Document:

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                                                                    EXHIBIT 10.7

                              MILLENNIUM CELL INC.

                             2000 STOCK OPTION PLAN
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                              MILLENNIUM CELL INC.

                          2000 LONG-TERM INCENTIVE PLAN

         SECTION 1. PURPOSE. The purpose of the Millennium Cell Inc. 2000
Long-Term Incentive Plan (the "Plan") is to foster and promote the long-term
financial success of Millennium Cell Inc., a Delaware corporation (the
"Company"), and its Subsidiaries and thereby increase stockholder value. The
Plan provides for the award of long-term incentives to those directors,
consultants, advisers, officers and other employees who make substantial
contributions to the Company or its Subsidiaries by their loyalty, industry and
invention.

         SECTION 2. DEFINITIONS. For purposes of this Plan, the following terms
used herein shall have the following meanings, unless a different meaning is
clearly required by the context.

         2.1 "Board" means the Board of Directors of the Company.

         2.2 "Cause" means any one of the following: the Participant's
conviction for any felony crime, the Participant's refusal to perform his or her
assigned duties, engaging in any act of fraud injurious to the Company or any
Subsidiary, the Participant's breach of any contract where such breach is
materially injurious to the Company or any Subsidiary, engaging in any conduct
that constitutes willful gross neglect with respect to the Company or any
Subsidiary and engaging in willful misconduct that results in material economic
harm to the Company or any Subsidiary.

         2.3 "Change of Control" means the occurrence of any of the following:

                  (i) the Board votes to approve:

                           (A) any consolidation or merger of the Company
pursuant to which less than 50 percent of the outstanding voting securities of
the surviving or resulting company are owned by the individuals or entities
which were shareholders of the Company prior to the consolidation or merger;

                           (B) any sale, lease, exchange or other transfer (in
one transaction or a series of related transactions) of all, or substantially
all, of the assets of the Company other than any sale, lease, exchange or other
transfer to any company where the Company owns, directly or indirectly, 100
percent of the outstanding voting securities of such company after any such
transfer;

                  (ii) any person (as such term is used in Section 13(d) of the
Exchange Act), other than one or more current shareholders, the Company, a
Subsidiary, or one or more employee benefit plans established by the Company for
the benefit of employees of the Company or its subsidiaries, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
whether directly, indirectly, beneficially or of record, of 35 percent or more
of outstanding Common Stock (other than as the result of an initial public
offering);

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                  (iii) commencement by any entity, person, or group (including
any affiliate thereof, other than the Company) of a tender offer or exchange
offer where the offeree acquires more than 50 percent of the outstanding
voting securities of the Company.

         2.4 "Code" means the Internal Revenue Code of 1986, as amended.

         2.5 "Committee" shall have the meaning provided in Section 3 of the
Plan.

         2.6 "Common Stock" means the common stock, $0.001 par value, of the
Company.

         2.7 "Constructive Discharge" means upon or within _____ of a "Change in
Control," the termination of a Participant's Continuous Service by the
Participant on account of (i) a material reduction in the Participant's
compensation, (ii) a material reduction in the level or scope of job
responsibility or status of the Participant occurring without the Participant's
consent, or (iii) the relocation of a Participant to a location which is more
than 50 miles from the office of the Company where the Participant was
previously located to which the Participant has not agreed.

         2.8 "Continuous Service" means that the Participant's service with the
Company or any Subsidiary whether as an employee, officer, director, adviser or
consultant, is not interrupted or terminated. Subject to Section 2.7 above, the
Participant's Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders service to
the Company or any Subsidiary as an employee, officer, consultant, adviser or
director or a change in the entity for which the Participant renders such
service, provided that there is no interruption or termination of the
Participant's Continuous Service. For example, a change in status from an
employee of the Company to a consultant of a Subsidiary or a director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

         2.9 "Disability" means, as it relates to the exercise of an Incentive
Stock Option after termination of employment, a disability within the meaning of
Section 22(e)(3) of the Code, and for all other purposes, a mental or physical
condition which, in the opinion of the Committee, renders a Participant unable
or incompetent to carry out the job responsibilities which such Participant held
or the tasks to which such Participant was assigned at the time the disability
was incurred, and which is expected to be permanent or for an indefinite
duration exceeding one year.

         2.10 "Effective Date" shall have the meaning provided in Section 27 of
the Plan.

         2.11 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         2.12 "Fair Market Value" means, as determined by the Committee, the
last sale price as quoted on the National Market System on the trading day
immediately preceding the date for which the determination is being made or, in
the event that no such sale takes place on such day, the average of the reported
closing bid and asked prices on such day, or, if the Common Stock of the Company
is listed on a national securities exchange, the last reported sale price on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading on the trading day immediately preceding the date for which
the determination is being

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made or, if no such reported sale takes place on such day, the average of the
closing bid and asked prices on such day on the principal national securities
exchange on which the Common Stock is listed or admitted to trading, or if the
Common Stock is not quoted on such National Market System nor listed or admitted
to trading on a national securities exchange, then the average of the closing
bid and asked prices on the day immediately preceding the date for which the
determination is being made in the over-the-counter market as reported by NASDAQ
or, if bid and asked prices for the Common Stock on such day shall not have been
reported through NASDAQ, the average of the bid and asked prices for such day as
furnished by any New York Stock Exchange member firm regularly making a market
in the Common Stock selected for such purpose by the Board or a committee
thereof. If none of the foregoing is applicable, then the fair market value of
the Common Stock shall be its value as determined in connection with the
Company's most recent corporate financing; provided, however, that if a
significant event (as determined in good faith by the Committee in its sole
discretion) has occurred with respect to the Company since the Company's most
recent corporate financing, the value of the Common Stock shall be determined in
good faith by the Committee in its sole discretion.

         2.13 "Immediate Family" means the Participant's spouse, parents,
children, stepchildren, adoptive relationships, sisters, brothers and
grandchildren (and, for this purpose, shall also include the Participant.

         2.14 "Incentive Stock Option" means a stock option granted under the
Plan which is intended to be designated as an "incentive stock option" within
the meaning of Section 422 of the Code.

         2.15 "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.

         2.16 "Non-Qualified Stock Option" means a stock option granted under
the Plan which is not intended to be an Incentive Stock Option, including any
stock option that provides (as of the time such option is granted) that it will
not be treated as an Incentive Stock Option nor as an option described in
Section 423(b) of the Code.

         2.17 "Parent Company" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if, at the time of the
granting of the option, each of the corporations other than the Company owns
stock possessing 50 percent or more of the combined voting power of all classes
of stock in one of the other corporations in the chain.

         2.18 "Participant" shall mean any employee, director or officer of, or
key adviser or consultant to, the Company or any Subsidiary to whom an award is
granted under the Plan.

         2.19 "Performance Unit Award" means an award made pursuant to Section
8.
         2.20 "Plan Year" means the twelve-month period beginning on January 1
and ending on December 31; provided, however, that the first Plan Year shall be
a short Plan Year beginning on the Effective Date and ending on December 31,
2000.

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         2.21 "Restricted Stock Award" means an award of shares of Common Stock
pursuant to Section 9.

         2.22 "Retirement" means _________________________.

         2.23 "Stock Appreciation Right" means an award made pursuant to Section
7.

         2.24 "Stock Bonus Award" means an award made pursuant to Section 10.

         2.25 "Stock Option" means any option to purchase Common Stock granted
pursuant to Section 6.

         2.26 "Subsidiary" means: (i) as it relates to Incentive Stock Options,
any corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the granting of the option, each
of the corporations (other than the last corporation in the unbroken chain) owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain; and (ii) for all
other purposes, a company, domestic or foreign, of which not less than 50
percent of the voting shares are held by the Company or by a Subsidiary, whether
or not such company now exists or is hereafter organized or acquired by the
Company or by a Subsidiary .

         2.27 "Term of the Plan" means the period beginning on the Effective
Date and ending on the earlier to occur of (i) the date the Plan is terminated
by the Committee in accordance with Section 24 and (ii) the date which is ten
years from the Effective Date.

         SECTION 3. ADMINISTRATION. The Plan shall be administered by the Board
or a committee of the Board (as the Board in its sole discretion shall
determine); provided, however, that if the Company registers any class of equity
security pursuant to Section 12 of the Exchange Act, and if the Plan is to be
administered by a committee, then such committee shall consist of two or more
members of the Board, each of whom shall each qualify as a "Non-employee
Director" within the meaning of Rule 16b-3 of the Exchange Act and also qualify
as an "outside director" within the meaning of Section l62(m) of the Code and
regulations pursuant thereto. For purposes of the Plan, the Board acting in this
capacity or the Committee described in the preceding sentence shall be referred
to as the "Committee". The Committee shall have the power and authority to grant
to eligible persons pursuant to the terms of the Plan: (1) Stock Options, (2)
Stock Appreciation Rights, (3) Restricted Stock Awards, (4) Performance Unit
Awards, (5) Stock Bonus Awards, or (6) any combination of the foregoing.

         The Committee shall have authority in its discretion to interpret the
provisions of the Plan and to decide all questions of fact arising in its
application; to select the persons to whom awards shall be made under the Plan;
to determine whether and to what extent awards shall be made under the Plan; to
determine the types of award to be made and the amount, size, terms and
conditions of each such award; to determine the time when the awards shall be
granted; to determine whether, to what extent and under what circumstances
Common Stock and other amounts payable with respect to an award under the Plan
shall be deferred either automatically or at the election of the Participant; to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; and to make all
other determinations necessary or advisable for the administration of the Plan.

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         The Committee also shall have authority in its discretion to vary the
terms of the Plan to the extent necessary to comply with federal, state or local
law.

         Notwithstanding anything in the Plan to the contrary, with respect to
any Participant or eligible person who is resident outside of the United States,
the Committee may, in its sole discretion, amend the terms of the Plan in order
to conform such terms with the requirements of local law or to meet the
objectives of the Plan. The Committee may, where appropriate, establish one or
more sub-plans for this purpose.

         All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons who participate in the Plan.

         All expenses and liabilities incurred by the Committee in the
administration of the Plan shall be borne by the Company. The Committee may
employ attorneys, consultants, accountants or other persons in connection with
the administration of the Plan. The Company, and its officers and directors,
shall be entitled to rely upon the advice, opinions or valuations of any such
persons.

         SECTION 4. COMMON STOCK SUBJECT TO THE PLAN.

         4.1 Share Reserve. There shall be reserved and available for issuance
under the Plan 5,500,000 shares of Common Stock, subject to such adjustment as
may be made pursuant to Section 23.

         4.2 Source of Shares/Reversion of Shares. Such shares may consist in
whole or in part of authorized and unissued shares or treasury shares or any
combination thereof as the Committee may determine. Except as otherwise provided
herein, any shares subject to an option or right which for any reason expires or
is terminated unexercised, becomes unexercisable, or is forfeited or otherwise
terminated, surrendered or canceled as to any shares, or if any shares of Common
Stock are surrendered to the Company in connection with any award (whether or
not such surrendered shares were acquired pursuant to any award), or if any
shares are withheld by the Company, the shares subject to such award and the
surrendered and withheld shares shall thereafter be available for further awards
under the Plan; provided, however, that any such shares that are surrendered to
or withheld by the Company in connection with any award or that are otherwise
forfeited after issuance shall not be available for purchase pursuant to
Incentive Stock Options. No awards may be granted following the end of the Term
of the Plan.

         4.3 Code Section 162(m) Limitation. The total number of shares of
Common Stock for which (i) Stock Options, (ii) Stock Appreciation Rights, and
(iii) Restricted Stock Awards and Stock Bonus Awards that are subject to the
attainment of performance criteria to protect against loss of deductibility
under Section 162(m) of the Code, may be granted to any employee during any
twelve month period shall not exceed _____________ in the aggregate, subject to
adjustment pursuant to Section 23. The maximum amount that may be earned under
Performance Unit Awards that are subject to the attainment of performance
criteria to protect against loss of deductibility under Section 162(m) of the
Code, by any employee during any twelve month period shall not exceed
$____________. This Section 4.3 shall not apply prior to the Listing Date and,
following the Listing Date, this Section 4.3 shall not apply until (i) the

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earliest of: (1) the first material modification of the Plan (including any
increase in the number of shares of Common Stock reserved for issuance under the
Plan in accordance with Section 4.1); (2) the issuance of all of the shares of
Common Stock reserved for issuance under the Plan; (3) the expiration of the
Plan; or (4) the first meeting of shareholders at which directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which occurred the first registration of an equity security
under Section 12 of the Exchange Act; or (ii) such other date required by
Section 162(m) of the Code and the rules and regulations promulgated thereunder.

SECTION 5. ELIGIBILITY TO RECEIVE AWARDS. An award may be granted to any
employee, director, or officer of, or key adviser or consultant to, the Company
or any Subsidiary, who is responsible for or contributes to the management,
growth or success of the Company or any Subsidiary, provided that bona fide
services shall be rendered by consultants or advisers to the Company or its
Subsidiaries and such services must not be in connection with the offer and sale
of securities in a capital-raising transaction and must not directly or
indirectly promote or maintain a market for the Company's securities. Subject to
the preceding sentence, the Committee shall have the sole authority to select
the persons to whom an award is to be granted hereunder and to determine what
type of award is to be granted to each such person. No person shall have any
right to participate in the Plan. Any person selected by the Committee for
participation during any one period will not by virtue of such participation
have the right to be selected as a Participant for any other period.

SECTION 6. STOCK OPTIONS. A Stock Option may be an Incentive Stock Option or a
Non-Qualified Stock Option. Only employees of the Company or any Parent or
Subsidiary of the Company are eligible to receive Incentive Stock Options. To
the extent that any Stock Option does not qualify as an Incentive Stock Option,
it shall constitute a separate Non-Qualified Stock Option. Stock Options may be
granted alone or in addition to other awards granted under the Plan. The terms
and conditions of each Stock Option granted under the Plan shall be specified by
the Committee, in its sole discretion, and shall be set forth in a written
option agreement between the Company and the Participant in such form as the
Committee shall approve from time to time. No person shall have any rights under
any Stock Option granted under the Plan unless and until the Company and the
person to whom such Stock Option shall have been granted shall have executed and
delivered an agreement expressly granting the Stock Option to such person and
containing provisions setting forth the terms for the Stock Option. The terms
and conditions of each Incentive Stock Option shall be such that each Incentive
Stock Option issued hereunder shall constitute and shall be treated as an
"incentive stock option" as defined in Section 422 of the Code. The terms and
conditions of each Non-Qualified Stock Option will be such that each
Non-Qualified Stock Option issued hereunder shall not constitute nor be treated
as an "incentive stock option" as defined in Section 422 of the Code or an
option described in Section 423(b) of the Code and will be a "non-qualified
stock option" for federal income tax purposes. The terms and conditions of any
Stock Option granted hereunder need not be identical to those of any other Stock
Option granted hereunder. The agreements shall contain in substance the
following terms and conditions and may contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

         6.1 Type of Option. Each option agreement shall identify the option
represented thereby as an Incentive Stock Option or a Non-Qualified Stock
Option, as the case may be.

