10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-15131

QUIKSILVER, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0199426
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

15202 Graham Street
Huntington Beach, California
92649
(Address of principal executive offices)
(Zip Code)

(714) 889-2200
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ     No o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ

The number of shares outstanding of Registrant’s Common Stock,
par value $0.01 per share, at
September 2, 2005 was
121,080,792

QUIKSILVER, INC.

FORM 10-Q
INDEX

	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets July 31, 2005 and October 31, 2004		2
Condensed Consolidated Statements of Income Three Months Ended July 31, 2005 and 2004		3
Condensed Consolidated Statements of Income Nine Months Ended July 31, 2005 and 2004		4
Condensed Consolidated Statements of Comprehensive Income Nine Months Ended July 31, 2005 and 2004		4
Condensed Consolidated Statements of Cash Flows Nine Months Ended July 31, 2005 and 2004		5
Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations		16
Three Months Ended July 31, 2005 Compared to Three Months Ended July 31, 2004		17
Nine Months Ended July 31, 2005 Compared to Nine Months Ended July 31, 2004		18
Financial Position, Capital Resources and Liquidity		19
Critical Accounting Policies		22
New Accounting Pronouncements		24
Forward-Looking Statements		25
Risk Factors		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		33
Part II — OTHER INFORMATION
Item 6. Exhibits		34
SIGNATURES		35
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

QUIKSILVER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	July 31,			October 31,
In thousands, except share amounts	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	159,860		$	55,197
Trade accounts receivable, less allowance for doubtful accounts of $12,067 (2005) and $11,367 (2004)		428,266			281,263
Other receivables		45,778			16,165
Inventories		438,336			179,605
Deferred income taxes		25,175			22,299
Prepaid expenses and other current assets		22,500			12,267
Total current assets		1,119,915			566,796
Fixed assets, less accumulated depreciation and amortization of $112,112 (2005) and $91,097 (2004)		252,245			122,787
Intangible assets, net		244,196			121,116
Goodwill		415,471			169,785
Deferred income taxes		5,003			¾
Other assets		34,133			10,506
Total assets	$	2,070,963		$	990,990
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	198,366		$	10,801
Accounts payable		219,806			105,054
Accrued liabilities		163,771			79,095
Current portion of long-term debt		74,396			10,304
Income taxes payable		22,252			18,442
Total current liabilities		678,591			223,696
Long-term debt, net of current portion		609,324			163,209
Deferred income taxes		73,943			15,841
Total liabilities		1,361,858			402,746
Minority interest		10,109			¾
Stockholders’ equity
Preferred stock, $.01 par value, authorized shares - 5,000,000; issued and outstanding shares — none		¾			¾
Common stock, $.01 par value, authorized shares - 185,000,000; issued shares - 123,965,591 (2005) and 120,339,046 (2004)		1,240			1,203
Additional paid-in-capital		241,427			200,118
Treasury stock, 2,885,200 shares		(6,778	)		(6,778	)
Retained earnings		432,439			358,923
Accumulated other comprehensive income		30,668			34,778
Total stockholders’ equity		698,996			588,244
Total liabilities and stockholders’ equity	$	2,070,963		$	990,990

See notes to condensed consolidated financial statements.

2

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three months ended July 31,
In thousands, except per share amounts	2005			2004
Revenues, net	$	373,751		$	337,930
Cost of goods sold		198,836			187,523
Gross profit		174,915			150,407
Selling, general and administrative expense		133,589			118,864
Operating income		41,326			31,543
Interest expense		5,490			1,498
Foreign currency gain		(388	)		(28	)
Other expense		207			392
Income before provision for income taxes		36,017			29,681
Provision for income taxes		11,382			10,151
Net income	$	24,635		$	19,530
Net income per share	$	0.21		$	0.17
Net income per share, assuming dilution	$	0.20		$	0.16
Weighted average common shares outstanding		118,764			116,772
Weighted average common shares outstanding, assuming dilution		124,308			121,626

See notes to condensed consolidated financial statements.

3

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Nine months ended July 31,
In thousands, except per share amounts	2005			2004
Revenues, net	$	1,143,464		$	916,651
Cost of goods sold		622,278			505,532
Gross profit		521,186			411,119
Selling, general and administrative expense		402,386			318,246
Operating income		118,800			92,873
Interest expense		10,548			4,563
Foreign currency (gain) loss		(213	)		2,059
Other expense		352			901
Income before provision for income taxes		108,113			85,350
Provision for income taxes		34,597			28,856
Net income	$	73,516		$	56,494
Net income per share	$	0.62		$	0.50
Net income per share, assuming dilution	$	0.59		$	0.48
Weighted average common shares outstanding		118,175			113,460
Weighted average common shares outstanding, assuming dilution		123,729			118,336

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Nine months ended July 31,
In thousands	2005			2004
Net income	$	73,516		$	56,494
Other comprehensive income:
Foreign currency translation adjustment		(10,936	)		3,977
Net unrealized gain on derivative instruments, net of tax of $3,657 (2005) and $1,138 (2004)		6,826			1,739
Comprehensive income	$	69,406		$	62,210

See notes to condensed consolidated financial statements.

4

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine months ended July 31,
In thousands	2005			2004
Cash flows from operating activities:
Net income	$	73,516		$	56,494
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,232			19,546
Provision for doubtful accounts		5,591			5,796
Loss on sale of fixed assets		174			668
Foreign currency loss (gain)		1,240			(488	)
Interest accretion		1,480			884
Changes in operating assets and liabilities:
Trade accounts receivable		(61,862	)		(32,666	)
Other receivables		(2,546	)		(240	)
Inventories		(25,995	)		(10,104	)
Prepaid expenses and other current assets		(2,383	)		(957	)
Other assets		(7,585	)		(2,058	)
Accounts payable		34,004			18,964
Accrued liabilities		1,039			11,507
Income taxes payable		11,857			7,523
Net cash provided by operating activities		53,762			74,869
Cash flows from investing activities:
Capital expenditures		(45,085	)		(33,364	)
Business acquisitions, net of cash acquired		(181,827	)		(55,767	)
Net cash used in investing activities		(226,912	)		(89,131	)
Cash flows from financing activities:
Borrowings on lines of credit		44,749			80,801
Payments on lines of credit		(41,634	)		(52,259	)
Borrowings on long-term debt		496,519			4,916
Payments on long-term debt		(227,628	)		(11,216	)
Proceeds from stock option exercises		7,285			7,904
Net cash provided by financing activities		279,291			30,146
Effect of exchange rate changes on cash		(1,478	)		1,639
Net increase in cash and cash equivalents		104,663			17,523
Cash and cash equivalents, beginning of period		55,197			27,866
Cash and cash equivalents, end of period	$	159,860		$	45,389
Supplementary cash flow information:
Cash paid during the period for:
Interest	$	9,410		$	4,021
Income taxes	$	22,535		$	17,989
Non-cash investing and financing activities:
Common stock issued for business acquisition	$	28,907		$	27,312
Deferred purchase price obligation	$	32,508		$	6,460

See notes to condensed consolidated financial statements.

5

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	Basis of Presentation
	The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statement presentation.
	The Company, in its opinion, has included all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the financial statements for the three and nine month periods ended July 31, 2005 and 2004. The condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes for the year ended October 31, 2004 included in the Company’s Annual Report on Form 10-K. Interim results are not necessarily indicative of results for the full year due to seasonal and other factors.
2.	New Accounting Pronouncements
	In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 151, “Inventory Costs an amendment of ARB No. 43, Chapter 4”. SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. The Company does not expect the adoption of SFAS No. 151 to have a significant impact on its consolidated financial position, results of operations or cash flows.
	In December 2004, the FASB issued SFAS No. 123 (R) “Share-Based Payment”. SFAS No. 123 (R) requires that companies recognize compensation expense equal to the fair value of stock options or other share based payments. The standard is effective for the Company beginning the first quarter of fiscal 2006. The impact on the Company’s net income will be significant and will include the remaining amortization of the fair value of existing options currently disclosed as pro-forma expense in Note 3 to the condensed consolidated financial statements and is contingent upon the number of future options granted, the selected transition method and the selection of either the Black-Scholes or the binomial lattice model for valuing options. The adoption of this standard will have no impact on the Company’s cash flows.
3.	Stock Based Compensation
	The Company applies Accounting Principles Board Opinion 25 and related interpretations in accounting for its stock option plans. No stock-based employee compensation expense is reflected in net income, as all options granted under our stock option plans have exercise prices equal to the market value of the underlying common stock on the grant dates. The following table contains the pro forma disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.”

6

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
In thousands, except per share amounts	2005		2004		2005		2004
Actual net income	$	24,635	$	19,530	$	73,516	$	56,494
Less: stock-based employee compensation expense determined under the fair value based method, net of tax		3,526		2,032		9,121		6,127
Pro forma net income	$	21,109	$	17,498	$	64,395	$	50,367
Actual net income per share	$	0.21	$	0.17	$	0.62	$	0.50
Pro forma net income per share	$	0.18	$	0.15	$	0.54	$	0.44
Actual net income per share, assuming dilution	$	0.20	$	0.16	$	0.59	$	0.48
Pro forma net income per share, assuming dilution	$	0.17	$	0.14	$	0.52	$	0.43

4.	Inventories
	Inventories consist of the following:

	July 31,		October 31,
In thousands	2005		2004
Raw Materials	$	46,920	$	14,133
Work-In-Process		11,821		7,698
Finished Goods		379,595		157,774
	$	438,336	$	179,605

5.	Intangible Assets and Goodwill
	A summary of intangible assets is as follows:

	July 31, 2005							October 31, 2004
	Gross		Amorti-			Net Book		Gross		Amorti-			Net Book
In thousands	Amount		zation			Value		Amount		zation			Value
Amortizable trademarks	$	4,810	$	(1,232	)	$	3,578	$	3,476	$	(692	)	$	2,784
Amortizable licenses		10,169		(2,712	)		7,457		10,105		(1,937	)		8,168
Other amortizable intangibles		24,233		(1,197	)		23,036		5,633		(498	)		5,135
Non-amortizable trademarks		210,125		¾			210,125		105,029		¾			105,029
	$	249,337	$	(5,141	)	$	244,196	$	124,243	$	(3,127	)	$	121,116

Certain trademarks and licenses will continue to be amortized by the Company using estimated useful lives of 10 to 25 years with no residual values. Non-amortizable trademarks increased by $105.1 million during the nine months ended July 31, 2005 as a result of $94.7 million of non-amortizable trademarks acquired in connection with the acquisition of Skis Rossignol S.A. (“Rossignol”). In addition, there was an $8.1 million increase related to a contingent purchase price payment for the acquisition of Quiksilver International, and a $2.3 million increase primarily related to foreign currency translation. Other amortizable intangibles increased by $18.6 million during the nine months ended July 31, 2005 due to the Rossignol acquisition. Intangible amortization expense for the nine months ended July 31, 2005 and 2004 was $1.8 million and $1.2 million, respectively. Annual amortization expense is estimated to be approximately $2.9 million in the fiscal year ending October 31, 2005, $4.8 million in the fiscal year ending October 31, 2006, $4.6 million in the fiscal year ending October 31, 2007 and approximately $3.3 million in

7

each of the fiscal years ending October 31, 2008 and 2009. Goodwill related to the Company’s geographic segments is as follows:

	July 31,		October 31,
In thousands	2005		2004
Americas	$	182,817	$	86,382
Europe		202,343		70,057
Asia/Pacific		30,311		13,346
	$	415,471	$	169,785

	Goodwill arose primarily from the acquisitions of Quiksilver Europe, Quiksilver Asia/Pacific, DC Shoes, Inc. and, at July 31, 2005, from the acquisition of Rossignol. Goodwill increased $245.7 million during the nine months ended July 31, 2005. This increase was primarily due to the Company’s acquisition of Rossignol of $239.5 million, with the remaining $6.2 million increase related to other acquisitions and foreign exchange fluctuations.
6.	Accumulated Other Comprehensive Income
	The components of accumulated other comprehensive income include changes in fair value of derivative instruments qualifying as cash flow hedges, the fair value of interest rate swaps and foreign currency translation adjustments. The components of accumulated other comprehensive income, net of income taxes, are as follows:

	July 31,			October 31,
In thousands	2005			2004
Foreign currency translation adjustment	$	31,488		$	42,424
Loss on cash flow hedges and interest rate swaps		(820	)		(7,646	)
	$	30,668		$	34,778

7.

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s management in deciding how to allocate resources and in assessing performance. The Company has historically operated exclusively in the consumer products industry in which the Company designs, produces and distributes clothing, accessories and related products. Operating results of the Company’s various product lines have been aggregated because of their common characteristics and their reliance on shared operating functions. Within the consumer products industry, the Company operates in the Americas (primarily the United States), Europe and Asia/Pacific. Costs that support all three geographic segments, including trademark protection, trademark maintenance and licensing functions are part of corporate operations. Corporate operations also includes sourcing income and gross profit earned from the Company’s international licensees. In connection with the Rossignol acquisition, the Company is currently evaluating its operating segments, and any change in segment reporting would be reflected in the three months ending October 31, 2005. No single customer accounted for more than 10% of the Company’s revenues.

8

Information related to the Company’s geographical segments is as follows:

	Three Months Ended July 31,
In thousands	2005			2004
Revenues, net:
Americas	$	196,261		$	187,880
Europe		133,573			115,436
Asia/Pacific		43,145			33,108
Corporate operations.		772			1,506
	$	373,751		$	337,930
Gross Profit:
Americas	$	78,791		$	75,286
Europe		73,419			58,194
Asia/Pacific		22,298			16,254
Corporate operations.		407			673
	$	174,915		$	150,407
Operating Income:
Americas	$	22,919		$	22,610
Europe		19,096			13,296
Asia/Pacific		5,799			3,812
Corporate operations.		(6,488	)		(8,175	)
	$	41,326		$	31,543

	Nine Months Ended July 31,
In thousands	2005			2004
Revenues, net:
Americas	$	554,727		$	459,615
Europe		442,435			361,905
Asia/Pacific		143,926			92,594
Corporate operations.		2,376			2,537
	$	1,143,464		$	916,651
Gross Profit:
Americas	$	217,912		$	186,164
Europe		229,642			178,532
Asia/Pacific		72,121			44,968
Corporate operations.		1,511			1,455
	$	521,186		$	411,119
Operating Income:
Americas	$	55,035		$	51,708
Europe		67,777			52,440
Asia/Pacific		19,494			8,861
Corporate operations.		(23,506	)		(20,136	)
	$	118,800		$	92,873
Identifiable assets:
Americas	$	805,654		$	417,894
Europe		1,011,467			382,691
Asia Pacific		190,783			96,120
Corporate operations.		63,059			12,183
	$	2,070,963		$	908,888

9

8.	Derivative Financial Instruments
	The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income, and product purchases of its international subsidiaries that are denominated in currencies other than their functional currencies. The Company is also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in U.S. dollars, and to fluctuations in interest rates related to its variable rate debt. Furthermore, the Company is exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in the Company’s consolidated financial statements due to the translation of the operating results and financial position of the Company’s international subsidiaries. As part of its overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses various foreign currency exchange contracts and intercompany loans. In addition, interest rate swaps are used to manage the Company’s exposure to the risk of fluctuations in interest rates.
	Derivatives that do not qualify for hedge accounting but are used by management to mitigate exposure to currency risks are marked to fair value with corresponding gains or losses recorded in earnings. A gain of $0.6 million was recognized related to these types of derivatives during the nine months ended July 31, 2005. For all qualifying cash flow hedges, the changes in the fair value of the derivatives are recorded in other comprehensive income. As of July 31, 2005, the Company was hedging forecasted transactions expected to occur through September 2009. Assuming exchange rates at July 31, 2005 remain constant, $1.0 million of gains, net of tax, related to hedges of these transactions are expected to be reclassified into earnings over the next nineteen months. Also included in accumulated other comprehensive income at July 31, 2005 is a $1.7 million loss, net of tax, related to cash flow hedges of the Company’s long-term debt, which is denominated in Australian dollars and matures in September 2005, and the fair value of interest rate swaps, totaling a loss of $0.1 million, net of tax, which is related to the Company’s U.S. dollar and euro denominated long-term debt that matures through fiscal 2009.
	On the date the Company enters into a derivative contract, management designates the derivative as a hedge of the identified exposure. The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for entering into various hedge transactions. In this documentation, the Company identifies the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and indicates how the hedging instrument is expected to hedge the risks related to the hedged item. The Company formally measures effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis in accordance with its risk management policy. The Company would discontinue hedge accounting prospectively (i) if it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is sold, terminated, or exercised, (iii) if it becomes probable that the forecasted transaction being hedged by the derivative will not occur, (iv) because a hedged firm commitment no longer meets the definition of a firm commitment, or (v) if management determines that designation of the derivative as a hedge instrument is no longer appropriate. During the nine months ended July 31, 2005, the Company reclassified into earnings a net loss of $4.9 million resulting from the expiration, sale, termination, or exercise of derivative contracts.
	The Company enters into forward exchange and other derivative contracts with major banks and is exposed to credit losses in the event of nonperformance by these banks. The Company anticipates, however, that these banks will be able to fully satisfy their obligations under the contracts. Accordingly, the Company does not obtain collateral or other security to support the contracts.

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A summary of derivative contracts at July 31, 2005 is as follows:

	Notional			Fair
In thousands	Amount		Maturity	Value
United States dollar	$	211,217	Aug 2005 - Oct 2006	$	1,757
Euro		8,489	Oct 2005		(281	)
Australian dollar		27,419	Sept 2005		5,780
British pound		3,164	Aug 2005		(6	)
Canadian dollar		8,503	Sept 2005 - April 2006		(126	)
Swiss franc		3,001	Aug 2005 - Feb 2007		44
Japanese yen		2,071	Nov 2005 - May 2006		19
Interest rate swap U.S. dollars		10,535	Oct 2006 - Jan 2007		(232	)
Interest rate swap euros		56,391	Sept 2005 - Sept 2009		(591	)
	$	330,790		$	6,364

9.

Business Acquisitions

Effective July 31, 2005, the Company acquired Rossignol, a wintersports and golf equipment manufacturer. Rossignol offers a full range of wintersports equipment under the Rossignol, Dynastar, Lange, Look and Kerma brands, and also sells golf products under the Cleveland Golf and Never Compromise brands. The Company will include the operations of Rossignol in its results beginning on August 1, 2005. The estimated purchase price, excluding transaction costs, includes cash of approximately $208.3 million, approximately 2.2 million restricted shares of the Company’s common stock, valued at $28.9 million, a deferred purchase price obligation of approximately $32.5 million, a liability of approximately $16.7 million for the mandatory purchase of approximately 0.7 million outstanding public shares of Rossignol representing less than 5% of the share capital of Rossignol, and a liability of approximately $2.0 million for the estimated fair value of 0.1 million fully vested Rossignol stock options. Estimated transaction costs total approximately $13.7 million. The valuation of the common stock issued in connection with the acquisition was based on its quoted market price for 5 days before and after the announcement date, discounted to reflect the estimated effect of its trading restrictions. The deferred purchase price obligation is expected to be paid in 2010 and will accrue interest equal to the 3 month euro interbank offered rate (“Euribor”) plus 2.35% (currently 4.48%). The mandatory purchase of the remaining Rossignol shares is required under French law as the Company has obtained over 95% of the outstanding shares of Rossignol through a combination of share purchases, including a public tender offer. Subsequent to the purchase of these shares expected in the quarter ending October 31, 2005, the Company will own 100% of the shares in Rossignol. Upon the future exercise of the Rossignol stock options, the Company will purchase the newly issued shares from the Rossignol stock option holders, retaining 100% ownership in Rossignol. Certain former owners retained a minority interest of 36.37% of Roger Cleveland Golf Company, Inc. (“Cleveland”), a Rossignol subsidiary. The Company and the minority owners have entered into a put/call arrangement whereby the minority owners of Cleveland can require the Company to buy all of their interest in Cleveland after 4.5 years and the Company can buy their interest at its option after 7 years, each at a purchase price generally determined by reference to a multiple of Cleveland’s annual profits and the Company’s price-earnings ratio. As a result of the minority interest and put/call arrangement, the Company will account for Cleveland as a step acquisition. Goodwill arises from synergies the Company believes can be achieved integrating Rossignol’s brands, products and operations with the Company’s, and is not expected to be deductible for income tax purposes. Amortizing intangibles consist of customer relationships, patents and athlete contracts with estimated useful lives of twenty, seven and two years, respectively. The acquired trademarks are non-amortizing as they have been determined to have indefinite lives.

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The allocation of purchase price is based on preliminary estimates and is subject to change. The following table summarizes the fair values of the assets acquired and the liabilities assumed at the date of the Rossignol acquisition in accordance with the purchase method of accounting:

In thousands	July 31,
	2005
Cash acquired	$	64,396
Accounts receivable		94,794
Inventory		233,909
Other current assets		21,548
Fixed assets		114,001
Deferred income taxes		6,404
Other assets		3,296
Amortizing intangible assets		18,600
Trademarks		94,700
Goodwill		239,477
Total assets acquired		891,125
Other liabilities		161,873
Long term debt and lines of credit		365,126
Deferred income taxes		51,874
Minority interest		10,109
Net assets acquired	$	302,143

Rossignol Integration Plan — In connection with the acquisition of Rossignol, the Company has begun to formulate the Rossignol Integration Plan (the “Plan”). The Plan covers the global operations of newly acquired Rossignol and the Company’s existing businesses, and it includes the evaluation of facility relocations, nonstrategic business activities, duplicate functions and other related items. The Company has not finalized the Plan, but as of July 31, 2005 has recognized $5.2 million of liabilities related to the Plan, including employee relocation and severance costs, moving costs, and other costs related primarily to the relocation of the Company’s wintersports equipment sales and distribution operations in the United States. These liabilities were included in the allocation of the purchase price for Rossignol in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” and EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination”. Costs that are not associated with the acquired company but relate to activities or employees of the Company’s existing operations are charged to earnings as incurred. Certain facilities owned by the acquired company are expected to be sold in connection with the Plan, while others are anticipated to be refinanced through sale-leaseback arrangements. Assets held for sale related to the United States relocations total approximately $4.2 million at July 31, 2005. The Plan has not been finalized as it relates to facilities outside of the United States, and the Company’s estimates of expected costs related to the U.S. aspects of the Plan may change. Accordingly, as uncertainties related to the Plan are resolved, additional liabilities related to facility relocations, the elimination of nonstrategic business activities and duplicate functions, and other related costs could be recognized. These uncertainties are expected to be resolved within one year of the consummation date of the acquisition, and when determined, additional liabilities could be significant and would be recorded as adjustments to goodwill. If the Company has overestimated these costs, the excess will reduce goodwill in future periods. Conversely, if the Company has underestimated these costs, additional liabilities recognized more than one year after the consummation date of the acquisition will be recorded in earnings.

Assuming the Rossignol acquisition had occurred as of November 1, 2003, consolidated net sales would have been approximately $1,489 million and approximately $1,266 million for the nine months ended July 31, 2005 and 2004, respectively. Net income would have been approximately $3.7 million and approximately $30.4 million, respectively, for those same periods, and diluted earnings per share would have been $0.03 and $0.26, respectively.

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	Effective May 1, 2004, the Company acquired DC Shoes, Inc. (“DC”), a premier designer, producer and distributor of action sports inspired footwear, apparel and related accessories in the United States and internationally. The operations of DC have been included in the Company’s results since May 1, 2004. The initial purchase price, excluding transaction costs, includes cash of approximately $52.8 million, 1.6 million restricted shares of the Company’s common stock, valued at $27.3 million, and the repayment of approximately $15.3 million in funded indebtedness. Transaction costs totaled $2.9 million. The valuation of the common stock issued in connection with the acquisition was based on its quoted market price for 5 days before and after the announcement date, discounted to reflect the estimated effect of its trading restrictions. Of the initial purchase price, $63.4 million was paid in fiscal 2004, $3.7 million was paid during the nine months ended July 31, 2005, and $1.0 million is expected to be paid based on the resolution of certain remaining contingencies. The sellers also received $8.0 million during the nine months ended July 31, 2005 based on achieving certain sales and earnings targets. The sellers are entitled to additional payments ranging from zero to $49.0 million if certain sales and earnings targets are achieved during the three years ending October 31, 2007. The amount of goodwill initially recorded for the transaction would increase if such contingent payments are made. Goodwill arises from synergies the Company believes can be achieved integrating DC’s product lines and operations with the Company’s, and is not expected to be deductible for income tax purposes. Amortizing intangibles consist of non-compete agreements, customer relationships and patents with estimated useful lives ranging from four to eighteen years.
10.	Indemnities and Guarantees
	During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale and/or license of Company products, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, (iii) indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company, and (iv) indemnities involving the accuracy of representations and warranties in certain contracts. The duration of these indemnities, commitments and guarantees varies, and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.
11.	Senior Notes and Rossignol Debt
	On July 22, 2005, the Company issued $400 million in senior notes (“Senior Notes”), which bear a coupon interest rate of 6.875% and are due April 15, 2015. The Senior Notes were issued at par value and sold in accordance with Rule 144A and Regulation S, and the Company intends to file a registration statement with the Securities and Exchange Commission that will enable the holders of these Senior Notes to exchange them for publicly registered notes with substantially the same terms. The Senior Notes are guaranteed on a senior unsecured basis by each of the Company’s domestic subsidiaries that guarantees any of its indebtedness or its subsidiaries’ indebtedness, or is an obligor under its existing senior secured credit facility (the “Guarantors”). The Company may redeem some or all of the Senior Notes after April 15, 2010 at fixed redemption prices as set forth in the indenture. In addition, prior to April 15, 2008, the Company may redeem up to 35% of the Senior Notes with the proceeds from certain equity offerings at a redemption price set forth in the indenture.
	The indenture includes covenants that limit the ability of the Company and its restricted subsidiaries to, among other things: incur additional debt; pay dividends on their capital stock or repurchase their capital stock; make certain investments; enter into certain types of transactions with affiliates; limit dividends or other payments by their restricted subsidiaries to the Company; use assets as security in other transactions; and sell certain assets or merge with or into other companies. If the Company experiences specific kinds of changes of control, it will be required to offer to purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. As of July 31, 2005, the Company was in compliance with these covenants.

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On July 25, 2005, the Company terminated its existing interim credit facility. The Company used approximately $136.8 million in proceeds from the Senior Notes to repay this facility.

Rossignol’s subsidiaries in the United States and Canada have unsecured, uncommitted lines of credit with banks that provide for maximum cash borrowings of approximately $164.0 million to finance the working capital and general corporate needs of these subsidiaries. At July 31, 2005, $61.5 million was outstanding on these facilities, at average interest rates of 3.0%. The lines of credit have varying expiration dates, the majority of which are renewed at the option of the banks on a yearly basis. In addition, Rossignol’s Americas’ subsidiaries collectively have $6.3 million in unsecured long-term loans outstanding as of July 31, 2005, which mature in 2006 with a weighted average interest rate of 4.5%. Quiksilver intends to retire these lines of credit and term loans, pledge the assets of Rossignol’s U.S. and Canadian subsidiaries as collateral under the revolving credit facility and refinance any balances outstanding on these credit facilities with availability under the Company’s existing revolving credit facility.

Rossignol’s European subsidiaries have unsecured, uncommitted overdraft lines of credit and long-term loans with banks that provide for the seasonal working capital needs of the business and other corporate purposes. The overdraft lines of credit provide for maximum cash borrowings of approximately $219.0 million, and at July 31, 2005, $124.4 million was outstanding. The overdraft lines of credit are renewable annually at the option of the banks. Rossignol’s European subsidiaries also had approximately $154.0 million of long-term indebtedness outstanding as of July 31, 2005. This long-term indebtedness is due at various dates through 2010, and contains covenants that are customary for such long-term indebtedness including, among other things, minimum financial ratios of net debt to shareholders’ equity and term debt to cash flow. The overall weighted average interest on long-term debt at July 31, 2005, was 3.0%, including 3.3% on fixed rate indebtedness and 2.7% on variable rate indebtedness.

Rossignol’s European subsidiaries also had approximately $6.7 million in capital leases and other borrowings as of July 31, 2005.

Rossignol’s Japanese subsidiary had approximately $12.2 million of long-term indebtedness outstanding as of July 31, 2005. This long-term indebtedness is due in 2006. The weighted average interest rate on this debt was 1.2% at July 31, 2005.

At July 31, 2005, the Company has $197.1 million of available borrowing capacity for its Rossignol subsidiaries and $304.1 million of available borrowing capacity for its other subsidiaries.

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PART I — FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context indicates otherwise, when we refer to “Quiksilver”, “we”, “us”, “our”, or the “Company” in this Form 10-Q, we are referring to Quiksilver, Inc. and its subsidiaries on a consolidated basis.

The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with our business. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended October 31, 2004, which discusses our business in greater detail.

In July 2005, we acquired Skis Rossignol, S.A. (“Rossignol”), a wintersports and golf equipment manufacturer. Rossignol offers a full range of wintersports equipment under the Rossignol, Dynastar, Lange, Look and Kerma brands, and also sells golf products under the Cleveland Golf and Never Compromise brands. The acquisition was effective July 31, 2005 and we will include the operations of Rossignol in our results beginning on August 1, 2005. Rossignol’s assets and liabilities are reflected in our financial statements as of July 31, 2005. In July 2005, we issued $400 million in senior notes that bear a coupon interest rate of 6.875% and are due April 15, 2015 (“Senior Notes”). These Senior Notes were used to fund a portion of the Rossignol purchase price and to refinance certain existing indebtedness.

We are a globally diversified company that designs, produces and distributes branded apparel, wintersports and golf equipment, footwear, accessories and related products. Our apparel and footwear brands represent a casual lifestyle for young-minded people that connect with our authentic boardriding culture and heritage. Our wintersports and golf brands symbolize a long standing commitment to technical expertise and competitive success on the mountains and on the links. These and other outdoor sports influence the apparel choices made by consumers as these activities are communicated to a global audience by television, the internet, movies and magazines. People are attracted to the venues in which these sports are performed and the values they represent, including individual expression, adventure and creativity.

