10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended January 31, 2009

OR

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

Commission file number 1-14229

QUIKSILVER, INC.

(Exact name of registrant as specified in its charter)

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

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o 
Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

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

The number of shares outstanding of Registrant’s Common Stock,
par value $0.01 per share, at
March 6, 2009 was
128,090,583

QUIKSILVER, INC.

FORM 10-Q
INDEX

	Page No.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Quiksilver, Inc. Condensed Consolidated Statements of Operations Three Months Ended January 31, 2009 and 2008		2
Quiksilver, Inc. Condensed Consolidated Statements of Comprehensive (Loss) Income Three Months Ended January 31, 2009 and 2008		2
Quiksilver, Inc. Condensed Consolidated Balance Sheets January 31, 2009 and October 31, 2008		3
Quiksilver, Inc. Condensed Consolidated Statements of Cash Flows Three Months Ended January 31, 2009 and 2008		4
Quiksilver, Inc. Notes to Condensed Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Results of Operations		23
Three Months Ended January 31, 2009 Compared to Three Months Ended January 31, 2008		24
Financial Position, Capital Resources and Liquidity		25
Critical Accounting Policies		27
New Accounting Pronouncements		29
Forward-Looking Statements		29
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		30
Part II — OTHER INFORMATION
Item 6. Exhibits		31
SIGNATURES		33
EX-10.1
EX-10.4
EX-10.5
EX-10.6
EX-10.7
EX-31.1
EX-31.2
EX-32.1
EX-32.2

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three months ended January 31,
In thousands, except per share amounts	2009			2008
Revenues, net	$	443,278		$	496,581
Cost of goods sold		236,115			253,057
Gross profit		207,163			243,524
Selling, general and administrative expense		206,818			221,410
Operating income		345			22,114
Interest expense		14,154			11,048
Foreign currency loss (gain)		1,430			(616	)
Other expense		42			74
(Loss) income before provision for income taxes		(15,281	)		11,608
Provision for income taxes		50,581			4,038
(Loss) income from continuing operations		(65,862	)		7,570
Loss from discontinued operations		(128,564	)		(29,510	)
Net loss	$	(194,426	)	$	(21,940	)
(Loss) income per share from continuing operations	$	(0.52	)	$	0.06
Loss per share from discontinued operations	$	(1.01	)	$	(0.24	)
Net loss per share	$	(1.53	)	$	(0.18	)
(Loss) income per share from continuing operations, assuming dilution	$	(0.52	)	$	0.06
Loss per share from discontinued operations, assuming dilution	$	(1.01	)	$	(0.23	)
Net loss per share, assuming dilution	$	(1.53	)	$	(0.17	)
Weighted average common shares outstanding		127,039			124,508
Weighted average common shares outstanding, assuming dilution		127,039			129,149

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)

	Three months ended January 31,
In thousands	2009			2008
Net loss	$	(194,426	)	$	(21,940	)
Other comprehensive (loss) income:
Foreign currency translation adjustment arising during current period		5,719			510
Reclassification adjustment for foreign currency translation included in current period loss from discontinued operations		(47,850	)		—
Net unrealized (loss) income on derivative instruments, net of tax of $168 (2009) and ($2,074) (2008)		(892	)		4,464
Comprehensive loss	$	(237,449	)	$	(16,966	)

See notes to condensed consolidated financial statements.

2

QUIKSILVER, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

	January 31,			October 31,
In thousands, except share amounts	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	42,089		$	53,042
Trade accounts receivable, less allowances of $30,899 (2009) and $31,331 (2008)		373,357			470,059
Other receivables		65,650			70,376
Income taxes receivable		—			10,738
Inventories		380,502			312,138
Deferred income taxes — short-term		88,284			12,220
Prepaid expenses and other current assets		37,337			25,869
Current assets held for sale		18,043			411,442
Total current assets		1,005,262			1,365,884
Restricted cash		45,824			46,475
Fixed assets, less accumulated depreciation and amortization of $232,187 (2009) and $223,572 (2008)		229,152			235,528
Intangible assets, net		143,683			144,434
Goodwill		295,406			299,350
Other assets		39,844			39,594
Deferred income taxes — long-term		647			39,000
Total assets	$	1,759,818		$	2,170,265
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	237,299		$	238,317
Accounts payable		252,557			235,729
Accrued liabilities		84,730			93,548
Current portion of long-term debt		33,051			31,904
Income taxes payable		3,763			—
Liabilities related to assets held for sale		3,925			135,071
Total current liabilities		615,325			734,569
Long-term debt, net of current portion		742,976			790,097
Other long-term liabilities		35,635			39,607
Non-current liabilities related to assets held for sale		—			6,026
Total liabilities		1,393,936			1,570,299
Stockholders’ 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 — 130,975,783 (2009) and 130,622,566 (2008)		1,310			1,306
Additional paid-in capital		337,870			334,509
Treasury stock, 2,885,200 shares		(6,778	)		(6,778	)
(Accumulated deficit) retained earnings		(4,007	)		190,419
Accumulated other comprehensive income		37,487			80,510
Total stockholders’ equity		365,882			599,966
Total liabilities and stockholders’ equity	$	1,759,818		$	2,170,265

See notes to condensed consolidated financial statements.

3

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Three months ended January 31,
In thousands	2009			2008
Cash flows from operating activities:
Net loss	$	(194,426	)	$	(21,940	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss from discontinued operations		128,564			29,510
Depreciation and amortization		13,303			13,531
Stock-based compensation and tax benefit on option exercises		2,707			2,528
Provision for doubtful accounts		2,945			2,023
Loss on disposal of fixed assets		185			946
Foreign currency (gain) loss		(322	)		120
Minority interest and equity in earnings		616			556
Deferred income taxes		45,659			—
Changes in operating assets and liabilities, net of the effects from business acquisitions:
Trade accounts receivable		89,336			76,274
Other receivables		3,752			3,894
Inventories		(72,418	)		(65,380	)
Prepaid expenses and other current assets		(11,779	)		(12,090	)
Other assets		(1,276	)		(658	)
Accounts payable		21,497			27,779
Accrued liabilities and other long-term liabilities		(7,787	)		(18,661	)
Income taxes payable		6,056			(5,684	)
Cash provided by operating activities of continuing operations		26,612			32,748
Cash provided by operating activities of discontinued operations		2,046			25,945
Net cash provided by operating activities		28,658			58,693
Cash flows from investing activities:
Capital expenditures		(10,309	)		(27,470	)
Business acquisitions, net of cash acquired		—			(1,038	)
Cash used in investing activities of continuing operations		(10,309	)		(28,508	)
Cash provided by investing activities of discontinued operations		21,848			107,789
Net cash provided by investing activities		11,539			79,281
Cash flows from financing activities:
Borrowings on lines of credit		8,454			14,551
Payments on lines of credit		(6,981	)		(12,411	)
Borrowings on long-term debt		23,222			87,523
Payments on long-term debt		(66,868	)		(140,777	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		495			2,772
Cash used in financing activities of continuing operations		(41,678	)		(48,342	)
Cash used in financing activities of discontinued operations		(11,136	)		(88,448	)
Net cash used in financing activities		(52,814	)		(136,790	)
Effect of exchange rate changes on cash		1,664			(351	)
Net (decrease) increase in cash and cash equivalents		(10,953	)		833
Cash and cash equivalents, beginning of period		53,042			74,348
Cash and cash equivalents, end of period	$	42,089		$	75,181
Supplementary cash flow information:
Cash paid during the period for:
Interest	$	6,981		$	12,356
Income taxes	$	5,521		$	14,062

See notes to condensed consolidated financial statements.

4

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.	Basis of Presentation
	The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statement presentation.
	Quiksilver, Inc. (the “Company”), in its opinion, has included all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the results of operations for the three months ended January 31, 2009 and 2008. The condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements and notes for the year ended October 31, 2008 included in the Company’s Annual Report on Form 10-K. Interim results are not necessarily indicative of results for the full year due to seasonal and other factors.
	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 will be adequate to fund the Company’s capital requirements for at least the next twelve months. The Company believes that its short-term uncommitted lines of credit will continue to be made available or be re-financed on a longer term basis. If these lines of credit are not made available, the Company could be adversely affected. The Company plans to refinance short-term uncommitted lines of credit in Europe and Asia/Pacific with new committed facilities. In addition to these refinancings, the Company expects to increase liquidity either through a sale of assets or by issuing secured debt. The Company also expects to arrange a new Americas credit facility with its U.S. lenders.
	Management believes that it can obtain this additional liquidity to improve the maturities of the Company’s debt and reduce the amount of the Company’s short-term uncommitted lines of credit. However, the continuing turmoil in the financial markets could make it more difficult for the Company to access capital, sell assets, refinance the Company’s existing indebtedness, enter into agreements for new indebtedness or obtain funding through the broader capital markets. Therefore, no assurances can be given that the Company will be successful in these efforts.
2.	New Accounting Pronouncements
	In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted this standard at the beginning of its fiscal year ending October 31, 2009. The adoption of this accounting pronouncement did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows. See Note 8 for certain required disclosures related to this standard.
	In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (“SFAS No. 159”), 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 statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted this standard at the beginning of its fiscal year ending October 31, 2009. The adoption of this accounting pronouncement 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.

5

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

	In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” (“SFAS No. 141(R)”), 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 previously allowed under Emerging Issues Task Force Issue No. 95-3 to be recorded as a component of purchase accounting. This statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008. The Company will adopt this standard 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 SFAS No. 141(R) 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 SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51,” (“SFAS No. 160”), which requires noncontrolling interests in subsidiaries to be included in the equity section of the balance sheet. This statement is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company will adopt this standard at the beginning of its fiscal year ending October 31, 2010. The Company has not determined the effect that the adoption of SFAS No. 160 will have on its consolidated financial statements.
	In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an Amendment of FASB Statement No. 133” (“SFAS No. 161”). The objective of SFAS No. 161 is to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance and cash flows. This statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company plans to adopt this standard at the beginning of its fiscal quarter ending April 30, 2009. The adoption of this accounting pronouncement is not expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
3.	Stock-Based Compensation
	The Company accounts for stock-based compensation under the fair value recognition provisions of SFAS No. 123(R) “Share-Based Payment”. The Company uses the Black-Scholes option-pricing model to value 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. For the three months ended January 31, 2009 and 2008, options were valued assuming a risk-free interest rate of 2.1% and 3.0%, respectively, volatility of 61.8% and 40.7%, respectively, zero dividend yield, and an expected life of 5.9 and 5.7 years, respectively. The weighted average fair value of options granted was $1.01 and $3.84 for the three months ended January 31, 2009 and 2008, respectively. The Company records stock compensation expense using the graded vested method over the vesting period, which is generally three years. As of January 31, 2009, the Company had approximately $5.0 million of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 1.7 years. Stock-based compensation expense was included as selling, general and administrative expense for the period.

6

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Changes in shares under option for the three months ended January 31, 2009 are as follows:

								Aggregate
Dollar amounts in thousands,				Weighted Average		Weighted Average		Intrinsic
except per share amounts	Shares			Price		Life		Value
Outstanding, October 31, 2008		15,902,575		$	9.97
Granted		1,189,000			1.77
Exercised		—			—				—
Canceled		(759,173	)		9.88
Outstanding, January 31, 2009		16,332,402		$	9.37		5.6	$	397
Options exercisable, January 31, 2009		13,284,705		$	9.70		4.9		—

Changes in non-vested shares under option for the three months ended January 31, 2009 are as follows:

				Weighted-
				Average Grant
	Shares			Date Fair Value
Non-vested, October 31, 2008		3,650,779		$	5.88
Granted		1,189,000			1.01
Vested		(1,729,078	)		6.44
Canceled		(63,004	)		5.72
Non-vested, January 31, 2009		3,047,697		$	3.67

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 stock and restricted stock units can be issued from such plan. Stock issued under these plans generally vests from three to five years and may have certain performance based acceleration features which allow for earlier vesting.

Changes in restricted stock for the three months ended January 31, 2009 are as follows:

	Shares
Outstanding, October 31, 2008		721,003
Granted		240,000
Vested		—
Forfeited		(204,001	)
Outstanding, January 31, 2009		757,002

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 January 31, 2009, there had been no acceleration of the amortization period. As of January 31, 2009, the Company had approximately $3.2 million of unrecognized compensation expense expected to be recognized over a weighted average period of approximately 1.5 years.

7

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4.	Inventories
	Inventories consist of the following:

	January 31,		October 31,
In thousands	2009		2008
Raw materials	$	7,372	$	9,156
Work in-process		3,942		7,743
Finished goods		369,188		295,239
	$	380,502	$	312,138

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

	January 31, 2009							October 31, 2008
In thousands	Gross Amount		Amortization			Net Book Value		Gross Amount		Amortization			Net Book Value
Amortizable trademarks	$	18,925	$	(5,827	)	$	13,098	$	18,976	$	(5,559	)	$	13,417
Amortizable licenses		8,639		(5,328	)		3,311		9,103		(5,386	)		3,717
Other amortizable intangibles		8,071		(3,984	)		4,087		8,103		(3,942	)		4,161
Non-amortizable trademarks		123,187		—			123,187		123,139		—			123,139
	$	158,822	$	(15,139	)	$	143,683	$	159,321	$	(14,887	)	$	144,434

Certain trademarks and licenses will continue to be amortized by the Company using estimated useful lives of 10 to 25 years with no residual values. Intangible amortization expense for the three months ended January 31, 2009 and 2008 was $0.8 million and $0.7 million, respectively. Annual amortization expense is estimated to be approximately $3.1 million in the fiscal years ending October 31, 2009 through 2012, and approximately $2.0 million in the fiscal year ending October 31, 2013. Goodwill related to the Company’s operating segments is as follows:

	January 31,		October 31,
In thousands	2009		2008
Americas	$	76,877	$	76,124
Europe		165,468		167,814
Asia/Pacific		53,061		55,412
	$	295,406	$	299,350

Goodwill decreased approximately $3.9 million during the three months ended January 31, 2009, primarily as a result of the effect of foreign currency exchange rates.

8

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6.	Accumulated Other Comprehensive Income
	The components of accumulated other comprehensive income include net income, 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:

	January 31,		October 31,
In thousands	2009		2008
Foreign currency translation adjustment	$	17,872	$	60,003
Gain on cash flow hedges		19,615		20,507
	$	37,487	$	80,510

7.

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s management in deciding how to allocate resources and in assessing performance. The Company 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 primarily from the U.S. and Canada. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand and Indonesia. 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 accounted for approximately 3% of the Company’s net revenues from continuing operations for the three months ended January 31, 2009 and approximately 4% for the three months ended January 31, 2008.

9

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

	Three months ended January 31,
In thousands	2009			2008
Revenues, net:
Americas	$	203,413		$	234,935
Europe		181,698			200,283
Asia/Pacific		57,590			60,376
Corporate operations		577			987
	$	443,278		$	496,581
Gross profit:
Americas	$	75,666		$	101,756
Europe		100,766			109,697
Asia/Pacific		30,701			31,735
Corporate operations		30			336
	$	207,163		$	243,524
Operating (loss) income:
Americas	$	(16,340	)	$	7,146
Europe		22,001			21,618
Asia/Pacific		3,785			3,821
Corporate operations		(9,101	)		(10,471	)
	$	345		$	22,114
Identifiable assets:
Americas	$	630,736		$	729,475
Europe		847,966			1,252,968
Asia/Pacific		232,958			369,212
Corporate operations		48,158			67,969
	$	1,759,818		$	2,419,624

8.	Derivative Financial Instruments
	The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income and product purchases of its international subsidiaries that are denominated in currencies other than their functional currencies. The Company is also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in U.S. dollars, and to fluctuations in interest rates related to its variable rate debt. Furthermore, the Company is exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in the Company’s consolidated financial statements due to the translation of the operating results and financial position of the Company’s international subsidiaries. As part of its overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses various foreign currency exchange contracts and intercompany loans.
	The Company accounts for all of its cash flow hedges under SFAS No. 133, which requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the statement of financial position. In accordance with SFAS No. 133, the Company designates forward contracts as cash flow hedges of forecasted purchases of commodities.
	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 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

10

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

recognized in current earnings. As of January 31, 2009, the Company was hedging forecasted transactions expected to occur through October 2010. Assuming exchange rates at January 31, 2009 remain constant, $19.6 million of gains, net of tax, related to hedges of these transactions are expected to be reclassified into earnings over the next 21 months.

