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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO
RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(A)
(AMENDMENT NO. ______)
The Vermont Teddy Bear Co., Inc.
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(Name of issuer)
Common Stock, $.05 par value per share
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(Title of class of securities)
000912960
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(CUSIP number)
Mr. Thomas R. Shepherd
The Shepherd Group LLC
636 Great Road
Stow, MA 01775
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(Name, address and telephone number of person
authorized to receive notices and communications)
November 3, 1998
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[_].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 11 Pages)
________________________________
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 or otherwise subject to the liabilities of that section of the Act but
shall be subject to all other provisions of the Act (however, see the Notes).
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SCHEDULE 13D
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CUSIP NO. 0000912960 PAGE 2 OF 11 PAGES
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Shepherd Group LLC
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
WC
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
Massachusetts
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SOLE VOTING POWER
7
NUMBER OF 956,975
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 224,099
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
224,099
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
4.1%
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TYPE OF REPORTING PERSON*
14
00
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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Page 3 of 11 Pages
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Shepherd Venture I, L.P.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4
WC
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
Massachusetts
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SOLE VOTING POWER
7
NUMBER OF 221,820
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 221,820
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
221,820
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [ ]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
4.1%
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TYPE OF REPORTING PERSON*
14
PN
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Page 4 of 11 Pages
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Thomas R. Shepherd
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4
PF
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
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SOLE VOTING POWER
7
NUMBER OF 1,067,295
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 334,419
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
334,419
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
6.1%
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TYPE OF REPORTING PERSON*
14
IN
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Page 5 of 11 Pages
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NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
T. Nathanael Shepherd
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [X]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS*
4
OO
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
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SOLE VOTING POWER
7
NUMBER OF 956,976
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 245,445
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
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AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
245,445
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CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12 [X]
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PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
4.5%
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TYPE OF REPORTING PERSON*
14
IN
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<PAGE>
Page 6 of 11 Pages
ITEM 1. SECURITY OF THE ISSUER.
----------------------
The securities to which this statement relates are the Common Stock, par
value $.05 per share (the "Common Stock"), of The Vermont Teddy Bear Co., Inc.,
a New York corporation (the "Company"). Unless otherwise indicated, all of the
beneficial ownership of shares of the Common Stock is derived from beneficial
ownership of Series C Convertible Redeemable Preferred Stock, par value $.05 per
share (the "Series C Preferred Stock"), of the Company, which is convertible
into shares of Common Stock, and warrants to purchase shares of Common Stock
(the "Warrants" and together with the Series C Preferred Stock, the
"Securities"). The Series C Preferred Stock is convertible into the number of
shares of Common Stock computed by multiplying each share of Series C Preferred
Stock by $10,000 and dividing the result by $1.05 (subject to adjustment for
anti dilution rights). The principal executive offices of the Company are
located at 6655 Shelburne Road, Shelburne, Vermont 05482.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
This statement is being filed jointly on behalf of The Shepherd Group LLC,
a Massachusetts limited liability company (the "LLC"), The Shepherd Venture Fund
I, L.P., a Massachusetts limited partnership (the "Fund"), Thomas R. Shepherd
("Mr. Shepherd") and T. Nathanael Shepherd, Mr. Shepherd's son, (each
individually a "Reporting Person" and collectively, the "Reporting Persons").
The LLC is the sole general partner of the Fund.
The business address or principal office address of each of the Reporting
Persons is as follows: 636 Great Road, Stow, Massachusetts 01775.
The principal business of the LLC is investing in venture and existing
small to middle market companies by managing the Fund.
The principal business of the Fund is investing in venture and existing
small to middle market companies.
Mr. Shepherd's current principal occupation is the Chairman of the LLC.
T. Nathanael Shepherd's current principal occupation is President of the
LLC.
During the last five years, none of the Reporting Persons has been
convicted in any criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to any civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violations with respect to such laws.
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Page 7 of 11 Pages
Each of Mr. Shepherd and T. Nathanael Shepherd is a citizen of the United
States.