Over the past 35 years, we have established Quiksilver as a leading global brand representing the casual, youth lifestyle associated with boardriding sports. Based on our fiscal 2004 revenues, we are the largest of the apparel and equipment companies that are identified with the sports of surfing, skateboarding and snowboarding. With our acquisition of Rossignol, we have added a collection of leading ski equipment brands to our company that we believe will be the foundation for a full range of technical ski apparel, sportswear and accessories. Based on its fiscal 2005 revenues, Rossignol is one of the world’s leading manufacturers of alpine skiing equipment, including skis, boots, bindings and poles. Also, as part of our acquisition of Rossignol, we acquired a majority interest in Roger Cleveland Golf Company, Inc. (“Cleveland”), a leading producer of wedges and golf clubs in the United States.

We believe that our acquisition of Rossignol provides us with multiple authentic brands in both snow and golf. Rossignol’s technical knowledge, combined with our current lifestyle brands, will enable us to produce and market apparel, equipment, footwear, accessories and related products for consumers in a broad cross section of the outdoor market. Furthermore, we believe the combination of our existing global expertise in branded apparel and footwear, along with Rossignol’s expertise in branded wintersports equipment, provide us with a diversified platform for continued growth and enhanced operating efficiencies.

Our acquisition of Rossignol is expected to have a significant impact on our financial results. Our revenues and expenses are expected to increase substantially. However, our overall profit margins are expected to be negatively impacted, because Rossignol has historically generated lower profit margins than we have, and this trend is expected to continue in the foreseeable future. In addition, Rossignol’s business has historically been seasonal, with revenues and operating profits generally higher in August through December, which will affect our consolidated quarterly results. Further, as discussed under “Financial Position, Capital Resources and Liquidity” below, we will be substantially more leveraged as a result of debt incurred in connection with the acquisition, and we will have an increased amount of capital committed to manufacturing functions.

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We operate in three geographic segments, the Americas, Europe and Asia/Pacific. The Americas segment includes revenues primarily from the United States and Canada. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand, and Indonesia. In connection with the Rossignol acquisition, we are currently evaluating our operating segments, and any change in segment reporting would be reflected in the quarter ending October 31, 2005.

Results of Operations

The table below shows the components in our statements of income and other data as a percentage of revenues:

	Three Months Ended July 31,						Nine Months Ended July 31,
	2005			2004			2005			2004
Statement of Income data
Revenues, net		100.0	%		100.0	%		100.0	%		100.0	%
Gross profit		46.8			44.5			45.6			44.8
Selling, general and administrative expense		35.7			35.2			35.2			34.7
Operating income		11.1			9.3			10.4			10.1
Interest expense		1.5			0.4			0.9			0.5
Foreign currency and other expense		0.0			0.1			0.1			0.3
Income before provision for income taxes		9.6	%		8.8	%		9.4	%		9.3	%
Provision for income taxes		3.0			3.0			3.0			3.1
Net income		6.6	%		5.8	%		6.4	%		6.2	%
Other data
EBITDA(1)		13.4	%		11.4	%		12.6	%		11.9	%

(1)

EBITDA is defined as net income before (i) interest expense, (ii) income tax expense, and (iii) depreciation and amortization. EBITDA is not defined under generally accepted accounting principles (“GAAP”), and it may not be comparable to similarly titled measures reported by other companies. We use EBITDA, along with other GAAP measures, as a measure of profitability because EBITDA helps us to compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions and the impact of our asset base, which can differ depending on the book value of assets and the accounting methods used to compute depreciation and amortization. We believe it is useful to investors for the same reasons. EBITDA has limitations as a profitability measure in that it does not include the interest expense on our debts, our provisions for income taxes or the effect of our expenditures for capital assets and certain intangible assets.

Following is a reconciliation of net income to EBITDA:

	Three Months Ended				Nine Months Ended
	July 31,				July 31,
	2005		2004		2005		2004
Net income	$	24,635	$	19,530	$	73,516	$	56,494
Provision for income taxes		11,382		10,151		34,597		28,856
Interest expense		5,490		1,498		10,548		4,563
Depreciation and amortization		8,606		7,181		25,232		19,546
EBITDA	$	50,113	$	38,360	$	143,893	$	109,459

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Three Months Ended July 31, 2005 Compared to Three Months Ended July 31, 2004

Our total net revenues for the three months ended July 31, 2005 increased 11% to $373.8 million from $337.9 million in the comparable period of the prior year. Revenues in the Americas increased 4% to $196.3 million for the three months ended July 31, 2005 from $187.9 million in the comparable period of the prior year, and European revenues increased 16% to $133.6 million from $115.4 million for those same periods. As measured in euros, Quiksilver Europe’s primary functional currency, revenues in the current year’s quarter increased 14% compared to the prior year. Asia/Pacific revenues increased 30% to $43.1 million in the three months ended July 31, 2005 from $33.1 million in the comparable period of the prior year. In Australian dollars, Quiksilver Asia/Pacific’s primary functional currency, Asia/Pacific revenues increased 21% from the comparable period of the prior year.

In the Americas, revenues in our men’s category, which includes the Quiksilver Young Men’s, Boys, Toddlers, Wintersports, Quiksilveredition, DC, Hawk Clothing and Fidra divisions, increased 5% to $106.8 million from $101.6 million in the comparable period of the prior year, while revenues in our women’s category, which includes the Roxy, Roxy Girl, Teenie Wahine, DC, Raisins, Leilani and Radio Fiji divisions, increased 5% to $87.8 million from $83.3 million. Revenues from snowboards, boots and bindings amounted to $1.7 million for the current year’s quarter compared to $3.0 million in the prior year. The increase in Americas’ men’s revenues came primarily from the Quiksilver Young Men’s division. The increase in Americas’ women’s revenues came primarily from the Roxy division. In Europe and as reported in dollars, men’s revenues increased 20% to $103.1 million from $86.1 million, while women’s revenues increased 4% to $30.5 million from $29.3 million. The European men’s revenue increase came primarily from the Quiksilver Young Men’s division. The European women’s revenue increase reflects growth in the Roxy division. The increases in European revenues were impacted by the stronger euro in comparison to the prior year. In euros, men’s revenues increased 18% and women’s revenues increased 3%. The increase in Asia/Pacific revenues also came primarily from the Quiksilver Young Men’s and Roxy divisions.

Our consolidated gross profit margin for the three months ended July 31, 2005 increased to 46.8% from 44.5% in the comparable period of the prior year. The Americas’ gross profit margin remained constant at 40.1%. The gross margin in the Americas was negatively affected by lower margins earned on in-season business but increased as we generated a higher percentage of sales through company-owned retail stores. We earn both the wholesale and retail margins on sales in company-owned stores, but these higher gross margins are generally offset by store operating costs, which are included in selling, general and administrative expense. The European gross profit margin increased to 55.0% from 50.4%, and the Asia/Pacific gross profit margin increased to 51.7% from 49.1% for those same periods. The increase in the European gross profit margin was primarily due to lower product costs from a stronger euro in comparision to the prior year, improved sourcing and as a result of generating a higher percentage of sales through company-owned retail stores. In Asia/Pacific, the gross profit margin increased primarily due to lower production costs resulting from a stronger Australian dollar in comparision to the prior year.

Selling, general and administrative expense (“SG&A”) for the three months ended July 31, 2005 increased 12% to $133.6 million from $118.9 million in the comparable period of the prior year. Americas’ SG&A increased 6% to $55.9 million from $52.7 million, while European SG&A increased 21% to $54.3 million from $44.9 million, and Asia/Pacific SG&A increased 33% to $16.5 million from $12.4 million for those same periods. The increase across all three segments was primarily due to additional company-owned retail stores, higher personnel and other costs related to increased sales volume, and additional marketing. The stronger euro and Australian dollar in relation to the previous year also contributed to higher SG&A in Europe and Asia/Pacific. As a percentage of revenues, SG&A increased to 35.7% for the three months ended July 30, 2005 from 35.2% for the three months ended July 31, 2004. In the Americas, SG&A as a percentage of revenue increased to 28.5% for the three months ended July 31, 2005 from 28.0% for the three months ended July 31, 2004. For those same periods, European SG&A increased to 40.7% of revenues from 38.9%, while Asia/Pacific SG&A increased to 38.2% of revenues from 37.6%.

Interest expense for the three months ended July 31, 2005 increased to $5.5 million from $1.5 million in the three months ended July 31, 2004. This increase was primarily due to debt incurred in fiscal 2005 related to the acquisition of Rossignol.

Foreign currency gain increased to $0.4 million for the three months ended July, 31, 2005 from basically zero in the comparable period of the prior year. This gain resulted primarily from the foreign currency contracts that we used to hedge the risk of translating the results of our international subsidiaries into U.S. dollars.

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The effective income tax rate for the three months ended July 31, 2005, which is based on current estimates of the annual effective income tax rate, decreased to 31.6% from 34.2% in the comparable period of the prior year. This improvement resulted primarily because a higher percentage of our 2005 profits are expected to be generated in countries with lower tax rates.

Net income for the three months ended July 31, 2005 increased 26% to $24.6 million or $0.20 per share on a diluted basis from $19.5 million or $0.16 per share on a diluted basis in the comparable period of the prior year. Basic net income per share increased to $0.21 per share for the three months ended July 31, 2005 from $0.17 in the comparable period of the prior year. EBITDA increased 31% to $50.1 million from $38.4 million for those same periods.

Nine Months Ended July 31, 2005 Compared to Nine Months Ended July 31, 2004

Our total net revenues for the nine months ended July 31, 2005 increased 25% to $1,143.5 million from $916.7 million in the comparable period of the prior year. The DC division, which was acquired on May 1, 2004, accounted for approximately 6% of our consolidated revenue growth for the nine months ended July 31, 2005. Revenues in the Americas increased 21% to $554.7 million for the nine months ended July 31, 2005 from $459.6 million in the comparable period of the prior year, and European revenues increased 22% to $442.4 million from $361.9 million for those same periods. As measured in euros, European revenues in the first nine months of the current year increased 16% as compared to the prior year. Asia/Pacific revenues increased 55% to $143.9 million in the nine months ended July 31, 2005 compared to $92.6 million in the comparable period of the prior year. In Australian dollars, Asia/Pacific revenues increased 48% compared to the prior year.

In the Americas, revenues in our men’s category increased 24% to $277.2 million from $223.5 million in the comparable period of the prior year, while revenues in our women’s category increased 18% to $274.1 million from $231.3 million. Revenues from snowboards, boots and bindings amounted to $3.4 million in the current year’s nine-month period compared to $4.8 million in the prior year. The increase in Americas’ men’s revenues came primarily from the DC division and, to a lesser extent, the Quiksilver Young Men’s division. The increase in Americas’ women’s revenues came primarily from the Roxy division and, to a lesser extent, the DC division. In Europe and as reported in dollars, men’s revenues increased 22% to $325.6 million from $266.9 million, while women’s revenues increased 23% to $116.9 million from $95.0 million. The European men’s revenue increase came primarily from the Quiksilver Young Men’s division and, to a lesser extent, the DC division, and the women’s revenue increase reflects growth in the Roxy division. The increases in European revenues were impacted by the stronger euro in comparison to the prior year. In euros, men’s revenues increased 16% and women’s revenues increased 17%. In Asia/Pacific, the increase in revenues came primarily from the Roxy, Quiksilver Young Men’s and DC divisions.

Our consolidated gross profit margin for the nine months ended July 31, 2005 increased to 45.6% from 44.8% in the comparable period of the prior year. The Americas’ gross profit margin decreased to 39.3% from 40.5%, while the European gross profit margin increased to 51.9% from 49.3%, and the Asia/Pacific gross profit margin increased to 50.1% from 48.6% for those same periods. The decrease in the Americas’ gross profit margin was primarily due to lower margins on in-season business in comparison to the prior year, which was partially offset by generating a higher percentage of sales through company-owned retail stores. Our European gross profit margin increase was primarily due to lower production costs resulting from a stronger euro in relation to the U.S. dollar, improved sourcing and, to a lesser extent, a higher percentage of sales through company-owned retail stores. In Asia/Pacific, the gross profit margin increased primarily due to lower production costs resulting from a stronger Australian dollar in relation to the U.S. dollar compared to the prior year.

SG&A for the nine months ended July 31, 2005 increased 26% to $402.4 million from $318.2 million in the comparable period of the prior year. Americas’ SG&A increased 21% to $162.9 million from $134.5 million, while European SG&A increased 28% to $161.9 million from $126.1 million, and Asia/Pacific SG&A increased 46% to $52.6 million from $36.1 million for those same periods. The increase across all three divisions was primarily due to additional company-owned retail stores, additional marketing, and expenses related to increased sales volume. The stronger euro and Australian dollar in relation to the previous year also contributed to higher SG&A in Europe and Asia/Pacific. As a percentage of revenues, SG&A increased to 35.2% for the nine months ended July 31, 2005 from 34.7% for the nine months

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ended July 31, 2004. In the Americas, SG&A increased slightly as a percentage of revenues to 29.4% from 29.3% of revenues as the impact of additional marketing expenses was substantially offset by general leverage on growth. In Europe, SG&A increased to 36.6% of revenues from 34.8%, due primarily to the impact of additional company-owned retail stores and, to a lesser extent, increased marketing efforts. Asia/Pacific SG&A decreased to 36.6% of revenues from 39.0%, due primarily to general leverage on growth.

Interest expense for the nine months ended July 31, 2005 increased to $10.5 million from $4.6 million in the comparable period of the prior year. This increase is primarily due to debt incurred in connection with the acquisition of Rossignol.

We had a foreign currency gain of $0.2 million for the nine months ended July 31, 2005 compared to a loss of $2.1 million in the comparable period of the prior year. This gain resulted primarily from the foreign currency contracts that we used to hedge the risk of translating the results of our international subsidiaries into U.S. dollars.

The effective income tax rate for the nine months ended July 31, 2005, which is based on current estimates of the annual effective income tax rate, decreased to 32.0% from 33.8% in the comparable period of the prior year. This improvement resulted primarily because a higher percentage of our 2005 profits are expected to be generated in countries with lower tax rates.

Net income for the nine months ended July 31, 2005 increased 30% to $73.5 million or $0.59 per share on a diluted basis from $56.5 million or $0.48 per share on a diluted basis in the comparable period of the prior year. Basic net income per share increased to $0.62 per share for the nine months ended July 31, 2005 from $0.50 per share in the comparable period of the prior year. EBITDA increased 31% to $143.9 million from $109.5 million for those same periods.

Financial Position, Capital Resources and Liquidity

We generally finance our working capital needs and capital investments with operating cash flows and bank revolving lines of credit. Multiple banks in the United States, Europe and Australia make these lines of credit available. Term loans are also used to supplement these lines of credit and are typically used to finance long-term assets. In July 2005, we issued $400 million in Senior Notes, primarily to fund a portion of the acquisition of Rossignol and to refinance certain existing indebtedness.

The net increase in cash and cash equivalents for the nine months ended July 31, 2005 was $104.7 million compared to $17.5 million in the comparable period of the prior year. Cash and cash equivalents totaled $159.9 million at July 31, 2005 compared to $55.2 million at October 31, 2004, while working capital was $441.3 million at July 31, 2005 compared to $343.1 million at October 31, 2004. We believe our current cash balance and current lines of credit are adequate to cover our seasonal working capital and other requirements for the foreseeable future, and that increases in our lines of credit can be obtained as needed to fund future growth.

Cash Flows

We generated $53.8 million of cash from operating activities in the nine months ended July 31, 2005 compared to $74.9 in the comparable period of the prior year. This $21.1 million decrease in cash provided was primarily due to changes in accounts receivable. During the nine months ended July 31, 2005, the increase in accounts receivable used cash of $61.9 million compared to $32.7 million during the nine months ended July 31, 2004, a decrease in cash provided of $29.2 million. The cash used by the increase in inventories was offset by the increase in accounts payable. Cash generated by the increase in net income adjusted for non-cash expenses more than offset cash used for changes in other working capital components, resulting in a net increase in cash provided of $8.9 million.

Capital expenditures totaled $45.1 million for the nine months ended July 31, 2005, compared to the $33.4 million in the comparable period of the prior year. These investments include company-owned retail stores and ongoing investments in computer and warehouse equipment. Capital expenditures are expected to range from $13 million to $16 million for the quarter ending October 31, 2005.

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During the nine months ended July 31, 2005, net cash provided by financing activities totaled $279.3 million, compared to $30.1 million provided in the comparable period of the prior year. This increase in borrowings primarily relates to the issuance of our Senior Notes for net proceeds of $389 million. We used a majority of the proceeds from these notes to fund a portion of the Rossignol acquisition and the balance to refinance a portion of our existing debt.

Business Acquisitions

Effective July 31, 2005, we acquired Rossignol, a wintersports and golf equipment manufacturer. We will include the operations of Rossignol in our results beginning on August 1, 2005. The purchase price, excluding transaction costs, includes cash of approximately $208.3 million, approximately 2.2 million restricted shares of our common stock, valued at $28.9 million, a deferred purchase price obligation of approximately $32.5 million, a liability of approximately $16.7 million for the mandatory purchase of approximately 0.7 million outstanding public shares of Rossignol representing less than 5% of the share capital of Rossignol, and a liability of approximately $2.0 million for the estimated fair value of 0.1 million fully vested Rossignol stock options. The deferred purchase price obligation is denominated in euros, and a weakening of the U.S. dollar in relation to the euro could cause the actual obligation to be greater. Transaction costs totaled approximately $13.7 million. The valuation of the common stock issued in connection with the acquisition was based on its quoted market price for 5 days before and after the announcement date, discounted to reflect the estimated effect of its trading restrictions.

The deferred purchase price obligation is expected to be paid in 2010 and will accrue interest equal to the 3 month euro interbank offered rate (“Euribor”) plus 2.35% (currently 4.48%). Since we have obtained over 95% of the outstanding shares of Rossignol through a combination of share purchases, including a public tender offer, a mandatory purchase of the remaining Rossignol shares is required under French law, which is expected to occur in the quarter ending October 31, 2005. Upon the future exercise of the Rossignol stock options, we will purchase the resulting issued shares from the Rossignol stock option holders. Certain former owners retained a minority interest of 36.37% of Cleveland, a Rossignol subsidiary. We have entered into a put/call arrangement whereby the minority owners of Cleveland can require us to buy all of their interest in Cleveland after 4.5 years and we can buy their interest at our option after 7 years, each at a purchase price generally determined by reference to a multiple of Cleveland’s annual profits and our price-earnings ratio.

In connection with the acquisition of Rossignol, we have begun to formulate the Rossignol Integration Plan (the “Plan”). The Plan covers the global operations of Rossignol and our existing businesses, and it includes the evaluation of facility relocations, nonstrategic business activities, duplicate functions and other related items. We have not finalized the Plan, but as of July 31, 2005 have recognized $5.2 million of liabilities related to the Plan, including employee relocation and severance costs, moving costs, and other costs related primarily to the relocation of our wintersports equipment sales and distribution operations in the United States. Costs that are not associated with Rossignol but relate to activities or employees of our existing operations will be charged to earnings as incurred. Certain facilities owned by Rossignol are expected to be sold in connection with the Plan, while others are anticipated to be refinanced through sale-leaseback arrangements. Assets held for sale related to the United States relocations total approximately $4.2 million at July 31, 2005. The Plan has not been finalized as it relates to facilities outside of the United States, and our estimates of expected costs related to the U.S. aspects of the Plan may change. Accordingly, as uncertainties related to the Plan are resolved, additional liabilities related to facility relocations, the elimination of nonstrategic business activities and duplicate functions, and other related costs could be recognized. These uncertainties are expected to be resolved within one year of the consummation date of the acquisition, and when determined, additional liabilities could be significant and would be recorded as adjustments to goodwill. If we have overestimated these costs, the excess will reduce goodwill in future periods. Conversely, if we have underestimated these costs, additional liabilities recognized more than one year after the consummation date of the acquisition will be recorded in earnings.

Effective May 1, 2004, we acquired DC. The initial purchase price, excluding transaction costs, included cash of approximately $52.8 million, 1.6 million restricted shares of our common stock valued at $27.3 million and the repayment of approximately $15.3 million in funded indebtedness. Transaction costs totaled $2.9 million. Of the initial purchase price, $63.4 million was paid in fiscal 2004, $3.7 million was

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paid during the nine months ended July 31, 2005, and $1.0 million is expected to be paid based on the resolution of certain remaining contingencies. The sellers also received $8.0 million during the nine months ended July 31, 2005 based on achieving certain sales and earnings targets. The sellers are entitled to future payments ranging from zero to $49.0 million if certain sales and earnings targets are achieved during the three years ending October 31, 2007. The amount of goodwill initially recorded for the transaction would increase if such contingent payments are made. Goodwill arises from synergies we believe can be achieved integrating DC’s product lines and operations with ours, and is not expected to be deductible for income tax purposes.

During the nine months ended July 31, 2005, we paid $5.3 million to the previous shareholders of the Asia/Pacific division based on the achievement of certain sales and earnings targets.

Commitments

Rossignol has approximately $19.1 million in operating lease commitments, with approximately $7.7 million in payments to be made within one year, $6.5 million in payments to be made in 2 to 3 years and $4.9 million in 4 to 5 years. Rossignol also has contracts with certain sponsored athletes with total commitments of approximately $21.4 million, with approximately $16.3 million in minimum payments under these commitments to be paid within 1 year, and $5.1 million to be paid in 2 to 3 years.

Debt Structure

On July 22, 2005, we issued $400 million in Senior Notes, which bear a coupon interest rate of 6.875% and are due April 15, 2015. The Senior Notes were issued at par value and sold in accordance with Rule 144A and Regulation S, and we intend to file a registration statement with the Securities and Exchange Commission that will enable the holders of these Senior Notes to exchange them for publicly registered notes with substantially the same terms. The Senior Notes are guaranteed on a senior unsecured basis by each of our domestic subsidiaries that guarantees any of our indebtedness or our subsidiaries’ indebtedness, or is an obligor under our existing senior secured credit facility (the “Guarantors”). We may redeem some or all of the Senior Notes after April 15, 2010 at fixed redemption prices as set forth in the indenture. In addition, prior to April 15, 2008, we may redeem up to 35% of the Senior Notes with the proceeds from certain equity offerings at a redemption price set forth in the indenture.

The indenture includes covenants that limit our ability to, among other things: incur additional debt; pay dividends on our capital stock or repurchase our capital stock; make certain investments; enter into certain types of transactions with affiliates; limit dividends or other payments by our restricted subsidiaries to us; use assets as security in other transactions; and sell certain assets or merge with or into other companies. If we experience specific kinds of changes of control, we will be required to offer to purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest. As of July 31, 2005, we were in compliance with these covenants.

In connection with the acquisition of Rossignol, we acquired approximately $365.1 million in lines of credit and long-term debt. Rossignol’s subsidiaries in the United States and Canada have unsecured, uncommitted lines of credit with banks that provide for maximum cash borrowings of approximately $164.0 million to finance the working capital and general corporate needs of these subsidiaries. At July 31, 2005, $61.5 million was outstanding on these facilities, at average interest rates of 3.0%. The lines of credit have varying expiration dates, the majority of which are renewed at the option of the banks on a yearly basis. In addition, Rossignol’s subsidiaries in the United States and Canada collectively have $6.3 million in unsecured fixed rate long-term loans outstanding as of July 31, 2005, which mature in 2006 with a weighted average interest rate of 4.5%. We intend to retire these lines of credit and term loans, pledge the assets of Rossignol’s U.S. and Canadian subsidiaries as collateral under our existing revolving credit facility and refinance any balances outstanding on these credit facilities with availability under our revolving credit facility.

Rossignol’s European subsidiaries have unsecured, uncommitted overdraft lines of credit and long-term loans with banks that provide for the seasonal working capital needs of the business and other corporate purposes. The overdraft lines of credit provide for maximum cash borrowings of approximately $219.0 million, and at July 31, 2005, $124.4 million was outstanding. The overdraft lines of credit are renewable annually at the option of the banks. Rossignol’s European subsidiaries also had approximately $154.0 million of long-term indebtedness outstanding as of July 31, 2005. This long-term indebtedness is due at

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various dates through 2010, and contains covenants that are customary for such long-term indebtedness, including, among other things, minimum financial ratios of net debt to shareholders’ equity and term debt to cash flow. The overall weighted average interest rate on this long-term debt at July 31, 2005, was 3.0%, including 3.3% on fixed rate indebtedness and 2.7% on variable rate indebtedness.

Rossignol’s European subsidiaries also had approximately $6.7 million in capital leases and other borrowings as of July 31, 2005.

Rossignol’s Japanese subsidiary had approximately $12.2 million of fixed and variable long-term indebtedness outstanding as of July 31, 2005. This long-term indebtedness is due in 2006. The weighted average interest rate on this debt was 1.2% at July 31, 2005.

At July 31, 2005, we have $197.1 million of available borrowing capacity for our Rossignol subsidiaries and $304.1 million of available borrowing capacity for our other subsidiaries.

Trade Accounts Receivable and Inventories

Excluding the $94.8 million of accounts receivable acquired with the Rossignol acquisition, consolidated accounts receivable increased 19% to $333.5 million at July 31, 2005 from $281.3 million at October 31, 2004. Accounts receivable in the Americas increased 23% to $155.1 million at July 31, 2005 from $125.8 million at October 31, 2004, while European accounts receivable increased 15% to $138.8 million from $120.7 million, and Asia/Pacific accounts receivable increased 14% to $39.6 million from $34.8 million at those same dates. Accounts receivable in the Americas increased 12% compared to July 31, 2004, while European accounts receivable increased 22% and Asia/Pacific accounts receivable increased 110% compared to July 31, 2004. In euros, European accounts receivable increased 21%, and in Australian dollars, Asia/Pacific accounts receivable increased 95%. Included in accounts receivable are approximately $19.8 million of Value Added Tax and Goods and Services Tax related to foreign accounts receivable. Such taxes are not reported as net revenues and as such, must be accounted for to accurately compute days sales outstanding. Excluding Rossignol, overall average days sales outstanding increased by approximately seven days at July 31, 2005 compared to July 31, 2004.

Excluding the $233.9 million of inventory acquired with the Rossignol acquisition, consolidated inventories increased 14% to $204.4 million at July 31, 2005 from $179.6 million at October 31, 2004. Inventories in the Americas decreased 4% to $100.7 million from $104.6 million at October 31, 2004, while European inventories increased 45% to $77.8 million from $53.7 million, and Asia/Pacific inventories increased 22% to $25.9 million from $21.3 million at October 31, 2004.

Excluding the effect of Rossignol inventories, consolidated inventories increased 19% compared to July 31, 2004. Inventories in the Americas increased 14%, while inventories in Europe increased 20%, and Asia/Pacific inventories increased 38% compared to July 31, 2004. The stronger euro and Australian dollar in relation to the U.S. dollar increased the value of the inventories by approximately $2.0 million over the prior year. Adjusting for these foreign exchange effects, consolidated inventories increased approximately 18%. Consolidated average inventory turnover decreased to approximately 4.0 at July 31, 2005 compared to approximately 4.2 for the comparable period of the prior year. Included in consolidated inventories as of July 31, 2005 is approximately $10 million of current season goods that were received earlier in the season compared to the prior year to facilitate better delivery to our customers, and $7 million related to our rapidly growing businesses in Japan and Indonesia and our new company-owned Canadian distributor. Adjusting for these factors, consolidated inventories increased approximately 9%.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. To prepare these financial statements, we must make estimates and assumptions that affect the reported amounts of assets and liabilities. These estimates also affect our reported revenues and expenses. Judgments must also be made about the disclosure of contingent liabilities. Actual results could be significantly different from these estimates. We believe that the following discussion addresses the accounting policies that are necessary to understand and evaluate our reported financial results.

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Revenue Recognition

Revenues are recognized when the risk of ownership and title passes to our customers. Generally, we extend credit to our customers and do not require collateral. Our payment terms range from net-30 to net-90, depending on the country or whether we sell directly to retailers in the country or to a distributor. None of our sales agreements with any of our customers provide for any rights of return. However, we do approve returns on a case-by-case basis at our sole discretion to protect our brands and our image. We provide allowances for estimated returns when revenues are recorded, and related losses have historically been within our expectations. If returns are higher than our estimates, our earnings would be adversely affected.

Accounts Receivable

It is not uncommon for some of our customers to have financial difficulties from time to time. This is normal given the wide variety of our account base, which includes small surf shops, medium-sized retail chains, and some large department store chains. Throughout the year, we perform credit evaluations of our customers, and we adjust credit limits based on payment history and the customer’s current creditworthiness. We continuously monitor our collections and maintain a reserve for estimated credit losses based on our historical experience and any specific customer collection issues that have been identified. Historically, our losses have been consistent with our estimates, but there can be no assurance that we will continue to experience the same credit loss rates that we have experienced in the past. Unforeseen, material financial difficulties of our customers could have an adverse impact on our profits.

Inventories

We value inventories at the cost to purchase and/or manufacture the product or the current estimated market value of the inventory, whichever is lower. We regularly review our inventory quantities on hand, and adjust values for excess and obsolete inventory based primarily on estimated forecasts of product demand and market value. Demand for our products could fluctuate significantly. The demand for our products could be negatively affected by many factors, including the following:

• weakening economic conditions,

• terrorist acts or threats,

• unanticipated changes in consumer preferences,

• reduced customer confidence in the retail market, and

• unseasonable weather.

Some of these factors could also interrupt the production and/or importation of our products or otherwise increase the cost of our products. As a result, our operations and financial performance could be negatively affected. Additionally, our estimates of product demand and/or market value could be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory.

Long-Lived Assets

We acquire tangible and intangible assets in the normal course of our business. We evaluate the recoverability of the carrying amount of these long-lived assets (including fixed assets, trademarks, licenses and other amortizable intangibles) whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when the carrying value exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. Impairments equal to the difference between the carrying value of the asset and its fair value, if any, would be recognized in operating earnings. We continually use judgment when applying these impairment rules to determine the timing of the impairment tests, the undiscounted cash flows used to assess impairments, and the fair value of a potentially impaired asset. The reasonableness of our judgment could significantly affect the carrying value of our long-lived assets.