On the date the Company enters into a derivative contract, management designates the derivative as a hedge of the identified exposure. The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for entering into various hedge transactions. In this documentation, the Company identifies the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and indicates how the hedging instrument is expected to hedge the risks related to the hedged item. The Company formally measures effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis in accordance with its risk management policy. The Company would discontinue hedge accounting prospectively (i) if 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 $3.2 million during the three months ended January 31, 2009.

The Company enters into forward exchange 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 January 31, 2009, the Company had the following outstanding forward contracts that were entered into to hedge forecasted purchases:

		Notional
In thousands	Commodity	Amount		Maturity	Fair Value
United States dollar	Inventory	$	405,083	Feb 2009 — Oct 2010	$	35,535
Swiss franc	Inventory		5,057	Feb 2009 — Oct 2009		(49	)
		$	410,140		$	35,486

Effective November 1, 2008, the Company adopted SFAS 157, which provides a framework for measuring fair value under generally accepted accounting principles (“GAAP”). SFAS 157 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. SFAS 157 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. SFAS 157 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

11

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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.

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

	January 31, 2009
	Fair Value Measurements Using							Assets (Liabilities)
In thousands	Level 1		Level 2			Level 3		at Fair Value
Derivative assets	$	—	$	37,720		$	—	$	37,720
Derivative liabilities		—		(2,234	)		—		(2,234	)
Total fair value	$	—	$	35,486		$	—	$	35,486

9.	Litigation, Indemnities and Guarantees
	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.
	During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale and/or license of Company products, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, (iii) indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company, and (iv) indemnities involving the accuracy of representations and warranties in certain contracts. The duration of these indemnities, commitments and guarantees varies and, in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. As of January 31, 2009, the Company had not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.
10.	Condensed Consolidating Financial Information
	The Company has $400 million in publicly registered senior notes. Obligations under the Company’s senior notes are fully and unconditionally guaranteed by certain of its 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 January 31, 2009 and October 31, 2008 and for the three months ended January 31, 2009 and 2008. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. The Company has adjusted certain prior year amounts in the current year’s presentation for prior periods to properly reflect the Company’s investment in its subsidiaries under the equity method

12

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

of accounting as required by Regulation S-X, Rule 3-10. The Company has applied the estimated consolidated annual effective income tax rate to both the guarantor and non-guarantor subsidiaries, adjusting for any discrete items, for interim reporting purposes. In the Company’s consolidated financial statements for the fiscal year ending October 31, 2009, management will apply the actual income tax rate to both the guarantor and non-guarantor subsidiaries. These interim tax rates may differ from the actual annual effective income tax rates for both the guarantor and non-guarantor subsidiaries.

13

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Three Months Ended January 31, 2009

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues, net	$	77		$	181,210		$	271,545		$	(9,554	)	$	443,278
Cost of goods sold		—			114,496			125,624			(4,005	)		236,115
Gross profit		77			66,714			145,921			(5,549	)		207,163
Selling, general and administrative expense		11,953			83,865			116,395			(5,395	)		206,818
Operating (loss) income		(11,876	)		(17,151	)		29,526			(154	)		345
Interest expense		10,625			534			2,995			—			14,154
Foreign currency (gain) loss		(135	)		(21	)		1,586			—			1,430
Minority interest, equity in earnings and other expense (income)		194,768			267			(225	)		(194,768	)		42
(Loss) income before (benefit) provision for income taxes		(217,134	)		(17,931	)		25,170			194,614			(15,281	)
(Benefit) provision for income taxes		(2,823	)		46,025			7,379			—			50,581
(Loss) income from continuing operations		(214,311	)		(63,956	)		17,791			194,614			(65,862	)
Income (loss) from discontinued operations		19,885			(2,722	)		(146,237	)		510			(128,564	)
Net (loss) income	$	(194,426	)	$	(66,678	)	$	(128,446	)	$	195,124		$	(194,426	)

14

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended January 31, 2008

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Revenues, net	$	(5	)	$	210,605		$	295,645		$	(9,664	)	$	496,581
Cost of goods sold		—			120,255			135,916			(3,114	)		253,057
Gross profit		(5	)		90,350			159,729			(6,550	)		243,524
Selling, general and administrative expense		8,785			89,856			129,327			(6,558	)		221,410
Operating (loss) income		(8,790	)		494			30,402			8			22,114
Interest expense (income)		10,680			(41	)		409			—			11,048
Foreign currency loss (gain)		196			2			(814	)		—			(616	)
Minority interest, equity in earnings and other expense (income)		8,485			(35	)		109			(8,485	)		74
(Loss) income before (benefit) provision for income taxes		(28,151	)		568			30,698			8,493			11,608
(Benefit) provision for income taxes		(6,421	)		170			10,289			—			4,038
(Loss) income from continuing operations		(21,730	)		398			20,409			8,493			7,570
Loss from discontinued operations		(210	)		(10,095	)		(18,935	)		(270	)		(29,510	)
Net (loss) income	$	(21,940	)	$	(9,697	)	$	1,474		$	8,223		$	(21,940	)

15

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET
At January 31, 2009

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	23		$	6,803		$	35,263		$	—		$	42,089
Trade accounts receivable, net		—			163,666			209,691			—			373,357
Other receivables		868			16,996			47,786			—			65,650
Inventories		—			158,477			223,457			(1,432	)		380,502
Deferred income taxes		—			(1,627	)		89,911			—			88,284
Prepaid expenses and other current assets		12,938			9,433			14,966			—			37,337
Current assets held for sale		—			7			18,036			—			18,043
Total current assets		13,829			353,755			639,110			(1,432	)		1,005,262
Restricted cash		—			—			45,824			—			45,824
Fixed assets, net		5,461			93,019			130,672			—			229,152
Intangible assets, net		2,773			51,086			89,824			—			143,683
Goodwill		—			118,112			177,294			—			295,406
Investment in subsidiaries		686,376			—			—			(686,376	)		—
Other assets		8,991			4,742			26,111			—			39,844
Deferred income taxes long-term		—			(19,206	)		19,853			—			647
Total assets	$	717,430		$	601,508		$	1,128,688		$	(687,808	)	$	1,759,818
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit	$	—		$	—		$	237,299		$	—		$	237,299
Accounts payable		4,494			123,834			124,229			—			252,557
Accrued liabilities		18,288			20,891			45,551			—			84,730
Current portion of long-term debt		—			1,225			31,826			—			33,051
Income taxes payable		—			2,202			1,561			—			3,763
Intercompany balances		(71,234	)		(112,993	)		184,227			—			—
Current liabilities of assets held for sale		—			17			3,908			—			3,925
Total current liabilities		(48,452	)		35,176			628,601			—			615,325
Long-term debt, net of current portion		400,000			122,256			220,720			—			742,976
Other long-term liabilities		—			36,604			(969	)		—			35,635
Total liabilities		351,548			194,036			848,352			—			1,393,936
Stockholders’/invested equity		365,882			407,472			280,336			(687,808	)		365,882
Total liabilities and stockholders’ equity	$	717,430		$	601,508		$	1,128,688		$	(687,808	)	$	1,759,818

16

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET
At October 31, 2008

						Non-
			Guarantor			Guarantor
In thousands	Quiksilver, 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 STOCKHOLDERS’ 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		—		29,882			9,725			—			39,607
Non-current liabilities related to assets held for sale		—		—			6,026			—			6,026
Total liabilities		610,527		208,700			751,072			—			1,570,299
Stockholders’/invested equity		599,966		528,607			658,566			(1,187,173	)		599,966
Total liabilities and stockholders’ equity	$	1,210,493	$	737,307		$	1,409,638		$	(1,187,173	)	$	2,170,265

17

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Three Months Ended January 31, 2009

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(194,426	)	$	(66,678	)	$	(128,446	)	$	195,124		$	(194,426	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
(Income) loss from discontinued operations		(19,885	)		2,722			146,237			(510	)		128,564
Depreciation and amortization		353			6,451			6,499			—			13,303
Stock-based compensation		2,707			—			—			—			2,707
Provision for doubtful accounts		—			1,148			1,797			—			2,945
Minority interest and equity in earnings		194,768			667			(51	)		(194,768	)		616
Deferred income taxes		—			47,940			(2,281	)		—			45,659
Other adjustments to reconcile net (loss) income		(136	)		5			(6	)		—			(137	)
Changes in operating assets and liabilities:
Trade accounts receivable		—			49,219			40,117			—			89,336
Inventories		—			(23,699	)		(48,363	)		(356	)		(72,418	)
Other operating assets and liabilities		(1,774	)		21,096			(8,859	)		—			10,463
Cash (used in) provided by operating activities of continuing operations		(18,393	)		38,871			6,644			(510	)		26,612
Cash (used in) provided by operating activities of discontinued operations		(19,885	)		45,099			(23,678	)		510			2,046
Net cash (used in) provided by operating activities		(38,278	)		83,970			(17,034	)		—			28,658
Cash flows from investing activities:
Capital expenditures		(3,484	)		(2,297	)		(4,528	)		—			(10,309	)
Cash used in investing activities of continuing operations		(3,484	)		(2,297	)		(4,528	)		—			(10,309	)
Cash provided by investing activities of discontinued operations		—			—			21,848			—			21,848
Net cash (used in) provided by investing activities		(3,484	)		(2,297	)		17,320			—			11,539
Cash flows from financing activities:
Borrowings on lines of credit		—			—			8,454			—			8,454
Payments on lines of credit		—			—			(6,981	)		—			(6,981	)
Borrowings on long-term debt		—			22,206			1,016			—			23,222
Payments on long-term debt		—			(43,286	)		(23,582	)		—			(66,868	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		495			—			—			—			495
Intercompany		41,272			(56,456	)		15,184			—			—
Cash provided by (used in) financing activities of continuing operations		41,767			(77,536	)		(5,909	)		—			(41,678	)
Cash used in financing activities of discontinued operations		—			—			(11,136	)		—			(11,136	)
Net cash provided by (used in) financing activities		41,767			(77,536	)		(17,045	)		—			(52,814	)
Effect of exchange rate changes on cash		—			—			1,664			—			1,664
Net increase (decrease) in cash and cash equivalents		5			4,137			(15,095	)		—			(10,953	)
Cash and cash equivalents, beginning of period		18			2,666			50,358			—			53,042
Cash and cash equivalents, end of period	$	23		$	6,803		$	35,263		$	—		$	42,089

18

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Three Months Ended January 31, 2008

							Non-
				Guarantor			Guarantor
In thousands	Quiksilver, Inc.			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(21,940	)	$	(9,697	)	$	1,474		$	8,223		$	(21,940	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Loss from discontinued operations		210			10,095			18,935			270			29,510
Depreciation and amortization		194			6,206			7,131			—			13,531
Stock-based compensation		2,528			—			—			—			2,528
Provision for doubtful accounts		—			788			1,235			—			2,023
Minority interest and equity in earnings		8,485			(184	)		740			(8,485	)		556
Other adjustments to reconcile net (loss) income		178			—			888			—			1,066
Changes in operating assets and liabilities:
Trade accounts receivable		—			25,487			50,787			—			76,274
Inventories		—			(7,696	)		(57,946	)		262			(65,380	)
Other operating assets and liabilities		2,544			(17,260	)		9,296			—			(5,420	)
Cash (used in) provided by operating activities of continuing operations		(7,801	)		7,739			32,540			270			32,748
Cash (used in) provided by operating activities of discontinued operations		(41	)		(21,764	)		48,020			(270	)		25,945
Net cash (used in) provided by operating activities		(7,842	)		(14,025	)		80,560			—			58,693
Cash flows from investing activities:
Capital expenditures		(285	)		(11,316	)		(15,869	)		—			(27,470	)
Business acquisitions, net of cash acquired		—			422			(1,460	)		—			(1,038	)
Cash used in investing activities of continuing operations		(285	)		(10,894	)		(17,329	)		—			(28,508	)
Cash provided by investing activities of discontinued operations		—			95,163			12,626			—			107,789
Net cash (used in) provided by investing activities		(285	)		84,269			(4,703	)		—			79,281
Cash flows from financing activities:
Borrowings on lines of credit		—			—			14,551			—			14,551
Payments on lines of credit		—			—			(12,411	)		—			(12,411	)
Borrowings on long-term debt		—			86,500			1,023			—			87,523
Payments on long-term debt		—			(119,700	)		(21,077	)		—			(140,777	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		2,772			—			—			—			2,772
Intercompany		5,272			(13,223	)		7,951			—			—
Cash provided by (used in) financing activities of continuing operations		8,044			(46,423	)		(9,963	)		—			(48,342	)
Cash used in financing activities of discontinued operations		—			(35,000	)		(53,448	)		—			(88,448	)
Net cash provided by (used in) financing activities		8,044			(81,423	)		(63,411	)		—			(136,790	)
Effect of exchange rate changes on cash		—			—			(351	)		—			(351	)
Net (decrease) increase in cash and cash equivalents		(83	)		(11,179	)		12,095			—			833
Cash and cash equivalents, beginning of period		12			13,254			61,082			—			74,348
Cash and cash equivalents, end of period	$	(71	)	$	2,075		$	73,177		$	—		$	75,181

19

11.	Discontinued Operations
	The Company completed the sale of its Rossignol business in November 2008 for a purchase price of approximately $50.8 million, comprised of $38.1 million in cash and a $12.7 million note. The business sold includes the related brands of Rossignol, Dynastar, Look and Lange. The Company used the cash proceeds from the sale to pay for related transaction costs and reduce its indebtedness. In accordance with the purchase agreement, the purchase price may be adjusted for certain items including a working capital adjustment. The Company is currently evaluating the working capital and certain other contractual adjustments with the buyer of Rossignol, but the Company does not expect any materially adverse purchase price adjustments.
	The operating results of discontinued operations, which include both the Rossignol wintersports and golf equipment businesses, included in the accompanying consolidated statements of operations were as follows:

	Three Months Ended
	January 31,
In thousands	2009			2008
Revenues, net	$	14,613		$	116,652
Loss before income taxes		(216,636	)		(35,193	)
Benefit for income taxes		(88,072	)		(5,683	)
Loss from discontinued operations	$	(128,564	)	$	(29,510	)

The loss from discontinued operations for the three months ended January 31, 2009 includes the loss on sale of Rossignol of approximately $122.3 million, net of expected tax benefits.

The remaining assets and liabilities of the Company’s discontinued businesses primarily relate to its discontinued Rossignol apparel business. The components of assets and liabilities held for sale are as follows:

	January 31,
In thousands	2009
Current assets:
Receivables, net	$	12,831
Inventories		4,596
Other current assets		616
	$	18,043
Current liabilities:
Accounts payable	$	2,804
Other current liabilities		1,121
	$	3,925

12.

Income Taxes

During the three months ended January 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 under SFAS 109 with respect to the U.S. consolidated tax group, which includes the U.S. portion of the Quiksilver Americas operating segment and the U.S. portion of our Corporate operations segment. Accordingly, the Company has concluded that based on all available information and proper weighting of objective and subjective evidence as of January 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 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 October 31, 2008. No valuation allowance has been established against the Company’s deferred tax assets outside of the U.S. based on all available information and proper weighting of objective and subjective evidence as of January 31, 2009.

