ROFR "Poison Pill" proviso?

[TroyWDW]

Corporations use a "poison pill" tactic to make it less attractive for a hostile acquiring company to execute a takeover.

What do people think about the possibility of the buyer adding a proviso or special condition to the resale purchase contract that would make DVD less likely to want to purchase that specific contract (via ROFR).

It would need to be something that would not make the seller react negatively, but would be difficult for DVD to execute, and hence deter them from taking the contract away from the original buyer.

Typically, purchase contracts are written entirely in terms of a money transfer, which is easy for DVD to execute. This is where it may take some creativity to come up with items in addition to the money.

For example, the resale purchase conditions would be:
1) $14,000
2) One bottle of "Chateau Chantal 1999 Riesling Late Harvest" wine, which could only be purchased from your favorite local winery in Traverse City, Michigan and is now sold out. But of course you happen to have a bottle in your wine cellar.

Is there language in the DVD contract that requires purchase contracts to be entirely a monetary transaction. Any lawyers out there want to weigh in and give their opinions.

Is this feasible, or just a silly idea?

Troy

 

[BJK]

i'm not a lawyer....and its not a dumb idea....i just don't think its something they haven't thought of...

as someone that has ivestigated the resale market already, and had a contract bought back....as its been explained to me, its standard language in the contracts that disney had ROFR that can't be circumvented...

one idea my uncle (a DVC member) had to potentially fool the DVC people was this....what if you ask the seller to pay the maintenence fees on the points you're buying....but you offer enough dollars per point so that you're actually paying the fees...

for example...you buy 100 points at $74 per...so the maintence fees are $400... but the seller pays the fees, so you're actually paying only 71 per point...??

we were told by our resale broker that if the seller is paying the fees, the DVC is made aware of this, so they would realize that THEY ALSO wouldn't have to pay the fees, so they would also know that the price was basically only 70 per....

it seemed like a good idea, but we were told that DVC had all the necessary safe guards in place to make sure that ROFR is something that can't be skirted...

 

[A1A1]

Why a concern over whether or not DVC excercises its right? Read many posts in which sellers express disappointment about this.

 

[TroyWDW]

BJK, thanks for your response.

I'm wasn't trying to circumvent the ROFR, but just trying to make it so that DVD would voluntarily decline the ROFR because DVD can't easily meet all of the conditions of the purchase contract.

In my example, would DVD be able to get a bottle of the sold-out wine and hence complete the full terms of the purchase agreement. DVD has the $14,000 but they don't have the Chateau Chantal wine.

Since, I the buyer have a bottle of the now rare, but inexpensive wine, and the $14,000, I can easily meet the conditions of the purchase agreement.

Troy

 

[Caskbill]

To expand on what Troy has said, what's to keep someone from just making a straight trade?

Maybe someone wants to trade their classic 1957 Chevy, in mint condition, with xxx miles and yyy options on it for someone else's 200 BWV points. There's no money involved at all.

I'd be curious how Disney handles something like this. Any legal people out there would like to comment?

 

[KNWVIKING]

I don't think the sellers care who pays them...the recent threads have been from disappointed would-be buyers who've had DVD step in at last minute with ROFR.

 

[GAIL HAYDEN]

I'd be curious how Disney handles something like this. Any legal people out there would like to comment?

If it is a trade and there is no money involved and IF the contract is paid in full (by the seller) then the seller can quit claim his title to the buyer (or trader).

 

[jctwizzer]

To answer your question, I think its a silly idea. Why circumvent the ROFR.? In either case, the seller gets the agreed to price. Which means he has no reason to circumvent, since he ends up the same....

 

[zulaya]

I think Dean posted a while back that he is doing something very similar. If I remember right, I *think* he offered a different timeshare deed for a DVC contract - a trade. I *think* he's waiting to see what DVD does with it since there isn't money changing hands.

 

[drusba]

I agree with the above comments that the seller has no incentive at all to avoid Disney's ROFR. Nevertheless, the cheap wine bottle trick would not work as Disney could assert, validly, that it is being done simply to avoid ROFR and that constitutes a seller's breach of his ROFR agreement because the seller cannot intentionally take steps simply designed to avoid the clause.

The concept of trading one time share property for another is very different. Such "like-kind" transactions where one party sells property by receiving another are a recognized and valid way of transfering properties and thus a presumption of intent to avoid the ROFR would not arise. As a result, you can use a like-kind transaction and Disney likely won't complain.

 

[JohnnyII]

Originally posted by jctwizzer
To answer your question, I think its a silly idea. Why circumvent the ROFR.? In either case, the seller gets the agreed to price. Which means he has no reason to circumvent, since he ends up the same....

I agree...However, should Disney continue with this practice, it will likey mean that more potential buyers will go directly do DVC to buy and will not take a chance on a resale.

This would mean it could become MUCH harder to sell your points should you need to. Why make an offer to save a few $$$ per point if there is a very good chance that Disney will toss their ROFR at it. I wouldn't want to wait 30 days to find out for a small savings...

The bigger question is why they have started this now. I can only assume they are trying to maintain inventory until SSR opens.

John

 

[CaptainMidnight]

Seems silly to me, and a feable attempt for buyers not to have to pay a fair reasonable rate for the point. ROFR point level isn't that high, maybe a little higher than in the past, and it's still a savings over buying direct from disney. It's a fabulous product, pay a reasonable rate for your DVC points, it will be a substantial savings over staying onsite, and avoid silly games. ROFR helps current owners, currently allowing them to purchase smaller add-ons they wouldn't find in the market. What do sellers care if Disney buys thier points back or another low ball, underbidding, buyer, they still recieve the payment for points.

 

[TroyWDW]

drusba,

Thanks for the legal explanation. I figured it wasn't feasible.


I agree the seller has no incentive to avoid ROFR and hence a like-kind trade is not feasible either. The seller just wants their money. Only the buyer desires to protect their interests, but, they do have another tool to apply. Increase the purchase price.

In the end, this is probably just a short-term blip in the resale market. Thanks for humoring me with the discussion.

Troy

 

[Dean]

Actually the intent really isn't important, only the structure. As long as the contract is a true representation of the deal, it really doesn't matter. I am in the middle of one permanent trade for DVC points and in negotiations on another. We strutured the contract initially as we are truly doing. It is an even exchange for OKW points (I get) and another timeshare (from me to the other person). It is an even exchange and we will evenly split closing costs. We submitted it this way and DVC came back to us saying we had to have a "value" place on the OKW points "for the purpose of the recording valuation". Frankly I doubted this as we will do the deed and recording separate from DVC. Rather than argue with them we just put a fair value for each which was high enough that they won't want to excercise their ROFR anyway. I don't think they could regardless as we only put a value and the way I read the terms of the ROFR they'd have to give exactly what the payment was, not just the "value" of it. Regardless we shall see and I'll let the group know once we're set on whatever happens with one or both.