8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
June 24, 2010

Quiksilver, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation) 001-14229
(Commission File Number) 33-0199426
(IRS Employer Identification Number)

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

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

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-10.1

EX-23.1

EX-99.1

EX-99.2

EX-99.3

ITEM 1.01. Entry into a Material Definitive Agreement

          On June 24, 2010, pursuant to the previously announced Exchange Letter Agreement dated June 14, 2010 (the “Exchange Letter Agreement”), Quiksilver, Inc., a Delaware corporation (“Quiksilver”), and its subsidiaries Quiksilver Americas, Inc. (“Quiksilver Americas”) and Mountain & Wave S.À.R.L. (“Quiksilver Europe” and, together with Quiksilver Americas, the “Borrowers”), entered into an exchange agreement (the “Exchange Agreement”) with Rhône Group LLC (“Rhône”) and Romolo Holdings C.V., Triton SPV L.P., Triton Onshore SPV L.P., Triton Offshore SPV L.P. and Triton Coinvestment SPV L.P. (collectively, the “Lenders”). Rhône is the administrative agent under the Credit Agreement, dated July 31, 2009, among Quiksilver, Quiksilver Americas, Rhône and the Lenders (the “U.S. Term Facility”), and the Credit Agreement, dated July 31, 2009, among Quiksilver, Quiksilver Europe, Rhône and the Lenders (the “European Term Facility” and, together with the U.S. Term Facility, the “Rhône Term Facilities”). The Exchange Agreement gives effect to the Exchange Letter Agreement and, pursuant to the Exchange Agreement, the parties terminated the Exchange Letter Agreement.

          Pursuant to the Exchange Agreement, subject to customary closing conditions, Quiksilver, the Borrowers, Rhône and the Lenders have agreed to exchange $75 million of the principal balance outstanding under the Rhône Term Facilities (the “First Exchange”) for an aggregate of 16,666,667 shares of Quiksilver’s common stock (the “Common Stock”) at an exchange price of $4.50 per share. In addition, the Borrowers have an option, exercisable until August 23, 2010, to require the Lenders to exchange a portion of the remaining principal balance outstanding under the Rhône Term Facilities for an additional number of shares of Common Stock at the same exchange price per share (the “Standby Exchange”, and, together with the First Exchange, the “Exchanges”), provided that the number of shares of Common Stock issuable pursuant to the Standby Exchange will not exceed the number of shares of Common Stock that would result in a change of control under the debt agreements of Quiksilver or its subsidiaries.

          The Exchanges are subject to customary closing conditions, including (1) if applicable, the filing of a notification under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the expiration or termination of the waiting period and any extension of such period thereunder; and (2) the approval of Quiksilver’s stockholders, as more fully discussed below. Quiksilver is required to seek stockholder approval of the issuance of the shares of Common Stock pursuant to the Exchanges under the listing rules of the New York Stock Exchange. If these conditions are not satisfied, then the transactions contemplated by the Exchange Agreement will not occur. If the First Exchange does not occur (i) because of a failure to obtain stockholder approval and Quiksilver prepays any portion of the outstanding principal amount under the Rhône Term Facilities within six months of such failure to obtain stockholder approval, (ii) because Quiksilver’s board of directors (the “Board”) changes its recommendation to the stockholders with respect to the Exchanges or (iii) because of a material breach by Quiksilver of its obligations under the Exchange Agreement, Rhône, as agent for the Lenders, is entitled to receive a termination fee of $10 million in the aggregate. Rhône, as agent for the Lenders, is not entitled to receive the termination fee under any other circumstances and the termination fee is the exclusive remedy of Rhône and the Lenders as a result of a termination of the Exchange Agreement by Quiksilver or Rhône and the Lenders.

          In addition, the Exchange Agreement provides that Quiksilver, Rhône and the Lenders will enter into a stockholders agreement (the “Stockholders Agreement”), substantially in the form attached to the Exchange Agreement included hereto as Exhibit 10.1, at the closing of the First Exchange. The Stockholders Agreement will provide that, among other things, Rhône Capital III L.P. and the Lenders will be entitled to (i) customary registration rights and preemptive rights in respect of the Common Stock issued pursuant to the Exchanges on the same basis as set forth in the Warrant Agreement (defined below), and (ii) information rights similar to certain provisions to those set forth under the U.S. Term Facility, and that each of Triton Onshore SPV L.P. and Triton Coinvestment SPV L.P. (together, the “Appointing Funds”) will be entitled to designate a director to the Board; provided, however, that if the Lenders sell one-third or more of the Common Stock they received in the Exchanges to any persons other than affiliates, then only Triton Onshore SPV L.P. shall be entitled to designate a director pursuant to the Stockholders Agreement, and if the Lenders sell two-thirds or more of the Common Stock they received in the Exchanges to any persons other than affiliates, then Triton Onshore SPV L.P.’s right to designate a director pursuant to the Stockholders Agreement shall terminate; provided further, however, that for so long as any directors designated by the Appointing Funds pursuant to the existing Warrant and Registration Rights Agreement, dated July 31, 2009, among Quiksilver, Rhône Capital III L.P. and the Lenders (the “Warrant Agreement”), serve on the Board, then such directors shall be counted as directors designated by the Appointing Funds for purposes of the Stockholders Agreement. Rhône currently has two directors on the Board pursuant to the Appointing Funds’ rights to appoint directors under the Warrant Agreement, subject to ownership requirements with respect to the shares underlying the warrants, or the warrants, as applicable, that are similar to those described above. Further, the Stockholders Agreement will provide that the Lenders will be subject to certain transfer and standstill restrictions, subject to certain exceptions and ownership requirements.

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          The Exchange Agreement also provides for reimbursement of expenses incurred by Rhône in connection with the Exchanges, subject to certain limitations. In addition, at the closing, Quiksilver has agreed to pay Rhône, as agent for the Lenders, an exchange fee of 4.75% of the principal amount of the term loans exchanged in the First Exchange, and, if exercised, of the principal amount of the term loans exchanged in the Standby Exchange.

          The foregoing summary of the Exchange Agreement and the Stockholders Agreement does not purport to be complete and is qualified in its entirety by reference to the Exchange Agreement and the Stockholders Agreement (included as an exhibit to the Exchange Agreement), which is attached hereto as Exhibit 10.1 and incorporated herein by reference.

          This report contains forward-looking statements including but not limited to statements regarding the Quiksilver’s financing activities and other future activities. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. Certain factors that may cause actual results to differ materially include, without limitation, our ability to obtain stockholder approval of the exchanges described above or the failure to satisfy other conditions to complete the exchanges, and a delay in completing any of the transactions described above. Please refer to Quiksilver’s SEC filings for more information on the other factors that could cause actual results to differ materially from expectations, specifically the sections titled “Risk Factors” and “Forward-Looking Statements” in Quiksilver’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

Item 1.02. Termination of a Material Definitive Agreement

          As described in Quiksilver’s Current Report on Form 8-K filed with the SEC on June 15, 2010, Quiksilver, the Borrowers, Rhône and the Lenders entered into the Exchange Letter Agreement. The Exchange Agreement gives effect to the terms of the Exchange Letter Agreement. See the discussion regarding the termination of the Exchange Letter Agreement in connection with the execution of the Exchange Agreement under Item 1.01, which is incorporated herein by reference.

Item 3.02. Unregistered Sales of Equity Securities.

          See the discussion of the Common Stock of Quiksilver to be issued pursuant to the Exchange Agreement under Item 1.01. The shares of Common Stock are being offered in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended.

Item 8.01. Other Events.

          In addition to disclosing the information under Item 1.01, Item 1.02 and Item 3.02, Quiksilver is filing this Current Report on Form 8-K to retrospectively recast portions of Quiksilver’s Annual Report on Form 10-K for the fiscal year ended October 31, 2009 (the “2009 Form 10-K”), filed on January 12, 2010, to reflect the adoption of new accounting guidance related to the presentation of noncontrolling interests at the beginning of fiscal 2010. Quiksilver adopted the new accounting guidance at the beginning of its fiscal year ending October 31, 2010, and the guidance was implemented in Quiksilver’s Quarterly Reports on Form 10-Q for the quarters ended January 31 and April 30, 2010. The portions of the 2009 Form 10-K that are included in the Current Report on Form 8-K are being revised only to conform to such presentation. This will permit Quiksilver to incorporate the recast portions of the 2009 Form 10-K by reference in future filings with the Securities and Exchange Commission.

          The impact of adoption of the new accounting guidance is summarized in Note 1 to the Consolidated Financial Statements in the section subtitled “Adjustment for Retrospective Application of New Accounting Standard Adopted on November 1, 2009” of Part II, Item 8. Financial Statements and Supplementary Data, as updated in Exhibit 99.3.

          The impact of the adoption of the accounting guidance is reflected in the following sections of the 2009 Form 10-K, which are attached hereto as Exhibits 99.1, 99.2, and 99.3:

• Part II, Item 6. Selected Financial Data (Exhibit 99.1)

• Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Exhibit 99.2)

• Part II, Item 8. Financial Statements and Supplementary Data (Exhibit 99.3)

          This Current Report on Form 8-K contains only the sections and exhibits to the 2009 Form 10-K that are being revised. The sections of and exhibits to our 2009 Form 10-K as originally filed, including, without limitation, “Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk”, which are not included herein, were not impacted by the adoption of the new accounting guidance and remain unchanged. All information in this filing, as well as the unchanged sections and exhibits to our 2009 Form 10-K, are as of October 31, 2009 and do not reflect events occurring after the date of the 2009 Form 10-K filing, except for (1) certain amounts recast as described in the

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Significant Accounting Policies note and disclosures affected by the adoption of the new accounting guidance, and (2) with respect to Items 7 and 8, the updated goodwill and intangible assets disclosure in the Critical Accounting Policies and in the Significant Accounting Policies note, as disclosed in our Quarterly Report on Form 10-Q for the quarter ended April 30, 2010.

Item 9.01. Financial Statements and Exhibits.

(d) The following exhibits are filed with this report

Exhibit
Number	Description
10.1	Exchange Agreement (including form of Stockholders Agreement)
23.1	Consent of Deloitte & Touche LLP
99.1	Part II, Item 6. Selected Financial Data
99.2	Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
99.3	Part II, Item 8. Financial Statements and Supplementary Data

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SIGNATURE

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

	QUIKSILVER, INC.
Date: June 25, 2010	By:	/s/ Joseph Scirocco
		Joseph Scirocco
		Chief Financial Officer and Chief Operating Officer

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EX-10.1

Exhibit 10.1

EXCHANGE AGREEMENT

by and among

QUIKSILVER, INC.,

QUIKSILVER AMERICAS, INC.,

MOUNTAIN & WAVE S.À R.L.,

THE LENDERS PARTY HERETO

and

RHÔNE GROUP L.L.C.

Dated as of June 24, 2010

TABLE OF CONTENT

			Page
1.	DEFINITIONS.			A-1
2.	THE EXCHANGES			A-4
	2.1	The First Exchange		A-4
	2.2	The Standby Exchange		A-4
	2.3	Closing Dates of the Exchanges		A-5
	2.4	Exchange Fee		A-5
	2.5	Delivery of the Common Stock		A-5
	2.6	Delivery of the Stockholders Agreement		A-5
	2.7	Replacement Notes		A-5
3.	STOCKHOLDER APPROVAL.			A-6
	3.1	Stockholders’ Meeting		A-6
	3.2	Preparation of Proxy Statement and Board and Stockholder Action		A-6
4.	REPRESENTATIONS AND WARRANTIES.			A-7
	4.1	Representations and Warranties of the Company and the Borrowers		A-7
	4.2	Representations and Warranties of Rhône and the Lenders		A-9
5.	COVENANTS			A-10
	5.1	Modification of Credit Agreements		A-10
	5.2	Beneficial Ownership		A-10
	5.3	Preemptive Rights		A-10
6.	CONDITIONS PRECEDENT TO THE EXCHANGES.			A-11
	6.1	Conditions Precedent to each of the First Exchange and the Standby Exchange		A-11
	6.2	Conditions Precedent to the Standby Exchange		A-13
7.	TERMINATION; FEES AND EXPENSES.			A-13
	7.1	Termination		A-13
	7.2	Termination Fee		A-13
	7.3	Expenses		A-13
8.	MISCELLANEOUS			A-14
	8.1	Payment of Taxes		A-14
	8.2	Notices		A-14
	8.3	Agent		A-14
	8.4	Governing Law		A-14
	8.5	Submission to Jurisdiction		A-15
	8.6	Service of Process		A-15
	8.7	Waiver of Venue		A-15
	8.8	Persons Benefiting		A-15
	8.9	Indemnification		A-15
	8.10	Counterparts		A-16
	8.11	Further Assurances		A-16
	8.12	Successors and Assigns		A-16
	8.13	Survival		A-16
	8.14	Publicity		A-16
	8.15	Exchange Rate		A-16
	8.16	Severability		A-16
	8.17	Headings		A-16
	8.18	Entire Agreement		A-16
	8.19	Limitation of Liability		A-16

SIGNATURES
Schedules and Exhibits
Schedule 2.1(a)	A-19
Schedule 4.2(g)	A-20
EXHIBIT 2.6 — Form of Stockholders Agreement

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EXCHANGE AGREEMENT

This EXCHANGE AGREEMENT (the “Agreement”) is entered into as of June 24, 2010, among Rhône Group L.L.C. (“Rhône”), Romolo Holdings C.V., Triton SPV L.P., Triton Onshore SPV L.P., Triton Offshore SPV L.P. and Triton Coinvestment SPV L.P. (each, a “Lender”, and collectively, the “Lenders”); Quiksilver, Inc. (the “Company”); Quiksilver Americas, Inc. (the “US Borrower”); and Mountain & Wave S.à r.l. (the “European Borrower” and, together with the US Borrower, the “Borrowers”).

WHEREAS, the Lenders have made term loans to the US Borrower with an original principal amount of $125,000,000 (the “US Term Loans”) pursuant to the Credit Agreement, dated as of July 31, 2009, among the Company, the US Borrower, Rhône, as administrative agent, and the Lenders (the “US Credit Agreement”);

WHEREAS, the Lenders have made term loans to the European Borrower with an original principal amount of €20,000,000 (the “European Term Loans” and, together with the US Term Loans, the “Term Loans”) pursuant to the Credit Agreement, dated as of July 31, 2009, among the Company, the European Borrower, Rhône, as administrative agent, and the Lenders (the “European Credit Agreement” and, together with the US Credit Agreement, the “Credit Agreements”);

WHEREAS, the Company, the Borrowers, Rhône and the Lenders have entered into a letter agreement, dated as of June 14, 2010 (the “Letter Agreement”), providing that, subject to satisfaction of the conditions set forth therein, (i) $75,000,000 principal amount of the Term Loans shall be exchanged for shares of Common Stock; (ii) up to the total remaining principal amount outstanding under the Term Loans may, at the option of the Borrowers, be exchanged for shares of Common Stock; (iii) the terms of the Credit Agreements shall be amended; and (iv) the Company, the Lenders and Rhône Capital III L.P. shall, at the closing of the transactions contemplated therein, enter into a stockholders agreement (the “Stockholders Agreement”); and

WHEREAS, the Company, the Borrowers, Rhône and the Lenders have determined to enter into this Agreement to give effect to the terms of the Letter Agreement and to terminate the Letter Agreement.

NOW THEREFORE, in consideration of the mutual covenants and conditions set forth herein, the sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

1.   DEFINITIONS.

As used in this Agreement, the following terms shall have the following meanings:

“Affiliate” means with respect to any Person, a Person that directly or indirectly controls, is controlled by or is under direct or indirect common control with such Person. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agreement” has the meaning set forth in the preamble to this Agreement.

“Board” means the Board of Directors of the Company.

“Borrowers” has the meaning set forth in the preamble to this Agreement and their successors and assigns.

“Business Day” means any day that is not a day on which banking institutions are authorized or required to be closed in the State of New York.

“Bylaws” means the Company’s Amended and Restated Bylaws, as amended from time to time.

“Capital Stock” means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of the Company, including any preferred stock but excluding any debt securities convertible into such equity.

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“Certificate of Incorporation” means the Company’s Restated Certificate of Incorporation, as amended from time to time.

“Common Stock” means the common stock, par value $0.01 per share, of the Company.

“Common Stock Equivalent” means any warrant, right or option to acquire any shares of Common Stock or any security convertible or exchangeable into shares of Common Stock.

“Company” has the meaning set forth in the preamble to this Agreement and shall be deemed to include its successors and assigns.

“Credit Agreements” has the meaning set forth in the recitals to this Agreement.

“DGCL” means the Delaware General Corporation Law.

“Dollars” and “$” mean lawful money of the United States.

“European Borrower” has the meaning set forth in the recitals to this Agreement and its successors and assigns.

“European Credit Agreement” has the meaning set forth in the recitals to this Agreement.

“European Term Loans” has the meaning set forth in the recitals to this Agreement.

“Euros” and “€” mean the single currency of the member states of the European Communities that adopt or have adopted the Euro as their lawful currency in accordance with the legislation of the European Union relating to European Monetary Union.

“Exchanges” means the First Exchange and the Standby Exchange.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Fee” has the meaning set forth in Section 2.4.

“Exchange Ratio” means $4.50 per share of Common Stock.

“First Exchange” has the meaning set forth in Section 2.1(a).

“First Exchange Closing Date” has the meaning set forth in Section 2.3(a).

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Lenders” has the meaning set forth in the preamble to this Agreement.

“Letter Agreement” has the meaning set forth in the recitals to this Agreement.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities, or condition (financial or otherwise) of the Company and the Borrowers taken as a whole; (b) a material impairment of the ability of the Company or either Borrower to perform its obligations under this Agreement or, solely with respect to the Company, the Stockholders Agreement; or (c) a material impairment of the rights and remedies of Rhône, the Lenders and/or Rhône Capital III L.P., as applicable, under the Credit Agreements (for so long as the Credit Agreements will remain outstanding after giving effect to the Exchanges), the Warrant Agreement, this Agreement or the Stockholders Agreement.

“Note” means a promissory note made by either of the Borrowers in favor of any Lender pursuant to the US Credit Agreement and/or the European Credit Agreement.

“NYSE” means the New York Stock Exchange.

“Permitted Transaction” means any acquisition of any Common Stock or Common Stock Equivalent (i) by Rhône or any of its Affiliates (including, for the avoidance of doubt, any partner or employee of

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Rhône then serving on the Board) directly from the Company or (ii) made pursuant to a tender or exchange offer made to all stockholders of the Company.

“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Preferred Stock” means the preferred stock, par value $0.01 per share, of the Company.

“Proxy Statement” means the proxy statement, together with any amendments or supplements thereto and any other related proxy materials, including, without limitation, any preliminary proxy materials, relating to the Stockholder Approval of the Exchanges.

“Rhône” has the meaning set forth in the preamble to this Agreement.

“Rhône Directors” means any director of the Board that is appointed pursuant to Section 9.4 of the Warrant Agreement or Section 6.2 of the Stockholders Agreement.

“Rhône Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities, or condition (financial or otherwise) of Rhône taken as a whole; (b) a material impairment of the ability of Rhône or Rhône Capital III L.P., as applicable, to perform its obligations under this Agreement or the Stockholders Agreement; or (c) a material impairment of the rights and remedies of the Company or the Borrowers under the Credit Agreements (for so long as the Credit Agreements will remain outstanding after giving effect to the Exchanges), the Warrant Agreement, this Agreement or the Stockholders Agreement.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Series A Preferred Stock” means the convertible non-voting preferred stock, par value $0.01 per share, of the Company on the terms set forth in Exhibit C of the Warrant Agreement.

“Special Meeting” has the meaning set forth in Section 3.1(a).

“Standby Exchange” has the meaning set forth in Section 2.2(a).

“Standby Exchange Closing Date” has the meaning set forth in Section 2.3(b).

“Standby Exchange Exercise Date” has the meaning set forth in Section 2.2(a).

“Standby Shares” has the meaning set forth in Section 2.2(a).

“Stockholder Approval” has the meaning set forth in Section 3.1(a).

“Stockholders Agreement” has the meaning set forth in the recitals to this Agreement.

“Termination Fee” has the meaning set forth in Section 7.2.

“Term Loans” has the meaning set forth in the recitals to this Agreement.

“US Borrower” has the meaning set forth in the recitals to this Agreement.

“US Credit Agreement” has the meaning set forth in the recitals to this Agreement.

“US Term Loans” has the meaning set forth in the recitals to this Agreement.

“Voting Stock” means all classes of Capital Stock of the Company then outstanding and normally entitled to vote in the election of directors.

“Warrant Agreement” means the Warrant and Registration Rights Agreement, dated as of July 31, 2009, by and among the Company, Rhône Capital III L.P. and the initial Warrant holders party thereto.

“Warrants” means the warrants issued by the Company from time to time pursuant to the Warrant Agreement.

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2.   THE EXCHANGES.

2.1 The First Exchange.

(a) Subject to the terms and conditions hereof, on the First Exchange Closing Date, the Company shall issue to the Lenders the number of shares of Common Stock set forth opposite such Lender’s name on Schedule 2.1(a) attached hereto in redemption and prepayment of $75,000,000 of the aggregate principal amount of the Term Loans (such redemption and prepayment to be applied on a pro rata basis against the principal amounts outstanding under the US Term Loans and the European Term Loans and such issuance and redemption and prepayment being referred to herein as the “First Exchange”), and the principal amounts of the US Terms Loans and the European Term Loans shall be, without any further action, permanently reduced by such amounts. The reduction of the principal amounts outstanding under the Term Loans upon completion of the First Exchange shall be permanent and will constitute a “prepayment” for purposes of Section 2.05 of each of the US Credit Agreement and the European Credit Agreement, and at the closing of the First Exchange, the US Borrower shall make payment of all amounts due under Section 2.09(a) of the US Credit Agreement in connection with such prepayment. Each Lender hereby (i) waives the provisions of Section 2.05(a)(ii) of each of the US Credit Agreement and the European Credit Agreement in connection with the prepayments of the Terms Loans described in this Section 2.1(a), and (ii) consents to any Investment (as defined in the applicable Credit Agreement) deemed to be made by the Company or any of its subsidiaries pursuant to or otherwise resulting from the First Exchange.

(b) Upon the closing of the First Exchange, the Company shall make a payment to the Lenders for any interest accrued (which payment may be made in cash or as a PIK Amount (as defined in the applicable Credit Agreement) to the extent permitted under the applicable Credit Agreement) on the principal amounts of the Term Loans that are subject to the First Exchange.

2.2 The Standby Exchange.

(a) The Borrowers shall have the right, exercisable in the sole discretion of the Borrowers, by delivering notice in accordance with Section 2.2(b) hereof on or prior to August 23, 2010 (the “Standby Exchange Exercise Date”), to require the Lenders to exchange, on a pro rata basis calculated based on each Lender’s interest in the Term Loans, all or a portion of the remaining principal amount of the Term Loans for a number of shares of Common Stock issued by the Company equal to the portion of such remaining principal amount of the Term Loans that the Borrowers elect to exchange pursuant to this Section 2.2(a) divided by the Exchange Ratio (subject to the following proviso, the “Standby Shares”) (such issuance and exchange and related redemption and prepayment of the Term Loans are referred to herein as the “Standby Exchange”); provided that the Borrowers may only exercise their option under this Section 2.2(a) to such extent that the number of shares of Common Stock issued to the Lenders in the Standby Exchange (taking into account all shares of Common Stock and Warrants then held by the Lenders and their Affiliates) shall not result in a “change in control”, “change of control” or similar concept occurring under any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their properties may be bound.

(b) In the event the Borrowers exercise their option with respect to the Standby Exchange, the Borrowers shall provide to the Lenders an irrevocable, written notice, in accordance with Section 8.2, of such election, and such notice shall be delivered to the Lenders no later than 5:00 pm, New York time, on the Standby Exchange Exercise Date and shall specify the aggregate principal amount of Term Loans subject to the Standby Exchange. The Borrowers may provide notice under this Section 2.2(b) one time only.

(c) On the Standby Exchange Closing Date, the Company shall issue to the Lenders, on a pro rata basis consistent with each Lender’s interest in the Term Loans the Standby Shares in redemption and prepayment of an aggregate of such principal amount, which shall be applied on a pro rata basis against the principal amounts outstanding under the US Term Loans and the European Term Loans, and the principal amounts of the US Term Loans and the European Term Loans shall be, without any further action, permanently reduced by such amounts. The reduction of the principal amounts outstanding under the Term Loans upon completion of the

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Standby Exchange will constitute a “prepayment” for purposes of Section 2.05 of each of the US Credit Agreement and the European Credit Agreement, and at the closing of the Standby Exchange, the US Borrower shall make payment of all amounts due under Section 2.09 of the US Credit Agreement in connection with such prepayment (including, without limitation, any obligations under Section 2.09(b) of the US Credit Agreement arising from the full repayment of the Term Loans, if applicable). Each Lender hereby (i) waives the provisions of Section 2.05(a)(ii) of each of the US Credit Agreement and the European Credit Agreement in connection with the prepayments of the Term Loans described in this Section 2.2(c), and (ii) consents to any Investment (as defined in the applicable Credit Agreement) deemed to be made by the Company or any of its subsidiaries pursuant to or otherwise resulting from the Standby Exchange.

(d) Upon the closing of the Standby Exchange, the Company shall make a payment to the Lenders for any interest accrued (which payment may be in cash or as a PIK Amount (as defined in the applicable Credit Agreement) to the extent permitted under the applicable Credit Agreement) on the principal amounts of the Term Loans that are subject to the Standby Exchange.

2.3 Closing Dates of the Exchanges.

(a) The closing of the First Exchange shall occur on the later of (i) August 1, 2010 and (ii) one Business Day following satisfaction of the conditions precedent to closing of the First Exchange set forth under Section 6.1 (the “First Exchange Closing Date”).

(b) The closing of the Standby Exchange shall occur on (i) the latest of (A) August 1, 2010, (B) one Business Day following satisfaction of the conditions to closing of the Standby Exchange set forth under Sections 6.1 and 6.2 and (C) five Business Days following delivery of a notice by the Borrowers to the Lenders, in accordance with Section 2.2(a), that the Borrowers are exercising their option with respect to the Standby Exchange or (ii) such other date as mutually agreed by the Lenders and the Borrowers (the “Standby Exchange Closing Date”), it being agreed that, if feasible, the First Exchange and the Standby Exchange will close simultaneously.

2.4 Exchange Fee.  Upon the closing of each of the First Exchange and the Standby Exchange, the Company shall pay to Rhône, as agent for the Lenders, on the First Exchange Closing Date and the Standby Exchange Closing Date, each as applicable, an exchange fee equal to 4.75% of the value of the principal amount of the Term Loans subject to such Exchange (an “Exchange Fee”). For the avoidance of doubt, the Company’s payment of the Exchange Fees shall not relieve the obligations of the US Borrower under Sections 2.05(a), 2.09(a) and 2.09(b) of the US Credit Agreement to pay all fees due to the Lenders in connection with the partial or full prepayment of the principal amounts of the US Term Loans.

2.5 Delivery of the Common Stock.  At the closing of each of the First Exchange and the Standby Exchange, the Company shall deliver, or cause to be delivered, to the Lenders certificates (bearing the legend substantially in the form set forth in Section 2.2(e) of the Stockholders Agreement) representing the Common Stock issued in such Exchange.

2.6 Delivery of the Stockholders Agreement.  At the closing of the First Exchange, the Company, the Lenders and Rhône Capital III L.P. shall execute and deliver the Stockholders Agreement substantially in the form set forth in Exhibit 2.6.

2.7 Replacement Notes.  At the closing of each of the First Exchange and the Standby Exchange, to the extent that as of such closing the Term Loans shall not have been repaid in full, at the request of any applicable Lender, each applicable Borrower shall replace any Note previously issued to a Lender pursuant to either Credit Agreement with a new Note, substantially in the form of such previously issued Note, which shall evidence such Lender’s outstanding loans under the applicable Credit Agreement after giving effect to such Exchange.

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3.   STOCKHOLDER APPROVAL.

3.1 Stockholders’ Meeting.

(a) As soon as practicable, but no later than 90 days after the date hereof, the Company shall hold a special meeting of its stockholders (the “Special Meeting”) for the purpose of obtaining stockholder approval of the Exchanges (the “Stockholder Approval”) in accordance with the stockholder approval requirements set forth in Section 312.03 of the NYSE Listed Company Manual.

(b) The Company shall use its reasonable best efforts to (i) solicit from its stockholders proxies in favor of the approval of the Exchanges and (ii) take any and all other actions reasonably necessary or advisable to secure the affirmative vote of its stockholders required by the DGCL, the Certificate of Incorporation, the Bylaws, this Agreement, the Stockholders Agreement and the rules and regulations of the NYSE, to obtain the Stockholder Approval.

(c) Nothing in this Section 3.1 shall prevent the Board from acting in accordance with its fiduciary duties or applicable law or from acting in good faith in accordance with the Certificate of Incorporation and the Bylaws, while giving due consideration to the intent of this Agreement.