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	On January 31, 2009, the Company’s liability for uncertain tax positions was approximately $33.5 million resulting from unrecognized tax benefits, excluding interest and penalties. During the three months ended January 31, 2009, the Company increased its liability for uncertain tax positions, exclusive of interest and penalties, by $8.1 million. Of this increase, approximately $4.8 million is related to positions taken in prior periods, and approximately $3.3 million is related to tax positions taken in the current quarter and certain other items. The nature of the increase relates to intercompany transactions between foreign affiliates and certain foreign withholding tax exposures.
	If the Company’s positions are favorably sustained by the relevant taxing authority, approximately $25.1 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. During the quarter ended January 31, 2009, the Company recorded an expense of approximately $1.5 million relating to interest and penalties, and as of January 31, 2009, the Company had a liability for interest and penalties of $7.8 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 no significant change to a reduction of the liability for unrecognized tax benefits of up to $14.2 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 fiscal year 2000. The Company is currently under examination in Australia, France, and Canada for fiscal years ending through 2007.
13.	Debt and Subsequent Events
	In March 2009, the Company extended the maturity date of a $70.8 million European credit facility, which was previously due on March 14, 2009, to June 30, 2009. The Company intends to conclude either a strategic or refinancing transaction within the period covered by this extension, in which case this credit facility would either be refinanced or repaid. In connection with this extension, the interest rate of the credit facility was adjusted to Euribor plus a margin of 2.8%.
	The Company’s lines of credit and agreements allow for total maximum cash borrowings and letters of credit of $588.8 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 $399.4 million of borrowings drawn on these lines of credit as of January 31, 2009, and letters of credit issued at that time totaled $48.7 million. The amount of availability for borrowings under these lines as of January 31, 2009 was $80.6 million of which $40.7 million was committed. Of this $40.7 million in committed capacity, the entire amount can also be used for letters of credit. In addition to the $80.6 million of availability for borrowings, the Company also had $60.1 million in additional capacity for letters of credit in Europe and Asia/Pacific as of January 31, 2009.

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PART I — FINANCIAL INFORMATION

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

Unless the context indicates otherwise, when we refer to “Quiksilver”, “we”, “us”, “our”, or the “Company” in this Form 10-Q, we are referring to Quiksilver, Inc. and its subsidiaries on a consolidated basis. You should read the following discussion and analysis in conjunction with our unaudited condensed consolidated financial statements and related notes thereto contained elsewhere in this report. The information contained in this quarterly report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our securities. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended October 31, 2008 and subsequent reports on Form 8-K, which discuss our business in greater detail. The section entitled “Risk Factors” set forth in Item 1A of our Annual Report on Form 10-K, and similar disclosures in our other SEC filings, discuss some of the important risk factors that may affect our business, results of operations and financial condition. You should carefully consider those risks, in addition to the information in this report and in our other filings with the SEC, before deciding to purchase, hold or sell our securities.

Over the past 38 years, Quiksilver has been established as a leading global brand 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 grew 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, Boardriders Clubs, 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 July 2005, we acquired Skis Rossignol, S.A., a wintersports and golf equipment manufacturer. Today our products are sold throughout the world, primarily in surf shops, skate shops, snow shops and specialty stores.

On November 12, 2008, we completed the sale of our Rossignol business, which includes the brands Rossignol, Dynastar, Look and Lange. Our Rossignol business, including both wintersports equipment and related apparel, is classified as discontinued operations. The assets and related liabilities of our Rossignol 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 condensed consolidated financial statements. As a result of these dispositions, the information herein 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 currently operate in three segments: the Americas, Europe and Asia/Pacific. Our former wintersports equipment segment has been classified as discontinued operations. The Americas segment includes revenues primarily from the U.S. and Canada. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand and Indonesia. Royalties earned from various licensees in other international territories are categorized in corporate operations along with revenues from sourcing services to our licensees.

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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 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 from continuing operations and other data as a percentage of revenues:

	Three Months Ended January 31,
Statements of Operations data	2009			2008
Revenues, net		100.0	%		100.0	%
Gross profit		46.7			49.0
Selling, general and administrative expense		46.7			44.6
Operating income		0.1			4.5
Interest expense		3.2			2.2
Foreign currency, minority interest and other expense (income)		0.3			(0.1	)
(Loss) income before provision for income taxes		(3.4	)%		2.3	%
Other data
Adjusted EBITDA(1)		3.4	%		8.0	%

⁽¹⁾ Adjusted EBITDA is defined as income from continuing operations 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 other 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 profitability. 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 (loss) income from continuing operations to Adjusted EBITDA:

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	Three Months Ended January 31,
	2009			2008
(Loss) income from continuing operations	$	(65,862	)	$	7,570
Provision for income taxes		50,581			4,038
Interest expense		14,154			11,048
Depreciation and amortization		13,303			13,531
Non-cash stock-based compensation expense		2,707			3,496
Adjusted EBITDA	$	14,883		$	39,683

Three Months Ended January 31, 2009 Compared to Three Months Ended January 31, 2008

Our total net revenues for the three months ended January 31, 2009 decreased 11% to $443.3 million from $496.6 million in the comparable period of the prior year. This revenue trend as compared to the same period in fiscal 2008 is expected to continue in the second quarter. The effect of changes in foreign currency exchange rates accounted for approximately $34.8 million of the decrease in total net revenues. Our net revenues in each of the Americas, Europe and Asia/Pacific segments include apparel, footwear and accessories product lines for our Quiksilver, Roxy, DC, and other brands which include Hawk, Raisins, Leilani, Radio Fiji, Lib Technologies, Gnu and Bent Metal. Revenues in the Americas decreased 13% to $203.4 million for the three months ended January 31, 2009 from $234.9 million in the comparable period of the prior year, while European revenues decreased 9% to $181.7 million from $200.3 million and Asia/Pacific revenues decreased 5% to $57.6 million from $60.4 million for those same periods. The decrease in the Americas came primarily from the Quiksilver and DC brand revenues and, to a lesser extent, Roxy brand revenues across a majority of product lines. The decrease in Americas’ revenues was attributable to general economic conditions affecting both our retail and wholesale markets, and the timing of shipments of DC product compared to the prior year. In addition to lower volume, market related price compression occurred in our company-owned retail stores which also impacted our overall gross margin. Approximately $20.1 million of Europe’s revenue decrease was attributable to the negative effects of foreign currency exchange rates. The currency adjusted revenue increase of 1% in Europe was driven by growth in our Quiksilver and DC brands, partially offset by a decrease in our Roxy brand revenues. Quiksilver brand revenue growth came primarily from apparel and, to a lesser extent, accessories. DC brand revenue growth came primarily from apparel and, to a lesser extent, accessories. The decrease in our Roxy brand came primarily from our accessories and footwear product lines, partially offset by growth in our Roxy apparel brand revenues. The decrease in Asia/Pacific’s revenue was caused by the negative effects of changes in foreign currency exchange rates, which caused a current year decline of approximately $14.7 million. The currency adjusted revenue increase in Asia/Pacific came primarily from growth in our Roxy and Quiksilver brands and, to a lesser extent, growth in our DC brand.

Our consolidated gross profit margin for the three months ended January 31, 2009 decreased to 46.7% from 49.0% in the comparable period of the prior year. The gross profit in the Americas segment decreased to 37.2% from 43.3%, our European segment’s gross profit margin increased to 55.5% from 54.8%, and our Asia/Pacific segment gross profit margin increased to 53.3% from 52.6% for those same periods. The decrease in the Americas segment’s gross profit margin was primarily caused by market related price compression in both our company-owned retail stores and our wholesale business. Our European segment gross profit margin increased primarily as a result of a higher percentage of sales through our retail stores and improved sourcing. In our Asia/Pacific segment, the gross profit margin increase was primarily due to improved wholesale margins in Australia as compared to the prior year.

Our selling, general and administrative expense (“SG&A”) for the three months ended January 31, 2009 decreased 7% to $206.8 million from $221.4 million in the comparable period of the prior year. The effect of changes in foreign currency exchange rates accounted for approximately $15.7 million of the decrease in total SG&A. In the Americas segment, SG&A expenses decreased 3% to $92.0 million from $94.6 million in the comparable period of the prior year, while our European segment’s SG&A decreased 11% to $78.8 million from $88.1 million, and our Asia/Pacific segment’s SG&A decreased 4% to $26.9 million from $27.9 million for those same periods. As a percentage of revenues, our consolidated SG&A

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increased to 46.7% for the three months ended January 31, 2009 from 44.6% for the three months ended January 31, 2008. In the Americas, SG&A as a percentage of revenues increased to 45.2% compared to 40.3% the year before. In Europe, SG&A as a percentage of revenue decreased to 43.3% from 44.0% and in Asia/Pacific, SG&A as a percentage of revenue increased to 46.7% from 46.2% for those same periods. The increase in SG&A costs as a percentage of revenue in our Americas segment was primarily due to lower revenues. Expense reductions were partially offset by approximately $5.0 million in severance related charges in connection with our January 2009 staff reductions. The decrease in SG&A costs as a percentage of revenue in our European segment was primarily caused by lower marketing and selling costs. In our Asia/Pacific segment, the increase in SG&A costs as a percentage of revenue is primarily related to lower revenues and the cost of opening and operating additional retail stores.

Interest expense for the three months ended January 31, 2009 increased to $14.2 million from $11.0 million in the comparable period of the prior year primarily as a result of interest expense previously allocated to the discontinued operations of Rossignol in the prior year. Including both continuing and discontinued operations our interest expense for the three months ended January 31, 2009 decreased to $14.3 million compared to $14.9 million in the comparable period of the prior year. In the prior year, the discontinued Rossignol business was allocated interest based on intercompany borrowings.

Our foreign currency loss amounted to $1.4 million for the three months ended January 31, 2009 compared to a gain of $0.6 million in the comparable period of the prior year. This loss resulted primarily from the foreign exchange effect of certain non-U.S. dollar denominated liabilities.

Our effective income tax rate for the three months ended January 31, 2009 was (331.0)% compared to 34.8% in the comparable period of the prior year. Despite having a loss for the three months ended January 31, 2009, our tax provision was $50.6 million as we recorded a valuation allowance of $45.9 million against our deferred tax assets in the United States.

Income from continuing operations for the three months ended January 31, 2009 decreased to a loss of $65.9 million or $0.52 per share on a diluted basis compared to income from continuing operations of $7.6 million or $0.06 per share on a diluted basis in the comparable period of the prior year. Adjusted EBITDA decreased to $14.9 million from $39.7 million for those same periods.

Financial Position, Capital Resources and Liquidity

We generally finance our working capital needs and capital investments with operating cash flows and bank revolving lines of credit. Multiple banks in the United States, Europe and Australia make these lines of credit available 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 Rossignol purchase price and to refinance certain existing indebtedness.

Cash Flows

Operating activities from continuing operations provided cash of $26.6 million in the three months ended January 31, 2009 compared to $32.7 million in the three months ended January 31, 2008. This $6.1 million decrease in cash provided was primarily due to increases in our net loss and other non-cash charges of $28.0 million, partially offset by improvements in working capital of $21.9 million.

Capital expenditures from continuing operations totaled $10.3 million for the three months ended January 31, 2009, compared to $27.5 million in the comparable period of the prior year. These investments include company-owned stores and ongoing investments in computer, warehouse and manufacturing equipment. We had no acquisitions during the three month period ended January 31, 2009. We generated $21.8 million in cash from investing activities of discontinued operations, which is primarily related to the net proceeds from the sale of our Rossignol wintersports business during the three months ended January 31, 2009.

During the three months ended January 31, 2009, net cash used in financing activities from continuing operations totaled $41.7 million, compared to cash used of $48.3 million in the comparable period of the

25

prior year. This decrease in cash used primarily relates to the repayment of debt with the proceeds from the sale of our Cleveland Golf business in December 2007. Additionally, we used $11.1 million in cash from discontinued operations to repay certain debt classified in discontinued operations relating to our Rossignol borrowings.

The net decrease in cash and cash equivalents for the three months ended January 31, 2009 was $11.0 million compared to an increase of $0.8 million in the comparable period of the prior year. Cash and cash equivalents totaled $42.1 million at January 31, 2009 compared to $53.0 million at October 31, 2008, while working capital was $389.9 million at January 31, 2009 compared to $631.3 million at October 31, 2008. Working capital decreased as a result of the disposal of the Rossignol wintersports business in November 2008.

In March 2009, we extended the maturity date of a $70.8 million European credit facility, which was previously due on March 14, 2009, to June 30, 2009. We intend to conclude either a strategic or refinancing transaction within the period covered by this extension, in which case this credit facility would either be refinanced or repaid. In connection with this extension, the interest rate of the credit facility was adjusted to Euribor plus a margin of 2.8%.

We are highly leveraged. However, we believe that our cash flows from operations, together with our existing credit facilities will be adequate to fund our capital requirements for at least the next twelve months. We plan to refinance our short-term uncommitted lines of credit in Europe and Asia/Pacific with new committed facilities. In addition to these refinancings, we expect to increase liquidity either through a sale of assets or by issuing secured debt. We also expect to arrange a new Americas credit facility with our U.S. lenders.

We believe that we can obtain additional liquidity to improve the maturities of our debt and reduce the amount of our short-term uncommitted lines of credit. However, the continuing turmoil in the financial markets could make it more difficult for us to access capital, sell assets, refinance the our existing indebtedness, enter into agreements for new indebtedness or obtain funding through the broader capital markets. Therefore, no assurances can be given that we will be successful in these efforts.

Trade Accounts Receivable and Inventories

Our trade accounts receivable decreased 21% to $373.4 million at January 31, 2009 from $470.1 million at October 31, 2008. Accounts receivable in our Americas segment decreased 22% to $197.5 million at January 31, 2009 from $254.2 million at October 31, 2008, European segment accounts receivable decreased 12% to $140.6 million from $160.0 million and Asia/Pacific segment accounts receivable decreased 37% to $35.3 million from $55.8 million. Compared to January 31, 2008, accounts receivable remained largely unchanged in the Americas segment, decreased 11% in our European segment and decreased 24% in our Asia/Pacific segment. Adjusting for the effects of foreign currency exchange rates, consolidated trade accounts receivable increased slightly compared to January 31, 2008. Included in accounts receivable at January 31, 2009 are approximately $19.6 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 deducted from accounts receivable to more accurately compute days sales outstanding. Overall average days sales outstanding increased by approximately 3 days at January 31, 2009 compared to January 31, 2008.

Consolidated inventories increased 22% to $380.5 million at January 31, 2009 from $312.1 million at October 31, 2008. Inventories in the Americas segment increased 19% to $193.7 million from $162.2 million at October 31, 2008, European segment inventories increased 36% to $134.1 million from $102.6 million and Asia/Pacific segment inventories increased 11% to $52.8 million from $47.4 million. Compared to January 31, 2008, inventories increased 26% in the Americas segment, decreased 12% in our European segment and decreased 10% in the Asia/Pacific segment. Adjusting for the effects of foreign currency exchange rates, our consolidated inventory increased 16% compared to January 31, 2008. Consolidated average annual inventory turnover was approximately 3.2 at January 31, 2009 compared to approximately 3.4 at January 31, 2008.

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Commitments

There have been no material changes in our contractual obligations since October 31, 2008.

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.

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 earnings would be adversely affected.

Accounts Receivable

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

Inventories

We value inventories at the cost to purchase and/or manufacture the product or the current estimated market value of the inventory, whichever is lower. We regularly review our inventory quantities on hand, and adjust 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 in the retail market; and

• unseasonable weather.

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

Long-Lived Assets

We acquire tangible and intangible assets in the normal course of our business. We evaluate the recoverability of the carrying amount of these long-lived assets (including fixed assets, trademarks

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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. If the carrying amount exceeds fair value, then the second step of the impairment test is performed to measure the amount of any impairment loss. Fair value is computed based on estimated future cash flows discounted at a rate that approximates our cost of capital. Such estimates are subject to change, and we may be required to recognize impairment losses in the future.

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.