The Reporting Persons are filing this statement because such Reporting
Persons may be deemed to be members of a group for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
On September 25, 1998, the Reporting Persons entered into a Securities
Purchase Agreement with the Company (the "Securities Agreement"), pursuant to
which the Company agreed to issue and sell on the Closing Date (as defined in
the Securities Agreement) to the Reporting Persons (and certain other persons
who executed a Joinder Agreement at a future date) an aggregate of 60 shares of
Series C Preferred Stock and Warrants to purchase an aggregate of 495,868 shares
of Common Stock. On November 3, 1998, certain other persons (collectively, the
"Investors") became parties to the Securities Agreement by execution of a
Joinder Agreement, and the purchase and sale contemplated under the Securities
Agreement was consummated on November 3, 1998.
On November 3, 1998, (i) the LLC acquired .13 shares of Series C Preferred
Stock, which currently are convertible into 1,238.1 shares of Common Stock, and
Warrants to purchase an aggregate of 1,040.99 shares of Common Stock for
$1,259.60 in cash, (ii) the Fund acquired 12.47 shares of Series C Preferred
Stock, which currently are convertible into 118,761.90 shares of Common Stock,
and Warrants to purchase an aggregate of 103,058.27 shares of Common Stock for
$124,700.40 in cash, (iii) Mr. Shepherd acquired 6.20 shares of Series C
Preferred Stock, which currently are convertible into 59,047.62 shares of Common
Stock, and Warrants to purchase an aggregate of 51,272.77 shares of Common Stock
for $62,040.00 in cash, (iv) T. Nathanael Shepherd acquired 1.20 shares of
Series C Preferred Stock, which currently are convertible into 11,428.57 shares
of Common Stock, and Warrants to purchase an aggregate of 9,917.36 shares of
Common Stock for $12,000.00 in cash and (v) the Investors collectively acquired
40 shares of Series C Preferred Stock, which currently are convertible into
380,952.38 shares of Common Stock, and Warrants to purchase an aggregate of
330,578.80 shares of Common Stock for an aggregate of $400,000.00 in cash. Each
of the LLC and the Fund used funds from its working capital to purchase its
Securities. Mr. Shepherd used his personal funds to purchase his Securities.
T. Nathanael Shepherd borrowed the funds for the purchase of his Securities from
the LLC and must repay such funds when a liquidity event of the Securities
occurs.
Each of the Investors appointed the LLC as his, her or its irrevocable
proxy to act for and vote on behalf of him, her or it with respect to the Series
C Preferred Stock and Warrants in connection with any matter requiring a vote of
the stockholders of the Company, including, without limitation, the election of
directors.
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Page 8 of 11 Pages
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
Each of the Reporting Persons purchased the Securities for investment
purposes. As provided in the Securities Agreement, each of Mr. Shepherd and T.
Nathanael Shepherd were appointed as members of the Board of Directors of the
Company effective as of November 3, 1998.
From time to time, the Reporting Persons may acquire additional shares of
Common Stock of the Company and/or Warrants or may dispose of the Securities,
depending on various factors, including, but not limited to, general economic
and business conditions, monetary and stock market conditions and future
developments affecting the Reporting Persons or the Company. Except as set forth
above, none of the Reporting Persons has any present plan or proposal to take
any action enumerated in the instructions to Item 4 of Schedule 13D under the
Exchange Act.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
(a) Amount Beneficially Owned:
As of the date hereof, collectively the Reporting Persons directly own
20 shares of Series C Preferred Stock and Warrants to purchase an
aggregate of 165,289.40 shares of Common Stock. Assuming conversion
of all of the shares of Series C Preferred Stock and exercise of all
of the Warrants held directly by the Reporting Persons, the Reporting
Persons directly and beneficially would own 355,765 shares of Common
Stock. Based upon there being approximately 5,539,498 shares of
Common Stock outstanding (includes the number of shares directly and
beneficially owned by the Reporting Persons), the Reporting Persons
directly and beneficially own approximately 6.4% of such outstanding
shares.
As of the date hereof, pursuant to the appoint of the LLC as each of
the Investor's irrevocable proxy, the LLC, Mr. Shepherd and T.