3.2 Preparation of Proxy Statement and Board and Stockholder Action.

(a) The Company shall use its reasonable best efforts to, promptly after the date hereof, in cooperation with Rhône and its advisors, prepare and file with the SEC the Proxy Statement. The Proxy Statement shall comply as to form and substance in all material respects with the applicable provisions of the Exchange Act. The Company shall use its reasonable best efforts to respond as promptly as reasonably practicable to any comments of the SEC with respect to the Proxy Statement and to cause the definitive Proxy Statement to be filed with the SEC and to be mailed to its stockholders as promptly as reasonably practicable following the date of this Agreement or, if applicable, following confirmation by the SEC or its staff that it has no further comments on the Proxy Statement. The Company shall promptly notify Rhône upon the receipt of any written or oral comments from the SEC or its staff or any written or oral request from the SEC or its staff for amendments or supplements to the Proxy Statement and shall provide Rhône with copies of all correspondence between the Company and its representatives, on the one hand, and the SEC and its staff, on the other hand, with respect thereto. Prior to filing or mailing the Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto (orally or in writing), the Company shall (i) provide Rhône and its counsel an opportunity to review and comment on such document or response and (ii) give reasonable consideration to all comments proposed by Rhône or its counsel.

(b) The Company shall use its reasonable best efforts to promptly and duly call, give notice of, convene and hold, the Special Meeting and take all other necessary actions so that, as promptly as reasonably practicable following the mailing of the Proxy Statement, the Special Meeting for the purpose of obtaining the Stockholder Approval is held. Subject to Section 3.1(c), the Company shall include in the Proxy Statement the unanimous recommendation of the Board (with the Rhône Directors taking no part in such recommendation) that the stockholders of the Company approve the issuance and sale of the shares of Common Stock in the Exchanges and vote in favor of such issuance.

(c) The information supplied by the Company for inclusion in the Proxy Statement shall not, at (i) the time the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to the stockholders and (ii) the time of the Special Meeting, contain any untrue statement of a material fact or fail to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If, at any time prior to the Special Meeting, any event or circumstance relating to the Company, or its officers or directors, should be discovered by the Company which should be set forth in an amendment or a supplement to the Proxy Statement, the Company shall promptly inform Rhône.

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4.   REPRESENTATIONS AND WARRANTIES.

4.1 Representations and Warranties of the Company and the Borrowers.  The Company and the Borrowers, jointly and severally, represent and warrant to Rhône and each of the Lenders that:

(a) Existence, Power and Ownership.  The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of the Borrowers is a corporation or a private limited liability company, duly organized or formed, validly existing, and, where applicable, in good standing under the laws of the jurisdiction of its incorporation or organization.

(b) Authorization.  The Company and each of the Borrowers has the corporate or other requisite power and authority to enter into this Agreement and to perform its obligations under, and consummate the transactions contemplated by, this Agreement and, solely with respect to the Company, the Stockholders Agreement, and has by proper action duly authorized the execution and delivery of this Agreement and, solely with respect to the Company, the Stockholders Agreement.

(c) No Conflicts.  None of the execution and delivery of this Agreement by the Company or the Borrowers, or, solely with respect to the Company, the Stockholders Agreement by the Company, or the consummation of the transactions contemplated herein or therein or the performance of and compliance with the terms and provisions hereof or thereof will: (i) violate or conflict with any provision of the Certificate of Incorporation or the Bylaws, or any of the Borrowers’ certificate of incorporation, bylaws or other constituent documents; (ii) violate any law, regulation, order, writ, judgment, injunction, decree or permit applicable to the Company or any of the Borrowers; (iii) violate or materially conflict with any contractual provisions of, or cause an event of default under, any material indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which the Company or any of the Borrowers is a party or by which the Company or any of the Borrowers or any of their properties may be bound; or (iv) result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to their properties, except in the case of clauses (ii), (iii) and (iv), for such violations, conflicts or defaults, or liens, security interests or encumbrances that would not, individually or in the aggregate, result in a Material Adverse Effect.

(d) Consents.  Subject to (i) the filing of a notification under the HSR Act and the expiration or termination of the waiting period required thereunder, (ii) receipt of the Stockholder Approval, (iii) the accuracy of the representations and warranties of Rhône and the Lenders set forth in Section 4.2 hereof, (iv) the filing of a supplemental listing application in accordance with the NYSE Listed Company Manual and (v) any consents, approvals or authorizations already obtained on or prior to the date hereof and in full force and effect, no consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or other Person is required in connection with the execution, delivery or performance of this Agreement.

(e) Enforceable Obligations.  This Agreement has been, and at the closing of the First Exchange, the Stockholders Agreement will be, duly executed and delivered by the Company and, solely with respect to this Agreement, each of the Borrowers and assuming due authorization, execution and delivery hereof by Rhône and each of the Lenders, this Agreement constitutes and, at the closing of the First Exchange, the Stockholders Agreement will constitute, a legal, valid and binding obligation of the Company and, solely with respect to this Agreement, each of the Borrowers, enforceable in accordance with their terms subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(f) Capitalization.  As of the date hereof, the Company’s authorized capital stock consists of (i) 285,000,000 shares of Common Stock of which 132,596,464 shares of Common Stock were issued and outstanding and (ii) 5,000,000 shares of Preferred Stock, including, without limitation, 1,000,000 shares of Series A Preferred Stock of which no shares were issued and outstanding. As of the date hereof, 2,885,200 shares of Common Stock are held in treasury, 13,269,447 shares of Common Stock are reserved for issuance upon exercise of outstanding stock options, 1,693,227 shares of Common Stock

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are reserved for future issuance under the Company’s equity compensation plans, and 25,653,831 shares of Common Stock are reserved for issuance upon exercise of the Warrants. As of the date hereof, 1,000,000 shares of Series A Preferred Stock are reserved for issuance upon exercise of the Warrants. There are no authorized or outstanding securities of the Company of any kind or class having power generally to vote in the election of directors other than the Common Stock. There are no other classes of capital stock of the Company authorized or outstanding. The outstanding shares of Common Stock are duly authorized, validly issued, fully paid and non-assessable. As of the date hereof, there are no preemptive rights (other than as set forth in Section 6.5 of the Stockholders Agreement and Section 5.6 of the Warrant Agreement) or other outstanding rights, options, warrants, conversion rights or agreements or commitments of any character relating to the Company’s authorized and issued, unissued or treasury shares of capital stock, and the Company has not issued any debt securities, other securities, rights or obligations that are currently outstanding and convertible into or exchangeable for, or giving any Person a right to subscribe for or acquire, capital stock of the Company.

(g) Board Approvals.  (i) The Board has taken all corporate actions necessary under the Certificate of Incorporation, the Bylaws and the DGCL, including, without limitation, for purposes of Section 203 thereunder, to approve the transactions contemplated herein, and (ii) other than the Rhône Directors who abstained from all discussion and voting with respect to the Exchanges, the Board resolved to recommend that stockholders of the Company approve the issuance and sale of the shares of Common Stock in the Exchanges and vote in favor of such issuance (the “Recommendation”), and no such approval or recommendation has been withdrawn; provided, however, that nothing in this Section 4.1(g) shall prevent the Board from acting in accordance with its fiduciary duties or applicable law or from acting in good faith in accordance with the Certificate of Incorporation and the Bylaws.

(h) Issuance of Common Stock.  The Common Stock to be issued pursuant to the Exchanges against payment therefor, when so issued and delivered by the Company, will have been (i) duly and validly authorized, issued, fully paid and nonassessable, free and clear of any mortgage, pledge, lien, security interest, claim, voting agreement, conditional sale agreement, title retention agreement, restriction, option or encumbrance of any kind, character or description whatsoever, other than those contained in the Stockholders Agreement, and no Person (other than each of the Lenders) will have any preemptive right of subscription, purchase or share issuance in respect thereof, (ii) free of any restrictions on transfer other than restrictions on transfer under applicable federal and state securities laws and restrictions provided under Section 2.1 of the Stockholders Agreement, and (iii) assuming the accuracy of the representations and warranties of Rhône and the Lenders set forth in Section 4.2 hereof, issued in compliance with all applicable federal and state securities laws. The Company has duly authorized and reserved a sufficient number of shares of Common Stock for issuance upon the completion of the Exchanges pursuant to the terms of this Agreement.

(i) State Takeover Statutes Inapplicable.  The Board has taken all corporate actions necessary so that Section 203 of the DGCL is inapplicable to the issuance of shares of Common Stock pursuant to the Exchanges. No other “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation is applicable to the issuance of shares of Common Stock pursuant to the Exchanges.

(j) No Registration Requirement.  None of the Company or any of its subsidiaries has directly, or through any agent, (i) 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 would be integrated with the issuance of the Common Stock pursuant to the Exchanges in a manner that would require the registration under the Securities Act of the Common Stock issued pursuant to the Exchanges or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act) in connection with the offering of the Common Stock issued pursuant to the Exchanges or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the representations and warranties of Rhône and the Lenders in Section 4.2 hereof, it is not necessary in connection with the offer, sale and delivery of the Common Stock issuable in connection with the Exchanges in the manner contemplated herein to register any of such Common Stock under the Securities Act.

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(k) Proxy Statement.  The Proxy Statement filed with the SEC shall not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading at the time of (i) the mailing of the definitive Proxy Statement to the Company’s stockholders, and (ii) the Special Meeting. Notwithstanding the foregoing, the representation and warranty made in this Section 4.1(k) does not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company by Rhône with respect to Rhône and the Lenders expressly for use in the Proxy Statement or any amendment thereof.

4.2 Representations and Warranties of Rhône and the Lenders.  Rhône and each of the Lenders, severally and not jointly, hereby represents and warrants that:

(a) Authorization.  Rhône and each of the Lenders has the corporate or limited liability company, as the case may be, power and authority to enter into this Agreement and the Stockholders Agreement and to perform its obligations under, and consummate the transactions contemplated by, this Agreement and the Stockholders Agreement and has by proper action duly authorized the execution and delivery of this Agreement and the Stockholders Agreement.

(b) No Conflicts.  None of the execution and delivery of this Agreement and the Stockholders Agreement by Rhône and each of the Lenders and the consummation of the transactions contemplated herein or therein or the performance of and compliance with the terms and provisions hereof or thereof will: (i) violate or conflict with any provision of the constituent documents of Rhône or any of the Lenders; or (ii) violate any law, regulation, order, writ, judgment, injunction, decree or permit applicable to Rhône or any of the Lenders, except in the case of clause (ii), for such violations that would not, individually or in the aggregate, result in a Rhône Material Adverse Effect.

(c) Enforceable Obligations.  This Agreement has been, and at the closing of the First Exchange, the Stockholders Agreement will be, duly executed and delivered by Rhône and each of the Lenders and assuming due authorization, execution and delivery hereof by the Company and each of the Borrowers, this Agreement constitutes, and, at the closing of the First Exchange, the Stockholders Agreement will constitute, a legal, valid and binding obligation of Rhône and each of the Lenders, enforceable in accordance with their terms subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

(d) Investment Intent.  Each Lender acknowledges that the Common Stock issued pursuant to the Exchanges will not have been, at the time of issuance, registered under the Securities Act or under any state securities laws. Each Lender (i) is acquiring the Common Stock issuable pursuant to the Exchanges pursuant to an exemption from registration under the Securities Act and solely for investment with no present intention to distribute any of the securities to any Person in violation of the Securities Act or any other applicable securities laws and (ii) will not sell or otherwise dispose of any of such Common Stock, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.

(e) Accredited Investor Status.  (i) Each Lender is an “accredited investor” as such term is defined in Rule 501(a) promulgated under the Securities Act whose knowledge and experience in financial and business matters are such that each Lender is capable of evaluating the merits and risks of its investment in the shares of Common Stock issuable pursuant to the Exchanges and (ii)(A) each Lender’s financial situation is such that each Lender can afford to bear the economic risk of holding the shares of Common Stock issuable pursuant to the Exchanges for an indefinite period of time, (B) each Lender can afford to suffer complete loss of its investment in shares of Common Stock issuable pursuant to the Exchanges, (C) the Company has made available to each Lender all documents and information that each Lender has requested relating to an investment in the Company, and (D) each Lender has had adequate opportunity to ask questions of, and receive answers from, the Company as well as the Company’s officers, employees, agents and other representatives concerning the Company’s business, operations, financial condition,

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assets, liabilities and all other matters relevant to each Lender’s investment in the shares of Common Stock issuable pursuant to the Exchanges.

(f) Restricted Securities.  Each of the Lenders agree that, at the time of issuance, the Common Stock issuable pursuant to the Exchanges will not be registered under the Securities Act or qualified under any state securities laws. Such securities are being issued on the basis that the Exchanges and the issuance by the Company in connection therewith of its Common Stock to the Lenders are exempt from registration under the Securities Act and from applicable state securities laws. Rhône and each of the Lenders agree that the reliance by the Company on such exemptions is predicated, in part, on the representations and warranties and other agreements of Rhône and each of the Lenders set forth in this Agreement. Rhône and each of the Lenders acknowledge and agree that each certificate representing the Common Stock issued in the Exchange shall bear the legend substantially in the form set forth in Section 2.2(e) of the Stockholders Agreement.

(g) Beneficial Ownership.  As of the date hereof, Rhône and its Affiliates, including the Lenders, collectively, beneficially own, or have the right to acquire, whether such right is exercisable immediately or only after the passage of time, 25,758,831 shares of Common Stock.

(h) Term Loans.  As of the date hereof, the principal amount of US Term Loans held by each Lender under the US Credit Agreement and the principal amount of European Term Loans held by each Lender under the European Credit Agreement are set forth on Schedule 4.2(g) attached hereto.

5.   COVENANTS

5.1 Modification of Credit Agreements.  In the event that immediately following the closing of the Exchanges, $30,000,000 or less in aggregate principal amount of the Term Loans remains outstanding, Section 7.14(a) of each of the US Credit Agreement and the European Credit Agreement shall be modified, automatically and without any further action, so as to replace the tables therein with the following:

	Americas Consolidated
Measurement Period Ending	EBITDA
January 31, 2010	$	20,000,000
April 30, 2010	$	20,000,000
July 31, 2010	$	18,000,000
October 31, 2010	$	24,000,000
January 31, 2011	$	27,000,000
April 30, 2011	$	30,000,000
July 31, 2011	$	33,000,000
October 31, 2011	$	39,000,000
January 31, 2012	$	42,000,000
April 30, 2012	$	45,000,000
July 31, 2012	$	48,000,000
October 31, 2012 and the last day of each Fiscal Quarter thereafter	$	51,000,000

5.2 Beneficial Ownership.  Prior to the Standby Exchange Exercise Date, other than pursuant to a Permitted Transaction or as a result of the exercise of any preemptive rights under Section 5.6 of the Warrant Agreement, Rhône and its Affiliates, including the Lenders, shall not, increase their aggregate beneficial ownership of Common Stock (including, for the avoidance of doubt, any shares of Common Stock that Rhône and its Affiliates have the right to acquire) from the amount set forth in Section 4.2(g) hereof.

5.3 Preemptive Rights.  The Lenders hereby waive their respective preemptive rights under Section 5.6 of the Warrant Agreement with respect to (i) the first underwritten public offering of Common Stock, if any, occurring prior to September 30, 2010 with gross proceeds of no more than $115 million and a public offering price of no less than $4.50 per share of Common Stock and (ii) the shares of Common Stock issuable in the Exchanges. In the event that the gross proceeds of such offering exceed $115 million and/or the public

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offering price is less than $4.50 per share of Common Stock, the Lenders shall deliver notice to the Company within 10 days following the pricing date relating to such offering, of their intention to exercise their preemptive rights to purchase at the public offering price an additional number of shares of Common Stock to maintain their respective proportionate, as-if-exercised ownership interest in the Company based on the number of shares of Common Stock outstanding immediately prior to such offering. If the Lenders fail to deliver such notice within such 10-day period, the Lenders shall be deemed to have waived their respective preemptive rights with respect to such offering. If the Lenders elect to exercise their preemptive rights with respect to such offering, the closing of the exercise of such preemptive rights shall occur as soon as reasonably practicable following the consummation of such offering or, if applicable, the expiration of the over-allotment option, subject to obtaining stockholder approval if required and regulatory approvals. For the avoidance of doubt, the preemptive rights set forth in Section 5.6 of the Warrant Agreement shall otherwise remain in effect.

5.4 Term Loans.  Prior to the Standby Exchange Exercise Date, each Lender shall not sell, transfer, assign, encumber, grant a participation in or otherwise dispose of the Term Loans held by such Lender or their rights in respect thereof.

6.   CONDITIONS PRECEDENT TO THE EXCHANGES.

6.1 Conditions Precedent to each of the First Exchange and the Standby Exchange.

(a) Notwithstanding any other provision of this Agreement, none of Rhône or any of the Lenders will be obligated to complete the First Exchange and, if applicable, the Standby Exchange, or fulfill any other obligations arising hereunder, unless the following conditions precedent have been (or, substantially contemporaneously with the applicable Exchange, will be) satisfied in full:

(i) Receipt within ninety (90) days of the date of this Agreement of the Stockholder Approval;

(ii) The Company and the Borrowers having performed in all material respects each of the obligations required by this Agreement to be performed or complied with by the Company at or prior to the closing date of such Exchange;

(iii) If required, the filing of a notification under the HSR Act and the expiration or termination of the waiting period and any extension of such period under the HSR Act as applicable to the Exchanges;

(iv) Execution and delivery by the Company of the Stockholders Agreement;

(v) Delivery to the Lenders of the certificates representing the shares of Common Stock issuable pursuant to such Exchange;

(vi) Delivery to Rhône and the Lenders of a legal opinion, dated as of the closing date of such Exchange, by Skadden, Arps, Slate, Meagher & Flom LLP, the Company’s outside legal counsel, such opinion, subject to customary limitations, exceptions, assumptions and qualifications, to be limited to the following matters: (A) each of this Agreement and the Stockholders Agreement has been duly authorized, executed and delivered by the Company; (B) each of this Agreement and the Stockholders Agreement is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms; (C) the Common Stock issuable to the Lenders pursuant to such Exchange, when issued to the Lenders in accordance with the terms of this Agreement, will have been validly issued, fully paid and nonassessable; (D) the Company is validly existing in good standing under the laws of the State of Delaware; and (E) the execution and delivery by the Company of this Agreement and the Stockholders Agreement and the consummation of the applicable transactions contemplated herein or therein do not: (x) constitute a violation of, or a default under, the material contracts filed as Exhibits 4.1, 10.11, 10.12, 10.13 and 10.16 to the Company’s Form 10-K for the fiscal year ended October 31, 2009, (y) result in a “change of control” under the material contracts filed as Exhibits 4.1 and 10.13 to the Company’s Form 10-K for the fiscal year ended October 31, 2009 (subject to (a) the accuracy of the representation and warranty made by Rhône and the Lenders in Section 4.2(g) hereof and (b) an officer’s certificate from the Company as to the beneficial ownership of Rhône and its Affiliates (including the Lenders)

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(expressed as a percentage) based on the information provided in clause (a) and in the case of Exhibit 4.1 to the Company’s Form 10-K for the fiscal year ended October 31, 2009, the number of outstanding shares of Voting Stock of the Company and in the case of Exhibit 10.13 to the Company’s Form 10-K for the fiscal year ended October 31, 2009, based on the number of outstanding equity interests of the Company entitled to vote for members of the Board on a fully-diluted basis (as determined in accordance with and as defined in the agreement filed as such Exhibit 10.13), in each case, such outstanding number to be provided by the Company), or (z) violate or conflict with, or result in any contravention of, the DGCL, the laws of the State of New York or the laws of the State of California;

(vii) As of the closing date of such Exchange (except for any representation or warranty that is expressly made as of a specified date, in which case as of such specified date), each representation or warranty of the Company or the Borrowers contained in this Agreement shall be true and correct in all material respects (except for such representations and warranties as are qualified by materiality or Material Adverse Effect, which representations and warranties shall be true and correct in all respects);

(viii) Execution and delivery to Rhône of a certificate, dated as of the closing date of such Exchange, from the Chief Executive Officer or the Chief Financial Officer of the Company confirming that (i) the representations and warranties of the Company contained in this Agreement are true and correct in all material respects (except for such representations and warranties as are qualified by materiality or Material Adverse Effect, which representations and warranties shall be true and correct in all respects) on and as of such closing date with the same force and effect as though such representations and warranties had been made on and as of such closing date, other than those representations and warranties that are made as of another date, in which case such representations and warranties shall be true and correct as of such other date, and (ii) all agreements, covenants, obligations and conditions required by this Agreement to be performed or complied with by the Company at or prior to such closing date have been performed and complied with in all material respects; and

(ix) The Company shall have paid to Rhône and/or each of the Lenders all amounts due under (i) this Agreement, including, without limitation, the Exchange Fee and all expenses provided for in Section 7.3 and (ii) the Credit Agreements as provided in Section 2.1(a) and, if applicable, Section 2.2(c).

(x) No temporary restraining order, preliminary or permanent injunction or other judgment or order issued by any governmental authority shall be in effect which prohibits, restrains or renders illegal the consummation of the transactions contemplated by this Agreement.

(b) Notwithstanding any other provision of this Agreement, none of the Company or the Borrowers will be obligated to complete the First Exchange and, if applicable, the Standby Exchange, or fulfill any other obligations arising hereunder, unless the following conditions precedent have been (or, substantially contemporaneously with the applicable Exchange, will be) satisfied in full:

(i) Receipt within ninety (90) days of the date of this Agreement of the Stockholder Approval;

(ii) Rhône and the Lenders having performed in all material respects each of the obligations required by this Agreement to be performed or complied with by Rhône and the Lenders at or prior to the closing date of such Exchange;

(iii) If required, the filing of a notification under the HSR Act and the expiration or termination of the waiting period and any extension of such period under the HSR Act as applicable to the Exchanges;

(iv) Execution and delivery by Rhône Capital III L.P. and each Lender of the Stockholders Agreement; and

(v) As of the closing date of such Exchange (except for any representation or warranty that is expressly made as of a specified date, in which case as of such specified date), each representation or warranty of Rhône and the Lenders contained in this Agreement shall be true and correct in all material respects (except for such representations and warranties as are qualified by materiality or Rhône Material Adverse Effect, which representations and warranties shall be true and correct in all respects).

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(vi) No temporary restraining order, preliminary or permanent injunction or other judgment or order issued by any governmental authority shall be in effect which prohibits, restrains or renders illegal the consummation of the transactions contemplated by this Agreement.

6.2 Conditions Precedent to the Standby Exchange.  Notwithstanding any other provision of this Agreement, none of Rhône or any of the Lenders will be obligated to complete the Standby Exchange if the Company fails to provide to Rhône, pursuant to Section 2.2(a), an irrevocable, written notice on or prior to the Standby Exchange Exercise Date.

7.   TERMINATION; FEES AND EXPENSES.

7.1 Termination.

(a) Subject to Section 7.1(c), in the event that Company or the Borrowers are not obligated to complete the First Exchange due to the failure to satisfy the conditions precedent to the closing of the Exchanges provided for in Section 6.1(b), the Company may terminate this Agreement by delivering notice to Rhône of such termination; provided that, notwithstanding the foregoing, the Company may not terminate this Agreement at any time where it is in material breach of any of its obligations under this Agreement.

(b) Subject to Section 7.1(c), in the event that Rhône or any of the Lenders are not obligated to complete the First Exchange due to the failure to satisfy the conditions precedent to the closing of the Exchanges provided for in Section 6.1(a), Rhône and the Lenders may terminate this Agreement by delivering notice to the Company of such termination; provided that, notwithstanding the foregoing, Rhône and the Lenders may not terminate this Agreement at any time where they are in material breach of any of their obligations under this Agreement.

(c) In the event of termination of this Agreement in accordance with Section 7.1(a) or Section 7.1(b), this Agreement shall become void and of no effect, with no liability to any Person on the part of any party hereto (or of any of its representatives or Affiliates); provided, however, that (i) no such termination shall relieve any party hereto of any liability or damages to the other party hereto resulting from any material breach of this Agreement occurring prior to such termination and (ii) the provisions set forth in Sections 7.2 and 7.3 and Article 8 (other than Sections 8.11 and 8.13), and all related definitions, shall survive the termination of this Agreement.

7.2 Termination Fee.  In the event the First Exchange fails to close due to (i) the failure by the Company to obtain the Stockholder Approval on or prior to September 22, 2010, and the Company prepays any portion of the outstanding principal amount of the Term Loans within six (6) months immediately following the earlier of (A) the date of the Special Meeting (or, if adjourned, the date of the reconvened Special Meeting) at which the Exchanges are not approved as a result of the negative vote of the Company’s stockholders or (B) September 22, 2010, (ii) the Board changing the Recommendation, or (iii) a material breach by the Company of its obligations hereunder, the Company shall pay a termination fee to Rhône, as agent for the Lenders, in an aggregate amount equal to $10,000,000 (the “Termination Fee”). Notwithstanding anything contained herein to the contrary, Rhône, as agent for the Lenders, will not be entitled to receive the Termination Fee under any other circumstances and the Termination Fee shall be the sole and exclusive remedy of Rhône and the Lenders as a result of a termination of this Agreement by the Company pursuant to Section 7.1(a) or by Rhône and the Lenders pursuant to Section 7.1(b). Upon the payment of the Termination Fee pursuant to this Section 7.2, none of the Company and the Borrowers shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated by this Agreement (other than indemnification obligations under Section 8.9 and any expense reimbursement obligations under Section 7.3).

7.3 Expenses.  All reasonable and documented out-of-pocket costs and expenses incurred by Rhône or the Lenders in connection with the Exchanges, including, without limitation, reasonable counsel fees and the filing fees in connection with all necessary notifications and other filings under the HSR Act shall be borne by the Company and shall be payable by the Company no later than ten (10) days following receipt by the Company of (i) a written notice from Rhône or the Lenders indicating any payments due pursuant to this

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Section 7.3, and (ii) reasonably detailed documentation of the expenses for which reimbursement is sought. For the avoidance of doubt, nothing under this Section 7.3 or Section 2.4 shall amend the expense reimbursement obligations of the Company under the Credit Agreements.

8.   MISCELLANEOUS.

8.1 Payment of Taxes.  The Company shall pay all transfer, stamp and other similar taxes that may be imposed in respect of the issuance or delivery of the Common Stock pursuant to the Exchanges.

8.2 Notices.  Any notice, demand or delivery to the Company or Rhône or the Lenders authorized by this Agreement shall be sufficiently given or made when mailed if sent by first-class mail, postage prepaid, addressed to the Company or Rhône, as applicable, as follows:

If to the Company:

Quiksilver, Inc.

15202 Graham St.

Huntington Beach, CA 92649

Fax: (734) 477-1370

Attention: General Counsel

With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

300 South Grand Avenue

Los Angeles, CA 90071-3144

Fax: (213) 621-5493

Attention: Brian J. McCarthy and K. Kristine Dunn

If to Rhône:

Rhône Group L.L.C.

630 Fifth Avenue, 27th Floor

New York, NY 10111

Fax: (212) 218-6789

Attention: Baudoin Lorans and M. Allison Steiner

With a copy to:

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004-2498

Fax: (212) 558-3588

Attention: Richard A. Pollack

or such other address as shall have been furnished to the party giving or making such notice, demand or delivery.

Any notice required to be given by the Company to the Lenders pursuant to this Agreement shall be made by mailing by registered mail, return receipt requested, to the Lenders at their respective addresses shown on Schedule 2.1(a) attached hereto. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given when mailed, whether or not the Lender receives the notice.

8.3 Agent.  The Lenders appoint Rhône as their agent and authorize Rhône to bind, and take all actions in connection with this Agreement on behalf of, the Lenders. The Company shall be entitled to rely on direction by Rhône on behalf of any Lender for all purposes hereunder.

8.4 Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT

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LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND THE NEW YORK CIVIL PRACTICE LAWS AND RULES 327(B).

8.5 Submission to Jurisdiction.  EACH OF THE BORROWERS AND THE COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE STOCKHOLDERS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE BORROWERS AND THE COMPANY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE BORROWERS AND THE COMPANY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY OF THE LENDERS OR RHôNE MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE STOCKHOLDERS AGREEMENT AGAINST ANY OF THE COMPANY OR THE BORROWERS OR THEIR PROPERTIES IN THE COURTS OF ANY JURISDICTION.

8.6 Service of Process.  EACH OF THE BORROWERS AND THE COMPANY IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 8.2.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

8.7 Waiver of Venue.  EACH OF THE BORROWERS AND THE COMPANY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN SECTION 8.5 OF THIS AGREEMENT. EACH OF THE BORROWERS AND THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

8.8 Persons Benefiting.  This Agreement shall be binding upon and inure to the benefit of the Company, the Borrowers and Rhône, and their successors, assigns, beneficiaries, executors and administrators, and the Lenders. Nothing in this Agreement is intended or shall be construed to confer upon any Person, other than the Company, the Borrowers, Rhône and the Lenders, any right, remedy or claim under or by reason of this Agreement or any part hereof.

8.9 Indemnification.  The Company and the Borrowers shall, jointly and severally, indemnify Rhône, the Lenders and each of their respective agents, attorneys, accountants, advisors, consultants, directors, officers, employees, partners, stockholders, Affiliates and other representatives (each such Person an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, causes of action, damages, liabilities, settlement payments, costs and related expenses (including the reasonable fees, charges and disbursements of counsel (it being understood that the Company shall not be liable for the fees and expenses of more than one counsel)), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Company or the Borrowers arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of the transactions contemplated hereby or (ii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Company or the Borrowers or any of their directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the

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comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence, willful misconduct or bad faith of such Indemnitee.

8.10 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument.

8.11 Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

8.12 Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. No party shall assign this Agreement or any rights or obligations hereunder.

8.13 Survival.  The parties agree that the covenants and agreements contained in this Agreement and the representations and warranties of the parties contained in Article 4 shall survive indefinitely, notwithstanding any due diligence investigation conducted by or on behalf of Rhône or the Lenders.

