10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended October 31, 2004

OR

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

Commission file number 0-15131

QUIKSILVER, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0199426
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
15202 Graham Street
Huntington Beach, California	92649
(Address of principal executive offices)	(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of	Name of each exchange
each class	on which registered
Common Stock	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

     The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant was approximately $1.23 billion as of April 30, 2004, the last business day of Registrant’s most recently completed second fiscal quarter.

     As of January 4, 2005, there were 58,741,674 shares of the Registrant’s Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held March 24, 2005 are incorporated by reference into Part III of this Form 10-K.

TABLE OF CONTENTS

		Page
PART I
Item 1.	BUSINESS
	Introduction	1
	Recent Developments	1
	Segment Information	2
	Products and Brands	2
	Product Categories	3
	Product Design	3
	Promotion and Advertising	4
	Customers and Sales	5
	Retail Concepts	6
	Seasonality	7
	Production and Raw Materials	7
	Imports and Import Restrictions	8
	Trademarks and Licensing Agreements	8
	Competition	9
	Future Season Orders	9
	Employees	10
	Environmental Matters	10
	Available Information	10
	Forward-Looking Statements	10
	Risk Factors	11
Item 2.	PROPERTIES	13
Item 3.	LEGAL PROCEEDINGS	14
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	14
PART II
Item 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	15
Item 6.	SELECTED FINANCIAL DATA	16
Item 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	30
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	30
Item 9A.	CONTROLS AND PROCEDURES	30
Item 9B.	OTHER INFORMATION	31
PART III
Item 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	32
Item 11.	EXECUTIVE COMPENSATION	32
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	32
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	32
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	32
PART IV
Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	33
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		34
SIGNATURES		58
EXHIBIT 3.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.6
EXHIBIT 10.9
EXHIBIT 10.10
EXHIBIT 10.19
EXHIBIT 10.20
EXHIBIT 10.21
EXHIBIT 21.1
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

PART I

Item 1. BUSINESS

Unless the context indicates otherwise, when we refer to “Quiksilver”, “we”, “us”, “our”, or the “Company” in this Form 10-K, we are referring to Quiksilver, Inc. and its subsidiaries on a consolidated basis. Quiksilver, Inc. was incorporated in 1976 and was reincorporated in Delaware in 1986. Our fiscal year ends on October 31, and references to fiscal 2004, fiscal 2003 or fiscal 2002 refer to the years ended October 31, 2004, 2003 or 2002, respectively.

Introduction

We are a globally integrated company that designs, produces and distributes branded clothing, accessories and related products for young-minded people. Our brands represent a casual lifestyle—driven from our authentic boardriding heritage. Our primary focus is apparel for young men and young women under the Quiksilver, Roxy, Raisins, DC Shoes, Radio Fiji and Gotcha (Europe) labels. We also manufacture apparel for boys (Quiksilver Boys and Hawk Clothing), girls (Roxy Girl, Teenie Wahine and Raisins Girls), men (Quiksilveredition and Fidra, our golf line) and women (Leilani swimwear), as well as snowboards, snowboard boots and bindings under the Lib Technologies, DC Shoes, Gnu, Roxy and Bent Metal labels.

We generate revenues primarily in the United States, Europe and the Asia/Pacific market. Our products are sold primarily in surf shops, specialty stores, and our proprietary retail concept Boardriders Club stores where we can best carry our authentic brand message to the consumer.

Since acquiring Quiksilver International Pty Ltd., an Australian company (“Quiksilver International”), in July 2000, we have owned all international rights to use the Quiksilver and Roxy trademarks. Before then, we owned these intellectual property rights in the United States and Mexico only, and operated under license agreements with Quiksilver International to use the trademarks in other countries and territories.

In December 2002, we took an additional step in consolidating global control of the Quiksilver and Roxy brands by acquiring Ug Manufacturing Co. Pty Ltd., and Quiksilver Japan KK, our licensees (through Quiksilver International) in Australia, Japan, New Zealand and other Southeast Asian territories. By acquiring this group of companies, which we refer to as Quiksilver Asia/Pacific, we created a global operating platform consisting of our Americas, European and Asia/Pacific operations.

We believe our 35-year history of continuing commitment to board sports and our development of innovative products that relate to and reflect this fast growing global lifestyle give our company and our brands a credibility and authenticity that is truly unique in our industry. Our boardriding lifestyle generates products and images that are recognized around the world as symbols of fun, freedom and individual expression. As the leader of the boardriding outdoor active lifestyle, we are now carrying our products and brand message to a diversity of markets worldwide.

Recent Developments

In May 2004, we acquired DC Shoes, Inc. (“DC”), a premier designer, producer and distributor of action sports inspired footwear, apparel and related accessories in the U.S. and internationally. DC’s skateboard-driven image and lifestyle is complementary to our existing brands, and it is well positioned within the global youth market. DC’s brand transcends the traditional boundaries of both footwear and skateboarding with a diverse product mix respected by boardriders as well as a broad base of consumers. We believe that DC’s business will benefit from our existing infrastructure, and that we will benefit from DC’s footwear expertise.

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Segment Information

We operate exclusively in the consumer products industry segment. Beginning with fiscal 2003, we have three geographic segments, the Americas, Europe and Asia/Pacific. The Americas segment includes revenues primarily from the U.S. and Canada. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand and Indonesia. Royalties earned from various licensees in other international territories are categorized in corporate operations. For information regarding the revenues, operating profits and identifiable assets attributable to our geographic segments, see Note 15 of our financial statements.

Products and Brands

Our first product was the famous Quiksilver boardshort developed by two Australian surfers who founded Quiksilver Australia in the late 1960’s. The Quiksilver boardshort, identified by its distinctive mountain and wave logo, became known in the core surfing world as a technically innovative and stylish product. The reputation and popularity of the Quiksilver boardshort grew, having been brought to the beaches of California and Southwest France in the 1970’s by the founders of our company and Quiksilver Europe. Since the first boardshort, our product lines have been greatly expanded, but our brands continue to represent innovation and quality. In the 1990’s we called on the Quiksilver heritage to reach out to the girls market by creating the Roxy brand for juniors, which has become our fastest growing brand. In 2004, we acquired the DC Shoes brand from its founders and expanded our presence in the action sports inspired footwear arena. In addition to Quiksilver, Roxy and DC Shoes, we have developed a stable of other brands to address a wide variety of consumers and markets. We believe this multibrand strategy will allow us to continue to grow across a diverse range of products and distribution with broad appeal across gender, age groups and geographies.

Quiksilver

Our Quiksilver product line now includes shirts, walkshorts, t-shirts, fleece, pants, jackets, snowboardwear, footwear, hats, backpacks, wetsuits, watches, eyewear and other accessories. Quiksilver has also expanded demographically and currently includes young men, boys and toddlers. Quiksilveredition is our brand targeted at men. In fiscal 2004, the Quiksilver line of products represented approximately 51% of our revenues.

Roxy

Our Roxy brand for young women is a surf-inspired collection that we introduced in fiscal 1991. The Roxy line is branded with a heart logo composed of back-to-back images of the Quiksilver mountain and wave logo and includes a full range of sportswear, swimwear, footwear, backpacks, snowboardwear, snowboards, snowboard boots, fragrance, beauty care, bedroom furnishings and other accessories for young women. Through fiscal 1997, Roxy included juniors sizes only, but was then expanded as Teenie Wahine and Roxy Girl into the girls categories. In fiscal 2004, the Roxy product line accounted for approximately 33% of our revenues.

DC Shoes

Our recently acquired DC Shoes label specializes in performance skateboard shoes, snowboard boots, sandals and apparel for both young men and juniors. This brand enhances our footwear expertise and strengthens our presence in the core skateboard market. In fiscal 2004, the DC Shoes product line accounted for approximately 7% of our revenues

Other Brands

In fiscal 2004, our other brands represented approximately 9% of our revenues.

•   Raisins, Radio Fiji, Leilani, Island Soul - Raisins and Radio Fiji are swimwear labels in the juniors category while Leilani is a contemporary swimwear label. We also produce Island Soul swimwear for certain department store chains and specialty shops.

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•   Hawk - Tony Hawk, the world-famous skateboarder, is the inspiration for our Hawk Clothing brand. Our target audience for the Hawk product line is boys who recognize Tony from his broad media and video game exposure.

•   Gotcha - Gotcha is one of our European labels and gives us product to address European street fashion for young men.

•   Fidra – Fidra, our golf apparel line, was conceived and developed by golf industry pioneer, John Ashworth, and is endorsed by world famous golfer, Ernie Els.

•   Lib Tech, Gnu, Bent Metal — We address the core snowboard market through our Lib Technologies and Gnu brands of snowboards and accessories and Bent Metal snowboard bindings.

Product Categories

The following table shows the approximate percentage of revenues attributable to each of our major product categories during the last three fiscal years:

	Percentage of Revenues
	2004			2003			2002
T-Shirts		19	%		20	%		20	%
Accessories		14			14			12
Jackets, sweaters and snowboardwear		12			12			12
Pants		10			11			11
Shirts		9			10			11
Footwear		9			5			4
Swimwear, excluding boardshorts		7			8			9
Fleece		5			6			7
Shorts		5			6			6
Boardshorts		4			4			3
Tops and dresses		4			3			3
Snowboards, snowboard boots, bindings and accessories		2			1			2
		100	%		100	%		100	%

Although our products are generally available throughout the year, demand for different categories of product changes in the different seasons of the year. Sales of shorts, short-sleeve shirts, t-shirts and swimwear are higher during the spring and summer seasons, and sales of pants, long-sleeve shirts, fleece, jackets, sweaters, snowboardwear and snowboards are higher during the fall and holiday seasons.

We believe that the U.S. retail prices for our apparel products range from approximately $18 for a t-shirt and $41 for a typical short to a range of $120 to $320 for a snowboard jacket. For European products, retail prices range from approximately $35 for a t-shirt and about $61 for a typical short to $220 for a basic snowboard jacket. Asia/Pacific t-shirts sell for approximately $32, while shorts sell for approximately $54, and a basic snowboard jacket sells for approximately $210. Retail prices for a typical skate shoe range from approximately $60 in the U.S. to approximately $117 in Europe.

Product Design

Our products are designed for young-minded people who live a casual lifestyle. Innovative design, active fabrics and quality of workmanship are emphasized. Our design and merchandising teams create seasonal product ranges for each of our brands. These design groups constantly monitor local and global fashion trends. We believe our most valuable input comes from our own managers, employees, sponsored athletes and independent sales representatives who are actively involved in surfing, skateboarding, snowboarding and other sports in our core market. This connection with our core market continues to be the inspiration for our product and is key to our reputation for distinct and authentic design.

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Our design centers in California, Europe, Australia and Japan develop and share designs and merchandising themes and concepts that are globally consistent while reflecting local adaptations for differences in geography, culture and taste.

Promotion and Advertising

Our three-decade commitment to core marketing at the grass-roots level in the sport of surfing and other youth boardriding activities is the foundation of the promotion and advertising of our brands and products.

The sponsorship of high profile athletes in outdoor, individual sports, including surfing, skateboarding, snowboarding, windsurfing and golf is an important marketing vehicle for us. Many of these athletes such as Kelly Slater, Lisa Anderson, Tom Carroll, Sofia Mulanovich, Tony Hawk, Danny Way, Bastien Salabanzi, Robbie Naish, Danny Kass and Ernie Els have achieved world champion status in their respective sports and are featured in our promotional content. We operate a promotional fund that is used to sponsor portions of our international team of leading athletes, produce promotional movies and videos featuring athletes wearing and/or using Quiksilver and Roxy products, and organize surf, skate and snow contests and other events that have international significance.

Our core marketing is based on our sponsorship and support of surf, skateboard and snowboard contests in markets where we distribute product. These events reinforce the reputations of our brands as authentic among boardriders and non-boardriders alike. For example, the Quiksilver in Memory of Eddie Aikau Big Wave Invitational is held at Waimea Bay in Hawaii. Quiksilver Pro events are held on the Gold Coast of Australia, the beaches of Southwestern France and the beaches of Japan. The Roxy Pro is held in Hawaii and other international locations. We also produce many events in Europe, including the Grommets Trophy surfing event, the Slopestyle Pro snowboarding event and the Bowlriders skateboarding event. The Quiksilver Airshows, which feature aerial surf maneuvers, are held in New Zealand, Japan, Indonesia and Australia. Along with other international contests, we also sponsor many regional and local events, such as surf camps and skate park tours, for beginners and enthusiasts. Our DC athletes participate regularly in the X Games. Sixteen of our DC athletes competed in the Summer X Games, earning 14 medals.

We sponsor the Quiksilver Crossing, a continuing voyage of the Indies Trader, a surf exploration vessel whose mission is to explore new surfing regions around the world and document the state of the environment under a team of marine biologists. The Quiksilver Crossing, now in its sixth year, began its voyage in the South Pacific, continued on through the Suez Canal to Europe in 2002, visited the Caribbean in 2003, reached the east coast and Mississippi River of the U.S. in 2004 and is heading for the west coast of the U.S. in 2005.

Based on our international reputation for authenticity, compelling content and technical competence in the youth market, we enter into co-branding arrangements. For example, Peugeot has produced cars branded with Quiksilver, while Boost Mobile has produced and sold Roxy mobile phones in the U.S. and Quiksilver and Roxy mobile phones in Australia, and Sony has produced a waterproof digital camera branded with Quiksilver and original Quiksilver artwork.

Our Quiksilver Entertainment division is also producing television programming, documentaries and feature films, and publishing fiction and non-fiction books to transmit our boardriding lifestyle to the core and mainstream audiences. We developed and produce 54321, a weekly series on Fuel TV and Fox Sports Net, and we produced the Surf Girls reality series on MTV which has aired in the U.S. and internationally. In 2004, we launched Union, a mainstream action sports film distribution company. Union distributes the highest quality action sports films from the leading producers in the action sports industry through a variety of mainstream channels, including over 1,000 retail locations in the U.S., Europe, Japan, China, and Australia.

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Customers and Sales

Our distribution strategy is premised on our longstanding belief that the integrity and success of our brands is dependent on responsible growth and careful selection of the retail accounts where our products are merchandised and sold.

Our policy is to sell to retailers who provide an outstanding in-store experience for their customers and who merchandise our products in a manner consistent with the image of our brands and the quality of our products. Our customer base has for many years reflected our goal of diversification of distribution to include surf shops, skate shops, snowboard shops, other specialty stores, national specialty chains and select department stores.

The foundation of our business is distribution of product through surf shops, skate shops, snowboard shops, Boardriders Clubs and specialty stores where in-store shops, fixturing and point-of-sale materials carry our brand message. This core distribution channel serves as a base of legitimacy and long-term loyalty to us and our brands. Most of these stores stand alone or are part of small chains.

We also sell to independent specialty or active lifestyle stores and specialty chains not specifically characterized as surf shops, skate shops or snowboard shops. This category includes chains such as Pacific Sunwear, Nordstrom, Zumiez, Chicks Sporting Goods and Journeys, as well as many independent active lifestyle stores and sports shops. We also sell to a limited number of department stores, including Macy’s, Robinsons-May, Dillards, The Bon Marche and Burdines in the U.S.; Le Printemps and Galeries Lafayette in France; Corte Ingles in Spain; and Lillywhites in Great Britain.

Many of our brands are sold through the same retail accounts; however, distribution can be different depending on the brand and demographic group. Our Quiksilver products are sold in the Americas to customers that have approximately 8,400 store locations combined. Likewise, Roxy products are sold in the Americas to customers with approximately 8,350 store locations. Most of these Roxy locations also carry Quiksilver product. In the Americas, DC products are carried in approximately 5,000 stores, primarily in the U.S. and Canada. Our swimwear brands (Raisins, Leilani and Radio Fiji) are found in 10,400 stores, including many small, specialty swim locations, while our wintersports hardgoods products are found in approximately 1,300 stores, including primarily snowboard shops in the U.S. and Canada. Hawk brands are carried in approximately 3,800 stores, primarily in the U.S. These stores include skate shops and department stores. Fidra is carried in approximately 900 green grass stores primarily in the U.S. Our products are found in approximately 6,800 store locations in Europe, and in approximately 2,100 store locations in Asia/Pacific, in both cases primarily Quiksilver and Roxy. Distribution of DC products in Europe and Asia/Pacific has been primarily through distributors.

Our European segment accounted for approximately 39% and 40% of our consolidated revenues during fiscal 2004 and 2003, respectively. Our Asia/Pacific segment accounted for approximately 12% and 10% of our consolidated revenues in fiscal 2004 and 2003, respectively. Other fiscal 2004 foreign sales are in the Americas (Canada, Central and South America) and were approximately 5% of consolidated revenues.

The following table summarizes the approximate percentages of our fiscal 2004 revenues by distribution channel:

	Percentage of Revenues
Distribution Channel	Americas			Europe			Asia/Pacific			Consolidated
Boardriders Clubs, in-store specialty shops, surf, skate and snow shops		26	%		37	%		78	%		36	%
Specialty stores		52			46			6			45
Department stores		11			7			9			9
U.S. exports		11			—			—			5
Distributors		—			10			7			5
Total		100	%		100	%		100	%		100	%
Geographic segment		49	%		39	%		12	%		100	%

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Our revenues are spread over a large wholesale customer base. During fiscal 2004, approximately 17% of our consolidated revenues were from our ten largest customers and no single customer accounted for more than 4% of such revenues.

Our products are sold by approximately 310 independent sales representatives in the Americas, Europe and Asia/Pacific. In addition, we use approximately 60 local distributors in Europe, which includes approximately 26 DC distributors. Our other international DC business uses approximately 20 distributors, primarily in Asia/Pacific and South America. Our sales representatives are generally compensated on a commission basis. We employ retail merchandise coordinators who travel between specified retail locations of our wholesale customers to further improve the presentation of our product and build our image at the retail level.

Our sales are globally diversified. The following table summarizes the approximate percentages of our fiscal 2004 revenues by geographic region (excluding licensees):

	Percentage of Revenues
Geographic Region	2004			2003			2002
U.S. West Coast and Hawaii		24	%		26	%		32	%
U.S. East Coast		10			11			12
Other U.S		10			8			10
Other Americas		5			5			6
France		15			16			17
United Kingdom and Spain		14			15			14
Other European countries		10			9			9
Asia/Pacific		12			10			—
Total		100	%		100	%		100	%

We generally sell our products to customers on a net-30 to net-60 day basis in the Americas, and in Europe and Asia/Pacific on a net-30 to net-90 day basis depending on the country and whether we sell directly to retailers in the country or to a distributor. Some customers are on C.O.D. terms. We generally do not reimburse our customers for marketing expenses, participate in markdown programs with our customers, or offer goods on consignment.

For additional information regarding our revenues, operating profits and identifiable assets attributable to our geographic segments, see Note 15 of our financial statements.

Retail Concepts

Quiksilver concept stores (Boardriders Clubs) are an important part of our global retail strategy. These stores are stocked primarily with Quiksilver and Roxy product, and their proprietary design demonstrates the Company’s history, authenticity and commitment to surfing and other boardriding sports. We also have Roxy stores, which are dedicated to the juniors customer, Quiksilver Youth stores, Hawk Clothing stores, Gotcha stores in Europe, Andaska shops in Europe that carry multiple brands in the outdoor market, and other multibrand stores in Europe.

We own 170 stores in selected markets that provide enhanced brand-building opportunities. In territories where we operated our wholesale businesses during fiscal 2004, we had 164 stores with independent retailers under license. We do not receive royalty income from these stores. Rather, we provide the independent retailer with our retail expertise and store design concepts in exchange for the independent retailer agreeing to maintain our brands at a minimum of 80% of the store’s inventory. Certain minimum purchase obligations are also required. Furthermore, in our licensed territories, such as Turkey and South Africa, our licensees operate 76 Boardriders Clubs. We receive royalty income from sales in these stores based on wholesale volume. We also distribute our products through outlet stores generally located in outlet malls in geographically diverse, non-urban locations. The total number of stores open at October 31, 2004 was 410.

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The unit count of both company-owned and licensed stores at October 31, 2004, excluding stores in licensed territories, is summarized in the following table:

	Number of Stores
	Americas				Europe				Asia/Pacific				Combined
Store Concept	Company Owned		Licensed		Company Owned		Licensed		Company Owned		Licensed		Company Owned		Licensed
Boardriders Clubs		29		12		55		114		8		17		92		143
Roxy stores		3		1		11		5		3		4		17		10
Youth stores		1		2		—		—		—		—		1		2
Hawk stores		3		—		—		—		—		—		3		—
Multibrand stores		—		—		3		3		—		—		3		3
Gotcha stores		—		—		1		1		—		—		1		1
Outlet stores		31		4		12		—		10		1		53		5
		67		19		82		123		21		22		170		164

Seasonality

Our sales fluctuate from quarter to quarter primarily due to seasonal consumer demand patterns for different categories of our products, and due to the effect that the Christmas season has on the buying patterns of our customers.

	Consolidated Revenues
Dollar amounts in thousands	2004				2003				2002
Quarter ended January 31	$	256,142	20	%	$	192,080	20	%	$	146,959	21	%
Quarter ended April 30		322,579	25			262,210	27			187,423	26
Quarter ended July 31		337,930	27			251,498	26			175,044	25
Quarter ended October 31		350,288	28			269,217	27			196,058	28
Total	$	1,266,939	100	%	$	975,005	100	%	$	705,484	100	%

Production and Raw Materials

Our apparel and accessories are generally sourced separately for the Americas, Europe and Asia/Pacific operations. With the acquisition of Quiksilver Asia/Pacific in fiscal 2002, we now control a sourcing office in Hong Kong that manages the majority of production for our Asia/Pacific business and some of our Americas and European production. We believe that as we expand the Hong Kong sourcing operations, more products can be sourced together and additional efficiences can be obtained. Approximately 89% of our apparel and accessories are purchased or imported as finished goods from suppliers principally in Hong Kong, China and the Far East, but also in Mexico, India, North Africa, Portugal and other foreign countries. After being imported, many of these products require embellishment such as screenprinting, dying, washing or embroidery. In the Americas, we also produce goods that are manufactured by independent contractors from raw materials we provide. Approximately 66% of this manufacturing is done in the U.S. with the balance in Mexico. We manufacture our snowboards and skateboards in company-owned factories in the U.S.

All products are manufactured based upon design specifications provided by us, whether they are purchased or imported as finished goods or produced from raw materials provided by us.

The majority of finished goods as well as raw materials must be committed to and purchased prior to the receipt of customer orders. If we overestimate the demand for a particular product, excess production can

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be distributed in our outlet stores or through secondary distribution channels. If we overestimate a particular raw material, it can be used in garments for subsequent seasons or in garments for distribution through our outlet stores or secondary distribution channels.

During fiscal 2004, no single contractor of finished goods accounted for more than 3% of our consolidated production. No single raw material supplier of fabric and trims accounted for more than 14% of our expenditures for raw materials during fiscal 2004. We believe that numerous qualified contractors and finished goods and raw materials suppliers are available to provide additional capacity on an as-needed basis and that we enjoy favorable on-going relationships with these contractors and suppliers.

Although we continue to explore new sourcing opportunities for finished goods and raw materials, we believe we have established solid working relationships over many years with vendors who are financially stable and reputable, and who understand our product quality and delivery standards. As part of our efforts to reduce costs and enhance our sourcing efficiency, we have shifted increasingly to foreign suppliers. We research, test and add, as needed, alternate and/or back-up suppliers. However, in the event of any unanticipated substantial disruption of our relationship with, or performance by, key existing suppliers and/or contractors, there could be a short-term adverse effect on our operations.

Imports and Import Restrictions

We have for some time imported finished goods and raw materials for our domestic operations under multilateral and bilateral trade agreements between the U.S. and a number of foreign countries, including Hong Kong, India, China and Japan. These agreements imposed quotas on the amount and type of textile and apparel products that were imported into the U.S. from the affected countries. As of January 1, 2005, certain of these quotas have expired. We do not anticipate future quota restrictions; however, if new restrictions or tariffs were imposed, we would not expect them to materially or adversely affect our operations since we would be able to meet our needs domestically or from countries not affected by the restrictions or tariffs on an annual basis.

In Europe we operate in the European Union (“EU”), within which there are few trade barriers. We sell to six other countries outside of France belonging to a trade union, which has some restrictions on imports of textile products and their sources. We also operate under constraints imposed on imports of finished goods and raw materials from outside the EU, including quotas and duty charges. We do not anticipate that these restrictions will materially or adversely impact our operations since we have always operated under such constraints, and the trend in Europe is continuing toward unification.

We retain independent buying agents, primarily in China, Hong Kong, India and other foreign countries to assist us in selecting and overseeing the majority of our independent third party manufacturing and sourcing of finished goods, fabrics, and blanks and other products. These agents also monitor quota and other trade regulations and perform some quality control functions. We also have approximately 55 employees in Hong Kong that are involved in sourcing and quality control functions to assist in monitoring and coordinating our overseas production.

By having employees in regions where we source our products, we enhance our ability to monitor factories to ensure their compliance with our standards of manufacturing practices. Our policies require every factory to comply with a code of conduct relating to factory working conditions and the treatment of workers involved in the manufacture of products.

Trademarks and Licensing Agreements

Trademarks

We own the “Quiksilver”, “Roxy” and famous mountain and wave and heart logos in virtually every country in the world. Other trademarks we own include “Raisins”, “Radio Fiji”, “Leilani”, “Island Soul”, “Quiksilveredition”, “Hawk”, “Fidra”, “Lib Tech”, “Gnu” and “Bent Metal”. With the acquisition of DC in 2004, we acquired “DCSHOECOUSA”, the “DC Star” logo and other trademarks.

We apply for and register our trademarks throughout the world mainly for use on apparel and related accessories and for retail services. We believe our trademarks and our other intellectual property are

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crucial to the successful marketing and sale of our products, and we attempt to vigorously prosecute and defend our rights throughout the world. Because of the success of our trademarks, we are required to maintain global anti-counterfeiting programs to protect our brands.

Licensing Agreements

Since acquiring Quiksilver International in July 2000, we have owned the international rights to use the Quiksilver and Roxy trademarks in substantially all apparel and related accessory product classifications. With the acquisition of our Asia/Pacific licensees in 2002, we now directly operate all of the global Quiksilver and Roxy businesses with the exception of remaining licensees in Argentina, South Korea and South Africa among others. We are currently negotiating new licensing arrangements in Turkey and Mexico.

We have a license agreement with Gotcha International, LP, which provides that we can sell products primarily in Western Europe under the Gotcha trademark. We have entered into licensing agreements in certain foreign territories with respect to several other of our non-Quiksilver and Roxy brands where we believe operating efficiencies and brand protection may best be achieved through licensees. In fiscal 2003, we terminated our domestic licensing agreement for Quiksilver and Roxy watches and added watches to our technical accessory line.

Competition

Competition is strong in the global beachwear, skateboard shoe, snowboardwear, casual sportswear and snowboard markets in which we operate, and each territory can have different competitors. Our direct competitors in the United States differ depending on distribution channel. Our principal competitors in our core channel of surf shops and Boardriders Clubs in the United States include Billabong, Volcom, O’Neill and Hurley. Our competitors in the department store and specialty store channels in the United States include Tommy Hilfiger, Abercrombie and Fitch, Nautica and Calvin Klein. Our principal competitors in the skateboard shoe market are Sole Technology, Inc. and DVS Shoe Company. In Europe, our principal competitors in the core channel include O’Neill, Billabong, Rip Curl, Oxbow and Chimsee. In Australia our primary competitors are Billabong and Rip Curl. In broader European distribution, and in Asia/Pacific, our competitors also include brands such as Nike, Adidas and Levis. Our principal competitors both in the United States and Europe in the snowboardwear and snowboard markets, are Burton, K2 and a host of smaller manufacturers. Some of our competitors may be significantly larger and have substantially greater resources than us.

We compete primarily on the basis of successful brand management and product design and quality born out of our ability to:

•   maintain our reputation for authenticity in the core boardriding lifestyle demographic,

•   continue to develop and respond to global fashion and lifestyle trends in our core markets,

•   create innovative, high quality and stylish product at appropriate price points, and

•   convey our boardriding lifestyle message to young-minded consumers worldwide (see “Risk Factors – Relating to Apparel Industry”).

Future Season Orders

We generally receive wholesale orders for apparel products approximately two to four months prior to the time the products are delivered to stores. All such orders are subject to cancellation for late delivery. We generally sell our products on a season-by-season basis. Our Americas women’s product ranges are generally separated into four delivery seasons, Spring, Summer, Fall and Holiday. Our men’s divisions in the Americas combine the Spring and Summer seasons to achieve three delivery seasons, while in Europe and Japan we have two seasons, Spring/Summer and Autumn/Winter. Our Australian business in the southern hemisphere uses three seasons, Summer, High Summer and Winter. At the end of November 2004 (based on the name of the northern hemisphere delivery season), Spring 2005 forward orders totaled $412 million and were up 29% over the previous year’s level of approximately $319 million. Our forward orders depend upon a number of factors and can fluctuate based on the timing of trade shows, sales meetings and market weeks. The timing of shipments also fluctuates from year to year and

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varies based on the production of goods. As a consequence, a comparison of forward orders from season to season is not necessarily meaningful and may not be indicative of eventual shipments.

Employees

At October 31, 2004, we had approximately 4,350 employees, consisting of approximately 2,450 in the United States, approximately 1,300 in Europe and approximately 600 in Asia/Pacific. None of our domestic employees are represented by a union, and approximately 25 of our foreign employees are represented by a union. We have never experienced a work stoppage and consider our working relationships with our employees to be good.

Environmental Matters

Compliance with environmental laws and regulations did not have a significant impact on our capital expenditures, earnings or competitive position during the last three fiscal years.

Available Information

Our primary website is http://www.quiksilver.com. We make available free of charge, on or through this website, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the Securities and Exchange Commission. In addition, copies of the written charters for the committees of our board of directors, our Corporate Governance Guidelines, our Code of Ethics for Senior Financial Officers and our Code of Business Conduct and Ethics are also available on this website, and can be found under the Investor Relations and Corporate Governance links. Copies are also available in print, free of charge, by writing to Investor Relations, Quiksilver, Inc., 15202 Graham Street, Huntington Beach, California 92649. We may post amendments or waivers of our Code of Ethics for Senior Financial Officers and Code of Business Conduct and Ethics, if any, on our website. This website address is intended to be an inactive textual reference only, and none of the information contained on our website is part of this report or is incorporated in this report by reference.

Forward-Looking Statements

Various statements in this Form 10-K or incorporated by reference into this Form 10-K, in future filings by us with the SEC, in our press releases and in oral statements made by or with the approval of authorized personnel constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations and are indicated by words or phrases such as “anticipate”, “estimate”, “expect”, “project”, “we believe”, “currently envisions” and similar words or phrases and involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Some of the factors that could affect our financial performance or cause actual results to differ from our estimates in, or underlying, such forward-looking statements are set forth under the heading of “Risk Factors”. Forward-looking statements include statements regarding, among other items:

•   our anticipated growth strategies,

•   our plans to expand internationally,

•   our intention to introduce new products and enter into new joint ventures,

•   our plans to open new retail stores,

•   future renewals of our credit facilities,

•   anticipated effective tax rates in future periods,

•   payments due on contractual commitments,

•   future expenditures for capital projects, and

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

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These forward-looking statements are based largely on our expectations and are subject to a number of risks and uncertainties, many of which are beyond our control. Actual results could differ materially from these forward-looking statements as a result of the facts described in “Risk Factors” including, among others, changes in the competitive marketplace, including the introduction of new products or pricing changes by our competitors, changes in the economy, and other events leading to a reduction in discretionary consumer spending. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking information contained in this Form 10-K will, in fact, transpire.

Risk Factors

Competition

The apparel and footwear industries are highly competitive. We compete with numerous domestic and foreign designers, brands and manufacturers of apparel, footwear, accessories and other products, some of which are significantly larger and have greater resources than us. We believe that our ability to compete effectively depends upon our continued ability to maintain our reputation for authencity in our core boardriding market, our flexibility in responding to market demand and our ability to manage our brands and offer fashion conscious consumers a wide variety of high quality apparel at competitive prices. See “Business – Competition.”

Changes in Fashion Trends

We believe that our success depends in substantial part on our ability to anticipate, gauge and respond to changing consumer demand and fashion trends in a timely manner. We attempt to minimize the risk of changing fashion trends and product acceptance by closely monitoring retail sales trends. However, if fashion trends shift away from our products, or if we otherwise misjudge the market for our product lines, we may be faced with a significant amount of unsold finished goods inventory or other conditions which could have a material adverse effect on us.

Uncertainties in Apparel and Footwear Retailing

The apparel and footwear industries historically have been subject to substantial cyclical variations, and a recession in the general economy or uncertainties regarding future economic prospects that affect consumer spending habits could have a material adverse effect on our results of operations. While various retailers, including some of our customers, experienced financial difficulties in the past three years which increased the risk of extending credit to such retailers, our bad debt experience has been limited.

Our Business is Subject to Seasonal Trends

Historically, our operating results have been subject to seasonal trends when measured on a quarterly basis. Our first fiscal quarter is traditionally weaker compared with our other fiscal quarters. This trend is dependent on numerous factors, including the markets in which we operate, holiday seasons, consumer demand, climate, economic conditions and numerous other factors beyond our control. There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.

Sourcing

We are dependent upon third parties for the manufacture of substantially all of our products. The inability of a manufacturer to ship orders of our products in a timely manner, including as a result of local financial market disruption which could impair the ability of such suppliers to finance their operations, or to meet quality standards, could cause us to miss the delivery date requirements of our customers for those items, which could result in cancellation of orders, refusal to accept deliveries or a reduction in purchase prices, any of which could have a material adverse effect on our financial condition and results of operations. We have no long-term formal arrangements with any of our suppliers of raw materials, and to date we have experienced only limited difficulty in satisfying our raw materials requirements. Although we believe we could replace such suppliers without a material adverse effect on us, there can be no assurance that such suppliers could be replaced in a timely manner, and the loss of such suppliers could have a material adverse effect on our short-term operating results.

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Impact of Potential Future Acquisitions

From time to time, we have pursued, and may continue to pursue, acquisitions. For example, during fiscal 2004, we completed the acquisition of DC using available lines of credit and common stock. If one or more acquisitions results in us becoming substantially more leveraged on a consolidated basis, our flexibility in responding to adverse changes in economic, business or market conditions may be adversely affected.

Risks Relating to International Operations

We conduct a majority of our business outside of the United States and, particularly in light of our recent acquisitions, we anticipate that revenue from foreign operations will account for an increasingly larger portion of our future revenue. Our international operations are directly related to and dependent on the volume of international trade and local market conditions. Our international operations and international commerce are influenced by many factors, including:

•   changes in economic and political conditions and in governmental policies,

•   changes in international and domestic customs regulations,

•   wars, civil unrest, acts of terrorism and other conflicts,

•   natural disasters,

•   changes in tariffs, trade restrictions, trade agreements and taxation,

•   difficulties in managing or overseeing foreign operations,

•   limitations on the repatriation of funds because of foreign exchange controls,

•   different liability standards, and

•   difficulties in enforcing intellectual property laws of other countries.

The occurrence or consequences of any of these factors may restrict our ability to operate in the affected region and/or decrease the profitability of our operations in that region.

Foreign Currency and Derivatives

We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income, and product purchases of our international subsidiaries that are denominated in currencies other than their functional currencies. We are also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in U.S. dollars, and to fluctuations in interest rates related to our variable rate debt. Furthermore, we are exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in our consolidated financial statements due to the translation of the operating results and financial position of our international subsidiaries. As part of our overall strategy to limit the level of exposure to the risk of fluctuations in foreign currency exchange rates, we use various foreign currency exchange contracts and intercompany loans. In addition, interest rate swaps are used to manage our exposure to the risk of fluctuations in interest rates.

Loss or Infringement of Our Trademarks

We believe that our trademarks are important to our success and competitive position. The loss of such trademarks, or the loss of the exclusive use of our trademarks, could have a material adverse effect on our business, financial condition and results of operations. Accordingly, we devote substantial resources to the establishment and protection of our trademarks on a worldwide basis. We cannot assure that our actions taken to establish and protect our trademarks will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as violative of their trademarks and proprietary rights. Moreover, we cannot assure that others will not assert rights in, or ownership of, our trademarks or that we will be able to successfully resolve such conflicts. In addition, the laws of certain foreign countries may not protect trademarks to the same extent as do the laws of the U.S.

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Internal controls

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

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

Item 2. PROPERTIES

Certain information concerning our principal facilities in excess of 40,000 rentable square feet, all of which are leased, is as follows:

		Approximate		Current Lease
Location	Principal Use	Sq. Ft.		Expiration
Huntington Beach, California	Corporate headquarters		120,000		2023	*
Huntington Beach, California	Americas distribution center		225,000		2016	*
Huntington Beach, California	Americas distribution center		110,000		2018	*
Huntington Beach, California	Americas distribution center		100,000		2018	*
Huntington Beach, California	Americas distribution center		100,000		2018	*
Huntington Beach, California	Americas distribution center		75,000		2019	*
Vista, California	Americas distribution center		98,000		2006	*
St. Jean de Luz, France	European headquarters		80,000		2011
St. Jean de Luz, France	European distribution center		100,000		2007
Hendaye, France	European distribution center		90,000		2008
Torquay, Australia	Asia/Pacific headquarters		54,000		2017	*
Geelong, Australia	Asia/Pacific distribution center		81,000		2018	*

* Includes extension periods exercisable at our option.

As of October 31, 2004, we operated 67 retail stores in the Americas, 82 European retail stores, and 21 retail stores in Asia/Pacific on leased premises. The leases for our facilities required aggregate annual rentals of approximately $31.5 million in fiscal 2004. We anticipate that we will be able to extend those leases that expire in the near future on terms satisfactory to us or, if necessary, locate substitute facilities on acceptable terms.

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Item 3. LEGAL PROCEEDINGS

We are involved from time to time in legal claims involving trademark and intellectual property, licensing, employee relations and other matters incidental to our business. We believe the resolution of any such matter currently pending will not have a material adverse effect on our financial condition or results of operations.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted for a vote of our stockholders during the fourth quarter of the fiscal year ended October 31, 2004.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “ZQK.” The high and low sales prices of our common stock, as reported by the NYSE for the two most recent fiscal years, are set forth below.

	High		Low
Fiscal 2004
4th quarter ended October 31, 2004	$	27.69	$	19.37
3rd quarter ended July 31, 2004		24.80		20.03
2nd quarter ended April 30, 2004		23.28		16.75
1st quarter ended January 31, 2004		18.30		14.91
Fiscal 2003
4th quarter ended October 31, 2003	$	19.55	$	15.00
3rd quarter ended July 31, 2003		18.75		15.59
2nd quarter ended April 30, 2003 *		16.77		12.10
1st quarter ended January 31, 2003 *		14.26		11.73

* Note: Prices have been adjusted to reflect a 2-for-1 stock split effected on May 9, 2003.

We have historically reinvested our earnings in our business and have never paid a cash dividend. No change in this practice is currently being considered. Our payment of cash dividends in the future will be determined by the Board of Directors, considering conditions existing at that time, including our earnings, financial requirements and condition, opportunities for reinvesting earnings, business conditions and other factors. In addition, under our principal credit agreement with a bank group, we must obtain the bank group’s prior consent to pay dividends.

On January 4, 2005, there were approximately 450 holders of record of our common stock and an estimated 12,300 beneficial stockholders.

