As filed with the Securities and Exchange Commission on June 12, 1998
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GARDENBURGER, INC.
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(Exact name of registrant as specified in its charter)
OREGON
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(State or other jurisdiction of incorporation or organization)
93-0886359
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(I.R.S. Employer Identification No.)
1411 S.W. Morrison St., Suite 400
Portland, Oregon 97205
(503) 205-1500
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(Address, including zip code, and telephone number
including area code, of registrant's principal executive offices)
Richard C. Dietz
Executive Vice President, Chief Financial Officer, Treasurer and Secretary
1411 S.W. Morrison St., Suite 400
Portland, Oregon 97205
(503) 205-1500
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of all correspondence to:
Mary Ann Frantz, Esq.
Miller, Nash, Wiener, Hager & Carlsen LLP
111 S.W. Fifth Avenue
Portland, Oregon 97204
(503) 224-5858
Approximate date of commencement of proposed sale to public: From time
to time after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ----------------------------.
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]----------------------------.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
===================================================================================================
Title of each class Amount to Proposed Proposed maximum Amount of
of securities to be be registered maximum offering aggregate offering Registration
registered (1) price per unit (1) price Fee
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<S> <C> <C> <C>
Common Stock, 1,315,789
no par value shares $11.40 $15,000,000 $4,425
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(1) Estimated pursuant to Rule 457(a) based on the maximum number of shares issuable upon
the conversion of the registrant's 7% Convertible Senior Subordinated Notes (the
"Notes"), of which an aggregate principal amount of $15,000,000 is outstanding, at the
lowest permitted conversion price of the Notes, subject to adjustment pursuant to
anti-dilution provisions. The maximum conversion price with respect to the Notes is
$12.90, which would correspond to 1,162,790 shares.
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</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS
GARDENBURGER, INC.
1,315,789 SHARES
COMMON STOCK
Gardenburger, Inc. (the "Company") is registering for resale up to
1,315,789 shares (together with the additional shares that may be issued
pursuant to anti-dilution provisions as discussed herein, the "Shares") of its
common stock, no par value (the "Common Stock"), which may be issued upon the
conversion of the Company's 7% Convertible Senior Subordinated Notes (the
"Notes") held by Dresdner Kleinwort Benson Private Equity Partners LP (the
"Selling Shareholder"). The Notes were issued by the Company in a private
placement. See "Selling Shareholder." Additional shares that may become issuable
as a result of the anti-dilution provisions of the Notes are also offered hereby
pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the
"Securities Act").
The Company will not receive any of the proceeds from the sale of the
Shares offered hereby (the "Offering"). However, the conversion of all of the
outstanding Notes into Common Stock would result in the cancellation of debt in
the aggregate principal amount of $15,000,000. There can be no assurance that
all or any part of the Notes will be converted into shares of Common Stock.
The Selling Shareholder will pay all sales commissions and similar
expenses related to the sale of the Shares offered hereby. The Company will pay
all expenses related to the registration of the Shares pursuant to the
Registration Statement of which this Prospectus is a part.
The Shares offered hereby may be sold from time to time in transactions
(which may include block transactions) on The Nasdaq Stock Market at the market
prices then prevailing. Sales of the Shares may also be made through negotiated
transactions or otherwise. The Selling Shareholder and the brokers and dealers
through which sales of the Shares may be made may be deemed to be "underwriters"
within the meaning set forth in the Securities Act, and their commissions and
discounts and other compensation may be deemed to be underwriters' compensation.
See "Plan of Distribution."
The Common Stock is quoted on the National Market tier of The Nasdaq
Stock Market under the symbol "GBUR". The last reported sales price of the
Common Stock on June __, 1998, was $_____ per share.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
The date of this Prospectus is June __, 1998.
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No person has been authorized in connection with this offering to give
any information or to make any representation not contained or incorporated by
reference in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company,
the Selling Shareholder or any other person. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to purchase, any securities
other than those to which it relates, nor does it constitute an offer to sell or
a solicitation of an offer to purchase by any person in any jurisdiction in
which it is unlawful for such person to make such an offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall under
any circumstances create any implication that the information contained herein
is correct as of any time subsequent to the date hereof.
AVAILABLE INFORMATION
The Company files annual, quarterly and current reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "SEC"). You may read and copy any reports, statements, and other
information we file at the SEC's public reference facilities at 450 Fifth
Street, N.W., Washington, D.C. 20549; and its regional offices at 500 West
Madison Street, Chicago, Illinois 60661; and 7 World Trade Center, New York, New
York 10048. Copies of these documents can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Our SEC filings are also available to the public on the SEC
internet site (http://www.sec.gov).