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 FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109. FIN 48 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 FIN 48 can create significant variability in our tax rate from period to period upon changes in or adjustments to our uncertain tax positions.

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.

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Gains and losses from translation of foreign subsidiary financial statements are included in accumulated other comprehensive income or loss.

As part of our overall strategy to manage our level of exposure to the risk of fluctuations in foreign currency exchange rates, we enter into various foreign 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.

New Accounting Pronouncements

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

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 obtain new financing or refinancing on reasonable terms;

• our ability to sell certain assets on reasonable terms;

• 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.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to a variety of risks, including foreign currency fluctuations and changes in interest rates that affect interest expense.

Foreign Currency and Derivatives

We are exposed to financial statement gains and losses as a result of translating the operating results and financial position of our international subsidiaries. We translate the local currency statements of

29

income of our foreign subsidiaries into U.S. dollars using the average exchange rate during the reporting period. Changes in foreign currency exchange rates affect our reported profits and distort comparisons from period to period. By way of example, when the U.S. dollar strengthens compared to the euro, there is a negative effect on our reported results for Quiksilver Europe because it takes more profits in euros to generate the same amount of profits in stronger U.S. dollars. In addition, the statements of income of Quiksilver Asia/Pacific are translated from Australian dollars and Japanese yen into U.S. dollars, and there is a negative effect on our reported results for Quiksilver Asia/Pacific when the U.S. dollar is stronger in comparison to the Australian dollar or Japanese yen.

European revenues increased 1% in euros during the three months ended January 31, 2009 compared to the three months ended January 31, 2008. As measured in U.S. dollars and reported in our consolidated statements of income, European revenues decreased 9% as a result of a stronger U.S. dollar versus the euro in comparison to the prior year.

Asia/Pacific revenues increased 26% in Australian dollars during the three months ended January 31, 2009 compared to the three months ended January 31, 2008. As measured in U.S. dollars and reported in our consolidated statements of income, Asia/Pacific revenues decreased 5% as a result of a stronger U.S. dollar versus the Australian dollar in comparison to the prior year.

Our other foreign currency and interest rate risks are discussed in our Annual Report on Form 10-K for the year ended October 31, 2008 in Item 7A.

Item 4. Controls and Procedures

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

We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2009, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of January 31, 2009.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended January 31, 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 6.

Exhibits
2.1	Stock Purchase Agreement between the Roger Cleveland Golf Company, Inc., Rossignol Ski Company, Incorporated, Quiksilver, Inc. and SRI Sports Limited dated October 30, 2007 (incorporated by reference to Exhibit 2.3 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2007).
2.2	Amendment No. 1 to the Stock Purchase Agreement between the Roger Cleveland Golf Company, Inc., Rossignol Ski Company, Incorporated, Quiksilver, Inc. and SRI Sports Limited dated December 7, 2007 (incorporated by reference to Exhibit 2.4 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2007).
2.3	Offer Letter dated August 25, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc. and Chartreuse et Mont Blanc LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 27, 2008).
2.4	Amended and Restated Offer Letter dated October 31, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc. and Chartreuse et Mont Blanc LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 31, 2008).
2.5	Stock Purchase Agreement dated November 12, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc., Chartreuse et Mont Blanc LLC, Chartreuse et Mont Blanc SAS, Chartreuse et Mont Blanc Global Holdings S.C.A., Macquarie Asset Finance Limited and Mavilia SAS (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on November 18, 2008).
3.1	Restated Certificate of Incorporation of Quiksilver, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2004).
3.2	Certificate of Amendment of Restated Certificate of Incorporation of Quiksilver, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2005).
3.3	Amended and Restated Bylaws of Quiksilver, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on December 7, 2007).
4.1	Indenture for the 6 7/8% Senior Notes due 2015 dated July 22, 2005, among Quiksilver, Inc., the subsidiary guarantors set forth therein and Wilmington Trust Company, as trustee, including the form of Global Note attached thereto (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed July 25, 2005).
10.1	Amendments to executive officer base salaries effective as of February 1, 2009. (1)
10.2	Eighth Amendment to Amended and Restated Credit Agreement dated November 12, 2008 (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2008).
10.3	Ninth Amendment to Amended and Restated Credit Agreement dated November 12, 2008 (incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2008).

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Exhibits
10.4	Separation and Transition Agreement between Martin J. Samuels and Quiksilver, Inc. dated January 12, 2009. (1)
10.5	Employment Agreement between Craig Stevenson and Quiksilver, Inc. dated January 19, 2009, as amended. (1)
10.6	Tenth Amendment to the Amended and Restated Credit Agreement dated March 6, 2009.
10.7	English Translation of Amendment No. 3 to Line of Credit Agreement dated March 14, 2008 between Pilot S.A.S. and Societe Generale, BNP Paribas and Le Credit Lyonnais dated March 9, 2009.
31.1	Rule 13a-14(a)/15d-14(a) Certifications — Principal Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certifications — Principal Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Financial Officer

(1) Management contract or compensatory plan.

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SIGNATURES

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

	QUIKSILVER, INC., a Delaware corporation
March 12, 2009	/s/ Brad L. Holman
	Brad L. Holman
	Vice President of Accounting and Financial Reporting (Principal Accounting Officer and Authorized Signatory)

33

EXHIBIT INDEX

Exhibits
2.1	Stock Purchase Agreement between the Roger Cleveland Golf Company, Inc., Rossignol Ski Company, Incorporated, Quiksilver, Inc. and SRI Sports Limited dated October 30, 2007 (incorporated by reference to Exhibit 2.3 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2007).
2.2	Amendment No. 1 to the Stock Purchase Agreement between the Roger Cleveland Golf Company, Inc., Rossignol Ski Company, Incorporated, Quiksilver, Inc. and SRI Sports Limited dated December 7, 2007 (incorporated by reference to Exhibit 2.4 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2007).
2.3	Offer Letter dated August 25, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc. and Chartreuse et Mont Blanc LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 27, 2008).
2.4	Amended and Restated Offer Letter dated October 31, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc. and Chartreuse et Mont Blanc LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October 31, 2008).
2.5	Stock Purchase Agreement dated November 12, 2008, by and among Quiksilver, Inc., Pilot S.A.S., Meribel S.A.S., Quiksilver Americas, Inc., Chartreuse et Mont Blanc LLC, Chartreuse et Mont Blanc SAS, Chartreuse et Mont Blanc Global Holdings S.C.A., Macquarie Asset Finance Limited and Mavilia SAS (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on November 18, 2008).
3.1	Restated Certificate of Incorporation of Quiksilver, Inc., as amended (incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2004).
3.2	Certificate of Amendment of Restated Certificate of Incorporation of Quiksilver, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2005).
3.3	Amended and Restated Bylaws of Quiksilver, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on December 7, 2007).
4.1	Indenture for the 6 7/8% Senior Notes due 2015 dated July 22, 2005, among Quiksilver, Inc., the subsidiary guarantors set forth therein and Wilmington Trust Company, as trustee, including the form of Global Note attached thereto (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed July 25, 2005).
10.1	Amendments to executive officer base salaries effective as of February 1, 2009. (1)
10.2	Eighth Amendment to Amended and Restated Credit Agreement dated November 12, 2008 (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2008).
10.3	Ninth Amendment to Amended and Restated Credit Agreement dated November 12, 2008 (incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2008).

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Exhibits
10.4	Separation and Transition Agreement between Martin J. Samuels and Quiksilver, Inc. dated January 12, 2009. (1)
10.5	Employment Agreement between Craig Stevenson and Quiksilver, Inc. dated January 19, 2009, as amended. (1)
10.6	Tenth Amendment to the Amended and Restated Credit Agreement dated March 6, 2009.
10.7	English Translation of Amendment No. 3 to Line of Credit Agreement dated March 14, 2008 between Pilot S.A.S. and Societe Generale, BNP Paribas and Le Credit Lyonnais dated March 9, 2009.
31.1	Rule 13a-14(a)/15d-14(a) Certifications — Principal Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certifications — Principal Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Executive Officer
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003 — Chief Financial Officer

(1) Management contract or compensatory plan.

35

EX-10.1

Exhibit 10.1

On January 16, 2009, the Compensation Committee of the Board of Directors of Quiksilver, Inc. (the “Company”) approved a reduction in the annual base salaries (effective as of February 1, 2009) for certain executive officers of the Company. The following table sets forth the reduced annual base salary levels of such executive officers:

Name and Position	Base Salary
Robert B. McKnight, Jr.,	$	903,000
Chief Executive Officer and President
Charles S. Exon,	$	404,000
Chief Administrative Officer, Secretary and General Counsel
Pierre Agnes,	€	332,500
President — Quiksilver Europe

EX-10.4

Exhibit 10.4

January 12, 2009

PERSONAL AND CONFIDENTIAL

VIA HAND DELIVERY

Mr. Martin J. Samuels
c/o Quiksilver, Inc.
15202 Graham Street
Huntington Beach, California 92649

Re: Separation and Transition Agreement

Dear Marty:

This letter (“Agreement”) will confirm the agreement and understanding we have reached regarding your transition and departure from, and consulting relationship with, Quiksilver, Inc. (“Quiksilver” or the “Company”). In that regard, we have agreed as follows:

1. End of Employment Relationship/Severance Pay Period.

A.

Your employment with the Company will end for all purposes on January 12, 2009 (the “Separation Date”). Effective as of the Separation Date, your employment with the Company is hereby terminated as a result of corporate restructuring. You are also resigning as a director and officer from any of the Company’s subsidiaries where you serve in any such capacity. Your termination constitutes a “separation from service” within the meaning of Treasury Regulations Section 1.409A-1(h) and an “involuntary separation from service” within the meaning of Treasury Regulations Section 1.409A-1(n)(1).

B.

The Company will pay you severance pay in the total amount of $1,200,000, less required tax deductions and withholdings (“Severance Pay”), with checks being sent to your home address and payable as follows:

(i)	A lump sum payment of $408,000, less required tax deductions and withholdings, payable on July 15, 2009; and
(ii)	Beginning August 1, 2009, and continuing through July 31, 2010 (the “Severance Pay Period”), the Company shall compensate you on its regular payroll dates in the monthly amount of $66,000, less legally required withholdings and deductions (for a total amount of $792,000).

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C.	Except for the strategic advisory services provided by you as a consultant after the Separation Date pursuant to Paragraph 3, which the Company is separately paying for, you will not be required to perform any duties during the Severance Pay Period. Through the end of the Severance Pay Period and afterwards, you are expected to conduct yourself in a positive and professional manner as it pertains to Quiksilver.
D.	Your health, life, long term disability and other insurance coverages will cease after the Separation Date. You may timely elect and pay for continued health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”). Other insurance coverages may be subject to continuation or conversion at your own expense, subject to the provisions of the particular plan.
E.	Nothing in this Agreement shall constitute a waiver of any benefits which are already vested as of the Separation Date, under any Company 401(k) or employee welfare benefit plan, and you shall remain fully entitled to all such benefits, if any, in accordance with the terms of the applicable plan.
F.	Except for any continuing and surviving obligations of yours thereunder (e.g., protection of Quiksilver’s trade secrets and proprietary and confidential information), any and all employment agreements you may have with Quiksilver (including, without limitation, that certain agreement dated May 25, 2005, and amended December 21, 2006) are deemed fully terminated and of no further force or effect. You have no right to any additional compensation, equity or benefits under any such employment agreement.
G.	After the Separation Date, you are not eligible for, and will not receive, any other compensation or benefit except as specifically provided herein (including, but not limited to, any additional bonuses, incentives, stock option grants, restricted stock grants, payments with respect to any outstanding awards under the Company’s Long Term Incentive Plan or the Annual Incentive Plan, expense reimbursement or employee benefits).
H.	Employment references should be directed to me, and I will verify your dates of employment and position(s) held. If you wish me to confirm your compensation (salary, bonuses, etc.), please check the box and initial at the end of this sentence, and that will constitute your authorization for me to do so. ¨ _______ Yes, I so authorize.                                                                 M.J.S.

2. Stock Options and Restricted Stock.

A. Attached hereto as Attachment “A” is a schedule of your vested and unvested stock options and restricted stock as of the date of this Agreement. It is anticipated that following the Separation Date, you will continue to provide Services (as defined in your stock option agreements) to the Company for some limited period of time as provided in Paragraph 3 below. The date upon which you cease to provide Services to the Company pursuant to Paragraph 3 below is

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	referred to as the “Services Cessation Date.” All of your unvested stock options which have not previously expired will accelerate and vest on the Services Cessation Date. Any unexercised stock options on the Services Cessation Date which have not previously expired will remain exercisable for a period of (i) ninety (90) days with respect to stock options granted to you prior to May 25, 2005 and (ii) twelve (12) months with respect to stock options granted to you on or after May 25, 2005, (commencing with the Services Cessation Date) after which they will expire and cease to be exercisable; provided, however, that in no event may such stock options be exercised after their expiration date, and they may terminate and cease to be exercisable earlier in the event of a corporate transaction as provided in your individual stock option agreements. All other terms of your stock options shall continue to be governed by the applicable plan pursuant to which they were issued and the applicable stock option agreements.
B.	On January 9, 2009, all shares of restricted stock of the Company held by you shall expire and be surrendered to the Company.
C.	Please note that all “blackout” periods under the Company’s Policy Prohibiting Insider Trading (a copy of which you have reviewed incident to the execution of this Agreement) will continue to apply to you through the Services Cessation Date, and you will continue to be subject to federal and state securities laws which prohibit the purchase or sale of shares while in possession of material, non-public information.

3. Strategic Advisory Services.

You agree that for a 12-month period following the Separation Date, you shall make yourself available on an as-requested basis to Bob McKnight, Charlie Exon and/or Joe Scirocco to provide strategic advisory and transition services. You shall not be required to consult in excess of 30 hours per month. The Company will also provide you with the opportunity to access career transition services (e.g., an office, answering service, etc.) through December 31, 2009, through a management services company such as Lee Hecht Harrison or Right Management at a total cost to the Company not to exceed $15,000. Said amount will be paid by Quiksilver directly to the vendor of such services on or before December 31, 2009. It is anticipated that you will provide most of such strategic advisory and transition services telephonically or electronically. Your primary contacts with respect to such services shall be Bob McKnight, Charlie Exon and Joe Scirocco. For such services, you shall receive a fee of $20,000 per month, payable within 30 days following the end of each month during the term of such strategic advisory and transition services. Also, during the period you are providing strategic advisory and transition services pursuant to this Paragraph 3, you shall be entitled to a clothing allowance of $500 per month at the Company’s wholesale prices. You acknowledge and agree that your services pursuant to this Paragraph 3 shall be provided as an independent contractor, and such services shall not be construed to create the relationship of employer and employee or principal and agent between you and the Company. During the period you are providing strategic advisory and transition services pursuant to this Paragraph 3, you shall not be entitled to participate in any of the medical, dental, life or long term disability insurance coverages provided by the Company for the benefit of its employees. You

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agree that the level of services you will provide under this Paragraph 3 will not exceed 20% of the level of services you provided to the Company during the 36-month period immediately preceding the Separation Date; and, therefore, your services under this Paragraph 3 will not delay the date of your “separation from service” beyond the Separation Date for purposes of Treasury Regulations Section 1.409A-1(h). You will maintain and pay all federal, state and local disability, worker’s compensation, payroll taxes, self-employment insurance, and income and other taxes, and the Company will not withhold or pay any such taxes or insurance on your behalf with respect to compensation for such services.

4. Full Understanding and Voluntary Acceptance.

There are both legal and tax implications to you in executing this Agreement, and you agree to be solely liable and responsible for, and indemnify and hold the Company harmless from, any tax liability you personally may incur as a result of this Agreement. Quiksilver advises you to consult an attorney and/or a tax professional prior to executing this Agreement. In entering into this Agreement, you agree that you have had the opportunity to seek the advice of an independent attorney and/or tax professional of your own choice and that you understand all the terms of this Agreement. You are executing this Agreement voluntarily with full knowledge of its significance and, in doing so, are not relying upon any statements, advice or representations made by the Company, its employees or its counsel.

