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This excerpt taken from the ZQK DEF 14A filed Feb 25, 2008. Related
Party Transactions
Laurent Boix-Vives, the former chairman of the board of
directors and chief executive officer of Skis Rossignol S.A.
prior to our acquisition of Rossignol in July 2005, became a
member of our board of directors in December 2005 and resigned
in April 2007.
In connection with our acquisition of Rossignol, we acquired all
of the outstanding equity interests of Rossignol, and a
controlling interest in Pilot SAS which also holds certain
shares of Rossignol. The Boix-Vives family continues to own
non-voting restricted shares in Pilot SAS. Beginning in April
2010, we have a call option to purchase, and the Boix-Vives
family has a put option to require us to purchase, all of such
non-voting restricted shares for an aggregate purchase price of
approximately $38,200,000 plus interest. The restricted shares
have limited voting and other rights and the Boix-Vives family
is prohibited from transferring these shares to a third party
until April 12, 2015, subject to limited exceptions. In
September 2007, we implemented a standby letter of credit for
the benefit of the Boix-Vives family to guaranty the purchase
price required upon the exercise of the put or call option,
which replaced certain pledge agreements between the Boix-Vives
family and us with respect to our shares in Roger Cleveland Golf
Company, Inc.
At the time of the Rossignol acquisition, we also entered into a
consulting agreement with the Boix-Vives family to provide
advisory and consulting services to us for a period of five
years following July 26, 2005, including with respect to
the branding and marketing strategy of Rossignol and its
subsidiaries, their relations with the press, distributors,
customers and local representatives, as well as the organization
of the 100th anniversary of the Rossignol brand in 2007.
The aggregate consideration payable to the Boix-Vives family for
such services over the five year period was approximately
€3,900,000. We also reimbursed the Boix-Vives family for
reasonable expenses incurred in connection with their provision
of advisory and consulting services to us. In September 2007, as
a part of our purchase of the Cleveland Golf minority interest
from Mr. Boix-Vives and his affiliates (as discussed
below), we terminated such consulting agreement and accelerated
all of the future payments due under that agreement.
Consequently, we paid the Boix-Vives family $3,557,000 in
connection with such contract termination.
As part of the acquisition of Rossignol, we acquired
approximately 64% of Cleveland Golf while the Boix-Vives family
retained approximately 36%. We and the Boix-Vives family entered
into a shareholders’ agreement with respect to our
respective holdings in Cleveland Golf which provided that
Mr. Boix-Vives was to be appointed the chairman of the
board of directors of Cleveland Golf, and that he would remain
in such position as long as the Boix-Vives family remained a
shareholder of such company. Also, Mr. Boix-Vives, through
a company that is wholly-owned by his family, received
€300,000 per year for his services as the chairman of the
board of directors of Cleveland Golf, as well as the
reimbursement of reasonable expenses incurred in connection with
his services as chairman.
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On June 20, 2007, we entered into a stock purchase
agreement with Mr. Boix-Vives, certain members of his
family, and Services Expansion International, a French
Société par actions simplifiée
wholly-owned by the Boix-Vives family, to acquire the
remaining minority interest in Cleveland Golf for a purchase
price of $17,500,000. We also agreed to amend the contractual
restrictions on resale of approximately 2,150,038 shares of
our common stock held by the Boix-Vives family to provide that
such shares may be sold by the Boix-Vives family so long as the
disposition is effected in an orderly fashion, through a
licensed broker, and does not exceed in the aggregate the
average daily volume of our shares negotiated on the NYSE on the
immediately preceding three (3) trading days (excluding the
shares held by the Boix-Vives family), except in the case of a
block trade in which case such restrictions would not apply. On
September 14, 2007, we completed the acquisition of the
Cleveland Golf minority interest, and consequently, Cleveland
Golf became a wholly-owned subsidiary and the Cleveland Golf
shareholders’ agreement terminated. As a further
consequence of the acquisition, Mr. Boix-Vives resigned as
the chairman of the board of directors of Cleveland Golf and we
paid him $1,455,000 in connection with his resignation from such
position. In December 2007, we sold Cleveland Golf to an
independent third party, and in connection with such sale
transaction, we paid Mr. Boix-Vives, Services Expansion
International and certain members of his family an additional
$8,533,000 that was required by the June 2007 stock purchase
agreement.
Between November 1, 2006 and our acquisition of the
Boix-Vives’ minority interest in Cleveland Golf on
September 14, 2007, Cleveland Golf repaid borrowings of
approximately $1,000,000 on our credit agreement. The total
amount of indebtedness that Cleveland Golf had borrowed from us
prior to and including our 2007 fiscal year, was subject to an
intercompany revolving line of credit that bore a variable
interest rate of 7.0% per year as of September 14, 2007.
The largest amount of indebtedness of Cleveland Golf to us
between November 1, 2006 and September 14, 2007 was
$58,000,000. We also included Cleveland Golf as a guarantor
under our credit agreement dated April 12, 2005, as
amended, by and between Quiksilver, Quiksilver Americas, Inc.,
JP Morgan Chase Bank, N.A., JP Morgan Chase Bank, N.A., London
Branch and the other banks and financial institutions that are
parties to such agreement from time to time. In connection with
Cleveland Golf’s guaranty under our credit agreement, it
pledged certain of its assets to secure our indebtedness
thereunder. Cleveland Golf ceased to be a guarantor under such
credit agreement after our sale of the company in December 2007,
and none of its assets remain pledged to secure our credit
agreement indebtedness after such date. Cleveland Golf and its
related companies also repaid all of their outstanding
indebtedness to us upon the sale of the company. The aggregate
amount of interest we received from such indebtedness between
November 1, 2006 and September 14, 2007 was $3,242,000.
Under the terms of our indenture agreement by and between
Quiksilver, certain of Quiksilver’s subsidiaries and the
Wilmington Trust Company dated July 22, 2005, we also
included Cleveland Golf as a guarantor of the $400,000,000 of
67/8% Senior
Notes issued by us pursuant to such indenture. Cleveland Golf
ceased to be a guarantor under such indenture after our sale of
the company in December 2007.
Prior to our sale of Cleveland Golf in December 2007, Cleveland
Golf sold certain of its products to our other subsidiaries
pursuant to distribution arrangements. The pricing and other
material terms related to such distribution agreements were no
more favorable to Cleveland Golf than its distribution
arrangements with its unrelated third party distributors.
Between November 1, 2006 and September 14, 2007, our
other subsidiaries purchased approximately $20,345,000 of
products from Cleveland Golf.
On February 11, 2008, we entered into a separation
agreement with Bernard Mariette, our former President and
Director, in connection with his resignation. For a description
of the terms of the separation agreement, see the discussion
under the section entitled “Potential Payments Upon
Termination, Change in Control or Corporate
Transaction — Separation Agreements.”
In February 2006, Mr. Ammerman purchased a principal amount
of $100,000 of our publicly traded senior notes. In February
2008, Mr. Ammerman made an additional purchase of $100,000,
in principal amount, of our senior notes. Our senior notes are
publicly traded, pay interest at an annual rate of
67/8%
and are governed by the terms of an indenture.
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