As filed with the Securities and Exchange Commission on December 4, 1998
Registration No. 333-56775
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 2 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GARDENBURGER, INC.
(Exact name of registrant as specified in its charter)
OREGON
(State or other jurisdiction of incorporation or organization)
93-0886359
(I.R.S. Employer Identification No.)
1411 S.W. Morrison St., Suite 400
Portland, Oregon 97205
(503) 205-1500
(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
(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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<PAGE>
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. [ ]
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------- ------------------ ---------------------- ------------------------- ------------------
Title of shares to be Additional Proposed maximum Proposed maximum Amount of
registered amount to be offering price per aggregate offering price registration fee
registered (1) unit (2)
- ------------------------------- ------------------ ---------------------- ------------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, 90,000 shares $10.375 $933,750 $ 259.59
no par value
- ------------------------------- ------------------ ---------------------- ------------------------- ------------------
</TABLE>
(1) The Registrant previously registered 1,315,789 shares (reduced to 1,162,790
shares as a result of elimination of a possible reduction in the conversion
price for the shares) for a fee of $4,425 in its initial filing on June 12,
1998.
(2) Estimated solely for the purpose of computing the registration fee required
by Section 6(b) of the Securities Act of 1933 and computed pursuant to Rule
457(c) under the Securities Act based on the average of the high and low sale
prices of the Common Stock on December 2, 1998, as reported on the Nasdaq
National Market.
-----------------------------
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.
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<PAGE>
PROSPECTUS
GARDENBURGER, INC.
1,252,790 SHARES
COMMON STOCK
Gardenburger, Inc. (the "Company") is registering for resale up to
1,252,790 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"), of which 1,162,790 Shares 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"), 40,974 Shares have been issued
by the Company to the Selling Shareholder in payment of accrued interest payable
on the Notes on September 30, 1998, and 49,026 Shares may, at the election of
the Company, be issued in the future in payment of accrued interest payable on
the Notes. 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 December 2, 1998, was $10.25 per share.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
================================================================================
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
================================================================================
The date of this Prospectus is December ___, 1998.
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<PAGE>
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.
<PAGE>
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 Room 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. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. 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
(No. 333-56775) (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) Registration Statement on Form 8-A dated June 23, 1992, as supplemented
by the description of the Company's Common Stock contained in Exhibit
99 to its Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
(2) Annual Report on Form 10-K for the year ended December 31, 1997, as
amended by Amendment No. 1 dated July 29, 1998, and Amendment No. 2
dated December 3, 1998;
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<PAGE>
(3) Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, as
amended by Amendment No. 1 dated July 29, 1998;
(4) Quarterly Report on Form 10-Q for the quarter ended June 30, 1998;
(5) Quarterly Report on Form 10-Q for the quarter ended September 30, 1998;
and
(6) 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 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
statement contained 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 AT NO
COST TO EACH PERSON TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST BY SUCH PERSON TO AMANDA COLE, 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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<PAGE>
RISK FACTORS
SALES INCREASES MAY NOT BE SUSTAINABLE. Beginning in April 1998, the
Company embarked on a major national television and print advertising campaign
to increase consumer awareness of its products. The Company spent $4 million on
print advertising and $10 million on television advertising (excluding agency
fees) in the first nine months of 1998, compared to $3.8 million spent solely on
print advertising during 1997. The Company's television spots ended in September
1998. Although the Company experienced a 103% increase in net sales in the third
quarter of 1998 compared to the same period in the prior year, consumer demand
may not continue to increase or may even decline without renewed television
advertising. Also, the Company's third quarter net sales were positively
affected by coupon promotions. Consumers may not try or continue to purchase the
Company's products without the added incentive of cents-off coupons.
The Company plans to introduce a new coupon promotion at the beginning
of 1999, followed by a renewed television advertising campaign commencing in the
spring of 1999. Although the Company's 1998 advertising efforts resulted in
substantially increased net sales, there can be no assurance that this trend can
be sustained or that the Company can maintain net sales at current levels. If
the Company's net sales levels begin to decrease, grocery stores may reduce the
amount of shelf space allocated to the Company's products, thereby further
increasing the difficulty of maintaining sales levels.