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Item 6. SELECTED FINANCIAL DATA

The statement of income and balance sheet data shown below were derived from our consolidated financial statements. Our consolidated financial statements as of October 31, 2004 and 2003 and for each of the three years in the period ended October 31, 2004, included herein, have been audited by Deloitte & Touche LLP , our independent registered public accounting firm. You should read this selected financial data together with our consolidated financial statements and related notes, as well as the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

	Years Ended October 31,
Amounts in thousands, except per share data and ratios	2004(1)(2)		2003(2)		2002		2001		2000
Statement of Income Data
Revenues, net	$	1,266,939	$	975,005	$	705,484	$	620,621	$	519,370
Income before provision for income taxes		121,992		90,067		59,986		45,412		51,862
Net income		81,369		58,516		37,591		28,021		31,836
Net income per share (3)		1.42		1.08		0.80		0.61		0.71
Net income per share, assuming dilution (3)		1.36		1.03		0.77		0.58		0.69
Weighted average common shares outstanding (3)		57,194		54,224		46,918		45,904		44,812
Weighted average common shares outstanding, assuming dilution (3)		59,644		56,635		48,944		48,098		46,464
Balance Sheet Data
Total assets	$	990,990	$	707,970	$	450,589	$	418,738	$	358,742
Working capital		343,100		286,625		160,518		132,416		119,529
Lines of credit		10,801		20,951		32,498		66,228		49,203
Long-term debt		173,513		123,419		54,085		70,464		66,712
Stockholders’ equity		588,244		446,508		272,873		216,594		177,614
Other Data
EBITDA(4)	$	155,229	$	119,519	$	82,975	$	70,162	$	68,320
Current ratio		2.6		3.0		2.2		1.8		2.0
Return on average stockholders’ equity (5)		15.7		16.3		15.4		14.2		19.3

(1)	Fiscal 2004 includes the operations of DC since its acquisition effective May 1, 2004. See Note 2 of our financial statements.
(2)	Fiscal 2004 and fiscal 2003 include the operations of Asia/Pacific since its acquisition effective December 1, 2002. See Note 2 of our financial statements.
(3)	Per share amounts and shares outstanding have been adjusted to reflect a two-for-one stock split effected on May 9, 2003.
(4)	EBITDA is defined as net income before (i) interest expense, (ii) income tax expense, and (iii) depreciation and amortization. EBITDA is not defined under generally accepted accounting principles (“GAAP”), and it may not be comparable to similarly titled measures reported by other companies. We believe that EBITDA is a meaningful measure to investors as it is a widely used measure of performance and our ability to meet liquidity requirements in our industry. Following is the reconciliation of net income to EBITDA and cash flows from operations:

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	Years Ended October 31,
	2004			2003			2002			2001			2000
Net income	$	81,369		$	58,516		$	37,591		$	28,021		$	31,836
Income taxes		40,623			31,551			22,395			17,391			20,026
Interest		6,390			8,267			8,640			10,873			6,435
Depreciation and amortization		26,847			21,185			14,349			13,877			10,023
EBITDA	$	155,229		$	119,519		$	82,975		$	70,162		$	68,320
EBITDA	$	155,229		$	119,519		$	82,975		$	70,162		$	68,320
Less interest expense and provision for income taxes		(47,013	)		(39,818	)		(31,035	)		(28,264	)		(26,461	)
Other non-cash expenses		11,904			3,939			3,548			3,524			3,226
Changes in operating assets and liabilities, net of effects from business acquisitions		10,475			(47,049	)		21,342			(39,575	)		(49,185	)
Net cash provided by operating activities	$	130,595		$	36,591		$	76,830		$	5,847		$	(4,100	)

⁽⁵⁾ Computed based on net income divided by the average of beginning and ending stockholders’ equity.

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

The following discussion should be read together with our consolidated financial statements and related notes, which are included in this report, and the “Risk Factors” information in the “Business” section of this report.

Overview

We began our domestic operations in 1976 as a designer and manufacturer of Quiksilver branded boardshorts designed for the sport of surfing. We grew our business through the late 1980’s by expanding our Quiksilver products into a full range of sportswear, and we bought our U.S. trademark from the Quiksilver brand’s Australian founders in 1986. The distribution of our products was primarily through surf shops. Since the early 1990’s, we have diversified and grown our business by increased sales of our Quiksilver product line, the creation of new brands such as Roxy, the introduction of new products, the development of our retail operations, and acquisitions. We acquired the European Quiksilver licensee in 1991 to expand geographically, we purchased Quiksilver International in 2000 to gain global ownership of the Quiksilver brand, and we acquired Quiksilver Asia/Pacific in December 2002 to unify our global operating platform and take advantage of available synergies in product development and sourcing, among other things. In May 2004, we acquired DC, a premier designer, producer and distributor of action sports inspired footwear, apparel and related accessories in the U.S. and internationally. We also acquired various other smaller businesses and brands. Brand building has been a key to our growth, and we have always maintained our roots in the boardriding lifestyle. Today our products are sold throughout the world, primarily in surf shops and specialty stores that provide an outstanding retail experience for our customers.

Over the last five years, our revenues have grown from $519 million in fiscal 2000 to $1.3 billion in fiscal 2004. We design, produce and distribute clothing, accessories and related products exclusively in the consumer products industry. We operate in three geographic segments, the Americas, Europe and Asia/Pacific. The Americas segment includes revenues primarily from the U.S. and Canada. The European segment includes revenues primarily from Western Europe. The Asia/Pacific segment includes revenues primarily from Australia, Japan, New Zealand, and Indonesia. Royalties earned from various licenses in other international territories are categorized in corporate operations along with revenues from sourcing services for our licensees. Revenues by segment are as follows:

	Years Ended October 31,
In thousands	2004		2003		2002		2001		2000
Americas	$	616,818	$	492,442	$	418,008	$	391,575	$	333,075
Europe		496,276		386,226		282,684		223,877		182,614
Asia/Pacific		148,733		94,187		—		—		—
Corporate operations		5,112		2,150		4,792		5,169		3,681
Total revenues, net	$	1,266,939	$	975,005	$	705,484	$	620,621	$	519,370

We operate in markets that are highly competitive, and our ability to evaluate and respond to changing consumer demands and tastes is critical to our success. Shifts in consumer preferences could have a negative effect on companies that misjudge these preferences. We believe that our historical success is due to the development of an experienced team of designers, artists, sponsored athletes, merchandisers, pattern makers, and cutting and sewing contractors. It’s this team and the heritage and current strength of our brands that has helped us remain in the forefront of design in our markets. Our success in the future will depend on our ability to continue to design products that are acceptable to the marketplace. There can be no assurance that we can do this. The consumer products industry is fragmented, and in order to retain and/or grow our market share, we must continue to be competitive in the areas of quality, brand image, distribution methods, price, customer service, and intellectual property protection.

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Results of Operations

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

	Years Ended October 31,
Statement of Income Data	2004			2003			2002
Revenues, net		100.0	%		100.0	%		100.0	%
Gross profit		45.6			44.4			40.6
Selling, general and administrative expense		35.2			34.0			30.7
Operating income		10.4			10.4			9.9
Interest expense		0.5			0.9			1.2
Foreign currency and other expense		0.3			0.3			0.2
Income before provision for income taxes		9.6	%		9.2	%		8.5	%
Other data
EBITDA (1)		12.3	%		12.3	%		11.8	%

⁽¹⁾ For a reconciliation of Net Income to EBITDA, see footnote (4) to the table under Item 6. Selected Financial Data.

Fiscal 2004 Compared to Fiscal 2003

Revenues

Total net revenues increased 30% in fiscal 2004 to $1,266.9 million from $975.0 million in fiscal 2003 primarily as a result of increased unit sales, new products and the DC acquisition. Revenues in the Americas increased 25%, European revenues increased 28%, and Asia/Pacific revenues increased 58%. We completed the acquisition of DC Shoes, Inc. effective May 1, 2004, which marks the beginning of our third fiscal quarter. DC Shoes, Inc. designs, produces and distributes action sports inspired footwear, apparel and related accessories. This new division, which operates in all three of our business segments, is referred to in this report as “DC” and accounted for approximately 9% of our consolidated revenue growth during the year ended October 31, 2004.

Americas’ revenues in our men’s category, which includes the Quiksilver Young Men’s, Boys, Toddlers, Wintersports, Quiksilveredition, DC, Hawk Clothing and Fidra divisions, increased 20% to $310.8 million in fiscal 2004 from $258.8 million the year before. Americas’ revenues in our women’s category, which includes the Roxy, Roxy Girl, Teenie Wahine, DC, Raisins, Leilani and Radio Fiji divisions, increased 32% to $295.6 million from $223.1 million for those same periods. Wintersports hardgoods are sold under the Lib Technologies, Gnu, Bent Metal and Roxy brands and totaled $10.4 and $10.5 million in fiscal 2004 and 2003, respectively. Men’s revenues in the Americas increased primarily from the newly acquired DC division and to a lesser extent, the Quiksilver division. The women’s increase came primarily from the Roxy division and, to a lesser extent, the newly acquired DC division. We believe that our product design and marketing efforts are resulting in increased consumer demand for our products in the Americas.

European revenues were approximately 39% of our consolidated total in fiscal 2004. In U.S. dollars, revenues in the men’s category increased 24% to $364.7 million in fiscal 2004 from $293.1 million in the previous year. Women’s revenues increased 41% to $131.6 million from $93.1 million for those same periods. The European men’s revenue increase came primarily from the Quiksilver Young Men’s division and, to a lesser extent, the DC division. The women’s revenue increase primarily reflects growth in the Roxy division. Revenue growth was the largest in France, the United Kingdom, and Spain. For consolidated financial statement reporting, euro results must be translated into U.S. dollar amounts at average exchange rates, but this can distort performance when exchange rates change from year to year. To understand our European fiscal 2004 growth and better assess competitive performance and market share gains. We believe it is important to look at revenues in euros as well, which is our operational currency in Europe. In euros, revenues grew 16% in fiscal 2004. This is lower than the 28% growth rate in U.S. dollars because the U.S. dollar was worth fewer euros on average in fiscal 2004 compared to fiscal 2003.

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Asia/Pacific revenues were approximately 12% of our consolidated total in fiscal 2004. In U.S. dollars, Asia/Pacific revenues increased 58% to $148.7 million in fiscal 2004 from $94.2 million in the previous year. The increase came primarily the Roxy division and, to a lesser extent, the Quiksilver and DC divisions. For consolidated financial statement reporting, Australian dollar results must be translated into U.S. dollar amounts at average exchange rates, but as with our European division this can distort performance when exchange rates change from year to year. In Australian dollars, revenues grew 38% in fiscal 2004. This is lower than the 58% growth rate in U.S. dollars because the U.S. dollar was worth fewer Australian dollars on average in fiscal 2004 compared to fiscal 2003.

Gross Profit

Our consolidated gross profit margin increased 120 basis points to 45.6% in fiscal 2004 from 44.4% in the previous year. The gross profit margin in the Americas increased to 40.8% from 40.1%, our European gross profit margin increased to 50.7% from 49.1%, and our Asia/Pacific gross profit margin increased to 49.2% from 46.9%. The gross margin in all areas is increasing as we generate a higher percentage of sales through company-owned retail stores. We earn higher gross margins on sales in company-owned stores, but these higher gross margins are offset by store operating costs. Additionally, in Europe and Asia/Pacific, the gross profit margin increased due to lower production costs resulting from a stronger euro and Australian dollar versus the U.S. dollar in comparison to the prior year.

Selling, General and Administrative Expense

Selling, general and administrative expense increased 34% in fiscal 2004 to $446.2 million from $332.2 million in fiscal 2003. In the Americas, it increased 24% to $187.5 million from $151.7 million, in Europe it increased 40% to $178.2 million from $127.5 million, and in Asia/Pacific it increased 62% to $52.0 million from $32.0 for those same periods. The increase among all three divisions was primarily due to additional company-owned retail stores, the addition of DC effective the beginning of our third fiscal quarter, additional marketing and expenses related to increased sales volume. As a percentage of revenues, selling general and administrative expense increased to 35.2% in fiscal 2004 from 34.0% in fiscal 2003 primarily due to new company-owned retail stores and increased marketing activities.

Non-operating Expenses

Interest expense decreased 23% to $6.4 million in fiscal 2004 compared to $8.3 million in fiscal 2003 primarily as a result of decreased debt levels and lower interest rates in Europe and in the Americas.

Foreign currency loss increased to $2.9 million in fiscal 2004 compared to $2.2 million in fiscal 2003. This increase was caused primarily by the increasing effect of the declining value of the U.S. dollar during fiscal 2004 compared to the Euro and Australian dollar. These foreign currency losses were substantially offset by higher operating profit in our international divisions resulting from changes in foreign currency exchange rates.

The Company’s income tax rate decreased to 33.3% in fiscal 2004 from 35.0% in fiscal 2003. This improvement resulted primarily because a higher percentage of our fiscal 2004 profits were generated in countries with lower tax rates.

Net Income and EBITDA

Net income in fiscal 2004 increased 39% to $81.4 million, and earnings per share on a diluted basis increased 32% to $1.36. EBITDA increased 30% in fiscal 2004 to $155.2 million.

Fiscal 2003 Compared to Fiscal 2002

Revenues

Total net revenues increased 38% in fiscal 2003 primarily as a result of increased unit sales and new products. Revenues in the Americas increased 18%, and European revenues increased 37%. Primarily because we acquired the business of our Australian and Japanese licensees in the first quarter of fiscal 2003, our royalty income decreased to $2.2 million from $4.8 million. Instead we reported product sales in this geographic region, which totaled $94.2 million in fiscal 2003.

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Americas’ revenues in our men’s category increased 13% to $258.8 million in fiscal 2003 from $229.2 million the year before. Americas’ revenues in our women’s category increased 25% to $223.1 million from $178.4 million for those same periods. Wintersports hardgoods totaled $10.5 million in fiscal 2003 compared to $10.4 million in the previous year. Men’s revenues in the Americas increased generally across all divisions. The women’s increase came from both the Roxy and Raisins divisions. We believe that our product design and marketing efforts resulted in increased consumer demand for our products in the Americas.

European revenues were approximately 40% of our consolidated total in fiscal 2003. In U.S. dollars, revenues in the men’s category increased 41% to $293.1 million in fiscal 2003 from $208.3 million in the previous year. Women’s revenues increased 25% to $93.1 million from $74.4 million for those same periods. Revenue growth was the largest in France, Spain and the United Kingdom. We believe that our product design and marketing efforts resulted in increased consumer demand for our products in the European market. In euros, revenues grew 15% in fiscal 2003. This is lower than the 37% growth rate in U.S. dollars because the U.S. dollar was worth fewer euros on average in fiscal 2003 compared to fiscal 2002.

Gross Profit

Our consolidated gross profit margin increased 380 basis points in fiscal 2003. The gross profit margin in the Americas increased to 40.1% from 36.7%, while our European gross profit margin increased to 49.1% from 45.3%. The Asia/Pacific gross profit margin was 46.9%. The Americas improvement occurred primarily due to an increase in our gross profit margin in the first half of fiscal 2003 because we lowered inventory levels toward the end of fiscal 2002. Consequently, our end-of season clearance business was down compared to the year before, and our gross margins on those sales were up. In the second half, the Americas’ gross profit margin was 39.3%. Our European gross profit margin increased in the second half of fiscal 2003 primarily as a result of the weaker U.S. dollar. Because a portion of our European product is purchased with U.S. dollars, product costs in euros decrease as the U.S. dollar decreases in value in comparison to the euro. Additionally, both the Americas’ and European gross profit margins improved because we had a higher percentage of our sales through company-owned retail stores.

Selling, General and Administrative Expense

Selling, general and administrative expense increased 53% in fiscal 2003. In the Americas, it increased 28% to $151.7 million from $118.2 million, and in Europe it increased 47% to $127.5 million from $86.6 million for those same periods. The Asia/Pacific segment added $32.0 million of these expenses. Higher personnel costs and other costs related to increased sales volume were the primary reasons for these increases. As a percentage of revenues, selling general and administrative expense increased to 34.0% in fiscal 2003 from 30.7% in fiscal 2002. Selling, general and administrative expense increased as a percentage of revenues primarily due to the incremental operating costs of new company-owned retail stores, and to a lesser extent additional marketing expenses.

Non-operating Expenses

Interest expense decreased 4% in fiscal 2003. Additional interest on debt incurred to acquire and operate the new Asia/Pacific segment was more than offset by lower interest rates in Europe and in the Americas.

Foreign currency loss increased to $2.2 million in fiscal 2003 compared to $0.7 million in fiscal 2002. The increase was caused primarily by the increasing effect of the declining value of the U.S. dollar during fiscal 2003 compared to the Euro and Australian dollar. These foreign currency losses were substantially offset by higher operating profit in our international divisions resulting from changes in foreign currency exchange rates.

The Company’s income tax rate decreased to 35.0% in fiscal 2003 from 37.3% in fiscal 2002. This improvement resulted primarily because a higher percentage of our fiscal 2003 profits were generated in countries with lower tax rates.

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Net Income and EBITDA

Net income in fiscal 2003 increased 56% to $58.5 million, and earnings per share on a diluted basis increased 34% to $1.03. EBITDA increased 44% in fiscal 2003 to $119.5 million.

Financial Position, Capital Resources and Liquidity

We finance our working capital needs and capital investments primarily with operating cash flows and bank revolving lines of credit. Multiple banks in the U.S., Europe and Australia make these lines of credit available. Term loans are used to supplement these lines of credit and are typically used to finance long-term assets.

Cash and cash equivalents totaled $55.2 million at October 31, 2004 versus $27.9 million at October 31, 2003. Working capital amounted to $343.1 million at October 31, 2004, compared to $286.6 million at October 31, 2003, an increase of 20%. We believe that our current cash balances, cash flows and credit facilities are adequate to cover our cash needs for the foreseeable future. Furthermore, we believe that increases in our credit facilities can be obtained if needed to fund future growth.

Operating Cash Flows

We generated $130.6 million from operations in fiscal 2004 compared to $36.6 million in fiscal 2003. This $94.0 million increase was primarily caused by an increase in accounts payable, partially offset by an increase in inventories, which together provided $8.9 million of cash in fiscal 2004 compared to using $32.0 million the year before. In addition to this $40.9 million improvement, operating cash flow also increased by $36.5 million due to higher net income adjusted for noncash expenses. Increases in accounts receivable offset by changes in other working capital components also generated $16.6 million of additional cash compared to the year before.

We generated $36.6 million from operations in fiscal 2003 compared to $76.8 million in fiscal 2002. This $40.2 million decrease was primarily caused by the increase in inventories combined with the small decrease in accounts payable, which together used $32.1 million of cash, a $53.2 million increase in cash used compared to $21.1 million of cash provided the year before. This more than offset the $28.2 million increase in cash from higher net income adjusted for noncash expenses. Changes in other working capital components also used $15.2 million of additional cash compared to the year before.

Capital Expenditures

We have avoided high levels of capital expenditures for our manufacturing functions by using independent contractors for sewing and other processes such as washing, dyeing and embroidery. We perform the cutting process in-house in the Americas to enhance control and efficiency, and we screenprint a portion of our product in-house in both the Americas and in Europe.

Fiscal 2004 capital expenditures were $52.5 million, which was approximately $19.4 million higher than the $33.1 million we spent in fiscal 2003. In fiscal 2004, we increased our investment in company-owned retail stores and in computer systems. Investments in warehouse equipment and fixtures continued in fiscal 2004 as in the previous years.

New company-owned retail stores are again part of our plans in fiscal 2005. Computer hardware and software will also be added to continuously improve systems. Capital spending for these and other projects in fiscal 2005 is expected to range between $50 million and $55 million, depending on the pace of our retail expansion.

Acquisitions

Effective May 1, 2004, we acquired DC. The initial purchase price, excluding transaction costs, included cash of approximately $52.8 million, 1.6 million restricted shares of our common stock valued at $27.3 million and the repayment of approximately $15.3 million in funded indebtedness. Transaction costs totaled $2.9 million. Of the initial purchase price, $63.4 million was paid in fiscal 2004, and $4.7 million will be paid in fiscal 2005 or later based on working capital at the date of acquisition and the resolution of certain other contingencies. Additionally, the sellers are entitled to future payments ranging from zero to $57 million if certain performance targets are achieved during the four years ending October 31, 2007. The amount of

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goodwill initially recorded for the transaction would increase if such contingent payments were made. Goodwill arises from synergies we believe can be achieved integrating DC’s product lines and operations with the Company’s, and is not expected to be deductible for income tax purposes. As of October 31, 2004 we have accrued $8.0 million based on achieving certain sales and earnings targets, which is expected to be paid in fiscal 2005, thereby reducing additional future payments to approximately $49.0 million.

Effective December 1, 2003, we acquired the operations of our Swiss distributor, Sunshine Diffusion SA. The initial purchase price was $1.6 million. The acquisition has been recorded using the purchase method of accounting and resulted in goodwill of $0.7 million at the acquisition date, which is not expected to be deductible for tax purposes. The sellers are entitled to future payments denominated in euros ranging from zero to $1.4 million if certain sales targets are achieved.

Effective December 1, 2002, we acquired our licensees in Australia and Japan to unify our global operating platform and take advantage of available syngergies in product development and sourcing, among other things. In addition to the initial purchase price, the sellers are entitled to payments denominated in Australian dollars that will be paid if certain sales and earnings targets are achieved during the three years ending October 31, 2005. The amount of goodwill initially recorded for the transaction would increase if such contingent payments are made. As of October 31, 2004, we have paid $4.0 million and accrued $5.2 million based on achieving targets, which is expected to be paid in fiscal 2005, thereby reducing potential future payouts to approximately $13.9 million.

Debt Structure

A syndication of U.S. banks finances our business in the Americas and internationally, European banks finance our European business, and Australian and Japanese banks finance our Asia/Pacific business. Our debt structure includes short-term lines of credit and long-term loans as follows:

	October 31,
In thousands	2004
European short-term credit arrangements	$	3,756
Asia/Pacific short-term lines of credit		7,045
Americas line of credit		105,974
Americas term loan		6,765
European long-term debt		33,714
Asia/Pacific long-term debt		460
Deferred purchase price obligation		26,600
Total debt	$	184,314

In June 2003, we replaced our syndicated bank facility in the Americas with a new syndicated revolving line of credit. The line of credit expires June 2006 and provides for borrowings up to $200.0 million. The line of credit bears interest based on the bank’s reference rate or based on LIBOR for borrowings committed to be outstanding for 30 days or longer. The weighted average interest rate at October 31, 2004 was 3.0%. The line of credit can be accessed by some of our foreign subsidiaries and includes a $75.0 million sublimit for letters of credit and a $35.0 million sublimit for borrowings in certain foreign currencies. The line of credit agreement contains restrictive covenants, the most significant of which relates to maintaining certain leverage and fixed charge coverage ratios. The payment of dividends is restricted, among other things, and our U.S. assets, other than trademarks and other intellectual property, generally have been pledged as collateral. We are currently in compliance with such covenants.

In Europe, we have arrangements with several banks that provide approximately $85.0 million for cash borrowings and approximately $74.0 million for letters of credit. These lines of credit expire in October 2005, and we believe that the banks will continue to make these facilities available with substantially similar terms. The amount outstanding on these lines of credit at October 31, 2004 was $3.8 million at an average interest rate of 2.7%.

In Asia/Pacific, we have revolving lines of credit with banks that provide up to approximately $19.0 million for cash borrowings and letters of credit. These lines of credit will be reviewed by the banks in January

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2005 and September 2005, and we believe the banks will continue to make these facilities available with substantially similar terms. The amount outstanding on these lines of credit at October 31, 2004 was $7.0 million at an average interest rate of 1.4%.

These line of credit commitments and agreements in the Americas, Europe and Asia/Pacific allow for total maximum cash borrowings and letters of credit of $378.0 million. Commitments totaling $178.0 million expire in fiscal 2005, while $200.0 million expire in fiscal 2006. We had $116.8 million of borrowings drawn on these lines of credit as of October 31, 2004, and letters of credit issued at that time totaled $68.6 million.

We also have a term loan with a single bank in the Americas that amounted to $6.8 million on October 31, 2004 and is repayable in installments of $0.1 million per month with a final balloon payment due in October 2007. We anticipate that these monthly payments and final balloon payment will be paid from cash and borrowings on our Americas’ line of credit. This term loan was established in April 2000 and is secured by the leasehold improvements at our headquarters in Huntington Beach, California. The interest rate structure and restrictive covenants are substantially the same as those under the line of credit. However, we entered into an interest rate swap agreement, which was valued at a loss of $0.4 million at October 31, 2004, to fix the interest rate at 8.4% per year. This swap agreement is effective through April 2007 and is an effective hedge of the related interest rate exposure.

In Europe, we also have $33.7 million of long-term debt with several banks, most of which is collateralized by fixed assets. This debt bears interest at rates ranging generally from 2.6% to 5.9%. Principal and interest payments are required either monthly, quarterly or annually, and the loans are due at various dates through 2011.

Our financing activities provided $20.4 million and $48.0 million of cash in fiscal 2004 and 2003 respectively, as debt was increased to fund the capital expenditures and business acquisitions discussed above. In fiscal 2002 debt was reduced, and our financing activities used $35.7 million.

Contractual Obligations and Commitments

We lease certain land and buildings under non-cancelable operating leases. The leases expire at various dates through 2014, excluding extensions at our option, and contain various provisions for rental adjustments including, in certain cases, adjustments based on increases in the Consumer Price Index. The leases generally contain renewal provisions for varying periods of time. We also have long-term debt and obligations related to business acquisitions. The former owners of DC are entitled to future payments up to $57.0 million if certain performance targets are achieved through October 31, 2007. In fiscal 2005, $8.0 million is expected to be paid based on the achievement of certain sales and earnings targets and is reflected in our balance sheet at October 31, 2004 as a component of accrued liabilities. Additional payments to the sellers, up to an additional $23.1 million, could be required for our acquisition of Asia/Pacific if certain sales and earnings targets are achieved. In fiscal 2004, $4.0 million was paid and $5.2 million is included in our balance sheet as a component of accrued liabilities and is expected to be paid in fiscal 2005. Our deferred purchase price obligation of $26.6 million related to our acquisition of Quiksilver International could increase based on the computed earnings of Quiksilver International through June 2005. Our significant contractual obligations and commitments as of October 31, 2004, excluding any additional payments that may be due if these acquired businesses achieve certain performance targets in the future, are summarized in the following table:

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	Payments Due by Period
			Two to		Four to		After
	One		Three		Five		Five
In thousands	Year		Years		Years		Years		Total
Operating lease obligations	$	33,666	$	61,794	$	47,111	$	79,256	$	221,827
Long-term debt obligations(1)		10,304		154,233		8,131		845		173,513
Professional athlete sponsorships(2)		9,051		8,258		2,097		–		19,406
Certain purchase obligations(3)		68,606		–		–		–		68,606
	$	121,627	$	224,285	$	57,339	$	80,101	$	483,352

(1)	Excludes interest. See Note 7 of Notes to Consolidated Financial Statements for interest terms.
(2)	We establish relationships with professional athletes in order to promote our products and brands. We have entered into endorsement agreements with professional athletes in sports such as surfing, skateboarding, snowboarding, windsurfing and golf. Many of these contracts provide incentives for magazine exposure and competitive victories while wearing or using our products. It is not possible to determine the amounts the Company is required to pay under these agreements as they are subject to many variables. The amounts listed are the approximate amounts of minimum obligations required to be paid under these contracts. The estimated maximum amount that could be paid under existing contracts is approximately $32.9 million and would assume that all bonuses, victories, etc. are achieved during a five-year period. The actual amounts paid under these agreements may be higher or lower than the amounts listed as a result of the variable nature of these obligations.
(3)	Amounts represent contractual letters of credit with maturity dates of less than one year. In addition, the Company also enters into unconditional purchase obligations with various vendors and suppliers of goods and services in the normal course of operations through purchase orders or other documentation or that are undocumented except for an invoice. Such unconditional purchase obligations are generally outstanding for periods less than a year and are settled by cash payments upon delivery of goods and services and are not reflected in this line item.

Trade Accounts Receivable and Inventories

Our trade accounts receivable were $281.3 million at October 31, 2004 versus $224.4 million the previous year, an increase of 25%. Of those totals, receivables in the Americas increased 54% to $125.8 million compared to $81.9 million, European receivables increased 10% to $120.7 million from $109.9 million and Asia/Pacific receivables increased 7% to $34.8 million from $32.6 million. The Americas accounts receivable increase is primarily due to the newly acquired DC division. Accounts receivable for DC’s sales to foreign distributors are reflected in the Americas. European and Asia/Pacific accounts receivable both decreased less than 1% when measured in euros and Australian dollars, respectively. Accounts receivable grew more slowly than revenues in Europe and Asia/Pacific primarily because of improved collections. Included in accounts receivable are approximately $18.9 million of Value Added Tax and Goods and Services Tax related to foreign accounts receivable. Such taxes are not reported as net revenues and as such, must be accounted for to accurately compute days sales outstanding. Our overall average days sales outstanding decreased approximately one day at the end of fiscal 2004 compared to the end of fiscal 2003.

Consolidated inventories increased 23% to $179.6 million at October 31, 2004 from $146.4 million the year before. Inventories in the Americas increased 21% to $104.6 million from $86.4 million, European inventories increased 23% to $53.7 million from $43.8 million, and Asia/Pacific inventories increased 31% to $21.3 million from $16.2 million. Inventories in the Americas increased primarily due to the newly acquired DC division. Inventories in Europe increased by approximately $4.0 million as a result of the stronger euro in relation to the U.S. dollar. The remaining increase in European inventories is primarily a result of increased inventory at new retail locations. Asia/Pacific inventories increased by approximately $1.0 million as a result of the stronger Australian dollar in relation to the U.S. dollar and also to support growth in our Asia/Pacific wholesale business. Consolidated average inventory turnover was approximately 4.6 at October 31, 2004 compared to approximately 4.0 at October 31, 2003.

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Inflation

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

New Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FIN 46, “Consolidation of Variable Interest Entities” and issued FIN 46 (R) in December 2003, which amended FIN 46. FIN 46 requires certain variable interest entities to be consolidated in certain circumstances by the primary beneficiary even if it lacks a controlling financial interest. The adoption of FIN 46 and FIN 46 (R) did not have a material impact our operational results or financial position since we do not have any variable interest entities.

In May 2003, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 150, “Accounting for Certain Financial Instruments With Characteristics of Both Liability and Equity.” SFAS No. 150 establishes standards for how companies classify and measure certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We adopted the standard on July 1, 2003. However, SFAS No. 150 did not have any impact on our consolidated financial position, results of operations or cash flows.

In December 2003, the Securities and Exchange Commission released Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” which supersedes SAB 101, “Revenue Recognition in Financial Statements.” SAB 104 clarifies existing guidance regarding revenues for contracts that contain multiple deliverables to make it consistent with Emerging Issues Task Force (“EITF”) No. 00-21,“Accounting for Revenue Arrangements with Multiple Deliverables.” The adoption of SAB 104 did not have an impact on our revenue recognition policies, nor our financial position or results of operations.

In March 2004, the Emerging Issues Task Force (“EITF”) ratified EITF Issue No. 03-1 (“EITF 03-1”), “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”. EITF 03-1 provides a three-step process for determining whether investments, including debt securities, are other than temporarily impaired and requires additional disclosures in annual financial statements. We do not expect the adoption of EITF 03-1 to have a material impact on our financial position or results of operations because we do not hold any applicable investments.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs an amendment of ARB No. 43, Chapter 4”. SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. We do not expect the adoption of SFAS No. 151 to have a significant impact on our consolidated financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (R) “Share-Based Payment”. SFAS No. 123 (R) requires that companies recognize compensation expense equal to the fair value of stock options or other share based payments. The standard is effective for us beginning the fourth quarter of fiscal 2005. The impact on our net income will include the remaining amortization of the fair value of existing options currently disclosed as pro-forma expense in Note 1 and is contingent upon the number of future options granted, the selected transition method and the selection of either the Black-Scholes or the binomial lattice model for valuing options. The adoption of this standard will have no impact on our cash flows.

Joint Venture Arrangement

In 2003, we formed a joint venture with Glorious Sun Enterprises, Ltd. to pursue opportunities to develop our Quiksilver business in China. The joint venture is 50% owned by us and 50% owned by Glorious Sun. Neither partner can independently control the joint venture, and accordingly, the results of its operations are not consolidated in our financial statements. Rather, our pro-rata share of the operating profits or losses are reported in our income statements as a component of operating income, and our net

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investment is included in other assets. Our investment in the joint venture has not been material to date, but additional capital contributions are anticipated as the joint venture ramps up its business and annual business plans are approved by us and Glorious Sun. In 2004, we opened four Boardriders Club stores, one in mainland China and three in Hong Kong. We also have an additional six shops, located within larger department stores.

Critical Accounting Policies

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

Revenue Recognition

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

Accounts Receivable

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

Inventories

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

•   weakening economic conditions,

•   terrorist acts or threats,

•   unanticipated changes in consumer preferences,

•   reduced customer confidence in the retail market, and

•   unseasonable weather.

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

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Long-Lived Assets

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

Goodwill

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

Income Taxes

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

Foreign Currency Translation

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

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

Forward-Looking Statements

Certain words in this report like “believes”, “anticipates”, “expects”, “estimates” and similar expressions are intended to identify, in certain cases, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks,

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uncertainties and other factors that may cause actual results to differ materially from the predicted results. Such factors include, among others, the following:

•   general economic and business conditions,

•   the acceptance in the marketplace of new products,

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

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

•   currency fluctuations,

•   changes in business strategy or development plans,

•   availability of qualified personnel,

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

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

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

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a variety of risks. Two of these risks are foreign currency fluctuations and changes in interest rates that affect interest expense. (See also Note 16 of our financial statements.)

Foreign Currency and Derivatives

We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income, and product purchases of our international subsidiaries that are denominated in currencies other than their functional currencies. We are also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in U.S. dollars, and to fluctuations in interest rates related to our variable rate debt. Furthermore, we are exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in our consolidated financial statements due to the translation of the operating results and financial position of our international subsidiaries. We use various foreign currency exchange contracts and intercompany loans as part of our overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates. In addition, we use interest rate swaps to manage our exposure to the risk of fluctuations in interest rates.

Derivatives that do not qualify for hedge accounting but are used by management to mitigate exposure to currency risks are marked to fair value with corresponding gains or losses recorded in earnings. A loss of $2.7 million was recognized related to these types of contracts during fiscal 2004. For all qualifying cash flow hedges, the changes in the fair value of the derivatives are recorded in other comprehensive income. As of October 31, 2004, we were hedging forecasted transactions expected to occur in the following seventeen months. Assuming exchange rates at October 31, 2004 remain constant, $5.2 million of losses, net of tax, related to hedges of these transactions are expected to be reclassified into earnings over the next seventeen months. Also included in accumulated other comprehensive income at October 31, 2004 is a $2.1 million loss, net of tax, related to cash flow hedges of our long-term debt, which is denominated in Australian dollars and matures through fiscal 2005, and the fair value of interest rate swaps, totaling a loss of $0.3 million, net of tax, which is related to our U.S. dollar denominated long-term debt and matures through fiscal 2007.

On the date we enter into a derivative contract, we designate certain of the derivatives as a hedge of the identified exposure. We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for entering into various hedge transactions. We identify in this documentation the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and indicate how the hedging instrument is expected to hedge the risks related to the hedged item. We formally measure effectiveness of our hedging relationships both at

29

the hedge inception and on an ongoing basis in accordance with our risk management policy. We will discontinue hedge accounting prospectively:

•   if we determine that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item,

•   when the derivative expires or is sold, terminated or exercised,

•   if it becomes probable that the forecasted transaction being hedged by the derivative will not occur,

•   because a hedged firm commitment no longer meets the definition of a firm commitment, or

•   if we determine that designation of the derivative as a hedge instrument is no longer appropriate.

We enter into forward exchange and other derivative contracts with major banks and are exposed to credit losses in the event of nonperformance by these banks. We anticipate, however, that these banks will be able to fully satisfy their obligations under the contracts. Accordingly, we do not obtain collateral or other security to support the contracts.

Translation of Results of International Subsidiaries

As discussed above, we are exposed to financial statement gains and losses as a result of translating the operating results and financial position of our international subsidiaries. We translate the local currency statements of income of our foreign subsidiaries into U.S. dollars using the average exchange rate during the reporting period. Changes in foreign exchange rates affect our reported profits and distort comparisons from year to year. We use various foreign currency exchange contracts and intercompany loans to hedge the profit and loss effects of such exposure, but accounting rules do not allow us to hedge the actual translation of sales and expenses.

By way of example, when the U.S. dollar strengthens compared to the euro, there is a negative effect on our reported results for Quiksilver Europe. It takes more profits in euros to generate the same amount of profits in stronger U.S. dollars. The opposite is also true. That is, when the U.S. dollar weakens there is a positive effect.

In fiscal 2004, the U.S. dollar weakened compared to the euro and the Australian dollar. As a result, our European revenues increased 16% in euros compared to an increase of 28% in U.S. dollars. Asia/Pacific revenues increased 38% in Australian dollars compared to an increase of 58% in U.S. dollars.

Interest Rates

Most of our lines of credit and long-term debt bear interest based on LIBOR. Interest rates, therefore, can move up or down depending on market conditions. As discussed above, we have entered into interest rate swap agreements to hedge a portion of our exposure to such fluctuations. The approximate amount of our remaining variable rate debt was $127.7 million at October 31, 2004, and the average interest rate at that time was 2.9%. If interest rates were to increase by 10%, our net income would be reduced by approximately $0.2 million based on these fiscal 2004 levels.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item appears beginning on page 35.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

Item 9A. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that

30

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

We carried out an evaluation under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of October 31, 2004, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of October 31, 2004.

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended October 31, 2004 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. OTHER INFORMATION

Not applicable

31

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required to be included by this item will be included in our proxy statement for the 2005 Annual Meeting of Stockholders. That information is incorporated herein by reference to that proxy statement, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended October 31, 2004.

Item 11. EXECUTIVE COMPENSATION

The information required to be included by this item will be included in our proxy statement for the 2005 Annual Meeting of Stockholders. That information is incorporated herein by reference to that proxy statement, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended October 31, 2004.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required to be included by this item will be included in our proxy statement for the 2005 Annual Meeting of Stockholders. That information is incorporated herein by reference to that proxy statement, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended October 31, 2004.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required to be included by this item will be included in our proxy statement for the 2005 Annual Meeting of Stockholders. That information is incorporated herein by reference to that proxy statement, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended October 31, 2004.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required to be included by this item will be included in our proxy statement for the 2005 Annual Meeting of Stockholders. That information is incorporated herein by reference to that proxy statement, which will be filed with the Securities and Exchange Commission within 120 days of our fiscal year ended October 31, 2004.

32

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this Annual Report on Form 10-K:

1.	Consolidated Financial Statements
	See “Index to Consolidated Financial Statements” on page 34
2.	Exhibits
	The Exhibits listed in the Exhibit Index, which appears immediately following the signature page and is incorporated herein by reference, are filed as part of this Annual Report on Form 10-K.

33

QUIKSILVER, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	35
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets October 31, 2004 and 2003	36
Consolidated Statements of Income Years Ended October 31, 2004, 2003 and 2002	37
Consolidated Statements of Comprehensive Income Years Ended October 31, 2004, 2003 and 2002	37
Consolidated Statements of Stockholders’ Equity Years Ended October 31, 2004, 2003 and 2002	38
Consolidated Statements of Cash Flows Years Ended October 31, 2004, 2003 and 2002	39
Notes to Consolidated Financial Statements	40

34

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Quiksilver, Inc.