8.14 Publicity.  The Company and Rhône each shall consult with each other prior to issuing any press releases or making any public statement with respect to this Agreement or the Stockholders Agreement and the transactions contemplated hereby and thereby, and shall not issue any such press release or make any such public statement with respect thereto unless the text of the statement shall first have been agreed to by the parties hereto; provided, however, that Rhône and the Lenders may make customary communications with their limited partners and other co-investors without consulting the Company. Notwithstanding the foregoing, Rhône, the Lenders and the Company acknowledge and agree that (i) the Company will file a Current Report on Form 8-K with the SEC that will describe the terms of this Agreement and the transactions contemplated hereby, (ii) Rhône, the Lenders and certain of their Affiliates will file one or more amendments to their Schedule 13D and a Form 4 with respect to the Exchanges that will describe the terms of this Agreement, the transactions contemplated hereby and the results of the Exchanges and (iii) nothing contained in this Section 8.14 shall prohibit the Company, Rhône or the Lenders from complying with its obligations under the federal securities laws or the rules and regulations of the NYSE.

8.15 Exchange Rate.  For purposes of this Agreement, with respect to the First Exchange Closing Date, the Standby Exchange Closing Date or the date immediately following the closing of the Exchanges, as applicable, the Dollar equivalent of any Euro-denominated principal amount outstanding under the European Term Loans on such date shall be equal to the product of (i) the applicable Euro-denominated principal amount multiplied by (ii) the Dollar to Euro exchange rate published in The Wall Street Journal on the day immediately prior to such date.

8.16 Severability.  In case any provision of this Agreement is declared invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

8.17 Headings.  The descriptive headings of the several Sections and Sub-Sections of this Agreement are inserted for convenience and shall not control or affect the meaning or construction of any of the provisions hereof.

8.18 Entire Agreement.  The Letter Agreement is hereby terminated and replaced by this Agreement. This Agreement and the other agreements referred to herein constitute the entire agreement and supersede all prior agreements, including the Letter Agreement, and understandings, both written and oral, between the parties with respect to the subject matter hereof.

8.19 Limitation of Liability.  No party to this Agreement shall be liable to any other party for any consequential, indirect, special or incidental damages under any provision of this Agreement or for any consequential, indirect, penal, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.

QUIKSILVER, INC.

By: 

Name:     

Title:

QUIKSILVER AMERICAS, INC.

By: 

Name:     

Title:

MOUNTAIN & WAVE S.À R.L.

By: 

Name:     

Title:

ROMOLO HOLDINGS C.V.

By: 

Name:     

Title:

TRITON SPV L.P.

By: 

Name:     

Title:

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TRITON ONSHORE SPV L.P.

By: 

Name:     

Title:

TRITON OFFSHORE SPV L.P.

By: 

Name:     

Title:

TRITON COINVESTMENT SPV L.P.

By: 

Name:     

Title:

RHÔNE GROUP L.L.C.

By: 

Name:     

Title:

[Signature Page to Exchange Agreement]

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Schedule 2.1(a)

	Number of Shares of
	Common Stock to be
Lender	Issued in the First Exchange
Romolo Holdings C.V. c/o Numitor Governance S.à r.l. c/o Rhône Group L.L.C. 630 5th Avenue, 27th Floor New York, NY 10111		1,040,634
Triton SPV L.P. c/o Triton GP SPV LLC c/o Rhône Capital III L.P. 630 5th Avenue, 27th Floor New York, NY 10111		2,081,477
Triton Onshore SPV L.P. c/o Triton GP SPV LLC c/o Rhône Capital III L.P. 630 5th Avenue, 27th Floor New York, NY 10111		6,719,935
Triton Offshore SPV L.P. c/o Triton GP SPV LLC c/o Rhône Capital III L.P. 630 5th Avenue, 27th Floor New York, NY 10111		5,600,700
Triton Coinvestment SPV L.P. c/o Triton GP SPV LLC c/o Rhône Capital III L.P. 630 5th Avenue, 27th Floor New York, NY 10111		1,223,921
TOTAL		16,666,667

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Schedule 4.2(g)

	Aggregate		Aggregate
	Principal Amount of		Principal Amount of
Lender	US Term Loans		European Term Loans
Romolo Holdings C.V.	$	8,125,072.18	€	1,379,446.19
Triton SPV L.P.	$	16,251,768.97	€	2,759,168.20
Triton Onshore SPV L.P.	$	52,467,943.21	€	8,907,822.94
Triton Offshore SPV L.P.	$	43,729,172.47	€	7,424,185.16
Triton Coinvestment SPV L.P.	$	9,556,134.08	€	1,622,406.85
TOTAL	$	130,130,090.91	€	22,093,029.34

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Exhibit 2.6

STOCKHOLDERS AGREEMENT
by and among
QUIKSILVER, INC.,
THE INITIAL HOLDERS
and
RHÔNE CAPITAL III L.P.
Dated as of • , 2010

TABLE OF CONTENTS

			Page
1.	DEFINITIONS			1
2.	TRANSFER RESTRICTIONS; COMPLIANCE WITH THE SECURITIES ACT			4
	2.1.	Transferability of the Exchange Stock		4
	2.2.	Compliance with the Securities Act		4
3.	AMENDMENT TO WARRANT AGREEMENT			5
	3.1.	Amendment to Warrant Agreement		5
4.	[RESERVED]			6
5.	REPRESENTATIONS AND WARRANTIES			6
	5.1.	Representations and Warranties of the Company		6
	5.2.	Representations and Warranties of Rhône, Rhône Capital and each of the Initial Holders		6
6.	COVENANTS			7
	6.1.	Standstill		7
	6.2.	Board Representation		8
	6.3.	Financial Statements		9
	6.4.	Rule 144 Reporting		9
	6.5.	Preemptive Rights		10
	6.6.	Consent Upon Certain Issuances		10
	6.7.	Affiliate Transactions		10
7.	MISCELLANEOUS			10
	7.1.	Agent		10
	7.2.	Removal of Legends		10
	7.3.	Notices		10
	7.4.	Applicable Law		11
	7.5.	Persons Benefiting		11
	7.6.	Counterparts		11
	7.7.	Amendments		11
	7.8.	Headings		12
	7.9.	Entire Agreement		12
	7.10.	Limitation of Liability		12

i

STOCKHOLDERS AGREEMENT

This STOCKHOLDERS AGREEMENT (the “Agreement”) is entered into as of • , 2010 by and among Quiksilver, Inc., a Delaware corporation (the “Company”), the Initial Holders and Rhône Capital III L.P. (“Rhône”).

WITNESSETH:

WHEREAS, the Company, the Initial Holders and Rhône Group L.L.C. are party to the Exchange Agreement, dated as of June • , 2010 (the “Exchange Agreement”), pursuant to which the Initial Holders are exchanging (i) pursuant to the First Exchange (as defined in the Exchange Agreement), on a pro rata basis, $75,000,000 of the principal amount outstanding under the Term Loans (as defined in the Exchange Agreement) for an aggregate of 16,666,667 shares of Common Stock and (ii) if the Borrowers (as defined in the Exchange Agreement) have exercised their option in respect of the Standby Exchange (as defined in the Exchange Agreement), an additional portion of the outstanding principal amount of the Term Loans for such additional number of shares of Common Stock as determined under the Exchange Agreement;

WHEREAS, in connection with the consummation of the transactions contemplated by the Exchange Agreement, the parties desire to enter into this Agreement in order to create certain rights for Rhône Capital III L.P. and the Initial Holders; and

WHEREAS, the execution of this Agreement is an inducement and a condition precedent to the obligations of the parties to the Exchange Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and in the Exchange Agreement, as an inducement to Rhône and the Initial Holders to consummate the transactions contemplated by the Exchange Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.   DEFINITIONS.

As used in this Agreement, the following terms shall have the following meanings:

“ABL Agent” means Bank of America, N.A., in its capacity as administrative agent for the lenders under the ABL Credit Agreement, together with any successor agent.

“ABL Credit Agreement” means the Credit Agreement, dated as of July 31, 2009 among Quiksilver Americas, Inc., the other borrowers party thereto, the Company, the other guarantors party thereto, the lenders party thereto, the ABL Agent, Bank of America, N.A. and General Electric Capital Corporation, as co-collateral agents, and the other agents party thereto, and any refinancings, refundings, renewals or extensions thereof permitted hereunder.

“Affiliate” means with respect to any Person, a Person that directly or indirectly controls, is controlled by or is under direct or indirect common control with such Person. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Appointing Funds” means Triton Onshore SPV L.P. and Triton Coinvestment SPV L.P.

“Board” means the board of directors of the Company.

“Bylaws” means the Company’s Amended and Restated Bylaws, as amended from time to time.

“Capital Stock” means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of the Company, including any preferred stock but excluding any debt securities convertible into such equity.

“Certificate of Incorporation” means the Company’s Restated Certificate of Incorporation, as amended from time to time.

“Common Stock” means the common stock, par value $0.01 per share, of the Company.

“Common Stock Equivalent” means any warrant, right or option to acquire any shares of Common Stock or any security convertible or exchangeable into shares of Common Stock.

“Company” has the meaning set forth in the recitals to this Agreement and its successors and assigns.

“Consolidated” means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.

“DGCL” means the Delaware General Corporation Law.

“Equity Interests” means with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, and all of the warrants or options for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person (including partnership, member or trust interests therein), whether voting or nonvoting.

“Exchanges” means the First Exchange and the Standby Exchange, each as defined in the recitals to this Agreement.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Agreement” has the meaning set forth in the recitals to this Agreement.

“Exchange Stock” means the Common Stock issued to the Holders under the Exchange Agreement at any time during the term of this Agreement and any securities issued or issuable with respect to any such Common Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, the exercise of any preemptive rights under Section 6.5 of this Agreement or otherwise.

“Excluded Securities” means (i) the Qualifying Employee Stock, (ii) the Exchange Stock, (iii) the shares of Common Stock or Series A Preferred Stock issuable or issued upon the exercise of the Warrants, (iv) any shares of Common Stock or Common Stock Equivalents issued for non-cash consideration in connection with any merger, consolidation, acquisition or similar business combination, (v) any shares of Common Stock issued pursuant to the commitments disclosed on Schedule 8.1 of the Warrant Agreement and (vi) any shares of Common Stock or Common Stock Equivalents issued in connection with any joint venture, licensing, development or sponsorship activities in the ordinary course of business.

“French Credit Agreement” means the Facilities Agreement, dated as of July 31, 2009, among, inter alia, Pilot SAS, a Société par Actions Simplifiée, and Na Pali, a Société par Actions Simplifiée, as borrowers, the Parent and Pilot SAS, as original guarantors, and Crédit Lyonnais, BNP Paribas and Société Générale Corporate & Investment Banking, as mandated lead arrangers, as amended, restated, amended and restated, supplemented or otherwise modified from time to time.

“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall generally end on the last day of each calendar month in accordance with the fiscal accounting calendar of the Company.

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally end on the last day of each January, April, July and October of such Fiscal Year in accordance with the fiscal accounting calendar of the Company.

“Fiscal Year” means any period of 12 consecutive months ending on October 31st of any calendar year.

2

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

“Holders” means the Initial Holders and any assignee or transferee of such Initial Holders and, unless otherwise provided or indicated herein, the holders of the Exchange Stock.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

“Initial Holders” means each of (i) Romolo Holdings C.V., (ii) Triton SPV L.P., (iii) Triton Onshore SPV L.P., (iv) Triton Offshore SPV L.P. and (v) Triton Coinvestment SPV L.P.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities, or condition (financial or otherwise) of the Company taken as a whole; (b) a material impairment of the ability of the Company to perform its obligations under this Agreement; or (c) a material impairment of the rights and remedies of Rhône, the Initial Holders and/or Rhône Group L.L.C., as applicable, under the Credit Agreements (for so long as the Credit Agreements will remain outstanding after giving effect to the Exchanges), the Warrant Agreement, this Agreement or the Exchange Agreement.

“Permitted Transaction” means any acquisition of any Common Stock or Common Stock Equivalent (i) by Rhône or any of its Affiliates (including, for the avoidance of doubt, any partner or employee of Rhône then serving on the Board) directly from the Company or (ii) made pursuant to a tender or exchange offer made to all stockholders of the Company.

“Permitted Transfer” means any transfer (i) to any Affiliate of Rhône or Rhône Group L.L.C. (including, for the avoidance of doubt, any entity controlled by Rhône or Rhône Group L.L.C.) or in a pro rata distribution to the partners of a fund controlled by Rhône or Rhône Group L.L.C., (ii) in an underwritten public offering, other broad distribution sale (including, without limitation, a sale pursuant to Rule 144) or open-market transaction, (iii) to any Person in connection with an offer by such Person to purchase 100% of the Common Stock then outstanding or (iv) to any Person of a number of shares of the Exchange Stock representing no greater than 15% of the then-outstanding number of shares of Common Stock.

“Person” means any individual, corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

“Qualifying Employee Stock” has the meaning set forth in the Warrant Agreement.

“Rhône” has the meaning set forth in the recitals to this Agreement.

“Rhône Director” means a director nominated by an Appointing Fund.

“Rule 144, Rule 405 and Rule 415” mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time.

“SEC” means the United States Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Series A Preferred Stock” means the convertible non-voting preferred stock, par value $0.01 per share, of the Company on the terms set forth in Exhibit C of the Warrant Agreement.

“Standstill Period” means the period commencing on the date hereof and continuing until such time as the restrictions set forth in Section 6.1(a) terminate in accordance with the terms of Section 6.1(c).

“Stockholder Approval” has the meaning set forth in the Exchange Agreement.

3

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the Equity Interests having ordinary voting power for the election of directors or other governing body are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.

“Voting Stock” means all classes of Capital Stock of the Company then outstanding and normally entitled to vote in the election of directors.

“Warrant Agreement” means the Warrant and Registration Rights Agreement, dated as of July 31, 2009, by and among the Company, Rhône and the initial Warrant holders party thereto.

“Warrants” means the warrants issued by the Company from time to time pursuant to the Warrant Agreement.

2.   TRANSFER RESTRICTIONS; COMPLIANCE WITH THE SECURITIES ACT.

2.1 Transferability of the Exchange Stock.  The Exchange Stock may not be transferred to any Person, other than (i) with the prior written consent of the Company or (ii) pursuant to a Permitted Transfer (subject, in the case of a Permitted Transfer, to compliance with Section 2.2).

2.2 Compliance with the Securities Act.

(a) The Exchange Stock may be transferred to any Person pursuant to a Permitted Transfer, provided that such transfer shall be in compliance with this Section 2.2.

(b) A Holder may sell its Exchange Stock to a transferee that is an “accredited investor” as such term is defined in Regulation D under the Securities Act, provided that each of the following conditions is satisfied:

(i) with respect to any “accredited investor” that is not an institution, such transferee, as the case may be, provides certification establishing to the reasonable satisfaction of the Company that it is an “accredited investor”;

(ii) such transferee represents that it is acquiring the Exchange Stock for its own account and that it is not acquiring such Exchange Stock with a view to, or for offer or sale in connection with, any distribution thereof (within the meaning of the Securities Act) that would be in violation of the securities laws of the United States or any applicable state thereof, but subject, nevertheless, to the disposition of its property being at all times within its control; and

(iii) such Holder or transferee agrees to be bound by the provisions of this Section 2 with respect to any sale of the Exchange Stock.

(c) A Holder may sell its Exchange Stock in accordance with Regulation S under the Securities Act.

(d) A Holder may sell its Exchange Stock to a transferee if:

(i) such Holder gives written notice to the Company of its intention to effect such sale, which notice shall describe the manner and circumstances of the proposed transaction in reasonable detail;

(ii) such notice includes a certification by the Holder to the effect that such proposed sale may be effected without registration under the Securities Act or under applicable Blue Sky laws; and

(iii) such transferee complies with Sections 2.2(b)(ii) and 2.2(b)(iii).

(e) Except for a sale in accordance with Section 2.2(f) and subject to Section 7.2, each certificate representing the Exchange Stock held by any Holder shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable law or other agreement):

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER

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APPLICABLE STATE SECURITIES LAWS. SUCH SHARES MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND OF ANY APPLICABLE STATE SECURITIES LAWS AND SUBJECT TO THE PROVISIONS OF THE STOCKHOLDERS AGREEMENT DATED AS OF [ • ], 2010 BY AND AMONG THE COMPANY, RHôNE CAPITAL III L.P. AND THE INITIAL HOLDERS PARTY THERETO. A COPY OF THE STOCKHOLDERS AGREEMENT IS AVAILABLE AT THE OFFICES OF THE COMPANY.

(f) A Holder may sell its Exchange Stock in a transaction that is registered under the Securities Act.

3.   AMENDMENT TO WARRANT AGREEMENT

3.1 Amendment to Warrant Agreement.  The Warrant Agreement is hereby amended as follows:

(a) Article I of the Warrant Agreement is hereby amended by inserting the following two defined terms between the defined terms “Exchange Act” and “Excluded Securities”:

“Exchange Agreement:  the Exchange Agreement, dated as of June 24, 2010, by and among the Company, Quiksilver Americas, Inc., Mountain & Wave S.à r.l., Rhône Group L.L.C. and the Initial Warrant Holders.

Exchange Stock:  the Common Stock issued to the Holders under the Exchange Agreement at any time during the term of the Stockholders Agreement and any securities issued or issuable with respect to any such Common Stock by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, the exercise of any preemptive rights under Section 6.5 of the Stockholders Agreement or otherwise.”

(b) Only with respect to Article 4 of the Warrant Agreement, but excluding Section 4.11 thereof, the definition of “Registrable Securities” as set forth in Article I of the Warrant Agreement is hereby amended in its entirety to read as follows:

“Registrable Securities:  Any (i) Common Stock, Series A Preferred Stock or other securities issuable under the Warrants to the Initial Warrant Holders on the Issuance Date and at any time during the term of this Agreement, including, without limitation, (x) any shares of Common Stock issued in connection with the exercise of any preemptive rights under Section 5.6 of this Agreement and (y) any securities issued with respect to the Common Stock, Series A Preferred Stock or other securities issuable under the Warrants in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, (ii) Exchange Stock issued pursuant to the Exchange Agreement, and (iii) Qualifying Employee Stock issued to the Rhône Directors. Registrable Securities shall continue to be Registrable Securities until (x) they are sold pursuant to an effective Registration Statement under the Securities Act, (y) they may be sold by their holder pursuant to Rule 144 without limitation thereunder on volume or manner of sale, or (z) they shall have otherwise been transferred and new securities not subject to transfer restrictions under any federal securities laws and not bearing any legend restricting further transfer shall have been delivered by the Company, all applicable holding periods shall have expired, and no other applicable and legally binding restriction on transfer by the Holder thereof shall exist.”

(c) Article I of the Warrant Agreement is hereby amended by inserting the following defined term between the defined terms “Series A Preferred Stock” and “Total Cap”:

“Stockholders Agreement:  the Stockholders Agreement, dated as of [ • ], 2010, by and among the Company, Rhône Capital III and the Initial Holders.”

(d) The first sentence of Section 4.01(b) of the Warrant Agreement is hereby amended in its entirety to read as follows:

“Rhône Capital III shall be entitled to request, in the aggregate, five Demand Registrations; provided that if at any time during the term of the Stockholders Agreement (i) the Company fails to

5

nominate any Rhône Director (as defined in the Stockholders Agreement) or to vote any of its proxies in favor of any Rhône Director (as defined in the Stockholders Agreement) or (ii) the stockholders of the Company fail to elect any Rhône Director (as defined in the Stockholders Agreement), then Rhône Capital III shall be entitled to request, in the aggregate, seven Demand Registrations.”

4.   [RESERVED]

5.   REPRESENTATIONS AND WARRANTIES.

5.1 Representations and Warranties of the Company.  The Company hereby represents and warrants that:

(a) Existence, Power and Ownership.  It is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.

(b) Authorization.  It has the corporate power and authority to enter into this Agreement and to perform its obligations under, and consummate the transactions contemplated by, this Agreement and has by proper action duly authorized the execution and delivery of this Agreement.

(c) No Conflicts.  None of the execution and delivery of this Agreement by the Company, the consummation of the transactions contemplated herein or the performance of and compliance with the terms and provisions hereof will: (i) violate or conflict with any provision of the Certificate of Incorporation or the Bylaws; (ii) violate any law, regulation, order, writ, judgment, injunction, decree or permit applicable to it; (iii) violate or materially conflict with any contractual provisions of, or cause an event of default under, any material indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it or any of its properties may be bound; or (iv) result in or require the creation of any lien, security interest or other charge or encumbrance (other than those contemplated in or in connection with this Agreement) upon or with respect to its properties, except in the case of clauses (ii), (iii) and (iv), for such violations, conflicts, defaults, or liens, security interests or encumbrances that would not, individually or in the aggregate, result in a Material Adverse Effect.

(d) Consents.  Except as otherwise provided or contemplated by this Agreement, and subject to the accuracy of the representations and warranties of Rhône and the Initial Holders, no consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental authority or other Person is required in connection with the execution, delivery or performance of this Agreement.

(e) Enforceable Obligations.  This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery hereof by the Initial Holders and Rhône, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

5.2 Representations and Warranties of Rhône, Rhône Capital and each of the Initial Holders.  Rhône and each of the Initial Holders, severally and not jointly, hereby represents and warrants that:

(a) Authorization.  Rhône and each of the Initial Holders has the corporate, limited partnership or limited liability company, as the case may be, power and authority to enter into this Agreement and to perform its obligations under, and consummate the transactions contemplated by, this Agreement and has by proper action duly authorized the execution and delivery of this Agreement.

(b) Enforceable Obligations.  This Agreement has been duly executed and delivered by Rhône and each of the Initial Holders and assuming due authorization, execution and delivery hereof by the Company, this Agreement constitutes a legal, valid and binding obligation of Rhône and each of the Initial Holders, enforceable in accordance with its terms subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

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(c) Investment Intent.  Each Initial Holder acknowledges that the Exchange Stock will not have been, at the time of issuance, registered under the Securities Act or under any state securities laws. Each Initial Holder (i) is acquiring the Exchange Stock pursuant to an exemption from registration under the Securities Act and solely for investment with no present intention to distribute any of the securities to any Person in violation of the Securities Act or any other applicable securities laws and (ii) will not sell or otherwise dispose of any of such Exchange Stock, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws.

(d) Accredited Investor Status.  (i) Each Initial Holder is an “accredited investor” as such term is defined in Rule 501(a) promulgated under the Securities Act whose knowledge and experience in financial and business matters are such that each Initial Holder is capable of evaluating the merits and risks of its investment in the shares of Exchange Stock and (ii)(A) each Initial Holder’s financial situation is such that each Initial Holder can afford to bear the economic risk of holding the shares of Exchange Stock for an indefinite period of time, (B) each Initial Holder can afford to suffer complete loss of its investment in shares of Exchange Stock, (C) the Company has made available to each Initial Holder all documents and information that each Initial Holder has requested relating to an investment in the Company and (D) each Initial Holder has had adequate opportunity to ask questions of, and receive answers from, the Company as well as the Company’s officers, employees, agents and other representatives concerning the Company’s business, operations, financial condition, assets, liabilities and all other matters relevant to each Initial Holder’s investment in the shares of Exchange Stock.

6.   COVENANTS.

6.1 Standstill.

(a) Except as provided in Section 6.1(b), and subject to Section 6.1(c), during the Standstill Period, none of Rhône or its Affiliates (including, for the avoidance of doubt, the Initial Holders) shall, without the prior written consent of the Board (excluding the Rhône Directors), directly or indirectly:

(i) effect or seek, offer or propose (whether publicly or otherwise) to effect or announce any intention to effect or cause or participate in, (A) any acquisition of Common Stock or Common Stock Equivalents if, as a result of any such acquisition, any of Rhône or its Affiliates (including, for the avoidance of doubt, the Initial Holders), individually or as part of a “group” (within the meaning of Section 13(d) of the Exchange Act), would become the beneficial owner (as defined in Rule 13(d) of the Exchange Act, except that the applicable Person(s) or group shall be deemed to have “beneficial ownership” of all shares that such Person(s) or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), of more than 34.99% of the total voting power of the Voting Stock, (B) any tender or exchange offer or merger involving the Company or (C) any “solicitation” of “proxies” (as such terms are used in the proxy rules of the SEC) or written consents with respect to any Voting Stock of the Company, in each case in order to elect directors to the Board (other than any solicitation of proxies to elect any Rhône Director who has not been nominated by the Board and/or elected by the stockholders of the Company), or

(ii) join, form or participate in any “group” (within the meaning of Section 13(d) of the Exchange Act), if such group would, as a result, become the beneficial owner (as defined in Rule 13(d) of the Exchange Act, except that such group shall be deemed to have “beneficial ownership” of all shares that such group has the right to acquire, whether such right is exercisable immediately or only after the passage of time), of more than 34.99% of the total voting power of the Voting Stock.

(b) Section 6.1(a) shall not prevent any direct or indirect acquisition (or participation in a “group” consisting solely of Rhône and any of its Affiliates with resulting beneficial ownership of more than 34.99% of the total voting power of the Voting Stock (determined in accordance with Section 6.1(a)(ii)) by Rhône or any of its Affiliates during the Standstill Period of (i) the Exchange Stock, (ii) the shares of Common Stock or Series A Preferred Stock issuable or issued upon the exercise of the Warrants or in connection with the exercise of any preemptive rights under Section 5.6 of the Warrant Agreement, (iii) any Qualifying Employee

7

Stock issued to the Rhône Directors or (iv) any Common Stock or Common Stock Equivalents acquired pursuant to a Permitted Transaction.

(c) If at any time during the term of this Agreement (i) the Company fails to nominate any Rhône Director or to vote any of its proxies in favor of any Rhône Director, (ii) the stockholders of the Company fail to elect any Rhône Director, (iii) a “change in control”, “change of control” or similar concept shall have occurred under any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their properties may be bound (other than as a result of Rhône breaching its obligations under Section 6.1(a)) or (iv) Rhône and its Affiliates (including, for the avoidance of doubt, the Initial Holders), individually or as part of a “group” (within the meaning of Section 13(d) of the Exchange Act), are the beneficial owner (as defined in Rule 13(d) of the Exchange Act, except that the applicable Person(s) or group shall be deemed to have “beneficial ownership” of all shares that such Person(s) or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time) of less than 20% of the outstanding Common Stock of the Company on a fully-diluted basis, then the restrictions set forth in Section 6.1(a) shall permanently terminate.

6.2 Board Representation.

(a) Subject to Section 6.2(c) and Section 6.2(e), in connection with each meeting of stockholders at which directors are to be elected to serve on the Board, the Company shall take all necessary steps to nominate each Rhône Director (or such alternative persons who are proposed by the Appointing Funds and notified to the Company on or prior to any date set forth in the Company’s constituent documents or applicable law for stockholder nominees) and to use its reasonable best efforts to cause the Board unanimously to recommend that the stockholders of the Company vote in favor of each Rhône Director for election to the Board. If, for any reason, a candidate designated as a Rhône Director is determined to be unqualified to serve on the Board, the Appointing Fund shall have the right to designate an alternative Rhône Director to be so nominated.

(b) Each elected Rhône Director will hold his or her office as a director of the Company for such term as is provided in the Company’s constituent documents or until his or her death, resignation or removal from the Board or until his or her successor has been duly elected and qualified in accordance with the provisions of this Agreement, the Company’s constituent documents and applicable law. If any Rhône Director ceases to serve as a director of the Company for any reason during his or her term, the Company will use its reasonable best efforts to cause the Board to fill the vacancy created thereby with a replacement designated by the applicable Appointing Fund.

(c) The Appointing Funds shall each have the right to designate a Rhône Director pursuant to Section 6.2(a) until such time as the Initial Holders have sold 331/3% of the Exchange Stock to any Person or Persons other than Affiliates of Rhône or other Initial Holders. Thereafter, Triton Onshore SPV L.P. shall have the right to designate one Rhône Director pursuant to Section 6.2(a) until such time as the Initial Holders have sold 662/3% of the Exchange Stock to any Person or Persons other than Affiliates of Rhône or other Initial Holders. Thereafter, the right of Triton Onshore SPV L.P. to designate a Rhône Director hereunder shall terminate.

(d) The Company shall provide the same compensation and rights and benefits of indemnity to the Rhône Directors as are provided to other non-employee directors.

(e) Nothing in this Section 6.2 shall prevent the Board from acting in accordance with its fiduciary duties or applicable law or from acting in good faith in accordance with its constituent documents, while giving due consideration to the intent of this Agreement. The Board shall have no obligation to appoint or nominate any Rhône Director upon written notice that such appointment or nomination would violate applicable law or result in a breach by the Board of its fiduciary duties to its stockholders; provided, however, that the foregoing shall not affect the right of the Appointing Funds to designate an alternate Rhône Director.

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(f) For so long as any directors designated by the Appointing Funds (or an Affiliate of an Appointing Fund) pursuant to Section 9.4 of the Warrant Agreement have been appointed to, and serve on, the Board, then such directors shall be considered “Rhône Directors” for purposes of this Agreement.