PRODUCT CONCENTRATION. The Company's net sales are attributable almost
entirely to the Gardenburger(R) veggie burger. If demand for the Gardenburger(R)
veggie burger declines or does not increase at the rate currently anticipated,
whether as a result of competition, lower consumer demand or other unforeseen
events, the Company's business will be adversely affected to a greater degree
than if it had multiple product lines.
CHANGING CONSUMER PREFERENCES. Consumer demand for the Company's veggie
burgers depends on continuation of the current trends of health awareness,
emphasis on a reduced fat diet and consumption of less red meat, as well as
safety concerns associated with red and white meat, such as e. Coli and
salmonella poisoning. Also, consumers may find other meat replacement products
more appealing than the veggie burger. The development of processes to reduce
the risks associated with eating meat, such as the irradiation of red meat, or
further development of low fat red or white meat products, may reduce demand for
meat replacement products. As a result, demand for the Company's products may be
affected by changes in consumer preferences, which often occur rapidly without
warning. Failure to anticipate and respond to changes in consumer preferences
could lead to lower net sales, excess inventories, lower margins and allocation
of less shelf space at grocery stores.
RISKS ASSOCIATED WITH MANAGING A GROWING BUSINESS. The Company has
rapidly expanded its business in the past several years and intends to continue
to grow rapidly. This growth will continue to place significant demands on the
Company's management, administrative, operating and financial resources. The
Company's future performance and profitability will depend in large part on its
ability to execute its growth strategy, attract and retain additional qualified
management and other key personnel, successfully implement enhancements to its
management information systems and adapt those systems, as necessary, to respond
to expansion of its business.
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<PAGE>
CONCENTRATION OF MANUFACTURING CAPACITY. The Company commenced
operations at its new Utah facility during the first quarter of 1998. This
facility is expected to handle a substantial portion of the Company's production
during 1999. A significant disruption in the facility's production capacity
could occur as a result of fire, power outages, severe weather, other natural
disasters, regulatory actions, work stoppages or other factors. If this
happened, the Company would be unable to manufacture its products at planned
levels. If Gardenburger(R) veggie burgers became less available, consumers may
switch to another brand of veggie burger and grocery stores may reclaim shelf
space allocated to the Company's products.
COMPETITION. The market for veggie burgers and other meat alternative
products is highly competitive. Competitors may introduce meat alternative
products that consumers find tastier, healthier or otherwise more appealing than
the Gardenburger(R) veggie burger. The Company also may experience competitive
pressures that may adversely affect its ability to maintain premium pricing. One
or more major food companies, all of which have substantially greater financial
resources and marketing experience than the Company, may introduce products that
compete with the Gardenburger(R) veggie burger or acquire one of the Company's
existing competitors. The Company's products also compete with low fat meat
products and frozen, mass produced low calorie/low fat entrees. These products
are produced by large companies with substantially greater financial resources
and marketing experience than the Company. Increased competition by existing or
future competitors could result in reductions in sales or prices of the
Company's products, which could have a material adverse effect on the Company's
business, results of operations and financial condition.
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 these claims have not resulted in any material liability to
date, there can be no assurance that future claims will not be made or that they
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
$2 million of product liability insurance coverage and $20 million of general
umbrella coverage, but there can be no assurance that this 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 upon the
continued service of Lyle G. Hubbard, its President and Chief Executive Officer,
and the other members of management. The loss of the services of any of these
people 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. Competition for qualified employees is intense, and the Company may
not be successful in its efforts. The Company currently does not carry key
person insurance on any of its personnel.
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<PAGE>
DEPENDENCE ON FOOD BROKERS AND DISTRIBUTORS. The Company depends on
independent food brokers and distributors, who act as intermediaries in all of
the Company's distribution channels. The Company could experience a substantial
decline in net sales if one or more of the Company's food brokers or
distributors were to discontinue handling the Company's products, go out of
business or decide to emphasize distributing products of the Company's
competitors.
