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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1996
REGISTRATION NO. 33-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GARDEN BOTANIKA, INC.
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
WASHINGTON 91-1464962
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
8624 154TH AVENUE N.E., REDMOND, WASHINGTON 98052
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE: (206) 881-9603
GARDEN BOTANIKA, INC. 1992 COMBINED INCENTIVE AND NONQUALIFIED STOCK
OPTION PLAN; OPTION AND SEVERANCE AGREEMENT BY AND BETWEEN
GARDEN BOTANIKA AND JOHN GARRUTO DATED OCTOBER 30, 1995; AND
GARDEN BOTANIKA, INC. 1996 DIRECTORS' NONQUALIFIED STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
MYRON E. KIRKPATRICK
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
8624 154TH AVENUE N.E.
REDMOND, WASHINGTON 98052
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(206) 881-9603
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
CALCULATION OF REGISTRATION FEE
======================================================================================
PROPOSED MAXIMUM PROPOSED
TITLE OF OFFERING PRICE MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO BE PER AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED SHARE (1) OFFERING PRICE (1) FEE (1)
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COMMON STOCK 487,202
$.01 PAR VALUE SHARES $16.50 $6,442,094 $2,221.43
======================================================================================
(1) THE PROPOSED MAXIMUM OFFERING PRICE PER SHARE, PROPOSED MAXIMUM AGGREGATE
OFFERING PRICE AND THE REGISTRATION FEE WERE CALCULATED IN ACCORDANCE WITH RULE
457(H) UNDER THE SECURITIES ACT OF 1933 BASED UPON (I) OUTSTANDING OPTIONS TO
PURCHASE UP TO 285,955 SHARES EXERCISABLE AT AN AVERAGE PRICE OF $10.92 PER
SHARE, AND (II) 201,247 SHARES REPRESENTED BY OPTIONS NOT CURRENTLY OUTSTANDING
HAVING A DEEMED EXERCISE PRICE OF $16.50 PER SHARE, REPRESENTING THE AVERAGE OF
THE HIGH AND LOW PRICES FOR GARDEN BOTANIKA, INC. COMMON STOCK ON JULY 19, 1996,
AS QUOTED BY THE NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATION
NATIONAL MARKET SYSTEM.
PAGE 1 OF 18 PAGES
EXHIBIT INDEX IS LOCATED ON PAGE II-5.
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Garden Botanika, Inc.
Cross Reference Sheet
Showing Location in Prospectus of Information
Required by Items in Part I of Form S-3
1. Forepart of Registration Statement and Outside Front Outside Front Cover Page
Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus Inside Front Cover Page; Outside Back
Cover Page; Additional Information
3. Summary Information Risk Factors and Ration of Outside Front Cover Page; Risk Factors
Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Plan of Distribution; Price Range of Shares
and Distribution History
6. Dilution Not Applicable
7. Selling Security-Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Not Applicable
10. Interests of Named Experts and Counsel Legal Matters; Experts
11. Material Changes Not Applicable
12. Incorporation of Certain Information by Reference Documents Incorporated by Reference
13. Disclosure of Commission Position on Indemnification Liability and Indemnification of Officers
For Securities Act Liabilities and Directors of the Company
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[GARDEN BOTANIKA LOGO]
7,043 Shares
Garden Botanika
Common Stock
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Garden Botanika, Inc. ("Garden Botanika" or the "Company") is a rapidly
growing retailer of high-quality, reasonably priced personal care products. The
Company's proprietary products encompass such categories as skin care, color
cosmetics, fragrances, bath and body care and related accessories and gifts.
Garden Botanika develops its branded products and distributes them for sale
through its 182 Company-owned and -operated specialty retail stores in 34 states
nationwide and the Company's catalog. The Company's principal executive offices
are located at 8624 154th Avenue N.E., Redmond, Washington 98052, and its
telephone number at that location is (206) 881-9603.
All of the shares of the Company's Common Stock offered hereby (the
"Shares") are being sold by various shareholders of the Company (the "Selling
Shareholders"). For information regarding the Selling Shareholders and the plan
of distribution of the Shares, see "Selling Shareholders" and "Plan of
Distribution."
The Company's Common Stock is listed on the Nasdaq National Market
("Nasdaq") under the symbol "GBOT." On July 19, 1996, the last reported sale
price of the shares on Nasdaq was $16.125. See "Price Range of Shares and
Distribution History."
Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or after the dates as
of which information is set forth herein. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, the securities to which
this Prospectus relates in any jurisdiction to any person to whom it is unlawful
to make such or solicitation in such jurisdiction.
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
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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 July 22, 1996.
