U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1996 .
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to _______________.
Commission file number 1-12580.
THE VERMONT TEDDY BEAR CO., INC.
(Exact name of small business issuer as specified in its charter)
New York 03-0291679
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2236 Shelburne Road, Post Office Box 965
Shelburne, Vermont 05482
(Address of principal executive offices)
(802) 985-3001
(Issuer's telephone number)
Not Applicable
(Former name, former address, and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X ; No .
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes
of common equity, as of the latest practicable date: 5,160,750 shares
of Common Stock, $.05 par value per share, as of February 1, 1997.
Traditional Small Business Disclosure Format (check one):
Yes ; No X .
<PAGE>
The Vermont Teddy Bear Co., Inc.
Index to Form 10-QSB
December 31, 1996
Page No.
Part I - Financial Information
Financial Statements
Balance Sheet as of December 31, 1996 3
Statements of Operations for the Three and Six
Months ended December 31, 1996 and 1995 4
Statements of Cash Flows for the Six Months
ended December 31, 1996 and 1995 5
Notes to Financial Statements 6
Management's Discussion and Analysis 9
Part II - Other Information
Item 4. Submission of Matters to a Vote of Stockholders 12
Item 6. Exhibits and Reports on Form 8-K 13
Signature 16
<PAGE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Balance Sheet
December 31, 1996
(Unaudited)
ASSETS
<C> <S>
Cash, cash equivalents(includes restricted $722,774
cash of $365,000)
Accounts receivable, trade 207,796
Inventories 3,112,472
Prepaid expenses and other current assets 522,387
Prepaid income taxes 266,886
Deferred income taxes 240,585
------------
Total Current Assets 5,072,900
Property and equipment, net 10,259,491
Deposits and other assets 377,393
Note receivable 95,000
------------
Total Assets $15,804,784
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable, bank line of credit $367,902
Current portion of:
Long-term debt 3,513,904
Capital lease obligations 105,323
Accounts payable 2,255,814
Accrued expenses 661,852
------------
Total Current Liabilities 6,904,795
Long-term debt, net of current portion 446,943
Other liabilities 0
Capital lease obligations, net of current portion 260,867
Deferred income taxes 240,585
------------
Total Liabilities $7,853,190
Stockholders' Equity:
Preferred stock, $.05 par value:
Authorized 1,000,000 shares Series A; issued and
outstanding, 90 shares. 900,000
Authorized 375,000 shares Series B; issued and
outstanding, 204,912 shares. 10,245
Common stock, $.05 par value:
Authorized 20,000,000 shares: issued 5,172,750 shares,
outstanding 5,160,750 shares 258,638
Additional paid-in capital 10,565,482
Treasury stock at cost, 12,000 shares (106,824)
Accumulated deficit (3,675,947)
------------
Total Stockholders' Equity 7,951,594
Total Liabilities and Stockholders' Equity $15,804,784
============
</TABLE>
<PAGE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Statements of Operations
For the Three Months and Six Months Ended December 31, 1996 and 1995
(Unaudited)
Three Months Ended Six Months Ended
Dec 31, 1996 Dec 31, 1995 Dec 31, 1996 Dec 31, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Revenues $4,484,977 $4,208,772 $7,409,233 $7,727,075
Cost of Goods Sold 1,889,777 1,823,355 3,065,060 3,528,693
------------ ------------ ------------ ------------
Gross Profit 2,595,200 2,385,417 4,344,173 4,198,382
Selling, General and Administrative Expenses:
Selling Expenses 2,360,006 1,757,878 3,567,090 3,104,175
General and Administrative Expenses 716,146 690,499 1,364,449 1,459,991
------------ ------------ ------------ ------------
3,076,152 2,448,377 4,931,539 4,564,166
------------ ------------ ------------ ------------
Operating Loss (480,952) (62,960) (587,366) (365,784)
Interest Income 15,416 9,274 30,928 22,499
Interest Expense (116,985) (121,669) (226,891) (214,780)
Other Income(Expense) 1,591 (1,654) (13,031) 6,845
------------ ------------ ------------ ------------
Loss Before Income Taxes (580,930) (177,009) (796,360) (551,220)
Income Tax Benefit 232,372 0 318,544 0
------------ ------------ ------------ ------------
Net Loss (348,558) (177,009) (477,816) (551,220)
Preferred Stock Dividends (18,000) (18,000) (36,000) (36,000)
------------ ------------ ------------ ------------
Net Loss-Common Stockholders ($366,558) ($195,009) ($513,816) ($587,220)
============ ============ ============ ============
Net Loss Per Common Share ($0.07) ($0.04) ($0.10) ($0.11)
============ ============ ============ ============
Weighted Average Number of Shares Outstanding 5,160,750 5,160,500 5,160,750 5,160,500
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
THE VERMONT TEDDY BEAR CO., INC.
Statements of Cash Flows
For the Six Months Ended December 31, 1996 and 1995
(Unaudited)
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss ($477,816) ($551,220)
Adjustments to reconcile net loss to net cash
provided by(used for) operating activities:
Depreciation and amortization 461,652 392,566
Loss on disposal of fixed assets 18,191 4,150
Changes in assets and liabilities:
Accounts receivable, trade (76,246) (235,080)
Inventories (1,137,741) 585,710
Prepaid and other current assets (244,885) 2,437
Deposits and other assets (279,307) 12,046
Accounts payable 902,116 (285,978)
Accrued expenses and other liabilities 92,374 (522,511)
Income taxes (304,251) 24,537
Deferred income taxes
----------- -----------
Net cash used for operating activities (1,045,913) (573,343)
Cash flows from investing activities:
Acquisition of property and equipment (439,016) (480,523)
Proceeds from sale of fixed assets 0 38,255
----------- -----------
Net cash used for investing activities (439,016) (442,268)
Cash flows from financing activities:
Borrowings of short-term debt 809,760 998,572
Borrowings of long-term debt 357,104 3,724,150
Payments of short-term debt (457,991) (4,154,905)
Payments of long-term debt (73,031) (62,545)
Principal payments on capital lease obligations (50,771) (73,098)
Dividends paid
Issuance of stock 501,132
----------- -----------
Net cash provided by financing activities 1,086,203 432,174
Net decrease in cash and cash equivalents (398,726) (583,437)
Cash and cash equivalents, beginning of period 1,121,500 1,070,862
----------- -----------
Cash and cash equivalents, end of period $722,774 $487,425
=========== ===========
Cash paid for interest 225,788 240,946
Cash paid for taxes 1,218 3,166
Non-cash financing - capital lease 0 42,933
</TABLE>
<PAGE>
Notes to Financial Statements
(1) Basis of Presentation
The interim financial statements of The Vermont Teddy Bear Co., Inc.
(the "Company") included herein have been prepared, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC") and, in the opinion of management, reflect all
adjustments necessary to present fairly the financial condition and
results of operations for such interim periods. Certain information
and footnote disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
It is suggested that these financial statements be read in conjunction
with the audited financial statements and notes thereto for the fiscal
year ended June 30, 1996, included in the Company's filing with the
SEC on Form 10-KSB. The Company's sales are seasonal in nature and
therefore the results for these interim periods are not necessarily
indicative of the results for the respective years.
(2) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(3) Net Earnings Per Share
Net earnings per common share is determined by dividing the net
earnings available to common stockholders by the weighted number of
shares of Common Stock and Common Stock equivalents, where dilutive,
outstanding during the period.
(4) Income Taxes
The Company accounts for income taxes in accordance with the Statement
of Financial Accounting Standards No. 109, "Accounting for income
taxes," which requires the use of the liability method. This standard
determines deferred income taxes based on the estimated future tax
effects of any differences between the financial statement and the
basis of tax assets and liabilities, given the provisions of the
enacted tax laws. Based upon the Company's recent losses, a valuation
allowance has been provided to fully reserve its deferred tax assets.
If the Company is able to achieve sufficient profitability to realize
all or a portion of its deferred assets, the valuation allowance will
be reduced through a credit to income in future periods.
(5) Inventories
Inventories are stated at the lower of cost or market using the first-
in, first-out method. Inventories consisted of the following at
December 31, 1996:
<TABLE>
1996 1995
<S> <C> <C>
Raw materials $547,862 $713,577
Work in process 205,295 168,362
Finished goods 1,703,617 2,230,532
</TABLE>
(6) Debt and Borrowings
Effective December 31, 1996, the Company extended its $1,000,000 line
of credit agreement with the Vermont National Bank through March 31,
1996. The line of credit, originally established September 26, 1995,
bears interest at a variable rate of two percent above the prime rate
and is secured by all assets of the Company. A total of approximately
$368,000 was borrowed against the line at December 31, 1996.
On September 26, 1995, the Company executed a financing agreement with
the Vermont National Bank, consisting of a $3.5 million commercial
mortgage loan secured by a first mortgage on the Company's Shelburne,
Vermont facility, as well as business assets. Repayment of the
mortgage is based on a thirty-year amortization schedule, with a
balloon payment due on September 26, 1997. The Company is currently
negotiating with several parties to replace this mortgage loan and
related line of credit financing, and management believes it will be
successful in securing an alternative financing source or sources to
replace its current mortgage loan and line of credit with the Vermont
National Bank.
On December 26, 1995, Green Mountain Capital L.P. agreed to lend the
Company up to $500,000 over a twelve-month period commencing upon the
date of agreement. As of December 31, 1996, the entire $500,000 had
been borrowed. The notes bear interest at twelve percent per annum,
are repayable in monthly installments through December 26, 2000, and
are secured by a subordinated security interest in the Company's
personal property. In conjunction with the issuance of the notes,
Green Mountain Capital has received warrants to purchase 20,000 shares
of Common Stock, at an exercise price of $3.375 per share. The right
to exercise these warrants begins December 26, 1997, and expires the
earlier of December 26, 2000, or five years after full repayment of
the notes.
(7) Statement of Financial Accounting Standards No. 123
In December 1995, the Financial Accounting Standards Board issued SFAS
No. 123, Accounting for Stock-Based Compensation, which is to become
effective for fiscal years beginning after December 15, 1995. SFAS
No. 123 requires employee stock-based compensation to be either
recorded or disclosed at its fair value. Management intends to
continue to account for employee-based compensation under Accounting
Principles Board Opinion No. 25 and will not adopt the new accounting
provision for employee stock-based compensation under SFAS No. 123,
but will include the additional required disclosures on the Company's
Form 10-KSB filing for the fiscal year ending June 30, 1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis provides information that the
Company's management believes is relevant to an assessment and
understanding of the Company's results of operations and financial
condition. The discussion should be read in conjunction with the
financial statements and footnotes which appear elsewhere in this
report, as well as the 10-KSB filing for the fiscal year ended June
30, 1996.
RESULTS OF OPERATIONS
Comparison of the three-month periods ended December 31, 1996 and
1995.