6.3 Financial Statements.  For so long as Rhône and any of its Affiliates collectively own at least 8,333,334 shares of the Exchange Stock, the Company shall deliver to Rhône (for distribution to each Holder):

(a) within ninety (90) days after the end of each Fiscal Year of the Company, a Consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Year, and the related Consolidated statements of income or operations and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all prepared in accordance with GAAP, such Consolidated statements to be audited and accompanied by a report and opinion of a registered public accounting firm of nationally recognized standing or otherwise reasonably acceptable to Rhône, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

(b) within forty-five (45) days after the end of each of the first three Fiscal Quarters of each Fiscal Year of the Company, a Consolidated balance sheet of the Company and its Subsidiaries as at the end of such Fiscal Quarter, and the related Consolidated statements of income or operations and cash flows for such Fiscal Quarter and for the portion of the Company’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (i) such period set forth in the projections delivered pursuant to Section 6.3(d) hereof (if applicable), (ii) the corresponding Fiscal Quarter of the previous Fiscal Year and (iii) the corresponding portion of the previous Fiscal Year, such Consolidated statements to be certified by a responsible officer of the Company as fairly presenting the financial condition, results of operations and cash flows of the Company and its Subsidiaries as of the end of such Fiscal Quarter in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

(c) within thirty (30) days after the end of each of the first two Fiscal Months of each Fiscal Quarter of the Company, a financial report for the immediately preceding Fiscal Month in a format reasonably satisfactory to Rhône;

(d) no later than within thirty (30) days prior to the end of each Fiscal Year, a copy of the approved annual budget of the Company and its Subsidiaries for the immediately following Fiscal Year; and

(e) (i) copies of any reports and other written information delivered to the administrative agent under the ABL Credit Agreement and any agent under the French Credit Agreement and (ii) upon the request of Rhône, copies of any reports and other written information delivered to the lenders or their respective agents under the credit facilities of certain Subsidiaries of the Company organized in Japan and Australia.

6.4 Rule 144 Reporting.  With a view to making available to the Holders the benefits of certain rules and regulations of the SEC which may permit the sale of the Exchange Stock to the public without registration, the Company agrees, so long as it is subject to the periodic reporting requirements of the Exchange Act, to use commercially reasonable efforts to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144(c)(1) or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of this Agreement;

(b) file with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and

(c) so long as Rhône and any of its Affiliates collectively own at least 8,333,334 shares of the Exchange Stock, furnish to such Holders forthwith upon request: (i) in the event the Company is no longer subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Exchange Act; (ii) in the event the Company is subject to the reporting

9

requirements of Section 13 or 15(d) of the Exchange Act, a copy of the most recent annual or quarterly report of the Company; and (iii) such other reports and documents as the Holders may reasonably request in availing themselves of any rule or regulation of the SEC allowing them to sell any such securities without registration.

6.5 Preemptive Rights.  So long as Rhône and any of its Affiliates collectively own at least 8,333,334 shares of the Exchange Stock, upon any issuance for cash of any shares of Common Stock, rights or options to acquire Common Stock or securities convertible or exchangeable into Common Stock for cash, any Initial Holder or any of their Affiliates shall have additional subscription rights allowing such Initial Holder or Affiliate to maintain its proportionate ownership interest in the Company based on the ratio of (i) the Exchange Stock issued to or transferred to, and owned by, such Initial Holder or Affiliate (which, for this purpose, shall be calculated taking into account any Exchange Stock subsequently transferred to such Initial Holder or Affiliate by another Initial Holder or Affiliate) and (ii) the number of shares of Common Stock outstanding immediately prior to such issuance, without giving effect to any Warrants or the shares of Common Stock held by the Initial Holders or any of their Affiliates. The foregoing shall not apply to any issuance of Excluded Securities. For the avoidance of doubt, notwithstanding this Section 6.5, the preemptive rights set forth in Section 5.6 of the Warrant Agreement shall remain in effect.

6.6 Consent Upon Certain Issuances.  So long as Rhône and any of its Affiliates collectively own at least 8,333,334 shares of the Exchange Stock, the Company shall not, without the prior written consent of Rhône in its sole discretion, issue shares of Common Stock (other than (i) issuances of Excluded Securities or (ii) issuances of Common Stock that are contemporaneously being sold pursuant to a bona fide underwritten public offering), at a price less than the lesser of (A) $4.50 per share of Common Stock and (B) the fair market value of the Common Stock.

6.7 Affiliate Transactions.  So long as Rhône and any of its Affiliates collectively own at least 8,333,334 shares of the Exchange Stock, any issuance by the Company of any shares of Common Stock to, or repurchase by the Company of any shares of Common Stock from, any Affiliate, other than Excluded Securities, shall be on terms no less favorable to the Company than those obtainable by a party who is not an Affiliate.

7.   MISCELLANEOUS.

7.1 Agent.  The Holders appoint Rhône as their agent and authorize Rhône to bind, and take all actions in connection with this Agreement on behalf of, the Holders, including agreeing to amendments of this Agreement pursuant to Section 7.7 herein. The Company shall be entitled to rely on direction by Rhône on behalf of any Holder for all purposes hereunder.

7.2 Removal of Legends.  In the event (i) the Exchange Stock is registered under the Securities Act or (ii) the Company is presented with an opinion of counsel reasonably satisfactory to the Company that transfers of the Exchange Stock do not require registration under the Securities Act, the Company shall direct its transfer agent, and the transfer agent shall, upon surrender by a Holder of its certificates evidencing such Exchange Stock, exchange such certificates for certificates without the legends referred to in Section 2.2(e).

7.3 Notices.  Any notice, demand or delivery to the Company or Rhône authorized by this Agreement shall be sufficiently given or made when mailed if sent by first-class mail, postage prepaid, addressed to the Company or Rhône, as applicable, as follows:

If to the Company:

Quiksilver, Inc.

15202 Graham St.

Huntington Beach, CA 92649

Fax: (734) 477-1370

Attention: General Counsel

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With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

300 South Grand Avenue

Los Angeles, CA 90071-3144

Fax: (213) 621-5493

Attention: Brian J. McCarthy and K. Kristine Dunn

If to Rhône:

Rhône Capital III L.P.

630 Fifth Avenue, 27th Floor

New York, NY 10111

Fax: (212) 218-6789

Attention: Baudoin Lorans and M. Allison Steiner

With a copy to:

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004-2498

Fax: (212) 291-9116

Attention: Richard A. Pollack

or such other address as shall have been furnished to the party giving or making such notice, demand or delivery.

Any notice required to be given by the Company to the Holders pursuant to this Agreement shall be made by mailing by registered mail, return receipt requested, to the Holders at their respective addresses shown on the register of the Company or, if any such Holder is an Initial Holder, to its respective address shown on Schedule I attached hereto. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given when mailed, whether or not the Holder receives the notice.

7.4 Applicable Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, including, without limitation, Section 5-1401 of the New York General Obligations Law.

7.5 Persons Benefiting.  This Agreement shall be binding upon and inure to the benefit of the Company and Rhône, and their successors, assigns, beneficiaries, executors and administrators, and the Holders from time to time. Nothing in this Agreement is intended or shall be construed to confer upon any Person, other than the Company, Rhône and the Holders, any right, remedy or claim under or by reason of this Agreement or any part hereof.

7.6 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together constitute one and the same instrument.

7.7 Amendments.

(a) Neither this Agreement nor any provisions hereof shall be waived, modified, changed, discharged or terminated other than in accordance with Section 7.7(b).

(b) With the consent of Rhône, the Company may from time to time (i) supplement or amend this Agreement to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, or to make any other provisions with regard to matters or questions arising hereunder and (ii) modify the Agreement for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or modifying in any manner the rights of the Holders hereunder.

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7.8 Headings.  The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience and shall not control or affect the meaning or construction of any of the provisions hereof.

7.9 Entire Agreement.  This Agreement and the other agreements referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.

7.10 Limitation of Liability.  No party to this Agreement shall be liable to any other party for any consequential, indirect, special or incidental damages under any provision of this Agreement or for any consequential, indirect, penal, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written.

QUIKSILVER, INC.

By: 

Name:     

Title:

ROMOLO HOLDINGS C.V.

By: 

Name:     

Title:

TRITON SPV L.P.

By: 

Name:     

Title:

TRITON ONSHORE SPV L.P.

By: 

Name:     

Title:

TRITON OFFSHORE SPV L.P.

By: 

Name:     

Title:

13

TRITON COINVESTMENT SPV L.P.

By: 

Name:     

Title:

RHÔNE CAPITAL III L.P.

By: 

Name:     

Title:

[Signature Page to Stockholder Agreement]

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Schedule I

Notice Addresses of Initial Holders

Romolo Holdings C.V.

c/o Numitor Governance S.à r.l.

c/o Rhône Group L.L.C.

630 5th Avenue, 27th Floor

New York, NY 10111

Triton SPV L.P.

c/o Triton GP SPV LLC

c/o Rhône Capital III L.P.

630 5th Avenue, 27th Floor

New York, NY 10111

Triton Onshore SPV L.P.

c/o Triton GP SPV LLC

c/o Rhône Capital III L.P.

630 5th Avenue, 27th Floor

New York, NY 10111

Triton Offshore SPV L.P.

c/o Triton GP SPV LLC

c/o Rhône Capital III L.P.

630 5th Avenue, 27th Floor

New York, NY 10111

Triton Coinvestment SPV L.P.

c/o Triton GP SPV LLC

c/o Rhône Capital III L.P.

630 5th Avenue, 27th Floor

New York, NY 10111

15

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-04169, No. 333-56593, No. 333-40328, No. 333-64106, No. 333-85204, No. 333-104462, No. 333-114845, No. 333-123858, No. 333-133229, No. 333-141463, and No. 333-166102, on Form S-8 of our report dated January 12, 2010 (June 25, 2010 as to the effect of the November 1, 2009 adoption of the new accounting standards requiring retrospective application described in Note 1), relating to the consolidated financial statements of Quiksilver, Inc. and subsidiaries (“the Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Accounting Standards Codification 740, Accounting for Uncertainty in Income Taxes, in 2008, and the retrospective adjustment to the consolidated financial statements for the adoption of guidance relating to noncontrolling interests during the first quarter of fiscal 2010), appearing in this Current Report on Form 8-K of the Company for the year ended October 31, 2009.

/s/ Deloitte & Touche LLP

Costa Mesa, California
June 25, 2010

EX-99.1

Exhibit 99.1

Item 6. SELECTED FINANCIAL DATA

The statement of operations and balance sheet data shown below were derived from our consolidated financial statements. Our consolidated financial statements as of October 31, 2009 and 2008 and for each of the three years in the period ended October 31, 2009, included herein, have been audited by Deloitte & Touche LLP, our independent registered public accounting firm. You should read this selected financial data together with our consolidated financial statements and related notes, as well as the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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Amounts in thousands, except ratios	Year Ended October 31,
and per share data	2009(1)(2)(6)			2008(1)(2)(6)			2007(1)(2)			2006(1)(2)			2005(2)
Statements of Operations Data
Revenues, net	$	1,977,526		$	2,264,636		$	2,047,072		$	1,722,150		$	1,562,417
(Loss) income before provision for income taxes		(3,622	)		99,261			151,159			122,862			143,305
(Loss) income from continuing operations attributable to Quiksilver, Inc.		(73,215	)		65,544			116,727			89,376			96,155
(Loss) income from discontinued operations attributable to Quiksilver, Inc.		(118,827	)		(291,809	)		(237,846	)		3,640			10,965
Net (loss) income attributable to Quiksilver, Inc.		(192,042	)		(226,265	)		(121,119	)		93,016			107,120
(Loss) income per share from continuing operations attributable to Quiksilver, Inc. (3)		(0.58	)		0.52			0.94			0.73			0.81
(Loss) income per share from discontinued operations attributable to Quiksilver, Inc. (3)		(0.94	)		(2.32	)		(1.92	)		0.03			0.09
Net (loss) income per share attributable to Quiksilver, Inc. (3)		(1.51	)		(1.80	)		(0.98	)		0.76			0.90
(Loss) income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution (3)		(0.58	)		0.51			0.90			0.70			0.77
(Loss) income per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution (3)		(0.94	)		(2.25	)		(1.83	)		0.03			0.09
Net (loss) income per share, attributable to Quiksilver, Inc., assuming dilution (3)		(1.51	)		(1.75	)		(0.93	)		0.73			0.86
Weighted average common shares outstanding (3)		127,042			125,975			123,770			122,074			118,920
Weighted average common shares outstanding, assuming dilution (3)		127,042			129,485			129,706			127,744			124,335
Balance Sheet Data
Total assets	$	1,852,608		$	2,170,265		$	2,662,064		$	2,447,378		$	2,158,601
Working capital		561,697			631,315			631,857			598,714			458,857
Lines of credit		32,592			238,317			124,634			61,106			35,158
Long-term debt		1,006,661			822,001			732,812			598,434			536,436
Quiksilver, Inc. stockholders’ equity		456,595			599,966			886,613			881,127			732,882
Other Data
Adjusted EBITDA(4)	$	131,532		$	278,945		$	260,786		$	221,687		$	194,331
Current ratio		2.3			1.9			1.7			1.8			1.7
Return on average stockholders’ equity(5)		(13.9	)%		8.8	%		13.2	%		11.1	%		14.6	%

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(1)	Fiscal 2009, 2008, 2007 and 2006 include stock compensation expense related to the adoption of ASC 718, “Stock Compensation.” See footnote (4) to the table below.
(2)	Fiscal 2009, 2008, 2007, 2006 and 2005 reflect the operations of Rossignol and Cleveland Golf, which were acquired in 2005, as discontinued operations. See note 18 of our consolidated financial statements.
(3)	Per share amounts and shares outstanding have been adjusted to reflect a two-for-one stock split effected on May 11, 2005.
(4)	Adjusted EBITDA is defined as income or loss from continuing operations attributable to Quiksilver, Inc. before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) non-cash stock-based compensation expense and (v) asset impairments. Adjusted 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 Adjusted EBITDA, along with GAAP measures, as a measure of profitability because Adjusted 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, the impact of our asset base, which can differ depending on the book value of assets, the accounting methods used to compute depreciation and amortization, the existence or timing of asset impairments and the effect of non-cash stock-based compensation expense. We believe EBITDA is useful to investors as it is a widely used measure of performance and the adjustments we make to EBITDA provide further clarity on our results of operations. We remove the effect of non-cash stock-based compensation from our earnings which can vary based on share price, share price volatility and expected life of the equity instruments we grant. In addition, this stock-based compensation expense does not result in cash payments by us. We remove the effect of asset impairments from Adjusted EBITDA for the same reason that we remove depreciation and amortization as it is part of the impact of our asset base. Adjusted EBITDA has limitations as a profitability measure in that it does not include the interest expense on our debts, our provisions for income taxes, the effect of our expenditures for capital assets and certain intangible assets, the effect of non-cash stock-based compensation expense and the effect of asset impairments. The following is a reconciliation of our (loss) income from continuing operations attributable to Quiksilver, Inc. to Adjusted EBITDA:

	Year Ended October 31,
Amounts in thousands	2009			2008		2007		2006		2005
(Loss) income from continuing operations attributable to Quiksilver, Inc.	$	(73,215	)	$	65,544	$	116,727	$	89,376	$	96,155
Income taxes		66,667			33,027		34,506		33,181		46,588
Interest		63,924			45,327		46,571		41,317		16,945
Depreciation and amortization		55,004			57,231		46,852		37,851		34,643
Non-cash stock-based compensation expense		8,415			12,019		16,130		19,962		—
Non-cash asset impairments		10,737			65,797		—		—		—
Adjusted EBITDA	$	131,532		$	278,945	$	260,786	$	221,687	$	194,331

(5)	Computed based on (loss) income from continuing operations attributable to Quiksilver, Inc. divided by the average of beginning and ending Quiksilver, Inc. stockholders’ equity.
(6)	Fiscal 2009 includes fixed asset impairments of $10.7 million and fiscal 2008 includes goodwill and fixed asset impairments of $65.8 million.

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EX-99.2

Exhibit 99.2

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read together with our consolidated financial statements and related notes, which are included in this report, and the “Risk Factors” information, set forth in Item 1A in our Annual Report on Form 10-K for the fiscal year ended October 31, 2009, filed on January 12, 2010.

Overview

Over the past 39 years, Quiksilver has been established as a global company representing the casual, youth lifestyle associated with boardriding sports. We began operations in 1976 as a California company making boardshorts for surfers in the United States under a license agreement with the Quiksilver brand founders in Australia. Our product offering expanded in the 1980s as we expanded our distribution channels. After going public in 1986 and purchasing the rights to the Quiksilver brand in the United States from our Australian licensor, we further expanded our product offerings and began to diversify. In 1991, we acquired the European licensee of Quiksilver and introduced Roxy, our surf brand for teenage girls. We also expanded demographically in the 1990s by adding products for boys, girls, toddlers and men, and we introduced our proprietary retail store concept, which displays the heritage and products of Quiksilver and Roxy. In 2000, we acquired the international Quiksilver and Roxy trademarks, and in 2002, we acquired our licensees in Australia and Japan. In 2004, we acquired DC Shoes, Inc. to expand our presence in action sports-inspired footwear. In 2005, we acquired Skis Rossignol SA, a wintersports and golf equipment company. Today our products are sold throughout the world, primarily in surf shops, skate shops, snow shops and specialty stores.

In November 2008, we completed the sale of our Rossignol business, which included the brands Rossignol, Dynastar, Look and Lange for an aggregate purchase price of approximately $50.8 million. We incurred a pre-tax loss on the sale of Rossignol of approximately $212.3 million, partially offset by a tax benefit of approximately $89.4 million, recognized primarily during the three months ended January 31, 2009. Our Rossignol business, including both wintersports equipment and related apparel, is classified as discontinued operations. The assets and related liabilities of our remaining Rossignol apparel business are classified as held for sale, and the operations are classified as discontinued in our consolidated financial statements. Also, as part of our acquisition of Rossignol in 2005, we acquired a majority interest in Roger Cleveland Golf Company, Inc. Our golf equipment operations were subsequently sold in December 2007 and are also classified as discontinued operations in our consolidated financial statements. As a result of these dispositions, the following information has been adjusted to exclude both our Rossignol and golf equipment businesses.

We operate in the outdoor market of the sporting goods industry in which we design, produce and distribute branded apparel, footwear, accessories and related products. We operate in three segments, the Americas, Europe and Asia/Pacific. Our Americas segment includes revenues from the U.S., Canada and Latin America. Our European segment includes revenues primarily from Western Europe. Our Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand and Indonesia. Royalties earned from various licensees in other international territories are categorized in corporate operations along with revenues from sourcing services for our licensees. Revenues by segment from continuing operations are as follows:

	Year Ended October 31,
In thousands	2009		2008		2007		2006		2005
Americas	$	929,691	$	1,061,370	$	995,801	$	831,583	$	752,797
Europe		792,627		933,119		803,395		660,127		591,228
Asia/Pacific		251,596		265,067		243,064		225,128		213,277
Corporate operations		3,612		5,080		4,812		5,312		5,115
Total revenues, net	$	1,977,526	$	2,264,636	$	2,047,072	$	1,722,150	$	1,562,417

We operate in markets that are highly competitive, and our ability to evaluate and respond to changing consumer demands and tastes is critical to our success. If we are unable to remain competitive and maintain our consumer loyalty, our business will be negatively affected. We believe that our historical

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success is due to the development of an experienced team of designers, artists, sponsored athletes, technicians, researchers, merchandisers, pattern makers and contractors. Our team and the heritage and current strength of our brands has helped us remain competitive in our markets. Our success in the future will depend, in part, on our ability to continue to design products that are acceptable to the marketplace and competitive in the areas of quality, brand image, technical specifications, distribution methods, price, customer service and intellectual property protection.

Results of Operations

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

	Year Ended October 31,
	2009			2008			2007
Statements of Operations data
Revenues, net		100.0	%		100.0	%		100.0	%
Gross profit		47.1			49.5			48.1
Selling, general and administrative expense		43.1			40.4			38.2
Asset impairments		0.5			2.9			0.0
Operating income		3.5			6.2			9.9
Interest expense		3.2			2.0			2.3
Foreign currency and other expense (income)		0.5			(0.2	)		0.2
(Loss) income before provision for income taxes		(0.2	)%		4.4	%		7.4	%
Other data
Adjusted EBITDA (1)		6.7	%		12.3	%		12.7	%

⁽¹⁾ For a definition of Adjusted EBITDA and a reconciliation of (loss) income from continuing operations attributable to Quiksilver, Inc. to Adjusted EBITDA, see footnote (4) to the table under Item 6. Selected Financial Data.

Our financial performance has been, and may continue to be, negatively affected by unfavorable global economic conditions. Continued or further deteriorating economic conditions are likely to have an adverse impact on our sales volumes, pricing levels and profitability. As domestic and international economic conditions change, trends in discretionary consumer spending become unpredictable and subject to reductions due to uncertainties about the future. When consumers reduce discretionary spending, purchases of apparel and footwear tend to decline. A general reduction in consumer discretionary spending due to the recession in the domestic and international economies or uncertainties regarding future economic prospects could have a material adverse effect on our results of operations.

Fiscal 2009 Compared to Fiscal 2008

Revenues

Our total net revenues decreased 13% in fiscal 2009 to $1,977.5 million from $2,264.6 million in fiscal 2008. In constant currency, net revenues decreased 8% compared to the prior year. Our net revenues in each of the Americas, Europe and Asia/Pacific segments include apparel, footwear, accessories and related products for our Quiksilver, Roxy, DC and other brands, which include Hawk, Raisins, Leilani, Radio Fiji, Lib Technologies, Gnu and Bent Metal.

In order to better understand growth rates in our foreign operating segments, we make reference to constant currency. Constant currency improves visibility into actual growth rates as it adjusts for the effect of changing foreign currency exchange rates from period to period. For income statement items, constant currency is calculated by taking the average foreign currency exchange rate used in translation for the current period and applying that same rate to the prior period. Our European segment is translated into constant currency using euros and our Asia/Pacific segment is translated into constant currency using Australian dollars as these are the primary functional currencies of each reporting segment. As such, this methodology does not account for movements in individual currencies within an

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operating segment (for example, non-euro currencies within our European segment). A constant currency translation methodology that accounts for movements in each individual currency could yield a different result compared to using only euros and Australian dollars. The following table presents revenues by segment in both historical currency and constant currency for the years ended October 31, 2008 and 2009:

In thousands

	Americas			Europe			Asia/Pacific			Corporate		Total
Historical currency (as reported)
October 31, 2008	$	1,061,370		$	933,119		$	265,067		$	5,080	$	2,264,636
October 31, 2009		929,691			792,627			251,596			3,612		1,977,526
Percentage decrease		(12	%)		(15	%)		(5	%)				(13	%)
Constant currency (current year exchange rates)
October 31, 2008	$	1,061,370		$	849,423		$	231,137		$	5,080	$	2,147,010
October 31, 2009		929,691			792,627			251,596			3,612		1,977,526
Percentage (decrease) increase		(12	%)		(7	%)		9	%				(8	%)

Revenues in the Americas decreased 12% to $929.7 million for fiscal 2009 from $1,061.4 million in the prior year, while European revenues decreased 15% to $792.6 million from $933.1 million and Asia/Pacific revenues decreased 5% to $251.6 million from $265.1 million for those same periods. In the Americas, the decrease in net revenues came primarily from the Roxy and Quiksilver brands and, to a lesser extent, our DC brand across all product lines. European net revenues decreased 7% in constant currency. The constant currency decrease in Europe was driven by a decrease in revenues from our Roxy brand and, to a lesser extent, our Quiksilver brand, partially offset by growth in our DC brand. Decreases in Roxy and Quiksilver brand revenues came primarily from our apparel and, to a lesser extent, our accessories product lines. DC brand revenue growth came primarily from our apparel and footwear product lines. Asia/Pacific’s net revenues increased 9% in constant currency. This constant currency increase in Asia/Pacific’s net revenues came across all product lines, primarily from our Roxy and Quiksilver brands and, to a lesser extent, growth in our DC brand.

Gross Profit

Our consolidated gross profit margin decreased to 47.1% in fiscal 2009 from 49.5% in the previous year. The gross profit margin in the Americas segment decreased to 37.6% from 42.0% in the prior year, our European segment gross profit margin decreased to 56.4% from 57.0%, and our Asia/Pacific segment gross profit margin increased to 53.9% from 52.9%. The decrease in the Americas segment gross profit margin was due primarily to market related price compression in both our company-owned retail stores and our wholesale business. Our European segment gross profit margin decreased primarily as a result of negative foreign currency translation effects of certain European subsidiaries that do not use euros as their functional currency, partially offset by improvements to our margin due to the foreign currency exchange effect of sourcing goods in U.S. dollars. In our Asia/Pacific segment, our gross profit margin increase was primarily due to improved margins in Japan compared to the prior year.

Selling, General and Administrative Expense

Our selling, general and administrative expense (“SG&A”) decreased 7% in fiscal 2009 to $851.7 million from $915.9 million in fiscal 2008. In the Americas segment, these expenses decreased 2% to $364.7 million in fiscal 2009 from $372.0 million in fiscal 2008, in our European segment, they decreased 10% to $341.8 million from $380.4 million, and in our Asia/Pacific segment, SG&A decreased 4% to $112.4 million from $117.2 million for those same periods. On a consolidated basis, expense reductions in SG&A were partially offset by approximately $28.8 million in charges related to restructuring activities, including severance costs. As a percentage of revenues, SG&A increased to 43.1% of revenues in fiscal 2009 compared to 40.4% in fiscal 2008. In the Americas, SG&A as a percentage of revenues increased to 39.2% compared to 35.0%. In Europe, SG&A as a percentage of revenues increased to 43.1% compared to 40.8% and in Asia/Pacific, SG&A as a percentage of revenues increased to 44.7%

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compared to 44.2% in the prior year. The increase in SG&A as a percentage of revenues in our Americas segment was primarily due to lower revenues. Expense reductions were partially offset by $22.9 million in charges related to restructuring activities, including severance costs, and by $3.0 million of incremental bad debt charges. The increase in SG&A as a percentage of revenues in our European segment was primarily caused by lower revenues and, to a lesser extent, the cost of operating additional retail stores and severance costs of $4.1 million. In our Asia/Pacific segment, the slight increase in SG&A as a percentage of revenues primarily related to the cost of operating additional retail stores.

Asset Impairments

Asset impairment charges totaled approximately $10.7 million in fiscal 2009 compared to approximately $65.8 million in fiscal 2008. The current year charge relates to the impairment of leasehold improvements and other assets in certain retail stores, whereas the prior year charge included $55.4 million of goodwill impairment in addition to approximately $10.4 million of impairment of leasehold improvements and other assets in certain retail stores. We analyzed the profitability of our retail stores and determined that a total of 14 stores were not generating sufficient cash flows to recover our investment, 6 of which are scheduled to close in 2010. We are evaluating the timing of the closure of the remaining 8 stores and any costs associated with future rent commitments for these stores will be charged to future earnings upon store closure. With respect to the fiscal 2008 impairment, we determined 25 stores were not generating sufficient cash flows to recover our investment. Of these 25 stores, 15 still remain open and are planned to close at lease expiration or sooner if an early termination agreement can be reached.

Non-operating Expenses

Net interest expense increased to $63.9 million in fiscal 2009 compared to $45.3 million in fiscal 2008. This increase was primarily due to our recognition of additional interest expense that was previously allocated to the discontinued operations of Rossignol in the prior year and higher interest rates during the three months ended October 31, 2009 on our newly refinanced debt in Europe and the United States, partially offset by lower interest rates on our variable rate debt in Europe and the United States during the nine months ended July 31, 2009. Including both continuing and discontinued operations for the years ended October 31, 2009 and 2008, interest expense was $64.3 million and $59.3 million, respectively. In fiscal 2008, the discontinued Rossignol business was allocated interest based on intercompany borrowings.

Our foreign currency loss amounted to $8.6 million in fiscal 2009 compared to a gain of $5.8 million in fiscal 2008. This current year loss primarily resulted from the foreign currency exchange effect of certain non-U.S. dollar denominated liabilities and the settlement of certain foreign currency exchange contracts.

Our income tax expense was $66.7 million in fiscal 2009 compared to $33.0 million in fiscal 2008. Income tax expense in fiscal 2009 was unfavorably impacted by a non-cash valuation allowance adjustment of $72.8 million recorded against our deferred tax assets in the United States.

Loss / income from continuing operations and Adjusted EBITDA

Our loss from continuing operations attributable to Quiksilver, Inc. in fiscal 2009 was $73.2 million, or $0.58 per share on a diluted basis, compared to income from continuing operations attributable to Quiksilver, Inc. of $65.5 million, or $0.51 per share on a diluted basis for fiscal 2008. Adjusted EBITDA decreased to $131.5 million in fiscal 2009 compared to $278.9 million in fiscal 2008.

Fiscal 2008 Compared to Fiscal 2007

Revenues

Our total net revenues increased 11% in fiscal 2008 to $2,264.6 million from $2,047.1 million in fiscal 2007 primarily as a result of changes in foreign currency exchange rates and higher unit sales. The effect of foreign currency exchange rates accounted for approximately $105.7 million of the increase in total net revenues. Our net revenues in each of the Americas, Europe and Asia/Pacific segments include apparel, footwear, accessories and related products for our Quiksilver, Roxy, DC and other brands which

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include Hawk, Raisins, Leilani, Radio Fiji, Lib Technologies, Gnu and Bent Metal. Revenues in the Americas increased 7% to $1,061.4 million for fiscal 2008 from $995.8 million in the prior year, while European revenues increased 16% to $933.1 million from $803.4 million and Asia/Pacific revenues increased 9% to $265.1 million from $243.1 million for those same periods. In the Americas, the increase in revenues came primarily from DC brand revenues, partially offset by small decreases in our Quiksilver and Roxy brand revenues. The increase in DC brand revenues came primarily from growth in our footwear and apparel product lines. The decrease in Quiksilver and Roxy came across all product lines except for increases in our Quiksilver footwear and Roxy apparel product lines. Approximately $89.6 million of Europe’s revenue increase was attributable to the positive effects of changes in foreign currency exchange rates. The currency adjusted increase in Europe came primarily from growth in our DC brand and, to a lesser extent, growth in our Roxy brand, partially offset by a slight decrease in our Quiksilver brand. The increase in DC brand revenues came primarily from growth in footwear and apparel product lines, while increases in Roxy came primarily from growth in the accessories and apparel product lines. Approximately $16.1 million of Asia/Pacific’s revenue increase was attributable to the positive effects of changes in foreign currency exchange rates. The currency adjusted increase in Asia/Pacific revenues came primarily from our DC and Quiksilver brands, partially offset by a decrease in our Roxy brand revenues.