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AVAILABLE INFORMATION
Garden Botanika is subject to the informational reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information can be inspected and copied at the Public
Reference Room of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices at 500 West Madison Street, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048,
and copies of such material can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has filed with the Commission a Registration Statement on
Form S-8 under the Securities Act of 1933, as amended, with respect to the
Shares being offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules filed therewith. For further information with respect to the Company
and the Shares offered hereby, reference is hereby made to such Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in the Prospectus regarding the contents of any contract or other
document referred to are not necessarily complete, and in each instance,
reference is made to the copy of such contract or other document previously
filed with the Commission, each such statement being qualified in all respects
by such reference. The Registration Statement, including the exhibits and
schedules thereof may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or
any part thereof may be obtained form such office upon the payment of prescribed
fees.
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before purchasing any of the Shares offered hereby.
HISTORICAL NET LOSSES
During the last three fiscal years, the Company incurred net losses of
$2.4 million, $1.4 million and $1.7 million. As of the end of fiscal 1995, the
Company had an accumulated deficit of $9.1 million. The Company may report a net
loss in fiscal 1996, and there can be no assurance that the Company will
generate profits in future periods. The Company's future operating results will
depend upon a number of factors, particularly the performance of its existing
and new stores as each class matures; the ability of the Company to manage its
planned rapid store expansion and to successfully identify and respond to
emerging trends in the personal care products industry; the level of
competition; and general economic conditions.
AGGRESSIVE GROWTH STRATEGY
The Company opened its first store in August 1990 and currently
operates 182 stores. The Company intends to continue to pursue an aggressive
growth strategy for the foreseeable future, and its future operating results
will depend, in large part, on its ability to open new stores on a timely basis
and enter markets and distribution channels in which it has no previous
experience. The Company, which has never opened more than 66 stores in any one
fiscal year, currently plans to open approximately 100 additional stores in
fiscal 1996 and approximately 120 stores in fiscal 1997, resulting in a
significant increase in the number of stores operated. The company's net
investment to open a new store averaged approximately $267,000 for the 66 stores
opened in fiscal 1995. The Company expects that the average cost to open a new
store during fiscal 1996 will decline materially due to cost reductions
associated with bringing certain lease acquisition and store design functions
in-house and to an expected general increase in the level of lessor construction
allowances. There can be no assurance, however, that such cost reductions will
occur. Because the Company will be expanding into geographic markets in which it
has no previous operating experience, it may face competitive challenges that
are different from those encountered to date. The Company's expansion plans
include, in addition to mall locations in which it has substantial historical
experience, the possibility of larger mall-based stores with different product
assortments and street-front shops in residential neighborhoods as well as other
less-traditional retail locations, that will involve different risks than the
Company's current mall-based activities. There can be no assurance that the
Company will successfully be able to open the planned number of new stores,
enter new geographic markets or open in non-mall locations.
The Company's future operating results will also depend on its ability
to operate its new and existing stores in a profitable manner. The profitability
of the Company's stores is dependent on a number of factors, including the
Company's ability to (i) secure suitable store sites on a timely basis and on
satisfactory terms; (ii) integrate its new stores into its existing operations;
(iii) manage operating expenses; (iv) manage its growth effectively; and (v)
secure adequate capital resources on acceptable terms. The Company's future
operating results will also depend on many other factors that are beyond the
Company's control, including the level of mall traffic and general economic
conditions affecting consumer confidence and spending. The Company expects to
open new stores in certain markets in which it is already operating, which could
adversely affect sales at existing stores. There can be no assurance that the
Company's stores will achieve targeted sales and profitability levels in the
future.
Of the Company's 182 stores, 80 stores, or 44 %, have been open less
than one year and 143 stores, or 79%, have been open less than two years.
Consequently, the results achieved by these stores to date may not be indicative
of future results for these stores or for other new stores. Although the sales
and profitability of each existing class of the Company's stores have improved
as the class has matured, there can be no assurance that future store classes
will experience similar results.
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In fiscal 1996, the Company plans to introduce a greater number of new
products on a more frequent basis than it has in the past. The costs associated
with new product introductions, including costs associated with advertising and
marketing expenses, are expected to increase significantly. For example, the
Company's advertising and marketing expenses for product launch signage and
direct-mail new product announcements are expected to be approximately $700,000
in fiscal 1996, compared to similar expenses of approximately $30,000 incurred
in fiscal 1995. There can be no assurance that the sales of new products will
justify the costs associated with their development and marketing.