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Goodwill

We evaluate the recoverability of goodwill at least annually based on a two-step impairment test. The first step compares the fair value of each reporting unit with its carrying amount including goodwill. If the carrying amount exceeds fair value, then the second step of the impairment test is performed to measure the amount of any impairment loss. Fair value is computed based on estimated future cash flows discounted at a rate that approximates our cost of capital. Such estimates are subject to change, and we may be required to recognize impairment losses in the future.

Income Taxes

Current income tax expense is the amount of income taxes expected to be payable for the current year. A deferred income tax asset or liability is established for the expected future consequences of temporary differences in the financial reporting and tax bases of assets and liabilities. We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the value of our deferred tax assets. If we determine that it is more likely than not that these assets will not be realized, we would reduce the value of these assets to their expected realizable value, thereby decreasing net income. Evaluating the value of these assets is necessarily based on our judgment. If we subsequently determined that the deferred tax assets, which had been written down would, in our judgment, be realized in the future, the value of the deferred tax assets would be increased, thereby increasing net income in the period when that determination was made.

Foreign Currency Translation

A significant portion of our revenues are generated in Europe, where we operate with the euro as our primary functional currency, and a smaller portion of our revenues are generated in Asia/Pacific, where we operate with the Australian dollar and Japanese yen as our functional currencies. Our European revenues in the United Kingdom are denominated in British pounds, and some European and Asia/Pacific product is sourced in U.S. dollars, both of which result in exposure to gains and losses that could occur from fluctuations in foreign exchange rates. We also have other foreign currency obligations related to our acquisitions of Quiksilver International and Quiksilver Asia/Pacific. Our assets and liabilities that are denominated in foreign currencies are translated at the rate of exchange on the balance sheet date. Revenues and expenses are translated using the average exchange rate for the period. Gains and losses from translation of foreign subsidiary financial statements are included in accumulated other comprehensive income or loss.

As part of our overall strategy to manage our level of exposure to the risk of fluctuations in foreign currency exchange rates, we enter into various foreign exchange contracts generally in the form of forward contracts. For all contracts that qualify as cash flow hedges, we record the changes in the fair value of the derivatives in other comprehensive income. We also use other derivatives that do not qualify for hedge accounting to mitigate our exposure to currency risks. These derivatives are marked to fair value with corresponding gains or losses recorded in earnings.

Business Combinations

We account for acquired businesses using the purchase method of accounting which requires that the assets and liabilities assumed be recorded at the date of acquisition at their respective fair values. Because of the expertise required to value intangible assets, we typically engage a third party valuation firm to assist management in determining those values. Valuation of intangible assets entails significant estimates and assumptions including, but not limited to, estimating future cash flows from product sales and developing appropriate discount rates. We believe that the fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions. To the extent actual results differ from those estimates, our future results of operations may be affected by charges to our statements of income. Additionally, estimates for purchase price allocations may change as subsequent information becomes available.

New Accounting Pronouncements

See Note 2 – New Accounting Pronouncements for a discussion of future pronouncements that may affect our financial reporting.

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Forward-Looking Statements

Certain words in this report like “believes”, “anticipates”, “expects”, “estimates” and similar expressions are intended to identify, in certain cases, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from the predicted results. Such factors include, among others, the following:

• general economic and business conditions,

• the acceptance in the marketplace of new products,

• the availability of outside contractors at prices favorable to us,

• the ability to source raw materials at prices favorable to us,

• currency fluctuations,

• changes in business strategy or development plans,

• availability of qualified personnel,

• changes in political, social and economic conditions and local regulations, particularly in Europe and Asia and

• our successful integration, and the future operating performance of Rossignol, and

• other factors outlined in our previously filed public documents, copies of which may be obtained without cost from us.

Given these uncertainties, investors are cautioned not to place too much weight on such statements. We are not obligated to update these forward-looking statements.

Risk Factors

Our business faces many risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of, or that we currently think are immaterial, may also impair our business operations. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could suffer and the trading price of our common stock or our Senior Notes could decline. You should consider the following risks before deciding to invest in our common stock or Senior Notes.

The apparel, sporting goods and footwear industries are each highly competitive, and if we fail to compete effectively, we could lose our market position.

The apparel, sporting goods and footwear industries are each highly competitive. We compete against a number of domestic and international designers, manufacturers and distributors of apparel, sporting goods and footwear, some of whom are significantly larger and have significantly greater financial resources than we do. In order to compete effectively, we must (1) maintain the image of our brands and our reputation for authenticity in our core boardriding and outdoor sports markets; (2) be flexible and innovative in responding to rapidly changing market demands on the basis of brand image, style, performance and quality; and (3) offer consumers a wide variety of high quality products at competitive prices.

The purchasing decisions of consumers are highly subjective and can be influenced by many factors, such as brand image, marketing programs and product design. Several of our competitors enjoy substantial competitive advantages, including greater brand recognition and greater financial resources for competitive activities, such as sales and marketing and strategic acquisitions. The number of our direct competitors and the intensity of competition may increase as we expand into other product lines or as other companies expand into our product lines. Our competitors may enter into business combinations or alliances that strengthen their competitive positions or prevent us from taking advantage of such combinations or alliances. Our competitors also may be able to respond more quickly and effectively than we can to new or changing opportunities, standards or consumer preferences. Our results of operations and market position may be adversely impacted by our competitors and the competitive pressures in the apparel, sporting goods and footwear industries.

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If we are unable to develop innovative and stylish products in response to rapid changes in consumer demands and fashion trends, we may suffer a decline in our revenues and market share.

The apparel, sporting goods and footwear industries are subject to constantly and rapidly changing consumer demands based on fashion trends and performance features. Our success depends, in part, on our ability to anticipate, gauge and respond to these changing consumer preferences in a timely manner while preserving the authenticity and quality of our brands.

Our success also depends upon our ability to continue to develop innovative products. Rossignol’s and Cleveland’s historical successes have been attributable, in part, to the introduction of sporting goods products which are perceived to represent an improvement in performance over sporting goods products already available in the market. Our future success will depend, in part, upon our continued ability to develop and introduce innovative products reflective of technological advances in the respective markets in which we compete. If we are unable to successfully introduce new outdoor sporting goods products, or if our competitors introduce superior products, customers may purchase outdoor sporting goods products from our competitors, which could adversely affect our revenues and results of operations.

As is typical with new products, market acceptance of new designs and products we may introduce is subject to uncertainty. In addition, we generally make decisions regarding product designs several months in advance of the time when consumer acceptance can be measured. If trends shift away from our products, or if we misjudge the market for our product lines, we may be faced with significant amounts of unsold finished goods inventory or other conditions which could have a material adverse effect on our results of operations.

The failure of new product designs or new product lines to gain market acceptance could also adversely affect our business and the image of our brands. Achieving market acceptance for new products may also require substantial marketing efforts and expenditures to expand consumer demand. These requirements could strain our management, financial and operational resources. If we do not continue to develop stylish and innovative products that provide better design and performance attributes than the products of our competitors and that are accepted by consumers, or if our future product lines misjudge consumer demands, we may lose consumer loyalty, which could result in a decline in our revenues and market share.

War, acts of terrorism, or the threat of either could have an adverse effect on our ability to procure our products and on the United States and/or international economies.

In the event of war or acts of terrorism or the escalation of existing hostilities, or if any are threatened, our ability to procure our products from our manufacturers for sale to our customers may be negatively affected. We import a substantial portion of our products from other countries. If it becomes difficult or impossible to import our products into the countries in which we sell our products, our sales and profit margins may be adversely affected. Additionally, war, military responses to future international conflicts and possible future terrorist attacks may lead to a downturn in the U.S. and/or international economies, which could have a material adverse effect on our results of operations.

Changes in foreign currency exchange or interest rates could affect our revenues and costs.

We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income, and product purchases of our international subsidiaries that are denominated in currencies other than their functional currencies. We are also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in U.S. dollars, and to fluctuations in interest rates related to our variable rate debt. If we are unsuccessful in using various foreign currency exchange contracts or interest rate swaps to hedge these potential losses, our profits and cash flows could be significantly reduced. In some cases, as part of our risk management strategies, we may choose not to hedge our exposure to foreign currency exchange rate changes, or we may choose to maintain variable interest rate debt. If we misjudge these risks, there could be a material adverse effect on our operating results and financial position.

Furthermore, we are exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in our consolidated financial statements due to the translation of the statements of income and balance sheets of our international subsidiaries into U.S. dollars. We use foreign currency exchange contracts to hedge the profit and loss effects of this

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translation effect; however, accounting rules do not allow us to classify these contracts as hedges, but require us to mark these contracts to fair value at the end of each financial reporting period and translate our revenues and expenses at average exchange rates during the period. As a result, the reported revenues and expenses of our international subsidiaries would decrease if the U.S. dollar increased in value in relation to other currencies, including, the euro, Australian dollar or Japanese yen.

Our business could be harmed if we fail to maintain proper inventory levels.

We maintain an inventory of selected products that we anticipate will be in high demand. We may be unable to sell the products we have ordered in advance from manufacturers or that we have in our inventory. Inventory levels in excess of customer demand may result in inventory write-downs or the sale of excess inventory at discounted or closeout prices. These events could significantly harm our operating results and impair the image of our brands. Conversely, if we underestimate consumer demand for our products or if our manufacturers fail to supply quality products in a timely manner, we may experience inventory shortages, which might result in unfilled orders, negatively impact customer relationships, diminish brand loyalty and result in lost revenues, any of which could harm our business.

Our current and potential future acquisitions and related financings may place a significant debt burden on us.

From time to time, we have pursued, and may continue to pursue, acquisitions which involve the incurrence of additional debt, such as was incurred in connection with our acquisitions of DC Shoes and Rossignol. If one or more acquisitions results in our becoming substantially more leveraged on a consolidated basis, our flexibility in responding to adverse changes in economic, business or market conditions may be adversely affected, which could have a material adverse effect on our results of operations.

Our success is dependent on our ability to protect our worldwide intellectual property rights, and our inability to enforce these rights could harm our business.

Our success depends to a significant degree upon our ability to protect and preserve our intellectual property, including copyrights, trademarks, patents, service marks, trade dress, trade secrets and similar intellectual property. We rely on the intellectual property, patent, trademark and copyright laws of the United States and other countries to protect our proprietary rights. However, we may be unable to prevent third parties from using our intellectual property without our authorization, particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States. The use of our intellectual property or similar intellectual property by others could reduce or eliminate any competitive advantage we have developed, causing us to lose sales or otherwise harm our business. If it became necessary for us to resort to litigation to protect these rights, any proceedings could be burdensome and costly and we may not prevail.

We have obtained some U.S. and foreign trademark, patents and service mark registrations, and have applied for additional ones, but cannot guarantee that any of our pending applications will be approved by the applicable governmental authorities. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise challenge these or other registrations. A failure to obtain trademark, patents or service mark registrations in the United States and in other countries could limit our ability to protect our trademarks, patents and service marks and impede our marketing efforts in those jurisdictions. The loss of such trademarks, patents and service marks, or the loss of the exclusive use of our trademarks, patents and service marks, could have a material adverse effect on our business, financial condition and results of operations. Accordingly, we devote substantial resources to the establishment and protection of our trademarks, patents and service marks on a worldwide basis and continue to evaluate the registration of additional trademarks, patents and service marks, as appropriate. We cannot assure that our actions taken to establish and protect our trademarks, patents and service marks will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as violative of their trademark or other proprietary rights.

Our products may infringe the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.

We cannot be certain that our products do not and will not infringe the intellectual property rights of others. We may be subject to legal proceedings and claims in the ordinary course of our business, including

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claims of alleged infringement of the intellectual property rights of third parties by us or our customers in connection with their use of our products. Any such claims, whether or not meritorious, could result in costly litigation and divert the efforts of our personnel. Moreover, should we be found liable for infringement, we may be required to enter into licensing agreements (if available on acceptable terms or at all) or to pay damages and cease making or selling certain products. Moreover, we may need to redesign or rename some of our products to avoid future infringement liability. Any of the foregoing could cause us to incur significant costs and prevent us from manufacturing or selling our products.

Our current executive officers and management are critical to our success, and the loss of any of these individuals could harm our business, brands and image.

We are heavily dependent on our current executive officers and management. We believe that our success depends to a significant degree upon the continued contributions of our executive officers and other key personnel, both individually and as a group. The loss of any of our executive officers or management or the inability to attract or retain qualified personnel could delay the development and introduction of new products, harm our ability to sell our products, damage the image of our brands and prevent us from executing our business strategy.

If we are unable to maintain and expand our endorsements by professional athletes, our ability to market and sell our products may be harmed.

A key element of our marketing strategy has been to obtain endorsements from prominent athletes, which contributes to the authenticity and image of our brands. We believe that this strategy has been an effective means of gaining brand exposure worldwide and creating broad appeal for our products. We cannot assure you that we will be able to maintain our existing relationships with these individuals in the future or that we will be able to attract new athletes to endorse our products. Larger companies with greater access to capital for athlete sponsorship may in the future increase the cost of sponsorship for these athletes to levels we may choose not to match. If this were to occur, our sponsored athletes may terminate their relationships with us and endorse the products of our competitors and we may be unable to obtain endorsements from other, comparable athletes.

We also are subject to risks related to the selection of athletes whom we choose to endorse our products. We may select athletes who are unable to perform at expected levels or who are not sufficiently marketable. In addition, negative publicity concerning any of our athletes could harm our brand and adversely impact our business. If we are unable in the future to secure prominent athletes and arrange athlete endorsements of our products on terms we deem to be reasonable, we may be required to modify our marketing platform and to rely more heavily on other forms of marketing and promotion, which may not prove to be as effective. In either case, our inability to obtain endorsements from professional athletes could adversely affect our ability to market and sell our products, resulting in loss of revenues and a loss of profitability.

Our failure to integrate Rossignol successfully and on a timely basis into our operations could reduce our profitability.

We expect that the acquisition of Rossignol will result in certain synergies, business opportunities and growth prospects. We, however, may never realize these expected synergies, business opportunities and growth prospects. In addition, integrating operations will require significant efforts and expenses. Personnel may leave or be terminated because of the acquisition of Rossignol. Our management may have its attention diverted while trying to integrate Rossignol. If these or other factors limit our ability to integrate the operations of Rossignol successfully or on a timely basis, our expectations of future results of operations, including certain cost savings and synergies expected to result from the acquisition of Rossignol, may not be met. In addition, our growth and operating strategies for Rossignol’s business may be different from the strategies that Rossignol was previously pursuing. If these strategies are not effective, it could have a material adverse effect on our business, financial condition and results of operations.

Employment related matters, such as unionization, may affect our profitability.

As of July 31, 2005, less than 25 of Quiksilver’s foreign employees were unionized. In addition, as of March 31, 2005, approximately 150 of Rossignol’s foreign employees were unionized. We have little control over the union activities in these areas and could face difficulties in the future. Unionized

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personnel in France may render any possible Rossignol factory relocation strategies more difficult by adding a risk of production blockage by a strike. There can be no assurance that we will not experience work stoppages or other labor problems in the future with our unionized and non-unionized employees or that we will be able to renew the collective bargaining agreements on similar or more favorable terms.

We may be subject to restrictions due to minority interests in Cleveland.

We directly or indirectly own approximately 64% of the outstanding capital stock of Cleveland, with the remaining approximately 36% held by certain other existing Cleveland shareholders. As a result, conflicts of interest may develop between us and the minority shareholders of Cleveland, and we may need to devote significant management attention to dealing with the minority shareholders. In addition, we will owe fiduciary duties to such minority shareholders which may restrict our control of Cleveland and impede our ability to transfer cash and assets to and from Cleveland or to realize the full benefits of capital that we provide to Cleveland. Although we have entered into a shareholders agreement with these minority shareholders which addresses some of these concerns, no assurances can be given that the minority interest in Cleveland will not cause conflicts in the future.

Cyclical trends in apparel, sporting goods and footwear retailing could have a material adverse effect on our results of operations.

The apparel, sporting goods and footwear industries historically have been subject to substantial cyclical variations. As domestic and international economic conditions change, trends in discretionary consumer spending become unpredictable and could be subject to reductions due to uncertainties about the future. When consumers reduce discretionary spending, purchases of specialty apparel and footwear and sporting goods may decline. A general reduction in consumer discretionary spending due to a recession in the domestic and/or international economies or uncertainties regarding future economic prospects could have a material adverse effect on our results of operations.

The demand for our products is seasonal and sales of our apparel and sporting goods products are dependent upon the weather.

Our revenues and operating results are subject to seasonal trends when measured on a quarterly basis. For example, sales of apparel products, including Rossignol, are typically lower during our first fiscal quarter when compared with our other fiscal quarters and a substantial amount of Rossignol’s operating profit has historically been generated from August through December at the peak of Rossignol’s winter equipment shipping activities, while Rossignol’s operating profit in other months has historically been lower or negative. These trends are dependent on many factors, including the holiday seasons, weather, consumer demand, markets in which we operate and numerous other factors beyond our control. Given the seasonality of our business, unseasonable weather during our peak selling periods and/or misjudgment in consumer demands could have a material adverse effect on our financial condition and results of operations.

Factors affecting international commerce and our international operations may seriously harm our financial condition.

With acquisition of Rossignol, we will generate a majority of our revenues from outside of the United States, and we anticipate that revenue from our international operations could account for an increasingly larger portion of our future revenues. Our international operations are directly related to and dependent on the volume of international trade and foreign market conditions. International commerce and our international operations are subject to many risks, including:

• recessions in foreign economies,

• the adoption and expansion of trade restrictions,

• limitations on repatriation of earnings,

• difficulties in protecting our intellectual property or enforcing our intellectual property rights under the laws of other countries,

• longer receivables collection periods and greater difficulty in collecting accounts receivable,

• difficulties in managing foreign operations,

• social, political and economic instability,

• unexpected changes in regulatory requirements,

• ability to finance foreign operations,

• tariffs and other trade barriers, and

• U.S. government licensing requirements for exports.

29

The occurrence or consequences of any of these risks may restrict our ability to operate in the affected regions and decrease the profitability of our international operations, which may seriously harm our financial condition.

As a result of our acquisition of Rossignol, we face greater challenges in managing several brands.

While we believe that we have significant experience in managing our apparel and footwear brands and their respective channels of distribution, with our acquisition of Rossignol, we have further penetrated the wintersports and golf markets. If we are unable to effectively manage our multiple product lines in multiple markets, our profitability may be reduced.

If the popularity of the sports associated with our brands were to decrease, our revenues could be adversely affected and our results of operations could be impaired.

We will generate a significant portion of our revenues from the sale of products directly associated with boardriding, wintersports and golf. The demand for such products is directly related to the popularity of boardriding activities, wintersports and golf and the number of respective participants worldwide. If the demand for boardriding, wintersports and/or golf equipment and accessories decreases, our revenues could be adversely affected and our results of operations could be impaired. In addition, if participation in boardriding activities, wintersports and/or golf were to decrease, sales of many of our products could decrease.

Our industry is subject to pricing pressures that may adversely impact our financial performance.

We manufacture many of our products offshore because products manufactured offshore generally cost less to make, primarily because labor costs are lower. Many of our competitors also source their product requirements offshore to achieve lower costs, possibly in locations with lower costs than our offshore operations, and those competitors may use these cost savings to reduce prices. To remain competitive, we must adjust our prices from time to time in response to these industry-wide pricing pressures. Our financial performance may be negatively affected by these pricing pressures if:

• we are forced to reduce our prices and we cannot reduce our production costs, or

• our production costs increase and we cannot increase our prices.

Changing international trade regulations and the elimination of quotas on imports of textiles and apparel may increase competition in the apparel industry.

Future quotas, duties or tariffs may have a material adverse effect on our business, financial condition and results of operations. We currently import raw materials and/or finished garments into the majority of countries in which we sell our apparel products. Substantially all of our import operations are subject to:

• quotas imposed by bilateral textile agreements between the countries where our apparel-producing facilities are located and foreign countries, and

• customs duties imposed by the governments where our apparel-producing facilities are located on imported products, including raw materials.

In addition, the countries in which our apparel products are manufactured or to which they are imported may from time to time impose additional new quotas, duties, tariffs, requirements as to where raw materials must be purchased, additional workplace regulations or other restrictions on our imports or adversely modify existing restrictions. Adverse changes in these costs and restrictions could harm our business. We cannot assure you that future trade agreements will not provide our competitors with an advantage over us, or increase our costs, either of which could have a material adverse effect on our business, results of operations and financial condition.

Our apparel-producing operations are also subject to the effects of international trade agreements and regulations such as the North American Free Trade Agreement, and the activities and regulations of the World Trade Organization, referred to as the WTO. Generally, such trade agreements benefit our apparel business by reducing or eliminating the duties and/or quotas assessed on products manufactured in a particular country. However, trade agreements can also impose requirements that negatively impact our apparel business, such as limiting the countries from which we can purchase raw materials and setting quotas on products that may be imported into the United States from a particular country. In addition, the

30

WTO may commence a new round of trade negotiations that liberalize textile trade. This increased competition could have a material adverse effect on our business, results of operations and financial condition.

We rely on third-party manufacturers and problems with or loss of suppliers or raw materials could harm our business and results of operations.

Substantially all of our apparel products are produced by independent manufacturers. We face the risk that these third-party manufacturers with whom we contract to produce our products may not produce and deliver our products on a timely basis or at all. We cannot be certain that we will not experience operational difficulties with our manufacturers, such as reductions in the availability of production capacity, errors in complying with product specifications, insufficient quality control, failures to meet production deadlines or increases in manufacturing costs. The failure of any manufacturer to perform to our expectations could result in supply shortages for certain products and harm our business.

The capacity of our manufacturers to manufacture our products also is dependent, in part, upon the availability of raw materials. Our manufacturers may experience shortages of raw materials, which could result in delays in deliveries of our products by our manufacturers or in increased costs to us. Any shortage of raw materials or inability of a manufacturer to manufacture or ship our products in a timely manner, or at all, could impair our ability to ship orders of our products in a cost-efficient, timely manner and could cause us to miss the delivery requirements of our customers. As a result, we could experience cancellations of orders, refusals to accept deliveries or reductions in our prices and margins, any of which could harm our financial performance and results of operations.

Rossignol relies on a number of unaffiliated suppliers to provide it with raw materials for its products.

Substantially all of the raw materials for Rossignol’s products are sold to it by unaffiliated suppliers located primarily in Europe and Asia. Rossignol has no exclusive or significant long-term contracts with its suppliers and competes with other companies for such suppliers’ output. Although we believe that Rossignol has established solid relationships with its suppliers, the inability to maintain such relationships or to find additional sources to cover future growth could have a material adverse effect on our Rossignol business.

Failure to achieve and maintain effective internal controls could result in a loss of investor confidence in our financial reports and in turn have a material adverse effect on our stock price.

Our internal controls over financial reporting may not be considered effective, which could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock price. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, beginning with our Annual Report on Form 10-K for the fiscal year ending October 31, 2005, we will be required to furnish a report by our management on our internal controls over financial reporting. Such report will contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of our fiscal year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. The report will also contain a statement that our independent registered public accounting firm has issued an attestation report on management’s assessment of internal controls.

We are currently performing the system and process documentation needed to comply with Section 404 and the new standard issued by the Public Company Accounting Oversight Board. This process is both costly and challenging. During this process, if we identify one or more material weaknesses in our internal controls over financial reporting, we will be unable to assert that such internal controls are effective. If we are unable to assert that our internal controls are effective as of October 31, 2005 (or if our independent registered public accounting firm is unable to attest that our management’s report is fairly stated or they are unable to express an opinion on our management’s evaluation or on the effectiveness of our internal controls), investors could lose confidence in the accuracy and completeness of our financial reports, which in turn could have an adverse effect on the price of our securities.

31

Our failure to comply with, or the imposition of liability under, environmental laws and regulations could result in significant costs.

Some of our facilities and operations are subject to various environmental laws and regulations which govern, among other things, the use and storage of hazardous materials, the storage and disposal of solid and hazardous wastes, the discharge of pollutants into the air, water and land, and the cleanup of contamination. Violations of these requirements could result in significant fines or penalties being imposed on us. Discovery of contamination for which we are responsible, the enactment of new laws and regulations, or changes in how existing requirements are enforced, could require us to incur additional costs for compliance or subject us to unexpected liabilities.

Our significant debt obligations could limit our flexibility in managing our business and expose us to certain risks.

We are highly leveraged. Our high degree of leverage may have important consequences to you, including the following:

• we may have difficulty satisfying our obligations under the senior notes or other indebtedness and, if we fail to comply with these requirements, an event of default could result;

• we may be required to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other general corporate activities;

• covenants relating to our indebtedness may limit our ability to obtain additional financing for working capital, capital expenditures and other general corporate activities;

• covenants relating to our indebtedness may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

• we may be more vulnerable to the impact of economic downturns and adverse developments in our business; and

• we may be placed at a competitive disadvantage against any less leveraged competitors.

The occurrence of any one of these events could have a material adverse effect on our business, financial condition, results of operations, prospects and ability to satisfy our obligations under the notes.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our revolving credit facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows would decrease.

32

PART I – FINANCIAL INFORMATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency

Our foreign currency and interest rate risks are discussed in the our Annual Report on Form 10-K for the year ended October 31, 2004 in Item 7a.

Quiksilver Europe’s statements of income are translated from euros into U.S. dollars at average exchange rates in effect during the reporting period. When the euro strengthens compared to the U.S. dollar there is a positive effect on Quiksilver Europe’s results as reported in the Company’s Consolidated Financial Statements. Conversely, when the U.S. dollar strengthens, there is a negative effect. Likewise, the statements of income of Quiksilver Asia/Pacific are translated from Australian dollars and Japanese yen into U.S. dollars, and there is a positive effect on our results from a stronger Australian dollar or Japanese yen in comparison to the U.S. dollar.

European revenues increased 16% in euros during the nine months ended July 31, 2005 compared to the nine months ended July 31, 2004. As measured in U.S. dollars and reported in the Company’s Consolidated Statements of Income, European revenues increased 22% as a result of a stronger euro versus the U.S. dollar in comparison to the prior year.

Asia/Pacific revenues increased 48% in Australian dollars during the nine months ended July 31, 2005 compared to the nine months ended July 31, 2004. As measured in U.S. dollars and reported in the Company’s Consolidated Statements of Income, Asia/Pacific revenues increased 55% as a result of a stronger Australian dollar versus the U.S. dollar in comparison to the prior year. Thus far in the Company’s fourth quarter, the Australian dollar continues to be stronger relative to the U.S. dollar in comparison to the prior year.

PART I – FINANCIAL INFORMATION

Item 4. Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of July 31, 2005, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of July 31, 2005.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended July 31, 2005 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

33

PART II – OTHER INFORMATION

Item 6. Exhibits

(a) Exhibits

4.1	Indenture for the 6 7/8% Senior Notes due 2015 dated July 22, 2005, among Quiksilver, Inc., the subsidiary guarantors set forth therein and Wilmington Trust Company, as trustee, including the form of Global Note attached thereto (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed July 25, 2005).
10.1	Registration Rights Agreement for the 6 7/8% Senior Notes due 2015 dated as of July 22, 2005, among Quiksilver, Inc., the Guarantors and the initial purchasers (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed July 25, 2005).
10.2	Purchase Agreement for the 6 7/8% Senior Notes due 2015 dated July 14, 2005, among Quiksilver, Inc., certain subsidiaries of Quiksilver, Inc. and the purchasers listed therein.
10.3	English translation of Subscription Agreement for the 3.231% EUR 50,000,000 notes due July, 2010 dated July 11, 2005 among Skis Rossignol S.A. and certain subsidiaries and Societe Generale Bank & Trust.
31.1	Rule 13a-14(a)/15d-14(a) Certifications – Principal Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certifications – Principal Financial Officer
32.1	32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 – Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 – Chief Financial Officer

34

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	QUIKSILVER, INC., a Delaware corporation
September 9, 2005	/s/ Steven L. Brink
	Steven L. Brink
	Chief Financial Officer and Treasurer (Principal Accounting Officer)

35

EXHIBIT INDEX

Exhibits	Description
4.1	Indenture for the 6 7/8% Senior Notes due 2015 dated July 22, 2005, among Quiksilver, Inc., the subsidiary guarantors set forth therein and Wilmington Trust Company, as trustee, including the form of Global Note attached thereto (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed July 25, 2005).
10.1	Registration Rights Agreement for the 6 7/8% Senior Notes due 2015 dated as of July 22, 2005, among Quiksilver, Inc., the Guarantors and the initial purchasers (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed July 25, 2005).
10.2	Purchase Agreement for the 6 7/8% Senior Notes due 2015 dated July 14, 2005, among Quiksilver, Inc., certain subsidiaries of Quiksilver, Inc. and the purchasers listed therein.
10.3	English translation of Subscription Agreement for the 3.231% EUR 50,000,000 notes due July, 2010 dated July 11, 2005 among Skis Rossignol S.A. and certain subsidiaries and Societe Generale Bank & Trust.
31.1	Rule 13a-14(a)/15d-14(a) Certifications — Principal Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certifications — Principal Financial Officer
32.1	32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Financial Officer

EX-10.2

                                                                    Exhibit 10.2

                                                                  EXECUTION COPY

                                QUIKSILVER, INC.

                                  $400,000,000

                          6 7/8% Senior Notes due 2015

                               Purchase Agreement

                                                                   July 14, 2005

J.P. Morgan Securities Inc.
   as Representative of the
   several Initial Purchasers listed
   in Schedule 1 hereto
c/o J.P. Morgan Securities Inc.
270 Park Avenue
New York, New York 10017

Ladies and Gentlemen:

     Quiksilver, Inc., a Delaware corporation (the "Company"), proposes to issue
and sell to the several Initial Purchasers listed in Schedule 1 hereto (the
"Initial Purchasers"), for whom you are acting as representative (the
"Representative"), $400,000,000 principal amount of its 6 7/8% Senior Notes due
2015 (the "Securities"). The Securities will be issued pursuant to an Indenture
to be dated as of July 22, 2005 among the Company, the guarantors listed in
Schedule 2 hereto (the "Guarantors") and Wilmington Trust Company, a Delaware
banking corporation, as trustee (the "Trustee"), and will be guaranteed on an
unsecured senior basis by each of the Guarantors (the "Guarantees").

