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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 27, 1994
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DART GROUP CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-1946 53-0242973
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3300 75th Avenue, Landover, Maryland 20785
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 731-1200
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(Former name or former address, if changed since last report.)
The total number of sequentially numbered pages is 10.
The exhibit index appears on page 3.
Page 1 of 10
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Item 1. Changes in Control of Registrant.
The discussion under Item 5 of this Current Report on Form 8-K is
incorporated herein by reference.
Item 5. Other Events
On December 27, 1994, Dart Group Corporation issued the press release
included as an exhibit to this report on Form 8-K.
Item 7. Financial Statements and Exhibits
Exhibit 99(d): Press release issued on December 27, 1994 by Dart
Group Corporation.
SIGNATURE
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 hereunto duly authorized.
DART GROUP CORPORATION
By: /s/ RONALD T. RICE
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Ronald T. Rice
Assistant Vice President/Controller
Date: January 3, 1995
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description Page Number
------- ----------- -----------
<S> <C> <C>
99(d) Press release issued on 4
December 27, 1994 by Dart Group
Corporation.
</TABLE>
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Exhibit 99(d)
DART GROUP CORPORATION PRESS RELEASE
December 27, 1994
LANDOVER, Md., Dec. 27 -- Dart Group Corporation (Nasdaq: DARTA), reacting to
recent news media stories containing incomplete information regarding a
proposal made by Ronald S. Haft earlier this month relating to settlement of
his pending lawsuit against Dart, today released a copy of that proposal and
Dart's rejection of it. Although Dart does not view the proposal and its
rejection to be material information, it wishes to prevent any adverse effect
of selective disclosures made by a representative of Ronald S. Haft.
Ronald S. Haft's proposal was presented to the Dart Executive
Committee on December 13, 1994. It is attached as part of this release. Also
attached as part of this release is a copy of a letter dated December 20, 1994
from Stephen J. Brogan of Jones, Day, Reavis & Pogue, counsel to the Dart
Executive Committee, to Stuart M. Grant, counsel to Ronald S. Haft,
communicating Dart's rejection of the proposal by Ronald S. Haft.
Dart Group Corporation has no comment as to whether there will be
future settlement discussions with Ronald H. Haft, and makes no representation
that it will comment on any future settlement discussions that may occur unless
an agreement is reached.
[Letterhead of Jones, Day, Reavis & Pogue]
December 20, 1994
Stuart M. Grant, Esq.
Blank, Rome, Comisky & McCauley
1220 Market Street
8th Floor
Wilmington, DE 19801
Dear Mr. Grant:
This letter responds on behalf of Dart's Executive Committee to the
slide presentation by you on behalf of Ronald S. Haft on December 13, 1994 in
our offices.
As you know, the Executive Committee strongly favors a proposal to
convert both Class A and Class B shares into a single new class of voting
stock. Such a new class of voting stock would undoubtedly trade at a higher
level than existing Class A shares because of its voting rights and diminished
market concerns over Haft family control. The Committee believes that granting
voting rights to Class A shareholders serves the best interests not only of
these shareholders, but of the Dart Group Corporation.
Apart from a willingness to agree to creating a new single class of
voting stock, the remainder of the content of your
Page 4 of 10
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presentation on behalf of Ronald S. Haft was, however, extremely disappointing.
The enormous financial benefits that Ronald S. Haft proposes be given to him by
Dart are bewildering and certainly bear no relationship to the merits of his
claim. As I and the Executive Committee understand it, he has proposed the
following:(1)
1. Ronald S. Haft would require Dart to allow him to exercise
fully his option for Class B shares, the legitimacy and fairness of which Dart
has disputed as fraudulently obtained by him. He has not proposed that the
option be repriced to reflect the real value of Dart's Class B shares or the
value of the proposed new class of stock. In fact, he has inexplicably
proposed that Dart refund the option purchase price of $985,000 plus interest,
further reducing the effective price paid for this stock and adding to the
multi-million dollar profits he would realize from this stock purchase. Thus,
under Ronald S. Haft's settlement proposal, Dart would loan Ronald S. Haft the
share purchase price, pay him $985,000 plus interest, and give him the option
stock for a price that Dart has already found to be a waste of corporate
assets.
2. Ronald S. Haft also proposes that Dart provide him with a loan
for $11 million to pay a personal debt he allegedly owes to Herbert Haft, with
no explanation of the corporate purpose for such an expenditure.