ABILITY TO MANAGE GROWTH
In order for the Company to expand successfully, management will be
required to anticipate the changing demands of the Company's growing operations
and to adapt systems and procedures accordingly. There can be no assurance that
the Company will anticipate all of the changing demands that its expanding
operations will impose on such systems. The Company has recently hired several
key officers and employees to supplement its management team. To support the
rapid growth in the number of its stores, the company will be required to hire
and train a greater number of store managers and sales associates than it has in
the past, and there can be no assurance that the training and supervision of a
large number of new employees will not adversely affect the performance of the
company's stores or the high standards that the Company seeks to maintain in
such stores. To enhance its new product development efforts, the Company
acquired its first direct manufacturing capability n October 1995. The Company's
future success will depend, in part, on its ability to integrate new individuals
and capabilities, as well as others, into its operations as it expands in the
future, and there can be no assurance that the company will be able to achieve
such integration. The Company recently completed relocating its distribution and
fabrication facilities into a single larger facility. Following the expiration
of the lease term for this facility in the summer of 1997, the Company intends
to establish a build-to-suit distribution facility which could be expanded in
the future to meet the Company's needs as they grow. The relocation and
expansion of its distribution facilities in 1997 could cause delays or
interruptions in the normal supply of inventory. The Company will also need to
continually evaluate the adequacy of its management information systems,
including its inventory control and distribution systems. Failure to upgrade its
information systems or unexpected difficulties encountered with these systems
during expansion could adversely affect the Company's business, financial
condition and operating results. See "Risk Factors -- Reliance on Single
Management Information Systems Vendor."
The Company's growth also places significant pressures on its inventory
controls. In fiscal 1995, the Company experienced inventory shrinkage higher
than its historical rate. Through use of an independent inventory service, the
Company expects to conduct partial physical inventories on a quarterly basis in
fiscal 1996 and to upgrade its inventory control systems. In addition, subject
to adjustment for results of future physical inventories, the Company will
reserve for inventory shrinkage in fiscal 1996 at the actual rate experienced in
fiscal 1995. There can be no assurance, however, that the Company's inventory
shrinkage rate will not increase as the Company continues to grow and introduce
new products.
The Company believes that cash generated from its recent initial public
offering, from anticipated bank borrowings under its working capital credit
facility and from operations will be sufficient to satisfy its currently
anticipated working capital and capital expenditure requirements through fiscal
1997. However, in connection with its aggressive growth strategy, the Company
will incur significant inventory and capital expenditure and preopening costs.
The Company may be required to seek additional sources of funds for such
expansion, and there can be no assurance that such funds will be available on
satisfactory terms. Failure to obtain such financing could delay or prevent the
Company's planned expansion, which could adversely affect the Company's
business, financial condition and operating results.
SEASONALITY AND QUARTERLY FLUCTUATIONS
The Company has experienced, and expects to continue to experience,
substantial seasonal fluctuations in its sales and operating results, which is
typical of many mall-based specialty retailers. Historically, a disproportionate
amount of the Company's retail sales, ranging from approximately 45% to 50% of
annual net sales, and all of its profits have been realized during its fourth
fiscal quarter. The Company expects this pattern to
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continue during the current fiscal year and anticipates that in subsequent years
the fourth quarter will continue to contribute disproportionately to its
operating results, particularly during November and December. In anticipation of
increased sales activity during the fourth quarter, the Company incurs
significant additional expenses, including the hiring of a substantial number of
temporary employees to supplement its permanent store staff. If, for any reason,
the Company's sales were to fall below its expectations during November and
December, the Company's business, financial condition and annual operating
results would be adversely affected. The Company's quarterly results of
operations may also fluctuate significantly as a result of a variety of other
factors, including, among other things, the timing of new store openings, net
sales contributed by new stores, increases or decreases in comparable store
sales, adverse weather conditions, shifts in the timing of holidays and changes
in the Company's product mix. Primarily as a result of the increasing number of
recently opened stores and new product initiatives, the Company experienced a
larger net loss in its first quarter of fiscal 1996 as compared to the prior
fiscal year and anticipates a larger comparable net loss in each of its second
and third quarters of fiscal 1996.
FLUCTUATIONS IN COMPARABLE STORE SALES RESULTS
A variety of factors affect the Company's comparable store sales
results, including, among others, general economic conditions, the retail sales
environment, timing of promotional events, including the mailing of the
Company's catalogs, new product introductions and the Company's ability to
execute its business strategy efficiently. The Company's comparable store sales
increases were 20%, 33% and 17% for fiscal 1993, 1994 and 1995, respectively.