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         6.2 Option Price. The Incentive Stock Option exercise price shall be
fixed by the Committee but shall in no event be less than 100 percent (or 110
percent in the case of an employee referred to in Section 6.7(ii) below) of the
Fair Market Value of the shares of Common Stock subject to the Incentive Stock
Option on the date the Incentive Stock Option is granted. The Non-Qualified
Stock Option exercise price shall be fixed by the Committee but in no event
shall be less than 100 percent of the Fair Market Value of the shares of Common
Stock subject to the Non-Qualified Stock Option at the time the option is
granted, and in no event less than the par value of the Common Stock.

         6.3 Exercise Term. Each option agreement shall state the period or
periods of time within which the Stock Option may be exercised, in whole or in
part, which shall be such period or periods of time as may be determined by the
Committee, provided that no Stock Option shall be exercisable after ten years
from the date of grant thereof (or, in the case of an Incentive Stock Option
granted to an employee referred to in Section 6.7(ii) below, such term shall in
no event exceed five (5) years from the date on which such Incentive Stock
Option is granted); provided further, each option granted under the Plan shall
become exercisable six (6) months after the grant date, unless specifically
stipulated otherwise under the option agreement. The Committee shall have the
power to permit an acceleration of previously established exercise terms,
subject to the requirements set forth herein, upon such circumstances and
subject to such terms and conditions as the Committee deems appropriate.

         6.4 Payment for Shares. A Stock Option shall be deemed to be exercised
when written notice of such exercise has been given to the Company in accordance
with the terms of the option agreement by the Participant entitled to exercise
the Stock Option and full payment for the shares of Common Stock with respect to
which the Stock Option is exercised has been received by the Company. The
Committee, in its sole discretion, may permit all or part of the payment of the
exercise price to be made, to the extent permitted by applicable statutes and
regulations, either: (i) in cash, by check or wire transfer, (ii) in any other
form of legal consideration as provided for under the terms of the Stock Option
agreement, or (iii) in the event the Common Stock is listed on any United States
securities exchange or traded on NASDAQ or on an over-the-counter quotation
system in the United States, through the delivery of irrevocable instructions to
a broker to deliver property to the Company in an amount equal to the aggregate
exercise price for the shares being purchased. In lieu of payment in fractions
of shares, payment of any fractional share amount shall be made in cash or check
payable to the Company. No shares of Common Stock shall be issued to any
Participant upon exercise of a Stock Option until the Company receives full
payment therefor as described above. Upon the receipt of notice of exercise and
full payment for the shares of Common Stock, the shares of Common Stock shall be
deemed to have been issued and the Participant shall be entitled to receive such
shares of Common Stock and shall be a stockholder with respect to such shares,
and the shares of Common Stock shall be considered fully paid and nonassessable.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date on which the stock certificate is issued, except as
provided in Section 23 of the Plan. Each exercise of a Stock Option shall
reduce, by an equal number, the total number of shares of Common Stock that may
thereafter be purchased under such Stock Option.

         6.5 Rights upon Termination of Continuous Service or Change of Control.
In the event that a Participant's Continuous Service terminates for any reason,
other than death, Retirement,

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Disability, or for Cause, any rights of the Participant under any Stock Option
shall immediately terminate; provided, however, that the Participant (or any
successor or legal representative) shall have the right to exercise the Stock
Option (to the extent that the Stock Option was exercisable at the time of
termination) within a period equal to the lesser of: (i) three (3) months after
the effective date of such termination of Continuous Service, and (ii) the
remainder of the term set forth in the Stock Option agreement.

                In the event that a Participant's Continuous Service terminates
for Cause, the Participant (or any successor or legal representative) shall not
have any rights under any Stock Option, and the Company shall not be obligated
to sell or deliver shares of Common Stock (or have any other obligation or
liability) under the Plan. The Committee shall determine in its sole discretion
whether the Participant's Continuous Service shall have been terminated for
Cause. In the event of such determination, the Participant (or any successor or
legal representative) shall have no right under any Stock Option to purchase any
shares of Common Stock regardless of whether the Participant (or any successor
or legal representative) shall have delivered a notice of exercise prior to the
making of such determination. Any Stock Option may be terminated entirely by the
Committee at the time or at any time subsequent to a determination by the
Committee under this Section 6.5 which has the effect of eliminating the
Company's obligation to sell or deliver shares of Common Stock under such Stock
Option.

         In the event that a Participant's Continuous Service terminates due to
a Participant's Retirement prior to the expiration of the Stock Option and
without the Participant's having fully exercised the Stock Option, the Stock
Option shall be deemed to be fully exercisable, and the Participant or his
successor or legal representative shall have the right to exercise the Stock
Option within a period of three (3) months following such Retirement.

         In the event that a Participant's Continuous Service terminates due to
a Participant's Disability prior to the expiration of the Stock Option and
without the Participant's having fully exercised the Stock Option, the Stock
Option shall be deemed to be exercisable as the Committee, in its sole
discretion, may determine, and the Participant or his successor or legal
representative shall have the right to exercise the Stock Option within the
period determined by the Committee.

         In the event that a Participant's Continuous Service terminates due to
a Participant's death prior to the expiration of the Stock Option and without
the Participant's having fully exercised the Stock Option, the Stock Option
shall be deemed to be fully exercisable, and the Participant's successor or
legal representative shall have the right to exercise the Stock Option within a
period of twelve (12) months following the Participant's death.

         The Stock Option agreement may, but need not, include a provision
whereby the Participant may elect at any time before the Participant's
Continuous Service terminates to exercise the Stock Option as to any part or all
of the shares of Common Stock subject to the Stock Option prior to the full
vesting of the Stock Option. Any unvested shares of Common Stock so purchased
may be subject to a repurchase option in favor of the Company (including but not
limited to the Right of Repurchase under Section 14) or to any other restriction
the Committee determines to be appropriate.

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         In the event of a Change of Control prior to the date a Participant's
Continuous Service terminates, such Participant shall have the right to exercise
the vested portion of his or her unexercised Stock Option for the remainder of
its term, provided, however, that upon the approval by the Board of any event
specified in Section 2.3(i)(A) or (B), any such Stock Option shall terminate if
it is not exercised prior to or upon the consummation of any such event. For
purposes of determining the vested portion of any unexercised Stock Option, upon
a Change of Control for any Stock Option subject to a vesting schedule, an
additional one (1) year shall be deemed to have lapsed since the Participant's
hire date or such other measurement date established by the Committee.

         6.6 Re-load Options. Without in any way limiting the authority of the
Committee to make or not to make grants of Stock Options hereunder, the
Committee shall have the authority (but not an obligation) to include as part of
any Stock Option a provision entitling the Participant to a further Stock Option
(a "Re-Load Option") in the event the Participant exercises the original Stock
Option, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Stock Option
agreement. Any such Re-Load Option shall (i) provide for a number of shares of
Common Stock equal to the number of shares of Common Stock surrendered as part
or all of the exercise price of such Stock Option; (ii) have an expiration date
which is the same as the expiration date of the Stock Option the exercise of
which gave rise to such Re-Load Option; and (iii) have an exercise price which
is equal to 100 percent of the Fair Market Value of the Common Stock subject to
the Re-Load Option on the date of exercise of the original Stock Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Stock Options under
the Plan.

         Any such Re-Load Option may be an Incentive Stock Option or a
Non-Qualified Stock Option, as the Committee may designate at the time of the
grant of the original Stock Option; provided, however, the designation of any
Re-Load Option as an Incentive Stock Option shall be subject to the $100,000
annual limitation on the exercisability of Incentive Stock Options described in
Section 6.7 and in Section 422(d) of the Code. There shall be no Re-Load Options
on a Re-Load Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares of Common Stock under Section 4.1 and the
limitation on the grants of Stock Options under Section 4.3 and shall be subject
to such other terms and conditions as the Committee may determine which are not
inconsistent with the express provisions of the Plan regarding the terms of
Stock Options.

         6.7 Special Incentive Stock Option Rules. Notwithstanding the
foregoing, in the case of an Incentive Stock Option, each option agreement shall
contain such other terms, conditions and provisions as the Committee determines
necessary or desirable in order to qualify such Stock Option as an Incentive
Stock Option under the Code including, without limitation, the following:

                  (i) To the extent that the aggregate Fair Market Value
(determined as of the time the option is granted) of the Common Stock, with
respect to which Incentive Stock Options granted under this Plan (and all other
plans of the Company and its Subsidiaries) become exercisable for the first time
by any person in any calendar year, exceeds $100,000, such options shall be
treated as Non-Qualified Stock Options; and

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                  (ii) No Incentive Stock Option shall be granted to any
employee if, at the time the Incentive Stock Option is granted, the employee (by
reason of the attribution rules applicable under Section 424(d) of the Code)
owns more than 10 percent of the combined voting power of all classes of stock
of the Company or any Parent or Subsidiary unless at the time such Incentive
Stock Option is granted the option price is at least 110 percent of the Fair
Market Value (determined as of the time the Incentive Stock Option is granted)
of the shares of Common Stock subject to the Incentive Stock Option and such
Incentive Stock Option by its terms is not exercisable after the expiration of
five years from the date of grant.

If an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
shall thereafter be treated as a Non-Qualified Stock Option.

         SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights entitle
Participants to increases in the Fair Market Value of shares of Common Stock.
The terms and conditions of each Stock Appreciation Right granted under the Plan
shall be specified by the Committee, in its sole discretion, and shall be set
forth in a written agreement between the Company and the Participant in such
form as the Committee shall approve from time to time. The agreements shall
contain in substance the following terms and conditions and may contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable:

         7.1 Award. Stock Appreciation Rights shall entitle the Participant,
subject to such terms and conditions determined by the Committee, to receive
upon exercise thereof an award equal to all or a portion of the excess of: (i)
the Fair Market Value of a specified number of shares of Common Stock at the
time of exercise, over (ii) a specified price which shall not be less than 100
percent of the Fair Market Value of the Common Stock at the time the right is
granted or, if connected with a previously issued Stock Option, not less than
100 percent of the Fair Market Value of the Common Stock at the time such Stock
Option was granted. Such amount may be paid by the Company in cash, Common Stock
(valued at its then Fair Market Value) or any combination thereof, as the
Committee may determine. Stock Appreciation Rights may be, but are not required
to be, granted in connection with a previously or contemporaneously granted
Stock Option. In the event of the exercise of a Stock Appreciation Right, the
number of shares reserved for issuance hereunder shall be reduced by the number
of shares covered by the Stock Appreciation Right.

         7.2 Term. Each agreement shall state the period or periods of time
within which the Stock Appreciation Right may be exercised, in whole or in part,
subject to such terms and conditions prescribed for such purpose by the
Committee provided that no Stock Appreciation Right shall be exercisable prior
to six months nor after ten years from the date of grant thereof. The Committee
shall have the power to permit an acceleration of previously established
exercise terms, subject to the requirements set forth herein, upon such
circumstances and subject to such terms and conditions as the Committee deems
appropriate.

         7.3 Rights upon Termination of Continuous Service or Change of Control.
In the event that a Participant's Continuous Service terminates for any reason,
other than death, Retirement, Disability or for Cause, any rights of the
Participant under any Stock Appreciation Right shall

                                      -10-
<PAGE>   12
immediately terminate; provided, however, that the Participant (or any successor
or legal representative) shall have the right to exercise the Stock Appreciation
Right (to the extent that the Stock Appreciation Right was exercisable at the
time of termination) within a period equal to the lesser of (i) three (3) months
after the effective date of such termination of Continuous Service, and (ii) the
remainder of term set forth in the Stock Appreciation Right.

         In the event that a Participant's Continuous Service terminates for
Cause, the Participant (or any successor or legal representative) shall not have
any rights under any Stock Appreciation Right, and the Company shall not be
obligated to pay or deliver any cash, Common Stock or any combination thereof
(or have any other obligation or liability) under any Stock Appreciation Right.
The Committee shall determine in its sole discretion whether the Participant's
Continuous Service shall have been terminated for Cause. In the event of such
determination, the Participant (or any successor or legal representative) shall
have no right under any Stock Appreciation Right to purchase any shares of
Common Stock regardless of whether the Participant (or any successor or legal
representative) shall have delivered a notice of exercise prior to the making of
such determination. Any Stock Appreciation Right may be terminated entirely by
the Committee at the time of or at any time subsequent to the determination by
the Committee under this Section 7.3 which has the effect of eliminating the
Company's obligations under such Stock Appreciation Right.

         In the event that a Participant's Continuous Service terminates due to
a Participant's Retirement prior to the expiration of the Stock Appreciation
Right and without the Participant's having fully exercised the Stock
Appreciation Right, the Stock Appreciation Right shall be deemed to be fully
exercisable, and the Participant or his successor or legal representative shall
have the right to exercise the Stock Appreciation Right within a period of three
(3) months following such Retirement.

         In the event that a Participant's Continuous Service terminates due to
a Participant's Disability prior to the expiration of the Stock Appreciation
Right and without the Participant's having fully exercised the Stock
Appreciation Right, the Stock Appreciation Right shall be deemed to be
exercisable as the Committee, in it's sole discretion, may determine, and the
Participant or his successor or legal representative shall have the right to
exercise the Stock Appreciation Right within the period determined by the
Committee.

         In the event that a Participant's Continuous Service terminates due to
a Participant's death prior to the expiration of the Stock Appreciation Right
and without the Participant's having fully exercised the Stock Appreciation
Right, the Stock Appreciation Right shall be deemed to be fully exercisable, and
the Participant's successor or legal representative shall have the right to
exercise the Stock Appreciation Right within a period of twelve (12) months
following the Participant's death.