Net revenues for the three-month period ended December 31, 1996
totaled $4,485,000, a 6.6 percent increase from net revenues of
$4,209,000 for the three-month period ended December 31, 1995. By
business segment, direct mail revenues rose $966,000 in the quarter,
as the number of circulated pages for the 1996 Holiday catalog was
substantially larger than the catalog mailed in the same quarter of
last year. Retail store revenues increased $218,000, principally the
result of the Company's new retail location on Madison Avenue in New
York City, which opened in November. Wholesale sales decreased
$149,000; the Company did not have an appearance on the QVC television
network in the recently-completed quarter, as it had had in the
comparable period of 1995. Bear-Gram revenues declined by $759,000.
Gross margin increased to $2,595,000 for the quarter ended December
31, 1996, from $2,385,000 for the quarter ended December 31, 1995. As
a percentage of net revenues, gross margin increased to 57.9 percent
from 56.7 percent, for the three months ended December 31, 1996, and
1995, respectively.
Selling expenses increased to $2,360,000 for the three-month period
ended December 31, 1996, from $1,758,000 for the three-month period
ended December 31, 1995. This $602,000 increase was attributable
primarily to additional costs associated with the production of the
larger 1996 Holiday catalog, as well as expenses related to the
Company's recently-opened stores in North Conway, New Hampshire and
New York City, New York. As a percentage of net revenues, selling
expenses were 52.6 percent and 41.8 percent for the three months ended
December 31, 1996, and 1995, respectively.
General and administrative expenses were $716,000 for the quarter
ended December 31, 1996, compared to $690,000 for the quarter ended
December 31, 1995. As a percentage of net revenues, general and
administrative expenses were 16.0 percent and 16.4 percent for the
three months ended December 31, 1996, and 1995, respectively.
The Company experienced an operating loss of $481,000 for the three
months ended December 31, 1996, compared to an operating loss of
$63,000 for the three months ended December 31, 1995. Higher net
revenues in the quarter were offset by increased selling expenses.
The Company recorded an income tax benefit of $232,000 for the quarter
ended December 31, 1996. For the comparable quarter of 1995, no tax
provision was recorded for the period. The Company had $2,360,000 in
Net Operating Loss Carryforwards ("NOLs") at June 30, 1996.
As a result of the foregoing factors, net loss to common stockholders
increased to a loss of $366,000, or seven cents per common share, for
the quarter ended December 31, 1996, from a loss of $195,000, or four
cents per common share, for the quarter ended December 31, 1995.
COMPARISON OF THE SIX-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995.
Net revenues for the six-month period ended December 31, 1996 totaled
$7,409,000, a 4.1 percent decrease from net revenues of $7,727,000
for the six-month period ended December 31, 1995. By business
segment, direct mail revenues increased $945,000, as the circulation
for this year's Holiday catalog was significantly larger than last
year's comparable catalog. Retail store revenues increased $249,000,
with new locations of North Conway, New Hampshire and New York City,
New York providing new sources of revenue. Wholesale sales decreased
$504,000; the Company did not have an appearance on the QVC television
network in the six-month period, as it had had in the comparable
period of 1995. Bear-Gram revenues declined by $1,038,000.
Gross margin increased to $4,344,000 for the six months ended December
31, 1996, compared to $4,198,000 for the six months ended December 31,
1995. As a percentage of net revenues, gross margin increased to 58.6
percent from 54.3 percent, for the six months ended December 31, 1996,
and 1995, respectively.
Selling expenses increased to $3,567,000 for the six-month period
ended December 31, 1996, from $3,104,000 for the six-month period
ended December 31, 1995. This $463,000 increase was attributable
primarily to additional costs associated with the production of the
larger 1996 Holiday catalog, and expenses related to the Company's
recently-opened stores in North Conway, New Hampshire and New York
City, New York. As a percentage of net revenues, selling expenses
were 48.1 percent and 40.2 percent for the six months ended December
31, 1996, and 1995, respectively.
General and administrative expenses were $1,364,000 for the six months
ended December 31, 1996, compared to $1,460,000 for the six months
ended December 31, 1995. As a percentage of net revenues, general and
administrative expenses were 18.4 percent and 18.9 percent for the six
months ended December 31, 1996, and 1995, respectively.
The Company experienced an operating loss of $587,000 for the six
months ended December 31, 1996, compared to an operating loss of
$366,000 for the six months ended December 31, 1995. The larger
operating loss resulted principally from a decrease in net revenues
and an increase in selling expenses.
The Company recorded an income tax benefit of $319,000 for the six
months ended December 31, 1996. For the comparable six months of
1995, no tax provision was recorded for the period. The Company had
$2,360,000 in Net Operating Loss Carryforwards ("NOLs") at June 30,
1996.
As a result of the foregoing factors, net loss to common stockholders
improved to a loss of $514,000, or ten cents per common share, for the
six months ended December 31, 1996, from a loss of $587,000, or eleven
cents per common share, for the six months ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company's cash position decreased to
$723,000, from $1,122,000 at June 30, 1996. Each of these amounts
include $365,000 classified as restricted cash, the largest component
of which is a $300,000 certificate of deposit required as part of the
Company's loan agreement with the Vermont National Bank. Debt
borrowings and proceeds from a preferred stock issuance in July were
more than offset by increases in inventory, deposits, prepaid, and
other current and long-term assets.
Inventory levels of materials, work-in-process, and finished goods
increased to $3,112,000 at December 31, 1996, from $1,975,000 at June
30, 1996, as the Company prepares for the upcoming Valentine's Day
selling season. Accounts payable totaled $2,256,000 at December 31,
1996, compared to $1,354,000 at June 30, 1996. Accounts payable
increased, as purchases of inventory were made for the upcoming
Valentine's Day season, and advertising costs were incurred for the
Christmas selling season.
Effective December 31, 1996, the Company extended its $1,000,000 line
of credit agreement with the Vermont National Bank through March 31,
1996. The line of credit, originally established September 26, 1995,
bears interest at a variable rate of two percent above the prime rate
and is secured by all assets of the Company. A total of $368,000 was
borrowed against the line at December 31, 1996
On September 26, 1995, the Company executed a financing agreement with
the Vermont National Bank, consisting of a $3.5 million commercial
mortgage loan secured by a first mortgage on the Company's Shelburne,
Vermont facility, as well as business assets. Repayment of the
mortgage is based on a thirty-year amortization schedule, with a
balloon payment due on September 26, 1997. The Company is currently
negotiating with several parties to replace this mortgage loan and
related line of credit financing, and management believes it will be
successful in securing an alternative financing source or sources to
replace its current mortgage loan and line of credit with the Vermont
National Bank.
On December 26, 1995, Green Mountain Capital L.P. agreed to lend the
Company up to $500,000 over a twelve-month period commencing upon the
date of agreement. As of December 31, 1996, the entire $500,000 had
been borrowed. The notes bear interest at twelve percent per annum,
are repayable in monthly installments through December 26, 2000, and
are secured by a subordinated security interest in the Company's
personal property. In conjunction with the issuance of the notes,
Green Mountain Capital has received warrants to purchase 20,000 shares
of Common Stock, at an exercise price of $3.375 per share. The right
to exercise these warrants begins December 26, 1997, and expires the
earlier of December 26, 2000, or five years after full repayment of
the notes.
Management believes that the amount and structure of financing
available to the Company, as well as cash flows from operations, will
be sufficient to meet the Company's working capital needs and planned
capital expenditures for the next twelve months, provided the Company
is successful in securing an alternative to its mortgage loan
financing with the Vermont National Bank prior to September 26, 1997.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 22, 1996, the Company held its 1996 Annual Meeting of
Shareholders, at which eight matters were discussed and voted upon.
The issues and the voting results were as follows:
1. Election of six individuals to the Company's Board of Directors for
the ensuing year.
For Withheld
R. Patrick Burns 4,723,489 161,729
David W. Garrett 4,723,129 162,089
Fred Marks 4,718,059 167,159
Joan H. Martin 4,715,047 170,171
Spencer C. Putnam 4,717,086 168,132
Elisabeth B. Robert 4,719,289 165,929
2. Ratification of the selection of Arthur Andersen L.L.P. as the
Company's independent public accountants for the 1997 fiscal year.
For: 4,788,975 Against: 10,170 Abstentions: 86,073.
3. Approval of Amendment No. 2 to The Vermont Teddy Bear Co., Inc.
1993 Incentive Stock Option plan, authorizing an increase in the
number of shares for which options to purchase the Company's Common
Stock may be issued from 1,000,000 shares to 2,000,000 shares.
For: 3,623,448 Against: 286,644 Abstentions: 25,246 Broker Non-
Votes: 949,880.
4. Approval of Amendment No. 3 to The Vermont Teddy Bear Co., Inc.
1993 Incentive Stock Option plan, authorizing the grant of non-
qualified stock options with an exercise price less than the fair
market value per share of the Company's Common Stock on the date of
the grant.
For: 3,611,161 Against: 300,396 Abstentions: 23,781 Broker Non-
Votes: 949,880.
5. Approval of an amendment of the Company's Bylaws, authorizing
compensation of the Company's directors upon prior approval of the
Company's Stockholders.
For: 3,765,495 Against: 191,851 Abstentions: 19,137 Broker Non-
Votes: 908,735.
6. Approval of the adoption of the Company's Non-Employee Directors
Stock Option Plan.
For: 3,686,989 Against: 234,499 Abstentions: 13,850 Broker Non-
Votes: 949,880.
7. Approval of the grant of an option to David W. Garrett to purchase
30,000 shares of the Company's Common Stock at an exercise price equal
to the fair market value of the Company's Common Stock as of the date
of the Annual Meeting.
For: 3,875,160 Against: 154,030 Abstentions: 10,386 Broker Non-
Votes: 845,642.
8. Approval of the grant of an option to Joan H. Martin to purchase
30,000 shares of the Company's Common Stock at an exercise price equal
to the fair market value of the Company's Common Stock as of the date
of the Annual Meeting.