We have audited the accompanying consolidated balance sheets of Quiksilver, Inc. and subsidiaries (the “Company”) as of October 31, 2004 and 2003, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended October 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Quiksilver, Inc. and subsidiaries as of October 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended October 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, in 2002 the Company changed its method of accounting for goodwill and intangible assets.

/s/ Deloitte & Touche LLP

January 12, 2005
Costa Mesa, California

35

QUIKSILVER, INC.

CONSOLIDATED BALANCE SHEETS
October 31, 2004 and 2003

In thousands, except share amounts	2004			2003
ASSETS
Current assets:
Cash and cash equivalents	$	55,197		$	27,866
Trade accounts receivable, net - Note 3		281,263			224,418
Other receivables		16,165			7,617
Inventories - Note 4		179,605			146,440
Deferred income taxes - Note 13		22,299			17,472
Prepaid expenses and other current assets		12,267			9,732
Total current assets		566,796			433,545
Fixed assets, net - Note 5		122,787			99,299
Intangible assets, net - Notes 2 and 6		121,116			65,577
Goodwill - Notes 2, 6 and 15		169,785			98,833
Deferred income taxes - Note 13		¾			1,984
Other assets		10,506			8,732
Total assets	$	990,990		$	707,970
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Lines of credit - Note 7	$	10,801		$	20,951
Accounts payable		105,054			64,537
Accrued liabilities - Note 8		79,095			41,759
Current portion of long-term debt - Note 7		10,304			8,877
Income taxes payable - Note 13		18,442			10,796
Total current liabilities		223,696			146,920
Long-term debt - Note 7		163,209			114,542
Deferred income taxes - Note 13		15,841			¾
Total liabilities		402,746			261,462
Commitments and contingencies - Note 9
Stockholders’ equity - Note 10:
Preferred stock, $.01 par value, authorized shares – 5,000,000; issued and outstanding shares - none		¾			¾
Common stock, $.01 par value, authorized shares – 85,000,000; issued shares - 60,169,523 (2004) and 57,020,517 (2003)		602			570
Additional paid-in capital		200,719			155,310
Treasury stock, 1,442,600 shares		(6,778	)		(6,778	)
Retained earnings		358,923			277,554
Accumulated other comprehensive income – Note 11		34,778			19,852
Total stockholders’ equity		588,244			446,508
Total liabilities and stockholders’ equity	$	990,990		$	707,970

See notes to consolidated financial statements.

36

QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF INCOME
Years Ended October 31, 2004, 2003 and 2002

In thousands, except per share amounts	2004		2003		2002
Revenues, net	$	1,266,939	$	975,005	$	705,484
Cost of goods sold		688,780		541,753		419,155
Gross profit		578,159		433,252		286,329
Selling, general and administrative expense		446,221		332,187		216,625
Operating income		131,938		101,065		69,704
Interest expense		6,390		8,267		8,640
Foreign currency loss		2,861		2,243		729
Other expense		695		488		349
Income before provision for income taxes		121,992		90,067		59,986
Provision for income taxes - Note 13		40,623		31,551		22,395
Net income	$	81,369	$	58,516	$	37,591
Net income per share - Note 1	$	1.42	$	1.08	$	0.80
Net income per share, assuming dilution - Note 1	$	1.36	$	1.03	$	0.77
Weighted average common shares outstanding - Note 1		57,194		54,224		46,918
Weighted average common shares outstanding, assuming dilution - Note 1		59,644		56,635		48,944

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended October 31, 2004, 2003 and 2002

In thousands	2004			2003			2002
Net income	$	81,369		$	58,516		$	37,591
Other comprehensive income (loss):
Foreign currency translation adjustment		18,554			26,799			6,896
Net loss on derivative instruments, net of tax of $1,792 (2004) $200 (2003) and $1,274 (2002)		(3,628	)		(544	)		(2,279	)
Comprehensive income	$	96,295		$	84,771		$	42,208

See notes to consolidated financial statements.

37

QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended October 31, 2004, 2003 and 2002

												Accumulated
					Additional							Other			Total
	Common Stock				Paid-in		Treasury			Retained		Comprehensive			Stockholders’
	Shares		Amount		Capital		Stock			Earnings		Income (Loss)			Equity
In thousands, except share amounts
Balance, November 1, 2001		47,780,566	$	478	$	52,467	$	(6,778	)	$	181,447	$	(11,020	)	$	216,594
Exercise of stock options		918,692		9		4,139		¾			¾		¾			4,148
Tax benefit from exercise of stock options		¾		¾		2,543		¾			¾		¾			2,543
Employee stock purchase plan		64,852		1		471		¾			¾		¾			472
Beach Street acquisition		596,184		6		6,902		¾			¾		¾			6,908
Net income and other comprehensive income		¾		¾		¾		¾			37,591		4,617			42,208
Balance, October 31, 2002		49,360,294		494		66,522		(6,778	)		219,038		(6,403	)		272,873
Exercise of stock options		1,983,701		19		10,742		¾			¾		¾			10,761
Tax benefit from exercise of stock options		¾		¾		6,284		¾			¾		¾			6,284
Employee stock purchase plan		50,666		1		567		¾			¾		¾			568
Asia/Pacific Acquisition		5,625,856		56		71,195		¾			¾		¾			71,251
Net income and other comprehensive income		¾		¾		¾		¾			58,516		26,255			84,771
Balance, October 31, 2003		57,020,517		570		155,310		(6,778	)		277,554		19,852			446,508
Exercise of stock options		1,498,720		15		8,745		¾			¾		¾			8,760
Tax benefit from exercise of stock options		¾		¾		8,411		¾			¾		¾			8,411
Employee stock purchase plan		65,711		1		957		¾			¾		¾			958
DC Acquisition		1,584,575		16		27,296		¾			¾		¾			27,312
Net income and other comprehensive income		¾		¾		¾		¾			81,369		14,926			96,295
Balance, October 31, 2004		60,169,523	$	602	$	200,719	$	(6,778	)	$	358,923	$	34,778		$	588,244

See notes to consolidated financial statements.

38

QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended October 31, 2004, 2003 and 2002

In thousands	2004			2003			2002
Cash flows from operating activities:
Net income	$	81,369		$	58,516		$	37,591
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		26,847			21,185			14,349
Provision for doubtful accounts		6,123			5,755			5,771
Loss on disposal of fixed assets		1,761			183			27
Foreign currency (gain) loss		(159	)		23			75
Interest accretion		1,368			902			1,713
Deferred income taxes		2,811			(2,924	)		(4,038	)
Changes in operating assets and liabilities, net of effects from business acquisitions:
Trade accounts receivable		(33,851	)		(19,399	)		(13,663	)
Other receivables		(1,022	)		(564	)		922
Inventories		(13,140	)		(30,673	)		16,444
Prepaid expenses and other current assets		1,124			(2,848	)		(2,811	)
Other assets		265			(3,115	)		437
Accounts payable		22,013			(1,394	)		4,661
Accrued liabilities		21,953			912			9,291
Income taxes payable		13,133			10,032			6,061
Net cash provided by operating activities		130,595			36,591			76,830
Cash flows from investing activities:
Capital expenditures		(52,457	)		(33,071	)		(22,216	)
Business acquisitions, net of acquired cash - Note 2		(70,619	)		(31,195	)		(20,676	)
Net cash used in investing activities		(123,076	)		(64,266	)		(42,892	)
Cash flows from financing activities:
Borrowings on lines of credit		83,482			99,110			4,585
Payments on lines of credit		(63,945	)		(56,807	)		(39,584	)
Borrowings on long-term debt		5,592			16,126			6,000
Payments on long-term debt		(14,478	)		(21,710	)		(11,309	)
Stock option exercises and employee stock purchases		9,718			11,330			4,620
Net cash provided by (used in) financing activities		20,369			48,049			(35,688	)
Effect of exchange rate changes on cash		(557	)		4,895			(655	)
Net increase (decrease) in cash and cash equivalents		27,331			25,269			(2,405	)
Cash and cash equivalents, beginning of year		27,866			2,597			5,002
Cash and cash equivalents, end of year	$	55,197		$	27,866		$	2,597
Supplementary cash flow information:
Cash paid during the year for:
Interest	$	5,009		$	5,893		$	6,297
Income taxes	$	22,046		$	21,348		$	18,914
Non-cash investing and financing activities:
Deferred purchase price obligation - Note 2	$	6,460		$	4,535		$	5,310
Common stock issued for business acquisitions - Note 2	$	27,312		$	71,251		$	6,908

See notes to consolidated financial statements.

39

QUIKSILVER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended October 31, 2004, 2003 and 2002

Note 1 ¾ Significant Accounting Policies

Company Business

The Company designs, produces and distributes clothing, accessories and related products for young-minded people and develops brands that represent a casual lifestyle—driven from a boardriding heritage. The Company’s primary focus is apparel for young men and young women under the Quiksilver, Roxy, Raisins, Radio Fiji, DC Shoes and Gotcha (Europe) labels. The Company also manufactures apparel for boys (Quiksilver Boys and Hawk Clothing), girls (Roxy Girl, Teenie Wahine and Raisins Girls), men (Quiksilveredition and Fidra) and women (Leilani swimwear), as well as snowboards, snowboard boots and bindings under the Lib Technologies, Gnu, Roxy, DC Shoes and Bent Metal labels. Distribution is primarily in the United States, Europe and Australia and is primarily based in surf shops, skate shops and other specialty stores that provide an outstanding retail experience for the customer. The Company performs ongoing credit evaluations of its customers and generally does not require collateral.

The Company competes in markets that are highly competitive. The Company’s ability to evaluate and respond to changing consumer demands and tastes is critical to its success. The Company believes that consumer acceptance depends on product, image, design, fit and quality. Consequently, the Company has developed an experienced team of designers, artists, merchandisers, pattern makers, and cutting and sewing contractors that it believes has helped it remain in the forefront of design in the areas in which it competes. The Company believes, however, that its continued success will depend on its ability to promote its image and to design products acceptable to the marketplace.

Principles of Consolidation

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

Basis of Presentation

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

Cash Equivalents

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

Inventories

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

Fixed Assets

Furniture, computer equipment, other equipment and buildings are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, which generally range from two to ten years. Leasehold improvements are recorded at cost and amortized over their estimated useful lives or related lease term, whichever is shorter. Land use rights for certain leased retail locations are accounted for in the same manner as land and are reviewed periodically for impairment.

40

Long-Lived Assets

The Company accounts for the impairment and disposition of long-lived assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. In accordance with SFAS No. 144, management assesses potential impairments of its long-lived assets whenever events or changes in circumstances indicate that an asset’s carrying value may not be recoverable. An impairment loss would be recognized when the carrying value exceeds the undiscounted future cash flows estimated to result from the use and eventual disposition of the asset. The Company determined that no impairment loss was necessary as of October 31, 2004.

Goodwill and Intangible Assets

The Company accounts for goodwill and intangible assets in accordance with SFAS No. 142, “Goodwill and Intangible Assets.” Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are tested for impairment annually and also in the event of an impairment indicator. The Company completed the required transitional impairment test in the fiscal year ended October 31, 2002 and the subsequent annual tests and determined that no impairment loss was necessary. Any subsequent impairment losses will be reflected in operating income. Under SFAS No. 142, the Company does not amortize goodwill or certain trademarks that are determined to have an indefinite life.

Other Assets

Other assets includes a note receivable from an executive officer totaling $0.8 million at October 31, 2003 related to an international relocation that bore interest at a market rate and was secured by a second trust deed on the executive’s residence. This note was repaid during fiscal 2004.

Revenue Recognition

Revenues are recognized upon the transfer of title and risk of ownership to customers. Allowances for estimated returns and doubtful accounts are provided when revenues are recorded. Returns and allowances are reported as reductions in revenues, whereas allowances for bad debts are reported as a component of selling, general and administrative expense. Revenues in the Consolidated Statements of Income includes the following:

	Years Ended October 31,
In thousands	2004		2003		2002
Product shipments, net	$	1,264,457	$	972,855	$	700,692
Royalty income		2,482		2,150		4,792
	$	1,266,939	$	975,005	$	705,484

Promotion and Advertising

The Company’s promotion and advertising efforts include athlete sponsorships, world-class boardriding contests, magazine advertisements, retail signage, television programs, cobranded products, surf camps, skate parks tours and other events. For the fiscal years ended October 31, 2004, 2003 and 2002, these expenses totaled $66.5 million, $40.3 million and $35.5 million, respectively. Advertising costs are expensed when incurred.

Stock-Based Compensation

The Company applies Accounting Principles Board Opinion 25 and related interpretations in accounting for its stock option plans. No stock-based employee compensation expense is reflected in net income, as all options granted under our stock option plans have exercise prices equal to the market value of the underlying common stock on the grant dates. The following table contains the pro forma disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.”

41

	Years Ended October 31,
In thousands, except per share amounts	2004		2003		2002
Actual net income	$	81,369	$	58,516	$	37,591
Less stock-based employee compensation expense determined under the fair value based method, net of tax		9,188		5,656		3,686
Pro forma net income	$	72,181	$	52,860	$	33,905
Actual net income per share	$	1.42	$	1.08	$	0.80
Pro forma net income per share	$	1.26	$	0.97	$	0.72
Actual net income per share, assuming dilution	$	1.36	$	1.03	$	0.77
Pro forma net income per share, assuming dilution	$	1.22	$	0.94	$	0.70

The fair value of each option grant was estimated as of the grant date using the Black-Scholes option-pricing model for the years ended October 31, 2004, 2003 and 2002 assuming risk-free interest rates of 4.0%, 4.3% and 3.9%, respectively, volatility of 56.1%, 59.3% and 63.4%, respectively, zero dividend yield, and expected lives of 5.4, 4.8 and 4.9 years, respectively. The weighted average fair value of options granted was $10.01, $9.78 and $5.40 for the years ended October 31, 2004, 2003, and 2002, respectively.

Income Taxes

The Company accounts for income taxes using the asset and liability approach as promulgated by SFAS No. 109, “Accounting for Income Taxes”. Deferred income tax assets and liabilities are established for temporary differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities at tax rates expected to be in effect when such assets or liabilities are realized or settled. Deferred income tax assets are reduced by a valuation allowance if, in the judgment of the Company’s management, it is more likely than not that such assets will not be realized.

Net Income Per Share

The Company reports basic and diluted earnings per share (“EPS”). Basic EPS is based on the weighted average number of shares outstanding during the periods, while diluted EPS additionally includes the dilutive effect of the Company’s outstanding stock options computed using the treasury stock method. For the years ended October 31, 2004, 2003 and 2002, the weighted average common shares outstanding, assuming dilution, includes 2,450,000, 2,411,000 and 2,026,000, respectively, of dilutive stock options.

Stock Split

During fiscal 2003, the Company’s Board of Directors approved a two-for-one stock split that was effected May 9, 2003. All share and per share information has been restated to reflect the stock split.

Foreign Currency and Derivatives

The Company’s primary functional currency is the U.S. dollar, while Quiksilver Europe functions in euros and British Pounds, and Quiksilver Asia/Pacific functions in Australian dollars and Japanese Yen. Assets and liabilities of the Company denominated in foreign currencies are translated at the rate of exchange on the balance sheet date. Revenues and expenses are translated using the average exchange rate for the period.

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

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Comprehensive Income

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

Use of Estimates

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

Fair Value of Financial Instruments

The carrying value of the Company’s trade accounts receivable and accounts payable approximates their fair value due to their short-term nature. The carrying value of the Company’s lines of credit and long-term debt approximates its fair value as these borrowings consist primarily of a series of short-term notes at floating interest rates.

Reclassifications

Certain reclassifications were made to conform to current year presentation.

New Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FIN 46, “Consolidation of Variable Interest Entities” and issued FIN 46 ® in December 2003, which amended FIN 46. FIN 46 requires certain variable interest entities to be consolidated in certain circumstances by the primary beneficiary even if it lacks a controlling financial interest. The adoption of FIN 46 and FIN 46 ® did not have a material impact on the Company’s operational results or financial position since it does not have any variable interest entities.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments With Characteristics of Both Liability and Equity.” SFAS No. 150 establishes standards for how companies classify and measure certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company adopted the standard on July 1, 2003, and it did not have any significant impact on the Company’s consolidated financial position, results of operations or cash flows.

In December 2003, the Securities and Exchange Commission released Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” which supersedes SAB 101, “Revenue Recognition in Financial Statements.” SAB 104 clarifies existing guidance regarding revenues for contracts that contain multiple deliverables to make it consistent with Emerging Issues Task Force (“EITF”) No. 00-21,“Accounting for Revenue Arrangements with Multiple Deliverables.” The adoption of SAB 104 did not have a material impact on the Company’s revenue recognition policies, nor its financial position or results of operations.

In March 2004, the Emerging Issues Task Force (“EITF”) ratified EITF Issue No. 03-1 (“EITF 03-1”), “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”. EITF 03-1 provides a three-step process for determining whether investments, including debt securities, are other than temporarily impaired and requires additional disclosures in annual financial statements. The Company does not expect the adoption of EITF 03-1 to have a material impact on its financial position or results of operations because the Company does not hold any applicable investments.

In November 2004, the FASB issued SFAS No. 151, “Inventory Costs an amendment of ARB No. 43, Chapter 4”. SFAS No. 151 clarifies that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and requires the

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allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. SFAS No. 151 is effective for fiscal years beginning after June 15, 2005. The Company does not expect the adoption of SFAS No. 151 to have a significant impact on its consolidated financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (R) “Share-Based Payment”. SFAS No. 123 (R) requires that companies recognize compensation expense equal to the fair value of stock options or other share based payments. The standard is effective for the Company beginning the fourth quarter of fiscal 2005. The impact on the Company’s net income will include the remaining amortization of the fair value of existing options currently disclosed as pro-forma expense in Note 1 and is contingent upon the number of future options granted, the selected transition method and the selection of either the Black-Scholes or the binominal lattice model for valuing options. The adoption of this standard will have no impact on the Company’s cash flows.

Note 2 ¾ Business Acquisitions

Effective May 1, 2004, the Company acquired DC Shoes, Inc. (“DC”), a premier designer, producer and distributor of action sports inspired footwear, apparel and related accessories in the U.S. and internationally. The operations of DC have been included in the Company’s results since May 1, 2004. The initial purchase price, excluding transaction costs, includes cash of approximately $52.8 million, 1.6 million restricted shares of the Company’s common stock valued at $27.3 million and the repayment of approximately $15.3 million in funded indebtedness. Transaction costs totaled $2.9 million. The valuation of the common stock issued in connection with the acquisition was based on its quoted market price for 5 days before and after the announcement date, discounted to reflect the estimated effect of its trading restrictions. Of the initial purchase price, $63.4 million was paid in fiscal 2004, and $4.7 million will be paid in fiscal 2005 or later based on the resolution of certain other contingencies. The sellers are entitled to future payments ranging from zero to $57.0 million if certain performance targets are achieved during the four years ending October 31, 2007. The amount of goodwill initially recorded for the transaction would increase if such contingent payments were made. As of October 31, 2004, $8.0 million was accrued based on achieving certain sales and earnings targets, reducing potential future obligations to approximately $49.0 million. Goodwill arises from synergies the Company believes can be achieved integrating DC’s product lines and operations with the Company’s, and is not expected to be deductible for income tax purposes. Amortizing intangibles consist of non-compete agreements, customer relationships and patents with estimated useful lives ranging from four to eighteen years.

The following table summarizes the fair values of the assets acquired and the liabilities assumed at the date of acquisition in accordance with the purchase method of accounting:

	May 1,
In thousands	2004
Current assets	$	37,528
Fixed assets		1,818
Deferred income taxes		2,359
Amortizing intangible assets		5,633
Trademarks		36,000
Goodwill		54,081
Total assets acquired		137,419
Other liabilities		20,808
Deferred income taxes		18,292
Net assets acquired	$	98,319

Effective December 1, 2003, the Company acquired the operations of its Swiss distributor, Sunshine Diffusion SA. The initial purchase price was $1.6 million. The acquisition has been recorded using the purchase method of accounting and resulted in goodwill of $0.7 million at the acquisition date, which is not

44

expected to be deductible for tax purposes. The sellers are entitled to future payments denominated in euros ranging from zero to $1.4 million if certain sales targets are achieved.

The results of operations for each of the acquisitions are included in the Consolidated Statements of Income from their respective acquisition dates. Assuming these fiscal 2004 acquisitions had occurred as of November 1, 2002, consolidated net sales would have been $1,314.8 million and $1,086.6 million for the years ended October 31, 2004 and 2003, respectively. Net income would have been $78.8 million and $62.8 million, respectively, for those same periods, and diluted earnings per share would have been $1.30 and $1.07, respectively.

Effective December 1, 2002, the Company acquired its licensees in Australia and Japan to unify its global operating platform and take advantage of available syngergies in product development and sourcing, among other things. This group of companies is referred to herein as “Quiksilver Asia/Pacific” and comprises two Australian operating companies, Ug Manufacturing Co. Pty Ltd. and QSJ Holdings Pty Ltd., one Japanese operating company, Quiksilver Japan KK, and the holding company, Quiksilver Australia Pty Ltd. Ug Manufacturing Co. Pty Ltd. was still owned by the founders of the Quiksilver brand and was the original Quiksilver operating company that has been producing Quiksilver products in Australia and surrounding countries and territories for over 30 years. Along with a Japanese partner, the founders also started Quiksilver Japan KK, which has been the Quiksilver licensee in Japan for approximately 20 years. The operations of Quiksilver Asia/Pacific have been included in the Company’s results since December 1, 2002.

The initial purchase price, excluding transaction costs, included cash of $25.3 million and 5.6 million shares of the Company’s common stock valued at $71.3 million. Transaction costs totaled $2.5 million. The valuation of the common stock issued in connection with the acquisition was based on the quoted market price for 5 days before and after the announcement date. The initial purchase price was subject to adjustment based on the closing balance sheet, which was finalized in the third quarter of fiscal 2003. The sellers are entitled to future payments denominated in Australian dollars ranging from up to $23.1 million if certain sales and earnings targets are achieved during the three years ending October 31, 2005. The amount of goodwill initially recorded for the transaction would increase if such contingent payments are made. As of October 31, 2004 we have paid or accrued $9.2 million based on achieving certain sales and earnings targets.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of acquisition in accordance with the purchase method of accounting.

	December 1,
In thousands	2002
Current assets	$	55,889
Long-term assets		6,325
License agreements		10,100
Goodwill		65,713
Total assets acquired		138,027
Current liabilities		38,890
Net assets acquired	$	99,137

License agreements are being amortized over their remaining lives through June 2012. Goodwill is not subject to amortization and is generally not expected to be deductible for tax purposes.

Effective November 1, 2002, the Company acquired the operations of its European licensee for eyewear and wetsuits, Omareef Europe, S.A. The initial purchase price was $5.2 million, which included a cash payment of $4.9 million and assumed debt of $0.3 million. The acquisition was recorded using the purchase method of accounting and resulted in goodwill of $3.5 million at the acquisition date, which is not expected to be deductible for tax purposes.

Effective February 1, 2003, the Company acquired its United States eyewear licensee, Q.S. Optics, Inc. The initial purchase price was $2.9 million, which included a cash payment of $2.4 million and assumed

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debt of $0.5 million. The acquisition was recorded using the purchase method of accounting and resulted in goodwill of $2.1 million at the acquisition date. Goodwill is not subject to amortization and is generally not expected to be deductible for tax purposes.

Effective September 15, 2002, the Company acquired Beach Street, Inc. (“Beach Street”), a company that operated 26 Quiksilver outlet stores. The results of Beach Street’s operations have been included in the consolidated financial statements since that date. As consideration for the acquisition, the Company issued 596,184 shares of common stock valued at $6.9 million. The acquisition was recorded using the purchase method of accounting. As a result of the acquisition, the Company recorded goodwill of $8.1 million, which is not expected to be deductible for tax purposes.

Note 3 ¾ Allowance for Doubtful Accounts

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

	Years Ended October 31,
In thousands	2004			2003			2002
Balance, beginning of year	$	8,700		$	6,667		$	6,280
Provision for doubtful accounts		6,123			5,755			5,771
Deductions		(3,456	)		(3,722	)		(5,384	)
Balance, end of year	$	11,367		$	8,700		$	6,667

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

Note 4 ¾ Inventories

Inventories consist of the following:

	October 31,
In thousands	2004		2003
Raw materials	$	14,133	$	10,708
Work in process		7,698		8,426
Finished goods		157,774		127,306
	$	179,605	$	146,440

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Note 5 ¾ Fixed Assets

Fixed assets consist of the following:

	October 31,
In thousands	2004			2003
Furniture and other equipment	$	88,302		$	68,537
Computer equipment		43,864			32,097
Leasehold improvements		57,715			50,586
Land use rights		21,620			15,643
Land and buildings		2,383			2,207
		213,884			169,070
Accumulated depreciation and amortization		(91,097	)		(69,771	)
	$	122,787		$	99,299

Note 6 ¾ Intangible Assets and Goodwill

A summary of intangible assets is as follows:

	October 31,
	2004							2003
										Amorti-
In thousands	Gross Amount		Amortization			Net Book Value		Gross Amount		zation			Net Book Value
Amortizable trademarks	$	3,476	$	(692	)	$	2,784	$	2,453	$	(489	)	$	1,964
Amortizable licenses		10,105		(1,937	)		8,168		10,105		(926	)		9,179
Other amortizable intangibles		5,633		(498	)		5,135		—		—			—
Non-amortizable trademarks		105,029		—			105,029		54,434		—			54,434
	$	124,243	$	(3,127	)	$	121,116	$	66,992	$	(1,415	)	$	65,577

The change in non-amortizable trademarks is due primarily to the DC acquisition. Other amortizable intangibles primarily include non-compete agreements, patents and customer relationships. Certain trademarks and licenses will continue to be amortized by the Company using estimated useful lives of 10 to 25 years with no residual values. Intangible amortization expense for the fiscal years ended October 31, 2004 and 2003 was $1.7 million and $1.1 million, respectively. Annual amortization expense, based on the Company’s amortizable intangible assets as of October 31, 2004, is estimated to be approximately $2.2 million in each of the fiscal years ending October 31, 2005 through 2007 and approximately $1.5 million in the fiscal years ending October 31, 2008 and 2009.

Goodwill arose primarily from the acquisitions of Quiksilver Europe, The Raisin Company, Inc., Mervin, Freestyle SA, Beach Street, Quiksilver Asia/Pacific and DC Shoes, Inc. Goodwill increased during the fiscal year ended October 31, 2004 as a result of the Company’s acquisition of its Swiss distributor, Sunshine Diffusion SA, from the contingent purchase price payment recorded related to the acquisition of Quiksilver Asia/Pacific and as a result of the Company’s acquisition of DC Shoes, Inc. as described in Note 2 to these financial statements, and also due to foreign exchange fluctuations. Changes to goowill for the fiscal year ended October 31, 2003 were primarily due to the acquisition of Quiksilver Asia/Pacific and foreign exchange fluctuations.

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Note 7 ¾ Lines of Credit and Long-term Debt

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

	October 31,
In thousands	2004		2003
European short-term credit arrangements	$	3,756	$	12,351
Asia/Pacific short-term lines of credit		7,045		8,600
Americas line of credit		105,974		60,912
Americas term loan		6,765		7,995
European long-term debt		33,714		37,071
Asia/Pacific long-term debt		460		438
Deferred purchase price obligation		26,600		17,003
	$	184,314	$	144,370

In June 2003, the Company replaced its syndicated bank facility with a new syndicated revolving line of credit (the “Line of Credit”). The Line of Credit expires June 2006 and provides for a revolving line of credit of up to $200.0 million. The Line of Credit bears interest based on the bank’s reference rate or based on LIBOR for borrowings committed to be outstanding for 30 days or longer. The weighted average interest rate at October 31, 2004 was 3.0%. The Line of Credit can be accessed by certain of the Company’s foreign subsidiaries and includes a $75.0 million sublimit for letters of credit and a $35.0 million sublimit for borrowings in certain foreign currencies. As of October 31, 2004, $106.0 million was outstanding under this line of credit.

The Line of Credit contains restrictive covenants. The most significant covenants relate to maintaining certain leverage and fixed charge coverage ratios. The payment of dividends is restricted, among other things, and the Company’s U.S. assets, other than trademarks and other intellectual property, generally have been pledged as collateral. At October 31, 2004, the Company was in compliance with such covenants.

The Company also has a term loan with a U.S. bank that initially totaled $12.3 million in April 2000. This term loan is repayable in installments of $0.1 million per month with a final maturity in October 2007. The Company anticipates that these monthly payments and final balloon payment will be paid from borrowings on the Line of Credit. This term loan is secured by the leasehold improvements at the Company’s Huntington Beach, California headquarters and bears interest contractually based on LIBOR. However, in January 2000, the Company entered into an interest rate swap agreement with a notional amount equal to the term loan, effective through April 2007, to fix the interest rate at 8.4% per annum. The fair value of the interest rate swap at October 31, 2004 was a loss of $0.4 million. The restrictive covenants under this term loan are substantially the same as those under the Line of Credit. The outstanding balance of this term loan at October 31, 2004 was $6.8 million.

Quiksilver Europe has arrangements with banks that provide for maximum cash borrowings of approximately $85.0 million in addition to approximately $74.0 million available for the issuance of letters of credit. At October 31, 2004, these lines of credit bore interest at an average rate of 2.7%, and $3.8 million was outstanding. The lines of credit expire in October 2005, and the Company believes that these lines of credit will continue to be available with substantially similar terms.

Quiksilver Europe also has $33.7 million of long-term debt, the majority of which is collateralized by land and buildings. This long-term debt bears interest at rates ranging generally from 2.6% to 5.9%, requires monthly, quarterly or annual principal and interest payments and is due at various dates through 2011.

Quiksilver Asia/Pacific has revolving lines of credit with banks that provide up to $19.0 million for cash borrowings and letters of credit. These lines of credit will be reviewed by the banks in January 2005 and September 2005, and the Company believes these lines of credit will continue to be available with substantially similar terms. The amount outstanding on these lines of credit at October 31, 2004 was $7.0 million at an average interest rate of 1.4%.

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As part of the acquisition of Quiksilver International in fiscal 2000, the Company was obligated to make two additional purchase price payments, which are denominated in Australian dollars and are contingent on the computed earnings of Quiksilver International through June 2005. These obligations were discounted to present value as of the acquisition date, and in addition to potentially increasing as this contingency is resolved, the carrying amount of the obligation fluctuates based on changes in the exchange rate between Australian dollars and U.S. dollars. As a result of Quiksilver International’s operations for the 12 months ended June 30, 2004, the deferred purchase price obligation was increased by $6.5 million with a corresponding increase to trademarks. As of October 31, 2004, the remaining deferred purchase price obligation totaled $26.6 million.

Short-term obligations that the Company has the intent and ability to refinance on a long-term basis are classified as long-term debt. Principal payments on long-term debt are due approximately as follows (in thousands):

2005	$	10,304
2006		142,202
2007		12,031
2008		5,374
2009		2,757
Thereafter		845
	$	173,513

Note 8 ¾ Accrued Liabilities

Accrued liabilities consist of the following:

	October 31,
In thousands	2004		2003
Accrued employee compensation and benefits	$	33,154	$	25,010
Accrued sales and payroll taxes		2,553		1,001
Derivative liability		6,362		202
Amounts payable for business acquisitions		17,951		—
Other liabilities		19,075		15,546
	$	79,095	$	41,759

Note 9 ¾ Commitments and Contingencies

Operating Leases

The Company leases certain land and buildings under long-term operating lease agreements. The following is a schedule of future minimum lease payments required under such leases as of October 31, 2004 (in thousands):

2005	$	33,666
2006		32,521
2007		29,273
2008		25,584
2009		21,527
Thereafter		79,256
	$	221,827

Total rent expense was $31.5 million, $24.8 million and $14.9 million for the years ended October 31, 2004, 2003 and 2002, respectively.

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Professional Athlete Sponsorships

We establish relationships with professional athletes in order to promote our products and brands. We have entered into endorsement agreements with professional athletes in sports such as surfing, skateboarding, snowboarding, windsurfing and golf. Many of these contracts provide incentives for magazine exposure and competitive victories while wearing or using our products. Such expenses are an ordinary part of our operations and are expensed as incurred. The following is a schedule of future estimated minimum payments required under such endorsement agreements as of October 31, 2004 (in thousands):

2005	$	9,051
2006		4,950
2007		3,308
2008		1,729
2009		368
	$	19,406

Litigation

We are involved from time to time in legal claims involving trademark and intellectual property, licensing, employee relations and other matters incidental to our business. We believe the resolution of any such matter currently pending will not have a material adverse effect on our financial condition or results of operations.

Indemnities and Guarantees

During its normal course of business, the Company has made certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. These include (i) intellectual property indemnities to the Company’s customers and licensees in connection with the use, sale and/or license of Company products, (ii) indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease, (iii) indemnities to vendors and service providers pertaining to claims based on the negligence or willful misconduct of the Company, and (iv) indemnities involving the accuracy of representations and warranties in certain contracts. The duration of these indemnities, commitments and guarantees varies, and in certain cases, may be indefinite. The majority of these indemnities, commitments and guarantees do not provide for any limitation of the maximum potential for future payments the Company could be obligated to make. The Company has not recorded any liability for these indemnities, commitments and guarantees in the accompanying consolidated balance sheets.

Note 10 ¾ Stockholders’ Equity

In March 2000, the Company’s stockholders approved the Company’s 2000 Stock Incentive Plan (the “2000 Plan”), which generally replaced the Company’s previous stock option plans. Under the 2000 Plan, 14,472,418 shares are reserved for issuance over its term, consisting of 6,472,418 shares authorized under predecessor plans plus an additional 8,000,000 shares. Nonqualified and incentive options may be granted to officers and employees selected by the plan’s administrative committee at an exercise price not less than the fair market value of the underlying shares on the date of grant. Payment by option holders upon exercise of an option may be made in cash or, with the consent of the committee, by delivering previously outstanding shares of the Company’s Common Stock. Options vest over a period of time, generally three to five years, as designated by the committee and are subject to such other terms and conditions as the committee determines. Certain stock options have also been granted to employees of acquired businesses under other plans.

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Changes in shares under option are summarized as follows:

	Years Ended October 31,
	2004					2003					2002
				Weighted					Weighted					Weighted
				Average					Average					Average
	Shares			Price		Shares			Price		Shares			Price
Outstanding, beginning of year		7,042,304		$	7.79		7,670,678		$	6.14		7,145,364		$	5.71
Granted		2,015,000			18.69		1,418,000			13.54		1,466,000			7.30
Exercised		(1,498,720	)		5.66		(1,983,701	)		5.49		(918,692	)		4.66
Canceled		(16,500	)		17.45		(62,673	)		9.27		(21,994	)		6.28
Outstanding, end of year		7,542,084		$	11.12		7,042,304		$	7.79		7,670,678		$	6.14
Options exercisable, end of year		3,595,521		$	7.52		3,960,285		$	6.01		4,652,982		$	5.36

Outstanding stock options at October 31, 2004 consist of the following:

	Options Outstanding						Options Exercisable
			Weighted
Range of			Average		Weighted				Weighted
Exercise			Remaining		Average				Average
Prices	Shares		Life		Price		Shares		Price
			(Years)
$2.23 - $4.45		822,268		1.8	$	3.78		822,268	$	3.78
$4.45 - $6.68		1,027,874		4.6		5.96		802,874		5.95
$6.68 - $8.90		1,685,092		6.3		7.38		1,071,729		7.57
$8.90 - $11.13		541,344		6.1		9.23		365,344		9.24
$11.13 - $13.35		1,306,006		8.1		13.23		391,308		13.03
$13.35 - $15.58		142,000		8.7		15.23		20,665		15.27
$15.58 - $17.80		1,452,500		9.0		17.37		61,333		15.70
$17.80 - $22.25		565,000		9.5		22.13		60,000		21.50
		7,542,084		6.7	$	11.12		3,595,521	$	7.52

As of October 31, 2004, there were 2,379,065 shares of common stock that were available for future grant.

The Company began the Quiksilver Employee Stock Purchase Plan (the “ESPP”) in fiscal 2001, which provides a method for employees of the Company to purchase common stock at a 15% discount from fair market value as of the beginning or end of each purchasing period of six months, whichever is lower. The ESPP covers substantially all full-time domestic and Australian employees who have at least five months of service with the Company. The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of section 423 of the Internal Revenue Code of 1986, as amended, and therefore the Company does not recognize compensation expense related to the ESPP. During the years ended October 31, 2004, 2003 and 2002, 65,711, 50,666 and 64,852 shares of stock were issued under the plan with proceeds to the Company of $1.0 million, $0.6 million and $0.5 million, respectively.

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Note 11 ¾ Accumulated Other Comprehensive Income

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

	October 31,
In thousands	2004			2003
Foreign currency translation adjustment	$	42,424		$	23,870
Loss on cash flow hedges and interest rate swaps		(7,646	)		(4,018	)
	$	34,778		$	19,852

Note 12 ¾ Licensing

Since acquiring Quiksilver International in July 2000, the Company owns all international rights to use the Quiksilver and Roxy trademarks. Prior to this acquisition, the Company owned these intellectual property rights in the United States and Mexico only, and operated under license agreements with Quiksilver International Pty Ltd. to use the Quiksilver and Roxy trademarks in other countries and territories.

Quiksilver Europe has a license agreement with Gotcha International, LP that resulted from the Company’s acquisition of Freestyle, SA, the European licensee of Gotcha International, LP. The license agreement provides that Quiksilver Europe can sell products under the Gotcha trademark and tradename through 2015 in the territories covered by the license agreement (primarily Western Europe). Royalties range from 2.8% to 4.0% of net sales, based on sales volume, with certain minimum requirements. Promotional contributions are also required based on sales volume and range from 1.0% to 1.5%.

The Company licensed the use of the Quiksilver and Roxy trademarks in Mexico in exchange for royalties of 4.5% of net sales after Mexican taxes. This license terminated in fiscal 2004. The Company is currently negotiating new licensing arrangements in Turkey and Mexico. The Company also licensed the use of the Quiksilver and Roxy trademarks on eyewear and licensed a chain of domestic outlet stores. The eyewear licensee and this outlet store chain were acquired in fiscal 2003 and fiscal 2002, respectively, and accordingly, the license agreements were eliminated. The Company’s license with its domestic watch licensee was terminated during the year ended October 31, 2002.

Effective with the acquisition of Quiksilver International during fiscal 2000, the Company acquired licenses for the use of the Quiksilver and Roxy trademarks in various countries and territories around the world. The licensees are currently headquartered in South Africa, South Korea, Argentina and Mauritius. These licensees pay the Company royalties ranging from 3% to 5% of the licensees’ sales. The licensees headquartered in Australia, Japan and Indonesia were acquired during fiscal 2003.

52

Note 13 ¾ Income Taxes

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

	Years Ended October 31,
In thousands	2004			2003			2002
Current:
Federal	$	7,201		$	7,240		$	10,874
State		2,539			2,729			2,545
Foreign		28,072			24,506			13,014
		37,812			34,475			26,433
Deferred:
Federal		5,548			1,956			(2,435	)
State		814			(56	)		(530	)
Foreign		(3,551	)		(4,824	)		(1,073	)
		2,811			(2,924	)		(4,038	)
Provision for income taxes	$	40,623		$	31,551		$	22,395

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

	Years Ended October 31,
	2004			2003			2002
Computed “expected” statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal income tax benefit		0.6			3.6			2.2
Foreign tax effect		(2.4	)		(1.0	)		0.2
Foreign tax credit		—			(2.9	)		(0.1	)
Other		0.1			0.3			—
Effective income tax rate		33.3	%		35.0	%		37.3	%

The components of net deferred income taxes are as follows:

	October 31,
In thousands	2004			2003
Deferred income tax assets:
Allowance for doubtful accounts	$	7,631		$	6,297
Other comprehensive income		4,407			2,467
Operating loss carryforwards		1,044			230
Nondeductible accruals and other		17,019			14,369
		30,101			23,363
Deferred income tax liabilities:
Depreciation and Amortization		(22,408	)		(1,283	)
Other		(1,235	)		(2,624	)
		(23,643	)		(3,907	)
Net deferred income taxes	$	6,458		$	19,456

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

Income before provision for income taxes includes $70.1 million, $55.2 million and $34.0 million from foreign jurisdictions for the years ended October 31, 2004, 2003 and 2002, respectively. The Company does not provide for the U.S. federal, state or additional foreign income tax effects on foreign earnings that

53

management intends to permanently reinvest. For the fiscal year ended October 31, 2004, foreign earnings earmarked for permanent reinvestment totaled approximately $172.0 million.

At October 31, 2004, the Company has state net operating loss carryforwards of approximately $5.3 million that will expire on various dates through 2014. In addition, the Company has foreign net operating loss carryforwards of approximately $2.9 million and $1.0 million for years ended October 31, 2004 and 2003, respectively, which will be carried forward until fully utilized.

Note 14 ¾ Employee Plans

The Company maintains the Quiksilver 401(k) Employee Savings Plan and Trust (the “401(k) Plan”). This plan is generally available to all domestic employees with six months of service and is funded by employee contributions and periodic discretionary contributions from the Company, which are approved by the Company’s Board of Directors. The Company made contributions of $0.7 million, $0.5 million and $0.4 million to the 401(k) Plan for the years ended October 31, 2004, 2003 and 2002, respectively.

Employees of the Company’s French subsidary, Na Pali, SAS, with three months of service are covered under the French Profit Sharing Plan (the “French Profit Sharing Plan”), which is mandated by law. Compensation is earned under the French Profit Sharing Plan based on statutory computations with an additional discretionary component. Funds are maintained by the Company and vest with the employees after five years, although earlier disbursement is optional if certain personal events occur or upon the termination of employment. Compensation expense of $2.3 million, $2.0 million and $1.6 million was recognized related to the French Profit Sharing Plan for the fiscal years ended October 31, 2004, 2003 and 2002, respectively.

Note 15 ¾ Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s management in deciding how to allocate resources and in assessing performance. The Company operates exclusively in the consumer products industry in which the Company designs, produces and distributes clothing, accessories and related products. Operating results of the Company’s various product lines have been aggregated because of their common economic and operating characteristics and their reliance on shared operating functions. Within the consumer products industry, the Company has historically operated in the Americas (primarily the U.S.) and Europe. Effective with its acquisition of Quiksilver Asia/Pacific on December 1, 2002, the Company has added operations in Australia, Japan, New Zealand and other Southeast Asian countries and territories. Accordingly, the Company revised its geographic segments to include Asia/Pacific and corporate operations. Costs that support all three geographic segments, including trademark protection, trademark maintenance and licensing functions are part of corporate operations. Corporate operations also includes sourcing income and gross profit earned from the Company’s licensees. No single customer accounts for more than 10% of the Company’s revenues.

54

Although the Company operates in one industry segment, it produces different product lines within the segment. The percentages of revenues attributable to each product line are as follows:

	Percentage of Revenues
	2004			2003			2002
T-Shirts		19	%		20	%		20	%
Accessories		14			14			12
Jackets, sweaters and snowboardwear		12			12			12
Pants		10			11			11
Shirts		9			10			11
Footwear		9			5			4
Swimwear, excluding boardshorts		7			8			9
Fleece		5			6			7
Shorts		5			6			6
Boardshorts		4			4			3
Tops and dresses		4			3			3
Snowboards, snowboard boots, bindings and accessories		2			1			2
		100	%		100	%		100	%

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

	Years Ended October 31,
In thousands	2004			2003			2002
Revenues:
Americas	$	616,818		$	492,442		$	418,008
Europe		496,276			386,226			282,684
Asia/Pacific		148,733			94,187			—
Corporate operations		5,112			2,150			4,792
Consolidated	$	1,266,939		$	975,005		$	705,484
Gross profit:
Americas	$	251,357		$	197,434		$	153,561
Europe		251,692			189,462			127,976
Asia/Pacific		73,152			44,206			—
Corporation operations		1,958			2,150			4,792
Consolidated	$	578,159		$	433,252		$	286,329
Operating income:
Americas	$	63,811		$	45,734		$	35,377
Europe		73,517			61,941			41,327
Asia/Pacific		21,164			12,168			—
Corporate operations		(26,554	)		(18,778	)		(7,000	)
Consolidated	$	131,938		$	101,065		$	69,704
Identifiable assets:
Americas	$	443,028		$	300,464		$	226,715
Europe		413,454			299,977			204,759
Asia/Pacific		118,918			95,835			—
Corporate operations		15,590			11,694			19,115
Consolidated	$	990,990		$	707,970		$	450,589

55

	Years Ended October 31,
In thousands	2004		2003		2002
Goodwill:
Americas	$	86,382	$	50,670	$	15,686
Europe		70,057		41,592		11,292
Asia/Pacific		13,346		6,571		—
Consolidated	$	169,785	$	98,833	$	26,978

Goodwill increased in the Americas, Europe and Asia/Pacific during the fiscal year ended October 31, 2004 as a result of the DC acquisition and a contingent payment related to the acquisition of Quiksilver International. Goodwill increased in the Americas, Europe and Asia/Pacific during the fiscal year ended October 31, 2003 as a result of the Company’s acquisitions of its U.S. eyewear licensee, its European licensee for eyewear and wetsuits and its licensees in Australia and Japan. See Note 2 to these consolidated financial statements. Goodwill related to the acquisition of Quiksilver Asia/Pacific and the trademark value was allocated to each respective geographic segment based on where the benefits from these intangibles were estimated to be realized.

France accounted for 38.4%, 39.6% and 41.1% of European net sales to unaffiliated customers for the years ended October 31, 2004, 2003 and 2002, respectively, while the United Kingdom accounted for 18.7%, 21.5% and 20.6%, respectively, and Spain accounted for 17.0%, 16.5% and 15.2%, respectively.

Note 16 ¾ Derivative Financial Instruments

The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income, and product purchases of its international subsidiaries that are denominated in currencies other than their functional currencies. The Company is also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in U.S. dollars, and to fluctuations in interest rates related to its variable rate debt. Furthermore, the Company is exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in the Company’s consolidated financial statements due to the translation of the operating results and financial position of the Company’s international subsidiaries. As part of its overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses various foreign currency exchange contracts and intercompany loans. In addition, interest rate swaps are used to manage the Company’s exposure to the risk of fluctuations in interest rates.

Derivatives that do not qualify for hedge accounting but are used by management to mitigate exposure to currency risks are marked to fair value with corresponding gains or losses recorded in earnings. A loss of $2.7 million was recognized related to these types of contracts during fiscal 2004. For all qualifying cash flow hedges, the changes in the fair value of the derivatives are recorded in other comprehensive income. As of October 31, 2004, the Company was hedging forecasted transactions expected to occur in the following seventeen months. Assuming exchange rates at October 31, 2004 remain constant, $5.2 million of losses, net of tax, related to hedges of these transactions are expected to be reclassified into earnings over the next seventeen months. Also included in accumulated other comprehensive income at October 31, 2004 is a $2.1 million loss, net of tax, related to cash flow hedges of the Company’s long-term debt, which is denominated in Australian dollars and matures through fiscal 2005, and the fair value of interest rate swaps, totaling a loss of $0.3 million, net of tax, which is related to the Company’s U.S. dollar denominated long-term debt and mature through fiscal 2007.

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

56

prospectively (i) if it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is sold, terminated, or exercised, (iii) if it becomes probable that the forecasted transaction being hedged by the derivative will not occur, (iv) because a hedged firm commitment no longer meets the definition of a firm commitment, or (v) if management determines that designation of the derivative as a hedge instrument is no longer appropriate. During the fiscal year ended October 31, 2004, the Company reclassified into earnings a net loss of $3.6 million resulting from the expiration, sale, termination, or exercise of derivative contracts.

The Company enters into forward exchange and other derivative contracts with major banks and is exposed to credit losses in the event of nonperformance by these banks. The Company anticipates, however, that these banks will be able to fully satisfy their obligations under the contracts. Accordingly, the Company does not obtain collateral or other security to support the contracts.

A summary of derivative contracts at October 31, 2004 is as follows:

	Notional			Fair
In thousands	Amount		Maturity	Value
U.S. dollars	$	165,242	Nov 2004 - Mar 2006	$	(7,898	)
Australian dollars		22,879	Sept 2005		4,773
New Zealand dollars		1,359	Nov 2004		(55	)
Interest rate swap		6,765	Jan 2007		(444	)
	$	196,245		$	(3,624	)

Note 17 ¾ Quarterly Financial Data (Unaudited)

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

	Quarter		Quarter		Quarter		Quarter
In thousands,	Ended		Ended		Ended		Ended
except per share amounts	January 31		April 30		July 31		October 31
Year ended October 31, 2004
Revenues, net	$	256,142	$	322,579	$	337,930	$	350,288
Gross profit		113,669		147,043		150,407		167,040
Net income		9,174		27,790		19,530		24,875
Net income per share, assuming dilution		0.16		0.47		0.32		0.41
Trade accounts receivable		200,558		257,122		271,399		281,263
Inventories		179,282		127,318		171,639		179,605
Year ended October 31, 2003
Revenues, net	$	192,080	$	262,210	$	251,498	$	269,217
Gross profit		81,508		118,583		107,129		126,032
Net income		6,568		22,630		11,918		17,400
Net income per share, assuming dilution		0.12		0.40		0.21		0.30
Trade accounts receivable		173,511		227,028		217,924		224,418
Inventories		144,237		120,775		159,493		146,440

57

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: January 11, 2005

QUIKSILVER, INC.
(Registrant)

By:	/s/ Robert B. McKnight, Jr.	By:	/s/ Steven L. Brink
	Robert B. McKnight, Jr.		Steven L. Brink
	Chairman of the Board and		Chief Financial Officer
	Chief Executive Officer		and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signatures	Title	Date Signed
/s/ Robert B. McKnight, Jr. Robert B. McKnight, Jr.	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	January 11, 2005
/s/ Steven L. Brink Steven L. Brink	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	January 11, 2005
/s/ William M. Barnum, Jr. William M. Barnum, Jr.	Director	January 11, 2005
/s/ Charles E. Crowe Charles E. Crowe	Director	January 11, 2005
/s/ Michael H. Gray Michael H. Gray	Director	January 11, 2005
/s/ Robert G. Kirby Robert G. Kirby	Director	January 11, 2005
/s/ Bernard Mariette Bernard Mariette	Director	January 11, 2005
/s/ Franck Riboud Franck Riboud	Director	January 11, 2005
/s/ Tom Roach Tom Roach	Director	January 11, 2005

58

EXHIBIT INDEX

Exhibit
Number	Description
3.1	Restated Certificate of Incorporation, as amended.
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2003).
10.1	JP Morgan Credit Agreement dated June 27, 2003 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2003).
10.2	First Amendment to the JP Morgan Credit Agreement dated May 3, 2004.
10.3	Second Amendment to the JP Morgan Credit Agreement dated November 2, 2004.
10.4	Share Purchase Agreement, dated July 27, 2000, by and among Quiksilver, Inc., Quiksilver Australia Pty Ltd, Quiksilver International Pty Ltd and Shareholders of Quiksilver International Pty Ltd. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated July 27, 2000).
10.5	Form of Indemnity Agreement between the Company and individual Directors and officers of the Company (incorporated by reference to Exhibit 10.5 of the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 1996). (1)
10.6	Quiksilver, Inc. Stock Option Plan, as amended through March 24, 1995, together with form Stock Option Agreements. (1)
10.7	Quiksilver, Inc. 1995 Nonemployee Directors’ Stock Option Plan, together with form Stock Option Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 1996). (1)
10.8	Quiksilver, Inc. 1996 Stock Option Plan, together with form Stock Option Agreements (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 1996). (1)
10.9	Quiksilver, Inc. 1998 Nonemployee Directors’ Stock Option Plan, together with form Stock Option Agreement. (1)
10.10	Quiksilver, Inc. 2000 Stock Incentive Plan, as amended through March 26, 2004, together with form Stock Option Agreements. (1)
10.11	Employment Agreement between Robert B. McKnight, Jr. and the Company dated August 1, 2004 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2004). (1)
10.12	Employment Agreement between Bernard Mariette and the Company dated August 1, 2004 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2004.) (1)
10.13	Employment Agreement between Charles S. Exon and the Company dated August 1, 2004 (incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2004.) (1)
10.14	Employment Agreement between Steven L. Brink and the Company dated August 1, 2004 (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2004.) (1)
10.15	Merger Agreement, dated November 18, 2002, by and among Quiksilver, Inc., Quiksilver Australia Pty Ltd., QSJ Holdings Pty Ltd., Ug Manufacturing Co. Pty Ltd., Quiksilver Japan K.K., and certain shareholders of Ug Manufacturing Co. Pty Ltd. and Quiksilver Japan K.K. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated January 2, 2003).

59

Exhibit
Number	Description
10.16	Agreement and Plan of Merger and Reorganization by and among Quiksilver, Inc., QS Retail, Inc., Beach Street, Inc. and John Thompson and Diana Thompson dated as of September 17, 2002 (incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K for the year ended October 31, 2002).
10.17	Stock Purchase Agreement between the Company and the Sellers of DC Shoes, Inc. dated March 8, 2004 (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K dated March 8, 2004).
10.18	First Amendment to the Stock Purchase Agreement between the Company and the Sellers of DC Shoes, Inc. dated May 3, 2004 (incorporated by reference to Exhibit 2.2 of the Company’s Current Report on Form 8-K dated May 3, 2004).
10.19	Quiksilver, Inc. Written Description of Nonemployee Director Compensation. (1)
10.20	Quiksilver, Inc. Long Term Incentive Plan. (1)
10.21	Quiksilver, Inc. Annual Incentive Plan. (1)
21.1	Names and Jurisdictions of Subsidiaries.
23.1	Independent Auditors’ Consent.
31.1	Rule 13a-14(a)/15d-14(a) Certifications - Principal Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certifications - Principal Financial Officer
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2003

(1) Management contract or compensatory plan.

60

EX-3.1

                                                                     Exhibit 3.1

                            CERTIFICATE OF AMENDMENT
                                       OF
                      RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                QUIKSILVER, INC.

            Quiksilver, Inc. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, does hereby certify that:

            FIRST: The original Certificate of Incorporation of the Company was
filed with the Secretary of State of Delaware on October 24, 1986. On April 8,
1996, the Company filed a Restated Certificate of Incorporation. On September
11, 2002, the Company filed a Certificate of Amendment of Restated Certificate
of Incorporation.

            SECOND: The Restated Certificate of Incorporation of Quiksilver,
Inc. is hereby amended by deleting Article FOURTH and replacing it with the
following:

      FOURTH:

            A. The total number of shares of all classes of stock that the
      Company shall have authority to issue is ninety million (90,000,000),
      consisting of:

                  (1) eighty-five million (85,000,000) shares of Common Stock,
      with a par value of $0.01 per share; and

                  (2) five million (5,000,000) shares of Preferred Stock, with a
      par value of $.01 per share.

            B. The shares of Preferred Stock may be issued from time to time in
      one or more series. The Board of Directors is authorized to fix the number
      of shares of any series of Preferred Stock and to determine the
      designation of any such series. The Board of Directors is also authorized
      to determine or alter the rights, preferences, privileges and restrictions
      granted to or imposed upon any wholly unissued series of Preferred Stock
      and, within the limits and restrictions stated in any resolution or
      resolutions of the Board of Directors originally fixing the number of
      shares constituting any series, to increase or decrease (but not below the
      number of shares of such series then outstanding) the number of shares of
      any such series subsequent to the issuance of shares of that series.

            THIRD: The amendment described above has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware by the directors and stockholders of the Company.



            IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment of Restated Certificate of Incorporation to be executed by its Chief
Executive Officer and attested by its Secretary this 7th day of April, 2003.

                                               QUIKSILVER, INC.

                                               By: /s/ Robert G. McKnight, Jr.
                                                   -----------------------------
                                                   Robert G. McKnight, Jr.
                                                   Chief Executive Officer

ATTEST:

/s/ Charles S. Exon
- ---------------------------
Charles S. Exon, Secretary

                                       2


                            CERTIFICATE OF AMENDMENT
                                       OF
                      RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                                QUIKSILVER, INC.

            Quiksilver, Inc. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, does hereby certify that:

            FIRST: The original Certificate of Incorporation of the Company was
filed with the Secretary of State of Delaware on October 24, 1986. On April 8,
1996, the Company filed a Restated Certificate of Incorporation.

            SECOND: The Restated Certificate of Incorporation of Quiksilver,
Inc. is hereby amended by deleting Article FOURTH and replacing it with the
following:

      FOURTH:

            A. The total number of shares of all classes of stock that the
      Company shall have authority to issue is fifty million (50,000,000),
      consisting of:

                  (1) forty-five million (45,000,000) shares of Common Stock,
      with a par value of $0.01 per share; and

                  (2) five million (5,000,000) shares of Preferred Stock, with a
      par value of $.01 per share.

            B. The shares of Preferred Stock may be issued from time to time in
      one or more series. The Board of Directors is authorized to fix the number
      of shares of any series of Preferred Stock and to determine the
      designation of any such series. The Board of Directors is also authorized
      to determine or alter the rights, preferences, privileges and restrictions
      granted to or imposed upon any wholly unissued series of Preferred Stock
      and, within the limits and restrictions stated in any resolution or
      resolutions of the Board of Directors originally fixing the number of
      shares constituting any series, to increase or decrease (but not below the
      number of shares of such series then outstanding) the number of shares of
      any such series subsequent to the issuance of shares of that series.

            THIRD: The amendment described above has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware by the directors and stockholders of the Company.



            IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment of Restated Certificate of Incorporation to be executed by its Chief
Executive Officer and attested by its Secretary this 11th day of September,
2002.

                                              QUIKSILVER, INC.

                                              By: /s/ Robert G. McKnight, Jr.
                                                  -----------------------------
                                                  Robert G. McKnight, Jr.
                                                  Chief Executive Officer

ATTEST:

/s/ Charles S. Exon
- -------------------------------
Charles S. Exon, Secretary

                                        2


                                    RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                                QUIKSILVER, INC.

      The undersigned, Robert B. McKnight, Jr. and Randall L. Herrel, Sr.,
certify that they are the Chief Executive Officer and Secretary, respectively,
of Quiksilver, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company"), and do hereby further certify as follows:

      A. The name of the Company is QUIKSILVER, INC.

      B. The original Certificate of Incorporation of the Company was filed in
the office of the Delaware Secretary of State on October 24, 1986.

      C. This Restated Certificate of Incorporation has been duly adopted by the
Board of Directors and by the Stockholders of the Company in accordance with the
applicable provisions of Section 242 and 245 of the General Corporation Law of
the State of Delaware.

      D. The text of the Certificate of Incorporation of the Company is hereby
amended and restated to read in its entirety as follows:

            FIRST: The name of this corporation is Quiksilver, Inc. (hereinafter
      referred to as the "Company").

            SECOND: The address of the Company's registered office in the State
      of Delaware is 1013 Centre Road, Wilmington, New Castle County, Delaware.
      The name of the Company's registered agent at that address is United
      States Corporation Company.

            THIRD: The purpose of the Company is to engage in any lawful act or
      activity for which a corporation may be organized under the General
      Corporation Law of Delaware.

            FOURTH:

                  A. The total number of shares of all classes of stock that the
      Company shall have authority to issue is thirty-five million (35,000,000),
      consisting of:

                        (1) thirty million (30,000,000) shares of Common Stock,
      with a par value of $.01 per share; and

                        (2) five million (5,000,000) shares of Preferred Stock,
      with a par value of $.01 per share.

                  B. The shares of Preferred Stock may be issued from time to
      time in one or more series. The Board of Directors is authorized to fix
      the number of shares of any series of Preferred Stock and to determine the
      designation of any such series. The Board of Directors is also authorized
      to determine or alter the rights, preferences, privileges and restrictions
      granted to or imposed upon any wholly unissued series of



      Preferred Stock and, within the limits and restrictions stated in any
      resolution or resolutions of the Board of Directors originally fixing the
      number of shares constituting any series, to increase or decrease (but not
      below the number of shares of such series then outstanding) the number of
      shares of any such series subsequent to the issuance of shares of that
      series.

            FIFTH: A director of the Company shall not be personally liable to
      the Company or its stockholders 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 Company or its stockholders, (ii)
      for acts or omissions not in good faith or which 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 an improper personal benefit.

                        If the Delaware General Corporation Law is hereafter
      amended to authorize the further elimination or limitation of the
      liability of a director, then the liability of a director of the Company
      shall be eliminated or limited to the fullest extent permitted by the
      Delaware General Corporation Law, as so amended.

                        Any repeal or modification of the foregoing provisions
      of this Article FIFTH by the stockholders of the Company shall not
      adversely affect any right or protection of a director of the Company
      existing at the time of such repeal or modification.

            SIXTH: In furtherance and not in limitation of the powers conferred
      by statute, the Board of Directors is expressly authorized to make, alter
      or repeal the bylaws of the Company.

            SEVENTH: Election of directors need not be by written ballot unless
      the bylaws of the Company shall so provide.

      E. The undersigned further declare under penalty of perjury under the laws
of the State of Delaware that this Restated Certificate of Incorporation is the
act and deed of the Company and that the facts stated herein are true.

DATED:  April 4, 1996                             QUIKSILVER, INC.

                                                  /s/ Robert B. McKnight, Jr.
                                                  ------------------------------
                                                  Robert B. McKnight, Jr.
                                                  Chief Executive Officer

ATTEST:

/s/ Randall L. Herrel, Sr.
- ---------------------------------------
Randall L. Herrel, Sr., Secretary

                                       2

EX-10.2

                                                                    EXHIBIT 10.2

                                                                  EXECUTION COPY

                       FIRST AMENDMENT TO CREDIT AGREEMENT

      This First Amendment (this "Amendment") to the Credit Agreement referenced
below is entered into as of May 3, 2004, among Quiksilver, Inc., a Delaware
corporation (the "Company"), the other borrowers signatory hereto (collectively
with the Company, the "Borrowers"), the lenders signatory hereto (the " Majority
Lenders"), and JPMorgan Chase Bank, as administrative agent for the Lenders (in
such capacity, the "Agent").

                                    RECITALS:

      WHEREAS, the Borrowers, the Lenders and the Agent are parties to the
Credit Agreement, dated as of June 27, 2003 (the "Credit Agreement"), providing
for the extension of credit to the Borrowers in the form of revolving credit
loans and letters of credit in an aggregate principal amount not to exceed
$200,000,000; and

      WHEREAS, the Borrowers have requested that certain provisions of the
Credit Agreement be amended, and the Majority Lenders have agreed to such an
amendment, on the terms and subject to the conditions set forth in this
Amendment.

      NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

      1. Amendments to Credit Agreement

            (a) Section 1.1 of the Credit Agreement. The following defined term
is hereby added to Section 1.1 of the Credit Agreement following the definition
of the term "Currency":

            "DC Shoes Acquisition": the acquisition by Quiksilver of DC Shoes,
            Inc., a California corporation ("DC Shoes"), pursuant to that
            certain Stock Purchase Agreement, dated as of March 8, 2004, by and
            among Quiksilver, DC Shoes and the Sellers of DC Shoes, for a
            Consideration equal to the sum of (i) approximately US$56,000,000 in
            cash, subject to certain adjustments, (ii) approximately 1,600,000
            shares of Quiksilver common stock, subject to certain adjustments,
            and (iii) possible earnout payments up to US$57,000,000.

            (b) Section 5.1(c) of the Credit Agreement. Section 5.1(c) of the
Credit Agreement is hereby amended and restated as follows:

                  (c) Within 105 days after the end of each fiscal year,
            Quiksilver shall deliver to the Lenders its projections with respect
            to the financial performance of Quiksilver and its Subsidiaries for
            the fiscal year commencing on the immediately preceding November 1.
            Such projections shall include quarterly cash-flow forecasts,
            quarterly consolidated balance sheets and quarterly



            consolidating income statements and shall otherwise be in form and
            scope reasonably satisfactory to the Agent.

            (c) Section 6.3(b) of the Credit Agreement. Section 6.3(b) of the
Agreement is hereby amended and restated as follows:

                  (b) Liens existing on any Property (other than trademarks,
            copyrights and other intellectual property rights) at the time of
            the acquisition of such Property and not created in anticipation of
            such acquisition; provided, however, with respect to a Subsidiary,
            the stock of which is acquired by one of the Borrowers, the Property
            of such Subsidiary shall be deemed to be acquired at the time the
            stock of such Subsidiary is acquired by such Borrower;

            (d) Section 6.7(d) of the Credit Agreement. Section 6.7(d) of the
Credit Agreement is hereby amended and restated as follows:

                  (d) Acquisitions of Persons or businesses in the same line of
            business as that described in Section 3.17, provided that (i) no
            Default has occurred and is continuing or would result from the
            consummation of such Acquisition (and Quiksilver shall have
            delivered to the Agent a Covenant Compliance Certificate showing pro
            forma calculations, as of the most recent quarter-end for which a
            Covenant Compliance Certificate has been provided by Quiksilver, and
            as of each of the three subsequent quarter-ends and on an annual
            basis thereafter through the Revolving Loan Commitment Expiration
            Date, assuming such Acquisition had been consummated), (ii) the
            aggregate Consideration therefor shall not exceed US$25,000,000
            annually, and US$50,000,000 in the aggregate, between the Closing
            Date and the Maturity Date; provided, however, that the
            Consideration set forth in the definition of "DC Shoes Acquisition"
            shall not be considered in this calculation, (iii) the Agent shall
            have received, reviewed and approved all documents requested by the
            Agent to insure that the Lenders have a first-priority security
            interest in, and assignment of, all personal property assets and
            interests acquired (excluding intellectual property), to the extent
            that a security interest in such assets and interests is required by
            the terms of this Agreement, including consents of third parties if
            reasonably requested, and (iv) such Acquisition is not opposed by
            the Person to be, or whose business is to be, acquired.

            (e) Schedule 3.19 to the Credit Agreement. Schedule 3.19 to the
Credit Agreement is hereby amended to add DC Shoes as a Material Domestic
Subsidiary.

                                       2



      2. Certain Tax Matters Regarding DC Shoes. The Agent and the Lenders
hereby agree that the matters regarding DC Shoes listed in Schedule 3 attached
hereto are exceptions to Section 3.6 of the Credit Agreement, and such matters
shall not constitute a breach thereof.

      3. Waiver. To the extent required under the Credit Agreement, if at all,
the Majority Lenders hereby waive compliance by Quiksilver with the requirements
of Section 5.1(c) of the Credit Agreement For the delivery of certain financial
projections for the fiscal year commencing on November 1, 2003.

      4. Defined Terms. All capitalized terms used herein, unless otherwise
defined herein, have the same meanings provided herein or in the Credit
Agreement.

      5. Modification of Credit Agreement. This Amendment is limited precisely
as written and shall not be deemed to (a) be a consent to a waiver or
modification of any other term or condition of the Credit Agreement, the other
Loan Documents or any of the documents referred to therein or executed in
connection therewith except as provided in Sections 1,2 and 3 hereof or (b)
prejudice any right or rights the Lenders may now have or may have in the future
under or in connection with the Credit Agreement, the other Loan Documents or
any documents referred to therein or executed in connection therewith.

      6. Construction. This Amendment is a document executed pursuant to the
Credit Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered or applied in accordance with the terms and provisions
thereof. Whenever the Credit Agreement is referred to in the Credit Agreement or
any of the instruments, agreements or other documents or papers executed and
delivered in connection therewith, it shall be deemed to mean the Credit
Agreement, as modified by this Amendment.

      7. Counterparts. This Amendment may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement. The parties may
execute facsimile copies of this Amendment and the facsimile signature of any
such party shall be deemed an original and fully binding on said party.

      8. Governing Law. This Amendment shall be governed and construed in
accordance with the applicable terms and provisions of Section 9.11 (Governing
Law) of the Credit Agreement, which terms and provisions are incorporated herein
by reference.

      9. Amendment Not a Novation. Except as hereby amended, no other term,
condition or provision of the Credit Agreement shall be deemed modified or
amended, and this Amendment shall not be considered a novation.

      10.Authorization. The Majority Lenders hereby direct and instruct the
Administrative Agent to execute this Amendment.

      11. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.

      [ Remainder of Page Intentionally Left Blank. Signature Pages Follow.]

                                       3



      IN WITNESS WHEREOF, the Borrowers, the Majority Lenders, and the
Administrative Agent have caused this First Amendment to the Credit Agreement to
be duly executed by their respective authorized officers as of the day and year
first written above.

                                 BORROWERS

                                 QUIKSILVER, INC.

                                 By:
                                    --------------------------------------------
                                 Name: STEVEN L. BRINK
                                 Title: CFO

                                 NA PALI, S.A.S.

                                 By:
                                    --------------------------------------------
                                 Name:  BERNARD MARIETTE
                                 Title: PRESIDENT

                                 QUIKSILVER JAPAN K.K.

                                 By:
                                    --------------------------------------------
                                 Name:  CHARLES EXON
                                 Title: DIRECTOR

                                 UG MANUFACTURING CO PTY LTD.

                                 By:
                                    --------------------------------------------
                                 Name:  CHARLES EXON
                                 Title: DIRECTOR

            [Signature Pages to First Amendment to Credit Agreement]



                      LENDERS

                      CHASE BANK, as a Lender

                      By:
                          ------------------------------------------------------
                      Name:  PAUL O'NEILL
                      Title: VICE PRESIDENT

                      Loan Commitment: $25,000,000

                      Address for Notices

                      (a) For Credit
                      1411 Broadway, 5th Floor
                      New York, New York 10018
                      Attention: Paul J. O'Neill
                      Telephone: (212) 391-7157
                      Facsimile: (212) 391-7118

                      (b) For Operations (Other Than Letters of Credit)
                      1411 Broadway, 5th Floor
                      New York, New York 10018
                      Attention: Millie Nogueras
                      Telephone: (212) 391-6079
                      Facsimile: (212) 391-7283

                      (c) For Letters of Credit
                      Global Trade Services
                      10420 Highland Manor Drive
                      Building No. 2, 4th Floor
                      Tampa, Florida 33610
                      Attention: Mildred Bowens
                      Telephone: (813) 432-6347
                      Facsimile: (813) 432-5162

                      Approved Lending Offices

                      Applicable Lending Office for Base Rate Loans: 1411
                      Broadway, 5th Floor
                      New York, New York 10018

                      Applicable Lending Office For LIBOR Loans:
                      1411 Broadway, 5th Floor
                      New York, New York 10018

                      Applicable Lending Office for Participations in Letters of
                      Credit:
                      Global Trade Services
                      10420 Highland Manor Drive
                      Building No. 2, 4th Floor
                      Tampa, Florida 33610

            [Signature Pages to First Amendment to Credit Agreement]



                        UNION BANK Of CALIFORNIA, N.A.,
                        as a Lender

                        By:
                            -------------------------------
                        Name: Margaret Fuchank
                        Title: V.P.

                        Loan Commitment: $40,000,000

                        Address for Notices

                        (a) For Credit

                        18300 Von Karman Avenue, Suite 310
                        Irvine, California 92612
                        Attention: Margaret Furbank
                        Telephone: (949) 553-6853
                        Facsimile: (949) 553-7122

                        (b) For Operations

                        601 Potrero Grande Drive
                        Monterey Park, California 91754
                        Attention: Shirley Davis
                        Telephone: (323) 720-2870
                        Facsimile: (323) 724-6198

                        Approved Lending Offices

                        Applicable Lending Office for Base Rate Loans:
                        18300 Von Karman Avenue, Suite 310
                        Irvine, California 92612

                        Applicable Lending Office for LIBOR Loans:
                        18300 Von Karman Avenue, Suite 310
                        Irvine, California 92612

                        Applicable Lending Office for Participations in
                        Letters of Credit:
                        1980 Saturn Street
                        Monterey Park, California 91755

            [Signature Pages to First Amendment to Credit Agreement]



                        FLEET NATIONAL BANK, as a Lender

                        By:
                            -------------------------------
                        Name: Stephen  J. Garvin
                        Title: Managing Director

                        Loan Commitment: $20,000,000

                        Address for Notices

                        (a) For Credit

                        40 Broad Street
                        Boston, Massachusetts 02115
                        Attention: Stephen J. Garvin
                        Telephone: (617) 434-9399
                        Facsimile: (617) 434-6685

                        (b) For Operations

                        100 Federal Street
                        Bostons, Massachusetts 02110
                        Attention: Michelle Mogan
                        Telephone: (617) 434-4187
                        Facsimile: (617) 434-9933

                        Approved Lending Offices

                        Applicable Lending Office for Base Rate Loans:
                        100 Federal Street
                        Boston, Massachusetts 02110

                        Applicable Lending Office for LIBOR Loans:
                        100 Federal Street
                        Boston, Massachusetts 02110

                        Applicable Lending Office for Participations in
                        Letters of Credit:
                        100 Federal Street
                        Boston, Massachusetts 02110

            [Signature Pages to First Amendment to Credit Agreement]



                        BANK OF AMERICA, N.A., as a Lender

                        By:
                            -------------------------------
                        Name: Cynthia Goodfellow
                        Title: Vice President

                        Loan Commitment: $20,000,000

                        Address for Notices

                        (a) For Credit

                        675 Anton Boulevard, 2nd Floor
                        Costa Mesa, California 92626
                        Attention: Cynthia K. Goodfellow
                        Telephone: (714) 850-6547
                        Facsimile: (714)850-6586

                        (b) For Operations

                        333 Beaudry Street; Suite 1100
                        Los Angeles, California 90017
                        Attention: Maria Castro
                        Telephone: (714) 850-6504
                        Facsimile: (714) 850-6586

                        Approved Lending Offices

                        Applicable Lending Office for Base Rate Loans:
                        675 Anton Boulevard, 2nd Floor
                        Costa Mesa, California 92626

                        Applicable Lending Office for LIBOR Loans:
                        1455 Market Street, 5th Floor
                        San Francisco, California 94103

                        Applicable Lending Office for Participations in
                        Letters of Credit:
                        675 Anton Boulevard, 2nd Floor
                        Costa Mesa, California 92626

            [Signature Pages to First Amendment to Credit Agreement]



                        U.S. BANK NATIONAL, ASSOCIATION, as a
                        Lender

                        By:
                            -------------------------------
                        Name: Marni A. Lombardo
                        Title: Vice President

                        Loan Commitment: $25,000,000

                        Address for Notices

                        (a) For Credit

                        4100 Newport Place, Suite 900
                        Newport Beach, California 92660
                        Attention: Marni Lombardo
                        Telephone: (949) 863-2365
                        Facsimile: (949) 863-2335

                        (b) For Operations

                        555 SW Oak
                        Portland, Oregon 97204
                        Attention: Marcy Marlow
                        Telephone: (503) 275-5005
                        Facsimile: (503) 275-8181

                        Approved Lending Offices

                        Applicable Lending Office for Base Rate Loans:
                        4100 Newport Place, Suite 900
                        Newport Beach, California 92660

                        Applicable Lending Office for LIBOR Loans:
                        4100 Newport Place, Suite 900
                        Newport Beach, California 92660

                        Applicable Lending Office for Participations in
                        Letters of Credit:
                        4100 Newport Place, Suite 900
                        Newport Beach, California 92660

            [Signature Pages to First Amendment to Credit Agreement]



                        COMERICA BANK, as a Lender

                        By:
                            -------------------------------
                        Name: Deborah Jenkins
                        Title: Vice President

                        Loan Commitment: $10,000,000

                        Address for Notices

                        (a) For Credit

                        201 North Figueroa Street, Suite 1425
                        Los Angeles, California 90012
                        Attention: Deborah Jenkins
                        Telephone: (213) 484-3729
                        Facsimile: (213) 484-3775

                        (b) For Operations

                        201 North Figueroa Street, Suite 1425
                        Los Angeles, California 90012
                        Attention: Margarita Quiteno
                        Telephone: (213) 484-3722
                        Facsimile: (213) 484-3775

                        Approved Lending Offices

                        Applicable Lending Office for Base Rate Loans:
                        333 West Santa Clara Street
                        San Jose, California 95113

                        Applicable Lending Office for LIBOR Loans:
                        333 West Santa Clara Street
                        San Jose, California 95113

                        Applicable Lending Office for Participations in
                        Letters of Credit:
                        333 West Santa Clara Street
                        San Jose, California 95113

            [Signature Pages to First Amendment to Credit Agreement]


                                  HSBC BANK USA, as a Lender

                                  By:
                                      ----------------------------
                                  Name: George Ahlmeyer
                                  Title: Sr. Vice President

                                  Loan Commitment:         $20,000,000

                                  Address for Notices

                                  (a) For Credit

                                  452 Fifth Avenue, 4th Floor
                                  New York, New York 10018
                                  Attention: Michael Behuniak/George Ahlmeyer
                                  Telephone: (212) 525-6589
                                  Facsimile: (212) 525-6905

                                  (b) For Operations

                                  1 HSBC Center, 26th Floor
                                  Buffalo, New York 14203
                                  Attention: Donna L. Riley
                                  Telephone: (716) 841-4178
                                  Facsimile: (716) 841-0269

                                  Approved Lending Offices

                                  Applicable Lending Office for Base RATE LOANS:
                                  452 Fifth Avenue, 4th Floor
                                  New York, New York 10018

                                  Applicable Lending Office for LIBOR Loans:
                                  452 Fifth Avenue, 4th Floor
                                  New York, New York 10018

                                  Applicable Lending Office for
                                  Participations in Letters of Credit:
                                  452 Fifth Avenue, 4th Floor
                                  New York, New York 10018

            [Signature Pages to First Amendment to Credit Agreement]



                                  BANK ONE, N.A., AS A LENDER

                                  By:
                                      ---------------------------------
                                  Name: Marion M. Church
                                  Title: Associate

                                  Loan Commitment:          $15,000,000

                                  Address for Notices

                                  (a) For Credit

                                  131 South Dearborn Street
                                  Chicago, Illinois 60603
                                  Attention: Marion Church
                                  Telephone: (312) 325-3234
                                  Facsimile: (312) 325-3050

                                  (b) For Operations

                                  1 Bank One Plaza, Suite IL 1-0088
                                  Chicago, Illinois 60670
                                  Attention: Saul Gierstikas
                                  Telephone: (312) 732-1794
                                  Facsimile: (312) 732-4303

                                  Approved Lending Offices

                                  Applicable Lending Office for Base Rate Loans:
                                  Bank One Plaza, Suite IL 1-0086
                                  Chicago, Illinois 60670

                                  Applicable Lending Office for LIBOR Loans:
                                  Bank One Plaza, Suite IL 1-0086
                                  Chicago, Illinois 60670

                                  Applicable Lending Office for Participations
                                  in Letters of Credit:
                                  Bank One Plaza, Suite IL 1-0086
                                  Chicago, Illinois 60670

            [Signature Pages to First Amendment to Credit Agreement]



                                 BANK LEUMI USA, AS A LENDER

                                 By:
                                     --------------------------------
                                 Name: Jacques V. Delvoye
                                 Title: Vice President

                                 Loan Commitment:        $10,000,000


                                 Address for Notices

                                 (a) Bank Leumi USA

                                 8383 Wilshire Boulevard, #400
                                 Beverly Hills, California 90211
                                 Attention: Jacques Delvoye
                                 Telephone: (323) 966-4727
                                 Facsimile: (323) 966-4248

                                 (b) For Operations

                                 Bank Leumi USA
                                 8383 Wilshire Boulevard, #400
                                 Beverly Hills, California 90211
                                 Attention: Jacques Delvoye
                                 Telephone: (323) 966-4727
                                 Facsimile: (323) 966-4248

                                 Approved Lending Offices

                                 Applicable Lending Office for Base Rate Loans:
                                 Bank Leumi USA
                                 8383 Wilshire Boulevard, #400
                                 Beverly Hills, California 90211

                                 Applicable Lending Office for LIBOR Loans:
                                 Bank Leumi USA
                                 8383 Wilshire Boulevard, #400
                                 Beverly Hills, California 90211

                                 Applicable Lending Office for Participations in
                                 Letters of Credit:
                                 Bank Leumi USA
                                 8383 Wilshire Boulevard, #400
                                 Beverly Hills, California 90211


            [Signature Pages to First Amendment to Credit Agreement]




                                 ISRAEL DISCOUNT BANK OF NEW YORK, as
                                 a Lender

                                 By:
                                    -----------------------------
                                 NAME:  Alan Lefkowitz
                                 TITLE: FVP

                                 BY:
                                    -----------------------------
                                 Name:  Lucas Ramirez
                                 Title: Assistant Manager

                                 Loan Commitment:     $15,000,000

                                 Address for Notices

                                 (a) For Credit

                                 511 Fifth Avenue
                                 New York, New York 10017
                                 Attention: Alan Lefkowitz
                                 Telephone: (212) 551-8288
                                 Facsimile: (212) 551-8720

                                 (b) For Operations

                                 511 Fifth Avenue
                                 New York, New York 10017
                                 Attention: Alan Lefkowitz
                                 Telephone: (212) 551-8288
                                 Facsimile: (212) 551-8720

                                 Approved Lending Offices

                                 Applicable Lending Office for Base Rate Loans:
                                 511 Fifth Avenue
                                 New York, New York 10017

                                 Applicable Lending Office for LIBOR Loans:
                                 511 Fifth Avenue
                                 New York, New York 10017

                                 Applicable Lending Office for Participations in
                                 Letters of Credit:
                                 511 Fifth Avenue
                                 New York, New York 10017

            [Signature Pages to First Amendment to Credit Agreement]



                                   SCHEDULE 3

                EXCEPTIONS TO SECTION 3.6 OF THE CREDIT AGREEMENT

      With respect to one of Quiksilver's Material Domestic Subsidiaries, DC
Shoes, Inc., a California corporation ("DC Shoes"):

      (a) DC Shoes has been informed by the Hong Kong Inland Revenue Department
that a subsidiary of DC Shoes failed to timely file a Profits Tax return with
respect to its 2002 and 2003 fiscal years. Such subsidiary may be subject to a
penalty and fines which should not be material.