5. Return of Property/Non-Solicitation.

A. Except as otherwise provided below, all Company Property must be returned within a reasonable period of time after the Separation Date. By signing this Agreement, you confirm that you will return all keys, magnetic access cards and all other means of access to the property or offices of the Company, and all other Company property, equipment and documents in your possession or under your control, including, but not limited to, credit cards, cell phones, PDA’s, BlackBerries, fax machines, pagers, files, personnel forms, accounting information and spreadsheets, budgets, compensation data, business plans, documents and any other property of the Company (“Company Property”) and that you will not copy, download or retain any such materials.

Notwithstanding the foregoing, you may retain your (i) laptop computer, provided that you deliver it to the Company within a reasonable period of time after the Company’s request to have the memory erased and software removed by the Company, and (ii) cellular telephone and BlackBerry equipment, provided you will be solely responsible for all service charges, billing and operating expenses after January 12, 2009. (Personal information on your laptop computer, such as photographs, will be copied to a disk.) You also agree (i) to preserve in confidence and not disclose any confidential, proprietary, or trade secret information relating to Quiksilver (or its affiliates), or their products, personnel, or financial data, and (ii) not to download, copy or transfer any documents or software from the Company’s computers.

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B. You agree that, for a period of one (1) year after the Separation Date, you shall not, without the prior written consent of the Company, directly or indirectly through the actions of any other individual or entity, whether for your own benefit or for that of another individual or entity, (i) solicit, divert or induce, or attempt to solicit, divert or induce, any individual who is an employee of the Company or any of the Released Parties (as defined below) to terminate his or her employment; or (ii) solicit, divert or induce, or attempt to solicit, divert or induce, any individual or entity who is a supplier, distributor, customer or client of the Company or any of the Released Parties not to continue as a supplier, distributor, customer or client of the Company.

6. Release of Claims.

A. In exchange for the consideration provided herein, you agree to, and by signing this Agreement do, forever waive and release Quiksilver and each of its affiliated or related entities, divisions, subsidiaries, foundations, licensees, shareholders, officers, directors, employees, agents, successors and assigns (collectively, “Released Parties”), from all known and unknown claims, rights, actions, complaints, charges, liabilities, obligations, promises, agreements, causes of action, suits, demands, damages, costs, losses, debts, and expenses of any nature whatsoever which you ever had, now have, or may claim to have against any of the Released Parties, including, without limitation, any claim arising out of (i) any aspect of your employment or the termination of your employment with the Company; (ii) any restrictions on the right of Quiksilver to terminate your employment or any employment agreement with you; (iii) any agreement, understanding or inducement, oral or written, express or implied, between you and any of the Released Parties, including any employment agreement (including, without limitation, that certain agreement dated May 25, 2005, and amended December 21, 2006); (iv) any stock options or restricted stock (other than as provided in Paragraph 2 of this Agreement); (v) any outstanding awards pursuant to the Company’s Long Term Incentive Plan or Annual Incentive Plan; and/or (vi) any federal, state or governmental constitution, statute, regulation or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the California Fair Employment and Housing Act; provided, however, that this release does not (a) affect rights or claims that may arise after the date it is executed, (b) waive rights or claims arising out of this Agreement, or (c) waive any rights you may have to indemnity under the Company’s By-Laws, any individual indemnification agreement between you and the Company, California Labor Code § 2802 or as otherwise required by law. In addition, except for acts or omissions that are grossly negligent or amount to willful misconduct, the Company hereby agrees to forever waive and release you from all known and unknown claims, rights, actions, complaints, charges, liabilities, obligations, promises, agreements, causes of action, suits, demands, damages, costs, losses, debts, and expenses of any nature whatsoever which it ever had, now has, or may claim to have against you. As of the date of its execution of this Agreement, the Company represents that it is not aware of any such gross negligence or willful misconduct.

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B. Further, each party waives and relinquishes all rights and benefits they may have under Section 1542 of the California Civil Code. Section 1542 reads as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

7. Non-Admission.

Nothing contained in this Agreement shall be considered an admission of any liability whatsoever. If you elect not to sign this Agreement, this Agreement is inadmissible in evidence to prove any liability or damage.

8. Severability.

Should any portion, word, clause, phrase, sentence or paragraph of this Agreement be declared void or unenforceable, such portion shall be considered independent and severable from the remainder, the validity of which shall remain unaffected.

9. Entire Agreement and Arbitration.

This Agreement constitutes the entire agreement between you and Quiksilver pertaining to the subject matter hereof and supersedes any and all prior agreements, understandings, negotiations and discussions, whether oral or written, pertaining to the subject matter hereof. After the execution of this Agreement, to the fullest extent allowed by law, any controversy, claim or dispute between you and the Company (and/or any of the Released Parties) relating to or arising out of this Agreement or your employment or the cessation of that employment will be submitted to final and binding arbitration in Orange County, California, for determination in accordance with the applicable rules of the American Arbitration Association.

10. Section 409A.

Notwithstanding the foregoing provisions of this Agreement, to the extent the Company reasonably determines that any payment or benefit under this Agreement is subject to Section 409A of the Internal Revenue Code (the “Code”), such payment or benefit shall be made at such times and in such forms as the Company reasonably determines are required to comply with Code Section 409A (including, without limitation, in the case of a “specified employee” within the meaning of Code Section 409A, any payments that would otherwise be made during the six-month period following separation of service will be paid in a lump sum after the end of the six-month period) and the Treasury Regulations; provided, however, that in no event will the Company be required to provide you with any additional payment or benefit in the event that any of your payments or benefits trigger additional income tax under Code Section 409A or in the event that the Company changes the time or form of your payments or benefits in

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accordance with this Paragraph. Each payment and benefit payable under this Agreement is intended to constitute a “separate payment” within the meaning of Treasury Regulations Section 1.409A-2(b)(2). The provisions of this Agreement are intended to comply with the requirements of Section 409A of the Code so that none of the severance payments and benefits to be provided under the Agreement will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.

11. Signature and Revocation Periods.

So that you can review this Agreement as you deem appropriate, the Company advises you as follows: (i) this Agreement does not waive any rights or claims that may arise after it is executed by you; (ii) you will have twenty-one (21) days to consider this Agreement, although you may sign it sooner than that if you so desire; (iii) you should consult with an attorney if you desire before executing this Agreement; and (iv) you also retain the right to revoke this Agreement at any time during the seven (7)-day period following execution of the Agreement. This Agreement shall not become effective or enforceable until such seven (7)-day period has expired.

By signing below, you voluntarily accept the terms contained in this Agreement.

Sincerely,

QUIKSILVER, INC.

By:
	Carol E. Scherman Senior Vice President, Human Resources

I HAVE READ, UNDERSTAND AND VOLUNTARILY
AGREE TO THE ABOVE.

Martin J. Samuels Date

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EX-10.5

Exhibit 10.5

January 19, 2009

Craig Stevenson
c/o Quiksilver
15202 Graham St.
Huntington Beach, CA 92649

Re: Employment at Quiksilver, Inc.

Dear Craig:

     On behalf of Quiksilver, Inc. (“Quiksilver” or the “Company”), I am pleased to offer you the following terms of employment to supplement your current agreement with the Company which is attached hereto as Exhibit A (as amended hereby, the “Agreement”).

1. Position; Exclusivity; Representation and Warranty.

(a)

The Company hereby agrees to employ you in the position of Interim President, Quiksilver Americas, currently reporting to Bob McKnight. This appointment will not change your status as President of Quiksilver South Asia Pacific and Global President of the Quiksilver Brand, but the Company acknowledges that during your tenure as Interim President of Quiksilver Americas, your principal duties will relate to the business and operations of the Americas region, as directed by the Chief Executive Officer. It is understood that you will serve as Interim President for 6 months, and that this period can be extended at any time by agreement between you and the Chief Executive Officer. Your responsibilities and duties may be changed from time to time as appropriate, and you may be assigned additional duties as determined by the Company.

(b)

Your anticipated start date is on or around January 12, 2009. During your employment with Quiksilver, you will devote your full professional and business time, interest, abilities and energies to the Company and will not render any services to any other person or entity, whether for compensation or otherwise, without the prior consent of the Company’s Chief Executive Officer. Further, during your employment, you will not engage in any business activities competitive with or adverse to the Company’s business or welfare, whether alone, as an employee, as a partner, as

1

a member, or as a shareholder, officer or director of any other corporation, or as a trustee, fiduciary or in any other similar representative capacity of any other entity.

2.	Base Salary. Your base salary will be $29,166 per month ($350,000 on an annualized basis), less applicable withholdings and deductions, paid on the Company’s regular payroll dates. A portion of your annual salary will be paid out of Australia’s payroll to ensure your maintenance of Australian residency. Your base salary will be reviewed at the time salaries are reviewed periodically and may be adjusted at the Company’s discretion in light of the Company’s performance, your performance, market conditions and other factors deemed relevant by the Company; provided however, the Company will review your base salary on the six month anniversary of this Agreement to evaluate a possible increase in your base salary to $400,000 (on an annualized basis). If you cease providing services as the Interim President, the Company will re-evaluate your base salary and possibly decrease your salary to reflect the change in your responsibilities.
3.	Bonus. For the fiscal year ending October 31, 2009, you shall be eligible to receive a discretionary bonus of up to $350,000, but no less than $200,000, provided certain transition and restructuring objectives have been met to the satisfaction of the Chief Executive Officer. In the event that your employment with the Company terminates (or your services as the Interim President terminates) prior to the end of the applicable fiscal year, your eligibility to receive a pro rata portion of the bonus is governed by the Agreement.
4.	Benefits. You will be eligible to participate in the Company’s employee benefit programs (e.g., group health insurance, 401(k), company paid life insurance, and company paid long term disability insurance) on the same terms and conditions applicable to comparable employees. You will be eligible to receive an annual clothing allowance of $5,000 used to purchase Company product at wholesale prices. Vacation and sick leave hours are not accrued for positions at your level; you are eligible to take time as needed. The Company reserves the right to change, modify, or eliminate any such benefits or coverage’s in its discretion.
5.	Stock Options. The amount and terms of any restricted stock, stock options, stock appreciation rights or other interests to be granted to you will be determined by the Board of Directors in its discretion and covered in separate agreements.
6.	Relocation Expenses. Quiksilver will reimburse you for reasonable and approved relocation costs incurred in moving you to California from Australia.
7.	Expatriate Assignment Compensation. The Company will contribute a total of $20,000 per month, less applicable withholdings and deductions,

2

	for the purpose of housing, education, cost of living and similar expenses incurred as a result of being on assignment in the United States. After the six month anniversary of this Agreement, the expatriate compensation will be determined at the discretion of the Company’s Chief Executive Officer, but shall be no more than $15,000 per month.
8.	Pre-Employment Requirements. In accordance with Quiksilver’s policies and state and federal law, this Agreement (and offer of employment) is contingent upon your successful completion of all requirements to establish the legal right to work in the United States. Quiksilver will incur all legal fees necessary to establish your residency and the residency of your spouse and children, while you work in the United States.
9.	Compliance With Business and Personnel Policies. You will be required to observe the Company’s personnel and business policies and procedures as they are in effect from time to time. In the event of any conflicts, the terms of this Agreement will control.

Please sign, date and return the enclosed copy of this letter to me for our files to acknowledge your agreement with the above.

Craig, we look forward to you joining the Quiksilver Americas team.

Very truly yours,
 

Robert McKnight 

CEO

Quiksilver, Inc.
 

ACKNOWLEDGED AND AGREED:

Craig Stevenson

Date

3

[Date]

PERSONAL AND CONFIDENTIAL

[Executive]
c/o Quiksilver, Inc.
15202 Graham Street
Huntington Beach, California 92649

Re: Employment at Quiksilver, Inc.

Dear [Executive]:

     This letter (“Agreement”) will confirm our understanding and agreement regarding your continued employment with Quiksilver, Inc. (“Quiksilver” or the “Company”). This Agreement is effective [Date], and completely supersedes and replaces any existing or previous oral or written understandings or agreements, express or implied, between you and the Company regarding your employment.

1.	Position; Exclusivity. The Company hereby agrees to employ you as its [___], currently reporting to the [___]. During your employment with Quiksilver, you will devote your full professional and business time, interest, abilities and energies to the Company and will not render any services to any other person or entity, whether for compensation or otherwise, or engage in any business activities competitive with or adverse to the Company’s business or welfare, whether alone, as an employee, as a partner, as a member, or as a shareholder, officer or director of any other corporation, or as a trustee, fiduciary or in any other similar representative capacity of any other entity.
2.	Base Salary. Your base salary will be $___ per month ($___ on an annualized basis), less applicable withholdings and deductions, paid on the Company’s regular payroll dates. Your salary will be reviewed at the time management salaries are reviewed periodically and may be adjusted (but not below $___ per month) at the Company’s discretion in light of the Company’s performance, your performance, market conditions and other factors deemed relevant by the Company.
3.	Bonus. For the fiscal year ending October [ ] and each fiscal year thereafter, you shall be eligible to receive a discretionary bonus under the terms approved by the Board of Directors for such bonus. Any such bonus shall be paid within thirty (30) days following the date the Company publicly releases its annual audited financial statements (the “Bonus Payment Date”). In the event that your employment with the Company terminates prior to

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	the end of the applicable fiscal year, your eligibility to receive a pro rata portion of the bonus is governed by Paragraph 9 below. Any bonus payments shall be less applicable withholdings and deductions.
4.	Vacation. Since Quiksilver does not have a vacation policy for executives of your level, no vacation days will be treated as earned or accrued.
5.	Health and Disability Insurance. You (and any eligible dependents you elect) will be covered by the Company’s group health insurance programs on the same terms and conditions applicable to comparable employees. You will also be covered by the long-term disability plan for senior executives on the same terms and conditions applicable to comparable employees. The Company reserves the right to change, modify, or eliminate such coverages in its discretion.
6.	Clothing Allowance. You will be provided a clothing allowance of $4,000 per year at the Company’s wholesale prices.
7.	Stock Options. You shall continue to be a participant in Quiksilver’s Stock Incentive Plan, or any successor equity plan. The amount and terms of any restricted stock, stock options, stock appreciation rights or other interests to be granted to you will be determined by the Board of Directors in its discretion and covered in separate agreements, but shall be substantially similar to those granted to other senior executives of Quiksilver of equivalent level. Stock options granted to you after the date hereof through the termination of your employment shall provide that if you are terminated by the Company without Cause (as hereinafter defined), as a result of your death or permanent disability, or you terminate your employment for Good Reason (as hereinafter defined), any such options outstanding will automatically vest in full on an accelerated basis so that the options will immediately prior to such termination become exercisable for all option shares and remain exercisable until the earlier to occur of (i) the first anniversary of such termination, (ii) the end of the option term, or (iii) termination pursuant to other provisions of the applicable option plan or agreement (e.g., a corporate transaction).
8.	Life Insurance. The Company will pay the premium on a term life insurance policy on your life with a company and policy of our choice, and a beneficiary of your choice, in the face amount determined by the Company of not less than $2,000,000. Our obligation to obtain and maintain this insurance is contingent upon your establishing and maintaining insurability, and we are not required to pay premiums for such a policy in excess of $5,000 annually.
9.	Unspecified Term; At Will Employment; Termination.

(a) Notwithstanding anything to the contrary in this Agreement or in your prior employment relationship with the Company, express or implied, your employment is for an unspecified term and either you or Quiksilver may terminate your employment at will and with or without Cause (as defined below) or notice at any time for any reason; provided, however, that you

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agree to provide the Company with thirty (30) days advance written notice of your resignation (during which time the Company may elect, in its discretion, to relieve you of all duties and responsibilities). This at-will aspect of your employment relationship can only be changed by an individualized written agreement signed by both you and an authorized officer of the Company.