The Company has filed with the SEC a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act with respect to the
Shares offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement or the exhibits thereto. As permitted by
the rules and regulations of the SEC, this Prospectus omits certain information
contained or incorporated by reference in the Registration Statement. For
further information, reference is hereby made to the Registration Statement and
exhibits thereto, copies of which may be read or obtained as described above.
The Company furnishes Annual Reports to its shareholders that contain
financial statements which have been examined and reported upon, with an opinion
expressed by, its independent certified public accountants.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the SEC pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act") are incorporated herein
by reference:
(1) Annual Report on Form 10-K for the year ended December 31, 1997;
(2) Quarterly Report on Form 10-Q for the quarter ended March 31,
1998; and
(3) Current Report on Form 8-K dated February 3, 1998.
All documents filed by the Company with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof
shall hereby be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of such documents. See "Available
Information." Any statement contained in a document
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<PAGE>
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document
incorporated or deemed to be incorporated herein by reference modifies or
supersedes such statement. Any statementcontained herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in any subsequently filed document incorporated or deemed to
be incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
INCLUDED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING
EXHIBITS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO
THE INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED BY FIRST CLASS MAIL
WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN
OR ORAL REQUEST BY SUCH PERSON TO INVESTOR RELATIONS, GARDENBURGER, INC., 1411
S.W. MORRISON STREET, SUITE 400, PORTLAND, OREGON 97205, (503) 205-1500.
CAUTIONARY STATEMENT
THIS PROSPECTUS, AS WELL AS INFORMATION INCORPORATED BY REFERENCE
HEREIN, CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE
ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY
DIFFERENT FROM HISTORICAL RESULTS OR FROM ANY FUTURE RESULTS, PERFORMANCE, OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. IN ADDITION
TO STATEMENTS THAT EXPLICITLY DESCRIBE SUCH RISKS AND UNCERTAINTIES, READERS
SHOULD CONSIDER STATEMENTS LABELED WITH THE TERMS "BELIEVES," "BELIEF,"
"EXPECTS," "INTENDS," "ANTICIPATES" OR "PLANS" TO BE UNCERTAIN AND
FORWARD-LOOKING. IMPORTANT RISKS THAT COULD CAUSE ACTUAL RESULTS, PERFORMANCE,
OR ACHIEVEMENTS TO DIFFER FROM THOSE EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING
STATEMENTS INCLUDE THOSE DESCRIBED BELOW AND THOSE DESCRIBED IN THE COMPANY'S
REPORTS FILED WITH THE SEC. SEE "AVAILABLE INFORMATION." GIVEN THESE RISKS AND
UNCERTAINTIES, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE
FORWARD-LOOKING STATEMENTS.
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RISK FACTORS
RISKS ASSOCIATED WITH NATIONAL ADVERTISING CAMPAIGN. A major element of
the Company's growth strategy includes a significant print and television media
advertising campaign. The Company's past advertising and promotional activities
focused primarily on print ads in food service trade publications, trade shows
and radio advertising; the Company has had limited experience with large-scale
national advertising. Television advertising is relatively expensive compared to
other forms of advertising. Consequently, the Company's increased emphasis on
this medium will significantly increase sales and marketing expenses without any
assurance that consumer demand will increase proportionately, if at all.
PRODUCT CONCENTRATION; INTRODUCTION OF NEW PRODUCTS. The majority of
the Company's net sales have been attributable to its flagship product, the
Gardenburger(R) veggie patty. Sales of the Gardenburger(R) veggie patty and its
variants accounted for substantially all of the Company's net sales in 1997. The
Company believes that the Gardenburger(R) veggie patty will continue to
constitute a substantial portion of net sales. Any decrease in the overall level
of sales of, or the prices for, the Company's Gardenburger(R) veggie patty or
the failure of demand for the Gardenburger(R) veggie patty to increase at the
rate currently anticipated, whether as a result of competition, change in
consumer demand, or other unforeseen events, could have a material adverse
effect upon the Company's business, results of operations and financial
condition.
The Company plans to introduce several new products to its line of meat
replacement products. There can be no assurance that the Company will be able to
successfully introduce these new products or that any of the new products will
gain market acceptance.