      (b) The corporate income and payroll tax returns of DC Shoes have been
audited for fiscal years 1998, 1999 and 2000. To Quiksilver's knowledge, all
issues relating to such years, except those with respect to the 2000 corporate
income tax return, have been resolved. The primary issues raised by the IRS in
connection with each audit related to the following:

            (i) Unsubstantiated use of the corporate credit card;

            (ii) Expensing certain capital expenditures;

            (iii) Using incorrect amortization schedule lor certain capital
expenditures;

            (iv) Mischaracterization of Clayton Blehm as an independent
contractor instead of as an employee;

            (v) Failure to amortize legal expenses related to trademark
registration; and

            (vi) Issues relating to Section 263A of the Code.

      (c) The issues discussed above with respect to the federal corporate
income and payroll tax returns of DC Shoes also relate to the corresponding
California state tax returns of DC Shoes. DC Shoes has filed amended California
state corporate tax returns for fiscal years 1998 and 1999 based on the
settlement with the IRS Upon final settlement of the 2000 tax year with the
IRS, it is the intent of DC Shoes to file an amended 2000 California state
return based on the settlement with the IRS. Nonetheless, the California tax
returns have not been audited, and deficiency amounts still could be assessed
against DC Shoes in the future with respect to those tax returns for which the
statute of limitations has not expired.

      (d) The states of Washington and Arizona have informed DC Shoes that it
may be subject to franchise taxes in those slates based on the fact that DC
Shoes has employees in those states. DC Shoes has not filed returns for such
franchise taxes (or similar taxes).

EX-10.3

                                                                    Exhibit 10.3
                                                         EXECUTION COPY

                      SECOND AMENDMENT TO CREDIT AGREEMENT

      This Second Amendment (this "Amendment") to the Credit Agreement
referenced below is entered into as of November 2, 2004, among Quiksilver, Inc.,
a Delaware corporation (the "Company"), the other borrowers signatory hereto
(collectively with the Company, the "Borrowers"), Quiksilver Australia Pty Ltd.,
a corporation organized under the laws of the State of Victoria, Australia
("QAPL"), Quiksilver Europa, S.L. ("Quiksilver Europa"), QS Holdings, S.a r.l.,
a Luxembourg company ("QS Holdings"), the lenders signatory hereto (the
"Lenders"), and JPMorgan Chase Bank, as administrative agent for the Lenders (in
such capacity, the "Agent").

                                R E C I T A L S:

      WHEREAS, the Borrowers, the Lenders and the Agent are parties to the
Credit Agreement, dated as of June 27, 2003, as amended by the First Amendment
to the Credit Agreement, dated as of May 3, 2004 (as so amended, the "Credit
Agreement"), providing for the extension of credit to the Borrowers in the form
of revolving credit loans and letters of credit in an aggregate principal amount
not to exceed $200,000,000; and

      WHEREAS, the Borrowers have requested that certain provisions of the
Credit Agreement be amended, and the Lenders have agreed to such an amendment,
on the terms and subject to the conditions set forth in this Amendment.

      NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

      1. Amendments to Credit Agreement

            (a) Title Page. The title page of the Credit Agreement is hereby
amended and restated to add QUIKSILVER AMERICAS, INC. and QS WHOLESALE, INC. to
the list of Borrowers thereon.

            (b) Preamble. The preamble on the first page of the Credit Agreement
is hereby amended and restated in its entirety as follows:

            "THIS CREDIT AGREEMENT, dated as of June 27, 2003, is by and among
            (1) QUIKSILVER, INC., a Delaware corporation ("Quiksilver"), NA
            PALI, S.A.S., QUIKSILVER JAPAN K.K., UG MANUFACTURING CO. PTY LTD.,
            QUIKSILVER AMERICAS, INC. and QS WHOLESALE, INC. (each,
            individually, a "Borrower" and collectively, the "Borrowers"), (2)
            QUIKSILVER AUSTRALIA PTY LTD., QUIKSILVER EUROPA, S.L. and QS
            HOLDINGS, S.A R.L., solely with respect to and subject to Section
            6.3 hereof, the terms of which shall be fully enforceable against
            such entities, (3) the several banks and other financial
            institutions from time to time parties to this Agreement (the
            "Lenders"), (4) JPMORGAN CHASE BANK, as



            administrative agent for the Lenders hereunder (in such capacity,
            the "Agent"), (5) UNION BANK OF CALIFORNIA, N.A., as Syndication
            Agent and Joint Lead Arranger, (6) BANK OF AMERICA, N.A., as
            Syndication Agent, (7) U.S. BANK NATIONAL ASSOCIATION, as
            Documentation Agent, and (8) J.P. MORGAN EUROPE LIMITED, as
            Multicurrency Agent."

            (c) Section 1.1 of the Credit Agreement.

            i. The following defined terms in Section 1.1 of the Credit
Agreement are hereby amended and restated as follows:

                  "Collateral Documents": the Security Agreement, the QS
            Holdings Equity Pledge, all control agreements executed pursuant to
            the Security Agreement, all Form UCC-1 Financing Statements and
            amendments thereto filed in respect of the Collateral and all other
            documents encumbering the Collateral or evidencing or perfecting a
            security interest therein that are executed or filed in favor of the
            Agent for the benefit of the Lenders.

                  "Intercreditor Agreement": the Intercreditor Agreement, dated
            as of October 29, 2004, between Quiksilver Americas, the Agent, on
            behalf of the Lenders, and the Leasehold Improvement Lender, as it
            may be amended, modified or restated from time to time.

                  "Permitted Borrowers": with respect to any Loan in the
            Approved Currencies: (a) in the case of US Dollars: Quiksilver,
            Quiksilver Americas and QS Wholesale, (b) in the case of Euros:
            Quiksilver and Na Pali, (c) in the case of Japanese Yen: Quiksilver
            and Quiksilver Japan K.K., (d) in the case of Pounds Sterling:
            Quiksilver and Na Pali, and (e) in the case of Australian Dollars:
            Quiksilver and Ug.

                  "Subsidiary": as to any Person at any time of determination, a
            corporation, partnership or other entity of which shares of stock or
            other ownership interests having ordinary voting power (other than
            stock or such other ownership interests having such power only by
            reason of the happening of a contingency) to elect a majority of the
            board of directors or other managers of such corporation,
            partnership or other entity are at the time owned, or the management
            of which is otherwise controlled, directly or indirectly through one
            or more intermediaries or Subsidiaries, or both, by such Person.
            Unless otherwise qualified, all references to a "Subsidiary" or to
            "Subsidiaries" in this Agreement shall refer to a Subsidiary or
            Subsidiaries of Quiksilver.

                                       2


            ii. The following defined terms are hereby added to Section 1.1 of
the Credit Agreement in their appropriate alphabetical position:

                  "QS Holdings": QS Holdings S.a r.l., a Luxembourg company.

                  "QS Holdings Equity Pledge": the Pledge of Shares of QS
            Holdings, dated November 2, 2004, between Quiksilver as pledgor, the
            Agent as pledge, and QS Holdings.

                  "QS Retail": QS Retail, Inc., a California corporation.

                  "QS Wholesale": QS Wholesale, Inc., a California corporation.

                  "Quiksilver Americas": Quiksilver Americas, Inc., a California
            corporation.

                  "Quiksilver Global Restructuring": The corporate restructuring
            of the consolidated Quiksilver group, including the formation of QS
            Holdings, Quiksilver Americas, QS Wholesale and the transactions and
            intragroup transfers of assets related thereto, to be completed on
            or about November 2, 2004.

            iii. The following defined terms in Section 1.1 of the Credit
Agreement are hereby deleted:

                  "QAPL Share Mortgage" and "Quiksilver Europa Equity Pledge."

            (d) Section 2.17 of the Credit Agreement. Section 2.17 of the
Agreement is hereby amended and restated as follows:

                  "2.17 QS Holdings Equity Pledge. Simultaneously with the
            effectiveness of and in connection with the Quiksilver Global
            Restructuring, Quiksilver shall cause the QS Holdings Equity Pledge
            to be executed and delivered to the Agent for the benefit of the
            Lenders, in form and substance satisfactory to the Agent in its sole
            discretion."

            (e) Section 6.3 of the Credit Agreement. QS Holdings, Quiksilver
Europa and QAPL hereby agree to be bound by the provisions of Section 6.3 of the
Credit Agreement and that the provisions of Section 6.3 of the Credit Agreement
shall be enforceable against each of them (either singly or jointly) to the full
extent as if they were Borrowers under the Credit Agreement.

            (f) Section 6.3(h) of the Credit Agreement. Section 6.3(h) of the
Agreement is hereby amended and restated as follows:

                                       3


                  "(h) Liens in favor of (i) the Leasehold Improvement Lender
            (x) securing the Leasehold Improvement Loan and (y) granted by
            Quiksilver Americas in favor of the Leasehold Improvement Lender
            pursuant to a security agreement, dated as of October 29, 2004,
            executed by Quiksilver Americas securing its obligations under its
            guaranty, dated as of October 29, 2004, of the obligations of
            Quiksilver, Inc. under the Leasehold Improvement Loan Agreement, and
            (ii) other leasehold improvement lenders who have become parties to
            an intercreditor agreement acceptable to the Agent, to secure an
            aggregate amount of up to US$ 25,000,000 of additional financing for
            the build-out of retail stores expected to be opened and/or existing
            stores which may be expanded, which Liens are subject to the terms
            of the Intercreditor Agreement;"

            (g) Section 6.4 of the Credit Agreement. Section 6.4 of the Credit
Agreement is hereby amended and restated as follows:

                  "6.4 Limitation on Fundamental Changes. Quiksilver shall not,
            and shall not permit any of its Subsidiaries to, enter into any
            merger, consolidation or amalgamation, or liquidate, wind up or
            dissolve itself (or suffer any liquidation or dissolution), except
            as permitted by Section 5.4, or create or acquire any Subsidiary, or
            convey, sell, lease, assign, transfer or otherwise dispose of all or
            substantially all of its property, business or assets, except that
            Quiksilver may consummate Acquisitions permitted by Section 6.7;
            provided, however, that this Section 6.4 shall not apply to the
            Quiksilver Global Restructuring."

            (h) Section 6.7 of the Credit Agreement. Section 6.7 of the Credit
Agreement is hereby amended by deleting the period after the number
"US5,000,000" at the end of subsection (g) thereof, replacing the period with a
semicolon, and inserting thereafter the phrase "provided, however, that this
Section 6.7 shall not apply to the Quiksilver Global Restructuring."

            (i) Section 6.8 of the Credit Agreement. Section 6.8 of the Credit
Agreement is hereby amended and restated as follows:

            "6.8 Transactions with Affiliates. Quiksilver shall not, and shall
            not permit any of its Subsidiaries to, enter into any transaction,
            including any purchase, sale, lease or exchange of property or the
            rendering of any service, with any Affiliate or with any Subsidiary
            that has not executed a Guarantee and Guarantor Collateral
            Documents, unless such transaction is in the ordinary course of
            Quiksilver's or such Subsidiary's business and is upon terms no less
            favorable to Quiksilver or such Subsidiary, as the case may be, than
            it would obtain in a comparable arm's length transaction with a
            Person not an Affiliate or a Subsidiary; provided, however, that

                                       4


            this Section 6.8 shall not apply to the DC Shoes Acquisition or the
            Quiksilver Global Restructuring."

            (j) Schedule 3.19 to the Credit Agreement. Schedule 3.19 to the
Credit Agreement is hereby amended to add Quiksilver Americas, QS Wholesale and
QS Retail as Material Domestic Subsidiaries and QS Holdings as a Material
Foreign Subsidiary.

      2. Defined Terms. All capitalized terms used herein, unless otherwise
defined herein, have the same meanings provided herein or in the Credit
Agreement.

      3. Modification of Credit Agreement. This Amendment is limited precisely
as written and shall not be deemed to (a) be a consent to a waiver or
modification of any other term or condition of the Credit Agreement, the other
Loan Documents or any of the documents referred to therein or executed in
connection therewith except as provided in Section 1 hereof or (b) prejudice any
right or rights the Lenders may now have or may have in the future under or in
connection with the Credit Agreement, the other Loan Documents or any documents
referred to therein or executed in connection therewith.

      4. Construction. This Amendment is a document executed pursuant to the
Credit Agreement and shall (unless otherwise expressly indicated therein) be
construed, administered or applied in accordance with the terms and provisions
thereof. Whenever the Credit Agreement is referred to in the Credit Agreement or
any of the instruments, agreements or other documents or papers executed and
delivered in connection therewith, it shall be deemed to mean the Credit
Agreement, as modified by this Amendment.

      5. Counterparts. This Amendment may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement. The parties may
execute facsimile copies of this Amendment and the facsimile signature of any
such party shall be deemed an original and fully binding on said party.

      6. Governing Law. This Amendment shall be governed and construed in
accordance with the applicable terms and provisions of Section 9.11 (Governing
Law) of the Credit Agreement, which terms and provisions are incorporated herein
by reference.

      7. Amendment Not a Novation. Except as hereby amended, no other term,
condition or provision of the Credit Agreement shall be deemed modified or
amended, and this Amendment shall not be considered a novation.

      8. Authorization. The Lenders hereby direct and instruct the Agent to
execute this Amendment.

      9. Successors and Assigns. This Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.

      [Remainder of Page Intentionally Left Blank. Signature Pages Follow.]

                                       5


      IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to the Credit Agreement to be duly executed by their respective authorized
officers as of the day and year first written above.

                                         BORROWERS

                                         QUIKSILVER, INC.

                                         By: ___________________________________
                                         Name: _________________________________
                                         Title: ________________________________

                                         NA PALI, S.A.S.

                                         By: ___________________________________
                                         Name: _________________________________
                                         Title: ________________________________

                                         QUIKSILVER JAPAN K.K.

                                         By: ___________________________________
                                         Name: _________________________________
                                         Title: ________________________________

                                         UG MANUFACTURING CO. PTY LTD.

                                         By: ___________________________________
                                         Name: _________________________________
                                         Title: ________________________________

                                         QUIKSILVER AMERICAS, INC.

                                         By: ___________________________________
                                         Name: _________________________________
                                         Title: ________________________________

            [Signature Pages to Second Amendment to Credit Agreement]



                                         QS WHOLESALE, INC.

                                         By: ___________________________________
                                         Name: _________________________________
                                         Title: ________________________________

            [Signature Pages to Second Amendment to Credit Agreement]



                                       OTHER QUIKSILVER ENTITIES

                                       QS HOLDINGS, S.A R.L.,
                                       solely with respect to (i) Section
                                       1(e) of the Second Amendment to the
                                       Credit Agreement and (ii) Section 6.3
                                       of the Credit Agreement (as such
                                       agreement may be amended, supplemented
                                       and otherwise modified from time to
                                       time)

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       QUIKSILVER AUSTRALIA PTY LTD.,
                                       solely with respect to (i) Section
                                       1(e) of the Second Amendment to the
                                       Credit Agreement and (ii) Section 6.3
                                       of the Credit Agreement (as such
                                       agreement may be amended, supplemented
                                       and otherwise modified from time to
                                       time)

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       QUIKSILVER EUROPA, S.L.,
                                       solely with respect to (i) Section
                                       1(e) of the Second Amendment to the
                                       Credit Agreement and (ii) Section 6.3
                                       of the Credit Agreement (as such
                                       agreement may be amended, supplemented
                                       and otherwise modified from time to
                                       time)

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

           [Signature Pages to Second Amendment to Credit Agreement]



                                       ADMINISTRATIVE AGENT

                                       JPMORGAN CHASE BANK, as Agent for
                                       the Lenders

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

           [Signature Pages to Second Amendment to Credit Agreement]



                                       LENDERS

                                       JPMORGAN CHASE BANK, as a Lender

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       Loan Commitment:          $25,000,000

                                       Address for Notices

                                       (a)   For Credit

                                       1411 Broadway, 5th Floor
                                       New York, New York 10018
                                       Attention: Paul J. O'Neill
                                       Telephone: (212) 391-7157
                                       Facsimile: (212) 391-7118

                                       (b)   For Operations (Other Than Letters
                                             of Credit)

                                       1411 Broadway, 5th Floor
                                       New York, New York 10018
                                       Attention: Millie Nogueras
                                       Telephone: (212) 391-6079
                                       Facsimile: (212) 391-7283

                                       (c)   For Letters of Credit

                                       Global Trade Services
                                       10420 Highland Manor Drive
                                       Building No. 2, 4th Floor
                                       Tampa, Florida 33610
                                       Attention: Mildred Bowens
                                       Telephone: (813) 432-6347
                                       Facsimile: (813) 432-5162

                                       Approved Lending Offices

                                       Applicable Lending Office for Base Rate
                                       Loans: 1411 Broadway, 5th Floor
                                       New York, New York 10018

           [Signature Pages to Second Amendment to Credit Agreement]



                                       Applicable Lending Office for LIBOR
                                       Loans:
                                       1411 Broadway, 5th Floor
                                       New York, New York 10018

                                       Applicable Lending Office for
                                       Participations in Letters of Credit:
                                       Global Trade Services
                                       10420 Highland Manor Drive
                                       Building No. 2, 4th Floor
                                       Tampa, Florida 33610

           [Signature Pages to Second Amendment to Credit Agreement]



                                       UNION BANK OF CALIFORNIA, N.A.,
                                       as a Lender

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       Loan Commitment:          $40,000,000

                                       Address for Notices

                                       (a)   For Credit

                                       18300 Von Karman Avenue, Suite 310
                                       Irvine, California 92612
                                       Attention: Margaret Furbank
                                       Telephone: (949) 553-6853
                                       Facsimile: (949) 553-7122

                                       (b)   For Operations

                                       601 Potrero Grande Drive
                                       Monterey Park, California 91754
                                       Attention: Shirley Davis
                                       Telephone: (323) 720-2870
                                       Facsimile: (323) 724-6198

                                       Approved Lending Offices

                                       Applicable Lending Office for Base Rate
                                       Loans:
                                       18300 Von Karman Avenue, Suite 310
                                       Irvine, California 92612

                                       Applicable Lending Office for LIBOR
                                       Loans:
                                       18300 Von Karman Avenue, Suite 310
                                       Irvine, California 92612

                                       Applicable Lending Office for
                                       Participations in Letters of Credit:
                                       1980 Saturn Street
                                       Monterey Park, California 91755

           [Signature Pages to Second Amendment to Credit Agreement]



                                       FLEET NATIONAL BANK, as a Lender

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       Loan Commitment:          $20,000,000

                                       Address for Notices

                                       (a)   For Credit

                                       40 Broad Street
                                       Boston, Massachusetts 02115
                                       Attention: Stephen J. Garvin
                                       Telephone: (617) 434-9399
                                       Facsimile: (617) 434-6685

                                       (b)   For Operations

                                       100 Federal Street
                                       Boston, Massachusetts 02110
                                       Attention: Michelle Mogan
                                       Telephone: (617) 434-4187
                                       Facsimile: (617) 434-9933

                                       Approved Lending Offices

                                       Applicable Lending Office for Base Rate
                                       Loans: 100 Federal Street
                                       Boston, Massachusetts 02110

                                       Applicable Lending Office for LIBOR
                                       Loans:
                                       100 Federal Street
                                       Boston, Massachusetts 02110

                                       Applicable Lending Office for
                                       Participations in Letters of Credit:
                                       100 Federal Street
                                       Boston, Massachusetts 02110

           [Signature Pages to Second Amendment to Credit Agreement]



                                       BANK OF AMERICA, N.A., as a Lender

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       Loan Commitment:          $20,000,000

                                       Address for Notices

                                       (a)   For Credit

                                       675 Anton Boulevard, 2nd Floor
                                       Costa Mesa, California 92626
                                       Attention: Cynthia K. Goodfellow
                                       Telephone: (714) 850-6547
                                       Facsimile: (714) 850-6586

                                       (b)   For Operations

                                       333 Beaudry Street; Suite 1100
                                       Los Angeles, California 90017
                                       Attention: Maria Castro
                                       Telephone: (714) 850-6504
                                       Facsimile: (714) 850-6586

                                       Approved Lending Offices

                                       Applicable Lending Office for Base Rate
                                       Loans: 675 Anton Boulevard, 2nd Floor
                                       Costa Mesa, California 92626

                                       Applicable Lending Office for LIBOR
                                       Loans:
                                       1455 Market Street, 5th Floor
                                       San Francisco, California 94103

                                       Applicable Lending Office for
                                       Participations in Letters of Credit:
                                       675 Anton Boulevard, 2nd Floor
                                       Costa Mesa, California 92626

           [Signature Pages to Second Amendment to Credit Agreement]



                                       U.S. BANK, as a Lender

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       Loan Commitment:          $25,000,000

                                       Address for Notices

                                       (a)   For Credit

                                       4100 Newport Place, Suite 120
                                       Newport Beach, California 92660
                                       Attention: Marni Lombardo
                                       Telephone: (949) 863-2365
                                       Facsimile: (949) 863-2335

                                       (b)   For Operations

                                       4100 Newport Place
                                       Newport Beach, California 92660
                                       Attention: Patti Brant
                                       Telephone: (949) 863-2470
                                       Facsimile: (949) 863-2335

                                       Approved Lending Offices

                                       Applicable Lending Office for Base Rate
                                       Loans: 4100 Newport Place, Suite 120
                                       Newport Beach, California 92660

                                       Applicable Lending Office for LIBOR
                                       Loans:
                                       4100 Newport Place, Suite 120
                                       Newport Beach, California 92660

                                       Applicable Lending Office for
                                       Participations in Letters of Credit:
                                       4100 Newport Place, Suite 120
                                       Newport Beach, California 92660

           [Signature Pages to Second Amendment to Credit Agreement]



                                       COMERICA BANK, as a Lender

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       Loan Commitment:          $10,000,000

                                       Address for Notices

                                       (a)   For Credit

                                       201 North Figueroa Street, Suite 1425
                                       Los Angeles, California 90012
                                       Attention: Deborah Jenkins
                                       Telephone: (213) 484-3729
                                       Facsimile: (213) 484-3775

                                       (b)   For Operations

                                       201 North Figueroa Street, Suite 1425
                                       Los Angeles, California 90012
                                       Attention: Margarita Quiteno
                                       Telephone: (213) 484-3722
                                       Facsimile: (213) 484-3775

                                       Approved Lending Offices

                                       Applicable Lending Office for Base Rate
                                       Loans: 333 West Santa Clara Street
                                       San Jose, California 95113

                                       Applicable Lending Office for LIBOR
                                       Loans:
                                       333 West Santa Clara Street
                                       San Jose, California 95113

                                       Applicable Lending Office for
                                       Participations in Letters of Credit:
                                       333 West Santa Clara Street
                                       San Jose, California 95113

           [Signature Pages to Second Amendment to Credit Agreement]



                                       HSBC BANK USA, as a Lender

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       Loan Commitment:          $20,000,000

                                       Address for Notices

                                       (a)   For Credit

                                       452 Fifth Avenue, 4th Floor
                                       New York, New York 10018
                                       Attention: Michael Behuniak/George
                                       Ahlmeyer
                                       Telephone: (212) 525-6589
                                       Facsimile: (212) 525-6905

                                       (b)   For Operations

                                       1 HSBC Center, 26th Floor
                                       Buffalo, New York 14203
                                       Attention: Donna L. Riley
                                       Telephone: (716) 841-4178
                                       Facsimile: (716) 841-0269

                                       Approved Lending Offices

                                       Applicable Lending Office for Base Rate
                                       Loans: 452 Fifth Avenue, 4th Floor
                                       New York, New York 10018

                                       Applicable Lending Office for LIBOR
                                       Loans:
                                       452 Fifth Avenue, 4th Floor
                                       New York, New York 10018

                                       Applicable Lending Office for
                                       Participations in Letters of Credit:
                                       452 Fifth Avenue, 4th Floor
                                       New York, New York 10018

           [Signature Pages to Second Amendment to Credit Agreement]



                                      BANK ONE, N.A., as a Lender

                                      By: ____________________________________
                                      Name: __________________________________
                                      Title: _________________________________

                                      Loan Commitment:          $15,000,000

                                      Address for Notices

                                      (a)   For Credit

                                      131 South Dearborn Street
                                      Chicago, Illinois 60603
                                      Attention: Marion Church
                                      Telephone: (312) 325-3234
                                      Facsimile: (312) 325-3050

                                      (b)   For Operations

                                      1 Bank One Plaza, Suite IL 1-0088
                                      Chicago, Illinois 60670
                                      Attention: Saul Gierstikas
                                      Telephone: (312) 732-1794
                                      Facsimile: (312) 732-4303

                                      Approved Lending Offices

                                      Applicable Lending Office for Base Rate
                                      Loans: Bank One Plaza, Suite IL 1-0086
                                      Chicago, Illinois 60670

                                      Applicable Lending Office for LIBOR Loans:
                                      Bank One Plaza, Suite IL 1-0086
                                      Chicago, Illinois 60670

                                      Applicable Lending Office for
                                      Participations in Letters of Credit:
                                      Bank One Plaza, Suite IL 1-0086
                                      Chicago, Illinois 60670

           [Signature Pages to Second Amendment to Credit Agreement]



                                      BANK LEUMI USA, as a Lender

                                      By: ____________________________________
                                      Name:  Jacques V. Delvoye
                                      Title: Vice President

                                      Loan Commitment:          $10,000,000

                                      Address for Notices

                                      (a)   For Credit

                                      Bank Leumi USA
                                      8383 Wilshire Boulevard, #400
                                      Beverly Hills, California 90211
                                      Attention: Jacques Delvoye
                                      Telephone: (323) 966-4727
                                      Facsimile: (323) 966-4248

                                      (b)   For Operations

                                      Bank Leumi USA
                                      8383 Wilshire Boulevard, #400
                                      Beverly Hills, California 90211
                                      Attention: Jacques Delvoye
                                      Telephone: (323) 966-4727
                                      Facsimile: (323) 966-4248

                                      Approved Lending Offices

                                      Applicable Lending Office for Base Rate
                                      Loans:
                                      Bank Leumi USA
                                      8383 Wilshire Boulevard, #400
                                      Beverly Hills, California 90211

                                      Applicable Lending Office for LIBOR Loans:
                                      Bank Leumi USA
                                      8383 Wilshire Boulevard, #400
                                      Beverly Hills, California 90211

                                      Applicable Lending Office for
                                      Participations in Letters of Credit:
                                      Bank Leumi USA
                                      8383 Wilshire Boulevard, #400
                                      Beverly Hills, California 90211

           [Signature Pages to Second Amendment to Credit Agreement]



                                       ISRAEL DISCOUNT BANK OF NEW YORK,
                                       as a Lender

                                       By: ____________________________________
                                       Name: __________________________________
                                       Title: _________________________________

                                       Loan Commitment:          $15,000,000

                                       Address for Notices

                                       (a)   For Credit

                                       511 Fifth Avenue
                                       New York, New York 10017
                                       Attention: Alan Lefkowitz
                                       Telephone: (212) 551-8288
                                       Facsimile: (212) 551-8720

                                       (b)   For Operations

                                       511 Fifth Avenue
                                       New York, New York 10017
                                       Attention: Alan Lefkowitz
                                       Telephone: (212) 551-8288
                                       Facsimile: (212) 551-8720

                                       Approved Lending Offices

                                       Applicable Lending Office for Base Rate
                                       Loans: 511 Fifth Avenue
                                       New York, New York 10017

                                       Applicable Lending Office for LIBOR
                                       Loans:
                                       511 Fifth Avenue
                                       New York, New York 10017

                                       Applicable Lending Office for
                                       Participations in Letters of Credit:
                                       511 Fifth Avenue
                                       New York, New York 10017

           [Signature Pages to Second Amendment to Credit Agreement]

EX-10.6

                                                                    Exhibit 10.6

                                QUIKSILVER, INC.

                                STOCK OPTION PLAN

                       (as amended through March 24, 1995)

      Quiksilver, Inc., a corporation organized under the laws of the State of
Delaware (the "Company"), hereby adopts this Quiksilver, Inc. Stock Option Plan
(the "Plan"). The purposes of this Plan are as follows:

      (1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its Directors and
Employees who have been or will be given responsibility for the management or
administration of the Company's business affairs, by assisting them to become
owners of capital stock of the Company and thus to benefit directly from its
growth, development and financial success.

      (2) To enable the Company to obtain and retain the services of the type of
professional, technical and managerial employees considered essential to the
long-range success of the Company by providing and offering them an opportunity
to become owners of capital stock of the Company under options, including
options that are intended to qualify as "incentive stock options" under Section
422 of the Internal Revenue Code of 1986, as amended.

                                    ARTICLE I

                                   DEFINITIONS

      Whenever the following terms are used in this Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include the feminine and neuter and the singular
shall include the plural, where the context so indicates.

Section 1.1 Board

      "Board" shall mean the Board of Directors of the Company.

Section 1.2 Code

      "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

Section 1.3 Committee

      "Committee" shall mean the Compensation Committee of the Board, appointed
as provided in Section 6.1.



Section 1.4 Company

      "Company" shall mean Quiksilver, Inc., a Delaware corporation. In
addition, "Company" shall mean any corporation assuming, or issuing new employee
stock options in substitution for, Incentive Stock Options outstanding under the
Plan in a transaction to which Section 424(a) of the Code applies.

Section 1.5 Director

      "Director" shall mean a member of the Board.

Section 1.6 Employee

      "Employee" shall mean any employee (as defined in accordance with the
Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company, or of any corporation which is then a Parent Corporation
or Subsidiary, whether such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of this Plan.

Section 1.7 Incentive Stock Option

      "Incentive Stock Option" shall mean an Option which qualifies as an
"incentive stock option" under Section 422 of the Code and which is designated
as an Incentive Stock Option by the Committee.

Section 1.8 Non-Qualified Option

      "Non-Qualified Option" shall mean an Option which is not an Incentive
Stock Option and which is designated as a Non-Qualified Option by the Committee.

Section 1.9 Officer

      "Officer" shall mean an officer of the Company, any Parent Corporation or
any Subsidiary.

Section 1.10 Option

      "Option" shall mean an option to purchase capital stock of the Company
granted under the Plan. "Options" includes both Incentive Stock Options and
Non-Qualified Options.

Section 1.11 Optionee

      "Optionee" shall mean a Director or Employee to whom an Option is granted
under the Plan.

Section 1.12 Parent Corporation

      "Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock

                                       2


possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

Section 1.13 Plan

      "Plan" shall mean this Quiksilver, Inc. Stock Option Plan.

Section 1.14 Secretary

      "Secretary" shall mean the Secretary of the Company.

Section 1.15 Securities Act

      "Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.16 Subsidiary

      "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

Section 1.17 Termination of Employment

      "Termination of Employment" shall mean the time when the employee-employer
relationship between the Optionee and the Company, a Parent Corporation or a
Subsidiary is terminated for any reason, or the time when the service of a
Director (who is not an Employee) as a member of the Board is terminated, in
each case with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, removal, death or retirement, but
excluding terminations where there is a simultaneous reemployment of the
Employee by the Company, a Parent Corporation or a Subsidiary. The Committee, in
its absolute discretion, shall determine the effect of all other matters and
questions relating to Termination of Employment, including, but not by way of
limitation, the question of whether a Termination of Employment resulted from a
discharge for good cause, and all questions of whether particular leaves of
absence constitute Terminations of Employment; provided, however, that, with
respect to Incentive Stock Options, a leave of absence shall constitute a
Termination of Employment if, and to the extent that, such leave of absence
interrupts employment for the purposes of Section 422(a)(2) of the Code and the
then applicable Regulations and Revenue Rulings under said Section.

                                       3


                                   ARTICLE II

                             SHARES SUBJECT TO PLAN

Section 2.1 Shares Subject to Plan

      The shares of stock subject to Options shall be shares of the Company's
$.01 par value Common Stock. The aggregate number of such shares which may be
issued upon exercise of Options shall not exceed 1,420,000.

Section 2.2 Unexercised Options

      If any Option expires or is cancelled without having been fully exercised,
the number of shares subject to such Option but as to which such Option was not
exercised prior to its expiration or cancellation may again be subject to
Options granted hereunder, subject to the limitations of Section 2.1.

Section 2.3 Changes in Company's Shares

      In the event that the outstanding shares of stock subject to Options to be
granted hereunder are hereafter changed into or exchanged for a different number
or kind of shares or other securities of the Company, or of another corporation,
by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind of
shares for the purchase of which Options may be granted, including adjustments
of the limitations in Section 2.1 on the maximum number and kind of shares which
may be issued on exercise of Options.

                                  ARTICLE III

                               GRANTING OF OPTIONS

Section 3.1 Eligibility

      Except as provided in Section 3.2, any Employee of the Company (including
any Employee of the Company who is also a Director) or of any corporation which
is then a Parent Corporation or a Subsidiary shall be eligible to be granted
Options, and any Director who is not an Employee shall be eligible to receive
Non-Qualified Options.

Section 3.2 Qualification of Incentive Stock Options

      No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "incentive stock option" under Section 422 of the Code.

Section 3.3 Granting of Options

            (a) The Committee shall from time to time, in its absolute
discretion:

                                       4

                  (i) Select from among the Employees and Directors (including
those to whom Options have been previously granted under the Plan) such of them
as shall be granted Options; and

                  (ii) Determine the number of shares to be subject to such
Options granted to such Employees or Directors, and, in the case of Employees,
determine whether such Options are to be Incentive Stock Options or
Non-Qualified Options; and

                  (iii) Determine the terms and conditions of such Options,
consistent with the Plan.

            (b) Upon the selection of a Director or Employee to be granted an
Option, the Committee shall instruct the Secretary to issue such Option and may
impose such conditions on the grant of such Option as it deems appropriate.
Without limiting the generality of the preceding sentence, the Committee may, in
its discretion and on such terms as it deems appropriate, require as a condition
on the grant of an Option to a Director or Employee, that the Director or
Employee surrender for cancellation some or all of any unexercised Options which
have been previously granted to the Director or Employee. An Option the grant of
which is conditioned upon such surrender may have an option price lower (or
higher) than the option price of the surrendered Option, may cover the same (or
a lesser or greater) number of shares as the surrendered Option, may contain
such other terms as the Committee deems appropriate and shall be exercisable in
accordance with its terms, without regard to the number of shares, price, option
period or any other term or condition of the surrendered Option.

                                   ARTICLE IV

                                TERMS OF OPTIONS

Section 4.1 Option Agreement

      Each Option shall be evidenced by a written Stock Option Agreement, which
shall be executed by the Optionee and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to qualify
such Options as "incentive stock options" under Section 422 of the Code.

Section 4.2 Option Price

            (a) The price of the shares subject to each Option shall be set by
the Committee; provided, however, that the price per share shall be not less
than 100% of the fair market value of such shares on the date such Option is
granted; and provided further, that in the case of an Incentive Stock Option,
the price per share shall not be less than 110% of the fair market value of such
shares on the date such Option is granted in the event such Option is granted to
an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of the
Company, any Subsidiary or any Parent Corporation.

                                       5


            (b) For purposes of the Plan, the fair market value of a share of
the Company's stock as of a given date shall be: (i) the closing price of a
share of the Company's stock on the principal exchange on which shares of the
Company's stock are then trading, if any, on the day previous to such date, or,
if shares were not traded on the day previous to such date, then on the next
preceding trading day during which a sale occurred; or (ii) if such stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation system,
(1) the last sales price (if the stock is then listed as a National Market Issue
under the NASD National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the stock on the
day previous to such date as reported by NASDAQ or such successor quotation
system; or (iii) if such stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the mean between the closing
bid and asked prices for the stock, on the day previous to such date, as
determined in good faith by the Committee; or (iv) if the Company's stock is not
publicly traded, the fair market value established by the Committee acting in
good faith.

Section 4.3 Commencement of Exercisability

            (a) Except as the Committee may otherwise provide, no Option may be
exercised in whole or in part during the first year after such Option is
granted.

            (b) Subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d) and
7.3, Options shall become exercisable at such times and in such installments
(which may be cumulative) as the Committee shall provide in the terms of each
individual Option; provided, however, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(a), 4.3(c), 4.3(d) and
7.3, accelerate the time at which such Option or any portion thereof may be
exercised.

            (c) No portion of an Option which is unexercisable at an Employee's
or Director's Termination of Employment shall thereafter become exercisable.

            (d) Notwithstanding any other provision of this Plan, in the case of
an Incentive Stock Option, the aggregate fair market value (determined at the
time the Incentive Stock Option is granted) of the shares of the Company's stock
with respect to which "incentive stock options" (within the meaning of Section
422 of the Code) are exercisable for the first time by the Optionee during any
calendar year (under the Plan and all other incentive stock option plans of the
Company, any Subsidiary and any Parent Corporation) shall not exceed $100,000.

