SEVERANCE AGREEMENT
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This SEVERANCE AGREEMENT (the "Agreement") is made as of the ____ day of
May, 2000, by and between Harvey Electronics, Inc., a New York corporation with
its principal office at 205 Chubb Avenue, Lyndhurst, NJ 07071, ("Harvey," which
term shall include any successor to Harvey Electronics, Inc. as a result of a
"Change in Control" event, as defined below) and Michael E. Recca, residing at
949 Edgewood Avenue, Pelham, New York 10803 (the "Executive").
WHEREAS, Harvey and the Executive desire to enter into this Severance
Agreement on the terms and conditions set forth herein;
NOW THEREFORE, Harvey and the Executive, intending to be legally bound,
agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated below:
(i) "Base Salary" shall mean the compensation paid by Harvey to the
Executive as was or would have been reported on a Form W-2, excluding
reimbursement of expenses, for the twelve (12) months prior to the Change
in Control, Potential Change in Control, Disability or termination absent a
Change in Control, Potential Change in Control or Disability (as
hereinafter defined).
(ii) "Cause" shall be deemed to be the commission of any of the
following acts by the Executive:
(a) The Executive shall have committed any act of gross
negligence in the performance of his duties to Harvey, or, without
proper cause, shall have willfully refused or habitually neglected to
perform such duties;
(b) The Executive shall have committed any material act of
willful misconduct, dishonesty or breach of trust which directly or
indirectly causes Harvey or any of its subsidiaries to suffer any
loss, fine, civil penalty, judgment, claim, damage or expense; or
(c) The Executive shall have been convicted of, or shall have
pled guilty or nolo contendere to, a felony or indictable offense
(unless committed in the reasonable, good faith belief that the
Executive's actions were in the best interests of Harvey and its
stockholders and would not violate criminal law).
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(iii) "Disability" shall be deemed to have occurred if the Executive
has been unable to perform his duties for six (6) consecutive months or an
aggregate of nine (9) months in any period of twelve (12) consecutive
months, as determined in good faith by the Board of Directors of Harvey.
(iv) "Change in Control" of Harvey shall be deemed to have occurred
upon the happening of any one of the following events:
(a)the acquisition of Beneficial Ownership (as hereinafter
defined), directly or indirectly, by any entity, person or group
(other than Harvey, any of its subsidiaries, or any executive benefit
plan of Harvey, including any trustee of such plan) of securities of
Harvey representing more than fifty (50%) percent of the combined
voting power of Harvey's outstanding securities.
(b) individuals who constitute the Board of Directors as of the
date hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any individual becoming a
director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters (3/4) of the directors comprising
the Incumbent Board, or whose nomination for election by the
stockholders of Harvey was approved by the Incumbent Board, shall be,
for purposes of this paragraph (b), considered as though he were a
member of the Incumbent Board; or
(c) the consummation of a reorganization, merger, or
consolidation of Harvey occurs in which stockholders of Harvey
immediately prior to such reorganization, merger or consolidation do
not own at least fifty (50%) percent of the voting securities of the
entity which is formed or which exists following such reorganization,
merger or consolidation; or
(d) the sale or disposition by Harvey of substantially all its
assets; or
(e) Executive ceases to serve as Chairman of the Board of Harvey
for any reason other than his voluntary resignation; or
(f) the assignment to the Executive of any duties inconsistent in
any adverse respect with the Executive's current position, authority
or responsibilities.
(v) "Beneficial Ownership" shall have the meaning set forth in Rule
13d-3 under the Securities Exchange Act of 1934;
(vi) "Potential Change in Control" of Harvey shall be deemed to have
occurred upon the happening of any one of the following events:
(a) any person commences a tender offer, which if consummated
would result in such person becoming the Beneficial Owner of more than
fifty percent (50%) of Harvey's voting securities;
(b) proxies are solicited by anyone other than Harvey or any of
its subsidiaries: (x) for the election of directors of Harvey, or (y)
seeking shareholder approval of a plan of reorganization, merger, or
consolidation of Harvey with one or more corporations as a result of
which the outstanding shares subject to the plan or transaction are to
be exchanged for or converted into cash, property or securities not
issued by Harvey; or
(c) the execution by Harvey of an agreement, the consummation of
which would result in a Change of Control of Harvey.
