Former Passholders Ask Court for Class Action Certification Against Killington

[Tin Woodsman]

I personally think one of the larger merits is, the purchase agreement with the SEC specifically said, they would need to be honored, and the clause was indefinite. Now perhaps they changed the language after the fact, but I don't see how. All of the SEC filings have stated they entered into agreement February 16th. That's the date on the SEC purchase agreement. The only exception that was stipulated was a posible price adjustment based on 'unnamed season passes'. A price adjustment. If the clause that they need to honor it was stricken, (IANAL) they would need to have filed the amended agreement with the SEC, which never happened. So far, I haven't seen anyone produce the supposed 'final' agreement, and until that time, all anyone has to go on is the SEC filing.

Now this is interesting. I had been operating under the assumption that the APA specifically left those out. Not sure how that can work if the contract filed with the SEC says they need to be honored. Are you certain of this? I guess the "unnamed season passes" is a strong hint, but it's not definitive - that could refer to any season passes. If this decision contravenes the purchase agreement, and was simply taken by POWDR mgmt (not unlike the BMMC alcohol ban fiasco), then that changes the picture substantially.

 

[Tin Woodsman]

The SEC filing serves as the 'notification' that it's taking place, and the SEC filing specifically had it listed. If the SEC filing didn't have it, then the lifetime pass holders could have said 'Hold on a second SEC, there's something not addressed here'. Specifically, who had the liability of the passes. At that point they could have gone after ASC for their liability. The announcement that it wasn't the new owners came after the point where the lifetime pass holders could have done anything about ensuring their liability was properly secured.

This makes one wonder whether there was a side letter or schedule, which doesn't need to be listed with the SEC, that spoke to this issue. Wouldn't surprise me at all - companies do that all the time so as to avoid having key concessions used against them in future deals by counterparties who do their homework.

 

[tcharron]

Now this is interesting. I had been operating under the assumption that the APA specifically left those out. Not sure how that can work if the contract filed with the SEC says they need to be honored. Are you certain of this? I guess the "unnamed season passes" is a strong hint, but it's not definitive - that could refer to any season passes. If this decision contravenes the purchase agreement, and was simply taken by POWDR mgmt (not unlike the BMMC alcohol ban fiasco), then that changes the picture substantially.

Go read it for yourself.

http://www.sec.gov/Archives/edgar/data/1043432/000110465907016723/a07-7202_1ex10d1.htm

Specifically, read section 8.13. It spells it out pretty clearly. 9.1 reinforces the agreement of 8.13. Also is an understanding of taking over liability in section 2.4 (a). People have assumed, 'Oh, that's just the draft.' But that's the February 16th agreement filed with the SEC, and all other SEC filings refer to the agreement on February 16th. It was signed and filed.

The modification of price that was mentioned in other ASC SEC filings specifically refered to 2.5 (a)(i). If POWDR didn't want to assume the lifetime passes, then they should have figured out their face value, and took that price out of the original purchase price.

 

[tcharron]

This makes one wonder whether there was a side letter or schedule, which doesn't need to be listed with the SEC, that spoke to this issue. Wouldn't surprise me at all - companies do that all the time so as to avoid having key concessions used against them in future deals by counterparties who do their homework.

Not sure, but any sort of modification of that nature to the original agreement.. Well, they're talking about something that would have an estimated value in excess of (estimated, aka, pulled out of my rear) 20 million dollars. I've heard numbers of anywhere between 800-1200 of these passes, depending on which of the two transferable types they had (once per year, or twice total). The current price of an adult season pass is $1,049. Assuming it's good for 30 more years, at that price the liability of 1,000 of these passes would be 31.5 million dollars. That HAS to cross some sort of threshold.

 

[ComeBackMudPuddles]

Your explanation pretty much spells out the value you bring to this subject. I'm not worked up at all - simply annoyed when people try to simplify issues (about which they understand little) into empty pleas regarding what they believe is "right" and "wrong", or worse, "should be".

My only comment is to read trailboss's post #57 in this thread.

 

[ski_resort_observer]

This is from November but I think has some points that are important to this issue

http://www.timesargus.com/apps/pbcs.dll/article?AID=/20071115/BUSINESS/711150306/1006/BUSINESS

 

[tcharron]

This is from November but I think has some points that are important to this issue

http://www.timesargus.com/apps/pbcs.dll/article?AID=/20071115/BUSINESS/711150306/1006/BUSINESS

The wording on the passes also states it is a lifetime 'pass'. While they do state WHY they where issued, the pass itself does say the words 'lifetime pass'. And their purchase agreement says they will issue all lifetime passes.

 

[tcharron]

This is from November but I think has some points that are important to this issue

http://www.timesargus.com/apps/pbcs.dll/article?AID=/20071115/BUSINESS/711150306/1006/BUSINESS

I'll correct myself. I quote SkiDork who has a pass, listed in another thread:

Killington Ltd.

SHERBURNE VERMONT

PASS

This certifies that SkiDork is the owner of record of Pass Number XXXX, entitling the holder to the free use of all ski lifts operated by Killington Ltd. at Killington Ski Are so long as the corporation shall operate in that area under an agreement with the State Of Vermont.

The Ownership of the pass may be transferred not more than once during the life of the pass. The transfer must be made upon the books of the corporation in person or by attorney, by surrender of this certificate properly endorsed.

