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.
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 Golfs 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 Quiksilvers 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.