For: 3,870,796 Against: 158,375 Abstentions: 10,406 Broker Non-
Votes: 845,641.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(6a) Exhibits
3.3 Restated Certificate of Incorporation of the Company, (filed with
the Securities and Exchange Commission as exhibit 4.1 to the
Company's 1996 Annual Report on Form 10-KSB (File No. 33-69898)
and incorporated herein by reference)
3.4 Amended and Restated By-Laws of the Company (filed herein)
4.1 Representative's Warrant issued to Barington Capital Group, L.P.
upon the consummation of the initial public offering of the
Company's Common Stock in November, 1993 (filed with the
Securities and Exchange Commission as exhibit 4.1 to the
Company's 1993 Annual Report on Form 10-KSB (File No. 33-69898)
and incorporated herein by reference)
4.2 Form of Common Stock Certificate (filed with the Securities and
Exchange Commission as exhibit 4.2 to the Company's Registration
Statement on Form SB-2 (File No. 33-69898) and incorporated
herein by reference)
4.3 Form of Warrant, issued in connection with the private placement
of 204,912 shares of the Company's Series B Convertible Preferred
Stock (filed with the Securities and Exchange Commission as
exhibit 4.3 to the Company's 1996 Annual Report on Form 10-KSB
(File No. 33-69898) and incorporated herein by reference)
4.4 Form of Subscription Agreement issued in connection with the
private placement of 204,912 shares of the Company's Series B
Convertible Preferred Stock (filed with the Securities and
Exchange Commission as exhibit 4.4 to the Company's 1996 Annual
Report on Form 10-KSB (File No. 33-69898) and incorporated
herein by reference)
4.5 Waiver of Joan H. Martin, dated April 12, 1996, issued in
connection with waiver of accrued dividends on Series A Preferred
stock (filed with the Securities and Exchange Commission as
exhibit 4.5 to the Company's 1996 Annual Report on Form 10-KSB
(File No. 33-69898) and incorporated herein by reference)
4.6 Warrant to purchase 43,826.087 shares of the Company's Common
Stock, dated April 12, 1996, issued in connection with Joan H.
Martin's waiver of accrued dividends on Series A Preferred Stock
(filed with the Securities and Exchange Commission as exhibit 4.6
to the Company's 1996 Annual Report on Form 10-KSB (File No.
33-69898) and incorporated herein by reference)
10.2 Stock warrants issued to Edmund H. Shea, Jr. IRA, Allan Lyons and
William Maines in connection with the bridge financing prior to
the initial public offering of the Company's Common Stock
in November, 1993 (a form of which was filed with the Securities
and Exchange Commission as exhibit 10.2 to the Company's
Registration Statement on Form SB-2 (File No. 33-69898) and
incorporated herein by reference)
10.10 Incentive Stock Option Plan adopted by the Company on August
16, 1993, with form of Incentive Stock Option Agreement
filed with the Securities and Exchange Commission as exhibit
10.10 to the Company's Registration Statement on Form SB-2
(File No. 33-69898) and incorporated herein by reference)
10.11 Securities Purchase Agreement, dated June 10, 1987 between
the Company and VTB Investment Group and Joan Hixon Martin
(filed with the Securities and Exchange Commission as exhibit
10.11 to the Company's Registration Statement on Form SB-2
(File No. 33- 69898) and incorporated herein by reference)
10.12 Agreement, dated as of June 19, 1995, between the Company and
John N. Sortino, providing the terms of Mr. Sortino's separation
agreement with the Company (filed with the Securities and
Exchange Commission as exhibit 10.12 to the Company's 10-KSB
for the transition period ending June 30, 1995 and incorporated
herein by reference)
10.13 Employment Agreement and Loan Arrangement, dated July 31, 1995,
between the Company and R. Patrick Burns providing the terms of
Mr. Burns' employment with the Company as Chief Executive Officer
(filed with the Securities and Exchange Commission as exhibit
10.13 to the Company's 10-KSB for the transition period ending
June 30, 1995 and incorporated herein by reference)
10.17 Commitment Letter issued by Vermont National Bank, Burlington,
Vermont, dated September 18, 1995, in connection with a
commercial mortgage loan and a line of credit loan (filed with
the Securities and Exchange Commission as exhibit 10.17 to the
Company's 10-KSB for the transition period ended June 30, 1995
and incorporated herein by reference)
10.18 Loan Agreement, dated September 26, 1995, between the Company
and Vermont National Bank regarding $3,500,000 Term Loan and
$1,000,000 Line of Credit Loan (filed with the Securities and
Exchange Commission as exhibit 10.18 to the Company's 10-KSB
for the transition period ended June 30, 1995 and incorporated
herein by reference)
10.19 Commercial Term Note, dated September 26, 1995, issued in
connection with the $3,500,000 Term Loan of Vermont National
Bank (filed with the Securities and Exchange Commission as
exhibit 10.19 to the Company's 10-KSB for the transition
period ended June 30, 1995 and incorporated herein by reference)
10.20 Commercial Time Note, dated September 26, 1995, issued in
connection with the $1,000,000 Line of Credit Loan of Vermont
National Bank (filed with the Securities and Exchange Commission
as exhibit 10.20 to the Company's 10-KSB for the transition
period ended June 30, 1995 and incorporated herein by reference)
10.24 Amended 1993 Incentive Stock Option Plan of the Company, amended
as of November 28, 1995 (filed with the Securities and Exchange
Commission as exhibit 10.24 to the Company's 10-QSB for the
quarter ended December 31, 1995 and incorporated herein by
reference)
10.25 Loan Agreement, dated December 26, 1995, between Green Mountain
Capital, L.P. and the Company in connection with a $500,000
Term Loan (filed with the Securities and Exchange Commission as
exhibit 10.25 to the Company's 10-QSB for the quarter ended
December 31, 1995 and incorporated herein by reference)
10.26 Convertible Note, dated December 26, 1995, in the principal
amount of $200,000, issued in connection with the $500,000
Term Loan of Green Mountain Capital (filed with the Securities
and Exchange Commission as exhibit 10.26 to the Company's
10-QSB for the quarter ended December 31, 1995 and incorporated
herein by reference)
10.27 Stock Purchase Warrant Agreement, dated December 26, 1995, in
connection with the $500,000 Term Loan of Green Mountain Capital
(filed with the Securities and Exchange Commission as exhibit
10.27 to the Company's 10-QSB for the quarter ended December 31,
1995 and incorporated herein by reference)
10.28 Employment and Loan Agreements, dated June 30, 1996, between
the Company and R. Patrick Burns (filed with the Securities and
Exchange Commission as exhibit 10.28 to the Company's 1996
Annual Report on Form 10-KSB (File No. 33-69898) and
incorporated herein by reference)
10.29 Employment Agreement, dated July 1, 1996, between the Company
and Elisabeth B. Robert (filed with the Securities and Exchange
Commission as exhibit 10.29 to the Company's 1996 Annual Report
on Form 10-KSB (File No. 33-69898)and incorporated herein by
reference)
10.30 Amended 1993 Incentive Stock Option Plan of the Company, amended
as of November 22, 1996 (filed herein)
10.31 Non-Employee Directors Stock Option Plan adopted by the Company
on November 22, 1996 (filed herein)
10.32 Employment Agreement, dated as of July 1, 1996, between the
Company and Spencer C. Putnam (filed herein)
10.33 Convertible Note, dated November 19, 1996, in the principal
amount of $300,000, issued in connection with the $500,000
Term Loan of Green Mountain Capital (filed herein)
(6b) Reports
There were no reports filed on Form 8-K during the quarter ended
December 31, 1997.
Signature
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
The Vermont Teddy Bear Co., Inc.
Date: February 12, 1997 /s/Elisabeth B. Robert
--------------------------------
Elisabeth B. Robert,
Chief Financial Officer
<PAGE>
EXHIBIT 3.4
AMENDED BY-LAWS
of
THE VERMONT TEDDY BEAR CO., INC.
(as amended November 22, 1996)
ARTICLE I - OFFICES
The principal office of the corporation shall be in the City of
Burlington, County of Chittenden, State of Vermont. The corporation
may also have offices at such other places within or without the State
of Vermont as the Board may from time to time determine or the
business of the corporation may require.
ARTICLE II SHAREHOLDERS
1. PLACE OF MEETINGS.
Meetings of the shareholders shall be held at the principal
office of the corporation or at such place within or without the State
of Vermont as the Board shall authorize.
2. ANNUAL MEETING.
The annual meeting of the shareholders shall be held each year at
such date, time and place as may be specified by the Directors at
which meeting the shareholders shall elect a Board and transact such
other business as may properly come before the meeting.
3. SPECIAL MEETINGS.
Special meetings of the shareholders may be called by the Board
or by the president and shall be called by the president or the
secretary at the request in writing of a majority of the Board or at
the request in writing by shareholders owning a majority in amount of
the shares issued and outstanding. Such request shall state the
purpose or purposes of the proposed meeting. Business transacted at a
special meeting shall be confined to the purposes stated in the
notice.
4. FIXING RECORD DATE.
For the purpose of determining the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment
thereof, or to express consent to or dissent from any proposal without
a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for
the purpose of any other action, the Board shall fix, in advance, a
date as the record date for any such determination of shareholders.
Such date shall not be more than fifty nor less than ten days before
the date of such meeting, nor more than fifty days prior to any other
action. If no record date is fixed it shall be determined in
accordance with the provisions of law.
5. NOTICE OF MEETINGS OF SHAREHOLDERS.
Written notice of each meeting of shareholders shall state the
purpose or purposes for which the meeting is called, the place, date
and hour of the meeting and unless it is the annual meeting, shall
indicate that it is being issued by or at the direction of the person
or persons calling the meeting. Notice shall be given either
personally or by mail to each shareholder entitled to vote at such
meeting, not less than ten nor more than fifty days before the date of
the meeting. If action is proposed to be taken that might entitle
shareholders to payment for their shares, the notice shall include a
statement of that purpose and to that effect. If mailed, the notice
is given when deposited in the United States mail, with postage
thereon prepaid, directed to the shareholder at his address as it
appears on the record of shareholders, or, if he shall have filed with
the secretary a written request that notices to him be mailed to some
other address, then directed to him at such other address.
6. WAIVERS.
Notice of meeting need not be given to any shareholder who signs
a waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at a meeting, in person or
by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of
notice by him.
7. QUORUM OF SHAREHOLDERS.
Except as otherwise provided by law or in the Certificate of
Incorporation or these By-laws, the holders of a majority of the
issued and outstanding shares of common stock of the corporation,
present and voting, shall constitute a quorum at a meeting of
shareholders for the transaction of any business. When a quorum is
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any shareholders. The shareholders present may adjourn
the meeting despite the absence of a quorum.
8. PROXIES.
Every shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his
attorney-in-fact. No proxy shall be valid after expiration of eleven
months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the shareholder
executing it, except as otherwise provided by law.
9. QUALIFICATION OF VOTERS.
Every shareholder of record shall be entitled at every meeting of
shareholders to one vote for every share standing in his name on the
record of shareholders.
10. VOTE OF SHAREHOLDERS.
Except as otherwise provided by law or in the Certificate of
Incorporation or these By-Laws and except for the election of
directors, at any meeting duly called and held at which a quorum is
present, a majority of the votes cast at such meeting upon a given
question by the holders of outstanding shares of stock of all classes
of stock of the Corporation entitled to vote thereon who are present
in person or by proxy shall decide such question. At any meeting duly
called and held for the election of directors at which a quorum is
present, directors shall be elected by a plurality of the votes cast
by the holders (acting as such) of shares of stock of the Corporation
entitled to elect such directors.