         In the event of a Change of Control prior to the date a Participant's
Continuous Service terminates, the Participant shall have the right to exercise
the vested portion of his or her unexercised Stock Appreciation Rights for the
remainder of their term; provided, however, that upon the approval by the Board
of any event specified in Section 2.3(i)(A) or (B), any such Stock Appreciation
Rights shall terminate if they are not exercised prior to or upon the
consummation of any such event. For purposes of determining the vested portion
of any

                                      -11-
<PAGE>   13
unexercised Stock Appreciation Rights, upon a Change of Control for any Stock
Appreciation Rights subject to a vesting schedule, an additional one (1) year
shall be deemed to have lapsed since the Participant's hire date or such other
measurement date established by the Committee.

         SECTION 8. PERFORMANCE UNIT AWARDS. Performance Unit Awards under the
Plan shall entitle Participants to future payments based upon the achievement of
preestablished long-term performance objectives. The terms and conditions of
each Performance Unit Award granted under the Plan shall be specified by the
Committee, in its sole discretion, and shall be set forth in a written agreement
between the Company and the Participant in such form as the Committee shall
approve from time to time. The agreements shall contain in substance the
following terms and conditions and may contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

         8.1 Performance Period. The Committee shall establish with respect to
each Performance Unit Award a performance period as determined by the Committee
in its discretion.

         8.2 Unit Value. The Committee shall establish with respect to each
Performance Unit Award a value for each unit which shall not thereafter change
or which may vary thereafter on the basis of criteria specified by the
Committee.

         8.3 Performance Targets. The Committee shall establish with respect to
each Performance Unit Award maximum and minimum performance targets to be
achieved during the applicable performance period. The achievement of maximum
targets shall entitle a Participant to payment with respect to the full value of
a Performance Unit Award. The achievement of less than the maximum targets, but
in excess of the minimum targets, shall entitle a Participant to payment with
respect to a portion of a Performance Unit Award according to the level of
achievement of targets as specified by the Committee. To the extent the
Committee deems necessary or appropriate to protect against the loss of
deductibility pursuant to Section 162(m) of the Code, such targets shall be
established in conformity with the requirements of Section 162(m) of the Code.

         8.4 Performance Measures. Performance targets established by the
Committee shall relate to corporate, division, subsidiary, group or unit
performance and may be established in terms of growth in gross revenue, earnings
per share, or ratios of earnings to equity or assets, net profits, stock price,
market share, sales or costs or, with respect to Participants not subject to
Section 162(m) of the Code, such other measures or standards determined by the
Committee in its discretion. Multiple targets may be used and may have the same
or different weighting, and they may relate to absolute performance or relative
performance measured against other companies or businesses.

         8.5 Adjustments. At any time prior to payment of a Performance Unit
Award, the Committee may adjust previously established performance targets or
other terms and conditions, including the Company's or other company's financial
performance, for Plan purposes, in order to reduce or eliminate, but not to
increase, the payment with respect to a Performance Unit Award that would
otherwise be due upon attainment of a preestablished performance objective. Such
adjustments shall be made to reflect major unforeseen events such as changes in
laws,

                                      -12-
<PAGE>   14
regulations or accounting practices, mergers, acquisitions or divestitures or
other extraordinary, unusual or nonrecurring items or events.

         8.6 Payment of Performance Unit Awards. Following the conclusion of
each performance period, the Committee shall determine the extent to which
performance targets have been attained, and any other terms and conditions
satisfied, for such period. The Committee shall determine what, if any, payment
is due on the Performance Unit Award and whether such payment shall be made in
cash, Common Stock or a combination thereof. Payment shall be made in a lump sum
or installments, as determined by the Committee, commencing as promptly as
practicable following the end of the performance period unless deferred subject
to such terms and conditions and in such form as may be prescribed by the
Committee.

         8.7 Termination of Continuous Service or Change of Control. In the
event that a Participant's Continuous Service terminates for any reason, other
than death or Disability, any rights of the Participant or his successor or
legal representative under any Performance Unit Award shall immediately
terminate.

         In the event that a Participant's Continuous Service terminates because
such Participant dies or suffers a Disability, or in the event of a Change of
Control prior to the date a Participant's Continuous Service terminates, the
Committee may, in its sole discretion, pay to the Participant or his successor
or legal representative all or any portion of any Performance Unit Award to the
extent earned under the applicable performance targets regardless of whether the
applicable performance period has ended, pursuant to such terms as the Committee
in its sole discretion shall determine.

         SECTION 9. RESTRICTED STOCK AWARDS. Restricted Stock Awards shall
consist of shares of Common Stock restricted against transfer ("Restricted
Stock"), subject to a substantial risk of forfeiture and other terms and
conditions intended to further the purpose of the Plan. The terms and conditions
of each Restricted Stock Award granted under the Plan shall be specified by the
Committee, in its sole discretion, and shall be set forth in a written agreement
between the Company and the Participant in such form as the Committee shall
approve from time to time. The agreements shall contain in substance the
following terms and conditions and may contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

         9.1 Restriction Period. Restricted Stock Awards shall be subject to the
above-described restrictions over such period as the Committee determines. To
the extent the Committee deems necessary or appropriate to protect against loss
of deductibility pursuant to Section 162(m) of the Code, Restricted Stock Awards
to certain Participants may also be subject to certain conditions with respect
to attainment of one or more preestablished performance objectives which shall
relate to corporate, subsidiary, division, group or unit performance in terms of
growth in gross revenue, earnings per share or ratios of earnings to equity or
assets; provided that such objectives may be adjusted to reduce or eliminate,
but not to increase, an award in order to take into account unforeseen events or
changes in circumstances.

         9.2 Restriction upon Transfer. Shares awarded, and the right to vote
such shares and to receive dividends thereon, may not be sold, assigned,
transferred, exchanged, pledged,

                                      -13-
<PAGE>   15
hypothecated or otherwise encumbered, except as herein provided or as provided
in any agreement entered into between the Company and a Participant in
connection with the Plan, during the restriction period applicable to such
shares. Notwithstanding the foregoing, and except as otherwise provided in the
Plan, the Participant shall have all the other rights of a stockholder
including, but not limited to, the right to receive dividends and the right to
vote such shares.

         9.3 Certificates. Each certificate issued in respect of shares awarded
to a Participant shall be registered in the name of the Participant and
deposited with the Company, or its designee, and shall bear the following
legend:

                  "This certificate and the shares of stock represented hereby
                  are subject to the terms and conditions (including forfeiture
                  provisions and restrictions against transfer) contained in the
                  Millennium Cell Inc. 2000 Long-Term Incentive Plan and a
                  Restricted Stock Award Agreement entered into between the
                  registered owner and Millennium Cell Inc. Release from such
                  terms and conditions shall be obtained only in accordance with
                  the provisions of the Plan and Agreement, a copy of each of
                  which is on file in the office of the Secretary of Millennium
                  Cell Inc."

Each Participant, as a condition of any Restricted Stock Award, shall have
delivered a stock power, endorsed in blank, relating to the Common Stock covered
by such award.

         9.4 Lapse of Restrictions. Except for preestablished performance
objectives established with respect to awards to Participants subject to Section
162(m) of the Code, the Committee may, in its sole discretion, provide for the
lapse of such restrictions in installments and may accelerate or waive such
restrictions in whole or in part based on such factors and such circumstances as
the Committee may determine. Upon the lapse of such restrictions, shares of
Common Stock, free of the restrictive legend set forth in Section 9.3 above,
shall be issued to the Participant or his legal representative. The Committee
shall have the power to permit, in its discretion, an acceleration of the
expiration of the applicable restrictions period with respect to any part or all
of the shares awarded to a Participant, except, with respect to Participants
subject to Section 162(m) of the Code, to the extent such acceleration would
result in the loss of the deductibility of an award to the Company.

         9.5 Termination of Continuous Service or Change of Control. In the
event that a Participant's Continuous Service terminates for any reason, other
than death or Disability, any rights of the Participant or his successors or
legal representatives under any Restricted Stock Award that remains subject to
restrictions shall immediately terminate and any Restricted Stock Award with
unlapsed restrictions shall be forfeited to the Company without payment of any
consideration.

         In the event that a Participant's Continuous Service terminates because
such Participant dies or suffers a Disability, or in the event of a Change of
Control prior to the date the Participant's Continuous Service terminates, all
remaining shares of a Restricted Stock Award shall no longer be subject to any
unlapsed restrictions.

                                      -14-
<PAGE>   16
         SECTION 10. STOCK BONUS AWARDS. The Committee may, in its sole
discretion, grant a Stock Bonus Award based upon corporate, division,
subsidiary, group or unit performance in terms of growth in gross revenue,
earnings per share or ratios of earnings to equity or assets or, with respect to
Participants not subject to Section 162(m) of the Code, such other measures or
standards determined by the Committee in its discretion; provided, that such
performance objectives may be adjusted to reduce or eliminate but not to
increase an award in order to take into account unforeseen events or changes in
circumstances.

         The terms and conditions of each Stock Bonus Award granted under the
Plan shall be specified by the Committee, in its sole discretion, and shall be
set forth in a written agreement between the Company and the Participant in such
form as the Committee shall approve from time to time. In addition to any
applicable performance goals, shares of Common Stock subject to a Stock Bonus
Award may be: (i) subject to additional restrictions (including, without
limitation, restrictions on transfer), or (ii) granted directly to a person free
of any restrictions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable.

         SECTION 11. LOANS. The Committee may, in its sole discretion and to
further the purpose of the Plan, provide for loans to persons in connection with
all or any part of an award under the Plan. Any loan made pursuant to this
Section 11 shall be evidenced by a loan agreement, promissory note or other
instruments in such form and which shall contain such terms and conditions
(including, without limitation, provisions for interest, payment, schedules,
collateral, forgiveness, acceleration of such loans or parts thereof or
acceleration in the event of termination) as the Committee shall prescribe from
time to time. Notwithstanding the foregoing, each loan shall comply with all
applicable laws, regulations and rules of the Board of Governors of the Federal
Reserve System and any other governmental agency having jurisdiction.

         SECTION 12. SECURITIES LAW REQUIREMENTS. No shares of Common Stock
shall be issued upon the exercise or payment of any Award unless and until:

                  (i) The shares of Common Stock underlying the Award have been
registered under the Securities Act of 1933, as amended (the "Act"), or the
Company has determined that an exemption from the registration requirements
under the Act is available or the registration requirements of the Act do not
apply to such exercise or payment;

                  (ii) The Company has determined that all applicable listing
requirements of any stock exchange or quotation system on which the shares of
Common Stock are listed have been satisfied; and

                  (iii) The Company has determined that any other applicable
provision of state or Federal law, including without limitation applicable state
securities laws, has been satisfied.

                  SECTION 13. RESTRICTIONS ON TRANSFER; REPRESENTATIONS OF
         PARTICIPANT; LEGENDS.

         The Committee in its sole discretion may restrict the transferability
of shares until the Common Stock is listed on any United States securities
exchange or traded on NASDAQ or an over-the-counter quotation system in the
United States.

                                      -15-
<PAGE>   17
         Regardless of whether the offering and sale of shares of Common Stock
has been registered under the Securities Act or has been registered or qualified
under the securities laws of any state, the Company may impose restrictions upon
the sale, pledge, or other transfer of such shares, including the placement of
appropriate legends on stock certificates, if, in the judgment of the Company
and its counsel, such restrictions are necessary or desirable in order to
achieve compliance with the provisions of the Securities Act, the securities
laws of any state, or any other law. As a condition to the Participant's receipt
of shares, the Company may require the Participant to represent that such shares
are being acquired for investment, and not with a view to the sale or
distribution thereof, except in compliance with the Securities Act, and to make
other representations as are deemed necessary or appropriate by the Company and
its counsel. Stock certificates evidencing shares acquired pursuant to an
unregistered transaction to which the Securities Act applies shall bear a
restrictive legend substantially in the following form and such other
restrictive legends as are required or deemed advisable under the Plan or the
provisions of any applicable law:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
                  "ACT"), OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
                  THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
                  VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION
                  THEREOF, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED
                  OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
                  UNDER THE ACT AND QUALIFICATION UNDER ANY APPLICABLE STATE
                  SECURITIES LAWS, OR WITHOUT AN OPINION OF COUNSEL ACCEPTABLE
                  TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION OR
                  QUALIFICATION IS NOT REQUIRED."

The Company shall also place legends on stock certificates representing its
right of repurchase under Section 14 hereof and the right of first refusal under
Section 15 hereof. Any determination by the Company and its counsel in
connection with any of the matters set forth in this Section 13 shall be
conclusive and binding on all persons.

         The Company may, but shall not be obligated to, register or qualify the
sale of shares under the Securities Act or any other applicable law.

         SECTION 14. RIGHT OF REPURCHASE.

         14.1 Repurchase Right. At the Committee's discretion, shares of Common
Stock issued to a Participant under this Plan may be subject to a right, but not
an obligation, of repurchase by the Company (the "Right of Repurchase"), at the
price specified in Section 14.2 below, if the Participant's Continuous Service
terminates for any reason ("Employment Termination"). Shares issued by the
Company shall be transferable only by the Participant subject to the Right of
Repurchase, and the Company shall legend the Right of Repurchase on the stock
certificates evidencing such shares and shall take such other steps as it deems
necessary

                                      -16-
<PAGE>   18
to ensure compliance with this restriction. The Company's rights under this
Section 14.1 shall be freely assignable, in whole or in part.

         14.2 Repurchase Price. The price per share at which the Company may
exercise the Right of Repurchase under Section 14.1 (the "Repurchase Price")
shall be:

                  (a) the lower of: (i) the exercise price of each share as paid
by the Participant (in the case of a Stock Option), or (ii) the Fair Market
Value of each share at the later of the date of the Participant's Employment
Termination or the date of issuance of such share to the Participant (provided,
the Company's ability to exercise the Right of Repurchase at the exercise price
of each share as paid by the Participant shall only apply to unvested shares
issued upon early exercise of the nonvested portion of the Participant's Stock
Option and shall lapse at a rate that will result in the same vesting as if
early exercise of the nonvested portion of the Participant's Stock Option had
not occurred); or

                  (b) such other price as the Committee in its sole discretion
shall determine in accordance with applicable state Blue Sky or other laws.

