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EXHIBIT 10.94
April 21, 1997
Xx. Xxxxxxx X. Xxxx
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Dear Xx. Xxxx:
This letter sets forth the settlement terms to which Dart Group
Corporation ("Dart") is prepared to agree in principle, subject to the
negotiation and execution of a definitive settlement agreement satisfactory to
Dart in its sole discretion. Dart's willingness to enter into an agreement on
these terms is also subject to its receipt of advice from Xxxxxxxxxxx Xxxxxxx &
Co. satisfactory to Dart that the proposed transaction is fair to Dart and that
adequate financing will be available at closing.
1. PAYMENTS TO XXXXXXX XXXX. Total payments to Xxxxxxx Xxxx of
approximately $42,000,000, as follows:
a. $11,619,274 of escrowed funds tendered to Xxxxxxx Xxxx
10/6/95 in repayment of Xxxxxx Xxxx'x 1993 note to
Xxxxxxx Xxxx. Xxxxxxx Xxxx also will receive $700,000 of
accrued interest in escrow account, which will require
the agreement of Xxxxxx Xxxx pursuant to the Amended
HHH/RSH Settlement (as defined below).
b. $11,120,000 additional cash at closing.
c. $9,250,000 on 1/31/98, or upon earlier sale for cash
(whether through an asset sale, stock sale, merger or
other similar transaction) of Shoppers Food Warehouse
Corp. ("Shoppers"), in whole or in substantial part, or
of Trak Auto Corporation ("Trak") or Crown Books
Corporation ("Crown") in whole. Simple interest on
unpaid amount @ 5% beginning the later of 8/1/97 or the
closing date, payable monthly.
d. $9,300,000, payable in three installments of $3,100,000
each on the first, second and third anniversaries of
closing (with simple interest on unpaid amount @ 5% from
the later of 8/1/97 or the closing date payable with
principal installments), subject to acceleration of any
unpaid installment(s) upon the sale for cash (whether
through an asset sale, stock sale, merger or other
similar transaction) of Shoppers, in whole or in
substantial part, or of Trak or Crown in whole.
Alternatively,
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April 21, 1997
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Dart may elect to pay in cash at closing an amount equal
to the present value (calculated at a 10% discount rate)
of these $9,300,000 deferred payments.
e. Dart's full-recourse payment obligations set forth in
subsections 1(c) and 1(d) hereof shall be secured by a
first priority pledge (pari passu with pledge to Xxxxxx,
Xxxxxx and Xxxxx Xxxx) of Trak shares owned by Dart.
f. The definitive settlement agreement will provide for the
allocation of the payments to Xxxxxxx Xxxx set forth in
subsection 1(d) hereof (i) to the May 1997 bonus
provided for under his employment agreement and (ii) the
balance to the termination of any further obligations of
Dart under such employment agreement. Dart will
allocate the other payments to Xxxxxxx Xxxx as Dart
determines to be appropriate.
g. At the closing, Xxxxxxx Xxxx will receive general
releases from Dart, Shoppers, Trak, Crown and Total
Beverage, and their respective affiliates, directors and
officers.
2. TRANSFERS AND BENEFITS TO DART.
a. At closing, Xxxxxxx Xxxx will transfer to Dart 122,747
Class A shares, free of liens, including shares now
pledged for a loan by First Union, and will also
transfer to Dart his claim to all Class A shares that
are subject to conflicting ownership claims among
members of the Haft family.
b. At closing, Xxxxxxx Xxxx will relinquish all options to
purchase stock of Dart, Trak and Crown, as listed on
Schedule I, and (except as provided under item 4(h)
below) any claims to co-investment or other rights with
respect to Total Beverage, Shoppers, Dart/SFW Corp. or
SFW Holding Corp.
c. Xxxxxxx Xxxx'x employment agreement will terminate
effective as of closing, with no further obligation by
Dart thereunder, and Xxxxxxx Xxxx will resign all
director and officer positions with Dart and its
affiliates. Prior to closing Dart will continue Xxxxxxx
Xxxx'x base salary and benefits provided for in his
employment agreement (including, without limitation,
401-k), but will not be obligated to pay any bonus.
Xxxxxxx Xxxx will be subject to the same
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April 21, 1997
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non-interference covenants that Xxxxxx Xxxx agreed to in
the 10/6/95 settlement.
d. From the date of this letter, Xxxxxxx Xxxx will
cooperate fully and promptly (including voting in favor
of) and not interfere with the amended plans of
reorganization for the 75th Avenue/wooded lot and
Bridgeview warehouses approved by Xxxxxx Xxxx and Dart,
which may become effective prior to the closing of the
settlement. At closing, Xxxxxxx Xxxx will transfer to
Dart all of his right, title and interest in any Dart
warehouse/office building properties (i.e., Pennsy I,
II, III and III addition and Ontario, Cal.; 75th
Avenue/wooded lot and Bridgeview, Ill., if plans of
reorganization have not theretofore become effective)
and will cooperate fully and promptly with the
implementation of Dart's 10/6/95 settlement with Xxxxxx
Xxxx with respect to these properties. Dart will at
closing receive a power of attorney from Xxxxxxx Xxxx
for this limited purpose, which power of attorney will
be in form and substance mutually satisfactory to both
Dart and Xxxxxxx Xxxx.
e. At closing, Xxxxxxx Xxxx'x claim to a proxy to vote Dart
Class B shares will be extinguished.
f. At the closing, Xxxxxxx Xxxx will deliver a general
release to Dart, Shoppers, Trak, Crown, Total Beverage,
and all of their respective affiliates, directors and
officers.
