UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 12, 1998
HARVEY ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 1-4626 13-1534671
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
205 Chubb Avenue, Lyndhurst, New Jersey 07071
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (201) 842-0078
N/A
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
Effective May 31, 1999, the Company's Dealer Agreement with one of its
major suppliers, Bang & Olufsen of America, Inc. ("Bang & Olufsen"), is being
cancelled. Bang & Olufsen products have been sold by the Company since 1980 and
the line represented approximately $1,176,000 or 6.8% of the Company's net sales
for the twelve month period ended October 31, 1998. Bang & Olufsen will now
focus on developing licensed "Branded Stores" throughout the world, of which
there are currently more than 250 stores worldwide. Bang & Olufsen's growth
strategy is to double this number in the next three years, including more than
160 stores in the United States. Accordingly, Bang & Olufsen has cancelled its
franchise agreement with the Company and all other retailers effective May 31,
1999. After this date, Bang & Olufsen products will only be available in Branded
Stores. In conjunction with this, the Company is pleased to announce that it has
received a commitment from Bang & Olufsen to open Branded Stores in Manhattan,
Long Island and Connecticut. Bang & Olufsen has authorized Harvey to open up to
five Branded Stores, but no assurance can be given about the number of Branded
Stores that Harvey will open.
Pursuant to this commitment, the Company must complete development and
construction of these locations at various dates through November 1999. The
Company currently operates six Harvey Electronics retail locations; two in
Manhattan, one in Paramus, NJ, one in Greenwich, CT, with its two newest stores
in Mt. Kisco, NY (formerly the Sound Mill) and Greenvale/Roslyn, Long Island.
The Bang & Olufsen opportunity has caused the Company to revise its corporate
business strategy. In addition to its plan to open an additional Harvey
Electronics store in New Jersey within the next eighteen months, the Company
will also focus its efforts on opening additional Bang & Olufsen stores through
November 1999. The Company's primary focus will be the location and development
of two Bang & Olufsen stores in Manhattan. To date, the Company has not secured
leases for any new Company or Bang & Olufsen Branded Stores.
As of October 31, 1998, the Company and The Thornwater Company, L.P.
("Thornwater") have mutually agreed to terminate (i) the Financial Advisory and
Investment Banking Agreement dated as of April 6, 1998 with Thornwater and (ii)
the Underwriting Agreement dated March 31, 1998 among the Company, Harvey
Acquisition Company, LLC ("HAC") and Thornwater. In addition, Thornwater has
agreed to modify the "lock-up" provisions with respect to shares of the
Company's common stock owned by HAC, and all officers and directors of the
Company. Each lock-up period has been reduced but shall remain in full force and
effect until January 1, 1999.
As of October 12, 1998, pursuant to the unanimous written consent of the
managers of HAC, 85,000 shares of the Company's common stock which had been
transferred without consideration by HAC during November, 1997, to certain
employees, officers and directors of the Company are no longer subject to
forfeiture. As a result, the Company will record in fiscal year ended October
31, 1998 a charge to earnings for the fair market value of the shares which has
not previously been recorded by the Company.
Item 7. Financial Statements and Exhibits
(c) Exhibits
10.01 Bang & Olufsen Termination letter dated September 7, 1998
10.02 Bang & Olufsen New Agreement letter dated October 8, 1998
10.03 Agreement with Thornwater regarding termination of agreements
and lock-up amendments dated October 31, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HARVEY ELECTRONICS, INC.
By:/s/ Joseph J. Calabrese
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Joseph J. Calabrese, Executive Vice President,
Chief Financial Officer, Treasurer, and Secretary
Date: December 10, 1998
Bang & Olufsen America, 1200 Business Center Drive, Suite 100
Mount Prospect, Illinois 60056-6041
September 7, 1998
Mr. Franklin Karp
Harvey Electronics, Inc.
205 Chubb Avenue
Lyndhurst, NJ 07071
Dear Mr. Karp:
After very serious consideration, Bang & Olufsen America, Inc. ("BOA") has
decided to limit the future distribution of Bang & Olufsen products to those
stores dedicated to selling primarily Bang & Olufsen products.