The Company expects comparable store sales to increase at a significantly lower
rate than in the past. The Company's comparable store sales results have also
fluctuated significantly in the past and are expected to continue to fluctuate
in the future. For example, the comparable store sales increase in February,
March, April, May and June of 1996 were 2%, 13%, 13%, 3% and 2%, respectively,
compared to 7%, 13% and 9% in the third and fourth quarters of fiscal 1995 and
the first quarter of fiscal 1996, respectively. There can be no assurance that
comparable store sales for any particular period will not decrease in the
future. Following this offering, the Company's comparable store sales results
could cause the price of the Common Stock to fluctuate substantially.
GENERAL ECONOMIC CONDITIONS
The success of the Company's operations depends to a significant extent
upon a number of factors relating to discretionary consumer spending. These
factors include economic conditions such as employment, business conditions,
interest rates and taxation, as well as the ability of mall anchors and other
tenants to generate customer traffic in the vicinity of the Company's stores.
The Company's business is also sensitive to consumer spending patterns and
customer preferences. There can be no assurance that consumer spending and
customer traffic will not be adversely affected by general social trends and
economic conditions, thereby impacting the Company's growth, net sales and
profitability. For example, the Company's sales, and sales in the retail
industry generally, were lower than expected ruing the 1995 holiday season. If
the demand for personal care products and related merchandise were to decline,
the Company's business, financial condition and operating results could also be
adversely affected.
COMPETITION
The personal care, makeup and fragrance businesses are highly
competitive. The Company's products compete directly against personal care,
makeup, fragrance and other functionally similar products sold through a variety
of retail channels, including department stores, mass merchants, drugstores,
supermarkets, telemarketing programs, television "infomercials" and catalogs.
The Company competes against a number of companies that have substantially
greater resources than the Company, including better name recognition, and that
sell their products through broader distribution channels than the Company. Some
department stores which have historically offered personal care products at
higher price points than the Company, have recently introduced less expensive
product lines that may compete more directly with the Company's products. The
Company also competes directly against mall-based specialty retailers of
personal care products, including national and international chains. In general,
there are no provisions in the Company's leases that limit or restrict competing
businesses from operating in the malls in which the Company's stores are
located. The number of local and regional specialty retail outlets
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selling personal care products has increased significantly in recent years, and
the lack of significant barriers to entry may result in new competition,
including possible imitators of the Garden Botanika concept. Such competition
could have a material adverse effect on the Company's business, financial
condition and operating results. In addition, should any of the Company's
competitors reduce prices, the Company may be required to implement price
reductions in order to remain competitive, which could have an adverse impact on
its business, financial condition and operating results. The Company believes
that success in the personal care industry depends, in part, on the regular
introduction of new and attractive products. There can be no assurance, however,
that the Company will continue to be able to develop such products or that if
and when introduced, such products will be accepted by its customers. The
Company also competes generally for store sites, and there can be no assurance
that it will be able to continue to secure suitable sites on satisfactory terms.
CATALOG EXPENSES
In the third quarter of fiscal 1994, the Company introduced its mail
order catalog for Garden Botanika products. One purpose of this catalog is to
increase sales at the Company's stores by advertising its products and
introducing new customers to those products in geographic areas that are not yet
served by the Company's stores. Initiation of the catalog resulted in additional
costs to the Company and, to date, those additional costs have exceeded the
additional sales directly attributable to the catalog. In fiscal 1995, the
direct operating expenses of the catalog were $3.7 million. There can be no
assurance that mail order sales directly attributable to the catalog will exceed
its direct operating expenses. The Company seeks to expand the size of its
catalog mailing list and is in the process of acquiring new names from a variety
of sources. There can be no assurance, however, that the Company will be able to
obtain new names in sufficient quantity or that the use of such names will
successfully produce mail order sales. Postal rates, delivery charges and paper
and printing costs directly affect the cost of the Company's catalog, and a
significant increase in any of these expenses could adversely affect the
Company's overall business, financial condition and operating results.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon the efforts of its key offices and
employees, including Michael W. Luce, President, Chief Executive Officer and a
director; Arlee J. Jensen, Senior Vice President -- Merchandising and Marketing;
C. Michael Fisher, Senior Vice President -- Operations; and John A. Garruto,
Vice President -- Research and Product Development. Although the Company has
employment agreements with certain key officers, the loss of any of these
individuals could adversely affect the Company's business, financial condition
and operating results. The Company has obtained insurance on the lives of Mr.
Luce and Ms. Jensen in the amounts of $1.5 million and $1.0 million,
respectively. There can be no assurance that the Company's existing management
team will be able to manage the Company's growth or that the Company will be
able to motivate, attract and retain key employees and qualified personnel in
the future.