Gross Profit

Our consolidated gross profit margin increased to 49.5% in fiscal 2008 from 48.1% in the previous year. The gross profit margin in the Americas segment remained constant at 42.0%, our European segment gross profit margin increased to 57.0% from 55.1%, and our Asia/Pacific segment gross profit margin increased to 52.9% from 49.5%. The Americas gross profit margin would have increased due to higher percentages of sales through company-owned retail stores, where we earn both wholesale and retail margins, and improved sourcing costs, but such improvements were wholly offset by market related price compression. Our European gross profit margin increases were primarily due to a higher percentage of our sales through company-owned stores and improved sourcing costs. In Asia/Pacific, the gross profit margin increase compared to the prior year was primarily a result of the change in mix to higher retail sales compared to the prior year.

Selling, General and Administrative Expense

Our SG&A increased 17% in fiscal 2008 to $915.9 million from $782.3 million in fiscal 2007. In the Americas segment, these expenses increased 19% to $372.0 million in fiscal 2008 from $311.8 million in fiscal 2007, in our European segment they increased 20% to $380.4 million from $316.9 million, and in our Asia/Pacific segment, SG&A increased 16% to $117.2 million from $100.9 million for those same periods. As a percentage of revenues, SG&A increased to 40.4% of revenues in fiscal 2008 compared to 38.2% in fiscal 2007. In the Americas, SG&A as a percentage of revenues increased to 35.0% compared to 31.3%. In Europe, SG&A as a percentage of revenues increased to 40.8% compared to 39.4% and in Asia/Pacific, SG&A as a percentage of revenues increased to 44.2% compared to 41.5% in the prior year. The increase in SG&A as a percentage of revenues in our Americas segment was primarily due to the cost of opening and operating additional retail stores, increased costs resulting from the consolidation of our recently acquired Brazilian subsidiary and increased marketing costs. The increase in SG&A costs as a percentage of revenues in our European segment was primarily due to the costs of opening and operating additional retail stores and increased distribution costs. In our Asia/Pacific segment, the increase in SG&A as a percentage of revenues is primarily related to the cost of opening and operating additional retail stores and, to a lesser extent, a legal settlement on a retail store lease.

Asset Impairments

Asset impairment charges totaled $65.8 million in fiscal 2008 compared to zero in fiscal 2007. Of these charges, approximately $55.4 million related to Asia/Pacific goodwill, and approximately $10.4 million related to the impairment of leasehold improvements and other assets in certain retail stores. The goodwill and other impairment charges were recorded as a result of our annual impairment test, where it was determined that the carrying values of our assets were more than their estimated fair values as of October 31, 2008. The retail store impairment included 25 stores, primarily in the U.S., which were not generating sufficient cash flows to recover our investment.

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Non-operating Expenses

Net interest expense decreased to $45.3 million in fiscal 2008 compared to $46.6 million in fiscal 2007 primarily as a result of lower interest rates on our variable-rate debt in the United States.

Our foreign currency gain amounted to $5.8 million in fiscal 2008 compared to a loss of $4.9 million in fiscal 2007. This current year gain resulted primarily from the foreign exchange effect of certain non-U.S. dollar denominated liabilities.

Our income tax rate increased to 33.3% in fiscal 2008 from 22.8% in fiscal 2007. The fiscal 2008 rate increased significantly over the fiscal 2007 rate due to the non-deductibility of the goodwill asset impairment recorded in fiscal 2008. This increase was partially offset by changes in accrual amounts for certain tax contingencies accounted for under ASC 740, “Income Taxes.”

Income from continuing operations and Adjusted EBITDA

Income from continuing operations attributable to Quiksilver, Inc. in fiscal 2008 decreased to $65.5 million, and earnings per share on a diluted basis decreased to $0.51 compared to income from continuing operations attributable to Quiksilver, Inc. of $116.7 million and diluted earnings per share of $0.90 for fiscal 2007. Adjusted EBITDA increased to $278.9 million in fiscal 2008 compared to $260.8 million in fiscal 2007.

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 to us. Term loans are also used to supplement these lines of credit and are typically used to finance long-term assets. In fiscal 2005, we issued $400 million of senior notes to fund a portion of the purchase price for our acquisition of Rossignol and to refinance certain existing indebtedness, and in July 2009, we closed a $153.1 million five year senior secured term loan to provide additional liquidity to our business. The cost of obtaining this additional liquidity was in the form of a higher interest rate on the five year senior secured term loan as compared to the debt that it replaced. This higher interest rate is reflected in our net interest expense of $63.9 million for the fiscal year ended October 31, 2009, which represents an increase of $18.6 million in interest expense over the fiscal year ended October 31, 2008. However, $3.4 million of this additional interest expense was non-cash interest. As of October 31, 2009, we had a total of $1,039.3 million of indebtedness.

We are highly leveraged; however, we believe that our cash flows from operations, together with our existing credit facilities and term loans will be adequate to fund our capital requirements for at least the next twelve months. During fiscal 2009, we closed a $153.1 million five year senior secured term loan, refinanced our existing asset-based credit facility with a new $200 million three year asset-based credit facility for our Americas segment, and we refinanced our short-term uncommitted lines of credit in Europe with a new €268 million multi-year facility. The closing of these transactions enabled us to extend a significant portion of our short-term maturities to a long-term basis. However, the applicable interest rates on these refinanced obligations, particularly the five year senior secured term loan, are higher than on the obligations they replaced.

Unrestricted cash and cash equivalents totaled $99.5 million at October 31, 2009 versus $53.0 million at October 31, 2008. Working capital amounted to $561.7 million at October 31, 2009, compared to $631.3 million at October 31, 2008, a decrease of 11%.

Operating Cash Flows

Operating activities of continuing operations provided cash of $192.4 million in fiscal 2009 compared to $179.5 million in fiscal 2008. This $12.9 million increase was primarily due to increased cash provided from working capital of $145.2 million, partially offset by the effect of our net loss and other non-cash charges, which amounted to $132.3 million.

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Capital Expenditures

We have historically avoided high levels of capital expenditures for our apparel manufacturing functions by using independent contractors for a majority of our production.

Fiscal 2009 capital expenditures were $54.6 million, which was approximately $36.4 million less than the $90.9 million we spent in fiscal 2008. In fiscal 2009, we invested in company-owned retail stores, warehouse equipment and computer systems.

Capital expenditures for new company-owned retail stores are expected to be reduced in fiscal 2010. A campus facility is being constructed for our European headquarters and computer hardware and software will also be purchased to continuously improve our systems. Capital spending for these and other projects in fiscal 2010 is expected to be around $50 million. We expect to fund our capital expenditures primarily from our operating cash flows.

Acquisitions and Dispositions

We completed the sale of our Rossignol business in November 2008 for a sale price of approximately $50.8 million, comprised of $38.1 million in cash and a $12.7 million seller’s note. The note was canceled in October 2009 in connection with the completion of the final working capital adjustment. The business sold included the related brands of Rossignol, Dynastar, Look and Lange. In December 2007, we sold our golf equipment business for a transaction value of $132.5 million.

Debt Structure

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 to us. 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 to fund a portion of the acquisition of Rossignol and to refinance certain existing indebtedness, and in July 2009, we closed a $153.1 million five year senior secured term loan to provide additional liquidity to our business. Our debt structure at October 31, 2009 includes short-term lines of credit and long-term loans as follows:

In thousands	U.S. Dollar		Non U.S. Dollar		Total
European short-term credit arrangements	$	—	$	14	$	14
Asia/Pacific short-term credit arrangements		—		32,578		32,578
Short-term lines of credit		—		32,592		32,592
Americas credit facility		—		—		—
European long-term debt		—		325,685		325,685
European credit facilities		—		75,252		75,252
Rhône term loan		109,329		26,335		135,664
Senior Notes		400,000		—		400,000
Deferred purchase price obligation		—		49,144		49,144
Capital lease obligations and other borrowings		2,639		18,277		20,916
Long-term debt		511,968		494,693		1,006,661
Total	$	511,968	$	527,285	$	1,039,253

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In July 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. In December 2005, these senior notes were exchanged for publicly registered notes with identical terms. The senior notes are guaranteed on a senior unsecured basis by certain of our domestic subsidiaries that guarantee any of our indebtedness or our subsidiaries’ indebtedness, or are obligors under our existing asset-based credit facility in the Americas segment. We may redeem some or all of the senior notes after April 15, 2010 at fixed redemption prices as set forth in the indenture.

The indenture for our senior notes 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 a change of control (as defined in the indenture), 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. We currently are in compliance with the covenants of the indenture. In addition, we have approximately $7.1 million in unamortized debt issuance costs included in other assets as of October 31, 2009.

On July 31, 2009, we entered into a $153.1 million five year senior secured term loan with funds affiliated with Rhône Capital LLC. In connection with the term loan, we issued warrants to purchase approximately 25.7 million shares of our common stock, representing 19.99% of our outstanding equity at the time, with an exercise price of $1.86 per share. The warrants are fully vested and have a seven year term. The estimated fair value of these warrants at issuance was $23.6 million. This amount was recorded as a debt discount and is being amortized into interest expense over the term of the loan. In addition, we incurred approximately $15.8 million in debt issuance costs which are included in prepaid expenses (short-term) and other assets (long-term) and are being amortized into interest expense over the five year term of the loan. The term loan is primarily secured by certain of our trademarks in the Americas and a first or second priority interest in substantially all property related to our Americas business. The term loan bears an interest rate of 15% on a $125 million tranche, with 6% of that interest payable in kind or in cash, at our option. The remaining tranche is denominated in euros (€20 million) and also bears an interest rate of 15%, with the full 15% payable in kind or cash at our option. Net proceeds from the new term loan were used to reduce other borrowings and increase our cash reserves. The term loan contains customary restrictive covenants and default provisions for loans of its type. We are currently in compliance with such covenants.

On July 31, 2009, we also entered into a new $200 million three year asset-based credit facility for our Americas segment (with the option to expand the facility to $250 million on certain conditions) which replaced our existing credit facility which was to expire in April 2010. The new credit facility, which expires in July 2012, includes a $100 million sublimit for letters of credit and bears interest at a rate of LIBOR plus a margin of 4.0% to 4.5%, depending upon availability. In connection with obtaining the credit facility, we incurred approximately $9.1 million in debt issuance costs which are included in prepaid expenses (short-term) and other assets (long-term) and are being amortized into interest expense over the term of the credit facility. As of October 31, 2009, there were no borrowings outstanding under this credit facility, other than outstanding letters of credit, which totaled $34.7 million.

The Americas credit facility is guaranteed by Quiksilver, Inc. and certain of our domestic and Canadian subsidiaries. The facility is secured by our U.S. and Canadian accounts receivable, inventory, certain intangibles, a second priority interest in substantially all other personal property and a second priority pledge of shares of certain of our domestic subsidiaries. The borrowing base is limited to certain percentages of eligible accounts receivable and inventory from our participating subsidiaries. The facility contains customary default provisions and restrictive covenants for facilities of its type. We are currently in compliance with such covenants.

On July 31, 2009, we entered into a commitment with a group of lenders in Europe to refinance our European indebtedness. This refinancing, which closed and was funded on September 29, 2009, consists of two term loans totaling approximately $251.7 million (€170 million), an $85.9 million (€58

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million) credit facility and a line of credit of $59.2 million (€40 million) for issuances of letters of credit. Together, these are referred to as our “European Facilities.” The maturity of these European Facilities is July 31, 2013. The term loans have minimum principal repayments due on January 31 and July 31 of each year, with €14.0 million due for each semi-annual payment in 2010, €17.0 million due for each semi-annual payment in 2011 and €27.0 million due for each semi-annual payment in 2012 and 2013. Amounts outstanding under the European Facilities bear interest at a rate of Euribor plus a margin of between 4.25% and 4.75%. The weighted average borrowing rate on the European Facilities was 5.09% as of October 31, 2009. In connection with obtaining the European Facilities, we incurred approximately $19.3 million in debt issuance costs which are included in prepaid expenses (short-term) and other assets (long-term) and are being amortized into interest expense over the term of the European Facilities. As of October 31, 2009, there were borrowings of approximately $251.7 million outstanding on the two term loans, approximately $37.0 million outstanding on the credit facility, and approximately $26.6 million of outstanding letters of credit.

The European Facilities are guaranteed by Quiksilver, Inc. and secured by pledges of certain assets of our European subsidiaries, including certain trademarks of our European business and shares of certain European subsidiaries. The European Facilities contain customary default provisions and covenants for transactions of this type. We are currently in compliance with such covenants.

In connection with the closing of the European Facilities, we refinanced an additional European term loan of $74.0 million (€50 million) such that its maturity date aligns with the European Facilities. This term loan has principal repayments due on January 31 and July 31 of each year, with €8.9 million due in the aggregate in 2011, €12.6 million due in the aggregate in 2012 and €28.5 million due in the aggregate in 2013. This extended term loan currently bears an interest rate of 3.23%, but will change to a variable rate of Euribor plus a margin of 4.8% beginning in July 2010. This term loan has the same security as the European Facilities and it contains customary default provisions and covenants for loans of its type. We are currently in compliance with such covenants.

In August 2008, certain of our European subsidiaries entered into a $148.0 million (€100 million) secured financing facility which expires in August 2011. Under this facility, we may borrow up to €100.0 million based upon the amount of accounts receivable that are pledged to the lender to secure the debt. Outstanding borrowings under this facility accrue interest at a rate of Euribor plus a margin of 0.55% (currently 1.34%). As of October 31, 2009, we had approximately $38.2 million of borrowings outstanding under this facility. This facility contains customary default provisions and covenants for facilities of its type. We are currently in compliance with such covenants.

In Asia/Pacific, we have uncommitted revolving lines of credit with banks that provide up to approximately $45.8 million ($50.3 million Australian dollars) for cash borrowings and letters of credit. These lines of credit are generally payable on demand, although we believe the banks will continue to make these lines of credit available to us. The amount outstanding on these lines of credit at October 31, 2009 was $32.6 million, in addition to $3.4 million in outstanding letters of credit, at an average borrowing rate of 2.2%.

Our current credit facilities allow for total maximum cash borrowings and letters of credit of $357.7 million. Our total maximum borrowings and actual availability fluctuate depending on the extent of assets comprising our borrowing base under certain credit facilities. We had approximately $107.8 million of borrowings drawn on these credit facilities as of October 31, 2009, and letters of credit issued at that time totaled $64.8 million. The amount of availability for borrowings under these facilities as of October 31, 2009 was $142.7 million, all of which was committed. Of this $142.7 million in committed capacity, $93.8 million can also be used for letters of credit. In addition to the $142.7 million of availability for borrowings, we also had $42.4 million in additional capacity for letters of credit in Europe and Asia/Pacific as of October 31, 2009.

In connection with our acquisition of Rossignol, we deferred payment of a portion of the purchase price. This deferred purchase price obligation is expected to be paid in 2010 and accrues interest equal to the 3-month Euribor plus 2.35% (currently 3.14%) and is denominated in euros. The carrying amount of the obligation fluctuates based on changes in the exchange rate between euros and U.S. dollars. We have a

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cash collateralized guarantee to the former owner of Rossignol of $52.7 million to secure this deferred purchase price obligation. The cash related to this guarantee is classified as restricted cash on our balance sheet as of October 31, 2009. As of October 31, 2009, the deferred purchase price obligation totaled $49.1 million.

We also had approximately $20.9 million in capital leases and other borrowings as of October 31, 2009.

Our financing activities from continuing operations used cash of $104.9 million in fiscal 2009, and provided cash of $191.8 million and $176.6 million in fiscal 2008 and 2007, respectively. In fiscal 2009 we used the proceeds from the sale of Rossignol to pay down debt, while in fiscal 2008 and 2007, our debt increased to fund the operations of Rossignol and the business acquisitions and capital expenditures discussed above.

Contractual Obligations and Commitments

We lease certain land and buildings under non-cancelable operating leases. The leases expire at various dates through 2028, excluding renewals at our option, and contain various provisions for rental adjustments including, in certain cases, adjustments based on increases in the Consumer Price Index. The leases generally contain renewal provisions for varying periods of time. We also have long-term debt related to business acquisitions. Our deferred purchase price obligation related to the Rossignol acquisition totals $49.1 million and is included in the current portion of long-term debt as of October 31, 2009. Our significant contractual obligations and commitments are summarized in the following table:

	Payments Due by Period
			Two to		Four to		After
	One		Three		Five		Five
In thousands	Year		Years		Years		Years		Total
Operating lease obligations	$	107,900	$	184,455	$	135,007	$	144,669	$	572,031
Long-term debt obligations(1)		95,231		207,080		304,350		400,000		1,006,661
Professional athlete sponsorships(2)		18,649		19,049		7,132		500		45,330
Certain other obligations(3)		64,753		—		—		—		64,753
	$	286,533	$	410,584	$	446,489	$	545,169	$	1,688,775

(1)	Excludes required interest payments. See note 7 of our consolidated financial statements for interest terms.
(2)	We establish relationships with professional athletes in order to promote our products and brands. We have entered into endorsement agreements with professional athletes in sports such as surfing, skateboarding, snowboarding, bmx and motocross. Many of these contracts provide incentives for magazine exposure and competitive victories while wearing or using our products. It is not possible to determine the amounts we may be required to pay under these agreements as they are subject to many variables. The amounts listed are the approximate amounts of minimum obligations required to be paid under these contracts. The estimated maximum amount that could be paid under existing contracts is approximately $61.9 million and would assume that all bonuses, victories, etc. are achieved during a five-year period. The actual amounts paid under these agreements may be higher or lower than the amounts listed as a result of the variable nature of these obligations. Under our current sponsorship agreement with Kelly Slater, in addition to the cash payment obligations included in the above table, we have agreed to propose to our shareholders a grant to Mr. Slater of 3 million shares of restricted stock. This restricted stock grant is subject to shareholder approval and would vest over a four year period. Should the grant not be approved by our shareholders, we may be required to compensate Mr. Slater with additional cash payments, which are not included in the table above.
(3)	Certain other obligations include approximately $64.8 million of contractual letters of credit with maturity dates of less than one year. We also enter into unconditional purchase obligations with various vendors and suppliers of goods and services in the normal course of operations through purchase orders or other documentation or that are undocumented except for an invoice. Such unconditional purchase obligations are generally outstanding for periods less than a year and are settled by cash payments upon delivery of goods and services and are not reflected in this line item. In addition, in certain circumstances we are required to acquire additional equity interests from our minority interest partners in Brazil and Mexico. These purchase requirements are generally based on revenue targets in U.S. dollars which can be significantly impacted by currency fluctuations. The purchase price applicable to these obligations is typically based on formulas that will be used to value the

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subsidiaries’ operations at the time of purchase. We do not expect any payments related to these commitments in fiscal 2010 and these potential purchase amounts generally cannot be determined beyond one year and are not included in this line item. We have approximately $54.4 million of tax contingencies related to ASC 740, “Income Taxes,” as disclosed in note 12 of our consolidated financial statements. Based on the uncertainly of the timing of these contingencies, these amounts have not been included in this line item.

Off Balance Sheet Arrangements

Other than certain obligations and commitments described in the table above, we did not have any material off balance sheet arrangements as of October 31, 2009.

Trade Accounts Receivable and Inventories

Our trade accounts receivable were $430.9 million at October 31, 2009, compared to $470.1 million the year before, a decrease of 8%. Receivables in the Americas decreased 22%, while European receivables increased 6% and Asia/Pacific receivables increased 11%. In constant currency, consolidated trade accounts receivable decreased 16%. European receivables in constant currency decreased 6% and Asia/Pacific receivables in constant currency decreased 17%. Included in trade accounts receivable are approximately $24.9 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 subtracted from accounts receivable to more accurately compute days sales outstanding. Overall days sales outstanding increased by approximately 2 days at October 31, 2009 compared to October 31, 2008.

Consolidated inventories totaled $267.7 million as of October 31, 2009, compared to $312.1 million the year before, a decrease of 14%. Inventories in the Americas decreased 32%, while European inventories decreased 7% and Asia/Pacific inventories increased 32%. In constant currency, consolidated inventories decreased 22%. European inventories in constant currency decreased 18% and Asia/Pacific inventories in constant currency decreased 2%. Consolidated average inventory turnover increased to 3.6 times per year at October 31, 2009 compared to 3.5 times per year at October 31, 2008.

Inflation

Inflation has been modest during the years covered by this report. Accordingly, inflation has had an insignificant impact on our sales and profits.

New Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standard Codification (“ASC”) Subtopic 105 “Generally Accepted Accounting Principles,” which establishes the Accounting Standards Codification as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the codification. This ASC is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We updated our historical U.S. GAAP references to comply with the codification at the beginning of our fiscal quarter ended October 31, 2009. The adoption of this guidance did not have a material effect on our consolidated financial position, results of operations or cash flows.

In September 2006, the FASB issued authoritative guidance included in ASC Subtopic 820 “Fair Value Measurements and Disclosures,” which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007. We adopted this guidance at the beginning of our fiscal year ended October 31, 2009. The adoption of this guidance did not have a material effect on our consolidated financial position, results of operations or cash flows. See note 15 for certain required disclosures related to this guidance.

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In February 2007, the FASB issued authoritative guidance included in ASC Subtopic 825 “Financial Instruments,” which permits companies to choose to measure certain financial instruments and other items at fair value that are not currently required to be measured at fair value. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007. We adopted this guidance at the beginning of our fiscal year ended October 31, 2009. The adoption of this guidance did not have a material effect on our consolidated financial position, results of operations or cash flows, since we did not elect the fair value option for any assets or liabilities.

In December 2007, the FASB issued authoritative guidance included in ASC Subtopic 805 “Business Combinations,” which requires us to record fair value estimates of contingent consideration and certain other potential liabilities during the original purchase price allocation, expense acquisition costs as incurred and does not permit certain restructuring activities to be recorded as a component of purchase accounting. In April 2009, the FASB issued additional guidance that requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value, only if fair value can be reasonably estimated and eliminates the requirement to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date. This guidance is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. We will adopt this guidance at the beginning of our fiscal year ending October 31, 2010 for all prospective business acquisitions. We have not determined the effect that the adoption of this guidance will have on our consolidated financial statements, but the impact will be limited to any future acquisitions beginning in fiscal 2010, except for certain tax treatment of previous acquisitions.

In December 2007, the FASB issued authoritative guidance included in ASC Subtopic 810 “Consolidation,” which requires noncontrolling interests in subsidiaries to be included in the equity section of the balance sheet. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008. We will adopt this guidance at the beginning of our fiscal year ending October 31, 2010. In the year of adoption, presentation and disclosure requirements apply retrospectively to all periods presented. These presentation and disclosure requirements resulted in the reclassification of minority interest liability to equity on our accompanying consolidated balance sheets and the movement of minority interest expense to a separate line after net loss on our accompanying consolidated statements of operations. Other than these presentation and disclosure changes, the adoption of this guidance did not have a material effect on our consolidated financial position, results of operations or cash flows.

In March 2008, the FASB issued authoritative guidance included in ASC Subtopic 815 “Derivatives and Hedging,” which requires enhanced disclosures to enable investors to better understand how and why derivatives are used and their effects on an entity’s financial position, financial performance and cash flows. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We adopted this guidance at the beginning of our fiscal quarter ended April 30, 2009. The adoption of this guidance did not have a material effect on our consolidated financial position, results of operations or cash flows. See note 15 for certain required disclosures related to this guidance.

In April 2009, the FASB issued authoritative guidance included in ASC Subtopic 825 “Financial Instruments,” which enhances consistency in financial reporting by increasing the frequency of fair value disclosures. This guidance is effective for interim periods ending after June 15, 2009 and we adopted this guidance during the three months ended July 31, 2009. The adoption of this guidance did not have a material effect on our consolidated financial position, results of operations or cash flows. See note 15 for certain required disclosures related to this guidance.

In May 2009, the FASB issued authoritative guidance included in ASC Subtopic 855 “Subsequent Events,” which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. Specifically, this guidance provides (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance is effective for interim or annual financial periods ending after June 15, 2009, and is to be applied prospectively. We adopted this guidance as of July 31, 2009. The adoption of this

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guidance did not have a material effect on our consolidated financial position, results of operations or cash flows. See note 1 for certain required disclosures related to this standard.

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. 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 results of operations 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 results of operations.

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 inventory 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; 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 is recognized when the carrying value exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. Impairments are 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.

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. We have three reporting units under which we evaluate goodwill for impairment, the Americas, Europe and Asia/Pacific. We estimate the fair value of our reporting units using a combination of a discounted cash flow approach and market approach. Material assumptions in our test for impairment include future cash

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flows of each reporting unit, discount rates applied to these cash flows and current market estimates of value. The discount rates used approximate our cost of capital. Future cash flows assume future levels of growth in each reporting unit’s business. If any of these assumptions significantly change, including a change in expected future growth rates or valuation multiples, we may be required to record future impairments of goodwill. If the carrying amount exceeds fair value under the first step of our goodwill impairment test, then the second step of the impairment test is performed to measure the amount of any impairment loss.

As of October 31, 2009, the fair value of the Americas reporting unit substantially exceeded its carrying value. For our Europe and Asia/Pacific reporting units, the fair value exceeded the carrying value by approximately 7% and 5%, respectively. Goodwill allocated to our Europe and Asia/Pacific reporting units was $184.8 million and $71.1 million, respectively, as of October 31, 2009. Based on the uncertainty of future growth rates and other assumptions used to estimate goodwill recoverability in these reporting units, future reductions in our expected cash flows for Europe or Asia/Pacific could cause a material impairment of goodwill.

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.

On November 1, 2007, we adopted the authoritative guidance included in ASC Subtopic 740 “Income Taxes,” which clarifies the accounting for uncertainty in income taxes recognized in the financial statements. This guidance provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the tax position. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of our provision for income taxes. The application of this guidance can create significant variability in our tax rate from period to period based upon changes in or adjustments to our uncertain tax positions.

Stock-Based Compensation Expense

We recognize compensation expense for all stock-based payments net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest using the graded vested method over the requisite service period of the award. For option valuation, we determine the fair value using the Black-Scholes option-pricing model which requires the input of certain assumptions, including the expected life of the stock-based payment awards, stock price volatility and interest rates.

Foreign Currency Translation

A significant portion of our revenues are generated in Europe, where we operate with the euro as our 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 substantial portions of our 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 currency exchange rates. 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 into U.S. dollars are included in accumulated other comprehensive income or loss.

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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 currency 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 or loss.

Forward-Looking Statements

All statements included in this report, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not limited to, statements regarding the trends and uncertainties in our financial condition, liquidity and results of operations. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us and speak only as of the date of this report. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “likely,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” and similar expressions, and variations or negatives of these words. In addition, any statements that refer to expectations, projections, guidance, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statement as a result of various factors, including, but not limited to, the following:

• continuing deterioration of global economic conditions and credit and capital markets;

• our ability to remain compliant with our debt covenants;

• our ability to achieve the financial results that we anticipate;

• payments due on contractual commitments and other debt obligations;

• future expenditures for capital projects;

• our ability to continue to maintain our brand image and reputation;

• foreign currency exchange rate fluctuations; and

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

These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, many of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of the risks described in Item 1A. “Risk Factors” included in this report, and other factors. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking information contained herein will, in fact, transpire.

16

EX-99.3

Exhibit 99.3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Quiksilver, Inc.:

We have audited the accompanying consolidated balance sheets of Quiksilver, Inc. and subsidiaries (the “Company”) as of October 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended October 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2009 and 2008, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 12 to the consolidated financial statements, the Company changed its method of accounting for income tax uncertainties during the year ended October  31, 2008 as a result of adopting Accounting Standards Codification 740, “Accounting for Uncertainty in Income Taxes.” As discussed in Note 1 to the consolidated financial statements, the Company adopted guidance requiring retrospective application relating to non-controlling interests during the first quarter of fiscal 2010.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of October 31, 2009, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated January 12, 2010 (not presented herein) expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Costa Mesa, California
January 12, 2010 (June 25, 2010 as to the effect of the November 1, 2009 adoption of the new accounting standards requiring retrospective application described in Note 1)

QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended October 31, 2009, 2008 and 2007

In thousands, except per share amounts	2009			2008			2007
Revenues, net	$	1,977,526		$	2,264,636		$	2,047,072
Cost of goods sold		1,046,495			1,144,050			1,062,027
Gross profit		931,031			1,120,586			985,045
Selling, general and administrative expense		851,746			915,933			782,263
Asset impairments		10,737			65,797			—
Operating income		68,548			138,856			202,782
Interest expense, net		63,924			45,327			46,571
Foreign currency loss (gain)		8,633			(5,761	)		4,857
Other (income) expense		(387	)		29			195
(Loss) income before provision for income taxes		(3,622	)		99,261			151,159
Provision for income taxes		66,667			33,027			34,506
(Loss) income from continuing operations		(70,289	)		66,234			116,653
Loss from discontinued operations, net of tax		(118,827	)		(291,809	)		(237,846	)
Net loss		(189,116	)		(225,575	)		(121,193	)
Less: net (income) loss attributable to non-controlling interest		(2,926	)		(690	)		74
Net loss attributable to Quiksilver, Inc.	$	(192,042	)	$	(226,265	)	$	(121,119	)
(Loss) income per share from continuing operations attributable to Quiksilver, Inc.	$	(0.58	)	$	0.52		$	0.94
Loss per share from discontinued operations attributable to Quiksilver, Inc.		(0.94	)		(2.32	)		(1.92	)
Net loss per share attributable to Quiksilver, Inc.	$	(1.51	)	$	(1.80	)	$	(0.98	)
(Loss) income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution	$	(0.58	)	$	0.51		$	0.90
Loss per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution		(0.94	)		(2.25	)		(1.83	)
Net loss per share attributable to Quiksilver, Inc., assuming dilution	$	(1.51	)	$	(1.75	)	$	(0.93	)
Weighted average common shares outstanding		127,042			125,975			123,770
Weighted average common shares outstanding, assuming dilution		127,042			129,485			129,706
Amounts attributable to Quiksilver, Inc.:
(Loss) income from continuing operations	$	(73,215	)	$	65,544		$	116,727
Loss from discontinued operations, net of tax		(118,827	)		(291,809	)		(237,846	)
Net loss	$	(192,042	)	$	(226,265	)	$	(121,119	)

See notes to consolidated financial statements.