Nathanael Shepherd are each deemed the beneficial owners of the
Securities purchased by the Investors, or an aggregate of 40 shares of
Series C Preferred Stock and Warrants to purchase an aggregate of
330,578.80 shares of Common Stock. Assuming conversion of all of the
shares of Series C Preferred Stock and exercise of all of the Warrants
held by the Investors, the Reporting Persons collectively would be
deemed to beneficially own 1,067,296 shares of Common Stock. Based
upon there being approximately 6,251,029 shares of Common Stock
outstanding (includes the number of shares deemed beneficially owned
by the Reporting Persons, either directly or pursuant to the
irrevocable proxy), the Reporting Persons are deemed to beneficially
own approximately 17.1% of such outstanding shares.
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Page 9 of 11 Pages
(b) The following assumes that the shares of Series C Preferred Stock are
converted into shares of Common Stock and that the Warrants are exercised:
The LLC's beneficial ownership consists of (i) 2,279 shares directly
and beneficially owned by the LLC, (ii) 221,820 shares directly and
beneficially owned by the Fund, of which the LLC is the sole general
partner, (iii) 711,531 shares beneficially owned collectively by the
Investors for which the LLC has been appointed as irrevocable proxy
and (iv) 21,345 shares directly and beneficially owned by T. Nathanael
Shepherd for which the LLC has authority to vote. The LLC has the
right to vote all of the shares in clauses (iii) and (iv) in
connection with any matter requiring a vote of the stockholders of the
Company, including, without limitation, the election of directors.
The Fund's beneficial ownership consists of 221,820 shares directly
and beneficially owned by the Fund.
Mr. Shepherd's beneficial ownership consists of (i) 110,320 shares
directly and beneficially owned by Mr. Shepherd; (ii) 2,279 shares
directly and beneficially owned by the LLC, of which Mr. Shepherd is
the Chairman, (iii) 221,820 shares directly and beneficially owned by
the Fund, of which the LLC is the sole general partner, (iv) 711,531
shares beneficially owned collectively by the Investors for which the
LLC has been appointed as irrevocable proxy and (v) 21,345 shares
directly and beneficially owned by T. Nathanael Shepherd for which the
LLC has authority to vote. Mr. Shepherd, as the Chairman of the LLC,
has the right to vote all of the shares in clauses (ii) through (v) in
connection with any matter requiring a vote of the stockholders of the
Company, including, without limitation, the election of directors.
T. Nathanael Shepherd's beneficial ownership consists of (i) 21,345
shares directly and beneficially owned by T. Nathanael Shepherd; (ii)
2,279 shares directly and beneficially owned by the LLC, of which Mr.
Shepherd is the Chairman, (iii) 221,820 shares directly and
beneficially owned by the Fund, of which the LLC is the sole general
partner, and (iv) 711,531 shares beneficially owned collectively by
the Investors for which the LLC has been appointed as irrevocable
proxy. T. Nathanael Shepherd, as the President of the LLC, has the
right to vote all of the shares in clauses (ii) through (iv) in
connection with any matter requiring a vote of the stockholders of the
Company, including, without limitation, the election of directors.
The responses of the Reporting Persons to Items 7 through 11 of the cover
pages to this statement relating to the beneficial ownership of shares of
Common Stock of the Company are incorporated herein by reference.
Pursuant to Rule 13d-4 of the Exchange Act, each of the Reporting Persons
disclaims beneficial ownership of the Securities owned by the Investors.
<PAGE>
Page 10 of 11 Pages
(c) Other than as otherwise described herein, none of the Reporting
Persons has effected any transactions in the Common Stock of the
Company during the preceding 60 days.
(d) Not applicable
(e) Not applicable
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
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TO SECURITIES OF THE ISSUER.
---------------------------
Irrevocable Proxy
- -----------------
711,531 shares of Common Stock beneficially owned by the Investors are
subject to the terms of an irrevocable proxy. In connection with their purchase
of Securities, each of the Investors appointed the LLC as his, her or its
irrevocable proxy to act for and vote on behalf of him, her or it with respect
to the Series C Preferred Stock and Warrants in connection with any matter
requiring a vote of the stockholders of the Company, including, without
limitation, the election of directors. In addition, the LLC has the right to
give or withhold any and all consents or waivers on behalf of the Investors with
respect to such Investors' rights under the Securities Agreement, the By-laws,
as amended, of the Company and the Certificate of Incorporation, as amended, of
the Company.