GOVERNMENT REGULATION. The manufacturing, packaging, storage,
distribution and labeling of food products are subject to extensive federal and
state laws and regulations. Regulators have broad powers to protect public
health, including the power to inspect the Company's products and facilities, to
order the shutdown of a facility or to seize or suspend delivery of the
Company's products and order a recall of previously shipped products, as well as
the power to impose substantial fines and seek criminal sanctions. Negative
publicity may result if regulators take any of the foregoing actions against the
Company, and negative publicity is likely to cause decreased demand for the
Company's products. Also, there is increasing public concern over the safety of
food products, which may result in additional laws or regulations or more
stringent interpretations of current laws or regulations relating to food. This
could substantially increase the Company's cost of doing business and,
therefore, adversely affect the Company's business, results of operations and
financial condition.
HISTORY OF OPERATING LOSSES; WORKING CAPITAL NEEDS; UNCERTAINTY OF
ADDITIONAL FUNDING. In 1997 and through the first nine months of 1998, the
Company incurred significant operating and net losses due largely to its efforts
to penetrate the retail grocery channel and to mainstream its veggie burger
products through extensive advertising. The Company may also incur losses in
1999 and thereafter as it seeks to execute its growth strategy. The continued
growth of the Company's business will require significant additional working
capital, particularly to support the Company's planned advertising campaigns and
expected higher levels of inventory and accounts receivable. In recent periods,
the Company has generated significant negative cash flow from operations and may
continue to do so. Although the Company has approximately $20 million in
revolving lines of credit, amounts available for borrowing thereunder may be
insufficient to support the Company's increased working capital needs. If this
were to occur, the Company would need to seek additional debt or equity capital,
which may not be available at all or, if available, may not be on acceptable
terms. If adequate funds are not available on acceptable terms, the Company may
be required to scale back its planned growth and may be unable to redeem the
Notes at such time as it may be required to do so.
FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY. The Company experiences
significant quarterly fluctuations in its net sales due to seasonal changes in
product demand, with net sales historically higher in the second and third
quarters and lower in the first and fourth quarters. The Company expects these
seasonal trends to continue for the foreseeable future. A significant portion of
the Company's operating expenses are relatively fixed and the timing of planned
increases in operating expenses, including advertising, is based in large part
on the Company's forecasts of future sales. If net sales begin to fall below
expectations, the adverse effect on operating results will be magnified if the
Company is unable to adjust expenses quickly enough to compensate for the net
sales shortfall.
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<PAGE>
YEAR 2000. Although the Company believes that it has identified and
developed plans to address internal Year 2000 issues, unexpected problems will
likely arise. As with most businesses, the Company will also be at risk from
Year 2000 failures in the systems of its customers, suppliers or transporters as
well as external infrastructure failures that could arise from Year 2000
failures. Any such failure could materially and adversely affect the Company's
business, results of operations and financial condition.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY. The Gardenburger(R)
trademark and the Company's other trademarks are important to its continued
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, third parties may infringe or misappropriate
the Company's trademarks. The Company might then be required to incur
substantial costs to protect its trademarks or lose its rights in those
trademarks. The Company does not hold any patents covering its recipes or
production methods and, therefore, can only protect them as trade secrets. Some
or all of these trade secrets could be obtained by others or could enter the
public domain, which could place the Company at a competitive disadvantage.
VOLATILITY OF STOCK PRICE. The market price of the Common Stock has
been and will likely continue to be subject to significant fluctuations in
response to variations in quarterly operating results, announcements concerning
the Company or its competitors, the introduction of new products or changes in
product pricing policies by the Company or its competitors or changes in
earnings estimates by analysts. In addition, the stock markets have experienced
extreme price and volume volatility in recent periods, which has had a
substantial effect on the market prices of securities of many small public
companies for reasons frequently unrelated to their operating performance.
ABSENCE OF DIVIDENDS. The Company does not intend to pay cash dividends
on its Common Stock for the foreseeable future. Under the terms of the Note
Purchase Agreement relating to the Notes, the Company may not pay cash dividends
without the consent of the holders of the Notes as long as at least $5,000,000
in principal amount of the Notes remain outstanding and the Selling Shareholder
or its affiliates continue to own at least a majority of the then outstanding
principal amount of the Notes. See "Selling Shareholder."