CHANGING CONSUMER PREFERENCES. The Company's business is focused on
providing products in response to the public's demand for foods that support
overall health and fitness. Consumer demand for the Company's products is
heavily reliant upon a continued public focus on the desirability of a healthy
lifestyle, as well as the potential risks associated with eating meat and
poultry products, including E. coli and salmonella. There can be no assurance
that public emphasis on a nutritious, healthy diet will continue or that certain
processes will not be developed and utilized to reduce risks associated with
eating meat. For example, the FDA recently approved the irradiation of red meat,
which could significantly reduce the risk of E. coli in hamburger. A decline in
consumer demand for meat alternative products would have a material adverse
effect upon the Company's business, results of operations and financial
condition. Additionally, demand for the Company's products may be affected
generally by consumer preferences, which are subject to frequent and
unanticipated changes. The Company is dependent in significant part on its
ability to continue to produce healthy and appealing products that anticipate,
gauge and respond in a timely manner to changing consumer demands and
preferences. Failure to anticipate and respond to changes in consumer
preferences could lead to, among other things, lower sales, excess inventories,
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diminished consumer loyalty and lower margins. There can be no assurance that
the current level of demand for the Company's products will be sustained or
grow.
CUSTOMER CONCENTRATION. In 1997, the Company's two largest accounts
were Norpac and Sysco, which accounted for approximately 19 percent and 10
percent of the Company's revenues, respectively. There can be no assurance that
sales to these accounts will not decrease or that these customers will not
choose to replace the Company's products with those of competitors. The loss of
either of these accounts or any significant decrease in the volume of products
purchased by these customers would have a material adverse effect on the
Company. Continuity of customer relationships is important and events that
impact the Company's customers, such as labor disputes, may have a material
adverse effect on the Company.
CONCENTRATION OF CAPACITY; RISKS ASSOCIATED WITH OPENING OF NEW
FACILITY. The Company commenced operations at its new Utah facility during the
first quarter of 1998 and may eventually transfer all manufacturing operations
to the Utah facility if circumstances so warrant. There can be no assurance that
the Company will not experience significant difficulties in its transition to
the new facility, including, but not limited to, manufacturing delays,
difficulties in maintaining product quality and its ability to hire and train a
new workforce. In addition, the Company may experience higher than expected
costs in connection with the transition. Any such difficulties could have a
material adverse effect on the Company's business, results of operations and
financial condition.
COMPETITION. The market for meatless food products is highly
competitive. The Company's competitors in the meatless patty segment may develop
and market products perceived by consumers to be tastier, healthier, or
otherwise more appealing than the Company's products. There can be no assurance
that the Company will not experience competitive pressures, particularly with
respect to pricing, that could have a material adverse effect on the Company's
business, results of operations and financial condition. Additionally, other
major food companies, many of which have substantially greater resources than
the Company, may become more active in the meatless patty business, either
directly or through the acquisition of smaller meatless patty companies.
FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY. The Company has
experienced significant quarterly fluctuations in operating results and
anticipates that these fluctuations will continue in future periods. These
fluctuations have resulted, in part, from varying prices of vegetables, new
product introductions, expansion into new markets, sales promotions, the level
of marketing expenditures and competition. The Company has in the past
experienced fluctuations in sales due to seasonal changes in product demand,
with net sales historically higher in the June and September quarters and lower
in the March and December quarters. The Company expects these seasonal trends to
continue for the foreseeable future. A significant portion of the Company's
expenses is relatively fixed and the timing of increases in expenses is based in
large part on the Company's forecasts of future sales. If sales are below
expectations in any given period, the adverse effect on results of operations
may be magnified by the Company's inability to adjust spending quickly
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enough to compensate for the sales shortfall. The Company may also choose to
reduce prices or increase spending in response to market conditions, which could
have a material adverse effect upon the Company's business, results of
operations and financial condition.
RAW MATERIALS SUPPLY. As with most food products, the availability and
price of raw materials used in the Company's products may be affected by a
number of factors beyond the control of the Company, such as economic factors
affecting growing decisions, frosts, drought, floods, other weather conditions,
various plant diseases, pests and other acts of nature. Because the Company does
not control the production of raw materials, it is also subject to delays caused
by interruption in production of materials based on conditions not within its
control. Such conditions include job actions or strikes by employees of
suppliers, weather, crop conditions, transportation interruptions, and natural
disasters or other catastrophic events. There can be no assurance that the
Company will be able to obtain alternative sources of raw materials at favorable
prices, or at all, if it experiences supply shortages.