(b) The Company may also terminate your employment immediately, without notice, for Cause, which shall include, but not be limited to, (i) your death, (ii) your permanent disability which renders you unable to perform your duties and responsibilities for a period in excess of three consecutive months, (iii) willful misconduct in the performance of your duties, (iv) commission of a felony or violation of law involving moral turpitude or dishonesty, (v) self-dealing, (vi) willful breach of duty, (vii) habitual neglect of duty, or (viii) a material breach by you of your obligations under this Agreement. If the Company terminates your employment for Cause, or you terminate your employment other than for Good Reason (as defined below), you (or your estate or beneficiaries in the case of your death) shall receive your base salary and other benefits earned and accrued prior to the termination of your employment and, in the case of a termination pursuant to subparagraphs (i) or (ii) only, a pro rata portion of your bonus, if any, as provided in Paragraph 3 for the fiscal year in which such termination occurs, less applicable withholdings and deductions, and you shall have no further rights to any other compensation or benefits hereunder on or after the termination of your employment.

(c) If Quiksilver elects to terminate your employment without Cause, or if you terminate your employment with the Company for Good Reason within six (6) months of the action constituting Good Reason, the Company will (i) continue to pay your base salary (but not any employment benefits) on its regular payroll dates for a period of eighteen (18) months, (ii) pay you a pro rata portion of a bonus adopted pursuant to Paragraph 3, if any, for the fiscal year in which such termination occurs, less applicable withholdings and deductions, and (iii) pay you an amount equal to two times the average annual bonus earned by you pursuant to Paragraph 3 during the two (2) most recently completed fiscal years of the Company, payable over an eighteen (18) month period following termination in equal installments on the Company’s regular payroll dates, less applicable withholdings and deductions. In order for you to be eligible to receive the payments specified in this Paragraph 9(c), you must execute a general release of claims in a form reasonably acceptable to the Company. You shall have no further rights to any other compensation or benefits hereunder on or after the termination of your employment. You shall not have a duty to seek substitute employment, and the Company shall not have the right to offset any compensation due you against any compensation or income received by you after the date of such termination.

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“Good Reason” for you to terminate employment means a voluntary termination as a result of (i) the assignment to you of duties materially inconsistent with your position as set forth above without your consent, (ii) a material diminution of your authority without your consent, (iii) a material breach by the Company of its obligations under this Agreement, (iv) a failure by the Company to obtain from any successor, before the succession takes place, an agreement to assume and perform the obligations contained in this Agreement, or (v) the Company requiring you to be based (other than temporarily) at any office or location outside of the Southern California area without your consent. Notwithstanding the foregoing, Good Reason shall not exist unless you provide the Company notice of termination on account thereof and, if such event or condition is curable, the Company fails to cure such event or condition within thirty (30) days of such notice.

(d) In the event that any payment or benefit received or to be received by you (collectively, the “Payments”) would constitute a parachute payment within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), then the following limitation shall apply:

The aggregate present value of those Payments shall be limited in amount to the greater of the following dollar amounts (the “Benefit Limit”):

(i) 2.99 times your Average Compensation (as defined below), or

(ii) the amount which yields you the greatest after-tax amount of Payments under this Agreement after taking into account any excise tax imposed under Code Section 4999 on those Payments.

The present value of the Payments will be measured as of the date of the change in control and determined in accordance with the provisions of Code Section 280G(d)(4).

Average Compensation means the average of your W-2 wages from the Company for the five (5) calendar years completed immediately prior to the calendar year in which the change in control is effected. Any W-2 wages for a partial year of employment will be annualized, in accordance with the frequency which such wages are paid during such partial year, before inclusion in Average Compensation.

(e) Notwithstanding the foregoing, to the extent the Company reasonably determines that any payment or benefit under this Agreement is subject to Section 409A of the Code, such payment or benefit shall be made at such times and in such forms as the Company reasonably determines are required to comply with Code Section 409A (including, without limitation, in the case of a “specified employee” within the meaning of Code Section 409A, any payments that would otherwise be made during the six-month period following separation of service will be paid in a lump sum after the end of the six-month period) and the Treasury Regulations and the transitional relief thereunder; provided, however, that in no event will the Company be required to provide you

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with any additional payment or benefit in the event that any of your payments or benefits trigger additional income tax under Code Section 409A or in the event that the Company changes the time or form of your payments or benefits in accordance with this paragraph.

10.	Trade Secrets; Confidential and/or Proprietary Information. The Company owns certain trade secrets and other confidential and/or proprietary information which constitute valuable property rights, which it has developed through a substantial expenditure of time and money, which are and will continue to be utilized in the Company’s business and which are not generally known in the trade. This proprietary information includes the list of names of the customers and suppliers of Quiksilver, and other particularized information concerning the products, finances, processes, material preferences, fabrics, designs, material sources, pricing information, production schedules, sales and marketing strategies, sales commission formulae, merchandising strategies, order forms and other types of proprietary information relating to our products, customers and suppliers. You agree that you will not disclose and will keep strictly secret and confidential all trade secrets and proprietary information of the Company, including, but not limited to, those items specifically mentioned above.
11.	Expense Reimbursement. The Company will reimburse you for documented reasonable and necessary business expenses incurred by you while engaged in business activities for the Company’s benefit on such terms and conditions as shall be generally available to other executives of the Company.
12.	Compliance With Business Policies. You will devote your full business time and attention to Quiksilver and will not be involved in other business ventures without written authorization from the Company’s Board of Directors. You will be required to observe the Company’s personnel and business policies and procedures as they are in effect from time to time. In the event of any conflicts, the terms of this Agreement will control.
13.	Entire Agreement. This Agreement, its addenda, and any stock option agreements the Company may enter into with you contain the entire integrated agreement between us regarding these issues, and no modification or amendment to this Agreement will be valid unless set forth in writing and signed by both you and an authorized officer of the Company.
14.	Arbitration as Exclusive Remedy. To the fullest extent allowed by law, any controversy, claim or dispute between you and the Company (and/or any of its affiliates, owners, shareholders, directors, officers, employees, volunteers or agents) relating to or arising out of your employment or the cessation of that employment will be submitted to final and binding arbitration in Orange County, California, for determination in accordance with the American Arbitration Association’s (“AAA”) National Rules for the Resolution of Employment Disputes, as the exclusive remedy for such controversy, claim or dispute. In any such arbitration, the parties may conduct discovery to the same extent as would be permitted in a court of law. The arbitrator shall issue a written decision, and shall have full authority to award all remedies

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which would be available in court. The Company shall pay the arbitrator’s fees and any AAA administrative expenses. Any judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Possible disputes covered by the above include (but are not limited to) unpaid wages, breach of contract, torts, violation of public policy, discrimination, harassment, or any other employment-related claims under laws including but not limited to, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act, the California Fair Employment and Housing Act, the California Labor Code and any other statutes or laws relating to an employee’s relationship with his/her employer, regardless of whether such dispute is initiated by the employee or the Company. Thus, this bilateral arbitration agreement fully applies to any and all claims that the Company may have against you, including (but not limited to) claims for misappropriation of Company property, disclosure of proprietary information or trade secrets, interference with contract, trade libel, gross negligence, or any other claim for alleged wrongful conduct or breach of the duty of loyalty. Nevertheless, claims for workers’ compensation benefits or unemployment insurance, those arising under the National Labor Relations Act, and any other claims where mandatory arbitration is prohibited by law, are not covered by this arbitration agreement, and such claims may be presented by either the Company or you to the appropriate court or government agency. BY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH YOU AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY JURY. This mutual arbitration agreement is to be construed as broadly as is permissible under applicable law.

15. Successors and Assigns. This Agreement will be assignable by the Company to any successor or to any other company owned or controlled by the Company, and will be binding upon any successor to the business of the Company, whether direct or indirect, by purchase of securities, merger, consolidation, purchase of all or substantially all of the assets of the Company or otherwise.

Please sign and return the enclosed copy of this letter to me for our files to acknowledge your agreement with the above.

Very truly yours,
 

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Robert B. McKnight 

Enclosure

ACKNOWLEDGED AND AGREED:

[Executive]

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March 5, 2009

Mr. Craig Stevenson
Quiksilver, Inc.
15202 Graham Street
Huntington Beach, California 92649

Dear Mr. Stevenson:

Reference is made to that certain letter agreement (the “Agreement”) with respect to your employment at Quiksilver, Inc. (“Quiksilver”) dated January 19, 2009. Capitalized terms used in this letter and not defined herein shall have the meaning ascribed to them in the Agreement.

This letter amends the Agreement as follows:

1.

The parties agree to amend and replace Section 7 of the Agreement as follows:

“Expatriate Assignment Compensation. The Company will contribute a total of $6,000 per month, less applicable withholdings and deductions, for the purpose of education, cost of living and similar expenses incurred as a result of being on assignment in the United States until the six month anniversary of this Agreement. After the six month anniversary of this Agreement, the expatriate compensation will be determined at the discretion of the Company’s Chief Executive Officer. The Company also agrees to provide you with access to a company-owned automobile while you are on assignment in the United States.”

Except as expressly amended by this letter, the terms, conditions, covenants and agreements contained in the Agreement remain unaffected by this letter and continue in full force and effect. Further, this letter and the Agreement constitute the entire agreement between the parties with respect to the subject matter set forth herein and therein and supercede all other agreements, proposals, oral or written statements. Please confirm your agreement by signing and returning one copy of this letter to the undersigned, whereupon this letter will become a binding agreement between the parties.

Very truly yours,

By:
	Name:	Charles Exon
	Title:	Chief Administrative Officer
Accepted and agreed to this 5th day of March, 2009
By:
	Name:	Craig Stevenson

EX-10.6

Exhibit 10.6

TENTH AMENDMENT

     TENTH AMENDMENT (this “Amendment”), dated as of March 6, 2009, to the Amended and Restated Credit Agreement dated as of June 3, 2005 (the “Credit Agreement”), among Quiksilver, Inc., a Delaware corporation, Quiksilver Americas, Inc., a California corporation, the several banks and other institutions from time to time parties thereto (the “Lenders”), Bank of America, N.A., as documentation agent, Union Bank of California, N.A., as syndication agent, JPMorgan Chase Bank, N.A., as US administrative agent for the US Lenders thereunder (in such capacity, the “US Administrative Agent”), JPMorgan Chase Bank, N.A., London Branch, as an alternate currency fronting lender, J.P. Morgan Europe Limited, as alternate currency fronting agent (in such capacity, the “Alternate Currency Fronting Agent”), and JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian administrative agent for the Canadian Lenders (in such capacity, the “Canadian Administrative Agent”).

WITNESSETH:

     WHEREAS, the Borrowers have requested that certain provisions of the Credit Agreement be amended as set forth herein; and

     WHEREAS, the Lenders are willing to agree to such amendment on the terms set forth herein;

     NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, the undersigned hereby agree as follows:

     I. Defined Terms. Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

     (a) Amendment to Section 1.1. The definition of “Pilot SAS Facility” is hereby amended and restated in its entirety as follows:

“Pilot SAS Facility”: that certain unsecured credit agreement dated as of March 14, 2008 among Pilot SAS, Crédit Lyonnais SA, BNP Paribas SA and Société Générale SA, as amended from time to time, with a maturity date of not later than June 30, 2009; provided, that the aggregate principal amount of Indebtedness permitted under such credit agreement shall in no event exceed the US Dollar Equivalent of €55,000,000.

          Amendment to Section 6.2(o). Section 6.2(o) is hereby amended and restated in its entirety to read as follows:

"(o) Guarantee Obligations of Quiksilver in connection with the Pilot SAS Facility so long as (x) the aggregate principal amount of such Guarantee Obligations does not exceed the US Dollar Equivalent of €55,000,000, (y) the terms and conditions of the related Guarantee dated March 17, 2008 made by Quiksilver in favor of BNP Paribas, as agent, as in effect on March 17, 2008 are not amended or otherwise modified (it being understood that an acknowledgment of such terms and conditions will not be deemed to be an amendment or

modification thereof) and (z) copies of all amendments or other modifications to the Pilot SAS Facility are delivered to the US Administrative Agent promptly after the execution thereof.”

          Amendment to Section 6.7. Section 6.7 is hereby amended by (i) deleting the word “and” at the end of clause (o) thereof, (ii) replacing the period at the end of clause (p) thereof with “; and” and (iii) adding the following new clause (q) at the end thereof:

"(q) investments consisting of the Guarantee Obligations permitted by Section 6.2(o)”.

     II. Effective Date. This Amendment shall become effective on the date (the “Effective Date”) on which the Borrowers and the Majority Lenders shall have duly executed and delivered to the US Administrative Agent this Amendment.

     III. Trademark License Agreement. The US Administrative Agent shall have received on or before March 20, 2009, a duly authorized and fully executed copy of a Trademark License Agreement, in form and substance satisfactory to the US Administrative Agent, by and among QS Holdings SARL, Quiksilver International Pty Ltd. (collectively, the “Licensors”) and Quiksilver, Inc., as licensee, with respect to certain trademarks owned by the Licensors, including “Quiksilver” and all related trademarks, trade names and trade designs.

     IV. Representations and Warranties. The Borrowers hereby represent and warrant that (a) each of the representations and warranties in Article III of the Credit Agreement shall be, after giving effect to this Amendment, true and correct in all material respects as if made on and as of the Effective Date (unless such representations and warranties are stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date) and (b) after giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing.

     V. No Other Amendments; Confirmation. Except as expressly amended hereby, the provisions of the Credit Agreement, as amended and restated, are and shall remain in full force and effect.

     VI. Governing Law. This Amendment and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York.

     VII. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Amendment may be delivered by facsimile transmission of the relevant signature pages hereof.

[signature pages follow]

2

     IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed and delivered by their duly authorized officers as of the date first above written.

QUIKSILVER, INC.
By:
	Name:
	Title:
QUIKSILVER AMERICAS, INC.
By:
	Name:
	Title:

Tenth Amendment Signature Page

JPMORGAN CHASE BANK, NA, as US Administrative Agent and as a Lender
By:
	Name:
	Title:

Tenth Amendment Signature Page

BANK OF AMERICA, NA., as Documentation Agent and as a Lender
By:
	Name:
	Title:

Tenth Amendment Signature Page

UNION BANK OF CALIFORNIA, NA., as Syndication Agent and as a Lender
By:
	Name:
	Title:

Tenth Amendment Signature Page

NATIXIS (F/K/A NATEXIS BANQUES POPULAIRES)
By:
	Name:
	Title:
By:
	Name:
	Title:

Tenth Amendment Signature Page

ALLIED IRISH BANK
By:
	Name:
	Title:
By:
	Name:
	Title:

Tenth Amendment Signature Page

GENERAL ELECTRIC CAPITAL CORP.
By:
	Name:
	Title:

Tenth Amendment Signature Page

HSBC BANK USA, NATIONAL ASSOCIATION
By:
	Name:
	Title:

Tenth Amendment Signature Page

ISRAEL DISCOUNT BANK OF NEW YORK
By:
	Name:
	Title:
By:
	Name:
	Title:

Tenth Amendment Signature Page

BNP PARIBAS
By:
	Name:
	Title:
By:
	Name:
	Title:

Tenth Amendment Signature Page

SUMITOMO MITSUI BANKING CORPORATION
By:
	Name:
	Title:

Tenth Amendment Signature Page

SOCIÉTÉ GÉNÉRALE
By:
	Name:
	Title:

Tenth Amendment Signature Page

     The US Guarantors hereby consent and agree to this Amendment as of the date hereof and reaffirm their obligations under the US Security Agreement, the US Guarantee and the other Loan Documents to which they are party.