3. CONDITIONS.
a. Dart's and Xxxxxxx Xxxx'x obligation to close the
settlement will be subject to the simultaneous closing
of a comprehensive settlement between Dart and Xxxxxx,
Xxxxxx and Xxxxx Xxxx (the "GRL Settlement") and a
supplemental settlement between Dart and Xxxxxx Xxxx
(the "Supplemental RSH Settlement"), on terms
satisfactory to the Board of Directors of Dart.
b. From and after the date of this letter, Xxxxxxx Xxxx
will agree not to object to or interfere in any way
with, and will agree to provide any consents that may be
reasonably requested by Dart in connection with any
financing, stock sale, asset sale or other similar
transactions by Dart and/or any of its subsidiaries
after approval by a majority of the
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April 21, 1997
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members of the Board of Directors of Dart, Shoppers,
Trak or Crown, provided that such transaction shall not
close before May 15, 1997.
c. Dart acknowledges that the implementation of the Amended
HHH/RSH Settlement will require that Dart make a secured
$10 million loan (guaranteed by Xxxxxx Xxxx) to the
"Retained Partnership," which will own and pledge 100%
of the equity interests in the Sully Plaza, Maryland
City and Rolling Valley shopping centers (the "$10
Million Loan"). A 50% interest in Shoppers'
headquarters building in Lanham, Maryland will also be
pledged as collateral. Dart's obligation to make the
$10 Million Loan will be subject to the negotiation by
Dart and Xxxxxx Xxxx of definitive loan terms and
documentation satisfactory to Dart in its sole
discretion and the completion by Dart of due diligence.
4. MISCELLANEOUS NON-MATERIAL ITEMS. The following terms shall be
deemed non-material to the essence of the settlement, so any
party's failure of performance thereof (which such failure
shall be a basis for liability or specific performance) will
not excuse the other party's performance of any other
obligation under the settlement agreement.
a. Holocaust Museum plaque would read "Dart Group
Corporation, Xxxxxxx X. Xxxx, Chairman" (if acceptable to
museum).
b. Dart will make 4 Redskins tickets available for purchase
(at face price) by Xxxxxxx Xxxx for each home game. The
tickets will be for contiguous seats comparable in
quality to Row 19 (seats 16-19) at RFK Stadium. If
Redskins' policy permits Dart to transfer the right to
purchase such tickets to Xxxxxxx Xxxx, Dart will do so
promptly, without any charge to Xxxxxxx Xxxx except to
the extent the Redskins impose a charge for such
transfer.
c. Dart will transfer clean title to the three cars used by
Xxxxxxx Xxxx to him for $62,000, with $15,000 of that
amount to be paid by Xxxxxx Xxxx.
d. Xxxxxxx Xxxx will be entitled to his furniture, art and
memorabilia (to be identified in a schedule attached to
the definitive settlement agreement at the time it is
signed) at Dart's headquarters,
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April 21, 1997
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subject to any lien of First Union or other creditors of
Xxxxxxx Xxxx. Dart will not be responsible for
packing/moving costs, towards which Xxxxxx Xxxx has
offered to pay $5,000.
e. Dart will not object to Xxxxxxx Xxxx, at his own
expense, using Xxxxxx Xxxxxxxx, LLP, as accountants for
tax return preparation services immediately upon signing
and for any purpose after closing.
f. Subject to review of policy terms, Dart will permit
Xxxxxxx Xxxx to continue preexisting life insurance
policies on his life at his expense. The cash value of
the policies and all death benefits will be pledged
(subject to preexisting loans) as collateral for
obligation to repay Dart for all premiums paid on the
policies. Xxxxxxx Xxxx will be responsible for
outstanding policy loans and will be prohibited from
taking new policy loans until Dart is fully paid for
premiums. If possible, the Phoenix Life policy will be
reinstated and brought to date at Xxxxxxx Xxxx'x
expense.
g. Dart will consent to Xxxxxx Xxxx'x assignment to Xxxxxxx
Xxxx of his co-investment right with respect to Total
Beverage under the U.S. District Court ruling, provided
Xxxxxxx Xxxx must exercise or forego such co-investment
right within six months of the closing. However, Dart
will be entitled to extinguish Xxxxxxx Xxxx'x
co-investment right on 30 days prior written notice
(within which 30-day period HHH will continue to be
entitled to exercise the co-investment right), at any
time prior to Xxxxxxx Xxxx'x exercise of such right, if
Dart develops a bona fide purchaser, merger partner or
joint venture partner for all or part of Total Beverage.
h. Dart will reimburse Xxxxxxx Xxxx up to $65,000 (and
Xxxxxx Xxxx has offered to reimburse Xxxxxxx Xxxx up to
another $25,000) for reasonable fees of Xxxxx Xxxx for
reviewing SEC filings and assisting Xxxxxxx Xxxx with
Board meetings of Dart and affiliates since September
1994.
i. Subject to prior due diligence satisfactory to Trak,
Crown and Shoppers (which will be completed prior to
closing), at closing Dart will cause them to deliver
standard tenant's estoppel/no controversy certificates
regarding their respective leases at
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April 21, 1997
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the Fair City and Landmark centers. At closing, Trak,
Crown and Shoppers will receive standard landlord's
estoppel/no controversy certificates regarding their
leases at the Fair City and Landmark centers.