RELIANCE ON SINGLE MANAGEMENT INFORMATION SYSTEMS VENDOR
The Company currently relies on a single outside vendor for the
software and day-to-day support that form the basis of the Company's management
information, distribution and financial systems. The Company believes that this
outside vendor has sufficient experience and commitment to its product lines to
be relied upon for continued support in developing, testing and implementing
systems and controls that are adequate to support the Company's store expansion
plans and its distribution and financial systems. The Company and its
information systems vendor are contemplating upgrades of Garden Botanika's
systems in areas relating to manufacturing, inventory control and distribution
in the current fiscal year. The introduction of new capabilities can be expected
to require additional management time and/or result in delays or complications
before the upgrades are completed. In addition, the Company may have little
control, apart from changing vendors, over the level of systems maintenance and
support it receives. In the event it were to change information systems vendors,
the Company could experience unforeseen delays or interruptions in its access to
information. Such problems, were they to occur, could adversely affect the
Company's business, financial condition and operating results.
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CONCENTRATION OF SUPPLIERS AND FOREIGN SOURCING
In fiscal 1995, approximately 55% of the Company's purchases of raw
materials, finished product, packaging and other supplies were obtained from the
Company's nine largest suppliers, with the Company's largest supplier accounting
for approximately 12% of such purchases. With the exception of certain packaging
orders, the Company has no long-term purchase contracts or other contractual
assurance of continued supply, pricing or access to new products. The inability
or failure of one or more key vendors to supply merchandise, the loss of one or
more principal vendors or a material change in the Company's purchase terms
could have a material adverse effect on the Company's business, financial
condition and operating results. There can be no assurance that the Company will
be able to acquire desired materials in sufficient quantities on acceptable
terms in the future.
In fiscal 1995, a significant portion of the Company's merchandise
purchases originated from independent foreign manufacturers, located primarily
in the far East and Canada, and some of its domestic vendors imported a
substantial portion of their merchandise from abroad. The Company's operations
may be adversely affected by political instability resulting in disruption of
trade from the foreign countries in which the Company's contractors and
suppliers are located; existing or potential duties, tariffs or quotas that may
limit the quantity of certain types of goods that may be imported into the
United States; and any significant fluctuation in the value of the dollar
against foreign currencies.
REGULATION AND POTENTIAL CLAIMS
The Company's advertising and product labeling practices are subject to
regulation by the Federal Trade Commission, and its cosmetic manufacturing
practices are subject to regulation by the Food and Drug Administration (the
"FDA"), as well as various other federal, state and local regulatory
authorities. Compliance with federal, state and local laws and regulations,
including laws and regulations pertaining to the protection of the environment,
has not had, and is not anticipated to have, a material adverse effect on the
competitive position of the Company. Nonetheless, federal, state and local
regulations in the United States that are designed to protect consumers or the
environment have had, and can be expected to have, an increasing influence on
product claims, manufacturing, contents and packaging. In addition, if the
Company were to expand its manufacturing capabilities to include
over-the-counter drug ingredients, it would become subject to FDA registration
and a higher degree of inspection and greater burden of regulatory compliance
than at present. The nature and use of personal care products could give rise to
product liability claims if one or more of Garden Botanika's customers were to
suffer adverse reactions following use of its products. Such reactions could be
caused by various factors, many of which are beyond the Company's control,
including hypoallergenic sensitivity and the possibility of malicious tampering
with the Company's products. In the event of such an occurrence, the Company
could incur substantial litigation expense, receive adverse publicity and suffer
a loss of sales.
CONTROL BY DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors, executive officers and their affiliates own,
in the aggregate, approximately 18% of the Company's outstanding shares of
Common Stock. As a result, these shareholders, acting together, would be able to
significantly influence many matters requiring approval by the shareholders of
the Company, including the election of directors.
SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial number of shares of Common Stock in the
public market could adversely affect the market price of the Common Stock.
Approximately 21,700 shares are currently eligible for sale in the public market
in accordance with Rule 144(k), and approximately 18,100 shares are eligible for
sale in accordance with Rules 144 and 701. In addition, approximately 92,900 and
2,953,100 shares will be eligible for sale beginning September 19, 1996 and
November 18, 1996, respectively, upon the expiration of lock-up agreements and
subject to the provisions of Rule 144 of the Securities Act of 1933, as amended
(the "Securities Act"). As of July 22, 1996, options to purchase approximately
18,228 shares of Common Stock not subject to lock-up agreements were vested and
eligible for sale pursuant to an effective registration statement filed by the
Company on Form S-8 in
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connection with this offering. In addition, certain existing shareholders
possess registration rights with respect to shares of Common Stock.