1

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Years Ended October 31, 2009, 2008 and 2007

In thousands	2009			2008			2007
Net loss	$	(189,116	)	$	(225,575	)	$	(121,193	)
Other comprehensive income (loss):
Foreign currency translation adjustment		99,798			(111,920	)		116,882
Reclassification adjustment for foreign currency translation included in current period loss from discontinued operations		(47,850	)		—			—
Net (loss) gain on derivative instruments, net of tax (benefit) provision of $(19,965) (2009), $26,322 (2008) and $(10,368) (2007)		(37,062	)		44,313			(21,859	)
Comprehensive loss		(174,230	)		(293,182	)		(26,170	)
Comprehensive income attributable to non-controlling interest		(2,926	)		(690	)		74
Comprehensive loss attributable to Quiksilver, Inc.	$	(177,156	)	$	(293,872	)	$	(26,096	)

See notes to consolidated financial statements.

2

QUIKSILVER, INC.

CONSOLIDATED BALANCE SHEETS
October 31, 2009 and 2008

In thousands, except share amounts	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	99,516		$	53,042
Restricted cash		52,706			—
Trade accounts receivable, net		430,884			470,059
Other receivables		25,615			70,376
Income taxes receivable		—			10,738
Inventories		267,730			312,138
Deferred income taxes		76,638			12,220
Prepaid expenses and other current assets		37,333			25,869
Current assets held for sale		1,777			411,442
Total current assets		992,199			1,365,884
Restricted cash		—			46,475
Fixed assets, net		239,333			235,528
Intangible assets, net		142,954			144,434
Goodwill		333,758			299,350
Other assets		75,353			39,594
Deferred income taxes long-term		69,011			39,000
Total assets	$	1,852,608		$	2,170,265
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	32,592		$	238,317
Accounts payable		162,373			235,729
Accrued liabilities		116,274			93,548
Current portion of long-term debt		95,231			31,904
Income taxes payable		23,574			—
Liabilities related to assets held for sale		458			135,071
Total current liabilities		430,502			734,569
Long-term debt, net of current portion		911,430			790,097
Other long-term liabilities		46,643			35,095
Non-current liabilities related to assets held for sale		—			6,026
Total liabilities		1,388,575			1,565,787
Commitments and contingencies — Note 9
Equity:
Preferred stock, $.01 par value, authorized shares - 5,000,000; issued and outstanding shares — none		—			—
Common stock, $.01 par value, authorized shares - 185,000,000; issued shares - 131,484,363 (2009) and 130,622,566 (2008)		1,315			1,306
Additional paid-in capital		368,285			334,509
Treasury stock, 2,885,200 shares		(6,778	)		(6,778	)
(Accumulated deficit) retained earnings		(1,623	)		190,419
Accumulated other comprehensive income		95,396			80,510
Total Quiksilver, Inc. stockholders’ equity		456,595			599,966
Non-controlling interest		7,438			4,512
Total equity		464,033			604,478
Total liabilities and equity	$	1,852,608		$	2,170,265

See notes to consolidated financial statements.

3

QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Years Ended October 31, 2009, 2008 and 2007

													Retained			Accumulated
							Additional						Earnings			Other			Non-
	Common Stock						Paid-in			Treasury			(Accumulated			Comprehensive			Controlling			Total
In thousands	Shares			Amounts			Capital			Stock			Deficit)			Income (Loss)			Interest			Equity
Balance, October 31, 2006		126,402		$	1,264		$	274,488		$	(6,778	)	$	559,059		$	53,094		$	1,694		$	882,821
Exercise of stock options		1,805			18			10,351			¾			¾			¾			¾			10,369
Tax benefit from exercise of stock options		¾			¾			2,896			¾			¾			¾			¾			2,896
Stock compensation expense		¾			¾			17,210			¾			¾			¾			¾			17,210
Restricted stock		42			¾			¾			¾			¾			¾			¾			¾
Employee stock purchase plan		92			1			1,106			¾			¾			¾			¾			1,107
Business acquisitions		¾			¾			¾			¾			¾			¾			(383	)		(383	)
Net loss and other comprehensive income		¾			¾			¾			¾			(121,119	)		95,023			(74	)		(26,170	)
Balance, October 31, 2007		128,341			1,283			306,051			(6,778	)		437,940			148,117			1,237			887,850
Exercise of stock options		1,828			18			6,719			¾			¾			¾			¾			6,737
Tax benefit from exercise of stock options		¾			¾			2,994			¾			¾			¾			¾			2,994
Stock compensation expense		¾			¾			13,002			¾			¾			¾			¾			13,002
Restricted stock		(103	)		(1	)		1			¾			¾			¾			¾			¾
Employee stock purchase plan		257			3			1,867			¾			¾			¾			¾			1,870
Business acquisitions		300			3			3,875			¾			¾			¾			2,585			6,463
Adjustment due to adoption of uncertain tax position guidance		¾			¾			¾			¾			(21,256	)		¾			¾			(21,256	)
Net loss and other comprehensive loss		¾			¾			¾			¾			(226,265	)		(67,607	)		690			(293,182	)
Balance, October 31, 2008		130,623			1,306			334,509			(6,778	)		190,419			80,510			4,512			604,478
Tax benefit from exercise of stock options		¾			¾			439			¾			¾			¾			¾			439
Stock compensation expense		¾			¾			8,884			¾			¾			¾			¾			8,884
Restricted stock		310			3			(3	)		¾			¾			¾			¾			¾
Employee stock purchase plan		551			6			855			¾			¾			¾			¾			861
Stock warrants issued		¾			¾			23,601			¾			¾			¾			¾			23,601
Net loss and other comprehensive income		¾			¾			¾			¾			(192,042	)		14,886			2,926			(174,230	)
Balance, October 31, 2009		131,484		$	1,315		$	368,285		$	(6,778	)	$	(1,623	)	$	95,396		$	7,438		$	464,033

See notes to consolidated financial statements.

4

QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31, 2009, 2008 and 2007

In thousands	2009			2008			2007
Cash flows from operating activities:
Net loss	$	(189,116	)	$	(225,575	)	$	(121,193	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss from discontinued operations		118,827			291,809			237,846
Depreciation and amortization		55,004			57,231			46,852
Stock-based compensation and tax benefit on option exercises		8,415			9,588			13,234
Provision for doubtful accounts		16,235			15,948			7,790
Loss on disposal of fixed assets		4,194			350			2,479
Foreign currency (gain) loss		(103	)		(2,618	)		1,266
Asset impairments		10,737			65,797			—
Non-cash interest		3,441			—			—
Equity in earnings		(2	)		1,121			(136	)
Deferred income taxes		43,234			(10,445	)		(15,412	)
Changes in operating assets and liabilities, net of effects from business acquisitions:
Trade accounts receivable		60,783			(16,179	)		(57,217	)
Other receivables		14,914			(7,446	)		(13,030	)
Inventories		78,039			(32,786	)		(19,563	)
Prepaid expenses and other current assets		(157	)		(1,333	)		988
Other assets		5,422			(1,776	)		(3,426	)
Accounts payable		(79,026	)		36,961			21,650
Accrued liabilities and other long-term liabilities		5,421			(14,871	)		43,064
Income taxes payable		36,091			13,688			36,657
Cash provided by operating activities of continuing operations		192,353			179,464			181,849
Cash provided by (used in) operating activities of discontinued operations		13,815			(107,302	)		(57,597	)
Net cash provided by operating activities		206,168			72,162			124,252
Cash flows from investing activities:
Capital expenditures		(54,564	)		(90,948	)		(78,276	)
Business acquisitions, net of acquired cash		—			(31,127	)		(41,257	)
Changes in restricted cash		—			(46,475	)		—
Cash used in investing activities of continuing operations		(54,564	)		(168,550	)		(119,533	)
Cash provided by (used in) investing activities of discontinued operations		21,848			103,811			(40,957	)
Net cash used in investing activities		(32,716	)		(64,739	)		(160,490	)
Cash flows from financing activities:
Borrowings on lines of credit		10,346			185,777			71,846
Payments on lines of credit		(237,025	)		(47,161	)		(17,247	)
Borrowings on long-term debt		895,268			240,389			209,311
Payments on long-term debt		(726,852	)		(198,793	)		(101,611	)
Payments of debt issuance costs		(47,478	)		—			—
Stock option exercises, employee stock purchases and tax benefit on option exercises		862			11,602			14,253
Cash (used in) provided by financing activities of continuing operations		(104,879	)		191,814			176,552
Cash used in financing activities of discontinued operations		(11,136	)		(224,794	)		(96,735	)
Net cash (used in) provided by financing activities		(116,015	)		(32,980	)		79,817
Effect of exchange rate changes on cash		(10,963	)		4,251			(6,065	)
Net increase (decrease) in cash and cash equivalents		46,474			(21,306	)		37,514
Cash and cash equivalents, beginning of year		53,042			74,348			36,834
Cash and cash equivalents, end of year	$	99,516		$	53,042		$	74,348
Supplementary cash flow information:
Cash paid (received) during the year for:
Interest	$	58,094		$	70,023		$	62,894
Income taxes	$	(5,794	)	$	31,049		$	17,454
Non-cash investing and financing activities:
Deferred purchase price obligation	$	—		$	—		$	26,356
Common stock issued for business acquisitions	$	—		$	3,878		$	—
Transfer of Rossignol debt to continuing operations	$	—		$	78,322		$	—
Stock warrants issued	$	23,601		$	—		$	—

See notes to consolidated financial statements

5

QUIKSILVER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended October 31, 2009, 2008 and 2007

Note 1 — Significant Accounting Policies

Company Business

Quiksilver, Inc. and its subsidiaries (the “Company”) design, produce and distribute branded apparel, footwear, accessories and related products. The Company’s apparel and footwear brands represent a casual lifestyle for young-minded people that connect with its boardriding culture and heritage. The Company’s Quiksilver, Roxy, DC and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding, and its beach and water oriented swimwear brands include Raisins, Radio Fiji and Leilani. The Company makes snowboarding equipment under its DC, Roxy, Lib Technologies, Gnu and Bent Metal labels. The Company’s products are sold in over 90 countries in a wide range of distribution channels, including surf shops, skateboard shops, snowboard shops, its proprietary concept stores, other specialty stores and select department stores. Distribution is primarily in the United States, Europe and Australia.

In November 2008, the Company sold its Rossignol business, including the related brands of Rossignol, Dynastar, Look and Lange, and in December 2007, the Company sold its golf equipment business. As a result, the Company has classified its Rossignol wintersports and golf equipment businesses as discontinued operations for all periods presented.

The Company is highly leveraged; however, management believes that its cash flow from operations, together with its existing credit facilities and term loans will be adequate to fund the Company’s capital requirements for at least the next twelve months. During fiscal 2009, the Company closed a $153.1 million five year senior secured term loan, refinanced its existing asset-based credit facility with a new $200 million three year asset-based credit facility for its Americas segment, and refinanced its short-term uncommitted lines of credit in Europe with a new €268 million multi-year facility. The closing of these transactions enabled the Company to extend a significant portion of its short-term maturities to a long-term basis. The Company also believes that its short-term uncommitted lines of credit in Asia/Pacific will continue to be made available. If these lines of credit are not made available, then the Company could be adversely affected.

Adjustment for Retrospective Application of New Accounting Standard Adopted

At the beginning of fiscal 2010, the Company adopted new accounting guidance related to the presentation of non-controlling interests, which required retrospective application. The financial statements and accompanying notes presented in this report have been adjusted for the retrospective application of this new accounting standard.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Quiksilver, Inc. and subsidiaries, including Pilot, SAS and subsidiaries (“Quiksilver Europe”) and Quiksilver Australia Pty Ltd. and subsidiaries (“Quiksilver Asia/Pacific” and “Quiksilver International”). Intercompany accounts and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Cash Equivalents

Certificates of deposit and highly liquid short-term investments purchased with original maturities of three months or less are considered cash equivalents. Carrying values approximate fair value.

6

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market. Management regularly reviews the inventory quantities on hand and adjusts inventory values for excess and obsolete inventory based primarily on estimated forecasts of product demand and market value.

Fixed Assets

Furniture and other equipment, computer equipment, manufacturing equipment and buildings are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, which generally range from two to twenty years. Leasehold improvements are recorded at cost and amortized over their estimated useful lives or related lease term, whichever is shorter. Land use rights for certain leased retail locations are amortized to estimated residual value.

Long-Lived Assets

The Company accounts for the impairment and disposition of long-lived assets in accordance with ASC 360, “Property, Plant, and Equipment.” In accordance with ASC 360, management assesses potential impairments of its long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable. An impairment loss is recognized when the carrying value exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. The Company recorded approximately $10.7 million, $10.4 million and zero in fixed asset impairments in continuing operations as of October 31, 2009, 2008 and 2007, respectively.

Goodwill and Intangible Assets

The Company accounts for goodwill and intangible assets in accordance with ASC 350, “Intangibles - Goodwill and Other.” Under ASC 350, goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment annually and also in the event of an impairment indicator. The annual impairment test is a fair value test as prescribed by ASC 350 which includes assumptions such as growth and discount rates. The Company determined that there was no impairment loss in continuing operations as of October 31, 2009, recorded approximately $55.4 million in goodwill impairment in continuing operations as of October 31, 2008, and had previously determined that there was no impairment loss in continuing operations as of October 31, 2007.

Revenue Recognition

Revenues are recognized upon the transfer of title and risk of ownership to customers. Allowances for estimated returns and doubtful accounts are provided when revenues are recorded. Returns and allowances are reported as reductions in revenues, whereas allowances for bad debts are reported as a component of selling, general and administrative expense. Royalty income is recorded as earned. The Company performs ongoing credit evaluations of its customers and generally does not require collateral.

Revenues in the Consolidated Statements of Operations include the following:

	Year Ended October 31,
In thousands	2009		2008		2007
Product shipments, net	$	1,961,389	$	2,254,245	$	2,040,289
Royalty income		16,137		10,391		6,783
	$	1,977,526	$	2,264,636	$	2,047,072

7

Promotion and Advertising

The Company’s promotion and advertising efforts include athlete sponsorships, world-class boardriding contests, websites, magazine advertisements, retail signage, television programs, co-branded products, surf camps, skate park tours and other events. For the fiscal years ended October 31, 2009, 2008 and 2007, these expenses totaled $101.8 million, $122.1 million and $102.9 million, respectively. Advertising costs are expensed when incurred.

Income Taxes

The Company accounts for income taxes using the asset and liability approach as promulgated by the authoritative guidance included in ASC Subtopic 740 “Income Taxes.” Deferred income tax assets and liabilities are established for temporary differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities at tax rates expected to be in effect when such assets or liabilities are realized or settled. Deferred income tax assets are reduced by a valuation allowance if, in the judgment of the Company’s management, it is more likely than not that such assets will not be realized.

On November 1, 2007, the Company adopted the authoritative guidance included in ASC Subtopic 740 “Income Taxes.” This guidance clarifies the accounting for uncertainty in income taxes recognized in the financial statements. This guidance provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the tax position. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of its provision for income taxes.

Stock-Based Compensation Expense

The Company recognizes compensation expense for all stock-based payments net of an estimated forfeiture rate and only recognizes compensation cost for those shares expected to vest using the graded vested method over the requisite service period of the award. For option valuation, the Company determines the fair value using the Black-Scholes option-pricing model which requires the input of certain assumptions, including the expected life of the stock-based payment awards, stock price volatility and interest rates.

Net (Loss) Income per Share

The Company reports basic and diluted earnings per share (“EPS”). Basic EPS is based on the weighted average number of shares outstanding during the period, while diluted EPS additionally includes the dilutive effect of the Company’s outstanding stock options, warrants and shares of restricted stock computed using the treasury stock method. For the year ended October 31, 2009, the weighted average common shares outstanding, assuming dilution, does not include 1,048,000 of dilutive stock options and shares of restricted stock as the effect is anti-dilutive. For the years ended October 31, 2008 and 2007, the weighted average common shares outstanding, assuming dilution, includes 3,510,000 and 5,936,000 shares, respectively, of dilutive stock options and restricted stock. For the years ended October 31, 2009, 2008 and 2007, additional option shares outstanding of 14,861,000, 12,392,000 and 11,375,000, respectively, and warrant shares outstanding of 25,654,000, zero and zero, respectively, were excluded from the calculation of diluted EPS, as their effect would have been anti-dilutive.

Foreign Currency and Derivatives

The Company’s reporting currency is the U.S. dollar, while Quiksilver Europe’s functional currencies are primarily the euro and the British pound, and Quiksilver Asia/Pacific’s functional currencies are primarily the Australian dollar and the Japanese yen. Assets and liabilities of the Company 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.

8

Derivative financial instruments are recognized as either assets or liabilities in the balance sheet and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the use and type of the derivative. The Company’s derivative financial instruments principally consist of foreign currency exchange contracts and interest rate swaps, which the Company uses to manage its exposure to the risk of foreign currency exchange rates and variable interest rates. The Company’s objectives are to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange and interest rates. The Company does not enter into derivative financial instruments for speculative or trading purposes.

Comprehensive Loss

Comprehensive loss or income includes all changes in stockholders’ equity except those resulting from investments by, and distributions to, stockholders. Accordingly, the Company’s Consolidated Statements of Comprehensive Loss include its net loss and the foreign currency adjustments that arise from the translation of the financial statements of Quiksilver Europe, Quiksilver Asia/Pacific and the foreign entities within the Americas segment into U.S. dollars and fair value gains and losses on certain derivative instruments.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying value of the Company’s trade accounts receivable and accounts payable approximates its fair value due to their short-term nature.

Subsequent Events

The Company evaluated all subsequent events through the time that it filed its consolidated financial statements in this Form 10-K with the Securities and Exchange Commission on January 12, 2010.

New Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Codification (“ASC”) Subtopic 105 “Generally Accepted Accounting Principles,” which establishes the Accounting Standards Codification as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the codification. This guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company updated its historical U.S. GAAP references to comply with the codification effective at the beginning of its fiscal quarter ending October 31, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows, since the codification is not intended to change U.S. GAAP.

In September 2006, the FASB issued authoritative guidance included in ASC Subtopic 820 “Fair Value Measurements and Disclosures,” which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted this guidance at the beginning of its fiscal year ending October 31, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows. See note 15 for certain required disclosures related to this guidance.

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In February 2007, the FASB issued authoritative guidance included in ASC Subtopic 825 “Financial Instruments,” which permits companies to choose to measure certain financial instruments and other items at fair value that are not currently required to be measured at fair value. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted this guidance at the beginning of its fiscal year ending October 31, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows, since the Company did not elect the fair value option for any assets or liabilities.

In December 2007, the FASB issued authoritative guidance included in ASC Subtopic 805 “Business Combinations,” which requires the Company to record fair value estimates of contingent consideration and certain other potential liabilities during the original purchase price allocation, expense acquisition costs as incurred and does not permit certain restructuring activities to be recorded as a component of purchase accounting. In April 2009, the FASB issued additional guidance that requires assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value, only if fair value can be reasonably estimated and eliminates the requirement to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date. This guidance is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. The Company will adopt this guidance at the beginning of its fiscal year ending October 31, 2010 for all prospective business acquisitions. The Company has not determined the effect that the adoption of this guidance will have on its consolidated financial statements, but the impact will be limited to any future acquisitions beginning in fiscal 2010, except for certain tax treatment of previous acquisitions.

In December 2007, the FASB issued authoritative guidance included in ASC Subtopic 810 “Consolidation,” which requires noncontrolling interests in subsidiaries to be included in the equity section of the balance sheet. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company will adopt this guidance at the beginning of its fiscal year ending October 31, 2010. In the year of adoption, presentation and disclosure requirements apply retrospectively to all periods presented. These presentation and disclosure requirements resulted in the reclassification of minority interest liability to equity on the accompanying consolidated balance sheets and the movement of minority interest expense to a separate line after net loss on the accompanying consolidated statements of operations. Other than these presentation and disclosure changes, the adoption of this guidance did not have a material effect on the Company's consolidated financial position, results of operations or cash flows.

In March 2008, the FASB issued authoritative guidance included in ASC Subtopic 815 “Derivatives and Hedging,” which requires enhanced disclosures to enable investors to better understand how and why derivatives are used and their effects on an entity’s financial position, financial performance and cash flows. This guidance is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this guidance at the beginning of its fiscal quarter ending April 30, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows. See note 15 for certain required disclosures related to this guidance.

In April 2009, the FASB issued authoritative guidance included in ASC Subtopic 825 “Financial Instruments,” which enhances consistency in financial reporting by increasing the frequency of fair value disclosures. This guidance is effective for interim periods ending after June 15, 2009 and the Company adopted this guidance during the three months ending July 31, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows. See note 15 for certain required disclosures related to this guidance.

In May 2009, the FASB issued authoritative guidance included in ASC Subtopic 855 “Subsequent Events,” which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date, but before financial statements are issued or are available to be issued. Specifically, this guidance provides (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance is effective for interim or annual financial periods ending after June 15, 2009, and is

10

to be applied prospectively. The Company adopted this guidance as of July 31, 2009. The adoption of this guidance did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows. See section above, entitled “Subsequent Events,” for certain required disclosures related to this guidance.

Adjustments for the Retrospective Application of New Accounting Standard Adopted on November 1, 2009

	Consolidated Statements of Operations
				Adjustments for			As
	As Previously			Non-Controlling			Currently
In thousands	Reported			Interest			Reported
Year Ended October 31, 2009
Other expense (income)	$	2,539		$	(2,926	)	$	(387	)
Loss before provision for income taxes		(6,548	)		2,926			(3,622	)
Year Ended October 31, 2008
Other expense	$	719		$	(690	)	$	29
Income before provision for income taxes		98,571			690			99,261
Year Ended October 31, 2007
Other expense	$	121		$	74		$	195
Income before provision for income taxes		151,233			(74	)		151,159
	Consolidated Balance Sheets
				Adjustments for			As
	As Previously			Non-Controlling			Currently
In thousands	Reported			Interest			Reported
As of October 31, 2009
Liabilities and Equity
Other long-term liabilities	$	54,081		$	(7,438	)	$	46,643
Total liabilities		1,396,013			(7,438	)		1,388,575
Non-controlling interest		—			7,438			7,438
As of October 31, 2008
Liabilities and Equity
Other long-term liabilities	$	39,607		$	(4,512	)	$	35,095
Total liabilities		1,570,299			(4,512	)		1,565,787
Non-controlling interest		—			4,512			4,512
	Consolidated Statements of Cash Flows
				Adjustments for			As
	As Previously			Non-Controlling			Currently
In thousands	Reported			Interest			Reported
Year Ended October 31, 2009
Net loss	$	(192,042	)	$	2,926		$	(189,116	)
Equity in earnings and minority interest		2,924			(2,926	)		(2	)
Year Ended October 31, 2008
Net loss	$	(226,265	)	$	690		$	(225,575	)
Equity in earnings and minority interest		1,811			(690	)		1,121
Year Ended October 31, 2007
Net loss	$	(121,119	)	$	(74	)	$	(121,193	)
Equity in earnings and minority interest		(210	)		74			(136	)

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Note 2 — Business Acquisitions

The Company did not engage in any business acquisitions, nor pay cash related to any prior business acquisitions, during the year ended October 31, 2009. For the years ended October 31, 2008 and 2007, the Company paid cash of approximately $31.1 million and $41.3 million respectively, in connection with certain business acquisitions, of which $19.2 million and $20.2 million for those same years relates to payments to the former owners of DC Shoes, Inc. in connection with the achievement of certain sales and earnings targets. The remaining $11.9 million and $21.1 million for the years ended October 31, 2008 and 2007 relate primarily to insignificant acquisitions of certain distributors, licensees and retail store locations.

Effective June 1, 2008, the Company acquired an additional 29% of Quiksilver Brazil for an aggregate purchase price of approximately $7.7 million, which included 300,180 shares of its common stock and approximately $3.9 million in cash. As a result of this transaction, the Company increased its ownership in Quiksilver Brazil to 51%.

Note 3 — Allowance for Doubtful Accounts

The allowance for doubtful accounts, which includes bad debts and returns and allowances, consists of the following:

	Year Ended October 31,
In thousands	2009			2008			2007
Balance, beginning of year	$	31,331		$	21,100		$	15,758
Provision for doubtful accounts		16,235			15,948			7,790
Deductions		(355	)		(5,717	)		(2,448	)
Balance, end of year	$	47,211		$	31,331		$	21,100

The provision for doubtful accounts represents charges to selling, general and administrative expense for estimated bad debts, whereas the provision for returns and allowances is reported as a reduction of revenues.

Note 4 — Inventories

Inventories consist of the following:

	October 31,
In thousands	2009		2008
Raw materials	$	6,904	$	9,156
Work in process		5,230		7,743
Finished goods		255,596		295,239
	$	267,730	$	312,138

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Note 5 — Fixed Assets

Fixed assets consist of the following:

	October 31,
In thousands	2009			2008
Furniture and other equipment	$	199,380		$	178,200
Computer equipment		101,505			103,472
Leasehold improvements		137,966			134,320
Land use rights		42,671			38,508
Land and buildings		6,368			4,600
		487,890			459,100
Accumulated depreciation and amortization		(248,557	)		(223,572	)
	$	239,333		$	235,528

During the three months ended October 31, 2009 and 2008, the Company recorded approximately $10.7 million and $10.4 million, respectively, in fixed asset impairments in continuing operations, primarily related to impairment of leasehold improvements on certain underperforming U.S. retail stores. These stores were not generating positive cash flows and are not expected to become profitable in the future. As a result, the Company is working to close these stores as soon as possible. Any charges associated with future rent commitments will be charged to future earnings upon store closure.

Note 6 — Intangible Assets and Goodwill

A summary of intangible assets is as follows:

	October 31,
	2009							2008
In thousands	Gross Amount		Amortization			Net Book Value		Gross Amount		Amortization			Net Book Value
Amortizable trademarks	$	19,472	$	(6,745	)	$	12,727	$	18,976	$	(5,559	)	$	13,417
Amortizable licenses		12,237		(8,464	)		3,773		9,103		(5,386	)		3,717
Other amortizable intangibles		8,318		(4,695	)		3,623		8,103		(3,942	)		4,161
Non-amortizable trademarks		122,831		—			122,831		123,139		—			123,139
	$	162,858	$	(19,904	)	$	142,954	$	159,321	$	(14,887	)	$	144,434

As of October 31, 2008 and in connection with its annual goodwill impairment test, the Company remeasured the value of its intangible assets in accordance with ASC 350, “Intangibles — Goodwill and Other,” and noted that the carrying value of assets of its Asia/Pacific segment were in excess of their estimated fair value. As a result, the Company recorded related goodwill impairment charges of approximately $55.4 million during the three months ended October 31, 2008. The fair value of assets was estimated using a combination of a discounted cash flow and market approach. The value implied by the test was affected by (1) reduced future cash flows expected for the Asia/Pacific segment, (2) the discount rates which were applied to future cash flows, and (3) current market estimates of value. The discount rates applied and current estimates of market values were affected by macro-economic conditions, contributing to the estimated decline in value. Goodwill in the Asia/Pacific segment arose primarily from the acquisition of the Company’s Australian and Japanese distributors in fiscal 2003, including subsequent earnout payments to the former owners of these businesses, and the acquisition of certain Australian retail store locations in fiscal 2005. For the years ended October 31, 2009 and 2007, there were no impairment charges resulting from the Company’s annual impairment test.

The change in non-amortizable trademarks is due primarily to foreign currency exchange fluctuations. Other amortizable intangibles primarily include non-compete agreements, patents and customer relationships. These amortizable intangibles are amortized on a straight-line basis over their estimated

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useful lives. Certain trademarks and licenses will continue to be amortized using estimated useful lives of 10 to 25 years with no residual values. Intangible amortization expense for the fiscal years ended October 31, 2009, 2008 and 2007 was $3.2 million, $2.9 million and $2.6 million, respectively. Annual amortization expense, based on the Company’s amortizable intangible assets as of October 31, 2009, is estimated to be approximately $3.2 million in the fiscal year ending October 31, 2010, approximately $3.0 million in each of the fiscal years ending October 31, 2011 through October 31, 2013 and approximately $2.0 million in the fiscal year ending October 31, 2014.