5. OTHER.
a. The settlement agreement will confirm that Dart's
existing obligations under its Articles, Bylaws and
Delaware law to indemnify Xxxxxxx Xxxx against
liabilities for actions relating to his positions and
responsibilities as an officer and director of Dart and
its subsidiaries will continue after the closing,
provided that such confirmation will explicitly not
waive any defenses Dart or any of its subsidiaries might
otherwise have to any such indemnification claim. Dart
will have no ongoing requirement to include Xxxxxxx Xxxx
within the coverage of Dart's directors and officers
liability insurance.
b. The closing of the settlement will occur upon Final
Court Approval, subject to delay of up to 90 days after
Final Court Approval to enable Dart to arrange financing
for the settlement and for the GRL Settlement, the
Supplemental RSH Settlement and the $10 Million Loan.
"Final Court Approval" will include, without limitation,
(1) final and non-appealable action by the Delaware
Court of Chancery or the Delaware Supreme Court
approving all of the terms of the settlement,
terminating the pending Xxxx and Xxx shareholder
derivative actions and approving the 10/6/95 settlement
between Dart and Xxxxxx Xxxx and the Supplemental RSH
Settlement, and (2) final and non-appealable action by
the U.S. Bankruptcy Court approving the effectiveness
of Chapter 11 plans of reorganization for the Combined
Properties entities.
c. [Non-material paragraph omitted]
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April 21, 1997
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d. Xxxxxxx Xxxx will agree that in the event of a
liquidating distribution by Dart at any time, Dart may
elect to cap any and all actual and contingent
liabilities that it or any of its direct or indirect
subsidiaries or any of their respective affiliates may
have to him (e.g., indemnification) by the establishment
of a $1.0 million reserve fund for such purpose,
provided that any unused portion of such reserve fund
may be withdrawn by Dart (or any liquidating trustee
therefor) or distributed to its shareholders at any time
after December 31, 2002.
e. The obligations of Dart under the settlement will not be
obligations of any of Dart's direct or indirect
subsidiaries.
f. Both at the time the definitive settlement agreement is
executed and delivered and at the time of the closing,
both parties will sign an acknowledgment that they have
read each of the documents they have signed, that they
have been fully represented by counsel in connection
with the transaction, and that they will not take the
position at any time that any of the documents they have
signed in connection with the settlement were not in
keeping with their understanding or do not reflect their
agreement.
g. Dart and Xxxxxxx Xxxx will be entitled to specific
performance of the settlement agreement.
h. The definitive settlement agreement will provide for the
suspension of litigation between Dart and Xxxxxxx Xxxx
pending closing of the settlement or termination of the
settlement agreement.
6. TERMINATION.
a. The parties acknowledge that the various dates set forth
herein assume the execution and delivery of a definitive
settlement agreement between Dart and Xxxxxxx Xxxx by
May 15, 1997.
b. The parties expect that definitive agreements for the
XXX Xxxxxxxxxx, xxx Xxxxxxxxxxxx XXX Xxxxxxxxxx,
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April 21, 1997
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the $10 Million Loan, the Amended HHH/RSH Settlement and
the Amended HHH/GRL Settlement will be entered into
prior to or simultaneously with the definitive
settlement agreement between Dart and Xxxxxxx Xxxx.
c. Either party may terminate the settlement agreement
prior to closing if Final Court Approval has not been
obtained by November 30, 1997.
If you are prepared to proceed with the negotiation of a definitive
settlement agreement reflecting the foregoing terms, please return a copy of
this letter with your signature in the space provided below.
This letter will terminate upon the earlier of the execution and
delivery by Dart and Xxxxxxx Xxxx of a definitive settlement agreement or May
9, 1997. If this agreement terminates without the execution and delivery of a
definitive settlement agreement, neither party shall have any liability to the
other for breach hereof; provided, however, that if the failure of either party
to proceed in good faith to enter into a settlement agreement consistent with
this letter causes injury to the other party, such party may seek actual
damages not to exceed $3,000,000 in the aggregate. Neither this letter nor any
party's breach hereof shall give rise to any liability to any third party.
This letter (exclusive of any drafts hereof or of any other documents)
sets forth the entire understanding of the parties with respect to the subject
matter hereof. This letter may be amended only by a written document signed by
both Dart and Xxxxxxx Xxxx.
Very truly yours,
DART GROUP CORPORATION
By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
Chairman, Executive Committee
of the Board of Directors
I agree to the foregoing, including and subject to the qualifications set forth
in the penultimate paragraph.
/s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx