S-8

As filed with the Securities and Exchange Commission on April 11, 2003

Registration No. 333-                    

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-8

REGISTRATION STATEMENT
Under
The Securities Act of 1933

QUIKSILVER, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0199426
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

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

2000 STOCK INCENTIVE PLAN
(Full title of the Plans)

Charles S. Exon
Secretary and General Counsel
Quiksilver, Inc.
15202 Graham Street
Huntington Beach, California 92649
(Name and address of agent for service)
(714) 889-2200
(Telephone number, including area code, of agent for service)

CALCULATION OF REGISTRATION FEE

		Proposed			Proposed
	Amount to be	Maximum Offering			Maximum Aggregate			Amount of
Title of Securities to be Registered	Registered(1)	Price per Share			Offering Price			Registration Fee
2000 Stock Incentive Plan
Common Stock, $0.01 par value	800,000 shares	$	30.705	(2)	$	24,564,000	(2)	$	1,987.23

(1)	This Registration Statement shall also cover any additional shares of Common Stock which become issuable under the 2000 Stock Incentive Plan by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without the Registrant’s receipt of consideration which results in an increase in the number of the outstanding shares of Registrant’s Common Stock.
(2)	Calculated solely for purposes of this offering under Rule 457(h) of the Securities Act of 1933, as amended, on the basis of the average of the high and low selling prices per share of Registrant’s Common Stock on April 8, 2003, as reported by the New York Stock Exchange.

TABLE OF CONTENTS

	Item 3. Incorporation of Documents by Reference
	Item 4. Description of Securities
	Item 5. Interests of Named Experts and Counsel
	Item 6. Indemnification of Directors and Officers
	Item 7. Exemption from Registration Claimed
	Item 8. Exhibits
	Item 9. Undertakings
SIGNATURES
EXHIBIT 5
EXHIBIT 23.1
EXHIBIT 23.3
EXHIBIT 99.1

PART II

Information Required in the Registration Statement

Item 3. Incorporation of Documents by Reference

          Quiksilver, Inc. (the “Registrant”) hereby incorporates by reference into this Registration Statement the following documents previously filed with the Securities and Exchange Commission (the “Commission”):

(a)	The Registrant’s Annual Report on Form 10-K for the fiscal year ended October 31, 2002 filed with the Commission on January 29, 2003;
(b)	The Registrant’s Proxy Statement dated February 12, 2003 filed with the Commission on February 12, 2003;
(c)	The Registrant’s Current Report on Form 8-K/A filed with the Commission on March 3, 2003;
(d)	The Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended January 31, 2003 filed with the Commission on March 17, 2003;
(e)	The Registrant’s Registration Statement on Form 8-A12B filed with the Commission on June 15, 1998, in which are described the terms, rights and provisions applicable to the Registrant’s outstanding Common Stock.

          All reports and definitive proxy or information statements subsequently filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (“1934 Act”) prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which de-registers all securities then remaining unsold shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any subsequently filed document which also is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement.

Item 4. Description of Securities

          Not Applicable.

Item 5. Interests of Named Experts and Counsel

          Not Applicable.

Item 6. Indemnification of Directors and Officers

          Section 145 of the Delaware General Corporation Law permits indemnification of officers and directors of the Registrant under certain conditions and subject to certain limitations. Section 145 of the Delaware General Corporation Law also provides that a corporation has the power to purchase and maintain insurance on behalf of its officers and directors against any liability asserted against such person and incurred by him or her in such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of Section 145 of the Delaware General Corporation Law.

II-1

          Article III, Section 13 of the Amended and Restated Bylaws of the Registrant provides that the Registrant shall indemnify its directors, executive officers and agents to the fullest extent permitted by the Delaware General Corporation Law. The rights to indemnity thereunder continue as to a person who has ceased to be a director, officer, employee or agent and inure to the benefit of the heirs, executors and administrators of the person. In addition, expenses incurred by a director or executive officer in defending any civil, criminal, administrative or investigative action, suit or proceeding by reason of the fact that he or she is or was a director or officer of the Registrant (or was serving at the Registrant’s request as a director or officer of another corporation) may be paid by the Registrant in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Registrant as authorized by the relevant section of the Delaware General Corporation Law.

     As permitted by Section 102(b)(7) of the Delaware General Corporation Law, Article Fifth of the Registrant’s Restated Certificate of Incorporation provides that a director of the Registrant shall not be personally liable for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in good faith or acts or omissions that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which the director derived any improper personal benefit.

     The Registrant has entered into indemnification agreements with each of its directors and executive officers. The indemnification agreements generally require the Registrant to indemnify its executive officers and directors against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred by the executive officer or director in connection with any proceeding arising by reason of the fact that such person is or was an executive officer or director of the Registrant. The indemnification agreements also require the Registrant to advance litigation expenses provided that the executive officer or director undertakes to repay the amounts if it is ultimately determined that the executive officer or director is not entitled to indemnification for the expenses. The indemnification agreements also establish a conclusive presumption that the director or executive officer has met the applicable standard of conduct required for indemnification unless a majority of the disinterested members of the board of directors, a majority of the stockholders or independent legal counsel in a written opinion determine that the applicable standard has not been met. Partial indemnification is explicitly provided for in the indemnification agreements in the event that a director or officer is not entitled to full indemnification under the terms of the indemnification agreements or under applicable law.

     The Registrant has purchased directors’ and officers’ liability insurance. The Registrant intends to enter into additional indemnification agreements with each of its directors and executive officers to effectuate these indemnity provisions.

     Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “1933 Act”) may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the 1933 Act and is therefore unenforceable.

Item 7. Exemption from Registration Claimed

          Not Applicable.

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Item 8. Exhibits

Exhibit Number	Exhibit
4	Instruments Defining the Rights of Stockholders. Reference is made to Registrant’s Registration Statement No. 001-14229 on Form 8-A12B, together with any exhibits thereto, which are incorporated herein by reference pursuant to Item 3(c) to this Registration Statement.
5	Opinion and Consent of Hewitt & O’Neil LLP.
23.1	Consent of Deloitte & Touche LLP, Independent Auditors.
23.2	Consent of Hewitt & O’Neil LLP is contained in Exhibit 5.
23.3	Consent of Deloitte Touche Tohmatsu, Independent Auditors.
24	Power of Attorney. Reference is made to the Signature Page of this Registration Statement.
99.1	2000 Stock Incentive Plan.

Item 9. Undertakings

          A. The undersigned Registrant hereby undertakes: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement and (iii) to include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if the information required to be included in a post-effective amendment by those clauses is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference into this Registration Statement; (2) that for the purpose of determining any liability under the 1933 Act each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the Registrant’s 2000 Stock Incentive Plan and 2000 Employee Stock Purchase Plan.

          B. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is incorporated by reference into this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

          C. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers or controlling persons of the Registrant pursuant to the indemnification provisions summarized in Item 6 or otherwise, the Registrant has been advised that, in the opinion of the Commission, such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.

II-3

SIGNATURES

          Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8, and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Huntington Beach, State of California on this 11th day of April, 2003.

QUIKSILVER, INC.
By:	/s/ Charles S. Exon
	Charles S. Exon Executive Vice President, Business & Legal Affairs, Secretary and General Counsel

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

          That the undersigned officers and directors of Quiksilver, Inc., a Delaware corporation, do hereby constitute and appoint Charles S. Exon and Steven L. Brink and each of them, the lawful attorneys-in-fact and agents with full power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents, and any one of them, determine may be necessary or advisable or required to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules or regulations or requirements of the Securities and Exchange Commission in connection with this Registration Statement. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to this Registration Statement, to any and all amendments, both pre-effective and post-effective, and supplements to this Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with this Registration Statement or amendments or supplements thereof, and each of the undersigned hereby ratifies and confirms that all said attorneys and agents, or any one of them, shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts.

          IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated.

          Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Robert B. McKnight, Jr. Robert B. McKnight, Jr.	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	April 11, 2003
/s/ Steven L. Brink Steven L. Brink	Chief Financial Officer and Treasurer (Principal Financial Officer)	April 11, 2003

II-4

Signature	Title	Date
/s/ William M. Barnum William M. Barnum	Director	April 11, 2003
/s/ Charles E. Crowe Charles E. Crowe	Director	April 11, 2003
/s/ Michael H. Gray Michael H. Gray	Director	April 11, 2003
/s/ Harry Hodge Harry Hodge	Director	April 11, 2003
Robert G. Kirby	Director	April       2003
/s/ Bernard Mariette Bernard Mariette	Director	April 11, 2003
/s/ Franck Riboud Franck Riboud	Director	April 11, 2003
/s/ Tom Roach Tom Roach	Director	April 11, 2003

II-5

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

EXHIBITS

TO

FORM S-8

UNDER

SECURITIES ACT OF 1933

QUIKSILVER, INC.

EXHIBIT INDEX

Exhibit Number	Exhibit
4	Instruments Defining the Rights of Stockholders. Reference is made to Registrant’s Registration Statement No. 001-14229 on Form 8-A12B, together with any exhibits thereto, which are incorporated herein by reference pursuant to Item 3(c) to this Registration Statement.
5	Opinion and Consent of Hewitt & O’Neil LLP.
23.1	Consent of Deloitte & Touche LLP, Independent Auditors.
23.2	Consent of Hewitt & O’Neil LLP is contained in Exhibit 5.
23.3	Consent of Deloitte Touche Tohmatsu, Independent Auditors.
24	Power of Attorney. Reference is made to the Signature Page of this Registration Statement.
99.1	2000 Stock Incentive Plan.

EX-5 3 a89168exv5.htm EXHIBIT 5

EXHIBIT 5

OPINION AND CONSENT OF HEWITT & O’NEIL LLP

April 11, 2003

Quiksilver, Inc.
15202 Graham Street
Huntington Beach, CA 92649

Re: Quiksilver, Inc.- Registration Statement for Offering of an Aggregate of 800,000 Shares of Common Stock

Dear Ladies and Gentlemen:

          We have acted as counsel to Quiksilver, Inc., a Delaware corporation (the “Company”), in connection with the registration on Form S-8 (the “Registration Statement”) under the Securities Act of 1933, as amended, of 800,000 shares of the Company’s common stock (the “Shares”) authorized for issuance under the Company’s 2000 Stock Incentive Plan (the “Plan”).

          This opinion is being furnished in accordance with the requirements of Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.

          We have reviewed the Company’s charter documents and the corporate proceedings taken by the Company in connection with the establishment of the Plan. Based on such review, we are of the opinion that, if, as and when the Shares have been issued and sold (and the consideration therefor received) pursuant to the provisions of option agreements or stock purchase rights duly authorized under the Plan and in accordance with the Registration Statement, such Shares will be duly authorized, legally issued, fully paid and nonassessable.

          We consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement.

          This opinion letter is rendered as of the date first written above and we disclaim any obligation to advise you of facts, circumstances, events or developments which hereafter may be brought to our attention and which may alter, affect or modify the opinion expressed herein. Our opinion is expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise, as to any other matters relating to the Company and the Shares.

Very truly yours,

/s/ Hewitt & O’Neil LLP

HEWITT & O’NEIL LLP

EX-23.1 4 a89168exv23w1.htm EXHIBIT 23.1

EXHIBIT 23.1

INDEPENDENT AUDITOR’S CONSENT

We consent to the incorporation by reference in this Registration Statement of Quiksilver, Inc. on Form S-8 of our report dated December 17, 2002 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to a change in the method for accounting for goodwill and intangible assets) appearing in the Annual Report on Form 10-K of Quiksilver, Inc. for the year ended October 31, 2002.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP

Costa Mesa, California
April 8, 2003

EX-23.3 5 a89168exv23w3.htm EXHIBIT 23.3

EXHIBIT 23.3

INDEPENDENT AUDITORS’ CONSENT

We consent to the incorporation by reference in this Registration Statement of Quiksilver, Inc. on Form S-8 of our report dated February 28, 2003 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to a change in the method for accounting for goodwill and intangible assets) appearing in the Current Report on Form 8-K/A of Quiksilver, Inc. filed March 3, 2003.

/s/ Deloitte Touche Tohmatsu

Deloitte Touche Tohmatsu

April 9, 2003

EX-99.1 6 a89168exv99w1.txt EXHIBIT 99.1 EXHIBIT 99.1 2000 STOCK INCENTIVE PLAN (as amended through March 28, 2003) ARTICLE ONE GENERAL PROVISIONS 1.1 PURPOSE OF THE PLAN This 2000 Stock Incentive Plan is intended to promote the interests of Quiksilver, Inc., a Delaware corporation, by providing eligible persons in the Corporation's service with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in such service. Capitalized terms shall have the meanings assigned to such terms in the attached Appendix. 1.2 STRUCTURE OF THE PLAN A. The Plan shall be divided into four separate equity programs: - the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock, - the Salary Investment Option Grant Program under which eligible employees may elect to have a portion of their base salary invested each year in special option grants, - the Automatic Option Grant Program under which eligible non- employee Board members shall automatically receive option grants at designated intervals over their period of continued Board service, and - the Director Fee Option Grant Program under which non-employee Board members may elect to have all or any portion of their annual retainer fee otherwise payable in cash applied to a special stock option grant. A-1 B. The provisions of Articles One and Six shall apply to all equity programs under the Plan and shall govern the interests of all persons under the Plan. 1.3 ADMINISTRATION OF THE PLAN A. The Primary Committee shall have sole and exclusive authority to administer the Discretionary Option Grant Program with respect to Section 16 Insiders. Administration of the Discretionary Option Grant Program with respect to all other persons eligible to participate in that program may, at the Board's discretion, be vested in the Primary Committee or a Secondary Committee, or the Board may retain the power to administer that program with respect to all such persons. However, any discretionary option grants for members of the Primary Committee shall be made by a disinterested majority of the Board. B. Members of the Primary Committee or any Secondary Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time. The Board may also at any time terminate the functions of any Secondary Committee and reassume all powers and authority previously delegated to such committee. C. Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant Program and to make such determinations under, and issue such interpretations of, the provisions of that program and any outstanding options thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Discretionary Option Grant Program under its jurisdiction or any option or stock issuance thereunder. D. The Primary Committee shall have the sole and exclusive authority to determine which Section 16 Insiders and other highly compensated Employees shall be eligible for participation in the Salary Investment Option Grant Program for one or more calendar years. However, all option grants under the Salary Investment Option Grant Program shall be made in accordance with the express terms of that program, and the Primary Committee shall not exercise any discretionary functions with respect to the option grants made under that program. E. Service on the Primary Committee or the Secondary Committee shall constitute service as a Board member, and members of each such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Primary Committee or the Secondary Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants or stock issuances under the Plan. F. Administration of the Automatic Option Grant and Director Fee Option Grant Programs shall be self-executing in accordance with the terms of those programs, and no Plan A-2 Administrator shall exercise any discretionary functions with respect to any option grants made under those programs. 1.4 ELIGIBILITY A. The persons eligible to participate in the Discretionary Option Grant Program are as follows: (i) Employees, (ii) non-employee members of the Board or the board of directors of any Parent or Subsidiary, and (iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). B. Only Employees who are Section 16 Insiders or other highly compensated individuals shall be eligible to participate in the Salary Investment Option Grant Program. C. Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine, with respect to the option grants under the Discretionary Option Grant Program, which eligible persons are to receive such grants, the time or times when those grants are to be made, the number of shares to be covered by each such grant, the status of the granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding. D. The Plan Administrator shall have the absolute discretion to grant options in accordance with the Discretionary Option Grant Program. E. The individuals who shall be eligible to participate in the Automatic Option Grant Program shall be limited to (i) those individuals serving as non-employee Board members on the Plan Effective Date who have not previously received an option grant from the Corporation in connection with their Board service, (ii) those individuals who first become non-employee Board members after the Plan Effective Date, whether through appointment by the Board or election by the Corporation's stockholders, and (iii) those individuals who continue to serve as non-employee Board members at one or more Annual Stockholders Meetings held after the Plan Effective Date. A non-employee Board member who has previously been in the employ of the Corporation (or any Parent or Subsidiary) shall not be eligible to receive an option grant under the Automatic Option Grant Program at the time he or she first becomes a non-employee Board member, but shall be eligible to A-3 receive periodic option grants under the Automatic Option Grant Program while he or she continues to serve as a non-employee Board member. F. All non-employee Board members shall be eligible to participate in the Director Fee Option Grant Program. 1.5 STOCK SUBJECT TO THE PLAN A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The number of shares of Common Stock reserved for issuance over the term of the Plan shall not exceed 5,036,209 shares. Such reserve shall consist of (i) the number of shares estimated to remain available for issuance, as of the Plan Effective Date, under the Predecessor Plans as last approved by the Corporation's stockholders, including the shares subject to outstanding options under those Predecessor Plans, (ii) an increase of 500,000 shares approved by the Corporation's stockholders in connection with the adoption of this Plan, (iii) an increase of 700,000 shares approved by the Corporation's stockholders on March 30, 2001, (iv) an increase of 600,000 shares approved by the Corporation's stockholders on March 26, 2002 and (v) an increase of 800,000 shares approved by the Corporation's stockholders on March 28, 2003. B. No one person participating in the Plan may receive options and separately exercisable stock appreciation rights for more than 200,000 shares of Common Stock in the aggregate per calendar year. C. Shares of Common Stock subject to outstanding options (including options incorporated into this Plan from the Predecessor Plans) shall be available for subsequent issuance under the Plan to the extent (i) those options expire or terminate for any reason prior to exercise in full or (ii) the options are canceled in accordance with the cancellation-regrant provisions of Article Two. Unvested shares issued under the Plan and subsequently canceled or repurchased by the Corporation at the original issue price paid per share, pursuant to the Corporation's repurchase rights under the Plan shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants under the Plan. However, should the exercise price of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an option under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced by the gross number of shares for which the option is exercised, and not by the net number of shares of Common Stock issued to the holder of such option. Shares of Common Stock underlying one or more stock appreciation rights exercised under Section 2.4 of Article Two, Section 3.3 of Article Three, Section 4.2 of Article Four A-4 or Section 5.3 of Article Five of the Plan shall NOT be available for subsequent issuance under the Plan. D. If any change is made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration, appropriate adjustments shall be made by the Plan Administrator to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities for which any one person may be granted stock options and separately exercisable stock appreciation rights under the Plan per calendar year, (iii) the number and/or class of securities for which grants are subsequently to be made under the Automatic Option Grant Program to new and continuing non-employee Board members, (iv) the number and/or class of securities and the exercise price per share in effect under each outstanding option under the Plan, and (v) the number and/or class of securities and price per share in effect under each outstanding option incorporated into this Plan from the Predecessor Plans. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. A-5 ARTICLE TWO DISCRETIONARY OPTION GRANT PROGRAM 2.1 OPTION TERMS Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to such options. A. EXERCISE PRICE. 1. The exercise price per share shall be fixed by the Plan Administrator but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. The Plan Administrator may not reset the exercise price of outstanding options and may not grant new options in exchange for the cancellation of outstanding options with a higher exercise price. 2. The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section 6.1 of Article Six and the documents evidencing the option, be payable in one or more of the forms specified below: (i) cash or check made payable to the Corporation, (ii) shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or (iii) to the extent the option is exercised for vested shares, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable instructions to (a) a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the purchased shares plus all applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale. Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date. A-6 C. EFFECT OF TERMINATION OF SERVICE. 1. The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death: (i) Any option outstanding at the time of the Optionee's cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option, but no such option shall be exercisable after the expiration of the option term. (ii) Any option held by the Optionee at the time of death and exercisable in whole or in part at that time may be subsequently exercised by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance or by the Optionee's designated beneficiary or beneficiaries of that option. (iii) Should the Optionee's Service be terminated for Misconduct, then all outstanding options held by the Optionee shall terminate immediately and cease to be outstanding. (iv) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the Optionee's cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Service, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. 2. The Plan Administrator shall have complete discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to: (i) extend the period of time for which the option is to remain exercisable following the Optionee's cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the expiration of the option term, and/or (ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee's cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested had the Optionee continued in Service. A-7 D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares. E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the exercise price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right. F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee's death. However, a Non-Statutory Option may, in connection with the Optionee's estate plan, be assigned in whole or in part during the Optionee's lifetime to one or more members of the Optionee's immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. Notwithstanding the foregoing, the Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two, and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee's death while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee's death. 2.2 INCENTIVE OPTIONS The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section 2.2, all the provisions of Articles One, Two and Seven shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall not be subject to the terms of this Section 2.2. A. ELIGIBILITY. Incentive Options may only be granted to Employees. B. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the A-8 same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. C. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date. 2.3 CORPORATE TRANSACTION/CHANGE IN CONTROL A. In the event of any Corporate Transaction, each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully vested shares of Common Stock. However, an outstanding option shall NOT become exercisable on such an accelerated basis if and to the extent: (i) such option is, in connection with the Corporate Transaction, to be assumed by the successor corporation (or parent thereof) or (ii) such option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing at the time of the Corporate Transaction on any shares for which the option is not otherwise at that time exercisable and provides for subsequent payout in accordance with the same exercise/vesting schedule applicable to those option shares or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. B. All outstanding repurchase rights shall automatically terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction, except to the extent: (i) those repurchase rights are to be assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction or (ii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued. C. Immediately following the consummation of the Corporate Transaction, all outstanding options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). D. Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments to reflect such Corporate Transaction shall also be made to (i) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same, (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan and (iii) the maximum number and/or class of securities for which any one person may be granted stock options, separately exercisable stock appreciation rights and direct stock issuances under the Plan per calendar year and A-9 (iv) the maximum number and/or class of securities by which the share reserve is to increase automatically each calendar year. E. The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall, immediately prior to the effect date of such Corporate Transaction, become fully exercisable for the total number of shares of Common Stock at the time subject to those options and may be exercised for any or all of those shares as fully vested shares of Common Stock, whether or not those options are to be assumed in the Corporate Transaction. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation's repurchase rights under the Discretionary Option Grant Program so that those rights shall not be assignable in connection with such Corporate Transaction and shall accordingly terminate upon the consummation of such Corporate Transaction, and the shares subject to those terminated rights shall thereupon vest in full. F. The Plan Administrator shall have full power and authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall become fully exercisable for the total number of shares of Common Stock at the time subject to those options in the event the Optionee's Service is subsequently terminated by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Corporate Transaction in which those options are assumed and do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully vested shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1) year period measured from the effective date of the Involuntary Termination. In addition, the Plan Administrator may structure one or more of the Corporation's repurchase rights so that those rights shall immediately terminate with respect to any shares held by the Optionee at the time of such Involuntary Termination, and the shares subject to those terminated repurchase rights shall accordingly vest in full at that time. G. The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall, immediately prior to the effect date of a Change in Control, become fully exercisable for the total number of shares of Common Stock at the time subject to those options and may be exercised for any or all of those shares as fully vested shares of Common Stock. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation's repurchase rights under the Discretionary Option Grant Program so that those rights shall terminate automatically upon the consummation of such Change in Control, and the shares subject to those terminated rights shall thereupon vest in full. Alternatively, the Plan Administrator may condition the automatic acceleration of one or more outstanding options under the Discretionary Option Grant Program and the termination of one or more of the Corporation's outstanding repurchase rights under such program upon the subsequent termination of the Optionee's Service by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of such Change in Control. Each option so accelerated shall remain exercisable for fully vested shares until the earlier of (i) the expiration of the option term or (ii) the expiration of the one (1) year period measured from the effective date of Optionee's cessation of Service. A-10 H. The portion of any Incentive Option accelerated in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Nonstatutory Option under the Federal tax laws. I. The outstanding options shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 2.4 STOCK APPRECIATION RIGHTS A. The Plan Administrator shall have full power and authority to grant to selected Optionees tandem stock appreciation rights and/or limited stock appreciation rights. B. The following terms shall govern the grant and exercise of tandem stock appreciation rights: (i) One or more Optionees may be granted the right, exercisable upon such terms as the Plan Administrator may establish, to elect between the exercise of the underlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of (a) the Fair Market Value (on the option surrender date) of the number of shares in which the Optionee is at the time vested under the surrendered option (or surrendered portion thereof) over (b) the aggregate exercise price payable for such shares. (ii) No such option surrender shall be effective unless it is approved by the Plan Administrator, either at the time of the actual option surrender or at any earlier time. If the surrender is so approved, then the distribution to which the Optionee shall be entitled may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate. (iii) If the surrender of an option is not approved by the Plan Administrator, then the Optionee shall retain whatever rights the Optionee had under the surrendered option (or surrendered portion thereof) on the option surrender date and may A-11 exercise such rights at any time prior to the later of (a) five (5) business days after the receipt of the rejection notice or (b) the last day on which the option is otherwise exercisable in accordance with the terms of the documents evidencing such option, but in no event may such rights be exercised more than ten (10) years after the option grant date. C. The following terms shall govern the grant and exercise of limited stock appreciation rights: (i) One or more Section 16 Insiders may be granted limited stock appreciation rights with respect to their outstanding options. (ii) Upon the occurrence of a Hostile Take-Over, each individual holding one or more options with such a limited stock appreciation right shall have the unconditional right (exercisable for a thirty (30)-day period following such Hostile Take-Over) to surrender each such option to the Corporation. In return for the surrendered option, the Optionee shall receive a cash distribution from the Corporation in an amount equal to the excess of (A) the Take-Over Price of the shares of Common Stock at the time subject to such option (whether or not the Optionee is otherwise vested in those shares) over (B) the aggregate exercise price payable for those shares. Such cash distribution shall be paid within five (5) days following the option surrender date. (iii) At the time such limited stock appreciation right is granted, the Plan Administrator shall pre-approve any subsequent exercise of that right in accordance with the terms of this Paragraph C. Accordingly, no further approval of the Plan Administrator or the Board shall be required at the time of the actual option surrender and cash distribution. A-12 ARTICLE THREE SALARY INVESTMENT OPTION GRANT PROGRAM 3.1 OPTION GRANTS The Primary Committee shall have the sole and exclusive authority to determine the calendar year or years (if any) for which the Salary Investment Option Grant Program is to be in effect and to select the Section 16 Insiders and other highly compensated Employees eligible to participate in the Salary Investment Option Grant Program for such calendar year or years. Each selected individual who elects to participate in the Salary Investment Option Grant Program must, prior to the start of each calendar year of participation, file with the Plan Administrator (or its designate) an irrevocable authorization directing the Corporation to reduce his or her base salary for that calendar year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely authorization shall automatically be granted an option under the Salary Investment Grant Program on the first trading day in January of the calendar year for which the salary reduction is to be in effect. 3.2 OPTION TERMS Each option shall be a Non-Statutory Option evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. A. EXERCISE PRICE. 1. The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock on the option grant date. 2. The exercise price shall become immediately due upon exercise of the option and shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down to the nearest whole number): X = A divided by (B x 66-2/3%), where X is the number of option shares, A is the dollar amount of the reduction in the Optionee's base salary for the calendar year to be in effect pursuant to this program, and B is the Fair Market Value per share of Common Stock on the option grant date. A-13 C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a series of twelve (12) successive equal monthly installments upon the Optionee's completion of each calendar month of Service in the calendar year for which the salary reduction is in effect. Each option shall have a maximum term of ten (10) years measured from the option grant date. D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease Service for any reason while holding one or more options under this Article Three, then each such option shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation of Service, until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Service. Should the Optionee die while holding one or more options under this Article Three, then each such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee's cessation of Service (less any shares subsequently purchased by Optionee prior to death), by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance or by the designated beneficiary or beneficiaries of such option. Such right of exercise shall lapse, and the option shall terminate, upon the earlier of (i) the expiration of the ten (10)-year option term or (ii) the three (3)-year period measured from the date of the Optionee's cessation of Service. However, the option shall, immediately upon the Optionee's cessation of Service for any reason, terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the option is not otherwise at that time exercisable. 3.3 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER A. In the event of any Corporate Transaction while the Optionee remains in Service, each outstanding option held by such Optionee under this Salary Investment Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such outstanding option shall terminate immediately following the Corporate Transaction, except to the extent assumed by the successor corporation (or parent thereof) in such Corporate Transaction. Any option so assumed and shall remain exercisable for the fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the Optionee's cessation of Service. B. In the event of a Change in Control while the Optionee remains in Service, each outstanding option held by such Optionee under this Salary Investment Option Grant Program shall automatically accelerate so that each such option shall immediately become fully exercisable for the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. The option shall remain so exercisable until the earliest to occur of (i) the expiration of the ten (10)-year option term, (ii) the expiration of the three (3)-year period measured from the date of the Optionee's cessation A-14 of Service, (iii) the termination of the option in connection with a Corporate Transaction or (iv) the surrender of the option in connection with a Hostile Take-Over. C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each outstanding option granted him or her under the Salary Investment Option Grant Program. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to the surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. The Primary Committee shall, at the time the option with such limited stock appreciation right is granted under the Salary Investment Option Grant Program, pre-approve any subsequent exercise of that right in accordance with the terms of this Paragraph C. Accordingly, no further approval of the Primary Committee or the Board shall be required at the time of the actual option surrender and cash distribution. D. Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. E. The grant of options under the Salary Investment Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 3.4 REMAINING TERMS The remaining terms of each option granted under the Salary Investment Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. A-15 ARTICLE FOUR AUTOMATIC OPTION GRANT PROGRAM 4.1 OPTION TERMS A. GRANT DATES. Option grants shall be made on the dates specified below: 1. Each individual who is first elected or appointed as a non-employee Board member at any time after the Plan Effective Date shall automatically be granted, on the date of such initial election or appointment, a Non-Statutory Option to purchase 15,000 shares of Common Stock, provided that individual has not previously been in the employ of the Corporation or any Parent or Subsidiary. 2. On the date of each Annual Stockholders Meeting, beginning with the Annual Stockholders Meeting coinciding with the Plan Effective Date, each individual who is to continue to serve as a non-employee Board member, whether or not that individual is standing for re-election to the Board at that particular Annual Meeting, shall automatically be granted a Non- Statutory Option to purchase 5,000 shares of Common Stock, provided such individual has served as a non-employee Board member for at least six (6) months. There shall be no limit on the number of such 5,000-share option grants any one non-employee Board member may receive over his or her period of Board service, and non-employee Board members who have previously been in the employ of the Corporation (or any Parent or Subsidiary) or who have previously received stock options in connection with their Board service prior to the Plan Effective Date shall be eligible to receive one or more such annual option grants over their period of continued Board service. B. EXERCISE PRICE. 1. The exercise price per share shall be equal to one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date. 2. The exercise price shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. C. OPTION TERM. Each option shall have a term of ten (10) years measured from the option grant date. D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately exercisable for any or all of the option shares. However, any unvested shares purchased under the option shall be subject to repurchase by the Corporation, at the exercise price paid per share, upon the Optionee's cessation of Board service prior to vesting in those shares. The shares subject to each initial 15,000-share grant shall vest, and the Corporation's repurchase right shall lapse, in a series of three (3) successive equal annual installments upon the Optionee's completion of each year of A-16 service as a Board member over the three (3) year period measured from the option grant date. The shares subject to each annual 5,000-share option grant shall be fully vested as of the grant date. E. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this Article Five may, in connection with the Optionee's estate plan, be assigned in whole or in part during the Optionee's lifetime to one or more members of the Optionee's immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. The Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Five, and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee's death while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee's death. F. TERMINATION OF BOARD SERVICE. The following provisions shall govern the exercise of any options held by the Optionee at the time the Optionee ceases to serve as a Board member: (i) The Optionee (or, in the event of Optionee's death, the personal representative of the Optionee's estate or the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance or the designated beneficiary or beneficiaries of such option) shall have a twelve (12)-month period following the date of such cessation of Board service in which to exercise each such option. (ii) During the twelve (12)-month exercise period, the option may not be exercised in the aggregate for more than the number of vested shares of Common Stock for which the option is exercisable at the time of the Optionee's cessation of Board service. (iii) Should the Optionee cease to serve as a Board member by reason of death or Permanent Disability, then all shares at the time subject to the option shall immediately vest so that such option may, during the twelve (12)-month exercise period following such cessation of Board service, be exercised for all or any portion of those shares as fully-vested shares of Common Stock. (iv) In no event shall the option remain exercisable after the expiration of the option term. Upon the expiration of the twelve (12)-month exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee's cessation of Board service for any reason other than death or Permanent Disability, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares. A-17 4.2 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER A. In the event of any Corporate Transaction, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of the option shares as fully-vested shares of Common Stock and may be exercised for all or any portion of those vested shares. Immediately following the consummation of the Corporate Transaction, each automatic option grant shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof). B. In connection with any Change in Control, the shares of Common Stock at the time subject to each outstanding option but not otherwise vested shall automatically vest in full so that each such option shall, immediately prior to the effective date of the Change in Control, become fully exercisable for all of the option shares as fully-vested shares of Common Stock and may be exercised for all or any portion of those vested shares. Each such option shall remain exercisable for such fully-vested option shares until the expiration or sooner termination of the option term or the surrender of the option in connection with a Hostile Take-Over. C. All outstanding repurchase rights shall automatically terminate, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Corporate Transaction or Change in Control. D. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each of his or her outstanding automatic option grants. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. No approval or consent of the Board or any Plan Administrator shall be required at the time of the actual option surrender and cash distribution. E. Each option which is assumed in connection with a Corporate Transaction shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate Transaction. Appropriate adjustments shall also be made to the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same. F. The grant of options under the Automatic Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital A-18 or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 4.3 REMAINING TERMS The remaining terms of each option granted under the Automatic Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. A-19 ARTICLE FIVE DIRECTOR FEE OPTION GRANT PROGRAM 5.1 OPTION GRANTS The Primary Committee shall have the sole and exclusive authority to determine the calendar year or years for which the Director Fee Option Grant Program is to be in effect. For each such calendar year the program is in effect, each non-employee Board member may elect to apply all or any portion of the annual retainer fee otherwise payable in cash for his or her service on the Board for that year to the acquisition of a special option grant under this Director Fee Option Grant Program. Such election must be filed with the Corporation's Chief Financial Officer prior to first day of the calendar year for which the annual retainer fee which is the subject of that election is otherwise payable. Each non-employee Board member who files such a timely election shall automatically be granted an option under this Director Fee Option Grant Program on the first trading day in January in the calendar year for which the annual retainer fee which is the subject of that election would otherwise be payable in cash. 5.2 OPTION TERMS Each option shall be a Non-Statutory Option governed by the terms and conditions specified below. A. EXERCISE PRICE. 1. The exercise price per share shall be thirty-three and one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock on the option grant date. 2. The exercise price shall become immediately due upon exercise of the option and shall be payable in one or more of the alternative forms authorized under the Discretionary Option Grant Program. Except to the extent the sale and remittance procedure specified thereunder is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date. B. NUMBER OF OPTION SHARES. The number of shares of Common Stock subject to the option shall be determined pursuant to the following formula (rounded down to the nearest whole number): X = A divided by (B x 66-2/3%), where X is the number of option shares, A is the portion of the annual retainer fee subject to the non-employee Board member's election, and A-20 B is the Fair Market Value per share of Common Stock on the option grant date. C. EXERCISE AND TERM OF OPTIONS. The option shall become exercisable in a series of twelve (12) equal monthly installments upon the Optionee's completion of each month of Board service over the twelve (12)-month period measured from the grant date. Each option shall have a maximum term of ten (10) years measured from the option grant date. D. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this Article Five may, in connection with the Optionee's estate plan, be assigned in whole or in part during the Optionee's lifetime to one or more members of the Optionee's immediate family or to a trust established exclusively for one or more such family members. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. The Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Five, and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee's death while holding those options. Such beneficiary or beneficiaries shall take the transferred options subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee's death. E. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board service for any reason (other than death or Permanent Disability) while holding one or more options under this Director Fee Option Grant Program, then each such option shall remain exercisable, for any or all of the shares for which the option is exercisable at the time of such cessation of Board service, until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. However, each option held by the Optionee under this Director Fee Option Grant Program at the time of his or her cessation of Board service shall immediately terminate and cease to remain outstanding with respect to any and all shares of Common Stock for which the option is not otherwise at that time exercisable. F. DEATH OR PERMANENT DISABILITY. Should the Optionee's service as a Board member cease by reason of death or Permanent Disability, then each option held by such Optionee under this Director Fee Option Grant Program shall immediately become exercisable for all the shares of Common Stock at the time subject to that option, and the option may be exercised for any or all of those shares as fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of such cessation of Board service. Should the Optionee die while holding such option, then the option may be exercised by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance or by the designated beneficiary or beneficiaries of that option. A-21 Should the Optionee die after cessation of Board service but while holding one or more options under this Director Fee Option Grant Program, then each such option may be exercised, for any or all of the shares for which the option is exercisable at the time of the Optionee's cessation of Board service (less any shares subsequently purchased by Optionee prior to death), by the personal representative of the Optionee's estate or by the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance or by the designated beneficiary or beneficiaries of such option. Such right of exercise shall lapse, and the option shall terminate, upon the earlier of (i) the expiration of the ten (10)-year option term or (ii) the three (3)- year period measured from the date of the Optionee's cessation of Board service. 5.3 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER A. In the event of any Corporate Transaction while the Optionee remains a Board member, each outstanding option held by such Optionee under this Director Fee Option Grant Program shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. Each such outstanding option shall terminate immediately following the Corporate Transaction, except to the extent assumed by the successor corporation (or parent thereof) in such Corporate Transaction. Any option so assumed and shall remain exercisable for the fully-vested shares until the earlier of (i) the expiration of the ten (10)-year option term or (ii) the expiration of the three (3)-year period measured from the date of the Optionee's cessation of Board service. B. In the event of a Change in Control while the Optionee remains in Service, each outstanding option held by such Optionee under this Director Fee Option Grant Program shall automatically accelerate so that each such option shall immediately become fully exercisable for the total number of shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully-vested shares of Common Stock. The option shall remain so exercisable until the earliest to occur of (i) the expiration of the ten (10)-year option term, (ii) the expiration of the two (2)-year period measured from the date of the Optionee's cessation of Board service, (iii) the termination of the option in connection with a Corporate Transaction or (iv) the surrender of the option in connection with a Hostile Take-Over. C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty (30)-day period in which to surrender to the Corporation each outstanding option granted him or her under the Director Fee Option Grant Program. The Optionee shall in return be entitled to a cash distribution from the Corporation in an amount equal to the excess of (i) the Take-Over Price of the shares of Common Stock at the time subject to each surrendered option (whether or not the Optionee is otherwise at the time vested in those shares) over (ii) the aggregate exercise price payable for such shares. Such cash distribution shall be paid within five (5) days following the surrender of the option to the Corporation. No approval or consent of the Board or any Plan Administrator shall be required at the time of the actual option surrender and cash distribution. A-22 D. The grant of options under the Director Fee Option Grant Program shall in no way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 5.4 REMAINING TERMS The remaining terms of each option granted under this Director Fee Option Grant Program shall be the same as the terms in effect for option grants made under the Discretionary Option Grant Program. A-23 ARTICLE SIX MISCELLANEOUS 6.1 FINANCING The Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Discretionary Option Grant Program by delivering a full-recourse, interest bearing promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the Optionee or Participant exceed the sum of (i) the aggregate option exercise price (less the par value of those shares) plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise. 6.2 TAX WITHHOLDING A. The Corporation's obligation to deliver shares of Common Stock upon the exercise of options under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements. B. The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options under the Plan (other than the options granted or the shares issued under the Automatic Option Grant or Director Fee Option Grant Program) with the right to use shares of Common Stock in satisfaction of all or part of the Withholding Taxes to which such holders may become subject in connection with the exercise of their options. Such right may be provided to any such holder in either or both of the following formats: Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option, a portion of those shares with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. Stock Delivery: The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the Withholding Taxes) with an aggregate Fair Market Value equal to the percentage of the Withholding Taxes (not to exceed one hundred percent (100%)) designated by the holder. A-24 6.3 EFFECTIVE DATE AND TERM OF THE PLAN A. The Plan shall become effective immediately on the Plan Effective Date. However, the Salary Investment Option Grant Program and the Director Fee Option Grant Program shall not be implemented until such time as the Primary Committee may deem appropriate. Options may be granted under the Discretionary Option Grant at any time on or after the Plan Effective Date, and the initial option grants under the Automatic Option Grant Program shall also be made on the Plan Effective Date to any non-employee Board members eligible for such a grant at that time. However, no options granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation's stockholders. If such stockholder approval is not obtained within twelve (12) months after the Plan Effective Date, then all options previously granted under this Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan. B. The Plan shall serve as the successor to each of the Predecessor Plans, and no further option grants shall be made under the Predecessor Plans after the Plan Effective Date. All options outstanding under the Predecessor Plans on the Plan Effective Date shall be incorporated into the Plan at that time and shall be treated as outstanding options under the Plan. However, each outstanding option so incorporated shall continue to be governed solely by the terms of the documents evidencing such option, and no provision of the Plan shall be deemed to affect or otherwise modify the rights or obligations of the holders of such incorporated options with respect to their acquisition of shares of Common Stock. C. One or more provisions of the Plan, including (without limitation) the option/vesting acceleration provisions of Article Two relating to Corporate Transactions, may, in the Plan Administrator's discretion, be extended to one or more options incorporated from the Predecessor Plans which do not otherwise contain such provisions. D. The Plan shall terminate upon the earliest to occur of (i) March 31, 2010, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully- vested shares or (iii) the termination of all outstanding options in connection with a Corporate Transaction. Should the Plan terminate on March 31, 2010, then all option grants and unvested stock issuances outstanding at that time shall continue to have force and effect in accordance with the provisions of the documents evidencing such grants or issuances. 6.4 AMENDMENT OF THE PLAN A. Except as provided below, the Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall (i) adversely affect the rights and obligations with respect to stock options or unvested stock issuances at the time outstanding under the Plan unless the Optionee consents to such amendment or modification or (ii) unless approved by the stockholders, permit the Plan Administrator to reset the exercise price of outstanding options or grant new options in exchange for the cancellation of outstanding options with a higher exercise price. In addition, if an amendment would (i) materially increase the benefits accruing to participants under the Plan, (ii) materially increase the aggregate number of securities that may be issued under the Plan or (iii) materially modify the requirements as to eligibility for participation in the Plan, then to the extent required by applicable law, or deemed necessary or advisable by the Plan Administrator or the Board of Directors, such amendment shall be subject to stockholder approval. A-25 B. Options to purchase shares of Common Stock may be granted under the Discretionary Option Grant and Salary Investment Option Grant Programs that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such stockholder approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically cancelled and cease to be outstanding. 6.5 USE OF PROCEEDS Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes. 6.6 REGULATORY APPROVALS A. The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock upon the exercise of any granted option shall be subject to the Corporation's procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it. B. No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of any stock exchange (or the Nasdaq National Market, if applicable) on which Common Stock is then listed for trading. 6.7 NO EMPLOYMENT/SERVICE RIGHTS Nothing in the Plan shall confer upon the Optionee or the Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person's Service at any time for any reason, with or without cause. A-26 APPENDIX The following definitions shall be in effect under the Plan: A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant program in effect under Article Four of the Plan. B. BOARD shall mean the Corporation's Board of Directors. C. CHANGE IN CONTROL shall mean a change in ownership or control of the Corporation effected through either of the following transactions: (i) the acquisition, directly or indirectly by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders, or (ii) a change in the composition of the Board over a period of thirty-six (36) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination. D. CODE shall mean the Internal Revenue Code of 1986, as amended. E. COMMON STOCK shall mean the Corporation's common stock. F. CORPORATE TRANSACTION shall mean either of the following stockholder-approved transactions to which the Corporation is a party: (i) a merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or (ii) the sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. G. CORPORATION shall mean Quiksilver, Inc., a Delaware corporation, and any corporate successor to all or substantially all of the assets or voting stock of Quiksilver, Inc. which shall by appropriate action adopt the Plan. A-27 H. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock option grant in effect for non-employee Board members under Article Five of the Plan. I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option grant program in effect under the Plan. J. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to participate in the Automatic Option Grant Program in accordance with the eligibility provisions of Articles One and Four. K. EMPLOYEE shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. L. EXERCISE DATE shall mean the date on which the Corporation shall have received written notice of the option exercise. M. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question, as such price is reported by the National Association of Securities Dealers on the Nasdaq National Market. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. (ii) If the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. N. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly, by any person or related group of persons (other than the Corporation or a person that directly or indirectly controls, is controlled by, or is under common control with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities pursuant to a tender or exchange offer made directly to the Corporation's stockholders which the Board does not recommend such stockholders to accept. A-28 O. INCENTIVE OPTION shall mean an option which satisfies the requirements of Code Section 422. P. INVOLUNTARY TERMINATION shall mean the termination of the Service of any individual which occurs by reason of: (i) such individual's involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or (ii) such individual's voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her duties and responsibilities or the level of management to which he or she reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and target bonus under any corporate-performance based bonus or incentive programs) by more than twenty percent (20%) or (C) a relocation of such individual's place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual's consent. Q. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person adversely affecting the business or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of any Optionee, Participant or other person in the Service of the Corporation (or any Parent or Subsidiary). R. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended. S. NON-STATUTORY OPTION shall mean an option not intended to satisfy the requirements of Code Section 422. T. OPTIONEE shall mean any person to whom an option is granted under the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option Grant or Director Fee Option Grant Program. U. PARENT shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A-29 V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of the Optionee or the Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. However, solely for purposes of the Automatic Option Grant and Director Fee Option Grant Programs, Permanent Disability or Permanently Disabled shall mean the inability of the non-employee Board member to perform his or her usual duties as a Board member by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more. W. PLAN shall mean the Corporation's 2000 Stock Incentive Plan, as set forth in this document. X. PLAN ADMINISTRATOR shall mean the particular entity, whether the Primary Committee, the Board or the Secondary Committee, which is authorized to administer the Discretionary Option Grant Program with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction. Y. PLAN EFFECTIVE DATE shall mean March 31, 2000. Z. PREDECESSOR PLANS shall mean the Corporation's (i) 1996 Stock Option Plan, (ii) the 1998 Nonemployee Directors' Stock Option Plan, (iii) the 1995 Nonemployee Directors' Stock Option Plan and (iv) the 1992 Nonemployee Directors' Stock Option Plan, as each of those plans is in effect immediately prior to the Plan Effective Date hereunder. AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more non- employee Board members appointed by the Board to administer the Discretionary Option Grant Program with respect to Section 16 Insiders and to administer the Salary Investment Option Grant Program solely with respect to the selection of the eligible individuals who may participate in such program. BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary investment option grant program in effect under Article Three of the Plan. CC. SECONDARY COMMITTEE shall mean a committee of one or more Board members appointed by the Board to administer the Discretionary Option Grant Program with respect to eligible persons other than Section 16 Insiders. DD. SECTION 16 INSIDER shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act. EE. SERVICE shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant. A-30 FF. STOCK EXCHANGE shall mean either the American Stock Exchange or the New York Stock Exchange. GG. SUBSIDIARY shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. HH. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation in connection with a Hostile Take-Over or (ii) the highest reported price per share of Common Stock paid by the tender offeror in effecting such Hostile Take-Over. However, if the surrendered option is an Incentive Option, the Take-Over Price shall not exceed the clause (i) price per share. II. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary). JJ. WITHHOLDING TAXES shall mean the Federal, state and local income and employment withholding taxes to which the holder of Non-Statutory Options may become subject in connection with the exercise of those options. A-31 -----END PRIVACY-ENHANCED MESSAGE-----

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EX-99.1

                                  EXHIBIT 99.1

                           2000 STOCK INCENTIVE PLAN
                      (as amended through March 28, 2003)

                                  ARTICLE ONE

                               GENERAL PROVISIONS

        1.1    PURPOSE OF THE PLAN

               This 2000 Stock Incentive Plan is intended to promote the
interests of Quiksilver, Inc., a Delaware corporation, by providing eligible
persons in the Corporation's service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in such service.

               Capitalized terms shall have the meanings assigned to such terms
in the attached Appendix.

        1.2    STRUCTURE OF THE PLAN

               A. The Plan shall be divided into four separate equity programs:

                      - the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,

                      - the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,

                      - the Automatic Option Grant Program under which eligible
non- employee Board members shall automatically receive option grants at
designated intervals over their period of continued Board service, and

                      - the Director Fee Option Grant Program under which
non-employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special stock option grant.



                                      A-1


               B. The provisions of Articles One and Six shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.

        1.3    ADMINISTRATION OF THE PLAN

               A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant Program with respect to Section 16
Insiders. Administration of the Discretionary Option Grant Program with respect
to all other persons eligible to participate in that program may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer that program with respect to all such
persons. However, any discretionary option grants for members of the Primary
Committee shall be made by a disinterested majority of the Board.

               B. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.

               C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant
Program and to make such determinations under, and issue such interpretations
of, the provisions of that program and any outstanding options thereunder as it
may deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant Program
under its jurisdiction or any option or stock issuance thereunder.

               D. The Primary Committee shall have the sole and exclusive
authority to determine which Section 16 Insiders and other highly compensated
Employees shall be eligible for participation in the Salary Investment Option
Grant Program for one or more calendar years. However, all option grants under
the Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.

               E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

               F. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan



                                      A-2


Administrator shall exercise any discretionary functions with respect to any
option grants made under those programs.

        1.4    ELIGIBILITY

               A. The persons eligible to participate in the Discretionary
Option Grant Program are as follows:

                      (i) Employees,

                      (ii) non-employee members of the Board or the board of
        directors of any Parent or Subsidiary, and

                      (iii) consultants and other independent advisors who
        provide services to the Corporation (or any Parent or Subsidiary).

               B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.

               C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive such grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding.

               D. The Plan Administrator shall have the absolute discretion to
grant options in accordance with the Discretionary Option Grant Program.

               E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as non-employee Board members on the Plan Effective Date who have not previously
received an option grant from the Corporation in connection with their Board
service, (ii) those individuals who first become non-employee Board members
after the Plan Effective Date, whether through appointment by the Board or
election by the Corporation's stockholders, and (iii) those individuals who
continue to serve as non-employee Board members at one or more Annual
Stockholders Meetings held after the Plan Effective Date. A non-employee Board
member who has previously been in the employ of the Corporation (or any Parent
or Subsidiary) shall not be eligible to receive an option grant under the
Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to



                                      A-3


receive periodic option grants under the Automatic Option Grant Program while he
or she continues to serve as a non-employee Board member.

               F. All non-employee Board members shall be eligible to
participate in the Director Fee Option Grant Program.

        1.5    STOCK SUBJECT TO THE PLAN

               A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The number of shares of Common Stock
reserved for issuance over the term of the Plan shall not exceed 5,036,209
shares. Such reserve shall consist of (i) the number of shares estimated to
remain available for issuance, as of the Plan Effective Date, under the
Predecessor Plans as last approved by the Corporation's stockholders, including
the shares subject to outstanding options under those Predecessor Plans, (ii) an
increase of 500,000 shares approved by the Corporation's stockholders in
connection with the adoption of this Plan, (iii) an increase of 700,000 shares
approved by the Corporation's stockholders on March 30, 2001, (iv) an increase
of 600,000 shares approved by the Corporation's stockholders on March 26, 2002
and (v) an increase of 800,000 shares approved by the Corporation's stockholders
on March 28, 2003.

               B. No one person participating in the Plan may receive options
and separately exercisable stock appreciation rights for more than 200,000
shares of Common Stock in the aggregate per calendar year.

               C. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plans) shall
be available for subsequent issuance under the Plan to the extent (i) those
options expire or terminate for any reason prior to exercise in full or (ii) the
options are canceled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently canceled or
repurchased by the Corporation at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of Common
Stock issued to the holder of such option. Shares of Common Stock underlying one
or more stock appreciation rights exercised under Section 2.4 of Article Two,
Section 3.3 of Article Three, Section 4.2 of Article Four


                                      A-4


or Section 5.3 of Article Five of the Plan shall NOT be available for subsequent
issuance under the Plan.

               D. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made by the Plan Administrator to (i) the maximum number and/or class
of securities issuable under the Plan, (ii) the number and/or class of
securities for which any one person may be granted stock options and separately
exercisable stock appreciation rights under the Plan per calendar year, (iii)
the number and/or class of securities for which grants are subsequently to be
made under the Automatic Option Grant Program to new and continuing non-employee
Board members, (iv) the number and/or class of securities and the exercise price
per share in effect under each outstanding option under the Plan, and (v) the
number and/or class of securities and price per share in effect under each
outstanding option incorporated into this Plan from the Predecessor Plans. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.


                                      A-5


                                   ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM

        2.1    OPTION TERMS

               Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

               A.     EXERCISE PRICE.

                      1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date. The Plan
Administrator may not reset the exercise price of outstanding options and may
not grant new options in exchange for the cancellation of outstanding options
with a higher exercise price.

                      2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section 6.1 of
Article Six and the documents evidencing the option, be payable in one or more
of the forms specified below:

                             (i) cash or check made payable to the Corporation,

                             (ii) shares of Common Stock held for the requisite
        period necessary to avoid a charge to the Corporation's earnings for
        financial reporting purposes and valued at Fair Market Value on the
        Exercise Date, or

                             (iii) to the extent the option is exercised for
        vested shares, through a special sale and remittance procedure pursuant
        to which the Optionee shall concurrently provide irrevocable
        instructions to (a) a Corporation-designated brokerage firm to effect
        the immediate sale of the purchased shares and remit to the Corporation,
        out of the sale proceeds available on the settlement date, sufficient
        funds to cover the aggregate exercise price payable for the purchased
        shares plus all applicable Federal, state and local income and
        employment taxes required to be withheld by the Corporation by reason of
        such exercise and (b) the Corporation to deliver the certificates for
        the purchased shares directly to such brokerage firm in order to
        complete the sale.

               Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

               B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.



                                      A-6


               C.     EFFECT OF TERMINATION OF SERVICE.

                      1. The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:

                             (i) Any option outstanding at the time of the
        Optionee's cessation of Service for any reason shall remain exercisable
        for such period of time thereafter as shall be determined by the Plan
        Administrator and set forth in the documents evidencing the option, but
        no such option shall be exercisable after the expiration of the option
        term.

                             (ii) Any option held by the Optionee at the time of
        death and exercisable in whole or in part at that time may be
        subsequently exercised by the personal representative of the Optionee's
        estate or by the person or persons to whom the option is transferred
        pursuant to the Optionee's will or the laws of inheritance or by the
        Optionee's designated beneficiary or beneficiaries of that option.

                             (iii) Should the Optionee's Service be terminated
        for Misconduct, then all outstanding options held by the Optionee shall
        terminate immediately and cease to be outstanding.

                             (iv) During the applicable post-Service exercise
        period, the option may not be exercised in the aggregate for more than
        the number of vested shares for which the option is exercisable on the
        date of the Optionee's cessation of Service. Upon the expiration of the
        applicable exercise period or (if earlier) upon the expiration of the
        option term, the option shall terminate and cease to be outstanding for
        any vested shares for which the option has not been exercised. However,
        the option shall, immediately upon the Optionee's cessation of Service,
        terminate and cease to be outstanding to the extent the option is not
        otherwise at that time exercisable for vested shares.

                      2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                             (i) extend the period of time for which the option
        is to remain exercisable following the Optionee's cessation of Service
        from the limited exercise period otherwise in effect for that option to
        such greater period of time as the Plan Administrator shall deem
        appropriate, but in no event beyond the expiration of the option term,
        and/or

                             (ii) permit the option to be exercised, during the
        applicable post-Service exercise period, not only with respect to the
        number of vested shares of Common Stock for which such option is
        exercisable at the time of the Optionee's cessation of Service but also
        with respect to one or more additional installments in which the
        Optionee would have vested had the Optionee continued in Service.



                                      A-7


               D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

               E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.

               F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. However, a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.

        2.2    INCENTIVE OPTIONS

               The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section 2.2, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section 2.2.

               A. ELIGIBILITY. Incentive Options may only be granted to
Employees.

               B. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the



                                      A-8


same calendar year, the foregoing limitation on the exercisability of such
options as Incentive Options shall be applied on the basis of the order in which
such options are granted.

               C. 10% STOCKHOLDER. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

        2.3    CORPORATE TRANSACTION/CHANGE IN CONTROL

               A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for the total number of shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. However, an outstanding option shall NOT
become exercisable on such an accelerated basis if and to the extent: (i) such
option is, in connection with the Corporate Transaction, to be assumed by the
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on any shares for which
the option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.

               B. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.

               C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

               D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year and



                                      A-9


(iv) the maximum number and/or class of securities by which the share reserve is
to increase automatically each calendar year.

               E. The Plan Administrator shall have the discretionary authority
to structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall, immediately prior to the effect date
of such Corporate Transaction, become fully exercisable for the total number of
shares of Common Stock at the time subject to those options and may be exercised
for any or all of those shares as fully vested shares of Common Stock, whether
or not those options are to be assumed in the Corporate Transaction. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be assignable
in connection with such Corporate Transaction and shall accordingly terminate
upon the consummation of such Corporate Transaction, and the shares subject to
those terminated rights shall thereupon vest in full.

               F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall become fully exercisable for the total
number of shares of Common Stock at the time subject to those options in the
event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may structure one or more of the Corporation's repurchase
rights so that those rights shall immediately terminate with respect to any
shares held by the Optionee at the time of such Involuntary Termination, and the
shares subject to those terminated repurchase rights shall accordingly vest in
full at that time.

               G. The Plan Administrator shall have the discretionary authority
to structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall, immediately prior to the effect date
of a Change in Control, become fully exercisable for the total number of shares
of Common Stock at the time subject to those options and may be exercised for
any or all of those shares as fully vested shares of Common Stock. In addition,
the Plan Administrator shall have the discretionary authority to structure one
or more of the Corporation's repurchase rights under the Discretionary Option
Grant Program so that those rights shall terminate automatically upon the
consummation of such Change in Control, and the shares subject to those
terminated rights shall thereupon vest in full. Alternatively, the Plan
Administrator may condition the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program and the
termination of one or more of the Corporation's outstanding repurchase rights
under such program upon the subsequent termination of the Optionee's Service by
reason of an Involuntary Termination within a designated period (not to exceed
eighteen (18) months) following the effective date of such Change in Control.
Each option so accelerated shall remain exercisable for fully vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1) year period measured from the effective date of
Optionee's cessation of Service.



                                      A-10


               H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.

               I. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

        2.4    STOCK APPRECIATION RIGHTS

               A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.

               B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:

                      (i) One or more Optionees may be granted the right,
        exercisable upon such terms as the Plan Administrator may establish, to
        elect between the exercise of the underlying option for shares of Common
        Stock and the surrender of that option in exchange for a distribution
        from the Corporation in an amount equal to the excess of (a) the Fair
        Market Value (on the option surrender date) of the number of shares in
        which the Optionee is at the time vested under the surrendered option
        (or surrendered portion thereof) over (b) the aggregate exercise price
        payable for such shares.

                      (ii) No such option surrender shall be effective unless it
        is approved by the Plan Administrator, either at the time of the actual
        option surrender or at any earlier time. If the surrender is so
        approved, then the distribution to which the Optionee shall be entitled
        may be made in shares of Common Stock valued at Fair Market Value on the
        option surrender date, in cash, or partly in shares and partly in cash,
        as the Plan Administrator shall in its sole discretion deem appropriate.

                      (iii) If the surrender of an option is not approved by the
        Plan Administrator, then the Optionee shall retain whatever rights the
        Optionee had under the surrendered option (or surrendered portion
        thereof) on the option surrender date and may



                                      A-11


        exercise such rights at any time prior to the later of (a) five (5)
        business days after the receipt of the rejection notice or (b) the last
        day on which the option is otherwise exercisable in accordance with the
        terms of the documents evidencing such option, but in no event may such
        rights be exercised more than ten (10) years after the option grant
        date.

               C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:

                      (i) One or more Section 16 Insiders may be granted limited
        stock appreciation rights with respect to their outstanding options.

                      (ii) Upon the occurrence of a Hostile Take-Over, each
        individual holding one or more options with such a limited stock
        appreciation right shall have the unconditional right (exercisable for a
        thirty (30)-day period following such Hostile Take-Over) to surrender
        each such option to the Corporation. In return for the surrendered
        option, the Optionee shall receive a cash distribution from the
        Corporation in an amount equal to the excess of (A) the Take-Over Price
        of the shares of Common Stock at the time subject to such option
        (whether or not the Optionee is otherwise vested in those shares) over
        (B) the aggregate exercise price payable for those shares. Such cash
        distribution shall be paid within five (5) days following the option
        surrender date.

                      (iii) At the time such limited stock appreciation right is
        granted, the Plan Administrator shall pre-approve any subsequent
        exercise of that right in accordance with the terms of this Paragraph C.
        Accordingly, no further approval of the Plan Administrator or the Board
        shall be required at the time of the actual option surrender and cash
        distribution.



                                      A-12


                                  ARTICLE THREE

                     SALARY INVESTMENT OPTION GRANT PROGRAM

        3.1    OPTION GRANTS

               The Primary Committee shall have the sole and exclusive authority
to determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Grant Program on the first trading day in January of the calendar
year for which the salary reduction is to be in effect.

        3.2    OPTION TERMS

               Each option shall be a Non-Statutory Option evidenced by one or
more documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms specified below.

               A.     EXERCISE PRICE.

                      1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.

                      2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

               B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

                             X = A divided by (B x 66-2/3%), where

                             X is the number of option shares,

                             A is the dollar amount of the reduction in the
                             Optionee's base salary for the calendar year to be
                             in effect pursuant to this program, and B is the
                             Fair Market Value per share of Common Stock on the
                             option grant date.



                                      A-13


               C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.

               D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or the laws of inheritance or by the designated beneficiary
or beneficiaries of such option. Such right of exercise shall lapse, and the
option shall terminate, upon the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the three (3)-year period measured from the date
of the Optionee's cessation of Service. However, the option shall, immediately
upon the Optionee's cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.

        3.3    CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

               A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Service.

               B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable for the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
ten (10)-year option term, (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation



                                      A-14


of Service, (iii) the termination of the option in connection with a Corporate
Transaction or (iv) the surrender of the option in connection with a Hostile
Take-Over.

               C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Salary Investment Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to the surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. The Primary Committee shall, at the time the option
with such limited stock appreciation right is granted under the Salary
Investment Option Grant Program, pre-approve any subsequent exercise of that
right in accordance with the terms of this Paragraph C. Accordingly, no further
approval of the Primary Committee or the Board shall be required at the time of
the actual option surrender and cash distribution.

               D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.

               E. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

        3.4    REMAINING TERMS

               The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.



                                      A-15


                                  ARTICLE FOUR

                         AUTOMATIC OPTION GRANT PROGRAM

        4.1    OPTION TERMS

               A. GRANT DATES. Option grants shall be made on the dates
specified below:

                      1. Each individual who is first elected or appointed as a
non-employee Board member at any time after the Plan Effective Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 15,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.

                      2. On the date of each Annual Stockholders Meeting,
beginning with the Annual Stockholders Meeting coinciding with the Plan
Effective Date, each individual who is to continue to serve as a non-employee
Board member, whether or not that individual is standing for re-election to the
Board at that particular Annual Meeting, shall automatically be granted a Non-
Statutory Option to purchase 5,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 5,000-share option grants
any one non-employee Board member may receive over his or her period of Board
service, and non-employee Board members who have previously been in the employ
of the Corporation (or any Parent or Subsidiary) or who have previously received
stock options in connection with their Board service prior to the Plan Effective
Date shall be eligible to receive one or more such annual option grants over
their period of continued Board service.

               B.     EXERCISE PRICE.

                      1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.

                      2. The exercise price shall be payable in one or more of
the alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.

               C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.

               D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any
unvested shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares. The shares subject to each
initial 15,000-share grant shall vest, and the Corporation's repurchase right
shall lapse, in a series of three (3) successive equal annual installments upon
the Optionee's completion of each year of



                                      A-16


service as a Board member over the three (3) year period measured from the
option grant date. The shares subject to each annual 5,000-share option grant
shall be fully vested as of the grant date.

               E. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Five may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.

               F. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:

                      (i) The Optionee (or, in the event of Optionee's death,
        the personal representative of the Optionee's estate or the person or
        persons to whom the option is transferred pursuant to the Optionee's
        will or the laws of inheritance or the designated beneficiary or
        beneficiaries of such option) shall have a twelve (12)-month period
        following the date of such cessation of Board service in which to
        exercise each such option.

                      (ii) During the twelve (12)-month exercise period, the
        option may not be exercised in the aggregate for more than the number of
        vested shares of Common Stock for which the option is exercisable at the
        time of the Optionee's cessation of Board service.

                      (iii) Should the Optionee cease to serve as a Board member
        by reason of death or Permanent Disability, then all shares at the time
        subject to the option shall immediately vest so that such option may,
        during the twelve (12)-month exercise period following such cessation of
        Board service, be exercised for all or any portion of those shares as
        fully-vested shares of Common Stock.

                      (iv) In no event shall the option remain exercisable after
        the expiration of the option term. Upon the expiration of the twelve
        (12)-month exercise period or (if earlier) upon the expiration of the
        option term, the option shall terminate and cease to be outstanding for
        any vested shares for which the option has not been exercised. However,
        the option shall, immediately upon the Optionee's cessation of Board
        service for any reason other than death or Permanent Disability,
        terminate and cease to be outstanding to the extent the option is not
        otherwise at that time exercisable for vested shares.



                                      A-17


        4.2    CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

               A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the option shares as fully-vested shares of Common
Stock and may be exercised for all or any portion of those vested shares.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).

               B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the option shares as fully-vested shares of Common Stock and may be
exercised for all or any portion of those vested shares. Each such option shall
remain exercisable for such fully-vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.

               C. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction or
Change in Control.

               D. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or consent
of the Board or any Plan Administrator shall be required at the time of the
actual option surrender and cash distribution.

               E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.

               F. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital



                                      A-18


or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

        4.3    REMAINING TERMS

               The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.



                                      A-19


                                  ARTICLE FIVE

                        DIRECTOR FEE OPTION GRANT PROGRAM

        5.1    OPTION GRANTS

               The Primary Committee shall have the sole and exclusive authority
to determine the calendar year or years for which the Director Fee Option Grant
Program is to be in effect. For each such calendar year the program is in
effect, each non-employee Board member may elect to apply all or any portion of
the annual retainer fee otherwise payable in cash for his or her service on the
Board for that year to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of the calendar year
for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would otherwise be
payable in cash.

        5.2    OPTION TERMS

               Each option shall be a Non-Statutory Option governed by the terms
and conditions specified below.

               A.     EXERCISE PRICE.

                      1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.

                      2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

               B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):

                             X = A divided by (B x 66-2/3%), where

                             X is the number of option shares,

                             A is the portion of the annual retainer fee subject
                             to the non-employee Board member's election, and



                                      A-20


                             B is the Fair Market Value per share of Common
                             Stock on the option grant date.

               C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) equal monthly installments upon the
Optionee's completion of each month of Board service over the twelve (12)-month
period measured from the grant date. Each option shall have a maximum term of
ten (10) years measured from the option grant date.

               D. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Five may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.