Section 4.4 Expiration of Options

            (a) No Incentive Stock Option may be exercised to any extent by
anyone after the first to occur of the following events:

                  (i) The expiration of ten years from the date the Option was
granted; or

                  (ii) In the case of an Optionee owning (within the meaning of
Section 424(d) of the Code), at the time the Option was granted, more than 10%
of the total

                                       6


combined voting power of all classes of stock of the Company, any Subsidiary or
any Parent Corporation, the expiration of five years from the date the Option
was granted; or

                  (iii) Except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the expiration of three
months from the date of the Optionee's Termination of Employment for any reason
other than such Optionee's death unless the Optionee dies within said
three-month period; or

                  (iv) In the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one year from the
date of the Optionee's Termination of Employment for any reason other than such
Optionee's death unless the Optionee dies within said one-year period; or

                  (v) The expiration of one year from the date of the Optionee's
death.

      No Non-Qualified Option may be exercised to any extent by anyone after the
expiration of ten years and one day from the date the Option was granted.

            (b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each individual Option, when such Option expires and
becomes unexercisable; and (without limiting the generality of the foregoing)
the Committee may provide in the terms of individual Options that said Options
expire immediately upon a Termination of Employment for any reason.

Section 4.5 Consideration

      In consideration of the granting of the Option, the Optionee shall agree,
in the written Stock Option Agreement, (a) if the Optionee is an Employee, to
remain in the employ of the Company, a Parent Corporation or a Subsidiary for a
period of at least one year after the Option is granted, or (b) if the Optionee
is a Director who is not also an Employee, to remain as a Director of the
Company for a period of at least one year after the Option is granted, unless
the shareholders of the Company fail to reelect the Director upon expiration of
the Director's term of office prior to the expiration of the one year period.
Nothing in this Plan or in any Stock Option Agreement hereunder shall confer
upon any Optionee any right to continue in the employ of the Company, any Parent
Corporation or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company, its Parent Corporations and its Subsidiaries, which are
hereby expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without cause.

Section 4.6 Adjustments in Outstanding Options

      In the event that the outstanding shares of the stock subject to Options
are changed into or exchanged for a different number or kind of shares or other
securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend or combination of shares, the Committee shall make an
appropriate and equitable adjustment in the number and kind of shares as to
which all outstanding Options, or portions thereof then unexercised, shall be
exercisable, to the end that after such event the Optionee's proportionate
interest shall be maintained as before the

                                       7


occurrence of such event. Such adjustment in an outstanding Option shall be made
without change in the total price applicable to the Option or the unexercised
portion of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in Option price per share; provided, however, that, in
the case of Incentive Stock Options, each such adjustment shall be made in such
manner as not to constitute a "modification" within the meaning of Section
424(h)(3) of the Code. Any such adjustment made by the Committee shall be final
and binding upon all Optionees, the Company and all other interested persons.

Section 4.7 Merger, Consolidation, Acquisition, Liquidation or Dissolution

      In its absolute discretion, and on such terms and conditions as it deems
appropriate, the Committee may provide by the terms of any Option that such
Option cannot be exercised after the merger or consolidation of the Company with
or into another corporation, the acquisition by another corporation or person of
all or substantially all of the Company's assets or 80% or more of the Company's
then outstanding voting stock or the liquidation or dissolution of the Company;
and if the Committee so provides, it may, in its absolute discretion and on such
terms and conditions as it deems appropriate, also provide, either by the terms
of such Option or by a resolution adopted prior to the occurrence of such
merger, consolidation, acquisition, liquidation or dissolution, that, for some
period of time prior to such event, such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in Section
4.3(a), Section 4.3(b) or any installment provisions of such Option, but subject
to Section 4.3(d).

                                   ARTICLE V

                               EXERCISE OF OPTIONS

Section 5.1 Person Eligible to Exercise

      During the lifetime of the Optionee, only he may exercise an Option
granted to him, or any portion thereof. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under Section 4.4 or Section 4.7, be exercised by the
Optionee's personal representative or by any person empowered to do so under the
deceased Optionee's will or under the then applicable laws of descent and
distribution.

Section 5.2 Partial Exercise

      At any time and from time to time prior to the time when any exercisable
Option or exercisable portion thereof becomes unexercisable under Section 4.4 or
Section 4.7, such exercisable Option or portion thereof may be exercised in
whole or in part; provided, however, that the Company shall not be required to
issue fractional shares and the Committee may, by the terms of the Option,
require any partial exercise to be with respect to a specified minimum number of
shares.

Section 5.3 Manner of Exercise

      An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or the Secretary's office of all
of the following prior to the time when

                                       8


such exercisable Option or portion thereof becomes unexercisable under Section
4.4 or Section 4.7:

            (a) Notice in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or portion
is exercised, such notice complying with all applicable rules established by the
Committee; and

            (b) (i) Full payment (in cash or by check) for the shares with
respect to which such Option or portion is thereby exercised; or

                (ii) With the consent of the Committee, shares of the
Company's Common Stock owned by the Optionee, duly endorsed for transfer to the
Company, with a fair market value (as determinable under Section 4.2(b)) on the
date of delivery equal to the aggregate purchase price of the shares with
respect to which such Option or portion is thereby exercised; or

                (iii) With the consent of the Committee, a full recourse
promissory note bearing interest (at at least such rate as shall then preclude
the imputation of interest under the Code) and payable upon such terms as may be
prescribed by the Committee. The Committee may also prescribe the form of such
note and the security to be given for such note. No Option may, however, be
exercised by delivery of a promissory note or by a loan from the Company when or
where such loan or other extension of credit is prohibited by law; or

                (iv) Any combination of the consideration provided in the
foregoing subsections (i), (ii) and (iii); and

            (c) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on share certificates
and issuing stop-transfer orders to transfer agents and registrars; and

            (d) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.

Section 5.4 Conditions to Issuance of Stock Certificates

      The shares of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have then been reacquired by the Company. The
Company shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:

            (a) The admission of such shares to listing on all stock exchanges,
if any, on which such class of stock is then listed; and

                                       9


            (b) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary or
advisable; and

            (c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and

            (d) The payment to the Company of all amounts which it is required
to withhold under federal, state or local law in connection with the exercise of
the Option; and

            (e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.

Section 5.5 Rights of Shareholders

      The holder of an Option or Options shall not be, nor shall such holder
have any of the rights or privileges of, a shareholder of the Company in respect
of any shares purchasable upon the exercise of any part of the Option or Options
unless and until a certificate or certificates representing such shares have
been issued by the Company to such holder.

Section 5.6 Transfer Restrictions

      The Committee, in its absolute discretion, may impose such restrictions on
the transferability of the shares purchasable upon the exercise of an Option as
it deems appropriate. Any such restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares. The Committee may require the Employee or Director to give the
Company prompt notice of any disposition of shares of stock acquired by exercise
of an Incentive Stock Option within two years from the date of grant of such
Option or one year after the issuance of such shares to such Employee or
Director. The Committee may direct that the certificates evidencing shares
acquired upon exercise of an Incentive Stock Option refer to such requirement to
give prompt notice of disposition.

                                   ARTICLE VI

                                 ADMINISTRATION

Section 6.1 Compensation Committee

      The Compensation Committee shall consist of at least two Directors
appointed by and holding office at the pleasure of the Board. Appointment of
Committee members shall be effective upon acceptance of appointment. Committee
members may resign at any time by delivering written notice of resignation to
the Board. Vacancies in the Committee shall be filled by the Board.

                                       10


Section 6.2 Duties and Powers of Committee

      It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan and the Options and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules. Any such
interpretations and rules in regard to Incentive Stock Options shall be
consistent with the basic purpose of the Plan to grant "incentive stock options"
within the meaning of Section 422 of the Code. In its absolute discretion, the
Board may at any time and from time to time exercise any and all rights and
duties of the Committee under the Plan.

Section 6.3 Majority Rule

      The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.

Section 6.4 Compensation; Professional Assistance; Good Faith Actions

      Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
Officers and Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination or interpretation.

                                  ARTICLE VII

                                OTHER PROVISIONS

Section 7.1 Options Not Transferable

      No Option or interest or right therein or part thereof shall be subject to
or liable for the debts, contracts or engagements of the Optionee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that nothing in this
Section 7.1 shall prevent transfers by will or by the applicable laws of descent
and distribution.

                                       11


Section 7.2 Amendment, Suspension or Termination of the Plan

      The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board or the
Committee. To the extent necessary or desirable to comply with Rule 16b-3, the
Code or any other applicable law or regulation, the Company shall obtain
shareholder approval of any amendment to the Plan in such a manner and to such a
degree as required. Neither the amendment, suspension nor termination of the
Plan shall, without the consent of the holder of the Option, alter or impair any
rights or obligations under any Option theretofore granted. No Option may be
granted during any period of suspension nor after termination of the Plan, and
in no event may any Option be granted under this Plan after the first to occur
of the following events:

            (a) The expiration of ten years from the date the Plan is adopted by
the Board; or

            (b) The expiration of ten years from the date the Plan is approved
by the Company's shareholders under Section 7.3.

Section 7.3 Approval of Plan by Shareholders

      This Plan will be submitted for the approval of the Company's shareholders
within 12 months after the date of the Board's initial adoption of the Plan.
Options may be granted prior to such shareholder approval; provided, however,
that such Options shall not be exercisable prior to the time when the Plan is
approved by the shareholders; and provided further, that if such approval has
not been obtained at the end of said 12-month period, all Incentive Stock
Options previously granted under the Plan shall thereupon become Non-Qualified
Options.

Section 7.4 Effect of Plan Upon Other Option and Compensation Plans

      The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, any Parent
Corporation or any Subsidiary or (b) to grant or assume options otherwise than
under this Plan in connection with any proper corporate purpose, including, but
not by way of limitation, the grant or assumption of options in connection with
the acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.

Section 7.5 Titles

      Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan.

                                       12


      IN WITNESS WHEREOF, pursuant to the due authorization and adoption of the
Plan by the Board on July 17, 1987, amended effective April 4, 1991, March 26,
1993, March 18, 1994 and March 24, 1995, the Company has caused this Plan to be
duly executed by its duly authorized officers.

                                       QUIKSILVER, INC.

                                       By:   ___________________________________
                                             Robert B. McKnight, Jr.
                                             Chairman of the Board and Chief
                                             Executive Officer

                                       By:   ___________________________________
                                             Randall L. Herrel, Sr.
                                             Chief Operating Officer, Chief
                                             Financial Officer, Secrfetary
                                             and Treasurer

Date Plan approved by Stockholders: March 29, 1988

Date Plan amendments approved by Stockholders: April 4, 1991, March 26, 1993,
March 18, 1994 and March 24, 1995

                                       13


                        INCENTIVE STOCK OPTION AGREEMENT

      THIS AGREEMENT, dated ______________, 19__ , is made by and between
Quiksilver, Inc., a Delaware corporation (the "Company"), and ___________, an
employee of the Company or a Subsidiary of the Company (the "Employee").

      WHEREAS, the Company wishes to afford the Employee the opportunity to
purchase shares of its $.01 par value Common Stock; and

      WHEREAS, the Company wishes to carry out the Quiksilver, Inc. Stock Option
Plan (the terms of which are hereby incorporated by reference and made a part of
this Agreement); and

      WHEREAS, the Compensation Committee of the Company's Board of Directors
(the "Committee"), appointed to administer said Plan, has determined that it
would be to the advantage and best interest of the Company and its stockholders
to grant the Incentive Stock Option provided for herein to the Employee as an
inducement to remain in the service of the Company or its Subsidiaries and as an
incentive for increased efforts during such service, and has advised the Company
thereof and instructed the undersigned officers to issue said Option;

      NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

      Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.

Section 1.1 Code

      "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

Section 1.2 Company

      "Company" shall mean Quiksilver, Inc. In addition, "Company" shall mean
any corporation assuming, or issuing a new incentive stock option in
substitution for, the Option in a transaction to which Section 424(a) of the
Code applies.

Section 1.3 Option

      "Option" shall mean the incentive stock option to purchase common stock of
the Company granted under this Agreement.



Section 1.4 Parent Corporation

      "Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one (1) of the other
corporations in such chain.

Section 1.5 Plan

      "Plan" shall mean the Quiksilver, Inc. Stock Option Plan.

Section 1.6 Secretary

      "Secretary" shall mean the Secretary of the Company.

Section 1.7 Securities Act

      "Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.8 Subsidiary

      "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one (1) of the other corporations in such chain.

Section 1.9 Termination of Employment

      "Termination of Employment" shall mean the time when the employee-employer
relationship between the Employee and the Company, a Parent Corporation or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, removal,
death or retirement, but excluding any termination where there is a simultaneous
reemployment of the Employee by the Company, a Parent Corporation or a
Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all other matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
provided, however, that a leave of absence shall constitute a Termination of
Employment if, and to the extent that, such leave of absence interrupts
employment for purposes of Section 422(a)(2) of the Code and the then applicable
Regulations and Revenue Rulings under said Section.

                                       2


                                   ARTICLE II

                                 GRANT OF OPTION

Section 2.1 Grant of Option

      In consideration of the Employee's agreement to remain in the employ of
the Company, its Parent Corporations or its Subsidiaries and for other good and
valuable consideration, on the date hereof the Company irrevocably grants to the
Employee the option to purchase any part or all of an aggregate of _______
shares of its $.01 par value Common Stock upon the terms and conditions set
forth in this Agreement.

Section 2.2 Purchase Price

      The purchase price of the shares of stock covered by the Option shall be $
per share without commission or other charge.

Section 2.3 Consideration to Company

      In consideration of the granting of this Option by the Company, the
Employee agrees to render faithful and efficient services to the Company, a
Parent Corporation or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least one (1) year
from the date this Option is granted. Nothing in this Agreement or in the Plan
shall confer upon the Employee any right to continue in the employ of the
Company, any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporations and its
Subsidiaries, which are hereby expressly reserved, to discharge the Employee at
any time for any reason whatsoever, with or without cause.

Section 2.4 Adjustments in Option

      In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split up, stock dividend or combination of shares, the Committee shall make an
appropriate and equitable adjustment in the number and kind of shares as to
which the Option, or portions thereof then unexercised, shall be exercisable, to
the end that after such event the Employee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in the Option
shall be made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Option price per share; provided, however, that
each such adjustment shall be made in such manner as not to constitute a
"modification" within the meaning of Section 424(h)(3) of the Code. Any such
adjustment made by the Committee shall be final and binding upon the Employee,
the Company and all other interested persons.

                                       3


                                  ARTICLE III

                            PERIOD OF EXERCISABILITY

Section 3.1 Commencement of Exercisability

            (a) Subject to Sections 3.5 and 5.6, the Option shall become
exercisable in five (5) cumulative installments as follows:

                  (i) The first installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
first anniversary of the date the Option is granted.

                  (ii) The second installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
second anniversary of the date the Option is granted.

                  (iii) The third installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
third anniversary of the date the Option is granted.

                  (iv) The fourth installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
fourth anniversary of the date the Option is granted.

                  (v) The fifth installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
fifth anniversary of the date the Option is granted.

            (b) No portion of the Option which is unexercisable at Employee's
Termination of Employment shall thereafter become exercisable.

Section 3.2 Duration of Exercisability

      The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.

Section 3.3 Expiration of Option

      The Option may not be exercised to any extent by anyone after the first to
occur of the following events:

            (a) The expiration of ten (10) years from the date the Option was
granted; or

            (b) If the Employee owned (within the meaning of Section 424(d) of
the Code), at the time the Option was granted, more than ten percent (10%) of
the total combined

                                       4


voting power of all classes of stock of the Company, any Subsidiary or any
Parent Corporation, the expiration of five (5) years from the date the Option
was granted; or

            (c) The time of the Employee's Termination of Employment unless such
Termination of Employment results from his death, his retirement, his disability
(within the meaning of Section 22(e)(3) of the Code) or his being discharged not
for good cause; or

            (d) The expiration of three (3) months from the date of the
Employee's Termination of Employment by reason of his retirement or his being
discharged not for good cause, unless the Employee dies within said three-month
period; or

            (e) The expiration of one (1) year from the date of the Employee's
Termination of Employment by reason of his disability (within the meaning of
Section 22(e)(3) of the Code); or

            (f) The expiration of one (1) year from the date of the Employee's
death; or

            (g) The effective date of either the merger or consolidation of the
Company with or into another corporation, or the acquisition by another
corporation or person of all or substantially all of the Company's assets or
eighty percent (80%) or more of the Company's then outstanding voting stock, or
the liquidation or dissolution of the Company, unless the Committee waives this
provision in connection with such transaction. At least ten (10) days prior to
the effective date of such merger, consolidation, acquisition, liquidation or
dissolution, the Committee shall give the Employee notice of such event if the
Option has then neither been fully exercised nor become unexercisable under this
Section 3.3.

Section 3.4 Acceleration of Exercisability

      In the event of the merger or consolidation of the Company with or into
another corporation, or the acquisition by another corporation or person of all
or substantially all of the Company's assets or eighty percent (80%) or more of
the Company's then outstanding voting stock, or the liquidation or dissolution
of the Company, the Committee may, in its absolute discretion and upon such
terms and conditions as it deems appropriate, provide by resolution, adopted
prior to such event and incorporated in the notice referred to in Section
3.3(g), that at some time prior to the effective date of such event this Option
shall be exercisable as to all the shares covered hereby, notwithstanding that
this Option may not yet have become fully exercisable under Section 3.1(a);
provided, however, that this acceleration of exercisability shall not take place
if:

            (a) This Option becomes unexercisable under Section 3.3 prior to
said effective date; or

            (b) In connection with such an event, provision is made for an
assumption of this Option or a substitution therefor of a new option by an
employer corporation, or a parent or subsidiary of such corporation, so that
such assumption or substitution complies with the provisions of Section 424(a)
of the Code; and

                                       5


provided, further, that nothing in this Section 3.4 shall make this Option
exercisable if it is otherwise unexercisable by reason of Section 3.5 or Section
5.6.

      The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with such acceleration of exercisability, including, but not by way of
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction, and determinations regarding whether provisions for
assumption or substitution have been made as defined in subsection (b) above.

Section 3.5 Limitation on Exercisability

      Notwithstanding any other provision of this Agreement, the aggregate fair
market value (determined at the time the Option is granted) of the shares of the
Company's stock with respect to which "incentive stock options" (within the
meaning of Section 422 of the Code) are exercisable for the first time by the
Employee during any calendar year (under the Plan and all other incentive stock
option plans of the Company, any Subsidiary and any Parent Corporation) shall
not exceed $100,000.

                                   ARTICLE IV

                               EXERCISE OF OPTION

Section 4.1 Person Eligible to Exercise

      During the lifetime of the Employee, only he may exercise the Option or
any portion thereof. After the death of the Employee, any exercisable portion of
the Option may, prior to the time when the Option becomes unexercisable under
Section 3.3, be exercised by the Employee's personal representative or by any
person empowered to do so under the Employee's will or under the then applicable
laws of descent and distribution.

Section 4.2 Partial Exercise

      Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3;
provided, however, that each partial exercise shall be for not less than one
hundred (100) shares (or minimum installment set forth in Section 3.1, if a
smaller number of shares) and shall be for whole shares only.

Section 4.3 Manner of Exercise

      The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or the Secretary's office of all of the following
prior to the time when such exercisable Option or portion thereof becomes
unexercisable under Section 3.3:

            (a) Notice in writing signed by the Employee or such other person
then entitled to exercise the Option or portion, stating that the Option or
portion is thereby exercised, such notice complying with all applicable rules
established by the Committee; and

                                       6


            (b) (i) Full payment (in cash or by check) for the shares with
respect to which such Option or portion is exercised; or

                (ii) With the consent of the Committee, shares of the
Company's Common Stock owned by the Employee duly endorsed for transfer to the
Company with a fair market value (as determinable under Section 4.2(b) of the
Plan) on the date of delivery equal to the aggregate purchase price of the
shares with respect to which such Option or portion is exercised; or

                (iii) With the consent of the Committee, a full recourse
promissory note bearing interest (at at least such rate as shall then preclude
the imputation of interest under the Code) and payable upon such terms as may be
prescribed by the Committee. The Committee may also prescribe the form of such
note and the security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is prohibited by
law; or

                (iv) Any combination of the consideration provided in the
foregoing subparagraphs (i), (ii) and (iii); and

            (c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Employee or other person then
entitled to exercise such Option or portion thereof, stating that the shares of
stock are being acquired for his own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act and then applicable rules and
regulations thereunder, and that the Employee or other person then entitled to
exercise such Option or portion thereof will indemnify the Company against and
hold it free and harmless from any loss, damage, expense or liability resulting
to the Company if any sale or distribution of the shares by such person is
contrary to the representation and agreement referred to above. The Committee
may, in its absolute discretion, take whatever additional actions it deems
appropriate to insure the observance and performance of such representation and
agreement and to effect compliance with the Securities Act and any other federal
or state securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on an Option exercise
does not violate the Securities Act, and may issue stop-transfer orders covering
such shares. Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of this
subsection (c) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued pursuant to such exercise
have been registered under the Securities Act, and such registration is then
effective in respect of such shares; and

            (d) Full payment to the Company of all amounts which it is required
to withhold under federal, state or local law upon exercise of the Option; and

            (e) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Employee,
appropriate proof of the right of such person or persons to exercise the Option.

                                       7


Section 4.4 Conditions to Issuance of Stock Certificates

      The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:

            (a) The admission of such shares to listing on all stock exchanges,
if any, on which such class of stock is then listed; and

            (b) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Committee shall, in its absolute discretion, deem necessary or
advisable; and

            (c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and

            (d) The payment to the Company of all amounts which it is required
to withhold under federal, state or local law upon exercise of the Option; and

            (e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.

Section 4.5 Rights as Shareholder

      The holder of the Option shall not be, nor shall such holder have any of
the rights or privileges of, a shareholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and until
a certificate or certificates representing such shares shall have been issued by
the Company to such holder.

                                   ARTICLE V

                                OTHER PROVISIONS

Section 5.1 Administration

      The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret, amend or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Employee, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option. In its
absolute discretion, the Board may at any time

                                       8


and from time to time exercise any and all rights and duties of the Committee
under the Plan and this Agreement.

Section 5.2 Option Not Transferable

      Neither the Option nor any interest or right therein or part thereof shall
be subject to or liable for the debts, contracts or engagements of the Employee
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.

Section 5.3 Shares to Be Reserved

      The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.

Section 5.4 Notices

      Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Employee shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to him. Any
notice which is required to be given to the Employee shall, if the Employee is
then deceased, be given to the Employee's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

Section 5.5 Titles

      Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

Section 5.6 Shareholder Approval

      The Plan will be submitted for approval by the Company's stockholders
within twelve (12) months after the date the Plan was initially adopted by the
Board. This Option may not be exercised to any extent by anyone prior to the
time when the Plan is approved by the stockholders, and if such approval has not
been obtained by the end of said twelve-month period, this Option shall
thereupon become a Non-Qualified Option (as defined in the Plan).

                                       9


Section 5.7 Notification of Disposition

      The Employee shall give prompt notice to the Company of any disposition or
other transfer of any shares of stock acquired under this Agreement if such
disposition or transfer is made (a) within two (2) years from the date of
granting the Option with respect to such shares or (b) within one (1) year after
the transfer of such shares to him. Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash, other property,
assumption of indebtedness or other consideration, by the Employee in such
disposition or other transfer.

Section 5.8 Construction

      This Agreement shall be administered, interpreted and enforced under the
laws of the State of California.

      IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

                                       QUIKSILVER, INC.

                                       By: _________________________________
                                           President

                                       By: _________________________________
                                           Secretary

____________________________________
Employee

____________________________________

____________________________________
Address

Employee's Taxpayer
Identification Number:

___________________________________

                                       10


                                    EMPLOYEE
                      NON-QUALIFIED STOCK OPTION AGREEMENT

      THIS AGREEMENT, dated _________, 19___ is made by and between Quiksilver,
Inc., a Delaware corporation (the "Company"), and ___________, an employee of
the Company or a Subsidiary of the Company (the "Employee").

      WHEREAS, the Company wishes to afford the Employee the opportunity to
purchase shares of its .01 par value Common Stock; and

      WHEREAS, the Company wishes to carry out the Quiksilver, Inc. Stock Option
Plan (the terms of which are hereby incorporated by reference and made a part of
this Agreement); and

      WHEREAS, the Compensation Committee of the Company's Board of Directors
(the "Committee"), appointed to administer said Plan, has determined that it
would be to the advantage and best interest of the Company and its shareholders
to grant the Non-Qualified Option provided for herein to the Employee as an
inducement to remain in the service of the Company or its Subsidiaries and as an
incentive for increased efforts during such service, and has advised the Company
thereof and instructed the undersigned officers to issue said Option;

      NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

      Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.

Section 1.1 Code.

      "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

Section 1.2 Company

      "Company" shall mean Quiksilver, Inc. In addition, "Company" shall mean
any corporation assuming, or issuing new employee stock options in substitution
for, the Option and Incentive Stock Options (as defined in Section 1.7 of the
Plan) outstanding under the Plan in a transaction to which Section 424(a) of the
Code applies.



Section 1.3 Option

      "Option" shall mean the non-qualified option to purchase common stock of
the Company granted under this Agreement.

Section 1.4 Parent Corporation

      "Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one (1) of the other
corporations in such chain.

Section 1.5 Plan

      "Plan" shall mean the Quiksilver, Inc. Stock Option Plan.

Section 1.6 Secretary

      "Secretary" shall mean the Secretary of the Company.

Section 1.7 Securities Act

      "Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.8 Subsidiary

      "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one (1) of the other corporations in such chain.

Section 1.9 Termination of Employment

      "Termination of Employment" shall mean the time when the employee-employer
relationship between the Employee and the Company, a Parent Corporation or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, removal,
death or retirement, but excluding any termination where there is a simultaneous
reemployment by the Company, a Parent Corporation or a Subsidiary. The
Committee, in its absolute discretion, shall determine the effect of all other
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment.

                                       2


                                   ARTICLE II

                                 GRANT OF OPTION

Section 2.1 Grant of Option

      In consideration of the Employee's agreement to remain in the employ of
the Company, its Parent Corporations or its Subsidiaries and for other good and
valuable consideration, on the date hereof the Company irrevocably grants to the
Employee the option to purchase any part or all of an aggregate of ____ shares
of its .01 par value Common Stock upon the terms and conditions set forth in
this Agreement.

Section 2.2 Purchase Price

      The purchase price of the shares of stock covered by the Option shall be
$_______ per share without commission or other charge.

Section 2.3 Consideration to Company

      In consideration of the granting of this Option by the Company, the
Employee agrees to render faithful and efficient services to the Company, a
Parent Corporation or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least one (1) year
from the date this Option is granted. Nothing in this Agreement or in the Plan
shall confer upon the Employee any right to continue in the employ of the
Company, any Parent Corporation or any Subsidiary, or shall interfere with or
restrict in any way the rights of the Company, its Parent Corporations and its
Subsidiaries, which are hereby expressly reserved, to discharge the Employee at
any time for any reason whatsoever, with or without cause.

Section 2.4 Adjustments in Option

      In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split up, stock dividend or combination of shares, the Committee shall make an
appropriate and equitable adjustment in the number and kind of shares as to
which the Option, or portions thereof then unexercised, shall be exercisable, to
the end that after such event the Employee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in the Option
shall be made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Option price per share. Any such adjustment made
by the Committee shall be final and binding upon the Employee, the Company and
all other interested persons.

                                       3


                                  ARTICLE III

                            PERIOD OF EXERCISABILITY

Section 3.1 Commencement of Exercisability

            (a) The Option shall become exercisable in five (5) cumulative
installments as follows:

                  (i) The first installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
first anniversary of the date the Option is granted.

                  (ii) The second installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
second anniversary of the date the Option is granted.

                  (iii) The third installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
third anniversary of the date the Option is granted.

                  (iv) The fourth installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
fourth anniversary of the date the Option is granted.

                  (v) The fifth installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
fifth anniversary of the date the Option is granted.

            (b) No portion of the Option which is unexercisable at Termination
of Employment of the Employee shall thereafter become exercisable.

Section 3.2 Duration of Exercisability

      The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.

Section 3.3 Expiration of Option

      The Option may not be exercised to any extent by anyone after the first to
occur of the following events:

            (a) The expiration of ten (10) years and one (1) day from the date
the Option was granted; or

                                       4


            (b) The time of the Employee's Termination of Employment unless such
Termination of Employment results from his death, retirement, disability or
being discharged not for good cause; or

            (c) The expiration of three (3) months from the date of the
Employee's Termination of Employment by reason of his retirement or his being
discharged not for good cause, unless the Employee dies within said three-month
period; or

            (d) The expiration of one (1) year from the date of the Employee's
Termination of Employment by reason of his disability; or

            (e) The expiration of one (1) year from the date of the Employee's
death; or

            (f) The effective date of either the merger or consolidation of the
Company with or into another corporation, or the acquisition by another
corporation or person of all or substantially all of the Company's assets or
eighty percent (80%) or more of the Company's then outstanding voting stock, or
the liquidation or dissolution of the Company, unless the Committee waives this
provision in connection with such transaction. At least ten (10) days prior to
the effective date of such merger, consolidation, acquisition, liquidation or
dissolution, the Committee shall give the Employee notice of such event if the
Option has then neither been fully exercised nor become unexercisable under this
Section 3.3.

Section 3.4 Acceleration of Exercisability

      In the event of the merger or consolidation of the Company with or into
another corporation, or the acquisition by another corporation or person of all
or substantially all of the Company's assets or eighty percent (80%) or more of
the Company's then outstanding voting stock, or the liquidation or dissolution
of the Company, the Committee may, in its absolute discretion and upon such
terms and conditions as it deems appropriate, provide by resolution, adopted
prior to such event and incorporated in the notice referred to in Section
3.3(f), that at some time prior to the effective date of such event this Option
shall be exercisable as to all the shares covered hereby, notwithstanding that
this Option may not yet have become fully exercisable under Section 3.1(a);
provided, however, that this acceleration of exercisability shall not take place
if:

            (a) This Option becomes unexercisable under Section 3.3 prior to
said effective date; or

            (b) In connection with such an event, provision is made for an
assumption of this Option or a substitution therefor of a new option by an
employer corporation or a parent or subsidiary of such corporation.

      The Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with such acceleration of exercisability, including, but not by way of
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction and determinations regarding whether provisions for
assumption or substitution have been made in accordance with subsection (b)
above.

                                       5


                                   ARTICLE IV

                               EXERCISE OF OPTION

Section 4.1 Person Eligible to Exercise

      During the lifetime of the Employee, only he may exercise the Option or
any portion thereof. After the death of the Employee, any exercisable portion of
the Option may, prior to the time when the Option becomes unexercisable under
Section 3.3, be exercised by the Employee's personal representative or by any
person empowered to do so under the Employee's will or under the then applicable
laws of descent and distribution.

Section 4.2 Partial Exercise

      Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3;
provided, however, that each partial exercise shall be for not less than one
hundred (100) shares (or the minimum installment set forth in Section 3.1, if a
smaller number of shares) and shall be for whole shares only.

Section 4.3 Manner of Exercise

      The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or the Secretary's office of all of the following
prior to the time when such exercisable Option or portion thereof becomes
unexercisable under Section 3.3:

            (a) Notice in writing signed by the Employee, or such other person
then entitled to exercise the Option or portion thereof, stating that the Option
or portion thereof is thereby exercised, such notice complying with all
applicable rules established by the Committee; and

            (b) (i) Full payment (in cash or by check) for the shares with
respect to which such Option or portion is exercised; or

                (ii) With the consent of the Committee, shares of the
      Company's Common Stock owned by the Employee duly endorsed for transfer to
      the Company with a fair market value (as determinable under Section 4.2(b)
      of the Plan) on the date of delivery equal to the aggregate purchase price
      of the shares with respect to which such Option or portion is exercised;
      or

                (iii) With the consent of the Committee, a full recourse
      promissory note bearing interest (at least such rate as shall then
      preclude the imputation of interest under the Code) and payable upon such
      terms as may be prescribed by the Committee. The Committee may also
      prescribe the form of such note and the security to be given for such
      note. The Option may not be exercised, however, by delivery of a
      promissory note or by a loan from the Company when or where such loan or
      other extension of credit is prohibited by law; or

                                       6


                  (iv) Any combination of the consideration provided in the
      foregoing subparagraphs (i), (ii) and (iii); and

            (c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Employee or other person then
entitled to exercise such Option or portion thereof, stating that the shares of
stock are being acquired for his own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act and then applicable rules and
regulations thereunder, and that the Employee or other person then entitled to
exercise such Option or portion thereof will indemnify the Company against and
hold it free and harmless from any loss, damage, expense or liability resulting
to the Company if any sale or distribution of the shares by such person is
contrary to the representation and agreement referred to above. The Committee
may, in its absolute discretion, take whatever additional actions it deems
appropriate to insure the observance and performance of such representation and
agreement and to effect compliance with the Securities Act and any other federal
or state securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on an Option exercise
does not violate the Securities Act, and may issue stop-transfer orders covering
such shares. Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of this
subsection (c) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued pursuant to such exercise
have been registered under the Securities Act, and such registration is then
effective in respect of such shares; and

            (d) Full payment to the Company of all amounts which it is required
to withhold under federal, state or local law upon exercise of the Option; and

            (e) In the event the Option or portion thereof shall be exercised
pursuant to Section 4.1 by any person or persons other than the Employee,
appropriate proof of the right of such person or persons to exercise the Option
or portion thereof.

Section 4.4 Conditions to Issuance of Stock Certificates

      The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:

            (a) The admission of such shares to listing on all stock exchanges,
if any, on which such class of stock is then listed; and

            (b) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange

                                       7


Commission or any other governmental regulatory body, which the Committee shall,
in its absolute discretion, deem necessary or advisable; and

            (c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and

            (d) The payment to the Company of all amounts which it is required
to withhold under federal, state or local law in connection with the exercise of
the Option; and

            (e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.

Section 4.5 Rights as Shareholder

      The holder of the Option shall not be, nor shall such holder have any of
the rights or privileges of, a shareholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and until
a certificate or certificates representing such shares shall have been issued by
the Company to such holder.

                                   ARTICLE V

                                OTHER PROVISIONS

Section 5.1 Administration

      The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret, amend or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Employee, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan and this
Agreement.

Section 5.2 Option Not Transferable

      Neither the Option nor any interest or right therein or part thereof shall
be subject to or liable for the debts, contracts or engagements of the Employee,
his successors in interest, or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.

                                       8


Section 5.3 Shares to Be Reserved

      The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.

Section 5.4 Notices

      Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Employee shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to him. Any
notice which is required to be given to the Employee shall, if the Employee is
then deceased, be given to the Employee's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

Section 5.5 Titles

      Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

Section 5.6 Construction

      This Agreement shall be administered, interpreted and enforced under the
laws of the State of California.

                            [Signature page follows]

                                       9


      IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

                                       QUIKSILVER, INC.

                                       By: ___________________________________
                                           President

                                       By: ___________________________________
                                           Secretary

________________________________
          Employee

________________________________
________________________________
          Address

Employee's Taxpayer
Identification Number:

________________________________

                                       10


                              NON-EMPLOYEE DIRECTOR
                      NON-QUALIFIED STOCK OPTION AGREEMENT

      THIS AGREEMENT, dated _______________, 19__, is made by and between
Quiksilver, Inc., a Delaware corporation (the "Company"), and __________ a
non-employee director of the Company or of a subsidiary of the Company (the
"Director").

      WHEREAS, the Company wishes to afford the Director the opportunity to
purchase shares of its .01 par value Common Stock; and

      WHEREAS, the Company wishes to carry out the Quiksilver, Inc. Stock Option
Plan (the terms of which are hereby incorporated by reference and made a part of
this Agreement); and

      WHEREAS, the Compensation Committee of the Company's Board of Directors
(the "Committee"), appointed to administer said Plan, has determined that it
would be to the advantage and best interest of the Company and its stockholders
to grant the Non-Qualified Option provided for herein to the Director as an
inducement to remain in the service of the Company or its Subsidiaries and as an
incentive for increased efforts during such service, and has advised the Company
thereof and instructed the undersigned officers to issue said Option;

      NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

      Whenever the following terms are used in this Agreement, they shall have
the meaning specified below unless the context clearly indicates to the
contrary. The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.

Section 1.1 Code

      "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

Section 1.2 Company

      "Company" shall mean Quiksilver, Inc. In addition, "Company" shall mean
any corporation assuming, or issuing new employee stock options in substitution
for, the Option and Incentive Stock Options (as defined in Section 1.7 of the
Plan) outstanding under the Plan in a transaction to which Section 424(a) of the
Code applies.



Section 1.3 Option

      "Option" shall mean the non-qualified option to purchase common stock of
the Company granted under this Agreement.

Section 1.4 Parent Corporation

      "Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one (1) of the other
corporations in such chain.

Section 1.5 Plan

      "Plan" shall mean the Quiksilver, Inc. Stock Option Plan.

Section 1.6 Secretary

      "Secretary" shall mean the Secretary of the Company.

Section 1.7 Securities Act

      "Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.8 Subsidiary

      "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one (1) of the other corporations in such chain.

Section 1.9 Termination of Directorship

      "Termination of Directorship" shall mean the time when the service of a
director (who is not an employee) as a member of the Board of Directors is
terminated, with or without cause, including, but not by way of limitation, a
termination by resignation, discharge, removal, death or retirement. The
Committee, in its absolute discretion, shall determine the effect of all other
matters and questions relating to Termination of Directorship, including, but
not by way of limitation, the question of whether a Termination of Directorship
resulted from a discharge for good cause and all questions of whether particular
leaves of absence constitute a Termination of Directorship.

                                       2


                                   ARTICLE II

                                 GRANT OF OPTION

Section 2.1 Grant of Option

      In consideration of the Director's agreement to continue in his service to
the Company, its Parent Corporations or its Subsidiaries and for other good and
valuable consideration, on the date hereof the Company irrevocably grants to the
Director the option to purchase any part or all of an aggregate of __________
shares of its .01 par value Common Stock upon the terms and conditions set forth
in this Agreement.

Section 2.2 Purchase Price

      The purchase price of the shares of stock covered by the Option shall be $
per share without commission or other charge.

Section 2.3 Consideration to Company

      In consideration of the granting of this Option by the Company, the
Director agrees to render faithful and efficient services to the Company, a
Parent Corporation or a Subsidiary, with such duties and responsibilities as the
Board of Directors shall from time to time prescribe, for a period of at least
one (1) year from the date this Option is granted, unless the stockholders of
the Company fail to reelect the Director upon expiration of the Director's term
of office prior to the expiration of the one year period. Nothing in this
Agreement or in the Plan shall confer upon the Director any right to continue
serving in a directorship position of the Company, any Parent Corporation or any
Subsidiary, or shall interfere with or restrict in any way the rights of the
stockholders of the Company, any Parent Corporation or any Subsidiary, which are
hereby expressly reserved, to remove the Director pursuant to provisions
therefor in the charter or bylaws of the Company, any Parent Corporation or any
Subsidiary, as the case may be.

Section 2.4 Adjustments in Option

      In the event that the outstanding shares of the stock subject to the
Option are changed into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split up, stock dividend or combination of shares, the Committee shall make an
appropriate and equitable adjustment in the number and kind of shares as to
which the Option, or portions thereof then unexercised, shall be exercisable, to
the end that after such event the Director's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in the Option
shall be made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Option price per share. Any such adjustment made
by the Committee shall be final and binding upon the Director, the Company and
all other interested persons.