PRODUCT LIABILITY. The Company's business involves the preparation and
processing of food products. The Company has from time to time received
complaints and claims from consumers regarding ill effects allegedly caused by
its products. While such claims have not resulted in any material liability to
date, there can be no assurance that future claims will not be made or that any
such claim will not result in adverse publicity for the Company or monetary
damages, either of which could have a material adverse effect upon the Company's
business, results of operations and financial condition. The Company currently
maintains certain product liability insurance coverage, but there can be no
assurance that such coverage will be sufficient to cover the cost of defense or
related damages in the event of a significant product liability claim.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a
significant extent upon the continued service of Lyle G. Hubbard, its President
and Chief Executive Officer. The loss of his services could have a material
adverse effect on the Company. Furthermore, the Company is dependent on its
ability to identify, recruit and retain other key personnel. The competition for
such employees is intense, and there can be no assurance the Company will be
successful in such efforts.
GOVERNMENT REGULATION. The manufacturing, packaging, labeling,
advertising, distribution and sale of the Company's products are subject to
regulation by various governmental agencies, principally the Food and Drug
Administration ("FDA"). The FDA regulates the Company's products under the
Federal Food, Drug and Cosmetic Act and related regulations. The Company's
activities are also subject to regulation by the Federal Trade Commission. The
Company's activities are also regulated by various agencies of the states,
localities and foreign countries to which the Company distributes its products
and in which the Company's products are sold. The Company believes that it
presently complies in all material respects with the foregoing laws and
regulations. There can be no assurance that future compliance with such laws or
regulations will not have a material adverse effect on the Company's business,
results of operations and financial condition.
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The Company may become subject to additional laws or regulations
administered by the FDA or other federal, state or foreign regulatory
authorities or more stringent interpretations of current laws or regulations in
the future. Although the Company is unable to predict the nature of such future
laws, regulations, interpretations or applications, such requirements could
include the reformulation of certain products to meet new standards, the recall
or discontinuance of certain products that cannot be reformulated, imposition of
additional record-keeping requirements, expanded documentation of the properties
of certain products, expanded or different labeling, and scientific
substantiation. Any or all of such requirements could have a material adverse
effect on the Company's business, results of operations and financial condition.
INTELLECTUAL PROPERTY. The Gardenburger(R) trademark and other
trademarks are important to the Company's commercial success. Although the
Company aggressively takes steps to protect its rights in these trademarks,
including obtaining registration of the trademarks in the United States and
other countries as it deems appropriate, there can be no assurance that third
parties will not infringe or misappropriate the Company's trademarks.
The Company's recipes and production processes are protected as trade
secrets. The Company does not hold any patents covering its products or
production methods. Trade secret protection can last indefinitely so long as
appropriate precautions are taken to avoid disclosure. Although the Company
seeks to protect its trade secrets through confidentiality agreements and
appropriate contractual provisions, some or all of the trade secrets and other
know-how that the Company considers proprietary could be developed independently
by others, could otherwise become known by others or could be deemed to be in
the public domain.
VOLATILITY OF STOCK PRICE. The market price of the Company's Common
Stock has been and will likely continue to be subject to significant
fluctuations in response to variations in quarterly operating results, future
announcements concerning the Company or its competitors, the introduction of new
products or changes in product pricing policies by the Company or its
competitors, weather patterns and other acts of nature that may be perceived to
affect the Company's sources of supply, or changes in earnings estimates by
analysts, among other factors. In addition, stock markets have experienced
extreme price and volume volatility in recent years. This volatility has had a
substantial effect on the market prices of securities of many small public
companies for reasons frequently unrelated to the operating performance of the
specific companies. These broad market fluctuations may adversely affect the
market price of the Company's Common Stock.
ABSENCE OF DIVIDENDS. The Company anticipates that all of its earnings
in the foreseeable future will be retained to finance the continued growth and
expansion of its business and has no current intention to pay cash dividends.
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THE COMPANY
The Company is a leading developer, producer and marketer of branded
low-fat, all-natural, meat replacement alternatives sold to food service and
retail outlets. The Company's products include a variety of frozen, meatless
items that are low in cholesterol and low in fat. The Company was founded to
provide a line of food products in response to the public's growing awareness of
the importance of diet to overall health and fitness. The Company believes that
the majority of consumers who eat its products are not vegetarians but choose
the Company's products for their healthy ingredients, taste and convenience as
part of a healthier lifestyle.
The Company's flagship product, the Gardenburger(R) veggie patty, is
the leading veggie patty in the retail grocery, food service, natural food
outlet, and club store channels of distribution. The Company's goal is to
aggressively expand distribution of the Gardenburger(R) brand in the retail
grocery channel and to stimulate awareness and trial of its products through
significantly increased levels of advertising and promotion.
The Company distributes its products to more than 30,000 food service
outlets throughout the U.S. and Canada, including restaurant chains such as
T.G.I. Friday's, Denny's, Applebee's, Red Robin, Subway, Lyon's and Damon's. The
Company's products are also distributed to more than 24,000 retail grocery and
natural foods outlets, as well as to club stores, including Costco Companies,
Inc. ("Costco") and Sam's Club, with over 300 locations.