         14.3 Repurchase Procedure. The Company may exercise its Right of
Repurchase by sending a written notice to the Participant or his or her
successor or legal representative and to the escrow agent, if any, of its taking
such action and specifying the number of shares being repurchased. The Company's
Right of Repurchase with respect to vested shares at their Fair Market Value as
provided in clause (a)(ii) of Section 14.2 above shall terminate if not
exercised by written notice from the Company to the Participant or his or her
successor or legal representative within thirty (30) days of the effective date
of the Employment Termination. If the Company exercises its Right of Repurchase,
within ninety (90) days of the effective date of the Participant's Employment
Termination (or, in the case of Common Stock issued upon exercise of the Stock
Option after the effective date of the Participant's Employment Termination,
within ninety (90) days after the date of exercise), the Participant, or his or
her successor or legal representative, or if applicable, the escrow agent, shall
deliver to the Company every stock certificate representing the shares being
repurchased, together with appropriate assignments separate from certificates,
and the Company shall then promptly pay the total Repurchase Price in cash to
the Participant, or if applicable, to the escrow agent, for delivery to the
Participant.

         14.4 Escrow. To facilitate the consummation of the Company's Right of
Repurchase under this Section 14, at the request of the Committee, the
Participant and the Company shall execute joint escrow instructions and the
Participant shall deliver and deposit with the escrow agent named in the joint
escrow instructions two "Assignments Separate from Certificate", together with
all certificates evidencing the shares of Common Stock issued to the Participant
pursuant to the Plan, duly endorsed in blank. The escrow agent shall hold such
documents and deliver the same to the Company pursuant to the joint escrow
instructions and in accordance with the terms of this Section 14, as applicable.

         14.5 Binding Effect. The Company's Right of Repurchase shall inure to
the benefit of its successors and assigns and shall be binding upon any
representative, executor, administrator, heir, or legatee of the Participant.

                                      -17-
<PAGE>   19
         14.6 Termination of Right of Repurchase. Notwithstanding any other
provision of this Section 14, in the event that the Common Stock is listed on
any United States securities exchange or traded on any formal over-the-counter
market in general use in the United States at the time the Participant would
otherwise be required to transfer his or her vested shares to the Company at not
less than the Fair Market Value thereof as provided in clause (a)(ii) of Section
14.2 above, the Company shall no longer have the Right of Repurchase with
respect to such vested shares, and the Participant shall have no obligations to
comply with this Section 14 with respect to such vested shares. The Company's
Right of Repurchase at the exercise price of each unvested share issued upon
early exercise of the nonvested portion of a Participant's Stock Option as
provided in clause (a)(i) of Section 14.2 above shall not expire but shall
continue in full force and effect on and after the date the Common Stock becomes
publicly traded.

         SECTION 15. RIGHT OF FIRST REFUSAL.

         15.1 Right of First Refusal. At the Committee's discretion, shares
issued to a Participant under this Plan may be subject to a requirement that if
the Participant proposes to sell, pledge, or otherwise transfer any such shares
or any interest in such shares, to any person or entity, the Company shall have
a right of first refusal (the "Right of First Refusal") with respect to such
shares. Any Participant desiring to transfer shares subject to the Right of
First Refusal shall give a written notice (the "Transfer Notice") to the Company
describing fully the proposed transfer, including the number of shares proposed
to be transferred, the proposed transfer price, and the name and address of the
proposed transferee. The Transfer Notice shall be signed both by the Participant
and by the proposed transferee and must constitute a binding commitment of both
parties to the transfer of the shares. The Company shall have the right to
purchase all (but not less than all) the shares subject to the Transfer Notice
on the terms of the proposal referred to in the Transfer Notice, subject to any
change in such terms permitted under Section 15.2 hereof, by delivery of a
notice of exercise of the Right of First Refusal within thirty (30) days after
the date the Transfer Notice is received by the Company. The Company's rights
under this Section 15.1 shall be freely assignable, in whole or in part.

         15.2 Transfer of Shares. If the Company fails to exercise the Right of
First Refusal within thirty (30) days after the date on which it receives the
Transfer Notice, the Participant may, not later than six (6) months following
receipt of the Transfer Notice by the Company, consummate a transfer of the
shares subject to the Transfer Notice on the terms and conditions described in
the Transfer Notice, subject to restrictions on the transfer of such shares
imposed pursuant to Section 13. Any proposed transfer on terms and conditions
different from those described in the Transfer Notice, as well as any subsequent
proposed transfer by the Participant, shall again be subject to the Right of
First Refusal and shall again require compliance with the procedure described in
Section 15.1. If the Company exercises its Right of First Refusal, the
Participant shall immediately endorse and deliver to the Company every stock
certificate representing the shares being purchased, and the Company shall then
promptly pay the purchase price in accordance with the terms set forth in the
Transfer Notice.

         15.3 Repurchase Payment. The amount payable to a Participant pursuant
to the Company's exercise of the Right of First Refusal shall be paid to the
Participant in accordance with the terms and conditions of the Transfer Notice
or may, at the election of the Company, be paid in full in cash.

                                      -18-
<PAGE>   20
         15.4 Binding Effect. The Company's Right of First Refusal shall inure
to the benefit of its successors and assigns and shall be binding upon any
transferee of the shares, other than a transferee acquiring shares in a
transaction with respect to which the Company failed to exercise its Right of
First Refusal (a "Free Transferee") or a transferee of a Free Transferee.

         15.5 Termination of Right of First Refusal. Notwithstanding any other
provision of this Section 15, if the Common Stock is listed on any United States
securities exchange or traded on any formal over-the-counter market in general
use in the United States at the time the Participant desires to transfer his or
her shares, the Company shall no longer have the Right of First Refusal, and the
Participant shall have no obligation to comply with this Section 15.

         SECTION 16. SINGLE OR MULTIPLE AGREEMENTS. Multiple forms of awards or
combinations thereof may be evidenced by a single agreement or multiple
agreements, as determined by the Committee.

         SECTION 17. RIGHTS OF A STOCKHOLDER. The recipient of any award under
the Plan, unless otherwise provided by the Plan, shall have no rights as a
stockholder with respect thereto unless and until certificates for shares of
Common Stock are issued to him.

         SECTION 18. NO RIGHT TO CONTINUE EMPLOYMENT OR SERVICE. Nothing in the
Plan or any instrument executed or award granted pursuant thereto shall confer
upon any Participant any right to continue to serve the Company or any
Subsidiary in the capacity in effect at the time the award was granted or shall
affect the right of the Company or any Subsidiary to terminate (i) the
employment of an employee with or without notice and with or without cause, (ii)
the service of a consultant or adviser pursuant to the terms of such
consultant's or adviser's agreement with the Company or any Subsidiary or (iii)
the service of a director pursuant to the Bylaws of the Company or any
Subsidiary and any applicable provisions of the corporate law of the state in
which the Company or any Subsidiary is incorporated, as the case may be.

         SECTION 19. WITHHOLDING. The Company's obligation to (i) deliver shares
of Common Stock or pay cash upon the exercise of any Non-Qualified Stock Option
or any Stock Appreciation Right granted under the Plan, (ii) deliver shares of
Common Stock or pay cash in payment of any Performance Unit Award, (iii) deliver
stock certificates upon the vesting of any award of Restricted Stock Award, and
(iv) deliver shares of Common Stock upon the grant of any Stock Bonus Award
shall be subject to the minimum statutory withholding requirements under
applicable foreign, federal, state and local law. Foreign, federal, state and
local withholding tax due under the terms of the Plan may be paid in cash or
shares of Common Stock (either through the surrender of previously held shares
of Common Stock or the withholding of shares of Common Stock otherwise issuable
upon the exercise or payment of such award) having a Fair Market Value equal to
the required withholding and upon such other terms and conditions as the
Committee shall determine; provided, however, the Committee, in its sole
discretion, may require that such taxes be paid in cash; and provided, further,
any election by a Participant subject to Section 16(b) of the Exchange Act to
pay his withholding tax in shares of Common Stock shall be subject to and must
comply with Rule 16b-3(e) of the Exchange Act.

         SECTION 20. INDEMNIFICATION. No member of the Board or the Committee,
nor any officer or employee of the Company or a Subsidiary acting on behalf of
the Board or the

                                      -19-
<PAGE>   21
Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company or any Subsidiary acting on their behalf shall, to the extent
permitted by law, be fully indemnified and protected by the Company in respect
of any such action, determination or interpretation.

         SECTION 21. NON-ASSIGNABILITY. No award under the Plan shall be
assignable or transferable by the recipient thereof except by will, by the laws
of descent and distribution and by such other means as the Committee may approve
from time to time. However, the Participant, with the approval of the Committee,
may transfer a Stock Option (other than an Incentive Stock Option) for no
consideration to or for the benefit of the Participant's Immediate Family
(including without limitation, to a trust for the benefit of a Participant's
Immediate Family or to a partnership or limited liability company for one or
more members of the Participant's Immediate Family), subject to such limits as
the Committee may establish, and the transferee shall remain subject to all the
terms and conditions applicable to the Stock Option prior to such transfer. The
foregoing right to transfer the Stock Option shall apply to the right to consent
to amendments to Plan and, in the discretion of the Committee, shall also apply
the right to transfer ancillary rights associated with the Stock Option.

         SECTION 22. NONUNIFORM DETERMINATIONS. The Committee's determinations
under the Plan (including without limitation determinations of the persons to
receive awards, the form, amount and timing of such awards, the terms and
provisions of such awards and the agreements evidencing same, and the
establishment of values and performance targets) need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
awards under the Plan, whether or not such persons are similarly situated.

         SECTION 23. ADJUSTMENTS. In the event of any change in the outstanding
shares of Common Stock, without the receipt of consideration by the Company, by
reason of a stock dividend, stock split, reverse stock split or distribution,
recapitalization, merger, reorganization, reclassification, consolidation,
split-up, spin-off, combination of shares, exchange of shares or other change in
corporate structure affecting the Common Stock and not involving the receipt of
consideration by the Company, the Committee shall make appropriate adjustments
in (a) the aggregate number of shares of Common Stock (i) reserved for issuance
under the Plan, (ii) for which grants or awards may be made to any Participant
and (iii) covered by outstanding awards and grants denominated in shares or
units of Common Stock, (b) the exercise or other applicable price related to
outstanding awards or grants and (c) the appropriate Fair Market Value and other
price determinations relevant to outstanding awards or grants and shall make
such other adjustments as may be appropriate under the circumstances; provided,
that the number of shares subject to any award or grant always shall be a whole
number.

         SECTION 24. TERMINATION AND AMENDMENT. The Board may terminate or amend
the Plan or any portion thereof at any time, including but not limited to
amendments to the Plan necessary to comply with the requirements of Section
16(b) of the Exchange Act or to correct any defect or supply an omission or
reconcile any inconsistency in the Plan or any award granted hereunder, without
approval of the shareholders of the Company, unless shareholder approval is
required by Rule 16b-3 of the Exchange Act, applicable stock exchange or NASDAQ
or other quotation system rules, or applicable Code provisions. No amendment,
termination or

                                      -20-
<PAGE>   22
modification of the Plan shall affect any award theretofore granted in any
material adverse way without the consent of the recipient.

         SECTION 25. SEVERABILITY. With respect to Participants subject to
Section 16 of the Exchange Act, (i) the Plan is intended to comply with all
applicable conditions of Rule 16b-3 or its successors, (ii) all transactions
involving Participants who are subject to Section 16(b) of the Exchange Act are
subject to such conditions, regardless of whether the conditions are expressly
set forth in the Plan, and (iii) any provision of the Plan that is contrary to a
condition of Rule 16b-3 shall not apply to Participants who are subject to
Section 16(b) of the Exchange Act. If any of the terms or provisions of this
Plan, or awards made under this Plan, conflict with the requirements of Section
162(m) or Section 422 of the Code with respect to awards subject to or governed
by Section 162(m) or Section 422 of the Code, then such terms or provisions
shall be deemed inoperative to the extent they so conflict with the requirements
of Section 162(m) or Section 422 of the Code. With respect to an Incentive Stock
Option, if this Plan does not contain any provision required to be included
herein under Section 422 of the Code (as the same shall be amended from time to
time), such provision shall be deemed to be incorporated herein with the same
force and effect as if such provision had been set out herein.

         SECTION 26. EFFECT ON OTHER PLANS. Participation in this Plan shall not
affect an employee's eligibility to participate in any other benefit or
incentive plan of the Company or any Subsidiary and any awards made pursuant to
this Plan shall not be used in determining the benefits provided under any other
plan of the Company or any Subsidiary unless specifically provided.

         SECTION 27. EFFECTIVE DATE OF THE PLAN. The Plan shall become effective
as determined by the Board, but no Stock Option shall be exercised and no other
awards shall be granted unless and until the Plan has been approved by the
shareholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.

         SECTION 28. GOVERNING LAW. This Plan and all agreements executed in
connection with the Plan shall be governed by, and construed in accordance with,
the laws of the State of Delaware, without regard to its conflicts of law
doctrine.

         SECTION 29. GENDER AND NUMBER. Words denoting the masculine gender
shall include the feminine gender, and words denoting the feminine gender shall
include the masculine gender. Words in the plural shall include the singular,
and the singular shall include the plural.

         SECTION 30. ACCELERATION OF EXERCISABILITY AND VESTING. The Committee
shall have the power to accelerate the time at which an award may first be
exercised or the time during which an award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the award stating
the time at which it may first be exercised or the time during which it will
vest.

         SECTION 31. MODIFICATION OF AWARDS. Within the limitations of the Plan
and subject to Section 23, the Committee may modify outstanding awards or accept
the cancellation of outstanding awards for the granting of new awards in
substitution therefor. Notwithstanding the

                                     - 21 -
<PAGE>   23
preceding sentence, except for any adjustment described in Section 23, no
modification of an award shall, without the consent of the Participant, alter or
impair any rights or obligations under any award previously granted under the
Plan in any material adverse way without the affected Participant's consent.

         SECTION 32. NO STRICT CONSTRUCTION. No rule of strict construction
shall be applied against the Company, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any agreement executed in
connection with the Plan, any award granted under the Plan, or any rule,
regulation or procedure established by the Committee.