11. WRITTEN CONSENT OF SHAREHOLDERS.
Any action that may be taken by vote may be taken without a
meeting on written consent, setting forth the action so taken, signed
by the holders of all the outstanding shares entitled to vote thereon.
ARTICLE III - DIRECTORS
1. BOARD OF DIRECTORS.
The business of the corporation shall be managed by its Board of
Directors, each of whom shall be at least 18 years of age.
2. NUMBER OF DIRECTORS.
The number of directors shall be nine; provided, however, that
the number of directors may be increased or decreased by a resolution
adopted by the vote of a majority of the entire Board. A minimum of
two of the directors shall neither be an officer nor employee of the
Corporation and shall have no other relationship with the Corporation
which, in the opinion of the Board, would interfere with the exercise
of independent judgment in carrying out the responsibilities of a
director. The directors shall be elected by the holders of shares
entitled to vote thereon at the annual meeting of shareholders, and
each shall serve (subject to the provisions of Article III.5) until
the next succeeding annual meeting of shareholders and until his or
her respective successor has been elected and qualified.
3. ELECTION AND TERM OF DIRECTORS.
At each annual meeting of shareholders, the shareholders shall
elect directors to hold office until the next annual meeting. Each
director shall hold office until the expiration of the term for which
he is elected and until his successor has been elected and qualified,
or until his prior resignation or removal.
4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board for any
reason except the removal of directors without cause may be filled by
a vote of a majority of the directors then in office, although less
than a quorum exists, unless otherwise provided in the Certificate of
Incorporation. Vacancies occurring by reason of the removal of
directors without cause shall be filled by vote of the shareholders
unless otherwise provided in the Certificate of Incorporation. A
director elected to fill a vacancy caused by resignation, death or
removal shall be elected to hold office for the unexpired term of his
predecessor.
5. REMOVAL OF DIRECTORS.
Directors may be removed or replaced only by the vote of the
holders of at least a majority of the issued and outstanding common
stock of the corporation.
6. RESIGNATION.
A director may resign at any time by giving written notice to the
Board, the president or the secretary of the corporation. Unless
otherwise specified in the notice, the resignation shall take effect
upon receipt thereof by the Board or such officer, and the acceptance
of the resignation shall not be necessary to make it effective.
7. QUORUM OF DIRECTORS.
A majority of the Board of Directors, present in person or by
proxy, shall constitute a quorum for the transaction of business or of
any specified item of business.
At the discretion of the Chairman or other members of the Board
of Directors, any director may participate in any meeting of the Board
of Directors by means of a conference telephone or similar
communications equipment such that all persons participating in the
meeting can hear each other, and participation in a meeting in such
manner shall constitute presence in person at such meeting.
8. ACTION OF THE BOARD.
Except as otherwise provided by law or in the Certificate of
Incorporation or by these By-laws, action of the Board of Directors of
any meeting shall require the affirmative vote of a majority of all of
the Directors, not simply a majority of those present at the meeting.
Additionally, any action consented to in writing by each and every
director shall be as valid as if the Board of Directors had adopted
such action at a duly held meeting thereof, provided such written
consent is inserted in the minute book of the corporation.
9. PLACE AND TIME OF BOARD MEETINGS.
The Board may hold its meetings at the office of the corporation
or at such other places, either within or without the State of
Vermont, as it may from time to time determine.
10. ANNUAL MEETING.
A regular annual meeting of the Board shall be held immediately
following the annual meeting of shareholders at the place of such
annual meeting of shareholders.
11. NOTICE OF MEETINGS OF THE BOARD, ADJOURNMENT.
(a) Regular meetings of the Board may be held without notice at
such time and place as the Board shall from time to time determine.
Special meetings may be called by the Chairman or by the secretary on
written request of two directors. Notice of special meetings of the
directors shall be given in writing to each director either personally
or by mail or facsimile transmission at least 3 days in advance of the
meeting, and shall include a written agenda of the meeting. No
business shall be conducted at a special meeting except as set forth
in the agenda. Notice of a meeting need not be given to any director
who submits a waiver of notice whether before or after the meeting or
who attends the meeting without protesting prior thereto or at its
commencement, the lack of notice to him.
(b) A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place. Notice
of the adjournment shall be given all directors who were absent at the
time of the adjournment and, unless such time and place are announced
at the meeting, to the other directors.
12. CHAIRMAN.
At all meetings of the Board the Chairman, or in his absence, a
chairman chosen by the Board shall preside.
13. EXECUTIVE AND OTHER COMMITTEES.
a. The Board of Directors shall designate and appoint an
executive committee, consisting of the President of the Corporation,
the Chairman of the Board, and one of the other directors. The
executive committee shall have and may exercise such powers of the
Board of Directors in the management of the business and affairs of
the Corporation as the Board may from time to time confer upon the
executive committee. This committee shall constitute a standing
committee of the Corporation, and a majority of its members may
determine its action and fix the time and place of its meetings unless
the Board of Directors shall otherwise provide.
b. The Board of Directors shall designate and appoint an audit
committee consisting of three directors. The Chief Executive Officer
and two additional members who shall be directors who are neither
officers nor employees of the Corporation and are free from all other
relationships that, in the opinion of the Board of Directors, would
interfere with their exercise of independent judgment as committee
members. It shall be the duty of the audit committee to act on behalf
of the Board in meeting and reviewing with the Corporation's
independent auditors, internal auditor and appropriate corporate
officers matters relating to corporate financial reporting and
accounting procedures and policies, adequacy of financial, accounting
and operating controls and the scope of the respective audits of the
independent auditors and the internal auditor. The committee shall
review the results of such audits with the respective auditors and
shall promptly report thereon to the Board of Directors. The
committee shall additionally submit to the Board any recommendations
it may have from time to time with respect to the independent
auditors, financial reporting and accounting practices and policies
and financial, accounting, and operation controls and safeguards.
c. The Board of Directors may also, by resolution adopted by a
majority of the entire Board, designate from among its members one or
more other committees, each consisting of three or more directors, and
each of which, to the extent provided in such resolution, shall have
all the authority of the Board except as otherwise provided by law or
in the Certificate of Incorporation or these By-Laws. No such
committee shall have authority as to any of the following matters:
(a) the submission to shareholders of any action as to
which shareholders' authorization or approval is
required by law, the Certificate of Incorporation,
or these By-Laws;
(b) the filling of vacancies in the Board of Directors
or in any committee;
(c) the fixing of compensation of the directors for
serving on the Board or on any committee;
(d) the amendment or repeal of these By-Laws, or the
adoption of new By-Laws; or
(e) the amendment or repeal of any resolution of the
Board of Directors which by its terms shall not be
so amendable or repealable.
The Board may designate one or more directors as alternate
members of any such committee, who may replace any absent member or
members at any meeting of such committee.
Each such committee shall serve at the pleasure of and be
responsible to the Board. It shall keep minutes of its meetings and
report the same to the Board.
14. COMPENSATION.
Directors shall be entitled to compensation for their services,
as approved by the Company's Shareholders, including, but not limited
to, a fixed sum and expenses for actual attendance at each regular or
special meeting of the Board or any committee meeting thereof.
Nothing herein contained shall be construed to preclude any director
from serving the corporation in any other capacity and receiving
compensation therefor.
ARTICLE IV - OFFICERS
1. OFFICES, ELECTION, TERM.
(a) Unless otherwise provided for in the Certificate of In-
corporation, the Board may elect or appoint a president, one or more
vice-presidents, a secretary and a treasurer, and such other officers
as it may determine, who shall have such duties, powers and functions
as hereinafter provided.
(b) All officers shall be elected or appointed to hold office
until the meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office for the term for which he is
elected or appointed and until his successor has been elected or
appointed and qualified.
2. REMOVAL, RESIGNATION, SALARY, ETC.
(a) Any officer elected or appointed by the Board may be removed
by the Board without cause.
(b) In the event of the death, resignation or removal of an
officer, the Board in its discretion may elect or appoint a successor
to fill the unexpired term.
(c) Any two or more offices may be held by the same person,
except the offices of president and secretary. When all of the issued
and outstanding stock of the corporation is owned by one person, such
person may hold all or any combination of offices.
(d) The salaries of all officers shall be fixed by the Board.
(e) The directors may require any officer to give security for
the faithful performance of his duties.
3. PRESIDENT.
The president shall be the chief executive officer of the
corporation; he shall preside at all meetings of the shareholders: he
shall have the management of the business of the corporation and shall
see that all orders and resolutions of the Board are carried into
effect.
4. VICE-PRESIDENTS.
During the absence or disability of the president, the
vice-president, or if there are more than one, the executive
vice-president, shall have all the powers and functions of the presi-
dent. Each vice-president shall perform such other duties as the
Board shall prescribe.
5. SECRETARY.
The secretary shall:
(a) attend all meetings of the Board and of the shareholders;
(b) record all votes and minutes of all proceedings in a book to
be kept for that purpose;
(c) give or cause to be given notice of all meetings of
shareholders and of special meetings of the Board;
(d) keep in safe custody the seal of the corporation and affix
it to any instrument when authorized by the Board;
(e) when required, prepare or cause to be prepared and available
at each meeting of shareholders a certified list in alphabetical order
of the names of shareholders entitled to vote thereat, indicating the
number of shares of each respective class held by each;
(f) keep all the documents and records of the corporation as
required by law or otherwise in a proper and safe manner;
(g) perform such other duties as may be prescribed by the Board.
6. ASSISTANT-SECRETARIES.
During the absence or disability of the secretary, the
assistant-secretary, or if there are more than one, the one so
designated by the secretary or by the Board, shall have all the powers
and functions of the secretary.
7. TREASURER.
The treasurer shall:
(a) have the custody of the corporate funds and securities;
(b) keep full and accurate accounts of receipts and dis-
bursements in the corporate books;
(c) deposit all money and other valuables in the name and to the
credit of the corporation in such depositories as may be designated by
the Board;
(d) disburse the funds of the corporation as may be ordered or
authorized by the Board and preserve proper vouchers for such
disbursements;
(e) render to the Chairman, the president and Board at the
regular meetings of the Board, or whenever they require it, an account
of all his transactions as treasurer and of the financial condition of
the corporation;
(f) render a full financial report at the annual meeting of the
shareholders if so requested;
(g) be furnished by all corporate officers and agents at his
request, with such reports and statements as he may require as to all
financial transactions of the corporation;
(h) perform such other duties as are given to him by these
By-Laws or as from time to time are assigned to him by the Board, the
Chairman or the president.
8. ASSISTANT-TREASURER.
During the absence or disability of the treasurer, the
assistant-treasurer, or if there are more than one, the one so
designated by the secretary or by the Board, shall have all the powers
and functions of the treasurer.
9. SURETIES AND BONDS.
In case the Board shall so require, any officer or agent of the
corporation shall execute to the corporation a bond in such sum and
with such surety or sureties as the Board may direct, conditioned upon
the faithful performance of his duties to the corporation and
including responsibility for negligence and for the accounting for all
property, funds or securities of the corporation which may come into
his hands.
