Lyndhurst, N.J. — Franklin Karp has resigned as president and CEO of Harvey Electronics following shareholder approval of a cash-for-equity deal led by Trinity Investment Partners LLC.
The transaction, which was put to a vote on Friday, will provide the beleaguered New York-area A/V chain with a $4 million infusion, and will give Trinity and its investment partners control of Harvey’s board.
In one of its first moves, the new management group replaced Karp, a 15-year veteran of the company, with Martin McClanan as interim CEO. McClanan was formerly CEO of RedEnvelope, a direct-sell gift business, and was president of Flax Art & Design, a San Francisco art supply house. He has also held sales and marketing positions with Nestle and Ernest and Julio Gallo Winery.
The transaction is expected to close in two weeks. At that time, D. Andrew Stackpole, Trinity’s founder and a former managing director in Merrill Lynch’s Global Consumer Products group, will become chairman of Harvey, and the investment groups will receive $4 million in convertible preferred stock in exchange for the cash infusion. Trinity is a private equity firm comprised of former Fortune 500 CEOs from some of the world’s most successful branded consumer products companies.
Harvey has said the investment is critical to the ailing business as it seeks to transform itself from a traditional retailer to a custom installer and integrator.
The investors will purchase newly issued shares of 8 percent Convertible Preferred Stock, convertible into the retailer’s common stock at 70 cents per share and will receive approximately 1.7 million Series A 7-year warrants exercisable at $1.40 per share, all on a pre-split basis. The approval by the stockholders was a condition to the proposed investment.
Stockholders also approved a 1-for-4 reverse stock split of the retailer’s common shares, which will become effective on or before Nov. 15. Once effective, Harvey’s shares will be listed under the symbol HRVED for a period of approximately 20 days, and then revert to the old symbol of HRVE.
Harvey said it believes that with the reverse split and consummation of the transaction, it will be able to fulfill all of the requirements presented by the NASDAQ Listing Qualification Panel, as part of its determination to allow the continued listing of the company’s shares on the Nasdaq Capital Market.
Harvey Electronics currently operates a total of nine locations in the New York metro area, eight Harvey showrooms and one separate Bang & Olufsen branded store.