         SECTION 33. SUCCESSORS. This Plan is binding on and will inure to the
benefit of any successor to the Company, whether by way of merger,
consolidation, purchase, or otherwise.

         SECTION 34. PLAN PROVISIONS CONTROL. The terms of the Plan govern all
awards granted under the Plan, and in no event will the Committee have the power
to grant any award under the Plan which is contrary to any of the provisions of
the Plan. In the event any provision of any award granted under the Plan shall
conflict with any term in the Plan as constituted on the grant date of such
award, the term in the Plan as constituted on the grant date of such award shall
control.

         SECTION 35. HEADINGS. The headings used in the Plan are for convenience
only, do not constitute a part of the Plan, and shall not be deemed to limit,
characterize, or affect in any way any provisions of the Plan, and all
provisions of the Plan shall be construed as if no captions had been used in the
Plan.

                                     - 22 -<PAGE>   1
                                                                     EXHIBIT 4.1

---------------------------------------------------------------------------

                              RAINFOREST CAFE, INC.

                                       AND

                  NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,

                                  RIGHTS AGENT

                                   ----------

                                RIGHTS AGREEMENT

                            DATED AS OF MAY 23, 2000

---------------------------------------------------------------------------

<PAGE>   2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                    Page
<S>               <C>                                                                             <C>
Section 1.        Certain Definitions                                                                1

Section 2.        Appointment of Rights Agent                                                        4

Section 3.        Issue of Right Certificates                                                        4

Section 4.        Form of Right Certificates                                                         6

Section 5.        Countersignature and Registration                                                  7

Section 6.        Transfer, Split Up, Combination and Exchange of Right
                  Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates              7

Section 7.        Exercise of Rights; Purchase Price; Expiration Date of Rights                      8

Section 8.        Cancellation and Destruction of Right Certificates                                 9

Section 9.        Availability of Preferred Shares                                                   10

Section 10.       Preferred Shares Record Date                                                       11

Section 11.       Adjustment of Purchase Price, Number of Shares or Number of Rights                 11

Section 12.       Certificate of Adjusted Purchase Price or Number of Shares                         18

Section 13.       Consolidation, Merger or Sale or Transfer of Assets or Earning Power               18

Section 14.       Fractional Rights and Fractional Shares                                            20

Section 15.       Rights of Action                                                                   22

Section 16.       Agreement of Right Holders                                                         22

Section 17.       Right Certificate Holder Not Deemed a Shareholder                                  22

Section 18.       Concerning the Rights Agent                                                        23

Section 19.       Merger or Consolidation or Change of Name of Rights Agent                          23

Section 20.       Duties of Rights Agent                                                             24

Section 21.       Change of Rights Agent                                                             25

Section 22.       Issuance of New Right Certificates                                                 26

</TABLE>

                                       i
<PAGE>   3
<TABLE>
<S>               <C>                                                                             <C>
Section 23.       Redemption                                                                         26

Section 24.       Exchange                                                                           27

Section 25.       Notice of Certain Events                                                           28

Section 26.       Notices                                                                            29

Section 27.       Supplements and Amendments                                                         30

Section 28.       Successors                                                                         30

Section 29.       Benefits of this Agreement                                                         30

Section 30.       Severability                                                                       30

Section 31.       Governing Law                                                                      30

Section 32.       Counterparts                                                                       31

Section 33.       Descriptive Headings                                                               31

Signatures                                                                                           32

Exhibit A         Certificate of Designation of Series A Junior Participating Preferred Stock

Exhibit B         Form of Right Certificates

Exhibit C         Summary of Rights to Purchase Preferred Shares

</TABLE>

                                       ii

<PAGE>   4

                                RIGHTS AGREEMENT

         RIGHTS AGREEMENT (the "AGREEMENT"), dated as of May 23, 2000, between
Rainforest Cafe, Inc., a Minnesota corporation (the "COMPANY"), and Norwest Bank
Minnesota, National Association (the "RIGHTS AGENT").

         WHEREAS, The Board of Directors of the Company has authorized and
declared a dividend of one preferred share purchase right (a "RIGHT") for each
Common Share (as hereinafter defined) of the Company outstanding at the Close of
Business (as hereinafter defined) on May 24, 2000 (the "RECORD DATE"), each
Right representing the right to purchase one one-hundredth of a Preferred Share,
upon the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Final Expiration Date (as
such terms are hereinafter defined); provided, however, that Rights may be
issued with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:

         SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:

                  (a) "ACQUIRING PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of the Threshold Percentage or more of the Common Shares then
outstanding, other than pursuant to a Permitted Offer, but shall not include any
Exempt Person. Notwithstanding any provision to the contrary contained herein,
with respect to any Person who or which, together with all Affiliates and
Associates of such Person, as of May 9, 2000, is the Beneficial Owner of 10% or
more of the Common Shares then outstanding, such Person shall not become an
"Acquiring Person" unless and until such Person, together with all Affiliates
and Associates of such Person, thereafter becomes the Beneficial Owner of 15% of
the Common Shares then outstanding (such percentage shall herein be referred to
as the "ALTERNATE THRESHOLD PERCENTAGE"), other than pursuant to a Permitted
Offer. Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as the result of an acquisition of Common Shares by the Company which,
by reducing the number of shares outstanding, increases the proportionate number
of shares beneficially owned by such Person to the Threshold Percentage (or the
Alternate Threshold Percentage, if applicable) or more of the Common Shares of
the Company then outstanding; provided, however, that if a Person shall become
the Beneficial Owner of the Threshold Percentage (or the Alternate Threshold
Percentage, if applicable) or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, increase the number of Common Shares of the
Company beneficially owned by such Person above the number of Common Shares of
the Company beneficially owned by such Person at the time of the last such share
purchase by the Company, then such Person shall be deemed to be an "Acquiring
Person." Notwithstanding the foregoing, if the Board of Directors of the

<PAGE>   5

Company determines in good faith that a Person who would otherwise be an
"Acquiring Person", as defined pursuant to the foregoing provisions of this
paragraph, has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person", as defined pursuant to the foregoing provisions
of this paragraph, then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.

                  (b) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act (as hereinafter defined).

                  (c) A Person shall be deemed the "BENEFICIAL OWNER" of and
shall be deemed to "BENEFICIALLY OWN" any securities:

                           (i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly, including
without limitation securities with respect to which such Person or any such
Person's Affiliates or Associates has "beneficial ownership" pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act, as in effect
on the date of this Agreement;

                           (ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than these Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given to such Person in response to a public
proxy or consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act and (2) is
not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or

                           (iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding, voting
(except to the extent contemplated by the proviso to clause(ii)(B) above) or
disposing of any securities of the Company.

                  Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "THEN OUTSTANDING," when used with
reference to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then

                                       2

<PAGE>   6

issued and outstanding together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to own
beneficially hereunder.

                  (d) "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in the State of Minnesota are
authorized or obligated by law or executive order to close.

                  (e) "CLOSE OF BUSINESS" on any given date shall mean 5:00
P.M., prevailing Minneapolis time, on such date; provided, however, that if such
date is not a Business Day, it shall mean 5:00 P.M., prevailing Minneapolis
time, on the next succeeding Business Day.

                  (f) "COMMON SHARES" or "COMMON STOCK," when used with
reference to the Company, shall mean the shares of common stock, par value $.01
per share, of the Company. "COMMON SHARES" or "COMMON STOCK," when used with
reference to any Person other than the Company, shall mean the capital stock (or
equity interest) with the greatest voting power of such other Person or, if such
other Person is a Subsidiary of any other Person, the Person or Persons which
ultimately control such first mentioned Person.

                  (g) "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3.

                  (h) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.

                  (i) "EXCHANGE DATE" shall have the meaning set forth in
Section 7.

                  (j) "EXEMPT PERSON" shall mean the (i) Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the Company or of
any Subsidiary of the Company, (iv) any Person organized, appointed or
established by the Company for or pursuant to the terms of any such plan and (v)
any Person who or which, together with all Affiliates and Associates of such
Person, shall become the Beneficial Owner of the Threshold Percentage (or the
Alternative Threshold Percentage, if applicable) or more of the then outstanding
Common Shares as the result of acquisitions of Common Shares directly from the
Company; provided, however, that if a Person shall become the Beneficial Owner
of the Threshold Percentage (or the Alternative Threshold Percentage, if
applicable) or more of the Common Shares of the Company then outstanding by
reason of acquisitions of Common Shares directly from the Company and shall,
after such share acquisitions from the Company, increase the number of Common
Shares of the Company beneficially owned by such Person above the number of
Common Shares of the Company beneficially owned by such Person at the time of
the last such share acquisitions from the Company, then such Person shall be
deemed to be an "Acquiring Person".

                  (k) "FINAL EXPIRATION DATE" shall have the meaning set forth
in Section 7.

                  (l) "PERSON" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.

                                       3

<PAGE>   7

                  (m) "PERMITTED OFFER" shall mean a tender offer or an exchange
offer for all outstanding Common Shares of the Company at a price and on terms
determined, prior to the purchase of shares under such tender or exchange offer,
by the Board of Directors (as determined in its discretion by the vote of a
majority of the Directors then in office), after receiving advice from one or
more investment banking firms, to be (i) fair to shareholders of the Company
(taking into account all factors which such Continuing Directors deem relevant)
and (ii) otherwise in the best interests of the Company, its shareholders,
employees, customers, suppliers and creditors and the communities in which the
Company does business, and which such Continuing Directors determine to
recommend to the shareholders of the Company.

                  (n) "PREFERRED SHARES" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01, of the Company having the rights
and preferences set forth in the form of Certificate of Designations attached to
this Agreement as Exhibit A.

                  (o) "REDEMPTION DATE" shall have the meaning set forth in
Section 7.

                  (p) "SECTION 11(A)(II) EVENT" shall mean any event described
in Section 11(a)(ii).

                  (q) "SECTION 13 EVENT" shall mean any event described
in clauses (w), (x), (y) or (z) of Section 13(a).

                  (r) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by the Company or any Person that such Person has become an Acquiring
Person.

                  (s) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.

                  (t) "THRESHOLD PERCENTAGE" shall mean 10%.

                  (u) "TRIGGERING EVENT" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.

         SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3, shall prior to the Distribution Date also be the
holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable. In the event the Company appoints one or more co-Rights Agents, the
respective duties of the Rights Agent and any co-Rights Agent shall be as the
Company shall determine.

         SECTION 3. ISSUE OF RIGHT CERTIFICATES.

                                       4

<PAGE>   8

                  (a) Until the earlier of (i) the Close of Business on the
tenth Business Day after the Shares Acquisition Date, or (ii) the tenth Business
Day (or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of any Person (other than an Exempt Person)
to commence, a tender or exchange offer the consummation of which would result
in any Person becoming an Acquiring Person (the earlier of such dates being
referred to herein as the "DISTRIBUTION DATE"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b)) by the certificates for Common
Shares registered in the names of the holders thereof (which certificates shall
also be deemed to be Right Certificates) and not by separate Right Certificates,
and (y) the right to receive Right Certificates will be transferable only in
connection with the transfer of Common Shares. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights Agent
will, if requested, send) by first-class, postage-prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B (a "RIGHT CERTIFICATE"),
evidencing one Right for each Common Share so held. As of the Distribution Date,
the Rights will be evidenced solely by such Right Certificates.

                  (b) As soon as practicable after the Record Date, the Company
will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C (the "SUMMARY OF RIGHTS"), by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for Common Shares outstanding as of
the Close of Business on the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights. Until the
Distribution Date (or the earlier of the Redemption Date or the Final Expiration
Date if occurring prior to the Distribution Date), the surrender for transfer of
any certificate for Common Shares outstanding on the Record Date, with or
without a copy of the Summary of Rights attached thereto, shall also constitute
the transfer of the Rights associated with the Common Shares represented
thereby.

                  (c) Certificates for Common Shares which become outstanding
after the Record Date but prior to the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date shall have impressed on, printed
on, written on or otherwise affixed to them the following legend:

         This certificate also evidences and entitles the holder hereof to
         certain rights as set forth in a Rights Agreement between Rainforest
         Cafe, Inc. and Norwest Bank Minnesota, National Association, dated as
         of May 23, 2000 (the "RIGHTS AGREEMENT"), the terms of which are hereby
         incorporated herein by reference and a copy of which is on file at the
         principal executive offices of Rainforest Cafe, Inc. Under certain
         circumstances, as set forth in the Rights Agreement, such Rights will
         be evidenced by separate certificates and will no longer be evidenced
         by this certificate. Rainforest Cafe, Inc. will mail to the holder of
         this certificate a copy of the Rights Agreement without charge after
         receipt of a written request therefor. Under certain circumstances, as
         set forth

                                       5

<PAGE>   9

         in the Rights Agreement, Rights issued to any Person who becomes an
         Acquiring Person or an Associate or Affiliate thereof (as defined in
         the Rights Agreement), or certain transferees of such Person, may
         become null and void.

                  With respect to such certificates containing the foregoing
legend, until the earlier of (i) the Distribution Date or (ii) the Final
Expiration Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.

         SECTION 4.   FORM OF RIGHT CERTIFICATES.

                  (a) The Right Certificates (and the forms of election to
purchase Preferred Shares and of assignment to be printed on the reverse
thereof) shall be substantially the same as Exhibit B and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or automated quotations system on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11, the Right Certificates shall entitle the holders
thereof to purchase such number of one one-hundredths of a Preferred Share as
shall be set forth therein at the price per one one-hundredth of a Preferred
Share set forth therein (the "PURCHASE PRICE"), but the number of such one
one-hundredths of a Preferred Share and the Purchase Price shall be subject to
adjustment as provided herein.

                  (b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible and reasonably
identifiable as such) the following legend:

         The Rights represented by this Rights Certificate are or were
         beneficially owned by a Person who was or became an Acquiring Person or
         an Affiliate or Associate of an Acquiring Person (as such terms are
         defined in that certain Rights Agreement between Rainforest Cafe, Inc.
         and Norwest Bank Minnesota, National Association, dated as of May 23,
         2000 (the "RIGHTS Agreement"), the terms of which are hereby
         incorporated herein by reference and a copy of which is on file at the
         principal executive offices of Rainforest

                                       6

<PAGE>   10

         Cafe, Inc.). Accordingly, this Rights Certificate and the Rights
         represented hereby may become null and void in the circumstances
         specified in Section 7(e) of the Rights Agreement.