2. Severance Payment. In the event of:
(a) a Change in Control; or
(b) a Potential Change of Control; or
(c) a Disability of the Executive,
and within one hundred eighty (180) days of the occurrence
of the event in Section 2(a), 2(b), or 2(c),
(1) Harvey terminates the Executive's employment for reasons
other than for Cause; or
(2) the Executive terminates his employment for any reason,
then Harvey shall pay the Executive, subject to Section 4, the amounts and
provide the Executive with the benefits described below:
(i) a cash amount equal to the higher of: (x) the Executive's Base Salary
prior to the event giving rise to the Change in Control, Potential Change in
Control or Disability, or (y) the Executive's Base Salary prior to the event
giving rise to the Executive's right to terminate his employment for any reason
(the "Severance Payment");
(ii) a cash payment equal to the higher of
(a) twelve (12) months of the Executive's highest monthly car
allowance or monthly average travel reimbursement in effect within the
six (6) month period immediately prior to the Change in Control,
Potential Change in Control or Disability, not to exceed Twelve
Thousand and 00/100 ($12,000) Dollars; or
(b) twelve (12) months of the Executive's highest monthly car
allowance or monthly average travel reimbursement in effect within the
six (6) month period immediately prior to the date the Executive
terminates his employment for any reason, not to exceed Twelve
Thousand and 00/100 ($12,000) Dollars.
(iii) the maximum/highest benefits which the Executive was receiving at any
time during a two-year period prior to termination, relating to health
insurance, accident insurance, long-term care, life insurance and disability,
shall continue for one (1) year beyond the date of termination of the
Executive's employment;
(iv) any stock options granted to the Executive on or prior to termination
date shall immediately vest as of the date of termination; and
(v) any other benefits, not named herein but provided by Harvey to its
executives, shall immediately vest upon termination; and
(vi) cash payment for accrued but unpaid vacation and sick days.
If any payments are due to Executive pursuant to this Section 2, Executive shall
not be entitled to any payments or benefits pursuant to Section 3.
3. Severance Payment Absent Change in Control. Notwithstanding anything to the
contrary contained herein, in the event (i) Executive is terminated for any
reason other than for Cause and (ii) a Change in Control, a Potential Change in
Control or a Disability shall not have occurred, then Harvey shall pay the
Executive, subject to Section 4, the amounts and provide the Executive with the
benefits described below:
a) one-half (1/2) of the cash payment provided in Section 2(i); and
b) one-half (1/2) of the cash payment provided in Section 2(ii); and
c) the benefits provided in Section 2(iii); and
d) the benefits provided in Section 2(v) and Section 2(vi); and
e) any stock options granted to the Executive on or prior to termination
date shall immediately vest as of the date of termination.
If any payments are due to Executive pursuant to this Section 3, Executive shall
not be entitled to any payments or benefits pursuant to Section 2.
4. Condition Precedent to Severance Payment. Notwithstanding the foregoing, as a
condition precedent to Executive's right to receive the payments and/or benefits
described in Section 2 or Section 3, the Executive shall execute, on or about
the date of the Executive's termination, a general release (the "Release") in
favor of Harvey in substantially the form annexed hereto as Exhibit A. Executive
shall have twenty one (21) days in which to execute and return the Release. Any
cash payment due to the Executive pursuant to Section 2 or Section 3 shall be
paid in a single lump sum ten (10) days after the date the Release is executed
and delivered to Harvey, unless Harvey is directed otherwise by the Executive in
writing, in which case, the payment shall be payable in accordance with
Executive's instructions. In the event of a Disability or death of Executive,
following (i) an event giving rise to a payment due to Executive from Harvey
pursuant to Section 2 or Section 3, and (ii) the execution and delivery of the
Release and any payments are still due and payable pursuant to Section 2 or
Section 3, then any such payment shall be paid to Executive's spouse or legal
representative.
5. No Rights as an Employee. This Agreement confers no rights to Executive with
respect to his employment with Harvey, or his Base Salary prior to a Change in
Control or Potential Change in Control event.
6. Amendments. This Agreement may be amended only in writing signed by both
parties hereto.
7. Governing Law. This Agreement shall be governed by, construed and interpreted
in accordance with the laws of the State of New York, without regard to
principles of conflict of laws.
8. Entire Agreement. This Agreement represents the entire agreement between the
parties with respect to the subject matter hereof, and supercedes all prior
agreements, arrangements and understanding between the parties, whether oral or
written, with respect thereto including the prior Severance Agreement dated
April 3, 1997.
9. Successors and Assigns. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their permitted heirs, executors,
administrators, successors and assigns.
10. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as the
date first written above.
HARVEY ELECTRONICS, INC.
By:/s/ Franklin C. Karp
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Franklin C. Karp
President
/s/ Michael E. Recca
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Michael E. Recca
Chairman
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EXHIBIT A
FORM OF RELEASE
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(PLEASE READ CAREFULLY. THIS AGREEMENT AND GENERAL RELEASE HAS IMPORTANT
LEGAL CONSEQUENCES.)