ANTI-TAKEOVER CONSIDERATIONS. Oregon corporate law contains provisions
that could make it more difficult for a third party to acquire, or discourage a
third party from attempting to acquire, control of the Company without the
approval of its Board of Directors. The Company's Articles of Incorporation
contain provisions designed to prevent sudden changes in the composition of the
Board of Directors and authorize the Board of Directors to issue shares of
Preferred Stock in the future without shareholder action. The Company has in
effect a Rights Agreement which provides for the future issuance of shares of
Series A Junior Participating Preferred Stock upon the occurrence of certain
events affecting the control of the Company. The holders of the Notes have the
right to require redemption of the Notes upon a Change of Control or Management
Change of the Company (as defined in the Note Purchase Agreement). The matters
discussed above may have the effect of delaying or preventing a change of
control of the Company, may discourage offers for the Company's Common Stock at
a premium and may adversely affect the market price of, and the voting rights of
the holders of, the Common Stock.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; DILUTION. This Prospectus relates to
the offering for sale of up to 1,252,790 shares of Common Stock that may be
issued upon conversion of, or in payment of interest on, the Notes. At November
1, 1998, the Company had outstanding 8,707,774 shares of Common Stock, all of
which are eligible for sale in the open market (as to the 995,328 shares held by
affiliates of the Company, in compliance with Rule 144), and 2,729,167 shares of
Common Stock reserved for issuance upon exercise of outstanding options, which
have been or will be registered under the Securities Act and, therefore, will be
freely tradable (as to options held by executive officers and directors, in
compliance with Rule 144). Sales, including block sales, of a significant number
of shares of Common Stock, or the potential for such sales, could have a
material adverse effect on the prevailing market price for the Common Stock,
particularly due to the limited public float of the Common Stock on the Nasdaq
National Market.
The Notes held by the Selling Shareholder may be converted at any time,
or from time to time, into Common Stock at an initial conversion price of $12.90
per share. Conversion of the Notes may cause the interests of shareholders in
the Company to be diluted, possibly significantly. If the market price of the
Common Stock rises, the dilutive effect of conversion will increase. See
"Selling Shareholder."
CONTROL BY EXISTING SHAREHOLDERS. Paul F. Wenner, Chief Creative
Officer and a Director of the Company, has beneficial ownership of 1,982,383
shares of the Company's Common Stock, or 20.3% of the outstanding Common Stock,
which includes 1,036,240 shares issuable upon exercise of currently exercisable
options. In addition, the Selling Shareholder is the beneficial owner of
1,203,764 shares of Common Stock, or 12.2% of the outstanding Common Stock,
including the 1,162,790 shares issuable upon conversion of the Notes. As a
result of this significant beneficial ownership by Mr. Wenner and the Selling
Shareholder, as well as the Selling Shareholder's right to designate a nominee
to the Board of Directors, each of Mr. Wenner and the Selling Shareholder may
exercise substantial influence over the Company's affairs, including the
election of directors and any significant corporate transactions. Such
concentration of ownership may enable management to delay or hinder a change in
control of the Company and may discourage third parties from attempting to
acquire such control without first soliciting the consents of Mr. Wenner and the
Selling Shareholder.
THE COMPANY
Gardenburger, Inc., is the leading producer and marketer of branded
veggie burgers, with substantial market share across multiple distribution
channels. The Company's Gardenburger(R) product line, featuring the grain-based
original Gardenburger(R) veggie burger, is the number one national brand in the
retail grocery, food service, club stores and natural foods channels of
distribution. In 1998, the Company began an aggressive national television
advertising campaign with the goal of branding the meat alternative category
with the Gardenburger(R) name and converting the veggie burger from a niche
health food product into a mainstream consumer product.
Sales to the retail grocery channel represented 56% of the Company's
net sales for the first nine months of 1998 as a result of distribution of
Gardenburger(R) veggie burgers to more than 30,000 grocery stores. The Company's
products are also distributed to more than 35,000 food service outlets,
including several national restaurant chains and smaller local outlets, as well
as to club stores with over 600 locations and more than 4,000 natural food
stores.
