Berman & Asbel, LLP

Share mis-valuation results in 2 years of probate litigation

The widow and estate of former president of the nation's oldest theme park, Indiana's Holiday World & Splashin' Safari, won a major victory after two years of probate litigation over the valuation of shares in the small business. A judge has ruled that the president of Koch Development Co. ("KDC"), the family-owned company that owns the park, improperly valued the widow's shares in a way that cost her more than $5.2 million and majority ownership of the business.

According to court records, the widow's husband was president of KDC until his death in June 2010. A shareholder agreement between the husband, his brother and his sister specified that, should any of the siblings die, the company would purchase that person's shares. The agreement stipulated that the company had to do so within 180 days of the death, or her husband's brother would himself buy the shares himself under certain terms.

When the former president died, the widow, who was acting as her husband's personal representative in probate, duly offered her deceased husband's shares to the company for purchase. Despite 180 days specified in the shareholder agreement, the company didn't offer to buy the shares until December 2010.

Worse yet, her husband's brother, who had taken over as president of theme park, of valued the shares at $26.8 million, and offered terms that were completely inconsistent with those in the shareholder agreement. The widow and estate valued the shares at more than $32 million and rejected the president's offer.

She and the estate filed suit against the new president and KDC in January 2011, arguing that the share price should have been determined based on decisions made during certain shareholder meetings and a prior sale of shares between the brothers. The new president calculated their value as a percentage of park income and set the valuation date at Dec. 1, 2009, instead of the transaction date, which is customary.

The court ruled that the shares had indeed been misvalued, and furthermore that the company and its new president had made "no effort to comply" with the agreement. As a result, he ruled, the widow and the estate now have no obligation to sell the stock to the company or her husband's brother. Finding herself now the majority shareholder of theme park, she fired her brother in law, naming the former general manager as president and taking the title of vice president for herself.

Holiday World & Splashin' Safari, once known as Santa Claus Land, was founded in 1946 and still remains a top tourist destination.

Source: Evansville Courier & Press, "Court ruling gives Will Koch's widow control of Holiday World," Nathan Blackford, Jan. 10, 2013

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