     The Securities will be sold to the Initial Purchasers without being
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon an exemption therefrom. The Company has prepared a preliminary
offering memorandum dated July 5, 2005 (the "Preliminary Offering Memorandum")
and will prepare an offering memorandum dated the date hereof (the "Offering
Memorandum") setting forth information concerning the Company and the
Securities. Copies of the Preliminary Offering Memorandum have been, and copies
of the Offering Memorandum will be, delivered by the Company to the Initial
Purchasers pursuant to the terms of this Agreement. The Company hereby confirms
that it has authorized the use of the Preliminary Offering Memorandum and the
Offering Memorandum in connection with

the offering and resale of the Securities by the Initial Purchasers in the
manner contemplated by this Agreement. Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Offering Memorandum.
References herein to the Preliminary Offering Memorandum and the Offering
Memorandum shall be deemed to refer to and include any document incorporated by
reference therein.

     Holders of the Securities (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of a
Registration Rights Agreement, to be dated the Closing Date (as defined below)
and substantially in the form attached hereto as Exhibit A (the "Registration
Rights Agreement"), pursuant to which the Company and the Guarantors will agree
to file one or more registration statements with the Securities and Exchange
Commission (the "Commission") providing for the registration under the
Securities Act of the Securities or the Exchange Securities referred to (and as
defined) in the Registration Rights Agreement.

     The Securities are being issued and sold in connection with the acquisition
by the Company of shares representing a minimum of 80% of the voting and
economic interests (the "Acquisition") of Skis Rossignol S.A. ("Rossignol" and,
together with the Company, the "Combined Company") pursuant to a Purchase
Agreement dated as of April 12, 2005 (the "Acquisition Agreement") and a tender
offer under French law (the "Tender Offer"). In connection with the Acquisition,
the Company entered into (i) an Amended and Restated Credit Agreement, dated as
of June 3, 2005, among the Company, Quiksilver Americas, Inc., as borrower, the
Lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent
(the "Senior Credit Agreement"), providing for a senior secured asset-based
revolving credit facility (the "Senior Secured Facility") and (ii) a Credit
Agreement, dated as of April 12, 2005, among the Company, the Lenders named
therein and JPMorgan Chase Bank, N.A., as administrative agent (the "Interim
Agreement"), providing for a $350,000,000 interim facility (the "Interim
Facility"). The Securities are being issued and sold to repay a portion of the
amounts outstanding under the Senior Secured Facility and all of the amounts
outstanding under the Interim Facility and to finance the Acquisition as
described in the Offering Memorandum under the heading "Use of proceeds". For
purposes of this Agreement, the term "Rossignol Transactions" means,
collectively, the Acquisition, entering into the Acquisition Agreement, the
Senior Credit Agreement and the Interim Agreement, the offering of the
Securities and the other related transactions as described in the Offering
Memorandum under the heading "The Rossignol acquisition".

     In the event that, prior to the Closing Date, the Company does not receive
official notice from the Autorite des Marches Financiers (the "AMF") and
Euronext Paris that a sufficient number of shares has been tendered in the
Tender Offer and are not withdrawable such that the Company will own shares
representing a minimum of 80% of the voting and economic interests of Rossignol
upon consummation of the Tender Offer, the Company will, on or prior to the
Closing Date, execute an escrow agreement, in the form and substance to be
agreed between the Company and the Initial Purchasers, which shall conform in
all material respects with the description thereof including in the Offering
Memorandum (the "Escrow Agreement"), and will direct the deposit in an escrow
account (the "Escrow Account") with Wilmington Trust Company, as escrow


                                        2

agent (the "Escrow Agent"), the net proceeds of the offering of the Securities,
together with an additional $18,638,888.90, such that the escrowed funds (the
"Escrowed Funds") are in an amount sufficient to redeem the Securities on
November 2, 2005 in cash at a redemption price equal to 100.0% of the principal
amount of the Securities plus accrued and unpaid interest thereon to such date.
The Escrow Agreement shall provide that the Escrowed Funds shall only be
released and paid out pursuant to the terms of the Escrow Agreement.

     The Company hereby confirms its agreement with the several Initial
Purchasers concerning the purchase and resale of the Securities, as follows:

     1. Purchase and Resale of the Securities. (a) The Company agrees to issue
and sell the Securities to the several Initial Purchasers as provided in this
Agreement, and each Initial Purchaser, on the basis of the representations,
warranties and agreements set forth herein and subject to the conditions set
forth herein, agrees, severally and not jointly, to purchase from the Company
the respective principal amount of Securities set forth opposite such Initial
Purchaser's name in Schedule 1 hereto at a price equal to 97.25% of the
principal amount thereof plus accrued interest, if any, from July 22, 2005 to
the Closing Date. The Company will not be obligated to deliver any of the
Securities except upon payment for all the Securities to be purchased as
provided herein.

     (b) The Company understands that the Initial Purchasers intend to offer the
Securities for resale on the terms set forth in the Offering Memorandum. Each
Initial Purchaser, severally and not jointly, represents, warrants and agrees
that:

          (i) it is a qualified institutional buyer within the meaning of Rule
     144A under the Securities Act (a "QIB") and an accredited investor within
     the meaning of Rule 501(a) under the Securities Act;

          (ii) it has not solicited offers for, or offered or sold, and will not
     solicit offers for, or offer or sell, the Securities by means of any form
     of general solicitation or general advertising within the meaning of Rule
     502(c) of Regulation D under the Securities Act ("Regulation D") or in any
     manner involving a public offering within the meaning of Section 4(2) of
     the Securities Act; and

          (iii) it has not solicited offers for, or offered or sold, and will
     not solicit offers for, or offer or sell, the Securities as part of their
     initial offering except:

               (A) within the United States to persons whom it reasonably
          believes to be QIBs in transactions pursuant to Rule 144A under the
          Securities Act ("Rule 144A") and in connection with each such sale, it
          has taken or will take reasonable steps to ensure that the purchaser
          of the Securities is aware that such sale is being made in reliance on
          Rule 144A; or

               (B) in accordance with the restrictions set forth in Annex A
          hereto.


                                        3

     (c) Each Initial Purchaser acknowledges and agrees that the Company and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Sections 5(f) and 5(h), counsel for the Company and counsel for the Initial
Purchasers, respectively, may rely (including, for purposes of the Company's
representations and warranties in Section 3 hereof) upon the accuracy of the
representations and warranties of the Initial Purchasers, and compliance by the
Initial Purchasers with their agreements, contained in paragraph (b) above
(including Annex A hereto), and each Initial Purchaser hereby consents to such
reliance.

     (d) The Company acknowledges and agrees that the Initial Purchasers may
offer and sell Securities to or through any affiliate of an Initial Purchaser
and that any such affiliate may offer and sell Securities purchased by it to or
through any Initial Purchaser.

     (e) The Company acknowledges and agrees that the Initial Purchasers are
acting solely in the capacity of an arm's length contractual counterparty to the
Company with respect to the offering of the Securities contemplated hereby
(including in connection with determining the terms of the offering) and not as
a financial advisor or a fiduciary to, or an agent of, the Company or any other
person. Additionally, no Initial Purchaser is advising the Company or any other
person as to any legal, tax, investment, accounting or regulatory matters in any
jurisdiction. The Company shall consult with its own advisors concerning such
matters and shall be responsible for making their own independent investigation
and appraisal of the transactions contemplated hereby, and the Initial
Purchasers shall have no responsibility or liability to the Company with respect
thereto. Any review by the Initial Purchasers of the Company, the transactions
contemplated hereby or other matters relating to such transactions will be
performed solely for the benefit of the Initial Purchasers and shall not be on
behalf of the Company.

     2. Payment and Delivery. (a) Payment for and delivery of the Securities
will be made at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington
Avenue, New York, NY at 9:00 A.M., New York City time on July 22, 2005, or at
such other time or place on the same or such other date, not later than the
fifth business day thereafter, as the Representative and the Company may agree
upon in writing. The time and date of such payment and delivery is referred to
herein as the "Closing Date".

     (b) In the event that, prior to the Closing Date, the Company does not
receive official notice from the AMF and Euronext Paris that a sufficient number
of shares has been tendered in the Tender Offer and are not withdrawable such
that the Company will own shares representing a minimum of 80% of the voting and
economic interests of Rossignol upon consummation of the Tender Offer, delivery
of the Securities by the Company shall be made to the Initial Purchasers against
payment of the purchase price by the Initial Purchasers, subject to the deposit
of such funds in the Escrow Account, together with an additional $18,638,888.90
provided by the Company, such that the Escrowed Funds are in an amount
sufficient to redeem the Securities on November 2, 2005 in cash at a redemption
price equal to 100.0% of the principal amount of the Securities plus accrued and
unpaid interest to such date; and payment for the Securities


                                        4

by the Initial Purchasers shall be made against delivery to the Initial
Purchasers of the Securities as set forth below and effected by wire transfer of
immediately available funds to the Escrow Account. In the event that the
Acquisition is consummated on or prior to the Closing Date, payment for the
Securities shall be made by wire transfer in immediately available funds to the
account(s) specified by the Company to the Representative against delivery to
the nominee of The Depository Trust Company, for the account of the Initial
Purchasers, of one or more global notes representing the Securities
(collectively, the "Global Notes"), with any transfer taxes payable in
connection with the sale of the Securities duly paid by the Company. The Global
Notes will be made available for inspection by the Representative not later than
1:00 P.M., New York City time, in each case, on the business day prior to the
Closing Date.

     3. Representations and Warranties of the Company and the Guarantors. The
Company and the Guarantors jointly and severally represent and warrant to each
Initial Purchaser that:

     (a) Offering Memorandum. The Preliminary Offering Memorandum, as of its
date, did not, and the Offering Memorandum, in the form first used by the
Initial Purchasers to confirm sales of the Securities and as of the Closing
Date, will not, contain any untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that
the Company and the Guarantors make no representation or warranty with respect
to any statements or omissions made in reliance upon and in conformity with
information relating to any Initial Purchaser furnished to the Company in
writing by such Initial Purchaser through the Representative expressly for use
in the Preliminary Offering Memorandum and the Offering Memorandum.

     (b) Incorporated Documents. The documents incorporated by reference in the
Preliminary Offering Memorandum and the Offering Memorandum, when filed with the
Commission, conformed or will conform, as the case may be, in all material
respects to the requirements of the Exchange Act and the rules and regulations
of the Commission thereunder, and did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.

     (c) Financial Statements.

          (i) The financial statements and the related notes thereto of the
     Company and its subsidiaries included or incorporated by reference in the
     Preliminary Offering Memorandum and the Offering Memorandum (A) comply as
     to form in all material respects of the accounting requirements of the
     Securities Act and Exchange Act, as applicable, and the rules and
     regulations thereunder; (B) have been prepared in accordance with U.S.
     generally accepted accounting principles ("U.S. GAAP") consistently applied
     (provided that, the unaudited financial statements do not include all of
     the information and notes required in accordance


                                        5

     with U.S. GAAP and are subject to normal year-end adjustments); (C) are
     true, accurate and complete in all material respects; (D) present fairly in
     all material respects the financial position of the Company and its
     subsidiaries as of the dates indicated and the results of their operations
     and the changes in their cash flows for the periods specified; and (E)
     disclose all material liabilities (contingent and otherwise) of the Company
     and its subsidiaries. The other financial information relating to the
     Company and its subsidiaries included or incorporated by reference in the
     Preliminary Offering Memorandum and the Offering Memorandum has been
     derived from the accounting records of the Company and its subsidiaries and
     presents fairly in all material respects the information shown thereby.

          (ii) To the Company's knowledge, the financial statements and the
     related notes thereto of Rossignol and its subsidiaries included in the
     Preliminary Offering Memorandum and the Offering Memorandum (A) comply in
     all material respects with the applicable requirements of the Securities
     Act and the Exchange Act, as applicable, and the rules and regulations
     thereunder; (B) have been prepared in accordance with French generally
     accepted accounting principles ("French GAAP") applied on a consistent
     basis throughout the periods covered thereby; (C) have been reconciled from
     French GAAP to U.S. GAAP in accordance with U.S. GAAP; (D) are true,
     accurate and complete in all material respects; (E) present fairly in all
     material respects the financial position of Rossignol and its subsidiaries
     as of the dates indicated and the results of their operations and changes
     in their cash flows for the periods specified; and (F) disclose all
     material liabilities (contingent and otherwise) of Rossignol and its
     subsidiaries. The other financial information relating to Rossignol and its
     subsidiaries included in the Preliminary Offering Memorandum and the
     Offering Memorandum has been derived from the accounting records of
     Rossignol and its subsidiaries and presents fairly in all material respects
     the information shown thereby.

          (iii) The pro forma financial information and the related notes
     thereto included or incorporated by reference in the Preliminary Offering
     Memorandum and the Offering Memorandum have been prepared in accordance
     with the Commission's rules and guidance with respect to pro forma
     financial information, and the assumptions underlying such pro forma
     financial information are reasonable and are set forth in the Preliminary
     Offering Memorandum and the Offering Memorandum.

     (d) No Material Adverse Change. Since the date of the most recent financial
statements of the Company or Rossignol, as applicable, included or incorporated
by reference in the Preliminary Offering Memorandum and the Offering Memorandum,
(i) there has not been any material change in the capital stock or long-term
debt of the Company or any of its subsidiaries or, to the Company's knowledge,
Rossignol or any of its subsidiaries, or any dividend or distribution of any
kind declared, set aside for payment, paid or made by the Company or, to the
Company's knowledge, Rossignol on any class of capital stock, or any material
adverse change in or affecting the business,


                                        6

properties, management, financial position, results of operations or prospects
of the Company and its subsidiaries taken as a whole or, to the Company's
knowledge, Rossignol and its subsidiaries taken as a whole; (ii) neither the
Company or any of its subsidiaries nor, to the Company's knowledge, Rossignol or
any of its subsidiaries has entered into any transaction (other than the
Acquisition) or agreement that is material to the Combined Company and its
subsidiaries taken as a whole or incurred any liability or obligation, direct or
contingent, that is material to the Combined Company and its subsidiaries taken
as a whole; and (iii) neither the Company or any of its subsidiaries nor, to the
Company's knowledge, Rossignol or any of its subsidiaries has sustained any
material loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or arbitrator
or governmental or regulatory authority, except in each case as otherwise
disclosed in the Preliminary Offering Memorandum and the Offering Memorandum.

     (e) Organization and Good Standing. Each of the Company and its
subsidiaries and, to the Company's knowledge, Rossignol and its subsidiaries
have been duly organized and are validly existing and in good standing under the
laws of their respective jurisdictions of organization, are duly qualified to
conduct business and are in good standing in each jurisdiction in which their
respective ownership or lease of property or the conduct of their respective
businesses requires such qualification, and have all power and authority
(corporate, partnership, limited liability company and otherwise) necessary to
own or hold their respective properties and to conduct the businesses in which
they are engaged and to conduct the businesses as currently proposed to be
conducted following the consummation of the Acquisition as described in the
Offering Memorandum, except where the failure to be so qualified or have such
power or authority would not, individually or in the aggregate, have a material
adverse effect on the business, properties, management, financial position,
results of operations or prospects of the Company and its subsidiaries taken as
a whole or on the performance by the Company and the Guarantors of their
obligations under the Securities and the Guarantees (a "Material Adverse
Effect"). After consummation of the Acquisition, the Company will not own or
control, directly or indirectly, any corporation, association or other entity
other than the subsidiaries listed in Schedule 3 to this Agreement.

     (f) Capitalization. The Company has a capitalization as set forth in the
Preliminary Offering Memorandum and the Offering Memorandum under the heading
"Capitalization"; and all the outstanding shares of capital stock or other
equity interests of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable (except, in the case of
any foreign subsidiary, for directors' qualifying shares and except as otherwise
described in the Offering Memorandum) and are owned directly or indirectly by
the Company, free and clear of any lien, charge, encumbrance, security interest,
restriction on voting or transfer or any other claim of any third party, other
than liens, charges, encumbrances, security interests and restrictions under the
Senior Secured Facility and the Interim Facility.

     (g) Due Authorization.


                                        7

          (i) The Company and each of the Guarantors have full right, power and
     authority to execute and deliver this Agreement, the Securities, the
     Indenture (including each Guarantee set forth therein), the Exchange
     Securities, the Escrow Agreement and the Registration Rights Agreement
     (collectively, the "Transaction Documents") and to perform their respective
     obligations hereunder and thereunder; and all action required to be taken
     for the due and proper authorization, execution and delivery of each of the
     Transaction Documents and the consummation of the transactions contemplated
     thereby has been duly and validly taken.

          (ii) At the time of entering into each of the agreements in connection
     with the Rossignol Transactions, including without limitation, the
     Acquisition Agreement, the Senior Credit Agreement and the Interim
     Agreement (collectively, the "Rossignol Transaction Documents"), the
     Company had full right, power and authority to execute and deliver each
     such agreement or instrument; the Company has full right, power and
     authority to perform its respective obligations under each Rossignol
     Transaction Document; and all action required to be taken for the due and
     proper authorization, execution and delivery of each of the Rossignol
     Transaction Documents and the consummation of the Rossignol Transactions
     has been duly and validly taken.

     (h) The Indenture. The Indenture has been duly authorized by the Company
and each of the Guarantors and, when duly executed and delivered in accordance
with its terms by each of the parties thereto, will constitute a valid and
legally binding agreement of the Company and each of the Guarantors enforceable
against the Company and each of the Guarantors in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability (collectively, the
"Enforceability Exceptions"); and on the Closing Date, the Indenture will
conform in all material respects to the requirements of the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), and the rules and regulations
of the Commission applicable to an indenture that is qualified thereunder.

     (i) The Securities and the Guarantees. The Securities have been duly
authorized by the Company and, when duly executed, authenticated, issued and
delivered as provided in the Indenture and paid for as provided herein, will be
duly and validly issued and outstanding and will constitute valid and legally
binding obligations of the Company enforceable against the Company in accordance
with their terms, subject to the Enforceability Exceptions, and will be entitled
to the benefits of the Indenture; and the Guarantees have been duly authorized
by each of the Guarantors and, when the Securities have been duly executed,
authenticated, issued and delivered as provided in the Indenture and paid for as
provided herein, will be valid and legally binding obligations of each of the
Guarantors, enforceable against each of the Guarantors in accordance with their
terms, subject to the Enforceability Exceptions, and will be entitled to the
benefits of the Indenture.


                                        8

     (j) The Exchange Securities. On the Closing Date, the Exchange Securities
(including the related guarantees) will have been duly authorized by the Company
and each of the Guarantors and, when duly executed, authenticated, issued and
delivered as contemplated by the Registration Rights Agreement, will be duly and
validly issued and outstanding and will constitute valid and legally binding
obligations of the Company, as issuer, and each of the Guarantors, as
guarantors, enforceable against the Company and each of the Guarantors in
accordance with their terms, subject to the Enforceability Exceptions, and will
be entitled to the benefits of the Indenture.

     (k) Purchase and Registration Rights Agreements. This Agreement has been
duly authorized, executed and delivered by the Company and each of the
Guarantors; and the Registration Rights Agreement has been duly authorized by
the Company and each of the Guarantors and, when duly executed and delivered in
accordance with its terms by each of the parties thereto, will constitute a
valid and legally binding agreement of the Company and each of the Guarantors
enforceable against the Company and each of the Guarantors in accordance with
its terms, subject to the Enforceability Exceptions, and except that rights to
indemnity and contribution thereunder may be limited by applicable law and
public policy.

     (l) Acquisition Agreement. The Acquisition Agreement has been duly
authorized, executed and delivered by the Company and, to the Company's
knowledge, Rossignol, and the transactions contemplated thereby have been duly
authorized by the Company and, to the Company's knowledge, Rossignol; the
Acquisition Agreement constitutes a legally valid and binding agreement of the
Company and, to the Company's knowledge, Rossignol, enforceable against the
Company and, to the Company's knowledge, Rossignol in accordance with its terms,
subject to the Enforceability Exceptions.

     (m) Escrow Agreement. The Escrow Agreement and the transactions
contemplated thereby have been duly authorized by the Company and, when duly
executed and delivered by the Company, and when duly executed and delivered by
the Escrow Agent, the Escrow Agreement will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to the Enforceability Exceptions.

     (n) Other Rossignol Transaction Documents. Each of the Rossignol
Transaction Documents not referred to in the preceding clause (l) has been duly
authorized, executed and delivered by the Company and, to the Company's
knowledge, Rossignol, if a signatory thereto, and constitutes a valid and
legally binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to the Enforceability Exceptions.

     (o) Descriptions of the Transaction Documents and the Rossignol Transaction
Documents. Each Transaction Document and each Rossignol Transaction Document
conforms in all material respects to the description thereof contained in the
Preliminary Offering Memorandum and the Offering Memorandum.


                                        9

     (p) No Violation or Default. Neither the Company or any of its subsidiaries
nor, to the Company's knowledge, Rossignol or any of its subsidiaries is (i) in
violation of its charter or by-laws or similar organizational documents; (ii) in
default, and no event has occurred that, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or any of
its subsidiaries or Rossignol or any of its subsidiaries, as applicable, is a
party or by which the Company or any of its subsidiaries or Rossignol or any of
its subsidiaries, as applicable, is bound or to which any of the property or
assets of the Company or any of its subsidiaries or Rossignol or any of its
subsidiaries, as applicable, is subject; or (iii) in violation of any law or
statute or any judgment, order, rule or regulation of any court or arbitrator or
governmental or regulatory authority, except, in the case of clauses (ii) and
(iii) above, for any such default or violation that would not, individually or
in the aggregate, have a Material Adverse Effect.

     (q) No Conflicts. The execution, delivery and performance by the Company
and each of the Guarantors of each of the Transaction Documents to which each is
a party; the execution, delivery and performance by the Company and Rossignol,
if a signatory thereto, of each of the Rossignol Transaction Documents; the
issuance and sale of the Securities (including the Guarantees) and compliance by
the Company and each of the Guarantors with the terms thereof; the consummation
of the transactions contemplated by the Transaction Documents; and the
consummation of the Rossignol Transactions will not (i) conflict with or result
in a breach or violation of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Senior Credit Agreement, the Interim
Agreement and the Escrow Agreement) upon any property or assets, whether
currently owned or hereafter acquired, of the Company or any of its subsidiaries
or, to the Company's knowledge, Rossignol or any of its subsidiaries pursuant
to, any indenture, mortgage, deed of trust, loan agreement, pledge, security
interest or other agreement or instrument to which the Company or any of its
subsidiaries or, to the Company's knowledge, Rossignol or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or,
to the Company's knowledge, Rossignol or any of its subsidiaries is bound or to
which any of the property or assets, whether currently owned or hereafter
acquired, of the Company or any of its subsidiaries or, to the Company's
knowledge, Rossignol or any of its subsidiaries is subject, (ii) result in any
violation of the provisions of the charter or by-laws or similar organizational
documents of the Company or any of its subsidiaries or, to the Company's
knowledge, Rossignol or any of its subsidiaries or (iii) result in the violation
or contravention of any law or statute, treaty or any judgment, order, rule or
regulation, determination, policy statement or interpretation of any court or
arbitrator or governmental or regulatory authority applicable to the Company or
any of its subsidiaries or, to the Company's knowledge, applicable to Rossignol
or any of its subsidiaries, except, in the case of clauses (i) and (iii) above,
for any such conflict, breach, violation, default or contravention that would
not, individually or in the aggregate, have a Material Adverse Effect. The
execution, delivery and performance by the Company and Rossignol, as applicable,
of each of the Rossignol Transaction Documents and the consummation of the
Rossignol Transactions, will not result in any material breach or violation of,
or constitute a material default or change of


                                       10

control under, or cause the acceleration of, any existing indebtedness of the
Company or, to the Company's knowledge, Rossignol.

     (r) No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority is required for (i) the execution, delivery and
performance by the Company and each of the Guarantors of each of the Transaction
Documents to which each is a party; (ii) the execution, delivery and performance
by the Company and Rossignol, as applicable, of each of the Rossignol
Transaction Documents; (iii) the issuance and sale of the Securities (including
the Guarantees) and compliance by the Company and each of the Guarantors with
the terms thereof; (iv) the consummation of the transactions contemplated by the
Transaction Documents; and (v) the consummation of the Rossignol Transactions,
except for such consents, approvals, authorizations, orders and registrations or
qualifications as may be required (x) under applicable state securities laws in
connection with the purchase and resale of the Securities by the Initial
Purchasers and (y) with respect to the Exchange Securities (including the
related guarantees) under the Securities Act and applicable state securities
laws as contemplated by the Registration Rights Agreement.

     (s) Legal Proceedings. Except as disclosed in the Preliminary Offering
Memorandum and the Offering Memorandum, there are no legal, governmental or
regulatory investigations, actions, suits or proceedings pending to which the
Company or any of its subsidiaries or, to the Company's knowledge, Rossignol or
any of its subsidiaries is a party or to which any property of the Company or
any of its subsidiaries or, to the Company's knowledge, Rossignol or any of its
subsidiaries is the subject that, individually or in the aggregate, if
determined adversely to the Company, Rossignol or any of their respective
subsidiaries, could reasonably be expected to have a (i) Material Adverse Effect
or (ii) a Material Adverse Effect on the performance of the Transaction
Documents or the Rossignol Transaction Documents or the consummation of any of
the transactions contemplated hereby and thereby; and no threats of such
investigations, actions, suits or proceedings have been made to the Company or
any of its subsidiaries or, to the Company's knowledge, Rossignol or any of its
subsidiaries, or, to the knowledge of the Company and each of the Guarantors, no
such investigations, actions, suits or proceedings are contemplated by any
governmental or regulatory authority or threatened by others.

     (t) Independent Accountants.

          (i) Deloitte & Touche LLP, who have certified certain financial
     statements of the Company and its subsidiaries, are independent registered
     public accountants with respect to the Company and its subsidiaries within
     the meaning of the Securities Act and the applicable published rules and
     regulations thereunder and the Public Company Accounting Oversight Board
     ("PCAOB").

          (ii) KPMG S.A., who have certified certain financial statements of
     Rossignol and its subsidiaries, are independent registered public
     accountants with respect to (x) Rossignol and its subsidiaries within the
     meaning of all applicable accounting standards and (y) the Company and its
     subsidiaries within


                                       11

     the meaning of the Securities Act and the applicable published rules and
     regulations thereunder and the PCAOB.

     (u) Title to Real and Personal Property. Each of the Company and its
subsidiaries and, to the Company's knowledge, Rossignol and its subsidiaries has
good and marketable title in fee simple to, or has valid rights to lease or
otherwise use, all items of real and personal property that are material to the
respective businesses of the Company and its subsidiaries and Rossignol and its
subsidiaries, in each case free and clear of all liens, encumbrances, claims and
defects and imperfections of title except those that (i) do not materially
interfere with the use made and proposed to be made, as described in the
Offering Memorandum, of such property by the Company, Rossignol or their
respective subsidiaries, as applicable, (ii) could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect or (iii) are
disclosed in the Offering Memorandum.

     (v) Title to Intellectual Property. Each of the Company and its
subsidiaries or, to the Company's knowledge, Rossignol and its subsidiaries (i)
own, possess or are licensed to use adequate rights to use all material patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), including (x) all extensions,
renewals, reissues, divisions, continuations and continuations-in-part of any of
the foregoing and (y) all rights to sue for past, present and future
infringements of any of the foregoing, necessary for the conduct of their
respective businesses as currently conducted in all material respects, and the
conduct of their respective businesses does not and will not conflict with or
infringe on, in any material respect, any such rights of others; and (ii) except
for claims that would not have a Material Adverse Effect, have not received any
notice of any claim of infringement of or conflict with any such rights of
others, and no claim has been asserted and is pending by others challenging or
questioning the use of any such rights of the Company and its subsidiaries or,
to the knowledge of the Company, Rossignol and its subsidiaries, as the case may
be, or the validity or effectiveness of any such rights, nor do the Company and
its subsidiaries or, to the knowledge of the Company, Rossignol and its
subsidiaries, know of any valid basis for any such claim.

     (w) Investment Company Act. Neither the Company nor any of its subsidiaries
is, and after giving effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the Offering Memorandum none
of them will be, an "investment company" or an entity "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations of the Commission thereunder
(collectively, "Investment Company Act").

     (x) Taxes. Each of the Company and its subsidiaries and, to the Company's
knowledge, Rossignol and its subsidiaries has paid all material federal, state,
local and foreign taxes and filed all material tax returns required to be paid
or filed through the date hereof; and except as otherwise disclosed in the
Preliminary Offering


                                       12

Memorandum and the Offering Memorandum, there is no material tax deficiency that
has been, or could reasonably be expected to be, asserted against the Company or
any of its subsidiaries or any of their respective properties or assets or, to
the Company's knowledge, Rossignol or any of its subsidiaries or any of their
respective properties or assets.

     (y) Licenses and Permits. The Company and its subsidiaries and, to the
Company's knowledge, Rossignol and its subsidiaries possess all licenses,
certificates, permits and other authorizations issued by, and have made all
declarations and filings with, the appropriate federal, state, local or foreign
governmental or regulatory authorities that are necessary for the ownership or
lease of their respective properties or the conduct of their respective
businesses as described in the Preliminary Offering Memorandum and the Offering
Memorandum, except where the failure to possess or make the same would not,
individually or in the aggregate, have a Material Adverse Effect; and except as
described in the Preliminary Offering Memorandum and the Offering Memorandum,
neither the Company or any of its subsidiaries nor, to the Company's knowledge,
Rossignol or any of its subsidiaries has received notice of any revocation or
modification of any such license, certificate, permit or authorization or has
any reason to believe that any such license, certificate, permit or
authorization will not be renewed in the ordinary course.

     (z) No Labor Disputes. No labor disturbance by or dispute with employees of
the Company or any of its subsidiaries or, to the Company's knowledge, Rossignol
or any of its subsidiaries exists or, to the knowledge of the Company and each
of the Guarantors, is contemplated or threatened.