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<PAGE>
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, as well as up to 90,000
Shares that have been or may be issued in payment of interest payable on 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 bear interest at the rate of 7% per annum, payable
semi-annually. Under specified circumstances, interest payments may, at the
election of the Company, be made in shares of Common Stock valued at the lower
of the conversion price for the Notes and the then current market price. The
Company has issued 40,974 shares in payment of the semi-annual interest payment
due September 30, 1998. The Notes may be converted at any time prior to maturity
on April 1, 2003, in whole or from time to time in part, into shares of the
Company's Common Stock, at the sole discretion of the Selling Shareholder. The
initial conversion price is $12.90 per share, subject to adjustment for changes
in capitalization and other anti-dilution provisions. As a result of the
convertibility of the Notes, at December 1, 1998, the Selling Shareholder was
deemed to beneficially own 1,203,764 shares of Common Stock, or 12.2% of the
outstanding shares (including shares issuable upon conversion of the Notes).
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%
of the principal amount if the prepayment occurs between April 1, 2000, and
March 31, 2001, and 1.4% 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% prepayment
premium) in the event of a change in control or sale of more than 50% 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.
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<PAGE>
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 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 is a summary of all of the material terms of the Notes
and the Note Purchase Agreement. The form of the Notes and the Note Purchase
Agreement are included as exhibits to the Registration Statement of which this
Prospectus is a part. You are encouraged to review the terms of the Notes and
the Note Purchase Agreement in their entirety. Copies of the Notes and the Note
Purchase Agreement may be obtained upon request to the Company as described
under "Information Incorporated by Reference."
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.
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<PAGE>
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 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.
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<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..................................................... $ 4,685
Legal Fees........................................................... 45,000*
Accounting Fees...................................................... 25,000*
Printing............................................................. 5,000*
Miscellaneous........................................................ 315*
-------
Total....................................................... $80,000*
=======
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* 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.
II-1
<PAGE>
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 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:
II-2
<PAGE>
(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 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 that 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
Amendment No. 2 to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Portland, State of
Oregon, on the 3rd day of December, 1998.
GARDENBURGER, INC.
By: /s/ Richard C. Dietz
-----------------------------------------
Richard C. Dietz
Executive Vice President, Chief Financial
Officer, Secretary and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to Registration Statement has been signed below by the
following persons in the capacities and as of the 3rd day of December, 1998.
Signature Title
- --------- -----
PRINCIPAL EXECUTIVE OFFICER:
LYLE G. HUBBARD* Director, President and Chief Executive Officer
PRINCIPAL FINANCIAL
AND ACCOUNTING OFFICER:
/s/ Richard C. Dietz Executive Vice President, Chief Financial Officer,
- ---------------------------- Secretary and Treasurer
Richard C. Dietz
II-4
<PAGE>
A MAJORITY OF THE BOARD OF
DIRECTORS:
RICHARD L. MAZER* Director
MARY O. McWILLIAMS* Director
MICHAEL L. RAY* Director
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, INC.
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.*
- --------------
* Previously filed.
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
December 3, 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 1,252,790 shares (the
"Shares") of the Company's common stock, no par value (the "Common Stock"), of
which 1,162,790 shares may be issued upon the conversion of $15,000,000
aggregate principal amount of the Company's 7% Convertible Senior Subordinated
Notes (the "Notes") purchased by Dresdner Kleinwort Benson Private Equity
Partners LP ("Dresdner"), 40,974 shares have been issued to Dresdner by the
Company as payment of interest due and payable on the Notes on September 30,
1998, and up to 49,026 shares may be issued to Dresdner as payment of interest
which may become due and payable on the Notes in the future. This opinion is
being rendered in connection with a Registration Statement on Form S-3 (No.
333-56775) 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.
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<PAGE>
Based on the foregoing, we are of the opinion that the Shares are duly
and validly authorized, 40,974 Shares have been validly issued and are fully
paid and nonassessable and, as to 1,162,790 Shares, when such Shares have been
issued upon the conversion of the Notes in accordance with their terms, such
Shares will be validly issued, fully paid and nonassessable, and, as to 49,026
Shares, in the event such Shares are issued in payment of interest due and
payable on the Notes in accordance with the terms of the Notes pursuant to a
resolution duly adopted by the Company's Board of Directors in compliance with
the Company's Articles of Incorporation and Bylaws and applicable law, such
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 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
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated February 5, 1998,
included in Amendment No. 2 to Annual Report on Form 10-K/A for the year ended
December 31, 1997, of Gardenburger, Inc., and to all references to our Firm
included in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
Portland, Oregon,
December 3, 1998