The Company was incorporated in Oregon in 1985. Its principal executive
offices are located at 1411 S.W. Morrison Street, Suite 400, Portland, Oregon
97205, and its telephone number is (503) 205-1500.
SELLING SHAREHOLDER
The Selling Shareholder is Dresdner Kleinwort Benson Private Equity
Partners LP, the holder of the Notes. All of the Shares that may be acquired by
the Selling Shareholder upon conversion of the Notes are being registered
pursuant to the Registration Statement of which this Prospectus forms a part,
and are being offered hereby.
The Company will not receive any proceeds from the sale of the Shares
by the Selling Shareholder. However, the conversion of all of the outstanding
Notes into Common Stock would result in the cancellation of debt in the
aggregate principal amount of $15,000,000.
The Notes may be converted at any time prior to maturity on April 1,
2003, in whole or in part, into shares of the Company's Common Stock. The
initial conversion price is $12.90 per share, subject to adjustment for changes
in capitalization and other anti-dilution provisions and as otherwise described
herein. As a result of the convertibility of the Notes, the Selling Shareholder
is presently deemed to beneficially own 1,162,790 shares of Common
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Stock, or 11.9 percent of the outstanding shares (including shares issuable upon
conversion of the Notes).
If the Alternative Market Price of the Common Stock is below $10.75 per
share on July 1, 1998, the conversion price will be reduced to a price which is
120 percent of the Alternative Market Price on that date, but not less than
$11.40 per share. The Alternative Market Price is the average of the bid prices
of the Common Stock as quoted in the Nasdaq System as of 4:00 p.m., New York
time, on each of the 30 consecutive business days prior to and including July 1,
1998. If the conversion price were reduced to $11.40 per share, the Notes would
become convertible into a total of 1,315,789 shares of Common Stock, or 13.2
percent of the Common Stock outstanding (including such shares).
The Company may prepay the principal amount of the Notes, in whole or
in part, at any time prior to maturity, subject to a prepayment premium of 2.8
percent of the principal amount if the prepayment occurs between April 1, 2000,
and March 31, 2001, and 1.4 percent if the prepayment occurs between April 1,
2001, and March 31, 2002. If the Company prepays any portion of the Notes on or
before March 31, 2000, or as a result of an event of default under the Notes,
the Company is required to issue warrants to purchase shares of Common Stock in
the same number as the repaid principal amount of Notes was convertible into and
with an exercise price equal to the then applicable conversion price. The Notes
are also subject to special prepayment provisions (including a 20 percent
prepayment premium) in the event of a change in control or sale of more than 50
percent of the assets of the Company or if a management change (defined as the
cessation of employment of Lyle G. Hubbard, President and Chief Executive
Officer, or Richard C. Dietz, Executive Vice President and Chief Financial
Officer, of the Company where a successor reasonably satisfactory to the holders
of a majority of the shares of Common Stock issued or issuable upon conversion
of the Notes (the "Majority Holders") is not employed by the Company within 60
days of such cessation of employment) has occurred.
Under the terms of the Note Purchase Agreement pursuant to which the
Notes were purchased, the Company may not, without the prior written consent of
the Majority Holders, (i) amend the Company's Articles of Incorporation, Bylaws
or the Rights Agreement between the Company and First Chicago Trust Company of
New York in a manner materially adverse to the Selling Shareholder's rights and
preferences under the Note Purchase Agreement and the Notes, (ii) create a new
class or series of securities on a par with or senior to the Notes, or (iii)
engage in certain significant corporate transactions, including, but not limited
to, a merger or sale of the Company or its business, liquidation or dissolution
of the Company, certain business acquisitions, and the incurrence of
indebtedness or lease obligations in excess of specified thresholds. So long as
at least $5,000,000 in principal amount of the Notes remains outstanding and the
Selling Shareholder and its affiliates own at least a majority of the principal
amount of Notes outstanding, the Company may not declare any dividends or make
any distributions with respect to its capital stock or redeem or purchase any of
its capital stock without the prior written consent of the Majority Holders. In
addition, so long as any Notes remain outstanding, Paul F. Wenner, Lyle G.
Hubbard and the Company have agreed to take all reasonably necessary and
desirable actions within their
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control so that an individual designated by the Majority Holders is elected as a
director of the Company (a "Designated Director"). If at any time a Designated
Director is not a member of the Board of Directors, the Majority Holders have
the right to appoint a representative to attend and observe board meetings at
the Company's expense.