QS RETAIL, INC.
By:
	Name:
	Title:
QS WHOLESALE, INC.
By:
	Name:
	Title:
DC SHOES, INC.
By:
	Name:
	Title:
HAWK DESIGNS, INC.
By:
	Name:
	Title:
MERVIN MANUFACTURING, INC.
By:
	Name:
	Title:
FIDRA, INC.
By:
	Name:
	Title:
ROSSIGNOL SKI COMPANY INCORPORATED
By:
	Name:
	Title:

Tenth Amendment Signature Page

SKIS DYNASTAR, INC.
By:
	Name:
	Title:

Tenth Amendment Signature Page

EX-10.7

EXHIBIT 10.7

March 9, 2009

AMENDMENT NO. 3
TO THE CREDIT FACILITY AGREEMENT
DATED MARCH 14, 2008
(AS AMENDED BY AMENDMENT NO. 1 DATED AUGUST 14, 2008
AND BY AMENDMENT NO. 2 DATED OCTOBER 30 OCTOBRE 2008)

by and among

BNP PARIBAS
CRÉDIT LYONNAIS
SOCIÉTÉ GÉNÉRALE
as Banks

and

BNP PARIBAS
as Security Agent (Agent des Sûretés)

and

SOCIÉTÉ GÉNÉRALE
as Credit Agent (Agent du Credit)

and

PILOT SAS
as Borrower

and

QUIKSILVER, INC.

11, boulevard de la Madeleine
75001 Paris

BETWEEN THE UNDERSIGNED:

(1)	BNP PARIBAS, a corporation (société anonyme) with share capital of 1,824,192,214 €, whose registered office is located 16, boulevard des Italiens, 75009 Paris, incorporated with the Paris Trade and Companies Register under the unique identification number 662 042 449,
(2)	CRÉDIT LYONNAIS, a corporation (société anonyme) with share capital of 1,847,857,783 €, whose registered office is located 18, rue de la République, 69002 Lyon and whose headquarters are located 19, boulevard des Italiens, 75002 Paris, incorporated with the Lyon Trade and Companies Register under the unique identification number 954 509 741,
(3)	SOCIÉTÉ GÉNÉRALE, a corporation (société anonyme) with share capital of 725,909,055, whose registered office is located 29, boulevard Haussmann, 75009 Paris, incorporated with the Paris Trade and Companies Register under the unique identification number 552 120 222,
	(parties (1) to (3) above being collective designated as the “Banks”),
(4)	BNP PARIBAS, as designated above, in the capacity of Security Agent pursuant to the terms and conditions of the Credit Facility (Convention de Credit) (as defined below),
(5)	SOCIÉTÉ GÉNÉRALE, as designated above, in the capacity of Credit Agent pursuant to the terms and conditions of the Credit Facility,
(6)	PILOT SAS, simplified form joint stock company (société par actions simplifiée) with share capital of 124,813,632 €, whose registered office is located 26/28, rue Danielle Casanova, 75002 Paris, incorporated with the Paris Trade and Companies Register under the unique identification number 070 501 374 (hereinafter, the “Borrower” or “Pilot”),
(7)	QUIKSILVER, INC., a company incorporated in the State of Delaware, whose registered office is located 15202 Graham Street, Huntington Beach, California 92649, U.S.A. (hereinafter, “Quiksilver, Inc.”).

WHEREAS:

(A) According to the terms and conditions of a facility agreement executed on March 14, 2008, as modified by an amendment dated August 14, 2008 (“AMENDMENT NO. 1”) and an amendment dated October 30, 2008 (“AMENDMENT NO. 2”) (this agreement, as modified, the “Credit Facility”), the Banks granted to the Borrower a renewable credit of a maximum principal amount of €70,000,000.

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(B)	According to the terms and conditions of Amendment No. 2, the Banks extended the term of the Facility (as defined in the Credit Facility), reduced to a maximum principal amount of €55,000,000.
(C)	Pursuant to a letter dated March 9, 2009, the Borrower and Quiksilver, Inc. have requested the Banks to agree to grant an extension of the term of the Facility, until June 30, 2009.
(D)	The purpose of this Agreement is to define the terms and conditions of the extension of the Credit requested by the Borrower and Quiksilver, Inc. and to define in detail the covenants and obligations of the Borrower and of Quiksilver, Inc. in connection with such extension.

THE FOLLOWING HAS THEREFORE BEEN AGREED

ARTICLE 1 — DEFINITIONS AND INTERPRETATIONS

1.1.	Definitions
(a)	For the purposes of the Agreement, except where otherwise stipulated, the terms and expressions defined in the Preamble shall have the same meaning in the rest of the Agreement.
(b)	The terms and expressions used in the Agreement but not defined therein shall have the meaning ascribed to them in the Credit Facility.
(c)	The following terms and expressions used in the Agreement shall, unless a different interpretation is required by the context, have the following meaning:
	“Agreement” means this amendment, the Preamble thereto and any potential amendments, which form an integral part thereof;
	“Effective Date” means March 13, 2009, subject to all of the conditions precedent listed in Article 4 (Conditions Precedent) having been fulfilled, in accordance with the provisions of the said article, at that date;
	“Signing Date” means the date of signature of this Agreement by the parties.
1.2.	Interpretations

For purposes of this Agreement, except where a different interpretation is required by the context:

(a) Any reference, within the Agreement, to an “Article”, a “paragraph”, to the “Preamble” or to a “Schedule” must, except where otherwise stipulated or when a

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different interpretation is required by the context, be interpreted as being a reference to an article, a paragraph, a preamble or a schedule to the Agreement.

(b)

Any reference, within the Agreement, to a document, a contract, a treaty (including the Agreement) or a deed must be understood as being a reference to this document, this contract, this treaty or this deed, as potentially modified or completed in accordance with the terms and conditions of the Agreement and including, if applicable, any document, contract, treaty or deed that may be substituted thereto via novation.

ARTICLE 2 -MODIFICATION OF THE CREDIT FACILITY

2.1.	Modification of Article 1 of the Credit Facility
(a)	The parties to this Agreement agree that, as from the Effective Date, the definition of “Applicable Margin” shall be deleted and replaced by the following new definition:
	““Applicable Margin” means the margin applicable to the Credit, equal to 2.8%.”
(b)	The parties to this Agreement agree that, as from the Effective Date, the definition of “Subsidiary” shall be deleted and replaced by the following new definition:
	““Subsidiary” means any company controlled by another, directly or indirectly, as defined by Article L. 233-3 I and II of the [French] Commercial Code.”
(c)	The parties to this Agreement agree that, as from the Effective Date, the following definition is added immediately after the definition of “TARGET Day”:
	““Extension Letter” means the letter dated 9 March 2009 addressed by the Borrower and Quiksilver, Inc. to the Credit Agent, whereby the Borrower and Quiksilver, Inc. have asked the Banks to extend the term of the Facility to 30 June 2009.”
(d)	The parties to this Agreement agree that, as from the Effective Date, the following definition shall be added immediately after the definition of “Interest Period”:
	““Quiksilver, Inc.” means Quiksilver, Inc., a Delaware corporation with headquarters at 15202 Graham Street, Huntington Beach, California 92649, U.S.A.”

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2.2. Modification of Article 2 of the Credit Facility

The parties to this Agreement agree that, as from the Effective Date, subject to the fulfillment of all of the conditions precedent cited at Article 4 herein, Article 2 (Amount and Term) of the Credit Facility shall be deleted and replaced by the following new article:

“2. AMOUNT AND TERM

The Banks have made available to the Borrower, in accordance with the methods and conditions defined in the Agreement, a Facility of a maximum amount of EUR 70,000,000.00 (seventy million euros), as from March 14, 2008 and for a term of six months. Pursuant to Amendment No. 1 dated August 14, 2008, the Facility was extended until October 31, 2008

At the Borrower’s request, by October 15, 2008 at the latest, this Facility could be renewed once, by the unanimous decision of the Banks, up until March 14, 2009, date by which the capital and interest must have been fully reimbursed.

On October 9, 2008, the Borrower requested an extension of the term of the Facility.

By Amendment No. 2 dated October 30, 2008, the Banks acted unanimously to extend the aforementioned Facility, reduced to a maximum amount of 55,000,000 euros (fifty-five million euros) as from October 30, 2008 up until March 14, 2009.

On March 9, 2009, the Borrower requested an extension of the term of the Facility.

By a unanimous decision, the Banks extend the aforementioned Facility up until June 30, 2009, the amount in principal of the Facility remaining limited to 55,000,000 euros (fifty-five million euros).

Each Bank participates in the Facility at the level of the amounts indicated in Schedule 1.

Each Bank undertakes, individually and without joint liability with the other Banks, to participate in the Facility. The Banks cannot be held liable for any potential participation default and for the failure of one or several of the other Banks.”

2.3. Modification of Article 7.2 (Effective Global Rate) of the Credit Facility

The parties to this Agreement agree that, as from the Effective Date, Article 7.2 (Effective Global Rate) of the Credit Facility shall be replaced by the following new article:

“7.2 Effective Global Rate

As the Facility generates interest at a floating rate, it is impossible to calculate an Effective Global Rate valid for the entire term of the Credit. However, the Credit Agent shall inform the Borrower, by way of an example, that in the event of the utilization of the maximum Facility amount as from the signature of the Agreement, and on the basis of all

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of the financial conditions described herein and of the most recent level of the EURIBOR 3-month rate published on 6 March 2009, i.e., 1.726% per annum increased by 2.8% per annum, the period rate on this basis for an Interest Period is 1.2459%. The Effective Global Rate, which is the annual rate in proportion to the period rate, therefore reaches 4.98% per annum.

2.4. Modification of Article 8.2 (Mandatory Prepayment) of the Credit Facility

The parties to this Agreement agree that, as from the Effective Date, the following paragraph shall be added at the end of Article 8.2 (Mandatory Prepayment):

“In the event of the sale of one or more of the principal businesses or brands of the group of companies comprising of Quiksilver, Inc. and its Subsidiaries (the “Quiksilver Group”) (including the Quiksilver, Roxy or DC Shoes brands and/or businesses), and whatever form such sale may take, simultaneously with (i) the said sale (and without regard as to the provisions of the preceding paragraph) and (ii) the repayment of amounts due under the ABL Agreement (to the extent such amounts are due under the ABL Agreement upon the date of such sale and that the ABL lenders require such repayment on such date), the Borrower shall reimburse, and Quiksilver, Inc. shall procure that the Borrower reimburse, all of the Drawings and amounts owed to the Banks pursuant to the Facility.”

2.5. Modification of Article 11.1 of the Credit Facility

The parties to this Agreement agree that, as from the Signing Date, the following provisions shall be added to the end of Article 11.1 (Positive covenants) of the Credit Facility:

“The Borrower undertakes (and Quiksilver, Inc. shall procure (within the meaning of Article 1120 of the [French] Civil Code) that the Borrower comply with such undertakings):

a)

To inform the Credit Agent in writing of any termination of any bank financing of any kind for the Borrower and its Subsidiaries immediately upon becoming aware thereof (including the factoring agreement executed by Na Pali and certain of its Subsidiaries with GE Factofrance and the lending listed in Schedule 6).

b)

To disclose immediately to the Credit Agent any material information relating to the sale of Rossignol carried out pursuant to the terms and conditions of the Stock Purchase Agreement dated November 12, 2008 executed notably by and between Quiksilver, Inc. and Macquarie Asset Finance Limited (including any material information in connection with any litigation or arbitration relating thereto) and to immediately forward to the Credit Agent any material information relating to the price adjustment (including in relation to the adjustment of the net working capital requirements) or to any claim under the representations and warranties made pursuant to the said sale of Rossignol.

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c)	That the Borrower’s percentage holding in Na Pali be maintained at a level identical to that in existence as of January 1st, 2009.
d)	To provide to the Credit Agent, by March 30, 2009 at the latest, a consolidated business plan for the Borrower and Na Pali, including and excluding the DC Shoes business, reviewed by the management of the Borrower, of Na Pali and of Quiksilver, Inc. and by Ernst & Young.
e)	To provide to the Credit Agent, by March 30, 2009 at the latest, a copy certified exact by a legal representative of the Borrower of the minutes of the Borrower’s general shareholders’ meeting convened pursuant to the provisions of Article L. 225-248 of the [French] Commercial Code, rejecting the dissolution of the Borrower despite of the fact that its net assets are equal to less than one half of its share capital and approving the measures envisaged for the reconstitution of the Borrower’s net assets.

Quiksilver, Inc. undertakes:

f)	That the equity percentage holding (i) of Quiksilver, Inc. in QS Holdings Sàrl, (ii) of QS Holdings Sàrl in Quiksilver Europa and (iii) of Quiksilver Europa in the Borrower shall be maintained at a level identical to that in existence as of January 1st, 2009.
g)	In event of the sale of the any of the principal businesses or brands of the Quiksilver Group (including the Quiksilver, Roxy or DC Shoes businesses and/or brands), and whatever form such sale could take, simultaneously with the said sale to cause the repayment of (i) all amounts due under the ABL Agreement and (ii) the Credit Facility, and immediately after repayments (or simultaneously with such repayments if the proceeds from such sale are sufficient), (x) to replace Na Pali in the EUR 35,600,000 cash collateral granted by Na Pali to JP Morgan and dated December 9, 2008, or (y) to contribute an equivalent amount in capital to Quiksilver Europa (in the form of an increase in the share capital of QS Holdings Sàrl), and to cause Quiksilver Europa to replace Na Pali in the EUR 35,600,000 cash collateral granted by Na Pali to JP Morgan and dated December 9, 2008.”.
h)	To disclose immediately to the Credit Agent any material information relating to the sale of Rossignol carried out pursuant to the terms and conditions of the Stock Purchase Agreement dated November 12, 2008 executed notably by and between Quiksilver, Inc. and Macquarie Asset Finance Limited (including any material information in connection with any litigation or arbitration relating thereto) and to immediately forward to the Credit Agent any material information relating to the price adjustment (including in relation to the adjustment of the net working capital requirements) or to any claim under the representations and warranties made pursuant to the said sale of Rossignol.”

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2.6. Modification of Article 11.2 of the Credit Facility

The parties to this Agreement agree that, as from the Signing Date, Article 11.2 (Negative covenants) of the Credit Facility shall be deleted and replaced by the new Article 11.2 (Negative covenants) set forth in Schedule B.

2.7.	Modification of Article 12.1 (Prepayment Event) of the Credit Facility
(a)	The parties to this Agreement agree that, as from the Signing Date, paragraph (c) of Article 12.1 (Prepayment Event) of the Credit Facility shall be deleted and replaced by the following new paragraph:
	“(c) Any one of the undertakings made by the Borrower and/or Quiksilver, Inc. in the Agreement (and notably, but not exclusively, those made at Article 12.1 is not complied with.”
(b)	The parties to this Agreement agree that, as from the Signing Date, the following paragraphs shall be added at the end of Article 12.1 (Prepayment Event) of the Credit Facility:
	“(j) The tax consolidation of the group comprised of the Borrower (the Borrower being consolidation head) and certain French subsidiaries of the Borrower, as in existence as of 31 October 2008, is terminated for any reason whatsoever, or the conditions allowing such tax consolidation are no longer met.
	(k) Any one of the credits listed in Schedule 6 is terminated, cancelled, annulled, declared payable, declared payable in advance and/or repaid in advance (including the repayment of any due debt prior to the expiry of any applicable legal deadline, but excluding voluntary repayments of amounts drawn under overdraft facilities (provided that the maximum amount authorized under such overdrafts shall have remained unchanged)).
	(l) Any one of the credits granted pursuant to the agreement entitled “Amended and Restated Credit Agreement” dated June 3, 2005 (and as modified since then by successive riders) executed by and between Quiksilver, Inc., Quiksilver Americas, Inc., Bank of America, N.A., Union Bank of California, N.A., JP Morgan Chase Bank, N.A., JP Morgan Chase Bank, N.A., Toronto Branch, J.P. Morgan Securities Inc. and various financial establishments in the capacity of lenders (the “ABL Agreement”) terminated, cancelled, annulled, declared payable, declared payable in advance and/or repaid in advance (including the repayment of any due debt prior to the expiry of any applicable legal deadline, but excluding repayments not involving a cancellation of the ABL arising from a change in utilizations of revolving facilities under such ABL Agreement).
	(m) Any one of the undertakings made by the Borrower and/or by Quiksilver, Inc. pursuant to the Extension Letter and/or Amendment No. 3 to this Agreement dated March 9, 2009, is not complied with.”