Your Dealer Agreement with BOA expires by its terms on May 31, 1999.
Consequently, we are now advising you that, in line with this decision, BOA does
not intend to offer a renewal of your Dealer Agreement, with the result that you
relationship as a dealer in B&O products will end on May 31, 1999.
Until then, the relationship between you and BOA will continue in full
effect, except that you will not be held to the display and minimum purchase
obligations contained in Exhibit A to your Dealer Agreement. We point out that,
on the termination date, May 31, 1999, certain obligations are imposed upon you
primarily by section "F" of the Dealer Agreement, which we suggest you review.
Among these, of course, are the requirements that you immediately discontinue
selling B&O products and using B&O trademarks.
We take this opportunity to thank you very much for your past support of
BOA and Bang & Olufsen products. We appreciate your efforts and wish you good
luck in the future.
Very truly yours,
/s/Ole Bek
------------------------------
Ole Bek
President
Bang & Olufsen America, 1200 Business Center Drive, Suite 100
Mount Prospect, Illinois 60056-6041
October 8, 1998
Mr. Franklin Karp
Harvey Electronics, Inc.
205 Chubb Avenue
Lyndhurst, NJ 07071
Dear Franklin:
After many years as a loyal and committed B&O distributor you recently
received a letter terminating your dealership of Bang & Olufsen products. The
letter was a result of the new Bang & Olufsen America retail strategy, a
strategy designed to improve our brand position in the United States.
We are pleased that our positive dialogue and preparation resulted in an
agreement that allows us to continue our long standing business relationship
under the new business conditions. We are pleased to confirm the following
agreement between Bang & Olufsen America and Harvey Electronics.
Union Square, Manhattan Begin the development process for the 873 Broadway
location immediately with an opening no later than May 1999.
Westport, Connecticut Secure a lease for the Main Street location and open
in early spring, no later than May 1999.
Manhasset, Long Island Initiate discussions with the Americana Shops at
Manhasset Long Island to secure an appropriate space with an opening no later
than November 1999.
Greenwich Connecticut Reserve Greenwich for Harvey's with a store opening
no later than November 1999.
Mid-town Manhattan Reserve this location for Harvey's with a store opening
no later than November 1999.
We are very pleased with the results of our conversations and your
commitment to develop B&O branded stores. We believe this new development can
contribute to an even stronger business relationship with increased
profitability for both parties.
We look forward to this future development between our two companies.
Best regards,
/s/Ole Bek
--------------------------------
Ole Bek
President
RELEASE AGREEMENT
THIS RELEASE AGREEMENT is entered into as of the 31st day of October, 1998,
by and among Harvey Electronics, Inc. ("Harvey"), The Thornwater Company L.P.
("Thornwater") and Harvey Acquisition Company, LLC ("HAC").
WHEREAS, Thornwater served as the lead underwriter for Harvey's initial
public offering (the "IPO") in accordance with that Underwriting Agreement dated
as of March 31,1998 among Harvey, HAC and Thornwater (the "Underwriting
Agreement") pursuant to which agreement Harvey granted Thornwater certain
continuing rights, including, but not limited to the right of first refusal on
future financings;
WHEREAS, Thornwater entered into a Financial Advisory and Investment
Banking Agreement with Harvey dated April 6, 1998 (the "Financial Advisory
Agreement") pursuant to which Thornwater provided services to Harvey and Harvey
utilized Thornwater's advisory services in connection with certain transactions
and other matters;
WHEREAS, in connection with the IPO Thornwater required all shareholders
(including holders of warrants exercisable into Harvey securities) of the
Company prior to the IPO to enter into a lock-up agreement pursuant to which
such shareholders were prohibited from selling or otherwise transferring or
disposing of any such securities for specified periods of time commencing March
31, 1998 without the prior written consent of Thornwater;
WHEREAS, each of Thornwater and Harvey desire to release each other from
certain of their obligations to one another and to further amend their
relationship in accordance with the provisions hereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements and
upon the terms and subject to the conditions hereinafter set forth, the parties
do hereby covenant and agree as follows:
1. Limited Release by Thornwater. Except as set forth in Section 3 below
and in the proviso to this Section 1, Thornwater hereby releases and discharges
Harvey from all actions, causes of action, suits, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties, covenants, obligations,
contracts, controversies, agreements, promises, variances, trespasses, damages,
judgments, extents, executions, claims and demands whatsoever, in law or equity,
which against any of it, Thornwater ever had, now has or hereafter can, shall or
may, have for, upon, or by reason of any matter cause or thing whatsoever from
the beginning of the world to the day of the date of this Release Agreement,
including, without limitation all rights under the Underwriting Agreement and
the Financial Advisory Agreement, provided, however, that this release shall not
release Harvey from its indemnification and contribution obligations under each
of the Underwriting Agreement and Financial Advisory Agreement, which
indemnification obligations on the part of Harvey shall survive this Agreement
in full force and effect and shall remain rights of Thornwater.