3. Ronald S. Haft further proposes that he be given a new
three-year contract with compensation "on the high side" of comparable
contracts. He also proposes that his compensation be composed primarily of new
stock options with an exercise price of $80, an exercise price still lower than
that in his original contract and far below the real value of Dart's shares.
4. Ronald S. Haft would also require that Dart provide him with
additional multi-million dollar profits by buying interests in Cabot Morgan
joint ventures from entities owned in part by Ronald S. Haft for $40 million
(which you acknowledge to be a "high" valuation) using Dart stock valued, for
this purpose, at $80 per share (which we both know greatly understates the
value of these shares).
5. Ronald S. Haft has further proposed that Dart release all
potential claims against him, CPI or any of the CPI-related entities that may
arise from abusive real estate arrangements
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(1)You and apparently your client refused to provide the
proposal in writing prior to the meeting even though our initial
request for such a written statement was made to you by letter
from me dated November 23, 1994 (copy attached). There is still
no written detailed proposal but only a topical slide
presentation, a copy of which is provided here for the record.
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with Dart, even though such claims could produce multi-million dollar
recoveries for Dart.
6. Finally, Ronald S. Haft has proposed that he appoint new Board
members with three-year, staggered terms, removable only "for cause." These
proposals are plainly designed to entrench Ronald S. Haft's control of Dart.
In sum, Ronald S. Haft's settlement proposal would allow him to take
enormous -- and wholly unjustified -- financial benefits from Dart, far beyond
what could have been realized even from the employment contract that has been
challenged by Dart as fraudulent and unfair to the Corporation and its
shareholders. This proposal would also commit Dart to Ronald S. Haft's
management and control, despite his scandalous failure for over 16 months to
spend any meaningful time at Dart, much less provide the serious management and
leadership required for this large retail organization. Your client has not
only ignored his management responsibilities but has damaged Dart greatly by
his attacks on its officers and directors. Under all the circumstances brought
upon the Corporation by your client, the directors -- as fiduciaries -- have
made the judgment that they cannot agree either to such a clear waste of
corporate assets or to place Dart's management in Ronald S. Haft's hands.
It is impossible to regard your presentation as a serious effort to
settle this matter. It is unclear, because of the fraudulent and unlawful
conduct that your client was involved in, that this matter can ever be settled
without the assistance of a court. However, if your client is seriously
interested in settlement, he should at least submit a proposal which (1)
reprices the option exercise price to a level that fairly reflects the value of
Dart stock to address Dart's obligation to prevent a waste of corporate assets;
and (2) provides for professional management insulated from the domination of
any Haft family members. As previously indicated, the Executive Committee
favors enfranchising Class A shareholders, which would provide assurance that
Directors and management remain attentive to the interests of the Class A
shareholders. Though the Executive Committee remains very interested in
achieving corporate peace, the Committee will not allow any settlement to be
used as an occasion for further abusive self-dealing by your client.(2)
Sincerely,
/S/ Stephen J. Brogan
SJB/mlt
Attachment
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(2)My letter to you dated November 23, 1994, referenced
above, sets forth the reasons why an end to your client's self-
interested dispute with his father is in the interest of Dart
Group Corporation.
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cc: Executive Committee of the Board of Directors of Dart Group
Corporation
RSH SETTLEMENT PROPOSAL
- -- PACKAGE DEAL
- -- LIMITED TIME OFFER
I. RECAPITALIZATION
-- Dart recapitalized so that there is only one class of stock,
all of which has equal voting rights and equal dividend rights
-- New stock will not be subject to any proxies given on former
Class A or Class B stock.
-- Class A stock converted to new stock at 1:1 ratio.
-- Class B stock converted to new stock at 1.1:1 ratio.
-- Investment Banker hired to assist with recapitalization chosen
by RSH and paid for by Dart.
-- Recapitalization subject to vote of Class A stockholders
(record date set after execution of Settlement Agreement).
-- Recapitalization subject to vote of Class B stockholders
(record date set after execution of Settlement Agreement).
II. OPTION
-- RSH' s Option is exercised as of September 6, 1994.
-- Dart issues Class B stock to RSH as of September 6, 1994.
-- Dart issues loan, as tendered by RSH on September 6, 1994, to
RSH to pay for stock.
-- Interest to begin on loan as of January 1, 1995.