The foregoing summary is qualified in its entirety by the terms of the
Notes and the Note Purchase Agreement.
The Selling Shareholder has had no material relationship with the
Company within the past three years, except that (i) Alexander Coleman, who is
Vice President of Dresdner Kleinwort Benson North America LLC and an Investment
Partner in the Selling Shareholder's general partner, Dresdner Kleinwort Benson
Private Equity Managers LLC, has been elected a director of the Company in
accordance with the terms of the Note Purchase Agreement and (ii) Dresdner
Kleinwort Benson North America LLC, an affiliate of the Selling Shareholder,
received a closing fee of $150,000 in connection with the purchase of the Notes.
PLAN OF DISTRIBUTION
The Selling Shareholder may sell the Shares in one or more transactions
(which may involve one or more block transactions) on the over-the-counter
market on Nasdaq and upon terms then prevailing or at prices related to the then
current market price, or in separately negotiated transactions or in a
combination of such transactions. The Shares offered hereby may be sold by one
or more of the following methods, without limitation: (a) a block trade in which
a broker or dealer so engaged will attempt to sell the Shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
(d) privately negotiated transactions; (e) short sales; and (f) face-to-face
transactions between sellers and purchasers without a broker-dealer. The Selling
Shareholder may also sell Shares in accordance with Rule 144 under the
Securities Act. The Selling Shareholder may be deemed to be an underwriter of
the Shares offered hereby within the meaning of the Securities Act.
The Company has agreed to keep the registration of the Shares offered
hereby effective until the date upon which all of the Shares have been sold or
until March 31, 2004, whichever is earlier.
In effecting sales, brokers or dealers engaged by the Selling
Shareholder may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from the Selling
Shareholder in amounts to be negotiated. All other expenses incurred in
connection with this offering will be borne by the Company, including fees of
the Selling Shareholder's counsel. Such brokers and dealers and any other
participating brokers or dealers may, in connection with such sales, be deemed
to be underwriters within the meaning of the Securities Act. Any discounts or
commissions received by any such brokers
- 10 -
<PAGE>
or dealers may be deemed to be underwriting discounts and commissions under the
Securities Act.
The Company has agreed to indemnify certain persons, including the
Selling Shareholder, its directors, officers, employees, agents, general and
limited partners, and controlling persons, against certain liabilities in
connection with the Registration Statement or this Prospectus, including
liabilities arising under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby has been
passed upon for the Company by Miller, Nash, Wiener, Hager & Carlsen LLP,
Portland, Oregon.
EXPERTS
The financial statements and schedules incorporated by reference in
this Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are so incorporated herein in reliance upon
the authority of said firm as experts in giving said reports.
- 11 -
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered hereby will be borne by the Company and are
estimated to be as follows:
Registration Fee........................................................$ 4,425
Legal Fees.............................................................. 20,000*
Accounting Fees......................................................... 5,000*
Printing................................................................ 5,000*
Miscellaneous........................................................... 575*
-------
Total..........................................................$35,000*
=======
- --------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ORS 60.367, a section of the Oregon Business Corporation Act (the
"Act"), provides in substance that any director held liable for an unlawful
distribution in violation of ORS 60.367 is entitled to contribution from (i)
every other director who voted for or assented to the distribution without
complying with the applicable statutory standards of conduct and (ii) each
shareholder for the amount the shareholder accepted knowing the distribution was
made in violation of the Act or the corporation's articles of incorporation.
Under Sections 60.387 to 60.414 of the Act, a person who is made a
party to a proceeding because such person is or was an officer or director of a
corporation (an "Indemnitee") shall be indemnified by the corporation (unless
the corporation's articles of incorporation provide otherwise) against
reasonable expenses incurred by the Indemnitee in connection with the proceeding
if the Indemnitee is wholly successful, on the merits or otherwise, or if
ordered by a court of competent jurisdiction. In addition, under said sections a
corporation is permitted to indemnify an Indemnitee against liability incurred
in a proceeding if (i) the Indemnitee's conduct was in good faith and in a
manner he or she reasonably believed was in the corporation's best interests or
at least not opposed to its best interests, (ii) the Indemnitee had no
reasonable cause to believe his or her conduct was unlawful if the proceeding
was a criminal proceeding, (iii) the Indemnitee was not adjudged liable to the
corporation if the proceeding was by or in the right of the corporation, and
(iv) the Indemnitee was not adjudged liable on the basis that he or she
improperly received a personal benefit. Indemnification in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
The registrant's Restated Articles of Incorporation do not contain any
provisions regarding indemnification. Section 10.1 of the registrant's 1995
Restated Bylaws, as
II - 1
<PAGE>
amended, provides that the registrant shall indemnify its directors and officers
to the fullest extent not prohibited by law, including, but not limited to, the
Act.