This proxy is irrevocable and remains in effect, including, without
limitation, following a transfer of the Securities owned by the Investors, until
less than 15% of the original aggregate amount of Series C Preferred Stock, or
60 shares, remains outstanding.
This summary is qualified in its entirety by reference to the text of the
form of irrevocable proxy, filed as Exhibit A to this statement.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
Exhibits
- --------
A Form of Irrevocable Proxy between the Investor and the LLC.
B Securities Purchase Agreement, dated as of September 25, 1998, by and among
the Company, the Reporting Persons and the other parties identified therein
is incorporated herein by reference to Exhibit 10.47 of the Company's
Annual Report on Form 10-KSB for the year ended June 30, 1998.
* * *
This statement speaks as of its date, and no inference should be drawn that
no change
has occurred in the facts set forth herein after the date hereof.
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Page 11 of 11 Pages
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief, we
certify that the information set forth in this statement is true, complete and
correct.
Date: November 13, 1998
THE SHEPHERD GROUP LLC
by: /s/ T. Nathanael Shepherd
---------------------------
Name: T. Nathanael Shepherd
Title: President
THE SHEPHERD VENTURE FUND I, L.P.
by: The Shepherd Group LLC, its general partner
by: /s/ The Shepherd Group LLC
----------------------------
Name: T. Nathanael Shepherd
Title: President
/s/ Thomas R. Shepherd
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Thomas R. Shepherd
/s/ T. Nathanael Shepherd
- -------------------------
T. Nathanael Shepherd
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
A Form of Irrevocable Proxy between the Investor and the LLC.
B Securities Purchase Agreement, dated as of September 25, 1998, by and among
the Company, the Reporting Persons and the other parties identified therein
is incorporated herein by reference to Exhibit 10.47 of the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1998.
<PAGE>
EXHIBIT A
FORM OF
IRREVOCABLE PROXY
Effective as of the date hereof, ____________________ (the "New Investor")
hereby appoints The Shepherd Group LLC (the "Investors' Representative") as
his/her irrevocable proxy with full power of substitution to act for and vote on
behalf of the New Investor with respect to the Shares (as hereinafter defined)
in connection with any matter requiring a vote of the stockholders of The
Vermont Teddy Bear Co., Inc. (the "Company"), including, without limitation, the
election of directors, regardless of (i) whether such approval is sought at an
annual or special meeting of the Company's stockholders, or by written consent
in lieu of a meeting, or otherwise, or (ii) whether such vote is to be cast in
person, or by proxy, or as otherwise permitted by law. The term "Shares" shall
mean and include any and all shares of capital stock of each class of the
Company and shall include any shares now owned or subsequently acquired by the
New Investor, however acquired, including without limitation, upon exercises,
conversations, stock splits, stock dividends, reclassifications and
reorganizations.
The New Investor hereby further grants to the Investor's Representative the
right to give or withhold any and all consents or waivers on behalf of the New
Investor with respect to the News Investor's rights under each of the Securities
Purchase Agreement by and among the Company, the New Investors, the Investors'
Representative and the other parties identified therein (the "Purchase
Agreement"), the By-Laws of the Company, and the Certificate of Incorporation of
the Company, in each case as amended from time to time (the "Company
Documents"). The Investors' Representative shall act as the representative for
the New Investor in any and all actions related to the Company Documents.
This proxy is coupled with an interest and shall be irrevocable and remain
in effect, including, without limitation, following a transfer of Shares, until
less than 15% of the original aggregate amount of the Series C Convertible
Redeemable Preferred Stock purchased pursuant to the Securities Purchase
Agreement dated September 25, 1998 remains outstanding.
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy as
of ___________, 1998.
By:____________________________________
Title:
Address of Holder:
__________________________________
__________________________________
__________________________________