                  The provisions of Section 7(e) shall be operative whether or
not the foregoing legend is contained on any such Rights Certificate.

         SECTION 5.   COUNTERSIGNATURE AND REGISTRATION.

                  (a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer or its
President, either manually or by facsimile signature and shall be attested by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent for purposes of authorization only and shall not be valid for
any purpose unless countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the Person who signed such Right Certificates had not ceased to
be such officer of the Company; and any Right Certificate may be signed on
behalf of the Company by any Person who, at the actual date of the execution of
such Right Certificate, shall be a proper officer of the Company to sign such
Right Certificate, although at the date of the execution of this Rights
Agreement any such Person was not such an officer.

                  (b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.

         SECTION 6.  TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES.

                  (a) Subject to the provisions of Section 4(b), Section 7(e)
and Section 14, at any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the earlier of the Redemption
Date or the Final Expiration Date, any Right Certificate or Right Certificates
may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of one one-hundredths of a Preferred Share (or, following a
Triggering Event, Common Shares, other securities, cash or other assets, as the
case may be) as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and
Section 24, countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or

                                       7

<PAGE>   11

governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.

                  (b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will issue,
execute and deliver a new Right Certificate of like tenor to the Rights Agent
for countersignature and delivery to the registered holder in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.

         SECTION 7.   EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE
OF RIGHTS.

                  (a) Subject to Section 7(e), the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
on the reverse side thereof duly executed, to the Rights Agent at the office or
offices of the Rights Agent designated for such purpose, together with payment
of the Purchase Price for each one one-hundredth of a Preferred Share as to
which the Rights are exercised, at or prior to the earliest of (i) the Close of
Business on May 23, 2010 (the "FINAL EXPIRATION DATE"), (ii) the time at which
the Rights are redeemed as provided in Section 23 (the "REDEMPTION Date") or
(iii) the time at which such Rights are exchanged as provided in Section 24 (the
"EXCHANGE DATE").

                  (b) The Purchase Price for each one one-hundredth of a
Preferred Share purchasable pursuant to the exercise of a Right shall initially
be $15, shall be subject to adjustment from time to time as provided in Sections
11 and 13 and shall be payable in lawful money of the United States of America
in accordance with paragraph (c) below.

                  (c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the Preferred Shares (or other
shares, securities, cash or other assets, as the case may be) to be purchased
and an amount equal to any applicable transfer tax required to be paid by the
holder of such Right Certificate in accordance with Section 9 by certified
check, cashier's check or money order payable to the order of the Company, the
Rights Agent shall thereupon promptly (i) (A) requisition from any transfer
agent for the Preferred Shares (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the number of Preferred Shares
to be purchased and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Company shall have elected to
deposit with a depository agent the total number of Preferred Shares issuable
upon exercise of the Rights hereunder, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in

                                       8

<PAGE>   12

accordance with Section 14, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder, and (iv) when appropriate, after receipt,
deliver such cash to or upon the order of the registered holder of such Right
Certificate.

                  (d) In case the registered holder of any Right Certificate
shall exercise less than all of the Rights evidenced thereby, a new Right
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to such holder's duly authorized assigns, subject to the
provisions of Section 14.

                  (e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights Beneficially Owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to insure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or any of their
respective Affiliates, Associates or transferees hereunder.

                  (f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section unless such registered
holder shall have (i) duly completed and executed the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) of such Right Certificate or
Affiliates or Associates thereof as the Company shall reasonably request.

         SECTION 8. CANCELLATION OF RIGHT CERTIFICATES. All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination or
exchange shall, if surrendered to the Company or to any of its agents, be
delivered to the Rights Agent for cancellation or in canceled form, or, if
surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the

                                       9

<PAGE>   13

exercise thereof. The Rights Agent shall deliver all canceled Right Certificates
to the Company.

         SECTION 9.   AVAILABILITY OF PREFERRED SHARES.

                  (a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares,
the number of Preferred Shares that will be sufficient to permit the exercise in
full of all outstanding Rights.

                  (b) At such time, if any, as the Preferred Shares issuable
upon the exercise of Rights may be listed on any national securities exchange,
the Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable (but only to the extent that it is reasonably likely
that the Rights will be exercised), all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise.

                  (c) The Company will prepare and file, as soon as practicable
after the Distribution Date, a registration statement under the Securities Act
of 1933, as amended (the "ACT"), with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and use its best
efforts to cause such registration statement to (i) become effective as soon as
practicable after such filing, and (ii) remain effective (with a prospectus at
all times meeting the requirements of the Act) until the earlier of (A) the date
as of which the Rights are no longer exercisable for such securities or (B) the
Final Expiration Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed 90 days
after the date the registration statement is filed, the exercisability of the
Rights in order to permit the registration statement to become effective. Upon
any such suspension, the Company shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained or the exercise thereof is not
permitted under applicable law.

                  (d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Preferred Shares delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such Preferred Shares (subject to payment of the Purchase Price and any
applicable transfer taxes), be duly and validly authorized and issued and fully
paid and nonassessable shares.

                  (e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Right
Certificates or of any Preferred Shares upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a Person other
than, or the issuance or delivery of certificates or depositary receipts for the
Preferred Shares in a name other than that of the registered holder of the Right
Certificate evidencing Rights surrendered for exercise, or to issue or to
deliver any certificates or depositary receipts

                                       10

<PAGE>   14

for Preferred Shares upon the exercise of any Rights until any such tax shall
have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's reasonable satisfaction that no such tax is due.

         SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for a number of one one-hundredths of a Preferred Share (or Common
Shares and/or other securities, as the case may be) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Preferred Shares (or Common Shares and/or other securities, as the case
may be) represented thereby on, and such certificate shall be dated, the date
upon which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the transfer books of the Company for the Preferred Shares are closed,
such Person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the next succeeding Business Day on which
such transfer books are open. Prior to the exercise of the Rights evidenced
thereby, the holder of a Right Certificate shall not be entitled to any rights
of a holder of Preferred Shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.

         SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF
RIGHTS. The Purchase Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11:

                  (a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e), the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
If an event occurs which would require an adjustment under both Section 11(a)(i)
and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii).

                                       11

<PAGE>   15

                      (ii) Subject to Section 24 of this Agreement, in the
event any Person becomes an Acquiring Person, other than pursuant to any
transaction set forth in Section 13(a), then proper provision shall be made so
that each holder of a Right (except as otherwise provided below and in Section
7(e)) shall thereafter have a right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement and
in lieu of Preferred Shares, such number of Common Shares of the Company as
shall equal the result obtained by (x) multiplying the then current Purchase
Price by the number of one one-hundredths of a Preferred Share for which a Right
was exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event and dividing that product by (y) 50% of the then current per share market
price of the Company's Common Shares (determined pursuant to Section 11(d)) on
the date of the occurrence of such event (such number of shares being referred
to as the "ADJUSTMENT SHARES"). In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall not
take any action which would eliminate or diminish the benefits intended to be
afforded by the Rights.

                      (iii) In lieu of issuing Common Stock in accordance
with Section 11(a)(ii) hereof, the Company may, if its Board of Directors
determines in its discretion (as evidenced by the vote of a majority of the
directors then in office) that such action is necessary or appropriate and not
contrary to the interests of the holders of the Rights as a whole, (A) determine
the value of the Adjustment Shares issuable upon the exercise of a Right (the
"CURRENT VALUE"), and (B) with respect to each Right (subject to Section 7(e)
hereof), make adequate provision to substitute for the Adjustment Shares, upon
the exercise of a Right and payment of the applicable Purchase Price, (1) cash,
(2) a reduction in the Purchase Price, (3) Common Shares or other equity
securities of the Company (including, without limitations, shares, or units of
shares, of preferred stock, such as the Preferred Shares, which the Board has
deemed to have essentially the same value or economic rights as Common Shares
(such shares of preferred stock being referred to as "COMMON SHARE
EQUIVALENTS")), (4) debt securities of the Company, (5) other assets, or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value (less the amount of any reduction in the Purchase Price), where such
aggregate value has been determined by the Board based upon the advice of a
nationally recognized investment banking firm selected by the Board; provided,
however, that if the Company shall not have made adequate provision to deliver
value pursuant to clause (B) above within ninety (90) days following the first
occurrence of a Section 11(a)(ii) Event (such ninety (90) day period is referred
to herein as the "SUBSTITUTION PERIOD"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, Common Shares (to the extent available) and then,
if necessary, cash, which shares and/or cash have an aggregate value equal to
the Spread. For purposes of the preceding sentence, the term "Spread" shall mean
the excess of (i) the Current Value over (ii) the Purchase Price. To the extent
that action is to be taken pursuant to the first and/or third sentences of this
Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights, and
(2) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such shareholder approval for such
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this

                                       12

<PAGE>   16

Section 11(a)(iii), the value of each Adjustment Share shall be the "CURRENT PER
SHARE MARKET PRICE" (as determined pursuant to Section 11(d)(i)) per Common
Share on the date of the first occurrence of Section 11(a)(ii) Event and the per
share or per unit value of any Common Share Equivalent shall be deemed to equal
the "CURRENT MARKET PRICE" per Common Share on such date.

                  (b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them to subscribe for or purchase Preferred Shares (or shares having
the same rights, privileges and preferences as the Preferred Shares (such shares
are herein called "PREFERRED SHARE EQUIVALENTS")) or securities convertible into
Preferred Shares or preferred share equivalents at a price per Preferred Share
or preferred share equivalent (or having a conversion price per share, if a
security convertible into Preferred Shares or preferred share equivalents) less
than the then current per share market price (as such term is defined in Section
11(d)) of the Preferred Shares on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of Preferred Shares outstanding on such
record date plus the number of Preferred Shares which the aggregate offering
price of the total number of Preferred Shares and/or preferred share equivalents
so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of additional Preferred Shares
and/or preferred share equivalents to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable n price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Preferred Shares held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.

                  (c) In case the Company shall fix a record date for the making
of a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b)), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then current per share market price of the Preferred Shares on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share, and the denominator of which shall be such
current per

                                       13

<PAGE>   17
share market price of the Preferred Shares; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company to be
issued upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.

                  (d) (i) For the purpose of any computation hereunder, the
"CURRENT PER SHARE MARKET PRICE" of any security (a "SECURITY" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive Trading
Days immediately prior to such date; provided, however, that in the event that
the current per share market price of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a dividend or
distribution on such Security payable in shares of such Security or securities
convertible into such shares, or (B) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each such
case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
not so quoted the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if on any such date the Security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by the Board
of Directors of the Company. If on any such day no market maker is making a
market in the Common Shares, the fair value of such share on such day as
determined in good faith by the Board of Directors of the Company shall be used
in lieu of the closing price for such day. The term "TRADING DAY" shall mean a
day on which the principal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of business or, if the
Security is not listed or admitted to trading on any national securities
exchange, a Business Day.

                      (ii) For the purpose of any computation hereunder,
the "CURRENT PER SHARE MARKET PRICE" of the Preferred Shares shall be determined
in accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "CURRENT PER SHARE MARKET PRICE" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by one thousand. If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "CURRENT PER SHARE MARKET PRICE" of the Preferred Shares shall
mean the fair value per share as

                                       14

<PAGE>   18

determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.

                  (e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one one
hundred-thousandth of a Preferred Share or one thousandth of any other share or
security as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which requires
such adjustment or (ii) the date of the expiration of the right to exercise any
Rights.

                  (f) If as a result of an adjustment made pursuant to Section
11(a) and 13(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Shares shall apply on like terms to any such other shares.

                  (g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.

                  (h) Unless the Company shall have exercised its election as
provided in Section 11(i) below, subject to the provisions of Sections 11(a) and
13, upon each adjustment of the Purchase Price as a result of the calculations
made in Sections 11(b) and (c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Purchase Price, that number of one one-thousandths of a Preferred
Share (calculated to the nearest one one hundred-thousandth of a Preferred
Share) obtained by (i) multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.

                  (i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of one one-hundredths of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one one-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect

                                       15

<PAGE>   19

immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least ten days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein, may bear, at the option of
the Company, the adjusted Purchase Price, and shall be registered in the names
of the holders of record of Right Certificates on the record date specified in
the public announcement.

                  (j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-thousandths of a Preferred Share issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-thousandths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.

                  (k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-thousandth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Purchase Price.

                  (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

                  (m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their sole discretion the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for
cash of any Preferred Shares at less than the current market price, (iii)
issuance wholly for cash of

                                       16

<PAGE>   20

Preferred Shares or securities which by their terms are convertible into or
exchangeable for Preferred Shares, (iv) dividends on Preferred Shares payable in
Preferred Shares or (v) issuance of rights, options or warrants referred to
hereinabove in Section 11(b), hereafter made by the Company to holders of its
Preferred Shares shall not be taxable to such shareholders.

                  (n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its subsidiaries in one or more transaction each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "PRINCIPAL PARTY" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.

                  (o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23, 24 or 27,
take (or permit any Subsidiary of the Company to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.

                  (p) Anything in this Agreement or the Rights to the contrary
notwithstanding, in the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (i) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (ii) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(p) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or consolidation
is effected. If an event occurs which would require an adjustment under Section
11(a)(ii) and this Section 11(p), the adjustments provided for in this Section
11(p) shall be in addition and prior to any adjustment required pursuant to
Section 11(a)(ii).

                                       17

<PAGE>   21

         SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13, the Company
shall promptly (a) prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment, (b) file with the
Rights Agent and with each transfer agent for the Common Shares or the Preferred
Shares a copy of such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25.

         SECTION 13.  CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.

