Koch: Court erred in Holiday World lawsuit

Herald Staff Writer

SANTA CLAUS — Dan Koch, partial owner of Holiday World & Splashin’ Safari, claims Vanderburgh Circuit Court made two errors in its December ruling that gave majority ownership of the parks to his brother Will’s widow, Lori Koch.

Dan Koch filed an appeal in the Indiana Court of Appeals in Indianapolis just days after the ruling. He filed a brief laying out his case earlier this month.

Lori Koch, executor of her husband’s estate, sued Koch Development Corp., the parent company often referred to as KDC, and Dan Koch in January 2011 claiming Will Koch’s 49,611.6 shares, representing 60 percent of the company, were worth more than $32 million.

A 2002 shareholders agreement between the brothers and their sister Natalie requires that upon the death of a shareholder, the corporation and the surviving shareholders are to purchase the deceased’s shares. Their value was to be determined by a formula based on the parks’ value and earnings, which Dan Koch and KDC used to calculate Will Koch’s shares at nearly $26.9 million, or $542 per share, after he died in 2010. Natalie Koch had sold her shares to her brothers in 2009 at a price of $653 per share, which Lori Koch argued should have been the prevailing price for the purchase of her husband’s shares.

Dan Koch, who owns 40 percent of the company, had served as president and CEO of the parks since his brother’s death until Lori Koch fired him after the December court ruling. Matt Eckert is now president and CEO, while Lori Koch is the vice president.

KDC has filed a notice of neutrality and nonparticipation in the appeal. Paula Werne, spokeswoman for the parks and for the Koch family, declined to comment.

In his ruling, Judge Carl Heldt permanently relieved the estate of any obligation to sell Will Koch’s shares, making Lori Koch the majority owner. In his brief, filed March 14, Dan Koch argues that in doing so, the court made its first error by making the sale of the shares conditional upon his and the corporation’s tendering of the correct price. He claims the shareholders agreement is explicit that the shares must be sold to the corporation and to the surviving shareholders.

“These duties are mandatory, not conditional,” the brief states. “To conclude otherwise is not only to rewrite the agreement, but to endorse a forfeiture of extraordinary proportions. ... Even if their tender were incorrect, the proper remedy was not to deprive Dan of his contractual right to purchase the controlling interest in his family’s business, but to order KDC and Dan to pay the correct price, plus interest.”

The brief states the trial court’s second error was concluding that KDC and Dan Koch breached the shareholders agreement. Dan Koch argues that any changes in the value of the stock as set out in the shareholders agreement was to have been stipulated in writing and agreed to by all shareholders. No such written agreement occurred when the brothers purchased their sister’s shares, the brief states.

“Nor is there evidence KDC and Dan breached the agreement by failing to tender the correct formula price within the purchase period,” it says. “KDC and Dan actually offered more for the estate’s stock than even the trial court thought the formula required.”

The highest formula price the trial court determined the shares could have been worth was $587, or about $29.1 million. The brief states that Dan Koch and KDC agreed and offered to increase their overall purchase price to about $29.3 million in December 2010 in an attempt to resolve the dispute, but the estate chose to reject it.

“At each step in the process KDC and Dan have showed willingness to pay whatever purchase price the trial court determined was correct,” the brief states. “Dan made this clear before trial by making repeated offers to purchase the shares, and by making payments to the estate for those shares long after it was clear the estate was unwilling to sell. He made it clear on the stand during trial. Finally, he made it clear after trial in his post-trial brief.”

The trial court had also ruled that Dan Koch and KDC breached the shareholders agreement by not adhering to its time limits for action. In his brief, Dan Koch argued time was not of the essence as he and Lori Koch had discussed the possibility of waiting and modifying the agreement to allow Will and Lori Koch’s three children to retain ownership of some or all of their father’s shares. Legal counsel for each side met in early November 2010 to that end, but by the end of the month, “the relationship between Dan and Lori began to sour” as the two could not agree on the children’s roles, Natalie Koch’s role, adding nonfamily members to the board or raising Dan Koch’s salary to allow him to pay off what he still owed his sister for her shares despite Will Koch’s salary having previously been raised for the same.

Dan Koch subsequently began working to purchase the estate’s shares. He and KDC tendered what they believed were the appropriate amounts within the allotted time period, according to the brief. The estate rejected those payments, and two subsequent offers for a higher overall purchase price.

Koch is asking the appellate court to order the estate to sell its shares and remand the case back to Vanderburgh Circuit Court for a purchase price to be fixed and for an order facilitating the transfer.

Lori Koch has until April 16 to file a response.

According to court records, Dan Koch is represented by five attorneys: Kevin Patmore of Santa Claus, Angela Freel and James Johnson, both of Evansville, and Brian Paul and Richard Smikle, both of Indianapolis. KDC is represented by Dwight Born of Evansville, while Lori Koch’s attorneys are Terry Farmer and Daniel Robinson, both of Evansville.

Contact Alexandra Sondeen at asondeen@dcherald.com.

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