The registrant's Restated Articles of Incorporation do provide for the
elimination of personal liability of directors to the registrant or its
shareholders for monetary damages for conduct as a director to the full extent
permitted by the Act. Under Section 60.047 of the Act, a corporation may not
eliminate or limit the liability of a director for: (A) any breach of the
director's duty of loyalty to the corporation or its shareholders; (B) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (C) any unlawful distribution under Section 60.367 of the Act;
or (D) any transaction from which the director derived an improper personal
benefit.
The registrant has entered into an indemnity agreement with one of its
current directors, Paul F. Wenner. The agreement provides that the registrant
will indemnify the director to the fullest extent permitted by law, including
the Act, against any obligation to pay a judgment, settlement, penalty, fine or
expenses, including attorneys' fees (any of the foregoing, a "Liability")
incurred in connection with any proceeding (as defined), including a claim by or
in the right of the registrant; provided that no indemnity shall be paid by the
registrant (A) if a final decision by a court having jurisdiction shall
determine that such indemnification is unlawful, (B) for any transaction from
which the director derived an improper personal benefit, (C) for which payment
has actually been made to or on behalf of the director under any insurance
policy, (D) in connection with any proceeding initiated by the director, with
certain exceptions, or (E) on account of Liability under Section 16(b) of the
Securities Exchange Act of 1934 or any similar provision of state statutory law.
The registrant maintains directors' and officers' liability insurance
under which the registrant's directors and officers are insured against loss (as
defined) as a result of claims brought against them for their wrongful acts in
such capacities.
ITEM 16. EXHIBITS.
The exhibits to the Registration Statement required by Item 601 to
Regulation S-K are listed in the index to exhibits appearing at page II-6.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, unless the information required to be
included in such post-effective amendment is contained in a
periodic report filed by the
II - 2
<PAGE>
registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") that is
incorporated herein by reference;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement, unless the
information required to be included in such post-effective
amendment is contained in a periodic report filed by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange
Act that is incorporated herein by reference;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer,
or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II - 3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Portland, State of Oregon, on the 12th day of
June, 1998.
GARDENBURGER, INC.
By: /s/ Lyle G. Hubbard
-------------------
Lyle G. Hubbard
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and as of the 12th day of June, 1998.
Signature Title
- --------- -----
PRINCIPAL EXECUTIVE OFFICER:
/s/ Lyle G. Hubbard Director, President and Chief Executive Officer
- -------------------
Lyle G. Hubbard
PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER:
/s/ Richard C. Dietz Executive Vice President,
- -------------------- Chief Financial Officer,
Richard C. Dietz Secretary and Treasurer
A MAJORITY OF THE BOARD OF
DIRECTORS:
RICHARD L. MAZER* Director
MARY O. McWILLIAMS* Director
MICHAEL L. RAY* Director
II - 4
<PAGE>
E. KAY STEPP* Chairman of the Board
PAUL F. WENNER* Founder, Chief Creative Officer
and Director
*By /s/ Richard C. Dietz
--------------------
Richard C. Dietz
Attorney-in-Fact
II - 5
<PAGE>
GARDENBURGER
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Instruments defining the rights of security holders.
See Article II, Sections 3, 4, and 5 of Restated
Articles of Incorporation, incorporated by reference
to the registrant's Form 10-Q Quarterly Report for
the quarter ended September 30, 1997, and Article I
of the registrant's 1995 Restated Bylaws, as amended
April 21, 1998, incorporated by reference to Exhibit
3 to the registrant's Form 10-Q Quarterly Report for
the quarter ended March 31, 1998.
4.2 Rights Agreement between the registrant and First
Chicago Trust Company of New York, dated April 25,
1996 ("Rights Agreement"), incorporated by reference
to the registrant's Current Report on Form 8-K filed
May 8, 1996.
4.3 Amendment No. 1 dated as of March 26, 1998, to the
Rights Agreement, incorporated by reference to
Exhibit 10.3 to the registrant's Form 10-Q Quarterly
Report for the quarter ended March 31, 1998.
5 Opinion of Miller, Nash, Wiener, Hager & Carlsen LLP.
10.1 Note Purchase Agreement dated as of March 27, 1998
between the registrant and Dresdner Kleinwort Benson
Private Equity Partners LP, incorporated by reference
to Exhibit 10.4 to the registrant's Form 10-Q
Quarterly Report for the quarter ended March 31,
1998.
