Exhibit 4.2
FORM OF
CONTRIBUTION
AGREEMENT
This Contribution Agreement ("Agreement") is entered into as of May
__, 2005 (the "Agreement Date"), by and among HIBERNATION HOLDING
COMPANY, INC., a Delaware company (the "Buyer"), and those persons
set forth on Schedule 1 (each a "Contributor" and,
collectively, the "Contributors").
W I T N E S S E T H
:
WHEREAS, the Contributors own shares of common stock (the "Company
Common Stock") of The Vermont Teddy Bear Co., Inc., a New York
corporation (the "Company"), and/or shares of Series A Preferred
Stock (the "Company Series A Stock") of the Company;
WHEREAS, pursuant to an Agreement and Plan of Merger of even date
herewith (the "Merger Agreement"), the Company is to be merged with
and into Hibernation Company, Inc., a wholly-owned subsidiary of
the Buyer, with the Company as the surviving entity (the
"Merger");
WHEREAS, each Contributor desires on the Closing Date (as
defined in the Merger Agreement), prior to the effectiveness of the
Merger, to contribute the number of shares of the Company Common
Stock and the Company Series A Preferred Stock set forth opposite
such Contributor's name on Schedule 1 (collectively, the
"Rollover Shares") in exchange for the issuance by the Buyer to
such Contributor of the number shares of the common stock of Buyer
(the "Buyer Common Stock") and of the Series A Preferred Stock of
the Buyer (the "Buyer Series A Stock") set forth opposite such
Contributor's name on Schedule 1 (the Buyer Common Stock and
the Buyer Series A Stock will be referred to herein, together, as
the "Buyer Shares); and
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto represent,
warrant and agree as follows:
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Contribution . On the Closing Date, and immediately prior to
the effectiveness of the Merger, each Contributor shall contribute,
transfer, assign, convey and deliver to the Buyer the shares of the
Company Common Stock and the shares of the Company Series A
Preferred Stock set forth opposite such Contributor's name on
Schedule 1 under the respective headings "Company Common
Stock Contributed to the Buyer" and "Company Series A Stock
Contributed to the Buyer." On the Closing Date, each Contributor
shall surrender the certificate or certificates (properly endorsed
for transfer) representing such shares to the Buyer at its
principal office.
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Shares of Buyer Stock . On the Closing Date, and immediately
prior to the effectiveness of the Merger, the Buyer shall issue and
sell to each Contributor, in exchange for such Contributor's
contribution of shares pursuant to Section 1, the number of shares
of the Buyer Common Stock and the Buyer Series A Stock set forth
opposite such Contributor's name on Schedule 1 under the
respective headings "Buyer Common Stock Issued to Contributor" and
"Buyer Series A Stock Issued to Contributor." On the Closing Date,
the Buyer shall deliver to each Contributor a certificate or
certificates evidencing the shares of the Buyer Common Stock and
the Buyer Series A Stock, as applicable, to be issued to such
Contributor pursuant to this Section 2.
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Representation and Warranties .
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Each Contributor represents and warrants severally, but not
jointly, as follows:
(i)
As of the Agreement Date he or she owns, and that as of the Closing
Date he or she shall own, the Buyer Shares to be contributed by
such Contributor to the Buyer pursuant to Section 1 above free and
clear of all liens, encumbrances and restrictions of any nature.
Each Contributor further represents and warrants that as of the
Agreement Date he or she has, and as of the Closing Date he or she
shall have, full power and authority to contribute to the Buyer the
shares to be contributed pursuant to Section 1 above.
(ii)
He or she is an "accredited investor" within the meaning of that
term as it is defined in Rule 501 under the Securities Act of
1933, as amended (the "Securities Act"), and understands that term
to mean that either (i) his or her net worth as of
the date hereof ( i.e. , excess of total assets over total
liabilities), inclusive of homes, home furnishings and automobiles,
either individually or jointly with his or her spouse, exceeds
$1,000,000 or (ii) his or her individual income
exceeded $200,000, or jointly with his or her spouse exceeded
$300,000, in each of the previous two years and he or she
reasonably expects his or her income to exceed $200,000, or jointly
with his or her spouse to exceed $300,000, in the current year.
(iii) He or
she is a bona fide domiciliary (not a temporary or transient
resident) of the jurisdiction specified on Schedule 1 to this
Agreement.
(b)
The Buyer represents and warrants that, on the Closing Date, the
shares of Buyer Common Stock and Buyer Series A Stock to be issued
and sold to such Contributor pursuant to Section 2 will be duly
authorized, fully paid and non-assessable.
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Acknowledgements of Certain Contingencies . Each Contributor
acknowledges and agrees to the following:
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On or after the Closing Date, the Buyer will adopt an equity
incentive plan for employees, consultants and other service
providers (the "Incentive Plan"). It is currently anticipated that
the number of shares of Buyer Common Stock reserved for issuance
under the Incentive Plan will be equal to twelve percent (12%) of
the fully-diluted capitalization of the Company on a consolidated
basis (consolidating outstanding options in the Company and the
Buyer's equity in the Company).
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(i) Following the Merger, the Company will be owned as follows:
Approximately 5% to 10% of the Company's fully-diluted equity will
consist of options to purchase Common Stock in the Company that are
currently held by certain employees of the Company who are expected
to continue holding their options instead of being cashed out in
the Merger. (This percentage will vary depending upon how many
option holders elect to be cashed out in the Merger.) The
remainder of the Company's fully-diluted equity (approximately 90%
to 95%) will be owned by the Buyer .
(ii) The Buyer's current intention is
for the Buyer to issue, on or about the Closing Date, approximately
2,690,000 shares of its Series B Preferred Stock (the "Buyer Series
B Stock"), for aggregate proceeds of approximately $17,500,000,000
(the "Financing"), or $6.50 per share. The rights, privileges and
preferences of the Buyer Common Stock, the Buyer Series A Stock and
the Buyer Ser