     (aa) Compliance With Environmental Laws. The Company and its subsidiaries
(i) are and have been in compliance with any and all applicable federal, state,
local and foreign laws, rules, regulations, decisions and orders relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively, "Environmental
Laws"); (ii) have received and are in compliance with all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses; and (iii) have not received notice of, and are not
aware of any reasonable basis for, any actual or potential liability or
obligations concerning the presence, investigation, remediation, disposal or
release of, or exposure to, hazardous or toxic substances or wastes, pollutants
or contaminants, except in any such case for any such failure to comply with, or
failure to receive required permits, licenses or approvals, or liability or
obligations, as would not, individually or in the aggregate, have a Material
Adverse Effect.

     (bb) Compliance With ERISA. Each employee benefit plan, within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), that is maintained, administered or contributed to (or
required to be contributed to) by the Company or any of its affiliates for
employees or former employees of the Company or its affiliates has been
maintained in compliance with its terms and the requirements of any applicable
statutes, orders, rules and regulations, in all material respects, including but
not limited to ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"); no event set forth in Section 4043(c) of ERISA has


                                       13

occurred during the five-year period prior to the date on which this
representation is made with respect to any such plan and no termination of any
such plan has occurred, and no lien in favor of the Pension Benefit Guaranty
Corporation or a plan has arisen, during such five-year period; no prohibited
transaction, within the meaning of Section 406 of ERISA or Section 4975 of the
Code, has occurred with respect to any such plan excluding transactions effected
pursuant to a statutory or administrative exemption; for each such plan that is
subject to the funding rules of Section 412 of the Code or Section 302 of ERISA,
no "accumulated funding deficiency" as defined in Section 412 of the Code has
been incurred, whether or not waived, and the fair market value of the assets of
each such plan (based on those assumption used to fund such plans) exceeds the
present value of all benefits accrued under such plan. Neither the Company nor
any of its affiliates maintains, contributes to or is required to contribute to
any "multiemployer plan", as such term is defined in Section 4001(a)(3) of
ERISA.

     (cc) Accounting Controls. Each of the Company and its subsidiaries and, to
the Company's knowledge, Rossignol and its subsidiaries maintain systems of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with their respective management's
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with their respective
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

     (dd) Sarbanes-Oxley. The Company is in compliance with applicable
provisions of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") that are
effective and is actively taking steps to ensure that it will be in compliance
with other applicable provisions of the Sarbanes-Oxley Act upon the
effectiveness of such provisions.

     (ee) Disclosure Controls and Procedures. The Company has established and
maintains "disclosure controls and procedures" (as defined in Rules 13a-15(e)
and 15d-15(e) of the Exchange Act); the Company's "disclosure controls and
procedures" (i) are reasonably designed to ensure that all information (both
financial and non-financial) required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and
regulations of the Exchange Act; (ii) that all such information is accumulated
and communicated to the Company's management as appropriate to allow timely
decisions regarding required disclosure and to make the certifications of the
chief executive officer and chief financial officer of the Company required
under the Exchange Act with respect to such reports; (iii) have been evaluated
for effectiveness as of the date of the filing of its most recent annual or
quarterly report filed with the Commission; and (iv) are effective in all
material respects to perform the functions for which they were established.

     (ff) No Material Weaknesses.


                                       14

          (i) Since the date of the filing of the Company's Annual Report on
     Form 10-K for the year ended October 31, 2004, the Company's auditors and
     the audit committee of the board of directors of the Company have not been
     advised of (A) any significant deficiencies or material weaknesses in the
     design or operation of internal controls which could adversely affect the
     Company's ability to record, process, summarize and report financial data;
     or (B) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the Company's internal
     controls.

          (ii) Based on the Company's evaluation of Rossignol's internal
     controls and procedures, the Company is not aware of (A) any significant
     deficiencies or material weaknesses in the design or operation of internal
     controls which could adversely affect Rossignol's ability to record,
     process, summarize and report financial data; or (B) any fraud, whether or
     not material, that involves management or other employees who have a
     significant role in Rossignol's internal controls.

     (gg) Insurance. The Company and its subsidiaries and, to the Company's
knowledge, Rossignol and its subsidiaries have insurance covering their
respective properties, operations, personnel and businesses, including business
interruption insurance, which insurance is in amounts and insures against such
losses and risks as are adequate to protect the Company and its subsidiaries and
their respective businesses and Rossignol and its subsidiaries and their
respective businesses, as applicable; and neither the Company or any of its
subsidiaries nor, to the Company's knowledge, Rossignol or any of its
subsidiaries has (i) received notice from any insurer or agent of such insurer
that capital improvements or other expenditures are required or necessary to be
made in order to continue such insurance or (ii) any reason to believe that it
will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage at reasonable cost from similar
insurers as may be necessary to continue its business.

     (hh) No Unlawful Payments. Neither the Company or any of its subsidiaries
nor, to the Company's knowledge, Rossignol or any of its subsidiaries nor, to
the knowledge of the Company and each of the Guarantors, any director, officer,
agent, employee or other person associated with or acting on behalf of the
Company, Rossignol or any of their respective subsidiaries has (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment.

     (ii) Solvency. On and immediately after the Closing Date, the Company
(after giving effect to the issuance of the Securities, the Acquisition and the
other transactions related thereto as described in the Offering Memorandum) will
be Solvent. As used in this paragraph, the term "Solvent" means, with respect to
a particular date, that on such date (i) the present fair market value (or
present fair saleable value) of the assets of the


                                       15

Company is not less than the total amount required to pay the liabilities of the
Company on its total existing debts and liabilities (including contingent
liabilities) as they become absolute and matured; (ii) the Company is able to
realize upon its assets and pay its debts and other liabilities, contingent
obligations and commitments as they mature and become due in the normal course
of business; (iii) assuming consummation of the issuance of the Securities as
contemplated by this Agreement and the Offering Memorandum, the Company is not
incurring debts or liabilities beyond its ability to pay as such debts and
liabilities mature; (iv) the Company is not engaged in any business or
transaction, and does not propose to engage in any business or transaction, for
which its property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which the Company is
engaged; and (v) the Company is not a defendant in any civil action that would
result in a judgment that the Company is or would become unable to satisfy.

     (jj) No Restrictions on Subsidiaries. Except for restrictions under the
Senior Secured Facility, the Interim Facility and the Leasehold Improvement Loan
made by Union Bank of California, N.A., in each case as disclosed in the
Offering Memorandum, no subsidiary of the Company or, to the Company's
knowledge, Rossignol is currently prohibited, directly or indirectly, under any
agreement or other instrument to which it is a party or is subject, from paying
any dividends to the Company or Rossignol, as applicable, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company or
Rossignol, as applicable, any loans or advances to such subsidiary from the
Company or Rossignol, as applicable, or from transferring any of such
subsidiary's properties or assets to the Company or Rossignol, as applicable, or
any other subsidiary of the Company or Rossignol, as applicable.

     (kk) No Broker's Fees. Neither the Company or any of its subsidiaries nor
Rossignol or any of its subsidiaries is a party to any contract, agreement or
understanding with any person (other than this Agreement) that would give rise
to a valid claim against any of them or any Initial Purchaser for a brokerage
commission, finder's fee or like payment in connection with the offering and
sale of the Securities.

     (ll) Rule 144A Eligibility. On the Closing Date, the Securities will not be
of the same class as securities listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in an automated
inter-dealer quotation system; and each of the Preliminary Offering Memorandum
and the Offering Memorandum, as of its respective date, contains or will contain
all the information that, if requested by a prospective purchaser of the
Securities, would be required to be provided to such prospective purchaser
pursuant to Rule 144A(d)(4) under the Securities Act.

     (mm) No Integration. Neither the Company nor any of its affiliates (as
defined in Rule 501(b) of Regulation D) has, directly or through any agent,
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Securities Act), that is or will be
integrated with the sale of the Securities in a manner that would require
registration of the Securities under the Securities Act.


                                       16

     (nn) No General Solicitation or Directed Selling Efforts. None of the
Company or any of its affiliates or any other person acting on its or their
behalf (other than the Initial Purchasers, as to which no representation is
made) has (i) solicited offers for, or offered or sold, the Securities by means
of any form of general solicitation or general advertising within the meaning of
Rule 502(c) of Regulation D or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act or (ii) engaged in any
directed selling efforts within the meaning of Regulation S under the Securities
Act ("Regulation S"), and all such persons have complied with the offering
restrictions requirement of Regulation S.

     (oo) Securities Law Exemptions. Assuming the accuracy of the
representations and warranties of the Initial Purchasers contained in Section
1(b) (including Annex A hereto) and their compliance with their agreements set
forth therein, it is not necessary, in connection with the issuance and sale of
the Securities to the Initial Purchasers and the offer, resale and delivery of
the Securities by the Initial Purchasers in the manner contemplated by this
Agreement and the Offering Memorandum, to register the Securities under the
Securities Act or to qualify the Indenture under the Trust Indenture Act.

     (pp) No Stabilization. Neither the Company nor, to the Company's knowledge,
Rossignol nor any of the Guarantors has taken, directly or indirectly, any
action designed to or that could reasonably be expected to cause or result in
any stabilization or manipulation of the price of the Securities.

     (qq) Margin Rules. Neither the issuance, sale and delivery of the
Securities nor the application of the proceeds thereof by the Company as
described in the Offering Memorandum will violate Regulation T, U or X of the
Board of Governors of the Federal Reserve System or any other regulation of such
Board of Governors.

     (rr) Forward-Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Preliminary Offering Memorandum and the Offering
Memorandum has been made or reaffirmed without a reasonable basis or has been
disclosed other than in good faith.

     (ss) Statistical and Market Data. Nothing has come to the attention of the
Company that has caused the Company to believe that the statistical and
market-related data included or incorporated by reference in the Preliminary
Offering Memorandum and the Offering Memorandum is not based on or derived from
sources that are reliable and accurate in all material respects.

     (tt) Disclosure. The statements in the Offering Memorandum under the
headings "Description of the other indebtedness," "Description of notes,"
"Exchange offer and registration rights agreement" and "Certain United States
federal income tax considerations" fairly summarize the matters therein
described.


                                       17

     (uu) No Registration Rights. There are no contracts, agreements or
understandings between the Company, on the one hand, and any person, on the
other hand, granting such person the right to require the Company, as the case
may be, to file a registration statement under the Securities Act with respect
to any securities of the Company owned or to be owned by such person or to
require the Company to include such securities in any securities being
registered pursuant to any other registration statement filed by the Company
under the Securities Act.

     4. Further Agreements of the Company and the Guarantors. The Company and
each of the Guarantors jointly and severally covenant and agree with each
Initial Purchaser that:

     (a) Delivery of Copies. The Company will deliver to the Initial Purchasers
as many copies of the Preliminary Offering Memorandum and the Offering
Memorandum (including all amendments and supplements thereto) as the
Representative may reasonably request.

     (b) Offering Memorandum, Amendments or Supplements. Before finalizing the
Offering Memorandum or making or distributing any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum or filing with the
Commission any document that will be incorporated by reference therein, the
Company will furnish to the Representative and counsel for the Initial
Purchasers a copy of the proposed Offering Memorandum, amendment or supplement
or document to be incorporated by reference therein for review, and will not
distribute any such proposed Offering Memorandum, amendment or supplement or
file any such document with the Commission to which the Representative may
reasonably object, except for documents filed under the Exchange Act as required
by applicable law.

     (c) Notice to the Representative. The Company will advise the
Representative promptly, and confirm such advice in writing, (i) of the issuance
by any governmental or regulatory authority of any order preventing or
suspending the use of the Preliminary Offering Memorandum or the Offering
Memorandum or the initiation or threatening of any proceeding for that purpose;
(ii) of the occurrence of any event at any time prior to the completion of the
initial offering of the Securities as a result of which the Offering Memorandum
as then amended or supplemented would include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing when the Offering Memorandum
is delivered to a purchaser, not misleading; and (iii) of the receipt by the
Company of any notice with respect to any suspension of the qualification of the
Securities for offer and sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and the Company will use its
reasonable best efforts to prevent the issuance of any such order preventing or
suspending the use of the Preliminary Offering Memorandum or the Offering
Memorandum or suspending any such qualification of the Securities and, if any
such order is issued, will obtain as soon as possible the withdrawal thereof.


                                       18

     (d) Ongoing Compliance of the Offering Memorandum. If at any time prior to
the completion of the initial offering of the Securities (i) any event shall
occur or condition shall exist as a result of which the Offering Memorandum as
then amended or supplemented would include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances existing when the Offering
Memorandum is delivered to a purchaser, not misleading or (ii) it is necessary
to amend or supplement the Offering Memorandum to comply with law, the Company
will immediately notify the Initial Purchasers thereof and forthwith prepare
and, subject to paragraph (b) above, furnish to the Initial Purchasers such
amendments or supplements to the Offering Memorandum (or any document to be
filed with the Commission and incorporated by reference therein) as may be
necessary so that the statements in the Offering Memorandum as so amended or
supplemented (or including such document to be incorporated by reference
therein) will not, in the light of the circumstances existing when the Offering
Memorandum is delivered to a purchaser, be misleading or so that the Offering
Memorandum will comply with law.

     (e) Blue Sky Compliance. The Company will qualify the Securities for offer
and sale under the securities or Blue Sky laws of such jurisdictions as the
Representative shall reasonably request and will continue such qualifications in
effect so long as required for the offering and resale of the Securities;
provided that neither the Company nor any of the Guarantors shall be required to
(i) qualify as a foreign corporation or other entity or as a dealer in
securities in any such jurisdiction where it would not otherwise be required to
so qualify, (ii) file any general consent to service of process in any such
jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it
is not otherwise so subject.

     (f) Clear Market. During the period from the date hereof through and
including the date that is ninety (90) days after the date hereof, the Company
and each of the Guarantors will not, without the prior written consent of the
Representative, offer, sell, contract to sell or otherwise dispose of any debt
securities issued or guaranteed by the Company or any of the Guarantors and
having a tenor of more than one year.

     (g) Use of Proceeds. The Company will apply the net proceeds from the sale
of the Securities as described in the Offering Memorandum under the heading "Use
of Proceeds".

     (h) Supplying Information. While the Securities remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company and each of the Guarantors will, during any period
in which the Company is not subject to and in compliance with Section 13 or
15(d) of the Exchange Act, furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon the request of
such holders or such prospective purchasers, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

     (i) PORTAL and DTC. The Company will assist the Initial Purchasers in
arranging for the Securities to be designated Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") Market securities in accordance
with the rules


                                       19

and regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL Market and for the Securities to be
eligible for clearance and settlement through The Depository Trust Company
("DTC").

     (j) No Resales by the Company. Until the issuance of the Exchange
Securities, the Company will not, and will not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the Securities
that have been acquired by any of them, except for Securities purchased by the
Company or any of its affiliates and resold in a transaction registered under
the Securities Act.

     (k) No Integration. Neither the Company nor any of its affiliates (as
defined in Rule 501(b) of Regulation D) will, directly or through any agent,
sell, offer for sale, solicit offers to buy or otherwise negotiate in respect
of, any security (as defined in the Securities Act), that is or will be
integrated with the sale of the Securities in a manner that would require
registration of the Securities under the Securities Act.

     (l) No General Solicitation or Directed Selling Efforts. None of the
Company or any of its affiliates or any other person acting on its or their
behalf (other than the Initial Purchasers, as to which no covenant is given)
will (i) solicit offers for, or offer or sell, the Securities by means of any
form of general solicitation or general advertising within the meaning of Rule
502(c) of Regulation D or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act or (ii) engage in any directed
selling efforts within the meaning of Regulation S, and all such persons will
comply with the offering restrictions requirement of Regulation S.

     (m) No Stabilization. Neither the Company nor any of the Guarantors will
take, directly or indirectly, any action designed to or that could reasonably be
expected to cause or result in any stabilization or manipulation of the price of
the Securities.

     5. Conditions of Initial Purchasers' Obligations. The obligation of each
Initial Purchaser to purchase Securities on the Closing Date as provided herein
is subject to the performance by the Company and each of the Guarantors of their
respective covenants and other obligations hereunder and to the following
additional conditions:

     (a) Representations and Warranties. The representations and warranties of
the Company and the Guarantors contained herein shall be true and correct on the
date hereof and on and as of the Closing Date; and the statements of the
Company, the Guarantors and their respective officers made in any certificates
delivered pursuant to this Agreement shall be true and correct on and as of the
Closing Date.

     (b) No Downgrade. Subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded the
Securities or any other debt securities or preferred stock issued or guaranteed
by the Company or any of the Guarantors by any "nationally recognized
statistical rating organization", as such term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act; and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, or has changed its outlook with respect to, its rating of the


                                       20

Securities or of any other debt securities or preferred stock issued or
guaranteed by the Company or any of the Guarantors (other than an announcement
with positive implications of a possible upgrading).

     (c) No Material Adverse Change. Subsequent to the execution and delivery of
this Agreement, no event or condition of a type described in Section 3(d) hereof
shall have occurred or shall exist, which event or condition is not described in
the Offering Memorandum (excluding any amendment or supplement thereto or any
document filed with the Commission after the date hereof and incorporated by
reference therein) and the effect of which in the judgment of the Representative
makes it impracticable or inadvisable to proceed with the offering, sale or
delivery of the Securities on the terms and in the manner contemplated by this
Agreement and the Offering Memorandum.

     (d) Officer's Certificate. The Representative shall have received on and as
of the Closing Date a certificate of an executive officer of the Company and of
each Guarantor who has specific knowledge of the Company's or such Guarantor's
financial matters and is satisfactory to the Representative (i) confirming that
such officer has carefully reviewed the Offering Memorandum and, to the
knowledge of such officer, the representation set forth in Section 3(a) hereof
is true and correct, (ii) confirming that the other representations and
warranties of the Company and the Guarantors in this Agreement are true and
correct and that the Company and the Guarantors have complied with all
agreements and satisfied all conditions on their part to be performed or
satisfied hereunder at or prior to the Closing Date and (iii) to the effect set
forth in paragraphs (b) and (c) above.

     (e) Comfort Letters. On the date of this Agreement and on the Closing Date,

          (i) Deloitte & Touche LLP shall have furnished to the Representative,
     at the request of the Company, letters, dated the respective dates of
     delivery thereof and addressed to the Initial Purchasers, in form and
     substance reasonably satisfactory to the Representative, containing
     statements and information of the type customarily included in accountants'
     "comfort letters" to underwriters with respect to the (x) financial
     statements and certain financial information of the Company and its
     subsidiaries and (y) pro forma financial information and the related notes
     thereto contained in the Preliminary Offering Memorandum and the Offering
     Memorandum; provided that the letter delivered on the Closing Date shall
     use a "cut-off" date no more than three business days prior to the Closing
     Date; and

          (ii) KPMG S.A. shall have furnished to the Representative, at the
     request of the Company, letters, dated the respective dates of delivery
     thereof and addressed to the Initial Purchasers, in form and substance
     reasonably satisfactory to the Representative, containing statements and
     information of the type customarily included in accountants' "comfort
     letters" to underwriters with respect to the financial statements and
     certain financial information of Rossignol and its subsidiaries; provided
     that the letter delivered on the Closing Date shall use a "cut-off" date no
     more than three business days prior to the Closing Date.


                                       21

     (f) Opinion of Counsel for the Company. Hewitt & O'Neil LLP, counsel for
the Company, shall have furnished to the Representative, at the request of the
Company, their written opinion, dated the Closing Date and addressed to the
Initial Purchasers, in form and substance reasonably satisfactory to the
Representative, to the effect set forth in Annex B hereto.

     (g) Opinion of Special Counsel for the Company. Skadden, Arps, Slate,
Meagher & Flom LLP & Affiliates, local counsel to the Company in the State of
New York, shall have furnished to the Representative, at the request of the
Company, their written opinion, dated the Closing Date and addressed to the
Initial Purchasers, in form and substance reasonably satisfactory to the
Representative, to the effect set forth in Annex C.

     (h) Opinion of General Counsel. Charles Exon, Executive Vice President,
Business & Legal Affairs, Secretary and General Counsel of the Company, shall
have furnished to the Representative, at the request of the Company, his written
opinion, dated the Closing Date and addressed to the Initial Purchasers, in form
and substance reasonably satisfactory to the Representative, to the effect set
forth in Annex D hereto.

     (i) Opinion of Counsel for the Initial Purchasers. The Representative shall
have received on and as of the Closing Date an opinion and negative assurance
letter of Simpson Thacher & Bartlett LLP, counsel for the Initial Purchasers,
with respect to such matters as the Representative may reasonably request, and
such counsel shall have received such documents and information as they may
reasonably request to enable them to pass upon such matters.

     (j) No Legal Impediment to Issuance. No action shall have been taken and no
statute, rule, regulation or order shall have been enacted, adopted or issued by
any federal, state or foreign governmental or regulatory authority that would,
as of the Closing Date, prevent the issuance or sale of the Securities or the
issuance of the Guarantees; and no injunction or order of any federal, state or
foreign court shall have been issued that would, as of the Closing Date, prevent
the issuance or sale of the Securities or the issuance of the Guarantees.

     (k) Good Standing. The Representative shall have received on and as of the
Closing Date satisfactory evidence of the good standing of the Company and the
Guarantors in their respective jurisdictions of organization and their good
standing in such other jurisdictions as the Representative may reasonably
request, in each case in writing or any standard form of telecommunication, from
the appropriate governmental authorities of such jurisdictions.

     (l) Registration Rights Agreement. The Initial Purchasers shall have
received a counterpart of the Registration Rights Agreement that shall have been
executed and delivered by a duly authorized officer of the Company and each of
the Guarantors.


                                       22

     (m) PORTAL and DTC. The Securities shall have been approved by the NASD for
trading in the PORTAL Market and shall be eligible for clearance and settlement
through DTC.

     (n) Additional Documents. On or prior to the Closing Date, the Company and
the Guarantors shall have furnished to the Representative such further
certificates and documents as the Representative may reasonably request.

     (o) Escrow Agreement. In the event that, prior to the Closing Date, the
Company does not receive official notice from the AMF and Euronext Paris that a
sufficient number of shares have been tendered in the Tender Offer and are not
withdrawable such that the Company will own shares representing a minimum of 80%
of the voting and economic interests of Rossignol upon consummation of the
Tender Offer, the Initial Purchasers shall have received counterparts of the
Escrow Agreement, which shall have been executed and delivered by a duly
authorized officer of each of the Company and the Escrow Agent, and the Company
shall have deposited $18,638,888.90 in the Escrow Account (in addition to the
net proceeds from the offering of the Securities deposited in the Escrow Account
pursuant to Section 2 of this Agreement) in accordance with the provisions of
the Escrow Agreement.

     (p) Management Comfort Letter. On the date of this Agreement and on the
Closing Date, Steven Brink, the Chief Executive Officer and Treasurer of the
Company, shall have furnished to the Representative, at the request of the
Company, letters, dated the respective dates of delivery thereof and addressed
to the Initial Purchasers, in form and substance reasonably satisfactory to the
Representative, to the effect set forth in Annex E hereto.

          All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.

     6. Indemnification and Contribution.

     (a) Indemnification of the Initial Purchasers. The Company and each of the
Guarantors jointly and severally agree to indemnify and hold harmless each
Initial Purchaser, its affiliates, directors and officers and each person, if
any, who controls such Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, legal
fees and other expenses reasonably incurred in connection with any suit, action
or proceeding or any claim asserted, as such fees and expenses are incurred),
joint or several, that arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum (or any amendment or supplement
thereto) or any omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims,


                                       23

damages or liabilities arise out of, or are based upon, any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with any information relating to any Initial Purchaser furnished to
the Company in writing by such Initial Purchaser through the Representative
expressly for use therein; provided, that with respect to any such untrue
statement in or omission from the Preliminary Offering Memorandum, the indemnity
agreement contained in this paragraph (a) shall not inure to the benefit of any
Initial Purchaser to the extent that the sale to the person asserting any such
loss, claim, damage or liability was an initial resale by such Initial Purchaser
and any such loss, claim, damage or liability of or with respect to such Initial
Purchaser results from the fact that both (i) a copy of the Offering Memorandum
(excluding any documents incorporated by reference therein) was not sent or
given to such person at or prior to the written confirmation of the sale of such
Securities to such person and (ii) the untrue statement in or omission from such
Preliminary Offering Memorandum was corrected in the Offering Memorandum unless,
in either case, such failure to deliver the Offering Memorandum was a result of
non-compliance by the Company with the provisions of Section 4 hereof.

     (b) Indemnification of the Company. Each Initial Purchaser agrees,
severally and not jointly, to indemnify and hold harmless the Company, each of
the Guarantors, each of their respective directors and officers and each person,
if any, who controls the Company or any of the Guarantors within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the indemnity set forth in paragraph (a) above, but only with respect
to any losses, claims, damages or liabilities that arise out of, or are based
upon, any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with any information relating to such
Initial Purchaser furnished to the Company in writing by such Initial Purchaser
through the Representative expressly for use in the Preliminary Offering
Memorandum and the Offering Memorandum (or any amendment or supplement thereto),
it being understood and agreed that the only such information consists of the
following: the statements concerning the Initial Purchasers in the third and
tenth paragraphs and the fifth and sixth sentences of the eighth paragraph under
the heading "Plan of Distribution."

     (c) Notice and Procedures. If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any person in respect of which indemnification may be sought
pursuant to either paragraph (a) or (b) above, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnification may
be sought (the "Indemnifying Person") in writing; provided that the failure to
notify the Indemnifying Person shall not relieve it from any liability that it
may have under this Section 6 except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by such
failure; and provided, further, that the failure to notify the Indemnifying
Person shall not relieve it from any liability that it may have to an
Indemnified Person otherwise than under this Section 6. If any such proceeding
shall be brought or asserted against an Indemnified Person and it shall have
notified the Indemnifying Person thereof, the Indemnifying Person shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others entitled to indemnification


                                       24

pursuant to this Section 6 that the Indemnifying Person may designate in such
proceeding and shall pay the fees and expenses of such counsel related to such
proceeding, as incurred. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary; (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person; (iii) the
Indemnified Person shall have reasonably concluded that there may be legal
defenses available to it that are different from or in addition to those
available to the Indemnifying Person; or (iv) the named parties in any such
proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood and agreed that the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for any Initial Purchaser, its affiliates, directors and officers
and any control persons of such Initial Purchaser shall be designated in writing
by J.P. Morgan Securities Inc., and any such separate firm for the Company, the
Guarantors and any control persons of the Company and the Guarantors shall be
designated in writing by the Company. The Indemnifying Person shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnification could have been sought hereunder by such Indemnified
Person, unless such settlement (x) includes an unconditional release of such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (y) does not include any statement as to or any admission of
fault, culpability or a failure to act by or on behalf of any Indemnified
Person.

     (d) Contribution. If the indemnification provided for in paragraphs (a) and
(b) above is unavailable to an Indemnified Person or insufficient in respect of
any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Guarantors on the one hand and the
Initial Purchasers on the other from the offering of the Securities or (ii) if
the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) but also the relative fault of the Company and the
Guarantors on the one hand and the Initial Purchasers on the other in connection
with the statements or omissions that resulted in


                                       25

such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors on the one hand and the Initial Purchasers on the other shall be
deemed to be in the same respective proportions as the net proceeds (before
deducting expenses) received by the Company from the sale of the Securities and
the total discounts and commissions received by the Initial Purchasers in
connection therewith, as provided in this Agreement, bear to the aggregate
offering price of the Securities. The relative fault of the Company and the
Guarantors on the one hand and the Initial Purchasers on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or any Guarantor
or by the Initial Purchasers and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.

     (e) Limitation on Liability. The Company, the Guarantors and the Initial
Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 6 were determined by pro rata allocation (even if the
Initial Purchasers were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable considerations
referred to in paragraph (d) above. The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages and liabilities referred to in
paragraph (d) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Person in connection with any such action or claim. Notwithstanding the
provisions of this Section 6, in no event shall an Initial Purchaser be required
to contribute any amount in excess of the amount by which the total discounts
and commissions received by such Initial Purchaser with respect to the offering
of the Securities exceeds the amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 6 are several in proportion to their respective
purchase obligations hereunder and not joint.

     (f) Non-Exclusive Remedies. The remedies provided for in this Section 6 are
not exclusive and shall not limit any rights or remedies that may otherwise be
available to any Indemnified Person at law or in equity.

     7. Termination. This Agreement may be terminated in the absolute discretion
of the Representative, by notice to the Company, if after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on the New York Stock Exchange
or the over-the-counter market; (ii) trading of any securities issued or
guaranteed by the Company or any of the Guarantors shall have been suspended on
any exchange or in any over-the-counter market; (iii) a general moratorium on
commercial banking activities shall have been declared by federal or New York
State authorities; or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any


                                       26

calamity or crisis, either within or outside the United States, that, in the
judgment of the Representative, is material and adverse and makes it
impracticable or inadvisable to proceed with the offering, sale or delivery of
the Securities on the terms and in the manner contemplated by this Agreement and
the Offering Memorandum.

     8. Defaulting Initial Purchaser. (a) If, on the Closing Date, any Initial
Purchaser defaults on its obligation to purchase the Securities that it has
agreed to purchase hereunder, the non-defaulting Initial Purchasers may in their
discretion arrange for the purchase of such Securities by other persons
satisfactory to the Company on the terms contained in this Agreement. If, within
36 hours after any such default by any Initial Purchaser, the non-defaulting
Initial Purchasers do not arrange for the purchase of such Securities, then the
Company shall be entitled to a further period of 36 hours within which to
procure other persons satisfactory to the non-defaulting Initial Purchasers to
purchase such Securities on such terms. If other persons become obligated or
agree to purchase the Securities of a defaulting Initial Purchaser, either the
non-defaulting Initial Purchasers or the Company may postpone the Closing Date
for up to five full business days in order to effect any changes that in the
opinion of counsel for the Company or counsel for the Initial Purchasers may be
necessary in the Offering Memorandum or in any other document or arrangement,
and the Company agrees to promptly prepare any amendment or supplement to the
Offering Memorandum that effects any such changes. As used in this Agreement,
the term "Initial Purchaser" includes, for all purposes of this Agreement unless
the context otherwise requires, any person not listed in Schedule 1 hereto that,
pursuant to this Section 8, purchases Securities that a defaulting Initial
Purchaser agreed but failed to purchase.