LACK OF PRIOR PUBLIC MARKET AND VOLATILITY OF STOCK PRICE
Prior to May of 1996, there had been no public market for the Common
Stock, and there can be no assurance that an active trading market will be
sustained. The market price of the Common Stock has been, and may continue to
be, subject to significant fluctuations in response to the Company's operating
results and other factors. In addition, the stock market in recent years
experienced extreme price and volume fluctuations that often have been unrelated
to or disproportionate to the operating performance of companies. These
fluctuations, as well as general economic and market conditions, may adversely
affect the market price of the Common Stock. See "Price Range of Shares and
Distribution History."
ANTITAKEOVER CONSIDERATIONS
The Company's Board of Directors has the authority, without shareholder
approval, to issue up to 10,000,000 shares of Preferred Stock and the fix the
rights and preferences thereof. This authority, together with certain provisions
in the Company's Articles of Incorporation, may have the effect of making it
more difficult for a third party to acquire, or discouraging a third part from
attempting to acquire, control of the Company even if shareholders purchasing
shares in this offering may consider such a change in control to be in their
best interests. In addition, Washington law contains certain provisions that may
have the effect of delaying, deterring, or preventing a hostile takeover of the
Company.
SELLING SHAREHOLDERS
The table below sets forth certain information concerning the Selling
Shareholders. From time to time since July of 1994, the Company has issued
shares of Common Stock to employees or former employees upon their exercise of
vested options under the terms of the Company's 1992 Combined Incentive and
Nonqualified Stock Option Plan (the "Plan"). All of the Selling Shareholders
received their shares as a result of exercising options they received while they
were employed by the Company. Some of the Selling Shareholders held material
positions while employed by the Company or currently hold such positions.
Specifically, Mr. Schlesinger served as the Company's Director of Stores from
June 1991 to August 1994; Ms. Emkes served as the Company's Controller and
Director of Accounting from December 1990 to December 1994, which position was
filled by Ms. Hoffman from December 1994 to January 1996. Aileen Protzmann was
employed as the Company's Western Regional Manager from January 1995 to March
1995, and Susanne Schoeller was the Company's Director of Marketing from March
1993 to April 1994. Ms. Johnson is currently the Company's Western Leasing
Manager. The other Selling Shareholders served as District Managers, where they
were each responsible for supervising a number of retail stores.
Number of Shares Number of Shares to Number of Shares to
Owned Prior to be Sold under this be Owned after this
Name Offering Prospectus Offering
---- -------- ---------- --------
Kelly J. Brewer 7 7 0
Jane Emkes 2,033 2,033 0
Krista Fox 25 25 0
Lindsey Hoffman 1,332 1,332 0
Kimberly Hutchinson 63 63 0
Nancy Johnson 317 317 0
Aileen Protzmann 216 216 0
Paul Schlesinger 1,144 1,144 0
Susanne Schoeller 1,906 1,906 0
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USE OF PROCEEDS
All of the Shares offered hereby are being sold by the Selling
Shareholders; the Company will receive none of the proceeds from the sale of the
Shares offered by this Prospectus. However, pursuant to the terms of the Plan,
the Company previously issued a total of 7,043 shares to the Selling
Shareholders for an aggregate consideration of $68,275. The proceeds from the
prior sale of these Shares was used for general corporate purposes prior to the
Company's initial public offering. The Shares are being registered at this time
as an accommodation to the Company's prior employees to provide liquidity for
their investment.
PLAN OF DISTRIBUTION
The Company has advised the Selling Shareholders that they may sell the
Shares described in this Prospectus from time to time in transactions effected
by or through registered broker-dealers, in independent negotiated transactions,
or otherwise. All Shares covered by this Prospectus may be sold at market prices
prevailing at the time of sale or at negotiated prices. The Selling Shareholders
will pay any and all fees, commissions and expenses associated with the sale of
their Shares.
PRICE RANGE OF SHARES AND DISTRIBUTION HISTORY
The Company's Common Stock has been listed on The Nasdaq Stock Market
since May 22, 1996 under the symbol GBOT. On July 19, 1996, the last reported
sale price of the Common Stock on Nasdaq was $16.125. The following table sets
forth the high and low closing price for the fiscal period indicated as reported
by Nasdaq. The Company has not paid any dividends since inception.
1996 High Low
---- ---- ---
May 22 through July 19 $35.00 $11.50
RECENT DEVELOPEMENTS
No material changes in the Company's affairs have occurred since the
end of the fiscal year to which the 1994 Form 10-K relates that have not been
described in a report on Form 10-Q or Form 8-K filed under the Exchange Act.