2. Release by Harvey. In exchange for Thornwater's release set forth in
Section 1 above, each of Harvey and HAC, releases and discharges Thornwater,
Thornwater Advisory Group Inc. and each of their former and current partners,
limited partners, employees, associates and agents, from all actions, causes of
action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, obligations, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims
and demands whatsoever, in law or equity, which against any of them, Harvey or
HAC, each of their officers, directors, shareholders, subsidiaries, affiliates,
successors or assigns ever had, now have or hereafter can, shall or may, have
for, upon, or by reason of any matter cause or thing whatsoever from the
beginning of the world to the day of the date of this Release Agreement,
including, without limitation any and all obligations arising under the
Underwriting Agreement and the Financial Advisory Agreement.
<PAGE>
3. Notwithstanding the release set forth in Section 1 above, those lock-up
agreements referred to on page 40 of the prospectus dated March 31, 1998 issued
in connection with the IPO and any and all other lock-up agreements entered into
between pre-IPO shareholders and Thornwater shall remain in full force and
effect, except that the term of each such lock-up shall be reduced to the close
of business (New York time) on January 1, 1999.
4. As soon as practicable after the date hereof, Harvey agrees to issue a
press release with respect to the reduction of the term of the lock-ups referred
to in Section 3 above.
5. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York without regard to the
conflict of law principles thereof.
6. Entire Agreement/Amendments. This Agreement contains the entire
agreement and understanding between the parties and supersedes and preempts any
prior understandings or agreements, whether written or oral. The provisions of
this Agreement may be amended or waived only with the prior written consent of
the parties hereto
7. Successors and Assigns. This Agreement shall be binding upon, inure to
the benefit of, and shall be enforceable by parties hereto and their respective
successors and permitted assigns.
8. Notices. All notices and other communications under this Agreement shall
be in writing and shall be deemed effective and given upon actual delivery if
presented personally, one business day after the date sent if sent by prepaid
telegram, overnight courier service, telex or facsimile transmission or five
business days if sent by registered or certified mail, return receipt requested,
postage prepaid which shall be addressed to the following addresses:
If to Thornwater:
The Thornwater Company L.P.
c/o Ziegler, Ziegler & Altman LLP
750 Lexington Avenue - 14th Floor
New York, New York 10022
Attention: Scott A. Ziegler, Esq.
If to Harvey:
Harvey Electronics, Inc.
206 Chubb Avenue
Lyndhurst, New Jersey 07071
Attention: Michael Recca
<PAGE>
9. Severability. If any provision of this Agreement or the application of
any such provision to any person or circumstance shall be held invalid, illegal
or unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof.
10. Section and Other Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which together shall be deemed to be one and the same
agreement. A facsimile copy of a signature hereupon shall have the same force
and effect as if this document contained manual signatures of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE THORNWATER COMPANY L.P.
By:/s/Robert Grabowski
--------------------------------
Name:Robert Grabowski
Title: Executive Vice President
HARVEY ELECTRONICS, INC.
By:/s/Michael E. Recca
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Name: Michael E. Recca
Title: Chairman
HARVEY ACQUISITION COMPANY, LLC
By:/s/Michael E. Recca
-------------------------------
Name: Michael E. Recca
Title: Manager