ARTICLE V - CERTIFICATES FOR SHARES
1. CERTIFICATES.
The shares of the corporation shall be represented by cer-
tificates. They shall be numbered and entered in the books of the
corporation as they are issued. They shall exhibit the holder's name
and the number of shares and shall be signed by the president or a
vice-president and the treasurer or the secretary and shall bear the
corporate seal.
2. LOST OR DESTROYED CERTIFICATES.
The Board may direct a new certificate or certificates to be
issued in place of any certificate or certificates theretofore issued
by the corporation, alleged to have been lost or destroyed, upon the
making of an affidavit of that fact by the person claiming the
certificate to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of
such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall
require and/or give the corporation a bond in such sum and with such
surety or sureties as it may direct as indemnity against any claim
that may be made against the corporation with respect to the
certificate alleged to have been lost of destroyed.
3. TRANSFER OF SHARES.
(a) Shares of capital stock of the Corporation may be
transferred on the books for the Corporation only by the holder of
such shares or by his duly authorized attorney, upon the surrender to
the Corporation or its transfer agent of the certificate representing
such stock properly endorsed.
(b) Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority
to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, and cancel the old
certificate; every such transfer shall be entered on the transfer book
of the corporation which shall be kept at its principal office. No
transfer shall be made within ten days next preceding the annual
meeting of shareholders.
(c) The corporation shall be entitled to treat the holder of
record of any share as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person whether or not
it shall have express or other notice thereof, except as expressly
provided by the laws of New York.
4. CLOSING TRANSFER BOOKS.
The Board shall have the power to close the share transfer books
of the corporation for a period of not more than ten days during the
thirty-day period immediately preceding (1) any shareholders' meeting,
or (2) any date fixed for the payment of a dividend or any other form
of distribution, and only those shareholders of record at the time the
transfer books are closed, shall be recognized as such for the purpose
of (i) receiving notice of or voting at such meeting, or (ii) allowing
them to take appropriate action, or (iii) entitling them to receive
any dividend or other form of distribution.
ARTICLE VI - DIVIDENDS
Subject to the provisions of the Certificate of Incorporation and
to applicable law, dividends on the outstanding shares of the
corporation may be declared in such amounts and at such time or times
as the Board may determine. Before payment of any dividend, there may
be set aside out of the net profits of the corporation available for
dividends such sum or sums as the Board from time to time in its
absolute discretion deems proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose
as the Board shall think conducive to the interests of the
corporation, and the Board may modify or abolish any such reserve.
ARTICLE VII - CORPORATE SEAL
The seal of the corporation shall be circular in form and bear
the name of the corporation, the year of its organization and the
words "Corporate Seal, New York." The seal may be used by causing it
to be impressed directly on the instrument or writing to be sealed, or
upon adhesive substance affixed thereto. The seal on the certificates
for shares or on any corporate obligation for the payment of money may
be a facsimile, engraved or printed.
ARTICLE VIII - EXECUTION OF INSTRUMENTS
All corporate instruments and documents shall be signed or
counter-signed, executed, verified or acknowledged by such officer of
officers or other person or persons as the Board may from time to time
designate.
ARTICLE IX - FISCAL YEAR
The fiscal year shall begin the first day of July in each year.
ARTICLE X - REFERENCES TO CERTIFICATE OF INCORPORATION
Reference to the Certificate of Incorporation in these By-Laws
shall include all amendments thereto or changes thereof unless
specifically excepted.
ARTICLE XI - INDEMNIFICATION
Except to the extent expressly prohibited by the New York
Business Corporation Law, the Corporation may indemnify each person
made or threatened to be made a party to any action or proceeding,
whether civil or criminal, by reason of the fact that such person or
such person's testator or intestate is or was a director, officer,
incorporator, employee or agent of the Corporation, or serves or
served at the request of the Corporation, any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against judgments, fines, penalties,
amounts paid in settlement and reasonable expenses, including
attorneys' fees, incurred in connection with such action or
proceeding, or any appeal therein; provided, however, that no such
indemnification shall be made if a judgment or other final
adjudication adverse to such person establishes that his or her acts
were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so
adjudicated, or that he or she personally gained in fact a financial
profit or other advantage to which he or she was not legally entitled,
and provided further that no such indemnification shall be required
with respect to any settlement or other non-adjudicated disposition of
any threatened or pending action or proceeding unless the Corporation
has given its prior consent to such settlement or other disposition.
The Corporation shall advance or promptly reimburse upon request
any person entitled to indemnification hereunder for all expenses,
including attorneys' fees, reasonably incurred in defending any action
or proceeding in advance of the final disposition thereof upon receipt
of an undertaking by or on behalf of such person to repay such amount
if such person is ultimately found not to be entitled to
indemnification or, where indemnification is granted, to the extent
the expenses so advanced or reimbursed exceed the amount to which such
person is entitled; provided, however, that such person shall
cooperate in good faith with any request by the Corporation that
common counsel be utilized by the parties to an action or proceeding
who are similarly situated unless to do so would be inappropriate due
to actual or potential differing interests between or among such
parties.
Nothing herein shall limit or affect any right of any person,
otherwise than hereunder, to indemnification or expenses, including
attorneys' fees, under any statute, rule, regulation, certificate of
incorporation, by-law, insurance policy, contract or otherwise.
Anything in these By-Laws to the contrary notwithstanding, no
elimination of this By-Law, and no amendment of this By-Law adversely
affecting the right of any person to indemnification or advancement of
expenses hereunder shall be effective until the 60th day following
notice to such person of such action, and no elimination of or
amendment to this By-Law shall deprive any person of his or her rights
hereunder arising out of alleged or actual occurrences, acts or
failures to act prior to such 60th day.
The Corporation shall not, except by elimination or amendment of
this By-law in a manner consistent with the preceding paragraph, take
any corporate action or enter into any agreement which prohibits, or
otherwise limits the rights of any person to, indemnification in
accordance with the provisions of this By-Law. The indemnification of
any person provided by this By-Law shall continue after such person
has ceased to be a director, officer, incorporator, employee or agent
of the Corporation and shall inure to the benefit of such person's
heirs, executors, administrators and legal representatives.
The Corporation is authorized to enter into agreements with any
of its directors, officers, incorporators, employees or agents
extending rights to indemnification and advancement of expenses to
such person to the fullest extent permitted by applicable law, but the
failure to enter into any such agreement shall not affect or limit the
rights of such person pursuant to this By-Law, it being expressly
recognized hereby that all directors, officers, incorporators,
employees and agents of the Corporation, by serving as such after the
adoption hereof, are acting in reliance hereon and that the
Corporation is estopped to contend otherwise.
In case any provision in this By-Law shall be determined at any
time to be unenforceable in any respect, the other provisions shall
not in any way be affected or impaired thereby, and the affected
provision shall be given the fullest possible enforcement in the
circumstances, it being the intention of the Corporation to afford
indemnification and advancement of expenses to its directors,
officers, incorporators, employees or agents acting in such capacities
or in the other capacities mentioned herein, to the fullest extent
permitted by law.
For purposes of this By-Law, the Corporation shall be deemed to
have requested a person to serve an employee benefit plan where the
performance by such person of his or her duties to the Corporation
also imposes duties on, or otherwise involves services by, such person
to the plan or participants or beneficiaries of the plan, and excise
taxes assessed on a person with respect to an employee benefit plan
pursuant to applicable law shall be considered indemnifiable expenses.
For purposes of this By-Law, the term "Corporation" shall include any
legal successor to the Corporation, including any corporation which
acquires all or substantially all of the assets of the Corporation in
one or more transactions.
A person who has been wholly successful, on the merits or
otherwise, in the defense of a civil or criminal action or proceeding
of the character described in the first paragraph of this By-Law shall
be entitled to indemnification as authorized in such paragraph.
Except as provided in the preceding sentence and unless ordered by a
court, any indemnification under this By-Law shall be made by the
Corporation if, and only if, authorized in the specific case:
1. By the Board of Directors acting by a quorum
consisting of directors who are not parties to such action
or proceeding upon a finding that the director, officer or
employee has met the standard of conduct set forth in the
first paragraph of this By-Law, or,
2. If such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs:
a. By the Board of Directors upon the opinion in
writing of independent legal counsel that
indemnification is proper in the circumstances because
the standard of conduct set forth in the first
paragraph of this By-Law has been met by such director,
officer or employee, or
b. By the shareholders upon a finding that the
director, officer or employee has met the applicable
standard of conduct set forth in such paragraph.
If any action with respect to indemnification of directors and
officers is taken by way of amendment of these By-Laws, resolution of
directors or by agreement, then the Corporation shall, not later than
the next annual meeting of shareholders, unless such meeting is held
within three months from the date of such action, and, in any event,
within fifteen months from the date of such action, mail to its
shareholders of recorded at the time entitled to vote for the
election of directors a statement specifying the action taken.
ARTICLE VIII - AMENDMENTS
The holders of shares entitled at the time to vote for the
election of directors shall have power to adopt, amend, or repeal the
By-Laws of the Corporation by vote of not less than a majority of such
shares, and the Board of Directors by vote of not less than a majority
of the entire Board shall have power equal in all respects to that of
the shareholders to adopt, amend or repeal the By-Laws; provided,
however, that any By-Law adopted by the Board may be amended or
repealed by vote of the holders of a majority of the shares entitled
at the time to vote for the election of directors.
If any By-Law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be
set forth in the notice of the next meeting of shareholders for the
election of directors the By-Law or By-Laws so adopted, amended or
repealed, together with a concise statement of the changes made.
<PAGE>
EXHIBIT 10.30
THE VERMONT TEDDY BEAR CO., INC.
INCENTIVE STOCK OPTION PLAN
(as amended November 22, 1996)
1. PURPOSE. The purpose of the Plan is to provide Employees
with a proprietary interest in the Company through the granting of
options.
2. ADMINISTRATION. The Plan will be administered by the Option
Committee of the Board of Directors of the Company which shall be
comprised of independent, outside directors.
3. PARTICIPANTS. The Board of Directors shall, from time to
time, select the particular Employees of the Company and its
Subsidiaries to whom options are to be granted, and who will, upon
such grant, become participants in the Plan.
4. STOCK OWNERSHIP LIMITATION. No option may be granted to an
Employee who owns more than 10% of the voting power of all classes of
stock of the Company or its Parent or Subsidiaries. This limitation
will not apply (a) to any Non-Qualified Option or (b) if the option
price is at least 110% of the fair market value of the stock at the
time the option is granted and the option is not exercisable more than
five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. The Board may not grant options
under the Plan for more than 2,000,000 shares of Common Stock of the
Company, but this number may be adjusted to reflect, if deemed
appropriate by the Board, any stock dividend, stock split, share
combination, recapitalization or the like, of or by the Company.