This Agreement and General Release (the "Agreement") is between Harvey
Electronics, Inc. ("Harvey") and Michael E. Recca ("Executive"). The term
"Harvey" shall include any subsidiaries or related companies, directors,
officers, shareholders, employees, agents, attorneys, and successors of Harvey.
IT IS AGREED THAT:
1 Executive's last date of employment with Harvey is _________________.
2. Ten (10) days after the date Executive executes this Agreement, Harvey
will pay Executive the payments and/or benefits described in a certain Amended
and Restated Severance Agreement executed by and between the Executive and
Harvey, dated _________,less applicable federal, state, and local legally
required deductions (the "Payment"). Executive agrees that Harvey owes Executive
nothing else, including but not limited to wages or benefits.
3. In exchange for the payment, Executive understands that Executive
releases and forever gives up the right to sue or make any claim whatsoever
against Harvey, for any reason whatsoever, including but not limited to any
claim under contract and/or equity and/or any law, relating in any way to
Executive's employment with Harvey or the termination of that employment. This
waiver of claims includes any claims of discrimination on any grounds, whether
or not Executive has previously filed such a claim. Executive understands that
Executive is giving up any rights or claims which Executive may have under the
numerous laws and regulations regulating employment, whether on the federal,
state, or local level, including, but not limited to, the Age Discrimination in
Employment Act of 1967, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Fair Labor Standards Act, the Equal Pay Act, and the New York
State Human Rights Law.
4. Executive agrees that Executive has returned to Harvey any and all
identification cards, files, books, records, materials, equipment or documents
in Executive's possession which were provided to or obtained by Executive in
connection with Executive's employment.
5. It is understood and agreed that Executive will not talk about, discuss
or communicate with anyone, orally or in writing, concerning the matter which is
the subject of this Agreement or any aspect of Executive's employment with
Harvey except Executive may (i) discuss this Agreement with Executive's spouse
and children, (ii) permit Executive's accountant to review this Agreement in
connection with the filing of tax returns, (iii) permit attorney(s) of
Executive's choice to review this Agreement, and (iv) testify truthfully under
oath pursuant to a subpoena (in which event Executive will provide Harvey with
prompt notice of the subpoena).
6. Executive represents that Executive is not aware of any breach of
contract, wrongdoing or liability by Harvey, and Executive expressly agrees that
this Agreement is not and shall not in any way be deemed to constitute an
admission or evidence of any breach of contract, wrongdoing or liability on the
part of Harvey, nor of any violation of any federal, state or municipal statute,
regulation or principle of common law or equity.
7. Executive acknowledges that Executive has received a copy of this
Agreement and that Harvey has informed Executive that Executive should consult
with an attorney in connection with it. Executive acknowledges that Executive's
decision to consult with an attorney or not to consult with an attorney was made
without influence by Harvey. Executive further acknowledges that Executive has
had at least 21 days in which to consider, execute, and return this Agreement.
Notwithstanding Executive's right to consider this Agreement for 21 days, if
Executive signs this Agreement before the expiration of the 21-day period,
Executive will have done so knowingly and voluntarily, and will have expressly
waived Executive's right to consider this Agreement for the balance of the
21-day period.
8. This Agreement shall not become effective until seven (7) days after the
date Executive executes the Agreement, and Executive may cancel this Agreement
within seven (7) days of the date Executive executes it, except that any
cancellation must be in writing, signed by Executive, and delivered to Harvey.
9. This Agreement is made in the State of New York. This Agreement is to be
interpreted under the law of the State of New York.
10. EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS CAREFULLY READ THIS
AGREEMENT; THAT EXECUTIVE HAS HAD AT LEAST 21 DAYS IN WHICH TO CONSIDER AND
RETURN THIS AGREEMENT; THAT EXECUTIVE HAS HAD AN OPPORTUNITY TO CONSULT WITH AN
ATTORNEY OF EXECUTIVE'S CHOICE IN CONNECTION WITH THIS AGREEMENT; THAT EXECUTIVE
FULLY UNDERSTANDS THE TERMS, CONDITIONS, AND SIGNIFICANCE AND CONSEQUENCES OF
THIS AGREEMENT; AND THAT EXECUTIVE HAS EXECUTED THIS AGREEMENT KNOWINGLY AND
VOLUNTARILY, AND OF EXECUTIVE'S OWN FREE WILL.
HARVEY ELECTRONICS, INC.
By: Dated:
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Dated:
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MICHAEL E. RECCA
Chairman