     (b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Initial Purchaser or Initial Purchasers by the
non-defaulting Initial Purchasers and the Company as provided in paragraph (a)
above, the aggregate principal amount of such Securities that remains
unpurchased does not exceed one-eleventh of the aggregate principal amount of
all the Securities, then the Company shall have the right to require each
non-defaulting Initial Purchaser to purchase the principal amount of Securities
that such Initial Purchaser agreed to purchase hereunder plus such Initial
Purchaser's pro rata share (based on the principal amount of Securities that
such Initial Purchaser agreed to purchase hereunder) of the Securities of such
defaulting Initial Purchaser or Initial Purchasers for which such arrangements
have not been made.

     (c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Initial Purchaser or Initial Purchasers by the
non-defaulting Initial Purchasers and the Company as provided in paragraph (a)
above, the aggregate principal amount of such Securities that remains
unpurchased exceeds one-eleventh of the aggregate principal amount of all the
Securities, or if the Company shall not exercise the right described in
paragraph (b) above, then this Agreement shall terminate without liability on
the part of the non-defaulting Initial Purchasers. Any termination of this
Agreement pursuant to this Section 8 shall be without liability on the part of
the Company or the Guarantors, except that the Company and each of the
Guarantors will continue to be liable for the payment of expenses as set forth
in Section 9 hereof and


                                       27

except that the provisions of Section 6 hereof shall not terminate and shall
remain in effect.

     (d) Nothing contained herein shall relieve a defaulting Initial Purchaser
of any liability it may have to the Company, the Guarantors or any
non-defaulting Initial Purchaser for damages caused by its default.

     9. Payment of Expenses. (a) Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is terminated, the Company and
each of the Guarantors jointly and severally agree to pay or cause to be paid
all reasonable costs and expenses incident to the performance of their
respective obligations hereunder, including without limitation, (i) the costs
incident to the authorization, issuance, sale, preparation and delivery of the
Securities and any taxes payable in that connection; (ii) the costs incident to
the preparation and printing of the Preliminary Offering Memorandum and the
Offering Memorandum (including any amendment or supplement thereto) and the
distribution thereof; (iii) the costs of reproducing and distributing each of
the Transaction Documents; (iv) the fees and expenses of the Company's and the
Guarantors' counsel and independent accountants; (v) the fees and expenses
reasonably incurred in connection with the registration or qualification and
determination of eligibility for investment of the Securities under the laws of
such jurisdictions as the Representative may designate and the preparation,
printing and distribution of a Blue Sky Memorandum (including the related fees
and expenses of counsel for the Initial Purchasers); (vi) any fees charged by
rating agencies for rating the Securities; (vii) the fees and expenses of the
Trustee and any paying agent (including related fees and expenses of any counsel
to such parties); (viii) all expenses and application fees incurred in
connection with the application for the inclusion of the Securities on the
PORTAL Market, the approval of the Securities for book-entry transfer by DTC;
(ix) the fees and expenses of the Escrow Agent; and (x) all expenses incurred by
the Company in connection with any "road show" presentation to potential
investors.

     (b) If (i) this Agreement is terminated pursuant to Section 7, (ii) the
Company for any reason fails to tender the Securities for delivery to the
Initial Purchasers or (iii) the Initial Purchasers decline to purchase the
Securities for any reason permitted under this Agreement, the Company and each
of the Guarantors jointly and severally agree to reimburse the Initial
Purchasers for all out-of-pocket costs and expenses (including the fees and
expenses of their counsel) reasonably incurred by the Initial Purchasers in
connection with this Agreement and the offering contemplated hereby.

     10. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and any controlling persons referred to herein, and the affiliates,
officers and directors of each Initial Purchaser referred to in Section 6
hereof. Nothing in this Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim under or in respect
of this Agreement or any provision contained herein. No purchaser of Securities
from any Initial Purchaser shall be deemed to be a successor merely by reason of
such purchase.


                                       28

     11. Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Company, the Guarantors and
the Initial Purchasers contained in this Agreement or made by or on behalf of
the Company, the Guarantors or the Initial Purchasers pursuant to this Agreement
or any certificate delivered pursuant hereto shall survive the delivery of and
payment for the Securities and shall remain in full force and effect, regardless
of any termination of this Agreement or any investigation made by or on behalf
of the Company, the Guarantors or the Initial Purchasers.

     12. Certain Defined Terms. For purposes of this Agreement, (a) except where
otherwise expressly provided, the term "affiliate" has the meaning set forth in
Rule 405 under the Securities Act; (b) the term "business day" means any day
other than a day on which banks are permitted or required to be closed in New
York City; (c) the term "Exchange Act" means the Securities Exchange Act of
1934, as amended; and (d) the term "subsidiary" has the meaning set forth in
Rule 405 under the Securities Act.

     13. Miscellaneous. (a) Authority of the Representative. Any action by the
Initial Purchasers hereunder may be taken by J.P. Morgan Securities Inc. on
behalf of the Initial Purchasers, and any such action taken by J.P. Morgan
Securities Inc. shall be binding upon the Initial Purchasers.

     (b) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted and
confirmed by any standard form of telecommunication. Notices to the Initial
Purchasers shall be given to the Representative c/o J.P. Morgan Securities Inc.,
270 Park Avenue, New York, New York 10017 (fax: (212) 270-1063); Attention:
Thomas Cassin. Notices to the Company and the Guarantors shall be given to them
at Quiksilver, Inc., 15202 Graham Street, Huntington Beach, CA 92649, (fax:
(714) 889-4250); Attention: Charles S. Exon.

     (c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

     (d) Counterparts. This Agreement may be signed in counterparts (which may
include counterparts delivered by any standard form of telecommunication), each
of which shall be an original and all of which together shall constitute one and
the same instrument.

     (e) Amendments or Waivers. No amendment or waiver of any provision of this
Agreement, nor any consent or approval to any departure therefrom, shall in any
event be effective unless the same shall be in writing and signed by the parties
hereto.

     (f) Headings. The headings herein are included for convenience of reference
only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.


                                       29

          If the foregoing is in accordance with your understanding, please
indicate your acceptance of this Agreement by signing in the space provided
below.

                                        Very truly yours,

                                        QUIKSILVER, INC.


                                        By
                                           -------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        FIDRA, INC.


                                        By
                                           -------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        HAWK DESIGNS, INC.


                                        By
                                           -------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        MERVIN MANUFACTURING, INC.


                                        By
                                           -------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        QS RETAIL, INC.


                                        By
                                           -------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                       30

                                        DC SHOES, INC.


                                        By
                                           -------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        QUIKSILVER AMERICAS, INC.


                                        By
                                           -------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------


                                        QS WHOLESALE, INC.


                                        By
                                           -------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

Accepted: July 14, 2005

J.P. MORGAN SECURITIES INC.

For itself and on behalf of the several Initial Purchasers listed in Schedule 1
hereto.


By
   ----------------------------------
   Authorized Signatory


                                       31

                                                                      Schedule 1



       Initial Purchaser                          Principal Amount of Securities
- ------------------------------                    ------------------------------
                                               
J.P. Morgan Securities Inc.                                $300,000,000
Banc of America Securities LLC                               23,000,000
SG Americas Securities, LLC                                  23,000,000
BNP Paribas Securities Corp.                                 15,000,000
Calyon Securities (USA) Inc.                                 15,000,000
Natexis Bleichroeder Inc.                                    15,000,000
CIBC World Markets Corp.                                      4,500,000
Piper Jaffray & Co.                                           4,500,000
                                                           ------------
Total                                                      $400,000,000
                                                           ============


                                                                      Schedule 2

                                QUIKSILVER, INC.

                      NAMES AND JURISDICTIONS OF GUARANTORS



     Subsidiary Name                                                Jurisdiction
- --------------------------                                          ------------
                                                                 
DC Shoes, Inc.                                                       California
Fidra, Inc.                                                          California
Hawk Designs, Inc.                                                   California
Mervin Manufacturing, Inc.                                           California
QS Retail, Inc.                                                      California
QS Wholesale, Inc.                                                   California
Quiksilver Americas, Inc.                                            California


                                                                      Schedule 3

                                QUIKSILVER, INC.

                     NAMES AND JURISDICTIONS OF SUBSIDIARIES



             Subsidiary Name                                        Jurisdiction
- -----------------------------------------                           ------------
                                                                 
DC Direct, Inc.                                                      California
DC Shoes, Inc.                                                       California
Fidra, Inc.                                                          California
Hawk Designs, Inc.                                                   California
Mervin Manufacturing, Inc.                                           California
Mt. Waimea, Inc.                                                     California
QS Optics, Inc.                                                      California
QS Retail, Inc.                                                      California
QS Wholesale, Inc.                                                   California
Quiksilver Alps LLC                                                  California
Quiksilver Americas, Inc.                                            California
Quiksilver Entertainment, Inc.                                       California
Quiksilver Links LLC                                                 California
Quiksilver Wetsuits, Inc.                                            California
Roger Cleveland Golf Company, Inc.                                   California
Rossignol Ski Company Inc.                                            Delaware
Skis Dynastar Inc.                                                    Delaware
Carribean Pty Ltd.                                                   Australia
DC Australia Pty Ltd.                                                Australia
Pavilion Productions Pty Ltd.                                        Australia
QS Retail Pty Ltd.                                                   Australia
QSJ Holdings Pty Ltd.                                                Australia
Quiksilver Australia Pty Ltd.                                        Australia
Quiksilver International Pty Ltd.                                    Australia
Ug Manufacturing Co. Pty Ltd.                                        Australia
UMTT Pty Ltd.                                                        Australia
Watermoons Pty Ltd.                                                  Australia
Rossignol Osterrich GmbH                                              Austria
Skis Dynastar Canada Ltee/Ltd                                          Canada
Skis Rossignol Canada Ltee/Ltd                                         Canada
Free Trade Zone Co.                                                    China
Longman WOFE                                                           China
Andaya s.ar.l.                                                         France
Cariboo s.ar.l                                                         France
DC Europe s.ar.l                                                       France
Emerald Coast SA (renamed from Gotcha SA)                              France
Grand Chavin Snowboards S.A                                            France
Infoborn s.ar.l                                                        France
Kokolo s.ar.l.                                                         France
Look Fixations S.A.                                                    France




             Subsidiary Name                                        Jurisdiction
- -----------------------------------------                           ------------
                                                                 
Na Pali Entertainment s.ar.l                                           France
Na Pali Europe s.ar.l                                                  France
Na Pali SAS                                                            France
Omareef Europe SAS                                                     France
Skis Dynastar S.A.                                                     France
Skis Rossignol S.A.                                                    France
Tavarua SCI                                                            France
Zebraska s.ar.l                                                        France
Kauai GmbH                                                            Germany
Makaha GmbH                                                           Germany
Rossignol Ski Deutschland GmbH                                        Germany
DC Shoes International Ltd.                                          Hong Kong
HK JV Company                                                        Hong Kong
Main Bridge Limited                                                  Hong Kong
QS (Australia) Sourcing Ltd.                                         Hong Kong
Quiksilver Asia Sourcing Ltd.                                        Hong Kong
Quiksilver Glorious Sun Licensing Limited                            Hong Kong
Quiksilver Greater China Ltd.                                        Hong Kong
PT Quiksilver Indonesia                                              Indonesia
Namotu, Ltd.                                                          Ireland
Haapiti SRL                                                            Italy
Moorea SRL                                                             Italy
Rossignol Lange S.p.A.                                                 Italy
Rossignol Sci S.p.A.                                                   Italy
Rossignol Ski Poles                                                    Italy
Groupe Rossignol K.K.                                                  Japan
Quiksilver Japan K.K.                                                  Japan
QS Holdings s.ar.l                                                   Luxemborg
Urban Surf                                                            Malaysia
Pukalani BV                                                         Netherlands
Tuvalu BV                                                           Netherlands
Ug Manufacturing Co. Pty Ltd.                                       New Zealand
Rawaki SP z.o.o.                                                       Poland
Kiribatti Lda                                                         Portugal
Tarawa Lda                                                            Portugal
Bakio SL                                                               Spain
Quiksilver Europa, SL.                                                 Spain
Skis Rossignol De Espana S.A.                                          Spain
Sumbawa SL                                                             Spain
Lange International S.A.                                            Switzerland
Longboarder GmbH                                                    Switzerland
Rossignol Ski A.G.                                                  Switzerland
Sunshine S.A.                                                       Switzerland
Town Surf                                                             Thailand
Escatade Ltd.                                                           U.K.



                                        2



             Subsidiary Name                                        Jurisdiction
- -----------------------------------------                           ------------
                                                                 
Lanai Ltd.                                                              U.K.
Molokai Ltd.                                                            U K.



                                       3

                                                                         Annex A

           Restrictions on Offers and Sales Outside the United States

     In connection with offers and sales of Securities outside the United
States:

     (a) Each Initial Purchaser acknowledges that the Securities have not been
registered under the Securities Act and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons except
pursuant to an exemption from, or in transactions not subject to, the
registration requirements of the Securities Act.

     (b) Each Initial Purchaser, severally and not jointly, represents, warrants
and agrees that:

          (i) Such Initial Purchaser has offered and sold the Securities, and
     will offer and sell the Securities, (A) as part of their distribution at
     any time and (B) otherwise until 40 days after the later of the
     commencement of the offering of the Securities and the Closing Date, only
     in accordance with Regulation S under the Securities Act ("Regulation S")
     or Rule 144A or any other available exemption from registration under the
     Securities Act.

          (ii) None of such Initial Purchaser or any of its affiliates or any
     other person acting on its or their behalf has engaged or will engage in
     any directed selling efforts with respect to the Securities, and all such
     persons have complied and will comply with the offering restrictions
     requirement of Regulation S.

          (iii) At or prior to the confirmation of sale of any Securities sold
     in reliance on Regulation S, such Initial Purchaser will have sent to each
     distributor, dealer or other person receiving a selling concession, fee or
     other remuneration that purchase Securities from it during the distribution
     compliance period a confirmation or notice to substantially the following
     effect:

          "The Securities covered hereby have not been registered under the U.S.
          Securities Act of 1933, as amended (the "Securities Act"), and may not
          be offered or sold within the United States or to, or for the account
          or benefit of, U.S. persons (i) as part of their distribution at any
          time or (ii) otherwise until 40 days after the later of the
          commencement of the offering of the Securities and the date of
          original issuance of the Securities, except in accordance with
          Regulation S or Rule 144A or any other available exemption from
          registration under the Securities Act. Terms used above have the
          meanings given to them by Regulation S."

          (iv) Such Initial Purchaser has not and will not enter into any
     contractual arrangement with any distributor with respect to the
     distribution of the

     Securities, except with its affiliates or with the prior written consent of
     the Company.

Terms used in paragraph (a) and this paragraph (b) and not otherwise defined in
this Agreement have the meanings given to them by Regulation S.

     (c) Each Initial Purchaser, severally and not jointly, represents, warrants
and agrees that:

          (i) it has not offered or sold and, prior to the date six months after
     the Closing Date, will not offer or sell any Securities to persons in the
     United Kingdom except to persons whose ordinary activities involve them in
     acquiring, holding, managing or disposing of investments (as principal or
     agent) for the purposes of their businesses or otherwise in circumstances
     which have not resulted and will not result in an offer to the public in
     the United Kingdom within the meaning of the United Kingdom Public Offers
     of Securities Regulations 1995 (as amended);

          (ii) it has only communicated or caused to be communicated and will
     only communicate or cause to be communicated any invitation or inducement
     to engage in investment activity (within the meaning of Section 21 of the
     United Kingdom Financial Services and Markets Act 2000 (the "FSMA"))
     received by it in connection with the issue or sale of any Securities in
     circumstances in which Section 21(1) of the FSMA does not apply to the
     Company or the Guarantors; and

          (iii) it has complied and will comply with all applicable provisions
     of the FSMA with respect to anything done by it in relation to the
     Securities in, from or otherwise involving the United Kingdom.

     (d) Each Initial Purchaser acknowledges that no action has been or will be
taken by the Company that would permit a public offering of the Securities, or
possession or distribution of the Preliminary Offering Memorandum, the Offering
Memorandum or any other offering or publicity material relating to the
Securities, in any country or jurisdiction where action for that purpose is
required.


                                        2

                                                                         Annex B

                     Form of Opinion of Hewitt & O'Neil LLP

                                                                         Annex C

               Form of Opinion of Special Counsel for the Company

                                                                         Annex D

                         Form of Opinion of Charles Exon

                                                                         Annex E

                        Form of Management Comfort Letter

          I, Steven Brink, Chief Financial Officer and Treasurer of Quiksilver,
Inc. (the "Company"), hereby certify that I have responsibility for financial
and accounting matters with respect to the Company and have read and am familiar
with the consolidated financial statements of the Company and its subsidiaries
as of October 31, 2003 and 2004 and for the three years ended October 30, 2004
and as of April 30, 2005 and the six months ended April 30, 2005, and I am
familiar with the Company's accounting records.

          In connection with the Offering Memorandum, dated July 14, 2005,
relating to the offering of $400,000,000 of 6 7/8% Senior Notes, due 2015 (the
"Senior Notes") by the Company (the "Offering Memorandum"), I hereby further
certify that:

     1. To my knowledge, with respect to the period from May 1, 2005 to July 14,
2005:

     (a)  at July 14, 2005, there was no material change in the capital stock,
          increase in short or long-term debt or any decreases in consolidated
          net current assets or stockholders' equity of the Company as compared
          with amounts shown on the April 30, 2005 unaudited condensed
          consolidated balance sheet, or

     (b)  for the period from May 1, 2005 to July 14, 2005, there were no
          material decreases in consolidated net revenues or decreases in
          consolidated net income, as compared with the corresponding period in
          the preceding year,

     except in all instances for changes, increases or decreases that the
     Offering Memorandum discloses have occurred or are contemplated to occur.

2.   Except with respect to (i) the Company's preliminary allocation of the
     purchase price for Skis Rossignol S.A. ("Rossignol") among Rossignol's
     tangible and intangible assets not being sufficiently complete to
     adequately support such allocation and (ii) the pro forma financial
     statements not separately disclosing the components or useful lives of
     identifiable intangible assets because the data necessary for such
     disclosure is not currently available:

     (a)  the unaudited pro forma condensed consolidated financial statements
          included in the Offering Memorandum comply as to form in all material
          respects with the applicable accounting requirements of Rule 11-02 of
          Regulation S-X, and

     (b)  the pro forma adjustments to the historical amounts in the unaudited
          pro forma condensed consolidated financial statements have been
          properly applied.

3.   For purposes of this letter, I have also read the items identified by you
     on the attached copy of selected pages of the Offering Memorandum, the
     Company's Annual Report on Form 10-K for the fiscal year ended October 31,
     2004 and the Company's Quarterly Reports on Form 10-Q for the quarterly
     periods ended January 31, 2005 and April 30, 2005 and have performed the
     following procedures, which were applied as indicated with respect to the
     symbols explained below:



PROCEDURE                                DESCRIPTION
- ---------                                -----------
         
   (A)      Derived the dollar amount, percentage, ratio or numerical amount
            from the Company's accounting records or Rossignol's accounting
            records, as applicable, after giving pro forma effect to the
            acquisition of Rossignol (assuming the Company acquires 100% of
            Rossignol) and the related financings, as set forth in the schedules
            attached hereto in Annex A.

   (B)      Derived the dollar amount, percentage, ratio or numerical amount
            from the Company's accounting records, as set forth in the schedules
            attached hereto in Annex B.

   (C)      Compared the dollar amount or percentage shown to a schedule
            prepared by the Company's accounting personnel and found them to be
            in agreement. In addition I proved the arithmetical accuracy, as
            applicable of the total dollar amount or percentage using data
            contained in the schedule, attached hereto in Annex C.


          I am not aware of any material adverse change or transaction since
April 30, 2005 affecting the financial position or results of operations of the
Company, otherwise than as set forth or contemplated in the Offering Memorandum.


                                        2

                                                                       Exhibit A

                      Form of Registration Rights Agreement

EX-10.3

                                                                    Exhibit 10.3

                                                                  EXECUTION COPY

                             SUBSCRIPTION AGREEMENT

                                      DATED
                                  JULY 11, 2005

                                     ISSUER
                     SKIS ROSSIGNOL FINANCE LUXEMBOURG S.A.

                                    GUARANTOR
                    SKIS ROSSIGNOL S.A. - CLUB ROSSIGNOL S.A.

                                   BOND ISSUE

                                 EUR 50,000,000
                            3.231% MATURING JULY 2010
                             ISIN CODE: FR0010199893

                                ALLEN & OVERY LLP

                                      Paris


                                        1

                                TABLE OF CONTENTS



CLAUSE                                                                      PAGE
- ------                                                                      ----
                                                                         
1.   Issuance and Subscription...........................................     4
2.   Payment of Proceeds From the Issue..................................     4
3.   Expenses............................................................     5
4.   Terms and Conditions................................................     5
5.   Representations, Guarantees, and Committments.......................     6
6.   Obligations of the Initial Subscriber...............................     9
7.   Material Change.....................................................     9
8.   Notification........................................................    10
9.   Applicable Law and Jurisdiction.....................................    10
APPENDIX 1 - CONDITIONS OF THE BOND ISSUE................................    12
APPENDIX 2 - GUARANTEE AGREEMENT.........................................    23



                                        2

THIS SUBSCRIPTION AGREEMENT is entered into on July 11, 2005

BY AND BETWEEN:

(1)  SKIS ROSSIGNOL FINANCE LUXEMBOURG S.A., a corporation under the law of
     Luxembourg, capitalized at E31,000, with headquarters at 11, avenue Emile
     Reuter, L-2420 Luxembourg, and in the process of registration (the
     "ISSUER");

(2)  SKIS ROSSIGNOL S.A. - CLUB ROSSIGNOL S.A., a corporation capitalized at
     E49,792,253, with headquarters at rue du Docteur Butterlin, 38509 Voiron,
     and registered in the Grenoble Registry of Trade and Companies under number
     RCS B 056 502 958 (the "GUARANTOR"); and

(3)  SOCIETE GENERALE BANK & TRUST, a corporation under the law of Luxembourg
     with headquarters at 11, avenue Emile Reuter, L-2420 Luxembourg and
     registered in the Registry of Trade and Companies of Luxembourg under
     number B. 6061 (the "INITIAL SUBSCRIBER").

WHEREAS: -

(A)  The Issuer plans to issue a bond with a total value of 50 million euros,
     bearing annual interest at the rate of 3.231 per cent, maturing on July 13,
     2010 (the "BONDS"), and guaranteed by the Issuer's parent company in its
     capacity as Guarantor. The conditions of the Bonds (the "CONDITIONS")
     appear in Appendix I of this Contract.

(B)  The Issuer's Board of Directors of met on July 8, 2005 and authorized the
     Issuer to issue the bonds up to a limit of 50,000,000 euros (or its
     exchange value in foreign currencies), in one or more transactions, and
     decided to empower one of its directors to carry out the bond issue. On
     July 8, 2005, Mr. Francois Chauvet decided to exercise this authority and
     to carry out the Bond issue. The Bonds shall be issued in the form of
     non-certificated bearer bonds, each with a nominal value of E10,000 (ten
     thousand euros).

(C)  The Bonds may not be the subjects of any request to be listed on a
     regulated market.

(D)  The issued Bonds will benefit from the stipulations of a financial services
     contract (the "FINANCIAL SERVICE CONTRACT") that the Issuer must enter into
     on or before the Settlement Date (as defined by Article 1.1 herein below),
     with Societe Generale Bank & Trust as principal financer and Societe
     Generale as paying agent in France.

(E)  The guarantee granted by the Guarantor is a joint and several guarantee
     dated July 11, 2005 and was approved (in accordance with L.225-68 of the
     Commercial Code) by a resolution of the Guarantor's Supervisory Board dated
     June 16, 2005 and by a decision of the Guarantor's Management Board dated
     July 8, 2005.

The "Agreements" referred to in this Contract include this Contract and the
Financial Services Contract.


                                        3

THE FOLLOWING HAS BEEN STIPULATED AND AGREED TO: -

1.   ISSUANCE AND SUBSCRIPTION

1.1  Subject to the stipulations of this Contract, the Issuer promises to issue
     and the Initial Subscriber promises to subscribe to and to pay for on July
     13, 2005 (the "SETTLEMENT DATE") 5000 Bonds, bearing interest from the
     Settlement Date, at a price (the "SUBSCRIPTION PRICE") equivalent to (a)
     100 per cent of the total value of the Bonds, or E10,000 per bond (the
     "ISSUE PRICE") less (b) the commissions cited in Article 3 that may be
     deducted from the funds paid for the Bonds subscribed.

1.2  Subject to the stipulations of this Contract, the Guarantor promises to
     issue and to sign the guarantee, the terms and conditions of which are
     described in Appendix 2 of this Contract (the "GUARANTEE").

1.3  There will be no public subscription period, because the Initial Subscriber
     will have fully subscribed the Bonds on the Settlement Date. The Initial
     Subscriber must ensure the placement of the Bonds.

1.4  Ownership of the Bonds must be established by entry in a book-based system
     in accordance with Article L. 211-4 of the Monetary and Financial Code. No
     documents certificating Bond ownership (including the representative
     certificates stipulated in Article 7 of Decree No.83-359 dated May 2, 1983)
     may be issued to correspond to the Bonds.

1.5  Upon their issue, the Bonds must be entered in the record book of Euroclear
     France, which must credit the accounts of the Transfer Agents. For the
     purpose of this contract, Transfer Agents means any financial intermediary
     entitled to have accounts with Euroclear France, and includes Euroclear
     Bank S.A./N.V., in its capacity of operator of the Euroclear System
     (Euroclear) and the custodian bank Clearstream Banking, a corporation
     (Clearstream, Luxembourg). The Bonds may be admitted to the transactions of
     Euroclear France, Euroclear and Clearstream, Luxembourg. Ownership of the
     Bonds must be established by recording the Bonds in the books of the
     Transfer Agent. Ownership may not be transferred and the Bonds may only be
     sold or assigned by registration on these books.

2.   PAYMENT OF THE PROCEEDS FROM THE ISSUE

2.1  The Initial Subscriber must pay the net proceeds of the Bonds subscribed
     (corresponding to the total amount due for subscribing the entirety of the
     5000 Bonds calculated at the Subscription Price) on the Settlement Date, at
     10 o'clock Paris time, in euros, and in immediate funds, to the
     euro-denominated account that the Issuer will have previously notified to
     the Initial Subscriber.

2.2  On or before the Issue Date, the Issuer must ensure the delivery of the
     Bonds to the Initial Subscriber by an account entry through Euroclear
     France. The Bonds must be held on the Issuer's behalf until the Initial
     Subscriber pays the amount due in accordance with Article 2.1. Upon receipt
     of payment, the Initial Subscriber must cause the account with Euroclear
     France to be credited.


                                        4

3.   EXPENSES

     The Issuer and the Initial Subscriber must be responsible for their own
     respective costs and expenses, including legal counsel and other advice, as
     well as the various expenses incurred when the Bonds are issued.

4.   TERMS AND CONDITIONS

4.1  The Initial Subscriber's commitment to subscribe the Bonds and to pay for
     them is subject to the satisfaction of the following conditions: -

     (i)  No event may occur on the Settlement Date that renders inaccurate or
          false any one whatsoever of the representations made, the guarantees
          given, or the commitments made under the terms of Article 6, regarding
          a material issue under the same terms that they had been expressed,
          given, or made on the Settlement Date, nor a material change or a
          development resulting in a substantial change in the activity,
          financial situation, assets, or results of the Issuer or Guarantor
          compared to what exists on the date of this Contract; and the Issuer
          and the Guarantor must have fulfilled all their obligations regarding
          this Contract that must be fulfilled on or before the Settlement Date.

     (ii) The receipt by the Initial Subscriber of a certificate regarding the
          compliance with the obligations cited in Article 5.1(i), and signed by
          the Issuer's representative, duly authorized for this purpose, on or
          before the Settlement Date.

     (iii) The receipt by the Initial Subscriber of a certificate of regarding
          the compliance with the obligations cited in Article 5.1(i), and
          signed by the Guarantor's representative duly authorized for this
          purpose, on or before the Settlement Date.

     (iv) The receipt by the Initial Subscriber the following on or before the
          Settlement Date:

          (a)  A certified true and up-to-date copy of the articles of
               incorporation of the Issuer and the Guarantor;

          (b)  a K-bis certificate regarding the Guarantor's situation;

          (c)  a certified true copy of the minutes of the meeting of the
               Issuer's Board of Directors on July 8, 2005 authorizing the Bond
               issue;

          (d)  an original copy of the Issuer's certificate of financial
               soundness;

          (e)  a certified true copy of the minutes of the meeting of the
               Guarantor's Supervisory Board on June 16, 2005 authorizing the
               Guarantee;

          (f)  A certified true copy of the minutes of the meeting of the
               Guarantor's Management Board on July 8, 2005;

          (h)  The legal opinions that the Initial Subscriber may reasonably
               request from Allen & Overy LLP (Initial Subscriber's French
               advisors) and from Allen & Overy Luxembourg (Initial Subscriber's
               advisors in Luxembourg) dating from the Issue Date.

          (i)  Issuer's signature of the Financial Service Contract.


                                        5

          (j)  Guarantor's signature of the Guarantee.

4.2  If any one whatsoever of the above-cited conditions is unfulfilled on the
     Settlement Date, then this Contract may be terminated on this date and the
     parties shall not incur any obligation or any duty under this Contract
     (excluding the obligation to bear the incurred expenses stipulated in
     Article 4 below and any obligation or duty arising before this cancellation
     or connected thereto ); it is moreover understood that the Initial
     Subscriber may have the discretionary right to waive, at his convenience
     and under the conditions that he may deem appropriate, full or partial
     compliance with any one whatsoever of the previously cited conditions.