Goodwill arose primarily from the acquisitions of Quiksilver Europe, Quiksilver Asia/Pacific and DC Shoes, Inc. Goodwill increased approximately $34.4 million during the fiscal year ended October 31, 2009, which was due to the effect of changes in foreign currency exchange rates. Goodwill decreased $99.5 million during the fiscal year ended October 31, 2008, which included a $55.4 million goodwill impairment in the Asia/Pacific segment. The remaining decrease was primarily due to $49.4 million related to the effect of changes in foreign currency exchange rates, which was partially offset by an increase to goodwill of approximately $5.3 million related to other insignificant acquisitions.

Note 7 — Lines of Credit and Long-term Debt

A summary of lines of credit and long-term debt is as follows:

	October 31,
In thousands	2009		2008
European short-term credit arrangements	$	14	$	187,309
Asia/Pacific short-term lines of credit		32,578		51,008
Americas Credit Facility		—		142,500
Americas long-term debt		109,329		—
European long-term debt		389,029		172,907
European Credit Facility		38,243		47,218
Senior Notes		400,000		400,000
Deferred purchase price obligation		49,144		41,922
Capital lease obligations and other borrowings		20,916		17,454
	$	1,039,253	$	1,060,318

In July 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. In December 2005, these Senior Notes were exchanged for publicly registered notes with identical terms. The Senior Notes are guaranteed on a senior unsecured basis by each of the Company’s domestic subsidiaries that guarantee any of its indebtedness or its subsidiaries’ indebtedness, or are obligors 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 related to such Senior Notes.

The Senior Notes 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 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 a change of control (as defined in the indenture), 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. The Company is currently in compliance with these covenants. In addition, the Company has approximately $7.1 million in unamortized debt issuance costs related to the Senior Notes included in other assets as of October 31, 2009.

On July 31, 2009, the Company entered into a $153.1 million five year senior secured term loan with funds affiliated with Rhône Capital LLC. In connection with the term loan, the Company issued warrants to purchase approximately 25.7 million shares of its common stock, representing 19.99% of the

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outstanding equity of the Company at the time, with an exercise price of $1.86 per share. The warrants are fully vested and have a seven year term. The estimated fair value of these warrants at issuance was $23.6 million. This amount was recorded as a debt discount and will be amortized into interest expense over the term of the loan. In addition to this, the Company incurred approximately $15.8 million in debt issuance costs which are classified in prepaid expenses (short-term) and other assets (long-term) and are being amortized into interest expense over the five year term of the loan. The term loan is primarily secured by certain of the Company’s trademarks in the Americas and a first or second priority interest in substantially all property related to the Company’s Americas business. The term loan bears an interest rate of 15% on a $125 million tranche, with 6% of that interest payable in kind or in cash, at the Company’s option. The remaining tranche is denominated in euros (€20 million) and also bears an interest rate of 15%, with the full 15% payable in kind or cash at the Company’s option. The gross outstanding balance of the term loan at October 31, 2009 was $158.7 million, while the balance net of the debt discount and included on the balance sheet was $135.7 million. Net proceeds from the new term loan were used to reduce other borrowings and increase cash reserves. The term loan contains customary restrictive covenants and default provisions for loans of its type. The Company is currently in compliance with such covenants.

On July 31, 2009, the Company also entered into a new $200 million three year asset-based credit facility for its Americas segment (with the option to expand the facility to $250.0 million on certain conditions) which replaced its existing credit facility which was to expire in April 2010 (“Credit Facility”). The new Credit Facility, which expires in July 2012, includes a $100 million sublimit for letters of credit and bears interest at a rate of LIBOR plus a margin of 4.0% to 4.5%, depending upon availability. In connection with obtaining the Credit Facility, the Company incurred approximately $9.1 million in debt issuance costs which are classified in prepaid expenses (short-term) and other assets (long-term) and are being amortized into interest expense over the term of the Credit Facility. As of October 31, 2009, there were no borrowings outstanding under the Credit Facility, other than outstanding letters of credit, which totaled $34.7 million.

The Credit Facility is guaranteed by Quiksilver, Inc. and certain of its domestic and Canadian subsidiaries. The Credit Facility is secured by the Company’s U.S. and Canadian accounts receivable, inventory, certain intangibles, a second priority interest in substantially all other personal property and a second priority pledge of shares of certain of the Company’s domestic subsidiaries. The borrowing base is limited to certain percentages of eligible accounts receivable and inventory from participating subsidiaries. The Credit Facility contains customary default provisions and restrictive covenants for facilities of its type. The Company is currently in compliance with such covenants.

On July 31, 2009, the Company and certain of its European subsidiaries entered into a commitment with a group of lenders in Europe to refinance its European indebtedness. This refinancing, which closed and was funded on September 29, 2009, consists of two term loans totaling approximately $251.7 million (€170 million), an $85.9 million (€58 million) credit facility and a line of credit of $59.2 million (€40 million) for issuances of letters of credit. Together, these are referred to as the “European Facilities.” The maturity of these European Facilities is July 31, 2013. The term loans have minimum principal repayments due on January 31 and July 31 of each year, with €14.0 million due for each semi-annual payment in 2010, €17.0 million due for each semi-annual payment in 2011 and €27.0 million due for each semi-annual payment in 2012 and 2013. Amounts outstanding under the European Facilities bear interest at a rate of Euribor plus a margin of between 4.25% and 4.75%. The weighted average borrowing rate on the European Facilities was 5.09% as of October 31, 2009. In connection with obtaining the European Facilities, the Company incurred approximately $19.3 million in debt issuance costs which are classified in prepaid expenses (short-term) and other assets (long-term) and are being amortized into interest expense over the term of the European Facilities. As of October 31, 2009, there were borrowings of approximately $251.7 million outstanding on the two term loans, approximately $37.0 million outstanding on the credit facility, and approximately $26.6 million of outstanding letters of credit.

The European Facilities are guaranteed by Quiksilver, Inc. and secured by pledges of certain assets of its European subsidiaries, including certain trademarks of its European business and shares of certain

15

European subsidiaries. The European Facilities contain customary default provisions and covenants for transactions of this type. The Company is currently in compliance with such covenants.

In connection with the closing of the European Facilities, the Company refinanced an additional European term loan of $74.0 million (€50 million) such that its maturity date aligns with the European Facilities. This term loan has principal repayments due on January 31 and July 31 of each year, with €8.9 million due in the aggregate in 2011, €12.6 million due in the aggregate in 2012 and €28.5 million due in the aggregate in 2013. This extended term loan currently bears an interest rate of 3.23%, but will change to a variable rate of Euribor plus a margin of 4.8% beginning in July 2010. This term loan has the same security as the European Facilities and it contains customary default provisions and covenants for loans of its type. The Company is currently in compliance with such covenants.

In August 2008, Quiksilver Europe entered into a $148.0 million (€100 million) secured financing facility which expires in August 2011. Under this facility, Quiksilver Europe may borrow up to €100.0 million based upon the amount of accounts receivable that are pledged to the lender to secure the debt. Outstanding borrowings under this facility accrue interest at a rate of Euribor plus a margin of 0.55% (currently 1.34%). As of October 31, 2009, the Company had approximately $38.2 million of borrowings outstanding under this facility. This facility contains customary default provisions and covenants for facilities of its type. The Company is currently in compliance with such covenants.

Quiksilver Asia/Pacific has uncommitted revolving lines of credit with banks that provide up to $45.8 million ($50.3 million Australian dollars) for cash borrowings and letters of credit. These lines of credit are generally payable on demand, although the Company believes these lines of credit will continue to be available. The amount outstanding on these lines of credit at October 31, 2009 was $32.6 million, in addition to outstanding letters of credit of $3.4 million, at an average borrowing rate of 2.2%.

The Company’s current credit facilities allow for total maximum cash borrowings and letters of credit of $357.7 million. The Company’s total maximum borrowings and actual availability fluctuate depending on the extent of assets comprising the Company’s borrowing base under certain credit facilities. The Company had $107.8 million of borrowings drawn on these credit facilities as of October 31, 2009, and letters of credit issued at that time totaled $64.8 million. The amount of availability for borrowings under these facilities as of October 31, 2009 was $142.7 million, all of which was committed. Of this $142.7 million in committed capacity, $93.8 million can also be used for letters of credit. In addition to the $142.7 million of availability for borrowings, the Company also had $42.4 million in additional capacity for letters of credit in Europe and Asia/Pacific as of October 31, 2009.

In connection with the acquisition of Rossignol, the Company deferred payment of a portion of the purchase price. This deferred purchase price obligation is expected to be paid in 2010 and accrues interest equal to the 3-month Euribor plus 2.35% (3.14% as of October 31, 2009) and is denominated in euros. The carrying amount of the obligation fluctuates based on changes in the foreign currency exchange rate between euros and U.S. dollars. The Company has a cash collateralized guaranty to the former owner of Rossignol of $52.7 million. The cash related to this guaranty is classified as restricted cash on the balance sheet as of October 31, 2009. As of October 31, 2009, the deferred purchase price obligation totaled $49.1 million.

The Company also has approximately $20.9 million in capital leases and other borrowings as of October 31, 2009.

Approximate principal payments on long-term debt are as follows (in thousands):

2010	$	95,231
2011		105,759
2012		101,321
2013		164,000
2014		140,350
Thereafter		400,000
	$	1,006,661

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The estimated fair values of the Company’s lines of credit and long-term debt are as follows (in thousands):

	October 31, 2009
	Carrying Amount		Fair Value
Lines of credit	$	32,592	$	32,592
Long-term debt		1,006,661		915,861
	$	1,039,253	$	948,453

The carrying value of the Company’s trade accounts receivable and accounts payable approximates its fair value due to their short-term nature.

Note 8 ¾ Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

	October 31,
	2009		2008
Accrued employee compensation and benefits	$	48,040	$	44,405
Accrued sales and payroll taxes		12,620		8,658
Derivative liability		20,611		—
Accrued interest		2,088		2,784
Other liabilities		32,915		37,701
	$	116,274	$	93,548

Note 9 ¾ Commitments and Contingencies

Operating Leases

The Company leases certain land and buildings under long-term operating lease agreements. The following is a schedule of future minimum lease payments required under such leases as of October 31, 2009 (in thousands):

2010	$	107,900
2011		98,382
2012		86,073
2013		76,052
2014		58,955
Thereafter		144,669
	$	572,031

Total rent expense was $119.2 million, $120.7 million and $93.0 million for the years ended October 31, 2009, 2008 and 2007, respectively.

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Professional Athlete Sponsorships

The Company establishes relationships with professional athletes in order to promote its products and brands. The Company has entered into endorsement agreements with professional athletes in sports such as surfing, skateboarding, snowboarding, bmx and motocross. Many of these contracts provide incentives for magazine exposure and competitive victories while wearing or using the Company’s products. Such expenses are an ordinary part of the Company’s operations and are expensed as incurred. The following is a schedule of future estimated minimum payments required under such endorsement agreements as of October 31, 2009 (in thousands):

2010	$	18,649
2011		12,598
2012		6,451
2013		4,345
2014		2,787
Thereafter		500
	$	45,330

Under the Company’s current sponsorship agreement with Kelly Slater, in addition to the cash payment obligations included in the above table, the Company has agreed to propose to its shareholders a grant to Mr. Slater of 3 million shares of restricted stock. This restricted stock grant is subject to shareholder approval and would vest over a four year period. Should the grant not be approved by the Company’s shareholders, the Company may be required to compensate Mr. Slater with additional cash payments, which are not included in the table above.

Litigation

The Company is involved from time to time in legal claims involving trademark and intellectual property, licensing, employee relations and other matters incidental to its business. The Company believes the resolution of any such matter currently pending will not have a material adverse effect on its financial condition or results of operations or cash flows.

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 facilities or leases, (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.

Note 10 ¾ Stockholders’ Equity

In March 2000, the Company’s stockholders approved the Company’s 2000 Stock Incentive Plan (the “2000 Plan”), which generally replaced the Company’s previous stock option plans. Under the 2000 Plan, 33,444,836 shares are reserved for issuance over its term, consisting of 12,944,836 shares authorized under predecessor plans plus an additional 20,500,000 shares. The plan was amended in March 2007 to allow for the issuance of restricted stock and restricted stock units. The maximum number of shares that may be reserved for issuance of restricted stock or restricted stock unit awards is 800,000. Nonqualified and incentive options may be granted to officers and employees selected by the plan’s administrative committee at an exercise price not less than the fair market value of the underlying shares on the date of grant. Options vest over a period of time, generally three years, as designated by the committee and are

18

subject to such other terms and conditions as the committee determines. Certain stock options have also been granted to employees of acquired businesses under other plans. The Company issues new shares for stock option exercises and restricted stock grants.

Changes in shares under option are summarized as follows:

	Year Ended October 31,
	2009					2008					2007
				Weighted Average					Weighted Average					Weighted Average
In thousands	Shares			Price		Shares			Price		Shares			Price
Outstanding, beginning of year		15,902,575		$	9.97		17,311,049		$	9.30		18,135,699		$	8.61
Granted		4,563,250			1.97		1,310,000			8.99		1,247,051			15.19
Exercised		—			—		(1,828,338	)		3.69		(1,804,515	)		5.74
Canceled		(4,556,724	)		11.21		(890,136	)		8.55		(267,186	)		13.48
Outstanding, end of year		15,909,101			7.32		15,902,575			9.97		17,311,049			9.30
Options exercisable, end of year		10,211,031			9.15		12,251,796			9.19		12,395,513			7.56

The aggregate intrinsic value of options exercised, outstanding and exercisable as of October 31, 2009 is zero, $0.6 and $0.1 million, respectively. The weighted average life of options outstanding and exercisable as of October 31, 2009 is 5.8 and 3.9 years, respectively.

Outstanding stock options at October 31, 2009 consist of the following:

	Options Outstanding				Options Exercisable
			Weighted Average		Weighted Average				Weighted Average
Range of Exercise Prices	Shares		Remaining Life		Exercise Price		Shares		Exercise Price
			(Years)
$1.04 - $2.56		4,412,250		9.5	$	1.97		45,000	$	1.56
$2.57 - $4.47		1,989,068		1.6		3.49		1,914,818		3.52
$4.48 - $5.96		686,676		1.3		4.78		686,676		4.78
$5.97 - $7.44		1,292,005		3.1		6.66		1,292,005		6.66
$7.45 - $8.93		2,035,500		4.1		8.57		2,002,165		8.57
$8.94 - $10.42		1,047,000		8.1		9.02		310,633		9.07
$10.43 - $11.90		616,001		4.5		11.08		616,001		11.08
$11.91 - $14.87		3,010,601		5.7		14.04		2,802,414		14.06
$14.88 - $16.36		820,000		6.7		15.75		541,319		15.86
		15,909,101		5.8		7.32		10,211,031		9.15

Changes in non-vested shares under option for the year ended October 31, 2009 are as follows:

				Weighted Average
				Grant Date
	Shares			Fair Value
Non-vested, beginning of year		3,650,779		$	5.88
Granted		4,563,250			1.00
Vested		(2,017,785	)		6.06
Canceled		(498,174	)		6.40
Non-vested, end of year		5,698,070			1.90

19

Of the 5.7 million non-vested shares under option as of October 31, 2009, approximately 4.8 million are expected to vest over their respective lives.

As of October 31, 2009, there were 1,269,652 shares of common stock that were available for future grant. Of these shares, 5,669 were available for issuance of restricted stock.

The Company uses the Black-Scholes option-pricing model to value stock-based compensation expense. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense recognized. The expected term of options granted is derived from historical data on employee exercises. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based on the historical volatility of the Company’s stock. The fair value of each option grant was estimated as of the grant date using the Black-Scholes option-pricing model for the years ended October 31, 2009, 2008 and 2007, assuming risk-free interest rates of 2.6%, 3.0% and 4.8%, respectively; volatility of 51.5%, 40.8% and 43.0%, respectively; zero dividend yield; and expected lives of 6.1, 5.7 and 5.6 years, respectively. The weighted average fair value of options granted was $1.00, $3.85 and $7.16 for the years ended October 31, 2009, 2008 and 2007, respectively. The Company records stock-based compensation expense using the graded vested method over the vesting period, which is generally three years. As of October 31, 2009, the Company had approximately $4.3 million of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 2.2 years. Compensation expense was included as selling, general and administrative expense for fiscal 2009, 2008 and 2007.

In March 2006, the Company’s shareholders approved the 2006 Restricted Stock Plan and in March 2007, the Company’s shareholders approved an amendment to the 2000 Stock Incentive Plan whereby restricted shares and restricted stock units can be issued from such plan. Restricted stock issued under these plans vests over a period of time, generally three to five years, and may have certain performance based acceleration features which allow for earlier vesting.

Changes in restricted stock are as follows:

	Year Ended October 31,
	2009			2008			2007
Outstanding, beginning of year		721,003			842,000			800,000
Granted		590,000			330,000			87,000
Vested		(9,999	)		(17,329	)		—
Forfeited		(279,001	)		(433,668	)		(45,000	)
Outstanding, end of year		1,022,003			721,003			842,000

Compensation expense for restricted stock is determined using the intrinsic value method and forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense recognized. The Company monitors the probability of meeting the restricted stock performance criteria and will adjust the amortization period as appropriate. As of October 31, 2009, there had been no acceleration of the amortization period. As of October 31, 2009, the Company had approximately $1.1 million of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 1.9 years.

The Company began the Quiksilver Employee Stock Purchase Plan (the “ESPP”) in fiscal 2001, which provides a method for employees of the Company to purchase common stock at a 15% discount from fair market value as of the beginning or end of each purchasing period of six months, whichever is lower. The ESPP covers substantially all full-time domestic and Australian employees who have at least five months of service with the Company. Since the adoption of guidance within ASC 718, “Stock Compensation,” compensation expense has been recognized for             shares issued under the ESPP. During the years ended October 31, 2009, 2008 and 2007, 550,798, 257,178 and 92,187 shares of stock were issued under the plan with proceeds to the Company of $0.9 million, $1.9 million and $1.1 million, respectively.

20

During the years ended October 31, 2009, 2008 and 2007, the Company recognized total compensation expense related to options, restricted stock and ESPP shares of approximately $8.4 million, $12.0 million and $16.1 million, respectively.

The Company issued warrants for approximately 25.7 million shares of its common stock in connection with the closing of its new five year senior secured term loan. See note 7 for further details.

Note 11 ¾ Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income include changes in fair value of derivative instruments qualifying as cash flow hedges and foreign currency translation adjustments. The components of accumulated other comprehensive income, net of tax, are as follows:

	October 31,
In thousands	2009			2008
Foreign currency translation adjustment	$	111,951		$	60,003
(Loss) gain on cash flow hedges		(16,555	)		20,507
	$	95,396		$	80,510

Note 12 ¾ Income Taxes

A summary of the provision for income taxes from continuing operations is as follows:

	Year Ended October 31,
In thousands	2009			2008			2007
Current:
Federal	$	3,221		$	4,403		$	(597	)
State		—			(572	)		399
Foreign		34,448			39,641			49,789
		37,669			43,472			49,591
Deferred:
Federal		24,699			(8,070	)		(5,103	)
State		8,166			(1,980	)		(770	)
Foreign		(3,867	)		(395	)		(9,212	)
		28,998			(10,445	)		(15,085	)
Provision for income taxes	$	66,667		$	33,027		$	34,506

21

A reconciliation of the effective income tax rate to a computed “expected” statutory federal income tax rate is as follows:

	Year Ended October 31,
	2009			2008			2007
Computed “expected” statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		150.2			(1.2	)		0.2
Foreign tax rate differential		505.5			(10.4	)		(8.7	)
Foreign tax exempt income		(174.3	)		(8.9	)		(5.3	)
Repatriation of foreign earnings, net of credits		—			0.7			0.4
Goodwill impairment		—			19.5			—
Stock-based compensation		(21.1	)		1.6			1.2
Uncertain tax positions		(116.5	)		(5.7	)		1.3
Valuation allowance		(2,016.7	)		2.2			—
Other		(202.4	)		0.5			(1.3	)
Effective income tax rate		(1,840.3	)%		33.3	%		22.8	%

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The components of net deferred income taxes are as follows:

	Year Ended October 31,
In thousands	2009			2008
Deferred income tax assets:
Allowance for doubtful accounts	$	8,509		$	13,176
Depreciation and amortization		869			6,467
Unrealized gains and losses		13,349			—
Tax loss carryforwards		177,134			113,655
Accruals and other		66,780			55,133
Basis difference in Rossignol investment		—			147,621
		266,641			336,052
Deferred income tax liabilities:
Unrealized gains and losses		—			(8,689	)
Basis difference in receivables due from Rossignol		—			(111,845	)
Intangibles		(27,354	)		(25,633	)
		(27,354	)		(146,167	)
Deferred income taxes		239,287			189,885
Valuation allowance		(93,638	)		(138,665	)
Net deferred income taxes	$	145,649		$	51,220

The tax benefits from the exercise of certain stock options are reflected as additions to paid-in capital.

Income before provision for income taxes from continuing operations includes $102.7 million, $138.9 million and $172.3 million of income from foreign jurisdictions for the fiscal years ended October 31, 2009, 2008 and 2007, respectively. The Company does not provide for the U.S. federal, state or additional foreign income tax effects on certain foreign earnings that management intends to permanently reinvest. As of October 31, 2009, foreign earnings earmarked for permanent reinvestment totaled approximately $170.3 million.

As of October 31, 2009, the Company has federal net operating loss carryforwards of approximately $101 million and state net operating loss carryforwards of approximately $134 million, which will expire on various dates through 2029. In addition, the Company has foreign tax loss carryforwards of approximately $358 million as of October 31, 2009. Approximately $340 million will be carried forward until fully utilized, with the remaining $18 million expiring on various dates through 2029. As of October 31, 2009, the Company has capital loss carryforwards of approximately $42 million which will expire in 2014.

On November 6, 2009, the Worker, Homeownership, and Business Assistance Act of 2009 (the “Act”) was enacted into legislation. The Act allows corporate taxpayers with net operating losses (“NOLs”) for fiscal years ending after 2007 and beginning before 2010 to elect to carry back such NOLs up to five years. This election may be made for only one fiscal year. The Company is evaluating the impact that this legislation will have on its results and expects to apply the impact of the extended NOL carry back period during fiscal 2010.

During the year ended October 31, 2009, the Company evaluated the realizability of its U.S. federal and state deferred tax assets. The Company has evaluated the need for a valuation allowance with respect to the U.S. consolidated tax group, which includes the U.S. portion of the Americas operating segment and the U.S. portion of corporate operations. The Company has concluded that based on all available information and proper weighting of objective and subjective evidence as of October 31, 2009, including a cumulative loss that had been sustained over a three-year period by the U.S. consolidated tax group, it is more likely than not that its U.S. federal and state deferred tax assets will not be realized and a full valuation allowance was established against $45.9 million of deferred tax assets that existed as of

23

October 31, 2008. A benefit from loss carrybacks of $2.8 million has been recognized on U.S. losses sustained during the twelve months ended October 31, 2009. Income tax expense has been recognized against non-U.S. earnings in the current period.

On November 1, 2007, the Company adopted guidance included in ASC 740, “Income Taxes.” As a result of the adoption of this guidance, the Company recognized a $21.3 million reduction in retained earnings upon adoption. This adjustment consisted of an increase in the Company’s liability for unrecognized tax benefits of $30.4 million partially offset by an increase to the Company’s deferred tax assets of $2.0 million and an increase in the Company’s taxes receivable of $7.1 million. The total balance of unrecognized tax benefits, including interest and penalties of $7.8 million, was $37.4 million as of November 1, 2007.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (excluding interest and penalties and related tax carryforwards):

	Year ended October 31,
In thousands	2009			2008
Balance, beginning of year	$	25,495		$	29,552
Gross increases related to prior year tax positions		7,134			2,759
Gross increases related to current year tax positions		6,461			7,888
Settlements		—			(6,770	)
Lapse in statute of limitation		(13	)		(4,700	)
Foreign exchange and other		3,026			(3,234	)
Balance, end of year	$	42,103		$	25,495

If the Company’s positions are sustained by the relevant taxing authority, approximately $31.4 million (excluding interest and penalties) of uncertain tax position liabilities would favorably impact the Company’s effective tax rate in future periods.

The Company includes interest and penalties related to unrecognized tax benefits in its provision for income taxes in the accompanying consolidated statements of operations, which is included in current tax expense in the summary of income tax provision table shown above. During the fiscal year ended October 31, 2009, the Company recorded tax expense of $4.1 million relating to interest and penalties, and as of October 31, 2009, the Company had recognized a liability for interest and penalties of $12.3 million.

During the next 12 months, it is reasonably possible that the Company’s liability for uncertain tax positions may change by a significant amount as a result of the resolution or payment of uncertain tax positions related to intercompany transactions between foreign affiliates and certain foreign withholding tax exposures. Conclusion of these matters could result in settlement for different amounts than the Company has accrued as uncertain tax benefits. If a position for which the Company concluded was more likely than not is subsequently not upheld, then the Company would need to accrue and ultimately pay an additional amount. Conversely, the Company could settle positions with the tax authorities for amounts lower than have been accrued or extinguish a position through payment. The Company believes the outcomes which are reasonably possible within the next 12 months range from a reduction of the liability for unrecognized tax benefits of $19 million to an increase of the liability of $14 million, excluding penalties and interest.

The Company has completed a federal tax audit in the United States for fiscal years ending in 2004 and 2005 and remains subject to examination for years thereafter. The Company’s significant foreign tax jurisdictions, including France, Australia and Canada, are subject to normal and regular examination for various tax years generally beginning in the 2000 fiscal year. The Company is currently under examination in France, Australia and Canada for fiscal years ending through 2007.

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Note 13 ¾ Employee Plans

The Company maintains the Quiksilver 401(k) Employee Savings Plan and Trust (the “401(k) Plan”). This plan is generally available to all domestic employees with six months of service and is funded by employee contributions and, through fiscal 2007, periodic discretionary contributions from the Company, which are approved by the Company’s Board of Directors. The Company made contributions of zero, zero and $1.0 million to the 401(k) Plan for the years ended October 31, 2009, 2008 and 2007, respectively.

Employees of the Company’s French subsidiary, Na Pali SAS, with three months of service are covered under the French Profit Sharing Plan (the “French Profit Sharing Plan”), which is mandated by law. Compensation is earned under the French Profit Sharing Plan based on statutory computations with an additional discretionary component. Funds are maintained by the Company and vest with the employees after five years, although earlier disbursement is optional if certain personal events occur or upon the termination of employment. Compensation expense of $3.2 million, $3.4 million and $4.1 million was recognized related to the French Profit Sharing Plan for the fiscal years ended October 31, 2009, 2008 and 2007, respectively.

Note 14 ¾ Segment and Geographic 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 operates in the outdoor market of the sporting goods industry in which the Company designs, markets and distributes clothing, footwear, accessories and related products. The Company currently operates in three segments: the Americas, Europe and Asia/Pacific. The Americas segment includes revenues from the U.S., Canada and Latin America. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand and Indonesia. Costs that support all three 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 licensees. The Company’s largest customer accounts for less than 4% of its net revenues from continuing operations.

The Company sells a full range of its products within each geographical segment. The percentages of revenues attributable to each of the Company’s major product categories are as follows:

	Percentage of Revenues
	2009			2008			2007
Apparel		66	%		65	%		66	%
Footwear		20			20			18
Accessories		14			15			16
		100	%		100	%		100	%

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

	Year Ended October 31,
In thousands	2009			2008			2007
Revenues, net:
Americas	$	929,691		$	1,061,370		$	995,801
Europe		792,627			933,119			803,395
Asia/Pacific		251,596			265,067			243,064
Corporate operations		3,612			5,080			4,812
Consolidated	$	1,977,526		$	2,264,636		$	2,047,072
Gross profit (loss):
Americas	$	349,526		$	445,381		$	418,021
Europe		446,801			532,034			442,923
Asia/Pacific		135,591			140,168			120,411
Corporate operations		(887	)		3,003			3,690
Consolidated	$	931,031		$	1,120,586		$	985,045
SG&A expense:
Americas	$	364,727		$	371,958		$	311,757
Europe		341,780			380,374			316,867
Asia/Pacific		112,418			117,219			100,922
Corporate operations		32,821			46,382			52,717
Consolidated	$	851,746		$	915,933		$	782,263
Asset impairments:
Americas	$	10,092		$	9,317		$	—
Europe		645			692			—
Asia/Pacific		—			55,788			—
Corporate operations		—			—			—
Consolidated	$	10,737		$	65,797		$	—
Operating (loss) income:
Americas	$	(25,293	)	$	64,106		$	106,264
Europe		104,376			150,968			126,056
Asia/Pacific		23,173			(32,839	)		19,489
Corporate operations		(33,708	)		(43,379	)		(49,027	)
Consolidated	$	68,548		$	138,856		$	202,782
Identifiable assets:
Americas	$	538,533		$	841,318		$	908,435
Europe		923,494			1,026,268			1,307,738
Asia/Pacific		296,806			247,480			390,338
Corporate operations		93,775			55,199			55,553
Consolidated	$	1,852,608		$	2,170,265		$	2,662,064
Goodwill:
Americas	$	77,891		$	76,124		$	73,709
Europe		184,802			167,814			179,012
Asia/Pacific		71,065			55,412			146,178
Consolidated	$	333,758		$	299,350		$	398,899

France accounted for 26.7%, 30.6% and 33.0% of European net revenues to unaffiliated customers for the years ended October 31, 2009, 2008 and 2007, respectively, while Spain accounted for 19.7%, 20.2% and 20.3%, respectively, and the United Kingdom accounted for 9.2%, 11.4% and 14.9%, respectively. Identifiable assets in the United States totaled $522.4 million as of October 31, 2009.

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Note 15 — 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.