Shares to be optioned and sold may be made available from either
authorized but unissued Common Stock or Common Stock held by the
Company in its treasury. Shares that by reason of the expiration of
an option or otherwise are no longer subject to purchase pursuant to
an option granted under the Plan may be re-offered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value
(determined at the time of grant) of the shares of Common Stock which
any Employee is first eligible to purchase in any calendar year by
exercise of incentive stock options (within the meaning of Section
422A of the Internal Revenue Code) granted under this Plan and all
incentive stock option plans of the Company or its Parent or
Subsidiaries shall not exceed $100,000. For this purpose, the fair
market value (determined at the respective date of grant of each
option) of the stock purchasable by exercise of an incentive stock
option (or an installment thereof) shall be counted against the
$100,000 annual limitation for an Employee only for the calendar year
such stock is first purchasable under the terms of the Option.
7. ALLOTMENT OF SHARES. The Board shall determine the number
of shares of Common Stock to be offered from time to time by grant of
options to members of management of the Company. The grant of an
option to an Employee shall not be deemed either to entitle the
Employee to, or to disqualify the Employee from, participation in any
other grant of options under the Plan.
8. GRANT OF OPTIONS. The Board is authorized to grant
Incentive Options and Non-Qualified Options under the Plan. All
options under the Plan shall be granted by the Board. The grant of
options shall be evidenced by stock option agreements containing such
terms and provisions as are approved by the Board, but not
inconsistent with the Plan, including provisions that may be necessary
to assure that the option is an incentive stock option under the
Internal Revenue Code. The Company sh all execute stock option
agreements upon instruments from the Board. The Plan shall be
submitted to the Company's stockholders for approval. The Board may
grant options under the Plan prior to the time of stockholder
approval, which options will be effective when granted, but if for any
reason the stockholders of the Company do not approve the Plan prior
to one year from the date of adoption of the Plan by the Board, all
options granted under the Plan will be terminated and of no effect,
and no option may be exercised in whole or in part prior to such
stockholder approval.
9. OPTION PRICE. The option price shall be determined by the
Board on the date of grant. The Board shall set forth the option
price determination in its minutes, using any reasonable valuation
method. The Board may grant non-qualified stock options at an
exercise price less than the fair market value of the Common Stock on
the date of grant.
10. OPTION PERIOD. The Option Period will begin on the date the
option is granted, which will be the date the Board authorizes the
option unless the Board specifies a later date. No option may
terminate later than 10 years from the date the option is granted.
The Board may provide for the exercise of options in installments and
upon such terms, conditions and restrictions as it may determine. The
Board may provide for termination of the option in the case of
termination of employment or any other reason.
11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a participant
dies or becomes disabled (within the meaning of Section 22(e)(3) of
the Internal Revenue Code) while in the employ of the Company, but
prior to termination of his right to exercise an option in accordance
with the provisions of his stock option agreement without having
totally exercised the option, the option agreement may provide that it
may be exercised, to the extent of the shares with respect to which
the option could have been exercised by the participant on the date of
the participant's death or disability, by (i) the participant's estate
or by the person who acquired the right to exercise the option by
bequest or inheritance or by reason of the death of the participant in
the event of the participant's death, or (ii) the participant or his
personal representative in the event of the participant's disability,
provided the option is exercised prior to the date of its expiration
or not more than one year from the date of the participant's death or
disability, whichever occurs first. The date of disability of a
participant shall be determined by the Company.
12. PAYMENT. Full payment for shares purchased upon exercising
an option shall be made in cash or by check at the time of exercise,
or on such other terms as are set forth in the applicable option
agreement. No shares may be issued until full payment of the purchase
price therefor has been made, and a participant will have none of the
rights of a stockholder until shares are issued to him.
13. EXERCISE OF OPTION. Options granted under the Plan may be
exercised during the Option Period, at such times, in such amounts, in
accordance with such terms and subject to such restrictions as are set
forth in the applicable stock option agreements. In no event may an
option be exercised or shares be issued pursuant to an option if any
requisite action, approval or consent of any governmental authority of
any kind having jurisdiction over the exercise of options shall not
have been taken or secured.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of
shares of Common Stock covered by each outstanding option granted
under the Plan and the option price may be adjusted to reflect, as
deemed appropriate by the Board, any stock dividend, stock split,
share combination, exchange of shares, recapitalization, merger,
consolidation, separation, reorganization, liquidation or the like, of
or by the Company.
15. NON-ASSIGNABILITY. Options may not be transferred other
than by will or by the laws of descent and distribution. During a
participant's lifetime, options granted to a participant may be
exercised only by the participant.
16. INTERPRETATION. The Board shall interpret the Plan and
shall prescribe such rules and regulations in connection with the
operation of the Plan as it determines to be advisable for the
administration of the Plan. The Board may rescind and amend its rules
and regulations.
17. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or
discontinued by the Board without the approval of the stockholders of
the Company, except that any amendment that would (a) materially
increase the benefits accruing to participants under the Plan, (b)
materially increase the number of securities that may be issued under
the Plan, or (c) materially modify the requirements of eligibility for
participation in the Plan must be approved by the stockholders of the
Company.
18. EFFECT OF PLAN. Neither the adoption of the Plan nor any
action of the Board shall be deemed to give any officer or Employee
any right to be granted an option to purchase Common Stock of the
Company or any other rights except as may be evidenced by the stock
option agreement, or any amendment thereto, duly authorized by the
Board and executed on behalf of the Company and then only to the
extent and on the terms and conditions expressly set forth therein.
19. TERM. Unless sooner terminated by action of the Board, the
Plan will terminate on the date ten years after the date hereof. The
Board may not grant options under the Plan after that date, but
options granted before that date will continue to be effective in
accordance with their terms.
20. DEFINITIONS. For the purpose of this Plan, unless the
context requires otherwise, the following terms shall have the
meanings indicated:
(a) "Plan" means this Incentive Stock Option Plan as
amended from time to time.
(b) "Board" means the Board of Directors of the Company.
(c) "Common Stock" means the Common Stock which the
Company is currently authorized to issue or may in the future be
authorized to issue (as long as the common stock varies from that
currently authorized, if at all, only in amount of par value).
(d) "Subsidiary" means any corporation in an unbroken chain
of corporations beginning with the Company if, at the time of the
granting of the option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the
other corporations in the chain, and "Subsidiaries" means more than
one of any such corporations.
(e) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company if, at the time of granting of
the option, each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
(f) "Option Period" means the period during which an option
may be exercised.
(g) "Incentive Option" means an option granted under the
Plan which meets the requirements of Section 422A of the Internal
Revenue Code.
(h) "Non-qualified Option" means an option granted under
the Plan which is not intended to be an Incentive Option.
(i) "Employee" means any full-time employee of the Company.
<PAGE>
EXHIBIT 10.31
THE VERMONT TEDDY BEAR CO., INC.
1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The purposes of the 1996 Non-employee Directors' Stock Option
Plan (the "Plan") are to further align the non-employee directors'
interests with those of the shareholders, to provide an additional
inducement for such directors to remain with the Company, and to
provide a means by which the Company may attract qualified persons to
serve as directors of the Company.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a committee (the "Committee")
to consist of not less than two of the Company's directors who are not
eligible to participate in the Plan. A majority of the Committee
shall constitute a quorum at every meeting and the acts of the
majority of the members at any meeting at which a quorum is present,
or acts approved in writing by all the members of the Committee, shall
be the acts of the Committee. The Committee shall interpret the Plan
and prescribe such rules, regulations and procedures in connection
with the operations of the Plan as it shall be deemed to be necessary
and advisable for the administration of the Plan consistent with the
purposes of the Plan. All questions of interpretation and application
of the Plan, or as to stock options granted under the Plan, shall be
subject to the determination of the Committee, which shall be final
and binding.
Notwithstanding the above, the selection of the Directors to whom
stock options are to be granted, the timing of such grants, the number
of shares subject to the stock option, the exercise price of any stock
option, the periods during which any stock option may be exercised and
the term of any stock option shall be as hereinafter provided and the
Committee shall have no discretion as to such matters.
SECTION 2
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares which may be issued and as to
which grants of stock options may be made under the plan is 400,000
shares of the Company's Common Stock, par value $.05 per share, (the
"Common Stock"), but this number of shares may be adjusted to reflect,
if deemed appropriate by the Committee, any stock dividend, any stock
split, share combination, recapitalization or the like, of or by the
Company. Shares to be optioned and sold may be made available from
either authorized but unissued Common Stock or Common Stock held by
the Company in its treasury. Shares that by reason of the expiration
of an option or otherwise are no longer subject to purchase pursuant
to an option granted under the Plan may be re-offered under the Plan.
SECTION 3
ELIGIBLE PARTICIPANTS
Each person who is a member of the Company's Board of Directors
and who is not, at the time of grant, an employee of the Company or
any of its subsidiaries (a "Participant") shall automatically be an
eligible participant under the Plan.
SECTION 4
GRANT OF STOCK OPTIONS
a. Annual Retainer. On the third day following the day of the
Company's Annual Meeting of Stockholders, each Participant shall
automatically and without further action by the Board or the Committee
be granted a "non-qualified stock option" (i.e., a stock option which
does not qualify under Sections 422 or 423 of the Internal Revenue
Code of 1986, as amended (the "Code")) to purchase 2,000 shares of
common stock, subject to adjustment as set forth in Section 6. If the
number of shares then remaining available for the grant of stock
options under the Plan is not sufficient for each Participant to be
granted an option for 2,000 shares (or the number of adjusted or
substituted shares pursuant to Section 6), then each such Participant
shall be granted an option for a number of whole shares equal to the
number of shares then remaining available divided by the number of
such Participants, disregarding any fractions of a share.
b. Regular and Special Meetings of the Board of Directors. On
the third business day following the day of each regular quarterly
meeting or special meeting of the Board of Directors at which a
Participant is present in person or by telephone, such Participant
shall automatically and without further action by the Board or the
Committee be granted a "non-qualified stock option" to purchase 1,500
shares of Common Stock, subject to adjustment as set forth in Section
6. Additionally, on the third business day following the day of each
regular quarterly meeting of the Board of Directors the Chairman of
the Company's Board of Directors (the "Chairman") shall automatically
and without further action by the Board or the Committee be granted an
additional "non-qualified stock option" to purchase 2,000 shares of
Common Stock, subject to adjustment as set forth in Section 6. If the
number of shares then remaining available for the grant of stock
options under the Plan is not sufficient for each Participant to be
granted an option for 1,500 shares and the Chairman to be granted an
option for 2,000 shares (or the number of adjusted or substituted
shares pursuant to Section 6) then each such Participant and the
Chairman shall be granted an option for a number of whole shares equal
to the number of shares then remaining available divided by the number
of such Participants plus the Chairman, disregarding any fractions of
a share.
c. Committee Meetings. On the third business day following the
day of each regular quarterly meeting or special meeting of any
committee of the Board of Directors on which a Participant serves and
at which such Participant is present in person or by telephone, such
Participant shall automatically and without further action by the
Board or the Committee be granted a "non-qualified stock option" to
purchase 1,000 shares of Common Stock, subject to adjustment as set
forth in Section 6. If the number of shares then remaining available
for the grant of stock options under the Plan is not sufficient for
each such Participant to be granted an option for 1,000 shares (or the
number of adjusted or substituted shares pursuant to Section 6) then
each participant shall be granted an option for a number of whole
shares equal to the number of shares then remaining available divided
by the number of such Participants, disregarding any fractions of a
share.
d. Special Assignments. In the event that any Participant
shall be engaged by the Company or the Board of Directors in a
consulting or similar capacity to provide services above and beyond
the duties of the Participant as a Board or Committee member, then,
upon approval by a majority of the other members of the full Board of
Directors, such Participant shall be granted a "non-qualified stock
option" as of the "date of completion" of the service to purchase the
number of shares equal to the "value of the service" provided by such
Participant divided by the fair market value per share of the Common
Stock as of the "date of completion." For purposes of this section,
the "date of completion" shall be the date on which the service is
completed, as determined by a majority of the other members of the
full Board, and the "value of the service" shall be the cash value of
such services as determined by a majority of the other members of the
full Board.