Signed by Allen Wilson

I believe that the new owners read this as the passes 'self destructed' since Killington Ltd. no longer exists. I think there are several things that go wrong with that translation however. Did POWDR get a new lease? Or did they take over the agreement with the state of Vermont? If they took over the existing agreement, then I would infer that the have taken over the 'ski lifts operated by Killington Ltd' as well, since it was tied to the agreement with the State of Vermont. The agreement still exists as far as I know.

 

[Tin Woodsman]

The wording on the passes also states it is a lifetime 'pass'. While they do state WHY they where issued, the pass itself does say the words 'lifetime pass'. And their purchase agreement says they will issue all lifetime passes.

"Issue" or "honor"? I don't understand, if it's the former.

 

[Tin Woodsman]

I'll correct myself. I quote SkiDork who has a pass, listed in another thread:



I believe that the new owners read this as the passes 'self destructed' since Killington Ltd. no longer exists. I think there are several things that go wrong with that translation however. Did POWDR get a new lease? Or did they take over the agreement with the state of Vermont? If they took over the existing agreement, then I would infer that the have taken over the 'ski lifts operated by Killington Ltd' as well, since it was tied to the agreement with the State of Vermont. The agreement still exists as far as I know.

Well doesn't that depend on the meaning of the word "corporation" in this context? It's not capitalized, but I wonder if it's a defined term specifically referring to Killington Ltd. If so, then the name on the lease is irrelevant - the lease is simply another asset that was part of the sale.

 

[Tin Woodsman]

Go read it for yourself.

http://www.sec.gov/Archives/edgar/data/1043432/000110465907016723/a07-7202_1ex10d1.htm

Specifically, read section 8.13. It spells it out pretty clearly. 9.1 reinforces the agreement of 8.13. Also is an understanding of taking over liability in section 2.4 (a). People have assumed, 'Oh, that's just the draft.' But that's the February 16th agreement filed with the SEC, and all other SEC filings refer to the agreement on February 16th. It was signed and filed.

The modification of price that was mentioned in other ASC SEC filings specifically refered to 2.5 (a)(i). If POWDR didn't want to assume the lifetime passes, then they should have figured out their face value, and took that price out of the original purchase price.

OK, so I went and read it for myself, and it looks like you've missed a key issue that is likely controlling here. First of all, Section 2.4 on Assumed and Excluded Liabilities is clear - Excluded Liabilities pursuant to 2.4(b) include anything not included as an Assumed Liability in 2.4(a). Well in 2.4(a) the only Assumed Liability relating to season passes speaks to passes for the 2006/2007 season. There is no mention of the lifetime passes as an assumed liability, so it is clearly considered an Excluded Liability. But don't take my word for it - here are the Assumed Liabilities from 2.4(a):

Assumed Liabilities. At the Closing, Buyer shall assume and shall agree to pay, defend, discharge and perform as and when due and performable the following specific Liabilities of the Sellers, except for Excluded Liabilities:

(i) all Liabilities of the Sellers under the Purchased Contracts, including, without limitation, Liabilities under Season Passes and the Permits transferred to Buyer under Section 2.2(p), in each case that arise out of or relate to the period from and after the Closing Date; and

(ii) all Liabilities with respect to the Business arising prior to the Closing Date to the extent explicitly contemplated with respect to employee compensation and benefits by Section 5.1 of this Agreement or otherwise included in the calculation of the Final Working Capital.

Note that "Season Passes" is a defined term relating solely to those passes issued for the 2006/2007 season.

Then in 8.23 (8.13 relates to rental equipment), the agreement reads as follows:

Lifetime Passes. Buyer shall honor all Lifetime Passes and shall cause any agreement for the sale of the Resort or the Business to require such subsequent owner to honor such passes; provided that in no event shall Buyer be required to enforce (nor shall it have any liability in respect to) such covenant with respect to such subsequent owner. This covenant shall survive Closing indefinitely.

The problem with this, and the subsequent reinforcement/reference in 9.1, is that "Lifetime Passes" is a defined term, which you find ONLY in section 3.27(b). All of Article 3 includes the Reps and Warranties of the Sellers (ASC). In English, this means that ASC was "promising" that all of the facts stated in Article 3 were true. 3.27(b) reads as follows:

(b) Schedule 3.27(b) sets forth a list of all holders of “lifetime” and “honorary” ski passes and similar rights and privilege for use of Resort facilities or accommodations (“Lifetime Passes”).

Well, as I speculated, there is more here than meets the eye b/c I'm not sure if we have access to Schedule 3.27(b) containing this list. Given the fact that the Vermont AG chose not to pursue this, and that POWDR is defending themselves as vigorously as they are, we can probably conclude that this list of Lifetime Passes includes only those certain names of employees etc that were referenced in the Rutland Herald article. While we would need to see Schedule 3.27(b) to confirm, the circumstantial evidence here is overwhelming:

a) The Assumed Liabilities did not include any lifetime passes

b) POWDR covenanted (promised) that they would honor only certain "Lifetime Passes" as defined on a schedule we haven't seen (you can bet your bottom dollar that schedule doesn't include the parties to the suit)

If the plaintiff's case is truly based upon the precedent of previous corporate changes of control at K-Mart, as indicated in the Rutland Herald article, they are just wasting their time and money. Hope they got the lawyer on a contingency fee basis.

There is no defrauding here, just standard terms in an M&A transaction involving an asset purchase.

 

[campgottagopee]

My head friggin hurts now