                                       3


                                  ARTICLE III

                            PERIOD OF EXERCISABILITY

Section 3.1 Commencement of Exercisability

            (a) The Option shall become exercisable in five (5) cumulative
installments as follows:

                  (i) The first installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
first anniversary of the date the Option is granted.

                  (ii) The second installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
second anniversary of the date the Option is granted.

                  (iii) The third installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
third anniversary of the date the Option is granted.

                  (iv) The fourth installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
fourth anniversary of the date the Option is granted.

                  (v) The fifth installment shall consist of twenty percent
(20%) of the shares covered by the Option and shall become exercisable on the
fifth anniversary of the date the Option is granted.

            (b) No portion of the Option which is unexercisable at the
Director's Termination of Directorship shall thereafter become exercisable.

Section 3.2 Duration of Exercisability

      The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.

Section 3.3 Expiration of Option

      The Option may not be exercised to any extent by anyone after the first to
occur of the following events:

            (a) The expiration of ten (10) years and one (1) day from the date
the Option was granted; or

                                       4


            (b) The time of the Director's Termination of Directorship unless
such resignation results from his death, retirement or disability (within the
meaning of Section 22(e)(3) of the Code); or

            (c) The expiration of three months from the date of the Director's
Termination of Directorship by reason of his retirement, unless the Director
dies within said three month period; or

            (d) The expiration of one (1) year from the date of the Director's
Termination of Directorship by reason of his disability (within the meaning of
Section 22(e)(3) of the Code); or

            (e) The expiration of one (1) year from the date of the Director's
death; or

            (f) The effective date of either the merger or consolidation of the
Company with or into another corporation, or the acquisition by another
corporation or person of all or substantially all of the Company's assets or
eighty percent (80%) or more of the Company's then outstanding voting stock, or
the liquidation or dissolution of the Company, unless the Committee waives this
provision in connection with such transaction. At least ten (10) days prior to
the effective date of such merger, consolidation, acquisition, liquidation or
dissolution, the Committee shall give the Director notice of such event if the
Option has then neither been fully exercised nor become unexercisable under this
Section 3.3.

Section 3.4 Acceleration of Exercisability

      In the event of the merger or consolidation of the Company with or into
another corporation, or the acquisition by another corporation or person of all
or substantially all of the Company's assets or eighty percent (80%) or more of
the Company's then outstanding voting stock, or the liquidation or dissolution
of the Company, the Committee may, in its absolute discretion and upon such
terms and conditions as it deems appropriate, provide by resolution, adopted
prior to such event and incorporated in the notice referred to in Section
3.3(f), that at some time prior to the effective date of such event this Option
shall be exercisable as to all the shares covered hereby, notwithstanding that
this Option may not yet have become fully exercisable under Section 3.1(a);
provided, however, that this acceleration of exercisability shall not take place
if:

            (a) This Option becomes unexercisable under Section 3.3 prior to
said effective date; or

            (b) In connection with such an event, provision is made for an
assumption of this Option or a substitution therefor of a new option by the
other corporation or a parent or subsidiary of such corporation.

      The Committee may take such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with such acceleration of exercisability, including, but not by way of
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the

                                       5


contemplated corporate transaction, and determinations regarding whether
provisions for assumption or substitution have been made in accordance with
subsection (b) hereof.

                                   ARTICLE IV

                               EXERCISE OF OPTION

Section 4.1 Person Eligible to Exercise

      During the lifetime of the Director, only he may exercise the Option or
any portion thereof. After the death of the Director, any exercisable portion of
the Option may, prior to the time when the Option becomes unexercisable under
Section 3.3, be exercised by the Director's personal representative or by any
person empowered to do so under the Director's will or under the then applicable
laws of descent and distribution.

Section 4.2 Partial Exercise

      Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3;
provided, however, that each partial exercise shall be for not less than one
hundred (100) shares (or the minimum installment set forth in Section 3.1, if a
smaller number of shares) and shall be for whole shares only.

Section 4.3 Manner of Exercise

      The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or the Secretary's office of all of the following
prior to the time when the exercisable Option or portion thereof becomes
unexercisable under Section 3.3:

            (a) Notice in writing signed by the Director or such other person
then entitled to exercise the Option or portion thereof, stating that the Option
or portion thereof is thereby exercised, such notice complying with all
applicable rules established by the Committee; and

            (b) (i) Full payment (in cash or by check) for the shares with
respect to which such Option or portion is exercised; or

                (ii) With the consent of the Committee, shares of the
Company's Common Stock owned by the Director duly endorsed for transfer to the
Company with a fair market value (as determinable under Section 4.2(b) of the
Plan) on the date of delivery equal to the aggregate purchase price of the
shares with respect to which such Option or portion is exercised; or

                (iii) With the consent of the Committee, a full recourse
promissory note bearing interest (at least such rate as shall then preclude the
imputation of interest under the Code) and payable upon such terms as may be
prescribed by the Committee. The Committee may also prescribe the form of such
note and the security to be given for such note. The Option may not be
exercised, however, by delivery of a promissory note or by a loan from the
Company when or where such loan or other extension of credit is prohibited by
law; or

                                       6


                  (iv) Any combination of the consideration provided in the
foregoing subparagraphs (i), (ii) and (iii); and

            (c) A bona fide written representation and agreement, in a form
satisfactory to the Committee, signed by the Director or other person then
entitled to exercise such Option or portion thereof, stating that the shares of
stock are being acquired for his own account, for investment and without any
present intention of distributing or reselling said shares or any of them except
as may be permitted under the Securities Act and then applicable rules and
regulations thereunder, and that the Director or other person then entitled to
exercise such Option or portion thereof will indemnify the Company against and
hold it free and harmless from any loss, damage, expense or liability resulting
to the Company if any sale or distribution of the shares by such person is
contrary to the representation and agreement referred to above. The Committee
may, in its absolute discretion, take whatever additional actions it deems
appropriate to insure the observance and performance of such representation and
agreement and to effect compliance with the Securities Act and any other federal
or state securities laws or regulations. Without limiting the generality of the
foregoing, the Committee may require an opinion of counsel acceptable to it to
the effect that any subsequent transfer of shares acquired on an Option exercise
does not violate the Securities Act, and may issue stop-transfer orders covering
such shares. Share certificates evidencing stock issued on exercise of this
Option shall bear an appropriate legend referring to the provisions of this
subsection (c) and the agreements herein. The written representation and
agreement referred to in the first sentence of this subsection (c) shall,
however, not be required if the shares to be issued pursuant to such exercise
have been registered under the Securities Act, and such registration is then
effective in respect of such shares; and

            (d) Full payment to the Company of all amounts which it is required
to withhold under federal, state or local law upon exercise of the Option; and

            (e) In the event the Option or portion shall be exercised pursuant
to Section 4.1 by any person or persons other than the Director, appropriate
proof of the right of such person or persons to exercise the Option or portion
thereof.

Section 4.4 Conditions to Issuance of Stock Certificates

      The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:

            (a) The admission of such shares to listing on all stock exchanges,
if any, on which such class of stock is then listed; and

            (b) The completion of any registration or other qualification of
such shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange

                                       7


Commission or any other governmental regulatory body, which the Committee shall,
in its absolute discretion, deem necessary or advisable; and

            (c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and

            (d) The payment to the Company of all amounts which it is required
to withhold under federal, state or local law upon exercise of the Option; and

            (e) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.

Section 4.5 Rights as Shareholder

      The holder of the Option shall not be, nor shall such holder have any of
the rights of privileges of, a stockholder of the Company in respect of any
shares purchasable upon the exercise of any part of the Option unless and until
a certificate or certificates representing such shares shall have been issued by
the Company to such holder.

                                   ARTICLE V

                                OTHER PROVISIONS

Section 5.1 Administration

      The Committee shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret, amend or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon the Director, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan and this
Agreement.

Section 5.2 Option Not Transferable

      Neither the Option nor any interest or right therein or part thereof shall
be subject to or liable for the debts, contracts or engagements of the Director
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.

                                       8


Section 5.3 Shares to Be Reserved

      The Company shall at all times during the term of the Option reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of this Agreement.

Section 5.4 Notices

      Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Director shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to him. Any
notice which is required to be given to the Director shall, if the Director is
then deceased, be given to the Director's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

Section 5.5 Titles

      Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

Section 5.6 Construction

      This Agreement shall be administered, interpreted and enforced under the
laws of the State of California.

                            [Signature page follows]

                                       9


           IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto.

                                       QUIKSILVER, INC.

                                       By: ___________________________________
                                           President

                                       By: ___________________________________
                                           Secretary

________________________________
          Employee

________________________________

________________________________

           Address

Employee's Taxpayer
Identification Number:

________________________________

                                       10

EX-10.9

                                                                    Exhibit 10.9

                                QUIKSILVER, INC.

                          1998 NONEMPLOYEE DIRECTORS'
                               STOCK OPTION PLAN

      Quiksilver, Inc., a corporation organized under the laws of the State of
Delaware (the "Company"), hereby adopts this Quiksilver, Inc. 1998 Nonemployee
Directors' Stock Option Plan (the "Plan"). The purpose of this Plan is to
advance the interests of the Company by enhancing its ability to retain
qualified persons who are neither employees nor officers of the Company to serve
as members of the Company's Board of Directors. This Plan provides such persons
with the opportunity to become owners of capital stock of the Company by the
grant of Options to purchase Shares. Options granted hereunder shall be
"nonstatutory options," and shall not include "incentive stock options" intended
to qualify for treatment under Sections 421 and 422A of the Internal Revenue
Code of 1986, as amended.

      Section 1. Definitions. As used herein, the following definitions shall
apply:

            (a) "Administrator" shall mean the entity, whether the Board or the
Committee, responsible for administering this Plan, as provided in Section 2.

            (b) "Board" shall mean the Board of Directors of the Company.

            (c) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.

            (d) "Committee" shall mean the committee, if any, appointed by the
Board in accordance with Section 3(c) to administer this Plan.

            (e) "Company" shall mean Quiksilver, Inc., a Delaware corporation.

            (f) "Common Stock" shall mean the Company's $.01 par value Common
Stock.

            (g) "Expiration Date" shall mean the last day of the term of an
Option established under Section 5(b).

            (h) "Fair Market Value" shall mean, as of the date in question: (i)
the closing price of a Share on the principal exchange on which Shares of the
Company's stock are then trading, if any, on the day previous to such date, or,
if shares were not traded on the day previous to such date, then on the next
preceding trading day during which a sale occurred; or (ii) if such stock is not
traded on an exchange but is quoted on NASDAQ or a successor quotation system,
(1) the last sales price (if the stock is then listed as a National Market Issue
under the NASD National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the stock on the
day previous to such date as reported by NASDAQ or such successor quotation
system; or (iii) if such stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the mean between the closing
bid and asked prices for the stock, on the day previous to such date, as
determined in good faith by the



Committee; or (iv) if the Company's stock is not publicly traded, the fair
market value established by the Committee acting in good faith. Such
determination shall be conclusive and binding on all persons.

            (i) "Nonemployee Director" shall mean any person who is a member of
the Board but is not an employee or officer of the Company or any Parent or
Subsidiary of the Company. Service as a director does not in itself constitute
employment for purposes of this definition.

            (j) "Option" shall mean a stock option granted pursuant to this
Plan. Each Option shall be a nonstatutory option not intended to qualify as an
incentive stock option within the meaning of Section 422A of the Code.

            (k) "Option Agreement" shall mean the written agreement described in
Section 5 evidencing the grant of an Option to a Nonemployee Director and
containing the terms, conditions and restrictions pertaining to such Option.

            (l) "Option Shares" shall mean the Shares subject to an Option
granted under this Plan.

            (m) "Optionee" shall mean a Nonemployee Director who holds an
Option.

            (n) "Plan" shall mean this Quiksilver, Inc. 1998 Nonemployee
Directors' Stock Option Plan, as it may be amended from time to time.

            (o) "Section," unless the context clearly indicates otherwise, shall
refer to a Section of this Plan.

            (p) "Share" shall mean a share of Common Stock, as adjusted in
accordance with Section 7.

            (q) "Subsidiary" shall mean a "subsidiary corporation" of the
Company, whether now or hereafter existing, within the meaning of Section 425(f)
of the Code, but only for so long as it is a "subsidiary corporation."

      Section 2. Administration.

            (a) The Board shall administer this Plan, including implementing and
overseeing (i) all necessary actions in connection with the delivery of Option
Agreements evidencing Option grants under this Plan, (ii) the exercise or
termination of Options pursuant to the terms of this Plan, and (iii) the
interpretation of the provisions of this Plan and any Option granted under this
Plan. The Board shall adopt by resolution such rules and regulations as may be
required to carry out the purposes of this Plan and shall have authority to do
everything necessary or appropriate to administer this Plan. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees.

            (b) The Board may delegate administration of the Plan to a Committee
of no less than two directors appointed by the Board. The Board may from time to
time remove

                                       2


members from, or add members to, the Committee, and vacancies on the Committee
shall be filled by the Board. Furthermore, the Board at any time by resolution
may abolish the Committee and revest in the Board the administration of this
Plan. (For purposes of this Plan document, the term "Administrator" shall mean
the Board or, to the extent that the Board's powers have been delegated to the
Committee, the Committee.)

            (c) All decisions, interpretations and other actions of the
Administrator shall be final and binding on all persons. No member of the
Committee or Board shall be liable for any action that he or she has taken or
failed to take in good faith with respect to this Plan or any Option.

      Section 3. Eligibility and Consideration. Only Nonemployee Directors may
receive Options under this Plan. In consideration of the granting of the Option,
the Optionee shall agree in the written Option Agreement to remain as a director
of the Company for a period of at least one year after the Option is granted.

      Section 4. Shares Subject to Plan.

            (a) Aggregate Number. Subject to Section 7 (relating to adjustments
upon changes in Shares), the Shares which may be issued upon exercise of Options
shall not exceed in the aggregate 200,000 Shares. Shares issued under this Plan
may be unissued Shares or reacquired Shares. The Company, during the term of the
Plan, shall at all times reserve and keep available sufficient Shares to satisfy
the requirements of the Plan.

            (b) No Rights as a Stockholder. An Optionee shall have no rights as
a stockholder with respect to any Shares covered by his or her Option until the
issuance (as evidenced by the appropriate entry on the books of the Company or
its duly authorized transfer agent) of a stock certificate evidencing such
Shares. Subject to Section 7, no adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions, or other rights for which the record date is prior to the date
the certificate is issued.

      Section 5. Grant of Options.

            (a) Option Grants. Each Nonemployee Director on the date the Plan is
approved by the Stockholders of the Company shall be automatically granted on
such date, an Option to purchase 40,000 shares at an exercise price per share
equal to the Fair Market Value of the Shares as of such date of approval and
such grants shall be subject to and conditioned upon obtaining such stockholder
approval of the Plan.

            (b) Terms; Vesting. Subject to the other provisions of this Plan,
each Option granted pursuant to this Plan shall be for a term of ten years. Each
Option granted under this Section 5 shall become exercisable with respect to
one-fourth of the number of Shares covered by such Option on the first, second,
third and fourth anniversary of the date such Option was granted, so that such
Option shall be fully exercisable beginning on such fourth anniversary of the
date the Option was granted.

            (c) Option Agreement. As soon as practicable after the grant of an
Option, the Optionee and the Company shall enter into a written Option Agreement
which specifies the

                                       3


date of grant, the number of Option Shares, the option price, and the other
terms and conditions applicable to the Option.

            (d) Transferability. No Option shall be transferable otherwise than
by will or the laws of descent and distribution, and an Option shall be
exercisable during the Optionee's lifetime only by the Optionee.

            (e) Limits on Exercise. Subject to the other provisions of this
Plan, an Option shall be exercisable in such amounts as are specified in the
Option Agreement.

            (f) Exercise Procedures. To the extent the right to purchase Shares
has accrued, Options may be exercised, in whole or in part, from time to time,
by written notice from the Optionee to the Company stating the number of Shares
being purchased, accompanied by payment of the exercise price for the Shares,
and other applicable amounts, as provided in Section 6.

            (g) Expiration of Options. No Option may be exercised to any extent
by anyone after the first to occur of the following events:

                  (i) The expiration of ten years from the date the Option was
granted;

                  (ii) Except in the case of any Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the expiration of three
months from the date of the termination of service by Optionee as a director of
the Company for any reason other than such Optionee's death unless the Optionee
dies within said three-month period;

                  (iii) In the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one year from the
date of the termination of service by Optionee as a director of the Company for
any reason other than such Optionee's death unless the Optionee dies within said
one-year period; or

                  (iv) The expiration of one year from the date of Optionee's
death.

      Section 6. Payment upon Exercise of Options.

            (a) Purchase Price. The purchase price of Shares issued under this
Plan shall be paid in full at the time an Option is exercised.

            (b) Form of Consideration. Optionees may make all or any portion of
any payment due to the Company upon exercise of an Option by delivery of cash or
any Shares or other securities of the Company, so long as such Shares or other
securities constitute valid consideration for the stock under applicable law and
are surrendered in good form for transfer; provided, however, that Options may
not be exercised by the delivery of Shares or other securities of the Company if
they have not been held for the requisite period necessary to avoid a charge to
the Company's earnings for financial reporting purposes. Shares or other
securities delivered upon exercise shall be valued at their Fair Market Value on
the delivery date.

                                       4


            (c) Taxes. Irrespective of the form of payment made for exercise of
an Option, exercise shall be conditioned upon payment in cash to the Company by
the Optionee of all local, state and federal withholding taxes applicable, in
the Administrator's judgment, to the exercise of the Option.

      Section 7. Adjustment of Shares.

            (a) Changes in Capital Structure. Subject to Section 7(b), if the
outstanding Shares are changed into or exchanged for a different number or kind
of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, combination of securities or stock dividend, the
total number and/or kind of securities for the purchase of which Options may be
granted under this Plan, and the number and/or kind of securities as to which
Options (or portions thereof) are outstanding, shall be adjusted proportionately
by the Administrator. Any adjustment in an outstanding Option shall be made
without change in the total exercise price applicable to the unexercised portion
of such Option and with a corresponding adjustment in the exercise price per
Share. Any adjustment under this Section 7(a) shall be subject to the provisions
of the Company's Certificate of Incorporation, as amended, and applicable law.
Any such adjustment shall be final and binding upon all Optionees, the Company
and all other interested persons.

            (b) Reorganization and Other Transactions. In its absolute
discretion, and on such terms and conditions as it deems appropriate, the
Administrator may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into another
corporation, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock or the liquidation or dissolution of the Company; and
if the Administrator so provides, it may, in its absolute discretion and on such
terms and conditions as it deems appropriate, also provide, either by the terms
of such Option or by a resolution adopted prior to the occurrence of such
merger, consolidation, acquisition, liquidation or dissolution, that, for some
period of time prior to such event, such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in Section 5.

      Section 8. No Right to Directorship. Neither, this Plan nor any Option
granted hereunder shall confer upon any Optionee any right with respect to
continuation of the Optionee's membership on the Board or shall interfere in any
way with provisions in the Company's Certificate of Incorporation and Bylaws
relating to the election, appointment, terms of office, and removal of members
of the Board.

      Section 9. Legal Requirements. The Company shall not be obligated to offer
or sell any Shares upon exercise of any Option unless the Shares are at that
time effectively registered or exempt from registration under the federal
securities laws and the offer and sale of the Shares are otherwise in compliance
with all applicable securities laws and the regulations of any stock exchange on
which the Company's securities may then be listed. The Company shall have no
obligation to register the securities covered by this Plan under the federal
securities laws or take any other steps as may be necessary to enable the
securities covered by this Plan to be offered and sold under federal or other
securities laws. Upon exercising all or any portion of an Option, an Optionee
may be required to furnish representations or undertakings deemed appropriate by

                                       5


the Company to enable the offer and sale of the Shares or subsequent transfers
of any interest in the Shares to comply with applicable securities laws.
Certificates evidencing Shares acquired upon exercise of Options shall bear any
legend required by, or useful for purposes of compliance with, applicable
securities laws, this Plan or the Option Agreements.

      Section 10. Duration and Amendments.

            (a) Duration. This Plan shall become effective on March 20, 1998,
subject to the approval of the Company's stockholders. This Plan and any Options
granted hereunder shall be null and void if such approval is not obtained. This
Plan shall terminate automatically on March 19, 2008, and may be terminated on
any earlier date pursuant to Section 10(b).

            (b) Amendment; Termination. The Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. To the extent necessary or desirable to
comply with Rule 16b-3, the Code or any other applicable law or regulation, the
Company shall obtain stockholder approval of any amendment to the Plan in such a
manner and to such a degree as required. Neither the amendment, suspension nor
termination of the Plan shall, without the consent of the holder of the Option,
alter or impair any rights or obligations under any Option theretofore granted.

            (c) Effect of Amendment or Termination. No Shares shall be issued or
sold under this Plan after the termination hereof, except upon exercise of an
Option granted before termination. Termination or amendment of this Plan shall
not affect any Shares previously issued and sold or any Option previously
granted under this Plan.

Date Plan approved by Board: December 17, 1997

Date Plan approved by Shareholders: March 20, 1998

                                       6


                             NON-EMPLOYEE DIRECTOR
                      NON-QUALIFIED STOCK OPTION AGREEMENT

            THIS AGREEMENT, dated __________, 1998, is made by and between
Quiksilver, Inc., a Delaware corporation (the "Company"), and
____________________, a non-employee director of the Company (the "Director").

            WHEREAS, the Company wishes to afford the Director the opportunity
to purchase shares of its Common Stock; and

            WHEREAS, the Company wishes to carry out the Quiksilver, Inc. 1998
Nonemployee Directors' Stock Option Plan (the "Plan") a copy of which is
delivered herewith and the terms of which are hereby incorporated by reference
and made a part of this Agreement.

            NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

            Capitalized terms used but not defined herein shall have the meaning
specified in the Plan. The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates.

                                   ARTICLE II

                                GRANT OF OPTION

Section 2.1. Grant of Option

      In consideration of the Director's agreement to continue in his service to
the Company, and for other good and valuable consideration, on the date hereof
the Company irrevocably grants to the Director the option to purchase any part
or all of an aggregate of 40,000 Shares of its Common Stock upon the terms and
conditions set forth in this Agreement; provided, however, that the grant of
this Option is subject to and conditioned upon stockholder approval of the Plan.
The Plan and this Option shall be null and void if such approval is not
obtained.

Section 2.2. Purchase Price

      The purchase price of the Shares of Common Stock covered by the Option
shall be $_____ per share without commission or other charge.



Section 2.3. Consideration to Company

      In consideration of the granting of this Option by the Company, the
Director agrees to render faithful and efficient services to the Company, with
such duties and responsibilities as the Board of Directors shall from time to
time prescribe, for a period of at least one year from the date this Option is
granted. Nothing in this Agreement or in the Plan shall confer upon the Director
any right to continue serving in a directorship position of the Company or shall
interfere with or restrict in any way the rights of the stockholders of the
Company, which are hereby expressly reserved, to remove the Director pursuant to
provisions therefor in the charter or bylaws of the Company.

                                  ARTICLE III

                            PERIOD OF EXERCISABILITY

Section 3.1. Commencement of Exercisability

      The Option shall become exercisable in four cumulative installments as
follows:

            (a) The first installment shall consist of twenty percent (25%) of
the Shares covered by the Option and shall become exercisable on the first
anniversary of the date the Option is granted.

            (b) The second installment shall consist of twenty percent (25%) of
the Shares covered by the Option and shall become exercisable on the second
anniversary of the date the Option is granted.

            (c) The third installment shall consist of twenty percent (25%) of
the Shares covered by the Option and shall become exercisable on the third
anniversary of the date the Option is granted.

            (d) The fourth installment shall consist of twenty percent (25%) of
the Shares covered by the Option and shall become exercisable on the fourth
anniversary of the date the Option is granted.

Section 3.2. Expiration of Option

         The Option may not be exercised to any extent by the Director after the
first to occur of the events set forth in Section 5(h) of the Plan.

                                   ARTICLE IV

                               EXERCISE OF OPTION

Section 4.1. Person Eligible to Exercise

      During the lifetime of the Director, only he may exercise the Option or
any portion thereof. After the death of the Director, any exercisable portion of
the Option may, prior to the

                                       2


time when the Option becomes unexercisable, be exercised by the Director's
personal representative or by any person empowered to do so under the Director's
will or under the then applicable laws of descent and distribution.

Section 4.2. Partial Exercise

      Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable; provided, however,
that each partial exercise shall be for not less than 100 Shares.

Section 4.3. Manner of Exercise

      The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary of the Company or the Secretary's office of all of the
following prior to the time when the exercisable Option or portion thereof
becomes unexercisable:

            (a) Notice in writing signed by the Director or such other person
then entitled to exercise the Option or portion thereof, stating that the Option
or portion thereof is thereby exercised, such notice complying with all
applicable rules established by the Administrator; and

            (b) (i) Full payment (in cash or by check) for the Shares with
respect to which such Option or portion is exercised;

                (ii) With the consent of the Administrator, Shares of the
Company's Common Stock owned by the Director duly endorsed for transfer to the
Company with a Fair Market Value on the date of delivery equal to the aggregate
purchase price of the Shares with respect to which such Option or portion is
exercised; or

                (iii) Any combination of the consideration provided in the
foregoing subparagraphs (i) and (ii); and

            (c) A bona fide written representation and agreement, in a form
satisfactory to the Administrator, signed by the Director or other person then
entitled to exercise such Option or portion thereof, stating that the Shares of
stock are being acquired for his or her own account, for investment and without
any present intention of distributing or reselling said Shares or any of them
except as may be permitted under the Securities Act of 1933, as amended (the
"Securities Act"), and then applicable rules and regulations thereunder, and
that the Director or other person then entitled to exercise such Option or
portion thereof will indemnify the Company against and hold it free and harmless
from any loss, damage, expense or liability resulting to the Company if any sale
or distribution of the Shares by such person is contrary to the representation
and agreement referred to above. The Administrator may, in its absolute
discretion, take whatever additional actions it deems appropriate to insure the
observance and performance of such representation and agreement and to effect
compliance with the Securities Act and any other federal or state securities
laws or regulations. Without limiting the generality of the foregoing, the
Administrator may require an opinion of counsel acceptable to it to the effect
that any subsequent transfer of Shares acquired on an Option exercise does not
violate the Securities Act, and may issue stop-transfer orders covering such
shares. Share certificates evidencing stock

                                       3


issued on exercise of this Option shall bear an appropriate legend referring to
the provisions of this subsection (c) and the agreements herein. The written
representation and agreement referred to in the first sentence of this
subsection (c) shall, however, not be required if the Shares to be issued
pursuant to such exercise have been registered under the Securities Act, and
such registration is then effective in respect of such Shares; and

            (d) Full payment to the Company of all amounts which it is required
to withhold under federal, state or local law upon exercise of the Option; and

            (e) In the event the Option or portion shall be exercised pursuant
to Section 4.1 by any person or persons other than the Director, appropriate
proof of the right of such person or persons to exercise the Option or portion
thereof.

Section 4.4. Conditions to Issuance of Stock Certificates

      The Shares deliverable upon the exercise of the Option, or any portion
thereof, may be either previously authorized but unissued shares or issued
shares which have then been reacquired by the Company. Such Shares shall be
fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for Shares purchased upon the exercise
of the Option or portion thereof prior to fulfillment of all of the following
conditions:

            (a) The admission of such Shares to listing on all stock exchanges,
if any, on which such class of stock is then listed;

            (b) The completion of any registration or other qualification of
such Shares under any state or federal law or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body, which the Administrator shall, in its absolute discretion, deem necessary
or advisable;

            (c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Administrator shall, in its absolute
discretion, determine to be necessary or advisable;

            (d) The payment to the Company of all amounts which it is required
to withhold under federal, state or local law upon exercise of the Option; and

            (e) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may from time to time establish for
reasons of administrative convenience.

Section 4.5. Rights as Shareholder

      The holder of the Option shall not be, nor shall such holder have any of
the rights of privileges of, a stockholder of the Company in respect of any
Shares purchasable upon the exercise of any part of the Option unless and until
a certificate or certificates representing such Shares shall have been issued by
the Company to such holder.

                                       4


                                   ARTICLE V

                                OTHER PROVISIONS

Section 5.1. Administration

      The Administrator shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret, amend or
revoke any such rules. All actions taken and all interpretations and
determinations made by the Administrator in good faith shall be final and
binding upon the Director, the Company and all other interested persons.

Section 5.2. Option Not Transferable

      Neither the Option nor any interest or right therein or part thereof shall
be subject to or liable for the debts, contracts or engagements of the Director
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.

Section 5.3. Shares to Be Reserved

      The Company shall at all times during the term of the Option reserve and
keep available such number of Shares as will be sufficient to satisfy the
requirements of this Agreement.

Section 5.4. Notices

      Any notice to be given under the terms of this Agreement to the Company
shall be addressed to the Company in care of its Secretary, and any notice to be
given to the Director shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section 5.4, either party
may hereafter designate a different address for notices to be given to him. Any
notice which is required to be given to the Director shall, if the Director is
then deceased, be given to the Director's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.4. Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.

Section 5.5. Titles

      Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

                                       5


Section 5.6. Construction

      This Agreement shall be administered, interpreted and enforced under the
laws of the State of California.

Section 5.7. The Plan

      A copy of the Plan has been delivered to the Director, and receipt of such
copy is hereby expressly acknowledged by the Director. This Agreement hereby
incorporates by reference said Plan document and all of the terms and conditions
of the Plan as the same may be amended from time to time hereafter in accordance
with the terms thereof. The terms of this Agreement shall in no manner limit or
modify the controlling provisions of the Plan, and in the case of any conflict
between the provisions of the Plan and this Agreement, the provisions of the
Plan shall be controlling and binding upon the parties hereto.

      IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

                                               QUIKSILVER, INC.

                                               By:  ____________________________
                                                    Chief Executive Officer

                                               By:  ____________________________
                                                    Secretary

___________________________________
             Director

___________________________________

___________________________________
             Address

                                       6

EX-10.10

                                                                   Exhibit 10.10

                                QUIKSILVER, INC.
                          2000 STOCK INCENTIVE PLAN(1)

                      (As amended through March 26, 2004)

                                  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.

            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) All share amounts in this document have been revised to reflect a 2 for 1
stock split effected through a stock dividend on April 30, 2003.



      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 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:

                                       2


                  (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 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 14,472,418 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 1,000,000
shares approved

                                       3


by the Corporation's stockholders in connection with the adoption of this Plan,
(iii) an increase of 1,400,000 shares approved by the Corporation's stockholders
on March 30, 2001, (iv) an increase of 1,200,000 shares approved by the
Corporation's stockholders on March 26, 2002 (v) an increase of 1,600,000 shares
approved by the Corporation's stockholders on March 28, 2003 and (vi) an
increase of 2,800,000 shares approved by the Corporation's stockholders on March
26, 2004.

            B. No one person participating in the Plan may receive options and
separately exercisable stock appreciation rights for more than 400,000 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 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.

                                       4


                                  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.

                                       5


            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.

            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.

                                       6


            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 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

                                       7


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 (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

                                       8


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.

            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.

                                       9


            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 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

                                       10


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.

                                 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.

                                       11


            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.

            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

                                       12


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 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.

                                       13


                                  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 30,000 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 10,000 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 10,000-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
30,000-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 service as a Board member over the three
(3) year period

                                       14


measured from the option grant date. The shares subject to each annual
10,000-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.

                                       15


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

                                       16


      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.

                                  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):

                                       17


                              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

                              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

                                       18


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.

            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

                                       19


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.

            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.

                                  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.

                                       20


            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.

      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

                                       21


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.

            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.

                                       22


      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.

                                       23


                                    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.

            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.

                                       24


            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.

            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

                                       25


                  (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.

            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.

                                       26


            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.

            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

                                       27


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.

                                       28


                                [QUICKSILVER LOGO]

                        NOTICE OF GRANT OF STOCK OPTION

                                (EMPLOYEE FORM)

      Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Quiksilver, Inc. (the "Corporation"):

                 Optionee:                                Grant Date:
Vesting Commencement Date:                            Exercise Price:
 Number of Options Shares:                           Expiration Date:
           Type of Option: __ Incentive Stock Option   __ Non-Statutory Stock
                                                           Option

      Exercise Schedule: Subject to the limitations contained in this Option and
the Plan, this Option shall become exercisable in installments as follows:

            Number of Shares                  Date of Earliest Exercise
             (Installment)                            (Vesting)

      In no event shall the Option become exercisable for any additional Option
Shares after Optionee's cessation of Service.

      Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the Quiksilver, Inc. 2000 Stock Incentive Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the Option as set forth in the Stock Option Agreement attached
hereto as Exhibit A. Optionee hereby acknowledges the receipt of a copy of the
official prospectus for the Plan in the form attached hereto as Exhibit B. A
copy of the Plan is available upon request made to the Corporate Secretary at
the Corporation's principal offices.

      Employment at Will. Nothing in this Notice or in the attached Stock Option
Agreement or in the Plan shall confer upon Optionee 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 Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.

      Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.

                                         QUIKSILVER, INC.

____________________________________     By:_______________________________
OPTIONEE

Address:                                 Title:

____________________________________     ATTACHMENTS
____________________________________     Exhibit A - Stock Option Agreement
____________________________________     Exhibit B - Plan Summary and Prospectus



                                   EXHIBIT A

                                QUIKSILVER, INC.
                             STOCK OPTION AGREEMENT

                                R E C I T A L S

            A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board (or the board
of directors of any Parent or Subsidiary) and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).

            B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.

            C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

            NOW, THEREFORE, it is hereby agreed as follows:

            1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

            2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

            3. LIMITED TRANSFERABILITY.

                  (a) This option shall be neither transferable nor assignable
by Optionee other than by will or the laws of inheritance following Optionee's
death and may be exercised, during Optionee's lifetime, only by Optionee.
However, Optionee may designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be exercised
following Optionee's death.

                  (b) If this option is designated a Non-Statutory Option in the
Grant Notice, then this option may be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's family or to a trust
established for the exclusive benefit of one or more such family members or to
Optionee's former spouse, to the extent such assignment is in

                                      A-1


connection with the Optionee's estate plan or pursuant to a domestic relations
order. The assigned portion shall be exercisable only by the person or persons
who acquire a proprietary interest in the option pursuant to such assignment.
The terms applicable to the assigned portion shall be the same as those in
effect for this option immediately prior to such assignment.

            4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

            5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

                  (a) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.

                  (b) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or the laws of inheritance
shall have the right to exercise this option. However, if Optionee has
designated one or more beneficiaries of this option, then those persons shall
have the exclusive right to exercise this option following Optionee's death. Any
such right to exercise this option shall lapse, and this option shall cease to
be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (ii) the Expiration Date.

                  (c) Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.

                  (d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any exercisable Option Shares for which the option has not been
exercised. However, this option shall, immediately upon Optionee's cessation of
Service for any reason, terminate and cease to be outstanding with respect to
any Option Shares for which this option is not otherwise at that time
exercisable.

                  (e) Should Optionee's Service be terminated for Misconduct or
should Optionee otherwise engage in any Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to remain
outstanding.

                                      A-2


            6. SPECIAL ACCELERATION OF OPTION.

                  (a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully vested shares of Common Stock. No such acceleration of
this option shall occur, however, if and to the extent: (i) this option is, in
connection with the Corporate Transaction, to be assumed by the successor
corporation (or parent thereof) or (ii) this 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 Option Shares for which
this option is not otherwise at that time exercisable (the excess of the Fair
Market Value of those Option Shares over the aggregate Exercise Price payable
for such shares) and provides for subsequent payout in accordance with the same
option exercise/vesting schedule for those Option Shares set forth in the Grant
Notice.

                  (b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.

                  (c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.

                  (d) This Agreement shall not in any 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.

            7. ADJUSTMENT IN OPTION SHARES. Should any change be 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 to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

                                      A-3


            8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

            9. MANNER OF EXERCISING OPTION.

                  (a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                        (i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.

                        (ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:

                              (A) cash or check made payable to the Corporation;

                              (B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in accordance with
Paragraph 13;

                              (C) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) 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

                              (D) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (i) to 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 (ii) to 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 the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Notice of Exercise delivered to the Corporation in connection
with the option exercise.

                        (iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.

                        (iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.

                                      A-4


                  (b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

                  (c) In no event may this option be exercised for any
fractional shares.

            10. COMPLIANCE WITH LAWS AND REGULATIONS.

                  (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

                  (b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.

            11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns, the legal representatives, heirs and legatees
of Optionee's estate and any beneficiaries of this option designated by
Optionee.

            12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

            13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.

            14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

                                      A-5


            15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.

            16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.

            17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

                  (a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (A) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (B) more than twelve (12) months after the date Optionee ceases to
be an Employee by reason of Permanent Disability.

                  (b) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of the Common Stock or other securities for which this option or any other
Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand
Dollar ($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.

                  (c) Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other securities
for which this option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction, the
option may nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.

                                      A-6


                  (d) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

                                      A-7


                                  EXHIBIT A-1

                               NOTICE OF EXERCISE

            I hereby notify Quiksilver, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 2000 Stock Incentive Plan on _______________, _____

            Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

_________________________, _________
Date

                                            ____________________________________
                                            Optionee

                                            Address: ___________________________
                                                     ___________________________
                                                     ___________________________

Print name in exact manner it is to
appear on the stock certificate:            ____________________________________

Address to which certificate is to          ____________________________________
be sent, if different from address
above:                                      ____________________________________

                                            ____________________________________

Social Security Number:                     ____________________________________

                                      A-8


                                    APPENDIX

            The following definitions shall be in effect under the Agreement:

            A. AGREEMENT shall mean this Stock Option Agreement.

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

            C. COMMON STOCK shall mean shares of the Corporation's common stock.

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

            E. 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.

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

            G. 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.

            H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.

            I. EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.

            J. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.

            K. 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 deemed equal to
            the closing selling price per share of Common

                                      A-9


            Stock on the date in question, as the 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, or

                  (ii) If the Common Stock is at the time listed on any Stock
            Exchange, then the Fair Market Value shall be deemed equal to 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.

            L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.

            M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

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

            O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee 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
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).

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

            Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

            R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.

            S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

                                      A-10


            T. 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.

            U. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.

            V. PLAN shall mean the Corporation's 2000 Stock Incentive Plan.

            W. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.

            X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

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

            Z. 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.

                                      A-11


                               [QUICKSILVER LOGO]

                        NOTICE OF GRANT OF STOCK OPTION

                          (NON-EMPLOYEE DIRECTOR FORM)

      Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Quiksilver, Inc. (the "Corporation"):

Optionee:                                                 Grant Date:

Vesting Commencement Date:                                Exercise Price:

Number of Options Shares:                                 Expiration
                                                          Date:
Type of Option:                    [ ] Incentive Stock Option
                                   [X] Non-Statutory Stock Option

      Exercise Schedule: The option shall become exercisable immediately upon
grant.

      Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the Quiksilver, Inc. 2000 Stock Incentive Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the Option as set forth in the Stock Option Agreement attached
hereto as Exhibit A. Optionee hereby acknowledges the receipt of a copy of the
official prospectus for the Plan in the form attached hereto as Exhibit B. A
copy of the Plan is available upon request made to the Corporate Secretary at
the Corporation's principal offices.

      Employment at Will. Nothing in this Notice or in the attached Stock Option
Agreement or in the Plan shall confer upon Optionee 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 Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.

      Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.

                                         QUIKSILVER, INC.

________________________________         By:____________________________________
OPTIONEE

Address:                                 Title:

________________________________
________________________________         ATTACHMENTS
________________________________         Exhibit A - Stock Option Agreement
                                         Exhibit B - Plan Summary and Prospectus



                                   EXHIBIT A

                             STOCK OPTION AGREEMENT

                                R E C I T A L S

            A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board (or the board
of directors of any Parent or Subsidiary) and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).