                  (a) In the event that, on or following the Shares
Acquisition Date, directly or indirectly,

                      (w) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
tr3ansaction which complies with Section 11(o)) and the Company shall not be the
continuing or surviving corporation of such consolidation or merger;

                      (x) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)) shall consolidate
with, or merge with and into, the Company, the Company shall be the continuing
or surviving corporation of such consolidation or merger and, in connection with
such consolidation or merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property;

                      (y) the Company shall effect a statutory share exchange
with the outstanding Common Shares of the Company being exchanged for stock or
other securities of any other Person, cash or property; or

                      (z) the Company shall sell or otherwise transfer (or
one or more of its Subsidiaries shall sell or otherwise transfer), in one or
more transactions, assets or earning power aggregating 50% or more of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more of its wholly owned
Subsidiaries in a transaction which complies with Section 11(o));

then, and in each such case, except as contemplated by Section 13(e), proper
provision shall be made so that (i) each holder of a Right (except as otherwise
provided in Section 7(e)) shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, in accordance with the
terms of this Agreement and in lieu of Preferred Shares, such number of validly
authorized and issued, fully paid, nonassessable and freely tradeable Common
Shares of the Principal Party (as hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or adverse claims, as shall be
equal to the result obtained by (x) multiplying the then current Purchase Price
by the number of one one-hundredths of a Preferred Share for which a Right is,
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such one one-hundredths of a Preferred Share
for which a Right was exercisable immediately prior to the first occurrence of
the Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
the first occurrence), exercisable

                                       18

<PAGE>   22

and (y) dividing that product by 50% of the current per share market price of
the Common Shares of such Principal Party (determined pursuant to Section 11(d))
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such merger,
consolidation, statutory share exchange, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "COMPANY"
shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; and (iv)
such Principal Party shall take all steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares to permit the exercise
of all outstanding Rights) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions of this Agreement
shall thereafter be applicable, as nearly as reasonably may be, in relation to
its Common Shares thereafter deliverable upon the exercise of the Rights.

                  (b)      "PRINCIPAL PARTY" shall mean:

                           (i) in the case of any transaction described in
clauses (w), (x) or (y) of the first sentence of Section 13(a), the Person that
is the issuer of any securities into which Common Shares of the Company are
converted in such merger, consolidation or exchange, or if no securities are so
issued, the Person that is the other party to such merger, consolidation or
exchange; and

                           (ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions;

provided, however, that in any such case, (1) if the Common Shares of such
Person are not at such time or have not been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act, and such Person
is a direct or indirect Subsidiary of another Person the Common Shares of which
are and have been so registered, "PRINCIPAL PARTY" shall refer to such other
Person, and (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of two or more of which are and have
been so registered, "PRINCIPAL PARTY" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market value.

                  (c) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of authorized,
unreserved Common Shares which have not been issued or are held in treasury to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any Section 13 Event,
the Principal Party will:

                           (i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable upon exercise
of the Rights, on an appropriate form, and use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus

                                       19

<PAGE>   23

at all times meeting the requirements of the Act) until the earlier of (1) the
date as of which the Rights are no longer exercisable for such securities or (2)
the Final Expiration Date;

                           (ii) take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights; and

                           (iii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.

                  (d) The Company shall not enter into any transaction of the
kind referred to in this Section 13 if at the time of such transaction there are
any rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights. Without limiting the generality of the preceding
sentence, in case the Principal Party which is to be a party to a transaction of
the kind referred to in this Section 13 has a provision in any of its authorized
securities or in its articles of incorporation or bylaws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with, or as a consequence
of, the consummation of a transaction of the kind referred to in this Section
13, Common Shares of such Principal Party at less than the then current per
share market price (determined pursuant to Section 11(d)) or securities
exercisable for or convertible into Common Shares of such Principal Party at
less than such then current market price (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special payment, tax or
similar provisions in connection with the issuance of Common Shares of such
Principal Party pursuant to the provisions of Section 13; then, in such event,
the Company shall not consummate any such transaction unless prior thereto the
provision in question of such Principal Party shall have been canceled, waived
or amended so as to avoid any of the effects referred to in clauses (i) and (ii)
of this paragraph, or the authorized securities shall have been redeemed, so
that the applicable provision will have no effect in connection with, or as a
consequence of, the consummation of the proposed transaction.

                  (e) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
clauses (w), (x) or (y) of Section 13(a) if (i) such transaction is consummated
with a Person or Persons who acquired Common Shares pursuant to a Permitted
Offer (or a wholly owned Subsidiary of any such Person or Persons), (ii) the
price per Common Share offered in such transaction is not less than the price
per Common Share paid to all holders of Common Shares whose shares were
purchased pursuant to such tender offer or exchange offer and (iii) the form of
consideration being offered to the remaining holders of Common Shares pursuant
to such transaction is the same as the form of consideration paid pursuant to
such tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(e), all Rights hereunder shall expire.

                  (f) The provisions of this Section 13 shall similarly apply to
successive mergers, consolidations, statutory share exchanges or sale or other
transfers.

         SECTION 14.  FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

                                       20

<PAGE>   24

                  (a) The Company shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or, if
the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.

                  (b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, however, that if the Company issues
depositary receipts pursuant to any such agreement, such agreement shall provide
that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, the Company shall pay to the registered holders of Right
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one Preferred
Share. For the purposes of this Section 14(b), the current market value of a
Preferred Share shall be the closing price of a Preferred Share (as determined
pursuant to Section 11(d)) for the Trading Day immediately prior to the date of
such exercise.

                  (c) The holder of a Right by the acceptance of the Right
expressly waives such holder's right to receive any fractional Rights or any
fractional shares upon exercise of a Right (except as provided above).

                                       21

<PAGE>   25

         SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.

         SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:

                  (a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;

                  (b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer; and

                  (c) subject to Section 6(a) and Section 7(f), the Company and
the Rights Agent may deem and treat the Person in whose name the Right
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary; and

                  (d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.

         SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Preferred Shares or any
other securities of the Company which

                                       22

<PAGE>   26

may at any time be issuable on the exercise of the Rights represented thereby,
nor shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in Section 25), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions of this Agreement.

         SECTION 18.  CONCERNING THE RIGHTS AGENT.

                  (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability in the premises.

                  (b) The Rights Agent shall be protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with, its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Shares (or for depositary receipts
evidencing fractional interests in Preferred Shares) or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons, or otherwise upon the advice of counsel as set
forth in Section 20.

         SECTION 19.  MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.

                  (a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust business of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties to this Agreement, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement any of the Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor

                                       23

<PAGE>   27

Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

                  (b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.

         SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:

                  (a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.

                  (b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.

                  (c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own negligence, bad faith or willful
misconduct.

                  (d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.

                  (e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery of this
Agreement (except the due execution of this Agreement by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including the Rights becoming void pursuant to Section 11(a)(ii)) or
any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the ascertaining
of the existence of facts that would require any such change or adjustment
(except with respect to

                                       24

<PAGE>   28

the exercise of Rights evidenced by Right Certificates after receipt of actual
notice from the Company stating that a change or adjustment is required and
specifying the manner and amount thereof); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant to this Agreement or
any Right Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.

                  (f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.

                  (g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer or for any delay in acting while waiting
for those instructions.

                  (h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

                  (i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.

                  (j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.

         SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become

                                       25

<PAGE>   29

incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit such
holder's Right Certificate for inspection by the Company), then the registered
holder of any Right Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of the State
of Minnesota or New York (or of any other state of the United States so long as
such corporation is authorized to do business as a banking institution in the
State of Minnesota or New York), in good standing, having an office in the State
of Minnesota or New York, which is authorized under such laws to exercise
corporate trust or stock transfer powers and is subject to supervision or
examination by federal or state authority and which has or is a subsidiary of a
corporation which has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $250 million, or (b) an affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares and Preferred Shares, and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.

         SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.

         SECTION 23.  REDEMPTION.

                                       26

<PAGE>   30

                  (a) The Board Directors (as determined in its discretion by
the vote of a majority of the Directors then in office) may, at its option, at
any time prior to the earlier of (i) the Close of Business on the tenth Business
Day after the related Shares Acquisition Date or (ii) the Final Expiration Date,
redeem all but not less than all of the then outstanding Rights at a redemption
price of $.01 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date of this Agreement
(such redemption price being hereinafter referred to as the "REDEMPTION PRICE").
The redemption of the Rights by the Board of Directors may be made effective at
such time and on such basis and with such conditions as the Board of Directors
in their sole discretion may establish. The Company may, at its option, pay the
Redemption Price in cash, Common Shares (based on the "CURRENT MARKET PRICE", as
defined in Section 11(d)(i), of the Common Shares at the time of the redemption)
or any other form of consideration deemed appropriate by the Board Directors;
provided, however, that if the Company elects to pay the Redemption Price in
Common Shares, the Company shall not be required to issue any fractional Common
Shares, and the number of shares issuable to each holder of Rights shall be
rounded down to the next whole number.

                  (b) Immediately upon the action of the Board of Directors
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten days after such action of the Board of Directors ordering the
redemption of the Rights, the Company shall mail a notice of redemption to all
the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24, and other than in
connection with the purchase of Common Shares prior to the Distribution Date.

         SECTION 24.  EXCHANGE.

                  (a) The Board of Directors (as determined in its discretion by
the vote of a majority of the Directors then in office) may, at its option, at
any time after any Person becomes an Acquiring Person, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e)), for Common Shares,
with each Right to be exchanged for such number of Common Shares as shall equal
the result obtained by dividing (x) the Purchase Price by (y) the current market
price of the Common Shares (determined pursuant to Section 11(d) (such number of
shares being hereinafter referred to as the "EXCHANGE RATIO"). The Exchange
Ratio shall be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date of this Agreement.
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any

                                       27

<PAGE>   31

Person (other than an Exempt Person) together with all Affiliates and Associates
of such Person, becomes the Beneficial Owner of 50% or more of the Common Shares
then outstanding.

                  (b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of outstanding and
exercisable Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii)) held by each holder of Rights.

                  (c) In the event that there shall not be sufficient Common
Shares authorized but unissued and unreserved to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exchange of a Right, a number of
Preferred Shares or fraction thereof such that the current per share market
price of one Preferred Share multiplied by such number or fraction is equal to
the current per share market price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof.

                  (d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share. For the
purposes of this paragraph (d), the current market value of a whole Common Share
shall be the closing price of a Common Share (as determined pursuant to the
second sentence of Section 11(d)(i)) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.

         SECTION 25.  NOTICE OF CERTAIN EVENTS.

                  (a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any

                                       28

<PAGE>   32

additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect any
statutory share exchange with the outstanding Common Shares of the Company being
exchanged for stock or other securities of any other corporation or cash or
other property, (vi) to effect the liquidation, dissolution or winding up of the
Company, or (vii) to declare or pay any dividend on the Common Shares payable in
Common Shares or to effect a subdivision, combination or consolidation of the
Common Shares (by reclassification or otherwise than by payment of dividends in
Common Shares), then, in each such case, the Company shall give to each holder
of a Right Certificate, in accordance with Section 26, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of the Common Shares and/or Preferred Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by clause (i) or (ii) of this paragraph at least ten days prior to the record
date for determining holders of the Preferred Shares for purposes of such
action, and in the case of any such other action, at least ten days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the Common Shares and/or Preferred Shares, whichever shall be
the earlier.

                  (b) In case the event set forth in Section 11(a)(ii) shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii).

         SECTION 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                  Rainforest Cafe, Inc.
                  720 South Fifth Street
                  Hopkins, MN  55343
                  Attention:  Corporate Secretary

Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:

                  Norwest Bank Minnesota, N. A.
                  161 North Concorde Exchange
                  So. St. Paul, MN  55075-0538
                  Attention:  Greg Luedke

                                       29

<PAGE>   33

Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.

         SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any
provisions of this Agreement without the approval of any holders of certificates
representing shares of Common Stock; provided, this Agreement may not be
supplemented or amended without the approval of the Board of Directors (as
determined in its discretion by the vote of a majority of the Directors then in
office). From and after the Distribution Date, the Company and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement or amend any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
to shorten or lengthen any time period hereunder or (iv) to change or supplement
the provisions hereunder in any manner which the Company may deem necessary or
desirable and which shall not adversely affect the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided, this Agreement may not be supplemented or
amended without the approval of the Board of Directors (as determined in its
discretion by the vote of a majority of the Directors then in office). Upon
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Shares.

         SECTION 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

         SECTION 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).

         SECTION 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

         SECTION 31. GOVERNING LAW. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Minnesota

                                       30

<PAGE>   34

and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts to be made and performed entirely
within such State.

         SECTION 32. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

         SECTION 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions of this
Agreement.

            [The remainder of this page is intentionally left blank.]

                                       31

<PAGE>   35

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first above written.

                                      RAINFOREST CAFE, INC.:

                                      By:   /s/ Lyle Berman
                                            ---------------------

                                      Its:  Chairman and Chief Executive Officer
                                            ------------------------------------

                                      NORWEST BANK MINNESOTA
                                               NATIONAL ASSOCIATION:

                                      By:   /s/ Barbara M. Novak
                                            ---------------------
                                      Its:  Vice President
                                            ------------------------------------

                        Signature Page - Rights Agreement

<PAGE>   36

                                    EXHIBIT A

                           CERTIFICATE OF DESIGNATION
                                       OF
                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
                                       OF
                              RAINFOREST CAFE, INC.

         The undersigned hereby certifies that the Board of Directors of
Rainforest Cafe, Inc. (the "CORPORATION"), a corporation organized and existing
under the Minnesota Business Corporation Act, duly adopted the following
resolution on May 9, 2000:

         RESOLVED, that a series of preferred stock of the Corporation is hereby
created, and the designation and amount thereof and the relative rights and
preferences of the shares of such series, are as follows:

          SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "PREFERRED
SHARES") and the number of shares constituting the Preferred Shares shall be
300,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors and any necessary shareholder approval; provided,
however, that no decrease shall reduce the number of shares of Preferred Shares
to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Preferred Shares.

         SECTION 2.  DIVIDENDS AND DISTRIBUTIONS.

         (a) Subject to the rights of the holders of any shares of any series of
preferred stock (or any similar stock) ranking prior and superior to the
Preferred Shares with respect to dividends, the holders of Preferred Shares, in
preference to the holders of Common Stock, par value $0.01 per share (the
"COMMON STOCK"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the first day of March, June, September and December in each year (each such
date being referred to herein as a "QUARTERLY DIVIDEND PAYMENT DATE"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Preferred Shares, in an amount per share
(rounded to the nearest cent) equal to the greater of (i) $0.01 or (ii) subject
to the provision for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all noncash dividends or other distributions, other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Preferred Shares. In the
event the Corporation shall at any time after May 24, 2000, declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision
                                       1

<PAGE>   37

or combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount to which holders of shares of
Preferred Shares were entitled immediately prior to such event under clause (ii)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

         (b) The Corporation shall declare a dividend or distribution on the
Preferred Shares as provided in paragraph (a) of this Section immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
Common Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $0.01 per share on the Preferred Shares shall nevertheless be
payable, out of funds legally available for such purpose, on such subsequent
Quarterly Dividend Payment Date.

