Compensation Committee granted options under the
Plan to purchase 450,000 shares of Common Stock to Lyle Berman, Chairman of the
Board and Chief Executive Officer. The Compensation Committee believed it is in
the best long-term interests of the Company's shareholders to provide incentives
to Mr. Berman who has received no cash compensation or other stock options from
the Company since its inception. As an employee of the Company, Mr. Berman was
offered the same exchange option in April 1998 to exchange stock options
previously issued with a replacement grant of a lower number of options at a
lower exercise price. Pursuant to such offer Mr. Berman exchanged 450,000
options exercisable at $21.42 per share for 382,500 options at $16.00 per share
with a new three year vesting schedule. In October 1998, Mr. Berman exchanged
such options and received a new grant of options for an aggregate grant of
750,000 options exercisable at $8.50 per share over a five year period beginning
one year after such date provided that 225,000 options vested immediately
reflecting his four years of service to the Company. The Compensation Committee
believed that such additional options provided incentives for Mr. Berman, who
receives no cash compensation for his services.
DAVID L. ROGERS
JOEL N. WALLER
9
<PAGE> 12
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 January 3, 1999,
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, CEC Entertainment (formerly known as 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.
Total Return To Stockholders
<TABLE>
<CAPTION>
RAINFOREST CAFE PEER GROUP S&P 500
--------------- ---------- -------
<S> <C> <C> <C>
'4/7/1995' 100.00 100.00 100.00
'12/29/1995' 547.73 99.54 123.84
'12/31/1996' 640.90 116.67 152.26
'12/31/1997' 899.99 130.37 203.05
'12/31/1998' 248.01 157.27 261.07
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS 4/7/1995 12/29/1995 12/31/1996 12/31/1997 12/31/1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rainforest Cafe $100.00 $547.73 $640.90 $899.99 $248.01
- -----------------------------------------------------------------------------------------------------------------------
Peer Group $100.00 $ 99.54 $116.67 $130.37 $157.27
- -----------------------------------------------------------------------------------------------------------------------
S&P 500 $100.00 $123.84 $152.26 $203.05 $261.07
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Carl Thompson Associates www.ctaonline.com (800) 959-9677. Date from
Bloomberg Financial Markets.
10
<PAGE> 13
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
selected Arthur Andersen LLP as independent public accountants for fiscal 1999.
Arthur Andersen LLP has been the independent public accountants for the Company
since November 10, 1995. A representative of Arthur Andersen LLP is expected to
attend the meeting and to have an opportunity to make a statement and respond to
appropriate questions from shareholders.
PROPOSALS OF SHAREHOLDERS
All proposals of shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders of the Company must be received by the Company at its
executive offices on or before December 6, 1999.
On May 21, 1998, the Securities and Exchange Commission amended Rule 14a-4
of the Securities Exchange Act of 1934. The amendment governs the Company's use
of its discretionary proxy voting authority with respect to a shareholder
proposal which the shareholder has not sought to include in the Company's proxy
statement. The new amendment provides that if a proponent of a proposal fails to
notify the Company at least 45 days prior to the month and day of mailing of the
prior year's proxy statement of a shareholder proposal, then the management
proxies will be allowed to use their discretionary voting authority when the
proposal is raised at the meeting, without any discussion of the matter in the
proxy statement.
With respect to the Company's 2000 Annual Meeting of Shareholders, if the
Company is not provided notice of a stockholder proposal which the stockholder
has not previously sought to include in the Company's proxy statement by
February 18, 2000, the management proxies will be allowed to use their
discretionary authority as outlined above.
OTHER MATTERS
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held five meetings during the Fiscal 1998. The
Company has an Audit Committee and a Compensation Committee, but does not have a
nominating committee of the Board of Directors.
The Company's Audit Committee, which consists of Messrs. David L. Rogers
and Joel N. Waller, held two meetings during Fiscal 1998. The Audit Committee
recommends to the full Board the engagement of the independent accountants,
reviews the audit plan and results of the audit engagement, reviews the
independence of the auditors, and reviews the adequacy of the Company's system
of internal accounting controls.
The Company's Compensation Committee, which consists of Messrs. David L.
Rogers and Joel N. Waller, held two meetings and took action pursuant to written
actions during Fiscal 1998. The Compensation Committee reviews the Company's
remuneration policies and practices, makes recommendations to the Board in
connection with all compensation matters affecting the Company and administers
the Company's 1995 Stock Option and Compensation Plan, the Company's 1998
Non-Executive Stock Option Plan and the Company's Employee Stock Purchase Plan.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the Nasdaq National Market. Officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on review of the
copies of such forms furnished to the Company, or written representations that
no Forms 5 were required, the Company believes that during Fiscal 1998, all
Section 16(a) filing requirements applicable to its officers,
11
<PAGE> 14
directors and greater than ten-percent beneficial owners were complied with;
except for the late Form 3 filing of Charly Robinson, Senior Vice
President -- Operations.
SOLICITATION
The Company will bear the cost of preparing, assembling and mailing the
proxy, Proxy Statement, Annual Report 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.
The Board of Directors does not intend to present to the meeting any other
matter not referred to above and does not presently know of any matters that may
be presented to the meeting by others. However, if other matters come before the
meeting, it is the intent of the persons named in the enclosed proxy to vote the
proxy in accordance with their best judgment.
By Order of the Board of Directors
RAINFOREST CAFE, INC.
Kenneth W. Brimmer,
Secretary
12
<PAGE> 15
RAINFOREST CAFE, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- MAY 17, 1999
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 Annual Meeting
of Shareholders of Rainforest Cafe, Inc. to be held at the Marriott Minneapolis
Southwest Hotel, 5801 Opus Parkway, Minnetonka, Minnesota, on May 17, 1999, at
9:00 a.m., and at any and all adjournments thereof, with all the powers which
the undersigned would possess if personally present, upon:
1. Election of Directors:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY
(except as marked to vote for all nominees to the contrary listed
below)
Lyle Berman, Kenneth W. Brimmer, David L. Rogers,
Steven W. Schussler, Ercu Ucan, Joel N. Waller.
INSTRUCTION: To withhold authority to vote for any individual nominee write that
nominee's name on the space provided below.
----------------------------------------------------------------------
2. Such other business as may properly come before the meeting
or any adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
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 Annual Meeting of Shareholders.
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 election of all nominees for director.
Dated , 1999
- -------------------------------
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.)