            B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.

            C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

            NOW, THEREFORE, it is hereby agreed as follows:

            1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

            2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

            3. LIMITED TRANSFERABILITY.

                  (a) This option shall be neither transferable nor assignable
by Optionee other than by will or the laws of inheritance following Optionee's
death and may be exercised, during Optionee's lifetime, only by Optionee.
However, Optionee may designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be exercised
following Optionee's death.

                  (b) If this option is designated a Non-Statutory Option in the
Grant Notice, then this option may be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's family or to a trust
established for the exclusive benefit of one or more such family members or to
Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The

                                      A-1



assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.

            4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

            5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should Optionee cease to remain in Service as a Board member for
any reason while holding this option. Upon ceasing to be a Board member,
Optionee (or, in the event of Optionee's death, the personal representative of
the Optionee's estate or the person or persons to whom this option is
transferred pursuant to the Optionee's will or the laws of inheritance or the
designated beneficiary or beneficiaries of this option) shall have a period of
twelve (12) months (commencing with the date of such cessation of Service as a
Board member) during which to exercise this option, but in no event shall this
option be exercisable at any time after the Expiration Date. Upon the expiration
of such limited exercise period or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding for any exercisable Option
Shares for which the option has not been exercised.

            6. CORPORATE TRANSACTION/HOSTILE TAKE-OVER.

                  (a) Immediately following a Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.

                  (b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.

                  (c) This Agreement shall not in any 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.

                                      A-2



                  (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
this option. 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 this option less (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.

            7. ADJUSTMENT IN OPTION SHARES. Should any change be 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 to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

            8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

            9. MANNER OF EXERCISING OPTION.

                  (a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                        (i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.

                        (ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:

                              (A) cash or check made payable to the Corporation;

                              (B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in accordance with
Paragraph 13;

                              (C) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) 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

                              (D) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (i) to 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

                                      A-3



(ii) to 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 the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Notice of Exercise delivered to the Corporation in connection
with the option exercise.

                        (iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.

                        (iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.

                  (b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

                  (c) In no event may this option be exercised for any
fractional shares.

            10. COMPLIANCE WITH LAWS AND REGULATIONS.

                  (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

                  (b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.

            11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns, the legal representatives, heirs and legatees
of Optionee's estate and any beneficiaries of this option designated by
Optionee.

            12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on

                                      A-4



the Grant Notice. All notices shall be deemed effective upon personal delivery
or upon deposit in the U.S. mail, postage prepaid and properly addressed to the
party to be notified.

            13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.

            14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

            15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.

            16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.

                                      A-5



                                   EXHIBIT A-1

                               NOTICE OF EXERCISE

            I hereby notify Quiksilver, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 2000 Stock Incentive Plan on _______________, _____.

            Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

___________________________,________
Date

                                        ________________________________________
                                        Optionee

                                        Address:  ______________________________
                                                  ______________________________
                                                  ______________________________

Print name in exact manner it is
to appear on the stock certificate:     ________________________________________

Address to which certificate is to      ________________________________________
be sent, if different from address      ________________________________________
above:                                  ________________________________________

Social Security Number:                 ________________________________________

                                      A-6



                                    APPENDIX

      The following definitions shall be in effect under the Agreement:

      A. AGREEMENT shall mean this Stock Option Agreement.

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

      C. COMMON STOCK shall mean shares of the Corporation's common stock.

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

      E. 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.

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

      G. 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.

      H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.

      I. EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.

      J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.

      K. 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 deemed equal to the closing selling
price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the

                                      A-7



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, or

            (ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to 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.

      L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.

      M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

      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.

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

      P. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

      Q. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Grant Notice.

      R. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

      S. 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.

      T. PERMANENT DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.

                                      A-8



      U. PLAN shall mean the Corporation's 2000 Stock Incentive Plan.

      V. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.

      W. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

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

      Y. 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.

      Z. 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.

                                      A-9



                                    EXHIBIT B

                           PLAN SUMMARY AND PROSPECTUS

                                       B-1



                               [QUIKSILVER LOGO]

                     NOTICE OF GRANT OF ATHLETE STOCK OPTION

      Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Quiksilver, Inc. (the "Corporation"):

                 Optionee:                                   Grant Date:
Vesting Commencement Date:                               Exercise Price:
 Number of Options Shares:                              Expiration Date:
           Type of Option:  [ ]Incentive Stock Option   [X] Non-Statutory Stock
                                                            Option

      Exercise Schedule: Subject to the limitations contained in this Option and
the Plan, this Option shall become exercisable in installments as follows:

            Number of Shares                      Date of Earliest
              (Installment)                            Exercise
                                                       (Vesting)

      Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the Quiksilver, Inc. 2000 Stock Incentive Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the Option as set forth in the Stock Option Agreement attached
hereto as Exhibit A. Optionee hereby acknowledges the receipt of a copy of the
official prospectus for the Plan in the form attached hereto as Exhibit B. A
copy of the Plan is available upon request made to the Corporate Secretary at
the Corporation's principal offices.

      Services at Will. Nothing in this Notice or in the attached Stock Option
Agreement or in the Plan shall confer upon Optionee 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 Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.

      Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.

                                      QUIKSILVER, INC.

___________________________________   By: ______________________________________
OPTIONEE

Address:                              Title:

___________________________________   ATTACHMENTS
___________________________________   Exhibit A - Stock Option Agreement
___________________________________   Exhibit B - Plan Summary and Prospectus



                                    EXHIBIT A

                                QUIKSILVER, INC.
                             STOCK OPTION AGREEMENT

                                 R E C I T A L S

            A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board (or the board
of directors of any Parent or Subsidiary) and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).

            B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.

            C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.

            NOW, THEREFORE, it is hereby agreed as follows:

            1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

            2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

            3. LIMITED TRANSFERABILITY.

                  (a) This option shall be neither transferable nor assignable
by Optionee other than by will or the laws of inheritance following Optionee's
death and may be exercised, during Optionee's lifetime, only by Optionee.
However, Optionee may designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be exercised
following Optionee's death.

                  (b) If this option is designated a Non-Statutory Option in the
Grant Notice, then this option may be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's family or to a trust
established for the exclusive benefit of one or more such family members or to
Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary

                                      A-1



interest in the option pursuant to such assignment. The terms applicable to the
assigned portion shall be the same as those in effect for this option
immediately prior to such assignment.

            4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

            5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

                  (a) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.

                  (b) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or the laws of inheritance
shall have the right to exercise this option. However, if Optionee has
designated one or more beneficiaries of this option, then those persons shall
have the exclusive right to exercise this option following Optionee's death. Any
such right to exercise this option shall lapse, and this option shall cease to
be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (ii) the Expiration Date.

                  (c) Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.

                  (d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any exercisable Option Shares for which the option has not been
exercised. However, this option shall, immediately upon Optionee's cessation of
Service for any reason, terminate and cease to be outstanding with respect to
any Option Shares for which this option is not otherwise at that time
exercisable.

                  (e) Should Optionee's Service be terminated for Misconduct or
should Optionee otherwise engage in any Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to remain
outstanding.

            6. SPECIAL ACCELERATION OF OPTION.

            (a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option

                                      A-2



shall, immediately prior to the effective date of such Corporate Transaction,
become exercisable for all of the Option Shares at the time subject to this
option and may be exercised for any or all of those Option Shares as fully
vested shares of Common Stock. No such acceleration of this option shall occur,
however, if and to the extent: (i) this option is, in connection with the
Corporate Transaction, to be assumed by the successor corporation (or parent
thereof) or (ii) this 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 Option Shares for which this option is not
otherwise at that time exercisable (the excess of the Fair Market Value of those
Option Shares over the aggregate Exercise Price payable for such shares) and
provides for subsequent payout in accordance with the same option
exercise/vesting schedule for those Option Shares set forth in the Grant Notice.

                  (b) Immediately following the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with the
Corporate Transaction.

                  (c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.

                  (d) This Agreement shall not in any 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.

            7. ADJUSTMENT IN OPTION SHARES. Should any change be 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 to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

            8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

                                      A-3



            9. MANNER OF EXERCISING OPTION.

                  (a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                        (i) Execute and deliver to the Corporation a Notice of
Exercise for the Option Shares for which the option is exercised.

                        (ii) Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:

                              (A) cash or check made payable to the Corporation;

                              (B) a promissory note payable to the Corporation,
but only to the extent authorized by the Plan Administrator in accordance with
Paragraph 13;

                              (C) shares of Common Stock held by Optionee (or
any other person or persons exercising the option) 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

                              (D) through a special sale and remittance
procedure pursuant to which Optionee (or any other person or persons exercising
the option) shall concurrently provide irrevocable instructions (i) to 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 (ii) to 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 the sale and remittance procedure is
utilized in connection with the option exercise, payment of the Exercise Price
must accompany the Notice of Exercise delivered to the Corporation in connection
with the option exercise.

                        (iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.

                        (iv) Make appropriate arrangements with the Corporation
(or Parent or Subsidiary employing or retaining Optionee) for the satisfaction
of all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.

                  (b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.

                  (c) In no event may this option be exercised for any
fractional shares.

                                      A-4



            10. COMPLIANCE WITH LAWS AND REGULATIONS.

                  (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

                  (b) The inability of the Corporation to obtain approval from
any regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the non-issuance
or sale of the Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts to obtain all
such approvals.

            11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Paragraphs 3 and 6, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns, the legal representatives, heirs and legatees
of Optionee's estate and any beneficiaries of this option designated by
Optionee.

            12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

            13. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a full-recourse
promissory note payable to the Corporation. The terms of any such promissory
note (including the interest rate, the requirements for collateral and the terms
of repayment) shall be established by the Plan Administrator in its sole
discretion.

            14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

            15. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of California
without resort to that State's conflict-of-laws rules.

            16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.

                                      A-5



            17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

                  (a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (A) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (B) more than twelve (12) months after the date Optionee ceases to
be an Employee by reason of Permanent Disability.

                  (b) No installment under this option shall qualify for
favorable tax treatment as an Incentive Option if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of the Common Stock or other securities for which this option or any other
Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand
Dollar ($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.

                  (c) Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other securities
for which this option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction, the
option may nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.

                  (d) Should Optionee hold, in addition to this option, one or
more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

                                      A-6



                                   EXHIBIT A-1

                               NOTICE OF EXERCISE

            I hereby notify Quiksilver, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $__________ per share (the "Exercise
Price") pursuant to that certain option (the "Option") granted to me under the
Corporation's 2000 Stock Incentive Plan on _______________, _____

            Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

_______________________, __________
Date

                                      __________________________________________
                                      Optionee

                                      Address: _________________________________
                                               _________________________________
                                               _________________________________

Print name in exact manner it is to
appear on the stock certificate:      __________________________________________

Address to which certificate is to    __________________________________________
be sent, if different from address    __________________________________________
above:                                __________________________________________

Social Security Number:               __________________________________________

                                      A-7



                                    APPENDIX

            The following definitions shall be in effect under the Agreement:

            A. AGREEMENT shall mean this Stock Option Agreement.

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

            C. COMMON STOCK shall mean shares of the Corporation's common stock.

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

            E. 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.

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

            G. 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.

            H. EXERCISE DATE shall mean the date on which the option shall have
been exercised in accordance with Paragraph 9 of the Agreement.

            I. EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.

            J. EXPIRATION DATE shall mean the date on which the option expires
as specified in the Grant Notice.

            K. 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 deemed equal to
            the closing selling price per share of Common Stock on the date in
            question, as the price is reported by the National Association of
            Securities Dealers on the Nasdaq National

                                      A-8



            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, or

                  (ii) If the Common Stock is at the time listed on any Stock
            Exchange, then the Fair Market Value shall be deemed equal to 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.

            L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.

            M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

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

            O. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee 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
Optionee or any other individual in the Service of the Corporation (or any
Parent or Subsidiary).

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

            Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

            R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.

            S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

            T. 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

                                      A-9



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.

            U. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.

            V. PLAN shall mean the Corporation's 2000 Stock Incentive Plan.

            W. PLAN ADMINISTRATOR shall mean either the Board or a committee of
the Board acting in its capacity as administrator of the Plan.

            X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

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

            Z. 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.

                                      A-10

EX-10.19

                                                                   EXHIBIT 10.19

                                QUIKSILVER, INC.

            WRITTEN DESCRIPTION OF NON-EMPLOYEE DIRECTOR COMPENSATION
                                   PURSUANT TO
                    ITEM 601(b)(10)(iii)(A) OF REGULATION S-K

            Each director who is not an employee of Quiksilver, Inc. receives an
annual retainer of $20,000, unless they are chairman of a committee of the Board
of Directors, in which case they receive an annual retainer of $25,000. In
addition, non-employee directors receive an attendance fee of $2,000 for each
meeting of the Board of Directors and each meeting of a committee of the Board
of Directors personally attended. Non-employee directors receive $1,000 for each
meeting of the Board and committee of the Board attended telephonically. Under
the terms of the 2000 Stock Incentive Plan, non-employee directors receive an
automatic grant of options to purchase 30,000 shares of the Company's common
stock, vesting over three years, upon first becoming a director and an automatic
annual grant of options to purchase 10,000 shares, vesting immediately, on the
date of each annual stockholders meeting thereafter following which they will
continue to serve as a non-employee director. The options have an exercise price
equal to fair market value on the date of grant and a maximum term of ten years.

EX-10.20

                                                                   Exhibit 10.20

                                QUIKSILVER, INC.
                            LONG-TERM INCENTIVE PLAN

1.    PURPOSE OF THE PLAN

      The Plan is intended to provide a greater long-term orientation to the
Company's compensation program, drive Company performance and individual rewards
on a long-term basis, and provide an additional incentive to attract, retain and
motivate executive talent critical to the success of the Company. This Plan is
effective November 1, 2003, subject to shareholder approval of certain Plan
terms at the Company's 2004 Annual Meeting of Shareholders in accordance with
Section 8(b).

2.    DEFINITIONS

      As used in the Plan, the following definitions apply to the terms
indicated below.

      (a) "Administrator" means the officers and employees of the Company
responsible for the day-to-day administration of the Plan and to which the
authority may be delegated under Section 3.

      (b) "Award" means a long-term incentive award granted under this Plan for
a Performance Cycle pursuant to Section 6. An Award constitutes an opportunity
for the Participant to earn incentive compensation, subject to the terms of the
Plan and the retained authority of the Committee to reduce or eliminate Awards
prior to their final determination.

      (c) "Board of Directors" means the Board of Directors of Quiksilver, Inc.

      (d) "Cause," when used in connection with the termination of a
Participant's employment with the Company, means the termination of the
Participant's employment by the Company by reason of any act of fraud,
embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Company (or any Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Company (or any Subsidiary)
in a material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Company (or any Subsidiary) may
consider as grounds for the dismissal or discharge or any Participant or other
person in the service of the Company (or any Subsidiary).

      (e) "Change in Control" means shall mean a change in ownership or control
of the Company effected through either of the following transactions:

            (i) the acquisition, directly or indirectly, by any person or
      related group of persons (other than the Company or a person that directly
      or indirectly controls, is controlled by, or is under common control with,
      the Company), of securities if after such acquisition such person or group
      is the beneficial owner (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 Company's outstanding securities pursuant to
      a tender or exchange offer made directly to the Company'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.

      (f) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. Reference in the Plan to any Code section shall be deemed to include
any amendments or successor provisions to any Section and any treasury
regulations promulgated thereunder.

      (g) "Committee" means the Compensation Committee of the Board of Directors
or such other committee as the Board of Directors may appoint from time to time
to administer the Plan. Membership and governance of the Committee shall be
determined in accordance with the Committee charter as from time-to-time in
effect. No action of the Committee shall be void or deemed to be without
authority solely due to the failure of a member to meet a qualification
requirement at the time such action was taken.

      (h) "Common Stock" means the Company's common stock, par value $.01 per
share.

      (i) "Company" means 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.

      (j) "Disability" means a Participant's "permanent and total disability,"
within the meaning of Code Section 22(e)(3). Notwithstanding the foregoing, if a
Participant has a written employment agreement with the Company that includes a
definition of "disability," the definition contained in the employment agreement
shall apply (in lieu of the definition set forth above) with respect to that
Participant.

      (k) "Employee" means any person who is an employee of the Company or any
Subsidiary within the meaning of Code Section 3401(c) and the applicable
interpretive authority thereunder.

      (l) "Fair Market Value" of a share of Common Stock on any date is (i) the
closing sales price on that date (or if that date is not a business day, on the
immediately preceding business day) of a share of Common Stock as reported on
the principal securities exchange on which shares of Common Stock are then
listed or admitted to trading, currently the New York Stock Exchange ("NYSE").
If the price of a share of Common Stock is not so reported, the Fair Market
Value of a share of Common Stock shall be determined by the Committee in its
absolute discretion

      (m) "Participant" means an eligible Employee who is granted an Award
pursuant to Section 6.

      (n) "Performance Cycle" means the three-year period (or one-year and
two-year period in the case of the phase-in Performance Cycle and initial
Performance Cycle) over which

                                       2


performance goals are measured with respect to any Awards granted for that
Performance Cycle. A phase-in Performance Cycle will begin November 1, 2003 and
end October 31, 2004. An initial two-year Performance Cycle and a regular (i.e.
three-year) Performance Cycle also will begin on November 1, 2003. Subsequent
Performance Cycles will begin annually each year thereafter on November 1 (i.e.,
beginning November 1, 2004).

      (o) "Plan" means the Quiksilver, Inc. Long-Term Incentive Plan, as set
forth herein and as may be amended from time to time.

      (p) "Retirement" means termination of employment at or after age 65.

      (q) "Securities Laws" means the Securities Act of 1933, the Securities
Exchange Act of 1934, applicable state securities laws, and any rules and
regulations issued thereunder.

      (r) "Subsidiary" means any corporation in which, at the pertinent time,
the Company owns, directly or indirectly, stock vested with 50% or more of the
total combined voting power of all classes of stock of such corporations within
the meaning of Code Section 424(f).

3.    ADMINISTRATION OF THE PLAN

      The Plan shall be administered by the Committee, subject to the Board of
Director's power to amend or terminate the Plan pursuant to Section 12. The
Committee will designate the eligible key management Employees of the Company to
whom Awards will be granted under the Plan, the time(s) at which such Awards
will be granted, and the other conditions of the grant of Awards, subject to the
terms of the Plan. The provisions and conditions of the grants of Awards need
not be the same with respect to each grantee or with respect to each Award.

      The Committee will, subject to the provisions of the Plan, establish such
rules and regulations as it deems necessary or advisable for the proper
administration of the Plan, and will make determinations and will take such
other action to accomplish the objectives of the Plan as it deems necessary or
advisable. Each determination or other action made or taken pursuant to the
Plan, any interpretation of the Plan and the specific conditions and provisions
of Awards set by the Committee will be final and conclusive for all purposes and
upon all persons.

      The Committee may delegate certain of its administrative powers to the
Administrator. The Committee may authorize any one or more of its members or any
officer of the Company to execute and deliver documents on behalf of the
Committee.

      No member of the Committee shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify and hold
harmless each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated from and against any cost or
expense (including attorneys' fees) or liability (including any sum paid in
settlement of a claim with the approval of the Committee) arising out of any
action, omission or determination relating to the Plan, unless, in either case,
such action, omission or determination was taken or made by such member,
director or employee in bad faith and without reasonable belief that it was in
the best interests of the Company.

                                       3


      The Committee may determine a pro-forma performance goal to adjust for
acquisitions, reflect changes in accounting rules, corporate structure or other
circumstances of the Company, for the purpose of preventing dilution or
enlargement of a Participant's opportunity to earn incentive compensation under
Awards; provided, however, that no adjustment shall be authorized if and to the
extent that such authorization or adjustment would cause the determined
objectives not to meet the "performance goal requirement" set forth in Treasury
Regulation 1.162-27(e)(2) under the Code.

4.    MAXIMUM AWARD

      In no event may the maximum Award amount for any Performance Cycle payable
to any one Participant exceed $3,000,000.

5.    ELIGIBILITY

      The Chief Executive Officer ("Chief Executive Officer") will recommend to
the Committee, from time to time, those key management Employees proposed to be
designated for participation in the Plan and granted an Award for a Performance
Cycle. Key management Employees are those Employees who are largely responsible
for the management, growth and profitability of the business of the Company. The
Committee will then designate those key management Employees who will
participate and shall specify the Awards to be granted for each Performance
Cycle, subject to Sections 6 and 7 and other applicable Plan provisions.
Participation in any one Performance Cycle does not guarantee participation in
any other Performance Cycle.

6.    GRANTS OF AWARDS

      Pursuant to Sections 3 and 5, Employees may be selected annually to
receive an Award for a Performance Cycle. Such selection will occur no later
than 90 days after the beginning of a Performance Cycle. Notwithstanding the
foregoing, if an Employee is newly hired or promoted into a key management
Employee position within the first nine months of a Performance Cycle, the
Committee (upon recommendation by the Chief Executive Officer) may grant such
Employee an Award for that Performance Cycle and may prorate the target amounts
with respect to such Award. Following such selection, the Chief Executive
Officer will advise the selected Employees that they are Participants in the
Plan for that Performance Cycle and will provide to each such Participant
written confirmation of such participation, including the target and performance
goals associated with the Participant's Award.

7.    TARGETS AND PERFORMANCE GOALS

      Annually, no later than 90 days after the beginning of a Performance Cycle
the Chief Executive Officer will recommend, and the Committee will determine and
establish in writing, the threshold, target, and maximum awards and the
performance goals (together with those factors related to such goals as well as
any applicable matrices, schedules or formulae applicable to the weighting of
such goals) for that Performance Cycle that will apply with respect to each
Award to be granted for that Cycle. The Committee may set different targets,
performance goals, and weightings with respect to each Award.

                                       4


      Performance will be measured based upon one or more pre-established,
objective performance goals (within the meaning of Code Section 162(m)) for each
Performance Cycle. Such performance goals shall be based on any one or any
combination of the following business criteria of the Company as a whole or any
of its Subsidiaries (or any division or department of the foregoing), as
determined by the Committee: revenues, profitability, earnings (including,
without limitation, earnings per share, earnings per share growth, earnings
before taxes or earnings before interest, depreciation, taxes, and
amortization), return on assets, return on equity, economic value created,
successful acquisitions of other companies or assets, successful dispositions of
Subsidiaries, divisions or departments of the Company or any of its
Subsidiaries, share market prices, return to stockholders, market share, or cost
or expense control. Performance goals may be expressed as absolute goals or
goals in relation to previous performance or performance of comparable companies
or industry indexes, or otherwise based on the business criteria as determined
by the Committee. Each goal may be assigned a weighting, so that its achievement
would result in a specified percentage of the overall Award being earned. Also,
goals may be made independent so that the specified percentage of an overall
Award can be earned if one goal is met, even if the threshold performance is not
met for another goal.

      Once the targets and performance goals are determined at the commencement
of each Performance Cycle, those targets and performance goals will not change
for that Performance Cycle, with the exception of the adjustments outlined in
Section 3.

      The Committee may exercise negative discretion with respect to any Award.
This authority includes the right to specify that, upon achievement of
performance goals as specified above in this Section 7, the earning and payout
of the Award will be conditioned upon or adjusted downward based on other
measures of performance or conditions that need not qualify as objective,
pre-set goals under Section 162(m).

8.    EARNED AWARD DETERMINATION/PAYMENT OF AWARDS

      (a) Certification of Performance Goals. As soon as administratively
reasonable after the last day of each Performance Cycle (the "Earning Date"),
the Committee will certify in writing the performance under the applicable goals
for each Award granted for that Performance Cycle and will determine the portion
of each Award that has been earned ("Earned Award") for that Cycle. No payment
will be made until this certification is complete.

      No Award will be earned if performance on at least one of the goals does
not meet the threshold level. The maximum Award that can be earned is reached at
the maximum performance level for all goals. No additional amount will be earned
if performance exceeds the maximum target. If, for any performance goal,
performance is between the threshold and target or between the target and the
maximum, the Committee may interpolate to calculate the Earned Award.

      Notwithstanding the foregoing, the Committee may, in its sole discretion,
reduce the amount of any Award or decline to pay any Award.

                                       5


      (b) Timing of Payment. Subject to Section 8(a), within an administratively
reasonable period following the Committee's certification pursuant to Section
8(a), each Earned Award will be paid in one lump sum payment. Notwithstanding
the foregoing, no Award will be payable pursuant to this Plan until shareholders
of the Company have approved the maximum Award limitation under Section 5,
eligibility terms under Section 6, and business criteria to be used to specify
performance goals under Section 7, to ensure that the Company will be able to
fully deduct payments under the Plan under Code Section 162(m).

      (c) Form of Payment. All Earned Awards will be paid in cash, subject to
deferral under Section 8(d); provided, however, that the Committee, in its sole
discretion, may permit a Participant to elect to defer all or part of the
payment in the form of Company Stock instead of cash. Any deferral to be made in
Common Stock will be made in the nearest whole number of shares based on 100% of
the Fair Market Value of the Common Stock on the date that the cash award
otherwise would have been payable.

      Shares of Common Stock issued as payment may be either newly issued or
treasury shares, at the discretion of the Committee and subject to applicable
rules under the Securities Laws. Payment shall not be made in shares of Common
Stock if such payment would violate any provision of the Securities Laws.

      The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of 1933 of any shares of Common Stock to be
issued as payment hereunder or to effect similar compliance under any state
laws. Notwithstanding anything herein to the contrary, the Company shall not be
obligated to cause to be issued or delivered any certificates evidencing shares
of Common Stock pursuant to the Plan unless and until the Company is advised by
its counsel that the issuance and delivery of such certificates is in compliance
with all applicable laws, regulations of governmental authority and the
requirements of any securities exchange on which shares of Common Stock are
traded. The Committee may require, as a condition of the issuance and delivery
of certificates evidencing shares of Common Stock pursuant to the terms hereof
that the recipient of such stock make such covenants, agreements and
representations, and that such certificates bear such legends, as the Committee,
in its sole discretion, deems necessary or desirable.

      (d) Deferral of Payment. At any time on or before such date as may be
specified by the Administrator, the Participant may elect to defer settlement of
an Award to a date (i) later than the Earning Date for the Performance Cycle to
which the Award relates or (ii) later than Termination of Employment due to
Retirement or Disability, as specified by the Participant; provided, however,
that an optional deferral shall be subject to such additional restrictions and
limitations as the Committee or Administrator may from time to time specify,
including for purposes of ensuring that the Participant will not be deemed to
have constructively received compensation in connection with such deferral.
Dividend equivalents shall accrue on deferred shares of Common Stock and shall
be paid in cash annually to the Participant at an annual payment date set by the
Administrator, without interest or compounding. Other provisions of the Plan
notwithstanding, if any legislation or regulation imposes requirements on
elective non-qualified deferred compensation that are inconsistent with the Plan
and procedures hereunder, if Participants are not afforded an opportunity under
such legislation or regulation to withdraw or modify their prior elections or
deferred compensation resulting from such elections, then (i) if

                                       6


the prior deferrals can be automatically modified to conform to the requirements
of the legislation or regulation with the Participant being deemed not to be in
constructive receipt of the deferred compensation, then such modification
automatically shall be in effect, and (ii) if not, then such deferral will
immediately end and the deferred Award(s) shall be promptly settled in
accordance with the Plan; provided, however, that if a Participant would be
deemed to be in constructive receipt of any deferred amounts solely because of
this provision, the provision shall be void and of no effect.

      (e) Withholding for Taxes. The Company will have the right to deduct from
all Award payments any Federal, state or local taxes required to be withheld
with respect to such payments. If payment is made in shares of Common Stock, the
Company shall withhold from the shares of Common Stock issuable or deliverable
in settlement of a Participant's Award the number of shares having an aggregate
Fair Market Value equal to any Federal, state, and local withholding or other
tax or charge which the Company is required to withhold under applicable law,
unless the Participant has otherwise elected and has made other arrangements
satisfactory to the Company to pay such withholding amounts.

      (f) Non-Transferability. Unless otherwise determined by the Committee,
neither a Participant nor any Beneficiary shall have the right to, directly or
indirectly, alienate, assign, transfer, pledge, or encumber (except by reason of
death) any Award or other right hereunder, nor shall any such Award or other
right be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or any Beneficiary, or to the debts, contracts, liabilities, engagements, or
torts of the Participant or any Beneficiary or transfer by operation of law in
the event of bankruptcy or insolvency of the Participant or any beneficiary, or
any legal process.

      (g) Payment to Beneficiary. Any Award payments due but not paid to a
Participant who is deceased will be made to the Participant's beneficiary. The
Participant's beneficiary will be the beneficiary on file with respect to
company paid life insurance (unless a beneficiary designation specific to the
Plan has been filed), or, if none, the Participant's estate.

9.    TERMINATION OF EMPLOYMENT DURING A PERFORMANCE CYCLE

      (a) Retirement, Disability, Or Death. Unless otherwise provided in a
written employment agreement between the Participant and the Company, if a
Participant's employment with the Company terminates as a result of Retirement,
Disability, or death, Awards for the Performance Cycles in effect as of the
termination date will be prorated as follows: the amount of the Earned Award
will be determined with reference to the performance goals for the entire
Performance Cycle and the resulting Earned Award will be multiplied by a
fraction, the numerator of which is the whole months of active employment during
the Performance Cycle and the denominator of which is 36 (or 24 or 12 if the
Performance Cycle at issue is the initial Performance Cycle or phase-in
Performance Cycle, respectively). Notwithstanding the foregoing, the Committee
may approve payment of the full amount or of a greater prorated amount. The
Committee may elect to determine the Earned Award and make the payout under this
Section 9(a) after the end of the Performance Cycle or earlier based on its good
faith determination of the level of performance achieved to date or to be
achieved for the Performance

                                       7


Cycle, which determination will be final. Any Awards granted for a Performance
Cycle that ended prior to the termination date will not be affected.

      (b) Termination By Participant Or For Cause. Unless otherwise provided in
a written employment agreement between the Participant and the Company, if a
Participant terminates his or her employment with the Company (for any reason
other than Retirement, Disability, or death) or the Company terminates the
Participant's employment with the Company for Cause, Awards for Performance
Cycles in effect as of the termination date will be forfeited as of the
commencement of business on the termination date. Notwithstanding the foregoing,
the Committee may approve payment of all or a portion of the Award that would
have been earned but for the termination of employment. Any Awards granted for a
Performance Cycle that ended prior to the termination date will not be affected.

      (c) Termination Without Cause. Unless otherwise provided in a written
employment agreement between the Participant and the Company, if the Company
terminates a Participant's employment with the Company (for any reason other
than Retirement, Disability, death, or Cause), any Awards for Performance Cycles
in effect as of the termination date will be forfeited except if and to the
extent the Committee determines to approve payment of an Award. Any Awards
granted for a Performance Cycle that ended prior to the termination date will
not be affected.

10.   CHANGE IN CONTROL

      If there is a Change in Control while the Plan remains in effect, then,
for all Performance Cycles in effect at the time the Change in Control occurs,
outstanding Awards will be deemed to be Earned Awards with all performance goals
achieved at target levels, with payment to be made pro-rata for the portion of
each Performance Cycle completed. Payment will made immediately following the
date the Change in Control occurs.

11.   NO SPECIAL EMPLOYMENT RIGHTS; NO RIGHT TO AWARD

      Nothing contained in the Plan or any Award shall confer upon any
Participant any right with respect to the continuation of his or her employment
by the Company or interfere in any way with the right of the Company, subject to
the terms of any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Award.

      No person shall have any claim or right to receive an Award hereunder. The
Committee's granting of an Award to a Participant at any time shall neither
require the Committee to grant an Award to such Participant or any other
Participant or other person at any time nor preclude the Committee from making
subsequent grants to such Participant or any other Participant or other person.

12.   AMENDMENTS, MODIFICATION AND TERMINATION OF THE PLAN

      The Board of Directors or the Committee may at any time amend, modify,
suspend, or terminate the Plan. This includes the right to adopt any amendments
deemed by the Board of Directors or the Committee to be necessary or desirable
to correct any defect or to supply an

                                       8


omission or to reconcile any inconsistency in the Plan or in any Award granted
hereunder, provided that shareholder approval is obtained if required for
compensation under the Plan to qualify as performance-based compensation under
Code Section 162(m). No amendment, modification, suspension or termination of
the Plan may in any manner affect Awards theretofore granted without the consent
of the Participant unless the Committee has made a determination that an
amendment or modification is in the best interest of all persons to whom Awards
have theretofore been granted, but in no event may such amendment or
modification result in an increase in the amount of compensation payable
pursuant to such Award.

13.   NONEXCLUSIVITY OF THE PLAN

      The adoption of this Plan shall not be construed as creating any
limitations on the power of the Board or Committee to adopt such other
compensation arrangements as it may deem desirable for any Participant.

14.   GOVERNING LAW

      The Plan and all determinations made and actions taken pursuant thereto
will be governed by the laws of the State of California and construed in
accordance therewith.

Dated:  ____________________________          QUIKSILVER, INC.

                                              By:     __________________________

                                              Title:  __________________________

                                       9

EX-10.21

                                                                   Exhibit 10.21

                                QUIKSILVER, INC.

                              ANNUAL INCENTIVE PLAN

                  (FORMERLY THE "EXECUTIVE OFFICER BONUS PLAN")

1.    PURPOSE

      The Quiksilver, Inc. Annual Incentive Plan (the "Plan") is designed to
promote the interests of the Company and its stockholders by stimulating the
efforts of the executive officers on behalf of the Company by establishing a
direct relationship between the payment of cash bonuses to such executive
officers and the profitability of the Company.

2.    CALCULATION OF BONUS AMOUNT

      Under the Plan, an annual cash bonus is paid to participants only if a
targeted increase in pre-tax income over the prior year has been met for the
year. In the case of officers of the Company, such bonus is based on the
Company's pre-tax income. In the case of officers of Quiksilver Europe, such
bonus is based on Quiksilver Europe's pre-tax income. Each participant shall
receive a cash bonus equal to a percentage of such participant's base salary,
ranging from 0% to 300% of base salary. The maximum amount payable to any
officer in any fiscal year is $2,400,000. Prior to the beginning of each fiscal
year, the Compensation Committee of the Board of Directors shall establish (i)
the pre-tax income growth goals for the upcoming year, (ii) the bonus, as a
percentage of base salary, payable upon achievement of these goals and (iii) the
executives eligible to participate. At the end of the year, the Committee shall
certify in writing whether the pre-tax income growth goals have been met for the
year and that the amount of bonus to be paid to each participant is correct. The
Compensation Committee does not have the discretion to increase the maximum
bonus percentage of 300% of base salary or the $2,400,000 maximum bonus payable
to any one participating executive for any fiscal year.

3.    ELIGIBLE PARTICIPANTS

      Individuals who are eligible to participate in the Plan include the
executive officers and certain other key employees of the Company as may be
determined by the Compensation Committee of the Board of Directors.

4.    ADMINISTRATION

      The Plan shall be administered by the Compensation Committee of the Board
of Directors.

5.    TERM; AMENDMENT

      The Plan will continue in effect until terminated by the Committee. The
Committee may amend, modify, suspend or terminate the Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other purpose
permitted by law. The Committee will seek stockholder approval of any amendment
determined to require stockholder approval or



advisable under the regulations of the Internal Revenue Service or other
applicable laws or regulations.

                                       2

EX-21.1

EXHIBIT 21.1

QUIKSILVER, INC.

NAMES AND JURISDICTIONS OF SUBSIDIARIES

Subsidiary Name	Jurisdiction
Fidra, Inc.	California
Hawk Designs, Inc.	California
Mervin Manufacturing, Inc.	California
Mt. Waimea, Inc.	California
QS Optics, Inc.	California
QS Retail, Inc.	California
Quiksilver Entertainment, Inc.	California
Quiksilver Wetsuits, Inc.	California
DC Shoes, Inc.	California
DC Direct, Inc.	California
Quiksilver Americas, Inc.	California
QS Wholesale, Inc.	California
UMTT Pty Ltd.	Australia
Carribean Pty Ltd.	Australia
Pavilion Productions Pty Ltd.	Australia
QSJ Holdings Pty Ltd.	Australia
Quiksilver Australia Pty Ltd.	Australia
Quiksilver International Pty Ltd.	Australia
Ug Manufacturing Co. Pty Ltd.	Australia
Watermoons Pty Ltd.	Australia
DC Australia Pty Ltd.	Australia
Andaya SARL	France
Cariboo SARL	France
Emerald Coast SA (renamed from Gotcha SA)	France
Infoborn SARL	France
Kokolo SARL	France
Na Pali SAS	France
Na Pali Entertainment SARL	France
Na Pali Europe SARL	France
Omareef Europe SAS	France
Tavarua SCI	France
DC Europe SARL	France
Zebraska SARL	France
Kauai GMBH	Germany
Makaha GMBH	Germany
Quiksilver Asia Sourcing Ltd. (Renamed from QS (Australia))	Hong Kong
Quiksilver Greater China Ltd.	Hong Kong
DC Shoes International Ltd.	Hong Kong
PT Quiksilver Indonesia	Indonesia
Namotu Ltd.	Ireland
Haapiti SRL	Italy
Moorea SRL	Italy
Quiksilver Japan K.K.	Japan
QS Holdings SARL	Luxemborg
Urban Surf	Malaysia
Pukalani BV	Netherlands
Tuvalu BV	Netherlands
Ug Manufacturing Co. Pty Ltd.	New Zealand
Rawaki sp z.o.o.	Poland

Subsidiary Name	Jurisdiction
Kiribatti Lda	Portugal
Tarawa Lda	Portugal
Bakio SL	Spain
Quiksilver Europa, SL.	Spain
Sumbawa SL	Spain
Town Surf	Thailand
Escatade Ltd.	U.K.
Lanai Ltd.	U.K.
Molokai Ltd.	U.K.
Sunshine SA	Switzerland
Longboarder GMBH	Switzerland

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 33-58657, No. 333-04169, No. 333-56593, No. 333-40328, No. 333-64106, No. 33-65724, No. 333-85204, No. 333-104462 and No. 333-114845 of Quiksilver, Inc. on Form S-8 of our report, dated January 12, 2005, which report expresses an unqualified opinion and includes an explanatory paragraph regarding a change in the Company’s method of accounting for goodwill and intangible assets, appearing in this Annual Report on Form 10-K of Quiksilver, Inc. for the year ended October 31, 2004.

/s/ Deloitte & Touche LLP

Costa Mesa, California
January 12, 2005

EX-31.1

Exhibit 31.1

§ 302 CERTIFICATION

               I, Robert B. McKnight, certify that:

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

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

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

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

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

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

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

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

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

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

Date: January 11, 2005	/s/ Robert B. McKnight, Jr.
	Robert B. McKnight, Jr.
	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

§ 302 CERTIFICATION

               I, Steven L. Brink, certify that:

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

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

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

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

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

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

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

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

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

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

Date: January 11, 2005	/s/ Steven L. Brink
	Steven L. Brink
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

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

In connection with the Annual Report of Quiksilver, Inc. (the “Company”) on Form 10-K for the period ending October 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert B. McKnight, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2003, that:

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

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

/s/ Robert B. McKnight, Jr.

Robert B. McKnight, Jr.
Chief Executive Officer
January 11, 2005

EX-32.2

Exhibit 32.2

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

In connection with the Annual Report of Quiksilver, Inc. (the “Company”) on Form 10-K for the period ending October 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven L. Brink, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2003, that:

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

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

/s/ Steven L. Brink

Steven L. Brink
Chief Financial Officer
January 11, 2005