5.   REPRESENTATIONS, GUARANTEES AND COMMITTMENTS

5.1  The Initial Subscriber made the commitment to subscribe the Bonds based on
     the following representations and guarantees of the Issuer:

     (i)  The Issuer was duly established in accordance with the law of
          Luxembourg, exists in the legal form of a societe anonyme (Luxembourg
          corporation), has full legal personality and holds all powers,
          authority, and competence to issue the Bonds, to enter into Agreements
          and to undertake its activities;

     (ii) All the steps, authorizations, approvals, representations,
          notifications, decisions, opinions, filings, and registrations with or
          by any court, authority, or public entity, as well as all other
          actions and conditions that are required to be executed, given, and
          fulfilled regarding:

          (a)  The Issuer's entering into and signature of the Agreements, as
               well as the Issuer's performance of the obligations stemming from
               the Agreements; and

          (b)  The issuance, offering, and sale of the Bonds and the performance
               of the resultant obligations in accordance with the stipulations
               of this Contract;

          were executed, given, and fulfilled on the Settlement Date and are
          fully in effect on this date;

     (iii) The Issuer's entering into and signature of the Agreements, the issue
          of the Bonds, and the performance by the Issuer of the obligations
          resulting from the Bonds and the Agreements were duly authorized by
          its corporate bodies;

     (iv) after they are duly signed, the Agreements may constitute the Issuer's
          valid obligations, enforceable against him in compliance with their
          terms;

     (v)  after their issuance in accordance with the stipulations of this
          Contract and after payment of the net proceeds of the subscription
          stipulated in Article 2, the Bonds may constitute the Issuer's valid
          obligation, enforceable against him in compliance with their terms

     (vi) The Issuer's entering into and signature of the Agreements, the
          issuance of the Bonds, and the performance by the Issuer of the
          obligations stemming from the Bonds and the Agreements (a) are not in
          breach of the Issuer's articles of incorporation; (b) constitute no
          deficiency or default regarding any contract, obligation, security
          interest, or instrument the Issuer is party to or which concerns all
          or part of is assets; (c) do not violate any legal or regulatory
          provision, judgment or decision of any court or public entity
          whatsoever that is competent to govern the Issuer or any one of its
          assets whatsoever.


                                        6

     (vii) Since July 1, 2005, there has been no material adverse change, nor
          any circumstance having or likely to have a materially adverse effect
          concerning the legal, economic, or financial situation, the operating
          results, the activity, or the financial outlook of the Issuer and its
          subsidiaries taken as a whole (the "MATERIALLY ADVERSE EFFECT ON THE
          ISSUER");

     (viii) There is no legal, administrative, arbitral, or other action or
          proceedings against or involving the Issuer or its subsidiaries that
          alone or with others may result in a Materially Adverse Effect on the
          Issuer, or that may affect the proper performance of this contract or
          the realization of the placement or the issuance of the Bonds or the
          capacity of the Issuer to fulfill his obligations under the Agreements
          and for the Bonds and to the knowledge of the Issuer, no actions or
          proceeding of this nature is planned or about to beinitiated;

     (ix) Neither the Issuer nor one of its subsidiaries is in default in the
          performance of a contractual obligation that could likely have a
          Materially Adverse Effect on the Issuer or adversely impact the
          ability of the Issuer to perform his obligations under this Contract,
          as well as the Conditions of the Bond issue;

     (x)  There has been no event or circumstance that, if the Bonds were
          already issued, could (with or without notification or the passage of
          a period of time, or the respect of any other obligation) constitute a
          case such as described in the paragraph under Conditions called,
          "Cases of Early Call for Payment;"

     (xi) Once issued, the Bonds and their interest must constitute the Issuer's
          general, direct, unconditional, non-subordinated commitments without
          attached security having the same priority now and in the future
          (subject to legal exceptions) and the same priority as all the
          Issuer's other present and future non-subordinated commitments without
          attached security.

     (xii) The Issuer must bear and must pay any tax or stamp duty or
          registration duty and all the other duties and taxes, as well as the
          interests and penalties due for the issuance of the Bonds or the
          signature of the Agreements (any reference in this Contract to an
          amount due by the Issuer is deemed to include any additional amount
          due for any of these taxes whatsoever); and

     (xiii) The Issuer shall use the net proceeds of the bond issue for its
          general operating requirements in accordance with its founding
          documents and the laws and regulations applicable to the Issuer.

5.2  The Initial Subscriber committed to subscribe to the Bonds based on the
     following representations of the Guarantor:

     (i)  The Guarantor is duly established in accordance with French law,
          exists in the legal form of a French societe anonyme (French
          corporation), has full legal personality, and holds all powers,
          authority, and capacity to enter into this Contract, issue the
          Guarantee, and perform its activities;

     (ii) All the steps, authorizations, approvals, representations,
          notifications, decisions, opinions, filings, and registrations with or
          by any court or authority or public entity, as well as all other
          actions and conditions that are required to be executed, given, and
          fulfilled regarding:

          (a)  The Guarantor's entering into and signature of this Contract, as
               well as the performance of the obligations that result from it;


                                        7

          (b)  The Guarantor's issuance and signature of the Guarantee, as well
               as the performance of the obligations that result from it in
               accordance with its stipulations;

          were performed, given, and fulfilled on the Settlement Date and are
          fully in effect on this date;

     (iii) The Guarantor's entering into and signature of the Contract, the
          issuance and signature of the Guarantee, and the performance by the
          Guarantor of the obligations that respectively result from it were
          duly authorized by its corporate bodies;

     (iv) When duly signed, the Contract and the Guarantee will constitute the
          Guarantor's valid and enforceable obligations in accordance with their
          terms;

     (v)  The Guarantor's entering into and signature of the Contract, the
          issuance and signature of the Guarantee, and the Guarantor's
          performance of the obligations that respectively (a) are not in breach
          of the Guarantor's articles of incorporation; (b) constitute no
          deficiency or default regarding any contract, obligation, security
          interest or instrument the Guarantor is party to or which concerns all
          or part of its assets; or (c) does not violate any legal or regulatory
          provision, judgment or decision of any court or public entity
          whatsoever that is competent to govern the Guarantor or any one of its
          assets whatsoever.

     (vi) Since March 31, 2005, there has been no material adverse change, nor
          any circumstance having or likely to have a materially adverse effect
          concerning the legal, economic, or financial situation, the operating
          results, the activity, or the financial outlook of the Guarantor and
          its subsidiaries taken as a whole (the "MATERIALLY ADVERSE EFFECT ON
          THE GUARANTOR");

     (vii) There is no legal, administrative, arbitral, or other action or
          proceedings against or involving the Guarantor or its subsidiaries
          that alone or with others could result in a Materially Adverse Effect
          on the Guarantor or that may affect the proper performance of this
          contract or the capacity of the Guarantor to fulfill his obligations
          under the Contract or the Guarantee, and to the Guarantor's knowledge,
          no action or proceedings of this nature is planned or about to be
          initiated;

     (viii) Neither the Guarantor nor one of its subsidiaries is in default in
          the performance of a contractual obligation that could likely have a
          Materially Adverse Effect on the Guarantor or adversely impact the
          ability of the Guarantor to perform his obligations under this
          Contract or the Guarantee;

     (ix) There has been no event or circumstance that, if the Bonds were
          already issued, might (with or without notification or passing of a
          period of time, or the respect of any other obligation) constitute a
          case such as described in the paragraph under Conditions called,
          "Cases of Early Call for Payment;"

     (x)  Once issued, the Guarantee may constitute the Guarantor's general,
          direct, unconditional, non-subordinated commitments without attached
          security, having the same priority now and in the future (subject to
          legal exceptions) and the same priority as all the Guarantor's other
          present and future non-subordinated commitments without attached
          security.

     (xi) The Guarantor must bear and must pay any tax or stamp duty or
          registration duty and all the other duties and taxes, due for the
          issuance of the Guarantee or the signature of the Contract by the
          Guarantor.


                                        8

5.3  The Issuer commits to immediately notify the Initial Subscriber of any
     material change that might affect any one whatsoever of the Issuer's
     representations, guarantees, and commitments and commits to take all
     measures to remedy this situation as soon as possible.

5.4  If there is a material violation of these representations, guarantees, or
     commitments, or a change making any one whatsoever of theserepresentations,
     guarantees, or commitments inaccurate on a material issue, before payment
     is made to the Issuer on the Settlement Date, the Initial Subscriber may
     have the right (but not the obligation) to deem that this violation or
     change releases and relieves the Initial Subscriber from its obligations
     under the Agreements and the Bonds, subject to the Initial Subscriber
     notifying the Issuer.

5.5  The commitment of the Initial Subscriber to subscribe the Bonds and to pay
     the net proceeds of the subscription being taken on the basis of the
     previously cited statements, guarantees, and commitments and with the
     certainty that these would remain true and accurate in all matters up to an
     including the Settlement Date, the Issuer promises to guarantee and
     indemnify the Initial Subscriber against all damages, fees, and expenses
     and all liabilities that it may sustain or incur as a result of any false
     statement, any violation, or any failure to execute, real or alleged, of
     any one whatsoever of the representations made, the guarantees given, or
     the commitments made under this Contract and to reimburse the Initial
     Subscriber for all reasonable and direct fees, costs, and expenses (with
     documentation) that it might commit or incur because of investigations
     into, challenges to, and defense of these actions.

5.6  If legal action brought against the Initial Subscriber is likely to involve
     activation of the indemnity commitment stipulated in Article 6.5 above, the
     Initial Subscriber will immediately notify the Issuer of this fact and will
     consult the Issuer to the greatest degree possible as to the manner of
     dealing with it. The Issuer may not be held responsible for the
     compensation of losses or expenses relating to any legal action that could
     have been resolved in an amicable manner without its consent.

6.   COMMITMENTS OF THE INITIAL SUBSCRIBER

6.1  The Initial Subscriber has not taken and may not take any measure to enable
     the public offering of the Bonds, or the holding or distribution of any
     offering document or publicity relating to the Bonds in any country or
     jurisdiction requiring that a measure be taken for this purpose. As a
     result, the Initial Subscriber promises not to offer or sell the Bonds,
     directly or indirectly, and promises not to distribute or publish the
     memorandum, prospectus, subscription form, publicity, or any other document
     or information in a country or jurisdiction, unless it is under
     circumstances that the Initial Subscription deems, to the best of its
     knowledge, to ensure the respect of applicable laws and regulations, in
     which case the Initial Subscriber may conduct the offer and sale of the
     Bonds under the said conditions. The Initial Subscriber then must then
     ensure that the Issuer is under no future obligation due to the actions
     cited above in such a country or jurisdiction.

6.2  The Initial Subscriber must indemnify the Issuer for any loss, liability,
     complaint, action, claim, or expense (including without limitation any
     reasonable costs, expenses and disbursement, paid or committed, in the
     framework of the actions or complaints cited above) that the Issuer must
     bear because of or in connection with the Initial Subscriber's failure to
     respect any one whatsoever of the restrictions or obligations mentioned
     above.

7.   MATERIAL CHANGE

     Notwithstanding any stipulation of this Contract, the Initial Subscriber,
     after consulting with the Issuer to the extent possible under the
     circumstances, may cancel this Contract at any time up to the Issue Date,
     subject to the Initial Subscriber's notifying the Issuer to this effect, if
     the Initial Subscriber deems that there has been a material change in the
     national or international financial, political, or economic situation, or
     that there has been a change in foreign exchange rates or a change


                                        9

     in the regulatory control of currencies likely in this sense to materially
     compromise the success of the issue, of the offer or of the placement of
     the Bonds or their trading on the secondary market. Once this notification
     has been sent, the parties to this Contract may be free of all their
     respective obligations in this Contract.

8.   NOTIFICATION

Any notification intended for the Issuer will have to be made by letter or fax
to the following address: -

SKIS ROSSIGNOL FINANCE LUXEMBOURG S.A.

Address:             11, avenue Emile Reuter - L-2420 Luxembourg
Telephone:           + 35 2 47 93 11 51 56
Fax:                 + 35 2 47 93 11 51
To the attention of: V. Plagnol

Any notification intended for the Guarantor will have to be made by letter or
fax to the following address: -

SKIS ROSSIGNOL S.A. - CLUB ROSSIGNOL S.A.

Address:             rue du Docteur Butterlin - 38509 Voiron, France
Telephone:           + 33 4 76 66 64 40
Fax:                 + 33 4 76 66 64 83
To the attention of: F. Chauvet

Any notification intended for the Initial Subscriber will have to be made by
letter or fax to the following address: -

SOCIETE GENERALE BANK & TRUST

Address:             11, avenue Emile Reuter - L-2420 Luxembourg
Telephone:           + 35 2 47 93 11 51 56
Fax:                 + 35 2 47 93 11 51
To the attention of: ENTR/MID, C. Beaucourt / R. Michel

All notifications made by letter are effective upon receipt and all
notifications made by fax are effective upon the time of the fax transmission.

9.   APPLICABLE LAW AND JURISDICTION

9.1  This Contract is governed by French law.

9.2  For all disputes that might result directly or indirectly from this
     Contract, jurisdiction is given to the competent courts under jurisdiction
     of the Cour d'Appel de Paris (Paris Court of Appeals); consequently, all
     the proceedings, actions, or procedures resulting from this Contract or
     relating to it will have to be brought before these jurisdictions. The
     Issuer and the Guarantor submit irrevocably to the competence of these
     jurisdictions and renounce in advance any exception that might be raised
     against this competence, whether it be founded on territorial issues, the
     court dealing with the case, or the immunity of jurisdiction.


                                       10

Executed in Paris on July 11, 2005,
in three original copies.

SKIS ROSSIGNOL FINANCE LUXEMBOURG S.A.
Represented by:
                -------------------------

SKIS ROSSIGNOL S.A. - CLUB ROSSIGNOL S.A.
Represented by:
                -------------------------

SOCIETE GENERALE BANK & TRUST
Represented by:
                -------------------------


                                       11

                    APPENDIX 1 - CONDITIONS OF THE BOND ISSUE

Subject to additions and modification, the conditions of the Bonds are as
follows:

The bonds, issued outside France, with a total value of 50,000,000 euros,
bearing annual interest at a fixed rate of 3.231%, and maturing in 2010 (the
"BONDS"), of Skis Rossignol Finance Luxembourg S.A., a company registered in the
Grand Duche du Luxembourg (the "ISSUER"), are guaranteed by Skis Rossignol S.A.
- - Club Rossignol S.A., a corporation registered in France. The bonds issue was
authorized by a resolution of the Issuer's Board of Directors dated July 8,
2005. The Guarantee granted by the Guarantor (the "GUARANTEE") is a joint and
several guarantee dated July 11, 2005 and was authorized in accordance with
Article L.225-68 of the Commercial Code by a resolution of the Guarantor's
Supervisory Board dated June 16, 2005 and by a decision of the Guarantor's
Management Board of the dated July 8, 2005.

The Issuer is a corporation under the law of Luxembourg headquartered at 11,
avenue Emile Reuter - L-2420 Luxembourg and in the process of registration. Its
share capital is EUR 31,000 divided into 310 registered shares, each with a
nominal value of EUR 100. The Issuer was established for an indefinite term. The
Issuer was created by a notarial act dated July 1, 2005. The Issuer's articles
of incorporation are about to be published in the official bulletin of
Luxembourg's companies and associations, the Memorial, Journal Officiel du
Grand-Duche de Luxembourg, Recueil des Societes et Associations.

A service contract relating to the Bonds dated July 11, 2005 (the "FINANCIAL
SERVICES CONTRACT") was entered into between Skis Rossignol Finance Luxembourg
S.A.; Societe Generale Bank & Trust S.A., as both financial agent and principal
payer (the "FINANCIAL AGENT"); and Societe Generale, as paying agent in France
(the "PAYING AGENT"). The expressions, "Financial Agent" and "Paying Agent"
include, when the context calls for it, any replacement financial agent or
paying agent or any additional paying agent(s) appointed under the Financial
Services Contract. Any reference to the Paying Agents includes, unless otherwise
specified, the Financial Agent. Copies of the Financial Services Contract will
be available for consultation at the offices of the Financial Agent and at the
offices of the Paying Agent during normal business hours.

An original copy of the Guarantee was deposited with the Financial Agent who is
keeping it available for the Bondholders (the "BONDHOLDERS") to consult during
normal business hours.

Unless the context calls for a different interpretation, all references
contained herein to the CONDITIONS refer to the numbered paragraphs below.

1.   FORM, NOMINAL VALUE, AND OWNERSHIP

     The Bonds are issued in non-certificated form bearing a nominal value of
     10,000 euros each. Ownership of the Bonds must be established by an account
     entry, in accordance with Article L.211-4 of the Monetary and Financial
     Code. No certificate (including the objectified certificates stipulated in
     Article 7 of Decree No. 83-359 dated May 2, 1983) objectifying ownership of
     the Bonds shall be issued.

     Upon their issuance on July 13, 2005 (the "SETTLEMENT DATE"), the Bonds
     will be recorded on the books of Euroclear France, which will credit the
     accounts of the Transfer Agents. For the purpose of this document, TRANSFER
     AGENTS means any financial intermediary authorized to have an account with
     Euroclear France, and includes Euroclear Bank S.A./N.V., in its capacity of
     operator of the Euroclear System (EUROCLEAR), and the custodian bank
     Clearstream Banking, a corporation (CLEARSTREAM, LUXEMBOURG). The Bonds
     will pass through the transactions of Euroclear France, Euroclear and
     Clearstream, Luxembourg.


                                       12

     Ownership of the Bonds must be established by entry into the books of the
     Transfer Agent. Ownership may not be transferred and the only transfer of
     the Bonds that may be carried out is their entry into these books.

2.   PRIORITY OF THE BONDS AND THE GUARANTEE AND MAINTAINING THE BOND PRIORITY

(a)  Bond Priority

     The Bonds represent the Issuer's direct, unconditional, non-subordinated
     commitments without attached security, having the same priority now and in
     the future (subject at any time to exceptions of legal imperatives under
     French law) and with the same priority as all the Issuer's other present
     and future non-subordinated commitments without attached security.

(b)  Guarantee Priority

     The obligations of the Guarantor under the Guarantee constitute the
     Guarantor's direct, unconditional, non-subordinated commitments without
     attached security having the same priority now and in the future (subject
     at any time to exceptions of legal imperatives under French law) and with
     the same priority as all the Guarantor's other present and future
     non-subordinated commitments without attached security.

(c)  Maintaining the bond priority

     (i) As long as the Bonds remain outstanding (such as defined below), the
     Issuer promises not to grant or permit the holding of any mortgage,
     privilege, security, pledge, or any other security whatsoever for its
     assets or income, present or future, for the purpose of guaranteeing any
     Debt Concerned (such as defined below) or any guarantee or indemnity
     related to any Concerned Debt other than an AUTHORIZED SECURITY (such as
     defined below) without (a) giving the same mortgage, privilege, security,
     pledge or any other security as guarantee of the Bonds or (b) granting any
     other security for the Bonds after prior approval of the Class (such as
     defined in Condition 8 below).

     In the context of these Conditions:

     OUTSTANDING BONDS means all the Bonds except (i) those that were redeemed
     in accordance with the Conditions; (ii) those that were the subject of
     complaints (subject to the time limitation under Condition 10); and (iii)
     those that were repurchased and canceled as stipulated in Condition 5;

     DEBT CONCERNED means any debt, present or future, represented by any type
     of debt instrument (including bonds and negotiable debt instruments) listed
     or likely to be listed, registered, or traded on any stock exchange
     whatsoever, any over-the-counter market whatsoever, or any other securities
     market.

     MAJOR SUBSIDIARY means any of the Guarantor's consolidated subsidiaries (in
     the meaning of Article L. 233-1 of the Commercial Code) cited below and/or
     whose net sales represent at least 10 per cent of the Group's net sales on
     the basis of the Guarantor's last consolidated and audited annual financial
     statements:

          -    Skis Dynastar (F)

          -    Look Fixations (F)

          -    Rossignol Lange Spa (I)

          -    Ski Rossignol de Espana (E)

          -    Rossignol Ski Company Inc (USA)


                                       13

          -    Roger Cleveland Golf Company Inc (USA)

     GROUP means the Guarantor and its consolidated subsidiaries

     AUTHORIZED SECURITY means:

     (A) any security cited in paragraphs (B) to (E) below, for which the total
     guaranteed amount is less than 15% of the Guarantor's net consolidated
     assets (such as indicated in the Guarantor's last annual consolidated
     balance sheet).

     (B) On the Signature Date, any existing security granted by the Issuer, the
     Guarantor, or a Major Subsidiary

     (C) any real security granted to enable the financing of the acquisition of
     any fixed asset or any asset recorded under current assets in the
     Guarantor's consolidated statements, to the degree that the security
     granted concerns exclusively the asset in question and solely guarantees
     the payment or the financing of this asset;

     (D) any security existing at the time of the acquisition of any asset by
     the Issuer, the Guarantor, or any Major Subsidiary after the Settlement
     Date that was not granted in anticipation of this acquisition; and

     (E) any statutory or court-ordered security that might be imposed upon the
     Guarantor or a Major Subsidiary by law.

     (ii) As long as the Bonds remain outstanding, the Guarantor commits not to
     grant and permit, and to see that no Major Subsidiary grants or permits,
     the holding of any mortgage, privilege, security, pledge, or any other
     security whatsoever of its assets or income, present or future, for the
     purpose of guaranteeing any Debt Concerned or any guarantee or indemnity
     relating to any Debt Concerned, other than an Authorized Security, without
     (a) giving the same mortgage, privilege, security, pledge or any other
     security as Guarantee of the Bonds or (b) granting any other security for
     the Bonds after prior approval of the Class.

3.   INTEREST

     The Bonds will bear interest as of the Settlement Date at an annual fixed
     rate of 3.231%, payable semi-annually on the due dates of January 13 and
     July 13 of each year, subject to adjustment in accordance with the Business
     Day convention cited in Condition 4 (b) (each of these dates being an
     INTEREST PAYMENT DATE). The first payment will be made on January 13, 2006
     for the period extending from the Settlement Date (included) to January 13,
     2006 (excluded).

     Each Bond will cease bearing interest from the anticipated redemption date,
     unless the payment of the principal is unduly withheld or refused on this
     date. In that case, the Bond concerned will continue to bear interest at
     the rate applicable to it on the impending redemption date (before and
     after judgment) up to the first of the following dates (inclusive): (a) the
     date on which all the amounts due at this date for the Bond concerned are
     received by or on behalf of the concerned Bondholder; and (b) the seventh
     day following the day on which the Financial Agent notified the Bearer of
     receipt of the amounts due on this date for all the Bonds (unless there is
     a failure to pay amounts due to the Bondholders concerned in accordance
     with these Conditions).

     Interest will be calculated on the basis of the actual number of days
     elapsed in the period under consideration (from the first day included to
     the last day excluded) divided by 365 (or, in the event of a leap year, the
     addition of (A) the number of days elapsed in the leap year divided by 366
     and (B) the number of days elapsed in the non-leap year divided by 365),
     the number being rounded off to the closest second decimal (with halves
     being rounded up).

     The payment of interest will be carried out subject to and in accordance to
     Condition 4.


                                       14

4.   PAYMENTS

(a)  Method of payments

     Payments of principal and interest due for Bonds will be made in euros by
     crediting an account or by bank transfer to an account set up in euros (or
     any other account in which deposits or bank transfers are permitted to be
     made in euros) indicated by the beneficiary and opened with a bank located
     in a financial market where banks have access to the TARGET system. TARGET
     SYSTEM means the Systeme Europeen de Transfert Express Automatise de
     Reglement Bruts en Temps Reel (the European Automated Rapid Transfer System
     for Gross Payment in Real Time).

     These payments will have to be made on behalf of the Bondholders among the
     Transfer Agents (including Euroclear and the custodian bank Clearstream,
     Luxembourg), and all payments made to the Transfer Agents on behalf of the
     Bondholders must validly release the Issuer and the Financial Agent, as the
     case may be, from these payments.

     Without prejudice to the provisions of Condition 6, the payments of
     principal and interest due for the Bonds must be made subject to all tax
     and other applicable regulations.

     Neither the Issuer, the Financial Agent, nor any Paying Agent may be
     responsible vis-a-vis the Bondholders or any other individual for all
     costs, commissions, losses, or any other expenses connected with or
     resulting from the bank transfers in euros or currency conversions or their
     related rounding off.

(b)  Payments on Business Days

     If any one payment date whatsoever for an amount in principal or interest
     due for the Bonds falls on a non-business day (as defined below), no
     payment shall be made until the following Business Day and the Bondholder
     will not be entitled to any interest or additional amount because to this
     delay.

     In these Conditions, BUSINESS DAY means a day (excluding Saturday, Sunday,
     and holidays) when banks and foreign currency markets are open in Paris and
     Luxembourg and when the TARGET system is operating.

(c)  Financial Agent and Paying Agent

     The Initial Financial Agent and its designated establishment is as follows:

     INITIAL FINANCIAL AGENT:

     Societe Generale Bank & Trust
     11, avenue Emile Reuter
     L-2420 Luxembourg

     The Initial Paying Agent and its designated establishment is as follows:

     INITIAL PAYING AGENT IN PARIS:

     Societe Generale
     BP 81 236
     32, rue du Champ de Tir
     43312 Nantes Cedex 3


                                       15

     The Issuer reserves the right at any time to modify or to cancel the
     mandate of the Financial Agent and/or the Paying Agent and to appoint a
     different financial agent, other paying agents, or additional paying
     agents, and to approve any modification of the function performed by the
     Financial Agent or any Paying Agent, on the condition that, as long as the
     Bonds are outstanding, it permanently maintains a Financial Agent whose
     designated establishment is located in a European city outside of France.

     In accordance with Condition 9, the Bondholders must be notified of
     modifications and appointments of Financial Agent or a Paying Agent, as
     well as any change in their office locations.

5.   REDEMPTION AND REPURCHASE

(a)  Final redemption

     Unless previously redeemed, repurchased, or cancelled by the issuer as
     provided for above, the Bonds will be redeemed at par on July 13, 2010.

(b)  Early redemption for tax reasons

     (i)  If, on the occasion of a forthcoming redemption of the principal or
          payment of interest under the Bonds, the Issuer is forced to make
          additional payments in accordance with Condition 6 above, because of
          changes in French laws or regulations or in the application or
          official interpretation of those laws or regulations occurring after
          the Settlement Date, the Issuer may, at any time, subject to
          irrevocable notification to the Bondholders at least 30 days and at
          most 60 days prior to such payment, pursuant to Condition 9, redeem
          all Bonds outstanding at that time, and not merely a portion thereof,
          at par value plus interest accrued up to the scheduled redemption
          date, provided that the scheduled redemption date covered by the
          notification is not prior to the latest date when the Issuer is, in
          practice, capable of paying the principal and interest without being
          subject to withholding at the source in France.

     (ii) If, on the occasion of a forthcoming redemption of the principal or
          payment of interest under the Bonds, the Issuer is prevented by French
          law from paying the Bondholders the total amount due and payable at
          that time, notwithstanding the commitment to pay the additional
          amounts provided for under Condition 6 below, then the Issuer will
          immediately notify the Financial Agent of this fact and the Issuer
          will immediately redeem all, and not merely a portion of, the Bonds
          outstanding at that time, at par value plus all interest and similar
          adjustments, subject to irrevocable notice sent to the Bondholders
          pursuant to Condition 9, within a period no less than 7 days, nor
          greater than 60 days, provided that the scheduled redemption date
          covered by the notice is not prior to the latest date when the Issuer
          is, in practice, capable of paying the principal and interest without
          being subject to withholding at the source in France.

(c)  Repurchase

     The issuer may at any time repurchase Bonds on the bourse or in any other
     way, for any price whatsoever.

(d)  Cancellation

     All Bonds redeemed or repurchased by, or on behalf of, the Issuer or one of
     its subsidiaries will be immediately cancelled and consequently may not be
     again reissued or resold.


                                       16

6.   TAX REGIME

(a)  Tax exexemption

     Payments under the Bonds will be made without withholding at the source for
     any tax, duty, charge or fee, present or future, of any kind whatsoever,
     imposed or levied on or on behalf of the Grand Duchy of Luxembourg or any
     authority of the Grand Duchy of Luxembourg with power to levy taxes (the
     TAXES).

(b)  Additional amounts

     If the payment of interest or the redemption due under any of the Bonds
     becomes subject to tax after the Settlement Date, by virtue of a law or
     regulation of the Grand Duchy of Luxembourg, the Issuer undertakes to
     supplement its payments or redemptions to the extent permitted by law, in
     such a way that the Bondholders receive the entire amount that would have
     been paid to them under the Bonds in the absence of such withholding, on
     the understanding that these additional amounts will not be owed:

     (i)  To a Bondholder (or beneficiary) owing such taxes or fees in France
          other than solely by reason of holding such Bonds; or

     (ii) In the event that such withholding applies to the amount of a payment
          made through an individual, in accordance with any European Union
          directive on the taxation of savings income in implementation of the
          conclusions of the ECOFIN Council at its deliberations of November
          26-27, 2000, or pursuant to any law implementing such directive,
          conforming thereto, or adopted for purposes of conforming thereto; or

     (iii) In the case of presentation for payment by or on behalf of a
          Bondholder (or beneficiary) capable of avoiding such withholding at
          the source by presenting the Obligation in question to another Paying
          Agent located in a Member State of the European Union; or

     (iv) To a Bondholder (or successor) who would be capable of avoiding such
          withholding at the source by making a declaration of non-residence or
          similar request for exemption, but fails to do so.

Under these Conditions, references to principal and interest due under the Bonds
will also be deemed as referring to any additional amounts that might be due and
payable under this Condition 6(b).