               E. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Director Fee Option Grant Program, then each such
option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Board service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Board service. However, each option held by the Optionee under this Director
Fee Option Grant Program at the time of his or her cessation of Board service
shall immediately terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.

               F. DEATH OR PERMANENT DISABILITY. Should the Optionee's service
as a Board member cease by reason of death or Permanent Disability, then each
option held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service. Should the Optionee
die while holding such option, then the option may be exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or the laws of inheritance
or by the designated beneficiary or beneficiaries of that option.



                                      A-21


                      Should the Optionee die after cessation of Board service
but while holding one or more options under this Director Fee Option Grant
Program, then each such option may be exercised, for any or all of the shares
for which the option is exercisable at the time of the Optionee's cessation of
Board service (less any shares subsequently purchased by Optionee prior to
death), by the personal representative of the Optionee's estate or by the person
or persons to whom the option is transferred pursuant to the Optionee's will or
the laws of inheritance or by the designated beneficiary or beneficiaries of
such option. Such right of exercise shall lapse, and the option shall terminate,
upon the earlier of (i) the expiration of the ten (10)-year option term or (ii)
the three (3)- year period measured from the date of the Optionee's cessation of
Board service.

        5.3    CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

               A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Board service.

               B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable for the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
ten (10)-year option term, (ii) the expiration of the two (2)-year period
measured from the date of the Optionee's cessation of Board service, (iii) the
termination of the option in connection with a Corporate Transaction or (iv) the
surrender of the option in connection with a Hostile Take-Over.

               C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Director Fee Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to each surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. No approval or consent of the Board or any Plan
Administrator shall be required at the time of the actual option surrender and
cash distribution.



                                      A-22


               D. The grant of options under the Director Fee Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

        5.4    REMAINING TERMS

               The remaining terms of each option granted under this Director
Fee Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.



                                      A-23


                                  ARTICLE SIX

                                 MISCELLANEOUS

        6.1    FINANCING

               The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price (less the par value of those shares) plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise.

        6.2    TAX WITHHOLDING

               A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options under the Plan shall be subject to the satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements.

               B. The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options under the Plan (other than the options
granted or the shares issued under the Automatic Option Grant or Director Fee
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Withholding Taxes to which such holders may
become subject in connection with the exercise of their options. Such right may
be provided to any such holder in either or both of the following formats:

                      Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option, a portion of those shares with an aggregate Fair
Market Value equal to the percentage of the Withholding Taxes (not to exceed one
hundred percent (100%)) designated by the holder.

                      Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder.


                                      A-24


        6.3    EFFECTIVE DATE AND TERM OF THE PLAN

               A. The Plan shall become effective immediately on the Plan
Effective Date. However, the Salary Investment Option Grant Program and the
Director Fee Option Grant Program shall not be implemented until such time as
the Primary Committee may deem appropriate. Options may be granted under the
Discretionary Option Grant at any time on or after the Plan Effective Date, and
the initial option grants under the Automatic Option Grant Program shall also be
made on the Plan Effective Date to any non-employee Board members eligible for
such a grant at that time. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.

               B. The Plan shall serve as the successor to each of the
Predecessor Plans, and no further option grants shall be made under the
Predecessor Plans after the Plan Effective Date. All options outstanding under
the Predecessor Plans on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.

               C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions, may, in the Plan Administrator's discretion, be
extended to one or more options incorporated from the Predecessor Plans which do
not otherwise contain such provisions.

               D. The Plan shall terminate upon the earliest to occur of (i)
March 31, 2010, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully- vested shares or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Should
the Plan terminate on March 31, 2010, then all option grants and unvested stock
issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.

        6.4    AMENDMENT OF THE PLAN

               A. Except as provided below, the Board shall have complete and
exclusive power and authority to amend or modify the Plan in any or all
respects. However, no such amendment or modification shall (i) adversely affect
the rights and obligations with respect to stock options or unvested stock
issuances at the time outstanding under the Plan unless the Optionee consents to
such amendment or modification or (ii) unless approved by the stockholders,
permit the Plan Administrator to reset the exercise price of outstanding options
or grant new options in exchange for the cancellation of outstanding options
with a higher exercise price. In addition, if an amendment would (i) materially
increase the benefits accruing to participants under the Plan, (ii) materially
increase the aggregate number of securities that may be issued under the Plan
or (iii) materially modify the requirements as to eligibility for participation
in the Plan, then to the extent required by applicable law, or deemed necessary
or advisable by the Plan Administrator or the Board of Directors, such amendment
shall be subject to stockholder approval.


                                      A-25


               B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment Option Grant Programs
that are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.

        6.5    USE OF PROCEEDS

               Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.

        6.6    REGULATORY APPROVALS

               A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock upon the
exercise of any granted option shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the stock options granted under it and the shares of
Common Stock issued pursuant to it.

               B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.

        6.7    NO EMPLOYMENT/SERVICE RIGHTS

               Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.



                                      A-26


                                    APPENDIX

               The following definitions shall be in effect under the Plan:

               A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under Article Four of the Plan.

               B. BOARD shall mean the Corporation's Board of Directors.

               C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:

                      (i) the acquisition, directly or indirectly by any person
        or related group of persons (other than the Corporation or a person that
        directly or indirectly controls, is controlled by, or is under common
        control with, the Corporation), of beneficial ownership (within the
        meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
        than fifty percent (50%) of the total combined voting power of the
        Corporation's outstanding securities pursuant to a tender or exchange
        offer made directly to the Corporation's stockholders, or

                      (ii) a change in the composition of the Board over a
        period of thirty-six (36) consecutive months or less such that a
        majority of the Board members ceases, by reason of one or more contested
        elections for Board membership, to be comprised of individuals who
        either (A) have been Board members continuously since the beginning of
        such period or (B) have been elected or nominated for election as Board
        members during such period by at least a majority of the Board members
        described in clause (A) who were still in office at the time the Board
        approved such election or nomination.

               D. CODE shall mean the Internal Revenue Code of 1986, as amended.

               E. COMMON STOCK shall mean the Corporation's common stock.

               F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

                      (i) a merger or consolidation in which securities
        possessing more than fifty percent (50%) of the total combined voting
        power of the Corporation's outstanding securities are transferred to a
        person or persons different from the persons holding those securities
        immediately prior to such transaction, or

                      (ii) the sale, transfer or other disposition of all or
        substantially all of the Corporation's assets in complete liquidation or
        dissolution of the Corporation.

               G. CORPORATION shall mean Quiksilver, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Quiksilver, Inc. which shall by appropriate action
adopt the Plan.



                                      A-27


               H. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock
option grant in effect for non-employee Board members under Article Five of the
Plan.

               I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.

               J. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Articles One and Four.

               K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

               L. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.

               M. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:

                      (i) If the Common Stock is at the time traded on the
        Nasdaq National Market, then the Fair Market Value shall be the closing
        selling price per share of Common Stock on the date in question, as such
        price is reported by the National Association of Securities Dealers on
        the Nasdaq National Market. If there is no closing selling price for the
        Common Stock on the date in question, then the Fair Market Value shall
        be the closing selling price on the last preceding date for which such
        quotation exists.

                      (ii) If the Common Stock is at the time listed on any
        Stock Exchange, then the Fair Market Value shall be the closing selling
        price per share of Common Stock on the date in question on the Stock
        Exchange determined by the Plan Administrator to be the primary market
        for the Common Stock, as such price is officially quoted in the
        composite tape of transactions on such exchange. If there is no closing
        selling price for the Common Stock on the date in question, then the
        Fair Market Value shall be the closing selling price on the last
        preceding date for which such quotation exists.

               N. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.



                                      A-28


               O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.

               P. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:

                      (i) such individual's involuntary dismissal or discharge
        by the Corporation for reasons other than Misconduct, or

                      (ii) such individual's voluntary resignation following (A)
        a change in his or her position with the Corporation which materially
        reduces his or her duties and responsibilities or the level of
        management to which he or she reports, (B) a reduction in his or her
        level of compensation (including base salary, fringe benefits and target
        bonus under any corporate-performance based bonus or incentive programs)
        by more than twenty percent (20%) or (C) a relocation of such
        individual's place of employment by more than fifty (50) miles, provided
        and only if such change, reduction or relocation is effected by the
        Corporation without the individual's consent.

               Q. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).

               R. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

               S. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.

               T. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant, Salary Investment Option Grant, Automatic
Option Grant or Director Fee Option Grant Program.

               U. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.


                                      A-29


               V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.

               W. PLAN shall mean the Corporation's 2000 Stock Incentive Plan,
as set forth in this document.

               X. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Discretionary Option Grant Program with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons under
its jurisdiction.

               Y. PLAN EFFECTIVE DATE shall mean March 31, 2000.

               Z. PREDECESSOR PLANS shall mean the Corporation's (i) 1996 Stock
Option Plan, (ii) the 1998 Nonemployee Directors' Stock Option Plan, (iii) the
1995 Nonemployee Directors' Stock Option Plan and (iv) the 1992 Nonemployee
Directors' Stock Option Plan, as each of those plans is in effect immediately
prior to the Plan Effective Date hereunder.

               AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non- employee Board members appointed by the Board to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders and to
administer the Salary Investment Option Grant Program solely with respect to the
selection of the eligible individuals who may participate in such program.

               BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under Article Three of the Plan.

               CC. SECONDARY COMMITTEE shall mean a committee of one or more
Board members appointed by the Board to administer the Discretionary Option
Grant Program with respect to eligible persons other than Section 16 Insiders.

               DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

               EE. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.



                                      A-30


               FF. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.

               GG. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.

               HH. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.

               II. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

               JJ. WITHHOLDING TAXES shall mean the Federal, state and local
income and employment withholding taxes to which the holder of Non-Statutory
Options may become subject in connection with the exercise of those options.



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