10.2 Gardenburger, Inc., Convertible Senior Subordinated
Note dated March 27, 1998, incorporated by reference
to Exhibit 10.5 to the registrant's Form 10-Q
Quarterly Report for the quarter ended March 31,
1998.
10.3 Registration Rights Agreement dated as of March 27,
1998 between the registrant and Dresdner Kleinwort
Benson Private Equity Partners LP, incorporated by
reference to Exhibit 10.6 to the registrant's Form
10-Q Quarterly Report for the quarter ended March 31,
1998.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Miller, Nash, Wiener, Hager & Carlsen LLP
(included in Exhibit 5).
24 Power of Attorney of certain officers and directors.
II - 6
EXHIBIT 5
Miller, Nash, Wiener, Hager & Carlsen LLP
Attorneys at Law
111 S.W. Fifth Avenue, Suite 3500
Portland, Oregon 97204-3699
(503) 224-5858
(503) 224-0155 fax
June 12, 1998
Gardenburger, Inc.
1411 S. W. Morrison St., Ste. 400
Portland, Oregon 97205
Gentlemen:
We have acted as counsel to Gardenburger, Inc. (the "Company"), in
connection with the registration by the Company of up to 1,315,789 shares (the
"Shares") of the Company's common stock, no par value (the "Common Stock"),
which may be issued upon the conversion of $15,000,000 aggregate principal
amount of the Company's 7% Senior Subordinated Convertible Notes (the "Notes")
purchased by Dresdner Kleinwort Benson Private Equity Partners LP. This opinion
is being rendered in connection with the filing of a Registration Statement on
Form S-3 covering resales of the Shares with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Securities
Act").
In connection herewith, we have examined and relied as to matters of
fact upon such certificates of public officials, certificates or copies
certified to our satisfaction of the Articles of Incorporation and Bylaws of the
Company (each amended through the date hereof), proceedings of the Board of
Directors of the Company and other corporate records, documents, certificates
and instruments as we have deemed necessary or appropriate in order to enable us
to render the opinion expressed below.
In rendering the following opinion, we have assumed the genuineness of
all signatures on all documents examined by us, the authenticity of all
documents submitted to us as originals and the conformity to authentic originals
of all documents submitted to us as certified or photostatic copies, and we have
relied as to matters of fact upon statements and certifications of officers of
the Company.
<PAGE>
Based on the foregoing, we are of the opinion that the Shares are duly
and validly authorized and, when issued upon the conversion of the Notes in
accordance with their terms, the Shares will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
aforesaid Registration Statement on Form S-3 and to the use of our name under
the caption "Legal Matters" in the Prospectus to be filed as a part thereof. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
MILLER, NASH, WIENER, HAGER & CARLSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
included in this Registration Statement and to the incorporation by reference in
this Registration Statement of our reports dated February 5, 1998, included in
Gardenburger, Inc.'s, Form 10-K for the year ended December 31, 1997, and to all
references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Portland, Oregon,
June 12, 1998
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose
signature appears below constitutes and appoints Lyle G. Hubbard and Richard C.
Dietz, and each of them, such person's true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for such person and
in his name, place and stead, in any and all such person's capacities with
Gardenburger, Inc., an Oregon corporation (the "Corporation"), to sign a
registration statement on Form S-3 relating to up to 1,400,000 outstanding
shares of the common stock, no par value, of the Corporation, which may be
issued in connection with the conversion of $15,000,000 aggregate principal
amount of the Corporation's 7% Convertible Senior Subordinated Notes, and
any and all amendments (including post-effective amendments) thereto, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission under the Securities Act
of 1933, granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitutes may lawfully do or cause to be done.
IN WITNESS WHEREOF, this power of attorney has been executed
by the undersigned as of this 21st day of April, 1998.
Signature Title
--------- -----
/s/ Lyle G. Hubbard Director, President and
- ------------------- Chief Executive Officer
Lyle G. Hubbard (Principal Executive Officer)
/s/ Richard C. Dietz Executive Vice President,
- -------------------- Chief Financial Officer,
Richard C. Dietz Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Richard L. Mazer Director
- --------------------
Richard L. Mazer
/s/ Mary O. McWilliams Director
- ----------------------
Mary O. McWilliams
/s/ Michael L. Ray Director
- ------------------
Michael L. Ray
/s/ E. Kay Stepp Chairman of the Board
- ----------------
E. Kay Stepp
/s/ Paul F. Wenner Founder, Chief Creative
- ------------------ Officer and Director
Paul F. Wenner