LIABILITY AND INDEMNIFICATION OF
OFFICERS AND DIRECTORS OF THE COMPANY
As permitted by Section 23B.08.320 of the Washington Business
Corporation Act, Article 13 of the Company's Articles of Incorporation
eliminates in certain circumstances the personal liability of the Company's
directors to the Company or its shareholders for monetary damages resulting from
their conduct as an officer or director. This provision does not eliminate the
liability of directors for (i) acts or omissions that involve intentional
misconduct or a knowing violation of law, (ii) improper declarations of
dividends, or (iii) transactions from which a director received an improper
personal benefit.
The Company's Bylaws require the Company to indemnify its directors and
officers to the fullest extent permitted by Washington law, including under
circumstances in which indemnification is otherwise discretionary. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has
9
12
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable. The Company has obtained officers' and directors'
liability insurance for members of its Board of Directors and key employees.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Heller, Ehrman, White & McAuliffe, Seattle, Washington.
EXPERTS
The consolidated financial statements included in the Company's
Registration Statement on Form S-1, amended, and the Company's final prospectus
dated May 22, 1996 and filed under Rule 424 in relation thereto, which have been
incorporated by reference herein, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included in reliance upon the authority of such firm as experts
in accounting and auditing in giving said report.
DOCUMENTS INCORPORATED BY REFERENCE
The documents listed in (a) through (c) below are incorporated by
reference in this Prospectus.
(a) The Company's Registration Statement on Form S-1, amended; the
Company's final prospectus dated May 22, 1996 and filed under
Rule 424 in relation thereto; and the Company's Quarterly
Report on Form 10-Q for the quarter ended May 4, 1996, filed
pursuant to Section 13(a) of the Exchange Act.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the filing of the Form 10-K referred to
in (a) above.
(c) The description or the Company's securities contained in a
registration statement on Form 8-A filed pursuant to Section
12 of the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the common stock pursuant to the Plans described
herein shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such documents. See "Available Information."
Any statement contained herein or in a document incorporated by reference 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 herein by reference modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except a so modified or
superseded, to constitute a part of this Prospectus.
In addition, copies of the following documents are available from the
Company, without charge, upon written or oral request:
(a) All documents containing the Plan information that constitutes part
of the Prospectus.
(b) One of the following documents: (i) the Company's annual report to
shareholders for its latest fiscal year, (ii) the Company's annual report on
Form 10-K, or (iii) the latest prospectus filed by the Company with the
Commission pursuant to Rule 424(b) promulgated under the Securities Act of 1933.
10
13
(c) Any report, proxy statement or other communication distributed to
the Company's security holders generally. The Company will provide without
charge to each person to whom a copy of this Prospectus is delivered, upon
written or oral request, a copy of any and all of the information that has been
or may be incorporated by reference in this Prospectus, other than exhibits to
such documents. Requests for such copies should be directed to Garden Botanika,
Inc., 8624 154th Avenue N.E., Redmond, Washington 98052, Attention: General
Counsel. The Company's telephone number at that location is (206) 881-9603. .
11
14
================================================================================
No dealer, salesperson or other individual has been authorized to give
any information make any representations not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the Shares in any jurisdiction where, or to any
person to whom, it is unlawful to make such offer or solicitations. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the facts
set forth in this Prospectus or in the affairs of the Company since the date
hereof.
--------------------
TABLE OF CONTENTS
PAGE
----
Available Information ................................................. 2
Risk Factors ............................................................ 3
Selling Shareholders .................................................... 8
Use of Proceeds ......................................................... 9
Plan of Distribution .................................................... 9
Price Range of Shares and Distribution
History ................................................ 9
Liability and Indemnification of Officers
and Directors of the Company ........................... 9
Legal Matters ........................................................... 10
Experts ................................................................. 10
Documents Incorporated by Reference ..................................... 10
================================================================================
7,043 SHARES
[GARDEN BOTANIKA LOGO]
GARDEN BOTANIKA, INC.
COMMON STOCK
------------------
PROSPECTUS
------------------
July 22, 1996
================================================================================
12
15
PART II
INFORMATION REQUIRED IN THE REGISTRATION
STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed or to be filed with the Commission by the
Registrant are incorporated by reference in this registration statement.
(a) The Registrant's Registration Statement on Form S-1, as
amended; the Registrant's final prospectus dated May 22, 1996
and filed under Rule 424 in relation thereto; and the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended May 4, 1996, filed with the Commission pursuant to
Section 13(a) of the Exchange Act of 1934, as amended (the
"Exchange Act").