SECTION 5
TERMS AND CONDITIONS OF STOCK OPTIONS
Stock options granted under the Plan shall be subject to the
following terms and conditions:
a. Exercise Price. The purchase price at which each stock
option may be exercised (the "Exercise Price") shall be equal to the
fair market value per share of the Common Stock on the date of grant.
The fair market value of the Common Stock shall be the price per share
of the Common Stock for the last reported sale on such date on the
National Association of Securities Dealers Automated Quotation system
or any successor system then in use ("NASDAQ").
b. Payment of Exercise Price. The Exercise Price for each
stock option shall be paid in full upon exercise and shall be payable
in cash in United States dollars (including check, bank draft or money
order). No shares of Common Stock will be issued by the Company upon
exercise of the stock option until the company has received payment of
the Exercise Price in full. The date of exercise of a stock option
shall be the date on which the Company has received payment of the
option price in full and, as of the date of exercise, the person
exercising the stock option shall be considered, for all purposes, to
be the owner of the shares with respect to which the stock option has
been exercised.
c. Option Period. The option period will begin on the date
that the option is granted. Each stock option shall be exercisable
for ten years from the date of grant and not thereafter. A stock
option to the extent exercisable at any time may be exercised in whole
or in part.
d. Termination of Board Membership. If a grantee ceases to be
a director of the corporation for any reason, any outstanding stock
options held by the grantee shall be exercisable according to the
following provisions:
(i) if a grantee ceases to be a director of the corporation
for any reason other than removal for cause or death,
any outstanding stock option held by such grantee shall
be exercisable by the grantee at any time prior to the
expiration date of such stock option;
(ii) if a grantee is removed from office for cause, any
outstanding stock option held by the grantee which is
not exercisable by the grantee immediately prior to
resignation or removal shall terminate as of the date
of resignation or removal, and any outstanding stock
option held by the grantee which is exercisable by the
grantee immediately prior to the removal shall be
exercisable by the grantee at any time prior to the
expiration date of such stock option or within one
month after the date of resignation or removal of the
grantee, whichever is the shorter period; and
(iii) following the death of a grantee, any outstanding
stock option held by the grantee at the time of death
(whether or not exercisable by the grantee immediately
prior to death) shall be exercisable by the person
entitled to do so under the will of the grantee, or, if
the grantee shall fail to make testamentary disposition
of the stock option or shall die intestate, by the
legal representative of the grantee at any time prior
to the expiration of such stock option.
e. Option Agreement. All stock options shall be confirmed by
an agreement, or an amendment thereto, which shall be executed on
behalf of the Company by the President or the Chief Financial Officer
and by the grantee.
Subject to the foregoing provisions of this Section 5 and of the
other provisions of the Plan, any stock option granted under the Plan
shall be subject to such restrictions and other terms and conditions,
if any, and shall be determined in its discretion, by the Committee
and set forth in the agreement referred to in Section 5(e) or an
amendment thereto.
SECTION 6
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the
Common Stock payable in shares of the Common Stock set forth in
Section 4, the number of shares of the Common Stock then subject to
any outstanding stock options or the number of shares of the Common
Stock which may be issued under the Plan, but are not then subject to
outstanding stock options on the date fixed for determining the
stockholders entitled to receive such stock dividend or distribution
shall be adjusted by adding thereto the numbers of shares of the
Common Stock which would have been distributable thereon if such
shares had been outstanding on such date.
If the outstanding shares of the Common Stock shall be changed
into or exchangeable for a different number or kind of shares of stock
or other securities of the Company or another corporation, whether
through reorganization, reclassification, recapitalization, stock
split-up, combination of shares, merger or consolidation, then there
shall be substituted for each share of the Common Stock set forth in
Section 4, for each share of the Common Stock subject to any then
outstanding stock option and for each share of the Common Stock which
may be issued under the Plan, but which has not been subject to any
outstanding stock option, the number and kind of shares of stock or
other securities into which each outstanding share of the Common Stock
shall be so changed or for which each such share shall be
exchangeable.
In case of any adjustment or substitution as provided for in the
first two paragraphs of this Section 6, the aggregate option price for
all shares subject to each then outstanding stock option prior to such
adjustment or substitution shall be the aggregate option price for all
shares of stock or other securities (including any fraction) to which
such shares shall have been adjusted or shall have been substituted
for such shares. Any new option price per share shall be carried to
at least three decimal places with the last decimal place rounded
upwards to the nearest whole number.
If the outstanding shares of the Common Stock shall be changed in
value by reason of any spin-off, split-off or split-up, or dividend in
partial liquidation, dividend in property other than cash or
extraordinary distribution to holders of the Common Stock, the
Committee shall make any adjustments to any outstanding stock option
which it determines are equitably required to prevent dilution or
enlargements of the rights of grantees which would otherwise result
from any such transaction.
No adjustment or substitution provided for in this Section 6
shall require the Company to issue or sell a fraction of a share or
other security. Accordingly, all fractional shares or other
securities which result from any such adjustment or substitution shall
be eliminated and not carried forward to any subsequent adjustment or
substitution.
Except as provided in this Section 6, a grantee shall have no
rights by reason of any issue by the Company of stock of any class or
securities convertible into stock with any class, any subdivision or
consolidation of any shares of stock of any class, the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class.
SECTION 7
EFFECT OF THE PLAN ON THE RIGHTS OF
THE COMPANY AND STOCKHOLDERS
Nothing in the Plan, in any stock option granted under the Plan,
or any stock option agreement shall confer any right to any person to
continue as a director of the Company or interfere in any way with the
rights of the stockholders of the Company or the Board of Directors to
elect and remove directors.
SECTION 8
AMENDMENT AND TERMINATION
The Plan may be amended or terminated by the Board without the
approval of the stockholders of the Company, except that any amendment
that would (a) materially increase the benefits accruing to
Participants in the Plan, (b) materially increase the number of
securities that may be issued under the Plan, or (c) materially modify
the requirements of eligibility for participation in the Plan must be
approved by the stockholders of the Company.
SECTION 9
EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective upon approval by the affirmative
vote of the holders of a majority of the common stock present in
person or by proxy and entitled to vote at a duly called and convened
meeting of such holders. If such approval is obtained at the 1996
Annual Meeting of Stockholders, the Plan shall be effective on the
date of such meeting.
<PAGE>
EXHIBIT 10.32
The Vermont Teddy Bear Co., Inc.
Shelburne, Vermont 05482
July 1, 1996
Mr. Spencer C. Putnam
Shelburne, VT 05482
Dear Spence:
This letter is to follow up on our recent discussions and confirm
our agreement concerning the terms of your continued employment by The
Vermont Teddy Bear Co., Inc. (the "Company"). Except as specifically
set forth in this letter, this agreement is intended to amend and
supersede your existing Employment Agreement, dated November 1, 1993
(the "Prior Agreement"). Our agreement is as follows:
1. Position. You shall to be employed as Secretary and Vice
President of the Company and you shall continue to devote all of your
business time, attention, skill and efforts to the business and
affairs of the Company, with such duties as shall be assigned to you
by the Board of Directors. You shall be based at the Company's
Shelburne, Vermont offices.
2. Term. Your employment shall continue for a term ending
October 31, 1998, unless earlier terminated in accordance with this
agreement.
3. Base Salary. For the year commencing July 1, 1996, your
base salary shall be $86,000. Thereafter, your base salary shall be
renegotiated.
4. Annual Bonus. In addition to your base salary, you will be
entitled to a bonus for each fiscal year during the term, based upon
the Company's net operating profit, determined by the Company's
Executive Administrative Group.
5. Stock Options. You shall be eligible to participate in the
Company's Incentive Stock Option Plan.
6. Benefits. You shall continue to participate in all of the
benefit plans generally available to employees of the Company in
accordance with the policies and procedures currently, or then in
effect, as the case may be, and in addition, you shall have the use of
a company car and life insurance policies totaling $15,000.
7. Indemnification. The Company shall indemnify you (and your
estate) in accordance with the Company's by-laws as in effect from
time to time. This indemnification by the Company shall survive
termination or expiration of this Agreement.
8. Termination. This Agreement may be terminated by either you
or by the Company at any time. If your employment is terminated by
(a) you for "Good Reason" or (b) the Company, for any reason other
than for "Cause" at any time, (i) you shall receive, in lieu of any
other payment or benefit except as set forth in this paragraph, and in
a lump sum, an amount equal to six months base salary, plus bonus for
the year in which your employment was terminated pro rated for the
period you were employed, and (ii) all your outstanding stock options
which were subject to vesting on or prior to the end of the fiscal
year in which your employment was terminated shall immediately vest
and all your stock options shall continue to be exercisable for a
period of ten years after the date of their grant. Upon a termination
of employment by the Company at any time (other than for "Cause") the
Company shall provide you with reasonable outplacement services. Upon
a termination by the Company for "Cause" or by you without "Good
Reason", you shall not be entitled to receive any further payments or
benefits following the date of your termination.
If your employment is terminated on account of your death or your
disability which lasts (or is likely, based on reasonable medical
evidence, to last) for more than six consecutive months and renders
you unable to perform your duties under this Agreement, all
outstanding stock options which were subject to vesting on or prior to
the end of the fiscal year in which your employment was terminated
shall immediately vest and all your stock options shall continue to be
exercisable for a period of ten years after the date of their grant.
Upon such termination for your death or disability, neither you nor
your estate shall be entitled to receive the salary continuation
referred to in clause (i) with respect to a termination by the Company
for any reason other than "Cause".