7.   CASE OF EARLY CALL FOR PAYMENT

If any of the following events (each one of which constitutes a CASE OF EARLY
CALL FOR PAYMENT) occurs and is continued:

     (i)  payment default by the Issuer on all principal and interest due and
          payable under the Bonds (including any additional amount covered in
          Condition 6(b)), which is not corrected within a period of 5 days; or

     (ii) the Issuer's breach or violation of any of its other commitments under
          the Bonds if such breach or violation remains in effect after a period
          of 5 days after receipt by the Issuer at the designated office of the
          Financial Agent of a written notification of such breach or violation
          sent by or on behalf of any Bondholder; or

     (iii) the Issuer incurs cessation of payments, proposes a general
          moratorium on its debt, requests the appointment of an arbitrator, or
          enters into a preventive bankruptcy accord or amicable agreement with
          its creditors, or if a judgment pronouncing judicial liquidation or
          full sale of the Issuer is pronounced, or if, to the extent permitted
          by applicable law, the Issuer is subject


                                       17

          to any other bankruptcy procedure or the Issuer enters into any
          judicial accord or other arrangement to the benefit of its creditors
          or enters into an amicable agreement with its creditors; or

     (iv) any present or future debt by the Issuer, the Guarantor, or a Major
          Subsidiary, in an amount greater than 10 million euros (or its
          equivalent in one or more other currency(ies)), either one time only
          or cumulatively, (a) becomes due and payable prior to its due date
          following a breach or default, or in the case of an early call for
          payment corresponding thereto which is not remedied during the grace
          period in question, or (b) is not paid on its due date or, as
          applicable, before the expiration of any grace period initially agreed
          to, or (c) relative to any guarantee or commitment to indemnification
          agreed to or given by the Issuer, the Guarantor, or a Major Subsidiary
          under such debt, is not honored when this guarantee is exercised; or

     (v)  the Guarantor fails to meet any one of the Financial Ratios (as
          defined below). So long as any Bond whatsoever remains outstanding,
          the Financial Ratios will be calculated twice a year based on the
          Guarantor's certified annual consolidated financial statements and
          semi-annual consolidated financial statements. The Issuer and
          Guarantor undertake to deliver to the Financial Agent, as soon as
          possible after the closing of each of the Guarantor's annual and
          semi-annual fiscal periods, and no later than the fifteenth (15th)
          Business Day after publication (or the legal date of publication under
          current regulation) of the Guarantor's certified annual consolidated
          financial statements and semi-annual consolidated financial
          statements, an affidavit signed by two duly qualified representatives
          of the Guarantor (the AFFIDAVIT) confirming compliance by the
          Guarantor with the Financial Ratios on the date of such Affidavit and
          detailing their calculation.

          The Financial Agent will not be required in any way to verify whether
          the Issuer and the Guarantor have complied with their obligations
          relating to issuance of the Affidavit, nor to notify the Bondholders
          as to whether or not such Affidavit was received.

          For purposes of these Conditions:

          FINANCIAL RATIOS means that, as of a given Confirmation Date, (i) the
          ratio of Net Consolidated Financial Debt over Consolidated Gross
          Operating Surplus is less than 3.5 on April 30, 2006, (ii) the ratio
          of Net Consolidated Financial Debt over Consolidated Gross Operating
          Surplus is less than 2.5 on April 30, 2007, and (iii) the ratio of
          Consolidated Gross Operating Surplus over Financial Expenses is
          greater than 3.5.

          CONFIRMATION DATE means April 30 of each year on the date of this
          instrument (i.e., the closing date of the Guarantor's 1st half-year).

          NET CONSOLIDATED FINANCIAL DEBT means, for a given Confirmation Date,
          the sum of the Group's net debt (as defined for accounting purposes on
          page 73, note 10) and on page 79 of the Group's 2003/2004 annual
          report for the fiscal year ending March 31, 2004 (the 2004 ANNUAL
          REPORT).

          CONSOLIDATED GROSS OPERATING SURPLUS means, for a given Confirmation
          Date, consolidated gross operating surplus, as defined for accounting
          purposes on note 22, page 77 of the 2004 Annual Report.

          FINANCIAL EXPENSES means, for a given Confirmation Date, the Group's
          total financial expenses as defined for accounting purposes on page 79
          of the 2004 Annual Report.

          In the event that new accounting standards applicable to the Issuer
          and/or Guarantor (and specifically US GAAP standards) make significant
          changes as determined by the Financial Agent and as communicated in
          writing to the Issuer and to the Guarantor in the definitions relating
          to Financial Ratios above, the Issuer will call a general meeting of
          Bondholders to


                                       18

          deliberate on a proposed set of new definitions relative to the
          accounting Financial Ratios compatible with these new accounting
          standards; or

     (vi) if the Guarantee ceases to be in full, valid, and binding force, for
          any reason whatsoever prior to the complete redemption of all Bonds,

in this case, the Representative (as defined in Condition 8(b)), on its own
initiative or at the request of a Bondholder may, upon written notification sent
to the Issuer through the intermediation of the Financial Agent, valid upon
receipt, declare the redemption of the Bonds outstanding, immediately due and
payable, in which case the par value of these Bonds, plus interest accrued up to
the payment date, will become immediately due and payable, unless all Cases of
Early Call for Payment have been remedied before the Financial Agent has
received such notification.

8.   REPRESENTATION OF THE BONDHOLDERS

(a)  The Class

The Bondholders will be automatically grouped together into a class (hereinafter
referred to as the CLASS) for the defense of their common interests.

The Class will be governed by the provisions of the Commercial Code, with the
exception of Articles L. 228-48 and L. 228-59 (the COMMERCIAL CODE), and Decree
No. 67-236 of March 23, 1967, as amended (with the exception of Articles 218,
222, 224 and 226 of the latter) and subject to the following provisions:

(b)  Civil status

The class will have a distinct status, pursuant to Article L. 228-46 of the
Commercial Code, acting in part through the intermediation of a representative
(the REPRESENTATIVE) and in part through the intermediation of a general
Bondholders meeting (the GENERAL BONDHOLDERS' MEETING).

The Class alone, excluding any individual Bondholder, will exercise the common
rights, actions, and benefits that might currently or subsequently result from
the Bonds.

(c)  Representative

The duty of Representative may be entrusted to any individual without regard for
nationality. However, the position may not be entrusted to the following
parties:

          (i)  the Issuer, members of its Board of Directors, its general
               directors, its statutory auditors, or its employees, as well as
               their respective ascendants, descendants, and spouses; or

          (ii) corporations guaranteeing all or part of the Issuer's
               obligations, their respective managers, their general directors,
               the members of their Board of Directors, Management Board or
               Supervisory Board, their statutory auditors or employees, as well
               as their respective ascendants, descendents, and spouses; or

          (iii) corporations holding at least one tenth of the Issuer's capital
               or for which the Issuer holds at least one tenth of the capital;
               or

          (iv) parties subject to a prohibition on practicing the profession of
               banker or who have been removed from the right to direct,
               administer, or manage a company in any capacity whatsoever.

The following is appointed as initial Representative:

Association de representation des masses d'obligataires [Association for the
representation of bondholder classes]


                                       19

Centre Jacques Ferronniere
32, rue du Champ de Tir
BP 81236
44312 Nantes Cedex 3.

In case of the retirement or revocation of the initial Representative, the
replacement representative will be elected by a General Bondholders' Meeting.

The Issuer will pay the Representative the annual sum of 610 euros, payable each
year during the life of the Bonds.

All interested parties may at any time obtain the name and address of the
Representative at the head office of the Issuer or at the offices of any of the
Paying Agents.

(d)  Authority of the Representative

In the absence of any resolution to the contrary by the General Bondholders'
Meeting, the Representative will have the authority to take any management
actions as may be necessary for defending the Bondholders' common interests.

Any legal proceedings filed against or at the initiative of the Bondholders must
be against or at the initiative of the Representative, and any proceeding that
does not comply with these provisions will not be legally valid.

The Representative may not become involved in management of the Issuer's
affairs.

(e)  General Bondholdes'r Meetings

General Bondholders' Meetings may be held at any time, at the convocation of
either the Issuer or the Representative. One or more Bondholders, holding a
total of at least one thirtieth of the Bonds outstanding, may send the Issuer
and the Representative a request for convocation of the General Bondholders'
Meeting. If this General Meeting has not been convoked within two months after
this request, these Bondholders may designate one from among them to file a
request with the competent courts in Paris with a view to appointing a
representative who will convoke the meeting.

A notice indicating the date, time, place, and agenda of any General
Bondholders' Meeting will be published in accordance with the provisions of
Condition 9.

Each Bondholder is entitled to participate personally in the General
Bondholders' Meetings or be represented by proxy. Each Bond entitles the holder
to one vote.

(f)  Authority of the General Bondholders' Meetings

The General Meeting is authorized to resolve on setting the compensation of the
Representative and on his revocation and replacement, and may also rule on any
other matter relating to the common rights, actions and benefits that might
currently or subsequently derive from the Bonds, and specifically to authorize
the Representative to act in court as plaintiff or defendant.

The General Bondholders' Meeting may also resolve on any proposal for change of
Conditions, including any proposal for arbitration or settlement, corresponding
to the litigation rights or subject to court rulings; it is understood, however,
that the General Bondholders' Meeting cannot increase the expenses of the
Bondholders, nor authorize or accept a deferral in the date of interest payment
or a change in the redemption conditions of the Bonds or rate of interest of the
Bonds, nor establish unequal treatment between Bondholders.


                                       20

General Meetings may only be validly held on first convocation provided that the
Bondholders present or represented hold at least one fourth of the par value of
all Bonds outstanding. On the second convocation no quorum will be required.
General Bondholders' Meetings will validly rule by a simple majority of votes
cast by the Bondholders present in person or through proxy.

(g)  Notification of Resolutions

Resolutions of the General Bondholders' Meeting must be published in accordance
with the provisions of Condition 9 within a maximum of 90 days after the date
they were approved.

(h)  Information of Bondholders

For the 15-day period before the holding of each General Bondholders' Meeting,
each Bondholder or its representative will be entitled to consult or obtain a
copy of the text of the resolutions to be proposed and the reports to be
presented to such General Meeting; all such documents will be made available for
consultation at the Issuer's corporate headquarters, at the offices of the
Paying Agents, and at any other location mentioned in the convocation notice to
such General Meeting.

(i)  Expenses

The Issuer will assume all expenses corresponding to the functioning of the
Class, specifically expenses relating to the convocation and holding of General
Bondholders' Meetings, compensation for the Representative, and in general, all
administrative expenses approved by a General Meeting, and it is expressly
stipulated that no expenses may be attributed to interest payable under the
Bonds.

9.   NOTICE

Any notice to be sent to the Bondholders will be deemed as having been given if
issued to Euroclear France, Euroclear, Clearstream Banking, Societe Anonyme, and
any settlement/ delivery system in which the Bonds are listed. Any notice thus
given will be deemed as having been validly issued three Business Days after the
date of receipt by the settlement/ delivery system.

10.  STATUTE OF LIMITATIONS

Any action relating to the payment of principal and interest under the Bonds
will be subject to the statute of limitations after the lapse of 10 years (for
principal) and 5 years (for interest), counting from their respective due dates.

11.  SIMILAR ISSUANCES

The issuer will be entitled, at any time, without the Bondholders' consent, to
issue additional bonds that might be similar to the Bonds with regard to their
financial servicing, provided that such additional bonds and the Bonds grant
their bondholders identical rights in all regards (or identical in all regards
except for the first interest payment) and that the conditions of such
additional bonds provide for such similarity. In the event that such a
similarity occurs, the Bondholders and holders of all similar bonds will be
consolidated into a single Class having legal status, for the defense of their
common interests.


                                       21

12.  APPLICABLE LAW AND ASSIGNMENT OF JURISDICTION

The Bonds and the Financial Service Agreement are governed by French law and
must be interpreted in accordance therewith. The provisions of Articles 86 to
94-8 of the Luxembourg Law of August 10, 1915 concerning commercial
corporations, as amended, are expressly excluded.

Jurisdiction is attributed to the competent courts of the Paris Appeals Court
for any dispute that may derive directly or indirectly from the Bonds or from
the Financial Service Agreement; consequently, any suits, actions, or
proceedings resulting from this Agreement or corresponding thereto must be
brought before these jurisdictions. The Issuer and the Guarantor are irrevocably
subject to the competence of these jurisdictions and waive in advance any
objection that might be filed against this jurisdiction, whether based on
territoriality, notified court, or immunity of jurisdiction.


                                       22

                        APPENDIX 2 - GUARANTEE AGREEMENT


                                       23

                                                                  EXECUTION COPY

                     JOINT AND SEVERAL GUARANTEE COMMITMENT

                               DATED JULY 11, 2005

                                     BETWEEN

                    SKIS ROSSIGNOL S.A. - CLUB ROSSIGNOL S.A.

                          In the capacity of Guarantor

                                       AND

                          SOCIETE GENERALE BANK & TRUST

                         In the capacity of Beneficiary

                                       AND

                     SKIS ROSSIGNOL FINANCE LUXEMBOURG S.A.

           in connection with the issue of bonds in a total amount of

                                   E50,000,000

           bearing interest at the rate of 3.231% and maturing in 2010

                                ALLEN & OVERY LLP

                                      PARIS


                                       24

                                    CONTENTS



CLAUSE                                                                      PAGE
- ------                                                                      ----
                                                                         
1.    Definitions and Interpretation.....................................     1
2.    Extent of Guarantee Agreement......................................     2
3.    Requests under the Guarantee Agreement - Payments
      by the Guarantor...................................................     2
4.    Application of the Guarantee Agreement.............................     2
5.    Taxes..............................................................     3
6.    Exercise of the Guarantee..........................................     3
7.    Representations of the Guarantor...................................     3
8.    Right of recourse..................................................     4
9.    Term of Guarantee..................................................     4
10.   Information of the Guarantor.......................................     5
11.   Successors.........................................................     5
12.   Notifications......................................................     5
13.   Expenses...........................................................     6
14.   Amendments and Partial Invalidity..................................     6
15.   Law and Applicable Jurisdiction....................................     6

SIGNATURES...............................................................     7



                                       25

THIS CONTRACT IS EXECUTED ON JULY 11, 2005

BETWEEN

(1)  SKIS ROSSIGNOL S.A. - CLUB ROSSIGNOL S.A., a corporation with capital stock
     of E49,792,253, having its head office at rue du Docteur Butterlin, 38509
     Voiron, and registered in the Commercial Register of Grenoble under number
     RCS B 056 502 958 (the GUARANTOR); and

(2)  SOCIETE GENERALE BANK & TRUST, a corporation organized pursuant to the laws
     of Luxembourg, having its head office at 11, avenue Emile Reuter, L-2420
     Luxembourg and registered in the Commercial Register, Luxembourg under
     number B. 6061 (the INITIAL SUBSCRIBER).

Together, the PARTIES.

AND IN THE PRESENCE OF

(3)  SKIS ROSSIGNOL FINANCE LUXEMBOURG S.A., a corporation organized pursuant to
     the laws of Luxemburg with capital stock of E31,000, having its head office
     at 11, avenue Emile Reuter, L-2420 Luxembourg and in the process of
     registration in the Commercial Register, (the ISSUER);

RECITALS:

(A)  The Issuer has authorized the issuance of bonds for a total amount of
     50,000,000 euros bearing interest at the rate of 3.231 % per annum and
     maturing in July 2010 (the BONDS).

(B)  The Initial Subscriber has consented to the subscription of the Bonds under
     the condition precedent of the execution of this guarantee instrument (the
     GUARANTEE).

THE FOLLOWING HAS BEEN AGREED:

1.   DEFINITIONS AND INTERPRETATION

1.1  The terms defined in the Conditions shall have the same meaning herein,
     unless a different intent has been expressed.

1.2  In this Guarantee Agreement:

     CASE OF EARLY CALL for Payment shall have the meaning that it is given in
     the Conditions.

     REQUEST shall designate a written request duly signed by a Bondholder, sent
     to the Guarantor and requesting the payment of an amount under the
     Guarantee Agreement.

     RIGHTS OF GUARANTEE shall designate all the rights, powers and actions of
     the Bondholders pursuant to the terms of this Guarantee Agreement or the
     law.

     RIGHTS OF RECOURSE shall designate each of the rights, actions and claims
     that the Guarantor has against the Issuer or any other company that has
     granted a security or a guarantee under the Secured Bonds, deriving from
     the execution of this Guarantee Agreement, including specifically the right
     of recourse of the Guarantor against the Issuer, or any other right of
     recourse born of subrogation or any other similar right, action, or claim
     available pursuant to the applicable law.

     CONDITIONS shall designate the terms and conditions of the Bonds that
     appear in exhibit 1 of the Subscription Contract and appended to this
     Guarantee contract.


                                       26

     SECURED BONDS shall designate all debts and payment obligations of the
     Issuer, present and future, with respect to the Bondholders under the
     Bonds, regardless of their nature (whether they be certain or contingent,
     joint or several on any basis).

     BONDHOLDER(S) shall designate the Initial Subscriber and each subsequent
     bondholder to whom a Bond has been transferred.

1.3  In this Guarantee Agreement, any reference to (a) a Clause shall be,
     barring contrary provision, a reference to a Clause hereof and (b) any
     other contract or document (including this Guarantee contract and the
     Conditions) shall be interpreted as applying to such other contract or
     document as it may be amended, modified or supplemented at any time. The
     titles of the Clauses of this Guarantee Agreement appear solely for
     information purposes and are not to be taken into consideration for the
     interpretation of the Guarantee Agreement.

2.   EXTENT OF GUARANTEE AGREEMENT

2.1  The Guarantor agrees to secure in the capacity of joint guarantor (pursuant
     to Articles 2011 et seq. of the Civil Code) in favor of each of the
     Bondholders, the payment and redemption by the Issuer of the Secured Bonds.

2.2  In the event of (i) merger or spin-off affecting the Issuer and causing the
     absorption or spin-off thereof or (ii) partial contribution of assets and
     if, in each of those eventualities, the Guarantee Agreement is maintained
     with respect to the absorbing entity or the entity that succeeds the Issuer
     in the rights and obligations under the Bonds (each, the NEW ENTITY), this
     Guarantee Agreement shall cover all payment obligations under the Bonds of
     the New Entity deriving from the merger, the spin-off or the partial
     contribution of assets.

3.   REQUESTS UNDER THE GUARANTEE AGREEMENT - PAYMENTS BY THE GUARANTOR

3.1  The Guarantor must make any payment requested under this Guarantee
     Agreement immediately after receipt of a Request.

3.2  The Guarantor waives the benefit of discussion stipulated in Articles 2021
     et seq. of the Civil Code and the benefit of division stipulated in
     Articles 2026 et seq. of the Civil Code (in the event there are several
     guarantors in the future). Thus, each of the Bondholders shall be
     authorized to demand payment by the Guarantor, without even having taken
     measures first to obtain the payment from the Borrower or any person who
     has agreed to secure the Secured Bonds (in the event there are several
     guarantors in the future).

4.   APPLICATION OF THE GUARANTEE AGREEMENT

4.1  The Guarantee Agreement shall be cumulative and independent of any other
     guarantee that the Bondholders may have received, at any time, to cover the
     Secured Bonds or any rights, powers and actions provided by law and must
     not under any circumstances act in such a way as to affect or be affected
     by any security or any other right or action of which the Bondholders may
     be or may come to be depositaries at any time with respect to the Secured
     Bonds.

4.2  The Guarantee Agreement may not be affected by the passage of time, by any
     extensions granted non-contentiously to any party, or any abstention or
     delay of the Bondholders in realizing any security or any rights or actions
     of which the Bondholders may be or may come to be depositaries against the
     Guarantor or against any other party.


                                       27

4.3  No default or delay of the Bondholders in exercising any of its [sic]
     rights under this Guarantee Agreement may be construed as a waiver hereof
     and the (partial or otherwise) exercise thereof shall not exclude the
     future exercise of said right or any other rights.

4.4  The obligations of the Guarantor that are contained in this Guarantee
     Agreement, the rights, powers and actions conferred upon the Bondholders by
     this Guarantee Agreement or by the law, and more generally the Guarantee
     Agreement hereby created may not be considered settled, impaired or
     affected by:

     (a)  an amendment or an abandonment of any of the Secured Bonds;

     (b)  any (even partial) default in the taking of any security stipulated in
          the Conditions or otherwise having been the subject of an agreement to
          be taken to cover the Secured Bonds;

     (c)  any (even partial) default in realizing a value or any restitution,
          release, exchange or substitution of any security taken in connection
          with the Secured Bonds; or

     (d)  any other act, event or omission that, in the absence of this Clause
          4.4, could cause the release, impair or affect any of the obligations
          of the Guarantor that are contained in this Guarantee Agreement and
          the rights, powers and actions that are conferred on the Bondholders
          under this Guarantee Agreement or the law.

4.5  Any termination or early redemption of the Secured Bonds occurring pursuant
     to the Conditions shall be enforceable against the Guarantor.

5.   TAXES

5.1  All payments made under this Guarantee Agreement must be made without
     withdrawing or withholding at the source of any tax, duty, charge or fee,
     present or future (the Tax Withholding), unless said Tax Withholding
     results from the law, in which case the Guarantor agrees to increase its
     payments, to the extent permitted by law, so that the Bondholders will
     receive the full amounts that they would have been paid under the Secured
     Bonds in the absence of such Tax Withholding.

5.2  If the Guarantor knows that it will be required to make a Tax Withholding
     (or if there is a change in the rate or the basis of calculation of said
     Tax Withholding), the Guarantor must so notify the Bondholders.

5.3  If the Guarantor is required to make a Tax Withholding, it must make said
     Tax Withholding and any payment required in connection with that Tax
     Withholding within the stipulated time limits and in the minimum amount
     required by law.

5.4  Within thirty days of making a Tax Withholding or any payment required in
     connection with that Tax Withholding, the Guarantor must give the
     Bondholders to whom the payment is owed reasonably satisfactory evidence
     that the Tax Withholding has been made or (if applicable) that any payment
     to be made to the applicable tax authority has indeed been made.

6.   EXERCISE OF GUARANTEE

     The Guarantor shall be required to pay to each Bondholder concerned the
     amount claimed thereby in the Request within two Paris business days after
     receipt of the Request.

7.   REPRESENTATIONS AND COMMITMENTS OF GUARANTOR

     The Guarantor represents and warrants that:


                                       28

     (a)  it is a corporation duly organized and governed by French law;

     (b)  it has full power to enter into this Guarantee and all measures
          necessary to authorize the execution and performance of said Guarantee
          Agreement have been taken; specifically, the execution of said
          Guarantee Agreement was authorized by a resolution of the Supervisory
          Board of the Guarantor on June 16, 2005, pursuant to Article L.225-68
          of the Commercial Code and by a decision of the Management Board of
          the Guarantor on July 8, 2005;

     (c)  the signer of this Guarantee Agreement is duly authorized to sign for
          and on behalf of the Guarantor;

     (d)  the execution and performance of this Guarantee Agreement do not
          violate any provision of its bylaws, or any provision of law that is
          applicable to it;

     (e)  no authorization of any government agency is required to permit the
          Guarantor to execute and perform its obligations under this Guarantee
          Agreement;

     (f)  this Guarantee Agreement creates obligations that are valid and
          enforceable against it pursuant to its terms;

     (g)  its obligations under the Guarantee Agreement are pari passu with the
          receivables of all the unsecured creditors, except for obligations
          that enjoy a privilege granted automatically by law;

     (h)  no legal action, no arbitration and no administrative proceeding has
          been brought against it that might prevent it from performing its
          obligations resulting from this Guarantee Agreement;

     (i)  it does not owe any taxes, assessments, duties or any other equivalent
          charge (TAXES) and it has not received any notice from the tax
          authorities of nonpayment of any Tax that cannot be seriously
          challenged;

     (j)  it is in compliance, in all respects, with the laws to which it is
          subject;

     (k)  it shall fulfill the obligations that is bears under the Conditions,
          including Condition 2(c)(ii) (Maintaining Bond Rank).

8.   RIGHT OF RECOURSE

8.1  The Guarantor hereby agrees not to exercise the Rights of Recourse or any
     other right (including, exercised through interim measures such as the
     interim attachment, by offset or by any other means), and not to exercise
     any action or undertake anything that may be connected with these Rights of
     Recourse or other equivalent rights, except when a contrary intention is
     expressed herein, or when it is authorized in writing by the Bondholders,
     until the Secured Bonds have been fully and irrevocably paid.

8.2  This clause shall remain in effect until the Secured Bonds are fully and
     irrevocably paid and shall survive, to the extent necessary, any
     termination or release of this Guarantee Agreement.

9.   TERM OF GUARANTEE

     This Guarantee shall remain in effect as long as the Issuer owes any amount
     under the Secured Bonds.


                                       29

10.  INFORMATION OF THE GUARANTOR

10.1 The Guarantor acknowledges that it has full knowledge of the terms of this
     Guarantee Agreement and of the legal and financial condition of the Issuer
     at the date of said Guarantee Agreement. It acknowledges that it is its
     responsibility to monitor the legal and financial condition of the Issuer
     and that the Bondholders do not have any obligation to provide it with
     information about the Issuer.

10.2 The Guarantor acknowledges that neither the legal and financial condition
     of the Issuer nor the existence of any other guarantee that has been
     provided to secure the Secured Bonds are decisive conditions of this
     Guarantee Agreement.

10.3 The Bondholders are not required to inform the Guarantor of any event that
     might affect the legal and financial condition of the Issuer, or of any
     other guarantor of the Secured Bonds.

11.  SUCCESSORS

     This Guarantee Agreement shall continue to be effective regardless of any
     merger or consolidation of the Bondholders, and references to the
     Bondholders must be construed as including any assignee or any successor in
     interest of the Bondholders and any party who, pursuant to law, holds
     rights and obligations of each of the Bondholders hereunder, or to whom the
     same rights have been transferred, novated or conveyed in any way.

12.  NOTIFICATIONS

12.1 All notices and communications that will be made in connection with this
     Guarantee Agreement must be made in writing and must be delivered
     personally, or be sent by registered letter with return receipt requested
     or by fax to the address and/or number of the recipient indicated below:

     THE GUARANTOR

     SKIS ROSSIGNOL S.A. - CLUB ROSSIGNOL S.A.

     Address:             rue du Docteur Butterlin - 38509 Voiron
     To the attention of: + 33 4 76 66 64 40
     Telephone:           + 33 4 76 66 64 83
     Fax:                 F. Chauvet

     THE INITIAL SUBSCRIBER

     SOCIETE GENERALE BANK & TRUST

     Address:             11, avenue Emile Reuter - L-2420 Luxembourg
     To the attention of: ENTR/MID, C. Beaucourt / R. Michel
     Telephone:           + 35 2 47 93 11 51 56
     Fax:                 + 35 2) 47 93 11 51


                                       30

     THE ISSUER

     SKIS ROSSIGNOL FINANCE LUXEMBOURG S.A.

     Address:             11, avenue Emile Reuter - L-2420 Luxembourg
     To the attention of: V. Plagnol
     Telephone:           + 35 2 47 93 11 51 56
     Fax:                 + 35 2 47 93 11 51

12.2 Delivery

     Any communication made by one party to another party under the Guarantee
     Agreement shall be heeded only:

     (a)  when it has been made in the form of a registered letter with return
          receipt requested, at the date appearing on the acknowledgement of
          receipt;

     (b)  when it has been given by fax, upon receipt (however, if the date of
          receipt appearing on the acknowledgment of receipt is not a business
          day in Paris, the date of receipt shall be the next business day in
          Paris); and

     (c)  when it has been delivered in person, at the date appearing on the
          acknowledgment of receipt.

13.  EXPENSES

     The Guarantor agrees to pay the Bondholders all documented costs and
     expenses (including the fees and expenses of legal counsel, and any
     charges, duties, taxes and registration fees) that the Bondholders or any
     representative, agent or any person designated by them will have incurred
     due to the (a) signing of this Guarantee Agreement, (b) the implementation
     and/or (c) the exercise of any Rights of Guarantee.

14.  AMENDMENTS AND PARTIAL INVALIDITY

14.1 Changes to this Guarantee Agreement and any waiver of any right under said
     Guarantee Agreement must be evidenced in writing.

14.2 If any of the stipulations of this Guarantee Agreement become or are
     declared void, illegal or ineffective, the validity of the other
     stipulations hereof shall nevertheless continue to be effective. However,
     the Parties agree to make their best efforts to amend the Guarantee
     Agreement to achieve, lawfully, the purpose of the invalidated stipulation.

15.  LAW AND APPLICABLE JURISDICTION

15.1 This Guarantee shall be governed by French law and the courts of the venue
     of the Paris Court of Appeal shall have exclusive jurisdiction to resolve
     any dispute that may arise between the Parties in connection with this
     Guarantee Agreement.

15.2 The Guarantor waives any immunity of jurisdiction or execution that it
     might enjoy for itself and for its present or future property.

     This Guarantee Agreement has been duly signed by the Parties in four
     original counterparts, one of which is available to the Bondholders at the
     office of the Financial Agent.


                                       31

SIGNATURES

THE GUARANTOR


By:
    ---------------------------------

For and on behalf of the Guarantor

THE INITIAL SUBSCRIBER


By:
    ---------------------------------


By:
    ---------------------------------

For and on behalf of the Initial Subscriber

THE ISSUER


By:
    ---------------------------------

For and on behalf of the Issuer


                                       32

                           EXHIBIT 1 - BOND CONDITIONS


                                       33

EX-31.1

Exhibit 31.1

§ 302 CERTIFICATION

     I, Robert B. McKnight, Jr., certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Quiksilver, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          (b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

          (c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

     5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2005	/s/ Robert B. McKnight, Jr.
	Robert B. McKnight, Jr.
	Chief Executive Officer

EX-31.2

Exhibit 31.2

§ 302 CERTIFICATION

     I, Steven L. Brink, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Quiksilver, Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          (b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and

          (c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

     5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2005	/s/ Steven L. Brink
	Steven L. Brink
	Chief Financial Officer and Treasurer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003

In connection with the Quarterly Report of Quiksilver, Inc. (the “Company”) on Form 10-Q for the period ending July 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert B. McKnight, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2003, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Robert B. McKnight, Jr.

Robert B. McKnight, Jr.
Chief Executive Officer
September 9, 2005

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003

In connection with the Quarterly Report of Quiksilver, Inc. (the “Company”) on Form 10-Q for the period ending July 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven L. Brink, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2003, that:

          (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

          (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Steven L. Brink

Steven L. Brink
Chief Financial Officer
September 9, 2005