(b) All other reports filed by the Registrant pursuant to Section
13(a) or 15(d) of the Exchange Act since the filing of the
Form 10-Q referred to in (a) above.
(c) The description of the Registrant's Common Stock contained in
a registration statement on Form 8-A filed pursuant to Section
12 of the Exchange Act.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date hereof and prior to the termination of
the offering of the common stock pursuant to the Plans described herein shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Washington Business Corporation Act (Sections 23B.08.500 through 23B.08.600
of the Revised Code of Washington) authorizes a court to award, or a
corporation's Board of Directors to grant, indemnity to directors and officers
in terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities arising under the Securities Act of 1933, as
amended. Article IX of the Registrant's Bylaws provides for such indemnification
of its directors, officers, employees and other agents.
The Washington Business Corporation Act includes a provision (Section 23B.08.320
of the Revised Code of Washington) that permits a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for his acts or omissions as a director, except for those acts or omissions
involving intentional misconduct or a knowing violation of law, certain unlawful
distributions or a transaction whereby the director received a personal benefit
to which he was not legally entitled. Article 13 of the Registrant's Restated
Articles of Incorporation contains provisions implementing, to the full extent,
the allowed limitations on a director's liabilities to the Registrant or its
shareholders.
II-1
16
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable
ITEM 8. EXHIBITS.
Exhibit Number Exhibit
- -------------- -------
5.1 Opinion of Heller, Ehrman, White & McAuliffe
10.1 Garden Botanika, Inc. 1992 Combined Incentive and
Nonqualified Stock Option Plan, Amended and Restated as of
May 21, 1996
10.2 Option and Severance Agreement by and between Garden
Botanika, Inc. and John Garruto dated October 30, 1995
10.3 Garden Botanika, Inc. 1996 Directors' Nonqualified Stock
Option Plan, Restated as of May 21, 1996
23.1 Consent of Heller, Ehrman, White & McAuliffe (See Exhibit
5.1)
23.2 Consent of Arthur Andersen LLP, Independent Auditors
24 Power of Attorney (See page II-4 of this Registration
Statement)
ITEM 9. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being 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;
(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; and
(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;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.
II-2
17
(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.
(b) The undersigned registrant hereby undertakes 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
Securities Exchange Act of 1934, (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
securities Exchange Act of 1934) 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.
(h) 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 foregoing provisions, 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 Act 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 of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Redmond, State of Washington, on July 22, 1996.
GARDEN BOTANIKA, INC.
By: /s/ Michael W. Luce
------------------------------------
Michael W. Luce, President and Chief
Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Michael W. Luce and Myron E. Kirkpatrick, or either of them, his true and lawful
attorney-in-fact and agent, with the power of substitution and resubstitution,
for him in his name, place and stead, in any and all capacities, to sign any or
all amendments to this Registration Statement, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact and his agent or his substitutes may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/Michael W. Luce President and Chief Executive Officer July 22, 1996
- -------------------------------- (Principal Executive Officer)
Michael W. Luce
/s/Myron E. Kirkpatrick Vice President-Finance and Treasurer July 22, 1996
- ------------------------------- (Principal Financial Officer and Principal
Myron E. Kirkpatrick Accounting Officer)
/s/Damon H. Ball Director July 22, 1996
- -------------------------------
Damon H. Ball
/s/Jeffrey H. Brotman Director July 22, 1996
- -------------------------------
Jeffrey H. Brotman
/s/David A. Ederer Director July 22, 1996
- -------------------------------
David A. Ederer
/s/Gerald R. Gallagher Director July 22, 1996
- -------------------------------
/s/William B. Randall Director July 22, 1996
- -------------------------------
William B. Randall
/s/Dale J. Vogel Director July 22, 1996
- -------------------------------
Dale J. Vogel
II-4
19
EXHIBIT INDEX
Sequential Page
Exhibit Number Exhibit No.
- -------------- ------- ---------------
5.1 Opinion of Heller, Ehrman, White & McAuliffe
10.1 Garden Botanika, Inc. 1992 Combined Incentive and Nonqualified
Stock Option Plan, Amended and Restated as of May 21, 1996
10.2 Option and Severance Agreement by and between Garden Botanika,
Inc. and John Garruto dated October 30, 1995
10.3 Garden Botanika, Inc. 1996 Directors' Nonqualified Stock
Option Plan, Restated as of May 21, 1996
23.2 Consent of Arthur Andersen LLP, Independent Auditors
24 Power of Attorney (See page II-4 of this Registration
Statement)
II-5