In the event that your employment is terminated within ninety
days prior to, or six months after, a "Change in Control", in addition
to the other benefits to which you would be entitled in the event of a
termination by the Company for any reason other than "Cause", all your
stock options shall continue to be exercisable for a period of ten
years after the date of their grant.
For purposes of this Agreement the terms "Good Reason", "Cause"
and "Change in Control" shall be defined as follows:
"Good Reason" means (a) the breach or
contravention by the Company of any provision of
this agreement, (b) the assignment to you of any
duties inconsistent your status as a senior
officer of the Company or a substantial adverse
alteration in the nature or status of your
responsibilities from those in effect on the
Commencement Date, (c) a reduction in your annual
base salary as set forth herein or as the same may
be increased from time to time and (d) the failure
of the company to provide you with the benefits
contemplated herein. Your continued employment
shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act
constituting Good Reason hereunder.
"Cause" means (a) your conviction for, or guilty
plea to, any felony, (b) your commission of an act
of personal dishonesty or breach of fiduciary duty
which involves personal profit in connection with
employment by the Company or (c) your material
breach or contravention of any material provision
of this agreement or your commission of an act of
gross negligence or willful misconduct in the
conduct of your duties to the Company; provided,
however, that in that cases of clauses (b) and
(c), the Company shall have given you ten business
days' notice thereof, a reasonable opportunity to
be heard by the Board of Directors and, during
such ten business day period, an opportunity to
cure.
"Change of Control" means (a) the Company is
merged or consolidated with another corporation or
entity, (b) one person (together with its
affiliates) becomes the beneficial owner of 50% or
more of the issued and outstanding equity
securities of the Company or (c) all or
substantially all of the assets of the Company are
acquired by another corporation or entity.
9. Covenant Not To Compete. During the term and for a period
of six (6) months following termination of your employment with the
Company, you shall not, directly or indirectly, whether as
stockholder, officer, director, employee, consultant or otherwise
(except as a beneficiary of less than 5% of the number of shares of
any publicly traded securities) engage in any business that, with
respect to 5% or more of its sales, competes with the Company in the
business of marketing and selling stuffed teddy bears.
If the foregoing correctly sets forth your understanding of our
Agreement, please sign and return the enclosed copy of this letter to
me.
Sincerely,
THE VERMONT TEDDY BEAR CO., INC.
By: ___________________________________
R. Patrick Burns, President
ACKNOWLEDGED AND AGREED TO:
______________________________
Spencer C. Putnam
<PAGE>
EXHIBIT 10.33
Subject to the terms and conditions of a Subordination Agreement
between the Vermont Teddy Bear Company, Inc., Green Mountain Capital,
L.P. and Vermont National Bank dated 12/22/1995.
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1993 AND MAY NOT BE SOLD, ASSIGNED, OR TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITY UNDER
THE SECURITIES ACT OF 1933 UNLESS THE COMPANY HAS RECEIVED THE WRITTEN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH
SALE, ASSIGNMENT, OR TRANSFER DOES NOT INVOLVE A TRANSACTION REQUIRING
REGISTRATION OF SUCH SECURITY UNDER THE SECURITIES ACT OF 1933.
CONVERTIBLE NOTE
Principal Amount: $300,000 Dated: November 19, 1996
FOR VALUE RECEIVED, The Vermont Teddy Bear Company, Inc., with
principal place of business in Shelburne, Vermont (the "Borrower"),
promises to pay to the order of Green Mountain Capital, L.P., a
Vermont limited partnership with an office in Waterbury, Vermont, or
order (the "Lender" or the "Holder"), the principal sum of Three
Hundred Thousand Dollars ($300,000.00) with interest as hereinafter
set forth.
Section 1. The Note.
1.1 This note is for a term of four (4) years and one (1) month, more
or less, with interest at the rate of twelve percent (12%) per annum
(365 day year) on the outstanding balance, payable monthly in arrears
on the last day of each month. Payment of principal shall be made in
equal consecutive monthly payments sufficient to amortize the loan
over the loan term (see attached payment schedule on Appendix A). All
principal and interest, if any, outstanding on December 26, 2000,
shall be due and payable in full.
1.2 In the event any payment or principal or interest hereunder is
not paid within fifteen (15) days of the date on which said payment is
due, the whole remaining balance shall become due and payable at the
option of the holder of this note if payment is not made within thirty
(30) days' written notice of default. Borrower shall pay a late
charge of five percent (5%) of each payment not received by Lender
within fifteen (15) days of the scheduled due date not to exceed
$50.00.
Section 2. Prepayment.
2.1 The Borrower may prepay this Note in whole or in part on any
payment date upon payment of a fee based on one percent (1%) for each
year, or part thereof, on the amount prepaid as set out below. The
penalty shall be waived where ninety (90) days' prior notice in
writing of the planned prepayment is furnished to the Lender after
twelve (12) months from the date hereof. In the event any such
prepayment is made by the Borrower, the amount thereof will be applied
first to accrued interest and delinquency charges and thereafter to
principal.
TWELVE MONTHS ENDED PERCENTAGE
1996 105.00
1997 104.00
1998 103.00
1999 102.00
2000 101.00
2.2 Prior written notice of each of each prepayment, if any, pursuant
to Section 2.1 hereof shall be given not less than thirty (30) or more
than ninety (90) days prior to each prepayment date. Such notice
shall state:
(1) The prepayment date; and
(2) The amount of principal and/or accrued interest to be paid on
the Notes to be prepaid.
Such notice, and any other notice given to a Holder of this Note,
shall be mailed, postage prepaid, by registered or certified mail to
the payee named herein, irrespective of whether the payee is the
Holder of this Note; provided, however, that any subsequent Holder of
this Note having presented it to the Company for inspection at the
office of the Company and having delivered to the Company at such an
office a written notice of the acquisition by such Holder of this Note
and designated in writing an address to which notices shall be mailed
to such Holder at such designated address instead of to the payee
herein named, unless and until any subsequent Holder of this Note
shall comply with the provisions of this Section 2.2 shall receive
notice.
2.3 Prior to prepayment, the Holder may exercise its conversion right
pursuant to Section 3 as to the amount to be prepaid by notice to the
Company not less than fifteen (15) days prior to the proposed
prepayment date.
2.4 On each prepayment date, the Company shall be obligated to
prepay, at the office of the Holder, the principal amount of this
Note, or the portion of such principal amount to be prepaid pursuant
to this Section 2, plus interest accrued on such principal amount, or
portion thereof, to the prepayment date. If this Note is to be
prepaid in whole or in part as herein provided, then this Note or the
portion hereof to be prepaid, as the case may be, shall cease to bear
interest on and after the date fixed for such prepayment, provided
such prepayment is duly made or duly provided for.
Section 3. Conversion.
3.1 Optional Conversion. At any time on or before December 26, 2000,
at the option of the Holder, the unpaid balance of this Note and
accrued interest may be converted into not more than 12,000 shares of
Common Stock of the Company ("Common Stock") at the price, on the
terms, and subject to the conditions of the Stock Purchase Warrant
Agreement dated December 26, 1995. For purposes of this paragraph
3.1, this Note and the Stock Purchase Warrant Agreement shall be
treated as a single, integrated convertible security.
Section 4. Covenants, Representations and Warranties - To induce
the Holder to promise to lend $300,000 in terms of this Note, the
Holder places full reliance upon the covenants, representations and
warranties contained in the Loan Agreement dated December 26, 1996,
which are incorporated herein by reference.
Section 5. Evidence of Default.
5.1 The occurrence of any one for more of the events described in
Article X of the said Loan Agreement shall constitute an "Event of
Default." In the event the default is not cured after 30 days of
written notice of default, then, and in every event, the holder of
this Note, may declare this Note to be, and this Note shall thereupon
become, due and payable without presentment, protest, or further
demand of any kind, all of which are hereby expressly waived.
Section 6. Notices, and So Forth.
Any request, demand, authorization, direction, notice, consent,
waiver, or other document provided or permitted by this Note to be
made upon, given or furnished to, or filed with either party shall be
sufficient for every purpose hereunder if in writing and mailed,
registered or certified mail, postage prepaid, to the other party,
addressed to its duly recorded office.
Section 7. Other Provisions.
7.1 All covenants, promises, and agreements in this Note by the
Company shall bind its successors and assigns, whether so expressed or
noted.
7.2 The Note shall be deemed to be a contract made under the laws of
the State of Vermont, and for all purposes each Note shall be
construed in accordance with the laws of said state.
7.3 Presentment, notice of dishonor and protest are hereby waived by
all makers, sureties, guarantors and endorsers hereof as well as all
other notices of demand in connection with the delivery, acceptance,
performance and enforcement of this Note.
7.4 The undersigned will pay on demand all costs of collection and
reasonable attorney fees paid or incurred by the Holder in enforcing
this Note in the event of default or collection.
7.5 No delay or omission on the part of the Holder in the exercise of
any right hereunder or any other loan document securing the payment of
the Note shall impair such right or be construed as a waiver of any
failure to pay the aggregate unpaid balance of principal of the
advances outstanding or to pay interest or any other obligation under
this Note when due. No waiver of any right, or change in the
provisions of this Note shall be as a bar to or a waiver of any right
on any future occasion.
7.6 This Note is given in addition to the December 26, 1995, Note for
$200,000 and constitutes the remainder of the $500,000 loan commitment
of Lender to Borrower.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in
its corporate name by its duly authorized officers and to be dated as
of the day and year first above written.
IN THE PRESENCE OF: VERMONT TEDDY BEAR COMPANY, INC.
- -------------------
BY:
--------------------------------
Its Duly Authorized Agent
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE DECEMBER 31, 1996 BALANCE SHEET
AND THE SIX MONTH STATEMENT OF OPERATIONS ENDED
DECEMBER 31, 1996 FOR THE VERMONT TEDDY BEAR CO., INC.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 722,774
<SECURITIES> 0
<RECEIVABLES> 207,796
<ALLOWANCES> 0
<INVENTORY> 3,112,472
<CURRENT-ASSETS> 5,072,900
<PP&E> 12,350,372
<DEPRECIATION> 2,090,881
<TOTAL-ASSETS> 15,804,784
<CURRENT-LIABILITIES> 6,904,795
<BONDS> 4,327,037
0
910,245
<COMMON> 258,638
<OTHER-SE> 6,782,711
<TOTAL-LIABILITY-AND-EQUITY> 15,804,784
<SALES> 4,484,977
<TOTAL-REVENUES> 4,484,977
<CGS> 1,889,777
<TOTAL-COSTS> 1,889,777
<OTHER-EXPENSES> 3,074,561
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,569
<INCOME-PRETAX> (580,930)
<INCOME-TAX> 0
<INCOME-CONTINUING> (366,558)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (366,558)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