The Company accounts for all of its cash flow hedges under ASC 815, “Derivatives and Hedging,” which requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the consolidated balance sheet. In accordance with ASC 815, the Company designates forward contracts as cash flow hedges of forecasted purchases of commodities.

Effective February 1, 2009, the Company adopted additional guidance, which provides an enhanced disclosure framework for derivative instruments. ASC 815 requires that the fair values of derivative instruments and their gains and losses be disclosed in a manner that provides adequate information about the impact these instruments can have on a company’s financial position, results of operations and cash flows.

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings. As of October 31, 2009, the Company was hedging forecasted transactions expected to occur through October 2011. Assuming October 31, 2009 exchange rates remain constant, $16.6 million of losses, net of tax, related to hedges of these transactions are expected to be reclassified to earnings over the next 24 months.

For the year ended October 31, 2009, the effective portions of gains (losses) of foreign exchange derivative instruments in the consolidated statement of operations were as follows:

	Year Ended October 31, 2009
In thousands	Amount			Location
Loss recognized in OCI on derivatives	$	(41,036	)	Other comprehensive income
Loss reclassified from accumulated OCI into income	$	(14,343	)	Cost of goods sold
Loss reclassified from accumulated OCI into income	$	(17	)	Foreign currency gain (loss)
Loss recognized in income on derivatives	$	(691	)	Foreign currency gain (loss)

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

27

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 management determines 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. As a result of the expiration, sale, termination, or exercise of derivative contracts, the Company reclassified into earnings net losses of $23.8 million and $8.3 million during the fiscal years ended October 31, 2008 and 2007, respectively.

The Company enters into forward exchange and other derivative contracts with major banks and is exposed to exchange rate 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.

As of October 31, 2009, the Company had the following outstanding forward contracts that were entered into to hedge forecasted purchases:

		Notional
In thousands	Hedged Item	Amount		Maturity	Fair Value
United States dollar	Inventory	$	425,352	Nov 2009 — Oct 2011	$	(23,138	)
British pounds	Accounts receivable		9,914	Nov 2009 — Jan 2010		(53	)
		$	435,266		$	(23,191	)

Effective November 1, 2008, the Company adopted guidance included in ASC 820, “Fair Value Measurements and Disclosures,” which provides a framework for measuring fair value under generally accepted accounting principles. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:

• Level 1 — Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 assets and liabilities include debt and equity securities traded in an active exchange market, as well as U.S. Treasury securities.

• Level 2 — Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 — Valuation is determined using model-based techniques with significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include the use of third party pricing services, option pricing models, discounted cash flow models and similar techniques.

28

The following table reflects the fair values of the foreign exchange contract assets and liabilities measured and recognized at fair value on a recurring basis on the consolidated balance sheet as of October 31, 2009:

	October 31, 2009
								Assets (Liabilities)
	Fair Value Measurements Using							at Fair Value
In thousands	Level 1		Level 2			Level 3
Derivative assets:
Other receivables	$	—	$	936		$	—	$	936
Other assets		—		7			—		7
Derivative liabilities:
Accrued liabilities		—		(20,611	)		—		(20,611	)
Other long-term liabilities		—		(3,523	)		—		(3,523	)
Total fair value	$	—	$	(23,191	)	$	—	$	(23,191	)

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Note 16 — Quarterly Financial Data (Unaudited)

A summary of quarterly financial data (unaudited) is as follows:

	Quarter Ended
In thousands, except per share amounts	January 31			April 30			July 31			October 31
Year ended October 31, 2009
Revenues, net	$	443,278		$	494,173		$	501,394		$	538,681
Gross profit		207,163			233,118			234,364			256,386
(Loss) income from continuing operations attributable to Quiksilver, Inc.		(65,862	)		4,945			3,413			(15,711	)
(Loss) income from discontinued operations attributable to Quiksilver, Inc.		(128,564	)		(2,132	)		(2,067	)		13,936
Net (loss) income attributable to Quiksilver, Inc.		(194,426	)		2,813			1,346			(1,775	)
(Loss) income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution		(0.52	)		0.04			0.03			(0.12	)
(Loss) income per share from discontinued operations attributable to Quiksilver, Inc, assuming dilution		(1.01	)		(0.02	)		(0.02	)		0.11
Net (loss) income per share attributable to Quiksilver, Inc., assuming dilution		(1.53	)		0.02			0.01			(0.01	)
Trade accounts receivable		373,357			410,971			424,191			430,884
Inventories		380,502			307,735			334,233			267,730
Year ended October 31, 2008
Revenues, net	$	496,581		$	596,280		$	564,876		$	606,899
Gross profit		243,524			300,342			284,829			291,891
Income (loss) from continuing operations attributable to Quiksilver, Inc.		7,570			38,725			33,073			(13,824	)
(Loss) income from discontinued operations attributable to Quiksilver, Inc.		(29,510	)		(244,949	)		(30,219	)		12,869
Net (loss) income attributable to Quiksilver, Inc.		(21,940	)		(206,224	)		2,854			(955	)
Income (loss) per share from continuing operations attributable to Quiksilver, Inc., assuming dilution		0.06			0.30			0.25			(0.11	)
(Loss) income per share from discontinued operations attributable to Quiksilver, Inc, assuming dilution		(0.24	)		(1.88	)		(0.23	)		0.10
Net (loss) income per share attributable to Quiksilver, Inc., assuming dilution		(0.18	)		(1.59	)		0.02			(0.01	)
Trade accounts receivable		402,536			473,032			491,369			470,059
Inventories		364,362			304,059			358,646			312,138

30

Note 17 — Condensed Consolidating Financial Information

In December 2005, the Company completed an exchange offer to exchange its Senior Notes for publicly registered notes with identical terms. Obligations under the Company’s Senior Notes are fully and unconditionally guaranteed by certain of its existing domestic subsidiaries.

The Company is required to present condensed consolidating financial information for Quiksilver, Inc. and its domestic subsidiaries within the notes to the consolidated financial statements in accordance with the criteria established for parent companies in the SEC’s Regulation S-X, Rule 3-10(f). The following condensed consolidating financial information presents the results of operations, financial position and cash flows of Quiksilver Inc., its Guarantor subsidiaries, its non-Guarantor subsidiaries and the eliminations necessary to arrive at the information for the Company on a consolidated basis as of October 31, 2009 and 2008 and for the years ended October 31, 2009, 2008 and 2007. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

31

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Year Ended October 31, 2009

							Non-
	Quiksilver,			Guarantor			Guarantor
In thousands	Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues, net	$	301		$	796,924		$	1,218,860		$	(38,559	)	$	1,977,526
Cost of goods sold		—			502,643			556,666			(12,814	)		1,046,495
Gross profit		301			294,281			662,194			(25,745	)		931,031
Selling, general and administrative expense		3,733			348,228			526,170			(26,385	)		851,746
Asset impairments		—			10,092			645			—			10,737
Operating (loss) income		(3,432	)		(64,039	)		135,379			640			68,548
Interest expense, net		39,097			8,700			16,127			—			63,924
Foreign currency loss		61			47			8,525			—			8,633
Equity in earnings and other (income) expense		147,848			(398	)		11			(147,848	)		(387	)
(Loss) income before (benefit) provision for income taxes		(190,438	)		(72,388	)		110,716			148,488			(3,622	)
(Benefit) provision for income taxes		(2,823	)		42,937			26,553			—			66,667
(Loss) income from continuing operations		(187,615	)		(115,325	)		84,163			148,488			(70,289	)
(Loss) income from discontinued operations		(4,427	)		13,303			(128,367	)		664			(118,827	)
Net loss		(192,042	)		(102,022	)		(44,204	)		149,152			(189,116	)
Less: net income attributable to non-controlling interest		—			(2,757	)		(169	)		—			(2,926	)
Net loss attributable to Quiksilver, Inc.	$	(192,042	)	$	(104,779	)	$	(44,373	)	$	149,152		$	(192,042	)

32

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Year Ended October 31, 2008

							Non-
	Quiksilver,			Guarantor			Guarantor
In thousands	Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues, net	$	116		$	927,971		$	1,382,879		$	(46,330	)	$	2,264,636
Cost of goods sold		—			521,833			636,627			(14,410	)		1,144,050
Gross profit		116			406,138			746,252			(31,920	)		1,120,586
Selling, general and administrative expense		59,739			345,451			553,608			(42,865	)		915,933
Asset impairments		—			9,317			56,480			—			65,797
Operating (loss) income		(59,623	)		51,370			136,164			10,945			138,856
Interest expense (income), net		47,512			377			(2,562	)		—			45,327
Foreign currency (gain) loss		(1,505	)		(5,674	)		1,418			—			(5,761	)
Equity in earnings and other (income) expense		134,831			(333	)		362			(134,831	)		29
(Loss) income before (benefit) provision for income taxes		(240,461	)		57,000			136,946			145,776			99,261
(Benefit) provision for income taxes		(14,986	)		2,488			45,525			—			33,027
(Loss) income from continuing operations		(225,475	)		54,512			91,421			145,776			66,234
Loss from discontinued operations		(790	)		(22,723	)		(255,976	)		(12,320	)		(291,809	)
Net (loss) income		(226,265	)		31,789			(164,555	)		133,456			(225,575	)
Less: net income attributable to non-controlling interest		—			(683	)		(7	)		—			(690	)
Net loss (income) attributable to Quiksilver, Inc.	$	(226,265	)	$	31,106		$	(164,562	)	$	133,456		$	(226,265	)

33

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Year Ended October 31, 2007

							Non-
	Quiksilver,			Guarantor			Guarantor
In thousands	Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues, net	$	19		$	893,969		$	1,196,874		$	(43,790	)	$	2,047,072
Cost of goods sold		—			525,839			550,977			(14,789	)		1,062,027
Gross profit		19			368,130			645,897			(29,001	)		985,045
Selling, general and administrative expense		52,955			260,140			497,158			(27,990	)		782,263
Operating (loss) income		(52,936	)		107,990			148,739			(1,011	)		202,782
Interest expense, net		43,480			2,202			889			—			46,571
Foreign currency loss		3,008			1,579			270			—			4,857
Equity in earnings and other expense		33,388			85			110			(33,388	)		195
(Loss) income before (benefit) provision for income taxes		(132,812	)		104,124			147,470			32,377			151,159
(Benefit) provision for income taxes		(16,066	)		9,996			40,576			—			34,506
(Loss) income from continuing operations		(116,746	)		94,128			106,894			32,377			116,653
(Loss) income from discontinued operations		(4,373	)		(61,578	)		(172,222	)		327			(237,846	)
Net (loss) income		(121,119	)		32,550			(65,328	)		32,704			(121,193	)
Less: net (income) loss attributable to non-controlling interest		—			158			(84	)		—			74
Net loss (income) attributable to Quiksilver, Inc.	$	(121,119	)	$	32,708		$	(65,412	)	$	32,704		$	(121,119	)

34

CONDENSED CONSOLIDATING BALANCE SHEET

OCTOBER 31, 2009

						Non-
	Quiksilver,		Guarantor			Guarantor
In thousands	Inc.		Subsidiaries			Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	321	$	1,135		$	98,060	$	—		$	99,516
Restricted cash		—		—			52,706		—			52,706
Trade accounts receivable, net		—		150,540			280,344		—			430,884
Other receivables		854		4,869			19,892		—			25,615
Inventories		—		86,501			182,006		(777	)		267,730
Deferred income taxes		—		8,658			67,980		—			76,638
Prepaid expenses and other current assets		12,981		11,039			13,313		—			37,333
Current assets held for sale		—		—			1,777		—			1,777
Total current assets		14,156		262,742			716,078		(777	)		992,199
Fixed assets, net		4,323		71,265			163,745		—			239,333
Intangible assets, net		2,886		50,426			89,642		—			142,954
Goodwill		—		118,111			215,647		—			333,758
Investment in subsidiaries		952,358		—			—		(952,358	)		—
Other assets		7,522		18,947			48,884		—			75,353
Deferred income taxes long-term		—		(28,017	)		97,028		—			69,011
Total assets	$	981,245	$	493,474		$	1,331,024	$	(953,135	)	$	1,852,608
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—	$	—		$	32,592	$	—		$	32,592
Accounts payable		1,594		60,003			100,776		—			162,373
Accrued liabilities		7,357		27,084			81,833		—			116,274
Current portion of long-term debt		—		1,140			94,091		—			95,231
Income taxes payable		—		9,174			14,400		—			23,574
Intercompany balances		115,699		(129,624	)		13,925		—			—
Current liabilities related to assets held for sale		—		15			443		—			458
Total current liabilities		124,650		(32,208	)		338,060		—			430,502
Long-term debt, net of current portion		400,000		110,829			400,601		—			911,430
Other long-term liabilities		—		36,984			9,659		—			46,643
Total liabilities		524,650		115,605			748,320		—			1,388,575
Stockholders’/invested equity		456,595		370,922			582,213		(953,135	)		456,595
Non-controlling interest		—		6,947			491		—			7,438
Total liabilities and equity	$	981,245	$	493,474		$	1,331,024	$	(953,135	)	$	1,852,608

35

CONDENSED CONSOLIDATING BALANCE SHEET

OCTOBER 31, 2008

						Non-
	Quiksilver,		Guarantor			Guarantor
In thousands	Inc.		Subsidiaries			Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	18	$	2,666		$	50,358		$	—		$	53,042
Trade accounts receivable, net		—		214,033			256,026			—			470,059
Other receivables		866		9,824			59,686			—			70,376
Income taxes receivable		—		2,859			7,879			—			10,738
Inventories		—		134,812			178,738			(1,412	)		312,138
Deferred income taxes		—		21,560			(9,340	)		—			12,220
Prepaid expenses and other current assets		6,019		8,773			11,077			—			25,869
Current assets held for sale		—		70,367			341,075			—			411,442
Total current assets		6,903		464,894			895,499			(1,412	)		1,365,884
Restricted cash		—		—			46,475			—			46,475
Fixed assets, net		5,775		96,686			133,067			—			235,528
Intangible assets, net		2,754		51,113			90,567			—			144,434
Goodwill		—		117,235			182,115			—			299,350
Investment in subsidiaries		1,185,761		—			—			(1,185,761	)		—
Other assets		9,300		3,387			26,907			—			39,594
Deferred income taxes long-term		—		3,992			35,008			—			39,000
Total assets	$	1,210,493	$	737,307		$	1,409,638		$	(1,187,173	)	$	2,170,265
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—	$	—		$	238,317		$	—		$	238,317
Accounts payable		5,121		102,987			127,621			—			235,729
Accrued liabilities		18,436		17,455			57,657			—			93,548
Current portion of long-term debt		—		2,061			29,843			—			31,904
Intercompany balances		186,970		(122,584	)		(64,386	)		—			—
Current liabilities related to assets held for sale		—		35,398			99,673			—			135,071
Total current liabilities		210,527		35,317			488,725			—			734,569
Long-term debt, net of current portion		400,000		143,501			246,596			—			790,097
Other long-term liabilities		—		25,692			9,403			—			35,095
Non-current liabilities related to assets held for sale		—		—			6,026			—			6,026
Total liabilities		610,527		204,510			750,750			—			1,565,787
Stockholders’/invested equity		599,966		528,607			658,566			(1,187,173	)		599,966
Non-controlling interest		—		4,190			322			—			4,512
Total liabilities and equity	$	1,210,493	$	737,307		$	1,409,638		$	(1,187,173	)	$	2,170,265

36

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Year Ended October 31, 2009

							Non-
	Quiksilver,			Guarantor			Guarantor
In thousands	Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net loss	$	(192,042	)	$	(102,022	)	$	(44,204	)	$	149,152		$	(189,116	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Loss (income) from discontinued operations		4,427			(13,303	)		128,367			(664	)		118,827
Depreciation and amortization		1,525			24,174			29,305			—			55,004
Stock-based compensation and tax benefit on option exercises		8,415			—			—			—			8,415
Provision for doubtful accounts		—			10,059			6,176			—			16,235
Equity in earnings		147,848			—			(2	)		(147,848	)		(2	)
Asset impairments		—			9,570			1,167			—			10,737
Deferred taxes		—			47,482			(4,248	)		—			43,234
Other adjustments to reconcile net loss		334			2,660			4,538			—			7,532
Changes in operating assets and liabilities:
Trade accounts receivable		—			53,272			7,511			—			60,783
Inventories		—			48,293			31,050			(1,304	)		78,039
Other operating assets and liabilities		(8,929	)		(4,245	)		(4,161	)		—			(17,335	)
Cash (used in) provided by operating activities of continuing operations		(38,422	)		75,940			155,499			(664	)		192,353
Cash (used in) provided by operating activities of discontinued operations		(19,423	)		36,806			(4,232	)		664			13,815
Net cash (used in) provided by operating activities		(57,845	)		112,746			151,267			—			206,168
Cash flows from investing activities:
Capital expenditures		(3,793	)		(7,214	)		(43,557	)		—			(54,564	)
Cash used in investing activities of continuing operations		(3,793	)		(7,214	)		(43,557	)		—			(54,564	)
Cash provided by investing activities of discontinued operations		—			—			21,848			—			21,848
Net cash used in investing activities		(3,793	)		(7,214	)		(21,709	)		—			(32,716	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			10,346			—			10,346
Payments on lines of credit		—			—			(237,025	)		—			(237,025	)
Borrowings on long-term debt		—			547,093			348,175			—			895,268
Payments on long-term debt		—			(561,113	)		(165,739	)		—			(726,852	)
Payments of debt issuance costs		—			(27,494	)		(19,984	)		—			(47,478	)
Proceeds from stock option exercises		862			—			—			—			862
Intercompany		61,079			(65,549	)		4,470			—			—
Cash provided by (used in) financing activities of continuing operations		61,941			(107,063	)		(59,757	)		—			(104,879	)
Cash used in financing activities of discontinued operations		—			—			(11,136	)		—			(11,136	)
Net cash provided by (used in) financing activities		61,941			(107,063	)		(70,893	)		—			(116,015	)
Effect of exchange rate changes on cash		—			—			(10,963	)		—			(10,963	)
Net increase (decrease) in cash and cash equivalents		303			(1,531	)		47,702			—			46,474
Cash and cash equivalents, beginning of period		18			2,666			50,358			—			53,042
Cash and cash equivalents, end of period	$	321		$	1,135		$	98,060			—		$	99,516

37

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Year Ended October 31, 2008

							Non-
	Quiksilver,			Guarantor			Guarantor
In thousands	Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(226,265	)	$	31,789		$	(164,555	)	$	133,456		$	(225,575	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Loss from discontinued operations		790			22,723			255,976			12,320			291,809
Depreciation and amortization		2,074			25,785			29,372			—			57,231
Stock-based compensation and tax benefit on option exercises		9,588			—			—			—			9,588
Provision for doubtful accounts		330			7,213			8,405			—			15,948
Equity in earnings		134,831			137			984			(134,831	)		1,121
Asset impairments		—			9,317			56,480			—			65,797
Other adjustments to reconcile net (loss) income		(1,478	)		3,422			(14,657	)		—			(12,713	)
Changes in operating assets and liabilities:
Trade accounts receivable		—			(21,640	)		5,461			—			(16,179	)
Inventories		—			(5,215	)		(28,946	)		1,375			(32,786	)
Other operating assets and liabilities		(3,395	)		19,531			9,087			—			25,223
Cash (used in) provided by operating activities of continuing operations		(83,525	)		93,062			157,607			12,320			179,464
Cash provided by (used in) operating activities of discontinued operations		12,203			(27,429	)		(79,756	)		(12,320	)		(107,302	)
Net cash (used in) provided by operating activities		(71,322	)		65,633			77,851			—			72,162
Cash flows from investing activities:
Capital expenditures		284			(38,525	)		(52,707	)		—			(90,948	)
Business acquisitions, net of cash acquired		—			(24,174	)		(6,953	)		—			(31,127	)
Changes in restricted cash		—			—			(46,475	)		—			(46,475	)
Cash provided by (used in) investing activities of continuing operations		284			(62,699	)		(106,135	)		—			(168,550	)
Cash provided by investing activities of discontinued operations		—			94,631			9,180			—			103,811
Net cash provided by (used in) investing activities		284			31,932			(96,955	)		—			(64,739	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			185,777			—			185,777
Payments on lines of credit		—			—			(47,161	)		—			(47,161	)
Borrowings on long-term debt		—			173,216			67,173			—			240,389
Payments on long-term debt		—			(159,201	)		(39,592	)		—			(198,793	)
Proceeds from stock option exercises		11,602			—			—			—			11,602
Intercompany		59,442			(87,168	)		27,726			—			—
Cash provided by (used in) financing activities of continuing operations		71,044			(73,153	)		193,923			—			191,814
Cash used in financing activities of discontinued operations		—			(35,000	)		(189,794	)		—			(224,794	)
Net cash provided by (used in) financing activities		71,044			(108,153	)		4,129			—			(32,980	)
Effect of exchange rate changes on cash		—			—			4,251			—			4,251
Net increase (decrease) in cash and cash equivalents		6			(10,588	)		(10,724	)		—			(21,306	)
Cash and cash equivalents, beginning of period		12			13,254			61,082			—			74,348
Cash and cash equivalents, end of period	$	18		$	2,666		$	50,358			—		$	53,042

38

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Year Ended October 31, 2007

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(121,119	)	$	32,550		$	(65,328	)	$	32,704		$	(121,193	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Loss from discontinued operations		4,373			61,578			172,222			(327	)		237,846
Depreciation and amortization		629			20,402			25,821			—			46,852
Stock-based compensation and tax benefit on option exercises		13,234			—			—			—			13,234
Provision for doubtful accounts		—			3,978			3,812			—			7,790
Equity in earnings		33,388			(486	)		350			(33,388	)		(136	)
Other adjustments to reconcile net (loss) income		903			(5,874	)		(6,696	)		—			(11,667	)
Changes in operating assets and liabilities:
Trade accounts receivable		—			(47,237	)		(9,980	)		—			(57,217	)
Inventories		—			(7,972	)		(12,275	)		684			(19,563	)
Other operating assets and liabilities		16,534			20,672			48,697			—			85,903
Cash (used in) provided by operating activities of continuing operations		(52,058	)		77,611			156,623			(327	)		181,849
Cash provided by (used in) operating activities of discontinued operations		386			(4,973	)		(53,337	)		327			(57,597	)
Net cash (used in) provided by operating activities		(51,672	)		72,638			103,286			—			124,252
Cash flows from investing activities:
Capital expenditures		(1,419	)		(35,993	)		(40,864	)		—			(78,276	)
Business acquisitions, net of cash acquired		(1,297	)		(38,353	)		(1,607	)		—			(41,257	)
Cash used in investing activities of continuing operations		(2,716	)		(74,346	)		(42,471	)		—			(119,533	)
Cash used in investing activities of discontinued operations		—			(2,656	)		(38,301	)		—			(40,957	)
Net cash used in investing activities		(2,716	)		(77,002	)		(80,772	)		—			(160,490	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			71,846			—			71,846
Payments on lines of credit		—			—			(17,247	)		—			(17,247	)
Borrowings on long-term debt		—			123,250			86,061			—			209,311
Payments on long-term debt		—			(74,375	)		(27,236	)		—			(101,611	)
Proceeds from stock option exercises		14,253			—			—			—			14,253
Intercompany		40,139			(25,646	)		(14,493	)		—			—
Cash provided by financing activities of continuing operations		54,392			23,229			98,931			—			176,552
Cash used in financing activities of discontinued operations		—			(9,003	)		(87,732	)		—			(96,735	)
Net cash provided by financing activities		54,392			14,226			11,199			—			79,817
Effect of exchange rate changes on cash		—			—			(6,065	)		—			(6,065	)
Net increase in cash and cash equivalents		4			9,862			27,648			—			37,514
Cash and cash equivalents, beginning of period		8			3,392			33,434			—			36,834
Cash and cash equivalents, end of period	$	12		$	13,254		$	61,082			—		$	74,348

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Note 18 — Discontinued Operations

In October 2007, the Company entered into an agreement to sell its golf equipment business, which included Roger Cleveland Golf Company, Inc. and certain other related international subsidiaries, for approximately $132.5 million. Majority ownership in this business was originally acquired in fiscal 2005 as part of the Rossignol acquisition. The Company acquired the remaining 36.37% minority interest in Roger Cleveland Golf Company, Inc. in September 2007. In connection with the acquisition of the minority interest in Roger Cleveland Golf Company, Inc., the Company’s U.S. golf equipment operations, the Company remeasured the carrying value of related intangible assets. As a result, the Company recorded asset impairments in fiscal 2007 of approximately $8.2 million, which included goodwill impairment of approximately $5.4 million, trademark impairments of approximately $2.4 million and patent impairments of approximately $0.4 million. The operations of the golf equipment business are classified as discontinued operations for all periods presented. The Company closed this transaction in December 2007. The Company used the net proceeds from this sale to repay indebtedness.

As of October 31, 2007 and in connection with its annual goodwill impairment test, the Company remeasured the value of its intangible assets in accordance with ASC 350, “Intangibles — Goodwill and Other,” and noted that the carrying value was in excess of the estimated fair value. As a result, the Company recorded Rossignol related goodwill impairment charges of approximately $156.9 million, approximately $6.9 million in trademark impairments and approximately $2.6 million in fixed asset impairments. The Company’s goodwill impairment was recognized as a result of its annual impairment test for goodwill which was calculated using a combination of a discounted cash flow and market approach. The value implied by the test was primarily affected by future forecasts for its wintersports equipment businesses which were revised downward, primarily due to management’s assessment of the time frame for recovery of the wintersports equipment business and the related expected future cash flows based on working capital requirements, recent snow conditions, current industry conditions and trends, and general economic conditions.

During the three months ended April 30, 2008, the Company classified its Rossignol business, including both wintersports equipment and related apparel, as discontinued operations. During this same period, the Company reassessed the carrying value of Rossignol under ASC 205-20, “Discontinued Operations.” The fair value of the Rossignol business was estimated using a combination of current market indications of value, a discounted cash flow and a market-based multiple approach. As a result, the Company recorded an impairment of Rossignol’s long-term assets of approximately $240.2 million, before taxes, during the three months ended April 30, 2008. This impairment included approximately $129.7 million in fixed assets, $88.2 million in trademark and other intangible assets, $18.3 million in goodwill and $4.0 million in other long-term assets. During the six months ended October 31, 2008, the Company performed the same assessment and recorded additional impairments of approximately $11.2 million, primarily consisting of fixed assets.

In August 2008, the Company received a binding offer for its Rossignol business, and completed the transaction on November 12, 2008 for a purchase price of $50.8 million, comprised of $38.1 million in cash and a $12.7 million seller’s note. The Company used the net cash proceeds from the sale to pay for related transaction costs and reduce its indebtedness. The seller’s note was canceled in October 2009 in connection with the completion of the final working capital adjustment.

The business sold includes the related brands of Rossignol, Dynastar, Look and Lange. The actual pre-tax losses incurred upon closing were approximately $212.3 million, partially offset by a tax benefit of approximately $89.4 million. These losses were recorded primarily during the three months ended January 31, 2009.

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The operating results of discontinued operations, which include both the Rossignol wintersports and golf equipment businesses, included in the accompanying consolidated statements of operations are as follows:

	Year Ended October 31,
In thousands	2009			2008			2007
Revenues, net	$	18,171		$	374,149		$	541,136
Loss before income taxes		(221,201	)		(365,917	)		(246,163	)
Benefit for income taxes		(102,374	)		(74,108	)		(8,317	)
Loss from discontinued operations	$	(118,827	)	$	(291,809	)	$	(237,846	)

The losses from discontinued operations for fiscal 2009, 2008 and 2007 include asset impairments of zero, $251.4 million and $166.4 million, respectively. The net tax benefit related to the asset impairments and the Company’s classification of Rossignol and Cleveland Golf as discontinued operations is zero, approximately $40.0 million, and approximately $4.2 million for fiscal 2009, 2008 and 2007, respectively. Net interest expense included in discontinued operations was zero, $14.0 million and $14.4 million for fiscal 2009, 2008 and 2007, respectively.

The remaining assets and liabilities of the Company’s discontinued businesses primarily relate to its Rossignol apparel business.

The components of assets and liabilities held for sale at October 31, 2009 are as follows:

In thousands	October 31, 2009
Current assets:
Receivables, net	$	669
Inventories		—
Other current assets		1,108
	$	1,777
Current liabilities:
Accounts payable	$	309
Other current liabilities		149
	$	458

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Note 19 — Restructuring Charges

In connection with its cost reduction efforts, the Company formulated the Fiscal 2009 Cost Reduction Plan (the “Plan”). During the twelve months ended October 31, 2009, the Company recorded $19.8 million in severance charges in selling, general and administrative expense (“SG&A”), which includes $13.9 million in the Americas segment, $4.1 million in the European segment and $1.8 million in corporate operations. The Plan covers the global operations of the Company, but is primarily concentrated in the United States. In addition to severance charges, the Company completed the closure of its Huntington Beach, California distribution center during the twelve months ended October 31, 2009. As a result, the Company recorded a charge of approximately $4.6 million in SG&A for the fair value of its lease commitments on this facility which extends through fiscal 2014. This charge is net of estimated future sublease income. The Company could be required to take future charges if it is not able to sub-lease this facility as planned. The Company continues to evaluate its cost structure and may incur future charges under the Plan.

Activity and liability balances recorded as part of the Plan are as follows:

				Facility
In thousands	Workforce			& Other			Total
Balance, November 1, 2008	$	—		$	—		$	—
Charged to expense		19,769			4,590			24,359
Cash payments		(9,768	)		(639	)		(10,407	)
Adjustments to accrual		(178	)		—			(178	)
Foreign currency translation		135			—			135
Balance, October 31, 2009	$	9,958		$	3,951		$	13,909

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