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2.8. Modification of the Schedules to the Credit Facility

The parties to this Agreement agree that, as from the Signing Date, the schedules set forth in Schedule D shall be added after Schedule 5 of the Credit Facility.

ARTICLE 3 — ADHESION OF QUIKSILVER, INC.

In signing this Agreement, Quiksilver, Inc. agrees to become a party to the Credit Facility and to be bound by the terms and conditions of such agreement as if it had been a party thereto from its origins. Quiksilver, Inc. declares that it is bound with regard to each of the Banks by all of the obligations and undertakings placed upon it by the Credit Facility as modified by this Agreement.

ARTICLE 4 — CONDITIONS PRECEDENT

(a) Subject to the provisions of paragraph (b) below, this Agreement shall become effective on March 13, 2009 on condition that, as of this date:

(i)	the Credit Agent has received all of the documents listed in Schedule C and has confirmed in writing (thereby acting on the instructions of all of the Banks) to the Borrower that such documents and certificates are satisfactory, both in form and in content;
(ii)	the Credit Agent has received payment, on behalf of the Banks, of (i) all of the amounts mentioned in paragraph (a) of Article 6 and (ii) amounts payable pursuant to paragraph (b) of Article 6 notified by the Credit Agent to the Borrower;
(iii)	the representations made by the Borrower at Article 10 of the Credit Facility are accurate;
(iv)	the Security mentioned at Article 4 of the Credit Facility remains valid and guarantees all of the amounts owed by the Borrower pursuant to the terms and conditions of the Credit Facility (as modified by this Agreement);
(v)	no Prepayment Event has occurred; and
(vi)	no Material Adverse Event has occurred.

(b) In the event that the conditions precedent listed in paragraph (a) have not been fulfilled by March 13, 2009, this Agreement shall lapse and the parties shall be released from any obligation pursuant to this Agreement. As a result, all of the Drawings made on the Credit, both in their principal and in interest, shall be due and payable as of March 14, 2009.

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ARTICLE 5 — INTERDEPENDANCE OF THE UNDERTAKINGS MADE BY EACH PARTY

(a)	The decisions and/or undertakings by each of the parties to this Agreement are made in consideration of the decisions and/or undertakings of the other parties, such interdependence of undertakings constituting an essential factor in the consent of each party, without which such party would not have taken part in the present.
(b)	In particular, the performance by each party of its undertakings and/or obligations as of the Effective Date is subject to the simultaneous performance of the respective undertakings and/or obligations of the other parties to be performed at the said date.

ARTICLE 6 — ARRANGEMENT FEE — ADVISORS’ FEES

(a)

The Borrower shall pay an arrangement fee to the Credit Agent (on behalf of the Banks) by March 13, 2009 at the latest, of an amount equal to 0.5% of the total amount of the outstanding Credit as of the Signing Date. The Credit Agent shall pay to each of the Banks its part of the said commission, in direct proportion to the participation of the said Bank in the Credit.

(b)

All expenses, costs and fees, notably attorneys’ fees and disbursements (up to a maximum amount agreed in a separate letter for attorneys’ fees) that will be incurred by the Banks in relation to the preparation and the execution of the Agreement, and in particular for the drawing up of deeds and documents that must be drawn up in application of the Agreement, shall be borne by Pilot, who agrees thereto.

ARTICLE 7 — MODIFICATIONS — AMENDMENTS

Any modification to this Agreement and to any other document related hereto must be the subject of a written agreement between the parties.

This Agreement, as from its Effective Date, shall have the value of an amendment to the Credit Facility. All other provisions of the Credit Facility not modified by this Agreement shall remain unchanged and shall retain their full and entire effectiveness. It is stipulated that this Agreement does not act as a novation to the Credit Facility and that the Surety shall retain its full and entire effectiveness.

ARTICLE 8 — PARTIAL INVALIDITY

In the event of a provision of this Agreement becoming null and void, unlawful or not liable to be enforced, in full or in part, such annulment or invalidity shall have no impact upon the other provisions of this Agreement. In this case, the parties must immediately

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and in so far as is possible replace the impacted stipulation with a similar provision that will comply as far as possible with the financial aim of the impacted stipulation, in accordance with the spirit of this Agreement.

ARTICLE 9 — APPLICABLE LEGAL REGIME

This Agreement shall be governed by and interpreted in accordance with French law.

ARTICLE 10 -COMPETENT JURISDICTION — DOMICILE

10.1. Competent jurisdiction

The Borrower and Quiksilver, Inc. irrevocably accept that any dispute relating to the validity, interpretation or performance of this Agreement or arising therefrom shall be brought before the Paris Commercial Courts.

10.2. Domicile

For the performance of the present and the consequences thereof, the parties designate domicile as follows:

(i)	for BNP Paribas, at Centre d’Affaires Sud Atlantique Entreprises, Les Bureaux de la Cité — 23 Parvis des Chartrons 33 000 Bordeaux;
(ii)	for Credit Lyonnais, at the Direction Entreprises Dauphiné Savoie located 1, rue Molière, 38000 Grenoble;
(iii)	for Société Générale, at its registered office as given hereinabove;
(iv)	for the Borrower, at its registered office as given hereinabove; and
(v)	for Quiksilver, Inc., at its registered office as given hereinabove.

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Executed in Saint-Jean-de-Luz, on March 9, 2009
on seven (7) original copies

BNP PARIBAS as Bank	BNP PARIBAS as Security Agent
By:	By:
CRÉDIT LYONNAIS as Bank
By:
SOCIÉTÉ GÉNÉRALE as Bank	SOCIÉTÉ GÉNÉRALE as Credit Agent
By:	By:
PILOT SAS as Borrower
By:
QUIKSILVER, INC.
By:

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Schedule B

Article 11.2 (Negative Covenants)

“11.2 Negative Covenants

(A) The Borrower, for so long as it shall continue to be a debtor pursuant to the Agreement, undertakes (and procures (within the meaning of Article 1120 of the [French] Civil Code) that its Subsidiaries shall comply with those of the following undertakings that concern them (whereas Quiksilver, Inc. procures (within the meaning of Article 1120 of the [French] Civil Code) that the Borrower and each of its Subsidiaries comply with such undertakings)), except with the prior agreement of the Majority of the Banks:

a)	Not to modify, and to ensure that the Group members do not modify, the relevant corporate purpose, legal status or nature of commercial activities as in existence on the day of the signature of the Agreement.
b)	Not to carry out any Change in Control, and to ensure that no such Change in Control is carried out.
c)	Not to carry out any reduction in the Borrower’s share capital, and to ensure that the Borrower does not make any payment of dividends, interim dividends or share buy-back programs (and not to put to the vote of the competent management bodies of the Borrower any draft resolution on the distribution of dividends in favor of its shareholders).
d)	Not to carry out any reorganization transaction (including in the form of a merger, merger by absorption, demerger or partial asset contribution) having an impact upon the Borrower or upon any one of its Subsidiaries.
e)	Not to grant (and to ensure that no member of the Group neither grants nor permits to exist) security for any present or future debt (other than to allow the financing of an asset acquisition, when such security relates exclusively to the said asset and when it guarantees the payment or the financing thereof), or security for any guarantee undertaking concluded with or toward any entity whatsoever, present or future, for any mortgage, pledge, endorsement (or their equivalent under any legal regime other than French law) or other rights or guarantees of any kind whatsoever over all or part of its assets or income, present or future, or over the assets or income, present of future, of its Subsidiaries, without granting to the Banks the same security, of the same rank, or without conferring upon them any other type of security that the Banks shall deem to be an equivalent thereto, with the exception of the following securities that may be granted by Na Pali and its Subsidiaries:

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(i)	any legal privilege arising in the ordinary course of the Group’s business and not further to a default or omission by a member of the Group;
(ii)	any security resulting from any retention right regarding an asset of any Group member in the normal course of its business, and not resulting from a default or omission by a member of the relevant Group member.

f)	To inform the Credit Agent immediately and in writing of the implementation by any creditor, notably by any financial institution, of any forfeiture of term or any prepayment event, with or without advance notice, in relation to any loan, credit or other financial assistance granted to the Borrower or to any member of the Group.
g)	To inform the Credit Agent immediately and in writing of any positive or negative undertakings (“to do” or “not to do”) made or to be made by a member of the Group to any financial institution, the non-performance or breach of which could result in the forfeiture of term of the prepayment of the obligation in relation to which such undertaking would have been made, and to allow the Banks to benefit, in the event of such an undertaking having been made, either from the same undertaking (if not already granted herein) or from equivalent rights or advantages satisfactory to such Banks;
h)	That no member of the Group shall incur any bank or other financial indebtedness of any kind whatsoever with any third parties, with Quiksilver, Inc. or with the latter’s Subsidiaries (including the members of the Group), except any borrowing pursuant to:

(i)	the Loan Facility;
(ii)	existing cash pooling agreement between Na Pali and its Subsidiaries;
(iii)	bank debt incurred by the Borrower’s Subsidiary in Poland, for a maximum amount of EUR1,000,000;
(iv)	bank debt incurred by the Borrower’s Subsidiary in the Czech Republic, for a maximum amount of EUR3,000,000;
(v)	the intra-group loans 7 shown in the detailed list (certified by a legal representative of the Borrower) delivered this day by the Borrower to the Credit Agent; and
(vi)	the factoring agreement executed with GE Factofrance by Na Pali and certain of its Subsidiaries.

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i)	That no member of the Group shall grant nor consent any additional loan or advance (including intra-group loans or advances on current accounts) to third parties or to any one of the members of the group consisting of Quiksilver, Inc. and of its Subsidiaries (other than debt pursuant to the existing cash pooling agreement between Na Pali and its Subsidiaries and the intra-group loans described in Schedule 7)
j)	Not to carry and to ensure that none of its Subsidiaries carries out any asset acquisition or sale with the exception of any acquisition or sale of assets other than brands, real estate, shares, partnership interests and/or business interests, and subject to the said acquisitions or sales being executed in the normal course of business and on arm’s length terms.
k)	Not to take part in the creation of any joint venture and to ensure that its Subsidiaries do not take part in the creation of any joint venture.
l)	Not to make any payment of any kind whatsoever (including the payment of any royalties and management fees) or any reimbursement of any debt or borrowing whatsoever and of any kind that may be due to Quiksilver, Inc. or to one of the latter’s Subsidiaries.
m)	To ensure that none of its Subsidiaries make any payment of any kind whatsoever (including the payment of all royalties or management fees) or any reimbursement of any debt or borrowing whatsoever and of any kind that may be due to Quiksilver, Inc. or to any one of the latter’s Subsidiaries (other than members of the Group), other than payments arising in the normal course of business and on arm’s length terms.

(B) For so long as the Borrower shall continue to be a debtor pursuant to the Agreement, Quiksilver, Inc. shall procure (within the meaning of Article 1120 of the [French] Civil Code) that QS Holdings Sàrl shall not grant any security of any kind over its assets (including over the trademarks held by the latter (including Quiksilver, Quiksilver & Mountain & Wave and Roxy)).”

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Schedule C

Conditions Precedent

(a)	Delivery of a declaration signed by a legal representative of Pilot confirming that there has been no termination of any financing arrangement whatsoever (of any kind whatsoever, including the factoring agreement executed by Na Pali and certain of its Subsidiaries with GE Factofrance) granted to Pilot and its Subsidiaries, and confirming the preservation of, the short- or medium-term credit facilities listed in Schedule A for the maximum undertakings detailed in the said Schedule.
(b)	Delivery of a deed confirming and reiterating the guarantee granted by Quiksilver, Inc. in accordance with the terms and conditions of the Credit Facility in order to ensure the maintenance of the said guarantee, in connection with the extension granted pursuant to the terms and conditions of the Agreement.
(c)	Delivery of a declaration signed by a legal representative of Pilot confirming:

(i)	that no Prepayment Event has occurred and is continuing pursuant to the Credit Facility; and
(ii)	that no Material Adverse Event has occurred pursuant to the Credit Facility.

(d)	Payment (i) of all commissions owing pursuant to the paragraph (a) of Article 6 hereof and (ii) of the fees of the Banks’ legal advisers incurred as of the date of signature of the Extension Agreement (up to a maximum limit agreed in a separate letter) and any other amounts payable pursuant to paragraph (a) of Article 6 which have been notified by the Credit Agent to the Borrower.
(e)	Delivery of legal opinions by counsel to Pilot and Quiksilver, Inc. confirming (x) the capacity and authority of Pilot and Quiksilver, Inc. to sign the agreements herein, and that (y) the signature of the Extension Agreement and the provisions contained therein are not contrary to and do not violate the ABL Agreement and the Indenture dated July 22, 2005 governing the Senior Notes, among Quiksilver, Inc., the subsidiary Guarantors party thereto and Wilmington Trust Guarantor as Trustee.
(f)	Delivery of a copy certified exact by a legal representative of Pilot of the quarterly consolidated balance sheet relating to the companies within the European perimeter of the Quiksilver group as of January 31, 2009 (including a balance sheet and profit and loss account) provided to Quiksilver, Inc. for US GAAP consolidation purposes.

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(g)	Delivery of a list, certified by a legal representative of Pilot, of the financial indebtedness of Pilot and Na Pali (authorizations and utilizations) as of February 28, 2009, including details of the type of undertakings (notably long-, medium- and short-term undertakings, undertakings made by signature (engagements de signature), letters of credit).
(h)	Delivery of a cash flow statement certified by a legal representative of Pilot for Pilot and its Subsidiaries as of February 28, 2009.
(i)	Delivery of a copy of the letter canceling the termination letter dated February 9, 2009, relating to the overdraft facility granted by Natixis to Na Pali.
(j)	Delivery of an undertaking by which Quiksilver, Inc. agrees, in the event of the sale of any of one or more of the principal businesses or brands of the Quiksilver group (including the Quiksilver, Roxy or DC Shoes business and/or brands), and regardless of the form of the sale, simultaneously with the said sale (and without regard as to the provisions of the preceding paragraph), to cause the repayment of (i) all amounts due under the ABL Agreement and (ii) the Credit Facility, and immediately after such repayments (or simultaneously with such repayments if the proceeds from such sale are sufficient), (x) to replace Na Pali in the EUR 35,600,000 cash collateral granted by Na Pali to JP Morgan and dated December 9, 2008, or (y) to contribute an equivalent amount in capital to Quiksilver Europa (in the form of an increase in the share capital of QS Holdings Sàrl), and to cause Quiksilver Europa to replace Na Pali in the EUR 35,600,000 cash collateral granted by Na Pali to JP Morgan and dated December 9, 2008.

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EX-31.1

Exhibit 31.1

§ 302 CERTIFICATION

          I, Robert B. McKnight, certify that:

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

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

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

     (4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

          b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: March 12, 2009	/s/ Robert B. McKnight, Jr.
	Robert B. McKnight, Jr.
	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

§ 302 CERTIFICATION

          I, Joseph Scirocco, certify that:

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

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

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

     (4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

          b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: March 12, 2009	/s/ Joseph Scirocco
	Joseph Scirocco
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

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

In connection with the Quarterly Report of Quiksilver, Inc. (the “Company”) on Form 10-Q for the period ending January 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert B. McKnight, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2003, that:

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

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

/s/ Robert B. McKnight, Jr.  

Robert B. McKnight, Jr. 

Chief Executive Officer
March 12, 2009 

EX-32.2

Exhibit 32.2

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

In connection with the Quarterly Report of Quiksilver, Inc. (the “Company”) on Form 10-Q for the period ending January 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph Scirocco, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2003, that:

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

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

/s/ Joseph Scirocco  

Joseph Scirocco 

Chief Financial Officer
March 12, 2009