         (c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Preferred Shares from their date of issue. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Preferred
Shares in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of Preferred
Shares entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.

         SECTION 3. VOTING RIGHTS.

         (a) Subject to the provision for adjustment hereinafter set forth, each
Preferred Share shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the shareholders of the Corporation. In the event the
Corporation shall at any time after May 24, 2000, declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the number of votes per share to which
holders of shares of Preferred Shares were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

         (b) Except as otherwise provided herein or by law, the holders of
Preferred Shares and the holders of Common Stock and any other capital stock of
the Corporation having general voting rights shall vote together as one class on
all matters submitted to a vote of shareholders of the Corporation.

                                       2

<PAGE>   38

         (c) Except as set forth herein or required by law, holders of Preferred
Shares shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.

         SECTION 4. CERTAIN RESTRICTIONS.

         (a) Whenever quarterly dividends or other dividends or distributions
payable on the Preferred Shares as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Preferred Shares outstanding shall have been paid
in full, the Corporation shall not:

                  (i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Preferred Shares;

                  (ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Preferred
Shares, except dividends paid ratably on the Preferred Shares and all such
parity stock on which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then entitled;

                  (iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Preferred Shares; provided,
however, that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Preferred Shares; or

                  (iv) redeem or purchase or otherwise acquire for consideration
any Preferred Shares, or any stock ranking on a parity with the Preferred
Shares, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.

         (b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

         SECTION 5. REACQUIRED SHARES. Any Preferred Shares purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of capital stock and
may be reissued as common stock or as part of any new series of preferred stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation, or in any other certificate of designation creating a
series of preferred stock or any similar stock or as otherwise required by law.

                                       3

<PAGE>   39

Upon such cancellation of Preferred Shares, the authorized number of Preferred
Shares set forth in Section 1 hereof shall be reduced automatically by the
number of Preferred Shares cancelled and the number of undesignated capital
stock shall be deemed increased by such number.

         SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Preferred
Shares unless, prior thereto, the holders of Preferred Shares shall have
received the greater of (i) $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, or (ii) an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate amount to
be distributed per share to holders of Common Stock, or (2) to the holders of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Preferred Shares, except distributions made
ratably on the Preferred Shares and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time after May 24, 2000, declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of shares of Preferred
Shares were entitled immediately prior to such event under clause (1)(ii) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

         SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Preferred Shares shall at the same time be similarly exchanged or changed into
an amount per share, subject to the provision for adjustment hereinafter set
forth, equal to 100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time after May 24, 2000, declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Preferred Shares
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

         SECTION 8.  NO REDEMPTION.  The Preferred Shares shall not be
redeemable.

                                       4

<PAGE>   40

         SECTION 9. RANK. The Preferred Shares shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's preferred stock.

         SECTION 10. FRACTIONAL SHARES. Preferred Shares may be issued in
fractions of a share which are integral multiples of one one-hundredth of a
share which shall entitle the holder, in proportion to such holder's fractional
shares, to receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Preferred Shares.

         SECTION 11. AMENDMENT. The Articles of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or rights of the Preferred Shares so as to affect them
adversely without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Preferred Shares, voting together as a single class.

         IN WITNESS WHEREOF, I have subscribed my name this ___ day of May,
2000.

                                                     RAINFOREST CAFE, INC.

                                                     By:
                                                         -----------------------
                                                     Its:
                                                         -----------------------

                                       5

<PAGE>   41

                                    EXHIBIT B

                           FORM OF RIGHT CERTIFICATES

Certificate No. R-___                                       __________Rights

NOT EXERCISABLE AFTER MAY ___, 2010 OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT (SUBJECT TO ADJUSTMENT)
AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY A
PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE
OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
SUBSEQUENT HOLDERS OF SUCH RIGHTS MAY BECOME NULL AND VOID.

                                RIGHT CERTIFICATE

                              RAINFOREST CAFE, INC.

         This certifies that _____________________ , or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of May ___, 2000 (the "RIGHTS AGREEMENT"),
between Rainforest Cafe, Inc., a Minnesota corporation (the "COMPANY"), and
Norwest Bank Minnesota, National Association (the "RIGHTS AGENT"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M., Minneapolis time, on
May ___, 2010 at the office or offices of the Rights Agent designated for such
purpose, or of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, par value
$.01 per share (the "PREFERRED SHARES"), of the Company, at a purchase price of
$15 (the "PURCHASE PRICE"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed. The number of
Rights evidenced by this Right Certificate (and the number of one one-hundredths
of a Preferred Share which may be purchased upon exercise hereof) set forth
above, and the Purchase Price set forth above, are the number and Purchase Price
as of May 24, 2000, based on the Preferred Shares as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number of one
one-hundredths of a Preferred Share which may be purchased upon the exercise of
the Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.

         This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the

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<PAGE>   42

above-mentioned office or offices of the Rights Agent and will be mailed without
charge by the Company or the Rights Agent to the holder of this certificate
promptly following receipt by the Company or the Rights Agent of a written
request therefor.

         From and after the occurrence of a Section 11(a)(ii) Event (as such
term is defined in the Rights Agreement), any Rights that are or were acquired
or beneficially owned by any Acquiring Person (or any Associate or Affiliate of
such Acquiring Person) (as such terms are defined in the Rights Agreement) shall
be void and any holder of such Rights shall thereafter have no right to exercise
such Rights under any provision of this Agreement.

         This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this certificate (i) may, but are not required to, be redeemed by the Company
at a redemption price of $.01 per Right, subject to adjustment as provided in
the Rights Agreement, and (ii) may, but are not required to, be exchanged by the
Company in whole or in part for Common Shares.

         No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

         No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

         This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

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<PAGE>   43

         WITNESS the manual or facsimile signature of the proper officer of the
Company.

Dated:

                                                     RAINFOREST CAFE, INC.

                                                     By:
                                                        ------------------------
                                                     [NAME and TITLE]

Countersigned for purposes
of authentication only:

NORWEST BANK MINNESOTA,
        NATIONAL ASSOCIATION

By
   --------------------------------------
   Authorized Signature

                                       3

<PAGE>   44

                    FORM OF REVERSE SIDE OF RIGHT CERTIFICATE

                               FORM OF ASSIGNMENT

                   (To be executed by the registered holder if
             such holder desires to transfer the Right Certificate.)

         FOR VALUE RECEIVED,              hereby sells, assigns and transfers
unto                                              (PRINT NAME OF TRANSFEREE)
                                       (PRINT ADDRESS OF TRANSFEREE) this Right
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint               Attorney, to transfer
the within Right Certificate on the books of the within-named Company, with full
power of substitution.

Please insert social security number, taxpayer identification
number or other identifying number:
                                    ---------------------------------

Dated:
       ------------------------------

                                    --------------------------------------------
                                    Signature

Signature Guaranteed:
                      -----------------------------------------------

         The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.

                                       4

<PAGE>   45

              FORM OF REVERSE SIDE OF RIGHT CERTIFICATE--CONTINUED

                          FORM OF ELECTION TO PURCHASE

                      (To be executed if holder desires to
                        exercise the Right Certificate.)

To:   [Name]

                  The undersigned hereby irrevocably elects to exercise_________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:

Please insert social security number, taxpayer identification
number or other identifying number:
                                    ----------------------------------------

--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security number, taxpayer identification
number or other identifying number:
                                    ------------------------------------

--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

Dated:
       ------------------------------------

                                    --------------------------------------
                                    Signature

Signature Guaranteed:
                      ----------------------------------------------------------

         The signature(s) should be guaranteed by an eligible guarantor
institution (banks, stockbrokers, savings and loan associations and credit
unions with membership in an approved signature guarantee medallion program),
pursuant to S.E.C. Rule 17Ad-15.

                                       5

<PAGE>   46

                                    EXHIBIT C

                              RAINFOREST CAFE, INC.

                          SUMMARY OF RIGHTS TO PURCHASE
                                PREFERRED SHARES

         On May 9, 2000, the Board of Directors of Rainforest Cafe, Inc. (the
"COMPANY"), declared a dividend of one preferred share purchase right (a
"RIGHT") per share for each outstanding share of Common Stock, par value $.01
(the "COMMON SHARES"), of the Company. The dividend is payable on May 24, 2000
(the "RECORD DATE") to shareholders of record as of the close of business on
that date.

         Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock,
par value $.01 (the "PREFERRED SHARES"), of the Company at a price of $15 per
one-hundredth of a Preferred Share (the "PURCHASE PRICE"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "RIGHTS AGREEMENT"), dated as of May 23, 2000, between the
Company and Norwest Bank Minnesota, National Association, as Rights Agent (the
"RIGHTS AGENT").

         Initially, the Rights will be evidenced by the certificates
representing Common Shares then outstanding and no separate Right Certificates
will be distributed. The Rights will separate from the Common Shares, and a
Distribution Date for the Rights will occur upon the earlier of: (i) the close
of business on the tenth business day following the first date of public
announcement that a person or group of affiliated or associated Persons has
become an "ACQUIRING PERSON" (i.e., has become, subject to certain exceptions,
the beneficial owner of 10% or more of the outstanding Common Shares) (except
pursuant to a Permitted Offer, as hereinafter defined) and (ii) the 10th
business day following the commencement or public announcement of a tender offer
or exchange offer, the consummation of which would result in a Person or group
of affiliated or associated Persons becoming, subject to certain exceptions, the
beneficial owner of 10% or more of the outstanding Common Shares (or such later
date as may be determined by the Board of Directors of the Company prior to a
Person or group of affiliated or associated Persons becoming an Acquiring
Person) (the earlier of such dates being called the "DISTRIBUTION DATE"). The
ownership percentage threshold applicable to a person or group who held 10% or
more of the Common Shares on May 9, 2000 is 15%.

         Until the Distribution Date, (i) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with the Common
Shares, (ii) new Common Share certificates issued after the Record Date upon
transfer or new issuance of the Common Shares will contain a notation
incorporating the Rights Agreement by reference, and (iii) the surrender for
transfer of any Common Share certificate, even without such notation or a copy
of this Summary of Rights attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate.

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<PAGE>   47

         As promptly as practicable following the Distribution Date, separate
certificates evidencing the Rights ("RIGHT CERTIFICATES") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date, and such separate Right Certificates alone will evidence the
Rights.

         The Rights are not exercisable until the Distribution Date. The Rights
will expire on May 23, 2010, unless extended or earlier redeemed or exchanged by
the Company as described below.

         The Purchase Price payable and the number of Preferred Shares or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution: (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain
rights, options or warrants to subscribe for or purchase Preferred Shares or
convertible securities at less than the then current market price of the
Preferred Shares, or (iii) upon the distribution to holders of the Preferred
Shares of evidences of indebtedness or assets (excluding regular periodic cash
dividends or dividends payable in Preferred Shares) or of subscription rights or
warrants (other than those described in clause (ii) of this paragraph). With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in the Purchase
Price.

         No fraction of a Preferred Share (other than fractions in integral
multiples of one one-hundredth of a share) will be issued and, in lieu thereof,
an adjustment in cash will be made based on the closing price on the last
trading date prior to the date of exercise.

         The number of outstanding Rights and the number of one one-hundredth of
a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.

         Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $.01 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $.01 per share but will be entitled
to an aggregate payment of 100 times the payment made per Common Share. Each
Preferred Share will have 100 votes, voting together with the Common Shares.
Finally, in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
100 times the amount received per Common Share. These rights are subject to
adjustment in the event of a stock dividend on the Common Shares or a
subdivision, combination or consolidation of the Common Shares.

         In the event that a person or group becomes an Acquiring Person (except
pursuant to a Permitted Offer (as defined below)), each holder of a Right, other
than the Acquiring Person or the affiliates, associates or transferees thereof
(whose Rights will thereafter be void), will thereafter have the right to
receive upon exercise thereof at the then current exercise price of the Right
that number of Common Shares having a market value of two times the exercise
price of the Right, subject to certain possible adjustments.

                                       2

<PAGE>   48

         In the event that the Company is acquired in certain mergers or other
business combination transactions or 50% or more of the assets or earning power
of the Company and its subsidiaries (taken as a whole) are sold after a person
or group becomes an Acquiring Person (except pursuant to a Permitted Offer),
holders of the Rights will thereafter have the Right to receive, upon exercise
thereof at the then current exercise price of the Right, that number of Common
Shares of the acquiring company (or, in certain cases, one of its Affiliates)
having a market value of two times the exercise price of the Right.

         A "PERMITTED OFFER" is a tender offer or an exchange offer for all
outstanding Common Shares of the Company at a price and on terms determined by a
majority of the Board of Directors then in office, after receiving advice from
one or more investment banking firms, to be (a) fair to shareholders (taking
into account all factors which the Board of Directors deems relevant) and (b)
otherwise in the best interests of the Company and its shareholders, employees,
customers, suppliers and creditors and the communities in which the Company does
business, and which the Board of Directors determines to recommend to the
shareholders of the Company.

         At any time after a Person becomes an Acquiring Person (subject to
certain exceptions), and prior to the acquisition by a Person of 50% or more of
the outstanding Common Shares, the Board of Directors may exchange all or part
of the Rights for Common Shares at an exchange ratio per Right equal to the
result obtained by dividing the exercise price of a Right by the current per
share market price of the Common Shares, subject to adjustment.

         At any time before a Person has become an Acquiring Person, the Board
of Directors may redeem the Rights in whole, but not in part, at a price of $.01
per Right (the "REDEMPTION PRICE"), subject to adjustment. The redemption of the
Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors may, in its sole discretion, establish.

         Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including without limitation, the right
to vote or to receive dividends.

         A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
May 24, 2000. A copy of the Rights Agreement is available free of charge from
the Company by contacting the Secretary at Rainforest Cafe, Inc., 720 South
Fifth Street, Hopkins, MN 55343. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.

                                       3

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