-- Dart refunds the purchase price of the Option of $985,000 to
RSH with interest.
-- Dart makes additional loan to RSH of approximately $11 million
to be used to take out the loan that RSH currently has with HHH, on same terms
and conditions as that loan.
III. REGISTRATION RIGHTS
-- Dart agrees that at request of any holder or group of holders
of more than 5% of the new stock, it will register shares (certain minimum
number required) with the SEC so that they may be sold in a public offering.
-- Registration rights to last for two years from the time of the
recapitalization.
IV. RSH EMPLOYMENT
-- RSH given new three year employment contract.
-- Contract not evergreen.
-- RSH's compensation based on salary plus options for new stock.
-- RSH's compensation determined with assistance from
Compensation experts. RSH's compensation to be on the high side of comparable
companies.
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-- RSH' s compensation to be significantly tied to stock
performance (i.e. through options).
-- The performance looked at for RSH' s compensation starts from
a base of where the stock is today (i.e. 80).
-- RSH gets a two-year severance agreement if he is ever removed
from his position.
V. BOARD OF DIRECTORS
-- Current board resigns immediately upon completion of
recapitalization.
-- New board comprised of 9 members.
-- New Board staggered into three classes of three members each,
each serving three year term.
-- RSH designates new board, to be ratified by stockholders as
part of the approval of the recapitalization.
-- RSH will designate one outside director selected by the
current Class A stockholders and reasonably acceptable to RSH.
-- RSH will designate one outside director selected by the
current Class B stockholders (other than RSH) reasonably acceptable to RSH.
-- No more than three inside directors including RSH.
VI. CERTIFICATE OF INCORPORATION
-- Charter amended to provide for staggered board.
-- Charter amended to otherwise conform to settlement agreement.
-- No stockholder action by written consents.
-- Directors may only be removed for cause.
VII. PURCHASE OF BALANCE OF JOINT VENTURES
-- Dart, or one of its subsidiaries, acquires the remaining
interest in the Cabot Morgan joint ventures in a stock for stock tax free
transaction.
-- The portion of the joint venture to be acquired is valued at
$40 million for purposes of transaction.
-- Dart stock valued at $80 a share for purpose of transaction.
-- Cost of transaction to be paid by Dart.
VIII.END OF LITIGATIONS
-- Termination of all actual and potential litigation.
-- Dismiss RSH suit against Dart.
-- Dismiss Kahn and Robert Haft derivative suits.
-- Release all potential claims among Dart, CPI and any combined
entity (i.e. ratifying all past dealings between and among them).
-- Dart, RSH and current Dart board exchange mutual releases and
RSH and Dart agree to honor all indemnifications of current Dart board.
-- Dart reimburses RSH for all litigation expenses related to
this action and any of the derivative actions.
-- Attempt to wrap up Robert Haft employment suit also.
-- Attempt to wrap up Lou derivative suit also.
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IX. SEVER RELATIONSHIP WITH KLEIN/WC&P
-- Klein and WC&P resign/fired from any and all representation of
Dart.
-- RSH drops suit against Klein and WC&P.
X. HHH' S EMPLOYMENT CONTRACT
-- Determination of what to do with HHH's current employment
contract turned over to new outside directors, excluding any director appointed
by current Class B stockholders.
XI. CURRENT BOARD OF DIRECTORS
-- Option or consulting contracts reflecting enhancement of
stockholder value as a result of recapitalization.
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DART STOCK OWNERSHIP
UNDER PROPOSED RECAPITALIZATION
[all numbers approximate]
<TABLE>
<CAPTION>
GENERAL JOINT HAFT GLORIA LINDA
PUBLIC VENTURES RSH RMH HHH EQUITIES HAFT HAFT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STOCK OPTIONS A 0 0 10,000 219,750 149,750 0 6,500 0
B @ 110% 0 0 216,753 0 0 0 0 0
EXISTING STOCK A 1,130,000 0 33,333 33,333 122,747 87,043 9,290 33,333
B @ 110% 0 0 217,774 27,771 0 0 59,932 27,771
JV ACQUISITION 0 500,000 0 0 0 0 0 0
TOTAL 2,885,080 1,130,000 500,000 477,859 280,854 272,497 87,043 75,722 61,104
PERCENTAGE OWNERSHIP 39.17% 17.33% 16.56% 9.73% 9.45% 3.02% 2.62% 2.12%
</TABLE>
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